Crosspost from Market Ticker

Awesome Post from the Market Ticker

To The Tea Party (And Related Organizations)

You're not going to want to hear this.

Nonetheless, you have to.

If you want to win - indeed, if you want to make any sort of serious inroad into the American Political Process, you need to read this, you need to listen, and you need to adopt this path.
If you do not, you will be marginalized into irrelevance, no matter what else you do.

Here it is:

You must discard - intentionally - all "wedge issues" as points of debate, discussion, or campaigning.  You know what these issues are - they fall broadly into the category of religion in one form or another.
These are issues such as abortion and gay rights (in all it's forms, including marriage debates), but is by no means limited to these two.  In short, if there's a religious basis for your position, you must not campaign on it, and indeed you must pointedly refuse to discuss it.

The Tea Party began as a protest over bailouts and handouts - that is, theft and corruption within our markets, government and economy.  This is a winning position with 90% of the American Body Politic. 

Any candidate who runs on these issues - and these issues alone, promising to stop it and lock up the scammers - all of them - wins.

As soon as you bring the other issues that everyone wants to talk about into this, you will lose.

Here's why.

These are called "wedge issues" for a reason.  There is about half the population, for example, that will rally around a position of "Abortion is Murder."  There is also about half the population that will say "well, maybe in some cases, but in others no", all the way down to "you can abort any time you want prior to the first breath."

What you personally believe is irrelevant to the political process.  These issues are used by the two main political parties to get the electorate to divide on a 50/50 basis - thus leaving them having to persuade exactly one person of their position on some other issue to win.

You cannot win such a contest.  At best you can force one of the other parties - the one that most agrees with you - to lose.  The reason is simple - you will split that half of the electorate, which means the other party - the one that disagrees with your position on those issues - wins the election.

Drill this into your head folks:

If you allow these issues to become part of your campaign, you will not only lose you will cause the party that most-agrees with you to lose.

I know this is going to be unpopular, but it needs to be said.  I've seen this happening in some of the local Tea Party groups, and it saddens me.  The local Niceville branch here featured people talking about "natural law" as an important qualifying factor for political candidacy, as just one of many examples. There were times I felt like I had walked into a Baptist sermon.

The Tea Party and other political expressions like it are, of course, free to run on whatever platform they'd like, and to back candidates based on whatever they'd like.  But if you're going to do this, then you'd be wise to try to take over the Republican Party instead of being "independent" or any other sort of "outside" influence, because it is the only way you can win with this approach.

That is, you can try to turn the Republican Party into The Tea Party, and then apply your litmus tests.  Now you have your 50%, and you need to persuade only one voter.  That's a winning strategy, if you can pull it off.  But to pull it off you will have to displace all of the "money men" who corrupted the Republicans - let us not forget that the Republicans were the ones who brought Henry Paulson into the Treasury after he, as Goldman's chief, set up lots of dodgy financial instruments, and then protected the banks who did those deeds from being smashed when it all blew up in their faces.

Not that the Democrats are blameless, of course. "Who is Chris Dodd and Barney Frank" would be a good starting question on that side of the aisle, and of course it doesn't stop there.  Nancy Pelosi and illegal immigrants anyone?

The Tea Party infiltrating The Republican establishment is a long shot.  Witness John McCain, who made a campaign spectacle out of bailing out the banks.  How's JD Hayworth doing in challenging him?  He lost, right?  How'd that happen?  The same way it always happens: Hayworth let the campaign's terms include those wedge issues, and then got tattoed by the guy with the bigger warchest and the ability to threaten people politically.

You either change the terms of the debate and the issues upon which the election is decided or you lose. 

It's that simple.

The candidate that says this to the TV cameras and his opponent wins:

I am running on fiscal responsibility which I define as (insert your platform), and on the removal of embezzlement and fraud from our government and financial system, (insert your platform), including the reversal of the bailouts my opponent voted for and supported.  Where fraud and embezzlement took place I will do everything in my power to see that each and every person involved goes to prison, starting with those at the top of these large corporations and, when necessary, current members of our government.

If you insist debating other issues the microphone is all yours, and you may monopolize it all you want.  We may agree or disagree on those issues, but that's not what I'm here to discuss, and it's not what I'm running on.

