Rebane's Ruminations

The Most Atrocious Tax of All (updated 18jun21)

‘A nation ignorant and free, that never was and never shall be.’  Thomas Jefferson

George Rebane

The country’s Democratic radical Left and Team Biden are prepared to expand asset taxes and introduce unrealized capital gains as another taxable form of ‘income’.  If they are successful, this will be the final nail in the coffin of American capitalism, the demonstrated most efficient way to generate and distribute wealth ever devised.

Income – The valuable return or yield from any kind of property, patent, service, etc. received in negotiable instruments, such as nominal dollars, that is spendable in an exchange for goods, services, or labor.  (Passive unrealized appreciation of any asset is NOT income.)

It boggles the sensible mind to hear that government has become so rapacious that it now wants to install a new, game-changing layer of taxes to perennially start taking more of what you have already earned and paid taxes on.  This atrocious taxing scheme comes in two parts.  They will apply one tax rate on the mark-to-market value of assets you already own, and another tax rate on your annual income augmented by the annual unrealized appreciation of those assets.  In other words, they will also perniciously count as income a fictitious amount of money that you never received or spent.

It is this malign definition of income that gave rise to the recent ‘news’ of billionaires paying miniscule tax rates of the order of 1% that came to light after their tax returns were hacked and distributed by the Left.  Where did such small tax rates come from when we know that the top 1% earners pay 40% of the nation’s income taxes?  The answer is easy when you slip in the new Democrat definition of income to include the appreciation of what they already own and have paid taxes on.  Using the accepted definition of income (see above), a wealthy high earner may pay at, say, a 30% rate on such income.  If his income last year was $10M, then his tax bill was $3M.  But if he was a billionaire worth, say, $10B, and his assets appreciated 10%, then Democrats want to call the unrealized $1B gain as ‘income’ and make his tax bill 30% of $1,010,000,000 or $303,000,000.  And if he only paid $3M, then the Left and their lamestream scream that billionaires tax rate is only 0.3% = 3,000,000/1,010,000,000.  And you can hear the envy chorus of the nation’s double dummies holler ‘Yeah, make him pay his fair share like I do!’

Inflation – Up close and personal

“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”  Milton Friedman

George Rebane

"The time has come," the Walrus said, "To talk of many things: Of shoes—and ships—and sealing-wax— Of cabbages—and kings— And why the sea is boiling hot— And what inflation brings."  (with apologies to Lewis Carroll)  And more specifically we need to be forewarned that inflation is like “the fog, that comes on little cat feet”, and then surreptitiously consumes our plans for the future.

Most people know that the government, through our Federal Reserve, controls the “quantity of money” which pursues available goods and services in our economy.  Fewer know that inflation is really an additional tax on your assets, which for their procurement you already have paid taxes on the inflated income.  Inflation is then another tax, more insidious and mostly invisible that takes buying power out of our pockets and transfers it into the hands of government politicians and their bureaucrats.  And it is they who get the benefits of ‘new money’, because those who get to spend it first, spend it with the value of the ‘old money’ before dilution sets in and the markets react.  By the time you get it, prices have already reflected the additional dollars chasing the same goods and services.

The blame for the return of inflation is ours.  It is we who voted in the conmen who promised us all kinds of goodies that would cost us nothing – it was always the other guy who would foot the bill.  And we have kept doing it year after year.

The other tax that inflation brings is the usual tax that doesn’t even need to be raised, at least for a while until we’re convinced that our government needs to make even more “investments” in our behalf.  The usual tax bill, not only goes up in nominal dollars, but also increases in the so-called ‘bracket creep’ which puts our inflated dollar amounts into the next higher rate categories.

In the final analysis, as we have said here for years, the dollar must be destroyed in order to satisfy all the obligations – now amounting to over $100T – that must be repaid in nominal dollar amounts.  That means that the dollar’s buying power has to be reduced essentially to zero in order to legally satisfy and defraud our creditors, many of whom are actually ourselves.  The ONLY thing that will save the dollar is an economy that grows at a rate which keeps the current debt levels at a low relative amount to our economy.  Elsewhere in these pages I calculated this annual growth rate to be at least 5%, and that means at least 5% GDP growth year after year with no end in sight.  No economy of our size has ever achieved such a steady state of high growth, and there’s no hope of our achieving it with socialists – who are rock apes when it comes to economics – in charge of our national weal.

Underwriting China’s Bad Behavior

George Rebane

[This is the transcript of my regular KVMR commentary broadcast on 20 November 2019.]

While our country is embroiled in the fight to oust a duly elected president on yet to be established evidence of high crimes and misdemeanors before voters have a chance to weigh in on the matter next November, a much more realistic threat to our fortunes and future continues to grow without any effective defense in sight.  Few Americans know of communist China’s strategic designs that include the relegation of America into a second-rate power in developing and employing the technologies that provide for our national defense and overall quality of life.  However, the few people who do follow national affairs are aware of China’s doings regarding the proprietary intellectual property they have stolen from our defense and private sectors, and how they continue on that same course today more effectively than ever before.

The Senate permanent sub-committee on investigations just released an extensive bi-partisan assessment report in excess of 100 pages titled ‘Threats to the US Research Enterprise: China’s Talent Recruitment Plans’.  It details how the US has for years failed to counter China’s enterprises to recruit scientists, acquire research, and maintain an ongoing program that compromises the fruits of our taxpayer funded research and development programs conducted in our universities and by our private enterprises.  The investigation’s findings criticize numerous federal science-funding agencies including the National Science Foundation, National Institutes of Health, the Energy Department, and many more than can be listed in this short commentary.

The basic MO of the Chinese government is to operate euphemistically named “talent recruitment programs”, more than 200 of these hire both visiting Chinese nationals and American citizens, numbering over 7,000 that include Nobel laureates.  These scientists and engineers are contracted and paid to transmit the fruits of their US-based research to Chinese agencies that then disseminate the information to the Chinese military and industries which compete with US companies in international commerce.  These surreptitious technology transfers amount to plain old thievery for hire, and according to the Senate report, our failure to stop them “continues to undermine the integrity of the American research enterprise and endanger our national security.” (more here)

The main Chinese extortion of technology program is called the ‘Thousand Talents Plan’ under which researchers in America are bought and paid for the benefit of communist China, which has openly stated that it intends to be the world hegemon well before 2050, and along the way to become the global leader in science, technology, commerce, and military power.  The Thousand Talents Plan, almost all of it effectively funded by US taxpayers through its $150B annual support of federal STEM R&D appropriations, is well on its way of meeting China’s global strategic objective.

