As there was NOT an ocean liner named Queen Elizabeth III, so there should not be a Quantitative Easing III.
Why?
There is no need for it. The economy now has all the monetary base it needs to grow and interest rates (short and long term) are low enough. Low interest rates are not preventing any profitable investments.
What Needs to Be Done?
The problems are now all policy. Loan growth is low because there are massive new, tighter restrictions on getting a loan. Mortgage refinancings are far below what should be occurring because good quality borrowers are prevent from obtaining a new loan, by either over restrictive credit policies or by their existing loan being "underwater". FDIC rules for management of banks causes real loans to be examined much harder than speculations in securities.
In sum, the problems are ALL now policy problems under the purview of Obama. And he is doing nothing ... need I refer to the old fable about Nero fiddling while Rome burns?
Partial Solutions.
1. FNMA and Freddie Mac should lower credit standards to permit refinancings of ANY loan currently not in default. I mean ANY loan, regardless of credit score or low-to-value ratio. After all, the government ALREADY has that risk, and the loan gets better IF the debt service payments fall.
2. Force banks to make real loans and not speculate in securities. The banking system does NOT exist to faciliate the speculation in securities or derivatives or any similar thing. It exists to make LOANS: old-fashioned commercial and industrial LOANS.
All this is rather obvious. One wonders why these have not been done. After all, it's 2011, not 2009. Policymakers have had two years to "study" the problems. They have failed. Maybe those people should have their pay and benefits cut for "failure to achieve objectives".
Word of the Day
"Fugacious" - adjective [$10] literary
Fugacious means fleeting, evanescent, hard to capture or keep.
Sentence: Fat fees and fugacious fame of hedge fund managers is a fraud on the foolish rich. Example: John Pauson's flagship fund is down 38% this year. So much for his "genius". He and most of those knaves just roll the dice with OPM, get lucky one year and the next year loses. Sigh ...
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Friday, August 26, 2011
Friday, January 21, 2011
Who Benefitted ?
Yesterday's post proved that the common man and woman obtained zero - nada - no benefit from the massive productivity gains since 1969. Where did that increased productivity come from ? Technology. New technology from computerization permitted everyone to do more work with less labor. Machines replaced people.
Expensive and time consuming studies could prove that, but our collective memory contains plenty of proof. Remember that great musical, "How to Succeed in Business Without Really Trying?" The secretarial pool and the junior executive pool no longer exist. Remember the job of receptionist at the elevator entrance on every floor? Gone. A person used to answer the telephone and take messages. No more - voice mail. Today many lawyers do their own documents and make changes; in the past a skilled legal secretary did them.
On the factory floor, fewer skilled machinists are needed as CNC machinery does their work after the set-up. Technology permits jobs to be performed in India for low wages that used to require highly paid analysts in NYC. X-rays are read in India, instead of by a US based skilled person. Plug-in modules dumb down the job of being a technician, reducing their skill - and pay levels.
You know all this deep in your mind and memory. BUT where is the profits go? Where did the gains in national income go? Who got it? Readers of yesterday's post know the common man and woman got nothing from 40 years of increasing national income.
The cynics are right. The people on top got it all. They took it all. Data prove this. I downloaded the table, "Table 695. Money Income of Families--Percent Distribution by Income" from the Census bureau. Families making $100,000 and over (in constant dollars) increased their share of the total national income from 8.7% in 1969 to 26% in 2008. Everyone else was mostly flat or got a lot less. Remember, the median Ozzie & Harriet family got nothing - almost no income gains for almost years. The group at the top got plenty.
We even see this process continuing today. WSJ: "Lenders See Little Choice: Layoffs - The banking industry, racked by the financial crisis and facing slower revenue growth, is starting to cut costs—increasingly at the expense of jobs."
The leadership at banks failed and is continuing to fail. Does the executive suite get a pay cut? Nope. They lay off lower paid workers, cut their pay, benefits and pension. The customer gets worse service. The bosses get MORE.
All this simple research and thinking proves the 200+ year old implied social contract was broken unilaterally around 1970. The group at the top left the rest of the people eating their dust and leftovers. For all the vaunted bloviations of the revolutionary baby boomers of the 1960s, the leaders of that generation did their best to screw the common man and woman. You can see that easily in people like the Clintons, Barry and the bespectacled Republicans. They all got plenty in favors and book deals. Joe Auto Mechanic got the shaft.
We need a new social compact, a square deal for the common men and women. We need an ideology to bind together the great majority of people in the US in the middle - the center. Let them rule and get a Square Deal. Cast aside the fringe right and left. The fringe right want to let the Vikings continue to raid and loot; the fringe left wants to turn us all into serfs for the government, union bosses and trust fund brats.
Under Free Fraternalism, the middle 60% or so gets complete freedom and a square deal; the top 20% pays part of their fortunes to support the unlucky and unendowed bottom 20%. Those numbers aren't strict lines; they are just rough guidelines. BUT I've proven in other posts that national happiness would increase under this political economic system. And in the past few days you have seen data to substantiate your own memories of 40 years, that national happiness has NOT improved for the great bulk of the people under the existing classic liberal system with its socialist admixture.
The existing system has failed: Time to recognize this and fix the problem.
More to come in future posts.
Word of the Day
"Pellucid" - adjective [$10]
Pellucid means easy to understand.
Sentence: Today's pellucid post should make the nature of the problem facing America obvious. Government and its implied social compact need to be fundamentally changed Free Fraternalism is the solution - a total makeover, not simple tinkering around the edges.
Expensive and time consuming studies could prove that, but our collective memory contains plenty of proof. Remember that great musical, "How to Succeed in Business Without Really Trying?" The secretarial pool and the junior executive pool no longer exist. Remember the job of receptionist at the elevator entrance on every floor? Gone. A person used to answer the telephone and take messages. No more - voice mail. Today many lawyers do their own documents and make changes; in the past a skilled legal secretary did them.
On the factory floor, fewer skilled machinists are needed as CNC machinery does their work after the set-up. Technology permits jobs to be performed in India for low wages that used to require highly paid analysts in NYC. X-rays are read in India, instead of by a US based skilled person. Plug-in modules dumb down the job of being a technician, reducing their skill - and pay levels.
You know all this deep in your mind and memory. BUT where is the profits go? Where did the gains in national income go? Who got it? Readers of yesterday's post know the common man and woman got nothing from 40 years of increasing national income.
The cynics are right. The people on top got it all. They took it all. Data prove this. I downloaded the table, "Table 695. Money Income of Families--Percent Distribution by Income" from the Census bureau. Families making $100,000 and over (in constant dollars) increased their share of the total national income from 8.7% in 1969 to 26% in 2008. Everyone else was mostly flat or got a lot less. Remember, the median Ozzie & Harriet family got nothing - almost no income gains for almost years. The group at the top got plenty.
We even see this process continuing today. WSJ: "Lenders See Little Choice: Layoffs - The banking industry, racked by the financial crisis and facing slower revenue growth, is starting to cut costs—increasingly at the expense of jobs."
The leadership at banks failed and is continuing to fail. Does the executive suite get a pay cut? Nope. They lay off lower paid workers, cut their pay, benefits and pension. The customer gets worse service. The bosses get MORE.
All this simple research and thinking proves the 200+ year old implied social contract was broken unilaterally around 1970. The group at the top left the rest of the people eating their dust and leftovers. For all the vaunted bloviations of the revolutionary baby boomers of the 1960s, the leaders of that generation did their best to screw the common man and woman. You can see that easily in people like the Clintons, Barry and the bespectacled Republicans. They all got plenty in favors and book deals. Joe Auto Mechanic got the shaft.
We need a new social compact, a square deal for the common men and women. We need an ideology to bind together the great majority of people in the US in the middle - the center. Let them rule and get a Square Deal. Cast aside the fringe right and left. The fringe right want to let the Vikings continue to raid and loot; the fringe left wants to turn us all into serfs for the government, union bosses and trust fund brats.
Under Free Fraternalism, the middle 60% or so gets complete freedom and a square deal; the top 20% pays part of their fortunes to support the unlucky and unendowed bottom 20%. Those numbers aren't strict lines; they are just rough guidelines. BUT I've proven in other posts that national happiness would increase under this political economic system. And in the past few days you have seen data to substantiate your own memories of 40 years, that national happiness has NOT improved for the great bulk of the people under the existing classic liberal system with its socialist admixture.
The existing system has failed: Time to recognize this and fix the problem.
More to come in future posts.
Word of the Day
"Pellucid" - adjective [$10]
Pellucid means easy to understand.
Sentence: Today's pellucid post should make the nature of the problem facing America obvious. Government and its implied social compact need to be fundamentally changed Free Fraternalism is the solution - a total makeover, not simple tinkering around the edges.
Thursday, January 20, 2011
Square Deal ... Not!
Yesterday I posed the question of whether the classic liberal political economic theory was working as it existed in the US since the 1960s. Did it produce the implied increases in happiness-utility-wealth for the common man and woman? In colloquial speech, was it a Square Deal for them ? Or not? Did the hegemonic class and their governmental bureaucratic allies live up to their express and / or implied promises?
Easily available data exist to test that question. The US Census Bureau keeps and has kept high quality statistical data about the US for decades; they've even extended those data series back to the beginning of the nation and before. This data is and was published in the Statistical Abstracts (published annually since 1878) and the companion volume Historical Statistics of the United States published in 1975 (I have a copy).
I learned about this data series at a course taken as a freshman at Harvard in 1972 from the late Sen. (then Prof.) Daniel Patrick Moynihan. He used his mind in serving the nation, and was a tough professor. You had to do the work and read the material. I did and it sunk in. [To brag a bit, the course was a mixed undergraduate-graduate level course - I did not take (many) gut courses; I wanted my money's worth.] Now, almost 40 years later, I can draw on that learning to write this blog post.
All that data is now available online. With a few clicks , I downloaded a spreadsheet: "Table 698. Median Income of Families by Type of Family in Current and Constant (2008) Dollars". To do a fair longitudinal evaluation, one must keep the sample type as fixed as possible to limit systematic drift. American demographics has changed over time. Let's study the canonical, "Ozzie and Harriet" family - the same as the "Leave It to Beaver" family: a married couple family with the husband working and the wife not in the labor force. Oh, of course she works hard taking care of the household, likely helping out in a family business, or doing many other tasks for no money compensation. Many baby boomers remember that type of family.
Were they treated to a Square Deal?
The numbers. In 1969, a median married couple family with wife not in the labor force made $46,101 in constant 2008 dollars. In 2008, that family made $48,502. The total increase over that huge 38 year span was a mere $2,401, a 5.21% gross increase over 39 years! Per annum, that is a minuscule 0.130% per year. That is NOT a Square Deal.
The numbers also show that for the two decades prior to 1969 (i., e., from 1949 to 1969), the median income for that family grew from $24,173 to $46,101, a gain of $21,928 which was 90.7% increase over the base year of 1949, or growth of 3.28% per annum. That WAS a Square Deal.
Something changed in the 1960s. The political-economic bargain between the common people and their leaders was changed ... unilaterally and possibly secretly and certainly unintended by the common man and woman. The common man and woman certainly did not bargain for that change.
Was there a secret coup? Or some insidious decaying process? Or something else going on?
Your writer will post more on this later.
Word of the Day
"Gravel" - verb usage [$10] a T. S. Eliot word
Gravel means (transitive verb) 1. to lay or strew with gravel; 2. perplex, puzzle, nonplus (from an obsolete sense of 'run (a ship) aground').
Sentence: Stagnant or declining living standards for decades gravel the common man and woman; the reality is and has been so far from the promises of the political leaders. What's going on?
Easily available data exist to test that question. The US Census Bureau keeps and has kept high quality statistical data about the US for decades; they've even extended those data series back to the beginning of the nation and before. This data is and was published in the Statistical Abstracts (published annually since 1878) and the companion volume Historical Statistics of the United States published in 1975 (I have a copy).
I learned about this data series at a course taken as a freshman at Harvard in 1972 from the late Sen. (then Prof.) Daniel Patrick Moynihan. He used his mind in serving the nation, and was a tough professor. You had to do the work and read the material. I did and it sunk in. [To brag a bit, the course was a mixed undergraduate-graduate level course - I did not take (many) gut courses; I wanted my money's worth.] Now, almost 40 years later, I can draw on that learning to write this blog post.
All that data is now available online. With a few clicks , I downloaded a spreadsheet: "Table 698. Median Income of Families by Type of Family in Current and Constant (2008) Dollars". To do a fair longitudinal evaluation, one must keep the sample type as fixed as possible to limit systematic drift. American demographics has changed over time. Let's study the canonical, "Ozzie and Harriet" family - the same as the "Leave It to Beaver" family: a married couple family with the husband working and the wife not in the labor force. Oh, of course she works hard taking care of the household, likely helping out in a family business, or doing many other tasks for no money compensation. Many baby boomers remember that type of family.
Were they treated to a Square Deal?
The numbers. In 1969, a median married couple family with wife not in the labor force made $46,101 in constant 2008 dollars. In 2008, that family made $48,502. The total increase over that huge 38 year span was a mere $2,401, a 5.21% gross increase over 39 years! Per annum, that is a minuscule 0.130% per year. That is NOT a Square Deal.
The numbers also show that for the two decades prior to 1969 (i., e., from 1949 to 1969), the median income for that family grew from $24,173 to $46,101, a gain of $21,928 which was 90.7% increase over the base year of 1949, or growth of 3.28% per annum. That WAS a Square Deal.
Something changed in the 1960s. The political-economic bargain between the common people and their leaders was changed ... unilaterally and possibly secretly and certainly unintended by the common man and woman. The common man and woman certainly did not bargain for that change.
Was there a secret coup? Or some insidious decaying process? Or something else going on?
Your writer will post more on this later.
Word of the Day
"Gravel" - verb usage [$10] a T. S. Eliot word
Gravel means (transitive verb) 1. to lay or strew with gravel; 2. perplex, puzzle, nonplus (from an obsolete sense of 'run (a ship) aground').
Sentence: Stagnant or declining living standards for decades gravel the common man and woman; the reality is and has been so far from the promises of the political leaders. What's going on?
Thursday, April 1, 2010
Bifurcation*
No, guys, that is not a vulgar term and contains no innuendo (well, not much). Bifurcation* is the separation of a previously single line or flow into two distinct ones. [* see Word of the Day]
I learned this word about 35 years ago in a Galactic Dynamics graduate level class at Beefer U. aka Harvard University. Galactic dynamics is the very advanced mechanics of many, many particles - in this case stars - that comprise galaxies. There are two major types of galaxies: elliptical and spiral. One can study the structure of elliptical galaxies analytically using Newtonian mechanics and some simplifying assumptions. The Nobel laureate, S. Chandrasekhar, who first explained white dwarf stars, advanced this theory very much. One finds sequences of stable ellipsoids with certain properties and finds that these sequences bifurcate at certain points into two distinct sequences having different shapes. For example, as rotation increases along certain axes, a pear-shape becomes stable. In general much was learned in those pre-computer days about galactic dynamics from the study of the bifurcation of homogeneous ellipsoids. Hehe. Yes, we used chuckle over that phrase in class.
