Wednesday, March 06, 2013

An old story, updated

SOCIALISM
You have 2 cows.
You feel compelled to give one to your neighbor.

COMMUNISM

You have 2 cows.
The State takes both and gives you some milk.

FASCISM

You have 2 cows.
The State takes both and sells you some milk.

BUREAUCRATISM

You have 2 cows.
The State takes both, shoots one, milks the other and then throws the milk away.

TRADITIONAL CAPITALISM

You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.

VENTURE CAPITALISM

You have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company.
The annual report says the company owns eight cows, with an option on one more.

AN AMERICAN CORPORATION

You have two cows.
You sell one, and force the other to produce the milk of four cows.
Later, you hire a consultant to analyze why the cow has dropped dead.

A FRENCH CORPORATION

You have two cows.
You go on strike, organize a riot, and block the roads, because you want three cows.

AN ITALIAN CORPORATION

You have two cows, but you don’t know where they are.
You decide to have lunch.

A SWISS CORPORATION

You have 5,000 cows. None of them belong to you.
You charge the owners for storing them.

A CHINESE CORPORATION

You have two cows.
You have 300 people milking them.
You claim that you have full employment and high bovine productivity.
You arrest the newsman who reported the real situation.

AN INDIAN CORPORATION

You have two cows.
You worship them.

A BRITISH CORPORATION

You have two cows.
Both are mad.

AN IRAQI CORPORATION

Everyone thinks you have lots of cows.
You tell them that you have none.
Nobody believes you, so they bomb the crap out of you and invade your country.
You still have no cows but at least you are now a Democracy.

AN AUSTRALIAN CORPORATION

You have two cows.
Business seems pretty good.
You close the office and go for a few beers to celebrate.

A NEW ZEALAND CORPORATION

You have two cows.
The one on the left looks very attractive.


A CANADIAN CORPORATION 
You have two cows.
They are indistinguishable from American cows.
You describe with typical Canadian modesty how much better yours are.

A GREEK CORPORATION
You have two cows borrowed from French and German banks.
You eat both of them.
The banks call to collect their milk, but you cannot deliver so you call the IMF.
The IMF loans you two cows.
You eat both of them.
The banks and the IMF call to collect their cows/milk.
You are out getting a haircut…

Tuesday, March 05, 2013

MSM: Mostly Symbiotic Media

Maybe it’s because I am now a cranky old man (You kids! Get off my lawn!!) but it seems to me that traditional media (broadcast and print) are in shameless symbiosis with the institutions they cover. You scratch my back with a story angle, I will give you access. This goes for politics, science, sports, business, whatever. It seems so shallow and selective, and it’s because those media live in fear due to their shrinking numbers. They have a lot to lose.

On the outside, where we can pursue our own interests and share what we learn as we go, theories can be test driven, stats can be crowd-sourced and analyses can be debated in virtually real time. The Mostly Symbiotic Media can’t touch that. They are left with arguing from authority.

I am waiting for one brave newspaper chain to attack the climate change cabal. The Intensely Political Climate Catastrophists of the IPCC use arguments and tactics that would get business leaders thrown in jail but which seem to get a free pass when used in the service of "saving" the planet. 

One simple example: we hear about the corrupting influence of oil money as it applies to so-called "climate deniers" but where is the investigative reporter who shows how much money is sloshing around the alarmist community, and asking what the impact might be? 

In another example, sports journalism in hockey is in danger of being left behind by advanced statistics regarding player performance in various on-ice situations. The stats guys (here is just one example) are outside the mainstream and their work is dismissed as irrelevant, yet the patterns that these analysts identify are relevant and persistent from season to season.

Friday, March 01, 2013

Buy when everyone else is selling

I follow the price of gold because gold is insurance against what governments do, debase their own currencies so that voters can be bribed with their own money.

In the long run, an ounce of gold has on average been the same as the cost of a really good suit of clothes.

In the short run, the madness of crowds sends the price of gold gyrating compared to other commodities. The chart below goes crazy around the time the US decoupled its currency from the gold standard in 1971 but the increasing volatility also coincides with various new forms of leveraged speculation in both wheat and gold.
You can't get rich buying insurance, but you may be able to avoid getting poor when the event you are insuring against actually happens.

And if you are buying insurance, why not buy it when it is on sale? Central Fund of Canada trades with the symbol CEF.A. All that CEF.A holds is a few billion dollars worth of gold and silver. When everyone wants gold and silver, there is a premium to buy CEF.A, often between 5 and 9% of the value of the bullion in the fund. Last night, the premium was 0.0%. Yesterday's figure can be found by scrolling down to Premium/-Discount at this link, which is live, so whenever you are reading this you are seeing last night's figures, not Feb 28 2013.

This is not investment advice, just an observation of a published fact.

Sunday, February 03, 2013

The Lessons of History (2) -- Is Progress Real?

This book -- The Lessons of History -- by Will and Ariel Durant, is well worth reading. It challenges me with historical perspectives that frankly I had no idea of and would not have troubled myself to go and get.

Today's question: Is Progress Real?  And of course, one must first decide "What is progress?" 

The Durants define progress as "the increasing control of the environment by life" and then narrow it to the individual by asking whether the average man has increased the ability to control the conditions of his life.

We may be more comfortable than ever, live longer than ever, travel further than ever. And yet, and yet...who here is going to say we have greater control than ever? 

I think we are more dependent and more naive than our parents. That's not progress.  




Monday, January 28, 2013

The Lessons of History (1)

Will and Ariel Durant spent over fifty years completing the critically acclaimed series "The Story of Civilization," and were awarded the Pulitzer Prize for general non-fiction in 1968. 

