Posted December 8, 2011 at 1:45 am
by Kenneth Rapoza
Americans have a profound misunderstanding of the nature of public debt, says Frank Newman, former CEO of Bankers Trust and CFO of Bank of America. Not only is the public debt never going to be paid off no matter what politicians cut from the federal budget, deficits do not necessarily mean greater tax burdens for future generations.
Newman spent 30 years in the public and private banking sectors. Not only did he work at the Treasury Department under Bill Clinton, he is the only American to ever run a Chinese bank…in China. Newman was CEO of the privately held Shenzhen Development Bank from 2005 to 2010.
I spoke with him on Dec. 1 about his new book, “Six Myths That Hold Back America”, released this month by Diversion Books.
“Nearly all of our public debt is held by U.S. banks and by the American public. China holds around 10% of it and believe me they don’t think they are doing us any favors by investing in Treasury bonds.
Yet you read in the paper that you have to treat China with [continue]….
Posted November 18, 2011 at 12:42 am
by Bill Fangio
If it is the case that elected officials reflect the desires of the voters then we are in a world of hurt. Andy Cobb and the Partisans recently appeared at a rally carrying a sign that read, Obama is a Keynesian. Many were outraged and took Cobb to task for suggesting that President Obama was from Kenya. And, there is the American electorate for you – they don’t know the difference between a country and an economic system.
These same people populate the comment strings whenever there is a news story regarding Dr. Ron Paul for President. Here are some of their reasons why Paul should not be President.
1) He is an old coot. Now there is a comment that really exercised the gray matter. Of course, coot refers to a kind of bird but can also mean a harmless, simple person. I agree that Paul is harmless, but to suggest he is simple misses the mark by a few light years. No other candidate for office of the President of the United States can meet Paul head on in a debate without coming out looking like a fool. If you don’t agree with that statement just read a few of Paul’s books, Keep a dictionary handy.
2) He is a nut. I suspect this shallow comment means that Paul is foolish, eccentric, or crazy. No proof is offered. It is just a baseless ad hominem attack.
3) He is an isolationist. This comment is clear evidence that the writer has made no effort at all to understand Paul’s foreign policy. It just happens to be identical to that of Thomas Jefferson. “Peace, commerce, and honest friendship with all nations-entangling alliances with none.” If we had followed that foreign policy throughout our history almost no wars would have been fought. We fought a war in Vietnam during the 1960′s. EVERY day in 1968 we brought an average of 80 boys a day home in body bags. Why did we fight that war? Containment? How did that work out? Then we normalized relations with Vietnam in 1979 and began the foreign policy of Paul and Jefferson. Guess what? We have a friend in Vietnam and trade regularly. What we could not do with bombs and bullets we have accomplished with commerce, friendliness, and example. Paul is not an isolationist – he is for non-intervention.
4) He doesn’t understand that we are at war with Islam. Really? Is that the express or implied policy of the United States? Shall we ask Congress to formally declare war on 1.5-billion Muslims? Islam may be a problem but any debate should take place in the free market place of ideas. Paul understands this quite well.
5) He is unelectable. This comment comes from [continue]…
Posted November 16, 2011 at 3:17 am
by Barry Goss
The tools of those that toot gold’s golden horn seem limitless… the pitch for the shiny metal almost unabated.
I’m not going to get into any detailed counterpoints here, as I have covered those with our paid-up members, throughout October, inside the vault.
So, here, I’ll just share the reply I gave to a worn-out, surface-level meme about gold [ this one on a private facebook fan page I frequent ]
“Gold and silver are bound to carry on rising in value because the banking system can’t print them.”
Be sure not to entangle price and value.
In regards to “physical” gold (bullion), wars have been fought over it, weddings sanctified by it, and paper currency (legal tender) pegged to it in the past.
Its price increases due to supply and demand (yes, it’s still that simple) and the demand for such an inert commodity increases when there’s fear, uncertainty and perception of scarcity in the marketplace (yes, it’s still that simple).
Gold, sitting there by itself, does NOT have commercial or business value. It doesn’t spit out interest, dividends, or income. It’s a cashflow-less commodity that has little demand outside it’s historical “psychological” demand as a currency of last resort.
An ounce of it bought at $300 has the same principles, qualities, and intrinsic value of the same ounce bought at $1300 [ Stocks, not so much, as the value changes based on an increase or decrease of productivity, profits, and people capital within a company ]
A gun (outside of one used as a collectible) or something intangible like… say… hurricane insurance — just like a bar of gold — is inert; passive. You have to do something with them to accrue value from them.
In the case of a bar of gold, it’s value can only be relative to those who feel they can use it for something else. Heh, trying going to Wal-Mart with some gold coins tomorrow.
Should paper currencies (all of whose value can be derived, at any given moment, through exchange rate measurement) collapse you’ll be better served putting value on that gun (and some food), in lieu of gold.
[[ I'll go on record to bet that paper currencies don't collapse in my, my son's, and his future offspring's lifetime as technology and human progress will have a lot to say about that ]]
Gold bandwagon riders continue to jump on the printing-press / devaluation-of-the-dollar spiel, without much research and understanding of how inflation in the first place is not driven by the stock of money [too long to go into here].
