Gary North has been a reliable guide to economics, and he is now arguing to begin unwinding any gold position, and how to do it. 
He has a subscription based advisory service, and although his analysis is excellent, he wonders why people don’t take his advice?
I think I know how he feels, wondering as I do why more people do not start their own businesses.
He is surpised maybe 4% take his advice.
He finds particularly tedious people who won’t pay him for advice...
I contacted him once and got one of his form emails back. He needs a mechanism for finding out for what they will pay him. For example, he has written phenomenal amounts on economics and the bible, and I’d like a guide, him, through his work. I’d pay for a class he taught online.
There is a way to reach him of course, a letter... in these days of emails a piece of paper in an envelope arriving in the mailbox is all the more powerful.
A quote from one of his articles above:
“As the markets keep confirming my forecasts, and as my website's subscribers make more money, a few of them cancel. It's the oddest thing. I am reminded of the old statement, "nothing fails like success."
Now he seems to be saying people who making money cancel, which I suspect is true. But he goes on to lament that people who see he is right cancel, since they missed the last oppty.
Of course people who subscribe, learn what you know, make money, will move on once they “get it.” And there are also people who tire of seeing the advice is good, but they just cannot take the step. For me, why people do not take the step, or why some do, is an unaddressed topic, or where addressed, wrong. I may someday contribute to knowledge by answering this question better. So working on this is something I do on the side, something else I’ll never get paid for.
But we cannot complain. Dr. North has been an inspiration to me, a confidence builder. He has written massive amounts of high quality output, and he both sells it and it away for free. And anyone who wishes could copy his stuff and put their own name on it and try to sell it as theirs, which at most would only amuse Dr. North. Dr. North is exhibit A in the case for free markets in intellectual property rights.
Dr. North is musing in his essays, not complaining. But it reminds of the scene when Michael Corleone is complaining to Hyman Roth in Godfather II, and Roth fires back, “it is the business we chose.”
The last line in the first article cited above Dr. North advises “make yourself more valuable to your employer.” I’d just note the best employers are your customers.
Saturday, March 22, 2008
Dr. Gary North
Friday, March 21, 2008
Twelve Stepping And New Business
I've always been suspicious of those 12-step programs to end substance abuse, they seem to be for quitters.
But recently I've had the occasion to speak with a few followers, and something occurred to me. Their program sounds an awful lot like what it takes to start a business. And the people who have had some success with the program seem an awful lot like people whose business is catching on: cautiously optimistic. I'll have to reflect on this more. Anyone else notice this?
Bjorn Checks In From Sweden
Bjorn orders a copy of my book and asks for:
Tip on an EXCELLENT US product in home and garden not yet on the Swedish market is welcome. Regards: Bjorn Johnsson, Helsingborg, Sweden
Export anyone? Act now, because after he reads my book, he'll likely change his mind.
Paranoia
My greatest fears are the the USA would use its might to wrongfully invade a country that posed no threat; or that our government would manipulate the economy in adventures that would put the world economy at risk, or both. And the disasters that would naturally follow.
I have no fear about any conspiracies to take down towers, because if it is a conspiracy, then I cannot know about it, nor do anything about it. It has nothing to do with me. If there was such a plan, it would have to be a conspiracy, because everyone would say "no."
On the other hand, my worst fears have come true. There is such a war and the economy is in trouble. There is no part of either that was secret. Certainly there was obfuscation, but anyone who cared could see what was going on, and there were plenty of people making clear warnings and explanations. Total transparency in both instances, every step of the way; nonetheless the vast majority, and certainly both political parties, said "yes."
Why worry about conspiracies when the plain facts are dreadful?
Markets Up Before The Holidays
I googled "markets up before holidays" on a hunch, and got a whopping 8.3 million hits. Has anyone else noticed how the markets are up before the holidays? And no doubt as people gather and the conversations turn to the economy, the bulls can point to the closing numbers, and the bears are on the defensive. It would be a good paper for a college business major to study the market closes and events thereafter, at least as far back as 1997 when the US govt set up the "plunge protection team" to manipulate market sentiment.
Skin In The Game
Over at Yahoo there is a fellow who bills himself as the mortgage professor. His topic gains a lot of attention. A kindly older man, he has abuse heaped upon him. His theme this week is whether all of the people in the mortgage chain should have "skin in the game."
The question has to do whether in particular mortgage brokers and mortgage bankers, the front line sales people, should have their compensation tied to the performance of the loans they write. His answer is "no."
