masqara
Monday, March 29, 2010
Politicians and the general
public scare me. Those with the least knowledge have the strongest opinions, and therefore, the most power.
Monday, March 8, 2010
Thursday, March 4, 2010
0310
Survive & Thrive Without Killing Your Boss. Instead, make goal-setting a private matter. Start by refocusing energy away from contempt for your Idiot Boss to personal growth and satisfaction.
Dr. John Hoover. How to Work for an Idiot.
Nature is a mutable cloud which is always and never the same.
Ralph Waldo Emerson (1803-1882)
Dr. John Hoover. How to Work for an Idiot.
Nature is a mutable cloud which is always and never the same.
Ralph Waldo Emerson (1803-1882)
Tuesday, February 23, 2010
Wednesday, February 17, 2010
In any decade,
one sector of the financial markets is usually dominant. There is one corner of the financial universe where so much new stuff is happening, and it is of such importance to the rest of the world, that it is far easier for a young, ambitious person to make their mark than anywhere else.
In the 1980s, it was mergers-and-acquisitions deals.
In the 1990s, it was the venture capitalist who backed technology companies, and the bankers who arranged initial public offerings for dot-com companies on the stock market.
In the 2000s, it was hedge funds, along with the derivatives traders that supplied them with products.
But in the 2010s, it will be currency trading.
There are already plenty of signs that the foreign-exchange markets are hotter than a sunny day on Venus.
Deutsche Bank AG reported last month that its currency- trading platform for retail investors had a 40 percent increase in customer numbers in 2009. Ordinary investors clearly see exchange trading as an area of the market they want to be in.
In London, which is the global currency-trading hub, strong growth is also evident. According to a Bank of England study, daily trading volumes rose 13 percent to $1.43 trillion in October compared with April last year. In the U.S., foreign- exchange trading volumes rose 28 percent to $675 billion a day in the six months ended in October, according to a Federal Reserve-affiliated study. Those are impressive numbers. The volume of London trading isn’t quite back to pre-credit crunch levels, but it is getting close.
Debt Crisis
There are several good reasons for expecting currency trading to be the focus for financial markets this decade.
First, the sovereign-debt crisis. Governments took on huge debt to combat the financial meltdown. That didn’t really fix the problem. It just shifted it from one place to another. Now there are doubts about whether nations can service their obligations. The only way the markets can discipline governments, or pass a verdict on their performance, is via the currency markets. However the crisis eventually works out, it is the foreign-exchange markets that will be in the driver’s seat.
Second, the dollar is in long-term decline. Regardless of how well the U.S. recovers, the rise of new economies such as China, Brazil and India means America won’t be the dominant force in the world that it once was. The result? The dollar’s special status is coming to an end. That may be a good thing after some intense volatility as the world adjusts. Again, it is currency traders who will be in control of that transition.
Third, the advent of new reserve currencies. With the dollar on the way down, the world will need something as a reliable store of value. There are plenty of candidates: It might be gold, an International Monetary Fund-sponsored basket of currencies, or a new world currency. Who knows, it could be something nobody has thought of yet. Ultimately it will be foreign-exchange traders who decide what works and what doesn’t. link
Monday, February 15, 2010
€
BERLIN (Reuters) - A majority of Germans want debt-ridden Greece to be thrown out of the euro zone if necessary and more than two-thirds oppose handing Athens billions of euros in credit, a poll published on Sunday showed.
Vocal opposition to aid for Greece from members of Chancellor Angela Merkel's coalition also grew at the weekend with several senior politicians expressing skepticism, especially as Germany's own recovery is fragile.The Emnid poll for Bild am Sonntag newspaper showed 53 percent of Germans asked said the European Union should, if necessary, expel Greece from the euro zone.Athens has struggled to convince investors it is tackling its debt crisis and markets are nervous about a default.EU leaders discussed the issue last week and offered words of support but failed to outline concrete steps, further unsettling markets. Euro zone finance ministers are expected to discuss Greece again on Monday and Tuesday.Merkel has adopted a cautious stance on support, saying while Greece will not be left on its own, it is up to Athens to sort out its own problems.The poll also showed 67 percent of Germans did not want Germany and other EU states to give billions of euros in credit to Greece."If we start now, where do we stop?" Michael Fuchs, deputy head of Merkel's conservatives in parliament, told Welt am Sonntag newspaper."I can't explain to people on unemployment benefit that they won't get a cent more but Greeks can draw a pension at 63."In her first term, Merkel raised Germany's retirement age to 67 from 65 in an effort to rein in the deficit to meet EU goals.
RESISTANCE GROWING?
Merkel's coalition partners, the pro-business Free Democrats (FDP) are even more resistant to helping Greece."Solving this problem cannot be about aid for Greece," FDP budget expert Otto Fricke told Welt am Sonntag. "If anything, it's about keeping any damage away from German tax payers."Germany suffered its sharpest post-war recession last year and the upturn in Europe's biggest economy stalled in the fourth quarter, data showed on Friday.Such data fuels economists' warnings about helping Greece.Former European Central Bank chief economist Otmar Issing, who has played a leading role in advising Berlin during the credit crisis, said financial support for Greece from euro zone countries would be misguided."That is the way to the whole building subsiding," Issing told Welt am Sonntag, adding Greece had to take further steps itself, pointing in particular to the generous pension system.Harvard University economist Kenneth Rogoff even warned Germany could face similar problems to Greece."Germany's public finances are not on a sustainable path," Rogoff told Welt am Sonntag. "There will come a time when Germany will have its own Greece problem ... it won't be as bad as in Greece, but it will be painful," said Rogoff.Germany's budget deficit is forecast to grow to 5.5 percent of gross domestic product in 2010 and Merkel has vowed to consolidate the deficit as soon as the recovery allows.However Rogoff, a former International Monetary Fund chief economist, said helping Greece was unavoidable.
