Bourne Ultimatum/T3/QE3

Is QE3 going to be Bourne ultimatum or T3?

You decide what makes sense.

Fed’s mandate is employment and inflation. Long term or short term?

You can go thru the academics of it. In a recession, it appears, printing money means -- no risk of inflation (recession means risk of contraction). It can only increase employment...

why?

I suppose, because, we now have the formula. Decades of economics just gave us the formula for fighting deflation and increase employment.

How about centuries old formula -- we need to earn our living.

Hmm... Do I see T3 or Bourne Ultimatum

T3 had a formula. Expect the unexpected. Not sure why... Bourne wanted to know why..

Do we want to understand why QE3 will work? Specially, since, people want to keep doing what they were doing (irrespective of the contribution). Answer -- Give money to people:Build infrastructure:Keep generating employment...Employees get money and they spend. GDP will grow...

Obama will take care of all of us, because everybody has a birthright to live well.

Why would that work? Whose money are they printing?

May be we will see a prequel with Alan Greenspan (and he will tell us why Ayn Rand told him to let everybody free by borrowing with no consequences... ) and bourne would interpret her differently...

Transparency

 
Can you see it?

Transparency. Enemy of the profiteer. Friend of the confident.

Do you like transparency? Or you hate it!

It is not good when it is about your privacy. But, when it applies to your dealings, it has to be transparent!

If you know how much money your counterparty is making off a transaction, you will demand fair share. Where does that leave your counterparty though?

It is in the incentive of a businessman to be less transparent. Hide fees. Figure out ways so that you don't know or understand how you are paying (and worse, you are going to pay).

Mutual funds hide fees in their underperformance. They will tell you that they bought a stock at $50.10, when in reality, their broker bought it at $50, and booked it at higher price for them, pocketing $.10 which is undeclared commission.

Hedge fund has a whole concept of soft dollar, even legitimizing the above.

Insurance companies manage your money. Promise you return on your premium. Return which is much lower than long term bonds (granted, these days, US bonds carry very low interest, but it is not always the case).

New age companies (such as Facebook itself) don’t want to tell you what do they do with your information.

If you are looking to renovate your kitchen, do you really get a straight answer from your contractor?

What will you do if they really tell you the real cost? Would you give them business?

PS: In my view, regulations should work on increasing transparency, reducing conflict of interest. Not dictate or decide if some business models are correct or incorrect.

What is Currency?

Written on any denomination of dollar bill.

“THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC OR PRIVATE”

What does it mean?

So when you pay that money, you are demanding a favor (debt). The favor being some kind of service somebody or something will do for you.

Of course, so if you have lot of money, you can keep demanding favors. Hmmm...... You are the master and people who are being paid are the servants.

It is all fine, as this is the system (and alternative is communism).

But, what does it do? Puts so much power in currency? The power is in the hands of people who commands these currencies.

Bernanke, Greenspan, Trichet and the list goes on....

Since you can exchange favors with currency, the currency itself is just an accounting mechanism about the relative prosperity, where that relativity is determined by central bankers.

The system supposedly works as the central bankers are supposedly impartial.

What if they are misguided. What if, they want to get reelected. Would they make rational decisions? Your money (hence assets) will be in the hands of these people. Would you keep your money in cash (so they can decide its fate), or in Gold (while being precious metal, it is still driven by demand/supply) or something else?

Food for thought.

PS: Whenever I think of the above, I let my kids buy that additional tennis lesson or that additional..xyz.... Because, otherwise I am leaving junk behind for them.... Yes money left behind is junk!

In the eyes of the beholder

What is Risk for you?
You don’t know whether you took the risk if you don’t envision an alternate outcome.

Risk in in the eyes of the beholder. Seeing an accident on the road reminds you of the risk involved; It may not exist in your mind before that.

My broker pushed me to buy Nation Bank of Greece bond in 2008 telling me that they don’t carry any material risk as they are almost like government bonds.

Gold used to be safe haven! Now with the violent moves, it may not be any more.

My 2 cents, risk is the fear of loss. It is perception which is kindled by recent experience or deeper traumatic experience.

I thought Merrill Lynch was not risky at $95. But, at $6.50 BAC, I think it can go to zero!

What is safe? What is risky? It all depends on your perspective!

People tell me that they are very conservative investor, so they put money in index fund. Go figure! Until they say index down 50%.

Is US treasury bond safe? Is Cash safe? Time will tell. I think not. But, I am not sure what to do about that.

