Saturday, September 20, 2014

Boeing Statement on Export-Import Bank Extension

This warning from Boeing:
"Congress has left thousands of small, medium and large U.S. exporters and their workers in limbo until the middle of next year and this will likely negatively impact U.S. sales to foreign customers. We will continue to press Congress for a multi-year reauthorization of Ex-Im."
They would say that, wouldn't they?  In capitalism, corporations are happy to ruin their customers: example 234,813,092,229 is Boeing's ExIm antics harms their domestic USA airline customers.  Who cares?  Where ya gonna go?  There is no other USA airliner builder.  There are no business setbacks that cannot be bailed out.

Their business model is on life support, and the other ExIm welfare queens are, as reported here variously, will not make it even with ExIm support.

One big argument is they do it, so we need to do it too!  EG,
New Delhi: ICICI Bank Limited, India's largest private sector bank, today signed a framework agreement with The Export-Import Bank of China (China Exim Bank) for USD 1 billion. Under this agreement, China Exim Bank will consider providing short term and long term credit lines to ICICI Bank for financing purchase and import by the latter’s clients of Chinese products and services. The credit lines may also be utilised to support the cooperation between Chinese and Indian enterprises in natural resources, energy exploration and construction contracting projects.
Wait...  if China extends ExIm loans to India, how come we extend ExIm loans to China?  Why not everyone just finance their own commerce?  Why not, because Chinese State Owned Enterprises (SOE), like USA SOE, Boeing, General Motors, Fox News, simply could not exist without the running bailouts.

On the other hand, USA companies ought work these programs as much as possible, China ExIm bank financing, since they are deleterious to China.  Once upon a time we were producers, not welfare queens.  But capitalism breeds welfare queens.

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The Alibaba Heist

Those outside of China who ever heard of Alibaba are probably familiar with the "trade lead" site where buyers and sellers can "hook up" internationally.  I've always advised against "trade lead' sites, even before the internet in their newsletter versions, because they are usually people with no customers talking to people with no supply, with a large contingent of scammers standing by.  I've characterized it as trying to drink from a fire-hose of sewage when all you want is a sip of clean water.  What I learned long ago was to work directly with that sip of clean water (the best suppliers and customers) and ignore the trade leads.  Indeed, one of the myriad steps in due diligence is to make sure a supplier or a customers is NOT on alibaba.com, for a busy, top company would not bother with that desultory exposure.

Alibaba also once had a JV going with Yahoo.com that gave alibaba.com some stature in USA, but that was severed when reputation issues where hurting Yahoo.com.

Today Alibaba is ebay, youtube, paypal, einsurance, google, sprint, geico, fedex, twitter, facebook, amazon, and everything else all in one. Is that a good idea?  Think management issues.

As a side note, I do like the idea of an economy that is so integrated and comprehensive that it acts in the place of any government.  Alibaba.com would be an example of what comparative law theorists call "private law."  It would be, except it is an invalid instance: private law grows organically along anarchistic lines, it is not a plot hatched by a few dozen people and financed by Goldman Sachs.

I've been looking for a reason why Alibaba would be a good buy, and about the most significant explicator I can find is here:
Michael Tudor, founder and CEO of New Jersey-based Ripen eCommerce, said small- to mid-size businesses can look at Alibaba as a shortcut to reaching the massive Chinese e-commerce market.
"Tmall (one of Alibaba's marketplaces) is a particularly brand-friendly marketplace for a number of reasons, including small commission rates and the fact that it doesn't sell merchandise of its own, unlike Amazon," said Tudor. "At the same time, Alibaba.com is a business-to-business site that connects manufacturers with retailers around the world. No other site has been able to streamline the connection between manufacturers and buyers."
Delusional, or fraud.  First, Alibaba can do nothing about physics, the cost of moving goods.  You can get $150 for a live Dungeness crab in Beijing.  But you have to get it to Beijing.

The fact that amazon.com does compete against its clients is the reason, albeit counterintuitive, that Amazon.com took the lead.  The lack of exclusivity allows the best to rise, not all too often crowd them out.  Alibaba.com may have eschewed a critical factor.

Second, what does a $20 billion (or whatever) flow out of USA pensions into Chinese tallies do for the USA small to mid-size businesses (not to mention the pensioners)?  Alibaba has been around since 1999.  There is nothing that will be improved in the next year that was not available in the last year.  At no time did Alibaba have any advantage that was not otherwise available in the last fifteen, nothing in the next fifteen that will be unique to Alibaba.  So where is the advantage in having moved $30 billion tally in pretend pension contributions onto Alibaba's books, in exchange for stocks held by pensions?