"As long as Germany isn't ready to kick Greece out of the euro zone, it must help," said Rogoff who also said an option would be for the Greek government to secure bridging credit. link
For the past few weeks the question has been whether Germany will rescue Greece and the other floundering eurozone economies from their own excesses. The point at issue now may be more whether Germany will even be able to afford such an exercise. Europe's largest economy seems to be heading for a "double dip" recession – raising fresh doubts about Berlin's ability to finance any possible rescues for the so-called PIIGS – Portugal, Ireland, Italy, Greece and Spain – the eurozone states with the weakest public finances.
Friday, February 12, 2010
5 fatal flaws of trading
Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit – and more importantly, do it consistently. How do they do that?
That’s an age-old question. While there is no magic formula, one of Elliott Wave International’s senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don’t claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person’s life. Maybe you’ll find one in Jeffrey’s take on trading? We sincerely hope so.
The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.
Why Do Traders Lose?
If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.
Which brings us to the question: Why do traders lose? Or maybe we should ask, ‘How do you stop the Hand?’ Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.
Fatal Flaw No. 1 – Lack of Methodology
If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.
How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.
Fatal Flaw No. 2 – Lack of Discipline
When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.
Fatal Flaw No. 3 – Unrealistic Expectations
Between you and me, nothing makes me angrier than those commercials that say something like, “…$5,000 properly positioned in Natural Gas can give you returns of over $40,000…” Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.
Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.
For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.
Fatal Flaw No. 4 – Lack of Patience
The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.
That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.
All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.
How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month … I promise.
I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: ‘Aim small, miss small.’ I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small.”
Fatal Flaw No. 5 – Lack of Money Management
The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.
Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% – 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.
Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).
To overcome this fatal flaw, let me expand on the logic from the ‘aim small, miss small’ movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.
Break the Hand’s Grip
Trading successfully is not easy. It’s hard work … damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.
That’s an age-old question. While there is no magic formula, one of Elliott Wave International’s senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don’t claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person’s life. Maybe you’ll find one in Jeffrey’s take on trading? We sincerely hope so.
The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.
Why Do Traders Lose?
If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.
Which brings us to the question: Why do traders lose? Or maybe we should ask, ‘How do you stop the Hand?’ Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.
Fatal Flaw No. 1 – Lack of Methodology
If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.
How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.
Fatal Flaw No. 2 – Lack of Discipline
When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.
Fatal Flaw No. 3 – Unrealistic Expectations
Between you and me, nothing makes me angrier than those commercials that say something like, “…$5,000 properly positioned in Natural Gas can give you returns of over $40,000…” Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.
Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.
For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.
Fatal Flaw No. 4 – Lack of Patience
The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.
That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.
All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.
How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month … I promise.
I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: ‘Aim small, miss small.’ I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small.”
Fatal Flaw No. 5 – Lack of Money Management
The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.
Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% – 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.
Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).
To overcome this fatal flaw, let me expand on the logic from the ‘aim small, miss small’ movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.
Break the Hand’s Grip
Trading successfully is not easy. It’s hard work … damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.
Wednesday, February 3, 2010
0210
When a true genius appears in the world, you may know him by this sign, that the dunces are all in confederacy against him.
Jonathan Swift (1667-1745)
Affairs are easier of entrance than of exit; and it is but common prudence to see our way out before we venture in.
Aesop (620 BC-560 BC)
Secret operations are essential in war; upon them the army relies to make its every move.
Sun Tzu (544 BC-496 BC)
Cy Charney suggests that the best executives are those who hire good people and then delegate. What duties to delegate? “Document your activities for a week. Divide tasks into two categories – those that you can do - those that can be delegated.” Delegated duties should include routine meetings and collecting data.
There's too much tendency to attribute to God the evils that man does of his own free will.
Agatha Christie (1890-1976)
Women leaders have an edge over male leaders, according to Caliper, a Princeton, N.J. consulting firm. Though women score lower on ego than men, they are more assertive and more persuasive, said Herb Greenberg, president and CEO: "When somebody tells a woman that she may not have what it takes to succeed, a woman will try harder, maybe to prove that person wrong."
Jonathan Swift (1667-1745)
Affairs are easier of entrance than of exit; and it is but common prudence to see our way out before we venture in.
Aesop (620 BC-560 BC)
Secret operations are essential in war; upon them the army relies to make its every move.
Sun Tzu (544 BC-496 BC)
Cy Charney suggests that the best executives are those who hire good people and then delegate. What duties to delegate? “Document your activities for a week. Divide tasks into two categories – those that you can do - those that can be delegated.” Delegated duties should include routine meetings and collecting data.
There's too much tendency to attribute to God the evils that man does of his own free will.
Agatha Christie (1890-1976)
Women leaders have an edge over male leaders, according to Caliper, a Princeton, N.J. consulting firm. Though women score lower on ego than men, they are more assertive and more persuasive, said Herb Greenberg, president and CEO: "When somebody tells a woman that she may not have what it takes to succeed, a woman will try harder, maybe to prove that person wrong."
Thursday, January 21, 2010
Tuesday, January 12, 2010
NZD/USD
dips on comments from official at China's CIC reported by Reuters that USD has hit bottom while JPY will continue to decline, says Stonebridge Group forex dealer Ricardo Garrido. NZD/USD moved down (along with AUD, EUR, gold) to around 0.7380 after Peng Junming, official at China Investment Corp, country's US$300 billion sovereign wealth fund, said in his personal view USD would start to rise when both China, U.S., lift interest rates in second half of 2010. Garrido still reckons NZD in 0.7300-0.7410 range, though "medium-term, the Kiwi can still break a short-term high, close to the 0.7500 level."
Monday, January 11, 2010
FED needs to be audited?
Forbes: Why do you think the Federal Reserve needs to be audited?
Dr. Ron Paul: For lots of reasons. I don't believe in secrecy. I don't think anyone should have so much power that they can create money out of thin air and spend it and interfere in the markets and do central economic planning without any oversight. Congress has a responsibility to know what they're doing because they created the Fed, they're very, very important, and people benefit from their actions. And I'd like to know who benefits and who suffers the consequence. I just think that it would be in the interest of the people to know exactly what the Fed is doing.