What should be even more galling to Americans is highlighted by Roger Robinson Jr, a think tank CEO and former senior director on President Reagan’s National Security Council.  In his recent article ‘Why and How the US Should Stop Financing China’s Bad Actors’, he details how the global capital markets, dominated by the United States, provide China with the direct financial support through trade and security markets that fuels their current rapid progress toward global primacy, as they violate almost every principle and value of western civilization.

Robinson states that “it is an empirical fact: the majority of American investors are unwittingly funding Chinese concentration camps, weapons systems for the People’s Liberation Army (PLA), and more. This is because the U.S. has no security-minded screening mechanism for our capital markets, which have roughly $35 trillion under management.”  And in the main, these investors include America’s pension funds for teachers and government employees, along with the billions of dollars from university endowments.  Investors whose talk preaches climate change and green investments, as their walk pours untold billions into the treasury of the world’s biggest tyranny and polluter.  And there’s much more to learn here than time allows, but I hope that some of this news will invite listeners to do their own research and act accordingly.

My name is Rebane, and I also expand on this and related themes on Rebane’s Ruminations where the transcript of this commentary is posted with relevant links, and where such issues are debated extensively.  However, my views are not necessarily shared by KVMR.  Thank you for listening.

When will the bull run end?

George Rebane

We are now in the longest bull run in the history of America’s security markets. The nearby figure filched from the 15jun19 WSJ provides some perspective.

The question on everyone’s lips is when will this bull run end. As readers know, I’m a semi-retired successful entrepreneur and capitalist who has managed his own securities portfolio for decades, has recently focused on financial engineering, and still enjoys inventing and coming up with new squigglies in that field. One of my recent contributions has been the extension of Gott’s theory that probabilistically treats the future termination of minimally known processes. This extension was described here in – ‘…, and this too shall pass’ - on 10 November 2014.

Well, it turns out that stock market bull runs are exactly the kinds of minimally known processes that succumb to the expanded R-G theory – all we reliably know about the bull market is its current age. So we can now ask more interesting questions such as, ‘What is the probability that the bull market will end in any future quarter (three-month period) starting now?’

The answer to that question is shown below for the next couple of years.  The blue dots/line indicate the diminishing probabilities that the bull will end in the quarter starting then, and the red dots/line indicate the growing probability that the bull will end sometime between now and the date shown.  (click on figure to enlarge)

Should there be more astute investors reading this, a natural extension of the above question is ‘How can we update such a probability when later we get some new information that bears on the markets?’ The good news is that this question can also be answered by using a form of the Bayes formula in which the then computed R-G probability serves as the ‘Bayesian prior’ from which to calculate the new (posterior) probability of the process about which we now know more than its age. The Bayes formula (described here) should be used thereafter as more pieces of relevant information are obtained. Fun stuff if you’re a bettin’ man (or woman).

‘Quants’, Kelly, and the RK formula

George Rebane – 19 May 2010 (V5apr18)

[I originally posted this little blurb on some work I had done on the Kelly formula prior to 2010.  Well, after some more noodling and squiggly pushing I found that there was a conflict in the way odds and expected gain/loss were defined which required me to revise what is now the RK formula.  As a result, I took down the 19may10 version and am now replacing it, appropriately edited and modified where required, with the current corrected version which still reflects its original publishing date.]

Contrary to the rumors you’ve been hearing for the last year plus, GeorgeW didn’t cause the Great Recession.  This fiasco had three main progenitors - government idiots, corporate greedies, and some very clever, but not clever enough, Wall Street traders practicing the arcane art and some of the more dubious science of financial engineering.

Scott Patterson has been reporting on things financial for the WSJ, and recently wrote The Quants – How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It (2010) which immediately shot up to the top of the charts and is still there.  I finished Quants before going on travel and was just going to add it to my collection of finance and economic history books.  But then I thought that there might be some little gems of broader interest there.

Patterson goes back to the beginnings of financial engineering in the 1960s, and takes us right up to the fall of 2009, the Great Recession and all.  In fact, the whole purpose of the book is to explicate the role of the quants in fostering the recession.  What’s a quant?  A quant is a person trained in many of the mathematical ideas and toolsets of the system sciences.  A bunch of them came from research universities like MIT, Caltech, UC, … .  They are generally at the PhD level, so they have a demonstrated ability to think out of the box and extend human knowledge.

Now these young graduates were snapped up by various ‘Wall Street investment houses’ and hedge funds.  Their job was to examine the price behavior of all kinds of securities around the world, and then apply their math wizardry to develop automated trading programs to lickety-split execute profitable arbitrage transactions that their algorithms discovered in the massive daily dataflows of the finance and securities industry.  Since I have some knowledge of these high-jinks (actually, I also claim to be a financial engineer), this kind of historical background fascinates me.  And doubly so since the political reverberations of this recession will be with us for a long time to come.

Financial engineering actually began with Modern Portfolio Theory credited mainly to Harry Markowitz and William Sharpe.  They both became Nobelists for their work.  MPT is used to allocate funds among a short list of competing investments like stocks.  Sharpe’s contribution was the Capital Asset Pricing Model or CAPM which introduced the notorious alpha and beta numbers to a stock.  Brilliant and elegant modeling of an investment world that turned out not to exist – well, not to exist quite like their equations required.

Today MPT and CAPM are used primarily by professionals for CYA purposes to manage other people’s money.  If the client’s portfolio blows up, you can always point to the Nobel prizes and claim you did the prudent thing.  And thereby hangs a tale, or should I say ‘tail’?.

Most of the applied financial phrenology is still based on the view that security prices move up and down sort of like a drunkard’s (or random) walk.  If you assume this, you can fit nifty bell curves to the magnitude of price movements, and off you go into the land of stochastics.  Stochastics is a fancy word for random processes that depend on other random processes.  The problem with the random walk model is that it doesn’t predict big catastrophic price swings very well – practically not at all.

(To continue reading, please Download Quants2_2018)

State of Jefferson Townhall in Penn Valley (updated 4aug14)

George Rebane

RR has posted on the national movements to break bigger states into smaller ones as part of the impetus to achieve some form of America’s Great Divide (here).  These movements are birthed by the realization by large cohorts of conservatives in the several states that they are no longer represented in their states’ legislatures, and the movements are fueled by the growing irreconcilable polarization of America’s Right and Left socio-political ideologies.  For some time now the distance has grown so large that no one can any longer suggest a plausible middle ground acceptable to sufficient numbers in both camps.

