By Claus Vistesen, on October 8th, 2010
I have just been listening to Ben Davies’ podcast (see also FT Alphaville here) from Hinde Capital about the funding issues of the Japanese government and the points he makes are important. I have used the metaphor of Japan as a bumblebee before and while I believe that the story on Japanese savings may just be a little more complicated than many believe I think Ben points his finger at two very important points. One is how Japan has difficulty with both deflation and potential inflation (higher yields) at the same time which not only puts the economy in a very tight spot, but also locks in Japan towards a balance between veering to far in either direction, a balance which can be difficult to strike. The second is that while Ben believes that Japan will ultimately pop, the central bank (and indeed Japan itself) will try to do everything it can before that happens. Especially the last point is very important. Coupled with the need for Japan to attempt to maintain a structural external surplus it brings me back to a point I have made before (and which I will continue to make again and again).
Ageing societies are not, in the main, characterised by aggregate dissaving but rather by the fight against it.
So, Japan will fight and the central bank will do the government’s dirty work and the most intriguing question here is how long it will take of unsterilised hyper-QE before an economy such as Japan stuck in both a fertility and liquidity trap [1] implodes in hyperinflation; will it happen at all(?) and what can the country do to balance the trade-off between deflation and inflation.
Finally, on Ben, he is bullish on gold but then again, he would be wouldn’t he as runs a gold fund. But there is a subtler point underneath the reaffirmation of the bull market in gold since Hinde is also, following Ben’s comments, long volatility, a bet which has not, yet, paid off (and one would assume the “position” has some carrying/opportunity costs even if volatility is flat). Or put differently, gold (precious metals) have performed strongly alongside risky assets as liquidity has been plenty but what has not happened yet is the ultimate shakeout in which volatility spikes and investors buy gold and not the dollar. I think that you need to fit two stories in your head. One is why gold might move alongside risky assets as fiat currencies are slowly debased as well as how gold should do also do well in a situation where volatility suddenly increases quickly and abruptly although I suspect this last situation is the ultimate endgame with the interim mainly being one of dollar strength in times of sudden reversals in market fortune.
But even gold can’t be a free lunch, right? Perhaps, this is one way to rationalize that fact that investor performance currently seem to be demarcated by those who climbed on the gold train a year ago (or 2-3 years ago if you will) and those who didn’t. When times are tough and volatility spikes, the USD rallies but as such events almost inevitably carries an immediate response of more liquidity so will gold (and other non-printable assets) do well. But then as liquidity manages to smooth over markets and as the SP500 starts to tick back up this should again be constructive for gold since after all; the whole precondition for low volatility at the moment is the promise of more QE from the Fed (well not quite, but still very close I think). This is then good for a long gold position but not a long volatility position although I am intrigued by the ultimate punt on the final coup de grace in which gold and volatility becomes the only place to be. Still you got to have that acking feeling on gold, I mean; either it trades as a risky asset or becomes the safe haven of choice in times of volatility. So, which is it? I don’t know, but perhaps we are going to find out very soon.
The Punchbowl
Indeed, I suspect that many readers would have counted on me pointing to gold as the ultimate punchbowl and while I can certainly envision a situation is which gold takes a 10-15% correction (or even more) the point is that this would not counter the trend (not even close). This brings me to the real punchbowl at the moment; equities, emerging markets and high beta EM currencies (Asia and Latam). I am largely indifferent to the first in the long run, long term bullish on the second, and by consequence pretty constructive on the latter as well in the long run [2].
However, in the short run I think that while the punchbowl never left the table, talks about a new round of QE and how Japan’s intervention might actually be a leading indicator of more to come from OECD central banks all at the same time as the SP500 breaks 1160 is extraordinary.
(quote Bloomberg)
The Bank of Japan may have acted first in a new round of central bank action to prop up the global economy as recoveries in industrial nations falter.
The unexpected decision by the Japanese central bank yesterday to drop its interest rate to “virtually zero” and expand its balance sheet follows the U.S. Federal Reserve’s move toward more unconventional easing. Bank of England officials will consider further stimulus tomorrow, while the central banks of Australia, Canada and New Zealand are among those now holding fire on further interest-rate increases.
It reminds me of a point made recently [3] that the marginal returns of additional QE measures (Q1, Q2, Q3 … QN) are declining rapidly. I mean, how much QE do we need before the SP500 hits 1200 or 1250 perhaps? Certainly, I think this is a worthwhile consideration when talking about the effects of QE even if the ultimate policy rationale for additional measures has intensified with the macro environment definitely turning darker in the OECD.