Third, what's for sale?  Let's read the prospectus:
(alibaba is) the largest online and mobile commerce company in the world in terms of gross merchandise volume in 2013, according to industry sources.
What industry sources?  No telling...  and a company in China that is "all-in-one" is likely, should be, the largest in the world.

Now what is for sale with this stock is a couple of websites... alibaba.com, taobao, etc...  all those other functions are part of the alibaba.com "ecosystem" -
Given the scale we have been able to achieve, an ecosystem has developed around our platform that consists of buyers, sellers, third-party service providers, strategic alliance partners, and investee companies. Our platform and the role we play in connecting buyers and sellers and making it possible for them to do business anytime and anywhere is at the nexus of this ecosystem. Much of our effort, our time and our energy is spent on initiatives that are for the greater good of the ecosystem and the various participants in it. We feel a strong responsibility for the continued development of the ecosystem and we take ownership for this development. Accordingly, we refer to this as “our ecosystem.”
So all those Chinese third party providers, strategic alliances, investees, are not part of what one is buying, but they all benefit from you buying the stock.

And what is Alibaba's China market penetration?

Well, their graphs are selective, but in mobile they claim a 76% market share in China online sales. Wow.  In a country, China, where 7.9% of retail sales is online.  Wow!  That is about 20% more  internet market penetration total in China than internet market penetration in the USA.  In USA only about 6% of retail sales is online.  When I ask in classes what per cent people think occurs online in USA, usually they offer a figure say 50% or higher.  They are astonished to learn it is so little.  And then I go on to say "why is it not higher?  There is nothing to keep it from having gone higher yet, and maybe it will get to 8% (where China is) but I doubt it will ever go above that. " (Back in the 1980s when every was a sure most retail took place out of catalogs, then too in boom, penetration never got about 8%.  There are rational limits.)

Online sales has maxed out its viability, and has yet to prove profitable. Apparently so does Amazon, who is yet to turn a profit with online sales, offers seminars on what may work to make online sales profitable  (who knows, it's never been done), and at the same time is trying to get into industrial supplies sales online.  (It usually costs more to attract a customer online than the profit from a sale.)

That Alibaba "76%" is GMV.  Gross merchandise volume.  That is, including returns and dissatisfaction. That 7.9% is entire China....  Hmmm....  AS one day google took over the search from yahoo, and Apple took computing away from Microsoft, is it possible there is something preferable to alibaba.com?

For a company of this size that made only $1.6 billion net before taxes and payouts FY 2013, and that if only
Non-GAAP MeasuresWe use the non-GAAP financial measures of adjusted EBITDA, adjusted income from operations, adjusted net income and free cash flow in evaluating our operating results and for financial and operational decision-making purposes.
Strikes me as rather tight, even if whimsical.   And if they are turning such a profit, why go borrow $3 billion in August from the very bankers who are underwriting the September IPO?  Although no reason is given for the $3 billion dollar loan a month ago, perhaps it was a down payment on the fees the banks will make, $3 bil being about 10% of the IPO.  Prepaid in case the coming crash comes before the IPO?  In any case, the price surged 40% on top of the richly priced $68.00.  No crash yet. Ka-ching.

Why USA?  Why is a Chinese website raising its IPO money in USA?  There is a perfectly good stock exchange in Shanghai, but China tends to shoot people who do very big fraud.  I have no idea if this compelled the Alibaba crew to seek money elsewhere, but Hong Kong turned Alibaba.com down too.  Are you kidding?  No place that values the rule of law, peace and prosperity would ever allow a website like Alibaba.com to do an IPO on the HKEx.  So what does that leave?  O yes, USA!

No matter what happens, the usual suspects made a killing off fees and fast-trading:
Six firms were listed as Alibaba’s lead underwriters, listed mostly in alphabetical order: Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Citigroup. They emerged as winners for the honor of running an I.P.O. that could ultimately end up raising more than $20 billion.
The alibaba.com offer is for a scope and scale that is unmanageable, the model is false-economy based, the content is apparently maxed out, and the funding is pension's desperate need for yield.  It's Enron on 'roids.  It may be crazy, but it is tradable.

On the other hand, had dim sum yesterday with a rep of a freight forwarder firm based in Chile.  He laid out the strategy and tactics on building new markets for their business by assisting certain segments of markets in various countries.  It all made sense, they'll make money, business will grow.  The "get big or get out" thing has failed.  The pendulum is swinging back.  There is money to be made at the small business level.  It is people with real products selling to people with real customers that is real economy based.  These people are why there are clothes on you back and food on your plate.  Nothing terrible exciting, but it's a lifestyle.