So what ?
The world economy is bifurcating more and more: Asia and Latin America are recovering and growing fast while the US and Europe are just creeping along. Today's headlines of screeching over iron ore price increases is further proof this economic bifurcation is affecting attitudes, too. The Asian steel makers are selling into a strong market with plenty of demand - they can raise prices and make money. The US and European steel makers - and their main customers - have stagnant markets and much difficulty raising prices. Perhaps a naive economist would say the 100% price rise is the allocation of a scare resource, BUT since iron is one of the most abundant elements in the earth's crust, that makes little sense.
There are three explanations: (A) the time lag for bring out new mines (much infrastructure is required to get the ore out of the ground and to market), (B) the big ore miners now have sufficient demand to move to an oligopolistic pricing regime and are holding back ore from the market, or (C) the new derivatives market in iron ore is permitting huge hedge funds and pension "investors" to "invest" in this commodity, thus sucking up enough excess supply to give prices a huge boost.
That's what happened in oil to cause the huge peak to $140/barrel in summer 2008 while the world economy was slowing. The funds just bought all the excess supply, forcing prices to rip higher in spite of weaker demand. Eventually it collapsed as OPEC increase production.
Or the bifurcation of the world economies is causing it: internal Asian demand - strong growth on a higher and higher base - is creating more new demand faster than new supply can come on the market.
More likely, it's a bit of all three - a combination or correlation of forces is creating this change in the state of the ore markets. After all, that's how the world works. [See blog post of October 27, 2009]
Markets
I'm just patiently waiting for more up, so I can sell more stocks at good prices & raise cash for the eventually dip/pullback.
Word of the Day
"Bifurcate" - verb [$10]
Bifurcate means (vt) to divide into two branches; (vi) to separate into two branches.
Sentence: Bifurcation of stable growth levels better explains strong Asian growth versus US+European stagnation than does decoupling of connections. Internal Asian and Latin American demand now is beginning to dominate those economies. The coupling is as strong as ever, it's just less important now. A new axis of stability exists now: that's bifurcation.
I learned this word about 35 years ago in a Galactic Dynamics graduate level class at Beefer U. aka Harvard University. Galactic dynamics is the very advanced mechanics of many, many particles - in this case stars - that comprise galaxies. There are two major types of galaxies: elliptical and spiral. One can study the structure of elliptical galaxies analytically using Newtonian mechanics and some simplifying assumptions. The Nobel laureate, S. Chandrasekhar, who first explained white dwarf stars, advanced this theory very much. One finds sequences of stable ellipsoids with certain properties and finds that these sequences bifurcate at certain points into two distinct sequences having different shapes. For example, as rotation increases along certain axes, a pear-shape becomes stable. In general much was learned in those pre-computer days about galactic dynamics from the study of the bifurcation of homogeneous ellipsoids. Hehe. Yes, we used chuckle over that phrase in class.
So what ?
The world economy is bifurcating more and more: Asia and Latin America are recovering and growing fast while the US and Europe are just creeping along. Today's headlines of screeching over iron ore price increases is further proof this economic bifurcation is affecting attitudes, too. The Asian steel makers are selling into a strong market with plenty of demand - they can raise prices and make money. The US and European steel makers - and their main customers - have stagnant markets and much difficulty raising prices. Perhaps a naive economist would say the 100% price rise is the allocation of a scare resource, BUT since iron is one of the most abundant elements in the earth's crust, that makes little sense.
There are three explanations: (A) the time lag for bring out new mines (much infrastructure is required to get the ore out of the ground and to market), (B) the big ore miners now have sufficient demand to move to an oligopolistic pricing regime and are holding back ore from the market, or (C) the new derivatives market in iron ore is permitting huge hedge funds and pension "investors" to "invest" in this commodity, thus sucking up enough excess supply to give prices a huge boost.
That's what happened in oil to cause the huge peak to $140/barrel in summer 2008 while the world economy was slowing. The funds just bought all the excess supply, forcing prices to rip higher in spite of weaker demand. Eventually it collapsed as OPEC increase production.
Or the bifurcation of the world economies is causing it: internal Asian demand - strong growth on a higher and higher base - is creating more new demand faster than new supply can come on the market.
More likely, it's a bit of all three - a combination or correlation of forces is creating this change in the state of the ore markets. After all, that's how the world works. [See blog post of October 27, 2009]
Markets
I'm just patiently waiting for more up, so I can sell more stocks at good prices & raise cash for the eventually dip/pullback.
Word of the Day
"Bifurcate" - verb [$10]
Bifurcate means (vt) to divide into two branches; (vi) to separate into two branches.
Sentence: Bifurcation of stable growth levels better explains strong Asian growth versus US+European stagnation than does decoupling of connections. Internal Asian and Latin American demand now is beginning to dominate those economies. The coupling is as strong as ever, it's just less important now. A new axis of stability exists now: that's bifurcation.
Friday, March 19, 2010
Prescription Drug Price Discrimination
This week I've written about the lack of real debate on issues, so today I'll practice what I have been preaching. Price discrimination is the technical economic term for offering different customers the same product at different prices. Obviously this can happen only when the product is not freely traded. The company can choose what to sell to whom at whatever price they think that market can bear. It's a matter of degree and economists split price discrimination into first, second and third degree price discrimination. Bulk sales at low prices to one buyer is one common example. Senior citizen discounts are another.
The market for prescription drugs world-wide is a good example, too. I suppose you won't be surprised the the US common man is the loser.
Drug companies sell drugs in the US at high prices while they are under patent protection, while selling those same drugs worldwide to various national health care systems are much lower prices. Why ? The national health care systems bargain quite hard and are backed up by national governments, who threaten to break patents for essential drugs.
In the US,. the common man pays full price, and even the US Medicare system does, too. There is some bargaining as insurance companies will negotiate better prices when substitutes are available. But overall the US common man pays a LOT more than those drugs cost in France or Germany. This price exploitation is not limited to US companies. European drug companies like Roche do the same thing: charge the US common man more than Germany.
Congress and the public have been screeching about this for years, talking up "re-importation" from Canada. But that debate does not go to the crux of the problem. Drug companies say they must make good profits to fund R&D to find new drugs. And they are right. BUT why does the US have to pay all the money for those profits ? Why do high prices in the US pay for ALL the research that the whole world benefits from ? That's just unfair.
Since all the world benefits from new drugs, fairness requires that each nation's people and all drug users pay for their fair share of the profits that are needed for the research. The US common man should NOT be forced by price discrimination to pay for it all.
Get the rest of the world off our backs and make them pay more. And lower US drug prices. The prescription drug market requires a "fair price" law requiring drug companies to sell drugs in the US at the same lower price as they sell them for in other developed nations. Such a law would give the drug companies muscle to charge MORE in Europe and Canada. Good. Let Europe and Canada pay more and the US common man to pay less.
Why can't the knaves in DC (aka RC racketeer central) figure this out ? Why doesn't this crucial part of the debate get more public exposure in the media. Well, that's what I've been ranting against all week. The media and the knaves are all part of the problem.
Market
Doing nothing. The 1-2-3 Fund needs a new name and focus. My efforts are going to the Krypto Fund, this is where most of the money is anyway. I'll keep checking for asset re-allocations.
Word of the Day
"Gnosis" - noun [$10]
Gnosis means knowledge of spiritual mysteries.
Sentence: There is no requirement for a Ph. D. in Gnosis Studies for one to use simple reason in thinking about major issues. The racketeers in DC seem to infer this requirement when they impugn critics as not being "exerts' or publishing in "referred journals". BUT if they can't answer simply questions and respond to critiques using simple reasoning, they are truly mountebanks selling a secret patent medicine at a high price.
The market for prescription drugs world-wide is a good example, too. I suppose you won't be surprised the the US common man is the loser.
Drug companies sell drugs in the US at high prices while they are under patent protection, while selling those same drugs worldwide to various national health care systems are much lower prices. Why ? The national health care systems bargain quite hard and are backed up by national governments, who threaten to break patents for essential drugs.
In the US,. the common man pays full price, and even the US Medicare system does, too. There is some bargaining as insurance companies will negotiate better prices when substitutes are available. But overall the US common man pays a LOT more than those drugs cost in France or Germany. This price exploitation is not limited to US companies. European drug companies like Roche do the same thing: charge the US common man more than Germany.
Congress and the public have been screeching about this for years, talking up "re-importation" from Canada. But that debate does not go to the crux of the problem. Drug companies say they must make good profits to fund R&D to find new drugs. And they are right. BUT why does the US have to pay all the money for those profits ? Why do high prices in the US pay for ALL the research that the whole world benefits from ? That's just unfair.
Since all the world benefits from new drugs, fairness requires that each nation's people and all drug users pay for their fair share of the profits that are needed for the research. The US common man should NOT be forced by price discrimination to pay for it all.
Get the rest of the world off our backs and make them pay more. And lower US drug prices. The prescription drug market requires a "fair price" law requiring drug companies to sell drugs in the US at the same lower price as they sell them for in other developed nations. Such a law would give the drug companies muscle to charge MORE in Europe and Canada. Good. Let Europe and Canada pay more and the US common man to pay less.
Why can't the knaves in DC (aka RC racketeer central) figure this out ? Why doesn't this crucial part of the debate get more public exposure in the media. Well, that's what I've been ranting against all week. The media and the knaves are all part of the problem.
Market
Doing nothing. The 1-2-3 Fund needs a new name and focus. My efforts are going to the Krypto Fund, this is where most of the money is anyway. I'll keep checking for asset re-allocations.
Word of the Day
"Gnosis" - noun [$10]
Gnosis means knowledge of spiritual mysteries.
Sentence: There is no requirement for a Ph. D. in Gnosis Studies for one to use simple reason in thinking about major issues. The racketeers in DC seem to infer this requirement when they impugn critics as not being "exerts' or publishing in "referred journals". BUT if they can't answer simply questions and respond to critiques using simple reasoning, they are truly mountebanks selling a secret patent medicine at a high price.
Thursday, January 28, 2010
The Way the World Works II
Last Fall on October 27, 2009 I wrote Part I of this series. This Part II tries to explain another aspect of The Way the World Works.
To understand how human societies are structured, or should be structured, and how they change with time, we need to consider what human beings in their rational dimensions are trying to do, or accomplish.
The World at its deepest, most fundamental level exists in states and changes with time according to a principle of optimizing some End over all possible paths. For classical motions of physical bodies, that is the Principle of Least Action, where for all possible paths, the chosen one is that one with the Least Action ("Action" is a combination of kinetic and potential energy). For classical electrodynamic fields and gravitational fields, a similar Principle exists from which one can derive the State of Nature and its time evolution. And for quantum physics, the states of nature are those that produce the maximum probability amplitude when all paths (real and virtual) are summed with complex number phases that are the classical action.
For human actions, Aristotle in his great work, Nichomachean Ethics, showed that human beings act to maximize their happiness. And also the State, comprised of all humans in a community, would maximize the sum of all human happiness in it. A person has various means to increase his happiness: wealth, pleasure, honor, children, family unity, friends, charity, etc. All those are means to the End, which is happiness: For no one seeks happiness for the sake of something else. People do seek wealth, perhaps thinking it will increase their happiness, or pleasure, or honor, or security and happiness for their children, or for their friends, or security and continuity for their family, or do works of charity for others. All those rational (and instinctive) actions are means for maximize a generalized happiness.
In the same work, Aristotle shows that various "goods" (in the sense of that which is good) are points of excellence between extremes. These are the moral virtues of prudence, temperance , courage and justice. For example, courage is the habitual choice of a state between the extremes of cowardice and foolhardiness. The point of excellence depends on the facts of each situation, which a truly courageous person learns with training. [NOTE: this concept connects to Part I of this series noted above.] Again, social custom for these virtues applies a principal of optimization.
Modern economic theory also uses a principal of optimization: a vague term called "utility" is maximized by people in their rational choices; for firms, profit is maximized.
And consider how a serious rational decision is made by a thinking person: he/she would contemplate the future course of events and paths and alternatives, real and simply possible ones; and then choose the "best" one for him. Best in what way ? Most wealth ? Nope, many actions contradict that rule. Most honor ? Nope, again, many counter examples exist. To me, Aristotle was right: a thinking person choose that action, or path that seems to maximize his happiness. Of course, he might err. The future is often unknowable and not all facts are known when a decision must be made.
At the next level, a community would, or should, seek to maximize the happiness of all people in it.
But that's the subject of a coming blog post where I will use all this to propose how one can sketch out a consistent political and economic philosophy with these principles and what a State implementing it would look like.
As a teaser, I will herewith state that my prior thinking that a Populist Libertarian philosophy was correct was wrong and that it must be modified. This is an personal example of why one must keep reading and questioning one's ideas. Reading one book [Aristotle's Nichomachean Ethics] made me realize I had made a fundamental error: my prior thinking for the correct political and economic philosophy was maximizing a Means, viz. freedom, not an End, viz., happiness. Those are connected but are NOT the same.
Obama
I did not watch his speech. These State of the Union speeches have become exercises in mass propaganda. I will read accounts to find out if anything new or interesting was said.
Word of the Day
"Vulpine" - adjective [$10]
Vulpine means 1. of or like a fox; 2. crafty, cunning
Sentence: Odysseus in the Homeric epics had a vulpine nature that was both celebrated and condemned.
To understand how human societies are structured, or should be structured, and how they change with time, we need to consider what human beings in their rational dimensions are trying to do, or accomplish.
The World at its deepest, most fundamental level exists in states and changes with time according to a principle of optimizing some End over all possible paths. For classical motions of physical bodies, that is the Principle of Least Action, where for all possible paths, the chosen one is that one with the Least Action ("Action" is a combination of kinetic and potential energy). For classical electrodynamic fields and gravitational fields, a similar Principle exists from which one can derive the State of Nature and its time evolution. And for quantum physics, the states of nature are those that produce the maximum probability amplitude when all paths (real and virtual) are summed with complex number phases that are the classical action.
