Tuesday, March 30, 2010


I was reading the news this morning.  The lead story is the arrest of Christian militia members plotting war against the US.  A few months ago, I would have thought nothing of it.  Just a bunch of crazies, and thank goodness the government stepped in to de-rail their plans.

Today, my perspective is different.  They may still be a bunch of crazies, but I'm not taking the government's word for it.  Except for the Christian part, I may be almost as crazy as these guys are.  I decided to see if their website was still up.  It is.  You can check it out at http://hutaree.com.  My first impression is of a group of citizens whose mental state lies somewhere on the scale between concerned and paranoid.  I'll reserve judgement for where they belong on that scale until we have more facts. 

IF they were plotting violence, the law should deal with them.   But this is still America.  Innocent until proven guilty.  I want to see Eric Holder's evidence before I make up my mind.

BTW, these guys at least have a sense of humor.  Check out the Beast Watch link on their website.  Scroll down to where it says "The Beast's Number (Humor)."

Monday, March 29, 2010

Political Discourse by Bumper Sticker

I've got a bumper sticker on my car. It says, "If you don't like Democrats or Republicans, you might be a Libertarian." I hope these sentiments make people chuckle, but I also hope they will make them pause and think. A lot of folks are very disillusioned with both parties these days. They have the attitude, "A pox on both your houses."

But that's the whole point of my bumper sticker. Did you know that there are more than two political parties in Delaware? It's not just a choice between chocolate and vanilla. Delaware has an Independent Party. We have a Constitution Party. We have a Libertarian Party. And the list goes on. These parties are made up of concerned, thoughtful, politically aware citizens who examined the platforms and the actions of the so-called "major" parties and found them wanting. If you are reading this article, I will go out on a limb here and assume that you too are a concerned, thoughtful, and politically aware citizen. Like many, you may have chosen a party when you were young and gradually evolved a political philosophy of your own as you matured. This often leads to an epiphany later in life and a change of party. Do you think now might be the time for such a self-examination? I encourage you to click the links to the websites of the political parties listed above and explore their ideas. If you like what you see there, you won't be alone. Fully 25% of the registered voters in Kent County are listed on the voters' rolls as "Other".

Of course, small parties face a few obstacles to success; some structural and some are in terms of perception. The major parties don't really want the competition, and the playing field is tilted against the smaller upstarts. Delaware enacted legislation this year, HB 245, which doubles the number of registered voters a party must have to get their candidates' names on the ballot. The Constitution Party, among others, has been shut out of the electoral process as a result. Doesn't sound like America, does it?  It might be appropriate to remember the words of Pastor Martin Niemoller.  He was speaking of the rise to power of the National Socialists in 1930s Germany.  He said:

"THEY CAME FIRST for the Communists,

and I didn't speak up because I wasn't a Communist.

THEN THEY CAME for the Jews,

and I didn't speak up because I wasn't a Jew.

THEN THEY CAME for the trade unionists,

and I didn't speak up because I wasn't a trade unionist.

THEN THEY CAME for the Catholics,

and I didn’t speak up because I was a Protestant.


and by that time no one was left to speak up."

But most obstacles faced by the smaller parties are problems of perception. "I agree with your ideas, but you can't win." Or, "I don't want to waste my vote." These are not frivolous arguments. The simple, unadorned answer is that it will often be an uphill battle, but if the cause is just, the impossible can be achieved. David slew Goliath. And don't forget the examples of Nelson Mandela and Martin Luther King. Underdogs sometimes prove to be bulldogs. In the words of Gandhi:

First they ignore you.

Then they laugh at you.

Then they fight you.

Then you win.

How will you ever get the kind of government you believe in, if you keep voting for people who won’t support your values? Sometimes you have to stand up for your principles. Whenever I have a hard time doing this, I find it helps to remember that I have children who will be living in this country after I’m gone. If your government and those who govern you are not up to the task, it's your responsibility to fix it. Sometimes that means taking a more difficult or unconventional path. Remember, the lesser of two evils is still evil.

