srbac

Lives in North Carolina

QE? What is Quantitative Easing anyway?

American Life, banks, Consumers, Economy, government Comments Off

Jan 182013

There are lots of news reports and internet musings about Quantitative Easing. I’ve read many with the hope of discovering one comprehensible article that would fairly represent QE for the non-fiscal, non-monetary schooled citizen. Not to be. The explanations are either way over my head or focused on attacking or defending the policy. People seem to use many exotic terms to describe an already abstract subject.

So I’m going to take a swag at explaining what and why.

The Fed chairman, Ben Bernanke has been fearful of the country falling into another depression since the bubble burst in 2008. He’s made plain that the bogeyman we have to fear is deflation, not inflation. Simply put, inflation is too much money chasing scarce goods. Inflation causes prices to rise. Deflation on the other hand is an abundance of goods and not enough money, or at least not enough buyers. Deflation causes prices to fall.

A recession brings a lot economic distress: job losses, company failures, personal bankruptcies….its ugly. But a depression, that’s an event that changes lives, economies and even governments, sometimes permanently.

The clear similarity between 1929 and 2008/2009 is that in both cases, a massive amount of capital disappeared. Money invested in almost anything (except long term treasury bonds) just disappeared. When money in investments and the value of owned assets disappears people won’t or can’t go out and buy things. Then more jobs disappear because employers know people aren’t spending as much money so they reduce expenses by laying off workers. Fewer jobs equal fewer paychecks and there is even less available money around. As you can see this becomes a really ugly self-perpetuating down spiral.

The 1929 depression saw the collapse of the stock market erase the supply of capitol. In 2008/2009 the wealth disappeared from home equity first and then the stock and bond market followed. Again, as in 1929 and the 1930′s, wealth just melted away. Homes purchased in 2000 for $300,000 escalated to $500,000 in 2005 then fell to $200,000 by 2010. This happened millions of times. Almost all the homes had mortgages, many owners had refinanced and taken money out for home improvements and vacations. By 2010 the inflated value was gone. Owners owed more than the possible selling price of the house. A vast amount of capital was taken out of the American economy. Whatever the details, 80 years ago or today, a huge amount of wealth ceased to exist.

Bernanke is using QE to replace the private capital that had been lost in the recession. To do this the Fed is using new money to buy mortgage backed securities (MBS) from banks so that the banks, in turn, make more loans. In other words replacing money which had disappeared and getting it back into the economy.

You might say that this is nice for the banks that are getting premium prices for otherwise unwanted securities, but has this worked to help the little guy? The answer is no, not directly. However, good things have happened to reverse some of the losses from the recession, For example: (1) The stock market is within hailing distance of its 2007 high, thus replacing a fair measure of the capital that was lost in the recession. (2) Unemployment has improved slightly. Not that much, but its better than it was two years ago. (3) New housing is showing some signs of life. Again its not a great recovery, but there is improvement. Along with that will come housing prices which will rise and replace a lot of lost wealth.

The arguments against QE mostly have to do with it reducing interest rates for savers and opening the door to inflation. The inflation argument is pretty weak right now since its very unusual to see high unemployment and high inflation at the same time. Later, when employment improves we hope the Fed stays ahead of the curve. Low interest rates for savers also means low interest rates for home buyers, so that’s a mixed blessing. Savers must take on more risk since bank interest rates won’t even keep pace with low inflation numbers.

SRBAC

Visit Visible Country for products made in the USA

NASCAR fans need nanny?

American Life, media, sports, Unconscious headlines Comments Off

Aug 082012

I’m not a big fan of car racing. As a matter of fact I’m not even a little fan of car racing. Sitting on your dead ass in the broiling sun watching cars go around in circles indicates a severe personality disorder. But that’s a digression. Brainless NASCAR fans are not my topic. My topic is brainless newspaper articles.

Last Sunday some people were hit by lightning in the parking lot of Pocono Raceway during (or after) a racing event. One person was killed. USA Today has launched the usual witch hunt for the culprits. Whose responsible? NASCAR? The raceway owners? The track officials?

