Internet Gambling

Some attention should be paid to what's been going on with Sportingbet following the reported reported arrest of their chairman on Thursday at JFK Airport.  Curiously, the story says the future of all unlicensed forms of internet gambling is threatened. For those with a serious gambling need, we point out that for a few thousand dollars, you can bet the pass/don't pass line on exchange listed options...

Deflation Signs?

We are watching several:  The price of oil down 4% this week.  The dollar has strengthened while gold dropped. And, housing prices continue to soften, leading to changes in the outlook by home builders. Add it all up, and the odds of the Fed raising rates seems to be lessening.

Embassy Security

An explosion that has claimed 16-lives in Afghanistan is getting media attention.  Two reasons: First it's more of the violence in country, Secondly because it indicates how close to a US embassy bombers can get.  The UN is seeking more international troops for the conflict. And neighboring Pakistan is ceding some ground to Taliban and potential Osama followers.

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The body count from bombings in India late this week is up to 31. It's being called :terrorism."

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Terrorism "Branding"

Following up to yesterday's notes on how terrorism is more a branding battle than pure military process, there's a good Reuters article worth reading suggesting that "AQ, Bush wage media war as anniversary nears."

Banksters Meet

Next week, the IMF and World Bank are meeting in Singapore.  There's some debate this weekend about Singapore's decisions to keep people out of their country if they might stir up protest actions.. 

Durable Net Worth

Over the course of this Fall, both the web bot project at HalfPastHuman and a lot of good business research suggest the US economy could hit the skids and end up in a "flash recession/Depression" that will take everyone by surprise. Well, almost everyone. The handwriting is on the wall, but it seems few want to break the media-driven hypnosis, wrapped up in neat statistical reports back by government figures. Still, in keeping with our philosophy of prudent wide-range contingency planning (not to be mistaken for mild paranoia), Labor Day weekend seems a dandy time to assess how we've been doing in the fight to hang on to at least some portion of the wealth that passes through our hands, and - if possible - figure out ways to make more of it "stick." Unfortunately, as I'll show you, as the housing bubble goes, and deflation shows up with a vengeance, millions of Americans are going to be financial road kill. But, it won't be like they weren't warned.

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Tell your Friends

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Friday September 8, 2006

Hats off to Harrison

Probably the most important piece of the economic puzzle I've seen this month has been proposed by Todd Harrison on Thursday.  "Who is that, and why should I care," you're asking?  Ah. Check it out, grasshopper:  Harrison wrote a piece for MarketWatch this week ("Waiting to Exhale") in which he finds a very high correlation between the National Association of Home Builder's Housing Index and the performance of the S&P 500 12-months later. (Here's his chart.). 

The action point of his observation is that if he's right, we should see the S&P collapse to about half of its present levels, and while that doesn't necessarily means the Dow will fall that far (there's bound to be some flight to safety), and while it doesn't means the NASDAQ would fall farther & faster (although there will be some flight from risk), it just all lines up too neatly with what's in the web bot runs for the period (collapse of paper assets/financial panic/destruction kind of stuff) to be ignored.

While I don't recommend investments or offer financial advice (preferring to simply collect and report with the odd comment here and there as well as reporting my own positions) I do have readers who are always on the lookout for ways to skins a buck or two. One offers this:

"If people think the market is on its way down, there are now some ETF's for shorting:

SH - S&P500

PSQ - QQQQ

DOG - Dow30

MYY - Mid-Cap400

 

For the really brave, the following correspond to 200% of the inverse:

SDS - S&P500

QID - QQQQ

DXD - Dow30

MZZ - Mid-Cap400"

Another email very much on point arrived from my friend Michael Nystrom of Bull! Not Bull - it's a "Cautionary Housing Tale from Japan." As you look at his report, remember that the Nikkei Average has gone from its all-time-highs of around 39,000 to the 15,000-16,500 range lately - and hasn't been over 20,000 since the year 2000 if my eyes are responding to light correctly.

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What this discussion of the End of the Housing Bubble, a site called "Seeing the Forest for the trees" has a handy roundup of headlines here. But it's not all "end of the world" reports.  A Mortgage News Daily headline refers to "Home Price Increases seen slow in OFHEO Report."

Slowing increases are, as my grandmother used to put it, "A different kettle of fish" than outright price collapse.  So we continue reading the stats & reports.  But, thanks to Harrison's observations, with more trepidation than before.  And word from the National Association of Realtor that home prices nationally may fall for the first time in 13-years doesn't sound good for the financial markets if the Harrison correlation holds.

Meantime, Back At World War IV

The global spread of violence is marching along with most pundits and leaders still confused by the structure of events.  What I mean by this is that conventional military thinking would have us believe that there's an organized global effort by militant Islam to bomb the West into conversion to Islam.  But, there's another way to view things.  It could also be that various groups (which I'd describe as essentially tribal) are banding together under tribal leaders in various regions - and that while they might all claim subscription to the militant brand of Islam, they're operating with essentially little overall coordination other than (in marketing terms) picking up the "brand name" and running with it.

The outcome of such a structure (e.g. tribal, but with a global brand) has the potential to seriously misdirect the efforts of those trying to stop out the brand's spread.  In marketing terms borrowed from the the soda pop business, it would be like devoting a lot of efforts to attacking a supposedly "monolithic national pop brand, while the reality is that the "monolithic giant" is powered by the autonomous local and regional bottlers.

It's an important topological distinction to make: Even if there were success killing the supposed monolithic brand, the "regional bottlers" would still find something to package.  They've got a niche to fill.  (Not to pick on regional pop bottlers - great guys - but the concept of central brand control powered by semi-autonomous regional manufacturers is spot on point here - and it's a damn fine business model):

So with this mindset, le's visit a few of the fronts of WW IV from this brand marketing perspective:

•  Afghanistan: 16 dead in bomb blasts.  Regional bottler equivalent being Taliban.

• Iraq: Improvised Explosive Devices are still going off daily. Two regional bottler equivalents are fighting for market share, Sunni Brand and Shiite brand.