Their short and charming publication "The Lessons of History" extracts lessons and insights from their lifelong research and presents them in highly readable essays.

A few sample chapter titles: 
  • History and the Earth
  • Morals and History
  • Character and History
  • Economics and History
  • Socialism and History
  • Government and History
  • Growth and Decay
The Economics and History chapter touches on how wealth becomes concentrated, and then distributed, over the centuries. Here is the closing paragraph:
We conclude that the concentration of wealth is natural and inevitable, and is periodically alleviated by violent or peaceable partial redistribution. In this view all economic history is the slow heartbeat of the social organism, a vast systole and diastole of concentrating wealth and compulsive recirculation.
That rings true.

Sunday, January 27, 2013

If someone told you the black line dots drive the red line...

The blue vertical lines are temperature extremes by year, in the US, since 1895.
The red line is the average temperature by year, in the US.
The black dots are atmospheric CO2 concentrations since 1895.

It's been hot. It's been cold. It's been mild, in between. 

Question 1: what's the trend? (please explain why you picked the starting point that you picked)

Question 2: does it look to you that CO2 levels are driving temperature up?

Question 3: does it look to you that CO2 levels are creating more temperature extremes?

*

Saturday, June 23, 2012

How to remove an Alpine 7814 Head Unit

I am no mechanical genius, but I love cars.

The oldest vehicle in the current Halfwise fleet is a 1984 Mercedes 280e, whose original Becker Europa radio was removed long since, replaced by an Alpine 7814 single CD player with the year 1994 on the back.  

No offense to Alpine, but in the interests of returning this vehicle to its original state a Becker Europa is required, and one has been obtained.  So the Alpine had to come out.

Easy?  Well, not evidently so.  The faceplate comes off just by pushing a button, but then what?  There are no obvious screws behind the faceplate.  The sides?  Access from the sides might involve dismantling the dashboard, which is not the way Mercedes would do things 30 years ago.

Remove the Alpine's faceplate and a fairly featureless expanse of plastic stares back. Of course it's featureless -- it was designed to look uninteresting to petty thieves.  

Some say the featureless plastic can be pried off.  I say that depends on whether you can get a screwdriver behind its edge, 3/8" inside the dashboard.  I could not.

But where finesse fails, brute force may triumph. I grabbed the bottom lip of the plastic with a blunt pair of pliers, and pulled.  The faceplate came off, a bit.  More importantly, the whole radio pulled forward and started to slide out.

Some days, there is less to something than meets the eye.

Sunday, April 29, 2012

Evocative and not seen before

Shots of New York City, released from their archives recently.  Thanks, SDA!

Monday, April 02, 2012

China develops a cold...or is it worse than that?

No one will confuse me with a market expert.  A wise investor would look at my record on this blog and conclude that doing exactly the opposite of what I suggest is a high-probability way to success. You need look no further than the March 15 post about SSL and SND; no sooner had I published it, SND fell and SSL set out for new record highs.

Undaunted, I present you with this from China.

Europe is an important customer of China. Europe is unhealthy.

China turns Australian and Canadian coal and iron ore into goods that it sells globally. I can't look at the chart above and think that it portends increasing demand and rising commodity prices.

Thursday, March 15, 2012

This is starting to look interesting

One tiny segment of the stock market carries the label "Royalty Companies."  No, you don't get to buy a share of Buckingham Palace. You get to buy a share of a company that finances the development of mines, oil wells and other resource developments in return for a piece of the action.

The appeal of Royalty Companies is simple.  They put a boundary around the kinds of risks that an investor in these areas is exposed to.  Country risk?  Lower if the Royalty Company invests in several jurisdictions.  Exploration risk?  No, they invest in developments where the exploration has already delivered proven results.  Production risk? Some, but diversified.  Price risk?  Well, yeah, some price risk, but many of the deals actually hedge price risk in some way.

Who are these companies?  In Canada, Silver Wheaton (SLW) is not the oldest but is a great example.  Royal Gold, Franco Nevada are other well-known, reputable firms.  These guys are listed on major exchanges and provide interesting exposure to precious metals prices.  And when precious metal prices take off, these firms leverage the gains.  After all, they have no operating costs to worry about, the way actual miners do.

One junior firm that caught my eye a couple of years back is called Sandstorm.  Sandstorm operates a Precious Metals firm called Sandstorm Gold (SSL on the Canadian Venture Exchange) and a non-Precious Metals firm called Sandstorm Metals & Energy (SND on that same exchange). The brains behind Sandstorm used to be the CFO of Silver Wheaton; he knows whereof he speaks.

Sandstorm has come to the attention of some reputable investment analysts. I am not one of them and this is not investment advice.  Don't lose your mind here.  But I do own shares in both SSL and SND.

Here is what I find interesting.  Both companies have been rising for the past months, but the ratio between SSL and SND may have stopped rising.  If you were to buy just one of the two, which would you buy?  For the past six months, the SSL buyers would have laughed at the SND buyers.  Now it looks as if it is the turn of the SND buyers to begin to laugh. The ratio is just dropping below the blue 50 day moving average line.  Stay tuned!


Tuesday, March 13, 2012

An older garage door opener

Our ancestors would marvel at our big conveniences (what would St. Augustin have said if someone had shown him a car?) but they might laugh at our little conveniences.  A garage door opener, for instance.

So what.  They should get with the times or stay where they are.  The reactions of the ancients don't matter much.  But what does matter is when last generation's technology still works but is no longer supported.  That is just waste, and it bugs me.