 Alibaba has nothing to offer those people.  But it is a way for a few people to become billionaires, and others to imagine they could, if that is your definition of wealth.

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Friday, September 19, 2014

Fail Fast, Fail Early and MOQ FOB

I am delighted to see a renaissance of an idea that was once common, fail fast, fail early.  Plenty o people have monetized the idea, and I don't care how much they make as long as they spread it around. This attitude is a winner.

I am getting much traction out of MOQ FOB especially in exporting food, and area I am focussing on for now because the need is dire in that field.  But to the point, it costs nothing in time and money to decide on a product to test overseas, do the research, write up the MOQ FOB, and get it in front of a decision maker.  Order? Good, improve based on feedback.  No order?  fine, failed early, improve based on feedback.  Either way, always onward and upward.  Never a requirement to "make money now" never need to turn a profit now since there is no burn rate, and never embarrassed by being caught with "big expenses, no customers."

Jobs and Wozniack had no idea what was ahead went they introduced their, ahem, tentative first offer.  Today Apple has thirty years of history to draw on for each iteration of their product.  The start-up was far more creative and fun than now.
http://en.wikipedia.org/wiki/Apple_I
Today, predatory financing backed start-ups, ala silicon valley are making a hash of fail fast fail early.  In their version, burn rate means 'fail fast, fail early."  The more faster the burn, the more sincere the effort.  Not working out so well.  Jobs and Wozniack had no financing to get started, and you need none either.  But here is where they arrived, so far.

https://www.apple.com/macbook-air/
Remember, almost everyone who ever entered the tech industry is still unemployed, or at best underemployed.  Go for lifestyle, not money (or really, its not money anyway, but credit score.)

If anyone wants to get going in international small business immediately using this tactic, here is an online seminar available.

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Killing Ebola Workers

I spent nearly a decade helping a retired narcotics undercover detective write his memoirs.  In his patrol days occasionally he'd be uniformed back-up in a raid in the war on drugs.  Flushing dope down the toilet was a problem in terms of evidence, or lack thereof, and in those days no-knock warrants were harder to get.  Now judges hand them out like confetti.

Absent a no-knock warrant, how to achieve surprise on the target?  Police would surround the house quietly and then position themselves at all doors.  Loud enough for the neighbors to hear the police would bang on the front door screaming "police warrant"  and a cop at the back door would instantly scream "come in!" and all doors would then be blown open by invading officers.

When no dope was found, but the target was desired to be arrested by powers that be, in spite of no evidence, the cops would bring along a rookie patrolman in uniform as part of the raid, next time.  During the chaotic entry an old cop would toss a kilo of heroin (stolen before the evidence was destroyed at the Weyerhauser burner) into a closet on his way in.  The old cops would search everywhere except the closet.  The rookie would look in there, find the dope, and get attaboys all around, and "Say, you are good at this."  What an adrenalin rush for a rookie!  When the defendant denies owning the dope, and claims it was planted, the young officer is obliged to take a polygraph which he passes with flying colors.  Even better, in court, the fresh innocent young patrolman makes a naturally persuasive, offended witness when he is asked if he planted the heroin he found.  Conviction.

There were always reformers, but they never were able to effect change.  They retire on the payroll or resign. What is left? No reform in democracy, not in capitalism, not in hegemonarchy.

When the USA, with a patent on ebola, says "may we invade your country with our soldiers" the USA educated leaders of the country say "come in!"  And our soldiers come rolling in.  And not a peep from anyone, anywhere in USA about the sheer madness of it all, evil and stupid. The actual citizens of the target country know there is a better way to handle the crisis than invite an invasion by USA troops.

But they have no say in their countries, as it is in USA.  In fear and frustration, they kill the advance parties, the aid workers.

We have more important discussions: NFL players family lives.

We need truth commissions to find out what is going on.

By the way, the members of the 9-11 truth commission have all repudiated their work.  So maybe there is no hope at all for the USA.  As long as we can lend asset-less credit at usury, there is no idea unprofitable to the bankers.  There is no rational limit to what can be financed.  New frontiers of crazy are constantly crossed, and at some point, with no rational (reason) basis, it all comes tumbling down.

See: history.

