Saturday, November 28, 2015

Destroy Capitalism: Deregulate Banking Now

Here is an essay you ought to read, a snippet:
It has been said not one person in ten thousand understands the process by which banks conjure money out of thin air, but it is a simple process. A favoured customer asks the bank for a loan. The bank credits the customer’s account with the money at a stroke of the keyboard. As the customer draws on the facility, for example to pay his creditors, this creates matching deposits at the creditors’ bank accounts. Their deposits are recycled through the banking system to cover the original loan as it is drawn down.
He is describing "fractional reserve" banking in which there is not enough money to cover the amounts loaned out.  Once considered a crime, it is now legitimized in capitalism.  Since it can and does fail, the capitalists have "privatized the profitable phase, socialized the loss phase" by the institution of the Federal Reserve banking system.  Exactly how this is achieved is best described by the Federal Reserve itself:
The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized similarly to private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.
Clear?  No? Well maybe this helps:

Do you notice anything?  Thew twelve regional banks, for example the Kansas City syndicate, are .org, since they private companies.  But the headquarters in DC is .gov.  They are all private companies until they need to run to DC for a bailout, then all of a sudden they are .gov.  As in taxpayer bailout. If you ever want an example of "having it both ways" you can't beat the Fed Reserve system.

Inflation is the monetary policy of the USA.  He who gets inflated currency first wins, so why would anyone ever sell their shares casino where the skim is legitimized. And at a guaranteed 6% a year, on top of that, why would you sell?

Please note people say "deregulation" gave us these problems.  The above is a summary of enabling regulations.  There are millions of pages of regulations that support all of this.  There may have been some tweaking of regulations here and there over the last 40 years, but there has never been deregulation.  Deregulation would be for congress to announce "we no longer have any interest in banking in the USA, we proclaim a free market in banking."  Now that's deregulation.

This present system has only been since 1913.  This system allowed us to get into the two biggest wars in history, destroy the family, education, medicine, housing, food, clothing and whatever else other USA once provided, and has now impoverished USA into a corner.

One path to freedom is to deregulate banking.  Delegitimize fractional reserve lending.  Let competitors start banks.  Capitalism depends on the state to legitimize practices that are detrimental to peace and prosperity.  Only by free markets can we gain prosperity, approximate justice, and enjoy a little peace.  Deregulate banking first.

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Friday, November 27, 2015

ADM Cowers

 ADM has withdrawn its booth from a major food show:
"ADM's top priority is the safety of our colleagues. Given the recent events in France, ADM has decided to cancel our participation at FiE 2015 in Paris" the firm said in a statement.

What is it about welfare queens that it is not enough to live off taxpayers, they must also steal and commit fraud and ...  well, is it just that the people running ADM, Boeing, Google, Walmart, McDonalds, Microsoft are culturally inferior?  People who collect welfare tend to be lazy, thieving, lying, violent, paranoid, mean...  right?  And talk about absentee fathers, one of those whose wrist got slapped in one of the ADM convictions was the son of the ADM CEO.  We really need to end welfare in the USA. But not a dime of personal welfare is cut until every dime of corporate welfare is cut.

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Ick. GE Salmon

The FDA comes through for big subsidy ventures:
On November 19, 2015, FDA approved the first genetically engineered (GE) animal intended for use as human food – AquaBounty Technologies’s AquAdvantage Salmon, a transgenic Atlantic salmon that contains a growth hormone gene from Chinook salmon that allows the fish to reach market size more quickly than traditional Atlantic salmon.
There is no rational limit to what crazy ideas may be pursued when there is no rational limit to credit.  This is where we are. GE foods is just one example of the madness we face for legalizing the lending of malcredit.

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Thursday, November 26, 2015

Patti Lebelle's Pie Success

A paean to Patti Labelle's Swee'patata pie went up on Youtube 12 November, it has 3.5 million views by the day before Thanksgiving, 26 November, and it helped push sales of the $3.28 pie to one pie per second for 72 hours straight at Walmart.  

This will go down as exhibit A in the canon of viral marketing.  There are two sides to this, a reality side and a fantasy side.  Billions will now be spent attempting to replicate a fantasy, and ignoring the reality.  The fantasy is viral marketing can make you rich and is replicable.  The reality is no one will make any extra money off this, and it is not replicable.

First the video, but warning, naughty language.

