Saturday, March 31, 2012

Thursday, March 29, 2012

Dollar is strong..against the weak Euro: Spain is next

Please do not get excited because someone states, "The US Dollar is strong". Yes it is strong, against the Euro. In which is struggling right now.  The strength of the currency is relative and comparative to another country's currency.

Now the Spanish are beginning to strike:

The Germans will be key to this deal. Of course, they one of the productive nations in the Euro Zone. I agree with the German Chancellor, the bailouts are NOT enough. In my opinion, people must produce, save, invest..repeat process:

If the dollar is so strong, why is Gold and other commodities continuing to stay strong?? If the currencies are so strong, why are the Central Banks attempting to purchase MORE Gold?

Professor Ben Bernanke does not stop the rise in Gold, Gas, and Oil Prices with his loose monetary policy. Let us not forget Palladium too..

The REAL Cause of the Financial Crisis!?

The Economic think tank known as the Cato Institute has published a new study on the cause of the Financial Crisis of 2008.   An interesting analysis and research paper.

What Made the Financial Crisis Systemic?, Cato Policy Analysis No. 693

Euro Zone Update:Greece, Spain and Italy

Greece, Spain and Italy are continuing in their attempts to shake the shackles of their fiscal problems. Mounting debt, lower credit ratings, bailouts, etc. Here are the current unemployment numbers:

Spain: 23%
Italy: 9.2%
Greece: 20.7%

What is the lesson? Wealth comes from production. Increased Economic savings will yield more investment which will fuel production and growth. These nations have embraced a concept of borrowing and egregious levels of Government spending. Nations that have egregious levels of Government spending crowd out capital as witnessed in these aforementioned countries.

"The Private Sector has been Destroyed"

A article discussing the the possibility of Spain Debt Restructuring:

This article discusses the unemployment rates of the youths in Greece:

Greece may have to restructure its debt again:

Is Italy on the upswing? Are they out of the woods? Here is an article discussing the sell off of Bonds:

The United States is walking down a similar path as these countries. Who will bail us out if this happens to us? Tough decisions need to be made, and it can be fixed.

Thought for the Day: Knowledge and Power

"Knowledge is only power only when put to use, and then only when the use made of it is constructive"~David J. Schwartz, PhD

Wednesday, March 28, 2012

Thought for the Day: Mental Slavery

"Before man can be enslaved, his state of mind must be reduced from spirituality to carnality. He must learn to think of himself as basically an animal with no spiritual purpose." ~Samuel Smiles

Tuesday, March 27, 2012

Monday, March 26, 2012

Is the Dollar getting weaker? Is it Near a Collapse?

Here is a video with Mr. Detlev Schlichter discussing Gold vs Fiat money. In his book, Paper Money collapse, he reviews the problems with Paper Money, specifically on how it relates to the Central Government's ability to spend and expand credit. For an example of this currency depreciation in the current news, see this article, "Dollar near lowest month after Bernanke Speech"

The Fed works with the Federal Government to print more money and keep interest rates low to spur on economic growth. This causes and creates asset bubbles, which eventually correct as Mr. Schlichter explains in this video.  The lack of savings, and the egregious use of borrowing and spending leads to disastrous results.

Lets do the twist: Operation Twist err QE3?

The Fed in September of 2011 has implemented "Operation Twist".  It is a policy that started in October of 2011 and will end in June of 2012. The process of "Operation Twist" is to sell out long term Government Bonds for short term Government Bonds. This is an effort to keep the long term Government Bond yield curve lower. It stays consistent with the Fed's overall policy to keep interest rates low. While this policy seems to have merit on the surface, it still is consistent with the overall trend to keep interest rates down. The logic in keeping the Interest rates down is to stimulate the economy by increasing aggregate demand.  The rationale is to keep interest rates low, so that people will borrow money to help boost the economy for businesses, home purchases, etc.

The downside of this method is that it increases the money supply, and this leads to inflation. If people do not believe inflation is here, please check the prices of commodities and food.  Eventually, interest rates will need to rise. Of course, this will have adverse consequences, but the correction must take place for all the egregious spending, bailouts, TARP, and the like.

Here are some links related to Operation Twist:

"Federal Reserve Launches Operation Twist" 

"Operation Twisted Logic"

"The Fed's Long Shot"

Hauser's Law: The Tax Collectors Enemy

In the current economic crisis, one of the topics that is central to the politicos is the Federal Government Debt. Many are seeking to raise taxes, citing this is a potential solution. While others are seeking to lower taxes as a solution as well. Regardless of which direction is chosen, Hauser's Law must be considered.

