Thursday, April 9, 2009

Pretty amazing this comic is from 1934. What is that saying again? Something about those who fail to learn from history are doomed to repeat it? Our government is filled with a bunch of group think retards. Few of which have the ability to come up with an original idea, and none of which have the fortitude to see one through to fruition.

You have got to be kidding me...the redundancy is amazing. Not that securitization is a bad thing, but to think that doing the same thing that got us in the financial mess is going to be what gets us out is pretty naive.

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Urban Survival...

"V" is for Velocity

It came to me in a flash of insight on Wednesday afternoon: No matter how much money the Obama administration, the Treasury, and the Fed, pump into the economy, if consumers cut back spending enough, then we're all screwed and no amount of printing will kick-start the economy.

So I called Cliff up at www.halfpasthuman.com and began the conversation by asking "You know why the economy is going to continue collapsing?" His answer was something to the effect "Gee, because you can't capitalize debt?" Oops, he's already there.

Still anxious to share my epiph, my next call was to my consigliore: "Hey, you know why this Second Depression augurs in anyway this coming fall when another leg down should get rolling? Velocity!"

His answer was almost like Cliff's: "Yeah...that's been in my model since 1979...the only question is about the timing of when the policy decision will be made to kick inflation into gear to bail the economy out because bouts of inflation usually only last four years versus deflations which go a decade..."

Hmmm. Must be preaching to the choir. If you have a less smart group of friends, though, you might point to the story we talked about yesterday (about credit card use falling like crazy) that's being reported today under headlines like "Fed: Credit Card Debt Down Almost 10 Percent" and dazzle your friends with a snappy short discourse on what happens when velocity (collapsing transaction counts) overrules policy intentions.

Let me know how many folks you put to sleep.

Wednesday, April 8, 2009

04/08/09 thoughts

Good Article

Dallas-Fort Worth's 'modern survivalists' are ready for layoffs - or war

mjmcdonald@star-telegram.com

Jack Spirko owns a media company, is married to a nurse and has a son in college. He has two dogs and lives in a nice house with a pool in a diversified neighborhood in Arlington.

Spirko, 36, considers himself an average guy with a normal life.

But for the past few years, Spirko has been stockpiling food, water, gas, guns and ammunition. He also has a load of red wine, Starbucks coffee and deodorant stashed away.

"I refer to myself as a modern survivalist, which means I don’t do without," Spirko explained. "I have a nice TV; I have nice furniture. We are not living in the sticks, but I take all of these things very seriously."

Spirko, an Army veteran and self-described "stark-raving-mad Libertarian," is part of a growing movement of people who are preparing for a disaster — natural, economic or man-made. Referred to as "modern survivalists" or "preppers," they are taking steps to protect and provide for their families should something bad happen.

Theirs is a different breed of survivalist, far from the right-wing militants or religious extremists who hole up in bunkers, live off the land and wait for the apocalypse.

Preppers are regular people with regular jobs who decided after 9-11, after Hurricane Katrina or when their 401(k)s tanked that they can’t rely on someone else to help them if something goes awry.

"We are normal people just like you," Spirko said. "We just understand that, sometimes, stuff goes wrong."

Prompted by Katrina

Donnie, 38, a McKinney resident who is an account executive with an international trade show organization, said Hurricane Katrina opened his eyes. He spent six weeks working as a paramedic in New Orleans.

"It was a logistical nightmare getting to the area," Donnie said. "And the longer you were there, the more you realized that, in a blink of an eye, your life can be turned upside down. I don’t want to be the person in the bread line or standing in line for ice."

Donnie, like many of those interviewed for this article, agreed to talk to the Star-Telegram on the condition that his last name not be used.

"I usually don’t advertise it," Donnie said. "There are people who cast a wary eye."

He said that after Katrina, he amassed about two weeks’ worth of food. But last September, after the economy began to sour, he "kicked into a higher gear" and acquired more supplies and water-filtration systems.

"I probably have about six months’ worth of food for two people," Donnie said. "I keep about 30 gallons of water on hand, and I have the means to store another 200 gallons if I have advance notice of something going bad."

Art Markman, a professor of psychology at the University of Texas at Austin, said that when people start stockpiling food and water or buying weapons, they are in a motivational state called "avoidance mode."

