Sunday, October 04, 2015

Vladimir Putin the Pragmatist

Syria is in the midst of a civil war and you hear stuff like “Bashar al-Assad has murdered thousands.” Kind of wonder what the headline would have been back in 1866 for our Civil War; “Lincoln murders 200,000.”
If the Russians can keep Bashar al-Assad in power, they have an ally in the Middle East that can help defeat ISIS. This guy is not jumping in a plane and leaving the country in fear of his life. Every foreign leader that our country has supported in the past is probably now living somewhere in Virginia.

In this case with Syria, the Russians offer stability and preservation of the political system. It’s not like the US where we invade and promise Democracy and then sneak out. Then we have to give refugee status to all of those who would be executed for collaboration on our exit.

If the civil war can be ended and the region becomes stable, people can move back to Syria. The present projected conditions are tragic. 4 million people are in the process of moving into Europe. When countries say that they can accommodate 20,000 over 5 years, what happens this year to the 4 million when the winter arrives? Logistically, how do you provide food and shelter on such a large scale?

Putin has a realistic approach to the problem. Stabilize Syria and get the refugees back into their own country, stem the emigration to Europe. Bashar al-Assad is not associated with a religious agenda that needs to be implemented which is a good thing.

Obama might not like what the Russians are doing, but the United States created this whole mess and if you have someone who is a strong leader that will fight, I say support them. 4 million people have a home that they would like to come back to, Political ideals like Democracy are for the idle rich, not the poor peasants who can ill afford it. Syria can come back just like Egypt.

Putin has no love for Democracy, maybe he realizes that it is a very ineffective form of government for people who are extremely poor. Move a family in Syria living on $200 a month to Europe and you find that they now need $800 per week to survive. Give the people stability and security in their own country and you recreate an economic engine for survival that will work again and revitalize Syria.

Consider Vladimir Putin as a pragmatist with a realistic solution for Syria. Of course we could step up to the plate, we already have 40 million on food stamps in this country, adding 4 million more to the program might even stimulate our economy.

Monday, September 14, 2015

Obama Land

Let’s see, half of the US is for Obamacare and half is against it. Then there is half against the Iranian deal and half for it. Immigration is another 50/50 split. There is one assumption being glossed over, that it is the same 50 percent in disagreement in all three cases. Obama has stepped on enough toes to have worn out his welcome. The thing that bothers me is that he has done it with an “Air” of authority. It reminds me of a person I worked in the past that smoked cigarettes. Most people that smoke are careful to tap their ashes into some sort of ash tray. This person would have a long ash on his cigarette, give you eye contact and then with you watching, tap the ashes onto the floor with kind of a head nod, suggesting that he hit the spot he intended.

Obama has found a way to circumvent Democracy, the rule of many with the rule of the few. His Presidential edicts poison the art of compromise. We no longer have a country united, we have a country divided by argument. His inability to see the Arab Spring as a mess waiting to happen is probably his greatest failure. Egypt will recover, but Libya is gone. Syria could be fixed, Russia is sending in troops. Syria’s president may not be well liked, but he is not a religious fanatic and he has the infrastructure to keep the country running by killing those that want to upset the apple cart. We didn’t like Saddam Hussain, but he kept order in his country. The refugees fleeing want order and they do not want to be drafted into a war. It’s kind of like the people that fled Europe to colonize North America. They didn’t want to fight in other people’s wars.

Preserving order is the prime directive. You cannot give a country Democracy, it doesn’t work that way. Raising the minimum wage, doesn’t solve poverty, more education doesn’t produce better paying jobs for many graduates.

We are not going to give the rest of the world Democracy when people are willing to die to further a religion because of their hopeless condition in this life; the right to vote never put food on the table. Religion gives the poor a new option, a better afterlife (notice how there is no way to argue that).

Where to from here? There lies the uncertainty. But one thing is sure, just as you need ugliness in order to define beauty, you need an example of incompetence in order to measure success. Obama land is a measure of incompetence, we can use it as a guide of what not to do in the future.

In a lighter sense, this is probably the first US President to have a sticker from every country in the world on his luggage. Job well done Mr. Tourist! And done on our dime—go figure--a real goldbrick!

Sunday, September 06, 2015

If It Ain’t Broke, Don’t Fix It!

In the past, Saddam Hussain in Iraq and Muammar Gaddafi in Libya, had a well-paid crew of police and informants that kept the population in order. Religion was out of the mix, if in doubt, execute. The driving force was dispersal of oil money to those who could control the population. It wasn’t perfect, but it worked. For most people the difference between democracy and a dictatorship is that in a dictatorship, you have a government to blame for your predicament, where here in the US, you have a list of reasons to choose from.