Two distinct yet related movements are stirring in California in which many of its mostly rural counties, located in the north and in the Sierra, have formed citizens groups to explore the feasibility and form of such a break-up.  The bigger and older movement – Six Californias - was founded by venture capitalist Tim Draper in 2013, and has gathered enough signatures for an initiative to be placed on the 2016 ballot.  The passed initiative will launch a process that then must successfully proceed through California’s legislature and then through Congress.

The other is the State of Jefferson (SoJ) movement that intends for a group of northern California counties to secede from the state and become a new state.  A number of northern counties have passed resolutions of support for SoJ, and more are in the offing.  SoJ is spearheaded by Mark Baird and others of the Jefferson Declaration.  Mark Baird will be one of the featured speakers at this Saturday’s SoJ townhall gathering in Nevada County's Western Gateway Park.

I invite everyone who is interested in knowing more about the motivation for and means of achieving a viable State of Jefferson to bring their lawn chairs to the park this Saturday afternoon.  You don’t have to have made up your mind about SoJ or any of the national partition movements, just come and find out what all the fuss is about so you can speak a bit more knowledgeably when you talk to your friends and neighbors.

[update]  In today’s (30jul14) Union we have ‘State splitters secede from reality’ by local resident Jerry Henderson.  From his article it is a safe bet that the man is of liberal leanings by just looking at how he reasons.  His message is summarized - People who have no voice in their state legislatures should not seek to constitutionally separate from their current states because that is a complicated process unlikely to succeed, because the majority party will oppose such moves in order to maintain its ideological monopoly.  Instead, such discontents should just “play by the rules” and “do something positive that will make (their) community and region a better place to live.”

So there you have it.  IMHO, if for nothing else, a split is warranted to just be out from under the electoral thumb of thinkers like Mr Henderson; my scrap lumber pile reasons better.  But the question that all such pooh-poohers should answer is, ‘How real is it to expect an aggrieved minority to remain compliant indefinitely, people who have been repressed for years by a government blind and deaf, nay, inimical to their just needs (liberty, security, property)?’

The reply of the majority Hendersons to the minority conservatives is to hunker down, accept the current order of things, and do your best.  It was the same perpetual advice that King George III gave the colonists.

[3aug14 update]  It was a fine gathering yesterday at the Western Gateway Park with good speakers making a cogent case for SoJ and the state splitting movement that is gaining momentum across the land.  The main grievance fueling discontent is that with growing national polarization that has now put permanent super-majorities into many state houses, the minorities have lost any effective representation in their states' legislatures.  For a complete report of the Nevada County SoJ townhall meeting, visit Russ Steele's Sierra Foothills Commentary here.

[4aug14 update]  George Boardman, columnist for The Union and RR reader, wrote a thoughtful piece in today’s edition of the paper – ‘‘Power to the People’ isn’t what it should be in California’.  There he advises conservatives to not “waste their energy on dead-propositions like the State of Jefferson, constitutional sheriffs, overturning Common Core, and taking control of federal forests …”.  Instead he proposes that it is the establishment of another state elected office (and supporting bureaucracy) that will “defend the will of the people all the way to the US Supreme Court if necessary” that will get conservatives’ juices flowing productively and beneficially.

IMHO that approach asks us to piss into much stronger winds than the ones now buffeting the specific and focused objectives he dismisses.  Such an initiative defending ombudsman (IDO?) will itself require an initiative to launch which has no more chance of being implemented than the other initiatives that have been overturned by activist progressive judges.  The IDO will immediately be seen as a conservative cause to be squashed by the states’ liberal super-majorities that today exist at all jurisdictional and bureaucratic levels.  The other problem is that an IDO office without an immediate cause celebre will be an abstraction that is harder to sell to the electorate than regaining representation of ideological minorities or opposing specific government overreach.  In short, given that the state's Attorney General will remain dysfunctional (biased), I like the notion of an aggressive IDO, but in addition to the established conservative objectives, not as their replacement.

Your life savings will bail in SIFIs

Oh what a tangled web we weave, when first we practice to deceive. - Sir Walter Scott

George Rebane

Remember those banks and other financial institutions that were ‘too big to fail’?  Well, the IMF has confirmed that the world of global finance still has such enterprises so that if one goes down, it has the tendency to pull others down, resulting in worldwide chaos.  In the past – recall 2008 – governments put billions of taxpayer monies into such banks to keep them solvent as they started to be stiffed on the loans and other risky commitments that they had made.

Regardless of all the happy dancing in the Rose Garden about increased employment and improving economy, what’s really happening is that the global economy, including America’s, is in a mess.  As a result, governments all over are worried sick about the size of future bailouts which promise to be huge compared to the amounts paid out a few years back.  Their reaction to this really tells the true tale of what is going on in the world’s fisc, and it ain’t pretty.  Catastrophe looms.

In response, the mavens at IMF have come up with a couple of ‘improvements’ to make things better in the future.  But don’t hold your breath about anything becoming better for you.  First, institutions too big to fail will no longer be labeled so obviously.  Instead, they will be called Systemically Important Financial Institutions, or SIFIs for short.  All that means is that each SIFI finds itself in a row of dominoes made up of other SIFIs and lesser banks, so that no SIFI is going to go down alone.

'The Real Crash' - Summary Notes

George Rebane

I read Peter Schiff's The Real Crash (2013) last year and summarized its main findings found in Chapter 12 of the book.  Since I recently attended a conference where Schiff was the keynote speaker and posted on it - A Libertarian Lovefest ... - I thought I'd share this little missal with my readers who may just want to cut to the chase.  Anyway, I ran across the summary while rummaging around in my files, so here it is.

