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Showing posts from April, 2013

Inflation? What Inflation?

Inflation is when prices rise, we all know this from listening to our grandparent prattle on how a nickel would buy a pair of shoes, lunch and a street car ride in “their day”.  On the other hand Hyperinflation is extreme inflation that happens when an economy collapses. Hyperinflation arises only under the most extreme conditions, such as war, political mismanagement, or the transition from a command economy to a market-based economy. If you compare the U.S. to countries that have experienced hyperinflation — think Iran, North Korea, Zimbabwe, and the former Yugoslavia, for example — the U.S. doesn't even come close. Hyperinflation begins when a country experiences an inflation rate of greater than 50 percent per month — which comes out to about 13,000 percent per year. Although it experienced elevated inflation around the time of the Revolution and the Civil War, the United States has never passed this magic mark of true Hyperinflation.

After World War One Germany was required …

Market Comment April 27 2013

April 27 2013 - Illusion and reality, truth and science -- the markets are fascinating because there are so many concepts and ideas many are false and some are very concrete. Technical Analysis, tries very hard to be a science, using charts of price (and volume) to try and predict the future based on the past. Many of the ardent believers come from technical backgrounds, doctors, scientists, programmers and engineers are commonly found in $2,000 a-pop seminars on how to read the Stochastic-RSI or draw an Elliott Wave.  I am as guilty as the rest  -- my black and white view of the rational world is always trying to instill order n the markets. 

From simple charts you progress to building automated trading programs that can back test results. From this you learn a few important lessons; the first is that no squiggly line works perfectly. In fact back testing many basic indicators like MACD and RSI shows them to be little more predictive than a coin toss. Second thing you learn is that ch…

Are You a Prince or a Pauper?

Ap 27 2013 – It is tax season and since you just had to tell the tax authorities how much you made, this is a great time to look at your income and see how you fit in vs. your fellow humans.

The World
The graph below shows a rough approximation of the distribution of income worldwide. Most people live on an annual income between $750 and $7,500, which is generally enough to provide a good standard of living. On the left edge of the graph, over a billion people live in absolute poverty, lacking sufficient food and clean water. The right side of the graph shows the consumer class, where over a billion people like me enjoy our western lifestyle.

So if you made more than $7500 this year, congratulations you are one of the world’s wealthiest people.

Closer To Home
Ha Ha you say, I don’t want to compare myself to Bangladesh, what about here at home. Lets look at how your income compares against typical Canadians (if you live in the USA the numbers are similar). This is a cute widget in a Mac…

Pop Goes the Commodity Bubble

April 20 22013 -- The “commodity bubble” is the idea that we are running out of stuff. From Potash to Coal or Oil to Cerium – the newly awaken dragon -- China was going to gobble it all up as Chinese farmers leapt from making a $100 a year in the back mountains of China to relocate to the new urban China. On the way they would buy luxury SUVs, condos, yachts and Smart phones.
The flaw in that idea is that Americans would need to consume just as much stuff and China would create a second USA size market. Well neither has happened so far, the aging US population is consuming less of most things and what it does continue to consume is a lot of Oil (but more from home grown sources lately) and services. Even if American bought the same amount of physical goods, it would not change the commodity picture, US consumed metals don’t care if they are assembled in Detroit, Tokyo or Shanghai – it is a global commodity market. So new growth hinges on China becoming a consumer economy.
China’s midd…

Why I Believe in America

"It's never paid to bet against America. We come through things, but its not always a smooth ride."
 – Warren Buffett
Like the Oracle of Omaha, I have always made money betting on America. In 1982 when the US was still reeling from the kidney stone decade -- the 70’s I watched the US reinvent itself under Ronald Reagan. It was then I began to understand the power of the US system.  By the mid 1980's many thought Tokyo would use Mitsubishi, Sony, Honda Motors and Toyota to conquer America. Japanese firms were gobbling up Hawaiian and Manhattan real estate. Americans were shocked when the Pebble Beach Golf Course was sold to Japanese businessman, Minuro Isutani for price far more than anyone could have imagined.  In the the 1980s the Nikkei stock index rose six fold during the decade.  Still after I visited Tokyo and seeing the price of things, I did not believe this was the end for the USA. In 1990 the real estate bubble burst and the Nikkei lost half of its value in…