So in this house that we recently acquired is a first class, smoothly operating, ultra-reliable Canadian-made Steel-Craft garage door opener.  Two, actually, dating back to about 1983, but only one remote control.  And a garage door opener without a remote is actually an anti-convenience, because you have to go around and inside the house to open the door that you could have opened, if it was strictly manual, by standing in front of it.

Steel-Craft uses components from LiftMaster, one of the big two surviving giants in the business. (The other is Genie, which I have no recent experience with).  LiftMaster has been in business for over 100 years, and have had to keep up with the times. A LiftMaster garage door opener from the late 1970s relied on a remote control that had 9 little switches in it.  As long as you set your 9 switches in different positions from anyone else in the neighborhood, your opener would not open anyone else's, and theirs would not open yours.

Then some perpetrator figured out that with a 315Mhz scanner, he could lurk around neighborhoods and either steal codes as people used them, or work through the fairly small number of combinations of switch settings.  And when the owner of a house with an attached garage was away, the perp would open the garage, enter it and get into the house through the most vulnerable entrance.

Modern remotes use a rolling code system that makes it almost impossible to steal codes.  And they don't have any way of activating that quaint 9 switch system.  If you have a pre-1984 garage door remote from LiftMaster, Sears Craftsman, True Value, True Guard, Garage Master, Master Mechanic, Home Hardware (Canada), Steel Craft, Access Master, Do-Its, Anaheim Door, or Garage Door of Indianapolis, chances are that remote was manufactured by a company called Chamberlain and it is near the end of its commercial life.  These are not supported any more and their replacements are getting harder to find. 
My one original remote is a Chamberlain 51LC.  I need another one for the other door.  Know what?  You can search the internet all day for replacement remotes and not find a reference to a 51LC.  Unless, of course, you check in with Halfwise, who is here to tell you that a LiftMaster 361LM will replace a 51LC.  So will a 362LM, and it comes with two buttons and two sets of 9 coding switches, one for each door.  Got 3 doors?  Get a 363LM. 

Sunday, March 04, 2012

9-5-2 -- What a great 3 handed card game!

It is fun to play cards, especially when the game involves both luck and skill like the trick-taking games in the Bridge/Whist family.  

What do you do when there are only three people around?  Inviting the cat to play is not always satisfying...
They get bored so easily, don't they?

We are big fans of the game 9-5-2, also known as Sergeant Major.  And through the magic of the Internet, we have access to a couple of versions of the basic rules, along with some optional rules that come up as people experience the ups and downs of the game and want to introduce something to make the game even more enjoyable.

A quick overview: 9-5-2 is a game for 3 people, played with a normal deck of 52 cards.  Each player starts with 16 cards, and there is a kitty of 4 cards set aside during the deal.  The dealer has a target to take at least 9 tricks; the player to dealer's left must take at least 5, and the third player must take at least 2. 

If you surpass your target, you are rewarded on the next hand with the privilege of passing low cards from your hand to the players who failed to make their targets, and they must return to you the highest card they have in that suit.  This exchange means the rich tend to get richer as the game goes on, and the misery of losing is compounded by having to endure the humiliation caused by smirking opponents passing you their 2s and 3s so that you can bless them with your precious aces and kings.

We add two local rules to even things out.  On the very first hand of the game, we play 9-4-3 instead of 9-5-2.  In the first hand, having to get 5 is too hard, and having to get 2 is too easy.  So it's 9-4-3 for the first hand then 9-5-2 after that.

Our second rule is contrary genius.  Let's say that you are the dealer this hand, and you were down 4 tricks going into your deal.  You are going to get 4 pretty low cards and give away 4 pretty high cards.  The rule is...you have the option of calling "Low No Trump" where the lowest card of the suit led wins the trick.  A person can do pretty well with a hand that is total crap by normal standards.  The "Low No" rule does not show up in the rules I linked to above.

The result?  Better mental health, better relationships at the table.  What a great game.






Thursday, March 01, 2012

I'm a "Client." Yikes

The Halfwise household has moved from Alberta to British Columbia.  We have to get driver's licenses, and new plates for the cars, and insurance and so forth.  It's mostly government-run here on the coast whereas in Alberta the agencies that handle this are strictly private.

So there we sat clutching our various Alberta documents, watching the knowledgeable young lady work through the handwritten forms (in 2012) and the phone calls to someone in charge of a database somewhere (in 2012) and the questions about our driving records.  What takes 20 minutes in the privatized province next door took 2 hours.

I was asked whether I had ever had a speeding ticket in BC and I answered "probably" because I do indeed recall being pulled over somewhere in the mountains and I did not have any points on my Alberta license as a result, so it must have been BC.

She enters my Alberta driver's license data and brightens right up..."Oh look, you are already a client in our system!"  She then asked about an address which I last occupied in about 1996, which is when the speedin' deed was perpetrated.

Apparently, having violated the Traffic Act makes me a "client."  The word "client" must not mean what I have always thought it meant.

Friday, February 24, 2012

Gold to silver ratio is on the move again

The ratio between the price of gold and the price of silver is an indicator of the appetite for risk among the strange creatures who follow the Precious Metals markets.


Last year silver prices went crazy relative to gold. Instead of the previous range where gold was 60 to 80 times more valuable than silver, the ratio plunged to around 30 times more valuable.  That plunge is the main feature of the chart above.  Then in May 2011 the temporary insanity passed and the ratio started working its way back up to the mid-to-high 50s.