1.    Main thesis – We consume more than we produce.  Therefore foreigners produce more than they consume.  They are the creditors and have pent up demand since they are living below their means.  Such economies will see a surge in demand while ours will languish/shrink.  Invest in companies that will benefit from this shift.  The US economy will crash.
2.    Sectors to invest in
    2.1.    Raw materials – they will drive more cars and buy more washing machines
    2.2.    Agriculture – they will eat more meat and complex foods
    2.3.    Energy
    2.4.    Manufacturing
    2.5.    Chemicals
    2.6.    Infrastructure
    2.7.    Utilities
    2.8.    Technology
3.    Countries to invest in
    3.1.    Australia – energy independent, export to Asia, strong banking system
    3.2.    Singapore – wealthy and high savings, freest economy, large exporter
    3.3.    Hong Kong – low taxes and regs, big China exports, “corporate Mecca”
    3.4.    New Zealand – shift from ag to mfg, big exporter to Australia and China (free trade agreement)
    3.5.    Switzerland – prudent and fiercely independent, home to thriving banks, insurers, pharma, and chemicals, not in Eurozone
    3.6.    Norway – global markets for its oil, fish, forests, and minerals; not in Eurozone, swinging away from a social welfare state
    3.7.    Netherlands – third largest ag exporter, has Europe’s largest natural gas field, good place for “euro exposure”
    3.8.    Canada – growing what the US is shrinking: manufacturing, mining, drilling, extraction, logging.  Poised to shift exports from declining US demand to increasing global demand.
    3.9.    China – “capitalism and democracy are not the same thing”, rocky road ahead but potential for tremendous growth, big US companies moving major operations there.
4.    Investment Strategy (“three legged stool”)
    4.1.    Quality dividend-paying foreign stocks in the right sectors (consider countries, currencies, sectors, individual stocks),  Euro Pacific Capital (brokerage company)
    4.2.    Liquidity and less volatile investments: cash (foreign currencies for liquidity, keep some dollars on hand) and foreign bonds (short maturities, non-dollar denominated, also convertibles), www.europacificfunds.com
    4.3.    Gold and gold mining stocks – Perth Mint Certificate Program, Euro Pacific Precious Metals
5.    Global decoupling from US economy is the big fear.  Our economic collapse “has barely begun”.  Before collapse is complete, “US bonds and the dollar will crash.”

Baumol’s Effect on Wages and the Liberal Mind

George Rebane

Actually Baumol’s Effect on the liberal mind is exactly nothing, zilch, zero, … .   Self-styled thinkers of the Left are constantly going on about workers not being paid enough as they come forward with all kinds of dodgy arithmetic showing how capitalists are making a greedy killing at the expense of their employees.  About fifty years ago a couple of economists – William Baumol and William Bowen - explained what happens when wage levels become disconnected from productivity, and here we’ll take a brief look at the result of that.  (This post is really an addendum to ‘The Liberal Mind – Wealth Transfer on Steroids’ and its extended comment stream.)

Before going on I would recommend that readers of the collectivist persuasion (liberal, progressive, socialist, communist, statist, …) give this posting a pass since it will only give rise to additional cognitive dissonance where enough is already in residence.  The purpose of this post is to familiarize the reader who already intuitively understands the basics of Baumol’s Effect (also known as Baumol’s Disease) but wishes to know its more quantitative details, and attach a label to it for effective communications.  I have been remiss in not having posted this much earlier, and thank a reader for his recent nudge.

Ruminations - 20jun13 (updated 21jun13)

George Rebane

So much bad stuff is happening that it’s literally hopeless to keep track of it any more.  A few samples follow.

Asylum for climate change refugees.  A correspondent sends me this heads up on the latest from the idiot senator from Hawaii.  He writes, “Sen. Brian Schatz’s bill would create a sort of political asylum for global warming refugees.  Senator Brian Schatz’s (D-HI) filed an amendment for the immigration bill Wednesday that would allow stateless people in the U.S. to seek conditional lawful status if their nations have been made uninhabitable by climate change.  Who decides what is uninhabitable? Does that mean all countries without air conditioned buildings?”  You can't make this stuff up.

Speaking of the immigration bill, it looks like the Republican heartthrob Senator Marco Rubio has caved.  No more requirement for a secure border.  The new bill would keep it porous and plug the holes with ‘best efforts’ rhetoric directed at the isheeple (q.v.).  Things will really look bad when the Border Patrol agents strap on their buttons that read ‘Pardon me, but you have me confused with someone who gives a crap.’

The Dow has dropped about 550 points in the last three days.  Helicopter Ben has now told everyone in the world that his chopper will soon be running out of gas thereby quenching QE whatever its number is.  Is this a Black Swan event?  Hard to believe that it is since everyone has been anticipating it for at least six months.  As predicted here, everyone thought that they could get out whole when the time came, because they would know it ahead of time.  Well, had they known, then the markets would not have plunged as they have, and it ain’t over yet.

“Signs of ObamaCare's failings mount daily, including soaring insurance costs, looming provider shortages and inadequate insurance exchanges. Yet the law's most disturbing feature may be the Independent Payment Advisory Board. The IPAB, sometimes called a "death panel," threatens both the Medicare program and the Constitution's separation of powers. At a time when many Americans have been unsettled by abuses at the Internal Revenue Service and Justice Department, the introduction of a powerful and largely unaccountable board into health care merits special scrutiny.” So say DAVID B. RIVKIN JR. and ELIZABETH P. FOLEY in the 20jun13 WSJ of these un-fireable appointed bureaucrats. And the bad news on that law will get a lot worse before serious attempts to repeal it are mounted.  Attributed deaths will have to number in the thousands before progressives will take notice (if then).

But there is an outside chance that this monster may collapse on itself from the gross incompetence at HHS according to the auditing arm of the GAO.  It seems that the HHS dunces in residence have not done their homework, and are having one hell of a time setting up the infamous insurance ‘exchanges’.  In fact, no one really knows what all is supposed to happen in these new bueraucracies that will dot the national landscape – that is one of the many reasons why HHS is running Obamacare as a black ops mission that is as opaque as it can possibly be – and the band starts playing in October.  Nationwide support for Obamacare is now down to about one out of three Americans, true believers all (more here).

To feel better, just go to the lamestream and/or any of the leftwing blogs where you will be burdened with none of this.

[21jun13 update]  The kids will get to ride elephants at the Nevada County Fair.  The fair board listened politely to the protestations of local ‘animal activists’, and then refused to cancel the contract with Have Trunk Will Travel.  To me people from organizations like Center for Animal Protection and Education comprise the faction of soft-headed, politically correct busybodies that have done so much to take our nation into the cultural oblivion and proscribed property rights mess in which we now wallow.  It’s good to celebrate a rare sparkle of sanity here and there in the public forum.

The WSJ’s enthusiastic editorial policy on immigration reform continues to miss the mark.  They celebrate the CBO’s analysis that the present bill would slightly lower our deficits by supplying new workers to boost GDP.  This is supposed to represent CBO’s new approach to ‘dynamic scoring’ instead of the ‘static’ type that they usually do in which every law is evaluated as if it will act in a hermetically sealed container from which collateral effects are removed.  Well, the CBO’s analysis and the WSJ’s assessment ('Mi Casa Su Growth Casa') of it both overlook the overriding effect of technology induced systemic unemployment (much discussed in these pages).  Neither organization recognizes that the existing legal American workforce continues to have trouble selling their outdated and rapidly diminishing skillsets into job markets that today demand so much more.