Actually, if you will allow me a mathematical description of this.
The first derivative of QE with respect to the macroeconomy and risky assets are positive but the second derivative appears to be negative for the macroeconomy. More and more is needed to have a smaller and smaller effect. But it is more complicated than that and some asset classes clearly have a very positive second derivative (gold for instance) and look at those poor emerging markets as well. More and more liquidity chasing relatively few assets and high yield opportunities are relatively scarce. This is then a positive second derivative and a clear risk of a bubble.
Quote Bloomberg
Emerging-market borrowers are on course to sell more bonds than ever this year after yields hit record lows and developing economies rebounded faster from the credit crisis than advanced nations. Governments and companies in developing countries including Vale SA, the world’s biggest iron-ore exporter, and Korea Electric Power Corp., South Korea’s largest electricity producer, borrowed $196 billion from July to September, the most for any quarter, according to data compiled by Bloomberg. Bond sales surged from $157 billion in the second quarter of 2010 as yields in developing countries slid to an all-time low of 5.4 percent on Aug. 23 from as high as 6.8 percent in February, JPMorgan Chase & Co.’s EMBI+ index shows.
(…)
Brazil doubled the tax yesterday on foreign investment to 4 percent on fixed-income securities to stem the currency’s two- year rally and help shore up exports. The move coincided with the Bank of Japan’s reduction of the overnight call rate target to a range of zero to 0.1 percent, the lowest since 2006, and said it would set up a fund to buy bonds. Brazil’s benchmark interest rate, at 10.75 percent, is the second-highest among the Group of 20 nations after Argentina’s and is luring demand for local-currency debt. “The IOF tax isn’t enough to contain the flows coming from the liquidity injection by the Japanese central bank and global dollar weakening,” said Luis Otavio Souza Leal, chief economist with Banco ABC Brasil SA in Sao Paulo.
(…)
Governments from South Korea to Brazil are stepping up attempts to control their currencies as investors pour a record amount of money into emerging markets.
Regulators in Seoul will start an audit of lenders handling foreign-currency derivatives on Oct. 19 to curb volatility caused by capital flows, the finance ministry said today. Brazil doubled a tax it charges foreigners on investments in fixed- income securities to 4 percent yesterday. The yen fell the most in three weeks after the Bank of Japan cut benchmark interest rates and pledged 5 trillion yen ($60 billion) to buy bonds and other assets, having sold $25 billion worth of its own currency last month in the first intervention since 2004.
This is just a small smørrebrødsbord then of the effects this is having in emerging markets where more and more creative policy measures are being tried to keep the money out. This is then a strongly positive second derivative effect and one which is a key mechanism to be aware of in the global economy.
The point here is of course that there is a lack of stability. It is fairly well established from Japan’s experience that once caught in a liquidity trap and with a rapidly ageing society the extra effect of more liquidity is almost 0 with respect to the macroeconomy (until of course the balance tilts, but sufficient unto that day and all). Yet, there is always a bubble waiting to inflate elsewhere as such the Japans of the world create a huge externality in the global economic system by filling the proverbial punchbowl for risky assets.
Yet for now and as markets seem to be wanting more and more QE to push forward it appears that investors should be careful diving too deep into the punchbowl even if it currently might appear as a golden opportunity.
—
[1] – For more on the fertility trap, look no further.
[2] – Although an AUD/USD at 0.97 is unbelievable to me. I think this is one of the brightest stars high their looking for a strong correction.
[3] – I can’t for the life of me remember who it was.
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By Ajay Shah, on October 8th, 2010
The much awaited decision of the Supreme Court in the matter of ICICI v. Official Liquidator of A.P.S. Star Industries is now available. The case had come as an appeal against a decision of the Gujarat High Court which invalidated transfer of Non-Performing Assets between banks. The decisions of the High Court and the Supreme Court are important in illuminating the legal foundations of Indian finance.
Background
Various borrowers owed a total of Rs. 52.45 crores to ICICI (Amongst which one of the borrowers was M/s A.P.S. Industries). These loans were classified as Non-Performing Assets (NPAs) by ICICI. ICICI transferred these NPAs to Kotak Mahindra on “as is where is” basis by way of a Deed of Assignment. Consequently, the Kotak Mahindra became the full and absolute owner of the debts and as such the entity legally entitled to receive the repayments of debts.
M/s A.P.S. Star Industries subsequently went into liquidation. Kotak Mahindra filed a Company Application in the winding up proceedings of A.P.S. Star, praying for being substituted in the place of ICICI (As it was now the owner of the debt). Though the transfer document between ICICI and Kotak was held to be valid the company court held that such transfers of NPAs was not allowed under the Banking Regulation Act of 1949 (BR Act).