First how many pies is one every second per day?  86,400.  At retail of $3.28.    That is about $284,000 at retail.  Do you know why Walmart had $284,000 worth of pies ready to sell?  Because Walmart expected to sell them.  If this viral video had an effect, then it only accomplished moving the pies faster than Walmart expected.

What we do not know, and Walmart is not likely to reveal, is what they expected to sell and on what time frame.  The video impacted sales and created more demand in a given time frame than Walmart anticipated. Walmart now has information upon which it can hypothesize near term sales, given the impact of the viral video.  This now breaks into two parts; replenishment (today it is in a sold out position at Walmart online) and purchase order.

Walmart will write one of their legendary 50 page purchase orders that will offer to buy X many pies at Y price, and all risk will be with Patti Labelle.  Walmart has raised the price 20 cents (slowing demand by raising price), but even at 21 ounces for $3.48, or just under 17 cents an ounce, this has to be one of the most inexpensive pies ever concocted.  With ingredients including "all California sweet potatoes" (Not 'Bama sweet potatoes?) coming up with that many sweet potatoes at that low of a price in the holiday time frame is one tall order.

Now no doubt that many pies has 50 separate industrial bakeries banging out her pies already, so it is a matter of booking more production time, but at overtime costs, since this is the busiest season for the industrial bakers.  With margins this tight, there is not a lot of room for either cost rises nor inventory mistakes.  I bet Walmart stays largely sold out, and they simply sell through what was ordered anyway. Nobody lifts a finger to expand production or sales.  There is nothing to be gained.

Patti Labelle is a smart, successful woman, and in one of the toughest industries out there, music.  She knows how contracts and managers make sure you earn practically nothing, so she is not about to be fooled by this fake success.

Nonetheless, this story will circulate for decades as people sell the fantasy of getting rich through viral marketing.  Even if you were a famous singer who went into pies and someone had a video that went viral (you aren't, and you won't) there is no money to be made following the "success" anyway.

Yet, people ever want to believe business success is about luck, fortuna, when it is about serving others.

As an aside, is her pie really that good? The pie has 90 reviews at Walmart online, where it is judged "not diabetic friendly" for being "super sweet."  Well, yes, in taste tests the most popular version of anything has the most sugar.  Imagine that.  You think you are eating all healthy like when you have a sushi meal?  Raw fish, organic rice?  Guess what holds that sushi rice together?  Sugar.  I was astonished at 15, taking a Japanese cooking class, to find every Japanese recipe loaded up on sugar.

But that is an aside.

What Ms. Labelle might do is instead of ramping up production, just license out her name to all of the pecan and pumkin pies coming out of industrial bakeries in plain boxes to be sold at grocery stores...  at 20 cents a pop, she could make millions at no risk to herself...  any mistakes by the licensee ends up in extra labels, not pies.  But she knows the music business, and that may be what she does.  Let's watch.

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Wednesday, November 25, 2015


Isaiah 50 has an interesting line:
Or to which of my creditors    did I sell you?
This is rather sophisticated finance, that is transferability.  We achieved that in the west only about 200 years ago or so, that is selling a debt on.  Our whole secondary market is based on this.

The idea was that if Joe and Jim make a deal, or form some kind of bond, neither Joe nor Jim could sell the deal to a third party, for neither Joe nor Jim had agreed to be obligated to this third party at the time of the deal was made.  Nor could they, for although they may foresee selling off a deal, their is no way they could know who would be the best bidder, from the sellers point of view.  Transferability just was not supported in law.

Now "to which...did I sell you" suggests slavery, or it just might mean the kind of ownership Uncle Sam has over people with students loans.  The first and best you produce goes to Uncle Sam, cause you took is loan.  Here the transferability occurs at the time of the loan, you borrow to pay the school, the bank takes a cut, the school takes the money, Uncle Sam owns you.

Back to Isaiah, here a debt is probably based on a loan, a charitable event, and the obligation is against the assets backing the loan.  Whatever the surety was, it could be sold off and you'd be obliged to pay that third party, apparently.

It is a mistake to think folks back then did not know anything we did not know, anything important, anyway.

