Friday, August 19, 2011

No PPI inflation, depressing Obama bus tour

Inflation is not materializing, still far below the 1970s as the attached PPI graph shows. WTI Oil is $82 today so gas prices should fall further. If companies raise prices then people will not buy so there is a limit what they can charge for non-essentials. Companies are hoarding cash. People are paying off loans instead of spending so recklessly. Rich fat cat gays get lots of money, do not pay taxes, and hoard money or buy luxuries from abroad such as Bentleys, Bugattis, Mansions, Wines, Paintings by dead artists who are not working today, which does not provide jobs for Americans. Government is also cutting back. There is not much demand, not much spending growth. Looks like we are in permanent stagnation with not much inflation except in goods where they rich can screw the poor such as oil, food, medicine, and college. Black Obama’s black bus is like a hearse touring the country, an armada of doom further spreading depressing messages about the depressed economy. “The vehicle looks like a creation out of Batman and the president appears as Paul Revere of the Apocalypse.”

If everybody is fearful and depressed they will hide out at home, not work or spend, and only come out to shoot at each other and thus cause a famine and political breakdown as in dark Africa. Are we in the early stages of a depression or will we just muddle along for years with little movement up or down? Seems the politicians have not changed their tune in years. Do they have any new ideas or is the current stalemate the best they have to offer? Is gridlock better than decisive action? Will our armies returning from victory in Iraq and Afghanistan save the day?

It is hard to get good price indexes for marijuana and other illegals:
Street Prices of Cannabis, Ecstasy and Cocaine at an All-time Low, Sep 10, 2006

The Producer Price Index for finished goods rose 0.2 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 0.4-percent decrease in June and a 0.2-percent rise in May.

Thursday, August 18, 2011

Urban Gardens

Another government program that should be cut is food stamps. I got stuck behind a lady with a rowdy brat in grocery store checkout who spent 5 minutes searching her purse for food stamps and cash because food stamps pay for some things but not other items such as her cigarettes. I think some use food stamps for junk food so they can spend their cash for drugs and contraband. USA has a glut of food and huge expanses of land that can be used for gardens. Liberals would benefit from the exercise and learning that comes with gardening and hunting and fishing. If we had fewer illegals there would be more space for legals. The article below discusses a promising trend to teach liberals how to grow their own food instead of becoming so dependent on government. There is also too much transportation of food long distance. Picked green, tastes terrible and costs as much as better local produce.

“People here are growing 24,000 pounds of food, everything from leafy greens to squash,” said the executive director of City Slicker Farms in Oakland, California that’s helped 170 inner-city families plant gardens in their yards. “If things cost $1.80 per pound— multiplied by 24,000 — people here are saving cumulatively over $43,200 a year,” Finnin said. “That’s money that can be spent in different ways.”

Wednesday, August 17, 2011

liquidity trap, deficits, balance of trade

Should Bernanke keep interest rates near zero for two more years? Doesn’t this penalize savers and retirees? Provide more fuel to speculators who want to borrow and trigger bubbles?

Are the Chinese right to be worried about their investment in US Treasuries? Shouldn’t China do more to correct the balance of trade by lowering their currency? Why should Chinese have to pay more to buy American ipods and Cadillacs? If China quit selling more in the USA than they buy then they would not have so many dollars to buy Treasuries. Seems they should let the China currency float upward to free market levels to solve their predicament.

Hilary Clinton was complaining about the loss of American ability to fund worthwhile ventures overseas that are in America’s interests. I wonder if it may be good if she had to stay home more? Is she our best representative? Is much of that money wasted anyway? Who is getting all those billions $ from opium and marijuana from Afghanistan?

Tuesday, August 16, 2011

CalPERS Lowers Target for Real Estate Investments, Boosts Stock

At some point retirement checks will be reduced. Medicare, medicaid, and social security may take a hit before Thanksgiving. CalPERS will take a hit later.

