Earthquake in Cumbria

There was a minor earth tremor in north-east England yesterday as reported here.

It reminds me of the spoof charity appeal email I received from a Dudley-born friend after the quake there in 2002. It is, as they say, a classic and is preserved on this site. We Brits are never more comfortable than when mocking ourselves. The following is the closest to my memory of the original, though it's been reworked since with regional variations:

At 00:54 on Monday 23 September an earthquake measuring 4.8 on the Richter scale hit Dudley, UK causing untold disruption and distress -

* Many were woken well before their giro arrived
* Several priceless collections of mementoes from the Balearics and Spanish Costas were damaged
* Three acres of historic and scientifically significant litter were disturbed
* Thousands are confused and bewildered, trying to come to terms with the fact that something interesting has happened in Dudley

One resident, Donna-Marie Dutton, a 17 year old mother-of-three said "It was such a shock, little Chantal-Leanne came running into my bedroom crying. My youngest two, Tyler-Morgan and Megan-Storm slept through it. I was still shaking when I was watching Trisha the next morning."

Apparently though, looting did carry on as normal.

The British Red Cross have so far managed to ship 4000 crates of Sunny Delight to the area to help the stricken masses.

Rescue workers are still searching through the rubble and have found large quantities of personal belongings including benefit books and jewellery from Elizabeth Duke at Argos.

HOW YOU CAN HELP

* £2 buys chips, scraps and blue pop for a family of four
* £10 can take a family to Stourport for the day, where children can play on an unspoiled canal bank among the national collection of stinging nettles
* 22p buys a biro for filling in a spurious compensation claim

PLEASE ACT NOW

Simply email us by return with your credit card details and we'll do the rest!

If you prefer to donate cash, there are collection points available at your local branches of Argos, Iceland and Clinton Cards.

Bank of America to be hit by Wikileaks

As I relayed here on 1 December, Julian Assange hinted at revelations about a major US bank. Now, according to the London Times, (htp: EPJ) he confirms it's BoA. He's going to be releasing much material next month and if its management is "responsive" there "will be resignations".

Journalists like to hint at causative connections - Yahoo News says "Shares in Bank of America have fallen amid speculation that it was a WikiLeaks target" - but in fact according to Yahoo Finance itself, BoA's shares have been trending down since mid-April and have actually risen slightly in the last week. Perhaps Assange appeals to the chip-on-the-shoulder Robin Hood element in the powerless scribe's psyche.

Men reveal their ambitions in their persons, but their souls in their writing. Assange set out his agenda in a couple of essays several years ago, and if you read with attention they tell us plenty about him. If you'd like to know a little more about how he thinks, I've recently done a little piece here.

That's not to say I trust banks any more. If there were no depositor insurance, I'd have my stash (accompanied by their ATM withdrawal slips) in my workplace locker or something similar. I started to do this when the banking crisis was on, and it seems the Irish are doing it now.

Buy your popcorn and sit down for the bank show overture in January. And, if Seeking Alpha commenter "Savelife" is to be believed, the whole investment and economic Ring Cycle drama over the course of 2011. Maybe it'll be best not to have a front seat.

Disclosure: None.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

More on Barnes & Noble - a contrarian view

Phil Wahba's article in ABC News / Money points out (a) that Borders outlets overlap substantially with B&N and (b) the leases on Borders stores are long, which suggests they could go out of business first - leaving a cannibal boost for B&N.

We should also remember that in addition to the high street presence, B&N have 637 college stores. Blackwell's has done famously meeting the text needs of generations of Oxford University students and I'd have thought the college connection will continue to be much to B&N's advantage.

Further, the Nook Color is getting favourable reviews e.g. here and here , and this says they expect a million sales by year end.

I don't tip shares - but I'll keep an eye out for B&N news and wouldn't be surprised if the shorters get a surprise in 2011.

