Financial topics

[Higgenbotham]

The S&P 500, priced in gold, is down 15% from its multi year peak that occurred at the turn of the year. As noted on March 1, "The ratio has been below 1.6 ever since right before the Lehman debacle hit." I had thought about using the combination of long gold short S&P 500 but didn't pull the trigger on the long gold.

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[Higgenbotham]

WASHINGTON (AP) — The Federal Deposit Insurance Corp. has sued 16 big banks that set a key global interest rate, accusing them of fraud and conspiring to keep the rate low to enrich themselves.

The banks, which include Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. in the U.S., are among the world's largest.

The FDIC says it is seeking to recover losses suffered from the rate manipulation by 10 U.S. banks that failed during the financial crisis and were taken over by the agency. The civil lawsuit was filed Friday in federal court in Manhattan.

A number of U.S. cities and municipal agencies also have filed suits against banks that set the LIBOR rate. They are seeking damages for losses suffered as a result of an artificially low rate. Local governments hold bonds and other investments whose value is pegged to LIBOR.

In addition, government-controlled mortgage giants Fannie Mae and Freddie Mac have brought similar suits against many of the banks.

[aedens]

http://paperempire.net/exters-pyramid/

[Higgenbotham]

On Sunday, thousands of Japanese residents marched to Parliament and called on the new Japanese government of Prime Minister Shinzo Abe not to restart some of Japan’s 48 idled reactors. Speakers at the rally included former Japanese Prime Minister Naoto Kan, who held the post at the time of the Fukushima meltdown.

NAOTO KAN: [translated] I believe that now is the crucial time for us to eliminate nuclear power, or we forgive the Abe administration, which is going in the opposite direction.

AMY GOODMAN: Since the Fukushima crisis, Naoto Kan has become a vocal critic of nuclear power, saying it’s too dangerous for Japan to keep open any of its nuclear plants. Up until the time of Fukushima, he was a longtime supporter nuclear power.

In this exclusive extended broadcast interview, I sat down with former Prime Minister Naoto Kan when we were in Japan in January. I began by asking him to talk about what happened three years ago today, on March 11, 2011.

AMY GOODMAN: Who was responsible for this catastrophe, for the meltdown at the reactors?

NAOTO KAN: [translated] First of all, I believe that the fact that all of the electricity was lost through this earthquake and tsunami, but no preparation or no consideration of such accidents or such things happening, and no preparations being made for this, under the assumption that no accidents could happen, and the technical side of things from this, including both the facilities and also the staffing situation, and the lack of ensuring the full safety of the plant, but still continuing to increase nuclear power plants and the situation, the responsibility for this lies on the state of Japan and on the government, including me. There is also responsible on TEPCO as the operator, in fact, of the site for not predicting, not expecting, not planning for such an accident to happen. But politically, of course, the responsibility lies on me, the government at the time, and also the previous government and TEPCO, in charge of the plant.

http://www.democracynow.org/2014/3/11/e ... _fukushima#

[Higgenbotham]

http://solarcycles.files.wordpress.com/ ... /11ma8.png

"Valuing country stock markets by PE or CAPE has to be considered relative to demographics. An expensive valuation is likely to become more expensive if demographic trends are upward, due to the increasing flows of new buyers. Hence, as the below chart shows, we saw the highest set of global CAPEs into 2000 due to the combined demographic uptrends of USA, Europe and China. Their combined current downtrends have produced a historically low set of overall CAPES. The US stock market is currently the second most expensive in the world by CAPE, and above all other bands in the chart above. Relative to demographics, this is very much overvalued."

http://solarcycles.net/2014/03/11/demog ... l-markets/

[Higgenbotham]

Buffett: I'd be 'surprised' if stock prices drop 50%

http://finance.yahoo.com/news/buffett-i ... 42587.html

Buffett got to where he got to by being overly optimistic at a time in history where being overly optimistic paid off. If Buffett lives another 10 years, he may in fact live long enough to see the stock market go to zero, and go from rags to riches and back to rags. He will be "surprised a lot" more.

At no time, ever, in the history of the world has an economy or population of anything grown in excess of 3% per year compounded for an entire working span of a long human lifetime, except exactly during the entire working span of Warren Buffett's long life. And he thinks this is normal? Normal growth in an ecological or human system is far below 1%.

It is a carnival atmosphere and Buffett is the head barker. CNBC is a media outlet devoted to airing the views of carnival barkers.

In the graph of world population below, the world population was 600 million in the year 1700 and 150 million in 200 BC. It grew 4 fold over 1900 years. On the graph I show exactly how to calculate the compound annual growth rate from those numbers. The compound annual growth rate over that long time span is less than 1/10 of one percent. Moving backward in time previous to 200 BC, it's probably even less.

(600/150) raised to the power of (1/1900) is 1.00072989. The percentage growth rate is then that number minus 1 multiplied by 100, or 0.072989 percent compound annual growth.

Looking at a more recent part of the graph, the compound annual growth rate of world population from 1700 to 1900 was 0.49%.

Between 1900 and 1950 it was 0.87%.

Only since the end of World War 2 has world population grown in excess of 1% per year, ever, and now it is slowing back down to sub 1%.

Can a stock market, which is dependent on economic growth, rise in the face of zero population growth? I don't think it can even exist, much less rise. World stock markets in fact barely existed before world population began to rise at rates greater than 1% after World War 2.