"You turn on the news and only hear about job losses and the prospect that things are going to get worse than better," he said. "You see signals that the world is full of nasty things you need to avoid. You’ve engaged in this general sense of avoidance. You are trying to focus on safety concerns."

Markman said the trend is not surprising, given the economy.

What exactly preppers are preparing for isn’t specific. It could be a layoff, tornado, global pandemic or nuclear war.

Internet sites devoted to survivalism often refer to scenarios like TEOTWAWKI, an acronym for "the end of the world as we know it."

"I am prepared for just about any disaster that disrupts everyday living," said Bob, 43, a sales manager from eastern Pennsylvania who runs www.thinkprepared.net.

"... The economy is at the forefront of my concerns. The unemployment rate is soaring, and most people are not prepared to be without a paycheck for a week, much less a month or longer," Bob said.

Booming business

Businesses that sell storable foods, disaster shelters and guns are thriving.

Bruce Hopkins, owner of Best Prices Storable Foods, which sells dehydrated and canned foods, said sales "exploded" last spring and remain steady. On a single day last week, Hopkins sold $31,000 worth of storable food. Hopkins said a popular item is a one-year food supply for a family of four or family of two, priced at $4,000 and $2,700, respectively.

"I think to have anything less than a month’s food supply is foolish," said Hopkins, whose business is in Quinlan, south of Greenville. "I think it is time to stop watching American Idol and start paying attention to what is going on in the world."

Walton McCarthy, owner and principal engineer of Radius Engineering International, builds underground disaster shelters that protect against nuclear, chemical and biological warfare, among other things.

He said his business has tripled since July, when reports of Iranian missile tests surfaced. McCarthy’s disaster shelters hold 10 to 300 people and cost $105,000 to $6 million. His customers include politicians, doctors and key executives.

"What we are going through now is the Pearl Harbor blues," said McCarthy, whose company is based in Forney, east of Dallas. "All of the ingredients are here. It is around the corner, and no one should be surprised."

At Cheaper Than Dirt Outdoor Adventures, a gun store in north Fort Worth, business has never been better. Owner Dewayne Irwin said he sees three types of customers: "You have the everyday good ol’ boy Texas gun owner. You have the folks that are coming in and saying, 'I’ve lost my job and my neighbor lost their job’ and they really believe they might have to fight over a bucket of carrots or something. And you have the guys who are first-time gun buyers and they don’t really know why. It is Main Street. It is crazy."

'Going back to my roots’

Spirko grew up in rural Pennsylvania, where hunting, fishing, gardening, and canning and storing food were a way of life.

"No one looked at that back then and said, 'These people were survivalists,’ " Spirko said. "That is just what you did."

After Spirko got out of the Army, he moved to Texas and started working in communications and sales.

"I found myself in my mid-20s pursuing corporate America, working the six-figure job and traveling all over the United States," Spirko said.

And then, Y2K happened or, rather, didn’t happen.

"I thought they were absolutely crazy," Spirko said. "They thought the toaster was going to explode when it goes to 2000 or whatever."

And while Spirko didn’t buy into the Y2K scare, he did think legitimate concerns had been raised.

"Right after that, we had the dot-com bubble explode. We had the stock market crash. My portfolio went down by 50 percent overnight. And then 9-11," he said. "I started going back to my roots and started to look at ways to preserve our cash and make sure we had some food on hand."

In July, Spirko launched a podcast for modern survivalists at TheSurvivalPodcast.com. He encourages people to pay down their debt and have extra cash, water and food and an evacuation plan. About the same time, he expanded his backyard garden, where he grows tomatoes, peas, corn, strawberries, onions and jalapeños, among other things.

"We had two big scares with produce last year — jalapeños and tomatoes," Spirko said. "First jalapeños had salmonella, and then tomatoes had salmonella. If that can happen, what other things can happen?"

Gwenn, 52, a self-described "girlvivalist," runs a lodging house in Beaumont. She has plenty of water, a year’s worth of food and a shotgun for protection.

"When we had Hurricane Ike here, a lot of my tenants didn’t evacuate," she said. "While my neighbors were standing in line for MREs [Meals Ready to Eat] at the shopping center, we were grilling steak."

Keeping it quiet

Many survivalists — Spirko is not one of them — are "closet preppers."

