Forbes suggests that college education can be financially ruinous. The association of education with wealth only works when both are in limited supply, otherwise the Hedge Schools would have made Irish peasants rich. A silk hat does not make you a Bradford millionaire.
A doctor friend often used to quote some factoid that if the average doctor had left school at 16 and become employed in some capacity suited to his abilities, his hard-studying medical counterpart would never catch up in terms of total lifetime income earned.
I've heard it said that after the Revolution, the French trained thousands more lawyers, in order to devalue the profession.
Man to the plough;
Wife to the cow;
Girl to the yarn;
Boy to the barn;
And your rent will be netted.
Man tally-ho;
Miss piano;
Wife silk and satin;
Boy Greek and Latin;
And you'll all be Gazetted.
Thursday, February 05, 2009
Global monetary inflation and the threat to peace
Last week, I suggested that we could be entering an era of competitive currency devaluation. Now, Mish sees it happening in Russia, Mexico, Indonesia - and hints of intervention in Japan. The Canadian National Post predicts a drop in the US dollar, too (htp: Jesse).
Can the Euro -already strained by member countries moving in different directions - take this pressure? A friend told me recently of an old restaurant incident involving people he knew, where first one "did a runner", then another, so that the last man left at the table was stuck with the whole bill. This is a game that punishes the virtuous.
Gold is supposed to be a haven in such conditions, but is already above its long-term post-1971 trend, as I show here. So the bold investor might buy in now, knowing it's high but hoping it'll go higher (or fearing that other things will go lower still). Others say silver, or oil, or agricultural land. "The best lack all conviction, while the worst / Are full of passionate intensity."
These are tricky times. As in revolutions generally, it's hard to see which faction will be victorious, but loss, injustice and confusion are certain: "we are here as on a darkling plain / Swept with confused alarms of struggle and flight / Where ignorant armies clash by night."
This may seem over-dramatic; but when money ceases to be dependable and deadly dull, everything else becomes much too exciting. If the middle classes suddenly find their savings wiped out by inflation, their assets generally devalued and their businesses and employment under threat, watch out.
Can the Euro -already strained by member countries moving in different directions - take this pressure? A friend told me recently of an old restaurant incident involving people he knew, where first one "did a runner", then another, so that the last man left at the table was stuck with the whole bill. This is a game that punishes the virtuous.
Gold is supposed to be a haven in such conditions, but is already above its long-term post-1971 trend, as I show here. So the bold investor might buy in now, knowing it's high but hoping it'll go higher (or fearing that other things will go lower still). Others say silver, or oil, or agricultural land. "The best lack all conviction, while the worst / Are full of passionate intensity."
These are tricky times. As in revolutions generally, it's hard to see which faction will be victorious, but loss, injustice and confusion are certain: "we are here as on a darkling plain / Swept with confused alarms of struggle and flight / Where ignorant armies clash by night."
This may seem over-dramatic; but when money ceases to be dependable and deadly dull, everything else becomes much too exciting. If the middle classes suddenly find their savings wiped out by inflation, their assets generally devalued and their businesses and employment under threat, watch out.
Civil liberties in Britain further eroded
Taking a photograph of a public servant, even if it's to record his wrongdoing, is to be illegal. That's if the photograph is 'likely to be useful to a person committing or preparing an act of terrorism'. How could you prove it wasn't?
Nazi comparisons are horrid cliches; yet my mother watched Nazism take hold as she grew up in rural East Prussia. Tyranny advances step by step, and one of its most useful allies is a natural disinclination to believe where it is heading.
Another ally of the tyrant is woolly language used in law - the freedom of the individual is in the precision of the language that grants powers to his incomparably mightier government.
Nazi comparisons are horrid cliches; yet my mother watched Nazism take hold as she grew up in rural East Prussia. Tyranny advances step by step, and one of its most useful allies is a natural disinclination to believe where it is heading.
Another ally of the tyrant is woolly language used in law - the freedom of the individual is in the precision of the language that grants powers to his incomparably mightier government.
Wednesday, February 04, 2009
Tuesday, February 03, 2009
Shoot the B******s
A piece by the columnist and Nobel-prize winning economist Paul Krugman: http://www.nytimes.com/2009/02/02/opinion/02krugman.html?_r=1&em
To me, it gives a strong argument for temporary state ownership.
To me, it gives a strong argument for temporary state ownership.
Shares: why bother?
The Contrarian Investor raises an issue I've been pondering recently: in today's financial climate, are stocks and shares old hat? They're only a market in what companies are willing to let the public invest.