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Ex-Im Bank Reauthorized, Taxpayers at Heightened Risk

Of course it was... as I said, the USA will have to end before the ExIm Bank ends, and the USA will end because no one will let the ExIM Bank end.
Reports surfaced last week suggesting Boehner and Hensarling were in talks for a deal reauthorizing Ex-Im for a short time. Rep. Jim Jordan, R-Ohio, confirmed the negotiations in an interview with The Daily Signal.
The chief "foe" of the Ex-Im Bank, Rep Hensarling, voted to reauthorize it, of course.  As a foe, favors run his way, to turn him around.  Being a foe means grandstanding for the voters, and at the same time getting benefits from your target.  The story is always the same: we just need more time.

Capitalism and the false economy will march on, and creditors worldwide maintain their faith that the USA will gladly enslave its people to bankers.

The votes that were cast against it are simply from legislators in a tight race who need to defend their re-elections.  Since we have a higher re-election rate than the Soviet Union ever had, usually politicians recall the Unruh rule.

AS Jesse Unruh explained:

if you can't drink their whiskey, screw their women, take their money, and vote against 'em anyway, you don't belong in office.
Starting up a business is secession.

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Thursday, September 18, 2014

Malaysian Experience of Shariah Banking

When people refer to Islam as medieval they mean it in a pejorative sense.  Never mind it was the phase where the West moved from "the dark ages" to the renaissance.  In one way Islam may be called medieval is it was in that era that the West went off the rails in relation to usury.  Malaysia has striven to introduce Shariah law in banking in Malaysia, hoping to advance peace and justice its lands.  As in the West, it seems, with much controversy, Malaysia is giving way to usury in much the same way the West did:
3.1 The development of Islamic banking and finance cases
The above tables showed that most cases reported were in relation to al Bay’ Bithaman Ajil (Sale with deferred payment) (BBA) transactions. Phase three (2008and forward) revealed that other Islamic transactions including Bay’ al Inah (salesof buy back), al Murabahah (sales with cost) and al Istisna’ (manufacturingcontract) were argued in court. The tables also laid down three important phases of IBF development. Phase 1 is the initial phase of the development of Islamic banking and finance cases in Malaysia. During this early stage, there were not many casessince Islamic banking and finance system was at its infancy. Phase 2 is the second stage of the development of Islamic banking and finance cases in Malaysia. There
were more Islamic banks and financial institutions being established during this
period, hence various Islamic banking activities took place. This development gave
rise to more legal disputes that had to be resolved in courts. The number of such
cases that were decided and reported during this phase also increased. This phase
witnessed a different approach by the judges in deciding Islamic banking cases.
Courts were seen to be interested in examining critically the underlying principles
under BBA agreements. They examined whether the BBA is contrary to the Islamic
principles or not. Nevertheless, they were silent on the validity and the legality of
profits derived from the facility.
They did not discuss the interpretation of  riba’ anddid not declare the profit gained from the BBA as unlawful. In the case of MalayanBanking Bhd v Ya’kup bin Oje & Anor, the learned judicial commissioner evenconsidered istihsan and the concept of equity before a case is being decided. The
third phase of the development of Islamic banking and finance in Malaysia has seen
the judges being more confident and assertive in their decisions. This could be due
to the fact that Islamic banking practice has been established for about two decades
in this country, hence judges have learnt from the earlier cases of Islamic banking
which were controversial and subject to criticisms. Judgments given are also more
consistent. This development is certainly a plus point in Islamic banking and finance
since it will lay down clear judicial precedents which serve as guidelines for future
cases.
I added the emphasis.  These cases were controversial, meaning conservative judges were overruled.  The validity and legality of profits from the BBA is the point, so to skip it is to move along the same lines we did in the West, in which the religious courts (as Shariah courts in Malaysia) deferred to the definitions provided by those who want to in effect practice usury.

It seems to me that in the geography of Islamic law, the Malaysian example in time will not tell us much about whether Shariah law advances peace and justice.  It does tell us whether Islamic or Christian law, when a state administers the law, the results are similar.

I don't think you can either let a state administer laws nor outlaw certain practices.  You must allow panarchy, that is people who consent to a legal framework to be free to contract under such without state interference.  In this way there is order, the opposite of the state, and systems may maintain their integrity and provide example of the benefit.  We cannot know if Malaysian Shariah law brings peace and justice, because it is not quite Shariah, it seems to me.

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Fake Invoicing and China Trade

There are various reasons people will submit "fake invoices" when reporting trade to the authorities, such as noted here.
Inflated mainland export figures last year due to fake invoicing have led to slower growth rates in trade data this year, economists said, and that might cause Beijing to miss its full-year external trade growth target of 7.5 per cent.
Some reasons:

1. Avoid duties.  Buyers may ask sellers to falsify invoices where say the duty is 10%.  To claim $10,000 in goods is really $5,000 is to save $500 in duties.