Afraid that they will be viewed as crazy or weird, they don’t tell people they are storing freeze-dried food, canning their own vegetables or setting up an alternate location where they can go if TEOTWAWKI arrives. They also don’t want "raiders" beating down their door if a disaster happens.

Bob said survivalists are often viewed — incorrectly — as doomsayers.

"Some people think we want the end of the world as we know it," he said. "I can tell you from my heart, I hope nothing like that ever happens. I want my sons to grow up and have a great life."

Still, Bob believes that everybody should at least have a 72-hour bag of gear, also known as a "bug-out bag," ready to go.

"Survival today is more about being prepared for short-term situations, like hurricanes, floods and blizzards," Bob said. ". . . Learn some basic skills like gardening, first aid and personal defense. Become self-reliant like our grandparents were."

Jordan Mills, 30, an information technology contractor in downtown Houston, put his bug-out bag to good use during Hurricanes Rita and Ike. In it, he keeps his birth certificate, medical records, cash, food, water, flashlights, tape, garbage bags, clothes and other supplies.

Mills said he didn’t choose the "survivalist" label, but others have called him that.

"The word brings to my mind an image of a gruff mountain man with a log cabin, 10 years of food stored up and enough guns to outfit a small army," he said. "I don’t meet that image at all. I consider the chance of a total collapse of society and the end of the world as we know it to be pretty much zero. To me, survivalism is really just preparing for day-to-day inconveniences or emergencies."

A growing community

Every morning, Spirko gets in his diesel Jetta and makes the 50-mile commute from Arlington to Frisco, where his media company is based.

During the drive, he records his daily podcast. He discusses things like storing food safely, finding alternative energy options, dealing with anti-survivalist stigma and finding time to prep.

"The more I dug in, the more I learned," he said. "And then something really cool happened: This community started to build around it."

Spirko said that about 4,000 people download his podcast each day and that his audience is growing.

"People are always waiting for someone else to come and help them," he said. "To me, survivalism is just waking back up to traditional American values. I’m talking about basic self-responsibility, basic self-worth — understanding that you control your life more than anybody else.

"If you do nothing, you may not regret it. But if you do regret it, you are really going to regret it."


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Urban Survival...

"I'm not a 'doomsayer' or 'doomster'. But I'm bright enough to figure out that globalism brings with it a new kind of risk.

In the past, if you had a failure of the food system, the effects could be isolated. Or, if you had something like the Black Plague break out in Europe, yes a lot of people died, but the effects were again, geographically limited.

Same with 'money'. Back when gold was 'money' counterparty risk was that the person holding the gold wouldn't turn it over without a fight. The power going out was a deliberate act, or done by the wind. But one has to wonder if an attack on either the power-grid SCADA system or an EMP burst wouldn't possibly have devastating impact? A local spat in the Middle East could blow up into an oil-shortage-driven dieoff at a global level; think scorched earth policy.

Consider that today, the failure of the food system would have global impacts. It would shake the financial system to its core. And terrorists could simply self-infect suicide-sicko's and throw them on airplanes and infect whole continents within hours.

We've never lived on a planet like that before. Used to be a move of a few miles - or several hundred miles, would solve many things. But today, unless you've gone through the self-reliance exercise, and have invested heavily in your own self-reliance training, you're betting that a complex system of global proportions will remain stable enough in all regards that you can trust your fate to it.

Well, frankly, I don't. Which is not to say that I want it to fail. Hell no. But could it fail? Hell yes."

Tuesday, April 7, 2009

04/07/09 thoughts

One World Currency

From an economic perspective I like this idea, but I know people will find a way to screw it up. The only "One World Currency" that would work is one that has a fixed supply. From a religious perspective I don't really like this idea at all, but what can you do? This is the next step in the time line...

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Urban Survival...

Sustainable Run Rates

Buckle up and try to stay awake though this, as I've got my lecture robe on and have been sniffing the china board marker for a few minutes: Want to know when it will be easy to call the ultimate bottom here in the Second Depression? Wait for factory run rates to stabilize. "And what brings this up," you're wondering? Well, buried in all the headlines and economic noise on Monday was this little report from the Midwest Fed that 'factory activity slips in February'. And, looking elsewhere, the astute investor could notice that a "Poll - India's Feb industrial output seen down 1 pct/y/y".