It looks to me that the ratio is heading back below 50.  In practical terms this means that the price of silver is rising faster than the price of gold.  Since the price of gold is also rising these days, people who own silver and stocks in silver miners are probably smiling again.

This blog occasionally points out financial ratios as curiosities, indicators that some sort of change or trend may be afoot. Don't lose your mind and think this is investment advice.

Thursday, February 23, 2012

Open letter from China to Europe...Velvet glove, iron fist

Dear Sirs/Madams,

I know you are in trouble and want China to help. I have heard your repeated calls in the media for our leaders to bail you out by buying the debt of European governments. I want to assure you your entreaties have not been in vain.

Last week our premier pledged that China will "get more deeply involved" in resolving your debt crisis. Our central bank governor tried to buoy up market confidence in the euro by vowing to continue holding your sovereign debts. Such comments came even as the international rating agencies - Moody's, Standard & Poor's and Fitch Ratings - cut their ratings for your nations because of the weakening prospects for an overhaul in Europe.

We want you to know that we are your friend in your time of need.

In fact, the ever-expanding trade ties between China and the European Union have brought us closer together. China is now the EU's top trade partner, and vice versa. So a collapse of the eurozone would also hurt China's interests. The International Monetary Fund has warned that a deepening EU debt crisis could slash China's economic growth in half this year. So we are both in the same boat.

But that does not mean you should take China's help lightly.

Yes, China has the money. Its stockpile of foreign currency, valued at nearly $3.2 trillion, is the world's largest. Yet this has been amassed over three decades of trade and built up from razor-thin profits. We are at the low end of the global value chain and we have to sweat and toil for every penny we earn. China has to export more than 800 million shirts to buy one Airbus A380.

To be frank, some of us don't understand why the rich are holding out their hands to the poor and asking for money. For common Chinese people, the wealth of your nations is unimaginable. The average monthly income of your citizens - at around $4,000 in countries such as Germany and Belgium - is 12 times that of the average Chinese citizen. The Chinese workers in the factories in coastal cities have to work 12 hours or longer each day with basically no days off, while workers in France enjoy two months of paid vacation, national holidays and regional festivals each year. If we can save 50 percent of our earnings, surely it should be possible for you to save just 1 percent of yours.

The cause of the crisis is simple: You have spent more than you earned. If we are injecting our hard-earned money into Greek, Irish, Portuguese or Italian government bonds, you should show the political resolve to clean up your own backyard. You have to stop bickering and dragging your feet over the urgently needed austerity measures. It is time to roll up your sleeves and get the job done.

And while I know that any investment has risks, I hope you will try to ensure our money does not evaporate. We have already been snared in a "dollar trap". You are not legally obliged to ensure our investment safety. But surely you don't want to be seen as luring China into a "euro trap". We have suffered huge losses from holding US Treasury bonds because of the unrestrained printing of the greenback. As Nobel Prize-winning economist Paul Krugman has pointed out, the dollar depreciation will result in losses of up to 20-30 percent of China's investment in US bonds. That's the reason we have sought to divert our investment in a basket of currencies other than the US dollar.

Perhaps now that China has shown its goodwill toward you with its chivalrous purchasing of European debts, we can expect some demonstration of goodwill from you. I think you should recognize China's market economy status as soon as possible. After all it is of no substantial significance. China is going to get the status anyway in a few years' time according to the World Trade Organization rules. Good relations are all about reciprocity.

I hope everything goes fine with you.

Yours Sincerely

The author is a senior writer with China Daily.

Saturday, February 11, 2012

Home e-mail management for rookies

Let's say you have a home e-mail account and several computers, for instance a laptop that you use a lot (including on the road) and an old desktop at home that you still use from time to time. And let's say you have a normal email account with an Internet Service Provider. You would like to keep up with your emails and not worry that some are on one machine and others are only on the other.

Oh, and you are not particularly computer-savvy and aren't likely to become any more savvy in the near future. And you use Thunderbird because it's smart, so you don't have to be.

Before this gets too autobiographical, let's cut to the chase. You have choices in how you receive your email and what happens to it after you receive it. You can make or change those choices right now on any computer that can access your email.

Scenario #1: One main machine gets and keeps all the email even if you read it first on another machine.
This is the one that I like. I want everything downloaded to my desktop. If I read it first on another machine, I still want to be able to read it on my desktop, without sending it from the laptop. Go into your email Account Settings/Server Settings on the desktop and set them to POP3. And Uncheck the box that says to save messages on the server for up to 14 days.

What happens as a result? Any message that you read on your desktop is downloaded onto it and removed from the email server. If a minute later you signed on with your laptop, there would be no messages to read.

Now go into the Account Settings/Server Settings on your laptop and set it to POP3 and Check the box that says to save messages on the server for up to 14 days, or whatever. Now, if you check email on that laptop, you have 14 days to check again on the desktop and get those same messages and store them where you want them. POP stands for Post Office Protocol. It works like this:
And you should never get a "mailbox full" error message, even if your friends send you those huge cloying powerpoint shows with the new age music and sunsets over camel caravans.

Scenario #2: you never know where you are going to be and you want all your email available to all your machines all the time.
The email provider's POP3 server is not for you. You want to be using their IMAP server, which you get to select in Account Settings/Server Settings. IMAP servers don't fully transfer anything to your laptop or your desktop or your mobile, they just leave all the files on the IMAP server and let you read copies, create folders and organize stuff, up to the limits of your email account. Sooner or later you will run out of room and have to get files off the IMAP server and onto some local storage. But as long as you are within the storage limits that you paid for with your email provider, the IMAP approach will be the best fit for you. IMAP stands for Internet Messaging Access Protocol. Here is how IMAP works:

Scenario #3: you have multiple email accounts, multiple machines and a need for everything all the time, everywhere.
You could forward some of your email accounts to gmail and use it with POP3 or IMAP, depending on your preferences. But your responses to the emails would go out from your gmail account, which you might not want. So then you need a service like Easy-Email which for a modest fee will handle all this stuff according to your specific instructions, regardless of how many computers and email accounts you are burdened with.