If I were a rich entrepreneur who'd been smart enough to get into cash a year or two ago, I'd be looking to take my company back into private ownership, or buy another for a suitcaseful. Who wants to be told what to do by shareholders with bees in their bonnets, institutional investors looking to maximise profits like, NOW, and other goons? It's like being in a three-legged race with the fat kid.
Venture capital - is that the place to be?
If I were a rich entrepreneur who'd been smart enough to get into cash a year or two ago, I'd be looking to take my company back into private ownership, or buy another for a suitcaseful. Who wants to be told what to do by shareholders with bees in their bonnets, institutional investors looking to maximise profits like, NOW, and other goons? It's like being in a three-legged race with the fat kid.
Venture capital - is that the place to be?
Monday, February 02, 2009
IN- vs. DE- and an upcoming opportunity
Jesse echoes my hunch: deflation now, inflation soon-ish, with high interest rates for a bit. At that latter point, get your annuity and /or bonds, and benefits as rates subside. A guess, but it's comforting to see wise owls coming to the same conclusion.
You now have our investment gameplan for what is likely to be the rest of Jesse's life.
No, no "Jesse"; live long and prosper.
You now have our investment gameplan for what is likely to be the rest of Jesse's life.
No, no "Jesse"; live long and prosper.
Number crunching - fractional reserve banking
Supposedly, banks lend 10 times (or more) what they have on deposit. Yet in June last year, it was estimated that total UK consumer borrowing (mortgages, loans and credit cards) stood at £1.444 trillion, and in October savings and deposits reportedly totalled £1.17 trillion - a ratio of c. 1.2 to 1.
By contrast, total U.S. household debt at the beginning of last year was estimated at $14.4 trillion, and in October the Mises Institute reckoned the True Money Supply to be $5.5 trillion, a ratio of around 2.6 to 1.
On the face of it, the American consumer is in twice as dire a state as his British counterpart.
I expect that's an oversimplification - but simplicity is in very short supply. I'd like to understand more, but I can't find reliable, user-friendly data on where all the money and debt is. There's far too much secrecy, complexity and obfuscation in this business.
By contrast, total U.S. household debt at the beginning of last year was estimated at $14.4 trillion, and in October the Mises Institute reckoned the True Money Supply to be $5.5 trillion, a ratio of around 2.6 to 1.
On the face of it, the American consumer is in twice as dire a state as his British counterpart.
I expect that's an oversimplification - but simplicity is in very short supply. I'd like to understand more, but I can't find reliable, user-friendly data on where all the money and debt is. There's far too much secrecy, complexity and obfuscation in this business.
Gold overpriced?
Gold's price since President Nixon closed the gold window on Aug 15, 1971 has been generally higher than in the era up to then, but still very variable. If we adjust it for inflation as measured by the Consumer Price Index (CPI) in the USA, and take September 1971 as being a "1", the mean and median values since then are of the order of 2.8 - 2.9.Currently the gold/CPI ratio is about 4, which is somewhat above trend, though nowhere near the spikes of the early 80s. So I'd regard gold's price as a bit high for getting in now, unless you're speculating, which is not my game. But if you got in 9 years ago, well done, and I guess you'll want to hold for some time yet.
Sunday, February 01, 2009
British jobs for foreign workers
Wanted:738 foreign (EEC domiciled) labourers, for casual work in comfortable and extremely well-appointed factory premises. Existing postholders need not apply.
Why has this contract become available?
We are seeking workers who will perform their duties solely for the official remuneration offered, without the payment of additional incentives from third parties, such as "consultancy fees" etc. The management feels that it is important to make a fresh start in order to establish a new working culture, without contamination from previous elements.
Duties
Reading and revising proposed laws. A good command of English is essential; it is therefore expected that applicants will have been educated abroad.
Legal revisions must be conducted solely and entirely on the merits of each case, for the benefit of the nation as a whole, without fear or favour.
Days worked per year / holidays
This varies, but in 2007-2008 the number of days the factory was open was 148.
Hours of work
From the following start times until 10 - 11 p.m., but sometimes later and occasionally throughout the night:
Mondays and Tuesdays from 2.30pm
Wednesdays from 3pm
Thursdays from 11am
some Fridays (10 in 2008 - 2009); on these days, from 10am
On average, 6 hours 46 minutes per session (in 2007-2008).
Thus, hours worked per year = c. 1,002, equivalent to less than 21 weeks at the EU maximum of 48 hours/week.