• India: Somewhere between 10 and 25 are reported dead from an explosion near a mosque in India. Which bottler equivalent isn't clear - yet.

• Brand Central: Osama bin Branding releases video showing himself with what are claimed to be some of the 9/11 perpetrators.

• Sudan: A rights group says Darfur civilians are being bombed by the government.  Competing bottlers duking it out..

• Philippines: Fresh fighting is reported by the BBC. The Abu Sayyaf group is playing the role of the challenging regional bottler with the new brand, while government dominates most of the market area.

In a world where "perception is reality" and where "Commanding the heights" really means media brand domination, it's very easy for policymakers to resort to bombs & bullets to solve what is at its core essentially a branding/marketing problem. The "War on Terror" brand seems weak, to me. Madison Avenue might do better if the policymakers could get over NIH syndrome.  For $30,000 the Pentagon could get some serious input from a guy like marketing/positioning guru Al Ries - and I think that would be money well spent. And maybe DoD and the White House ought to order a case or 10 of "The Origin of Brands" while they're at it.

Bermuda Blow

Here comes Florence.  I don't know of any specific Bermuda shorts to play.

Much Nothing about To Do

The republicorps have again breached faith with voters - this time failing to act on meaningful enforcement of border security.  But with their chances dimmed by voters with good memories, the spin is in as they try to "talk a good game" going into the (election) silly season. The only keepers I see in the House are Tancredo and Paul.  The rest can leave. Your vote?

Gov Spitzer?

Elliott Spitzer was out campaigning to head the Empire State.  Spitzer, unlike a lot of candidates for office, has actually done some things. 

Oil

... seems to have leveled off after recent lows.

HP Spying

The California attorney general is hinting that prosecutions may come from revelations about HP's alleged spying on its directors.

Thursday September 7, 2006

The Plot Thins

We notice that purported planners of a coup in (once Soviet) Georgia are being rounded up. Police have 29 in various iron bar hotels so far.  What's curious to us is how Georgia is becoming a focal point for Russian/ US relations.  Specifically, recall that John McCain says "Georgia is the U.S.'s Best Friend. Russia, so far, says the whole flap is an internal affair of Georgia.  But some Russian media report the opposition (and coup planners) were supported by Russia. Besides John McCain's remarks, Richard Lugar was in Georgia last month promoting Georgian energy independence. So while for today, the plot has thinned, my thinking is that longer term, it will continue to thicken.

Sea Stories

A longtime sailor like me is always intrigued by sea stories.  Today: Reports are that Israel will lift its naval blockade of Lebanon.

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Two dead in a fire on a Russian nuclear sub in the Barents Sea.  Is this the bot's ship incident this week?  Too early to see what the emotional fallout will be.

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34 Bangladeshis have been rescued from a sinking ship by the Sri Lanka navy.

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Princess Cruise's Golden Princess will be cruising the Antarctic this February.

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Mystery of sea bird and wildlife kill off California has been solved: a World War One era cement ship which sank offshore.

Oil

Prices firmed ahead of the weekly inventory report. Outlook: Low gasoline prices till the election - and then we are screwed for another couple of years.

Attn Moonies & Irish:

There's a big full moon and a partial lunar eclipse tonight - biggest of 2006 according to SpaceWeather.com. About the same time (not so coincidentally, as the moon drives tides) the Irish (among others) are bracing for record tides, too.

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Me?  No Bushmill's or telescopes, thanks.  I'll be watching seismographs.  Why?  Land "tides" are just as real as water tides, and thus with the moon giving it's best shot in a quarter century, it might be prime time for quakes.  Well, OK maybe one Bushmill's...if you insist....

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Seriously: a big mine disaster is reported in India.  Earth movement associated with Big Moon?

Secrets Revealed

George Bush's revelation that yes, the US has used secret CIA prisons has a number of readers asking if this is more of the web bot's "secrets revealed"  meta data laughing at us.  Like you need to ask?

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On the other hand, the timing of the rickety time machine sometimes drifts - as I was expecting more of an emotional "build" in here than we've seen so far. Maybe today a big emotion whump. Still waiting.

Urban Legend & Inflation/Deflation Outlook

My mention yesterday of Aspartame and ants got us some immediate feedback:

"Love the free site as well as 'Peoplenomics'.

Saw your article about Ants & Aspartame. Never tried it, but I do have a solution I know works. Used it first hand a few times over the last 5 years. Got it out of a newspaper in NY.

There are 2 simple ingredients You need to buy: -20 Mule Team Borax -Confection Sugar

Mix a small, but equal amount of each and drop a couple of small blotches along the ant trail. At first they will go around it. But then they will start picking it up and carry it back to the nest. Within 1-2 days, it will kill 99% of the ants, including the queens. They don't come back for quite awhile.

Now my question, if we are going to have deflation in the fall, doesn't that mean the price of Gold & Silver will drop also. And if so, wouldn't it be wise to unload a bit of it now ( I have enough to play around a little) at the high's and buy more back later with the same amount of money?

Thanks for your feedback. "

Gosh, the inflation or deflation problem is one that is really vexing me - I was on the phone last night with a knowledgeable Peoplenomics subscriber till about 10 PM kicking it around.  The subscriber made the point that in the Weimar experience, documented by an Italian fellow {Economics of Inflations] in a spendy (>$150 on the used market if you can find it) book, the leverage of the Weimar experience was well documented - and in many cases inflationary.  Big name Germans made some serious dough apparently betting on specific types of inflation.

For my side of the conversation, I tried to point out that while it is true that there are economic distortions that can occur in a hyperinflation, such as the Weimar, the hyperinflation route is not always the outcome when an economy implodes. To wit, the U.S. experience in the (first) Great Depression.

While it would seem simple enough for the Fed to just print enough money to keep everyone spending freely, there's still the ugly catch that once the money is printed, it has to be borrowed into existence.  And, as the case of Japan's crash from 1989 to (today) shows, having a negative interest rate doesn't do anything but set up economic distortions like the yen-gold carry trade, which while profitable, distort everything in their path, including the price of gold.