Thursday, February 02, 2012

Natural Gas vs copper




North American prices for natural gas are getting hammered. Copper, by comparison, is holding up well. Here is a chart of the ratio of Natural Gas Price to Copper Price, covering the last 3 years.

Copper price is a global indicator of economic conditions. Its current strength indicates that global demand remains firm. Natural gas prices are more regional; North American gas prices reflect the new shale gas supplies and a shortage of LNG export facilities. Recall that just 4 years ago, LNG was going to be imported to North America, not exported from North America. That Peak Oil theory has some more waiting to do, perhaps...

Despite the low prices of gas, it is still not cheap to buy the shares of natural gas producers. Here is a chart of Altagas, formerly a Canadian Energy Trust.
What's the message from all this? Hell if I know, I am no investment guru. But gas prices are going to have to go up, sooner or later. And the shares already reflect that. Plus, supplies are being held back because it's not worth producing them. Next, exploration slows down. Eventually prices will rebound. Then the commodity pricing cycle repeats.

PS: Aren't Metals.com and Stockcharts.com amazing?

Thursday, January 26, 2012

PayPal remembers, even if you don't want to...


Here is a common question on the Internet:
"How do I delete old shipping addresses from PayPal?"

Answer: You can't. You can spend hours trying to figure out how.

Then call PayPal, and once you get through to a human being, THEY can delete old addresses, but you can't. Seriously.


You can add addresses. You can't delete them. And every stale address that stays there has a chance to be used by mistake when something gets shipped. Everyone that you have ever sent anything to is listed right there, perhaps to your present dismay or embarrassment.

It gets better, at least, it gets more intense. If you link PayPal with its parent company eBay, all those people and addresses from your past show up as eBay shipping addresses too.

And no, there is no delete button that you can depend on.

Fail.

Tuesday, January 24, 2012

This might not be a good sign...


The Baltic Dry Index reflects the demand for shipping. Someone just put a hole in it.

Saturday, January 21, 2012

Inflation? Deflation? Both?

Every great power succumbs to the temptation to debase its currency. The rulers of Rome, China, Persia, Great Britain, Germany, and the US have each, in their time, seen fit to print money at a rate that outstrips the growth of their economy. So has every country whose politicians control its treasury, from Argentina to Zimbabwe in this century alone.

The inevitable result is a loss in the purchasing power of the money of the realm. Inflation.

Every consumer, individual or corporate, would like to have more money at his disposal than he currently possesses. There are three ways to do this besides earning it: beg, borrow or steal. Setting aside begging and stealing, we can focus on borrowing. A wise man once observed that "every loan is paid, usually by the borrower and the rest of the time by the lender." (If that wise man had been cynical he would have added "or the taxpayers of future generations").

When money is loaned into existence, everyone feels richer. The lender expects to get repaid with interest, and counts his loan as an asset. The borrower has the use of more money than before, and spends the money to satisfy his needs.

But when loans can not be repaid, that sense of wealth is replaced by something approaching despair. And the money supply (by many definitions) can be seen has having shrunk. Remaining money rises in purchasing power. Deflation.


Let's look at how this translates to real life in 2012. In the US, home prices have tripled from the mid 1990s to 2007, then dropped to merely double their 1996 levels. The function of housing did not triple in value, just the price.

The US Dollar held its value as measured by the USD index, so in terms of one paper currency vs another, nothing much has happened. But if you had sold your house in 1996 and taken the cash and buried it, you would have lost 2/3 of your purchasing power 11 years later. Inflation. Had you been smart enough to sell your house in 2007 and buried the cash, you would have gained 50% in housing-related purchasing power. Deflation.
Real economists will protest, if they get this far, that I have grossly oversimplified how money works. I agree. The point I am striving to make is that things we borrow money to acquire rise in price if money is easy to borrow, and drop in price if money is hard to borrow. The value (utility) of those things does not change, just the price. From the perspective of money, a dollar is worth more after deflation than after inflation.

What about things that we do NOT beg, borrow or steal to acquire? If you need a loan to put food on your table, you are in trouble (and you are probably not reading this, nor do you need me to tell you that you are in trouble). Things we buy with cash rise in price when currency is debased. "What this country needs is a good 5 cent cigar" is a familiar phrase first heard in the 1870s. Cigars are consumables, and their intrinsic value doesn't change much. But their price does.

What does all this mean in 2012? Deflation AND Inflation.
  • Expect a continued drop in the price of things that people borrow money to buy, because credit has had its bubble and is collapsing
  • Expect a continued rise in the price of things that people pay for with cash, because the value of cash has been debased for decades and is still being debased

Thursday, January 19, 2012

Abundance vs Scarcity

Lots of changes these days in the Halfwise household: my wife and I have relocated, she has retired from paid employment, I am cutting back my hours, and we will bring her mother under our roof.

When we examine the trade-off of time for money, we likely come to different conclusions at different stages of our lives. When I was starting out, it was "give me all the work you can." I had lots of time, not much money, and maximizing income was what work was all about.

