Ladies and gentlemen,
Strange things are brewing, both at home and abroad. I consider it my general job to run around the internet, evaluating what could objectively called news, rumor, fallacy, or conspiracy. As of late, the conspiracies are merging with news, on a daily basis, as are fallacies.
Buy and Hold…
They say that the greatest thing the devil ever accomplished was convincing people that he didn’t exist. That may be true. The second greatest thing he ever did was sell people on the idea that the market always goes up over time. Does it really? I suppose that is correct, if you keep those numbers independent of inflation.
I thought I knew a little something about finance before I started attending more advanced classes. Determining profit or loss didn’t seem that difficult of a thing, until I started learning about Yield to Maturity formulas, and the true value of everything based upon an equation. Deep Thought put the answer to life, the universe, and everything at 42. My guess is, he used a formula derived from WACC.
My ideas are mainly theoretical. As of yet, they have not fully formed the algorithm that describes the behavior of others in a massive panic. While there will always be the boys who understand technical chart movements, I prefer to understand human beings, at least here in the States, along with the change of trends around the world.
For instance, the traditional investment books categorize me as a “speculator”. Really? The argument could be made that you are, too. All investing is speculation, depending on what you define as risk. Evidently, the fact that I am pro-precious metals makes me a speculator. And you may be saying “Not another gold bug.” To which I reply, “Gold is ok. Silver is where things are moving.”
Did that Cat just Walk by Twice?
What brings me into this state of despondent “speculation”? History repeating itself. Evidently, our politicians, central bankers, and business leaders have called a press conference, and declared that fundamental laws of economics don’t apply to the USA. Then again, I find that most of the so-called leaders are advised by economists who are just pulling random levers, and hoping something works.
That’s the state of the economy: Our gas tank fell off a few miles back, and the administration thinks the alternator is broken. Instead of attaching a new fuel tank and filling it with petrol(gotta love the British), they have decided that it would be better if several weak men pushed us over the next hill, so the battery will charge (incidentally, this is not how batteries are charged). This, they call recovery.
Guess-timation and Tyranny.
Speaking of fuel, our dear friends the Saudis broke their calculator. It seems that they have 40% less fuel than they originally estimated. Dear George and George II, I am so glad we protected your buddies’ businesses. You told us you did it because you believed in Democracy, because at least one of you believed in Jesus. We didn’t question that. Using some logic would have been a good idea.
While we’re on the subject of democracy, allow me to thoroughly decry the recent ousting of Hosni Mubarak. What? Yup. If the Middle East has proven anything to us over the past few years, it’s that democracy is no better than a dictatorship, in many instances. There is such a thing as a benevolent dictator. The Shah was one such benevolent dictator. He used to rule Iran, before Ayatollah Khomeini and Achmadenijad became the Supreme Leaders in charge of the glorious Iranian revolution.
Saddam was reasonably benevolent, as well. Was he awful? Yes. Better one Saddam who thinks he is god/Nebuchadnezzar reincarnate, than a bunch of other people who think that god wants them to kill all the Jews/Christians. The people who welcomed us as liberators eventually remembered that we were the Great Satan. It’s funny how things work out.
We Have Always Been at War With Eastasia…
Allow me to refresh your memories on who America has been for, before we were against them: Ayatollah Khomeini, the Mujahadeen, Osama Bin Laden, Saddam Hussein…yeah, my favorite picture is the one where Donald Rumsfeld is giving him the golden spurs. Who sent Saddam the golden spurs? Ronaldus Magnus. Put that in your elephant-shaped pipe and smoke it. You can’t be good at everything, and that move was proof positive.
(Also, as a recent class reminded me, we were allied with Stalin in WWII, who killed far more people than Hitler ever did. That Stalin was a genius at Reputation Management.) Oh, and we interned a bunch of innocent, Japanese-Americans here in the States, for no apparent reason. Gives a whole new meaning to “American Exceptionalism”.
At any rate, recent developments in Egypt are bad news for the world, because Mubarak signed and enforced the Camp David accords. This is the deal that has let Israel live in relative peace for a number of years now. Not so much now, as the people want out of the accords. They also want Islamic banking, civil, and criminal law enacted. Oh, and they aren’t so hostile to Iran, who has said this revolution is like their revolution. The people whose liberation we cheered, will be the people we have our guns trained on tomorrow. Anybody want to give the hands on the Doomsday Clock a nudge toward midnight?
Walk Like An Egyptian…
While Egypt has received most of the buzz over the past few weeks, it would be intelligent to note that they ain’t the only ones in a stir. Tunisia, Yemen, Syria, and Jordan all are hosting civil uprisings( I mean, peaceful, democratic protests) of late. Jordanians have been taking pot shots at the Queen, which isn’t very good form in a country where criticizing your government can get you 3 years in prison. Islamist websites are spreading rumors that Saudi Arabia’s King Abdullah had a heart attack while arguing with Obama about Egypt. Not exactly great timing, if that turns out to be the case.
Why are all these revolutions taking place? No jobs. High food costs. Women working side-by-side with men in the workplace. Thieves with both hands intact. Frustration with governments that are friendly with Israel. By friendly, I mean that these governments haven’t killed all the Jews.
Congratulations. A massive Middle-East war, and diminished women’s rights are going to be the end of this “Democratic Transition”. Keep on cheering, Fox News commentator. It’s going to have worldwide implications, and all because you equated this uprising with Tianamen Square. Yay for being uninformed about the world around you.