If you elect me you will get the following (list of corruption and fraud that you intend to excise, along with your fiscal responsibility promises, including charts, facts and figures.) 

I understand that these other issues are important to virtually everyone, but I also understand that almost exactly half of you who hear me speak now are on each side of these issues and none of you are going to change your mind.  Therefore, the question I ask you is this: Are those issues more important than getting rid of the fraud, corruption, and scamming in our government and economy?  If they are, no matter which side of those issues you happen to be on, then I'm probably not your candidate.  If, on the other hand, fixing our economy, locking up the fraudsters and putting a stop to the rampant theft from each and every citizen in this room, which has personally indebted each and every man, woman and child in America by more than $40,000 over the last three years, is the most-important issue before you as you head to the polls, then I ask for your vote.

If you don't do this as a third-party or "outsider" candidate, you lose.

You need to appeal to the 90% issues and ignore the 50/50 ones. 

On purpose.

Oh sure, there will be some people who won't vote for you without those answers to the questions you refuse to entertain and waste your time on.  The siren song from those organizations, whether they be "Focus on the Family" or "Planned Parenthood" is strong.  But their siren song is false, for every voter you attract by appealing to them comes with one who will vote against you with rabid furor, and the direction in which you declare your intentions on these issues doesn't matter - there is no winning in those points of debate no matter how you approach it.  You can only lose and worse, cause those most-aligned with you to lose.

In short those who think that $40,000 is less important than your stance on abortion will split their vote for and against irrespective of which side of that issue you come down on.  Your opponent that is closest to your personal position on abortion will thus lose, and so will you!

The only way you can avoid this happening is to not allow the debate to go down that road, and you must be steadfast and studious in rejecting all entreaties and attempts to get you to speak on those issues, because the two major political parties know this is how they get you to forfeit your ability to win - the fact that you stand and run on an issue they cannot agree with and yet which 90%+ of the population sees your way!

The Tea Party will not listen to this, but until they do, they will be insignificant, and the two primary political parties know it.

Quote of the Day

What we had was a government-prescribed course of amphetamines (to keep it up), antibiotics (to prevent infection) and antidepressants (to make it feel better). It endured regular steroid injections from both monetary and fiscal authorities. And it still has no real muscle. - Caroline Baum

EPA Considering Ban on Traditional Ammunition

Now I know this is supposed to be a finance blog and I went off a little bit on privacy invasion, but this is now unacceptable.

EPA Considering Ban on Traditional Ammunition

 I knew that those second amendment opponents were going to try and go after ammunition as they know they can't directly challenge the amendment. I just did not think they were going to go after it this soon. This country truly is moving towards an agenda that removes any any all freedoms from its citizens for the sake of "security" or the "environment". Now I am not going to go off on a fanatical rant as much as I would like to but I for one will be hoarding ammo, gold and silver.........

With the fall hunting season fast approaching, the Environmental Protection Agency (EPA) under Lisa Jackson, who was responsible for banning bear hunting in New Jersey, is now considering a petition by the Center for Biological Diversity (CBD) – a leading anti-hunting organization – to ban all traditional ammunition under the Toxic Substance Control Act of 1976, a law in which Congress expressly exempted ammunition.  If the EPA approves the petition, the result will be a total ban on all ammunition containing lead-core components, including hunting and target-shooting rounds. The EPA must decide to accept or reject this petition by November 1, 2010, the day before the midterm elections.

More comments on my previous post

from this article in Time


Where does this end.... say for the sake of argument that we no longer have an immediate threat by any extremists. These precedents will now be ingrained in the legal system and impossible to get rid of. This is THE main reason why I fail to understand progressive law making. It is another example of reactionary response vs proactive thinking. But the public will never back proactive methods. 


I know there isn't a question in here just me venting my frustration. The one judge that abstained I think did a good enough job:


"1984 may have come a bit later than predicted, but it's here at last," he lamented in his dissent. And invoking Orwell's totalitarian dystopia where privacy is essentially nonexistent, he warned: "Some day, soon, we may wake up and find we're living in Oceania."

The Single Most Offensive Thing I've Read This Year

Giving up a tiny bit of your freedom for the sake of safety starts a precedent and leads to a very slippery slope... Look where we are now.....