I've got another bumper sticker on my car. It reads, "When injustice becomes law, resistance becomes duty."


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Thursday, March 25, 2010

Why Gold?

This is from today 25 March, 2010

This next one is a bit older. It is from January, 2009

And this from June, 2009

Pretty much explains our financial world as I've come to see it.


Tuesday, March 23, 2010

Drinking the Kool Aid

 I've become obsessed lately with a dozen or so websites that I would characterize as "alternative blogs".  My view of the world has radically changed as a result of my exposure to these sites, and I'd be the first to admit, I may be drinking some really bad Kool Aid.  But I'm not so sure. I think we may be approaching the end of the world as we know it, financially speaking, but I'm still lucid enough to realize that I may just be crazy.  You be the judge.  I was talking with a friend today about my expectations for the future and the websites I'd been reading that were largely responsible for my "whole new outlook on life."  I offered to send him an e-mail with a few links to see what he thought.  I'd like to share the e-mail with you and see what you think.  Feel free to post comments.  Here's the e-mail:

Dear XXXX: 

I promised you some links to a few of the websites I've been reading lately.  Here are three of about a dozen that I read every day.  I've practically abandoned conventional business news sources like Yahoo Finance, CNBC etc.  I'm afraid they may have become nothing more than cheerleaders for an optimistic point of view that has little basis in reality.  These sites below are fairly technical and obviously written by people very experienced in finance, trading, economics etc.  I'm often confused by the terminology and the complexity of the arguments, but as I continue my reading, I understand a little more every day.  Still, maybe half of what I read is beyond my full comprehension. 

The general consensus of these sites, however, comes through loud and clear. To wit:  We are in deep Doo Doo, and the government and the major market movers are colluding to cover it up in hopes that positive investor sentiment will lead to some sort of recovery.  Bank balance sheets are a fraud sanctioned by the government to keep the banks from formally going bankrupt. Unprecedented stimulatory intervention by the government and the fed have barely kept the economy treading water, and those extraordinary fiscal measures are about to run out.  Housing statistics, mortgage default rates, unemployment numbers are all being massaged by the government agencies collecting the data to hide the severity of the crisis.  One major catalyst and the whole house of cards will come tumbling down, and in a much more calamitous fashion than in 2008-2009.  The fed is loaning huge sums of money to the banks using overvalued crap assets as collateral, essentially bringing the bank's private crap onto the public balance sheet.  The more benign points of view hold that neglect and lack of foresight on the parts of investors and government regulators led to the crisis.  The more sinister explanations blame predatory banking institutions, Goldman Sachs seems to be singled out more than most, corrupt politicians bought off with campaign donations, and a Federal Reserve that is either incompetent or actively participating in the deception. 

The consensus view here seems to promote what sound like conspiracy theories, so I am skeptical and reluctant to accept the arguments on face value.  But the arguments seem to have merit.  My own view for the present is wait and see.  I don't thoroughly embrace their story line, but I have come to see the conventional explanations as extremely suspect.  I now analyze every piece of news through the spectrum of the conspiracy theorist to see if their paradigm explains the news better than the Mainstream Media/Government paradigm.  More and more, I find the conspiracy paradigm does a better job of explaining the facts.  And to lend some credence to the doomsayer's point of view, I would refer you to this article, Basically, It's Over,  written by Charlie Munger, Warren Buffet's lesser known but equally astute business partner at Berkshire Hathaway.  I find this dire prediction from a very sensible and down to earth observer as chilling evidence that this time it really is different.

The first site below is a link to a specific article at The Automatic Earth.  I like the site because every article includes an old B/W photo in the header.  For what it's worth, this gives the site a very charming feel.  Also, they post only once every other day or so, so I can easily keep up with them.  This particular article provides a relatively clear summary of their point of view. I say relatively clear, because as I re-read it, I realize that it has a lot of jargon.  A month ago, I may not have found it so clear.  Today, it makes perfect sense to me. 