The High Court ruling
On appeal a Division Bench of the Gujarat High Court upheld the observation of the Company Court on the following main grounds:
- Section 6 of BR Act gives and exhaustive list of activities a bank is allowed to carry out and sale of NPAs is not present in the list.
- Since banks prohibited from trading activities (See section 8 of the BR Act) and the sale of NPAs is essentially trading, such transfer was invalid.
- Such trading of NPAs would mean transfer of NPA from one banks balance sheet to another without any resolution and therefore against the health of the banking industry.
- Since individual loans were lumped together and bought there was no way to ascertain the value of individual loans and the amount recovered from them. This made such loans essentially speculative trading.
- Since the customer is forced to transact with another bank now and also he is being lumped with other loans, this amounts to violation of the relationship between the bank and the customer.
- By legislating s.5 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), the Parliament has made it clear that only securitisation companies can buy NPAs and not banks.
The Supreme Court ruling
To much relief of the banks, the Apex Court has set aside the impugned judgment and order, laying down the following important legal propositions:
- Section 6(1) of the BR Act is a general provision and enumerates topics as fields in which banks can carry on their business. This is the core banking business. However, RBI, being the regulator, under Section 21 and 35A can issue directions having statutory force, laying down parameters enabling banks to expand their business. Such parameters will define `banking business’. (¶ 13)
- RBI, by issuing guidelines authorized banks to deal in NPAs and such guidelines cannot be held ultra vires of the Act. Such guidelines have statutory force and hence inter se transfer of NPAs between banks is permissible. (¶ 14)
- The 2005 guidelines of RBI are not to eliminate NPAs but to restructure the same. Such restructuring cannot be treated as trading. (¶ 15)
- The SARFAESI Act was enacted enabling specified SPVs to buy the NPAs from the banks. However, from that it does not follow that banks cannot transfer their own assets. (¶ 21)
Deeper issues
While the judgment seems to set law in the correct direction, it raises other questions. The borrowers had argued that the only legal way of transferring financial assets is under Section 5 of the SARFAESI Act which reads:
“Notwithstanding anything contained in any agreement or any other law for the time being in force, any securitisation company or reconstruction company may acquire financial assets of any bank/FI..”
However, Chief Justice Kapadia, while writing the judgment observed in ¶ 21 that `the SARFESI Act 2002 was enacted enabling specified SPVs to buy the NPAs from the banks’. As discussed, this statement seems to be missing out that even good debts which are not NPAs can be bought by those SPVs under s. 5 of the SARFESI Act. May be this is an inadvertent omission, but it is interesting to observe that Justice Kapadia previously also in Transcore v. Union of India (2008) 1 SCC 125 observed (in ¶ 20) that `it is only when these assets in the hands of the bank/FI becomes sub-standard, doubtful or loss then the account or asset becomes classifiable as a NPA and it is only then that the NPA Act comes into operation’. The same is reiterated in ¶ 30. Clearly, these observations do not quite fit with the literal interpretation of s. 5. Probably the pedantic have got another question lingering in their minds: `Can a bank/financial institution sell off a debt, which is not a NPA, to a securitisation/assets reconstruction company?’
One also asks what remains of Section 6 of the BR Act which describes what activities banks can take part in. Justice Kapadia states `In other words, the 1949 Act allows banking companies to undertake activities and businesses as long as they do not attract prohibitions and restrictions like those contained in Sections 8 and 9′. This would mean that while the legislature drafted Section 6, this is irrelevant today. He also goes on to state `Thus, RBI is empowered to enact a policy which would enable banking companies to engage in activities in addition to core banking process it defines as to what constitutes “banking business”.’
This implies that there is unfettered power with RBI to define what business banks can take part in. This is unusual as it seems that there are no parliamentary control over what banking business can imply. Unlike `securities’ which is defined under the Securities Contract Regulation Act by Parliament and only the central government may modify it by notification, (and therefore no regulator is free to define any instrument as a security and regulate it) `banking’ seems to be under a Henry VII clause for RBI. There seems to be no provision under the BR Act allowing the central government (let alone the RBI) to change the definition of `banking’. The judgment however empowers RBI to do so without and rider or guidelines. This also goes against the principles of interpreting laws as it makes all provisions in Section 6(a) to (o) irrelevant.
Conclusion
The judgment reveals the state of financial laws in the country which are unable to guide the judiciary unambiguously. The judicial interpretations also seem to alter the nature of the laws and the drift between the letter of the law and its meaning continues to increase.