I expect this from the gang that can never shoot straight at the CBO, but the WSJ error continues to surprise me.  The new beneficiaries of amnesty that this immigration bill would create will be able to add significantly to the lines at the various welfare windows that the feds and state governments operate.  And we haven’t even begun to consider that the illegal alien problem will continue under the new perpetually porous borders provisions of this so-called immigration reform.

Gold plummets, but then why … ?

George Rebane

Has everyone been watching the goings on in gold and other precious metals lately?  Today the price of one ounce plummeted another 9.4%, making the price drop of that barbaric relic in the last few trading days to be the biggest in thirty years.  Astute observers tell us that Big Money (central banks, institutions, ...) even margined retail investors have been selling to deleverage and clear their books.  Cyprus is held up as a sovereign nation poster child in this mad rush to divest.

So you’d think that with everyone acting like the gold rush is over and economic normalcy is returning in the world, that you could waltz into your local gold dealer (hereabouts JH Mint) and walk out with a bag full of the yellow stuff on the cheap.  Not a chance, the shelves are bare and the prices quoted for uncertain future delivery are marked up by 14% or more.  In other words, the retail dealers have effectively not lowered their prices at all, just increased their margins.  JH Mint, along with other dealers across the land, were literally cleaned out last Friday when their establishements looked like the land office in 1893 Oklahoma.

Then why can’t I buy gold on the cheap today?  The simple reason is that Big Money is manipulating the price drop.  Ben and his ilk need to depress prices so that after a little time has passed (days, weeks?), all the big players can buy back in on the cheap.  In the meantime, none of the big guys want to let the physical stuff get into the retail buyers’ hands and boost the price prematurely.  Retail buyers are the people who look at the world and where they live, and ask (as 321gold.com reports) –

“Did gold fall off the cliff because the dollar index ripped higher? NO! Did Uncle Ben Bernanke say they were stopping the $85 billion + QE immediately? NO! Has physical gold become more abundant than any time in the recent past? NO! Are the world's central banks stopping their counterfeiting operations by devaluing their currency by stopping the printing presses? NO! It's quite the opposite,  Japan, U.S., and the EU are increasing the money supply.”

The big secret is that no one can allow interest rates to increase on sovereign debts across the globe.  That interest rates will have to increase in any case at some future time makes no nevermind to today’s big players, they already have their portfolios appropriately stuffed with what the little guy cannot buy on the cheap today.  And all of them are betting that they individually will be out of the public eye and ire before the crapola hits the fan when interest rates skyrocket after no one believes in the brand new funny money being used today to buy sovereign treasuries in the industrialized world.  And when interest rates do rise, then the dominoes will start crashing as every country’s debt service to GDP ratio sky rockets.  And gold will again be in short supply as its price goes to the moon.

In the interval, please fasten your seatbelts.

Productivity – A new perspective

George Rebane

[This piece continues the RR series on the US economy and the factors taking it into new regions - unknown unknowns - during these pre-Singularity years.  As usual, the frail and the young should be spared from these deliberations.]

Productivity of a nation’s workforce is an important metric in understanding its prospects for growth and its ability to compete globally.  The bottom line metric of workforce productivity has been to divide gross national product (GDP) by the number of workers involved in producing it.  But puzzling on it a bit reveals that there’s more to the story.  After all, we are talking about a nation’s ability to output product at some level of unit cost – note that I did not say ‘unit of labor cost’.

Since the GDP of a country includes government spending, and since a big part of what government spends is in transfer payments that don’t directly support production (see figure in endnote), shouldn’t that somehow enter the productivity calculation?  Also, workforce members not participating, due to a number of reasons, are still sustained by the economy (to a large part by transfer payments), should they not be factored in since they remain as a ballast or deadweight in their unemployed condition?

In short, if we were to compute a true productivity index for a nation in the units of productive GDP per each member of the workforce, whether employed or not, then we should compensate that index for these factors since they affect both growth and global competitiveness.  My effort to do that required searching for a lot of data that could be used commensurately.  The result is shown as the ‘Available Workforce Compensated Productivity Index’ (AWCPI) which uses the workforce as consisting of the total of employed and unemployed for any given year.  The GDP is compensated by subtracting out that year’s direct transfer payments, but leaving in any multiplier effect from such payments – i.e. a consumer spending his unemployment check on household expenses, entertainment, etc.

Ruminations – 12jun12 (updated 13jun12)

George Rebane

The situation in Europe is coming to a head, and Angela's got the whole world in her hand.  Now it’s definitely Spain’s and Italy’s turn in the barrel.  The remarkable news is that most likely there will be another €100B thrown at Spain’s banks intended to bail them out of bad sovereign debts that Spain’s government doesn’t have the money to repay.  But this money can serve no other purpose than to delay the inevitable; there is nothing Spain is doing to kick-start its economy and stop its descent.

From the prices of Spain’s government bonds today, the markets are saying that there is one chance in 23 that Spain will default within a year.  For Italy that likelihood is one out of 25 in the same period.  Tomorrow these odds will be less favorable.  What’s in your portfolio?  (Put in other numbers here.)

“It is not clear whether the expanded testing regimen boosted student learning.”  So opines a Reuters journalist reporting on the backlash to standardized testing that appears to be increasing across the country.  Parents of poorly scoring students are chanting that their “kids are not a test score”, and are demanding “more teaching and less testing.”   Apparently all these anti-testing factions – from teachers, unions, parents, … - are not concerned about assessing how their little darlins are doing in school as the test scores are heading south.  The journalist’s wonderment is probably shared by the multitudes who don’t know that learning and testing are necessarily independent efforts.  The clear conclusion is that the best way to address junior’s poor performance in reading and math, and all the subjects that require proficiency in reading and math, is to turn a blind eye to the matter by eliminating or dumbing down standardized tests.  (more here)

Many pundits are telling us that this or that faction will sit out the November election because their candidate is not exactly on the mark with certain facets of ideology or promises made.  Most of the discontents and vexed seem to be on the left side of the aisle.  I think they are flat wrong.

But no one who has been paying attention is going to sit out this election.  We are a nation too vehemently polarized to let others decide which of the two ‘evils’ facing us will prevail.  The only ones who won’t vote are the usual double dummies who don’t recognize the fork in the road and keep running into the road sign.  Unfortunately, too many of them are smug conservatives who tell you that it doesn’t really matter who wins, the whole thing is corrupt and rigged, they’re too busy working to pay taxes for those who don’t, …, or they just mumble ‘smurglemurf’ (for you of appropriate vintage, that’s how you pronounce the Lil’ Abner eternal jinx Joe Btsfplk’s name.)