For human actions, Aristotle in his great work, Nichomachean Ethics, showed that human beings act to maximize their happiness. And also the State, comprised of all humans in a community, would maximize the sum of all human happiness in it. A person has various means to increase his happiness: wealth, pleasure, honor, children, family unity, friends, charity, etc. All those are means to the End, which is happiness: For no one seeks happiness for the sake of something else. People do seek wealth, perhaps thinking it will increase their happiness, or pleasure, or honor, or security and happiness for their children, or for their friends, or security and continuity for their family, or do works of charity for others. All those rational (and instinctive) actions are means for maximize a generalized happiness.
In the same work, Aristotle shows that various "goods" (in the sense of that which is good) are points of excellence between extremes. These are the moral virtues of prudence, temperance , courage and justice. For example, courage is the habitual choice of a state between the extremes of cowardice and foolhardiness. The point of excellence depends on the facts of each situation, which a truly courageous person learns with training. [NOTE: this concept connects to Part I of this series noted above.] Again, social custom for these virtues applies a principal of optimization.
Modern economic theory also uses a principal of optimization: a vague term called "utility" is maximized by people in their rational choices; for firms, profit is maximized.
And consider how a serious rational decision is made by a thinking person: he/she would contemplate the future course of events and paths and alternatives, real and simply possible ones; and then choose the "best" one for him. Best in what way ? Most wealth ? Nope, many actions contradict that rule. Most honor ? Nope, again, many counter examples exist. To me, Aristotle was right: a thinking person choose that action, or path that seems to maximize his happiness. Of course, he might err. The future is often unknowable and not all facts are known when a decision must be made.
At the next level, a community would, or should, seek to maximize the happiness of all people in it.
But that's the subject of a coming blog post where I will use all this to propose how one can sketch out a consistent political and economic philosophy with these principles and what a State implementing it would look like.
As a teaser, I will herewith state that my prior thinking that a Populist Libertarian philosophy was correct was wrong and that it must be modified. This is an personal example of why one must keep reading and questioning one's ideas. Reading one book [Aristotle's Nichomachean Ethics] made me realize I had made a fundamental error: my prior thinking for the correct political and economic philosophy was maximizing a Means, viz. freedom, not an End, viz., happiness. Those are connected but are NOT the same.
Obama
I did not watch his speech. These State of the Union speeches have become exercises in mass propaganda. I will read accounts to find out if anything new or interesting was said.
Word of the Day
"Vulpine" - adjective [$10]
Vulpine means 1. of or like a fox; 2. crafty, cunning
Sentence: Odysseus in the Homeric epics had a vulpine nature that was both celebrated and condemned.
Tuesday, July 7, 2009
The New Normal
That's the 2009 version of "it's different this time". Of course, it's not and normal is the same old normal. People are the same. The "new normal" is the same old normal with lots of excesses tossed onto the dustbins of history.
I thought I'd toss out a few ideas I've mentioned here over the past few years for the "new normal".
People will prepare and cook more of their own food. Food is practically free if one buys simple ingredients and prepares the meal at home, saving the leftovers to spread the labor over a second meal.
McMansions in exurbia will have little demand. Why own such a big home that requires "help" to maintain and forces a lengthy commute.
Central city and small town living will be the trend. Suburbs will be stagnant.
Shopping centers must be re-invented to offer something that is not available online. Services are one possibility. The Apple stores with their service centers make a lot of sense.
Microsoft will stay in its lengthy decline. Vista stinks, Vista Explorer 8 is both nosey and crummy.
Overpaying will be seen as the killer of companies and investments.
The home will be seen as a place to live, not as an investment or as a piggy-bank.
This is a hope: Companies will start to cut or cap the pay of the top executive suite.
Another hope: Education in real learning and real skills will get a re-birth, and less novel and entertaining subjects.
Today's silly infatuation: green jobs.
World economic growth will be led by the emerging markets and eastern Europe, with the US, western Europe and Japan providing the same old 2-3% growth. Soon this will be recognized and the stock market will return quickly to the long plateau on the 100 year wall chart, viz. around 1200 in the S&P.
The structure of the world was set in the early 1920s in both economic and social contexts. All we see now are incremental changes and technologies. That great song by Julie Andrews, "Thoroughly Modern Millie" makes the point.
I'm open to other ideas & will post any "good" ones.
Markets
Obama Fund is now all cash. I locked in a 31% year-to-date gain. Those stocks in Obama Fund are really good ones for "trading" a return to the plateau as they make huge percentage moves. In hindsight, I should have traded them a bit more on an individual basis.
Once my distractions end, I'll look for re-entries on a stock-by-stock basis.
I also sold GE in Fido Fund. That stock looks like still water until financial regulation clarifies the status of GE Capital.
Word of the Day
"Conceit" - noun [$10 - meaning #2]
Conceit means 1. personal vanity, pride; 2. (literary) a. a far-fetched comparision, especially as a stylistic affectation; a convoluted or unlikely metaphor; b. a fanciful notion.
Sentence: The great overused conceit of modern environmental leftism is the conceit "green" for their hair-brained schemes. Brown would fit better, to match the color of the manure they favor instead of efficient, white nitrogen fertilizer. Most "green" ideas belong in the outhouse.
Słowo Tygodnia
"Gówno" - noun, neuter
Gówno means s*** (vulgar, very informal) [pronounced 'guvno' with the 'u' as in 'put', not 'putt']
Zdanie: Energia zielona ? To jest gówno !
Sentence: Green energy ? That's s*** !
I thought I'd toss out a few ideas I've mentioned here over the past few years for the "new normal".
People will prepare and cook more of their own food. Food is practically free if one buys simple ingredients and prepares the meal at home, saving the leftovers to spread the labor over a second meal.
McMansions in exurbia will have little demand. Why own such a big home that requires "help" to maintain and forces a lengthy commute.
Central city and small town living will be the trend. Suburbs will be stagnant.
Shopping centers must be re-invented to offer something that is not available online. Services are one possibility. The Apple stores with their service centers make a lot of sense.
Microsoft will stay in its lengthy decline. Vista stinks, Vista Explorer 8 is both nosey and crummy.
Overpaying will be seen as the killer of companies and investments.
The home will be seen as a place to live, not as an investment or as a piggy-bank.
This is a hope: Companies will start to cut or cap the pay of the top executive suite.
Another hope: Education in real learning and real skills will get a re-birth, and less novel and entertaining subjects.
Today's silly infatuation: green jobs.
World economic growth will be led by the emerging markets and eastern Europe, with the US, western Europe and Japan providing the same old 2-3% growth. Soon this will be recognized and the stock market will return quickly to the long plateau on the 100 year wall chart, viz. around 1200 in the S&P.
The structure of the world was set in the early 1920s in both economic and social contexts. All we see now are incremental changes and technologies. That great song by Julie Andrews, "Thoroughly Modern Millie" makes the point.
I'm open to other ideas & will post any "good" ones.
Markets
Obama Fund is now all cash. I locked in a 31% year-to-date gain. Those stocks in Obama Fund are really good ones for "trading" a return to the plateau as they make huge percentage moves. In hindsight, I should have traded them a bit more on an individual basis.
Once my distractions end, I'll look for re-entries on a stock-by-stock basis.
I also sold GE in Fido Fund. That stock looks like still water until financial regulation clarifies the status of GE Capital.
Word of the Day
"Conceit" - noun [$10 - meaning #2]
Conceit means 1. personal vanity, pride; 2. (literary) a. a far-fetched comparision, especially as a stylistic affectation; a convoluted or unlikely metaphor; b. a fanciful notion.
Sentence: The great overused conceit of modern environmental leftism is the conceit "green" for their hair-brained schemes. Brown would fit better, to match the color of the manure they favor instead of efficient, white nitrogen fertilizer. Most "green" ideas belong in the outhouse.
Słowo Tygodnia
"Gówno" - noun, neuter
Gówno means s*** (vulgar, very informal) [pronounced 'guvno' with the 'u' as in 'put', not 'putt']
Zdanie: Energia zielona ? To jest gówno !
Sentence: Green energy ? That's s*** !
Tuesday, June 23, 2009
Metaphoritis
The public discourse in the US suffers from that disease - Metaphoritis. It's a syndrome arsing from sloppy thinking, poor verbal skills and weak argumentation. The metaphor of the day is "green shoots", lately deemed to be "withering" by bears or "patchy" as I just heard on Blabberg.
Pundits and news writers seem intellectually incapable of simply discussing and arguing the facts. For example, Trichet says the economic downturn in Europe is decelerating. That's a simple statement based on European data. The rate of change of GDP must decelerating before turning positive. That's simple math. So why oh why do we get buried in these "green shoots' metaphors over & over again by every news outlet ? And then instead of pointing out conflicting data, those disagreeing resort to the metaphor on a metaphor - the "green shoots" are "withering" or "patchy". Sheesh, such thumping tosh !
However, some news writers in Europe (of course) do have some intellectual skills beyond formula articles and commentary. I just heard today's word of the day - deracinate -and another $10 word - rapprochement - on Blabberg by a person with a clear British accent. Hooray ! Maybe he reads this blog. As a bonus, the word, rapprochement, was spoken as it would be in French from which it was borrowed.
Europe is catching up with US, finally.
FT: “The European Central Bank is on track to deliver a record-breaking “stimulus by stealth” to the eurozone economy on Tuesday, as the first-ever offer of unlimited one-year funds could see demand running into several hundred billion euros.
“The size of the ECB’s emergency liquidity-boosting operation, which was announced last month, is expected to be bolstered dramatically by the belief in financial markets that eurozone official interest rates will not fall – and the opportunity to borrow on such favourable conditions will not be repeated.”
And: “German business confidence has brightened more than expected this month with companies in Europe’s largest economy becoming markedly more upbeat on prospects for the next six months.
“The Munich-based Ifo institute reported its closely-watched “business climate” index had risen for the third consecutive month, from 84.3 in May to 85.9 in June to the highest level since November.”
Emerging Markets Pulling Their Oar.
FT: “India’s Congress party-led coalition government is planning to invite foreign investors to participate in an ambitious move to increase road construction 10-fold as the country seeks to boost much-needed infrastructure development.”
Actions
I added a bit to positions in MOS, FCX, GSI and EXM in Obama Fund. And flipped a bit of EEFT. I am simply doing my stock my trading tactic, viz., "buy dips, sell rips" on a stock by stock basis when the market pulls back. With 50 stocks in Obama Fund, that's the only way to do it. I have six more stocks on the "on deck" circle for adds if they pull back a but more.
Word of the Day
"Deracinate" - verb [$10]; transitive, literary
Deracinate means 1. tear up by the roots; 2. obliterate, expunge.
Sentence: Without a doubt, this recession has deracinated whatever "inflation" truly existed in 2007. And Battleship Ben's superb monetary policy has deracinated deflation risks. The doomsayers, however, now are dreaming up a "hyperinflation" fear. What thumping tosh !
Słowo Tygodnia
[That's "Word of the Week" in Polish (I think). That letter - ł - is pronounced as a "w" and the Polish "w" is pronounced as "v"]
"Pić" and "Wypić" - verbs, imperfective and perfective forms, first conjugation
Pić and Wypić mean to drink. The imperfective form denotes incomplete or habitual or repeated action; the perfective form is used for completed actions. Polish verbs require this distinction.
Zdanie: Wczoraj wypiłem dwa piwa. Yesterday I drank two beers. Teraz piję czarną kawę. Now I am drinking black coffee. Dziś wieczorem wypiję dwa piwa. Tonight I will drink two beers.
By the way, the adverbs go at the beginning of the sentence, not at the end.
Pundits and news writers seem intellectually incapable of simply discussing and arguing the facts. For example, Trichet says the economic downturn in Europe is decelerating. That's a simple statement based on European data. The rate of change of GDP must decelerating before turning positive. That's simple math. So why oh why do we get buried in these "green shoots' metaphors over & over again by every news outlet ? And then instead of pointing out conflicting data, those disagreeing resort to the metaphor on a metaphor - the "green shoots" are "withering" or "patchy". Sheesh, such thumping tosh !
However, some news writers in Europe (of course) do have some intellectual skills beyond formula articles and commentary. I just heard today's word of the day - deracinate -and another $10 word - rapprochement - on Blabberg by a person with a clear British accent. Hooray ! Maybe he reads this blog. As a bonus, the word, rapprochement, was spoken as it would be in French from which it was borrowed.
Europe is catching up with US, finally.
FT: “The European Central Bank is on track to deliver a record-breaking “stimulus by stealth” to the eurozone economy on Tuesday, as the first-ever offer of unlimited one-year funds could see demand running into several hundred billion euros.
“The size of the ECB’s emergency liquidity-boosting operation, which was announced last month, is expected to be bolstered dramatically by the belief in financial markets that eurozone official interest rates will not fall – and the opportunity to borrow on such favourable conditions will not be repeated.”
And: “German business confidence has brightened more than expected this month with companies in Europe’s largest economy becoming markedly more upbeat on prospects for the next six months.
“The Munich-based Ifo institute reported its closely-watched “business climate” index had risen for the third consecutive month, from 84.3 in May to 85.9 in June to the highest level since November.”
Emerging Markets Pulling Their Oar.
FT: “India’s Congress party-led coalition government is planning to invite foreign investors to participate in an ambitious move to increase road construction 10-fold as the country seeks to boost much-needed infrastructure development.”
Actions
I added a bit to positions in MOS, FCX, GSI and EXM in Obama Fund. And flipped a bit of EEFT. I am simply doing my stock my trading tactic, viz., "buy dips, sell rips" on a stock by stock basis when the market pulls back. With 50 stocks in Obama Fund, that's the only way to do it. I have six more stocks on the "on deck" circle for adds if they pull back a but more.
Word of the Day
"Deracinate" - verb [$10]; transitive, literary
Deracinate means 1. tear up by the roots; 2. obliterate, expunge.
Sentence: Without a doubt, this recession has deracinated whatever "inflation" truly existed in 2007. And Battleship Ben's superb monetary policy has deracinated deflation risks. The doomsayers, however, now are dreaming up a "hyperinflation" fear. What thumping tosh !
Słowo Tygodnia
[That's "Word of the Week" in Polish (I think). That letter - ł - is pronounced as a "w" and the Polish "w" is pronounced as "v"]
"Pić" and "Wypić" - verbs, imperfective and perfective forms, first conjugation
Pić and Wypić mean to drink. The imperfective form denotes incomplete or habitual or repeated action; the perfective form is used for completed actions. Polish verbs require this distinction.
Zdanie: Wczoraj wypiłem dwa piwa. Yesterday I drank two beers. Teraz piję czarną kawę. Now I am drinking black coffee. Dziś wieczorem wypiję dwa piwa. Tonight I will drink two beers.
By the way, the adverbs go at the beginning of the sentence, not at the end.
Wednesday, February 11, 2009
The End of Good Music ... a reprise
[This post is mostly from one I made in the summer of 2007 - I was reminded of this proof last evening and think a reprise is needed. I've made a few alterations. By the way, I will be traveling to NYC - the Beast - this afternoon and staying there through Thursday evening. No post for Thursday.]