The second site, Jesse's Crossroads Cafe was the first "alternative" site that I discovered while researching a blogpost on the administration's possible plans for usurping our 401K's.  It too has a very charming feel to it.  The author also posts relatively infrequently.  More importantly, most of the dozen or so sites I read now I found through his links section.

The last site on the list, Zero Hedge,  is the heavy hitter.  The big gun of all the sites I follow.  Not as attractive an interface, but Man O Man is this site packed with the goods.  First of all, this site posts about 15 - 20 articles a day.  Presumably all by the same author.  I can barely read that much in one day, and this guy is writing it all.  Many of the articles are not just comments, but true  revelations.  Investigative financial journalism like nothing available in the mainstream.  The author uses a pseudonym, Tyler Durden.  Tyler Durden is a character in the movie Fight Club.  I'm not sure of the significance.  This site has the most to offer in terms of content, but it is also the most difficult to understand.  Some of the articles are still totally beyond me.  The other feature of this website that sets it apart from the rest is that it posts a lot of comments to the articles.  Its not unusual for many of the articles to have 50-100 comments.  This is a mixed blessing.  I can often learn a lot from the comments if the article itself confused me.  On the other hand, some the commenters seem a little juvenile in their content and their tone.  It detracts a bit from the credibility of the site, but not much as the author can hardly be held responsible for the frivolous nature of the comments.


The first few paragraphs of this article are a little confusing if you don't know the personalities on this site.  But the narrative makes more sense if you start a few paragraphs down at "Dear J"



Well, this turned out to be quite a bit longer than I intended.  Hope you find it useful.  Take some time with these sites if you find them of any interest.  I'd be curious to get your opinion.  Like I said, I'm not sure that I'm not just a 2010 version of the 1960's kook who was building a bomb shelter in his back yard.  But like they say, "Just because you know you're paranoid doesn't mean they aren't really out to get you."


Thursday, March 18, 2010

You Go Guv!!

New Jersey's Chris Christie is fast becoming my most admired conservative politician.

Governor calls for ‘real change’ at the local level

Here's more at "Mish" Shedlock's Global Economic Trend Analysis.


Tuesday, March 9, 2010

The Parable of Heidi's Bar or Financial Armageddon Explained in Laymans Terms

I can't take credit for this piece.  I lifted it from another website that I read obsessively.  Here's the link by way of attribution.

Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed in a ledger (thereby granting the customers loans).
Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit.
By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.
Consequently, Heidi's gross sales volume increases massively. A young and dynamic Vice President at the local bank recognizes that these customer debts constitute valuable future assets, and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.
At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics.
 Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.
One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.
 Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Heidi cannot fulfill her loan obligations, she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs. Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with not only having to write off her bad debt but also with losing over 90% of the presumed value of the bonds. Her wine supplier claims bankruptcy, closing the doors on a family business that had endured for three generations, and her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar, no-strings attached cash infusion from their cronies in Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Heidi's bar.


Healthcare--It Comes Down to Trust

Here we are almost halfway through the month of March, and we are still living with the specter of Congress passing a sweeping government takeover of the health care system in this country.  We thought this horrible idea was dead and buried after Scott Brown's election in Massachusetts in January, but Congressional Democrats are still dragging around the dead carcass of "insurance reform" despite the clear message from the American people.  Liberal pundits are in denial about the rejection of this proposal by the electorate.  They keep saying things like, "Polls show that the American people are in favor of many of the elements in this bill".  And that's certainly true.  As Americans, we're a generous and caring people.  We'd all like to see 30 million people get health insurance who don't have it now.  We'd all like people with pre-existing conditions to have the opportunity to get affordable health care.  We'd all like to see health care costs go down and deficits shrink.  The problem is, most of us know that there is no such thing as a free lunch. The president and Congressional Democrats are trying to tell us there is.

I'd be perfectly happy to spend the next several paragraphs arguing about this or that detail of the health care plan.  I've spent plenty of time doing just that with friends and family.  But to be honest, that's just beating a dead horse.  By now, we've all made up our minds on the merits or lack thereof in this health care package.  I could propose lots of better alternatives.  Less comprehensive, perhaps, but more affordable, and a step in the right direction.  I believe the Republicans have done just that.  It's all old news by now.  So let's cut to the chase.  The main reason to defeat this monstrosity is simple.  We, the American people, do not believe that those in government will not screw this up.  GOVERNMENT--WE DON'T TRUST YOU!!