To recap the yen-gold carry-trade: Groups with deep pockets and good credit following 1989, when Japan's rates dropped following their crash of the Nikkei, would borrow money at what was essentially zero percent and then invest in something like gold as a general inflation hedge.  They got to pocket the spread.

The problem for the pending economic mess, which is not clear to millions or even billions of investors because of the timing of the War on Terror, is that we still don't know if the pending decline will break first as short term inflation, then deflation, or whether we will hit hyper inflation, or just plain deflation.  There are too many contradictory  indications.

My friend Jas (as I've posted recently) thinks that housing prices are pointing the way to a highly deflationary collapse - and his point is well taken: If home prices collapse, and the Fed governors drop interest rates  at their next meeting - which some "experts" call for - then the refi market would be able to "hang 10" and life goes on.  The consumer would be able to avoid financial ARMageddon by locking in lower rates, and that would in turn, shore up consumer confidence.  On the flip side, it would scare business which would read the tea leaves as the Fed messaging that the economy is at the edge of the crapper.  Close enough to reality, for us.

On the no move side, doing nothing is what government does best. Under this scenario, the Fed would just let the cookies crumble as they will, and then come in with lower rates, promises and happy talk, and keep things from sliding further.

On the increase rate side, the only compelling argument is that the Balance of Payments deficit is being largely funded at the moment by certain mysterious offshore Caribbean banks supposedly representing hedge funds.  Now, what's a mystery is whether these hedge funds are real (e.g. civilian) or just an action arm of the banksters, who have set up something akin to a circular reference/Ponzi scheme with government debt.  I'd propose that it doesn't matter...at least as long as no one spills the beans about it in a meaningful way if true. If that were to happen, confidence in the global economy would tank, and off we go into deflation because ultimately printed money still needs to be injected into the economy in order to exert inflationary pressure.

Hidden off in the formulas on the side of my envelope (the back of which I use for the really important calculations) is the question of the velocity of money.  In my someday to be published "Laws of Electronics and Money", I note that money acts a lot like electronics if you substitute terms. 

• Voltage is similar Money Supply:  When we consider volts in electronics, what we're considering is the pressure of the electromotive force. To nail this down for those too lazy to get a ham radio license, think of water in your garden hose.  Voltage is pressure in the hose and determines how far water will spurt.  When the money supplies are reported,  you know the potential of the economic system, just as measuring Volts with your pocket multimeter tells you if you'll get shocked (as voltage rises above skin resistance, current flow and you begin scream epitaphs, until somewhere between 6 milliamps and 10 milliamps [and depending on whether the current flow is through your chest] you die from electric shock.).
• Velocity is Amperage/Amps:  In electronics, the number of Amps flowing through a circuit gives you the volume of electrons, but not their "pressure".  Answers.com defines things this way: "A standard unit of electrical charge. Pronounced "kool-ahm," one coulomb (C) is equivalent to one amp of current flowing through a conductor for one second. It is also equal to 6.25 quintillion electrons (6.25 X 10 to the 18th)."

We can look at velocity of money under a similar light: "The speed with which money circulates or turnover in the economy. It is calculated as the annual national income: average money stock in the period."  Money flowing, get it?

Thus, in our quest to figure out how much Work will be done by in electric circuit, we know that Volts X Amps = work done reported in watts.  That hair dryer you used on low power this morning was probably something like 120 Volts times 6.5 Amps which meant it was pulling 780 Watts.  because you've had a double shot this morning, (coffee!) you recall that 745 Watts is one horsepower - so "Aha!  A hairdryer on low is one horsepower!"  Genius.

So now we get to economic equivalency:  One money supply measure times turnover, gives "work" in the economy.  Which I liken to GDP (or some fraction thereof).

And yes, like electronics where you can use any two parts of the Power in Watts (P) equals Current/amps (shown as I) times Voltage (shown as E) such that:

P=IE   (Simple as "pie: which is how I can remember it with only one cup downed.

To demonstrate (hand me that hair dryer, would you?) how we can solve missing I and E (current and volts) we just plug in:

P/E = I   (or if we didn't know the current of the hair dryer, but we knew watts (780) divided by volts (E), we can calculate the missing I:  Try it: 780/120 = 6.5 (amps)

So too, if we know money supply and GPD, we should be able to pencil out a velocity, or, if we know Money Supply, and we know GDP, we can solve for velocity.

So the really smart economist would look at all the money supply figures and velocity and from that would determine where our economic future lies.  If you have a good measure of Velocity and a good measure of Money Supply, you can solve for GDP and figure out if/by how much, government figures are being diddled. Of course, you need precision velocity and money supply figures, which is why the disappearance of M-3 reports by the Fed ticked me off so much.  You can't solve for two out of three variables in this stuff.  You can only define solution sets and formulas.

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I have my private calculations and I'm buying gold and silver.  Why?  because they can't be printed.  Gold's price might  go down in a deflation, but it's purchasing power will go up.  That's what people have a hard time "de-linking in their thinking" (one of my favorite phrases).  People who ask me about holding "gold certificates" fall into this camp.  They hate it when I ask "Is that certificate made of gold or paper?"  ("Paper")  "Then tell me how you own - as in possess - the gold?"  Paper is paper is a promise waiting to be broken.

Wednesday September 7, 2006

HP: Invent?  No: Spy

There's a fascinating story on MSNBC about how HP has reportedly plugged a leak of board level information to the press by allegedly looking at home telephone records of its directors. What's more, there's a report today that HP is now reportedly saying the director is claims was involved should not be returned to the board for another term.

This will no doubt end up being one for the grad school textbooks - but I'm not sure which grad school - law or business. Board member Tom Perkins - not implicated - resigned over the tactics according to a British Paper.

.My opinion?  Too early.  One side of the argument is that HP Chairperson Patricia Dunn was acting to ensure compliance with law. Leaking of board-level conversations which could have a material impact on stock prices is serious stuff.  On the other, it's a lot like big brotherism gone berserk.  I need to gnaw on this one - and wait till some of the legal gadflies check in before I decide whether to label this "HP does right" or "HP acts governmental." Good arguments both ways by the look of it.  I have to give Dunn credit for an "Inventive solution."