From Time Magazine

Government agents can sneak onto your property in the middle of the night, put a GPS device on the bottom of your car and keep track of everywhere you go. This doesn't violate your Fourth Amendment rights, because you do not have any reasonable expectation of privacy in your own driveway - and no reasonable expectation that the government isn't tracking your movements.
That is the bizarre - and scary - rule that now applies in California and eight other Western states. The U.S. Court of Appeals for the Ninth Circuit, which covers this vast jurisdiction, recently decided the government can monitor you in this way virtually anytime it wants - with no need for a search warrant. (Read about one man's efforts to escape the surveillance state.)

It is a dangerous decision - one that, as the dissenting judges warned, could turn America into the sort of totalitarian state imagined by George Orwell. It is particularly offensive because the judges added insult to injury with some shocking class bias: the little personal privacy that still exists, the court suggested, should belong mainly to the rich.

This case began in 2007, when Drug Enforcement Administration (DEA) agents decided to monitor Juan Pineda-Moreno, an Oregon resident who they suspected was growing marijuana. They snuck onto his property in the middle of the night and found his Jeep in his driveway, a few feet from his trailer home. Then they attached a GPS tracking device to the vehicle's underside.

After Pineda-Moreno challenged the DEA's actions, a three-judge panel of the Ninth Circuit ruled in January that it was all perfectly legal. More disturbingly, a larger group of judges on the circuit, who were subsequently asked to reconsider the ruling, decided this month to let it stand. (Pineda-Moreno has pleaded guilty conditionally to conspiracy to manufacture marijuana and manufacturing marijuana while appealing the denial of his motion to suppress evidence obtained with the help of GPS.)

In fact, the government violated Pineda-Moreno's privacy rights in two different ways. For starters, the invasion of his driveway was wrong. The courts have long held that people have a reasonable expectation of privacy in their homes and in the "curtilage," a fancy legal term for the area around the home. The government's intrusion on property just a few feet away was clearly in this zone of privacy.
The judges veered into offensiveness when they explained why Pineda-Moreno's driveway was not private. It was open to strangers, they said, such as delivery people and neighborhood children, who could wander across it uninvited. (See the misadventures of the CIA.)

Chief Judge Alex Kozinski, who dissented from this month's decision refusing to reconsider the case, pointed out whose homes are not open to strangers: rich people's. The court's ruling, he said, means that people who protect their homes with electric gates, fences and security booths have a large protected zone of privacy around their homes. People who cannot afford such barriers have to put up with the government sneaking around at night.

Judge Kozinski is a leading conservative, appointed by President Ronald Reagan, but in his dissent he came across as a raging liberal. "There's been much talk about diversity on the bench, but there's one kind of diversity that doesn't exist," he wrote. "No truly poor people are appointed as federal judges, or as state judges for that matter." The judges in the majority, he charged, were guilty of "cultural elitism."

The court went on to make a second terrible decision about privacy: that once a GPS device has been planted, the government is free to use it to track people without getting a warrant. There is a major battle under way in the federal and state courts over this issue, and the stakes are high. After all, if government agents can track people with secretly planted GPS devices virtually anytime they want, without having to go to a court for a warrant, we are one step closer to a classic police state - with technology taking on the role of the KGB or the East German Stasi.

Fortunately, other courts are coming to a different conclusion from the Ninth Circuit's - including the influential U.S. Court of Appeals for the District of Columbia Circuit. That court ruled, also this month, that tracking for an extended period of time with GPS is an invasion of privacy that requires a warrant. The issue is likely to end up in the Supreme Court.

In these highly partisan times, GPS monitoring is a subject that has both conservatives and liberals worried. The U.S. Court of Appeals for the D.C. Circuit's pro-privacy ruling was unanimous - decided by judges appointed by Presidents Ronald Reagan, George W. Bush and Bill Clinton.

Plenty of liberals have objected to this kind of spying, but it is the conservative Chief Judge Kozinski who has done so most passionately. "1984 may have come a bit later than predicted, but it's here at last," he lamented in his dissent. And invoking Orwell's totalitarian dystopia where privacy is essentially nonexistent, he warned: "Some day, soon, we may wake up and find we're living in Oceania."

Cohen, a lawyer, is a former TIME writer and a former member of the New York Times editorial board.