I might as well start some trouble ;-)
Here are three postulates about the quality of recorded music.
1. No excellent music has been written since December 31, 1947.
2. No excellent music has been recorded since December 31, 1954.
3. The principal class of exceptions to Rules #1 and #2 is for (a) Broadway productions, (b) Classical Music, or (c) from great singers who choose to perform in the old ways.
For now, Rule #1 is an axiom based on the general level of complexity and taste. I'm working on a proof. ;-) I'm going to sketch out the proof for #2 and then provide examples to adduce #3.
I think I can "prove" the postulates #2 and #3 for the whole class of recorded music [in the US] considered as an ensemble. Perhaps there are a "few" exceptions, but these are mere outliers - singularities - and don't represent any substantial class.
Consider the widely accepted and empirically proven economic principal of "division of labor" in creating a complex good. Recorded music is a complex good, requiring skilled labor in four different skills: writing music, lyrics, instrumentals and singing. Few individual people have all four skills at any high level, even when an entire population is the source.
Assume the quality "Q" of any recorded music can be represented as the product of a normalized "skill" number [cf. an "IQ" in the skill] of the contributor in each skill, which are symbolized by M, L, I, and S for skills in music, lyrics, instrumentals and singing.
Q = M x L x I x S
The quality of "written music with lyrics" is M x L as each skill is required. For a big band jazz, lyrics are not required, BUT the performance requires many individual performances - at least 10 for a "big band". Hence its Q included I^n where n is at least 10. A "band" would require more than one I - perhaps 3 or 4.
Now assuming the likelihood of each skill being present in any single individual is independent, clearly the highest Q can be reached by selecting four individuals [more for bands]: one each with high M, L, I and S. And just as clearly, if we are required to choose only one individual, the probability of a large product of the single person's levels of M, L, I and S is exceedingly small. I think I could prove this mathematically, but I haven't done much applied math for a few years. But it does seem evident visualizing the distributions.
In 1947, Les Paul and Capital Records created the first multi-track recording where Les Paul played each of eight tracks with his electric guitar. This invention broke the requirement for the selection of many individual performers to create the sound of a "band" on a recording.
In the early 1950s, Les Paul and Mary Ford created revolutionary recordings where Paul's multi-track guitar playing was combined with Mary Ford's singing and rhythm guitar playing were records on separate track and overdubbing. This invention broke the requirement for separate performers for I and S.
In 1954, the eight track tape recorder was developed, which was the core technology for multi-track recording for the next 30 years until the digital age commence. This invention broke the requirement for the selection of many individual performers to create the sound of a "band" on a recording. This invention massively reduced the time and cost for creating complex sounds from very few performers.In 1953-4, the rock & roll era began, producing growing demand for a performer to write his/her own music and lyrics - for some unknown reason, perhaps part of the "idol" phenomena. This greatly reduced the likelihood of high M and L numbers in a recorded performance.
So by 1955, the economics of creating recorded music at low cost [necessary to maximize profit] required finding a few artists of simply above average skills and using technology to create complex sounds for a band and a song. No longer were separate EXCELLENT performers combined, but merely "GOOD" performances were combined from a few people. Almost no one was excellent in all the required skills necessary for recorded music. Combining several "good" quality skills of a person with perhaps one "excellent skill of those persons creates merely a slightly above average "good" recording.
Hence nothing excellent has been recorded since December 31, 1954. QED ;-)
Rule #3 provides examples that arise when the recording does NOT follows "modern" creation methods and hence adduce support for the proof.
Exception (a) follows immediately when the distinctions of the economic of Broadway are considered. A relatively few number of very high priced tickets are sold. And all the artists MUST perform separately live. There is NO value added for having the same person write the musics and lyrics. All performers are excellent and all music and lyrics are selected from the best available. So this class of music is a clear exception to Rule #2.
Similarly for (b) , recordings produced by orchestras of classical music have no division of labor loss of quality.
Finally, examples for (c) are Julie Andrews and Judy Garland - both simply sang great songs in their fine styles with music and lyrics written by others and accompanied by others, so their songs are excellent overall.
That proves Rule #3. QED ;-)
So a Julie Andrews performance of a Broadway hit show is still excellent. But a Bob Dylan performance of a song is merely good. The lyrics might be good, but the singing is ... horrible. ;-)
That should start some trouble :-)))))))
PS: Remember George M. Cohan of "Yankee Doodle Dandy" fame - that's a great movie. And although he wrote the lyrics and musics and danced in his Broadway productions, not even such a star deigned to perform the instruments for the orchestra of the productions.
PPS: I've been thinking about this for quite awhile. Some of the dates were chosen with the help of my father-in-law, who was listening to music during the key dates. I figured I needed to post this on the Internet to claim "precedence" for my proof ;-)
Addendum: I made a few changes, but the proof still holds up well, combining historical facts in technique and style, and the economic force of "division of labor"
Word of the Day
"Cogent" - adjective [$10]
Cogent means 1. having power to compel or constrain; 2. appealing forcibly to the mind of reason: convincing.
Sentence: Tim Geitner yesterday did not deliver a cogent speech to add to buyers' confidence, so when all the traders' bailed out en mass as usual, no buyers were bidding for stocks..
Le Mot du Jour
"S'enivrer" - verb - regular -er conjugation.
S'enivrer means to get drunk; to become intoxicated ('de' with)
La Phrase: Les baissiers s'ont enivré de joie hier quand Geitner a fait un flop.
Sentence: The bears got drunk with joy yesterday when Geitner flopped.
I might as well start some trouble ;-)
Here are three postulates about the quality of recorded music.
1. No excellent music has been written since December 31, 1947.
2. No excellent music has been recorded since December 31, 1954.
3. The principal class of exceptions to Rules #1 and #2 is for (a) Broadway productions, (b) Classical Music, or (c) from great singers who choose to perform in the old ways.
For now, Rule #1 is an axiom based on the general level of complexity and taste. I'm working on a proof. ;-) I'm going to sketch out the proof for #2 and then provide examples to adduce #3.
I think I can "prove" the postulates #2 and #3 for the whole class of recorded music [in the US] considered as an ensemble. Perhaps there are a "few" exceptions, but these are mere outliers - singularities - and don't represent any substantial class.
Consider the widely accepted and empirically proven economic principal of "division of labor" in creating a complex good. Recorded music is a complex good, requiring skilled labor in four different skills: writing music, lyrics, instrumentals and singing. Few individual people have all four skills at any high level, even when an entire population is the source.
Assume the quality "Q" of any recorded music can be represented as the product of a normalized "skill" number [cf. an "IQ" in the skill] of the contributor in each skill, which are symbolized by M, L, I, and S for skills in music, lyrics, instrumentals and singing.
Q = M x L x I x S
The quality of "written music with lyrics" is M x L as each skill is required. For a big band jazz, lyrics are not required, BUT the performance requires many individual performances - at least 10 for a "big band". Hence its Q included I^n where n is at least 10. A "band" would require more than one I - perhaps 3 or 4.
Now assuming the likelihood of each skill being present in any single individual is independent, clearly the highest Q can be reached by selecting four individuals [more for bands]: one each with high M, L, I and S. And just as clearly, if we are required to choose only one individual, the probability of a large product of the single person's levels of M, L, I and S is exceedingly small. I think I could prove this mathematically, but I haven't done much applied math for a few years. But it does seem evident visualizing the distributions.
In 1947, Les Paul and Capital Records created the first multi-track recording where Les Paul played each of eight tracks with his electric guitar. This invention broke the requirement for the selection of many individual performers to create the sound of a "band" on a recording.
In the early 1950s, Les Paul and Mary Ford created revolutionary recordings where Paul's multi-track guitar playing was combined with Mary Ford's singing and rhythm guitar playing were records on separate track and overdubbing. This invention broke the requirement for separate performers for I and S.
In 1954, the eight track tape recorder was developed, which was the core technology for multi-track recording for the next 30 years until the digital age commence. This invention broke the requirement for the selection of many individual performers to create the sound of a "band" on a recording. This invention massively reduced the time and cost for creating complex sounds from very few performers.In 1953-4, the rock & roll era began, producing growing demand for a performer to write his/her own music and lyrics - for some unknown reason, perhaps part of the "idol" phenomena. This greatly reduced the likelihood of high M and L numbers in a recorded performance.
So by 1955, the economics of creating recorded music at low cost [necessary to maximize profit] required finding a few artists of simply above average skills and using technology to create complex sounds for a band and a song. No longer were separate EXCELLENT performers combined, but merely "GOOD" performances were combined from a few people. Almost no one was excellent in all the required skills necessary for recorded music. Combining several "good" quality skills of a person with perhaps one "excellent skill of those persons creates merely a slightly above average "good" recording.
Hence nothing excellent has been recorded since December 31, 1954. QED ;-)
Rule #3 provides examples that arise when the recording does NOT follows "modern" creation methods and hence adduce support for the proof.
Exception (a) follows immediately when the distinctions of the economic of Broadway are considered. A relatively few number of very high priced tickets are sold. And all the artists MUST perform separately live. There is NO value added for having the same person write the musics and lyrics. All performers are excellent and all music and lyrics are selected from the best available. So this class of music is a clear exception to Rule #2.
Similarly for (b) , recordings produced by orchestras of classical music have no division of labor loss of quality.
Finally, examples for (c) are Julie Andrews and Judy Garland - both simply sang great songs in their fine styles with music and lyrics written by others and accompanied by others, so their songs are excellent overall.
That proves Rule #3. QED ;-)
So a Julie Andrews performance of a Broadway hit show is still excellent. But a Bob Dylan performance of a song is merely good. The lyrics might be good, but the singing is ... horrible. ;-)
That should start some trouble :-)))))))
PS: Remember George M. Cohan of "Yankee Doodle Dandy" fame - that's a great movie. And although he wrote the lyrics and musics and danced in his Broadway productions, not even such a star deigned to perform the instruments for the orchestra of the productions.
PPS: I've been thinking about this for quite awhile. Some of the dates were chosen with the help of my father-in-law, who was listening to music during the key dates. I figured I needed to post this on the Internet to claim "precedence" for my proof ;-)
Addendum: I made a few changes, but the proof still holds up well, combining historical facts in technique and style, and the economic force of "division of labor"
Word of the Day
"Cogent" - adjective [$10]
Cogent means 1. having power to compel or constrain; 2. appealing forcibly to the mind of reason: convincing.
Sentence: Tim Geitner yesterday did not deliver a cogent speech to add to buyers' confidence, so when all the traders' bailed out en mass as usual, no buyers were bidding for stocks..
Le Mot du Jour
"S'enivrer" - verb - regular -er conjugation.
S'enivrer means to get drunk; to become intoxicated ('de' with)
La Phrase: Les baissiers s'ont enivré de joie hier quand Geitner a fait un flop.
Sentence: The bears got drunk with joy yesterday when Geitner flopped.
Friday, December 19, 2008
Welcome New Reader ...
That's for Rush Limbaugh, who borrowed my posted ideas of a few days ago for his broadcast yesterday. A few days ago I wrote in this blog that States were going to be shocked by the low amounts that will be paid in estimated taxes for the January 15, 2009 payment date. And yesterday he used that for part of his monologue. Of course he didn't cite me. Oh well ...
Here's another good secondary effect of the drop in oil prices: the world's bad boys, viz., Venezuela, Russia and Iran now have far fewer resources to cause trouble.
Russia continues to deteriorate. And why not ? After virtually driving foreign investors out and cheating them of contractual rights, and acting like the old Brezhnev regime in Georgia, Russia finds its budget gutted and the money it used to buy support gone. No economic reforms were done while the money was flowing well. So Putin squandered the good times and now must reap the whirlwind. And who in their rational minds would invest in Russia now ? Only a fool.
Reports and leaks now imply that Lyndon [that's the official blog nickname for W] will provide debtor-in-possession financing for GM and Chrysler. Good. I like that way to get a rational restructuring of those effectively bankrupt firms. Much of the money could go to suppliers, of course, to pay for goods already delivered.
From FT, I read that some Deutsche Bank investors are actually "shocked" that DB is exercising its contractual rights to not prepay on some subordinated debt. It is truly amazing to me that so many "sophisticated" investors seem not to bother to read the documents. Or wonder why such clauses are inserted, unless they might be used in a difficult environment.
Q4 2008 and Q1 2009 GNP numbers will be very poor. The auto production cuts and announced corporate layoffs are going to make this winter a long, cold winter. The poor and unfortunate will need help, so if you have some money for charitable gifts, this winter it will be quite needed. Contributions directly to local support organizations go the furthest.
Markets
Perhaps Ms. Market will perform for me and pullback nicely so the new Obama Fund can get good entries. The Master List is nearly complete. The cash is raised and ready in my Ameritrade accounts. I'll re-post it around New Year's Day as I begin making investments.
Holiday Schedule
I will be visiting my hometown in central southeast Ohio from Monday, December 22 through Monday December 29. I will not have Internet service so cannot write posts here. I expect to write the next post for Tuesday, December 29, unless something interesting happens over the weekend.
Auto Bridge Loan
Early rumors were wrong - Lyndon went with a straight bridge loan and a fig leaf deadline of March 31. Sheer BS. Oh well.
Words of the Day
"Inconcinnity" - noun [$1000] obsolete or archaic
Inconcinnity means inelegance, impropriety; want of congruence or proportion; inelegance, awkwardness, unsuitableness.
"Incincinnous" - adjective [$1000' obsolete
Inconcinnous means 1. incongruence; 2. inharmonious (musical).
"Inconcinn, -e" - adjective [$1000] obsolete, rare
Incincinn means not adjusted or adapted.
"Inconcinnate" - adjective [$1000] obsolete, rare
Inconcinnate means a) awkward, clumsy, b) not adapted, unsuitable
Sentence: GM and Chrysler needs deep and serious restructuring. A simple direct TARP bridge loan would be inconcinnate to their restructuring needs and unduly complicate a difficult process. Using this money as debtor-in-possession financing perhaps with some private loans in parallel would be much better.
Here's another good secondary effect of the drop in oil prices: the world's bad boys, viz., Venezuela, Russia and Iran now have far fewer resources to cause trouble.
Russia continues to deteriorate. And why not ? After virtually driving foreign investors out and cheating them of contractual rights, and acting like the old Brezhnev regime in Georgia, Russia finds its budget gutted and the money it used to buy support gone. No economic reforms were done while the money was flowing well. So Putin squandered the good times and now must reap the whirlwind. And who in their rational minds would invest in Russia now ? Only a fool.