Mexico's Revolution

It's not like the decision by the judicial to uphold the "election" (installation may be more accurate) of Felipe Calderon as Mexico's new corpgov leader is any surprise.  But check out that use of the word "Revolution" +Mexico in Google news search returns. Many writers are suggesting that the decision - far from being the end of debate - may only mark the start.

Israel's Other War

The Palestinian people are still living in a large jail.  And while the world doesn't seem to care - buying into the idea that the Palestinians have brought it on themselves through bombings and mayhem - there nevertheless is still a lot of military action aimed at Palestinians including jets attacking a couple of automobiles that may have been loaded with explosives.  I say may because there's no actual evidence - just an eyewitness report - and who knows what the jets payload was?  Exploding ordnance and gas tanks would probably be indistinguishable from explosives in an auto, I reckon, without "sniff testing debris." But my, doesn't it make good copy supporting bombing Gaza?

Russian Influence Expanding

While the US is trying to stand in the middle of a civil war in the Middle East - and while we are squandering our window of opportunity to  transition to a sustainable economy and create middle class jobs in the US, Russia has not-to-quietly paid off its foreign debt and is now out buying important relations among countries with strategic mineral resources.  Like South Africa, where Vlad Putin's been pimping "born again" capitalist line. Think Shaka's enveloping (Buffalo) horns strategy.

Outing Blair?

We read that Tony Blair will be gone as Britain's head within a year.  Is this a sign of major change in England?  Doubtful.  The Powers That Be (PTB) may just be doing a face-change. Helps the sheeple.

Jawboning Nukes

The US and China are trying to warn North Korea not to set off an atomic test.  This is rich - considering how many nukes we have set off - and China too.  OK, so the North Koreans are nuts.  I don't suppose you have looked at US foreign policy critically, or read about who likes fart jokes lately? This is rich!

Wanta Opinion?

Several readers have been asking me what I think about the Leo Wanta story making the rounds on the net.  The basic idea is that the government some how trusted trillions (4.5 - 73 trillion, in fact, depending on how you read it) and that now, forces of evil are going to have to "give up the money" and that will somehow toss the bad guys out, and solve the problems of America's budget.   Here's a typical exchange between me as a reader on point:

Reader: "Just wondering if you have picked up any bot hits pertaining to the Wanta Fund fiasco?????? Sept. 7 looms large right now………"

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Skeptical George: "We’ve been watching for it – and it sounds – sadly – like a fabrication because it’s an unprovable negative – thus, makes interesting reading, but we’re left with “where’s the beef?”"

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Reader: "Thank you very much George for your honest insights into this matter! It has been on my radar screen for sometime now and could not get anyone, who’s opinion I trust, to comment on this situation. Truly is a shame that it is not provable at present time."

The idea that somehow one person would end up in control of several trillion seems to fly in the face of every accounting check & balance I've ever heard of.  More to the point: The $%4.5 trillion is nowhere near enough money to solve the budget problems America has been digging.  But the real heart of the story keeps coming back to "Do you believe one person - I don't care how honest - would be trusted with trillions of public money?"   This lynchpin point of the story is so suspect to me that it's over in my "urban legends" stack of items.  Along with the report that aspartame is an effective ant poison.  Elaine and I tried it - and all we have are diabetic ants now ;-)

Round the Ranch

This morning's report is a little shorter than usual because I overslept.  besides still fighting a sinus infection, I've been buy building a trail/tractor road on the west side of the property.  No big deal you're thinking?  Well, it involves moving yards of dirt because there's a big ravine with a creek in it.  So I am doing a little civil engineering, using natural  erosion points to get me down into the ravine.   And then there's the project with the repaired/new office - got the floor put on this week, now it's a matter of framing up two more walls - and that means buying a 10-foot step ladder and...well, you know how one thing leads to another.  One of these days I will get a few pictures of both projects up - but it's definitely making progress.  Between all that, plus consulting work, plus writing the definitive ebook on marketing/advertising - which I plan to complete this month, life's good &  busy....

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Elaine just wondered in to report there are nine deer in the front yard eating the bird seed she puts out.  I hope there's a payoff to the deer eating the bird food out of the feeders.  Maybe they will learn to fly?

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Someone asked me about my "blog" the other day and I explained that no, none of my sites is a "blog."  It's better defined as a news columnist.  First, I was a serious reporting in MSM for more than a decade (so I do have some reportorial credentials) but more important, I try to provide reference links for most things so you can backtrack the facts I offer.  So if anyone ever asks you about UrbanSurvival - or the subscriber site Peoplenomics, please don't call it a blog.  I'm a financial columnist.  Thanks.

Tuesday September 5, 2006

End of the World Libretto

A deep thinking reader offers this thought provoking email:

"George

I've been working on this Abrupt Climate Change chart for the past two months and is pretty much self-explanatory in regarding to your today's topic on global warming/climate change. It is in PDF. While abrupt climate change is a potential reality coming true, I am somewhat deeply skeptical of a human-induced global warming since there are scientific evidences of past global warmings (AND global coolings) long before humanity ever came to being.

The whole chart is based on the Abrupt Climate Change report endorsed by the Pentagon back in 2003. I've strongly suspected the Pentagon have been aware of the abrupt climate change event(s) for far longer than we assumed (goes back to 1988). Only the Pentagon endorsed that report is based on several think-tank deliberations and on-going computer model researches on abrupt climate change, presumably from the DARPA. I also think there is a strong correlation between the coming Abrupt Climate Change and the formation of a North American Union, this I'd suspected as much since last year. The whole point is NOT about preserving and defending freedoms but the very survival of the entire human race at any or all costs.

You are free to display the chart on your website for all to see. Please do not include my name or email. My gift to the economists, analysts, DoD boys, admirers, haters, conspiracy theorists and the general readers.

Pay special attention to something about new continents toward the end of the chart. You should get the idea."

(Click here for the chart - .PDF file - definitely worth a look. It's an "end of the world" roadmap!)