By B.P.T., on October 8th, 2010
At 8:30 AM EDT the Employment Situation report for September will be announced, and the consensus for non-farm payrolls is an decrease of 8,000 jobs compared to a loss of 54,000 in August, the consensus for private payrolls is an increase of 85,000 jobs compared to a gain of 67,000 in August, the consensus for the unemployment rate is that it will increase by 0.1% to 9.7%, the consensus average hourly earnings rate is expected to increase 0.1%, and the consensus for the average workweek is 34.2 hours.
At 10:00 AM EDT, the Wholesale Trade report will be released for August, showing inventory levels for wholesalers in the United States.
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By Winton Bates, on October 7th, 2010
I am sometimes asked questions like: What is so wonderful about the free market? My answer is that the free market is about choice. You choose what you want to buy. The choices you make send signals through the market to huge numbers of people involved in retailing, manufacturing and production of raw materials. A lot of these people live in different parts of the world. They don’t even know each other – they are just responding to market opportunities. It is inspiring to think that this whole system responds to individual choice.
However, some people argue that free choice is just an illusion. These people include some famous economists, such a J K Galbraith, who wrote ‘The Affluent Society’ in the 1950s. He argued that your choices are manipulated by advertisers, who sell you things that you may not really need. Others argue that modern economies are geared to selling things that are bad for us – food full of fat and sugar; fuel guzzling cars; new fashions in clothes that serve no obvious purpose – often funded with credit that consumers have difficulty repaying.
How has the economics profession responded to this challenge? Over most of the last 50 or so years I think it is fair to say that the profession has largely ignored the challenge. That was easy to do because there was never any serious suggestion that advertising should be banned. Advertising of some addictive products that are harmful to health has been restricted and there has been some regulation to shield children from exposure. Everyone agrees, however, that it would be silly to discourage informational advertising about store locations, products sold and prices. As for more subtle forms of advertising, it is difficult to define activities that should be discouraged without infringing the rights of individuals to engage in persuasive communication with each other.
Much of the economic research that has been undertaken on the effects of advertising has suggested that they are small and do not last long. However, such findings raise more questions than they have answered. Why would firms spend large amounts on advertising if it has little effect on sales?
The findings of some recent studies on the evolution of brand preferences are consistent with Israel Kirzner’s view that it is the entrepreneur’s function not only to make the product available, but also to ensure that the consumer’s attention is attracted to the opportunities that the product provides (‘Perception, Opportunity and Profit’, 1983, p 10). These studies have shown that:
• brand loyalty tends to be a very important factor – many people prefer to buy a leading brand product, even though a less expensive product is indistinguishable when packaging is not visible;
• the first brand that becomes established in a market tends to maintain a substantial advantage over those that come later; and
• this advantage is greatest for products that are heavily advertised.
(For example, see “The marmite effect’, ‘The Economist’, Sept. 23 2010 and Bart Bronnenburg, Jean-Pierre Dubé and Matthew Gentzkow, ‘The evolution of brand preferences’, NBER Working Paper 16267.)
Marketing experts have a great deal to say about how brand loyalty is established. Conventional branding models assume that the purpose of advertising is to influence consumer perceptions about the brand (e.g., associations tied to quality, benefits, personality, and aspirational user imagery). In cultural branding, however, advertisers seek to establish a story about the kind of people who buy the product they are selling and how it fits into their lives. The product is simply a conduit through which customers can experience the stories that the brand tells. (see: Douglas Holt, ‘How Brands Become Icons’, chapter 2). Some people identify strongly with the brand’s story, some may see it as saying something relevant to themselves, others see it as irrelevant.
One of the most interesting marketing exercises in Australia is the advertising of Victoria Bitter. For a long time the story was about ‘Vic’ as a reward for a hard days work – the ‘hard-earned thirst’. It was the working man’s beer. Over the last couple of years the advertising has moved up market. Last year, the story suggested that VB was every man’s beer. The most recent advertising seems to be aimed at young me who sees themselves as a ‘authentic Aussie blokes’. (The latest ad is here). If you buy the story, you buy the product and you make a statement about how you see yourself and how you want to be seen by others.
How can an understanding of marketing be incorporated into economics? There is a relatively new brand of economics developed by George Akerlof and Rachel Kranton  that is helpful. Identity economics recognizes that people gain satisfaction from acting in accordance with their identity – how they perceive themselves – as well from the goods and services they consume. This explains why some people would prefer to buy the branded product they usually buy rather another product that is a lot cheaper and is indistinguishable in all respects when taken out of its packaging. They get satisfaction from being the kinds of people who use that brand. The satisfaction they get from acting in accordance with their identity – the story associated with the brand – may exceed the satisfaction they would get from paying a lower price. Summing up then, advertising does not make consumer choice an illusion. Advertisers are often trying to sell you a story. If you don’t identify with the story they are telling, you don’t buy their product. It’s your choice.