Reports and leaks now imply that Lyndon [that's the official blog nickname for W] will provide debtor-in-possession financing for GM and Chrysler. Good. I like that way to get a rational restructuring of those effectively bankrupt firms. Much of the money could go to suppliers, of course, to pay for goods already delivered.
From FT, I read that some Deutsche Bank investors are actually "shocked" that DB is exercising its contractual rights to not prepay on some subordinated debt. It is truly amazing to me that so many "sophisticated" investors seem not to bother to read the documents. Or wonder why such clauses are inserted, unless they might be used in a difficult environment.
Q4 2008 and Q1 2009 GNP numbers will be very poor. The auto production cuts and announced corporate layoffs are going to make this winter a long, cold winter. The poor and unfortunate will need help, so if you have some money for charitable gifts, this winter it will be quite needed. Contributions directly to local support organizations go the furthest.
Markets
Perhaps Ms. Market will perform for me and pullback nicely so the new Obama Fund can get good entries. The Master List is nearly complete. The cash is raised and ready in my Ameritrade accounts. I'll re-post it around New Year's Day as I begin making investments.
Holiday Schedule
I will be visiting my hometown in central southeast Ohio from Monday, December 22 through Monday December 29. I will not have Internet service so cannot write posts here. I expect to write the next post for Tuesday, December 29, unless something interesting happens over the weekend.
Auto Bridge Loan
Early rumors were wrong - Lyndon went with a straight bridge loan and a fig leaf deadline of March 31. Sheer BS. Oh well.
Words of the Day
"Inconcinnity" - noun [$1000] obsolete or archaic
Inconcinnity means inelegance, impropriety; want of congruence or proportion; inelegance, awkwardness, unsuitableness.
"Incincinnous" - adjective [$1000' obsolete
Inconcinnous means 1. incongruence; 2. inharmonious (musical).
"Inconcinn, -e" - adjective [$1000] obsolete, rare
Incincinn means not adjusted or adapted.
"Inconcinnate" - adjective [$1000] obsolete, rare
Inconcinnate means a) awkward, clumsy, b) not adapted, unsuitable
Sentence: GM and Chrysler needs deep and serious restructuring. A simple direct TARP bridge loan would be inconcinnate to their restructuring needs and unduly complicate a difficult process. Using this money as debtor-in-possession financing perhaps with some private loans in parallel would be much better.
Wednesday, November 19, 2008
What to Do ?
I was asked yesterday by a loquacious commentor what Barry - aka Obama - should do for a stimulus plan. As this writer is NOT a purist - pharisaic - libertarian, but favors maximum freedom for the common man with strong limits on the ruling classes, you should not be surprised that I favor a large stimulus bill, properly used.
Barry should propose a $1 trillion economic stimulus that would be spent over two years - $500 billion per year.
The money should go to the following productive investments:
1. Generalized infrastructure - roads, bridges, railroads, ports, airports, air traffic control, high speed rail between major cities within 300 miles of each other, nationwide fiber optic Internet, wireless Internet in major cities, etc.
2. Purchase foreclosed homes and rent them to lower income people under a rent-to-own contract as long as they maintain the home and actually live there for ten years. This contract could be assignable with consent of government with suitable anti-speculation rules.
Barry should also request massive global regulation on hedge funds and all aspects of global hot money. Investors in hedge funds should be required to invest for a minimum of three years - complete, strict lock-up. Hedge fund managers should be taxed on all management income as ordinary income. Of course, massive regulation of all derivatives should also be required.
Current dividend and capital gains tax rates should be kept, as they really just help lesson the double taxation of corporate income.
Also, I DO favor some kind of auto industry aid, however distasteful for that failed management and labor clique. When one buys a car, one expects the company will be around to provide service, parts, etc., and a re-sale on the trade in. An auto industry bankruptcy might seriously affect that perception with fearsome unintended consequences. In addition, the chain of bankruptcies throughout the supply chain can be enormous as payments are disrupted. This unknown is not needed now. For $25-$50 billion in aid, it's worth avoiding.
Congress wastes that much on worthless earmarks every year.
Markets
More tax loss selling is and will occur, but there do seem to be "real" nibblers buying these dips.
I have more tax loss selling to do. This is really saving me a lot of money. The timing difference between realized gains and unrealized losses can be substantial if one invests for a longer time period. I mostly re-invest in something else immediately, but do wait a bit for some, as I have other wash sale rules to carefully watch.
PS: Also, doe sanyone else notice how much of this trouble is now located in Europe ? I wonder when The Ostrich, aka ECB chief Trichet, will cut rates to a realistic level. ECB and Bank of Engalnd should cut rates to 1%.
Word of the Day
"Sadduce" - noun [$10] or "Sadducee" - this word contrasts "Pharisaic"
Sadduce means a member of a Jewish sect or party at the time of Christ that denied the resurrection of the dead, the existence of spirits, and the obligation of the traditional oral law.
Sentence: Perhaps Bunkerman is more like a sadducaic libertarian, as he opposes the strict pharisaic - purist - interpretation and favors practical limits on the rich and powerful to prevent them from oppressing the common man, re-creating an aristocracy and permitting their antics from harming the global economy. And he also denies the existence of the god or demigod of the "market" as correct interpreter or diviner of the future of the world.
Barry should propose a $1 trillion economic stimulus that would be spent over two years - $500 billion per year.
The money should go to the following productive investments:
1. Generalized infrastructure - roads, bridges, railroads, ports, airports, air traffic control, high speed rail between major cities within 300 miles of each other, nationwide fiber optic Internet, wireless Internet in major cities, etc.
2. Purchase foreclosed homes and rent them to lower income people under a rent-to-own contract as long as they maintain the home and actually live there for ten years. This contract could be assignable with consent of government with suitable anti-speculation rules.
Barry should also request massive global regulation on hedge funds and all aspects of global hot money. Investors in hedge funds should be required to invest for a minimum of three years - complete, strict lock-up. Hedge fund managers should be taxed on all management income as ordinary income. Of course, massive regulation of all derivatives should also be required.
Current dividend and capital gains tax rates should be kept, as they really just help lesson the double taxation of corporate income.
Also, I DO favor some kind of auto industry aid, however distasteful for that failed management and labor clique. When one buys a car, one expects the company will be around to provide service, parts, etc., and a re-sale on the trade in. An auto industry bankruptcy might seriously affect that perception with fearsome unintended consequences. In addition, the chain of bankruptcies throughout the supply chain can be enormous as payments are disrupted. This unknown is not needed now. For $25-$50 billion in aid, it's worth avoiding.
Congress wastes that much on worthless earmarks every year.
Markets
More tax loss selling is and will occur, but there do seem to be "real" nibblers buying these dips.
I have more tax loss selling to do. This is really saving me a lot of money. The timing difference between realized gains and unrealized losses can be substantial if one invests for a longer time period. I mostly re-invest in something else immediately, but do wait a bit for some, as I have other wash sale rules to carefully watch.
PS: Also, doe sanyone else notice how much of this trouble is now located in Europe ? I wonder when The Ostrich, aka ECB chief Trichet, will cut rates to a realistic level. ECB and Bank of Engalnd should cut rates to 1%.
Word of the Day
"Sadduce" - noun [$10] or "Sadducee" - this word contrasts "Pharisaic"
Sadduce means a member of a Jewish sect or party at the time of Christ that denied the resurrection of the dead, the existence of spirits, and the obligation of the traditional oral law.
Sentence: Perhaps Bunkerman is more like a sadducaic libertarian, as he opposes the strict pharisaic - purist - interpretation and favors practical limits on the rich and powerful to prevent them from oppressing the common man, re-creating an aristocracy and permitting their antics from harming the global economy. And he also denies the existence of the god or demigod of the "market" as correct interpreter or diviner of the future of the world.
Wednesday, November 12, 2008
Bits and Trends
Retail sales in China are up 22% in October - I guess that's year over year. Hmmm ... quite interesting. Perhaps China have developed considerable internal domestic demand and doesn't rely as much as one might have thought on exports.
A problem Japan has had for many years is that its economy excessively relies on exports and domestic demand is too low. Demographics partly forces that, but government policies there exacerbate it.
American Express to ask for TARP aid. Huh ? What the heck has that management been doing ? I've never liked the management of American Express. I fear there is a bug under that rock.
I think the Mexico story from yesterday about how they have hedged a very large amount of oil tells us why oil is still weak. Hedging by producer nations that need the money. Hmmm ...
Actions
Yesterday I re-bought some CCJ as the wash sale tax window is long gone. Their earnings were OK and uranium really is the only effective power source that does not produce carbon dioxide. I don't believe that global warming is caused by humans, but enough people do and I'd like to profit from their stupidity. 1/2 position for now.
I also added a bit to DRYS, EXM and GNK. These stocks are ultra risky as the chance does exist the banks won't show some flexibility in loan to value covenants. But in my experience, as long as the companies produce cash flow on the loans, the banks will, and should, forebear. These companies do not have excessive debt and did a good job locking in long term charters with good credits for enough of the fleet to cover the bank debt. Dilution is a risk, as is whether large shareholders are margined on their stock. I do not have positions that are too large in those, and will add a bit me at good prices.
Late yesterday an astute commentor skeptically asked for my 'plan". Overall my plan is to continue to buy some stocks I like at good prices. I like GOOG but cannot buy it until late in the month due to the 30 day wash sale window. I will maintain a reserve, either in the Alpha Fund itself or in the bank account from which I can easily shift $ to it. "Protect yourself at all times."
Why do I care about tax losses ? Since I plan to hold these stocks a long time in the future to get large, long term gains. I don't want to lock up valuable tax losses for years. And I can use those losses this year as I still have very large capital gains to offset - both short term and long term. This save me real money every quarterly estimated tax payment day.
Word of the Day
"Assay" - noun and verb [many usages, this usage is a $100 one from an H. L. Mencken quote]
Assay means (after meanings 1-7) 8. (metallurgy) determination of the amount of metal, especially gold or silver, in an ore, alloy, etc.; 9. a substance undergoing analysis or trial; 10. a detailed report of the findings in assaying a substance; 11. (archaic) examination, trial, attempt, essay.
Sentences:
(A) (from "the Impossible H. L. Mencken", page 207) "For seldom have these eyes encountered a document by an American politician which there was a larger assay of common sense."
(B) The assay of common sense provided by Babblevsion, Blabberg and in general the American press compares unfavorably to the assay of true gold in fool's gold.
A problem Japan has had for many years is that its economy excessively relies on exports and domestic demand is too low. Demographics partly forces that, but government policies there exacerbate it.
American Express to ask for TARP aid. Huh ? What the heck has that management been doing ? I've never liked the management of American Express. I fear there is a bug under that rock.
I think the Mexico story from yesterday about how they have hedged a very large amount of oil tells us why oil is still weak. Hedging by producer nations that need the money. Hmmm ...
Actions
Yesterday I re-bought some CCJ as the wash sale tax window is long gone. Their earnings were OK and uranium really is the only effective power source that does not produce carbon dioxide. I don't believe that global warming is caused by humans, but enough people do and I'd like to profit from their stupidity. 1/2 position for now.
I also added a bit to DRYS, EXM and GNK. These stocks are ultra risky as the chance does exist the banks won't show some flexibility in loan to value covenants. But in my experience, as long as the companies produce cash flow on the loans, the banks will, and should, forebear. These companies do not have excessive debt and did a good job locking in long term charters with good credits for enough of the fleet to cover the bank debt. Dilution is a risk, as is whether large shareholders are margined on their stock. I do not have positions that are too large in those, and will add a bit me at good prices.
Late yesterday an astute commentor skeptically asked for my 'plan". Overall my plan is to continue to buy some stocks I like at good prices. I like GOOG but cannot buy it until late in the month due to the 30 day wash sale window. I will maintain a reserve, either in the Alpha Fund itself or in the bank account from which I can easily shift $ to it. "Protect yourself at all times."
Why do I care about tax losses ? Since I plan to hold these stocks a long time in the future to get large, long term gains. I don't want to lock up valuable tax losses for years. And I can use those losses this year as I still have very large capital gains to offset - both short term and long term. This save me real money every quarterly estimated tax payment day.
Word of the Day
"Assay" - noun and verb [many usages, this usage is a $100 one from an H. L. Mencken quote]
Assay means (after meanings 1-7) 8. (metallurgy) determination of the amount of metal, especially gold or silver, in an ore, alloy, etc.; 9. a substance undergoing analysis or trial; 10. a detailed report of the findings in assaying a substance; 11. (archaic) examination, trial, attempt, essay.
Sentences:
(A) (from "the Impossible H. L. Mencken", page 207) "For seldom have these eyes encountered a document by an American politician which there was a larger assay of common sense."
(B) The assay of common sense provided by Babblevsion, Blabberg and in general the American press compares unfavorably to the assay of true gold in fool's gold.
Wednesday, June 25, 2008
Outlook for the Economy
Yesterday the question of the prospect for the Fed's raising rates was asked in the comments [click on "Comments" below each day's blog]. A Reader adduced the probabilities for hikes in the Federal Funds rate to suggest an increase in the fall by a bit. Those probabilities are determined by traders and beefers, so can be dominated by fear and greed, and were quite wrong just recently in forecasting rates below 2%. If they were wrong just recently, why should I believe then now ?
But then I thought about the question and what would make the Fed raise rates. Inflation is near the comfort zone and likely to fall in the near future. The 2% overnight rate equals the 2% upper band of the comfort zone and is a bit below the 2.2% core PCE year over year rate of inflation. A neutral federal funds rate would now be 2.5% as the overnight rate should be a bit over a short term Treasury bill rate, which in turn should approximately equal to the core rate of inflation in equilibrium. So the decision depends on the economy. When the economy bottoms, the Fed will be able to raise rates to neutral.
Data will lag the real economy by about three months. So what are the prospects for the economy ?
Bunkerman wrote a few months ago that the housing market will bottom in the late Spring. That means June. Housing has gone down enough to entice buyers and the price bubble from 2004-2006 is gone. Many homes are affordable now. Some areas have oversupply [sun & surf areas], so will take awhile to work off that inventory. But I think the housing market has btoomed in June, or is bottoming now. Data will appear in August.
The economy is bottoming now, in my humble opinion. That means the Fed can raise rates to neutral this fall, perhaps in September, to the neutral zone of 2.25 to 2.5%. That's when I think the Fed will raise. Hmmm .... mirabile dictu ! That agrees with the fed funds market estimates.
So I need a buy list for stocks. While traveling, that is tough to compile. And I have new money coming in soon, so must figure out what to buy. I'll try to put a list together next week when I return.
PS: I shift my base of operations this evening, so might lose my Internet. If so I won't be able to post Thursday. I plan to drive home on Friday, so can't post Friday.