The people posting comments on his blog are split 50/50 in essence arguing either the people writing have no control so you cannot penalize them, or the people writing are on the front lines, and know when they write junk.
One fellow makes a suggestion: why not spread their pay across the life of the loan. You write a five year ARM, you get paid over 5 years; 30 year mortgage, pay over 30 years? Your loan goes bad, your pay stops. That would sort things out.
These are the kinds of "neat ideas" that keep policy wonks at think-tanks in business. They are like entertainment studios, where people think up entertaining ideas and then sell them to the public. And about as useful for solving our problems as a Seinfeld episode.
The error all 235 posters (and counting) are making is they fail to perceive the genesis of the problem. The housing bubble, and the concomitant mortgage mess started with the FED printing too much money and "missing the mark" in setting the correct interest rate (only a free market in money, and a free market in interest rates can ever get it right, and keep it stable).
With low interest and a flood of money, plus Japan offering near-zero interest rates, and plenty of cheap YEN to go around, and add governments leasing out gold at extremely low rates, you have very many millionaires becoming billionaires borrowing gold from sovereign nations and shorting it, taking the cash and coverting to yen and Japanese financial instruments that gave them near free money, and then offering to buy anything and everything banks in USA could finance in Home Loans.
As this bubble started, money and investment left productive areas, and moved into unproductive areas (the housing boom) and the salespeople and the armies of staff were drawn in by the attractive compensation. (Let Frank Shostak teach you about how a bubble here robs us of a benefit there.) Those people who moved to mortgages would have been engaged in other productive pursuits. To get them to move over to "mortgages" took the money that was paid. If you offered them a deal that paid over thirty years, they would not have moved over. The compensation worked out was precisely what was necessary to do the deal. No policy from on high would solve any problem. These people would have done as well in other pursuits, but the other pursuits were robbed of a natural credit availability, and of course the human talent as well. In short, diseases have gone uncured, maglev transport has gone unintroduced, so Americans can have granite countertops in houses they cannot afford.
Of course the banks knew they were writing junk. The people putting up the money, the people with all of the skin in the game, the secondary market buyers for the paper, know it was junk and were happy to finance it. All of the responsible parties, especially with those with "skin in the game" knew that when it failed, when it all came crashing down, the governments would bail them out and pass the losses to the taxpayers.
The problem isn't who has skin in the game, we know: it is you and me. The problem is the Federal Reserve System, the fact we have one.
Pensions To Buy Mortgages
John Connolly, the Texas governor who took a bullet riding with JFK back in 1963, put everything he had into bonds that had fallen to 10 cents on the dollar back in the early 1980's. The the bonds continued down to 2 cents on the dollar (or something like that) wiping Connolly out. His friends retrieved his saddle for him at auction, when everything he owned was sold off to cover his debt obligations.
Mortgage debt is now called a great buy, so pensions (your pension?) are loading up on them. Would you buy it?
Subsidiarity
The thesis is not new, the unintended consequences of expanding the police power of the state. RICO rules written to bring down mobsters were used to destroy the anti-abortion protest movement. (And of course, as peaceful protest was outlawed, some protesters turned violent in their frustration).
Now we learn it was the Patriot Act that ensnared Elliott Spitzer. When Elliott Spitzer showed up on the radar screen, whatever he was engaged in, it would not be terrorism. Nonetheless, away they go. And his crime? Call girls. I guess the lesson to politicians is be like Henry Hyde and Bill Clinton: never pay for it.
Why Didn't You Quit At The End Of Your First Shift?
Starbucks has been ordered to pay $106 million to barristas because their compensation plan declared shift managers shared in tips. The worker who brought this suit must have figured that out on day one, so if unhappy, why not quit? I doubt this judgment will stand on appeal, because shift supervisors work as hard as anyone else, and aren't paid much better. The problem is the cost to our economy to fight these fights; a free market would allow a Tully's to out[perform Starbucks in compensation, if it were truly an issue, and gain market share.
Thursday, March 20, 2008
A White Riot
Drudge reports on a fellow who has tapped into a gold mine making light of white folk's preferences. It is painfully funny stuff, but it supports a theme I've struck before: with controlled media, who gets on the air is severely limited. I've seen local talent all over the world, when travelling, things and people I thought were world class, but just never "lucky" enough to make it into the big time. With the internet, nobodies can make it into the big time. It is close to a free market phenomenam.