Since then, life has taken interesting twists and turns, some of which were lucrative and some of which were damned expensive. I have lived lean, I have lived fat. Fat feels more comfortable.

As of a few days ago we have relocated to live on an island, with arcane rules for recycling (milk cartons can go in to a compost bin with dirty kleenex and coffee grounds, but glass jars must be spotless before they go into their recycling stream). I can see how someone living here all their lives would come to believe that scarcity requires rules, imposed by an outside authority. The west coast of North America seems to spawn zealots, more than willing to impose views that nature must be protected from mankind.

To a degree, this viewpoint has merits. People can be cruel, greedy and thoughtless. Free markets do not immediately punish these behaviours (but in the fullness of time what goes around comes around).

Today is the morning after a US decision to kick the can of Keystone Pipeline approval down the road. Opponents of the development, apparently unburdened by reference to any maps of existing pipelines, predicted dire consequences of adding a pipeline to the US landscape. "No big deal" implied Canadian politicians, and turned their attention to an alternative, the Gateway Pipeline that would take oil to the west coast for export.

There is no scarcity of oil. There is a scarcity of common-sense acceptance that oil leads to wealth that is essential to society, to education, health care, highways and arts programs.

There is no scarcity of technology, that makes the transportation of oil by pipeline a manageable risk. There is a scarcity of perspective that enables the general public to recognize that risk accompanies everything we do, including choosing to delay activities that create wealth.

There is an abundance of opinion, including this trivial blog posting. But there seems to be an abundance of entitlement amongst people who are both ill-informed and unelected, that their precious opinions must be respected, not just endured.

Social progress requires the freedom to express strong opinions on all sides of issues. From the resulting debate emerges an alternative that likely would not even have been considered otherwise. This is how we advance.

Pipeline opponents, you don't need Halfwise to tell you be strong in seeking safeguards. But while you are "safeguarding" the rest of us, keep the perspective of our abundantly active society. You are part of it and benefiting every day.

Friday, January 13, 2012

Gaming the system for personal gain but international pain

I am a free market kind of guy, but games that threaten the global financial system worry the heck out of me. I am not suggesting more regulation; I am publishing this to highlight some risks that are baked right into the Euro-cookie.

Everyone knows that Greece is in trouble financially. In many ways, the Greeks no longer rule their own country; a troika unelected by any Greek is in charge. The International Monetary Fund, the European Commission and the European Central Bank now hold the purse strings for the birthplace of democracy. Greece is not alone, of course, it just happens to be in the news. Italy's situation is similar.

Any rational investor would want to protect his capital during difficult times. You know, maybe buy some insurance (a credit default swap, or CDS). Naturally, every insurance policy has its fine print. Credit default swaps only pay off under certain forms of financial failure. You are insured only for certain hazards.

Here is where the cookie starts to crumble. According to the Institute for Individual Investors, there is a total of approximately €355 billion in outstanding Greek debt, with €100-140 billion held by the ECB, IMF, and EU (the Troika). This includes the €35-40 billion purchased by the ECB during 2011. The remaining €200 billion plus is held by banks, pension funds, and, increasingly, hedge funds. It all comes to a head in the next few weeks.

Those private holders are expected to take a €100 billion and change loss; the Troika’s holdings would be unaffected by the plans to resolve the debt crisis. That alone should raise eyebrows, but let's look more closely.

If certain Greek debt was expected to take a 50% write-down, it would be priced at 50% of face value. Instead, it is selling at a bit over 30% of face value. What gives? Let's quote directly from the IFII's free subscription Tycoon Report for January 13th:

...magnanimous private holders are expected to voluntarily take a 50% haircut. The plan under consideration is that for each €100 of debt tendered, €15 in cash would be received and €35 in long dated (as much as 30 or 40 years), low-interest Greek debt.

Now if this plan was anywhere close to a reality, Greek debt would be trading near that 50% of face value mark, but it is not. It is trading around 32% of face value.

Additionally, if this voluntary plan goes into effect, it would not be a “credit event”. It is a non-event according to the determiner of such things (the International Swaps and Derivatives Association), because it is “voluntary” and not everyone is affected; remember the Troika would be exempt. That is important, because it would not trigger the insurance contracts on the bonds, known as credit default swaps (CDS). Without the insurance to make up the 50% of value that goes poof, losses will be very real.

However, if not enough private holders volunteer, then the deal falls apart and Greece will default for real. The CDS holders will be made whole because a default is a “credit event” and will affect everyone.

So hedge funds have been accumulating Greek debt with the specific intention of not volunteering their holdings. They are also buying CDS, which cost 8% of face value.

In other words, funds are paying €32 for Greek bonds that have a face value of €100, and paying €8 for insurance, resulting in a total cost of €40. When they withhold their bonds from the voluntary swap, Greece will be unable to roll its debt and will default. Then the CDS will trigger and they will receive €100 on an average investment of little more than €40. A tidy 150% profit before the end of March!
I bolded the part that is the most dangerous part of the game. The report goes on to say:
A Greek default will have huge ripple effects. It doesn’t even matter if Greece is forced to leave the Euro or it is allowed to stay -- a run on Italian and Spanish sovereign debt is sure to follow.

The big money manipulation of the markets is going to cause a serious monetary and economic dislocation that could move Europe rapidly from mild recession to full on depression. The US stock market and economy are not on an insulated island; there will be a deleterious effect on both when the tsunami effect hits these shores.
So let's sum this up in layman's language.
  1. Greece owes money it won't pay back, to banks and countries that should never have lent it in the first place.
  2. Those banks and countries have replaced Greece's leadership to try to make sure they get their money back.
  3. Some private parties are buying the parts of the debt that are not controlled by the troika of replacement leaders.
  4. The private parties will try to arrange things to maximize their profit on the questionable debt.
  5. The way they are going about this threatens the global financial system.
Got gold? Cash? This could turn out badly.