2.  This is how it works. Investors create fake invoices for exports to Hong Kong. That allows them to bring cash back onshore, circumventing China’s capital controls, and allowing investors to benefit from higher Chinese interest rates. The extent of the practice is visible in the difference between China’s official exports to Hong Kong and Hong Kong’s much-lower record of imports from China.

In other words, either nothing was exported or $10,000 in sales is reported as $100,000 and so in any event the incoming payment is free of Chinese capital investment inflow controls.  There are also other export tax rebates etc that can be claimed.

And...
Another common reason manufacturers fake exports is that they are colluding with someone who wants to move foreign currency into China, perhaps to take advantage of the nation's red hot property market.
The nation's currency is tightly controlled, and foreign investors must jump through a daunting series of bureaucratic hoops to get money in. But partnering up with a factory owner who is willing to fake some export invoices is a much faster way of illicitly getting cash into China.
The wheeze works thus: the exporter sends the businessman a fake invoice for goods. The businessman pays the invoice by depositing dollars in the manufacturer's offshore bank account. The manufacturer then uses the export paperwork to get permission from his bank to convert the dollars into Chinese yuan. The factory owner may also get a fee from the investor, and can collect a VAT rebate on top.
I've been asked to falsify invoices as an exporter by customers.  I answer no.  That is the end of it.  There is enough good business out there to do without having to do funny business.  Never be so eager to do a deal that you will break the rules.  And keep in mind the person asking is rarely interested in capturing a few per cent savings, they are usually interested in capturing you.

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QuiBids

An interesting mix of online gaming and auctions...

While winning an auction is a huge thrill, strategizing over when to bid and how many bids to commit to a particular auction is a ton of fun too. Every time a user bids, no more than 20 seconds is added to the auction clock, and the last person to bid when the clock runs out claims the right to purchase the item at the discounted price. CEO Matt Beckham said that QuiBids is growing rapidly, and that their number of customers now reaches into the millions. “This is a new type of shopping that appeals to a mass audience.  Consumers expect more when they shop these days and QuiBids offers that,” he said.

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Boeing Doubles Down on Ex-Im Renewal

Kevin points out the ExIm Bank is going for a seven year renewal, long enough to ride out the coming outrage as their bad loans go bust.
Even the government’s own Congressional Research Service found that in FY 2010, “more than 60% of Ex-Im Bank’s loan guarantees, by dollar value, supported the sale of Boeing airplanes in foreign countries.”In fact, last year alone, Boeing received $8.3 billion in financing for its products from the Ex-Im Bank. This translates directly into sales worth roughly 10% of the company’s 2013 revenue.So while Ex-Im doesn’t really do jack squat for the economy, they’re really moving the needle for a handful of favored companies. Especially Boeing, the bank’s #1 beneficiary.And Boeing’s getting a pretty fantastic deal for it. According to OpenSecrets.org, Boeing spent $15.2 million on lobbying in 2013. For the $8.3 billion they received, that’s a 54,539% return on investment. Not too shabby.Needless to say, Boeing has a huge incentive to maintain this special relationship.That would likely explain why just in the second quarter of 2014, Boeing spent over $4.18 million on lobbying for this bill to be passed.You see, Ex-Im Bank’s charter is due to expire at the end of this month. And HR 4950 ensures that the bank will keep operating for seven more years.

I'll say it again.  USA will have to end before ExIm bank ends.  Because we cannot end ExIm Bank, USA will end.  It is a prime example of what is wrong, of negligible benefit but cannot be ended.

I'd love to be proved wrong.

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Wednesday, September 17, 2014

MOQ FOB Advantage Now

It is astonishing to read such things...
At this stage, we’ve identified four potential suppliers including two from Australia for beef and macadamia nuts, one from the Netherlands for vegetarian food and one from Japan for Kobe beef. We are expecting detailed price quotations from them first before concluding business orders.
All the time talent and treasure to get a booth in a show and be unprepared on the most basic point?  Sellers let buyers leave without a substantive discussion?  No MOQ FOB with which to get an order on the spot?  if I was in any of the lines mentioned, I'd swoop in now and take the business away.

The MOQ FOB attracts the serious, smokes out the unserious, and gets orders placed.  If you are trading food, get this down now, either in person November 17 in San Francisco at UCBerkeley Extension or online starting October 7.  Demand is high and the competition is weak.  Get some business!

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Hong Kong: "An environment ... so favorable..."