Wednesday, March 19, 2008
Jacque Considers Export Online Services To Brazil
Jacque has some questions about exporting online services to Brazil...
***
I watch your seminar in San Francisco 2 years ago. I also bought your book.
Unfortunately, you never touch on exporting online software and services.
***thank you for remembering me. You are quite right, I have never touched on it myself, except to mention that when schools and people overseas register for my online class, I am in fact exporting services online. But what you are contemplating is more complex.***
My company is a on-demand software in Wellness, such as Salesforce.com (on-demand software for sales and marketing). I am about to close a deal in Brazil, and I do not want to open a company there yet. So I guess I am exporting my services (it is software, but there is no CD because it is dierect on the internet).
***Yes, that seems right.***
How can the company in Brazil pay Nutrihand for the Wellness Portal we are developing for them? I thought about a letter of credit at the time that we launch live the software/service. What do you suggest?
*** a letter of credit seems ideal, perhaps a "red clause" version that permits you to draw out money as various benchmarks are accomplished. The buyer may require you to post a stand-by letter of credit in return. Google those terms for details on each.***
Also, how would I pay the commission to the Brazilian lady who found this client and she gets paid 15% of the total deal?
***that could be built into the letter of credit, or you could just send the lady the money. I imagine you want some sort of documentation that proves you've been paid as a basis for this agent being paid.***
If you cannot answer these questions, do you have a place or a person I should contact/research?
***It is a new area, and I have not come across any stories or information on this... I understand you welcome contact at to jacqueline_leao@haasalum.berkeley.edu .
John.
Why The Economy Is Crashing
It is very simple:
1. It is wrong to print money when there is no value to back it. It is the source of inflation, and it is stealing.
2. It is wrong to manipulate interest rates, to benefit some and harm others.
3. It is wrong to invade countries that never posed any threat to you. Lying about a threat changes nothing.
If you are watching your assets disappear from your side of the ledger, and appear on the side of those who brought us this mess, then perhaps you can wake yourself up if you contemplate the problem from a moral point of view. Modern economics claims to be moral-neutral and scientific, except its central fear is what they term the "moral hazard." Each of the above is a morally hazardous scheme.
The solution is a short period of sackcloth and ashes now for those who brought us this mess. If not, you'll wear the sackcloth and ashes exponentially longer, later.
Free Is The New Price
In order to keep customers from leaving to McDonalds, Starbucks will give away coffee. This is a twist on free market. Everyone should read Wired Magazine article on Free is the new price. Starbucks is making a mistake. Give up the impoverished custoemrs. McDonalds knows them and will win them. Upgrade everything and lay off half the empire.
Govt Flu Vaccine Contaminated
See this is the problem: if the government provides it for free, it is what the government says it is. If the government provided bubble gum, they would put sand in a piece of paper and call you ungrateful if you complained. People cannot wait for Hillary to give them healthcare. And she will, good and hard.
Anne Writes In...
And has some questions:
I've been trying to follow the steps you've outlined, and while having read most of the reading and looked at the resources, I'm still in the 'asking retailers if it's a good idea' step. I have quite a few ideas, actually, but it takes some time to go around and get responses from various people, and I haven't found anything yet where they say 'can't get it and it's a good idea'. They have said 'can't get it', and have mused about the idea, but not come right out and said it's a good idea. So I'm still researching.
***Yes, this is hard, but think of the alternative: setting up a business, buying equipment, sourcing goods, and THEN being told no. As the carpenters say, "measure twice, cut once." If the product is easy, then the customers are hard. If the product is hard, the customers are easy. Right now you are going the hard way, the right way about getting product. When idea and demand do come together, the rest will be easy, plus you'll know how to do it.***
I may have to take your class again, because this is something I dearly do want to follow through on. It's one of the few things that makes me feel gleeful when I think of all the possible ways I might want to spend my time in the future. But I need more time to get through the steps. The first one is the most challenging.
***Right, you are taking a radical step in starting your own business, and the paradigm is different. As far as retaking the class, sure, if you want to , but why bother? You've got enough to get going, and you might as well put your time in the essential problem you do know..and this listserv is probably enough help after taking the class and reading the book.***
I really appreciate the way you have conducted the class. When I first learned it was all on the computer I was very dubious it would be effective. I couldn't imagine a class without some aural component (conference call or such). But this does work! Thanks for bringing technology into my life in a new way (I don't frequent chats for any other purpose with any regularity).