Tuesday, January 10, 2012

Using the Kindle with Calibre e-Books

I travel a lot on business (>150,000 air miles last year, without ever checking a bag) and a Kindle is a great way to carry reading material without getting weighed down. My newspaper subscription, for instance, is on the Kindle, and other than some funky formatting issues, I prefer it to the tree-and-ink version.

The free books available electronically are another great feature. And a free software called Calibre works as an essential middle-man between the source of the book and the Kindle. Go to Calibre and download the version that works on your computer or portable device.

Now you can work with anything published in standard epub format.

Say you want one of the hundreds of excellent books and articles from the Ludwig von Mises Institute. Go to their site and track down what you want to read. Let's say it is Leonard Read's classic article I, Pencil, which is free of charge.

Click on it and download it into wherever your downloads go. Open Calibre, and click on the Add Books button. Browse to your Downloads folder, highlight the I, Pencil file and click the Open button. Calibre brings the article and its cover illustration into the Calibre Library on your computer. Then plug in your Kindle and click on the Send to Device button. Keep an eye on the little wheel at the bottom right of your screen...it takes a bit of time to squeeze the book through the wire.

Done. Now you can read the article for free. Plus you can use Calibre to manage the books on your device.

Monday, January 09, 2012

Technivorm


Coffee is an interesting beverage to brew. There are only a handful of variables:
  • What kind of beans are we using?
  • How coarsely are the beans ground?
  • How consistent is the particle size of the ground beans?
  • How pure is the water?
  • What temperature is the water?
  • Are we using a filter?
  • If so, what kind? Paper or metal?
  • How fast does the water flow through the beans into the pot?

Okay, maybe there are more variables than you might imagine.

Technivorm is a Dutch company specializing in coffee makers that (a) heat water to the right temperature (195 - 200F) and (b) have adjustments to restrict the flow of water through the filter. Most drip coffee makers fail at both of these.

We have one. It makes better coffee than our old drip maker. Better flavour, better to drink.

Saturday, May 28, 2011

And now there's a Kindle in my briefcase

I am a new and curious Kindle owner, thanks to my lovely wife.

Interesting device: it can hold 1500 books at a time, adding a new one is instantaneous, you can search for text, highlight and annotate, hell you can even check Facebook, which by the way looks better using the texty version of touch.facebook.com.

If I had bought the books on Kindle that I bought in paper, I would typically have saved a buck or 5 on them, plus delivery charges for the online purchases, if any. So there may be a cost savings over time.

But here's the thing: I can get thousands of books for free, books that I have always figured I should get around to reading...EM Forester, Joseph Conrad, Dickens...that are off copyright and there for the download. And since we have a house full of books with no shelf space for new ones, it's got some practical value in terms of clutter control, no small feature I must say.

I downloaded the complete works of Winston Churchill for free, only to find that it was not THAT Winston Churchill but a US author who writes of the days of Davey Crockett. So it turns out you can easily delete books from your device...just push the left side of the Kindle's square mouse device once inside the book in question. Easy peasy.

For the broader web experience, count me impressed in a Windows 2 for DOS sort of way. For the book experience, count me impressed period.

It's amazing, this device, for its stated purpose of enabling the acquisition of books from a huge list, for little or no money, from pretty much anywhere, and allowing the owner to read them on the run, in places where the brighter the light the better the experience, unlike my Panasonic Toughbook on which this is being typed.


The typing and web interfaces are not even Blackberry-simple, but the book buying and reading functionality and interfaces are completely streamlined and easy.

Buy one for what they are good for, and look past the clunkiness in what it wasn't really designed for. No regrets, and two thumbs up.

Thursday, May 26, 2011

How to remove stuck spikes from your golf shoes

The shoes that have to carry me around the course need new soft spikes. Of course, when your shoes are new, removing the old spikes is easy. But two years later, the rubber things are worn down, the tiny holes for the wrench are full of something impenetrable and mere mortals can't get the old spikes out no matter what they try.

So my first attempt involved a claw-like spike wrench at the pro shop. This tool dispenses with the two little tips and substitutes a medieval device that grabs the outside edges of your spikes.
No luck.
My second attempt involved the pro shop's industrial strength spike remover. All I managed was to shred some rubber.

My third attempt involved some physics. I put my shoes into the freezer overnight in the hopes that the lower temperatures would both harden the rubber and loosen the grip of the threads.


As if.


So tonight I hauled out the electric drill and deepened the wrench holes, right into the plastic of the old spikes.
Finally the regular spike wrench had something to grip on, and after I wrapped its non-ergonomic handle in the finest of old golf towels and leaned on it, the shoes released their beloved spikes.

Kind of makes you wonder how the darn things fall out, given how hard it is to get them out when you want them out.

Monday, May 23, 2011

That damned Squeak!

It started about 4 weeks ago, a squeak from somewhere in my basement. At first I thought it was a smoke detector with a low battery. So I took the battery out of my lower level detector, but the squeak continued.



After reinstalling the battery I started going through the basement. The squeak was only every 5 minutes or so, so there was nothing that I could follow to the source. Every time I heard the squeak I tried to zero in on where it was, but it seemed to move around.