Meantime, Back at WW IV

Do we really need to run through the footwork of the day-to-day war stuff?  OK:

• Lebanon: Kofi Annan says the Israeli naval blockade should end by Thursday.

• Sudan: Heavy fighting resumes.

• Afghanistan: 700 Taliban are trapped, 200 already killed.

Enough for today...you get the idea.

Mexico: Parties and Revolution

Later on today, Mexico's final, final, final election decision will install Felipe Calderon, the hand picked conservation/corporate guy to run the country.  Well, actually, 9/10th's of the country.  George Bush runs the other 1-10th of Mexico - that'd be the 1-10th of Mexico that lives illegally in the USA.  Calderon will party, Oaxaca will continue to rebel.

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Speaking of which, those cowardly republicorps that run CONgress are not going to stand up and be counted on immigration reform due to the pending elections.  Much easier to waffle before the waffle is served, don'tcha know?

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And pro immigration reform supporters have been out marching in Dallas and Houston, but the turnouts were not like the ones in Mexiifornia earlier this year.

Where does Money Go?

OK, back at the grind again, eh?  Maybe you too, ask yourself over your morning coffee, like I do - "Where does all the money go?"  Today, there some interesting theories to read up on which try to get to the heart of the matter.

As a starting place, some of the money goes is to high paid celebrities.  Now, I hold nothing against Tiger Woods for winning the Deutche Bank Open this weekend, but I am astounded that he's at $5.7 million on the tour just in winnings (not counting endorsements).  As the Daily News Transcript picks up (from the Boston Herald's Joe Gordon):

"Woods has made an average of $4,259.67 for each stroke in the span and is 86-under par. And by the way, he’s made $8.6 million total this season. "

 If you have a household income of $87,000 (fair to good by most accounts), Woods has made 100-times your family income so far - and the year's not over.

Obviously something is wrong.  You're putting in how many hours a week?  Why, seems to me you ought to be practicing your golf game and signing up for a few pro-ams. Not that you will ever make a fortune - in fact you probably won't make a dime - but you will at least feel more involved in the sport and develop a deeper appreciation for Tiger's high skill level at the game. And get some exercise and fresh air - good things, too.  You're going to get fired some day anyway so play golf when you can afford it.

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Another place the "money goes" I noticed on Labor Day, was into cell phones.  My brother in law, Panama Bates, just back from adventures Panama (the country) last week, observed that "even the poorest of people in Panama have cell phones."  When a woman's cell phone battery went dead at the airport, and she asked if she could borrow Panama's cell phone, and he told her that he didn't have one, she looked at him like he was nuts. Such are addictions.  And they are not limited to poor people in Panama City.

While I was waiting to pick up the BIL at Houston airport Saturday night, the security staff told me I could find out how late Panama's flight would be if I would just "Call this number on your cell phone..."  When I explained that I didn't believe in brain cooking while alive, they looked at me aghast - like I was an alien life form or something - and told me I could use the pay phone inside the terminal.

The cell phone has brought with it a whole "communications culture" not unlike the CB radio craze.  Only, unlike the CB craze, there's money in this one - ongoing corporate revenue - because CB radio's grand shortcoming from the corporatist's perspective was that there was no ongoing tariff for its use.  With cell phones, there is. They're here to stay and to keep putting sparklies in them until everyone of monkey-mind on earth just has to have one.  When they make espresso, call me.

I caught a few commercials on television which drove home the point that a $50/month cell bill is a "bargain".  What they don't mention is the tax load on that - I've heard $15 and up - adding a 30% premium by government to "regulate" their use.  What crap.

But check it out: $65 a month for cell phones for a family of four means writing $3,120/year worth of checks for the family's jawboning - and in the 30% tax bracket, I reckon $4,457 of family income is being allocated so the kids can rip off.MP3's, take mostly useless pictures, and become great texters.  Not to mention the price of the phone itself.  And, not to mention making your kids a new target of demographic following thieves.

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But I digress from this morning's observations about where the money goes. If I was going to recommend a newsletter to keep you thinking straight about money (assuming you've already subscribed to our premium www.peoplenomics.com site natchurly, I would have to say "The Privateer" is exceptionally worthwhile.  Published in Australia, William Buckler's observations are often concise statements of the obvious that somehow miss getting covered by America's mainstream financial media. Two examples?

"US durable goods orders fell 2.4 percent in July. This shows where US output is going. US consumer confidence fell sharply in August, the Conference Board said on August 29. The consumer confidence index fell to 99.6 in August from a revised 107.0 in July. This is a huge break, the main cause being that new US home sales for July were down 21.6 percent from the previous July. That confirms that the real estate bubble of 2001-05 has ended. Add the fact that the US median hourly wage for US workers has declined 2 percent since 2003 after factoring in price inflation and the result is that for most Americans, living standards are down."

Buckler has also managed to figure out the dirty secret of Wall Street's strength of late:

"Corporate buybacks. Many of the larger US companies bought back a record $US 116 Billion worth of their shares in the second quarter according to a recent Standard & Poor’s report. The previous buyback record was $US 104 Billion set in the fourth quarter of 2005."

Yup, that'll fool a few sheeple. And no one is going to hold up cue cards for the US talking heads to reveal this stuff.  Besides, if stock prices are stable to up, the third quarter bonus plans for CEO's are a slam dunk, perhaps earned for largely for hiding their company from being fingered as losing in key financial metrics if the buybacks are penciled out.

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We also need to talk about another pair of "R's" this morning.  Recall that I've labeled World War IV (yesterday's recap of WW IV here) as the "R&R (resource and religion) War". Curiously, we're about to have our domestic "R&R War," too:  Only this time it means "Refinancing and Remorse War" that results from the housing bubble collapsing.  One reader spied this:

This site collects articles concerning the housing market in USA. It is enough to make your blood turn to ice!

http://www.realestatedecline.com/ 

The housing market is not going to crash but has crashed in the last two months. Just wait until the August figures come out and then Septembers.

The repercussions are going to be something else!

I'd like to refer you to The Mogambo Guru's piece today about "Moose and Squirrel Economics" that describes (via Business Week) some of the strains and pains emerging.  It's enough to make even that fiendish Boris Badenov (bad-enough) [from the Rocky & Bullwinkle cartoons, lower left of picture]  smile with bankerly glee.