[update]  Jo Ann forwarded a piece from Senator LaMalfa wherein he alerts us that the Democrats audacity to rape the taxpayer is going up another notch.  Gov Moonbeam has a bill in the state legislature that would penalize you 20% of any tax overpayment refund you would request that the Franchise Tax Board considers “excessive”.  Many of us overpay during the year so as not to incur and underpayment penalty when taxes are due.  Now the sumbich wants to dunn us for giving the state the use of our excess payment until refund time comes around.  I think these people know no shame.  Now they want you to pay them for restocking your wallet with your own money.  If you want to bitch and moan about this one – and you should – then here is some contact info.

Office of the Governor (voice mail): (916) 445–2841
Assembly Member Bob Blumenfield, Chair, Assembly Budget Committee (916) 319–2040
Senator Mark Leno, Chair, Senate Budget and Fiscal Review (916) 651–4003

[13jun12 update]  Now we hear that the total of unfunded pension liabilities across all jurisdictions in the country has exceeded $4,000,000,000,000 - yes, that four TRILLION dollars.  And no one has a clue on how to make good on those obligations.  The only solution still is to stiff the retired public service workers.  I hope everyone has pictures and videos of the celebrations that took place after the unions got the members of NASP (National Association of Scumbag Politicians) to authorize all those contracts.  That's about the most that they'll have to look at besides very tiny retirement checks in their mailboxes.

Mark Meckler of tea party fame reported today that people who track what the media - including the lamestream - cover, now tell us that it was only four days ago that NBC first reported on 'Fast and Furious', the months old gun walking fiasco that the Dept of Justice authorized along the Mexican border.  This aspect of liberal journalism at work goes a long way to explain why progressives have little clue on what's happening in the world, and respond in outrage to presentations of blatant and well-aged facts.  On RR we do what we can.

The Off and On of the Inevitable (Addended)

George Rebane

The Greeks are rioting in the streets again.  They don’t like the new tranche of austerity measures that their parliament was forced to levy on the country.  This was in response to the northern eurozone countries imposing more conditions before giving Greece its next bailout check of approximately $170B in March.  The north, led by Germany, is keeping a wary eye on Greece to see if these austerity measures will be made to stick.

Greece’s big unfunded liability is of the same stripe as ours – entitlements that range from public employee pensions to healthcare.  We recall that in Greece one out of four workers is unproductively employed by the government.  And up until now, the parliament doesn’t even want to put public sector pension cuts on the table.

The markets in Europe and America are acting insanely as they digest the daily dribble of news from Brussels and Athens.  ‘Are the Greeks going to make it?  Well maybe, and then again, today it doesn’t look like it.’  My long held view that Greece will tank is getting more certain by the day.  There is no hint that with the March check, the Greeks will be any closer to financial stability than they are today.  They’ll use that cash to service their national debt, make government payroll and pension payments,  and buy time in dickering with their bond holders to take a 50% haircut.  But none of this will put the country on to a path of fiscal recovery.  After the March check, they’ll start rioting for the August or September check.

As a political and finance junkie, I keep asking myself as to who benefits from this silly dance with the foregone ending.  The only answer I have been able to cobble together is the ruling elites and the rich guys.  They are buying time to get their finances rearranged, relocated, and redoubted (hidden in places their governments can’t get it, see nearby chart).  So when it finally hits the fan, and spreads from Greece around the European shore of the Mediterranean to the northern countries, the remaining visible wealth of the smart people will be small enough to surrender without really affecting the quality of their lives.  The delay also gives the clever people time enough to get out of Dodge, whether that be a political office or country of residence.

Countries like Switzerland have been the monetary redoubt for the smart and wealthy for generations.  But now that security is being breached by developed nations led by the US.  The Swiss are now the prime target of big countries who want to know who of their citizens have how much squirreled away where.  While the Swiss and others are putting up a fuss to the likes of America, they have no intention in getting out of the numbered bank account business for the rich of the less developed and muscular countries.  From these countries it is still easy to pull profits from your nation’s natural resource sales, or even foreign aid from idiots in America, and get it into your secret accounts on some ‘El Dorado shore’.

Employment 2022 (Addended)

George Rebane

Here's a quick back of the envelope look at the employment situation over the next decade when we take into account accelerating technology that increases worker productivity.  GDP growth is taken at the indicated 2.5%/year.  This post is really as a 'memo to file' since people have asked me how I come up with the 70 million un/underemployed in the next decade with unemployment at 35%.  Even with GDP growth at 5%/year, the 2022 unemployment does not come down below 17%.  The blue numbers are inputs.  I have posted the actual Excel spreadsheet here so that readers may play with it and insert their own numbers - Download Employment2022.

 

Pay Gaps and System D

George Rebane

Frankly, it’s a bit eerie how the events long predicted on RR are ticking off as recently having happened, or about to happen.  Here I want to focus on the infamous pay gap of the American worker, and an economic activity that is hard to track, but globally significant.

Income comes in two forms – wages and profits/interest.  As has long been argued here, the pre-Singularity years are illuminated by worker productivity abetted by screaming technology advances.  Using new gizmos and software, today a worker can make more and/or service more per unit time than yesterday, and even more tomorrow.  Given that the size of the markets requiring new stuff and services is not growing as fast as productivity, the result should be predictable for people who think.

A New Corporate Vision – The Constitutional Partnership Corporation

[In the 'Hiroshima+66, Detroit+Welfare' comment stream RR reader Michael Rogers introduced us to the John Lewis Partnership, a unique type of worker owned/controlled corporation that has a ‘constitution’ as its organizing and operating policy document – let’s call it a Constitutional Partnership Corporation (CPC).  MichaelR launched a comment thread that expanded its examination.  RR readers are familiar with my concern about the growth of US un(der)employment which I project to be over 70 million by the end of this decade.  This will call for massive wealth redistribution which I have discussed extensively in these pages and in my Union column (here).  I introduced the Non-Profit Service Corporation (NPSC) as a stake in the ground for starting a discussion about how to accomplish such wealth redistribution.  I have elevated MichaelR’s thoughtful and extended comment into a post of its own to invite development (integration?) of his expanded CPC and the NPSC ideas.  For continuity, please see the 'Hiroshima' comment thread. gjr]

Michael Rogers

Since when has complex design ever stopped us? We flew to the moon, built the Panama Canal, the Transcontinental Railroad, and the modern economy that has brought security to billions worldwide for gosh sakes.

