Friday at the Council of Salamanca

imageWe begin today’s economics discussion with a bit of art history.

Specifically, with a picture of Christopher Columbus arguing his crazy “round the world” idea to the Council of Salamanca, a 1400’s intellectual group in Spain, from which the name is drawn.

The painting was done by Emanuel Leutze who almost no one has heard of, but everyone has probably seen his painting of Washington crossing the Potomac…

This has what, exactly, to do with the market?

Ah…to the point. 

The Council of Salamanca was a kind of intellectual arbitration group.  Things were proposed to the group and voted as fact or fiction and the King and Queen of Spain (usually) took their advice.

So that’s what the Council was.

In the modern world, we have similar such councils, groups, commissions and the like – and all with pretty much the same purpose:  The vote on “what’s real.”

Having written about the Greater Depression that we’re now in for 18 years now, I feel a bit like Columbus at times; arguing rational and science before a herd of sheep.  Occasionally, there will be some head-nodding, but that could just be the herd grazing.

Nevertheless we stand at a very important “do or die” day for the market today.

A major decline (such as the one hinted at by the futures) will indicate the next big leg of the decline could be getting underway.

Regrettably, the line in the sand by my friend Robin Landry’s work is 1990 to 1991 on the S&P 500 index.  In our Trading Model that Peoplenomics readers follow, we have a terribly interesting counterpoint:  Our Global Index has just broken to marginal new highs as of mid-week, compared with 2007’s peaking process, but if global markets drop back enough from Wednesday levels, then it will be a massive double top formation – of the sort spanning 7+ years.

At the larger zoom-out, we could see the declines since 2007 being replayed in short order.  There continues to be a viewpoint (mine) that when the Internet Bubble popped in 2001 (and between 5 and 7 trillion in values blew up) that was really the start of the Greater Depression.

Unlike the 1930’s event, we went promptly to war (albeit with the wrong country and on made-up intel) and the Fed lit off the largest housing bubble ever.  And all they had to do was fall in love with no doc loans and make M3 disappear and no one would notice.

I mean besides this nutjob in the woods.

While it is true that the stock market has more than recovered from the 11723 Dow peak in the spring of 2000, we have to take inflation into account.  Using the Minneapolis Fed calculator, the Dow would only need to beat 16,080 in 2014 to be at technical new highs, even on an “inflation adjusted basis.”

But is this really true?


The US GDP in 2000 was 10.28 trillion. And this morning we get a fresh report on GDP to look at:

“Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — increased at an annual rate of 2.6 percent in the fourth quarter of 2014, according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 5.0 percent.

The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4 and “Comparisons of Revisions to GDP” on page 5). The “second” estimate for the fourth quarter, based on more complete data, will be released on February 27, 2015.

The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP growth in the fourth quarter primarily reflected an upturn in imports, a downturn in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by an upturn in private inventory investment and an acceleration in PCE.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, decreased 0.3 percent in the fourth quarter, in contrast to an increase of 1.4 percent in the third. Excluding food and energy prices, the price index for gross domestic purchases increased 0.7 percent, compared with an increase of 1.6 percent.

Where my confidence wanes in the BEA account of reality is when they make claims like this about personal savings:

Personal outlays increased $120.4 billion in the fourth quarter, compared with an increase of $143.4 billion in the third.

Personal saving — disposable personal income less personal outlays — was $601.7 billion in the fourth quarter, compared with $617.2 billion in the third. The personal saving rate — personal saving as a percentage of disposable personal income — was 4.6 percent in the fourth quarter, compared with 4.7 percent in the third.

Damn shame I’m not in Washington DC.  Otherwise I would ask the BEA folks how much of the GDP would simply disappear if the holdings of the Federal Reserve (last time I checked, they had something like $4 trillion on the books but my memory ain’t so good as once was) were discounted at marked to market rates?

The government is our silent partner and we’ve trusted it to do the partnership accounting.

It wouldn’t be the first partnership in history to keep cooked books.

Oh, by the way:  Those Minneapolis Fed numbers are based on BLS data and that includes heuristic adjustments.   Without those, inflation would be much worse than reported.

But we don’t doubt America’s future economic might.  The next time the economy gets in trouble we’ll simply find a convenient war to drop into, thus modulating employment and everything else.  Like Masters of the Universe without the conscience option.

Person of Interest

CNET headlines this morning that Microsoftie Bill Gates is worried about AI.