What is Hauser's Law? W.Kurt Hauser, an investment economist, has reviewed economic data over the last 60 years, and it has shown that regardless of how the marginal income tax rates have been structured, the total income tax collected has been approximately 19% of GDP.  The top Marginal Income tax rates have been as high as 92%, and has low 28%. In both extremes, the rule of 19% of GDP has not been violated.

Why is this the case? Many possible things could lead to this answer, but ultimately it is about the elasticity of behavior towards taxes.

Here are some links regarding Hauser's Law:

"There is no Escaping Hauser's Law"

"Will Hauser Law Protect Us from Revenue Hungry Politicians? "

"Hauser's Law"

The question is really this: Do we want the Government to tax us at higher income tax rates, but receive a smaller piece of the economic pie, or do we prefer the Government to tax us at a lower rate and receive more revenue from a larger economic pie?  In either case, the Government will still receive 19% of the GDP.

Thought for the Day: Choose to Set Goals

Motivational speaker Zig Ziglar discusses goal setting. Making a CHOICE on setting Goals is paramount in success.

Saturday, March 24, 2012

Interest Rates: Is the Fed waiting to long to raise Rates?

Interesting video regarding the Fed and interest rates. Is the Fed waiting to long to raise rates? Should unemployment be a primary signal to raise or lower interest rates?  This video addresses those issues.

Thursday, March 22, 2012

Tuesday, March 20, 2012

Monday, March 19, 2012

Thought of the day:Nature of Freedom

The late Dr. Milton Friedman discusses the Nature of Freedom. He uses a pencil as an example. Powerful concepts sometimes are displayed with simple examples.

Sunday, March 18, 2012

Speculation: Good or Bad?

Speculation is a topic that provides a variety of responses and reactions from various individuals. Some folks want to ban it, some folks defend the activity. Many activists are seeking to ban the activity, and are pushing politicians to pass legislation to eliminate this practice.  I believe speculation plays a vital role in the free market.  Here is a quote from the famous economist Ludwig von Mises regarding speculation:

 “Speculation is the link that binds isolated economic action to the economic activity of society as a whole. “

Speculation provides a mitigation of volatility while providing liquidity to the market place; and it does not create increases in demand of the underlying asset.  It should not be banned; in fact, banning this practice will increase the volatility in the marketplace, making the banning of this practice very dangerous.

 A Speculator assumes the risk of the volatility of future prices and brings them into the present.  In other words, he assumes the risk of the rapid price changes in the marketplace, thus making the volatility, well quite frankly, less volatile for the producer.   Many people assume speculation is like gambling.  As Economist Dr. Thomas Sowell writes:

“Speculation is often misunderstood as being the same as gambling, when in fact it is the opposite of gambling. What gambling involves, whether in games of chance or in actions like playing Russian roulette, is creating a risk that would otherwise not exist, in order either to profit or to exhibit one’s skill or lack of fear.  What economic speculation involves is coping with in inherent risk in such a way as to minimize it and to leave it to be borne by whoever is best to equipped to hear it.”

For the most part, speculators are mitigating the risk—the risk of price fluctuations.   They serve as a form of “insurance” for the marketplace.  For example, a farmer that is growing a particular commodity may be unsure of how his crop will turn out.  His prices of his crop are determined not just based on the availability of his crops, but a worldwide inventory.  If there is a situation that causes shrinkage of the worldwide inventory, the farmer’s prices will be impacted.  This may place the farmer in a precarious financial situation. To mitigate this situation, he will enter into a contract with a speculator. That speculator will assume the risk of the uncertainty of the price fluctuation. This agreement allows the famer to move forward in working his operation; the speculator has provided an offer to purchase a finite quantity of the farmer’s crop at a set price in the future. Of course, the speculator will never take issue or inventory of that particular good or crop.

Let us assume that the farmer was in an environment where speculators were banned. What would be the consequences of this action? Reviewing the scenario, the farmer would still be uncertain of future prices and how the future prices would turn out. So, he is placing his operation’s resources at risk in the event that prices are not able to satisfy his cost to produce a crop. If he guesses wrong, he loses money, maybe his operation.  Transferring this risk to a speculator actually protects his operation and its finite resources.  This scenario can be used in any sort of speculative transaction.