Dr. Ron Paul: For lots of reasons. I don't believe in secrecy. I don't think anyone should have so much power that they can create money out of thin air and spend it and interfere in the markets and do central economic planning without any oversight. Congress has a responsibility to know what they're doing because they created the Fed, they're very, very important, and people benefit from their actions. And I'd like to know who benefits and who suffers the consequence. I just think that it would be in the interest of the people to know exactly what the Fed is doing.
Sunday, January 10, 2010
Taking Steps to Prepare for the Worst
In Sunday school I was taught the parable of the pharaoh of Egypt and his dream of seven fat cows being eaten by seven skinny cows. Deeply disturbed, the pharaoh sought the interpretation of his dream. A young slave boy interpreted the dream to mean Egypt would have seven years of plenty to be followed by seven years of famine. The message: Prepare for the lean years during the years of plenty. The pharaoh prepared Egypt for the lean years and led it into an era of prosperity.
My rich dad used the story of the three little pigs to make a similar point. As you know, one pig built his house out of straw, the other of sticks. Once the first two pigs finished their houses they began to party, taunting and laughing at the third pig who was taking longer, building his house of bricks. After the house of bricks was finished, a big bad wolf appeared and blew down the houses of straw and sticks. If not for the shelter of the house of bricks, the first two pigs would have been pork dinner.
In 2007 a big bad wolf known as the ‘subprime crisis' blew down financial houses made of straw and sticks, houses known as Lehman Brothers, Bear Stearns, AIG, Merrill Lynch, Washington Mutual, Fannie Mae, and Countrywide -- as well as the homes and businesses of people who built their lives on straw and sticks.
Lessons of the Pharaoh
Last month's column was about reasons why people should prepare for the worst. This article is about how to prepare for the worst. Preparation begins with understanding the lessons of the pharaoh and the three little pigs: Prepare for the worst even when times are good.
For me, it was not easy to follow these lessons, especially during the boom years. It was tough preparing for bad times while my friends were enjoying the good times. It was tough not to climb the corporate ladder seeking higher pay and job security or chasing financial fads such as flipping real estate, day trading stocks, gambling on dotcom companies, investing in mutual funds, or using my home as an ATM to pay off my credit cards. Today, many of my fellow baby boomers who enjoyed the boom years are concerned about survival in the lean years.
In 1973, returning from the Vietnam War, I found my dad, in his fifties and in the prime of his life, unemployed. Although a highly educated, honest, hard-working man -- and former superintendent of education for the state of Hawaii and Republican Party candidate for Lt. governor of the state - he was sitting at home, looking for work. My dad's situation, combined with my experience of the war, was my wake-up call. I knew something was wrong, but I did not know what was wrong.
The stories of the pharaoh and the three little pigs danced in my head. I knew I had to prepare, but for what I did not know. I just knew I could not follow my dad's advice, which was to fly for the airlines or go back to school and get my PhD. My instincts, sharpened by the war, knew his advice was not right for me. I decided to follow in my rich dad's footsteps, not my poor dad's.
One Path to Take
The following are some of the steps I took to prepare for the worst. I do not recommend my path; I will simply state why I did what I did and what benefits were gained.
1. I became an entrepreneur, not an employee. This was a tough choice. I did not have the skills, experience, or financial backing to support me through the lean years and my mistakes...and there were many lean years and mistakes. Many of the businesses I started failed.
Thirty-six years later, I own a number of businesses and employ hundreds of people all over the world. Some of the benefits: A) I make more money and pay less in taxes because I provide jobs, and that is what this economy needs -- more jobs. When President Obama speaks about raising taxes on the rich, he speaks about high-income employees and small business owners, not entrepreneurs who build big businesses. As you know today, many big businesses are doing better as small businesses crumble. B) I can start new businesses as the economy changes and new opportunities appear. C) I can start businesses in different countries when new opportunities appear. D) I am not afraid of losing my job. E) My income goes up as my business grows.
The good news is that it is easier to be an entrepreneur today. The Web and new technology offer more opportunities to reach a world market at a lower price. Today a person can start a business at home and reach the world market.
2. I invest for cash flow, not capital gains. Most people invest for capital gains. These are the people who have lost a lot of money or are afraid of losing more money. When a person says, "My house has appreciated in value" or "The stock market is going up," they are investing for capital gains. Investing for capital gains is like building a house of straw or sticks.
In 1973 I took a real estate course to learn how to invest for cash flow. Even though the real estate market crashed in 2007, my rental properties continue to produce cash flow. Even though banks are not lending money to many homeowners, the government continues to loan millions, via the FHA, to investors who provide housing. This means we receive tax breaks and use debt -- other people's money -- to increase income.
The good news is, when prices crash, cash flow investments become more affordable. For example, stocks such as Johnson & Johnson, a company that pays a steady dividend (cash flow), become more affordable. If you want to start your real estate career, now is the time to invest for cash flow.
3. I invest for inflation. In 1971 President Nixon took the world off the gold standard, which means the world's central banks can print as much money as they want. I was in Vietnam in 1972 and saw what happens when people do not trust paper money. Rather than try to live below my means and save money, I invest in gold, silver, and oil -- commodities that go up in price as the government prints more money.
When investing for inflation, I am not investing for cash flow. In this case, I am investing to protect my wealth from the predatory practices of the Federal Reserve Bank, the U.S. Treasury, and the ultra rich manipulating the world economy.
China does not trust the U.S. dollar. Today China is using U.S. dollars to buy commodities such as oil, copper, gold, and silver. The good news is silver is still inexpensive. In 2007 gold was approximately 50 times more expensive than silver. In 2009 the gap is 70 times -- which means silver is a bargain.
Silver is used in the electronics industry and is consumed daily; stock piles of silver are dwindling. On top of that, for the first time in modern history, there is more gold in the world than silver. In other words, silver is more valuable than gold. The good news is, at less than $20 an ounce, almost anyone can afford to start preparing for the worst and building their own house of silver.
In conclusion: My mom and dad lived through the last depression. They knew lean years. The baby boom generation is about to have their fat cows eaten by skinny cows. The good news is, if you can thrive when times are bad, these are the best of times.