WW2 Explained to the American Teenager

Click on the link to read a modern adaptation of world war II for the american teenager.

WWII Explained By Facebook

2008 Bailout Counter-Factual

An incredible piece by Barry Ritholtz from the Big Picture Blog

Earlier this month, I discussed a NYT OpEd ^[1] by Treasury Secretary Tim Geithner (Welcome to My Job Security ^[2]). Geithner pointed approvingly to the report ^[3] released by Alan Blinder and Mark Zandi, advisers to President Bill Clinton and Senator John McCain, respectively:

“The combined actions since the fall of 2007 of the Federal Reserve, the White House and Congress helped save 8.5 million jobs and increased gross domestic product by 6.5 percent relative to what would have happened had we done nothing.” (emphasis added).

I did not have cause to disagree with the Blinder/Zandi numbers; they are best guesses using Moody’s econometric modeling. However, I did criticize their overall approach, saying: “That is now our standard — what was done versus doing nothing? That is truly the wrong counter-factual…”
David Weidner took issue with that assessment. In his column A Nation That Won’t Be Fooled Again ^[4], he noted:

“The financial crisis and stagnant economy have made us bitter. We’ve become a nation of complainers and critics. Nothing is ever good enough for us. The bailouts are misguided. The stimulus didn’t work or wasn’t enough. Reform is too weak or makes matters worse. It’s one thing to call the glass half empty, but these days we deny the existence of tableware.”

I don’t disagree with Weidner’s perspective. Many people have gone off the deep end, obsessing with “recession porn,” seemingly addicted to negative commentary and wild conspiracy theories.
>
^[5]
>
My disagreement with the Zandi-Blinder report is not its theoretical underpinnings — it is by definition a hypothetical counter-factual. Rather, it is the counter-factual Blinder/Zandi chose to use: “What would the economy look like now if we had done nothing?”
Instead, I propose a better counter-factual: “What if we had done the right thing, instead of nothing — or the wrong thing?”
A quick definition first: The term “counter-factual” is a term of art often misunderstood. The definition of counter-factual is a “what-if” — counter-factuals explore historical incidents by extrapolating an alternative time line:

-What-if Chrysler was not bailed out in 1980?
-What-if JPM was not guaranteed $29B of Bear’s liabilities?
-What if Citi and BofA were put into reorg/receivership?
-What if AIG’s counter-parties were not made whole 100 cents on the dollar?

We don’t have alternative universe laboratories to run control bailout experiments, but we can imagine the alternative outcomes if different actions were taken.
So let’s do just that. Imagine a nation in the midst of an economic crisis, circa September-December 2008. Only this time, there are key differences: 1) A President who understood Capitalism requires insolvent firms to suffer failure (as opposed to a lame duck running out the clock); 2) A Treasury Secretary who was not a former Goldman Sachs CEO, with a misguided sympathy for Wall Street firms at risk of failure (as opposed to overseeing the greatest wealth transfer in human history);  3) A Federal Reserve Chairman who understood the limits of the Federal Reserve (versus a massive expansion of its power and balance sheet).
In my counter factual, the bailouts did not occur. Instead of the Japanese model, the US government went the Swedish route of banking crises: They stepped in with temporary nationalizations, prepackaged bankruptcies, and financial reorganizations; banks write down all of their bad debt, they sell off the paper. Int he end, the goal is to spin out clean, well financed, toxic-asset-free banks into the public markets.
Thus, Bear Stearns is not bailed out by the Fed. Instead, the FOMC chair tells JP Morgan’s CEO “You have 9 trillion dollars in exposure to Bear derivatives. Instead of guaranteeing you $29 billion for a risk free takeover, we will start preparing a liquidation plan for Bear. And given your exposure to them, we best plan one for JPM too. (and if you don’t like that, you can kiss our ass).”
Tough talk, but the outcome would have been much better: JPM would likely have bought Bear anyway, if for no other reason than to prevent someone else from buying them, and forcing JPM into bankruptcy, to pick up their assets for pennies on the dollar. That would have set a much better tone for future bailout expectations, versus the massive moral hazard the Fed created with the Bear bailout.
Lehman? Prepackaged bankruptcy, less disruptive.
AIG ? There never was an implicit government guarantee that all counter-parties dealing with AIG-Financial Products — a giant leveraged structured finance hedge fund hiding under the skirt of the regulated insurer — would be made whole. But the Bush/Paulson/Bernanke bailout created one. Instead, AIG-FP should have been carved out for dissolution/wind down, while the insurer could have continued to exist on its own. AIG would have had the liability for the government’s costs, but the counter parties? They would have gotten zero. If you go to Vegas and shoot craps in the alley way behind the casino, don’t expect the gaming commission to collect your winnings. But that is what we did with AIG.
Fannie & Freddie: Two more crappy banks that should have been wound down. These were publicly traded companies that were guaranteed lower interest rates — not an infinite backing from taxpayers. They should have been wound down like all any insolvent bank. Today, they serve ^[6] as the mechanism for backdoor bailouts ^[7] of the rest of the wounded banking sector ^[8].
The same approach should have occurred with the rest of the crowd of irresponsible banks, investment houses, monoline insurers, etc. One by one, we should have put each insolvent bank into receivership, cleaned up the balance sheer, sold off the bad debts for 15-50 cents on the dollar, fired the management, wiped out the shareholders, and spun out the proceeds, with the bondholders taking the haircut, and the taxpayers on the hook for precisely zero dollars. Citi, Bank of America, Wamu, Wachovia,  Countrywide, Lehman, Merrill, Morgan, etc. all of them should have been handled this way.
The net result of this would have been more turmoil, lower stock prices, and a sharper, but much shorter economic contraction. It would have been painful and disruptive — like emergency surgery is — but its better than an exploded appendix.
And today, we would have a much healthier economy:

• Functioning Banking System: Clean banks not laden with bad paper would be actually making loans to qualified borrowers;
• Healthier Housing Sector: An unsubsidized real estate sector — no tax credits to first time buyers, no ultra low interest rates — would have had much lower prices, with far less bad mortgages floating around. We would be much further along in the foreclosure process. More of the folks who bought more house than they could afford would have moved into homes they can afford;
• Much Smaller Federal Deficits: The trillions of dollars of bailout costs on the books of Uncle Sam would not exist. Not he Tarp, not the government guarantees, not the GSEs, none of it.
• Right-sized Finance Sector: Instead of an outsized banking sector, finance in the US would be more proportional relative to the overall economy. Resources and assets (including programmers, quants, and engineers) would go to more appropriate firms.
• Bond holders Lose: Here is an insane idea: If you lend money to a firm that goes out of business, you lose most of that money (You do get a high priority in the liquidation). The US Taxpayer does not step in to guarantee the loss. Crazy, I know, but it is crazy enough that it just might work!
• Counter-parties Lose: See above
• Managements Lose: It seems that for the most part, most of the upper level bankers who helped bring about the crisis are still working for the same banks ^[9]. A study found that “92% of the management and directors of the top 17 recipients of TARP funds” are still working for the same banks. Reorg would have caused these people to be fired; perhaps the bankruptcy judges would have clawed back some of the execs ill gotten gains ^[10].
• Moral Hazard: Bankers expectations that they can behave recklessly because Uncle Sam will bail them out, is dramatically reduced.

While we certainly can compare what was done with doing nothing, the proper counter-factual is to compare what was done with what should have been done.
Throwing trillions of dollars at the crisis, and hoping for the best will provide a short term improvement over doing nothing; trillions of dollars have that sort of power.
The proper comparison, however, should be versus what should have been done. Performing that analysis leads one to a very different set of conclusions . . .

Frankly, I'm Terrified

A quote from Google CEO Eric Schmidt:

"We're trying to figure out what the future of search is," Mr Schmidt said. “One idea is that more and more searches are done on your behalf without you needing to type.
"I actually think most people don't want Google to answer their questions. They want Google to tell them what they should be doing next."

This somewhat seemingly innocuous statement is quite profound and terrifying in my humble opinion. I might be taking some time to think about how much information I want to be providing Google.

Source

Old People: Not Spending Like they Used to

The thing is with the fed continuing its policy of crushing interest rates and insurance and health care costs skyrocketing, there really isn't going to be much room for the boomers to spend. Keep in mind the boomers accounted for almost 50% of the consumer spending in America during these past 5-10 years.

Well Worth 26 Minutes of your time

David Rosenberg warning that the chances of a double-dip recession are greater than 50-50 and that the recession may not have ended last year at all.