Always remember: an investment is not measured by its ability to “hold value” but to increase in value. That part happens by the investment doing or offering something that is usable NOW — i.e., cash-flow, shelter, transportation, etc.
Yes, gold can help collateralize the value of your net worth — i.e. the dollar value of your total assets (bank accounts, stocks, real estate equity, etc.) minus the dollar value of your total liabilities (bank loans, credit card debt, etc.)
Yet, current day money (yes, even it its paper / fiat and legal tender form), can (and should) be used to increase income and build wealth.
If you feel otherwise, transfer the digital dollars in your bank account(s) my way and I’ll then grow those digits and then sell / trade some for a few ‘hands-off’ income-producing assets
The anti-flame war qualifier: to prevent any ODD sudden reactions to the title of this blog post, keep one thing in mind: I promise you that I won’t go to money purgatory for being okay with desiring dollars.
But, if you’re the type who thinks everybody who does is evil and only if they believe as extremely as you do about the “other way” (gold), will they survive.. you need help.
So, I’ll cut right to the chase:
Whether you should be buying, holding or selling physical gold today will depend on your personal circumstances, which include your net worth and how much of it is or isn’t already backed by value-increasing and/or inflation-protecting assets; your level of suspicion against our fiat monetary system and whether it can or will be sustainable during your and your children’s life; and your level of fear for a financial doomsday scenario.
Posted November 9, 2011 at 8:19 pm
by Michael Covel
author of The Little Book of Trading
This rich/poor wealth gap is all the conversational rage. However, tonight I started thinking about two basic issues where “wealth” can have distinct advantages. These issues seem to be completely ignored by the people pumping class warfare and by the media covering the class warfare:
Compounding: Once you have made a certain amount of money, and especially if it is big money, compounding can play a huge role in accelerating the growth of money.
Access to top investing professionals: Yes, if you have a billion dollars, you get special treatment.
Does that make the current richest among us necessarily evil? No, of course not because the short answer is that each blueprint for wealth is unique.
And today’s wealthiest list is filled with first generation money. We have a winner take all society, but who said life was fair?
All we can do is buckle the chin strap and get in the game. Occupations, marches, protests, etc. all just delay any chance you might have at financial success.
Michael W. Covel is the author of Trend Commandments (FT Press; Jul, 11) and The Little Book of Trading (Wiley; Aug, 11). Mr. Covel’s past bestsellers include Trend Following (FT Press; 09, 07, 05, 04) & The Complete TurtleTrader (HarperCollins; 09, 07). His trend following books have been translated into 10+ languages. More…
Posted November 8, 2011 at 11:47 am
by John Stossel
RED ALERT: China’s Prosperity Threatens the American Way of Life
That’s the title of a new book by money manager Stephen Leeb.
On my Fox Business show this week, Leeb argues that China, with the help of its government, will dominate industries of the future — like wind energy and water distillation. He wants our government to do more of what China’s does: support “key” industries.
This is a bad idea. Boondoggles like Syn-fuels and Solyndra aside, history shows that China’s success comes despite — not because of government.
From 1950 to 1980, China managed ALL resources in its economy. How did that work out? This graph tells the story:
There was almost NO economic growth. In fact, millions of people starved.
But then, in the 1980′s, China’s government finally began to relax its suffocating grip on the economy. In 1988, the Chinese constitution was amended to officially recognize the existence of private property. What happened? Chinese entrepreneurs — working to make themselves richer — made China’s economy boom.
So when I hear that America can grow fast, if only the U.S. government meddles the way China’s did, I say: Give me a break.
Getting government out of the way is what leads to economic growth and prosperity.
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Additional commentary from the WV staff:
If there ever was a poster boy for the frenetic, almost rationally delirious, paces Chicken Little Investment Analysts (CLIAs) put themselves through to make their perilous prognosticates have validity in the now, just watch this video:
Posted October 20, 2011 at 11:44 pm
by Megan McArdle
Unsurprisingly, Occupy Wall Street have pushed income inequality to the center of the national conversation. Also unsurprising, I think, is the unspoken assumption that income inequality has continued to get worse since the crisis. After all, where are the bankers panhandling for change or standing in line at the food pantry?
But it would actually be quite surprising, if true. The massive, decades-long data set assembled by Piketty and Saez seems to show that income inequality falls during recessions, and particularly during prolonged crises.
Crises destroy capital, and top incomes tend to be more tightly linked to capital than those of average workers. If you work for a wire factory that goes bankrupt, you may well have a rough year or two before you find another job, and your income may never fully recover. But if you own that factory, it will be years before you have an income even close to what you enjoyed before–and it’s very possible that you’ll never get there at all.
Note that this is not an argument about who suffers more during a recession; it is self-evident that a worker who loses a third of their $20,000 annual paycheck is much worse off than an owner who loses two thirds of their $500,000 annual draw. But the measured gap between their incomes will still shrink dramatically.
That’s why I was surprised, two years ago, when census data seemed to show that income inequality had continued rising. However, I filed it under “maybe this time is different” and didn’t really revisit the subject.