Disclosure: None.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Barnes & Noble not finished

In February this year, investment analysts Stansberry and Associates recommended short-selling booksellers Barnes & Noble (BKS). Less than 5 years ago, the share price stood at $46.25; on Friday it was at $14.30. More recently, Stansberry has explained how doomed B&N are, what with their debts and the impact of new technological alternatives.

I sometimes wonder what American business could achieve if all - or even half - the talent that went into stock trading and analysis, finance, banking and law were diverted into actually making things and running businesses.

"Retail is detail", so the adage goes. Please bear with me for an anecdote: I recently idled away some time on a little sim game by Armor Games called "Coffee Shop". You have a sidewalk coffee stand and only one product. All you can change is the recipe, your inventory and the price. Simple enough, and after setting these parameters and running the simulation I ended with a few tens of dollars profit. Isn't business easy?

Then I looked at the high scores - several were over a thousand. What I hadn't thought to do was change the variables according to the forecast weather. So instead of trying not to go broke, I doubled the price, strengthened the mixture and multiplied my final score.

That was without being able to increase my range of products, investing in advertising and marketing, researching locations etc. Macdonald's does, and has turned a hot meat sandwich into a global empire.

So imagine if Barnes & Noble were a sim game and someone let you see the high score beforehand - let's say a mere 13% compound annual growth, which would beat their previous high within 10 years. If you knew for certain it could be done - had been done - don't you think you might find a way?

According to this 2007 article in the Washington Post, Americans read on average 4 books a year. Yet in still-poor, workaholic China the average is 7 - and 25% have read an e-book.

Books increase mental power. Stalin and Mao were huge readers, which helped them dominate their unfortunate fellow man. On "The Long March", Mao was carried about in a litter as he continued to stock his mind with his reading; in his case, it should've been called "The Long Carry". 50 years ago, President Kennedy was concerned that US rates of literacy and scientific learning were falling behind those of Communist competitors; we need to re-visit this issue as our youngsters give themselves eyestrain with PCs, partial hearing loss from cranked-up iPods and repetitive strain injury from thumbing their DSs.

You could argue that B&N aren't done yet. They may have come late to the e-book party, but their Nook e-reader has been out for a year and done well - Amazon are now in the position of playing catchup with a 3G version of Kindle (which I've just bought) - and we've yet to see the impact of the new Nook Color.

That's not to say that the dead tree press is finished, either. Allowing for the 25% of Americans who don't read books at all, the per capita read is 7 books a year and B&N's 1,352 stores therefore have a potential customer base of maybe 150,000 adult readers each. One extra book per year = 14% growth.

There's also the fact that we read products in different ways. I'm enchanted with my Kindle, which I can glance at as I drink my tea without the cover flipping over and losing my place; but although it is good at marching you through a novel, it's not so good for the skimming, riffling through and back-and-forthing I do when I read a newpaper or magazine. It's great if I know what I want to find and download; it's not so great at the serendipitous finds you make browsing through a good shop. And it doesn't serve me a coffee, a doughnut and a pleasant smile.

Did paperback kill hardback? The car, the bicycle? The movies, radio? TV, the movies? No: but the market developed, and some of those that made their money in one invested most profitably in the next (remember when IBM made comptometers? Nor do I).

When I say invested, I mean got involved. It's all very well quoting the debt load, the tight margins and all, but perhaps you'd agree with me that the real driver of success or failure is quality of management. Here in the UK, Philip Green (now Sir Philip) took over the failing BHS store chain 10 years ago, grew it an estimated 600% and built an empire. Short, stocky, shirtsleeves rolled up, he got his hands dirty and a billion-plus (sterling) into his wife's Monaco account.

When America (and even more so, poor benighted Britain) gets back to minding the store, instead of boosting its executive perks and playing beggar-my-neighbour with fellow short-term investors, the country will get back on its feet. Don't play the funeral march just yet.