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Tuesday, November 24, 2015

Betting Food Prices Fall

The hegemon has subsidized USA Big Ag exports to disaster:
Overflowing grain bins prompted money managers to expand their wagers on lower crop prices by almost ten times in the space of a week.
Global inventories of corn, wheat and soybeans will each rise to all-time highs before next year’s North American harvests, the U.S. government forecasts. While grain prices have already dropped to five-year lows, hedge funds are predicting more losses as stockpiles expand. The funds are holding the biggest bearish bet on the crops since June.
Supplies are rising after record prices in 2008 spurred farmers worldwide to increase plantings, while favorable weather in the past few seasons helped spur bigger yields. Even with a slowdown in acreage growth in recent years, gains for global consumption are also easing. A stronger dollar is also cutting the appeal of exports from the U.S., the world’s largest seller.
“We’re negative on the grains right now,” said Paul Christopher, St. Louis-based head global market strategist for Wells Fargo Investment Institute, which oversees $1.7 trillion. “It’s a combination of negative factors including weak foreign demand, record production in some places, and global supplies that are at worst, adequate, and at best, more than adequate.’
This is commodity grains, the vast majority of USA exports of food.  A stronger dollqar actuaklly matters to this category, but does not to specialty foods.  The ships that carry these graiins are not the ones that carry specialty foods, but we do have overcapacity on export, hjave for a while, so great freight low ocean freight rates.

We do not compete on price, but we can ride prices down in deflation and enjoy ever wider profits.  Here is how: as the cost of inputs of drops at an accelerating pace, you lower your prices at a slower pace.  There is a lag on perceived value, and as your costs drop faster than your selling price, your profits widen.  The next crash cannot come soon enough!
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Monday, November 23, 2015

Best Buy In Trouble and Opportunities

You should be reading David Stockman every day, and to do so sign up for his email roundup.  Yesterday came an article about another big box store in trouble, which is great news for small business.  Like GM, McDonalds, BankofAmerica, bad news for them is great news for humanity.  In this case electronics king Best Buy cannot pull it out:

Best Buy Co. shares fell after the retailer’s sales missed estimates, raising doubts about its turnaround bid and the health of the broader electronics industry.
Revenue slid 2.4 percent to $8.82 billion in the quarter that ended Oct. 31
The slump also brings a higher hurdle to Joly’s three-year comeback attempt. He initially focused on cutting costs, including selling off foreign divisions in China and Europe. But investors have been waiting for the company to show stronger revenue growth, and Best Buy disappointed on that front this quarter. 

2.4% of 8.8 bil is $21 mil in sales that did not happen that quarter.  $21 million in goods not made, goods not shipped, not warehoused.  That means there is excess capacity in all these areas, and at the production level, there are plant owners looking for work.
Both Target Corp. and Wal-Mart Stores Inc. also reported disappointing sales of gadgets and other technology earlier this week. Demand for tablets — a hot product in past years — has been particularly weak.
I have not bought a tablet because they charge too much to do too much.  I want them to do far less, which I assume means faster.  Apples new software (pages, numbers) are poorly designed, I am still using 1990s programs because anything newer is counterproductive.

Sounding like Charlie Sheen on meth, the CEO of Best Buy summarizes and assesses:

In an interview, Joly pointed out that industrywide sales of U.S. consumer electronics tracked by NPD Group fell 4.3 percent during the third quarter while Best Buy’s same-store sales rose, meaning that the chain gained market share. The company expects a similar decline in the industry for the current quarter. The categories tracked by NPD, which include computers and televisions but not phones and appliances, represent about 65 percent of Best Buy’s domestic revenue.
“That’s why I say we are crushing it,” Joly said. “We are winning in the market.”

Winning!  Your business is dying, just not as fast as others, so relatively speaking, you are picking up market share.
The company has more space dedicated to top brands like Apple and Sony and is situated the best to sell burgeoning categories such as connected home devices, ultra-high definition television and wearable computers.
You cannot discount those, and you are a discounter.  You tried the high end service and specialty when you bought Magnolia Hi Fi, and how has that done for you?

And when all else fails get back to fantasy:
The company also is revamping its e-commerce operations and adding more space for services such as home-theater setup.
Implicit example that internet marketing is a non-starter, if they need a re-do on what they were doing.

If consumer electronics is your thing, a vacuum is being created as both the ability to offer discount and the demand for same is dropping at the same time.  The vacuum is not dollar for dollar, just a shift in which what customers are left are more discerning, price is not the main thing.  I'd buy a simpler tablet, bit not these gee-whiz do everything efficiency killers.  I'd prefer a task-oriented tablet for each task, rather than a one-tablet does all...  Would enough others in USA to cover the supplier's minimum in a workable amount of time profitably??  A hypothesis worth testing.

I guarantee you the tablet makers would listen to new ideas today.