By Bron Suchecki, on October 7th, 2010
In a recent High Court of Australia judgement on the Goods and Services Tax treatment of foreign currency transactions, I note with amusement Justice Dyson Heydon’s statement that:
“Apart from those rights [as legal tender], the pieces of paper had little value. They might have been used to stop an uneven table wobbling, or to jam shut a loose door, or to amuse small children, or to light a cigar. If the currency included coins, the coins might have been used to turn stiff screws or to lay on railway lines for the purpose of being flattened. But uses of that kind, which are very remote from their real purpose, would not prevent both the pieces of paper and the coins from being almost worthless.”
Before you rush to burn your money or flatten your coins, the judgement notes that “because the tokens are currency, the holder of the tokens can use them as a medium of exchange and as a store of economic value. Currency has value only because of the rights that attach to it.”
So relax, your paper money does have value. However, if you are concerned about what high inflation may do to the value of cash, you may wish to consider storing your surplus “economic value” in the form of legal tender bullion coins – sorry, tokens.
Of course, I can’t guarantee that precious metal prices will not fall, but at least you will always be able to use the coins to turn a stiff screw or two! 
By B.P.T., on October 7th, 2010
The monthly Chain Store Sales report will be released today. This report on sales in chain stores gives a look at the health of stores that make up about 10% of all retail sales.
The Monster Employment Index for September was released today, and the index moved up 2 points to a value of 138, which was an increase of 16% from last year.
At 8:30 AM EDT, the U.S. government will release its weekly Jobless Claims report. The consensus is that there were 450,000 new jobless claims last week, which would would be 3,000 less than last week’s number.
At 10:30 AM EDT, the weekly Energy Information Administration Natural Gas Report will be released, giving an update on natural gas inventories in the United States.
At 3:00 PM EDT, the Consumer Credit report for August will be released. The consensus estimate is that there will be an decrease of $4 billion in the consumer credit available from July to August, which would be the seventh month of declines in a row.
At 4:30 PM EDT, the Federal Reserve will release its Money Supply report, showing the amount of liquidity available in the U.S. economy.
Also at 4:30 PM EDT, the Federal Reserve will release its Balance Sheet report, showing the amount of liquidity the Fed has injected into the economy by adding or removing reserves.
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By Trace Mayer, on October 6th, 2010
What is absolutely required during an interaction with Customs? … Like muscles as you flex your rights they become stronger; so use them or lose them.
This article is mainly just some very helpful hints with some slight economic analysis. Being an entrepreneur who enjoys creating wealth and building from scratch I have a special empathy for those engaged in similar work. One entrepreneur that has added value to my life is Scott Jordan, CEO and Founder of Scottevest. As I traveled almost 100,000 miles in 2010 I found my Scottevest incredibly helpful and it has saved me plenty of money from the evil airline’s ridiculous fees. Of course, when there are lucrative profit pools the entrenched interests will almost always by hook or by crook attempt to stifle innovation and advancement but in this case there some helpful travel tips we can apply to save time and money.
It’s still true: Delta Airlines sucks.
SCOTTEVEST ADVERTISEMENT DENIED
Years ago I decided to never fly Delta again. Then somehow I ended up with a free Delta ticket so I used it. It’s still true: Delta Airlines sucks. So when I received an email from Scott Jordan on 2 October 2010 I figured I should lend the fellow entrepreneur a friendly voice.
The New York Times reported that “the fee frenzy, which generated nearly $8 billion for American carriers last year.” Scott’s awesome travel clothing help owners ‘Beat The System’ so when he attempted to advertise in the airlines magazines the advertisement was canceled at the last moment. Seriously, what did Scott Jordan expect would happen when he advertises a value-adding product that attacks an extremely lucrative profit pool? Even worse Scott’s media agent pleaded with him to not press the issue. I am not sure the media agent gets it.
But it seems Hap Klopp, founder of North Face and chief adviser to Scott, gets it because he hit the nail on the head with an excellent economic analysis. “Scott, this is classic David vs. Goliath. Their reaction shows how touchy of a subject baggage fees are for them. You’ve found a way for everyday people to get around their crazy policies, and you just put a fork in their cash cow.” Forutantely, Scott took Klopp’s advice and remarked, “Hap’s comments solidified it for me: this was a big story, and the cat was out of the bag.”