DISCLOSURE: Not trading. 100% in cash.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Passivity and moral implication

A letter to this week's Spectator magazine by a Thomas Furber of Greenwich directs us to the blog of Charles Stross for materials written by Julian Assange, "editor-in-chief" of Wikileaks. Stross' blog includes excerpts from and links to Assange's essays from late 2006, the period in which Wikileaks was founded.

These essays (3 Dec 2006 here and 10 Nov 2006 here) are a sort of attempted revolutionary rationale and have something of the flavour of the autodidact, which to some extent Assange is. They remind me of the 1970 film "The Strawberry Statement", in which the lead character (Simon) gets caught up in the feeling of revolution before he has any particular reason to revolt; at one stage, Simon composes and reads a revolutionary paper of his own, semi-incoherently, blah-blahing his way over passages that even he is impatient with. Interestingly, Assange himself rehearses the old Zen story after which this film is titled (see the entry for 24 October 2006 here).

There is an enemy in Assange's philosophy, but a very generalized one: "authoritarian power". As a child, my imagination fed on war comics, I would drift off to sleep absorbedly machine-gunning Germans running across a barbed-wired battlefield. I suspect the motivation in his case now is the same as mine was then: testosterone, the urge to have a go. The imagery used in the essays is tellingly violent - "knife", "throttle".

Mixed in with this is a sort of cybernetic analysis of communication systems in political circles and a reaching for ways in which communications can be disrupted to create disorder and the collapse of the tyrannous regime, to be replaced (of course) by "more humane forms of governance". (It's amazing that even self-styled right-wingers like James Delingpole harbour this delusion - his latest Spectator column ends with the words "Until we learn to stop thinking like slaves we shall never have the revolution that will set us free." It's as though neither man has read anything about what really happens in and after revolutions.)

As I said here a few days ago, I think the most likely consequence will be a mutation of confidential communications - more use of encoding, more done by whispers and note of hand, more sofa government but this time on the sofas of special advisers' homes rather than in Downing Street or the White House; that sort of thing. The system will react rather like Hot Lips Houlihan in the "natural blonde" scene in M.A.S.H.: humiliated, but afterwards enduringly careful - and resentful.

And yet... here is a footnote on page 1 of "Conspiracy as Governance":

Every time we witness an act that we feel to be unjust and do not act we become a party to injustice. Those who are repeatedly passive in the face of injustice soon find their character corroded into servility. Most witnessed acts of injustice are associated with bad governance, since when governance is good, unanswered injustice is rare. By the progressive diminution of a people’s character, the impact of reported, but unanswered injustice is far greater than it may initially seem. Modern communications states through their scale, homogeneity and excesses provide their populace with an unprecedented deluge of witnessed, but seemingly unanswerable injustices.

That chimes with me: the sense of being powerless, yet also defiled by inaction when action seems impossible. We see a self-serving and corrupt body of politicians and others - two ex-ministers publicly disgraced and disciplined yesterday; a coalition government of parties that didn't win the last General Election and very likely won't win the next one; the official exoneration of the banker who presided over the vast collapse of his firm and almost the banking system; ex-Prime Minister Tony Blair recalled to the Chilcott Enquiry to give "further detail" about how he led Britain into what many say was an illegal war; big bonuses all round for failure; and so on.

There is certainly plenty to be mended, even though I think Assange is not the man, and his methods not the means, to do it.

Purple prose

Sackerson's Prose Prize goes to Liz Jones in today's Mail on Sunday:

Like everything vaguely pleasurable these days – holidays, sofas – Christmas has been so super-hyped that the real thing is bound to disappoint. Isn’t Christmas Day always a bit of a let-down? I far prefer the promise of Christmas Eve, the twinkly equivalent of foreplay.

I am half-suppressing a mental image of tiny lights, um, ...

Will commodities protect investors in a major crisis?