In Libya today, there is big money to be made, supplying refugees with flimsy boats for a trip to Italy, which is really a travesty. Their citizens have no means to effectively fight a bunch of gangsters with guns, so they vote with their feet. It’s a little like a movie where the bad guy wins and rides off into the sunset with your girlfriend or daughter.

If a group could be found to finance an invasion of Libya with a force of 30,000 mercenaries at 25K per mercenary, (we would be talking about 1.5 billion dollars) (750 million for wages and the rest for ammunition) the need for migration would end. Upon securing the country, the invader would have about 8 billion a year from oil sales. Kind of like what the Duke of Normandy did in 1066 to England.

The thing that really bothers me is our government’s meddling in the Middle East, and not taking any responsibility for the mess created. Millions of people trying to emigrate in life rafts to escape from a country that we have freed from dictatorship???? It doesn’t sound like we are going to get a thank you note from any of them.

Tuesday, September 01, 2015

The Federal Reserve An Impotent Institution

Let’s get this straight, the Federal Reserve is about to raise the Fed funds rate by ¼ of a percent. The business television hosts are discoursing ad nausea on this. If they were to raise it 3% that might do something.

One quarter of one percent is almost too small to measure. The phrase “Canary fart” comes to mind." The Federal Reserve thinks that raising the interest rate a minuscule amount is going to change the celestial motion of the heavenly bodies?

The idea that this is discussed as a plausible item on the business shows, kind of tells you that many people have lost their true perspective of the markets. An increase of ¼ point from zero is a pittance and a joke.

As long as the Federal Reserve can dictate very low interest rates, there is no reason to save. Common sense suggests that cash stashed in your mattress is better than cash stashed in the bank. Where to from here?--- Buy Gold, Silver and Platinum, the price is right!

Sunday, August 30, 2015

Red China, A Panic That Could Bring The House Down

The Chinese appear to have lost control of their stock market. In reality, the stock market is a psychological theater with no rhyme or reason. A bad day in one market can induce a world panic. Value is determined by the potential buyer’s willingness to agree on price. Is google worth 630 dollars a share? It is, if you can sell it to someone else for even more. A lot of the rest of the world is living on margin. And in our country, every rest home retiree is in the stock market—the bond market won’t pay the rent.

Our bond market is living on borrowed time. Risk is not factored into the market. Triple D bonds are not like a bra size, bigger is better. Buyers should be demanding 25% interest, not fighting each other for 7.25%. And in the past when things got really bad, the Federal Reserve would drop interest rates a quarter point time after time. Guess what, they are as low as they can go. You have to laugh when they talk about raising the interest rate one quarter point. This is not going to send people to the banks to open up savings accounts.

In times of panic, the stock market can have moments where there are no bids to buy a stock (called air pockets) and a stock can take a very large quick drop. Like 50 to 60 dollars.

And then there is the phrase, “Stocks always come back.” If you retired in 1929, were you around in 1954 when they came back? The real truth is; the stock market is an allusion of wealth without having to work for it.

Mark Faber is expecting a black swan event in world markets. I think we are fast approaching it. The bond market marches to a different drummer. It is manipulated by the Federal Reserve guarantees. The weird thing is, the Federal Reserve can buy all the bonds it desires and keep interest rates low. All it does is force investors into different investment vehicles. Real estate, oil drilling in the Midwest, and stocks have replaced bonds for interest’s rate returns.

So we have the Chinese market swirling out of control. Nobody ever claimed that a Socialist Republic had any entrepreneurial financial acumen; that would run contrary to the fabric of the socialist doctrine. They played our game using our rules and it had a good run. Now it has turned sour, like the tulip bubble, of several centuries ago. Financial meltdowns don’t destroy buildings, they destroy fortunes. One minute you are rich and the next minute you are poor. It is invisible in its speed and reach. This is what we are fast approaching. Oil goes from $110 a barrel to $40, an unexpected event. What happens if real interest rates jump to 8 percent? Of course it is not supposed to happen, but oil was never expected to hit $40. We can project what will happen in the future; the only trouble is that common sense, is not what markets run on.

China right now is like a bunch of school kids walking by a graveyard late at night. One loud noise and they’ll run like the devil is chasing them.

Sunday, August 23, 2015

Food Shortages in Africa and the Middle East

We are seeing mass migrations of people from the Middle East and northern Africa into Europe. Normally we are use to immigrants working in a country and sending money home for the family. The news reports show thousands of families with men, women and children in the boats. The driving force is the idea that any place is better than where they are coming from.