Rightly so.  It may come with a global BSOD. 

Maybe after another round of beta testing he could believe in RC3?

I’m not worried about AI as much as I am GMOs which are already sterilizing and dumbing down people.  But that is what freedom has come to:  Free to pick your own worry points.

Ruble Rubble, Banks and Trouble

Russia has dropped its central bank prime rate 2%.  That is collapsing the ruble on the Forex markets.

As I said earlier, the sanctions are having an impact and they will push the Russians into internal depressions which will drive them to attack the breadbasket and manufacturing strongholds in Ukraine.

And on the point, they’re already sabre rattling about out-nuking NATO and the USA.

Meanwhile:  Just had a call from Grady who runs our future-seeking software project and he reports two items that should surface shortly:  Military recruiting ads are up in Canada AND the biggie, a Canadian news report of Canadian forces being in a fire right with ISIS so we will see how deeply Canada wades in…but they seem to be present now.

Coping: With Sticky Notes Friday


If you have Windows 7, or newer, and have not discovered the little utility program (Sticky Notes) you are missing one of the most useful little tools of computing out there.

Not like it’s a breakthrough, or anything like that.  My personal experience with this kind of thing goes back to my earlier days when Gaye of owned a successful computer company in Bellevue, Wa. that was sold off to a Baby Bell Operating Company (BBOC) in the late 1980’s. 

Back then, there was a program called “SideKick” which featured the (then new) ability to operate in “terminate and stay resident” mode. 

Called TSR, the features of SideKick originally included things like a calculator and it was from this, and a few other TSR programs and early PIMS (personal information management systems) that much of today’s modern computing “ease of use” came into being.

Before Windows, however, Borland’s SideKick was the serious computer geek’s secret weapon.  And it operated under DOS:

Sidekick 1.0 included Calculator, Notepad, Appointment Calendar, Auto Dialer, ASCII Table and other tools.

1.0 Plus[edit]

Sidekick 1.0 Plus included a broader selection of calculators (Business, Scientific, Programmer, Formula), a 9-file Notepad text editor, Appointment Book and Scheduler, a terminal communication tool and ASCII Table. In addition to variants on and enhancements to the 1.0 features, Plus included a 9-file Outliner, q file and directory manager, Clipboard, and supported Expanded Memory and a RAM disk. Control+Alt is the default shortcut to open sidekick 1.0 plus

The program was eventually rolled out as compatible with Windows (before they adopted year-dates, we’re talking 3.1 and earlier).

Anyway…for some reason I thought you’d get a kick out of knowing where some of us old-schooler’s got out taste for Sticky Notes….before the first mouse (and it wasn’t Apple’s) escaped from X-PARC.

But enough of history…on to my Friday notes collection.

Don’t Sue Me!

It occurred to me with all the solar power articles I wrote this week that I didn’t include our typical lengthy disclaimer.  The one where we say something like:

WORKING ON ELECTRICITY IS DANGEROUS:  All articles presented on this site are to stimulate thinking and discussion of  the art and science of alternative energy only.  We do not intend for you to actually do any of this work yourself.  Hiring a licensed professional electrician is the only way to go and if you ignore this advice you do so at your own peril.  This warning applies to everything on this site.  The electrician may even be a better stock-picker than most.

There; all happily disclaimed now.

Where’s the Dream?

Following yesterday’s discussion of Robert Shiller’s assessment of problems facing the global economy, a reader  (young/successful) took me to task:

The American people aren’t afraid of the future, they aren’t afraid of the road ahead, AS LONG AS GOVERNMENT (POLITICIANS, LAW ENFORCEMENT & CORPORATIONS AREN’T WAITING ON THE ROADSIDE TO POUNCE ON THEM), If we are afraid of anything it’s our corrupt, outlaw government taking over & destroying the world along with their crony parties in the Vatican, City of London & Israhell!

Hmmm…was I off base? 

I called my son to talk it over…had I misunderstood him, his friends, and lots of other 30-somethings?  I’ll paraphrase…

“Look dad, the guy probably makes good 4-grand a month take home.  He’s lost the roots.

The reality is that even taking home $2,200 a month is about the least someone can work for here (Seattle) and break even.  That’s with a passable studio apartment, Obamacare, a little bit of food and not much else.

When you bring home less than $2,000 a month, there is not American Dream…you don’t get a bite at that because you’re just working your ass off all the time.  Student loans, insurance…I mean at less than 2,000 a month a single person is pretty well screwed here.