This in from Hong Kong:
Actually, Hong Kong made me an entrepreneur. I was not born one, but seeing so many entrepreneurs around me and with the environment being so favourable, it was easy for me to leave the corporate world and try my luck.
Just so.  We used to have that in USA.  "An environment ... so favorable..."  Now to start a business is the most revolutionary act a person can perform in USA.  Top to bottom, left to right, the entire country is overwhelmed by a false economy of Finance, Investment and Real Estate (FIRE).  FIRE is in the service of production of images on little machines people carry around and self-report themselves to the authorities.

A car full of people staring into these machines, windows down, pulled up alongside me and I said "Put it away.."  The dirty looks I got were lethal, as if I snatched smack away from a crackhead.  I wonder, like crackheads, anyone in that car yesterday could name today who else was in the car.

Cash is tied up in flipping houses, unlimited credit is out there at near zero rates to pump of the market, to quiet the masses with false sense of retirement security, plus keep the tens of millions unable to support themselves on EBT.   Everyone has a cellphone.  We used to build the best cars in the world.  Today we tweet.

This will end badly and swiftly. 2008 will be nothing compared to what is next.  There is an environment that fosters productivity, but there is not a single voice in politics advocating it, and in USA we have deferred to politics as our decider, polity, not comity.  Ouch.

If things improve, it will be purely accidental.

Overthrow this system.  Start a business.

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Working Trade Show Attendees

Not all trade show attendees are buyers, and this fellow outlines the problem:
I don’t know how many times I have exhibited at a trade show where my booth has been flooded with attendees who have no interest in purchasing my products or services. These people may stop by trade show displays for a number of reasons not related to the company itself. They could be there to collect giveaways, enter drawings, or simply because they see tons of traffic going to a show booth and want to see what all the fuss is about.
But I disagree with his solutions -

1. Politely end the conversation.  Any conversation should be the "approach" in a sales process...  your MOQ FOB smokes out real buyers immediately, and if not a buyer, hand them the MOQ FOB and say something to the effect "When this order makes sense for you please do come back."  GEt rid of them decidedly.

2. Given the above, you can skip the body language festival.

3.  Business cards are given to people with whom you will do business.  If they ahve no written an order, no business cards.  Therefore, give out as few cards as necessary, no more.  Given #1, they have all the contact info they need.

One goes to a trade show to do business.  Blow off anyone who is not there for the same reason.

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Tuesday, September 16, 2014

Deflation is Your Friend

Mish is one of the few financial writers who understands that deflation, a monetary event, is a very good thing.  All government policies have winners and losers.  The 1% win when the policy is to goose up inflation.

Thus, when deflation begins to occur, the powers that be go into panic mode, and insist you shoudl be afraid, very afraid, in spite of this being good news for you.

The Italian National Institute of Statistics (ISTAT) reports that consumer price inflation declined by 0.1% from August 2013 to August 2014. 

As soon as deflation wipes out (merely corrects) the bad inflationary policy, we can begin economic recovery.

Give Mish a read for the scoop on deflation.

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Nothing Happened on 9-11 This Year

But ebola, a disease for which we the people of USA now have a patent, is oddly getting out of hand.  Against all disease control, we at great expense shipped diseased patience from the source to the USA.  Now we are sending 3000 soldiers into the epidemic area, to this end.
The Obama administration is ramping up its response to west Africa’s Ebola crisis, preparing to assign 3,000 US military personnel to the afflicted region to supply medical and logistical support to overwhelmed local healthcare systems and to boost the number of beds needed to isolate and treat victims of the epidemic.
Barack Obama is to announce the stepped-up effort on Tuesday during a visit to the US Centres for Disease Control and Prevention in Atlanta amid alarm that the outbreak could spread and the deadly virus could mutate into a more easily transmitted disease.
Alarmingly, one function of the Centers for Disease Control is to mutate diseases to be more easily transmitted.  How many soldiers will contract the disease and bring it back to USA?

Having gotten our asses well and truly kicked, again, by farmers, again, and become isolated in world affairs, USA is retreating to mad scientist "disease control" and what better diseases to control than ones for which we have a patent?

That Obama would make his announcement at the Center for Disease Control sends a message: the same department that ran the Tuskegee Experiments will be running the Africa Ebola gig.  No one was ever prosecuted for the Tuskegee crimes.  Get it?  No one will be this time around either.

Is it possible all these elements add up to something benign?

No.

Stop the Ebola deployments.  Cut the military budget and tell the Africans to figure it out for themselves.  It's none of our country's business, we cannot yet manage our country, provision health care for the thousands dying of preventable disease in USA.  Let private companies address the disease, since ultimately, it can only be addressed thus anyway.