***Yes chat groups are dreadful, but the technique used to deliver the class is socratic dialogue, the oldest teaching method there is.***
I have a question about the value of design school creations when it comes to choosing a new solution. I recently saw something in the paper about the results of a design competition at a home design exposition. So wondered, since you suggest having someone else do a design anyway, what about finding a new design for an item that really speaks to you because it solves a problem you have, but you didn't think of the solution. All those students are looking for people to productize their idea, and very few of them get picked up by large firms (the ideal for them) so for the ones that don't, what about coming in as the smaller business person that is willing to productize their idea for a problem you have.
For instance, http://www.core77.com/competitions/greener_gadgets.asp or http://www.housewares.org/show/exhibit/ (IHA) are examples of exhibitions that produce manifold solutions that could be opportunities for productization, and some of them might really grab you. Are there significant drawbacks to starting at this place?
***Funny you should say that. I ran contest at a design school, in fact a couple of times, where there was a award of a few hundred dollars for best designs, but we started with what we were trying to get (say clock faces). You'll see below on this blog where some Germans wrote in with exactly the same idea, in Germany. Perhaps you are tied into some worldwide awakening bring entrepreneur and design schools together. Perhaps recruit some retailers as judges, tying them in with "good idea, does not exist..." as part of who gets the award. Pursue it and let me know how it goes... ***
Tuesday, March 18, 2008
Nothing Changed Today
FED made cuts, Obama made a speech, the market shot up, but nothing has changed. The market fundamentals are still trash so it will continue down, people will continue to get their investment advice from entertainers like Jim Cramer, amd Hillary continues her march to her destiny, as POTUS.
Monday, March 17, 2008
China Runs Out of Cheap Labor - Re-exports USA Inflation
This is how the real world works, and what our inferior policies are up against. Why did anyone think cheap labor would be a factor in international trade? Why did anyone think the Chinese would import our inflation?
Geo Bush Assures Us
WSJ Reports:
"One thing is for certain, we're in challenging times," Mr. Bush told reporters after meeting with his top economic aides. "But another thing is for certain -- that we've taken strong and decisive action. ... The United States is on top of the situation," Mr. Bush said. "The Federal Reserve has moved quickly to bring order to the financial markets," he said. Mr. Bush ... reaffirmed that U.S. "financial institutions are strong and that our capital markets are functioning efficiently and effectively."
Bear Stearns is down in the last few months from nearly $160, to $5.It Is Only A Draft
Dear Uniformed Personnel,
We regret to inform you we have lost the war we started in Iraq. In the meantime, we have ruined the US economy. No one will lend us the money to bring you home. We recommend you make friends with the people who surround you.
Your Decider,
George
Do We Trade Places Now?
So, the people who accurately described the problems we faced, and warned of the pickle we are now in, what happens to them? Do they change places with the mainstream media, government and industry? Do the bankers and lawyers and academics who brought us this mess have their positions liquidated in the free market, and the people who were correct move up to the commanding heights?
No. If the FED did nothing, and the government did nothing, all of those people who promoted and profited from this disaster would find their assets wiped out, and they and their followers would change their minds about their ideas. Larry Kudlow would be seeking gainful employment right now.
As the economy reordered itself to a natural state, we'd have butter shortages for say six months, among other inconveniences. And that would be it, except we would all know the shortages stemmed from the incoherent philosophy of mainstream economics, the politics of lying; religion, academia and law being bought off, with false charity and government violence being the fundamental organizing principle of this regime.
A Mike Gravel, Ron Paul, Dennis 'the menace" Kucinich, a Ralph Nader might get a fair hearing. Law and religion, politics and business, academia and government would have to do some soul-searching. The people who were right would get a fair hearing in arguments with the people who were wrong, and morally wrong. We Americans would get to work, sorting out our personal lives, and exacting condign punishment on those who led this disaster.
But that will not happen. In every other time in history, what the powers-that-be in fact do is get into a war. And everyone rallies a round the flag. There are still butter shortages, but it is claimed to be due to the war effort, which people will feel good about, and not because of bad government policy. And the shortages last for five years, not six months.
The whole world is thrown into a turmoil, moves to war footing, all industry and commerce is regulated, and when excess production capacity is destroyed around the world to the point that the exhausted parties agree we can all start anew, then we reemerge on a new world order. Exhausted from war, we’ll naturally deregulate, which we should have done instead of war. And happy days are here again, sans 20 million people.
This is how USA got on top 60 years ago, but it is unlikely we would be on top this time around.