BUT adjusted for average attendance figures (see below), actual time worked per worker in 2007-2008 was the equivalent of 11 weeks 2 days per year.
Sick leave
N/A. But attendance is voluntary, and average attendance in the last 3 years was c. 54%.
Minimum attendance by the workforce as a whole is 3 workers per shift (30 on days when the product is due to roll off the assembly line).
Job security
Extremely good. Under current terms, workers cannot relinquish their position once appointed, even if they wish to; but they may take indefinite leave of absence without notice or permission. One current worker has stayed away from the workplace since 2001.
Pay
£335.50 per shift, plus other expenses.
Outside employment when not in attendance at the factory is permitted, provided that it has no bearing or influence whatever on the worker's primary duties at Lawmaking plc.
Important note
Applicants must be prepared to endure some initial unpopularity from protectionist malcontents (many apparently disguised as Santa Claus), but may be assured of the full protection of the law.
Davos: inaugural address
Sorry, I keep getting it confused with Davros. One has a plan to take over the world with the aid of heavily-protected, ultra-aggressive, lunatic invertebrates, and the other...
DIY? GSI, say I.
Doing the rounds on the Internet...
DRILL PRESS: A tall upright machine useful for suddenly snatching flat metal bar stock out of your hands so that it smacks you in the chest and flings your beer across the room, denting the
freshly-painted project which you had carefully set in the corner where nothing could get to it.
WIRE WHEEL: Cleans paint off bolts and then throws them somewhere under the workbench with the speed of light. Also removes fingerprints and hard-earned calluses from fingers in about the time it takes you to say, 'Oh sh*t '
ELECTRIC HAND DRILL: Normally used for spinning pop rivets in their holes until you die of old age.
SKILL SAW: A portable cutting tool used to make studs too short.
PLIERS: Used to round off bolt heads. Sometimes used in the creation of blood-blisters.
BELT SANDER: An electric sanding tool commonly used to convert minor touch-up jobs into major refinishing jobs.
HACKSAW: One of a family of cutting tools built on the Ouija board principle. It transforms human energy into a crooked, unpredictable motion, and the more you attempt to influence its course, the more dismal your future becomes.
VISE-GRIPS: Generally used after pliers to completely round off bolt heads. If nothing else is available, they can also be used to transfer intense welding heat to the palm of your hand.
OXYACETYLENE TORCH: Used almost entirely forsetting various flammable objects in your workshop on fire. Also handy for igniting the grease inside the wheel hub out of which you want to remove a bearing race.
TABLE SAW: A large stationary power tool commonly used to launch wood projectiles for testing wall integrity.
HYDRAULIC FLOOR JACK: Used for lowering an automobile to the ground after you have installed your new brake shoes, trapping the jack handle firmly under the bumper.
BAND SAW: A large stationary power saw primarily used by most shops to cut good aluminum sheet into smaller pieces that more easily fit into the trash can after you cut on the inside of the line instead of the outside edge.
TWO-TON ENGINE HOIST: A tool for testing the maximum tensile strength of everything you forgot to disconnect.
PHILLIPS SCREWDRIVER: Normally used to stab the vacuum seals under lids or for opening old-style paper-and-tin oil cans and splashing oil on your shirt; but can also be used, as the name implies, to strip out Phillips screw heads.
STRAIGHT SCREWDRIVER: A tool for opening paint cans. Sometimes used to convert common slotted screws into non-removable screws and butchering your palms.
PRY BAR: A tool used to crumple the metal surrounding that clip or bracket you needed to remove in order to replace a 50 cent part.
HOSE CUTTER: A tool used to make hoses too short.
HAMMER: Originally employed as a weapon of war, the hammer nowadays is used as a kind of divining rod to locate the most expensive parts adjacent the object we are trying to hit.
UTILITY KNIFE: Used to open and slice through the contents of cardboard cartons delivered to your front door; works particularly well on contents such as seats, vinyl records, liquids in plastic bottles, collector magazines, refund cheques, and rubber or plastic parts. Especially useful for slicing work clothes, but only while in use.
DAMM-IT TOOL: Any handy tool that you grab and throw across the garage while yelling 'DAMM-IT' at the top of your lungs. It is also, most often, the next tool that you will need.
DRILL PRESS: A tall upright machine useful for suddenly snatching flat metal bar stock out of your hands so that it smacks you in the chest and flings your beer across the room, denting the
freshly-painted project which you had carefully set in the corner where nothing could get to it.