There's an old alarm system from a previous owner, which we have never fully decommissioned. I figured it must have been this thing, beginning to act up. So I removed the backup battery (the squeak still occurred), I disconnected the power supply (the squeak still occurred); I bypassed every zone in the alarm system (the squeak still occurred) and I put it all back together. The squeak still occurred.

Examine the various modems and routers. Nothing.

Up into the ceiling...listening. Sometimes it felt as if I was getting closer but it was never as if I was next to the source.

Turn off the power supply to every basement room. The squeak still occurred.

What did it turn out to be? Someone had given me a smoke detector that I did not feel the need to mount, so I put it in a bucket that also held a cleaning brush and other basement randomness, on the floor behind a door. Eventually the installed battery began to fail, causing a chirp (my first instinct was right!) The sound went straight up from the bucket, so you couldn't really pinpoint where it was coming from.

Now I miss the damn thing.

Saturday, April 02, 2011

TurboTax, Quick Tax and Stock Trade Tracker

I have been a user of QuickTax for years, and for 2010 taxes it is now called TurboTax.

If you buy the Platinum version it allows you to record all your stock buys and sells in a separate program called Stock Trade Tracker, or STT.

Every year I struggle to remember how to import the info from STT up into QuickTax, and I have just struggled to get it into TurboTax. But now I remember. I will write it here so I can find it next year...

It looks like it should be easy, but it is not.

First, if you are on the EasyStep screen that asks you for T5 information, don't try to use Stock Trade Tracker to provide it. STT does not produce T5 forms. Move along. The chance to enter Capital Gains and Losses comes later. Why does Turbotax even hint that STT is useful for T5s?

When you do eventually come to the Easy Step that looks for Capital Gains and losses, it will give you a screen that looks almost the same as the one asking for T5 info. But now, click on the link that opens STT. Then go to Reports and select Capital Gains. Then pick Last Year. Make sure it is what you want. For example, if you have TFSA trades in there, take them out. If you have RRSP trades in there, take them out.

Assuming it is the right info, go back to TurboTax and follow the instructions. It works fine.

What DOESN'T work fine is the glib assurance in the TurboTax help screens that the process is as easy as clicking one button. No, you have to work through several steps of opening STT and picking your report. Judging from the frustrated and unanswered comments in the margins, TurboTax has an opportunity, shall we say, for an improvement in customer service.

UPDATE Jan 30 2012
It appears that TurboTax has dropped STT entirely. For me this is a real pain, as the computer drive that held my old QuickTax applications has crashed. I have my backed up data files, but I was counting on another copy of STT on TurboTax 2011. Now I am going to hunt for the box with the old app disks in it, which is not the end of the world.

But I don't like their suggestion, as noted in the link above, to sum the amounts from your trades and import the total into TurboTax. I like to have the trades themselves, and in the event of an audit we can go through them all and see if anything was missed or double counted. Pffft.

Monday, March 14, 2011

Cynicism vs Observation

The power of accurate observation is commonly called cynicism, by those who haven't got it.

Bertrand Russel

Sunday, March 06, 2011

Gold:Silver ratio below 40!


Historically over the centuries, the Gold:Silver ratio was 15:1. Gold was worth 15 times what silver was worth. Fifteen ounces of silver would buy one ounce of gold. The ratio broke out of this pattern in the late 1800s and was recently over 65.

Silver is seen as the more speculative of the two metals, and a rising appetite for silver has been interpreted as a greater appetite for risk. When markets fail, silver usually falls faster than gold, driving the ratio higher.

Monday morning in Asia, the ratio dropped below 40, with Gold at $1436 and Silver climbing over $36.25.

Check this link for the latest chart.

Sunday, February 20, 2011

Never seen anything like this before

Why you're not married


There is more truth in this article than you will find in the entire self-help section of your book megastore. You, young lady, are not married for one or more of the following reasons:
  • You're a bitch
  • You're shallow
  • You're a slut
  • You're a liar
  • You're selfish
  • You're not good enough (in your own mind)
Read the whole thing. Thanks, Captain Capitalism, for the original link.

Saturday, January 29, 2011

Sunday, January 23, 2011

Lots of contributors to temperature

This posting at Watt's Up With That enumerates a dozen contributors to temperatures, and temperature trends.

After mentioning a handful of mechanisms that would not be noticeable on human time scales (eg the sun is slowly brightening) the author rolls up his sleeves and gets into solar cycles, ocean oscillations and atmospheric and weather phenomena, along with descriptions of whether their feedback is positive (eg surface ice) or negative (eg clouds).

The comments are also excellent, serving to clarify and expand on Dr. Glickstein's posting.

When someone wrings his hands over CO2, one might hope that perspective such as this would be of comfort.

But have you noticed that news that implies disaster is not imminent, is not received with joy by the AGW community? A cynic might wonder whether the agenda is more important than the underlying reality.


Nah. Couldn't be.

Wednesday, January 05, 2011

Let the game come to you...



*Title widely attributed to Larry Bird, also some capable stock market advisors.

Besides seeing the wisdom in it, I really like the pun.

Thursday, December 30, 2010

A useful response to CO2 Hand-wringing

I saw a friend's post on Facebook the other day that quoted a regional government website from BC:
"Climate change is a complex, multi-year challenge for our region. It is a wake-up call to a system in decline"
All I can say is
"I am enjoying the current interglacial period, which is overdue to end. Don't you think we are going to need all the warming we can get?"
(By the way, note the effortless slide into Marxism implied in the BC position. If the science is settled, for something that hasn't actually happened yet, why is the policy response based on a philosophy which has been proven an utter failure?")

Saturday, December 25, 2010