Then we have to consider the headlines out of the UK where happy-talk/rally-the-sheep blather about manufacturing has been finessed in ways that add immeasurably to what out predictive linguistics pals call this period of developing 'surreality'. Here's a perfect example.

Confused? "Beats Forecast" may be viewed in a "only fell off a 24 story building instead of a 30 story building" kind of way. "Less than expected" may refer to it only being a 16-20 story building, while "Most since 1968" sounds like it refers to the mess on the concrete, compared with other manufacturing death leaps in the past.

Sorry if this is a bit graphic, but it's important to have your head firmly wrapped about the way numbers of column inches of 'news' reports can be distilled down to a single number while the rest of the words in the story - a few hundred in many cases - boils down to contexting this way or that.

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Once you're nodding "Yeah...OK...so what?" the next item up is understanding that economics of the conventional sort hates...and I mean loathes in a fearsome way, the very idea of cycles. Oh sure, those cycle guys (Schumpeter, Juglar, Kitchin, Kuznets, Kondratieff/Kondratiev, et all) make interesting reading, but the study of economics as the complex interaction between cycles is generally frowned on by economists of the mainstream stripe. (*If you've really been hitting the coffee this morning you'll notice that of these cycle guys, why are there so many with last names starting with 'K'? I should change my last name, perhaps...)

All of which would be fine if the conventional-thinking sorts had a demonstrated record of accurate predictions, but they don't as evidenced by the crap-pile economy we're in right now, the main feature of which is what? Pretty much falling everything. And that's why we need to consider something that I've yet to see discussed in economics in anything other than nearly incomprehensible multiagent variant studies that'd make your head hurt. I call it simply "The Slosh."

No, it's not exactly an original concept, since it's covered pretty well in the study of complex systems - which gee, gosh, economics really might be -- but it doesn't make headlines because no one has come up with the really simple way to convey the information, other than infer how the slosh is going by looking at a broad economic indicator, such as the Consumer Debt figure due out from the Fed today, which has me sitting on the edge of my chair with anticipation. Either that or because I need to run down the hall, but let's assume it's anticipation...

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My consigliore', the JD in Tax Law and CPA fellow who I often credit with being not only a good friend, but a fine economics thinker, actual got me to thinking about how 'slosh' worked when we were exchanging views on the old Long Wave Economics newsgroup run by the University of Colorado back in the day. He had made some very interesting comments about how in his modeling of the economy (easily done with linked spreadsheets if you have enough time on your hands) suggested that, just for example, oil price movements could take as long as 60-months to be fully integrated into the price behavior of all markets.

If you're a conventional economist, stuck in formula-land, a good starting point for visualization would be a multivariate implementation of the Putnam-Norden-Rayleigh Curve:

E_a=m \left ( \frac{{t_d}^4}{{t_a}^4}\right )

Where

Ea=Effort in person months

td=The nominal delivery time for the schedule

ta=Actual delivery time desired

Or, maybe the F.N. Parr alternative. What I envision is something like this, and I'll annotate this as a oil price change implementation, supposing that you have an oil price change - like the OPEC shockers of the 1970's coming through the system...

So was the 1980-81 'soft patch' just a result of a new stability point in run rates and consumption following the 1970's oil shocks? Maybe...

And so it goes for how economic shocks work out. As to where we are today? If I were guessing where we are presently in how the curve is developing, we might be looking at something like this:

Pardon the lines not being precisely smooth - it's early yet and I don't have a lot of time to spend on getting the drawings 'just sop' but you can see the problem: There's a fair chance that we will have some kind of a gulf problem develop between this fall - when around the end of October it will start to dawn on markets, I figure, that "OMG we are still in a recession and is this a DEPRESSION will kick in...and the Obama folks will be right saying "Remain Calm: Economic recovery is almost here..." but by then the villagers with the pitchforks and torches will be at the gates of government at all levels asking "WTF?"

But, thanks to the miracle of offset curves, we can sketch out the road ahead in very general terms, and hopefully have a much smoother sail through the Straits of Disaster.

That funny shaded box are, by the way, means that we could argue endlessly about precisely where things are, but the main thing is to get the overarching view right and let the rest fall into place.