According to USA Today, almost anyone except the fans, duh. USA Today never mentioned that perhaps fans might consider personal safety to be their own responsibility. Not to be picky, but isn’t this familiar? Isn’t this the role of the nanny state? Shouldn’t we pass a law about staying out in the rain? Okay, the chances of you getting hit by lightning are pretty small, but if you chose to ignore the possibility, isn’t it on you?

Fans should be alerted to the fact that some sporting events take place OUTDOORS, and thus may be subject to THE WEATHER.

One raceway official said if the race was still in progress, some fans would not leave even in a monsoon. “that’s why they are the ~~greatest~~ dumbest fans in the world”.

SRBAC

Visit www.visiblecountry.com for products made in the USA.

The Irony of Facebook

American Life Comments Off

Jun 042012

There’s a lot of irony surrounding the existence of Facebook and social media in general. For example, spending more time on electronic social media means you spend less in the company of friends or family or co-workers. Where’s the gain in that? But that’s not the real irony. The eventual life cycle outcome of the Facebook phenomenon will tell that tale.

Most companies have a business model that includes producing a product or service. Not Facebook. Most companies have customers who use their product or service and pay them for it. Not Facebook. Most companies grow value by making themselves unique in some way and thereby establishing barriers of entry for would be competitors. Facebook…not so much. They claim to have 900 million users, but there are no users fees. It’s free… forever. For users, free is a really good price. But for the company, free means zero revenue from the user base. For investors, no reliable cash flow means your back to the internet bubble of the 1990′s.

All the talk about Facebook is becoming irritating. How big will social media get? Is Facebook a substitute for actually participating in your life? Is Facebook more than games and gossip? How do you figure out the “value” of Facebook? If its worth $100,000,000,000. If it is, then the dollar has already been devalued. Thanks Ben.

If you have a Facebook page you begin to hear from people who want to “friend” you. This “friending” business is really odd. Facebook prods you to supply personal information and then uses it to act like a matchmaker. A Facebook message says: “Davis wants to be your friend”. Now you accept or ignore. Is there any way to say “NO, don’t ever friend me again”? Don’t these people have anyone to talk to? Maybe have lunch, take a walk? Really, is there an objective here?

So here we have a company with no product to sell and no paying customers in a market space where a smart guy with a computer is the price of entry. This is dangerous. Facebook must rely on advertisers to make up the bulk of their revenue. Sort of like television except they don’t even produce new shows. They rely on their users to supply the content to keep other users coming back. This is the real danger…people get bored.

The irony is that the rate of speed with which Facebook has grown may be the instrument which hastens its demise. By accelerating the ability to quickly tell friends (who will in turn tell their friends, who will in turn tell…never-mind) and pass on the the new next big thing which insures that something else soon will be the next big thing and therefore replace the current big thing. When that comes along, all the friends will let their friends know via Facebook, and they’ll be gone in a flash.

SRBAC

Visit Visible Country for products made in the USA

America making things

American Life, Economy, Made in USA, Working Comments Off

Apr 292012

About two years ago I decided to build a web site that featured 100 companies that make things in the USA. By “things” I mean consumer goods since that’s what American seem to complain about most (…everything for sale in big box stores is made in China, India, etc.). Since I had never built a web site before, I also had to teach myself HTML. Also, in the middle of all this I decided to start this blog. My attention span isn’t all that great and I wandered off to do other things from time to time, but the good news is I’m almost done. See Visible Country

That said, what I’ll start doing now is revising the website and do everything the way it should have been done if I’d known what I was doing in the first place.

A great benefit of the time spent is that I now understand and have opinions on several things that I didn’t know about two years ago.

What I have learned about companies making consumer goods in the USA.

1. Some of these companies are hard to find.

You just can’t Google “made in USA” and expect to come up with a respectable list of manufacturers. First you’ll get pages and pages of directories of websites with lists of things made in the USA. Not what I wanted. I wanted to discover companies that might not be on the usual “buy American” lists. So you have to do some harder work, like searching the internet by state and manufacturing groups, and then back checking and verifying.