GDP & the Upcoming Elections

 Zero Hedge has identified two credible reasons to believe that second quarter GDP is going to get revised downward — wayyyyyy downward (internal link is in original; bold is mine):

As JPM (Michael Feroli at JP Morgan) reported earlier, revision in BEA (Uncle Sam’s Bureau of Economic Analysis) assumptions on wholesale and non-durable inventory alone will push Q1 GDP from the official 2.4% to 1.3%. Today’s data (on trade) is the last nail in the Q2 GDP number, and according to analyst(s) will take out another 0.4% from the GDP, meaning that when all is said and done, Q2 GDP will come out to sub-1%.

Geez, I was hoping that the trade data foreshadowed upward revisions, not downwards.
The late August and late September revisions to GDP will come out just as many in the 85 (a group whose votes are largely swayed by headlines,and make up 85% of the population) are relatively disengaged and are beginning to really pay attention to the fall electoral contests (okay, maybe thanks to the Tea Party movement it might —  be more like 75%-80%). If the GDP revisions are as bad as JPM and ZeroHedge are estimating (conceivably they could be worse, given the track record of downward revisions for other reasons in recent quarters), the political fallout will be immense.

That final week before elections will certainly get interesting............

WEEEEEeeeeeee!

Ancien Régime: extravagant and out of touch with the American people

From the FT

-Photo Courtesy of Reuters

What the great French historian Alexis de Tocqueville would make of today’s Obama administration were he alive today is anyone’s guess. But I would wager that the author of L’Ancien Régime and Democracy in America would be less than impressed with the extravagance and arrogance on display among the White House elites that rule America as though they had been handed some divine right to govern with impunity.

It is the kind of impunity that has been highlighted on the world stage this week by Michelle Obama’s hugely costly trip to Spain, which has prompted a New York Post columnist Andrea Tantaros to dub the First Lady a contemporary Marie Antoinette. As The Telegraph reports, while the Obamas are covering their own vacation expenses such as accommodation, the trip may cost US taxpayers as much as $375,000 in terms of secret service security and flight costs on Air Force Two.

The timing of this lavish European vacation could not have come at a worse moment, when unemployment in America stands at 10 percent, and large numbers of Americans are fighting to survive financially in the wake of the global economic downturn. It sends a message of indifference, even contempt, for the millions of Americans who are struggling just to feed their families on a daily basis and pay the mortgage, while the size of the national debt balloons to Greek-style proportions.

While the liberal-dominated US mainstream media have largely ignored the story, it is all over the blogosphere and talk radio, and will undoubtedly add to the President’s free falling poll ratings. As much as the media establishment turn a blind eye to stories like this, which are major news in the international media, the American public is increasingly turning to alternative news sources, including the British press, which has a far less deferential approach towards the White House.

The First Lady’s ill-conceived trip to Marbella and the complete disregard for public opinion and concerns over excessive government spending is symbolic of a far wider problem with the Obama presidency – the overarching disdain for the principles of limited government, individual liberty and free enterprise that have built the United States over the course of nearly two and a half centuries into the most powerful and free nation on earth.

It is epitomised above all by the President’s relentless drive towards big government against the will of the American people, and the dramatic increases in government spending and borrowing, which threaten to leave the US hugely in debt for generations. It is also showcased by Barack Obama’s drive towards a socialised health care system, which, as I’ve noted before, is “a thinly disguised vanity project for a president who is committed to transforming the United States from the world’s most successful large-scale free enterprise economy, to a highly interventionist society with a massive role for centralized government.”

There is however a political revolution fast approaching Washington that is driven not by mob rule but by the power of ideas and principles, based upon the ideals of the Founding Fathers and the US Constitution. It is a distinctly conservative revolution that is sweeping America and is reflected in almost every poll ahead of this November’s mid-terms. It is based on a belief in individual liberty, limited government, and above all, political accountability from the ruling elites. The Obama administration’s mantra may well be “let them eat cake”, as it continues to gorge itself on taxpayers’ money, but it will be looking nervously over its shoulder as public unease mounts.

Mauldin: Bad time to be experimenting with tax increases

He does a very nice job explaining why this is horrible timing to allow the tax cuts to expire in 2011. 70% of those in the highest income bracket that Obama wants to raise taxes on are small business owners.