John Butler fears that we will be overwhelmed by debt and governments must - perhaps should - default. In his Financial Sense article "A Century of Money Mischief and the Rising Sea of Debt" he looks to commodities as the Ark that will save us from the flood:

Everywhere you look, there are increasing risks to currencies, sovereign bonds, corporate securities and financial assets generally. The problem is, as pointed out above, there is just too much credit risk in the world and investors demand that it be reduced, by crisis if necessary. But how to avoid taking credit risk when even sovereign debt is at risk of default? When the world’s reserve currency, the dollar, is being deliberately devalued? There is only one asset class that has zero credit risk or devaluation risk: Unencumbered real assets. While in principle this includes property owned free and clear, with banks still on the hook for massive losses in residential and commercial lending, most of which are still not marked-to-market on balance sheets, we think it is too early to venture back into the property market. A much safer alternative is liquid commodities that can be traded for other goods, or services, all over the world. These cannot be defaulted on. They cannot be devalued by central banks or governments. As such, in a world of unstable currencies and financial markets generally, a well-diversified basket of liquid commodities provides the best available store of value until the reduction in credit risk has run its course, one way or the other. As global debt levels are still rising, we have a long, long way to go yet.

In the long run, he may be right. But although commodities tend to rise in value in the buildup period, the liquidity shortage when the crisis hits forces them down with other assets, as we see from the events of 2008:

Chart: Google Finance

In the above chart, we see that the Deutsche Bank Liquid Commodities Index rose while the Dow fell, then collapsed, almost closing the gap. This suggests that a potentially very profitable strategy for the nimble and daring, would be a switch to cash just before the dam breaks. That still assumes a degree of normality, and I'll say a little more about that in a moment.

Meanwhile, how is the DBLCI doing now? It's nominally around where it was in the Summer of 2007 and has been trending up from its low of December 1, 2008. But allowing some adjustment for inflation, it seems to be indicating, not a crisis, but a slow recovery from crisis.

Chart: Yahoo! Finance

That's not to say that a fresh catastrophe is remote, but we have to remember that the worst part of the 2008 crunch was the moment when interbank lending broke down. Now that governments have established a policy of supporting the banks (or at least, their favoured ones) at all costs, the next blow is more likely to come from a different direction; maybe in the form of a breakdown in Eurozone intergovernment lending.

Or perhaps we may see the sort of sovereign default that Mr Butler urges; but this could spread in a way that might make conventional investment strategy irrelevant. And default is a more brutal and naked form of cheating others than the slow embezzlement of inflation. What will those who stand to lose the money they've loaned, do about it?

It seems to me that some financial commentators are like those people who stood still and stared at the pretty white line on the ocean in the 2004 tsunami, unconscious of the need to move immediately; or like the farmers who grudgingly gave my refugee grandparents shelter in their barn in 1945, not dreaming that a couple of days later the Soviet Army would overtake them also.

Instead of a market readjustment, with winners and losers in a system basically unchanged, we may be facing a reordering of world affairs, one that may not have a comfortable place for ourselves personally. If Mr Butler is right in comparing debt to global warming, we must hope for the financial equivalent of the Kyoto and Cancun Summits.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

One Flew Over The Cuckoo's Nest, revisited for real

If this is to be believed, health workers are effectively kidnapping an autistic lad without sectioning him... a case of officialdom creating the problem it claims to be trying to solve?

Please read this and pass it on.

And on the other hand ...

In contrast to my item yesterday, which I consider 'reality' (in my own biased way), we have the following piece on a Sudbury alternative school No Teachers, no homework .

The article contains this gem: 'While some may question how the format works with reading and math, "the truth is, that's the easy stuff,'' Ekendiz said. "Our children will need skills like self-understanding, self-motivation and creative problem-solving.'''

Hands up those who think that the typical child from this school will find reading and math 'easy'.

Bears go mainstream

If you won't quite believe bloggers and even doubt financial world insiders, perhaps you'll listen to one of the voices of middle-class, middle-brow England: Max Hastings. Britain's most-read newspaper the Daily Mail today published a piece by Hastings titled "We're all doomed."