What about the claims that the speculators are raking in all this cash, and operating with surreptitious motives? This claim does not tell the entire story. Most trades do not make money. Obviously, they earn money as a whole; otherwise they would do something else.  They must have the ability to predict for each contract the proper price on the contract. If the contract prices do not meet the actual price projected by the farmer, the speculator can and will lose money. Since the risk is being passed from the farmer to the speculator, they absorb more of the risk. This makes this type of enterprise with a potential high reward, and very high risk. 

Lastly, there is no evidence that speculation drives up the market price. The Hunt brothers in the 1970s attempted to corner the silver commodities market. They lost billions within a matter of days or weeks.  Here is a quote from Economist Darryl Duffie of the Hoover Institute:

 “The market for silver was temporarily cornered in 1979-80, when Nelson Bunker Hunt and his brother William Herbert Hunt held silver derivatives representing approximately half of annual global silver production. In the end, the Hunt brothers were unable to maintain a corner. As they sold, silver prices fell, causing them calamitous losses “

The FTC did an investigation [,] where they found no correlation between speculators and gas prices.

In closing, speculation is a needed function in the marketplace. Removal of this activity would be extremely hazardous.  Speculators provide a method of handling risk in the marketplace. It is a means to provide producers a way to transfer the risk of uncertainty of prices, so producers can focus on what they are well equipped to do: Produce. 

Friday, March 16, 2012

Thought of the Day: Life, Liberty, and Property

“Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.”~Federic Bastiat

Thursday, March 15, 2012

Thought for the Day: Reasoning

"A Few Lines of Reasoning can change the way we see the World"~Steve Landsburg

Monday, March 12, 2012

Thought for the day

Ludwig von Mises: "We must comprehend that it is impossible to improve the economic conditions of the underdeveloped nations by grants in aid. If we send them foodstuffs to fight famines, we merely relieve their governments from the necessity of abandoning their disastrous agricultural policies." - Money, Method, and the Market Process

Thursday, March 8, 2012

Words from Robert Kiyosaki

Excerpt from Mr. Robert Kiyosaki's regular update, "Conspiracy of the Rich"

Online Exclusive Update #115 - Tax Which Rich?

Conspiracy of the Rich
The 8 New Rules of Money
by Robert Kiyosaki
Online Exclusive Update - #115
  March 6, 2012

Tax Which Rich?
By Robert Kiyosaki

It’s that time again—election time. And in true form, politicians are willing to say and do just about anything to get elected. Generally, the things that politicians say during an election year are contradictory at best and downright idiotic at worst. But this time around, the Republicans are doing their very best to sound like socialists by attacking one another for being rich and not paying enough taxes.
The reality is that the rich are easy to pick on right now because everyone is hurting financially. But it’s important to define what you mean when you say rich—because there are many different types of rich people in the world.

One of the very first lessons I learned from my rich dad was the CASHFLOW Quadrant.

E stands for employees. Whether they are a janitor or a CEO, they are an employee of a business.
S stands for small business or self-employed. These are small business owners and specialists. Many highly educated professionals such as doctors and lawyers fall into this category.
B stands for big business. These are companies with 500 or more employees.
I stands for investor. These people are always looking for other people’s money to fund their business projects.
In each category of the CASHFLOW Quadrant, there are many people who would be considered rich because they make a lot of money. However, the real dividing line between the true rich and those who simply make a lot of money is how much money they actually keep in their pockets. Those with high financial intelligence can make a lot of money but also keep that money come tax time.

As my tax advisor, and author of Tax-Free Wealth, Tom Wheelwright, teaches, the tax code is simply a tool for governments to get you to do what they want you to do. If the government wants cheap housing, they’ll give you a tax break to build it. If they want oil discovery, they’ll give you a tax break to do oil exploration. If they want to encourage debt, they’ll give you a tax break for debt. In this election year, there will be a lot of talk about taxing the rich. This is funny and depressing because the only rich who pay lower taxes are those who do what the government wants—stimulate the economy by creating housing, industry, jobs, and more.

Those with a high financial IQ—those on the B and I side of the CASHFLOW Quadrant—have a lower tax rate because they’re rewarded for doing activities that the government needs to help the economy. There are many rich who already pay extremely high taxes—in fact, for those on the E and S side of the CASHFLOW Quadrant, the more they make the higher their percentage in taxes paid—sometimes up to 40 percent of their income.