But as it happens, I was back at the University of Chicago this weekend for my tenth business school reunion. And while I was there, I ran into [continue]…
Posted October 19, 2011 at 5:57 pm
by Verena Dobnik, Associated Press
NEW YORK – After a month of bashing banks and other corporations, the Occupy Wall Street movement has had to become a money manager itself.
It has $435,000. Most of it came from online credit-card donations, but $85,000 has been donated in person at the Manhattan park that’s become the center of the global “anti-greed” protests, said Darrell Prince, an activist using his business background to keep track of the daily donations.
Handling the money, and figuring out what to do with it, could be one of the biggest challenges for a movement united by anger more than strategy, and devoted to building consensus among activists with wide-ranging goals.
The protesters have been spending about $1,500 a day on food, and also just covered a $2,000 laundry bill for sleeping bags, jackets and sweaters. They’ve spent about $20,000 on equipment such as laptops and cameras, and costs associated with streaming video of the protest on the Internet.
And they don’t just have money donations. They have a mountain of donated goods, from blankets to cans of food to swim goggles to protect them from pepper spray — some stored in a cavernous space on Broadway a block from Wall Street.
Though the money is a pittance compared to the profits of many corporations that the activists blame for the nation’s financial woes, it’s growing. Roughly $8,000 is coming in every day just from lock boxes set up to take donations at Zuccotti Park, Prince said. More is coming by mail and online.
“It’s way more support than we ever thought would come in,” Prince said.
The cash has forced changes in the “finance working group” that arose spontaneously among the self-governed protesters. Buckets were once used to collect park donations, and until recently, a 21-year-old art student played a key role in the working group.
Prince, who has worked in sales, said the group is [continue]…
Posted September 29, 2011 at 11:30 am
by Michael Ellsberg
Three of the biggest purchases a typical middle-class family makes are a home, a car, and a college education for the kids.
In the past sixty years, there have been waves of disruptive innovation within the real estate industry (perhaps too much innovation, considering 2008), and within the automobile industry.
Yet, the higher education industry (and it is an industry, even if most of the players are nonprofits) hasn’t changed much since the fifties.
That’s all about to change, drastically.
As budget cuts slash public universities to ghosts of their former selves, and as the “You’ve gotta be kidding me” factor on the tuition for private education grows more extreme year, increasing numbers of parents and students are beginning to question some long-reigning assumptions about higher education. Innovation and disruption are in the air.
Here are some once-sacrosanct myths that are starting to be challenged.
“Higher education is necessary to create critical-minded citizens of democracy.”
I’m amazed that anyone who says this isn’t laughed out of the room instantly.
We need to pay up to $200,000 to become functioning citizens of our own political system? If that is the case, our nation has some very deep problems indeed.
The back-and-forth mudslinging attack ads that constitute today’s political discourse do not call for critical-minded Aristotelian analysis of the finer-points of their rhetorical argumentation. They call for the channel-changer.
I’ve never once heard a parent express their willingness to scrimp-and-save for decades, and even go into debt, so that their son or daughter can [continue]…
Posted September 27, 2011 at 2:16 am
The WV editorial staff
We thought this comment, from this post, was worth pondering:
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Social security exists in order to mitigate the deleterious effects of capitalism. In fact, most forms of “social welfare” exist in order to render less harsh the inherent dislocations and/or inequities which free-market capitalism engenders.
Thus while we live in an age of unprecedented economic output, we also live in an age of unprecedented economic disparity between the haves and have-nots, rich and poor, etc.
Social security, welfare, etc. are not — historically speaking — Marxist inventions, but neo-liberal constructions designed to pacify the underclass. The self-described purists of capitalism pride themselves on eliminating the state from our everyday lives, never once acknowledging to what extent the “state” in its current, modern form exists solely to perpetuate the desires of a small cabal of corporate elites.
There’s only so much support you can cut until the vast majority of Americans wake up and realize they own nothing. This realization leads directly to social upheaval and possibly to political revolution.
Thus, social security is not anathema to free-market capitalism, but rather essential to it’s survival.
Remove the welfare opium at your own risk.
Posted September 27, 2011 at 1:55 am
by Jeff Miller
A basic lesson on getting attention is how to frame the question. If you are interviewing a corporate executive you can ask either:
A) How is your business doing? Do you see any need to expand? Are you changing the size of your work force?
B) Do you think we are in a recession?
If you are interviewing one of the ubiquitous parrots of Wall Street — who might have the title of “investment strategist” or even “chief economist” — you also have a choice of questions. [If you read the biographical information for these sources, you will often find an array of non-economists whose chief credential is that they are interviewed a lot on TV.]
A) What is your current investment allocation? How have you done through the last business cycle? What is your best idea?
B) Do you think we are in a recession?
I’m sure you get the idea. While some journalists ask questions where they can get an informed answer, those topics are not very exciting for headlines and ratings. It is more seductive to ask about the R word!!
This is even better when there is no definition for what is meant by a recession. For the average citizen, we never emerged from the last recession, since employment and growth have not returned to normal levels. I completely understand.
This is a fine common-sense definition, but it is a bit [continue]…