It's only half-joking, and reminds me of the British hedge fund manager who, in 2008, actually came home at the end of one week and bought a farmer neighbour's flock of sheep, to ensure that his family would have something to eat in the general system breakdown.

Be prepared for emergencies, even if you don't expect one.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Some people get it

I was referred to The Heresy of Higher Education by Sackerson.

It is an excellent piece, echoing my frequent diatribes that higher education generates far too many people who want to 'manage' without actually producing anything (or having any skills, for that matter).

Is quantitative easing the cause of the rally?

Tyler Durden at Zero Hedge thinks so, and offers the following graph to illustrate the correlation:

Correlation is not the same as causation: I'd be a little happier about this theory if the mechanism could be explained. How exactly did the Federal Reserve's purchase of government bonds force up stocks?

I suppose the effect was indirect, in that the stock market recovered confidence when it saw that interest rates would be kept low with this extra demand for government credit, so making debt-fuelled market speculation cheap and easy. Also the fear of a banking sector collapse eased as the policy of official support at all costs became clear.

I guess the new bubble is in government credit, and will continue to inflate until a weak seam in the fabric splits. Keynes said, "Markets can remain irrational longer than you can remain solvent"; similarly, governments can stay irrational longer than you can afford to short their darlings. I'd be in no hurry to bet on a market reversal, even though it "should" happen and the present state of affairs is not tenable indefinitely.

Which is why I grit my teeth and hold cash.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

The correction will be delayed until after the bonuses are calculated

Bob Clark over at FSU airs the bonus-conspiracy theory of stock market movements, and after the way 1999 ended I'm inclined to give it some credence:

... there are a lot of Christmas bonuses tied to fund performance at year end. If you are the Fat Boys, why not let the funds buy the price up into a strong, year ending close. Sell to them, then kick the stool out from under them early next year. They make easy victims.

On 3 December on CNBC, Gary Kominski said (video embedded here) that effectively, there were only 9 trading days left because there is very low volume in the last two weeks of the year - "the 17th is your last day to make a significant change to your portfolio." If Clark is right and the "Fat Boys" are setting us up for a fall, I'd expect them to sweep up the cards and stand up from the table a week before Christmas. Perhaps we should be watching the behaviour of "the usual suspects" in this period.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Measuring GDP for real

Another thing to thank Wikileaks for:

GDP figures are “man-made” and therefore unreliable, Li said. When evaluating Liaoning’s economy, he focuses on three figures:

1) electricity consumption, which was up 10 percent in Liaoning last year;

2) volume of rail cargo, which is fairly accurate because fees are charged for each unit of weight; and

3) amount of loans disbursed, which also tends to be accurate given the interest fees charged.

By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are “for reference only,” he said smiling.

So, how would that set of measures work in our case?

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

The uselessness of gold

An article by Elliot Turner last week ("Why I Sold My Gold") echoes what I've been saying for a while:

No one knows what will happen in the event of chaos, but to me the only real answer would be to buy a cave stocked with canned goods. Forget about gold, as that would do nothing in a state of anarchy. Gold ultimately relies on the same psychological comfort that fiat currencies do in universal acceptance, and therein lies the gold as currency paradox.

I'd suggest that gold is not a protection against disaster per se, but a speculation during moderate troubles, and a store of wealth for a future time after disaster, when recovery has happened. But as with the Staffordshire Hoard, that latter time may be a long, long while later and you may not be there to benefit.

So I propose a new currency valid in good and bad times:

"Ah," you may say, "but this currency is perishable." So was the scrip issued in Wörgl in 1932-33; in fact, a negative interest rate was built into the scheme to encourage circulation instead of hoarding during a deflation. It worked wonderfully - so well that it displeased the local socialist party and the central bank.

Which leads me to think that the true measure of a currency's virtue, as of a man's, is not its supporters but its enemies.

Footnote:

The Heinz will also be superior to the current pound (= 100 pence) in terms of giving change, as was the old British pound. The latter was worth 240 pence, each penny legally exchangeable (until the end of 1960) for 4 farthings, thus £1 = 960 farthings.