Goldman Sachs, Loots, and Pillages…
You’ll notice I mentioned food costs…While a $1 uptick on a bushel of corn might hurt your feelings, in the rest of the world, it’s the equivalent of $15 a gallon gas. While part of the increase is due to really harsh weather events, much of it is due to major investment firms holding more “lots” in the commodities markets than they should legally be able to.
It seems Goldman Sachs managed to find a way around the Commodities Exchange Act of 1936, and drive prices upward through what amounts to commodities hoarding . Many people have explained this in great, complex detail, but no one does it better than Matt Taibbi in his informative, intelligent, and wholly profane book: Griftopia. (See the chapter entitled “Blowout” for enlightenment.)
To summarize, sans some very accurate usages of profanity: The basic idea is that the commodities exchanges for things like corn, rice, wheat and beans were set up so that farmers could find buyers for their crops, and lock in a price. When the farmer brought the good to market, the investor made a fair profit(or didn’t) by selling the crude commodity to butchers, bakers, and candlestick makers. It was never supposed to be a “buy and hold market”. Even if someone did want to buy and hold, there were things called “position limits” which kept them from manipulating the market.
Goldman received an exemption from position limits, and is now allowed unlimited freedom to speculate on these staples of survival, with few considerations other than the profit motive. I needn’t tell you that this kind of behavior affects people worldwide. People have to eat, and when the government can’t get the stuff to make bread for a fair price, naturally the people decide it is time for a change in the government.
Meanwhile, Goldman walks away with profits, bonuses, bailouts, and exemptions from fraudulent behavior, while somebody’s kid in Northern Africa starves, or is accidentally killed during a “peaceful protest”.
So I’m the Speculator…A Sunday School Lesson
I’m not a speculator. I’m a steward.
When I see people doing dumb, crazy, or revolutionary things, it naturally puts me on defense. The Butterfly Effect is not just a really weird movie starring Ashton Kutcher. If a butterfly may change the path of a storm system, how much more the movement of nations, natural disasters, and illicit activities in markets.
People will remind me that God is in control. That he is. The question I would ask, is this “What was Joseph supposed to do with Pharoah’s Dream?” Is Joseph free of responsibility, just because God is in control?
For those of you who remember the early days of Sunday School/VBS/TBS’ movie of the week…and for the patently irreligious, I’m going to refresh you on the story of Joseph.
1 minute catchup: His brothers threw him in a well, because they were jealous of him. He’s sold into slavery, becomes the head of the Household. He gets thrown into prison over a trumped-up rape charge. He becomes the most powerful prisoner in the prison. Two of Pharoah’s servants get thrown in the slammer. Joseph interprets their dreams, and accurately predicts their fates.
Couple years later, Pharoah has 2 dreams that really disturb him. One of the fellows remembers that Joseph interpreted his dream, accurately. So Joseph is called before Pharaoh. The dreams are 1.) 7 massively fattened cows come up out of the Nile. Then seven cows that are mean and skinny (think British models) come out of the river, and devour the fat cows…bones and all. 2.) Seven really nice looking heads of grain pop up. Then, seven really withered blighted heads of grain come up, and eat those other stalks of grain, stalks and all.
Joseph interprets the dreams as 7 years where the (metaphorical) market is on fire. Then, there are 7 years that come after that completely obliterate the gains. It’s going to affect the whole earth, says Joseph. <end catchup>
The question as I stated earlier, is what is Joseph supposed to do? God is in control. God evidently told Joseph the meaning of the dream. So what is Joseph’s response? It’s pretty socialistic. Joseph tells Pharaoh to gather 1/5 of all the crops of the land, during the good years, and put them in storehouses. Pharoah makes him second in command, and Joseph heads up the effort. There was so much corn, it couldn’t be counted.
Ever Read This Part of the Story?
Then, the famine hit, and everybody comes to Joseph for food. Now, while there’s quite a bit of family drama that takes place, nobody ever seems to read Genesis 47. The land of Egypt runs out of corn/bread. In that chapter, we see the first evidence of hyperinflation. The Bible explains it this way “The money failed.” So, Joseph takes all the money they have to give him. No money is left in the land.
Then what happens? The Egyptians give their cattle in exchange for food. The Egyptian government owns all the cattle. What next? They run out of cattle, so they give the State all their land. Then, Joseph gave them seed for their land, and the Egyptian government became legally entitled to a 20% tax on the fields, forever.
Essentially, the State became owner of all. Joseph was a benevolent, and kind regent/dictator. The problems began when “There arose a Pharaoh who knew not Joseph.”
The Lean Years…
There is some intelligence, I believe in understanding that God doesn’t always give future mummies visions in the middle of the night. Sometimes he teaches us using history, other times he references places and events in the Bible that haven’t occurred yet. Yes, I believe the Bible predicts future events, which sometimes have a dual fulfillment.(I say you’re hypocritical if you make fun of this, and still know your astrological sign.)
America, and indeed the world, finds itself in a place that they think will get better. I believe it will be far worse. Any objective observer of events political, natural, and virtual should come to this conclusion, if they give it any thought. The land is about to run out of bread again, and my guess is that people will be giving up things they never imagined to maintain much more modest lifestyles.
Here in America, we have given up freedoms. There are days coming when people will give up land, goods, and their profound love for the US Dollar, the god in whom they indeed trust. In short, the money will fail.
The operating question becomes “Where will you stand?” Will you be wiped out when markets crash, and prices rise? If you think that is God’s will, alright. Perhaps it is. All things are in His hands. The question is one of stewardship. The implication that the Bible gives us is that Joseph was a wonderful steward, regardless of his position.
Do we lack that responsibility? I think not. Will God provide? Yes. Will you go through things that could have been avoided, given a little wisdom and foresight? Only God knows.