2. We make more things than you think.

Those people who say “we don’t make things anymore” are wrong. For example, home audio and watches. I thought we stopped making that stuff years ago. Turns our I was wrong. We make lots of high end audio components. We just about did stop making watches, but that’s begun to change. Stylish clothing, expertly made home furnishings, sports and outdoors equipment, we make it all.

3. We don’t make some things that we should make.

Computer electronics for example. You can’t buy any wireless routers made in the USA…I know, I tried. It’s also very hard to find any computers even assembled in the USA. It seems to me we may be losing the ability to build factories to make electronic components. This is something we need to work on.

Another thing is sailplanes (gliders). OK, not something everyone wants in their garage, but I have a category on the site called “flying”, and I planned to add a company making sailplanes. Imagine my surprise, you would think at least one company would build sailplanes here.

4. Some things will be made elsewhere.

China and India have 2.5 billion people between them. The US has about 310 million. It seems reasonable that other countries in the world are going to get good at making certain things. Factories are becoming more automated. This started a long time ago and is more responsible for the fall off in manufacturing jobs in the US, than all the off-shoring combined. Other countries have become way more capable at making textiles that we are here. Making towels and carpets and t-shirts is no longer in our wheelhouse. That’s just going to happen. Americans need to concentrate on their strengths.

5. Even if we don’t make it here we often own the company.

American companies are often criticized for making products elsewhere. Goods that American companies make for sale in other places frequently cannot be manufactured competitively in the United States. American global companies both make and sell their products internationally. If they didn’t make the products overseas, they would not even be in the marketplace. As a result, the company prospers, its shareholders (often Americans) prosper and eventually when earned profits are repatriated to the states, the international American corporations pay their taxes on it.

6. We need to re-think the “made in USA” trope.

When Americans (especially politicians) talk about the manufacturing jobs that have been lost, they are frequently referred to as: “good high paying manufacturing jobs”. The media asks the politicians about how they would create “good high paying manufacturing jobs” and the politicians respond with various schemes, as if they could wave a magic wand and make it happen. The reality is that many of those “good high paying manufacturing jobs” were hard, dirty, tedious and sometimes dangerous jobs that have been replaced by foreign manufacturers and by automation. Many of those jobs aren’t coming back.

When you go through the 100 companies at Visible Country most of what you’ll see is how Americans are creating jobs by starting their own companies to make things. This together with taking advantage of the educational opportunities that are available to all American is how “made in the USA” will make a comeback.

SRBAC

Visit Visible Country for products made in the USA

If it’s too complicated, don’t buy it.

American Life, banks, Consumers, Economy Comments Off

Mar 262012

Goldman Sachs, Bernard Madoff, MF Global, etc. There seems to be a lot of opportunity today for people to lose money on bad investments. In spite of investing for years, I still don’t understand what these people are (or were) selling. Did the investors? Why would you invest money in something you don’t understand? No question that banks and hedge funds and mutual funds all need to be clear about how they are using your money. But what about the people who bought what they were selling? Shouldn’t they take some of the responsibility?

If some of these sellers were cheating investors by lying to them, that’s one thing. We don’t need new laws to deal with that. We already have laws against fraud. But fraud is hard to prove (it’s all right there in the fine print). We don’t though, have any laws against being stupid. The sellers say “trust me” and the buyers say “OK, here’s my money”. What! What happened to common sense? PT Barnum said “There’s one born every minute” (he was referring to suckers, not bankers).

Maybe the people who lost money weren’t stupid, maybe they were just lazy. Still not a good excuse. It’s pretty hard to cheat people who are willing to do their homework. Instead people buy because their relatives or friends have recommended the investment (bad idea). Or because the salesman has shown them a color glossy with the investment history of continuous profitable returns (worse idea).

People don’t buy individual stocks or bonds because its hard to accumulate a portfolio to accomplish a certain objective without a lot of work. A good mutual fund company will do a better job, and charge you a reasonable amount for their work. But how many people research the fund before they buy? What are the underlying securities that compose the fund?

There’s really no excuse anymore for not doing your homework. Just about any information you need about companies or mutual funds is available on the web. Corporate history, financial information, profit projections, annual reports, whatever.