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[Higgenbotham]

https://www.census.gov/population/inter ... rgraph.php

worldgr.png (39.7 KiB) Viewed 2921 times

Buffett said he's been bullish on the U.S. economy since the fall of 2008, but he doesn't expect it to rapidly accelerate this year. Instead, he thinks it will continue its slow upward trajectory.

Why?

Similar to life on earth, a multinational corporation can only operate within a narrow range of environmental conditions. We have come to assume those environmental conditions that sustain multinational corporations can be maintained indefinitely. They cannot and are not being maintained.

[Higgenbotham]

http://www.zerohedge.com/print/486099

It is also important to note that Microsoft was a particularly eager participant in NSA spying from the very beginning. For example, according to the following PRISM slide provided by Edward Snowden, we see that Gates’ company was the first to become involved. In fact, they were participating a full six months before Yahoo!, while Apple didn’t join until a year after Steve Jobs died.

Maybe that's why he died.

http://www.zerohedge.com/sites/default/ ... _gates.png

Question: When people think about the cloud, it’s not only the accessibility of information and their documents that comes to mind, but also their privacy – or lack of it.

Gates: Should there be cameras everywhere in outdoor streets? My personal view is having cameras in inner cities is a very good thing.

Yes, your personal view is that you want the rabble watched. I can understand that, seeing as your personal view is that they probably hate you.

Question: Thanks to Edward Snowden, who has leaked tens of thousands of NSA documents, we are. Do you consider him a hero or a traitor?

Gates: I think he broke the law, so I certainly wouldn’t characterize him as a hero. If he wanted to raise the issues and stay in the country and engage in civil disobedience or something of that kind, or if he had been careful in terms of what he had released, then it would fit more of the model of “OK, I’m really trying to improve things.” You won’t find much admiration from me.

He probably thinks you broke the law. He also probably thinks you can continue to get away with breaking the law so why try to follow your insincere suggestion that anything can be "improved".

I read this as the rich are getting paranoid because there's 7 billion of us and 7 million of them. Paranoid to the point that they are psychopathic and losing touch with reality. That's not surprising at all when you really think about it. I would not want to be this guy as civilization breaks down, and he's got no choice now; he's locked in. Nobody is going to have it easy.

[Higgenbotham]

It is a carnival atmosphere and Buffett is the head barker. CNBC is a media outlet devoted to airing the views of carnival barkers.

“Somebody came to us a couple years ago…a large investment bank and they said take a look at this portfolio… They said to us, ‘Will you insure that these bonds in these states will pay for 10 years?’

“I looked at the list and Ajit Jain [Buffett’s ace reinsurance exec] looked at the list and we had to decide would we insure them and what premium we would charge. We offered to charge $160 million for 10 years… We will pay somebody on the other side—the counterparty they call it—if these states don’t pay, we will pay as if they did pay.

“We didn’t dream up this list,” Buffett says, and then makes one of the most revealing statements of the session.

“Another carny dreamed up this list.”

http://jeffmatthewsisnotmakingthisup.bl ... carny.html

His own words. No argument from me.

[Higgenbotham]

From an economic and sociological standpoint, I see the buildup and decline of civilizations being governed by two opposing forces. The positive force is the benefit of the division of labor. The negative force is the detriment of parasites and scammers. The individuals in the society have to look at these opposing forces and make a determination as to whether it is to their benefit or detriment to participate in the tradeoff that appears to be offered, or appears will be offered. Many might say there is no choice, but there are in fact choices, as long as "safety nets" exist that allow one to choose the category of parasite.

To be a positive force by participating in the division of labor, the individual must first believe that he has a talent to bring to the table for mutual benefit. The greater the scope of the division of labor the more likely it is that this will be the case. Next, the individual must believe that the cost and time investment of education or apprenticeship to utilize this talent is reasonable and will pay off. Finally, the individual must believe that there will be employment available to utilize this talent and training for long enough to make it worth obtaining. Therefore, a wide variety of potential jobs, a low cost and time involved to qualify for one of those jobs, and a high availability of jobs and commensurate reward are the necessary ingredients to build up the civilization from an economic standpoint with the positive force of division of labor.

Upon entering the workforce, with PhD in hand, you immediately get a higher pay of around $68k, but you're well behind the bachelor. Assuming you slog it out in the profession (and we're all still around in 25 years) you'd never quite catch up because the premium of $17k becomes a smaller and smaller proportion of the lifetime earnings. To help make up the difference the PhD perhaps should consider becoming a manager, although even this wouldn't be enough

lifetime_salary.jpg (28.54 KiB) Viewed 2899 times

http://www.measuringusability.com/usability-phd.php

What might the above information indicate? Here are some possible explanations:

1. The time investment to obtain a PhD is too long because the civilization has become too complex.

2. The education system for the delivery of the PhD degree is too inefficient to make it pay out.

3. The professors in control of the delivery of the PhD degree are holding back the candidates to scam free labor off of them by means of research assistantships and teaching assistantships.

4. The progress of the civilization has stalled out enough that it cannot any longer afford to pay a premium for this expertise.

5. Too many students are obtaining PhD degrees because they cannot find jobs once they complete their bachelor's degree.

I would also add that if there's a problem, this is the place to look because it will show up on the higher end of the specialization scale first.

My belief is that all 5 of these factors are at work with none of them being dominant.