Sure, you can find cheaper housing in other places, but the pay’s lower and you’re not around as much opportunity.

Thing about you is, you remember what poor is, and that’s what makes your column relevant.  People with money, who’ve forgotten their roots? Forget this guy’s whining.  I bet he takes home a lot more than $2,000 a month and is one of those people who forgets what  poor’s all about.

That’s something I don’t expect to ever lose.  Having been lower income is actually an asset.  Teaches a person how to think and how to make value decisions.

And as for the City of London and Israel?  Easier to find (and blame) externalities than look in the mirror for the source of all results in life.

I’m quick to point out the crooks in office, government, law enforcement, etc.  But their not all bad, not all crooked, and I’d guess well over 50% are still trying to do the right thing.

Populism ain’t popular with the high take-home pseudo-sufferers who blame first and ask questions later.

I will grant you that the two corporate patsy parties have a sweet deal going:  The R’s are mining the would-be Hitler Youth with high incomes and the D’s are working the poor with more free lunch deals.  They wouldn’t be successful, if people would figure out that both sides are full of crap, but that’s a much longer rap.

Cruise Points

Back in the day BG (before George) Elaine did a fair amount of cruising. Somewhere between 8 and 24 cruises, but we’re not sure.  Well, turns out, thanks to the miracle of computers, she was able to update her history so we may end up doing more than the Norwegian Jewel cruise this year.  Turns out we’re already “Ruby” level on Princess thanks to running into an old paper card with her earlier cruise history keyed to the number on it.

I was just thinking – idle thoughts kind of thing – there must be 50 cruise ships out there nowadays.  And if each carries 2,000 passengers,  that’s like having a city of 100,000 people coming and going every week.

If you’ve been on a cruise in the past, don’t forget to keep your profile current and guard them points.  They didn’t offer me any special deals for living on a sailboat I skippered myself for more than 10-years.  A fella just can’t get no respect.  A well quaffed blonde on the other hand…

Radio Adventures vs. Dancing

My buddy Gaye and Survival Hubby are committed to (finally) getting their ham radio licenses.  She’s asked me to do a quickie guide to programming their radios for them.  So that will be on an upcoming article.

I haven’t mentioned to her that even though it’s not required, high speed Morse code (30+ WPM) is still a worthy art form.  They’re more the ballroom dancing types, and live only partly in the mental headspace geek set. 

When comes to dancing, I have two left feet…a disappointment to Elaine who was queen of the disco set.  I’ve been telling her that a T.O. Keyer and a Vibroplex Vibrokeyer Deluxe paddle is way cooler than a sequined mini-dress, but who am I kidding?

I mean maybe if 20 meters isn’t open to Europe, I suppose and it’s not a contest weekend……

Flying the Checkbook

Meantime, for weekends like that, we have the old airplane which should be out of the shop today, or tomorrow.

When it comes out, I always take the mechanic along for the ride.  I figure if the mechanic knows up front that he will be in the plane, everything will be perfect.

It’s called have skin in the game.

On the other hand, if the test flight doesn’t work out well, it will certainly make for shorter columns.  Plus, I won’t have to get up early and I won’t have to pay income taxes, anymore.

Around the Ranch:  Martini’s on the Poop Deck

And why is it called the Poop Deck?  Well, it’s right outside the master bath, is why.  And talk about a marvelous “false spring.”  Thursday was our first outside sitting this year.  Local weather broke into the high 70’s and it passed 80 up in Dallas.

Freezing temps will be back shortly, but for now, global warming doesn’t seem like such a bad thing.  We use more ice, though.

Sweat Equity

We think Zeus the cat may be courting.  Out on the tractor lately, there’s been what looks like a white spotted female cat wandering around on the lower part of the property down by the creek.

Old Zeus doesn’t seem to understand that he’s been fixed, so he’s been looking all over the woods for this pussy of his dreams.

I’ve tried to explain to him that women select men on the basis how what their skills are in terms of providing for a family, and so forth.  I mention that there are two moles tearing up the front yard, and no woman can resist a male’s advances if he’s got something to show for his sweat.

I then explained that’s why having something in the checkbook makes a man appealing and why a fresh mole offering might impress the new puss.

Sweat equity is a marvelous thing – and it’s what weekends are for…unless 20-meters is open or weather is VFR.  Ever notice how remarkably similar pets and their owners are?

Write when you break even