Check the "Bubble Meter site" to see if your  hometown is in one of the big bubblicious of bubble areas.

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Another chunk of your personal money is going to support the auto industry.  And, as a site called the "AutoExtremist" recently reported, times are not good in that industry.  With auto manufacturing exceeding demand, and excess factory capacity seems to abound, we're frankly surprised that auto prices haven't come down, but they doubtlessly will.  Especially now that the Fed may have hit its high water mark in interest rates, and may actually have to ease this fall and the unwinding of the economy comes into focus for even the economic dunderheads.  It's deflation, stoopid!

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Still, before the financial horrors of this fall arrive, there's still hope.  The market could march on to a new all-time-high.  (Ha!)  But even if it doesn't, we see that both gold and silver are showing some resilience again today (charts above).

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So far, in 57+ years of trying to figure out the answer to the question "Where does the money go?" the best answer I've come up with is "Away." And that answer isn't changed today after a whole weekend of thinking about it.

Monday September 4, 2006

Peoplenomics Subscriber Note

The link to the personal asset value model in the spreadsheet that accompanies this week's report has been fixed.  Apparently, it wandered off on its own...Spreadsheets will do that now and then, you know.  Click here to access it.

Mexico Simmers

Lopez Obrador continues to object to the national election returns in Mexico, questioning the validity of the outcome.  Today, he has added a new call: Constitutional Reform to the increasingly tense rhetoric. This weekend, it was more demonstration by supporters of what the Western press keeps pejoratively referring to as "left wing candidate's" supporters. It's my observation that once you get south of the US border (the the middle of Los Angeles?), what seems "leftist" is really more moderate. But, don't let me stop your not-quite subliminal programming by the corpress!

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But the rebellion/revolution meme in www.halfpasthuman.com web bot modelspace is not strictly a North American problem.  A reader in Germany says he's seeing signs of "rebelli9on" in British press reports:

"Revolt" as mentioned by the web bots is manifesting in Great Britain. See this from the Independent:

"Tony Blair will be served notice to quit Downing Street at a meeting of the Cabinet next week when senior ministers plan to confront him over his refusal to commit to a departure timetable.

One described Mr Blair this weekend as "deluded", while another said he was being "self-indulgent". They are among a growing number of cabinet ministers, some formerly loyal to Mr Blair, who have concluded he must leave office sooner rather than later if Labour is to have a chance of winning a fourth term.

"This pantomime has to end or we are going to lose the next election," said one last night. ....

Now he faces a full-scale revolt after suggesting that the "largest part" of those MPs who want him to go also desire a return to the beliefs and practices of "Old Labour"....."

Source: http://news.independent.co.uk/uk/politics/article1325433.ece 

The rickety time machines and their attending monks are getting accurater and accurater ;-)

One personal "discovery note" for web bot subscribers:  Until an email today, I didn't know that internal Defense Department memos from Donald Rumsfeld were called "snowflakes."   As global warring grows, look for "snowflakes" to become blizzard-like in World Wars IV.

As one reader informs us, the term is actually wider in use:

"To be more specific, a "snowflake" is the small white piece of paper ("document control record") attached to a document. The form's primary purpose was to keep track of suspenses (due dates) on documents requiring an answer or other action.

The snowflake is a multipart form about the size of an index card (back in the old days they used carbon paper), and as the document passed through various hands, one of the copies would be removed and placed in a secretaries "suspense file", who kept track of when these things were due.

I hated the things."

--"Remington Rangers: We don't retreat, we backspace!"

Word from the Fronts of WW IV

As we have now passed the web bot's context shift into rebellion/revolution, I think it's fair to start lumping all warfare reports under the single category label they deserve: World Wars IV.  World War III was (besides being essentially a singular US/Soviet deal), it goes (almost) without saying, was the "cold war" which ended with Soviet-style communism bankrupting the Soviet empire.  But, not to worry, the US since the wall came down has engaged in a spree of resource exploitation and Big Governance that would make communist Central Planners proud. 

In fact, one could argue that the Soviets won, if you look at government spending, as a fraction of income as the metric.  Lack an enemy?  Create one!  Machiavellian sounding perhaps, but there's some evidence to that effect.  Why? Because war is such a dandy economic tool - and it may be modulated to drive an economy  any which way or that, depending as who's cast in what enemy role. And who is to benefit?  The same military-industrial complex that none less than President Dwight Eisenhower warned the country of in his famous speech, although arguably, we could throw pharmaceutical corps into the mix today..

On to our daily review:

Jordan:  A British tourist has been killed by gunmen. This may be the opening of a new front.

 

Afghanistan: 200 "Taliban" and four Canadians have been killed. in righting and follow-on bombing. 15 British have been killed - one in fighting and 14 in a Nimrod plane crash.

 

Iraq: A soccer player has been kidnapped. Elsewhere, two British soldiers wounded, and what's called a "key al Qaida leader" has been captured.

 

Turkey: Turkey's front (war on the Kurds) has resulted in 7 soldiers being killed, and a further two in a bombing attack.

 

Ossetia: The media muzzle continues two years after Beslan.

 

Sri Lanka:  Government troops claim to have taken a key town.

 

Europe: The human invasion of Europe continues as governments grapple with immigration limits.  (Say, this sounds familiar, doesn't it?)

 

Lebanon: US-influenced Qatar is sending 200 "peace" keepers.  No sign of a prisoner swap yet.

Philippines: Muslim rebels and government troops clash.

 

Somalia: Muslim militants have issued a set of demands to the (what's left of it) government.

 

Sudan:   Darfur peacekeepers have been sent packing by the government.