But then I thought about the question and what would make the Fed raise rates. Inflation is near the comfort zone and likely to fall in the near future. The 2% overnight rate equals the 2% upper band of the comfort zone and is a bit below the 2.2% core PCE year over year rate of inflation. A neutral federal funds rate would now be 2.5% as the overnight rate should be a bit over a short term Treasury bill rate, which in turn should approximately equal to the core rate of inflation in equilibrium. So the decision depends on the economy. When the economy bottoms, the Fed will be able to raise rates to neutral.
Data will lag the real economy by about three months. So what are the prospects for the economy ?
Bunkerman wrote a few months ago that the housing market will bottom in the late Spring. That means June. Housing has gone down enough to entice buyers and the price bubble from 2004-2006 is gone. Many homes are affordable now. Some areas have oversupply [sun & surf areas], so will take awhile to work off that inventory. But I think the housing market has btoomed in June, or is bottoming now. Data will appear in August.
The economy is bottoming now, in my humble opinion. That means the Fed can raise rates to neutral this fall, perhaps in September, to the neutral zone of 2.25 to 2.5%. That's when I think the Fed will raise. Hmmm .... mirabile dictu ! That agrees with the fed funds market estimates.
So I need a buy list for stocks. While traveling, that is tough to compile. And I have new money coming in soon, so must figure out what to buy. I'll try to put a list together next week when I return.
PS: I shift my base of operations this evening, so might lose my Internet. If so I won't be able to post Thursday. I plan to drive home on Friday, so can't post Friday.
Wednesday, June 18, 2008
Deja Vu all over again
In the latter half of the 19th century, the Sear Roebuck catalog opened up the distant rural US to the world. Innumerable products could be ordered at a fixed price and delivered to small towns or farms. The great movie, "The Music Man" has memorable scene where the townspeople in Iowa are so excited by the arrival of the Wells Fargo wagon delivering ordered goods.
So now, the Internet has opened up the whole world - the developing world - to the innumerable goods and services of the developed world. No wholesaler, no middleman taking an undetermined, but large, "trading profit".
What happened in the last half of the 19th century ? A huge boom lasting decades occurred. Crises occurred , as the railroads were overbuilt and had short term problems. The technology crash in the period 2000-2003 should be viewed with this background. After the 19th century railroad busts, the economy came roaring back. New energy sources such as electricty and oil replaced the old ones of wood and whale oil.
Housing was overbuilt by speculative demand. That has ended. Exubia is being repriced to reflect the cost of commutes and heating or cooling that McMansion. Central cities and small towns where transportation costs are less will do fine using the Internet and efficient deliveries to thrive.
Bunkerman's world view sees renewed, strong growth "second phase" to this economic boom. The risks are really political disruptions and wars caused by the ruling classes. Will they mess up the world to retain their power ? I think the talk of the ECB rasing rates reflects this desire to retain power. The already wealthy want to grind "inflation" out of the common man. Does any of their talk reflect the needs of the common worker in Europe ? No. This is a big risk to a united Europe, already reeeling from the Irish "NO" vote.
Similarly Obama wants to raise taxes on those working to earn more income, not on the tax free wealth of his ruling class supporters. Can he deceive the common man ? Time will tell.
I don't think one rate bump will be decisive, but this bears watching.
[by the way, "second phase" is a rugby term, for a renewed offense after a tackle.]
So now, the Internet has opened up the whole world - the developing world - to the innumerable goods and services of the developed world. No wholesaler, no middleman taking an undetermined, but large, "trading profit".
What happened in the last half of the 19th century ? A huge boom lasting decades occurred. Crises occurred , as the railroads were overbuilt and had short term problems. The technology crash in the period 2000-2003 should be viewed with this background. After the 19th century railroad busts, the economy came roaring back. New energy sources such as electricty and oil replaced the old ones of wood and whale oil.
Housing was overbuilt by speculative demand. That has ended. Exubia is being repriced to reflect the cost of commutes and heating or cooling that McMansion. Central cities and small towns where transportation costs are less will do fine using the Internet and efficient deliveries to thrive.
Bunkerman's world view sees renewed, strong growth "second phase" to this economic boom. The risks are really political disruptions and wars caused by the ruling classes. Will they mess up the world to retain their power ? I think the talk of the ECB rasing rates reflects this desire to retain power. The already wealthy want to grind "inflation" out of the common man. Does any of their talk reflect the needs of the common worker in Europe ? No. This is a big risk to a united Europe, already reeeling from the Irish "NO" vote.
Similarly Obama wants to raise taxes on those working to earn more income, not on the tax free wealth of his ruling class supporters. Can he deceive the common man ? Time will tell.
I don't think one rate bump will be decisive, but this bears watching.
[by the way, "second phase" is a rugby term, for a renewed offense after a tackle.]
Thursday, June 12, 2008
Missing Links
While modern man seems to eschew facts, your blogger's quotidian reading of three newspapers (paper ones) and a few more online finds many reported facts to develop his theories, and his quotidian mingling with the common man, aka the average Joe, provides more.
Japan's GDP grew 4% in real terms in Q1 of 2008 (WSJ 6/12).
Bunkerman bought 30 DVDs of his favorite movies as his old VHS tapes from 20 years ago are wearing out [they get too dark to view]. The price: about $9 each on http://www.amazon.com/ ; he paid about $20 per tape in the late 1980s. So this form of entertainment has declined in price by more than 50% over 20 years, plus improved quality. Whither inflation ?
The new Apple 3G iPhone will sell for $200. Last year the original product was introduced for $400. Higher quality, price down 50% in one year. Whither inflation ?
Bunkerman bought a case of a fine, local craft ale named "Ipswich Ale" produced by Mercury Brewing Company about 10 miles from my bunker. Price - $26 per case. Prior price: $25 per case for prior three years. That's a rise of 1.3% per year, validating core inflation measures.
Markets
Late yesterday we witnessed a fine example of 1920s style market manipulation. The Oppenhemier bank analyst comes on CNBC near the close to shriek about doom for the banks ... again. Why ? Why on TV near the close ? Readings of 1920s style market manipulation show old antics is now the modus operandi of the beefers. Load up shorts, then get a prominent person to go to the press and present doom. Then with no uptick rule, hit them with big short orders and hit the XFL bigtime with more shorts and probably hit the options, too. So her beefer clients loaded up and she obligingly goes on babblevision airhead Maria's show in the last 30 minutes of trading. Market manipulation re-born thanks to the SEC.
In Q1 the obvious anti-bubble trade was sell gold & silver, buy stocks. The obvious anti-bubble trade now is to sell oil, buy stocks. WB weekly chart looks like a black hole is forming. Ugh ! I can't sell my oil stocks since the gains would be ST. Yesterday I re-bought all the BAC shares I had flipped around 43 in March, so I've doubled up. On Monday I am considering re-buying the WB and C shares I sold on 5/15 for a tax loss. I can then sell the old, higher priced shares in 31 days for a ST tax loss to offset my gold & silver profits. That will save me 40% - worth doing. Still thinking about JPM re-buy as it's not down enough yet to let me do the tax loss play for enough money.
Ruling Classes
A top Obama advisor resigns after his special deal loans from Countrywide Finanace become public. These knaves are all alike. Grind down the common man with taxes while getting favored treatment.
Word of the Day
"Manque" - adjective [$10], pronounced "man ka" with the "a" in "man" as in father and the "ka" rhymes with may, accent on "ka"; used postpositionally, i. e., after the noun.
Manque means [$10] that might have been but is not, unfullfilled; [$100] having failed, missed or fallen short, esp. because of circumstances of a defect of character, unsuccessful, frustrated.
Sentence: Will the Hillary campaign manque now provide a wave of new support for Big John McCain from angry Hillary voters ?
Japan's GDP grew 4% in real terms in Q1 of 2008 (WSJ 6/12).
Bunkerman bought 30 DVDs of his favorite movies as his old VHS tapes from 20 years ago are wearing out [they get too dark to view]. The price: about $9 each on http://www.amazon.com/ ; he paid about $20 per tape in the late 1980s. So this form of entertainment has declined in price by more than 50% over 20 years, plus improved quality. Whither inflation ?
The new Apple 3G iPhone will sell for $200. Last year the original product was introduced for $400. Higher quality, price down 50% in one year. Whither inflation ?
Bunkerman bought a case of a fine, local craft ale named "Ipswich Ale" produced by Mercury Brewing Company about 10 miles from my bunker. Price - $26 per case. Prior price: $25 per case for prior three years. That's a rise of 1.3% per year, validating core inflation measures.
Markets
Late yesterday we witnessed a fine example of 1920s style market manipulation. The Oppenhemier bank analyst comes on CNBC near the close to shriek about doom for the banks ... again. Why ? Why on TV near the close ? Readings of 1920s style market manipulation show old antics is now the modus operandi of the beefers. Load up shorts, then get a prominent person to go to the press and present doom. Then with no uptick rule, hit them with big short orders and hit the XFL bigtime with more shorts and probably hit the options, too. So her beefer clients loaded up and she obligingly goes on babblevision airhead Maria's show in the last 30 minutes of trading. Market manipulation re-born thanks to the SEC.
In Q1 the obvious anti-bubble trade was sell gold & silver, buy stocks. The obvious anti-bubble trade now is to sell oil, buy stocks. WB weekly chart looks like a black hole is forming. Ugh ! I can't sell my oil stocks since the gains would be ST. Yesterday I re-bought all the BAC shares I had flipped around 43 in March, so I've doubled up. On Monday I am considering re-buying the WB and C shares I sold on 5/15 for a tax loss. I can then sell the old, higher priced shares in 31 days for a ST tax loss to offset my gold & silver profits. That will save me 40% - worth doing. Still thinking about JPM re-buy as it's not down enough yet to let me do the tax loss play for enough money.
Ruling Classes
A top Obama advisor resigns after his special deal loans from Countrywide Finanace become public. These knaves are all alike. Grind down the common man with taxes while getting favored treatment.
Word of the Day
"Manque" - adjective [$10], pronounced "man ka" with the "a" in "man" as in father and the "ka" rhymes with may, accent on "ka"; used postpositionally, i. e., after the noun.
Manque means [$10] that might have been but is not, unfullfilled; [$100] having failed, missed or fallen short, esp. because of circumstances of a defect of character, unsuccessful, frustrated.
Sentence: Will the Hillary campaign manque now provide a wave of new support for Big John McCain from angry Hillary voters ?
Monday, June 9, 2008
Poorer
I still remember the lecture on the oil price increases of 1973 and 1979-1980 in the business economics class at MIT's Sloan School of Management. This was 1979 and its effects were still being felt. The professor simply said that such an increase in the price of an important, irreplaceable (in the short term) raw material was going to make everyone poorer. There was no way around it - poorer. Those oil price increases were quite sudden. The current wave of oil price increases are occurring over a few years - from a monthly chart, oil prices broke out in 2004 at $40/barrel and the trend has been up ever since.
The professor said there were two outcomes from a sudden oil price spike: recession or inflation. The inflation occurs if the central bank monetizes the oil price increase. A third outcome exists in a steady price rise: a slowdown. I note that hourly earnings are nearly flat in real terms. But productivity was up about 2.5%. So what's going on ?
The gains in productivity are being used to pay for the higher cost of oil, not to increase the standard of living of the common man. Coupled with the continued avarice of the ruling classes, the common man is experiencing a decline in his standard of living as he must work harder and learn new skills to stay even.
Ruling Classes
These hogs are continuing to create trouble for the common man. I heard this morning from an analyst in Europe that for five years there has been an aversion to investing in equity. The beefers*, who were getting all the funds flows, instead heavily played in spread products, creating the debt bubble and the current credit crises. And they are playing in commodities. Together with their friends/clients in the pension funds, they are buying oil futures. Not investing to find more oil. Just buying futures and swaps. For every buyer there is a seller - that is a truism in any derivative product.
Who are the sellers in oil futures/swaps ? There is a limited universe of strong sellers: oil companies with oil in the ground. But they limit how much oil they will sell forward. OPEC and other governments don't sell oil in the forward markets. So this stampede of money into commodities has overwhelmed those derivative markets. That's the cause of this oil price increase since $100. Anyone saying that's not possible simply hasn't done the math. I did a quick calculation last Friday and it's rather easy to prove this flood of pension and beefer money into the oil derivative markets can overwhelm them.
I have no problem with pension funds investing in real assets, but futures are NOT real assets. If a pension fund wants to own oil, it should buy physical oil in the ground, as they do for timber - they buy forests. Or invest in drilling and other real, physical oil investments - that creates more supply. So the old rules against pension funds speculating in futres should be reinstated. Bring back the "unrelated business income tax" for these activities. And beefers must be regulated stringently.
*big, evil funds.
Markets
Ugh. Obviously the markets can't sustain a bullish trend until the upper limit to oil prices is known for the intermediate term.
Hmmm ... I see Goldman, Sachs is building a new, palatial corporate headquarters with six huge trading floors. See my blog post of june 4 for "Truisms", #1. Perhaps this will signal a top in this unholy focus on "trading" as a source of income. How unproductive is that ? Nothing is created by that huge human activity of talented people. They just try to skim money off their institutional clients. What a despicable business for a corporation !
Word of the Day
"Congener" - noun [$10]
Congener means 1. a thing or person of the same kind or category as another, esp. animals or plants of a specified genus; 2. (esp. US) a by-product giving a distinctive character to a wine or spirit.
Sentence: Huge Wall Street firms that focus huge capital and effort in trading, such as Goldman Sach, are simply gargantuan congeners of the beefers. They must be heavily regulated to prevent them harming the common man with their shenanigans.
The professor said there were two outcomes from a sudden oil price spike: recession or inflation. The inflation occurs if the central bank monetizes the oil price increase. A third outcome exists in a steady price rise: a slowdown. I note that hourly earnings are nearly flat in real terms. But productivity was up about 2.5%. So what's going on ?
The gains in productivity are being used to pay for the higher cost of oil, not to increase the standard of living of the common man. Coupled with the continued avarice of the ruling classes, the common man is experiencing a decline in his standard of living as he must work harder and learn new skills to stay even.
Ruling Classes
These hogs are continuing to create trouble for the common man. I heard this morning from an analyst in Europe that for five years there has been an aversion to investing in equity. The beefers*, who were getting all the funds flows, instead heavily played in spread products, creating the debt bubble and the current credit crises. And they are playing in commodities. Together with their friends/clients in the pension funds, they are buying oil futures. Not investing to find more oil. Just buying futures and swaps. For every buyer there is a seller - that is a truism in any derivative product.