Most areas of the world support a maxed out number of people in good times. The amount of food and water is limited. Start a war, and you pretty much eliminate farming as an occupation. At that point people with guns are eagerly waiting for your harvest.

Oil used to be the great generator of income for many parts of the world. At $110 dollars a barrel, populations increased to balance the extra dollars. The drop in oil prices is like what the potato blight did to the Irish from 1845 to 1852. Populations increased because of the abundance of food and then collapsed. Starvation ensued—a million people died; plus the population of Ireland dropped 25% from emigration.

Oil has dropped 2/3’s in price. The old economic question of guns and/or butter is playing a major part in the wars around the Mediterranean. These areas in turmoil, could run out of money, food and farmers, before they run out of guns.

The Middle East oil has some logistic problems. A 500 gallon truck can only haul 12 barrels of oil. And it is very unlikely that the driver would be able to sell the oil at $40 per barrel after delivering it to a refinery or an oil tanker. Most of the oil will have to go by pipeline. How this can be coordinated in a war zone is rather mind boggling to say the least.

The one thing that we know, is that this year’s budget in most countries is probably close in size to last year’s budget. The trouble is, if oil revenues drop by 2/3’s, production has to increase to make up for the shortfall. Since guns are not a food item, look for armament purchases to drop drastically. Look for oil production to triple to cover government expenses. Net effect, more oil will be pumped out of the ground than anyone could ever need. Oil could drop to $28 a barrel.

The indirect effect of the drop in oil prices and war in the Middle East could lead to starvation on a large scale. Escape or die in place.

Wednesday, August 05, 2015

Raising the Minimum Wage

A while ago, I was in the self-serve check out at Ralphs supermarket and there was this guy waiting in the cashier line next to me. The girl managing the 4 self-serve kiosks asked the gentleman if he would like to use one of the self-serve kiosks, as it was faster. His reply, “No thank you, I already have a job.” I laughed for hours after hearing that.

The one thing that many have not realized is that the computer revolution has drastically eliminated many jobs. If it is repetitive, it is gone. ATM machines come to mind, look at all of the bank tellers that are no more. I went to Home Depot the other day and they have 6 self-serve kiosks with one worker running them. At Walmart, they had 10 of them running. Meter readers for gas, water and electricity are no more; each meter phones home to report consumption. One person with an excel spread sheet can do the work of 20 accountants. 40 years ago, a secretary had to be able to type 60 words a minute and handle a lot of printed correspondence. In today’s world, nobody even knows what I am talking about. Pull up a reply form letter on your computer, change the name, type in the email address and hit send.

The irritating thing is this, we have had a computer revolution that has change the mindset of business radically but yet Congress does not understand the future economic projection of the concept. Congress and local governments, think that setting wage standards in the USA will set the tune. The problem is, they are not even close. Profit return is what runs business. The bottom line, can a machine do the work cheaper than an employee? At a wage of $9 per hour, the answer is no, but at $15 per hour, the answer may be yes.

So don’t look for $15 per hour to solve our problems. In the long run it could create more unemployment. On the lighter side, one job is safe (as long as computers need humans), cleaning rest rooms. The sad thing, you may be over qualified for the job if you have a college degree.

Sunday, July 19, 2015

The Foolish Iranian Nuclear Agreement

Kind of a weird agreement. Iran doesn’t really need nukes. Once the sanctions are lifted, they will go into full production of armaments. Their economy will supply that part of the world with oil and weapons. Talk about full employment, everyone will have a job, building something that explodes -- everyday can be the 4th of July somewhere in the world!

Israel is a state of 6 million Jews surrounded by 40 million Arabs. Do you get the feeling that Iran feels the need to nuke Israel? Why even bother? It is the passion of Islam’s radical followers, to destroy Israel. That unites them and gives them resolve. For that reason, the target (Israel) is allowed to exist--magnify the hatred.

Iran will export religion. Of course this will be the fanatical form of religion with the standard promise of 70 virgins in the afterlife (no inflation there yet--I'd hold out for at least 90). Nobody has come back from the hereafter to contradict the validity of the purported promise; so it is a done deal without argument. You explode and kill Christians and live the good life for ever after.

Look for the consolidation of Iraqi, Egypt, Libya and possibly half of Africa. Iran will welcome them with open arms or with more arms if they need them.

We are dealing with religious zealots, whose primary goal is to spread Islam by eliminating non-believers (a religious war if you think outside the box). If Congress votes down this Mickey Mouse arms agreement with Iran, Israel may provide the solution that could be more stable; nuke the radicals and take over the country.

We have a president who we mise well call “Slick,” The Car Salesman. He’ll sell you a health care plan, a student loan program, a nuke agreement, a Cuban cigar and a government paid sex change.