Posted on Monday, September 28, 2009, 12:00AM
My rich dad used the story of the three little pigs to make a similar point. As you know, one pig built his house out of straw, the other of sticks. Once the first two pigs finished their houses they began to party, taunting and laughing at the third pig who was taking longer, building his house of bricks. After the house of bricks was finished, a big bad wolf appeared and blew down the houses of straw and sticks. If not for the shelter of the house of bricks, the first two pigs would have been pork dinner.
In 2007 a big bad wolf known as the ‘subprime crisis' blew down financial houses made of straw and sticks, houses known as Lehman Brothers, Bear Stearns, AIG, Merrill Lynch, Washington Mutual, Fannie Mae, and Countrywide -- as well as the homes and businesses of people who built their lives on straw and sticks.
Lessons of the Pharaoh
Last month's column was about reasons why people should prepare for the worst. This article is about how to prepare for the worst. Preparation begins with understanding the lessons of the pharaoh and the three little pigs: Prepare for the worst even when times are good.
For me, it was not easy to follow these lessons, especially during the boom years. It was tough preparing for bad times while my friends were enjoying the good times. It was tough not to climb the corporate ladder seeking higher pay and job security or chasing financial fads such as flipping real estate, day trading stocks, gambling on dotcom companies, investing in mutual funds, or using my home as an ATM to pay off my credit cards. Today, many of my fellow baby boomers who enjoyed the boom years are concerned about survival in the lean years.
In 1973, returning from the Vietnam War, I found my dad, in his fifties and in the prime of his life, unemployed. Although a highly educated, honest, hard-working man -- and former superintendent of education for the state of Hawaii and Republican Party candidate for Lt. governor of the state - he was sitting at home, looking for work. My dad's situation, combined with my experience of the war, was my wake-up call. I knew something was wrong, but I did not know what was wrong.
The stories of the pharaoh and the three little pigs danced in my head. I knew I had to prepare, but for what I did not know. I just knew I could not follow my dad's advice, which was to fly for the airlines or go back to school and get my PhD. My instincts, sharpened by the war, knew his advice was not right for me. I decided to follow in my rich dad's footsteps, not my poor dad's.
One Path to Take
The following are some of the steps I took to prepare for the worst. I do not recommend my path; I will simply state why I did what I did and what benefits were gained.
1. I became an entrepreneur, not an employee. This was a tough choice. I did not have the skills, experience, or financial backing to support me through the lean years and my mistakes...and there were many lean years and mistakes. Many of the businesses I started failed.
Thirty-six years later, I own a number of businesses and employ hundreds of people all over the world. Some of the benefits: A) I make more money and pay less in taxes because I provide jobs, and that is what this economy needs -- more jobs. When President Obama speaks about raising taxes on the rich, he speaks about high-income employees and small business owners, not entrepreneurs who build big businesses. As you know today, many big businesses are doing better as small businesses crumble. B) I can start new businesses as the economy changes and new opportunities appear. C) I can start businesses in different countries when new opportunities appear. D) I am not afraid of losing my job. E) My income goes up as my business grows.
The good news is that it is easier to be an entrepreneur today. The Web and new technology offer more opportunities to reach a world market at a lower price. Today a person can start a business at home and reach the world market.
2. I invest for cash flow, not capital gains. Most people invest for capital gains. These are the people who have lost a lot of money or are afraid of losing more money. When a person says, "My house has appreciated in value" or "The stock market is going up," they are investing for capital gains. Investing for capital gains is like building a house of straw or sticks.
In 1973 I took a real estate course to learn how to invest for cash flow. Even though the real estate market crashed in 2007, my rental properties continue to produce cash flow. Even though banks are not lending money to many homeowners, the government continues to loan millions, via the FHA, to investors who provide housing. This means we receive tax breaks and use debt -- other people's money -- to increase income.
The good news is, when prices crash, cash flow investments become more affordable. For example, stocks such as Johnson & Johnson, a company that pays a steady dividend (cash flow), become more affordable. If you want to start your real estate career, now is the time to invest for cash flow.
3. I invest for inflation. In 1971 President Nixon took the world off the gold standard, which means the world's central banks can print as much money as they want. I was in Vietnam in 1972 and saw what happens when people do not trust paper money. Rather than try to live below my means and save money, I invest in gold, silver, and oil -- commodities that go up in price as the government prints more money.
When investing for inflation, I am not investing for cash flow. In this case, I am investing to protect my wealth from the predatory practices of the Federal Reserve Bank, the U.S. Treasury, and the ultra rich manipulating the world economy.
China does not trust the U.S. dollar. Today China is using U.S. dollars to buy commodities such as oil, copper, gold, and silver. The good news is silver is still inexpensive. In 2007 gold was approximately 50 times more expensive than silver. In 2009 the gap is 70 times -- which means silver is a bargain.
Silver is used in the electronics industry and is consumed daily; stock piles of silver are dwindling. On top of that, for the first time in modern history, there is more gold in the world than silver. In other words, silver is more valuable than gold. The good news is, at less than $20 an ounce, almost anyone can afford to start preparing for the worst and building their own house of silver.
In conclusion: My mom and dad lived through the last depression. They knew lean years. The baby boom generation is about to have their fat cows eaten by skinny cows. The good news is, if you can thrive when times are bad, these are the best of times.
Posted on Monday, September 28, 2009, 12:00AM
Saturday, January 9, 2010
Preparing for the Worst
"Is the crisis over?" is a question I am often asked. "Is the economy coming back?"
My reply is, "I don't think so. I would prepare for the worst."
Like most people, I wish for a better future for all of us. Life is better when people are working, happy, and spending money.
The stock market has been going up since March 9, 2009. Talk of "green shoots" fill the air. Yet, in spite of the more positive news, I continue to recommend that people prepare for the worst. The following are some of my reasons:
1. I believe the stock market is being manipulated. I suspect the government, banks, and Wall Street are doing everything they can to keep the market from crashing. Our leaders know that nothing makes the world feel better than a raging bull market.
Do I have any proof that the market is being manipulated? No. I just smell a rat, or a pack of rats. I believe greed, self-interest, arrogance, and fear control the financial markets. I suspect those in charge will do anything to keep us all from panicking... and I don't blame them. A global panic would be ugly and dangerous.