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After Russia Wins WWIII

Russians will be telling us how to eat...  here is a preview:

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2 to 1 Welfare Sign-ups Over Job Creation

This is dire:
In the recession era, the number of Illinoisans dependent on food stamps has risen by 745,000. Without adequate job creation in the state, Illinois families have had no choice but to depend upon food stamps to put bread on the table.
But "no choice" is not true.  People can start businesses, in spite of the venomous hatred that policy-makers have for the self-employed.  The self-employed are soooo unmanageable!  There is not a single candidate who plans to vary from the welfare/warfare state, so expect no more hope and change this time around than last.

The most revolutionary act an American can make is to start a business.

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Monday, September 15, 2014

Baum Bawerk & Interest Critique

Here is a an excellent review of Baum Bawerk's contribution to Austrian economics, which one should read in toto:

This led Böhm-Bawerk to his theory of interest. Obviously, individuals evaluating the production possibilities just discussed must weigh ends available sooner versus other (perhaps more productive) ends that might be obtainable later. As a rule, Böhm-Bawerk argued, individuals prefer goods sooner rather than later.
Each individual places a premium on goods available in the present and discounts to some degree goods that can only be achieved further in the future. Since individuals have different premiums and discounts (time-preferences), there are potential mutual gains from trade. That is the source of the rate of interest: it is the price of trading consumption and production goods across time.

And here is an excellent critique on this one point, pages 197 through 215.

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Online Privacy

Silicon Valley is concerned that the USA record of spying may hurt competitiveness worldwide.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. The US tech industry has failed to appreciate the mounting global concern over its record on online privacy and security and must act fast to prevent deeper damage to its image, Silicon Valley’s top executives and investors have conceded.
There is a solution.  USA stop spying.  It costs too much to do.  It yields information compromising to the politicians and thus makes them enslaved by the peepers,  what actionable intel that is derived gets flubbed anyway, and then the after-costs of rejecting USA products is quite high.  USA could just stop spying,

Industry, people who actually work for a living, have far better information in a far more timely manner anyway.

We also need to deregulate the internet, allow alternatives, so someone can finally create a private, secure net.


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Sunday, September 14, 2014

How To Choose a Profession

Fr. Guido Sarducci offers this counsel...



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False Economy

After attending a book reading last night, a fellow gave me a lift home.  As we walked thought the streets of a hipster neighborhood, he complained bitterly of the trash and filth on the street, complaining loud enough to invite a conflict.  Construction is underway all over Seattle, with a view to reaching from some 700,000 now to 2 million in what, a decade?

The author had noted we have tremendous resources going into mass transit (some 2 billion in bonds to dig a mere 26 feet of a severl mile tunnel only to be stopped cold by an unknown obstruction), and his point was why can we not fund proper health care, why are we board and dosing street psychotics for a 2 week stretch then throwing them back onto the street?  (Because in states, the bad policies always win.)

Amazon, Google, multiply biotechs, Boeing, Starbucks, a University or four,  our community colleges are shifting to four year gigs to sell Bachelors degrees to high-paying Chinese students, everybody is making cleaning up.  Finance, Investment, Real Estate.  Dot.com. Everyone is cleaning up, if you are in those fields.  

The author had noted we have tremendous resources going into mass transit (some 2 billion in bonds to dig a mere 26 feet of a several mile tunnel only to be stopped cold by an unknown obstruction).  And looking at a map, it is pretty clear the powers that be are rearranging the city to be a wealthy core with rings of less fortunate and a mass transit system to keep the flow moving between districts.

IN Tombstone, the counties and provinces that most embraced Maoism looked best briefly as people gorged on the "free food" in communal kitchens.  Travellers were assured a free meal and place to sleep.   The food came from the stores.  The "wealth" was provided by simply emptying the storehouses early.  Plenty of food now meant export earnings could be ramped up.  The reckoning of yield on crops (yield on investment, or stock market price) skyrocketed as false economy statistics proved communism was triumphant.  Starvation followed, for several years.  The counties and provinces who did "best" suffered most.

Prior to 1971, that which one could invest required money (more than now.)  But there was no debate as to what money was back then, gold and silver.  After we went off the quasi-gold standard, banks not only learned they could lend credit, that if and when this borrowing credit short and lending credit long failed, a necessarily disastrous scam, the Feds would bail them out,  every time.  (And they know they will be bailed out next time too, so it goes on, right now.)  So the began to lend credit, not money.