Finally after a 4 year real estate price collapse and large losses, CalPERS has figured that out and are moving money into the stock market (another mistake?). Why is management of that fund so bad? Should they be moved out of Sacramento and the corruptive political influences? Could they be forced to hire based on merit? Should that fund be split up into multiple managers so that a few idiots cannot ruin the whole fund? or would that allow more corruption? Should they be prohibited from investing in California properties, stocks, and bonds so as to force diversification?

Because employees jobs and houses are in California if something happens to the California economy then their pay, houses, and retirements will all suffer at the same time. Isn’t it better to at least put the retirement money into a geographical region and industries that are not tied to their jobs and houses so when one asset goes down the other assets may go up? High correlations are fun on the upside but are brutal on the downside. Are they paying enough attention to fundamental rules of diversification?

Calpers lagged behind its target because real-estate holdings suffered “significant write-downs” during the housing bubble

Wednesday, August 10, 2011

Another Bubble, Liberalism, Rules, Regulations

Obama Geithner Bernanke are triggering another bubble. Low interest rates will penalize savers and retirees while at the same time giving more money to speculators who will drive up asset prices that will eventually bust. Aside: hedge funds are dumping oil and buying gold and farmland? While many prices are low others are out of whack because booms and busts distort relative prices. I paid $3.359 yesterday per gallon for gas and $3 for a cantaloupe.

I also have been following the riots in England and the negro flash mob attacks in Chicago, Philadelphia, and elsewhere. Criminals use cell phones and texting to organize criminal activities. They riot to divert police and then steal everything and beat up people. Reminds me of the negro riots of the 1960s made worse by modern technology. I remember 1968 when a gang of LA negroes stabbed a USC fraternity boy who went to his car to get his pipe. I have not to this day set foot on that campus. UCLA is plush and safe.

Liberalism is unraveling. People can see the problems and don’t like what they see. Spoiled brat baby boomers have ruined this country — we are now run by negroes, hippies, gays, draft dodgers, addicts, illegals, ball players, talk radio illiterates and uneducated “greed is good” check recipients with TV radio movie fried brains who have reverted to a wild, feral, jungle culture. They have infiltrated government, banks, companies, universities, churches and now are the majority and demand tax cuts now that they got money while in the past they wanted to tax the greatest generation that built up the wealth that they are now squandering.

How to fix this mess? Return to high taxes, rules and regulations instituted in the Great Depression and WWII would help get out of this mess. 1950-1965 were reasonably good years in the USA at least where I was living. Similarly return to traditional diet, exercise, education and civic duty standards. USA needs to take 2 steps forward for each step backward, rather than 2 steps backward for each step forward.

Blackberry its easy-to-use messaging service is attracting looters in Britain’s worst rioting since the 1980s. At least 770 people have been arrested in the capital since Aug. 6, when the violence began after a local black man, Mark Duggan, was shot and killed by police.

Tuesday, August 9, 2011

Crash, Economy, Statistical Framework

I am sure you noticed the stock market crash.  It may be irrational pessimism but there are lots of problems in the USA, Europe and Asia.  But many corporations are rich and flush with cash and making lots of money.  One question: Does the average consumer have enough money to buy what the corporations want to sell them?  High debt payments, unemployment, and taxes limit spending.  Also news on the debt is scaring people into not buying. It may be irrational pessimism or rational realization that taxes may have to rise in the future, and social security will be cut.  

Pep talk by Obama did not help.  Hopefully Bernanke can do better today. 

My fancy German-made keyboard quit working on my Apple macBook.  I just plugged in my old Dell keyboard which seems to work even though the layout and some keys are different and it is not as fancy.  Will continue to use to see if it works ok.  Maybe cheaper is better.  Lots of fancy cheap computers on the market.  I need to upgrade both my Windows and my Apple computers to stay up-to-date.  It takes a lot of time to get full benefit of fancy modern technology.  