SRBAC

See Made in the USA products at Visible Country.

E-wallet – What’s the hurry?

American Life, banks, Consumers Comments Off

Mar 022012

I once used an American Express card almost exclusively. The reason was that Amex had a great attitude toward how long you could take to pay your bill. We use to call this “the float”. If you traveled a lot (which I did), and you weren’t always on-time with your expense reports (which I wasn’t), Amex was very understanding. If you were tardy with your payments, American Express didn’t charge any interest. You were expected to pay for your charges every 30 days, but if you didn’t they just carried you, in some cases for up to 90 days. All this for $30 a year annual membership.

The reason for they did this was because Amex knew they made their money from the retailers. Since I was the customer, they chose to manage our relationship very carefully. They were making so much money from their percentage of every charge I made (which the retailer paid), that they were happy to let me go on being a chronic slow pay. So if I used my American Express card to buy a $100 dinner in January, I might not actually pay for that meal until April (if I got the invoice in February and took the entire 90 days to pay).

Sadly, all this ended some time ago when Amex decided the carrying charges for the money it was lending me every month was too high. A very nice, but firm, Amex employee explained to me that it didn’t matter if I was a long time customer, I was just going to have to start paying my bill every 30 days. Today I carry the standard bank cards, but since I’m careful to pay them on time they don’t cost me anything at all.

What I don’t get is this E-wallet business. It’s convenient? For who, you or the bank? Essentially they are into your bank account micro-seconds after you make a purchase. Where’s the float? Why are we so anxious to pay? It’s un-American!

SRBAC

See Made in the USA products at Visible Country.

The Big American Political Lies

American Life, Economy, government Comments Off

Feb 292012

Do the math. It’s a fairy tale to believe that just increasing taxes on rich people will solve our deficit problems. It’s also a fairy tale to believe that reducing taxes will solve our deficit problems.

Incredible as it sounds though, these are the two big lies American politicians want citizens to believe. One side says that all we have to do is tax the rich, which is anyone making more than $200,000 annually, and we’ll be OK. We don’t have to cut any programs, well maybe defense, but no social programs. Basic arithmetic aside, that’s what the party with the donkeys want us to believe. The other side, the party with the elephant, want us to believe that if we reduce taxes, huge amounts of dollars will flow into government coffers because, in some mysterious way the economy will soar and there will be more tax dollars without increasing tax rates. That’s magical. The elephant guys also want us to slash government spending, but most of then are really vague about which programs should get slashed. They wouldn’t want to piss-off any voters.

There’s a theory that government spending can’t be cut while an economy is in recovery. The theory says that reducing government spending will worsen the situation by increasing unemployment and further reducing tax revenues. Economists argue about this constantly. There is really no proof that adjusting government spending will affect the economy. What there is proof of is that government spending of funds we don’t have will increase the public debt.

There’s also a theory that says taxes can’t be increased during recovery from recession, because that will reduce growth and subsequently further reduce tax receipts. In fact, taxes have been both raised and lowered during economically tough times. There’s no proof that one works better than the other. There is plenty of evidence however that if we don’t raise enough money to meet our debts, it will have a very negative effect on the country’s future.

It’s pretty evident that people in favor of less government control are not going to vote for higher taxes and people in favor of more government subsidies and wealth transfer are not going to vote for reducing spending. Both groups can point to historical situations where implementing their program (or not implementing the opposing program) achieved desirable results. Both sides will put their own spin on not implementing their programs: citizens starving in the dark for example , or conversely, total economic collapse and Armageddon.

Both sides seem to believe that if you talk long enough and loud enough the fairy tales will come true.

SRBAC

See Made in the USA products at Visible Country

The Future of the Political Universe

American Life, elections, evolution, politicians 1 Response »

Jan 312012

The universe is about 13 billion years old.

Earth (the planet) is about 4,000,000,000 years old (except if your a creationist and then its only 6,000).

Life on the planet in some kind of cellular form has been around for about 2,000,000,000 years.