If you have a quality product that adds value to the customer then in the Information Age with social media, blogs, YouTube, etc. the story will get out. The economic concept of creative destruction was first introduced by the Austrian School economist Joseph Schumpeter in his 1942 book Capitalism, Socialism and Democracy. For those that have not noticed, the newspapers evaporated through creative destruction so the era of screwing your customers and getting away with it because the media gatekeepers will protect you is over. And when it is a David vs. Goliath story then almost everyone roots for David, especially when David is engaged in creative destruction in an attempt to save them money on baggage fees!
Time is the most valuable commodity.
THRIFTY RENT-A-CAR’S SLEAZINESS
Another thing the airlines are often doing is bundling products and making it difficult to discern what fees actually apply and which goods or services are actually mandatory. Airlines love to privatize the gains and socialize the losses to their customers which are often incurred by wasting your time through delays, cancellations, bumps, etc. The rental car companies seem to play a similar game.
For example, I was recently in Dallas, Texas meeting with a few friends who run various hedge funds. At the airport I went to rent a car and they wanted to charge $150 for what I had earlier researched on the Internet to cost about $50. Not being able to book at the counter at $50 I booked through my iPhone and then had to wait about 20 minutes, which was worth it to starve the vampire squid, for the reservation to get into their system. When I went to pick up the keys the desk agent asked me, “And which type of insurance do you want, minimal, medium or comprehensive?”
Because she did not mention none and because it is reasonable to assume that insurance may be required in Texas and because ‘minimal’ implies the least amount required therefore I replied, “Minimal.” She then said the total would be $120. This was surprising because the Internet reservation was for about $50 and said all I needed to provide was a driver’s license and the reservation.
So I responded, “Is the insurance required?” At first she dodged the issue by trying to explain probabilities, risk and reward. Seriously, as an investor who calculates probabilities of risk and reward for a living do I really need that advice from a desk agent who has probably never taken a statistics class and has a conflict of interest? So I responded with a little sterner tone of voice, “Is it required?” She said, “No.” and I responded, “Then no insurance, please.”
I get annoyed when people, institutions and organizations waste my time pitching me products I do not need and add no value to my life. After all, time is the most valuable commodity. Vacations are great when you take the airlines, car rental companies and hotels with their $8 bottled water and $15 potato chips out of the equation. Guess what the car company’s lucrative profit pool must be? Yep, insurance! So keep that in mind next time you rent a car and Thrifty’s was very clean and ran well.
SCOTTEVEST REVIEW AND HELPFUL TRAVEL TIPS
Many people have asked how I pack so light and efficiently. Nothing is worse than going on a trip and having your airline suck your luggage into the engine. On one trip to Guatemala one of my travel companion’s luggage was lost and seemed to always be a day behind us as we traveled around the country. Very annoying for them! I no longer check luggage and it has made an tremendous difference. Eliminate all but the essentials and you will have a lot less stress on your trips.
After doing a ton of research and getting plenty of products which were a waste I have winnowed down my travel infrastructure to: (1) Rick Steve’s Convertible Carry-On, (2) Scottevest Essential Travel Jacket, (3) Eagle Creek Pack-It Garment Sleeve and (4) a few Eagle Creek cubes of varying sizes. With this infrastructure I have ample space for either a weekend or a six weeks to either Europe or Argentina.
There are a few other reasons I really like my Scottevest. In the morning I like to take a walk in the brisk air. The Scottevest has pockets for both my iPhone and iPad which keeps them out of my hands as I search for a place to read. It is a great tool for my morning routine. So from one entrepreneur to another; I hope Scott Jordan appreciates this free review.
Like muscles as you flex your rights they become stronger; so use them or lose them.
HELPFUL TRAVEL TIPS FOR CUSTOMS
Casey Research is having another investment conference at La Estancia de Cafayate on 20-24 October 2010 and I hope to see you there. What that means is another international trip and another interaction with Customs which seems like just another case of government sending ‘hither swarms of officers to harass our people, and eat out their substance.’ Responsible law abiding citizens need to be wasting neither their nor customs official’s time by even talking to them or answering their questions because this results in increased spending and drives up the federal debt.
Thus, when I came across Paul Karl’s extremely popular article, even being discussed on The Economist, about being detained by Customs for refusing to answer their questions my interest was immediately sparked and I even began to formulate the question: What is absolutely required during an interaction with Customs?