2. In my view, this global crisis has been caused by the Federal Reserve Bank, the U.S. Treasury, Wall Street, and the central banks of the world. They caused the problem, profited excessively in doing so, and now profit by being asked to fix the problem.
Every time I hear a politician mention the word stimulus, my mind flashes back to high school biology class, when I touched battery wires to a dead frog to make it twitch. Today, you and I are the dead frogs. Pretty soon the dead frog will be fried frog.
In the 1980s, our government's hot money stimulus was measured only in the millions of dollars. By the 1990s, the government had to ramp the stimulus voltage into the billions in order to get the frog to twitch. Today the frog has jumper cables with trillions in high-voltage hot money pouring through the lines.
While most us feel better when we have more high-voltage money in our hands, none of us feel good about higher taxes, increasing national debt, and rising inflation for the long term. Another old saying goes, "Sometimes the cure is worse than the disease." I say the government stimulus cure is killing us frogs.
3. Old frogs don't hop. Another reason I am cautious about the future is that the Western world has a growing number of old frogs. Between 1970 and 2000, the economy responded to bailouts and stimulus packages because the baby boomers of the world were entering their greatest earning years -- their purchasing power increased, and demand for homes, cars, refrigerators, computers, and TVs boosted the economy.
The stimulus plans seemed to work. But when a person turns 60, their spending habits change dramatically. They stop consuming and start conserving like a bear preparing for winter. The economy of the Western world is heading into winter. Hot wires and hot money will not get old frogs to hop. Old frogs will simply join the bears and stick that money in the bank as they prepare for the long, hard winter known as old age. The businesses that will do well in a winter economy are drug companies, hospitals, wheelchair manufacturers, and mortuaries.
4. The dying frog economy will lead us to the biggest Ponzi schemes of all: Social Security and Medicare. If we think this subprime financial crisis is big, it's my opinion that this crisis will be dwarfed by the crisis brewing in Social Security and Medicare...Medicare being the biggest crisis of all. As old frogs head for the big lily pad in the sky, they will demand young frogs spend even more in tax dollars just to keep old frogs from croaking.
5. The 401(k)Ponzi scheme. A Ponzi scheme, like the scheme Madoff ran, depends upon young money to pay off old money. In other words, a Ponzi scheme needs tadpoles to finance old frogs. The same is true for the 401(k) and other retirement plans to work. If young money does not come into the stock market, the old money cannot retire. One reason so many people my age are worried, not only about Social Security and Medicare, is because they're concerned about getting their money out of the stock market before the other old frogs decide to drain the swamp.
The facts are that the 401(k) plan has a trigger that requires old frogs to begin withdrawing their money at a certain age. In other words, as baby boomers grow older, more and more will be required, by law, to begin withdrawing their money from the market. You do not have to be a rocket scientist to know that it is hard for a market to keep going up when more and more people are getting out.
The reason the 401(k) has this law related to mandatory withdrawals is because the Federal government wants to collect the taxes that they deferred when the worker's money went into the plan. In other words, the taxman wants their pound of flesh. Since they allowed the worker to invest without paying taxes, the government wants their tax dollars when the employee retires. That is why the laws require older workers to sell their shares ¬-- and pay their pound of flesh.
Demographics show that we are entering a battle between young and old. I call it the "Age War." The young want to hang onto their money to grow their families, businesses, and wealth. The old want the tax and investment dollars of the young to sustain their old age.
This war is not coming...it is upon us now. This is one of many reasons why I remain cautious and say, "The worst is yet to come."
Posted on Monday, August 24, 2009, 12:00AM
My reply is, "I don't think so. I would prepare for the worst."
Like most people, I wish for a better future for all of us. Life is better when people are working, happy, and spending money.
The stock market has been going up since March 9, 2009. Talk of "green shoots" fill the air. Yet, in spite of the more positive news, I continue to recommend that people prepare for the worst. The following are some of my reasons:
1. I believe the stock market is being manipulated. I suspect the government, banks, and Wall Street are doing everything they can to keep the market from crashing. Our leaders know that nothing makes the world feel better than a raging bull market.
Do I have any proof that the market is being manipulated? No. I just smell a rat, or a pack of rats. I believe greed, self-interest, arrogance, and fear control the financial markets. I suspect those in charge will do anything to keep us all from panicking... and I don't blame them. A global panic would be ugly and dangerous.
2. In my view, this global crisis has been caused by the Federal Reserve Bank, the U.S. Treasury, Wall Street, and the central banks of the world. They caused the problem, profited excessively in doing so, and now profit by being asked to fix the problem.
Every time I hear a politician mention the word stimulus, my mind flashes back to high school biology class, when I touched battery wires to a dead frog to make it twitch. Today, you and I are the dead frogs. Pretty soon the dead frog will be fried frog.
In the 1980s, our government's hot money stimulus was measured only in the millions of dollars. By the 1990s, the government had to ramp the stimulus voltage into the billions in order to get the frog to twitch. Today the frog has jumper cables with trillions in high-voltage hot money pouring through the lines.
While most us feel better when we have more high-voltage money in our hands, none of us feel good about higher taxes, increasing national debt, and rising inflation for the long term. Another old saying goes, "Sometimes the cure is worse than the disease." I say the government stimulus cure is killing us frogs.
3. Old frogs don't hop. Another reason I am cautious about the future is that the Western world has a growing number of old frogs. Between 1970 and 2000, the economy responded to bailouts and stimulus packages because the baby boomers of the world were entering their greatest earning years -- their purchasing power increased, and demand for homes, cars, refrigerators, computers, and TVs boosted the economy.
The stimulus plans seemed to work. But when a person turns 60, their spending habits change dramatically. They stop consuming and start conserving like a bear preparing for winter. The economy of the Western world is heading into winter. Hot wires and hot money will not get old frogs to hop. Old frogs will simply join the bears and stick that money in the bank as they prepare for the long, hard winter known as old age. The businesses that will do well in a winter economy are drug companies, hospitals, wheelchair manufacturers, and mortuaries.