Maybe people need less employment —- instead spend more time at home learning technology, cooking healthier food, building stronger families instead of hiring illegals to babysit, clean house, and cook junk food.  100 years ago the economy was much smaller — Modern conveniences were not affordable or available at any price.  Is a bigger economy better if all people do is waste their money on health insurance that pays for drug addict diseases, gay diseases, junk food diseases, and the vast sums spent on drugs, taxes to support liberal spending programs, excessively large vehicles, houses built too far from work by illegals on farmland causing food to be imported from Mexico at higher cost and lower quality? May be more steps backward than forward.

It seems to me that the size of the economy as measured by popular statistics is about 70 years out of date — it was a first attempt developed during the Great Depression. Nowadays there are computers and huge databases on products, quality, health statistics, and so on that can be a better gauge on the “real” economy. These don’t get reported on as much or at all. Also nearly ignored are the readily available flow of funds statistics by the Federal Reserve. Probably because these were not taught in college in a systematic fashion by any department nor are any good textbooks available. It is probably due time to upgrade the theoretical and statistical framework. Like Keynes said:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

Tuesday, August 2, 2011

Gloom vs Capitalism, Democracy, and Money

There have always been depressed people waiting for the coming depression or the end of the world. Preachers and writers can get rich by selling them sermons and books. I remember Ravi Batra selling doom in 1985 at the beginning the greatest bull market of the century. I remember my colleague in the Air Force selling gold and silver in the 1970s. It worked for a while before a crash and a decades long bear market (graph below). He has come out of the woodwork and is back online writing gold sales pitches again. Ron Paul’s timing was worse, advocating gold after the bear market had already begun. The nature of markets is to be cyclical so if you forecast gloom you will sometimes be right. Similarly you can always say buy, buy and sometimes be right. The trick is to be right on both sides of the market —- when to buy and when to sell. Most cannot do that.

There is not much danger from the financial system in terms of hyperinflation — it would have happened already. USA has had considerable economic stimulus since 2008 from both fiscal and monetary policy but we are still stuck with a deflationary stagnant economy. The fed may have to try QEIII but it won’t trigger inflation any more than QEI and QEII. The deal in congress to cut spending did not include any tax increases. I don’t see another fiscal stimulus in this political environment unless the economy really does sink into a deflationary depression and Nancy Pelosi gets elected president sweeping in all democrats. Even then we will not get much inflation — too many forces working in the opposite direction.

Rich people own the banks, companies, and politicians and like it they way it is going now. The rich hate inflation because the poor would repay them in cheaper dollars. Now the rich have lots of money in the bank, low or zero taxes, and they are buying up everything of value and dumping the rest on the poor who face some inflation while the rich get falling or low prices on most of what they buy. The rich are squeezing the working people to cut back their retirements, medical care, and freedoms, and pay more for food, fuel, health insurance, and college. Most of what the poor gets are declining in quality as well as quantity. The poor are addicted, sick from junk food, sexual diseases, and blasted by TV, radio, ipods, preachers, movies to brainwash them to thinking everything is ok and all we need is to vote for X to make it better (even though X is part of the system that is causing their problems).

Such is the history of the human race. The rich get richer and a few elites, priests, kings, and nobles end up owning and running everything. USA had a period of a middle class, good education, and democracy but we have now returned to rule by elites. The elites sometimes make big mistakes but they will not allow inflation voluntarily — the 1970s inflation was due to a middle east surprise and was quickly stopped by Reagan. If there is another meltdown it will be the poor working people who will pay for the bailouts — the rich will not have to suffer inflation.

The main risks are from the real physical environment. The rich do not understand ecology nor does anybody else. We could see a serious ecological collapse leading to billions of dead people. Population is growing exponentially against a fixed, finite resource base and a very delicate ecology. This trend cannot continue. A catastrophe could easily occur. However, it is not clear when or how that will happen.

Before a die-off, civil wars and world wars are possible. Many people forecast wars over fresh water and other natural resources. Even Texas, New Mexico, and California today are in trouble from water and racial conflicts. But the wars may be decades away. The environmental collapse can happen at any time. Somalia is an example of these problems.