Tuesday, November 4, 2014

Humans Need Not Apply



Great video...and I agree.
The issue is this...corporations are getting bigger and bigger.

Pretty soon (probably at about the time 99% of human labor will be obsolete), one or two companies will own all of the machines.  What then do we do with all the poor unemployed people who are now breeding at sub-saharan rates?

Sunday, November 2, 2014

Swarmcoin

Do you hunger for more risk?

Do you desire the ability to put in small amounts of money and have a shot at making large sums?

Are you under the impression you can spot a good company?

Well look no further for opportunities than swarmcoin:




This is crowd funding with the chance of making it big. Say goodbye to pandering rich guys who want 50% of your profit for a few thousand for your startup. Here we all get to be involved and we all get to reap the benefit.

Fracking and the unsustainablity

http://www.telegraph.co.uk/finance/personalfinance/investing/11006723/fracking-for-Shale-gas-the-dotcom-bubble-of-our-times.html  


Regardless of what you think of the environmental issues, it looks like the math just isn't there.

In 2008, natural gas was north of 12 dollars pm BTU's...now its around 4.  So sure we got cheap gas...mission successful.  But now what?

There hasn't been an energy revolution.  Any new drilling ventures (and you could argue current ones) aren't profitable any longer.  And shale reserves we found out were vastly overstated and likely to peak even at our current rate around 2018.

So no more jobs, no revolution from cheap energy, nothing to see here...

But don't worry, Exxon got rich off of the deal, and they're going to continue to take out loans on these fracking properties that will never pay off.  You can get some good call options by buying fracking rights and using them to leverage up your dying oil company.

Friday, October 31, 2014

Effects of low interest rates

We all know the story.

If you lower interest rates, the theory is that it boosts the economy by pumping money into the system.  But do low interest rates really spur inflation?

So I'm keeping the graphs together for comparisons.
The top is the monthly inflation rate.  It's much more volatile than you would expect because a recession really kicks it lower.  The next is the  Fed funds rate, the middle is the average of future inflation (orange is one year, grey is 5), so if you have a high orange bar in january of 1970, the period of Feb1970 to Jan 1971 will have high inflation. And the last graph is the monthly interest rate minus the inflation rate.





So now lets see what we have here:
First...I'm going to fight against some libertarians here and say that inflation is not out of control right now and that this data is most likely correct or pretty darn close.  To prove my point, if inflation is 10% like some people claim, that means prices would double in 7 years.  And I mean we all know that prices are rising, but to say that anything (think cars, houses, utilities) has doubled since 2007, you're just trying to be difficult. The interest rates too...those are right and sad in their own aspect. 


So do low interest rates cause inflation?
In theory....yes.  In practice...it's hard to tell. It actually appears (and has been shown) to be a rather backward looking tool.  Usually inflation will drop and THEN the interest rate will drop.  The interest rate is much more reactionary to inflation rather than actually causing it.

Now you say...well its cyclical, so we have low interest rates that cause inflation and then we raise them, crash the economy and start over.  But as you see, and Japan has shown, a period of high rates doesn't lead to a period of low rates and a period of low rates doesn't lead a period of high rates.  We've been relatively low since circa 2000 (thats 14 years with annual inflation under 4%) and in the 70's (74 to 83), we had 9 years of above 5% inflation, some years much higher.  So you can't say that low interest rates will lead to economy wide inflation.  The theory is broken.

So Japan has had low interest rates for what...30 years?  We've had them for half that, and both countries fail to get that Keynesian 8% inflation that will boost our economy out of the liquidity trap (or so the theory goes).  So why then even have lower interest rates:


You guessed it...debt.  And not just any debt, corporate and government debt.  Household debt is relatively flat (same as in Japan) and corporate debt looks flat, but theres one sector thats just rocking it and thats financial sectors.  These low interest rates are making more debt and thats it.  

We don't get a boost in the economy.
We don't get any 'inflation' or even cheap debt for households (we want less debt). 
Instead we get more debt for the financial sector and governments and thats exactly why we're never going to raise rates.  It's not about the economy.  A look at the graphs shows that interest rates don't have nearly as big of an effect as economists like to say.  The truth is that people get rich of these rates, so don't expect it to change. 



Thursday, August 7, 2014

China to build Nicaraguan canal

http://www.zerohedge.com/news/2014-08-06/step-aside-panama-canal-china-build-nicaragua-canal-worlds-largest-infrastructure-pr

"A month ago, a Nicaraguan committee approved Chinese billionaire Wang Jing's project to create The Nicaraguan Canal. With a planned capacity to accommodate ships with loaded displacement of 400,000 tons (notably bigger than The Panama Canal), the proposed 278-kilometer-long canal that will run across the Nicaragua isthmus would probably change the landscape of the world's maritime trade.
"The project is the largest infrastructure project ever in the history of man in terms of engineering difficulty, investment scale, workload and its global impact," Wang told reporters, adding that with regard the project's financing, which is around $50 billion, Wang seems quite confident, "If you can deliver, you will find all the world's money at your disposal.""

So Mr. Wang needs a bigger canal to fit his ship...seems logical to me.