Nonetheless, the people who got us into this mess would still be on top, albeit a much reduced USA. No matter if in the USA the vast majority sees our rights, privileges and standard of living drop. When Rome finally disintegrated, it was a Roman Emperor who headed new regime. The nazi elite who thrived before and during W.W.II were the very ones, except for a few top players, who continued to run Germany after the war. The people running Russia today were running the Soviet Union.
The people who got us in this mess will remain in power in USA. They will have caviar and private jets and high-fee call girls (or boys, when republicans are in power) and red carpet treatment, like a Bokassa emperor-for-life, when they visit overseas.
If you were John McCain or Hillary Clinton (or pick your fave) would you apologize and withdraw from power, or start a war?
This process will take about 25 years. We self-employed will continue to fill in around the edges. We will watch, like the Amish, as those around us descend ever more into the madness. And the whole time slather farm-fresh butter, which we traded for something of equal value to the farmer, on our toast.
Sunday, March 16, 2008
Gold Rush
A buddy of mine is a gold coin dealer who tells me when gold hit $1000 he was hit with a flood of sellers, and nearly found he could not make any more market himself. As I understand it, these retailers are backed by wholesalers who buy up what they take in. A question and a lesson:
If there was a rush of sellers at $1000, how come the price did not go down (it's now $1027)? Because more people bought than sold, on balance? The lesson: don't wait for the top, whether $4000 or $8000 an ounce, to unload. The door will be so crowded you'll likely be unable to unload your gold at that price, and have to take what you can get. Better to safely sell at $3500 or $7500, or whatever your guess is.
Bear Stearns Non-Bust
What a tough pickle! The FED has to keep Bear Stearns assets from bankruptcy and thus marked to market, because any price set for any of these assets will suggest how another $2-4 trillion nominally valued securities is likely priced. So the FED forks over another 30 billion so JPMorgan can pretend to buy Bear Stearns. And who gets hurt?
About a third of Bear Stearns stock is held by employees, none of whom will see more than 10 cents on the dollar. Recall a few days ago the head of Bear Stearns assured the world all was well. A few days later, the stock lost almost 50%.
The other two-thirds is where? Pensions, savings, etc. Of course this is far from over. The FED is fast running out of bail-money. The Chinese declined to save Bear Stearns.
Here is Arthur Laffer of Laffer Curve fame, arguing all is well against Peter Schiff, two years ago. Of course, Arthur Laffer is a Hamiltonian, whose claim to fame is the clever argument government can get bigger if we cut taxes. It is a paradox, but true. (He does not explain why we should view this as good.) Peter Schiff is obviously right on, but is sneered and jeered.
When California passed proposition 9 in the late 1970's, governments found themselves unable to tax the people into oblivion. With Laffer, they could continue on, up to a point. But to get really big government you must raise taxes, but the people are against that. So what to do? foment a real estate bubble, raise the 'value" of houses, and thus the tax income, and you have a stealth tax. problem is, so many peopl are losing jobs and under water in their mortgages, that they are simply walking away from the properties. And the huge government cannot afford what it "bought" either. California is laying off 20,000 teachers.
None of what we are going through is unexpected, anyone could have listened to people like Schiff who accurately described the problems. The amazing thing is people sit tight as the damage is done.
Brew Better Coffee
Anthony offers how to brew a better cup, and birddogs an article on Starbuck's relations with Ethiopia. Says Anthony:
Says Anthony:
Starbucks is using the US government to block Ethiopia
from trade marking its coffee.
http://news.bbc.co.uk/2/hi/business/6619307.stm
I'm not going to import coffee, but I heard something
interesting yesterday about coffee.
I bet Italy colonized Ethiopia for the coffee. I
think they save the best beans for themselves. Italy
probably imports inferior columbian beans then exports
them to the US with Italian labels.
Recently, a coffee connoisseur shared the three
secrets to why Italian coffee is so good(I guess they
are not so secret). 1) Use only Ethiopian Arabica
beans. All other coffee beans are inferior. 2) Stop
the roasting process right after the second "crack".
Evidently coffee "cracks" when roasted. 3) Hand pull
the shot at the lowest acceptable temperature. It may
take longer, but will taste less bitter. The higher
the temperature the more bitter it will taste.
Hear Him...
Mish Shedlock is at it again, he has facts galore and refuses to speculate, merely asks questions. This is different from me, as I am happy to be loose with the facts and jump to conclusions.