4. The dying frog economy will lead us to the biggest Ponzi schemes of all: Social Security and Medicare. If we think this subprime financial crisis is big, it's my opinion that this crisis will be dwarfed by the crisis brewing in Social Security and Medicare...Medicare being the biggest crisis of all. As old frogs head for the big lily pad in the sky, they will demand young frogs spend even more in tax dollars just to keep old frogs from croaking.
5. The 401(k)Ponzi scheme. A Ponzi scheme, like the scheme Madoff ran, depends upon young money to pay off old money. In other words, a Ponzi scheme needs tadpoles to finance old frogs. The same is true for the 401(k) and other retirement plans to work. If young money does not come into the stock market, the old money cannot retire. One reason so many people my age are worried, not only about Social Security and Medicare, is because they're concerned about getting their money out of the stock market before the other old frogs decide to drain the swamp.
The facts are that the 401(k) plan has a trigger that requires old frogs to begin withdrawing their money at a certain age. In other words, as baby boomers grow older, more and more will be required, by law, to begin withdrawing their money from the market. You do not have to be a rocket scientist to know that it is hard for a market to keep going up when more and more people are getting out.
The reason the 401(k) has this law related to mandatory withdrawals is because the Federal government wants to collect the taxes that they deferred when the worker's money went into the plan. In other words, the taxman wants their pound of flesh. Since they allowed the worker to invest without paying taxes, the government wants their tax dollars when the employee retires. That is why the laws require older workers to sell their shares ¬-- and pay their pound of flesh.
Demographics show that we are entering a battle between young and old. I call it the "Age War." The young want to hang onto their money to grow their families, businesses, and wealth. The old want the tax and investment dollars of the young to sustain their old age.
This war is not coming...it is upon us now. This is one of many reasons why I remain cautious and say, "The worst is yet to come."
Posted on Monday, August 24, 2009, 12:00AM
Saturday, January 2, 2010
Friday, January 1, 2010
0110
The idea is not to block every shot. The idea is to make your opponent believe that you might block every shot.
Bill Russell NBA legend
Man lives consciously for himself, but is an unconscious instrument in the attainment of the historic, universal aims of humanity.
Leo Tolstoy
When neither their property nor their honor is touched, the majority of men live content.
Niccolo Machiavelli (1469-1527)
He of whom many are afraid ought to fear many.
Francis Bacon (1561-1626)
The roots of education are bitter, but the fruit is sweet.
Aristotle (384 BC-322 BC)
Toleration is the best religion.
Victor Hugo (1802-1885)
'Tis an old maxim in the schools,
That flattery's the food of fools;
Yet now and then your men of wit
Will condescend to take a bit.
Jonathan Swift (1667-1745)
Every time I hear a politician mention the word stimulus, my mind flashes back to high school biology class, when I touched battery wires to a dead frog to make it twitch. Today, you and I are the dead frogs. Pretty soon the dead frog will be fried frog.
Robert Kiyosaki
The invariable mark of wisdom is to see the miraculous in the common.
Ralph Waldo Emerson (1803-1882)
Politics, as the word is commonly understood, are nothing but corruptions.
Jonathan Swift (1667-1745)
Make a point never to answer the telephone on the first ring. First ring answers mean you don't have anything better to do. Don't wait until the fourth ring. Callers imagine reasons - such as customer service is a low.
He who loses wealth loses much; he who loses a friend loses more; but he that loses his courage loses all.
Miguel de Cervantes (1547-1616)
Intuition can be developed, according to The Innovative Woman (Career Press) by Norma Carr-Ruffino, a professor of management at San Francisco State University: “Meditate every day to tap into subconscious and super conscious levels. Practice using your intuition every day, beginning with small predictions and messages and graduating to more important visioning, problem-solving and decision-making.”
В 1787 году Томас Джеферсон сказал: «Если американский народ когда-нибудь разрешит контролировать выпуск их денег сначала через инфляцию, а потом через дефляцию, банки и корпорации, которые вырастут вокруг них, будут лишать народ всей собственности до тех пор, пока их дети не проснутся бездомными на континенте, завоеванном их отцами».
When sorrows come, they come not single spies, But in battalions!
William Shakespeare (1564-1616)
Bill Russell NBA legend
Man lives consciously for himself, but is an unconscious instrument in the attainment of the historic, universal aims of humanity.
Leo Tolstoy
When neither their property nor their honor is touched, the majority of men live content.
Niccolo Machiavelli (1469-1527)
He of whom many are afraid ought to fear many.
Francis Bacon (1561-1626)
The roots of education are bitter, but the fruit is sweet.
Aristotle (384 BC-322 BC)
Toleration is the best religion.
Victor Hugo (1802-1885)
'Tis an old maxim in the schools,
That flattery's the food of fools;
Yet now and then your men of wit
Will condescend to take a bit.
Jonathan Swift (1667-1745)
Every time I hear a politician mention the word stimulus, my mind flashes back to high school biology class, when I touched battery wires to a dead frog to make it twitch. Today, you and I are the dead frogs. Pretty soon the dead frog will be fried frog.
Robert Kiyosaki
The invariable mark of wisdom is to see the miraculous in the common.
Ralph Waldo Emerson (1803-1882)
Politics, as the word is commonly understood, are nothing but corruptions.
Jonathan Swift (1667-1745)
Make a point never to answer the telephone on the first ring. First ring answers mean you don't have anything better to do. Don't wait until the fourth ring. Callers imagine reasons - such as customer service is a low.
He who loses wealth loses much; he who loses a friend loses more; but he that loses his courage loses all.
Miguel de Cervantes (1547-1616)
Intuition can be developed, according to The Innovative Woman (Career Press) by Norma Carr-Ruffino, a professor of management at San Francisco State University: “Meditate every day to tap into subconscious and super conscious levels. Practice using your intuition every day, beginning with small predictions and messages and graduating to more important visioning, problem-solving and decision-making.”
В 1787 году Томас Джеферсон сказал: «Если американский народ когда-нибудь разрешит контролировать выпуск их денег сначала через инфляцию, а потом через дефляцию, банки и корпорации, которые вырастут вокруг них, будут лишать народ всей собственности до тех пор, пока их дети не проснутся бездомными на континенте, завоеванном их отцами».