You can get two 400g cans of Heinz beans today for less than £1, and each tin contains over 400 beans. So the modern pound must buy you c. 960 individual baked beans. I therefore propose to call a single baked bean a "farting".

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Restructure debt, or lose prosperity and liberty

Karl Denninger draws our attention to an interview with David Stockman on CNBC (see below). Key points:

• Combining middle-class earners with government employees (aside from teachers), we see that millions of jobs have previously been lost and there is now no net gain in half the 130 million American jobs market. Stockman terms this the "new normal".
• Numbers are increasing among part-time earners, but their annual pay averages $20,000 instead of the middle class' $50,000. As Stockman says, you can't support a family on that.

This is industrialization in reverse gear. America - and even more so the UK - now faces a great question: are we prepared to watch our industry eaten away? Last month, it was reported as a sort of victory that Britain made a deal with China to export pigs to them. Though agricultural production is important - God speed the plow - I don't see a bright future for the whole nation as pig farmers.

In a digitized world and globalized economy, our problems are evident and important to our competitors. Back in September China's "Beijing Review" crisply summarized America's woes and their causes:

Increasing financial pressures forced middle class Americans to rely on debt to continue their current lifestyles. Meanwhile, thriving financial innovations on Wall Street have encouraged their lifestyle of high debt and high consumption. The median debt-to-income ratio of the middle class families climbed to 1.19 in 2004 from 0.45 in 1983. So basically, credit-supported over-consumption of the middle class laid the groundwork for U.S. economic prosperity over the past three decades.

The over-consumption can be corrected by cutting back - something that is certainly a matter of concern to Beijing - but though the spending song is over, the debt melody lingers on. Private and public debts are absorbing the resources that should go into trade and industry. Lowering interest rates further is scarcely possible, and as Michael Panzer reports in "Ready for some crowding out?", the need (especially in Japan and the USA) to roll-over huge amounts of debt in the near future may see a bond market revolt and higher interest rates, instead. Commercial finance may well become both harder to obtain and significantly more expensive.

Meanwhile, the burden of debt now lies not in interest rates but in the capital repayments. As average incomes fall (owing to the shift from higher-paying to lower-paid jobs), the liabilities will grow heavier in proportion. Some of this ballast may have to be ejected from the balloon if we are not to crash to earth.

Normally, one would say that letting debtors off the hook is a moral hazard, but I think the scale of the emergency takes us beyond that consideration. In any case, default is already happening piecemeal in the residential mortgage market, and would be far more extensive if lenders constrained by capital adequacy requirements were not reluctant to foreclose. Beneath the tide of "jingle mail" is a savage undertow of tolerated delinquencies (*). Similarly, the banking sector would be pretty much dead if the government had not also been willing to defer foreclosure.

The challenge is to tackle the debt monster openly and through policy, not inaction and denial. Cutting welfare won't do it fast enough and generates many other problems. If we can't restructure our debts by agreement with creditors, we have to accept the "new normal": high unemployment, a reduced and distressed middle class and, perhaps, political instability barely restrained by greater authoritarianism.


(*) See today's post (with many graphs) by Michael David White, who thinks housing in America is only halfway through its correction.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Serbian Jazz is hot!

Even Johnny Depp comes to Serbia - admittedly more for the film, but the brass sound seems to be "in."



My favourite so far is this one:


BOBAN MARKOVIC-RROMANO BIJAV-LA BELLEVILLOISE
Uploaded by aceituna11. - Watch more music videos, in HD!

Governments should provide secure inflation-proof savings vehicles

Logically, speculators and investors should be residing in two different groups, but the two kinds of sheep keep wandering out of their respective pens. And there are wolves outside the pens.

John Lounsbury, reviewing ‘What Investors Really Want,’ by Meir Statman.