I am not happy with (the John Lewis Partnership) constitution either -- not a tight feedback system as I see it. I also am not sure I see robust checks and balances or separation of powers in their design. However, they do seem to have created a stable management system that has a good deal of accountability built in, and appears to have legitimacy in the eyes of at least the long-term partners.

I think that a system like this applied to Detroit would necessitate the elimination of unions and the imposition of personal responsibility on the individual worker level so that working partners would need to focus on the efficiency of their unit in particular, and the coordination of the entire company in general, in order to get their wage or benefit desires fulfilled. Also, the more self-managing a unit was, the fewer managers are needed and thus more resources are available for higher wages/benefits or shorter work weeks.

There might also be the possibility of passing legislation where Industrial Democratic Incorporations are giving special tax-exempt (or at least tax reduced) status and long-desired deregulation could be achieved with bi-partisan support based on the premise that an Industrial Democratic Corporation would have a self-regulating, tight feedback design and does not need the regulatory oversight that an open loop control, traditional corporate management system does.

This could be extended to a drastic reduction in OSHA and Labor Law interference which were all predicated on an adversarial worker/management dynamic. When workers have the right to redress their grievances within an internal structure then the need of a nanny state to meddle is reduced if not eliminated.

It might also be possible to achieve a privatization of Social Security as the accountable and elected corporate officials in the pension division of the company would act as professional managers of the retirement portfolio of the partners thus reducing the likelihood of waste, graft, or stupidity diminishing the value of the portfolio -- and the portfolio manager who achieved a 55 year retirement age would be carried around the company on gilded litters as if he were a conquering Roman general.

The financing to build these companies could come from tax free government bonds which would create a tax advantages investment vehicle for the "1%" so that, rather than worrying about taxing the rich, the left could be focused on convincing them to invest.

You spoke of the ephemeral nature of our monetary system and the disconnect from anything of tangible value. I have even imagined the possibility of the growth of a stock standard, where the bonds of self-regulating companies become a currency of value. Where the stock of smart, well-run companies with solid markets, low levels of debt, and abundant tangible assets are traded at a premium and the bonds of poorly run companies with speculative markets and highly leveraged are discounted to their true market value -- these bonds would become the currency of trade and the ability of government to reduce or manipulate their value is eliminated.

Investors Playing the Odds

George Rebane

At the risk of boring the bejeezus out of RR’s readership, here’s a bit of quantitative follow-up for all you investors playing the odds on the approaching collapse of socialist Europe.  Well, maybe that’s putting it on a little too strong, but looking at the way sovereign debt is being priced by the bond markets today, you gotta do more than wonder.

My last yawner on this (it got all of 4 reader comments) was ‘Greece and the 100% haircut’ where I showed how to calculate the probability that a borrower (here Greece) would default within a future interval of time, say, in the next year or two years.  The probability would be assessed by the world bond markets.  I gave the formula for computing that probability on your calculator using your own input values.

The piece also had another formula for computing what minimum interest you should demand from a borrower if you thought he’d go belly up with a certain probability within a given time.  Fun stuff if you are an investor playing that great American favorite ‘You Bet Your Ass'.

Anyway, for those who don’t want to mess with their calculator, and still want to keep track of the real shenanigans in Europe (the rest is just BS), I made a plot of default probability as a function of time and the rate difference.  The numerate reader will notice that the probability of default (Q) depends on the interest rate spread (r_B – r_RF) between the current bond rate and the so-called available ‘risk free’ rate – for the faithful, that’s what a 10-year US Treasury pays.  The formula for Q is shown in the figure below, and when you use it remember to convert percents into decimals.


Suppose you hear in the news one morning that some teetering country’s bonds are going for 23% per annum, and US Treasuries are paying 3% - that gives you r_B – r_RF = 23%  - 3% = 20%.  And you want to find out what is the probability that said country will default before two years from now (T = 2).  Then enter the horizontal T-axis at two, go straight up to the 20% curve, and then left to the vertical Q axis to read off about 33%.  The market is saying that there’s a one out of three chance that you’re going to get a haircut if you buy and plan to hold those bonds for two years - that's the real news.  Now is 23% enough of a return for you to take that risk?  If your numbers fall between the values given in the figure, you'll have to remember how to interpolate.  See, you’re having fun already.

Greece and the 100% haircut (updated 5oct2011)

George Rebane

We hear that Greece’s financial situation is so dicey that they now have to pay over 270% yearly interest on their bonds.  The ten-year US Treasury today closed at 4.88% per annum.  Everyone who reads RR knows that Greece is teetering on the edge of default and pulling out of the eurozone.  Being prone to financial engineering, this set me thinking about the chance (probability) that Greece will go belly up during a certain future time interval, say, in the next 12 months.  The interest yields on the two bonds should contain enough information to tease out this number given that the US Treasury is still considered a safe haven or risk-free investment.

So I pulled out my trusty pencil with the big eraser strapped to one end, and set myself down to push a few squigglies.  The question I sought to answer is ‘Given the market interest rate for a risky and a risk-free bond, what probability of default in a specified future interval does the market implicitly assess to a risky borrower?’  Well, it turns out that there is a very definite answer to that question, and the market’s probability of default is given by –

Where Q is the default probability, i_R and i_RF are risky and risk-free annual interest rates, and T is the interval from the present to some future time expressed in years.

Plugging in the above interest rate numbers and looking out one year, we get 0.93 or 93% as today’s market assessment of Greece defaulting some time during the next twelve months.  One can, of course, work the formula backward and answer the question ‘If I believe the probability is X% that Greece will default during the next year, what interest rate should I demand on their bonds?’  The answer to that is computed from –

Where the mathematically astute will recognize 1-Q as the probability that the risky borrower will NOT default.  ln is the natural logarithm (to the base e = 2.7182… ).

You can now put those formulas into a spreadsheet and have all kinds of fun figuring out how solid a certain corporation is, given the interest they have to pay on their bonds.  And you can plot Q, their probability of default, against T, which you would expect to increase over longer periods into the future.  Using the above numbers, I’ve done that for Greece.

Again, technically inclined investors will recognize that these formulas can now be used in allocating assets and designing a portfolio.  If there is qualified interest in their derivation, I’ll write up my scribbles into a readable pdf and attach it as a download to this post.  Enjoy.

[5oct2011 update]  A reader emailed me that the risk-free rate really closed at 2.04% instead of the 4.88% I used above.  My eyes must have been crossed when I looked at that rate to get the example for this post.  Nevertheless, I reran the calcs with the 2.04%, and as expected, the results were essentially the same as they were higher only in the third decimal place.  This is because the two interest rates enter the formula as a difference, which in this case did not change very much at all.  H/T to the attentive reader.