Iran doesn’t need to go nuclear with numbnuts Obama running the show. The nuclear option is a form of miss direction. It’s kind of like Brer Rabbit (Iran) pleading with Brer Bear (Obama) to not throw him into the briar patch (no nukes). Iran gets everything they need by signing off on a nuclear option. They can consolidate their position and extend their boundaries using religion and small arms.

Our leader is giving pink slips to 60,000 more American troops this year. Great for the unemployment numbers. There is much world unrest because we have a President with no balls and the rest of the world knows it. You can lead with the projection of power, or you can talk with the projection of weakness.

Thursday, July 02, 2015

Greece, What Happens Next?

Greece over the last 50 years has implemented a retirement and government bureaucracy that has become a very large portion of their tax expenditures. Notice one thing, retirement and government expenses contribute nothing to the economy. They are like leaches that live on a host. Like most governments, the bills got bigger and bigger and the bureaucrats figured out a way to pass the financing of these contracts of debt into the future. Why does that mythical country, Obamaland come to mind, for some reason?

Greece is about to have a referendum on whether to accept the terms of the EU or to refuse them. It doesn’t really matter. All transfer payments that deal with support for non-working citizens will be eliminated or reduced by about 70 percent. The Army will get paid either way. If the vote is yes, I expect a rebellion with the military taking control. If the vote is no, expect everyone on a pension or government subsidy to be out of luck, no more funds. Savings in the banks will go poof.

So next Sunday with Greece, it really doesn’t matter how the vote goes. If you are retired, you will pay for passing this mess onto the youth of your country. Their banking system is in ruins. Their educated youth has fled to other countries.

The preservation of the Euro is a Non-Sequitur for Greece. The old “farts” need to realize that they can’t tax the youth of their country for their future retirement. They can try, but I think it will fail this time. Let's not single them out as the only guilty country; it was the world bankers that "Cleaned their plow." The PIIGS as a group will fall together, one at a time.

The vote on Sunday revolves around; "Do you want to keep your government pension" or "Do you want to default on the EU loans?" Greece is in a depression. Chancellor Merkel of Germany is demanding repayment from Greece --- funny, how in 1933, "someone" in Germany repudiated the war reparations that had impoverished their country. To say that solution worked OK for them is a gross understatement of fact; it eventually led to a world war.

Moral: Don't expect a politician to get you out of a problem they helped you get into.

Tuesday, June 16, 2015

Congressional Mentality -- Idiots Rule

I was listening to the radio yesterday and heard that Congressman Charles Schumer is trying to get the airlines to stop their downsizing of the luggage size limits for passengers. I mentally thought it through, and realized that many passengers abuse the carry-on luggage to a ridiculous level. The airlines idea to make the luggage bags smaller would be a partial solution. But that is not the real problem.

The real problem is space per passenger. If you remember air travel 30 years ago, you had some space when you sat down and some leg room too. This “lebensraum” gave you some peace of mind and comfort. I used to be able to get up from a window seat and squeeze between the other two persons to get to the bathroom or stretch my legs. That isn't so anymore. The two passengers in your row have to get out of their seats in order for you to access the isle. God help you if the drink cart is blocking your access to the restrooms. Don't even try to use the first class rest rooms.

In today’s seating on airlines, you mentally have to discuss with yourself who has access to the arm rest next to you. Do you dare recline the seat? This invasion of your body space is very stressful. Just as a test, move real close to someone you are not familiar with and you can observe it firsthand. Violating someone’s body space (unless you are romantically involved with them) is very irritating, if not intimidating. It is this close confinement on airlines that results in a lot of bad behavior. You feel uncomfortable and claustrophobic and don’t really know why. Your perceived envelope of body space is yours alone and the airlines should understand this concepts from a physiological perspective. Airline management has to ignore that, if they are trying to pack the plane for max profit. "Sardine can" comes to mind for some reason.

Of course Congressman Schumer wants you to believe the discussion revolves around bag size, not the number of people stuffed into the airplane. Why don’t we do something different, instead of making the carry-on baggage smaller, why not lengthen the space between seats by about a foot and make the seats 3 inches wider? Guess what, you can’t fit as many people on an airliner and therefore, there is more luggage space.

Do we need Congressmen that can only think inside the box? --suitcase mentality! Or people that really understand the problem? I'd like to see standards set for airline seating space, not suitcase size. Schumer impresses me as a complete ID-10T that is 404 in the internet world. His solutions address the business world of money not the airline traveler. Give me a break, give me more leg and elbow room on my next flight.

The real question; "Are we getting more for our dollar or less?" That is what this Great Depression is all about.