So many people spend lot of money and effort in doing estate planning etc. Will it work? Will this cash mean anything when your kids grow up?

But, one thing is for sure. I never cared about such things when I had nothing. And, I was still quite happy leading a risk free life. Can we give that to the ipad generation?

Is Government God?

That is what Karl Marx believed.

Corollary: Can government create jobs?

For a long time, we have heard that capitalism is the “right” philosophy. Government has no business telling people what to do.

I believe(d) that. Then, why is western world changing? Why is governments trying to create jobs? do they think capitalism failed? Are investors no longer capable of creating jobs?

What is wrong?

What is wrong is, we no longer can endure pain. The western world is too used to getting lifestyle (and resources) as birth right. We even want our survival as a right (no longer, you need to work to survive). Ha!

We are not God (if it exists). We are born to persevere. We are born to learn and achieve freedom by working hard and smart. Nothing is our birth right. Our society provides us the luxury of learning and other freedom and that is why we all have freedom. But that is humanity, not earnt! That is human largesse. That is the only give away we should be reliant upon.

We have to earn the rest.

We create job the hard way. When somebody needs a service, a job can be created. West should leave the capitalism to work and let the jobs be created.

Right now, at least in US, there is a huge overhead of taxes and other entitlements on the job creators that jobs are not being created. (How many of you had spent hours waiting for continental representative to ask simple questions, I would have easily paid some money to be able to do that). Reason: hiring the extra representative is too expensive..

There are needs. There are unemployed. And, that is where the government comes in. Create and enforce rules which provide people certainty in their interactions. The jobs will come.

Current economic meltdow -- I am sorry, we (out of imperfection of capitalism) created so many jobs where people are out there to fool others. Their jobs should be eliminated. At least, that is what capitalism is telling. They don’t want to accept that and unfortunately so does their government. Funny thing is that these people are in both main street (people who overstretched), but also on wall street (they seem to have overstretched as well : but, less accepting to coming reality).

Who are the hard working people who can be the answer? I wish I know. I would like to bet on them. But, they are there and will provide us the direction.

Buy Growth and get value free

What is growth?

I thought growth is an outcome (or output), not an input. If FED thinks that they can induce growth by printing money, then GOD help us.

Growth comes from improving efficiency. By coming up with better way of fulfilling our lives. Not by producing more, or consuming more.

America and the western world forgot the value of productive work. Everybody wants to enhance their lives by fooling somebody else, as opposed to helping somebody else.

The financial crisis of 2008 look distant. We are already seeing the new crisis. There are so many of us whose skill set are proving useless. How many of us are willing to acknowledge that. How many of us are looking beyond the glass and ask, can I do better (as opposed to, why am I stuck because I know only this much?). The group of people in this category will only grow.

My nephew told me that it is looking scary. Indeed it is scary. Who knows if London riots evolve into something sinister. What are we doing about this. 9/11 and follow on events brought down the world to its knees. So, hatred is winning.

What is the answer? Optimism. Sure. I am an optimist. I believe in GOD and creativity of human beings. I guess that is where it stops. Believing is something and wishful thinking is another. We need somebody/something to help us provide growth.

I don’t consider FB, Google, and apple to be those people. There are many reasons why they have their own shortcomings. We need more than that. We need people to take charge in a better way than democracy. We need a superior system.

Or may be some retailer in Las Vegas will say "Buy growth get value free".

The best one I heard. If we have growth in America, then it will increase employment, taxes... and it will solve the problems.

So, growth is available to buy? Can we buy it?

PS: I wrote this couple of days ago. So, it may look a little stale already. I still thought it is is worthwhile publishing this.

Money vs Environment

What is money?

Simple question for some of us naive people. What is money?

If money is piece of paper, printing more is a good idea. Everybody can have some.

Wait! German learnt the hard way. It causes inflation.

So, why is all feds of the world printing more?

They are worried about deflation. They say! They need to "inflate". They need to utilize the "current exceess capacity" in the economy. They can do that, if they print money, distribute it. So that, everybody else can buy more milk, bread. So, instead of throwing milk away (excess capacity), you can use it.

What a noble thought!!!!

What is wrong with this?

Well, that is what socialism is. So, what was wrong with socialism? Why did USSR fail? Why did China abandon communism?

If we get free food, what do you think we will do. We will produce more population! Create more misery in the future. Create USSR, and fail!

More population means more resource consumption. That means more oil, food, metals and more of everything.

What suffers? Environment. So, wait... Am I suggesting that printing of money is going to create environmental issues?

Tell me where did I get it wrong!