This is the difficulty we face now. If you are a savvy speculator and willing to accept a high degree of risk, you may (with luck) do well in today's volatile markets.

But if you are an ordinary investor (like most people), you are looking for something that will at least preserve the value of your savings and reward you with modest real growth for not spending them.

Unfortunately for investors, our governments' attempts to shore up an essentially bankrupt banking system and profligate welfare system involve lower-than-inflation interest rates, and at least one product that is guaranteed to overmatch inflation has been withdrawn - see what happened to NS&I Index-Linked Savings Certificates in July.

Sadly, one suspects that even if such products continue to be available, inflation will be defined in a way that does not fully reflect increases in the cost of living for ordinary people. In fact, definition tweaking is already happening, as in the case of "hedonic adjustment" in the American CPI Index. This means, for example, that a new computer that costs the same as your old one but has double the memory, has effectively halved in price - even if the extra computing speed has absolutely no practical benefit for you (we don't all live in the fantasy world of role-playing games).

I'm quite happy to let the speculators play high-stakes poker with each other, as long as the rest of us can humbly and patiently build security through thrift. It should be a lasting shame to governments that they are denying us ways to do this.

"The hungry sheep look up, and are not fed."

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

A 13th century account of the Big Bang

At the briefest instant following creation all the matter of the universe was concentrated in a very small place, no larger than a grain of mustard.

The matter at this time was very thin, so intangible, that it did not have real substance. It did have, however, a potential to gain substance and form and to become tangible matter.

From the initial concentration of this intangible substance in its minute location, the substance expanded, expanding the universe as it did so.

As the expansion progressed, a change in the substance occurred. This initially thin noncorporeal substance took on the tangible aspects of matter as we know it.

From this initial act of creation, from this etherieally thin pseudosubstance, everything that has existed, or will ever exist, was, is, and will be formed.

Rabbi Moshe ben Nahman (aka "Ramban" or "Nahmanides"), 1194 - 1270; Commentary on the Torah

Wikipedia article here, looked up in reference to a reader's query in the Dail Mail today.

Will Wikileaks break a US bank?

Which American bank is going to be blown apart by promised revelations from Wikileaks?

Britain's Daily Mail newspaper today reported US speculation that it might be Citigroup, but that doesn't appear in the online edition so maybe it was just a wild guess. Tyler Durden hears that the hard drive of a Bank of America executive casts a shadow over Merrill Lynch and/or Countrywide.

Slightly creepy though Julian Assange may be, it seems he's doing what our journalists over here used to do, before they started to see themselves as part of the New Aristocracy. When the horse-puckey hits the turbo, maybe we could see another Enron-type scandal complete with jailings and business foldups.

But I think there will be other repercussions. One will be, presumably, a drive to "clean up the act" - more regulations to try to bring the rogues under control.

Another will be how discussions are (or aren't) recorded in future. I'm sure that thanks to Assange's latest stunt, many diplomats will now be encoding their gossip prior to transmission.

But the most significant will be how observation will be evaded and rules circumvented.

This has already happened in politics: it's one of the curious features of Tony Blair's decade-long "sofa government" that decisions were often made without civil servants present to take minutes: no name, no pack drill, as they used to say in the Army.

We can expect the same in commercial circles. Again, some smart guys have been doing this all along: Jordan Belfort's book "The Wolf of Wall Street" describes how, in order to carry on share-ramping without the inconvenience of explaining their office telephone transcripts to SEC investigators, his boys would simply tell the client they'd call back, then go out and fire up their personal cellphones for an intimate, no-repercussions sales spiel.

The Sicilian Mafia showed them all the way. Bernardo Provenzano ran the Outfit from a shack, avoiding all electronic communication and typing little notes ("pizzini") on his Olivetti instead.

It's kind of a Darwinian co-evolution of predator and prey. We can expect continued crookery, with heightened secrecy. And a surge in sales of two-colour typewriter ribbons.

DISCLOSURE: No positions. Not even in typewriter ribbons.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.