‘Investors sell …’ – What a crock!

George Rebane

Time to vent.  One of today’s financial reporters again comes out with – “U.S. stocks sank in afternoon trading as investors worried about policymakers' ability to contain Europe's debt crisis.” (28sep11 WSJ)  You read this kind of pabulum constantly in the financial press.  ‘Investors believe X, therefore they sell’, ‘Investors look forward to Y, therefore they buy.’

As a long time investor in the stock and bond markets, I and my friends of similar persuasion always smile at the naifs who write such drivel.  If the investors are selling or buying, who the hell are they selling to or buying from? The local public storage facility, United Van Lines, inmates of the nearby mental hospital, who?

No one has informed these ‘journalists’ that when investors sell, guess what?, other investors buy.  And it would probably surprise those same keen observers of the markets that it also works the other way around.

Such pieces point out the uselessness of 95% of financial reporting.  They spout the obvious (i.e. tautologies), or make up stuff when no one knows what’s happening.  When the market goes down and I buy, what am I then?  A potted plant?

Entrepreneurship 2011

George Rebane

[This is the submitted form of my July column that appears in the 11jun11 edition of The Union and in its online form here.  A related graphic on the impact of the stimulus is on NC Media Watch here.]

This administration has taken a bad economy and, by any measure, made it unimaginably worse.  We all know the litany of government stimulus packages, corporate bailouts and takeovers, new reams of regulations designed to drive business and finance off-shore, and, of course, Obamacare.  That nationalized healthcare monstrosity is proving to do exactly the opposite of every one of its touted benefits.  And parodying Nancy Pelosi, the more we find out about the Patient Protection and Affordable Care Act, the worse it gets.

Polls now show President Obama’s disapproval ratings well above 60% for his handling of the economy, yet enough people are being paid sufficiently that 44% of voters would still re-elect him.  With so many people ignorant about or out of today’s economy, it will take a miracle to replace him.

Meanwhile both Democrats and Republicans agree that small businesses are the nation’s job creators, and success there paves the road to recovery.  Yet the social engineers and vote buyers in Washington continue hindering the very economic activities they tout from the other side of their mouths.

Few people know what it takes to be an entrepreneur and start a job-creating business.  A successful entrepreneur comes with an over-arching dream, a practical approach, tolerance for considerable risk, and enough funds to last through the ‘cash minimum point’ when revenues start exceeding costs – whenever that may be.

You would? Really?

George Rebane

Would you lend money to someone who already owes you more than he can repay, wants you to loan him more so he can use some of it to pay you the interest on what he currently owes (a la Madoff), and owns a printing press that is already printing his debt to you into oblivion?

 

(If YES, then when would you stop?)

Bet You Didn’t Know About this Tax

George Rebane

This year I promised to write more stuff on technology and finances.  In the winter I also start writing the year’s TechTest2011 which will be taken in the spring by a select cadre of Nevada County’s high school seniors and juniors.  Reviewing some of the problems from previous TTs, I came upon one that involves taxes and should be of interest to all of us.

Not many people have a clue about how income and sales taxes combine to present us with the total tax burden we have to bear.  If we did, maybe more progressives would abandon their faith in ever higher taxes.  So let’s consider a simple example of dollars and cents or sense.

And they still don’t know jack –

George Rebane

My career as a markets watcher and investor goes back to 1970 when I started tracking stocks and mutual funds along with my aerospace company engineering peers.  We heard the pundits, analysts, and economists make their sage assessments and predictions, and pooled our resources to subscribe to some pricey financial and investment newsletters.  What we also studied very closely were the prognostications that these gentlemen issued to earn their daily bread and public adulation.

Being of a quantitative and analytical bent, we started paying attention to the high priced predictions we received through the mail, in newspapers, and on TV.  A little research quickly showed that these guys didn’t have a clue about what they were talking.  It was all blather.  Yet, then as now, the media audiences kept lapping it up, and the government agencies kept quoting their wisdom in support of whatever policies and/or regulations they were trying to foist.  The bottom line we discovered was that it was bad for your bottom line if you acted on what the stuffed shirts spouted.

 

But what galled us most was that they got to keep their jobs with whatever university, agency, or bureau they were with after constantly making such horrendous errors in their work product.  As engineers, any of us screwing up just once and half as badly would have been shown the door.  And back in those days such mistakes would have followed you to your next job interview.  As a result many unfortunate engineers gave up engineering, got their teaching credential, and became classroom teachers.

Happy 2011!

George Rebane

Here in Nevada County the new year arrived clad in a light blanket of snow with a few flakes still drifting from a gray but hopeful looking sky.  The nearby photo from our office window says it better.  It will warm up later.

Jo Ann and I take this opportunity to wish all RR readers a healthy, prosperous, and hopeful new year.  Although, to keep with the distinctive tenor of these pages, I have to admit that I can’t offer the ‘hopeful’ part as an equal opportunity wish to all readers.  Some of you of the 20% progressive bent might take extraordinary pleasure in seeing things happen in the next twelve months that would bring another tear to the eye of the 40% rest of us.  Instead, to those so afflicted I wish a robust start on the road to recovery, especially in the understanding of things economic and financial that affect both our national welfare and personal finances.

In the last regard, I will put on my financial engineer’s hat more often than in the past, and try to write more pieces useful for interpreting the fate of the public purse and its implication on your private purse.  There is much mismatch between what the administration says about our economy and the effects of public policy on that economy, and what we here on the ground experience every time we go to the store or pay a bill.  One need look no further than the much cited 2.6% official inflation rate, or our Social Security ‘fully funded’ by a drawer full of IOUs.

If nothing else, I sincerely hope that such reports will help you to ask more revealing questions of your financial advisor and/or improve your own financial planning.  My hidden agenda is that when we better understand how to handle our money, we will also make wiser decisions in the voting booth.

The flip side of such commentary is that it will require dusting off some math that many of us left in high school for safe keeping when we graduated.  But when something comes down to reality, it inevitably comes down to numbers.  Besides, those who have alternative approaches and/or want to refute my assertions will have something firm to cite for comparison and correction.

So thank you again for visiting these pages.  Your thoughtful feedback is always welcome, and the discussion threads you have launched have been stimulating.  In spite of our different views of the where, the why, and the how in our country, we can all join in a prayer that in the coming year America will be an ever stronger, independent, and sovereign nation-state, and keep its place as the achievable example and pinnacle of mankind’s civil governance.