Who are the sellers in oil futures/swaps ? There is a limited universe of strong sellers: oil companies with oil in the ground. But they limit how much oil they will sell forward. OPEC and other governments don't sell oil in the forward markets. So this stampede of money into commodities has overwhelmed those derivative markets. That's the cause of this oil price increase since $100. Anyone saying that's not possible simply hasn't done the math. I did a quick calculation last Friday and it's rather easy to prove this flood of pension and beefer money into the oil derivative markets can overwhelm them.
I have no problem with pension funds investing in real assets, but futures are NOT real assets. If a pension fund wants to own oil, it should buy physical oil in the ground, as they do for timber - they buy forests. Or invest in drilling and other real, physical oil investments - that creates more supply. So the old rules against pension funds speculating in futres should be reinstated. Bring back the "unrelated business income tax" for these activities. And beefers must be regulated stringently.
*big, evil funds.
Markets
Ugh. Obviously the markets can't sustain a bullish trend until the upper limit to oil prices is known for the intermediate term.
Hmmm ... I see Goldman, Sachs is building a new, palatial corporate headquarters with six huge trading floors. See my blog post of june 4 for "Truisms", #1. Perhaps this will signal a top in this unholy focus on "trading" as a source of income. How unproductive is that ? Nothing is created by that huge human activity of talented people. They just try to skim money off their institutional clients. What a despicable business for a corporation !
Word of the Day
"Congener" - noun [$10]
Congener means 1. a thing or person of the same kind or category as another, esp. animals or plants of a specified genus; 2. (esp. US) a by-product giving a distinctive character to a wine or spirit.
Sentence: Huge Wall Street firms that focus huge capital and effort in trading, such as Goldman Sach, are simply gargantuan congeners of the beefers. They must be heavily regulated to prevent them harming the common man with their shenanigans.
Tuesday, June 3, 2008
Problem Identification
In World War II, soldiers, sailors and airmen were trained to identify quickly what type of enemy equipment was approaching, so the correct response could be immediately made. It matters if that rumble is a Panther tank or a half-track with infantry. It matters if that silhouette is a Val bomber or a Zero. And it matters if that object in the periscope is a freighter or a destroyer. So they trained and paid attention to details like the number of engines, etc.
The modern investor doesn't seem to have or seek this skill. He seems lazy or superstitious, blaming old demons for everything. Definitions get changed to fit whatever is happening. So I thought I'd help a bit.
Inflation - a significant rise in prices of almost all goods and services beyond internal quality or technological improvements. The cause is excessive nominal demand due to prolonged excession growth in the supply of money in excess of economic growth. The cure is tight money. Significant rises in just a few groups due to supply problems is not "inflation", it's a supply problem in those groups.
Recession - A broad, prolonged DECLINE in the Gross Domestic Product. The period must be at least two quarters of NEGATIVE change in the GDP. There are multiple causes, including bubbles in major economic sectors, excessive business capital investment, excessive business inventories caused by a drop in consumer demand, government policy, etc. The cure must fit that cause. Sometimes passage of time is the only cure.
Stagnation - A broad, very prolonged period of economic growth below the long term trend capability of the economy, usually considered 2.5-3%. A mid-cycle slowdown is a short period of stagnation while an economy adjusts internally or externally from one growth sector to another. A prolonged stagnation, other that a mid-cycle slowdown, is usually caused by poor government policies that inhibit growth, excessive taxation, or pressures from overseas.
Stagflation is the simultaneous occurrence of BOTH Inflation and Stagnation. This did occur in the late 1970s as high inflation due to excessive monetary growth combined with stagnation caused by excessive taxation and multiple new regulations on business created stagnation. The Reagan Revolution cured this with some aid from Volcker's Fed. The cures weren't perfect interest rates were kept too high for too long and the initial wave of tax cuts contained too much special treatment for powerful political groups.
Standard of Living - the combination of wages and the cost of living. By "wages" I mean total compensation. A declining standard of living can occur even under GDP growth if the common man's wages are cut while the ruling classes take more of the pie. This is more painful if inflation is even small, at 2%. The combination of a 2% wage cut with a 2% inflation seems very painful at a 4% decline in the standard of living of the common man.
Recent major changes in benefits for health care, cutting retirement plans, replacement of slkilled work with high pay with low pay unskilled work have and are causing broad reductions in wages of the common man. CEO and other ruling class pay has increased the share of the pie of the ruling classes while doing nothing for overall economic growth, leaving less for the common man.
I'lll write more later or on another day. I hope this helps people identify the real "problem" which I see as a decline in the standard of living caused in the example I gave.
Markets
Mirabile Dictu !!! George Soros says that index investments by pension funds in commodities is creating a bubble in commodities. I guess George Soros reads this blog - even though I bash him often - as I wrote about that recently. From Financial Times web site this morning: "the relatively recent ability of investment institutions to invest in the futures market through index funds is exaggerating price rises and creating an oil market bubble."
Wachovia fires its CEO - good, they listened to my two letters to the lead outside director. The guy clearly was not competent to lead a major bank.
Ruling Classes
Today's WSJ contains a fine example of how the DC ruling classes loot the public funds. The WTO ruled again against US cotton subsidies. "The U.S. government was forced to overhaul federal aid to its politically powerful cotton industry after the WTO ruled in 2005 in Brazil's favor that certain payments distort trade." US govt. is subsidizing cotton growers ... think ... cotton plantations ... uh ... the rich & powerful.
If an agricultural product must be subsidized, why not fresh fruits & vegetables, which are healthy ?
I think this will be a regular part of my blog, viz., pointing out news items that show how the common man is being systematically looted by the DC ruling classes causing a decline in his standard of living.
Word of the Day
"Refractory" - adjective and noun [$10]
Refractory means (Adj.) 1. stubborn, unmanageable, rebellious; 2a. (of a wound, disease, etc.) not yielding to treatment; 2b. (of a person, etc. ) resistant to infection; 3. (of a substance) hard to fuse or work; (Noun) substance especially resistant to corrosion, heat, etc.
Sentence: To increase energy supply and hence cut the long term growth in oil prices is quite a refractory problem. There is no "silver bullet" or "quick fix" or "easy way out". All means to increase supply or find alternatives must be employed to gain a few percent from each. This means more nuclear power, more drilling, more development of oil shales, etc. All are needed.
The modern investor doesn't seem to have or seek this skill. He seems lazy or superstitious, blaming old demons for everything. Definitions get changed to fit whatever is happening. So I thought I'd help a bit.
Inflation - a significant rise in prices of almost all goods and services beyond internal quality or technological improvements. The cause is excessive nominal demand due to prolonged excession growth in the supply of money in excess of economic growth. The cure is tight money. Significant rises in just a few groups due to supply problems is not "inflation", it's a supply problem in those groups.
Recession - A broad, prolonged DECLINE in the Gross Domestic Product. The period must be at least two quarters of NEGATIVE change in the GDP. There are multiple causes, including bubbles in major economic sectors, excessive business capital investment, excessive business inventories caused by a drop in consumer demand, government policy, etc. The cure must fit that cause. Sometimes passage of time is the only cure.
Stagnation - A broad, very prolonged period of economic growth below the long term trend capability of the economy, usually considered 2.5-3%. A mid-cycle slowdown is a short period of stagnation while an economy adjusts internally or externally from one growth sector to another. A prolonged stagnation, other that a mid-cycle slowdown, is usually caused by poor government policies that inhibit growth, excessive taxation, or pressures from overseas.
Stagflation is the simultaneous occurrence of BOTH Inflation and Stagnation. This did occur in the late 1970s as high inflation due to excessive monetary growth combined with stagnation caused by excessive taxation and multiple new regulations on business created stagnation. The Reagan Revolution cured this with some aid from Volcker's Fed. The cures weren't perfect interest rates were kept too high for too long and the initial wave of tax cuts contained too much special treatment for powerful political groups.
Standard of Living - the combination of wages and the cost of living. By "wages" I mean total compensation. A declining standard of living can occur even under GDP growth if the common man's wages are cut while the ruling classes take more of the pie. This is more painful if inflation is even small, at 2%. The combination of a 2% wage cut with a 2% inflation seems very painful at a 4% decline in the standard of living of the common man.
Recent major changes in benefits for health care, cutting retirement plans, replacement of slkilled work with high pay with low pay unskilled work have and are causing broad reductions in wages of the common man. CEO and other ruling class pay has increased the share of the pie of the ruling classes while doing nothing for overall economic growth, leaving less for the common man.
I'lll write more later or on another day. I hope this helps people identify the real "problem" which I see as a decline in the standard of living caused in the example I gave.
Markets
Mirabile Dictu !!! George Soros says that index investments by pension funds in commodities is creating a bubble in commodities. I guess George Soros reads this blog - even though I bash him often - as I wrote about that recently. From Financial Times web site this morning: "the relatively recent ability of investment institutions to invest in the futures market through index funds is exaggerating price rises and creating an oil market bubble."
Wachovia fires its CEO - good, they listened to my two letters to the lead outside director. The guy clearly was not competent to lead a major bank.
Ruling Classes
Today's WSJ contains a fine example of how the DC ruling classes loot the public funds. The WTO ruled again against US cotton subsidies. "The U.S. government was forced to overhaul federal aid to its politically powerful cotton industry after the WTO ruled in 2005 in Brazil's favor that certain payments distort trade." US govt. is subsidizing cotton growers ... think ... cotton plantations ... uh ... the rich & powerful.
If an agricultural product must be subsidized, why not fresh fruits & vegetables, which are healthy ?
I think this will be a regular part of my blog, viz., pointing out news items that show how the common man is being systematically looted by the DC ruling classes causing a decline in his standard of living.
Word of the Day
"Refractory" - adjective and noun [$10]
Refractory means (Adj.) 1. stubborn, unmanageable, rebellious; 2a. (of a wound, disease, etc.) not yielding to treatment; 2b. (of a person, etc. ) resistant to infection; 3. (of a substance) hard to fuse or work; (Noun) substance especially resistant to corrosion, heat, etc.
Sentence: To increase energy supply and hence cut the long term growth in oil prices is quite a refractory problem. There is no "silver bullet" or "quick fix" or "easy way out". All means to increase supply or find alternatives must be employed to gain a few percent from each. This means more nuclear power, more drilling, more development of oil shales, etc. All are needed.
Friday, May 30, 2008
Summing Up
As summer is upon us, I thought that reiterating some of my more controverisal views might be fun. And might cause some trouble, too !
1. No recession has or will occur. This is a mid-cycle slowdown.
2. A rich man's panic did occur, which also brought to light some amazing cupidity and stupidity in Wall Street.
3. The housing bottom is upon us.
4. There is too much money sloshing in hedge funds.
5. Hedge funds should be regulated like mutual funds or banks, as appropriate.
6. Pension funds should be prohibited from speculating in futures markets. If they want to buy oil, buy oil in the ground or buy physical oil & store it.
7. All derivatives should be regulated and required to be traded on exchanges with pure right of set off.
8. There is no significant general inflation. Oil & some energy prices have risen hugely, mostly due to lack of new supply and increased demand. Everything else is just painful adjustments to that pressure.
9. The Fed needs to increase the monetary base more; money growth is too slow.
10. The US should declare victory in the cold war over totalitarianism and other conflicts and pull back from foreign entanglements and stop trying to unduly influence other nations' actions.
11. All earmarks are payoffs or bribes and all must be abolished.
12. Congressional terms should be limited to 12 years total service. No further office holding permitted. Cabinet-level government service should be included in this limit. Only Presidential or Vice-Presidential service is excluded.
13. Supreme Court justices and all Federal judges should be required to retire and leave office at age 80. The Senate should be required to hold votes on nominees within 90 days of submission or the candidate is deemed approved..
14. Congressional gerrymandering should be prohibited. Districts should be required to be composed on whole counties, towns, etc.
15. Former public officials should be prohibited from engaging in lobbying. Spouses, "partners", etc. should be prohibited from engaging in lobbying.
16. CEO and top corporate pay should be limited, except to stock awards - not options - voted by shareholders.
17. Hedge fund, private equity, etc. managers should pay ordinary income taxes on all compensation, including social security and Medicare taxes. If a fund manager receives pay and pays taxes on it, he can invest the net amount in the fund and then be treated as any other partner.
18. All municipal bond income should be subject to the Alternative Minimum Tax.
19. All private foundations should be required to liquidate in full within 50 years.
20. The 99 year rule against perpetuities should be strictly applied to any private trust.
That's enough for now.
"Populist libertarianism" means maximum freedom with limits to prevent the ruling classes from (1) attaining too much power & wealth, (2) creating a new aristocracy, and (3) from using their wealth and power to affect the lives of the common man. All limits are imposed on the ruling classes only, not on the lives of the common man.
PS: Item #10 does not mean cut military spending. As George Washington knew and said, one must prepare for war to ensure peace. I'm not sure what the limit under #16 should be. Maybe $3 million per year. That's enough cash ... let them get stock for the rest.
PPS: I am not using ruling classes in any Marxist sense. It's a literal, yet colorful term for the rich & powerful & a few others who connive in DC (or Brussels) to increase their power, wealth and / or to mold us into beings of their design. "Connive" ... a fine word ... reminds me of "knave".
Word of the Day
"Antimetabole" - noun [$1000 !] Rhetoric
Antimetabole means a figure [of speech] in which the same words or ideas are repeated in inverse order.
Sentence: (A) Shakespeare's sonnet #129 uses frequent antimetabole, a Greek term that denotes the rhetoric of reversal. An example is line 2, "Is lust in action; and till action, lust".
(B) Bunkerman's frequent musing about the best label for his political philosophy uses antimetabole, viz., he's a populist libertarian, or is that a libertarian populist ?
1. No recession has or will occur. This is a mid-cycle slowdown.
2. A rich man's panic did occur, which also brought to light some amazing cupidity and stupidity in Wall Street.
3. The housing bottom is upon us.
4. There is too much money sloshing in hedge funds.
5. Hedge funds should be regulated like mutual funds or banks, as appropriate.
6. Pension funds should be prohibited from speculating in futures markets. If they want to buy oil, buy oil in the ground or buy physical oil & store it.
7. All derivatives should be regulated and required to be traded on exchanges with pure right of set off.
8. There is no significant general inflation. Oil & some energy prices have risen hugely, mostly due to lack of new supply and increased demand. Everything else is just painful adjustments to that pressure.
9. The Fed needs to increase the monetary base more; money growth is too slow.
10. The US should declare victory in the cold war over totalitarianism and other conflicts and pull back from foreign entanglements and stop trying to unduly influence other nations' actions.
11. All earmarks are payoffs or bribes and all must be abolished.
12. Congressional terms should be limited to 12 years total service. No further office holding permitted. Cabinet-level government service should be included in this limit. Only Presidential or Vice-Presidential service is excluded.