When sorrows come, they come not single spies, But in battalions!
William Shakespeare (1564-1616)
Thursday, December 17, 2009
Statistics
Gross National Product (GDP)
The total value of goods and services produced within the borders of a country, regardless of who owns the assets or the nationality of the labor used in producing that output.. The growth of output is usually measured in real terms, meaning increases in output due to inflation have been removed.
Importance: One goal (often unstated) of central banks is sustained growth of the economy with full employment and stable prices. Real GDP is the most comprehensive measure of the performance of an economy. By monitoring trends in the overall growth rate as well as the unemployment rate and the rate of inflation, policy makers are able to assess whether the current stance of monetary policy is consistent with its policy goals.
Consumer Price Index (most countries have a similar measure)
The CPI is an index designed to measure the change in price of a fixed market basket of goods and services. The market basket of goods and services is representative of the purchases of a typical consumer. Most countries have an alternate measure of inflation where they exclude volatile items, such as food and energy, to arrive at a measure of underlying inflation. Colloquially, this is usually referred to as “core” inflation. Core inflation can be a useful analytical tool.
Many Central banks explicitly target inflation levels. An acceleration or deceleration of inflation may signal that a change in monetary policy might be appropriate.
Home Starts/Permits
New Home Sales record sales of U.S. newly constructed residences. The U.S. Census Bureau publishes New Home Sales, Starts and Permits statistics monthly.
The S&P/Case-Shiller Home Price Indices
The S&P/Case-Shiller Home Price Indices measures the residential housing market. This index family consists of 20 regional indices and two composite indices as aggregates of the regions. The S&P/Case-Shiller U.S. National Home Price Index is a broader composite of single-family home price indices for the nine U.S. Census divisions and is calculated quarterly.
This is yet another measure of the housing industry in the U.S. It is watched because of its accuracy, but the data tend to be too old to impact the markets much.
Current Account balance
The Current Account balance is the difference between a nation's exports of goods and services and its imports of goods and services. The current account is one of the two primary components of the balance of payments, the other being the capital account. It is called the current account because goods and services are generally consumed in the current period.
U.S. Core PCE price index
The Core PCE price index is defined as personal consumption expenditures (PCE) prices excluding food and energy.
IMPACT: Core PCE is said to be the preferred inflation measure of the Fed and therefore is a very significant release in that it can influence policy. It is thought the Fed targets core PCE loosely between 2.0% and 3.0%.
Industrial Production/Capacity Utilization
Industrial Production is an index designed to measure changes in the level of output in the industrial sector of the economy. The index is grouped by both products (consumer goods, business equipment, intermediate goods, and materials) and industry (manufacturing, mining, and utilities). The data is produced by the Board of Governors of the Federal Reserve System
IMPACT: While the industrial sector of the economy represents only about 20 percent of GDP, because changes in GDP are heavily concentrated in the industrial sector changes in this index provide useful information on the current growth of GDP. The level of capacity utilization in the industrial sector provides information on the overall level of resource utilization in the economy which may in turn provide information on the likely future course of inflation.
Personal Income
Personal income is defined as the income that is received by persons from participation in production, from both government and business transfer payments, and from government interest (which is treated like a transfer payment). It is calculated as the sum of wage and salary disbursements, other labor income, proprietors'' income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and transfer payments to persons, less personal contributions for social insurance.
The Conference Board Consumer Confidence Survey
Consumer Confidence Survey is a monthly report detailing consumer attitudes and buying intentions. The Index is calculated on the basis of a 5,000 household survey of consumer opinions on current conditions and future expectations of the economy.
Weekly jobless data
Weekly jobless data are the most current read on employment and also the economy.
Initial Jobless claims can be very volatile so many also watch the 4-week moving average to get a better handle on trends.
Continuing claims are used by economists to predict the unemployment rate. These data are not as consistent as they once were as statutory benefit rules have been changing. Changes in the rules can affect the number of individuals eligible for claims.
Purchasing Managers Index – Manufacturing and Service and Regional PMIs
Most major economies have purchasing managers indices (PMI) released monthly. They are compiled by various organizations. Some focus on the manufacturing sector while others measure the service sector. They are a very current measure of the economic health of the manufacturing or services sector. The PMI indies are usually based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
A PMI of greater than 50 represents expansion, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change.
We find the PMI indices to be useful predictors of future economic activity.
The total value of goods and services produced within the borders of a country, regardless of who owns the assets or the nationality of the labor used in producing that output.. The growth of output is usually measured in real terms, meaning increases in output due to inflation have been removed.
Importance: One goal (often unstated) of central banks is sustained growth of the economy with full employment and stable prices. Real GDP is the most comprehensive measure of the performance of an economy. By monitoring trends in the overall growth rate as well as the unemployment rate and the rate of inflation, policy makers are able to assess whether the current stance of monetary policy is consistent with its policy goals.
Consumer Price Index (most countries have a similar measure)
The CPI is an index designed to measure the change in price of a fixed market basket of goods and services. The market basket of goods and services is representative of the purchases of a typical consumer. Most countries have an alternate measure of inflation where they exclude volatile items, such as food and energy, to arrive at a measure of underlying inflation. Colloquially, this is usually referred to as “core” inflation. Core inflation can be a useful analytical tool.
Many Central banks explicitly target inflation levels. An acceleration or deceleration of inflation may signal that a change in monetary policy might be appropriate.
Home Starts/Permits
New Home Sales record sales of U.S. newly constructed residences. The U.S. Census Bureau publishes New Home Sales, Starts and Permits statistics monthly.
The S&P/Case-Shiller Home Price Indices
The S&P/Case-Shiller Home Price Indices measures the residential housing market. This index family consists of 20 regional indices and two composite indices as aggregates of the regions. The S&P/Case-Shiller U.S. National Home Price Index is a broader composite of single-family home price indices for the nine U.S. Census divisions and is calculated quarterly.
This is yet another measure of the housing industry in the U.S. It is watched because of its accuracy, but the data tend to be too old to impact the markets much.