Not that being in the middle of World War IV will matter in a decade or two.  James Lovelock, inventor of the concept of Earth as an organism, essentially says in a Washington Post interview today that Global Warming is gonna get most of us anyway:

"Our global furnace is out of control. By 2020, 2025, you will be able to sail a sailboat to the North Pole. The Amazon will become a desert, and the forests of Siberia will burn and release more methane and plagues will return.":

Given global warming, Lovelock figures only 200-million humans will survive the next 20-years and those from moving close to What is now the Arctic.  Given sea level changes that will come, perhaps in as little as 10-seconds says a British paper, I've been eyeing mountain valleys in Patagonia. I know, extra sunscreen for the ozone hole there, sure, but at least that may be improving..

Peak Debt

My friend Jas Jain, who is expecting rampant deflation in the next rear or so, sent in a wonderful article on Peak Debt that's worth a read:

"I am no expert on Peak Oil, but Peak Oil is not the urgent problem that the world faces, economically, or politically. The problems of the supply-demand of oil will play out over a longer period and its effects would be spread over a longer period of time than that of the Peak Debt, which are lot more immediate. As a matter of fact, it has been the rapidly rising debt (racing towards the peak), which in turn has “fueled” a worldwide construction boom, that has resulted in the high prices for oil over the past 4 years and not the realization of the problem of Peak Oil. During the coming global depression, within this decade, the price of crude oil should fall below $25 a barrel and there will be glut.

What Is Peak Debt?

I will limit the discussion to the US. If one looks at the long-term graph of Total Debt as a percent of the GDP (see graph in the above reference) one sees a Longwave Cycle type of behavior whereby the debt grows for a long period, decades, reaches a crescendo and then seem to fall down rapidly, in a crash-like fashion, and remains low for a long period. Since the process is cyclical in nature, it repeats. Thus, Peak Debt, unlike Peak Oil, is not a theory but an observed reality of our economic system.

What happens at the Peak Debt is that the Total Debt of the economy, as a percent of the GDP, or nominal debt in current dollars, or both, stop going up and start to go down. The last time that the Peak Debt occurred in the US was in early 1930s and I can confidently predict that the next Peak Debt will occur within this decade, because the forces pushing debt higher and higher are reaching a point of exhaustion. The rising Consumption Debt exerts a depressionary effect on future consumption and at some point the debt service reaches a high enough portion of the income that the current consumption must be cut down.

Debt plays an extremely important role in our economic system, especially, if one recognizes that stock market is a substitute debt market. In particular, Consumption Debt, taken on by the households for the express purposes of consumption expenditures (including mortgage debt), plays direct role in income and wealth inequality; corporate profits, hence stock market booms; inflation rate; etc. All these – inequality, historically high corporate profits, and inflation – peak before the Peak Debt. Peak Debt occurs during the early part of the Deflationary Depression phase of the Longwave Cycle. What follows Peak Debt is a long period of depression, as the material and psychological effects of the prior consumption boom linger. All the above are based on cause and effect and not some theory and fully supported by history of earlier episodes. Since these cycles are rooted in human behavior, in this case the predictable behavior of various participants, especially, bankers and consumers, the cycle unfolds in a “clock-work” fashion.

The modern history of Consumption Debt, on a broad scale, especially, on non-essential purchases, is only a century old. Its messiah was none other than Henry Ford. Ford realized that it is not enough to offer great products at a reasonable price but the consumers must be induced to purchase in order to be able to sell more and more product and make more profits. This led to financing of the consumer goods that ultimately resulted in the 1920s boom in the US (very very similar to what has been going on in India over the past ten years). What is new in 2000s, compared with the 1920s, is not just pushing the consumer products, for which financing became a vehicle, but pushing of the debt itself, which now results in later afterthought purchases of big-ticket consumer items. I hope that you discern the difference between the two. PUSHING DEBT HAS BECOME THE EASIEST AND THE MOST PROFITABLE BUSINESS IN THE US OVER THE PAST FEW YEARS. Who wants to take the risks of a producer when financing has become so lucrative? Look at the largest “industrial” corporations in the US over the past decade, or two, and what you see is that they are lot more into financing business than in production business.

BTW, the boom-bust nature of the Longwave Cycle has most to do with debt, hence the “banker’s mischief” in creating them. Let me quote my favorite economist, Joseph Schumpeter, “One of the results of our historical sketch will, in fact, be that the failure of the banking community to function in the way required by the structure of the capitalistic machine account for most of the events which the majority of the observers would call “catastrophe.”” I am amazed by the fact that blind faithful of the American System don’t see the current “reckless mortgage lending” as an indictment of the whole econo-political system as being corrupt. These blind faithful will pay the price in not too distant a future. That is what happens with any blind faith. No system, or human institution, is immune from the control by the Crooks. We can proudly claim to be #1 when it comes to takeover of the econo-political system by Crooks, or as “the Money Bags” had done in England a hundred years ago.

The two largest bubbles of their kind in the US history – the Stock Market Bubble of late 1990s and the Housing Bubble of 2002-06 – over the past ten years are a result of the largest Debt Bubble (or Credit Bubble) in US history.

Economic Central Planning, the American Style

We all know that the Central Planning, the Soviet Style, consisted of planning of the production. In America, Federal Reserve, particularly in the recent years, has been attempting to plan the level of consumption (we all know that the consumption is some 70% of the GDP and to keep the GDP growing consumption must not be allowed to fall below a certain level). The control mechanism is Consumption Debt, because at the margin all the growth in recent years is a result of debt-driven consumption. Thus, by the control of interest rates and lending policies the Federal Reserve affects the growth in Consumption Debt, the most visible examples of this have been the lending on homes and automobiles.

Of course, Federal Reserve doesn’t tell you that it is trying to control Consumption Debt, or control the economy via Consumption Debt, but its policies do exactly that. This is because there are other variables that come into play when Consumption Debt is being affected. The most important of these variables being the inflation rate – all other things being equal, the increase in Consumption Debt leads to increase in inflation rate (simple demand driven inflation) and vice versa. Now, that is in Fed’s domain.