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Sunday, November 22, 2015

When the Pusillanimous Mulct

A reader inquires:
Hi John, is deflation linked to negative interest rates? What is the rationale for negative interest rates? Why banks would do this does not make any sense. Wouldn't depositors just change banks or remove most, if not all of their funds?
Swiss alternative bank breaks negative rates taboo:
Well, I am no economist, but I think it is like this:  the negative interest rate is a symptom, not a cause.  When you know an irreversible haircut of some 30% at least is coming to equities in the near term, you can leave your money in stocks and have say 70% of a million, or $700,000 in value, or 98% of a million, or $980,000 after the crash.  The price of bonds are bid, and the bond vigilantes keep the markets as real as can be hoped, so they are the smart money.

Now smarter yet is to have a million in cash, that is $100 bills, because after the crash you'll have a million.  Problem there is the hegemon will seise anything anyone have over a few hundred dollars, and is doing so currently on our nations highways and the borders.  So take your losses with bonds.

But the very best place to have your equity in deflation is in the form of asset-backed credit extended to customers of yours.  It is in microscopic amounts, making it too difficult for the hegemon to steal, its necessarily laddered, meaning it comes at intervals (usually not more they 30-60 day terms), you control then you want to book it as income by either doing so, or not, by extending the credit again, so you roll-over at your convenience.  When you match this control with business expenses, or in small business "lifestyle costs" you are simply too marginal and too squirrelly to mulct.  (Such an ugly word for taxing, I love it.)  As pusillanimous as the hegemon is, he does have limited resources. Almost all fruit is hanging lower than you, you being to high and too small to pick.

Navigating this all depends on how you define wealth.  Personal accumulation, or the range of goods and services people can afford with their own resources?

If personal accumulation, then you will be in hand to hand combat with looters fighting over what little resources are available to cover the gargantuan claims the hegemon has made.  Condign punishment for  accepting a erroneous definition.  If the other, the your work is your lifestyle, and you are pretty much denied nothing.

Get self-employed.

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Saturday, November 21, 2015

Watch Market Hammered in Hong Kong

One thinks of luxury when thinking of Swiss watches, and when I read the headline I thought it would show me something contrary to what I say: specialty does fine as mass merchandise is in deflation/freefall/death spiral.  But what does the article talk about?  Swatch, Fossil... discount leader watches:
Hong Kong’s lead against the U.S. is eroding seven years after becoming the world’s biggest marketplace for Swiss watches. The industry is pulling back in the island city, with TAG Heuer shuttering a store there in August. Richemont, , the maker of Cartier jewelry and IWC timepieces, has said its sales declined in October on weak watch demand....
“The data would suggest prudence about Swatch,” wrote Luca Solca, an analyst at Exane BNP Paribas in a note to investors. The watchmaker will find it harder to fight inventory build-up due to the difficult wholesale watch market and a significant number of new models the watchmaker is introducing, Solca said.
Competition from Apple Inc.’s smartwatch has also weighed on low-end brands of timepieces. Fossil Group Inc., a U.S. watchmaker, saw its stock slump 37 percent Nov. 13 after saying fourth-quarter sales may decline as much as 16 percent amid competition with wearable technology.
So Patek Phillippe, no word.  The article mentions Tag Heuer, but it all Swatch and low end watches  Again, low end is in trouble, not specialty.

Who cares about saving 20% tax on a $200 watch....  it's the 20% of a $5000 watch that matters,  a thousand bucks!


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Thursday, November 19, 2015

If Too Much Currency is Hyperinflation, is Too Much Debt Hyperdeflation?

Money, properly defined, is a positive.

Debt, properly defined, is a negative.

Mish notes both money and debt have monetary aspects, and all deflation and inflation is a monetary event.

Now, if inflation is positively printing too much (positive x positive) currency, the the result is hyperinflation at some point, too much currency for too little goods.

Now a negative times a positive yields a negative.  A positive three times a negative five gives you three negative fives, or negative 15.  So the more debt you multiply, the more negative you get in the hole.    When there is more credit (debt facility) than demand for credit (debt facility), then there is credit deflation, hyper-deflation?

High and low, left and right, there is a head-scratching going on regarding the debt markets:
As we stated before, a negative swap spread holds no interpretative meaning, the very fact of which is the most important element.
Do they not see what they have done?  Hyperinflation of debt means hyperdeflation of currency, it seems to me.  Correct me if I am wrong.

If I am right, do not own property or pension or either, nor have a paycheck.  All bad news. Get self employed.

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