Current Account balance
The Current Account balance is the difference between a nation's exports of goods and services and its imports of goods and services. The current account is one of the two primary components of the balance of payments, the other being the capital account. It is called the current account because goods and services are generally consumed in the current period.
U.S. Core PCE price index
The Core PCE price index is defined as personal consumption expenditures (PCE) prices excluding food and energy.
IMPACT: Core PCE is said to be the preferred inflation measure of the Fed and therefore is a very significant release in that it can influence policy. It is thought the Fed targets core PCE loosely between 2.0% and 3.0%.
Industrial Production/Capacity Utilization
Industrial Production is an index designed to measure changes in the level of output in the industrial sector of the economy. The index is grouped by both products (consumer goods, business equipment, intermediate goods, and materials) and industry (manufacturing, mining, and utilities). The data is produced by the Board of Governors of the Federal Reserve System
IMPACT: While the industrial sector of the economy represents only about 20 percent of GDP, because changes in GDP are heavily concentrated in the industrial sector changes in this index provide useful information on the current growth of GDP. The level of capacity utilization in the industrial sector provides information on the overall level of resource utilization in the economy which may in turn provide information on the likely future course of inflation.
Personal Income
Personal income is defined as the income that is received by persons from participation in production, from both government and business transfer payments, and from government interest (which is treated like a transfer payment). It is calculated as the sum of wage and salary disbursements, other labor income, proprietors'' income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and transfer payments to persons, less personal contributions for social insurance.
The Conference Board Consumer Confidence Survey
Consumer Confidence Survey is a monthly report detailing consumer attitudes and buying intentions. The Index is calculated on the basis of a 5,000 household survey of consumer opinions on current conditions and future expectations of the economy.
Weekly jobless data
Weekly jobless data are the most current read on employment and also the economy.
Initial Jobless claims can be very volatile so many also watch the 4-week moving average to get a better handle on trends.
Continuing claims are used by economists to predict the unemployment rate. These data are not as consistent as they once were as statutory benefit rules have been changing. Changes in the rules can affect the number of individuals eligible for claims.
Purchasing Managers Index – Manufacturing and Service and Regional PMIs
Most major economies have purchasing managers indices (PMI) released monthly. They are compiled by various organizations. Some focus on the manufacturing sector while others measure the service sector. They are a very current measure of the economic health of the manufacturing or services sector. The PMI indies are usually based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
A PMI of greater than 50 represents expansion, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change.
We find the PMI indices to be useful predictors of future economic activity.
Monday, December 14, 2009
1209
They who act without sufficient thought, will often fall into unsuspected danger.
Aesop (620 BC-560 BC)
Humor is the first of the gifts to perish in a foreign tongue.
Virginia Woolf (1882-1941)
One element about performance is clear "Nobody can be at the top of their game unless they love what their doing. Freud put it simply. Life really is all about love and work"
Caliper a Princeton, N.J.-based management-consulting firm:
Please do not shoot the pianist. He is doing his best.
Oscar Wilde (1854-1900)
So wise so young, they say, do never live long.
William Shakespeare (1564-1616)
The world is full of willing people, some willing to work, the others willing to let them.
American poet Robert Frost
To hold the same views at forty as we held at twenty is to have been stupefied for a score of years, and take rank, not as a prophet, but as an unteachable brat, well birched and none the wiser.
Robert Louis Stevenson (1850-1894)
Books are good enough in their own way, but they are a poor substitute for life.
Robert Louis Stevenson (1850-1894)
A man dies still if he has done nothing, as one who has done much.
Homer (900 BC-800 BC)
My best friend is the man who in wishing me well wishes it for my sake.
Aristotle (384 BC-322 BC)
There is no good ... in living in a society where you are merely the equal of everybody else. ... The true pleasure of life is to live with your inferiors.
William Makepeace Thackeray (1811-1863)
Aesop (620 BC-560 BC)
Humor is the first of the gifts to perish in a foreign tongue.
Virginia Woolf (1882-1941)
One element about performance is clear "Nobody can be at the top of their game unless they love what their doing. Freud put it simply. Life really is all about love and work"
Caliper a Princeton, N.J.-based management-consulting firm:
Please do not shoot the pianist. He is doing his best.
Oscar Wilde (1854-1900)
So wise so young, they say, do never live long.
William Shakespeare (1564-1616)
The world is full of willing people, some willing to work, the others willing to let them.
American poet Robert Frost
To hold the same views at forty as we held at twenty is to have been stupefied for a score of years, and take rank, not as a prophet, but as an unteachable brat, well birched and none the wiser.
Robert Louis Stevenson (1850-1894)
Books are good enough in their own way, but they are a poor substitute for life.
Robert Louis Stevenson (1850-1894)
A man dies still if he has done nothing, as one who has done much.
Homer (900 BC-800 BC)
My best friend is the man who in wishing me well wishes it for my sake.
Aristotle (384 BC-322 BC)
There is no good ... in living in a society where you are merely the equal of everybody else. ... The true pleasure of life is to live with your inferiors.
William Makepeace Thackeray (1811-1863)
Friday, December 11, 2009
Wednesday, November 25, 2009
welcome to ethiopia
BAKO, ETHIOPIA -- In recent months, the Ethiopian government began marketing abroad one of the hottest commodities in an increasingly crowded and hungry world: farmland.
Why Attractive?" reads one glossy poster with photos of green fields and a map outlining swaths of the country available at bargain-basement prices. "Vast, fertile, irrigable land at low rent. Abundant water resources. Cheap labor. Warmest hospitality."
This impoverished and chronically food-insecure Horn of Africa nation is rapidly becoming one of the world's leading destinations for the booming business of land leasing, by which relatively rich countries and investment firms are securing 40-to-99-year contracts to farm vast tracts of land.
Governments across Southeast Asia, Latin America and especially Africa are seizing the chance to attract this new breed of investors, wining and dining executives and creating land-leasing agencies and land catalogues to showcase their offerings of earth. In Africa alone, experts estimate that about 50 million acres -- roughly the size of Nebraska -- have been leased in the past two years.
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