Again, it’s only the rich who build the economy and provide jobs who are rewarded with tax breaks. But that’s an inconvenient truth in an election year when rhetoric gets you further than facts.

This election year, focus on the facts and not the rhetoric. As you get rich for all the right reasons, you shouldn’t be punished for it. You should be rewarded. And my hope is that all of you will experience the benefits of building a better world through financial intelligence.
© 2012 Robert T. Kiyosaki. All rights reserved. No publication or use without the prior written permission.

Thought for the Day: Master Yoda

"Do or Do not, there is no try"~Master Yoda

The Ongoing Greek Tragedy

As the Greek are seeking a buyer of their debt, many feel they should be kicked out of the Euro.I think it is a smart move, since their lack of Economic output is the real issue. Unfortunately, more borrowing and consumption is being done as compared to saving, investing and production. These are the keys of building an economy. These keys have been eschewed by the Greek, thus they are seeking someone to bail them out.  This article from Bloomberg discusses the possibilities of a Greek exit from the Euro Zone. 

This video below discusses the need to make cuts for the Greek Government:

And, here is a video discussing the potential unrest in Greece AND Italy. Italy, is tied into Greece with being one of the world's largest bond holders.

A Response to LEAP Advisers. RE:Dave Ramsey

As a member of the social networking site, Linkedin a question was posed about my feelings towards Dave Ramsey. Here is my reply:

Dave Ramsey, Suze Orman both are mountebanks of the highest order. He has a poor grasp of Economic fundamentals, thus making his disdain towards Insurance and investing flawed and irrational. His appeal to emotion makes him a wonderful charlatan. People cite that he should continue his "get out of debt" message. But, what is so unique about that message? Is there something special about his methodology of getting out of debt that differentiates from other methods? Is that a complicated message that requires spending $200+ dollars to figure out? Really?

I eschew every aspect of his message including his debt message. Getting out of debt is a wonderful deal, but integrated with maxing out qualified plans does not provide people with a capital base. Investing in mutual funds viz a viz a qualified plan in the hopes to be self insured in 20 years, is the most ridiculous concept of his sophistry style message. And, it is highly risky. If your home was paid off, would you remove the homeowner's insurance? Answer: No. Why recommend to be "Self insured" when you do not have economies of scale over your life? Transfer the risk to the Insurance company and have a built in growing capital base. One can invest in equities, Real Estate, etc once a sufficient capital base is built.

If Mr. Ramsey understood economics, Capital reserves is the starting point of production. You save to invest, not invest to save. With using perm life, that gives the client the secured foundation, along with debt freedom if the client seeks to get out of debt.

In short, Ramsey is a quack. Nothing in his message is solid simply because its all integrated into a one size fit all scam.

Here is a video mix with Peter Schiff and Dave Ramsey: (DISCLAIMER I am not a Gold Bug, but nothing is wrong with looking at commodities)

Monday, March 5, 2012

Thought for the Day: Quitters vs Winners

"A Winner Never Quits, and a Quitter Never Wins"~Napoleon Hill from his timeless work, "Think and Grow Rich"

Here is a sample of the Audio version the famous book:

Friday, March 2, 2012

Thought for the Day:Freedom from Fear

This quote needs no introduction. Well, this is an introduction.

"So over you is the greatest enemy a man can have and that is fear. I know some of you are afraid to listen to the truth-you have been raised on fear and lies. But, I am going to preach to you the truth until you are free from that fear...."~Malcolm X

Fear is an emotion that acts as a parking break on the accelerator of success. Many have a variety of fears, and these fears are just an illusion. Overcoming fear requires one to dig and seek the truth. This action will help people knock down those beliefs or fears that hold most back from success.

Thursday, March 1, 2012

Thought for the Day:What do YOU Value?

People have things they value. Those things may be intangible or tangible in nature. Do we all value the same things equally at all times?   A thought to ponder on about value from the economist named Carl Menger from his legendary work, "Principles of Economics":

"Value of goods is entirely subjective in nature. Value is thus nothing inherent in goods, no property of them, nor an independent thing existing by itself. It is a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being. Hence, value does not exist outside the consciousness of men."

People can tell us what they value based on where they spend the majority of time and money on in those respective endeavors.  Those "valued" things will vary from person to person. What things are valuable to you? Is it working 40-70 hrs per week? Is it financial freedom? Is it seeing your children attend college? Is it starting a dream business? Based on our vision, goals and objectives, we organize our resources to fit things that we value.