Homo sapiens, identified from earlier hominids by a larger brain case and self-awareness, have been around for almost 200,000 years.

Homo politicus (politicians) with a smaller brain case, inability to hear or reason and awareness only of itself, has been around way too long.

The present election campaigns are unique in that none of the politicians are even pretending that they are telling the truth.

Apparently its been a mistake to equate the terms “politician” and “leader”.

They don’t seem to be leading us anywhere, but that’s our fault as much as theirs.

The future of the planet is in doubt…the universe looks like it’ll be okay.

VISIT VISIBLE COUNTRY FOR AMERICAN MADE PRODUCTS

Unconscious Headlines #4 – What do we deserve?

American Life, government, media, Unconscious headlines Comments Off

Jan 012012

Happy New Year.

For the first post of the new year we’ll celebrate The Sunday New York Times for an unconscious headline on their editorial page. The editorial is “As Good As it Gets?” and the subheading is “Americans deserve better than an economy that merely muddles along”.

My question is: why do we deserve a better economy? What exactly have we done to deserve a better economy? The article of course blames Republican intransigence for blocking more government spending. And by doing so have prevented “more government aid to help create jobs”. Setting aside the fact that governments don’t create jobs (except more government jobs), the NYT is stuck on Americans deserving something (from the government).

I was brought up with the idea that I was deserving of anything I earned. Where is the part that says “American deserve everything they earn”. And if we go on electing the same bad actors that tell Americans they “deserve” things, then we’ll get what we deserve.

Have a healthy and happy.

SRBAC

VISIT VISIBLE COUNTRY FOR AMERICAN MADE PRODUCTS

Life In America – Holiday Story

American Life Comments Off

Dec 262011

In the beach town where I spent most of my growing up years we had a volunteer fire company and volunteer first aid squad (not known then as an EMS). The town covered less than two square miles. There was a string of these small beach communities running along the ocean, each with their own fire departments and first aid stations. If a fire was reported, the volunteers were called out by several blasts on the air horn located on top of the borough hall/police station. The volunteers would then rush from their jobs or dinner tables or beds to get to the fire station before the trucks left.

A few volunteers actually had portable flashing lights that fit on the dashboards of their cars. It was thought that some were volunteers only so they could streak along the town streets with impunity.

My Dad owned a small business in “the city” and we were only part time summer residents for a time. Slowly, my family became more and more a part of the little town and we began living there on weekends and holidays as well as summer. Finally we moved there for good. Now Dad was a quiet, somewhat shy person. Mom was just the opposite: outgoing, charming and quick to make friends. Some of her new-found women friends were part of the firehouse crowd known as the Ladies Auxiliary. Naturally they were eager for her to join, but for that to happen, my Dad had to become a volunteer fireman.

Dad took the news well. He had met many of the firehouse company since it was a central part of the social life of the town. His joining was quickly arranged and took place without fanfare during the last week that December. I frankly have no recollection of any fire-fighting training involved. However there was an initiation requirement Dad had to undergo. Each New Years Day, all the fire companies had a sort of floating party that went to each firehouse along the string of beach towns. The Ladies Auxiliary’s supplied food and there were kegs of beer and bottles of liquor at every firehouse.

Dad’s initiation was that he had to drink a shot of whiskey and a beer at every firehouse they visited.

When the trucks got back to the town’s firehouse early in the evening of New Years Day, Dad was missing. Calls were made to the other firehouses, cars were searched and Mom was alerted that Dad could not be found. What had happened to him? Had he fallen off a truck on the way back? Had someone taken him home? No one had any idea. As the firemen began to put the trucks away for the night Dad was found. Sound asleep between the equipment boxes on the town’s sparkling pumper truck.

In the time I lived there, no fires were reported on New Years Day.

SRBAC

VISIT VISIBLE COUNTRY FOR AMERICAN MADE PRODUCTS

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srbac

QE? What is Quantitative Easing anyway?

NASCAR fans need nanny?

America making things

If it’s too complicated, don’t buy it.

E-wallet – What’s the hurry?

The Big American Political Lies

Unconscious Headlines #4 – What do we deserve?

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