WIRE WHEEL: Cleans paint off bolts and then throws them somewhere under the workbench with the speed of light. Also removes fingerprints and hard-earned calluses from fingers in about the time it takes you to say, 'Oh sh*t '
ELECTRIC HAND DRILL: Normally used for spinning pop rivets in their holes until you die of old age.
SKILL SAW: A portable cutting tool used to make studs too short.
PLIERS: Used to round off bolt heads. Sometimes used in the creation of blood-blisters.
BELT SANDER: An electric sanding tool commonly used to convert minor touch-up jobs into major refinishing jobs.
HACKSAW: One of a family of cutting tools built on the Ouija board principle. It transforms human energy into a crooked, unpredictable motion, and the more you attempt to influence its course, the more dismal your future becomes.
VISE-GRIPS: Generally used after pliers to completely round off bolt heads. If nothing else is available, they can also be used to transfer intense welding heat to the palm of your hand.
OXYACETYLENE TORCH: Used almost entirely forsetting various flammable objects in your workshop on fire. Also handy for igniting the grease inside the wheel hub out of which you want to remove a bearing race.
TABLE SAW: A large stationary power tool commonly used to launch wood projectiles for testing wall integrity.
HYDRAULIC FLOOR JACK: Used for lowering an automobile to the ground after you have installed your new brake shoes, trapping the jack handle firmly under the bumper.
BAND SAW: A large stationary power saw primarily used by most shops to cut good aluminum sheet into smaller pieces that more easily fit into the trash can after you cut on the inside of the line instead of the outside edge.
TWO-TON ENGINE HOIST: A tool for testing the maximum tensile strength of everything you forgot to disconnect.
PHILLIPS SCREWDRIVER: Normally used to stab the vacuum seals under lids or for opening old-style paper-and-tin oil cans and splashing oil on your shirt; but can also be used, as the name implies, to strip out Phillips screw heads.
STRAIGHT SCREWDRIVER: A tool for opening paint cans. Sometimes used to convert common slotted screws into non-removable screws and butchering your palms.
PRY BAR: A tool used to crumple the metal surrounding that clip or bracket you needed to remove in order to replace a 50 cent part.
HOSE CUTTER: A tool used to make hoses too short.
HAMMER: Originally employed as a weapon of war, the hammer nowadays is used as a kind of divining rod to locate the most expensive parts adjacent the object we are trying to hit.
UTILITY KNIFE: Used to open and slice through the contents of cardboard cartons delivered to your front door; works particularly well on contents such as seats, vinyl records, liquids in plastic bottles, collector magazines, refund cheques, and rubber or plastic parts. Especially useful for slicing work clothes, but only while in use.
DAMM-IT TOOL: Any handy tool that you grab and throw across the garage while yelling 'DAMM-IT' at the top of your lungs. It is also, most often, the next tool that you will need.
Michael Panzner interview
Some salient points in Michael's answers:
- The crisis could continue for another decade;
- investors will have to tread carefully and consider the risk of dealing with others;
- dividend yields could increase 2 - 4 times (suggesting that current stock prices could halve or quarter);
- after some more deleveraging during this year, it may be useful to accumulate precious metals
Also linked on AN is a story about Warren Buffett's firm insuring third parties against a long-term market drop. Berkshire Hathaway has taken $4 billion in bets; are they right? Or are they right only in the sense that nominal prices will hold, while inflation will mask the real reduction in value?
The banking crisis: did we have a choice?
Could any of the leading nations have retained their moral fibre during the monetary inflation of the last decade and more? Wouldn't prudent, restrained lenders have lost out to foreign sellers of "liar" and "fog a mirror" loans? Wouldn't the currency have risen and crippled exports? Could considerations like this form part of the "don't shoot me" defence of our busted banks and discredited politicians?
Or would it have been a trial by fire, where the virtuous are rewarded at the end? Denninger: "It is also increasingly clear that there are literally hundreds of midsize and smaller banks that are perfectly fine. They did not lever up, they did not write a bunch of crap commercial or residential construction paper that cannot be serviced and they most certainly did not drink the KoolAid of securitized synthetic garbage debt. Even in bad economic times traditional banking is a very profitable business - so long as you lend money to people who can pay you back or you have sufficient collateral so that if they default you don't lose your shirt."
In which case, the original offence of reckless finance has been compounded by the failure to punish it. The bailouts whisk away the deserved reward of the good, and teach a hugely damaging lesson to all onlookers: you can Get Away With It.
Of course, you can't - or rather society can't, though individuals will. And when injustice finally falls, it will take down with it many of the good, the poor and the powerless.