It all boils down to trust.  We don't believe members of Congress are smarter than us.  We don't believe they are better informed than us.  We doubt many in Congress have even half the integrity of the stereotypical used car salesman.  (No offense to used car salesmen).   We don't trust the motivations of our lawmakers.  The way Congress has handled the financial crisis with huge bailouts and politically driven crony capitalism has only served to highlight the mediocrity of America's leadership these days.  They are presiding over an economic meltdown right before our eyes, and yet the political class has the nerve to say, "Trust us.  We know what we're doing."   That would have been a bad wager a few years ago.  Today, it's more like a suckers bet.

We don't like the plan!  Even if we're wrong, and it's a great plan, we don't trust you to execute the plan without screwing it up.  And even if it's a great plan and you execute it to perfection, we don't believe you can do it without ballooning an already out of control budget  into the stratosphere.  There are just so many levels on which to object to Obamacare.  Substantive reasons.  Ideological reasons.  Practical reasons.  Economic reasons.  Procedural reasons.  Take your pick.  Democratic health care reform fails the smell test any way you look/sniff at it.

 In January, Democratic health care reform had one foot in the grave.  Scott Brown's election looked like it would seal the deal, but the ghost has come back to life.  Its time to drive a stake through the heart of Obamacare once and for all and start covering the grave.  This is one piece of legislation that should be declared shovel ready.


Tuesday, March 2, 2010

Listen to New Jersey's Governor

Here's a link to an address by New Jersey's new Republican governor Chris Christie.  About twenty five minutes.  I thought it was impressive.  Can a politician live up to the rhetoric?  He sounds sincere.  I hope the task isn't too much to achieve.


Monday, March 1, 2010

News from 1930

Here's a link to an interesting blog I came across.  This fellow has been publishing, every day, a summary of the Wall Street Journal from the corresponding day in the 1930's.  He started this last year.  So in other words, today being March 1, 2010, his blog post is a summary of the Journal from March 1, 1931.  And it's not just market news, but politics, personalities, entertainment, and advertising.

If you click on the entry "Just What Is The Point of This Blog?" at the top right hand side of his home page, he explains by paraphrasing Mark Twain that while history doesn't always repeat itself, it often rhymes.  A daily reading of the Journal from the 1930's does show many similarities between then and now, such as a precipitous market panic, followed by recovery, followed by another drop.  And all the while, lots of pundits were proclaiming the crisis was over when the worst was yet to come.  It's fascinating to see how many knowledgable people didn't see what was happening to them as they were sitting right there at ground zero.  Very interesting reading from both a market perspective, and a historical perspective.


Bending the Health Care Cost Curve Down

I read a great line in an article by Cato's Michael Tanner.  He explained that of all the money spent on health care each year, only about 13% of it comes from the pocket of the consumer of that health care.  The rest of the money comes from the government or private insurance plans.  Such a system has the effect of skewing the market toward the consumption of more health care at higher cost to all parties.  If someone else is paying the bill, there is no incentive to make prudent choices in the consumption of health care.  Or as Mr Tanner writes:

Think of it this way. If every time you went to the grocery store, someone else paid 87 percent of your bill, not only would you eat a lot more steak and a lot less hamburger - but so would your dog. And food costs would go up for everyone.

Here's a link to a Wall Street Journal article by Indiana's Republican Governor Mitch Daniels talking about his state's experiment with Health Savings Accounts.  These plans incentivise consumers to spend wisely by providing less expensive high deductible medical insurance while putting money in an account that belongs to each insured person to be used for routine medical expenses.  If there is money left over at the end of the year, it belongs to that insured beneficiary. 

When you're spending your own money instead of someone elses, you're bound to spend it more wisely.  This brings everyone's costs down.