So my co-author of How To Vanish, CA attorney Bill Rounds, and I began to research the issue. The result of our work is this handy tab which fits right in your passport with the applicable binding law outlining your rights and tips on how to politely apply them. I hope you find it helpful. To help save the customs officer’s time feel free to print this PDF and distribute it widely, perhaps to everyone on your plane. Remember, like muscles as you flex your rights they become stronger; so use them or lose them.
For data I find Dropbox and Truecrypt a very effective combination.
It is always about the money.
CONCLUSION
The Internet is changing the way news, products and information is distributed. Gatekeepers can no longer protect the lucrative profit pools by refusing to discuss the issues or actively trying to prevent the market from learning about value adding products. As a result, entrepreneurs with good products that add value to the customer have a greater chance of penetrating the marketplace and this leads to David having more leverage against Goliath.
As the greater depression continues and intensifies coupled with the evolution of the Information Age it will be even more critical for companies to truly add value to their customers. Those that do not will encounter swift and powerful damage to their brands as sleazy business and governmental practices are quickly brought under scrutiny. Individuals are getting extremely tired of this crap, the depression is making disposable income tighter and some are even intentionally fighting back with the misumer movement to silently and peacefully starve the vampire squid. After all, with the civil rights movement it was not the protests but the boycotts that caused massive social change. It is always about the money.
For example, Dollar Thrifty Automotive Group made $45M in 2009 compared to their $340M loss in 2010. Delta lost $8.9B in 2008 and $1.2B in 2009 for a reason. Perhaps these sleazy companies and governments should try adding more value to the customers? Better yet they can go bankrupt or cease to exist and be replaced by fresher companies that to add value to their customers and have a good culture. No one will miss them.
So please, tell me how you feel about the airlines, car rental companies, customs and please contribute any helpful travel tips!
By Ajay Shah, on October 6th, 2010
There is a lot of talk about capital inflows, rupee appreciation, concerns about export competitiveness, etc. It made me pull up the data to look at what is going on. The graph shows the nominal and real effective exchange rate of the rupee. The source is the BIS: the best computation of these indexes presently available.
 |
| Real and Nominal effective exchange rate of the Indian Rupee |
There is one constraint of this data: it ends in August. The picture shown there is rather benign. Over the five year period shown in the graph, modest REER fluctuations are visible. Over the recent period of roughly a year, where RBI intervention has subsided, it isn’t clear that something dramatic shifted.
And, I like to always remind everyone that the REER is a rather weak way to think about export competitiveness, so even if there was a sharp rise in the REER, we’d have to be cautious in rushing to conclusions about what it is saying.
The people making the case for currency trading by RBI have to cross four hurdles:
- Is there a crisis on export competitiveness that is rooted in exchange rate misalignment?
- How can controlling nominal things (the exchange rate) influence real things (the real rate)?
- Given a choice of using the tool of monetary policy for the purpose of delivering low and stable inflation (which benefits every citizen of India), versus the purpose of delivering some modification of the nominal exchange rate (which benefits a sectarian interest at best), what is the best choice?
- How can RBI be held accountable to maximise the interests of the people of India, if it is to do active trading on the currency market? What checks and balances, and what accountability mechanisms, need to be put into place in order to run a trading room in the government sector?
It is not so long ago (until early 2007) that RBI was actively trading in the currency market, championing the cause of India’s exporters, and we saw how much trouble it got them in. In some ways, our inflation crisis today is the legacy of the unprecedented credit boom of the Y V Reddy years. Today’s India is only more open than the India where Y V Reddy’s regime tripped up on currency trading, so the challenges in embarking on that path today are even more daunting.
By B.P.T., on October 6th, 2010
The Mortgage Bankers’ Association purchase index was released at 7:00 AM EDT, and there was a week to week increase of 9.3% in the Purchase Index and a week to week decrease of 2.5% in the Refinance Index.
The Challenger Job-Cut Report was released at 7:30 AM EDT, and it showed that there were 37,151 layoffs in September, which is about 2,500 more than the number of layoffs that were reported in August.
At 8:15 AM EDT, the ADP Employment Report will be released. Investors will be watching this number to get advance notice on the state of the job market in advance of the government’s report on Friday.
At 10:30 AM EDT, the weekly Energy Information Administration Petroleum Status Report will be released, giving investors an update on oil inventories in the United States.
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By Trace Mayer, on October 5th, 2010
I am grateful that a reader recently suggested to me the idea for this post about Anthony Weiner and I will carry over his sentiment. One thing I find particularly funny and stupid is when people with no marketable skills, ability to generate wealth, who lack prognostication skill and have a terrible record of managing their personal situation think they should babysit those with marketable skills, the ability to generate wealth, who are skilled prognosticators and have an excellent record of managing their personal situation.