Yahoo won't let me embed the video so Click HERE to go over an view it.

The Most Amazing Catch I've Ever Seen

EMBED-Spiderman Style Baseball Catch - Watch more free videos

Steve Wynn With an Awesome Rant!

Fun with math! Investment Returns!

Say I give you $100,000 and you have a choice to invest it 2 ways, The first way earns you 25% a year for 4 years and then during year 5 the market tanks and you lose 50%. Or an account that earns 6% every year for 5 years.

Which would you choose?


The answer might surprise you.

25% of Americans Have Bad Credit Scores

From The Big Picture Blog:

Quite fascinating:

“Over the past couple years, millions of Americans have reneged on their debts — because they lost their jobs, because they took on more than they could handle, or both. For many, those defaults have brought immediate financial relief, leaving more cash to spend on other things. Now, though, they’ll also have to face the challenge of living with bad credit.
As of April, 25% of Americans had fallen into the least-creditworthy category, garnering a rating of less than 600 from FICO, the main arbiter of consumer credit in the U.S. That compares to only 15% before the recession, according to data compiled by Deutsche Bank.”

Why does this matter? Now that NINJA loans are verbotten, this pretty much means that “one in four Americans won’t be able to borrow money to make a major purchase in the foreseeable future.”
Before the recession, the number of people with a FICO score of less than 600 was under 15%.
Some people will lament this, but it has a silver lining. Deleveraging is certainly a good thing, and forcing consumers off of the credit treadmill may actually help these folks over the long haul. The repercussions of the credit weakening means softer growth as the broader economy moves to a more sustainable basis of spending.
Some people complain that unemployment insurance makes people lazy; I disagree — at least so long as their are 5 or 6 unemployed people for each job opening.
But I am going to posture that easy credit allowed some people borrow to maintain a lifestyle, rather than earning to maintain a lifestyle.
I wonder: Will the lack of credit spark a revival of creativity and industriousness amongst those that want to maintain their spending habits? Asked another way, could bad credit spark more economic activity?

An Incredible Video Presentation about Money

Makes it super easy to understand for the layman.

A Classroom without walls

A great post from the Daily Recokoning 


Last November, my wife Karen and I toured the Mediterranean with a group of friends, landing one day at the Great Pyramids at Giza.

It’s not those marvels of the ancient world that I remember most vividly, however, or the majesty of the Sphinx, or the sweep of the desert beyond. It’s the camel abduction.
On the way to the pyramids, our guide told us to keep a wary eye on the local peddlers. “Having someone take a photo of you in front of the pyramids should cost a dollar,” he said. “A camel ride is about three dollars.”

Minutes later, as I was gazing up at the imposing Pyramid of Khufu, an older gentleman invited me to take a jaunt on his camel, a mangy beast who was, unfortunately, standing just upwind. As I looked on with mild interest, he whistled for the animal to kneel down.

The next thing I knew he was firmly escorting me onto the saddle and whistling for the camel to rise. Our group laughed and cheered as the camel driver led me off toward a rocky outcrop eighty or so yards away.
As soon as we were out of sight, however, the driver brought the camel to a halt and I was quickly surrounded by eight or ten Arab men shouting angrily at me in broken English to pay them each twenty dollars for the ride…now!

I said no and told the camel driver to take me back. He turned away as if he couldn’t hear me.
The group of men now pressed in tighter, feigning greater anger, as if I had somehow stiffed them all for the ride, which had so far lasted about 45 seconds. “Pay us now!” they shouted again, their hands stretched upwards.

We were at an impasse. I wasn’t about to pull out my wallet in front of this pack of hyenas. And I was too high up and boxed in to jump down. The men continued shouting and waving their arms. I shook my head and sat on my wallet like Jack Benny, wondering how this was going to play out.
About then, a fellow tourist wandered by, recognized what was going on and barked at the men to back off.

“He said he would pay you,” he insisted. “Let him go.”

At this, the Arab men melted away and the camel driver turned and led me back.
I’m sure this incident would have infuriated some, but I was more amused than rattled. I had never sensed any real danger. The men didn’t threaten violence or brandish any weapons. This was sheer intimidation, a tawdry little shakedown. And a reminder that Egypt is not Des Moines.
Back home, I discovered that friends and colleagues were only vaguely interested in the ruins of ancient Greece, the history of Jerusalem or the serene beauty of the Amalfi coast. “Tell us again about the camel abduction,” they said.

