Monday, August 25, 2014

The Upside Down Logic of Today’s Economy

People used to buy homes because it was cheaper to own than to rent. Let’s face it, the ability to pick up and move at the drop of a hat, is real freedom. And just that alone should dictate that renters pay more for that freedom. That doesn’t seem to be the case. Selling a home in California can cost 20K, and that’s a year’s rent.

Common sense suggests that if you want people to save their money, you should pay them a reasonable interest rate so they would forgo immediate gratification. I can’t think of one reason if you are young, to put money in a bank at these interest rates. Buy something real and enjoy it.

If you are ready for retirement, even Suze Orman is suggesting that you hop into the stock market. The return on bonds is so low that you need to invest in stocks with some reasonable amount of return even if the risk is greater. Otherwise you will outlive your savings. And to think, that the eighth wonder of the world used to be “Compound Interest.” Right now the spread between Junk and Treasury’s is about 100 basis points and at times in the past, used to be as high as 800 to 1400 basis points (that's before the government insured everything).

It used to be that the minimum wage was an entry rate into the labor force. You couldn’t live on it as a career wage, but it gave you training and gave your employer a way to measure you for advancement. Now we have the realization by the masses that you can’t support a family on the minimum wage. Plus we have a new economic concept that raising the minimum wage will solve problems. Let me ask you one question, does a law solve a problem or set fines for violators? Just maybe pointing out that the minimum wage won’t support a family sells more newspapers. Everyone earning the minimum wage has a pretty good idea that family life will really suck on the minimum wage.

The infrastructure in most of the states is over 60 years old and needs to be replaced. “Infrastructure is a fancy name for; roads, sewer, water and electricity. On top of that, my state, California is in the middle of a drought. Add insult to injury, consuming less water by everyone will raise everyone’s water rates. A lot of the fixed costs used to be passed on to the large consumers. So in a down economy, consuming less costs more and we are not even talking inflation.

Inflation appears to have disappeared if we look at all of the government statistics. But if we examine the national debt, a jump of 10 trillion in the last 9 years, kind of makes one wonder. When I pointed out to someone some wastefully spending in our organization, the reply was, “Oh, that’s government money.” There appears to be a complete disconnect between the taxes we pay and government spending. So it’s not surprising to see that the average man on the street looks at the national debt as a government thing that has nothing to do with the people. Then carry it one step further; this form of government financing has worked great so far, why not continue it? Don’t rock the boat.

I remember as a kid offering up an excuse for bad behavior to my parents with “The other kids do it or their parents think its ok.” The response from my parents was wisdom for growing up into adulthood, “they might do it, but it doesn’t make it right. In this house you live up to our standards, not their lack of standards.” So when you open the morning paper and find out that all of the other countries are printing money at a very rapid rate just as we are; what you can deduce from the fracas, is that there are no “adults” in charge.

Common sense suggests that the economy is stressed to the limit. We are not sure, why or how but the facts don’t fit any model we use. Something is wrong, there is an economic conflict that has to be resolved. We cannot spend what we have not taxed, forever. There comes a point to where it has to fail. Of course we are not there yet, so as long as it works, it works.

It kind of reminds me of a roller coaster ride video from a blogger a few years ago about the Stock Market, we are now most certainly near a top and are ready for the real ride to begin. Or better yet, it's enjoying snow cones on the Titanic after the iceberg hit. Are we having fun yet? Do you get the idea that reality and common sense, are traits lacking from the players at our "roulette table" commonly referred to as the stock market? "Faites vos jeux."

Tuesday, August 12, 2014

War and Non Wars

I wrote this a week ago and published it for about 12 hours and then unpublished it. It didn't really conform to what this blog is about and that's why I pulled it. But it seems to have a of a lot of relevance when we watch the cruelty going on in the third world news.

This is a little off topic, but right now the world is in the midst of several armed conflicts and many are mislabeled “wars.” Wars are fought by two differing groups wearing uniforms to designate their affiliations and there are rules of engagement. If you remove your uniform and go behind enemy lines, you are then considered a spy and entitled to be immediately shot if discovered. In these types of conflicts, civilians are a protected group.

In a second type of conflict many times labeled “a war,” are religious conflicts. There are no uniforms to designate participants, in fact, most are masked. These barbarians think nothing of killing a man’s family, if they cannot get the man himself. What we need to realize is that these people are terrorists and do not even deserve the right to surrender and be captured. They claim to be innocent civilians when discovered.

We need to recognize what terrorism is, it is an attack on everyone, not just the military of a country. We have a war in Syria and at least half of the combatants wear uniforms; in Israel, the same thing. In both cases, only one side is held accountable, only because they follow the rules of war.

In the Ukraine, they have a civil war and the war is real, they’re not trying to kill civilians. It is soldier killing soldier. When it’s over, the winner’s rule and it has nothing to do with religion.

Most of the civil unrest in the world right now involves the Muslim religion. They are using terrorism to conquer those who block their path with mindless senseless trails of death and destruction, through terror and intimidation, with the hope to conquer, kill and convert what is left.

A pressure cooker blows up during the Boston Marathon and it sets a whole nation on edge. Our airlines could be on the verge of collapse with one or two future successful terrorist attacks.

As a suggestion, why not drop one or two nuclear bombs on ISIS to show them what we are using for a pressure cookers? We don’t need boots on the ground to vaporize someone who is a terrorist. This might give Iran second thoughts on producing a nuclear device. If they want to wear a uniform and play by the rules of war, then that would change the game plan. Right now our game plan doesn’t work because they don’t play according to the rules of war. They are playing to win and are succeeding, the threat to kill your wife and kids will make anyone toe the line.

A nuclear bomb would bring home to them the absolute horrors of real war, more so than a car bomb or a pressure cooker. The certainty of the lethal impact of a nuclear weapon makes a car bomb seem like an act of futility. If you get vaporized, you don’t get the 60 virgins. Of course I could be wrong on that, no one has come back to complain that they didn’t get their quota of virgins. And if we are talking sheep, I can see a realistic possibility of filling that quota of virgins.

We need to examine the rules of engagement for terrorists. Do we play by our rules, or do we give them a dose of what they are handing out to the rest of the world?

I'm sure that I will be more on topic next week.