Let us see, in 2003, Bernanke wanted to artificially boost the economy in preparation for the Bush re-election in late 2004 and his own future appointment. He had read articles by some self-serving economists in 2002, if it hadn’t occurred to him, that low interest rates could boost housing and that may lead the economy out of the recession (it was already out of the recession, but didn’t feel like a recovery with the employment falling). So, during the first half of 2003, Bernanke started to publicly talk about the deflation threat and how the Fed can stop that by “printing money.” Thus, the Fed, under Greenspan chairmanship back then, lowered the rates to “emergency” levels when the only real emergency was the Bush re-election. Greenspan was very happy to play along because his own reappointment in 2004 was contingent upon the economy visibly recovering.

The artificially low rates gave rise to artificial boost to the economy in the form of the predictable housing boom, but no one could have predicted the Housing Bubble and the overbuilding that ensued. As mentioned earlier, the global building boom, as well as the general rise in consumption due to the boom, also gave rise to steep increases in the price of oil, which has led to the current problem of inflation. So, now the Fed has the excuse to force consumption down by altering the availability of Consumption Debt in the form of mortgage refinancing. Therefore, the Fed is actively engaged in leading to the Peak Debt that I am predicting. This is because curbing consumption is necessary to control inflation, especially, inflationary psychology, and it is not an accident that “inflation peaks during the first year of a recession,” as announced by Ron Insana on CNBC. One way or another (by raising the rates further, if necessary, or holding rates high enough for long enough) Bernanke will have to bring the consumption down by indirectly affecting Consumption Debt. As in the past, at some point Consumption Debt in the US will peak (the debt service to income ratio having reached historical highs), most likely during the next recession, leading to the general condition of the Peak Debt for the current Longwave Cycle.

With great forethought, in 1999, Bernanke, an academic getting attention as the future Fed Governor, pre-empted any talk of Fed having to take any actions to nip in the bud any asset bubble by his public declaration that Fed should keep its hands off any asset bubbles, i.e., let the asset bubbles build as far as they go. Bernanke was just the man that Bush needed on the Fed for his re-election bid and was thus appointed just in time. (On a historical note, one of the three conditions that Grant had to agree to get the command of the Union Army was that Lincoln be re-elected; this was confirmed by another general who was offered the command on the same conditions, before Grant was offered, and who declined due to the conditions).

Consequences of Peak Debt

The most immediate impact of the falling debt would be a collapse in corporate profits, hence, a sharp fall in the stock market, either crash-like, or over a period of 1-2 years. The second would be fall in inflation rate to level significantly below the level preceding the Peak Debt. Demand Destruction is what is going to kill inflation in the US, as has been the case in the past time after time, and when inflation starts to fall it doesn’t stop readily and keeps falling all the way into the next economic recovery. You can count on the inflation rate going down below zero because the rate wouldn’t be very high to begin with when it starts to fall. Trying to control inflation rate within a very narrow band, e.g., 1-2% core CPI, is idiotic and tells you more about the mindset of the economic central planers of the US of A than about anything else. Trying to control the economy too finely, requiring too much meddling into the economy, is not a sign of a country committed to free markets. Higher degree of uncertainty is one price of freedom. Control freaks are never lovers of freedom and the Federal Reserve System is a dark mark against the free market principles. In case you haven’t noticed, Federal Reserve interferes is the markets, incessantly. These meddlers don’t even know the meaning of hands off policy most of the time (to a blind faithful whatever the Fed does must be right and for the good). In attempting to control inflation in a very tight range haven’t these geniuses looked at the historical data on inflation? Oh, they are smarter than all the rest in the past?

One consequence of the rise in Consumption Debt over an extended period, mostly pushed on the middle class, is rising inequality. This is one consequence that takes a very long time to correct. If you listen to people like Greenspan and Bernanke, who act as if they are “very concerned” about the problem of rising inequality, which they have contributed the most to!, you will hear lame excuses like education gap. What a crock. Is the education gap in the US much higher today than in 1973? Most importantly, the rich are NOT the most educated; it so happens that the most educated serve the richest, who happen to be lot less educated then them! BTW, Bush administration’s solution to narrowing the inequality is, you guessed it, “No Child Should be Left Behind” program! I heard an administration official claim that, just a few days ago.

You will find direct correlation between the increase in debt on the middle class, as percent of income, and the rise in inequality. And this correlation is a result of causation. This time, the banking Crooks have taken the problem to such a scale that the middle class in America will be decimated. America will become a nation full of bankrupt households most of whom were formerly middle class. It does not bode well for the stability of the whole political system. The current Peak Debt may well foreshadow the collapse of the American political system, as the world has known it since 1776. And that would be a long life for a political system. Circa 2020s: It was a good system for most of the time it lived. May it rest in peace.

Jas

New Diseases

At a health confab in Seattle, experts are warning that obesity is becoming pandemic.  Let's have a doughnut and talk about it...

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Elaine was wandering around the ranch with a dazed look Sunday after seeing TV "news" reports about parents treating short children with human growth factors to make them taller.  "They're trying to make being short a disease now?" she wonders.  Sure! Look how it held Napoleon back...

Duck's WOT

The folks at Disney are upgrading their park entrance electronics - and by using something that comes close to being fingerprinting, privacy advocates are worried about tomorrow's land. Of course the system won't work on Mickey - but forensically, we have to wonder why he always wears those white gloves?

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Meantime, for the seriously paranoid, there's a report in a UK paper suggesting that a giant software company like, oh, say Google, could easily enough develop software to turn on your computer microphone and here what's going on at your home.  Sort of like the old "infinity transmitter" type telephone bug.  Oops!  Not that I'm paranoid....

Rumor Mill

An email I received overnight purports that a new telephone survey of Texas residents attitudes on immigration has been done.  41% percent of the respondents said "Yes, it is a serious problem."  The other 59% replied "No hablo ingles..." (I wasn't sure whether the report was serious, but for now it's in the "It's a Holiday, let's lighten up pile.)

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I'm just waiting for my first time hitting an automatic call distributor system (ACD) where option #1 is Spanish and option #2 is English.  I won't have long to wait. 

News from Elliott Wave International

The Web UrbanSurvival Only

On to Our Chart!

Instead of our customary chart, this week you get a free peak at one of our other charts from www.peoplenomics.com - this is our "Global Markets Equally Weighted" chart:

Write when you get rich,

George Ure, The People's Economist