Or would it have been a trial by fire, where the virtuous are rewarded at the end? Denninger: "It is also increasingly clear that there are literally hundreds of midsize and smaller banks that are perfectly fine. They did not lever up, they did not write a bunch of crap commercial or residential construction paper that cannot be serviced and they most certainly did not drink the KoolAid of securitized synthetic garbage debt. Even in bad economic times traditional banking is a very profitable business - so long as you lend money to people who can pay you back or you have sufficient collateral so that if they default you don't lose your shirt."
In which case, the original offence of reckless finance has been compounded by the failure to punish it. The bailouts whisk away the deserved reward of the good, and teach a hugely damaging lesson to all onlookers: you can Get Away With It.
Of course, you can't - or rather society can't, though individuals will. And when injustice finally falls, it will take down with it many of the good, the poor and the powerless.
Saturday, January 31, 2009
Not Chicken Little: the sky could really be near falling
Jesse is not an air-filled doomster, yet here he has become really sombre. Pound heading for parity with the Euro, major banks insolvent, action ineffectual, hush-hush all around so the common people don't realize the gravity of the situation. It's rumour, but rumour that Jesse, clearly an experienced financial man, finds plausible.
Like I said, you've had your warning. Prepare for the worst, hope for the best.
Like I said, you've had your warning. Prepare for the worst, hope for the best.
Money and life
The previous post is a summary of Brad Setser's views on China and the dollar. What with the oil price coming down and the trade deficit reducing because of declining demand, it seems reassuring for Americans. But Michael Panzner also returns to one of his themes, the inflationary phase that he (and many others) fear may succeed the recession-depression.
Marc Faber has observed that this is the first time in history that economies around the world are affected simultaneously, since we are now much more inter-connected. So if inflation should take hold, perhaps it will not be fully reflected in the exchange rates - it might be that the dollar remains relatively buoyant against the pound, Euro, renminbi etc.
So maybe the real victims of global inflation, or hyperinflation, will not be this nation or that, but cash savers as a class. They have set aside some of the rewards of work, instead of spending it, and will come back to the cupboard to find it turned half-rotten, as happened in the 70s (if they'd put it in the stockmarket instead, it would only have been a bit mouldy).
How is it that China can award death sentences to those who adulterate milk with melamine, but adulterating the currency - the accumulation of millions of years of human labour - is not even punishable by loss of office? In the year George Washington took Presidential Office, "coining" in England was treason, and perpetrators were accordingly hanged, drawn and quartered (or, in the case of women, burned).
Money is stored life, and devaluing money is stealing life. Next month will be the 20th anniversary of my becoming a financial adviser, and the people I have advised would mostly not bother with investments if only their cash savings could hold their real value. What a scam this all is.
Marc Faber has observed that this is the first time in history that economies around the world are affected simultaneously, since we are now much more inter-connected. So if inflation should take hold, perhaps it will not be fully reflected in the exchange rates - it might be that the dollar remains relatively buoyant against the pound, Euro, renminbi etc.
So maybe the real victims of global inflation, or hyperinflation, will not be this nation or that, but cash savers as a class. They have set aside some of the rewards of work, instead of spending it, and will come back to the cupboard to find it turned half-rotten, as happened in the 70s (if they'd put it in the stockmarket instead, it would only have been a bit mouldy).
How is it that China can award death sentences to those who adulterate milk with melamine, but adulterating the currency - the accumulation of millions of years of human labour - is not even punishable by loss of office? In the year George Washington took Presidential Office, "coining" in England was treason, and perpetrators were accordingly hanged, drawn and quartered (or, in the case of women, burned).
Money is stored life, and devaluing money is stealing life. Next month will be the 20th anniversary of my becoming a financial adviser, and the people I have advised would mostly not bother with investments if only their cash savings could hold their real value. What a scam this all is.
The Greenback is Red-backed
Brad Setser returns to a favourite theme, China's investment in the US. If I can summarise:1. China buys American bonds directly, but also via the UK. Practically all the UK's purchases are on behalf of China.
2. American government bonds are either Treasuries (debts of the government of the USA) or Agencies (debts of US States and local government). Concerned about risk, China has recently been selling Agencies to buy Treasuries, because the latter are backed by the Federal Government.
3. China will continue to invest in the US, because this keeps up demand for the dollar and so keeps down the Chinese currency, the Renminbi. This means that Chinese exports to America will remain very competitive in terms of price.
4. China's continuing support will stop the US dollar from collapsing in the world currency market, as many have feared. Other countries who are also running a trade deficit and need financing, have much more reason to worry.
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