Apparently, it was the highlight of the trip.

Not all travel is a success. With expectations high, things can go awry, especially in a foreign land. But even the occasional bad incident makes a good story. (And, perversely, the worst trips make the best ones.)
Most of my travel abroad, however, has not only been great fun but the best part of my education. This idea was once widely accepted.

In his Essay Concerning Human Understanding, John Locke argued that we absorb knowledge from our immediate environment. If you spend too much time in one place, you can “use up” its educational value. In order to grow, you must change locales.

In Victorian England, for example, travel abroad was more than just a mark of privilege. A “change of scenery” was a mandatory part of an upper-class education. The Grand Tour was the capstone of scholarship.

It was a rite of passage that marked a superior understanding of the world. Young aristocratic gentlemen (and later young ladies) set out from the white cliffs of Dover for the Continent with their personal tutors in tow to gain knowledge from the worlds of classical antiquity and the Renaissance, to understand the cultures and ideas that underpin Western Civilization.

Of course, the urge to travel – to open our minds and move beyond the familiar – is as old as mankind itself. It drove our ancestors out of Africa and around the globe. It motivated the ancient Romans to visit Verona’s amphitheater and Athens’ Acropolis. Philo of Byzantium was already listing his Seven Wonders of the Ancient World in the third century B.C. The spirit of adventure, the quest for understanding, and, of course, the dream of great riches pulled Marco Polo to the East and men like Columbus and de Soto to the West.
Travel broadens the mind, increases tolerance, and connects you with your fellow human beings. The more we understand others, the better we understand ourselves.

There are good people and unusual sights everywhere you go. Venture widely enough and you’ll enjoy exotic foods, extraordinary architecture, and jaw-dropping landscapes.
Exploring the world is like attending a classroom without walls. It enriches and changes you. The only requirements are patience, curiosity and a bit of money. (A traveler’s tip: Pack half the clothes you think you’ll need and twice the cash.)

Travel abroad fills in the gaps in our knowledge, dispels our preconceptions and offers endless surprises. Those who forego the opportunity truly don’t know what they’re missing.
It’s sad to go through life thinking foreigners are just strangers who dress oddly, eat bizarre foods, speak in incomprehensible tongues and drive on the wrong side of the road. As Mark Twain observed, “travel is fatal to prejudice, bigotry and narrow-mindedness.” A voyage abroad teaches acceptance and humility. When you travel, you are the stranger. You are the foreigner.

Your kids and grandkids should discover this too, beginning with travel closer to home. Years ago, I became mildly nauseated by all the toys and games my son and daughter were receiving on their birthdays and at Christmas.

A trip – even if it’s only to the local fair or the town next door – is a far better gift. For kids, every outing is an adventure. Why not spend your time and money collecting memories instead of more stuff?
It doesn’t need to be some place exotic, especially when they’re young. Just make for the horizon and see what’s out there. Traveling without knowing where you are going, without having any particular destination in mind, is one of life’s great pleasures.
Of course, there are plenty of resources to get your mind working on places you’ve never considered. One of my favorites is Journeys of a Lifetime: 500 of the World’s Greatest Trips, a lavish volume put together by National Geographic.

Another handy guide is the bestseller 1,000 Places to See Before You Die by Patricia Schultz. It’s is a fine way to investigate destinations both on and off the beaten track. I’ve gotten in the habit of taking it with me on business trips to make sure I don’t miss the local sights and events. (If you’re on a tight budget – or unable to travel overseas – there’s even a version dedicated solely to the U.S. and Canada.)
In short, travel broadens our perspective and sharpens our view of the world. Rather than imagining how things may be, we see them as they truly are.

Your mind becomes more tolerant, your heart more magnanimous, your opinions better informed. And once your perspective is enlarged, it never shrinks back to its original state.
Some people make a pledge to visit all 50 states, or all seven continents, or fulfill some other checklist. And that’s fine.
But your ultimate goal is not a place, but a new way of seeing things.
Carpe Diem,
Alex Green
for The Daily Reckoning