This makes for fantastic possibilities, Indian farmers who are starving, but have an iPhone!  Wars that can continue for 23 years (Iraq) and no end in site.  Countries with no legitimacy at all, but populations under control.  Everyone a superstar, but unable to write a sentence.  Amazing medical breakthroughs, and astonishing brutality.  Whole industries can be built out, selling things online at no profit, selling coffee and distorting traditional businesses by access to E Z Credit, and mountains of talent to keep track of who owes what and how to avoid the taxes.  Air travel cheaper than it costs, with 25% in taxes going to TSA and "security" theatre.  This is all false economy, like buying a high ranking on google.

"People are getting paid, they are buying things, the economy is moving here."  Here the conversation usually switches to "but look around at all the poor, the kicked-to-the-curb ill, the 99% who are not making it."  I don't work that angle, since 98% of the poor are voluntarily poor.  Certainly there is the 2% of street people whose distress will break your heart, but the vast majority on the street, so to speak, are there by choice.  When offered picking apples or EBT card lifestyle, they took the EBT card.  The 1% can ignore them, because the 1% know full well there is an EBT lifestyle, just as there is the 1% lifestyle, it too a product of the welfare/warfare state built on the false economy of lending credit.

You will be told debt is as old as money, and I would say older.  In fact, the classic barter-to-money narrative, as David Graeber points out, has no instance in history.  What is everywhere at all times is "vendor financing."  When I was a kid my father sent me to the store fairly often to pick up "one pound ground round" and milk or whatever.  The nice lady rang it up on the till, tore off the receipt, wrote "Spiers" on the receipt and put it in the drawer.  Off I went, and at the end of the month, my father went around to the pharmacy, gas station, grocery store and paid out from his pay packet what he owed whom.  Each of those who extended my family credit each month were businesses extended credit by their suppliers.  Suppliers were extended credit by manufacturers.  Extraction businesses were so fundamental they were usually backed by old money.  But what you see is everyone extending each other credit, almost no money involved at any point, except at extraction and then the extinguishing of debt, when my father paid out his debt with warehouse receipts called silver certificates, now gone, but once common.  There was gold and silver backing the currency.  There was widespread credit extended, but asset backed and no usury (interest) charged.  Man did not go from barter to money to solve the problem of double coincidence of wants conundrum: the lamb merchant gave basket maker credit and noted it on a tally.  The egg merchant took lamb merchant's tally in trade for eggs and paid the basket maker.  Credit, not money everywhere.

Money shows up when times are dire, and relationships are broken.  No one trusts anyone else to pay, so they no longer offer credit, they demand money, gold and silver, to extinguish the debts now.  Archeologists find tallies where a civilization was wiped out by natural disaster, they find stashes of gold and silver where the civilization was wiped out by social unrest.  In USA today, people are stashing gold and silver.

So what is the difference between the credit system we have now and what we had?

1. Back then it was asset based.  Credit was extended for groceries, against a claim of a paycheck.

2. Back then it was diffuse and limited.  The lenders knew well to whom they lent, and if they judged their customer poorly, only the lender suffered, no one else.

3. Today, there is no possible way you can know from whom the credit comes, the teller or loan officer mimics friendship, but friends are impertinent and annoying.

4.  Back then there was no usury, all extended credit as a loan, today there are no loans (almost) without usury.  Charging and paying interest always does damage.

5. Back then it was impossible to track all of this economy, nor tax it.  Now with all going through a few banks, all can be seen, and taxed.  Not content with collecting more taxes due, they added on taxes payable.  This advanced the progressive dream of "get big or get out."

6. We hate those we harm, noted Tacitus.  The 1% know their advantage is necessarily tied up with other's disadvantage, they are getting what cannot be in a fair system.  The 1% control the policies.  Those policies reflect hate.  Look at the representatives of the 1%, those with whom you come in closest proximity, the police officer.  The more you are of the EBT culture, the more you experience the hate.

7. And we love those we help.  The merchants who extended credit back in the day truly, profoundly cared about their customers.  Kid sick?  Take another month.  And the customers appreciated the people who operated the commerce in their neighborhoods.

What net advantage do we have from google, cell phones, socialization and concentration of medicine, total financial lockdown, the severing of community, mass transit for people collected into cities to run the FIRE flipping and dot.com gigs, so we can have sales systems yet to turn a profit and travel that is charged off to someone else's tab.  That tab being run is not against assets, it is against future earnings, next generations.

There is no rational limit to what you can do once you begin to lend credit at interest.  Look around, this is all one option.    It doesn't really matter what array the few have foisted on us, it cannot last.  There is no rational limit, but once faith in the system fails, an irrational limit will be met, and down comes the system.  Worse where things look best.

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