13. Supreme Court justices and all Federal judges should be required to retire and leave office at age 80. The Senate should be required to hold votes on nominees within 90 days of submission or the candidate is deemed approved..
14. Congressional gerrymandering should be prohibited. Districts should be required to be composed on whole counties, towns, etc.
15. Former public officials should be prohibited from engaging in lobbying. Spouses, "partners", etc. should be prohibited from engaging in lobbying.
16. CEO and top corporate pay should be limited, except to stock awards - not options - voted by shareholders.
17. Hedge fund, private equity, etc. managers should pay ordinary income taxes on all compensation, including social security and Medicare taxes. If a fund manager receives pay and pays taxes on it, he can invest the net amount in the fund and then be treated as any other partner.
18. All municipal bond income should be subject to the Alternative Minimum Tax.
19. All private foundations should be required to liquidate in full within 50 years.
20. The 99 year rule against perpetuities should be strictly applied to any private trust.
That's enough for now.
"Populist libertarianism" means maximum freedom with limits to prevent the ruling classes from (1) attaining too much power & wealth, (2) creating a new aristocracy, and (3) from using their wealth and power to affect the lives of the common man. All limits are imposed on the ruling classes only, not on the lives of the common man.
PS: Item #10 does not mean cut military spending. As George Washington knew and said, one must prepare for war to ensure peace. I'm not sure what the limit under #16 should be. Maybe $3 million per year. That's enough cash ... let them get stock for the rest.
PPS: I am not using ruling classes in any Marxist sense. It's a literal, yet colorful term for the rich & powerful & a few others who connive in DC (or Brussels) to increase their power, wealth and / or to mold us into beings of their design. "Connive" ... a fine word ... reminds me of "knave".
Word of the Day
"Antimetabole" - noun [$1000 !] Rhetoric
Antimetabole means a figure [of speech] in which the same words or ideas are repeated in inverse order.
Sentence: (A) Shakespeare's sonnet #129 uses frequent antimetabole, a Greek term that denotes the rhetoric of reversal. An example is line 2, "Is lust in action; and till action, lust".
(B) Bunkerman's frequent musing about the best label for his political philosophy uses antimetabole, viz., he's a populist libertarian, or is that a libertarian populist ?
Wednesday, May 28, 2008
Declining Standard of Living
All the consumer confidence, "inflation" angst and other concerns of the common man and woman in the past two decades really reflect a consensus that their standard of living is declining. Standard of living is hard to measure and is a moving target. How much do you have to work to realize the same quality and quantity in your daily life ?
No governmental data captures this, if it could be measured at all.
Here's an example. You used to mow your own lawn, because you were fairly young and energetic, had the free time and liked the fresh air and exercise. But as your employer imposed new work burdens on you - unpaid - you now must hire a fellow to do it. You must pay the mower, so are poorer. Your "household profit" is lower. BUT ... GDP rises. That "domestic product" is now part of the measured GDP of the nation, so it "appears" the nation is more productive. Of course, it's not.
Of course, my ofted cited example of cooking food might fit this picture, too. Your commute has become really long as the traffic gets worse & worse every year. So your free time is less, and you now buy more prepared foods as you feel less time to cook, even if you enjoy cooking. So that personal time is again transferred to the "measured GDP" as your purchases increase it. Overall, your standard of living is less, but GDP says it's more.
Notice that neither example has any connection with "inflation". Really, one must identify and name the problem correctly to realize any telic value from analysis. Calling a broader problem "inflation" is a mistake. Certainly, much higher oil prices in the US and EU make everyone there poorer. But that's not "inflation", it's just higher oil prices.
Technology makes some work easier, but does the common man really realize the profit ? In some cases, the answer is yes. For example the iPod really has made much free time more pleasant as one can conveniently listen to music or books while performing other tasks, or just taking a walk. In other cases, no. The Blackberry or cell phone from the employer simply permits him to capture more of the employee's time off the job and make him subject to call or responsibility more hours every day or weekend. All that is unpaid. So the company or boss got the profit of that technology.
Suppose management screws up and now must cut costs. The common working man suffers more restrictions or must figure out how to perform 1.5 or 2 jobs for no extra pay. His standard of living goes down.
Suppose the government shifts spending to support rich farmers while cutting Medicaid or Medicare reimbursements. No net change in GDP results, but lots of health care workers are poorer while a few rich farmers get more money. Many people have a lower standard of living.
Suppose an educational institution's management spends more money on buildings and sports, while adding work requirements to professors/teachers - more teaching, paperwork or class size. GDP does not change but the professors/teachers have a lower standard of living.
Suppose state & local government raise taxes. They take that money from you and spend it on something wasteful, like patronage jobs for the second cousins of the state legislators. Net change in GDP is zero. The common man has a lower standard of living.
Here's another angle. Who capures the "profit" of productivity ? US tax and labor laws really favor equipment over people. A machine can be depreciated, junked as needed, can't sue, and no social security, medicare or uinemployment taxes are due. So companies naturally favor the machine. Voice mail permits a company to fire its receptionists and some secretaries, making "productivity" go up. The person loses the job. Government economic statistics seem "better", but certainly the standard of living of the people is less.
Who has captured the "profit" from great productivity gains of the past two decades ? Overall, except in a few cases such as the iPod, my opinion is that the "ruling classes" have, aka the "rich & powerful". CEOs, some lawyers, powerful governmental persons, some money managers, etc. That's the source of asset price inflation in so many places, such as the sun & surf places or in the art markets, etc. The huge growth in hedge funds is a sign of that excess profit sloshing around, creating more problems.
I'm noodling over these issues and will write more in the future. But I think inflation is not the problem It's a general decline in standard of living for the common man as the ruling classes take more and more of the admittedly growing economic pie. Not enough - or any - of the growth created by great technology and process productivity gains is shared with the common man.
I don't yet have a solution - still thinking this through to find one consistent liberty and freedom required by my populist libertarian philosophy. Transferring more wealth to the government to be redistributed is definitely NOT the solution, as it simply give more power to the DC ( & Brussels) ruling classes. The failure of that approach was proven by the success of the Reagan revolution. But something needs to be done to give the common man a square deal from this growing economy.
Word of the Day
"Ideate" - verb [$10] Psychology; "Ideation" - noun [$10]
Ideate means 1. (transitive) to imagine, conceive; 2. (intransitive) form ideas.
Sentence: Bunkerman will intensely ideate today for ways to give the common man a square deal while preserving as much freedom as possible.
No governmental data captures this, if it could be measured at all.
Here's an example. You used to mow your own lawn, because you were fairly young and energetic, had the free time and liked the fresh air and exercise. But as your employer imposed new work burdens on you - unpaid - you now must hire a fellow to do it. You must pay the mower, so are poorer. Your "household profit" is lower. BUT ... GDP rises. That "domestic product" is now part of the measured GDP of the nation, so it "appears" the nation is more productive. Of course, it's not.
Of course, my ofted cited example of cooking food might fit this picture, too. Your commute has become really long as the traffic gets worse & worse every year. So your free time is less, and you now buy more prepared foods as you feel less time to cook, even if you enjoy cooking. So that personal time is again transferred to the "measured GDP" as your purchases increase it. Overall, your standard of living is less, but GDP says it's more.
Notice that neither example has any connection with "inflation". Really, one must identify and name the problem correctly to realize any telic value from analysis. Calling a broader problem "inflation" is a mistake. Certainly, much higher oil prices in the US and EU make everyone there poorer. But that's not "inflation", it's just higher oil prices.
Technology makes some work easier, but does the common man really realize the profit ? In some cases, the answer is yes. For example the iPod really has made much free time more pleasant as one can conveniently listen to music or books while performing other tasks, or just taking a walk. In other cases, no. The Blackberry or cell phone from the employer simply permits him to capture more of the employee's time off the job and make him subject to call or responsibility more hours every day or weekend. All that is unpaid. So the company or boss got the profit of that technology.
Suppose management screws up and now must cut costs. The common working man suffers more restrictions or must figure out how to perform 1.5 or 2 jobs for no extra pay. His standard of living goes down.
Suppose the government shifts spending to support rich farmers while cutting Medicaid or Medicare reimbursements. No net change in GDP results, but lots of health care workers are poorer while a few rich farmers get more money. Many people have a lower standard of living.
Suppose an educational institution's management spends more money on buildings and sports, while adding work requirements to professors/teachers - more teaching, paperwork or class size. GDP does not change but the professors/teachers have a lower standard of living.
Suppose state & local government raise taxes. They take that money from you and spend it on something wasteful, like patronage jobs for the second cousins of the state legislators. Net change in GDP is zero. The common man has a lower standard of living.
Here's another angle. Who capures the "profit" of productivity ? US tax and labor laws really favor equipment over people. A machine can be depreciated, junked as needed, can't sue, and no social security, medicare or uinemployment taxes are due. So companies naturally favor the machine. Voice mail permits a company to fire its receptionists and some secretaries, making "productivity" go up. The person loses the job. Government economic statistics seem "better", but certainly the standard of living of the people is less.
Who has captured the "profit" from great productivity gains of the past two decades ? Overall, except in a few cases such as the iPod, my opinion is that the "ruling classes" have, aka the "rich & powerful". CEOs, some lawyers, powerful governmental persons, some money managers, etc. That's the source of asset price inflation in so many places, such as the sun & surf places or in the art markets, etc. The huge growth in hedge funds is a sign of that excess profit sloshing around, creating more problems.
I'm noodling over these issues and will write more in the future. But I think inflation is not the problem It's a general decline in standard of living for the common man as the ruling classes take more and more of the admittedly growing economic pie. Not enough - or any - of the growth created by great technology and process productivity gains is shared with the common man.
I don't yet have a solution - still thinking this through to find one consistent liberty and freedom required by my populist libertarian philosophy. Transferring more wealth to the government to be redistributed is definitely NOT the solution, as it simply give more power to the DC ( & Brussels) ruling classes. The failure of that approach was proven by the success of the Reagan revolution. But something needs to be done to give the common man a square deal from this growing economy.
Word of the Day
"Ideate" - verb [$10] Psychology; "Ideation" - noun [$10]
Ideate means 1. (transitive) to imagine, conceive; 2. (intransitive) form ideas.
Sentence: Bunkerman will intensely ideate today for ways to give the common man a square deal while preserving as much freedom as possible.
Tuesday, May 6, 2008
What's New Under the Sun ?
Not much.
French company Alstom is in a scandal regarding paying bribes for business. That's a common problem in European business. US laws lessen that for stodgy, moralistic America.
OPEC member Indonesia is a net importer of oil, mulls leaving OPEC to save costs.
US ISM non-mfg. index was reported at 52 on Monday, indicating expansion in the service sector, which is the majority of the US economy.
YHOO stock price collapses.
Energy and miners rise Monday. In my opinion the easy money is made in that sector via the price rises of the commodities. Now one must look at those companies as normal stocks with PEs, growth rates, etc., not just asset plays That applies to gold stocks, too. Earnings will determine the future price appreciation in them as I think the commodity prices will stay on a high plateau now, and the companies must manage costs and seek new output. I own DVN, CVX, FCX and CCJ in reasonable amounts - not overweights.
There is not now nor has there been a recession in the US. We have a midcycle slowdown somewhat aggravated by a rich man's panic, caused by Wall Street stupidity and greed.
No armageddon occured nor will occur from the current situations. The Fed did its historical and statutory job correctly, although a bit belatedly.
Inflation will fall this year to the Fed's "comfort zone" in both core PCE and in the headline numbers.
The Asian Co-Prosperity Zone of interlocking, self-reinforcing consumer demand-driven growth will continue to develop. This is very positive for world economic growth for years to come [... provided the Chinese communist politboro does nothing stupid militarily].
Eastern Europe will grow rapidly as the freedom of people there continues to let them create better lives for themselves. That area benefits from huge markets in Western Europe, Russia and even the Near East.
"Protect Yourself at All Times" - those instructions for boxing apply to active investing and trading. Mind your money management and position size.
Buy dips in good stocks in good groups.
OK, that's my outlook in review. Mrs. B and I travel to Rome this afternoon to see some sights and culture. Next blog will be May 15. Good luck.
Word of the Day
"Peregrinate" - verb, intrasitive [$10] and peregrination - noun [$10]
Peregrinate means to travel, journey, esp. extensively or at leisure.
Sentence: After many years of focussing on creating a sturdy base of wealth for retirement, Bunkerman hopes now to peregrinate among the major cities of Europe to experience - borrowing that 1970s psychobabble word - their culture and art in "one city" and/or "one country" vacations of approximately eight days each.
French company Alstom is in a scandal regarding paying bribes for business. That's a common problem in European business. US laws lessen that for stodgy, moralistic America.
OPEC member Indonesia is a net importer of oil, mulls leaving OPEC to save costs.
US ISM non-mfg. index was reported at 52 on Monday, indicating expansion in the service sector, which is the majority of the US economy.
YHOO stock price collapses.
Energy and miners rise Monday. In my opinion the easy money is made in that sector via the price rises of the commodities. Now one must look at those companies as normal stocks with PEs, growth rates, etc., not just asset plays That applies to gold stocks, too. Earnings will determine the future price appreciation in them as I think the commodity prices will stay on a high plateau now, and the companies must manage costs and seek new output. I own DVN, CVX, FCX and CCJ in reasonable amounts - not overweights.
There is not now nor has there been a recession in the US. We have a midcycle slowdown somewhat aggravated by a rich man's panic, caused by Wall Street stupidity and greed.
No armageddon occured nor will occur from the current situations. The Fed did its historical and statutory job correctly, although a bit belatedly.
Inflation will fall this year to the Fed's "comfort zone" in both core PCE and in the headline numbers.
The Asian Co-Prosperity Zone of interlocking, self-reinforcing consumer demand-driven growth will continue to develop. This is very positive for world economic growth for years to come [... provided the Chinese communist politboro does nothing stupid militarily].
Eastern Europe will grow rapidly as the freedom of people there continues to let them create better lives for themselves. That area benefits from huge markets in Western Europe, Russia and even the Near East.
"Protect Yourself at All Times" - those instructions for boxing apply to active investing and trading. Mind your money management and position size.
Buy dips in good stocks in good groups.
OK, that's my outlook in review. Mrs. B and I travel to Rome this afternoon to see some sights and culture. Next blog will be May 15. Good luck.
Word of the Day
"Peregrinate" - verb, intrasitive [$10] and peregrination - noun [$10]
Peregrinate means to travel, journey, esp. extensively or at leisure.
Sentence: After many years of focussing on creating a sturdy base of wealth for retirement, Bunkerman hopes now to peregrinate among the major cities of Europe to experience - borrowing that 1970s psychobabble word - their culture and art in "one city" and/or "one country" vacations of approximately eight days each.
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