All I can think is, seriously, you have rocks for brains making idiotic decisions resulting in stupid consequences and yet you want to tell me what to do? I suppose the only reasonable response is: Leave me alone and don’t touch my stuff, you idiot.
ANTHONY WEINER BEARISH ON GOLD
On 27 May 2010 I wrote about the Congressional Critter Anthony Weiner who decided to attack Glenn Beck and Goldline. While I did not defend Beck or Goldline’s assertions, I would use a different bullion dealer like Apmex with lower premiums, what I did defend was their ability to engage in consensual transactions with voluntary customers at mutually agreed upon terms unlike Mr. Weiner’s congressional salary which he extorts through violence from federal taxpayers.
On 18 May 2010 CBS News reported,
Weiner accused Beck and other conservative spokespeople (among them Mark Levin and Fred Thompson) of using “their shows to prey on the public’s fears of inflation and socialist takeovers while actively promoting the purchase of gold coins as insurance against this purported government overreach.”
WHAT ANTHONY WEINER BOUGHT INSTEAD OF GOLD
Assuming Anthony Weiner actually has excess capital, inquiring minds may want to know where he allocated it instead of gold. Thanks to Open Secrets we can easily access the Anthony Weiner 2009 financial disclosure form. Due to the form being out of date and containing generalized amounts we will have to estimate his actual financial position. It appears he had about $170,000 of net worth with about $12,500 of credit card debt. Mr. Weiner owned 3M (MMM), CR Bard (BCR), DOW Chemical Co. (DOW), McGraw Hill (MHP), Questar (STR), Rowan Companies (RDC), Sony (SNE), Teco Energy (TE), Zimmer Holdings (ZMH), Calpine Co. (CPN), Hewlett-Packard (HPQ), Micron Technology (MU), New York Times (NYT) and Wells Fargo (WF). I warned against buying McGraw Hill or the New York Times, Hewlett-Packard and Wells Fargo.
Although unlikely, we will assume on 31 December 2009 that his portfolio was worth $170,000, or about 154 ounces of gold, and equally allocated among the 14 companies listed on his disclosure form. From 31 December 2009 until 2 October 2010 this shows a decline in Mr. Weiner’s net worth of about $10,398 or 6.1%. But if we are consistent with RunToGold’s practice of using gold as the numeraire, then the loss is even more staggering going from 154 to 121 ounces of gold or about 21.2%.
So Mr. Weiner, how is not buying gold working out for you? Scoreboard. Look, losing over 20% of your net worth in a mere 10 months may be suitable for you but it is not suitable for me so leave me alone, don’t touch my stuff and stop trying to babysit me because obviously you are completely incompetent at even babysitting yourself.
FINANCIAL PROFESSIONALS
Of course, Mr. Weiner is not the only one. After seeing the record and the numbers I chuckle at some of the Establishment ‘financial professionals’. For example, in January 2009 on my article ‘How the Treasury Bubble Will Burst and Why‘ at Seeking Alpha I received a comment from Alan Brochstein, CFA of AB Analytical Services and fellow Gold Standard Contributor who provides analytical services for hire. He said, “Trace, sorry, but this makes absolutely no sense…” This is not surprising considering his 8 Dec 2008 article, when gold was about $772 per ounce, ‘Own Gold? Time to Fold‘ where he stated, “Gold remains a sucker’s bet…”
ANTHONY WEINER’S DAILY SHOW APPEARANCE
On John Stewart’s Daily Show Mr. Weiner makes an incredibly funny comment, “Yeah, but considering that I don’t have a lot of marketable skills I am like one of the jobs Obama created so I get to keep doing this. (1:41)” Well, I guess it would be funny but it isn’t. Fortunately, it appears Mr. Weiner is not intentionally exacerbating the greater depression but just doing it through sheer stupidity and lack of marketable skills, the inability to generate wealth and a really bad prognostication ability which has led to a massive decline in his net worth.
CONCLUSION
As the United States moves into election seasons keep in mind that almost all those on the ballot, in federal, state and local elections, are like Mr. Weiner. Not only are they unable to adequately manage their own financial and personal circumstances but in almost all cases they lack marketable skills and foresight. Like Mr. Weiner their portfolios when measured in gold have sustained heavy losses.
Unfortunately, misery loves company and they want to extend the pain to those with marketable skills, the ability to generate wealth and have properly prognosticated which has resulted in increased net worths. So protect yourself from these incompetent looters and moochers which is easier to do at the state and local level through state income tax optimization. By all means, please leave your opinion in the comments about these Congress critters and other looters and moochers!
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