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OK, now that you're back to sleep, we move on to the next pointer. Starting with Robin Landry's latest note to his clients:

"Once in awhile I like to focus on the larger trend to clarify my views as to where we are in the market, and what I believe is ahead. Below is a weekly chart of the Dow with the count I have as my primary count, based upon other technical indicators I use to help me stay objective in my analysis. As the chart shows, the low on March 6th was the end of wave 3 and we are currently in a 4th wave rally which should last several months before turning down in a 5th wave to new lows. That low would be the end of the larger wave 1 or A, and a rally lasting almost a year would begin to form a larger wave B before turning back down for wave C to even lower lows and the end of the bear market.

My secondary count says that the recent low was the end of wave 1, and we are in a wave 2 rally. The short term difference is of little consequence to most investors, but the pattern will be more complex if my primary count is correct. Under my primary count the market should rally to about 9700 sometime later this summer to early fall, then the decline in the 5th wave would begin. I will discuss targets for the 5th wave low once the 4th wave top is in. If the count is my secondary count, the rally will like reach a higher level around 11250 and the wave pattern a more simple ABC or Up-Down-Up. Either way we are in a period where the surprises are likely to be to the upside until the rally is over. There is one other count which is much more bearish and I will discuss it should the market action dictate a change in my analysis regarding the 2 counts discussed in this update.

The main point I want to drive home is that this is just a BEAR Market Rally. The LOW is not in and we still have several years of overall market declines to come if my analysis is correct and I believe it is. I would like to be wrong, the economic stimulus works, the economy turns up, and everything is great again, but history and common sense says it won't. To put it in a more simple analogy, I liken the stimulus program to telling someone who is deep in debt that the answer is to borrow more money and spend his or her way out of debt when common sense says it will only delay the inevitable bankruptcy. Such is the madness in Washington. As always questions and comments are welcome. I will answer them as time permits." rlandry@allegiance.tv

And this is the place where I have to point out the usefulness of having the 'skewed curves' thing in mind, because you can see not only how I'm viewing things, but how Landry's work - which comes from about 30-years of pushing data around following grad school has reached a similar outlook.

And as if Landry's work and my view isn't enough, I can help but note another guy who has much the same outlook as mine & Robin's is Dr. Marc Faber who says "Stocks may see 'correction' of 10%" before we continue the rally. So from 8,000 and change, a knockdown of 10% would be 7,200, which as I've told you before is what? Landry's 7,200 (or 7,100 next level down) of support.

If you're really, really awake, you should here something that sounds almost, well, George-like about this part of the Faber story:

"“We need some kind of correction, maybe around 5 to 10 percent, and after that we can maybe rally more into July,” said Faber, the publisher of the Gloom, Boom & Doom report. “The economic news, while it won’t be good, the rate of getting worse will slow down.”

Don't mean to spend so much time on the mechanics of how all this works out, but then again, people come here looking for serious economics and light-hearted humor. This is not financial advice...just how I think things will play out: Gold lower before higher, stocks lower before higher, and if you think the sociopolitical air is charged and tense now? Wait until this fall. Keep October 26th circled...not that it will be the day, but around there and the weeks following, say the linguistic reports, government's gonna be hunkered down trying to cope with a whole mess of humans who haven't had the roadmap handy who are going to be frothing mad about prices going up and wages going down.

The only thing that keeps us from auguring into new Third World status is manufacturing of something at a sustainable run rate. And, since our manufacturing of bogus financial products has been outed, we've now got to come up with something else. Unless, of course, we can figure out a new 'over-unity' kind of government, where government gives back more than it takes in the way of taxes.

Pardon me if I don't expect that breakthrough in human events will be coming any time soon. So, I will just work on my garden, tend my investments, and ponder how the system can keep the obvious hidden in plain sight for so long.

Monday, April 6, 2009

04/06/09 thoughts

Pretty on target if you ask me.

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The rhetoric in this article sounds very familiar. Where else could an American have heard something like, "This isn't about _____; it's about state rights"?

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Urban Survival...

It's like the distinction between data and information: Data that can't be distilled down into action is pointless and I'm not seeing anything much in the way of action steps/go forwards out of present coverage. Maybe I missed it, but this seems like the news department version of one of those 3-hours meetings in the conference room back when where I emerged often going "Whew! Was that ever a waste of time..."