Jim Grant on the Gold Standard and the Fed’s Hall of Mirrors

Quote of the Day: Mark P. Mills

Apple went public in December 1980. And there followed the longest run of economic growth in modern history, spanning five presidencies from Reagan through Clinton. Apple grew to become the world’s largest market cap company and a tech icon.

According to today’s techno-pessimists (Tyler Cowen, Niall Ferguson and Jean Gimpel are cited in the article), nothing like that can happen again because technology and America have plateaued. Such naysayers, who flourish like mushrooms in the depths of economic recessions, have been wrong in every one of the 19 economic downturns we have experienced since 1912. And they’re wrong again.

The techno-pessimists are innovation Malthusians cut from the same cloth as the resource Malthusians. Every time reality proves them wrong following each crisis, they say a variant of the same thing: I may have been wrong before, but I’m right this time.

Technological innovation is pivotal to whether the American economy will experience prosperity growth again. In a world with a growing population but a tepidly expanding economic pie, we see shrunken expectations and a reversion to fighting over how to get one’s “fair share.” People lose faith that the pie will ever grow again; in essence, they lose faith in the future itself. Certainly there’s limited optimism today about technology’s future and what that might mean for the economy, jobs, debt, taxation, and fairness.

When it comes to predicting the future—especially of technology—with all due respect, one does not turn to historians or economists. We are poised to enter a new era that will come from the convergence of three technological transformations that have already happened: Big Data, the Wireless Wired World, and Computational Manufacturing (3D printing).

The emerging grand transformations—Big Data, Wireless Broadband, Computational Manufacturing—are all an integrated part of the next great cycle of the information economy. Returning to Drucker, the evidence that this transformation has already happened is visible in Census data. The share of our economy devoted to moving bits—ideas and information—is already much bigger than the share associated with moving people and stuff.

Not only does the United States have the world’s most sophisticated and reliable (and low-cost) electric grid that is a vital infrastructure to fuel the information industries, but the United States also leads in the development of each of the core technological transformations. All things considered, there is every reason to be optimistic about our future.

You can’t predict what company will be the next Apple—though investors try. But you can predict there will be another Apple-like company. And there will emerge an entirely new family of companies—and jobs, and growth—arising from the transformational technology changes already happening.

~ Mark P. Mills, from The Next Great Growth Cycle

Cartoon of the Day: The Fuel Driving Green Jobs

Markets in Everything: Virginity Cream

Weird stuff. Who would fall for such a pitch?

Neil Armstrong Bio

The baby boomer challenge--- no one born after 1935 has walked on the moon.

Crony Clean

Neil Armstrong - 1930 - 2012

Interviewed by the BBC. His prediction of a manned moonstation in his lifetime did not come true, but his feats certainly captured the imagination of the Star Trek generation.

Here's a challenge to the baby boomers--- no one born after 1935 has walked on the moon.

Fighting the Deleveraging Trend

The Federal Governments has bravely (or not so bravely) decided to fight the deleveraging trend in the economy. With the financial crisis of 2008-2009, it was painfully obvious that the overall debt burden carried by individuals, corporations and governments needed to be reduced, and the impact of this deleveraging would slow economic growth around the world for many years, but lay the foundation for a future economic growth. The private sector has read the tea leaves and is getting their financial house in order, while the Keynesians in government have stepped on the gas pedal. So the question looms: has the economy deleveraged at all? Does private sector debt count more than public sector debt or vice versa? Can you have a solid recovery if governments need to drive interest rates to zero so they can continue to service their debt? Are we setting the table for another round of stagflation as in the 1970's?

Quote of the Day: P. J. O'Rourke

America’s retreat from visible, tangible manifestations of superiority doesn’t hurt just our pride, our economy, and our place in the Guinness Book of World Records. It’s also a bad advertising campaign. America has one great product to sell, individual liberty. It’s attractive, useful, healthy, and the fate of the world depends upon it.

We are the most important and maybe the only country that fully embodies the sanctity, dignity, independence, and responsibility of each and every person. “American” is not a nationality, an ethnicity, or a culture; it’s a fact of human freedom. Our country was not created and is not governed by a ruling class or even by majority rule. America is individuals exercising their right to do what they think is best with due respect (to the extent human nature allows) for the right of all other Americans to do likewise. This is not an ideology or a system. This is a blessing.

The rest of the world would like to be so blessed. But the concept of individual liberty is harder to grasp than we Americans think. Those with little experience of liberty understand license and lawlessness better than they understand freedom. We want everyone on earth to have sanctity, dignity, independence, and responsibility. And we want everyone to want it for each other. We want this not because of our idealism but because of our selfish desire for a little more peace and plenty.

The world will never be good. People fight hard and cause a lot of trouble when commanded by their self-interest. But people fight viciously and cause ruin when commanded by the interests of others. Individual liberty is the best we can do. Try any other sociopolitical combination—collective liberty, individual oppression, communitarian despotism.

However, if we are going to promote the benefits of individual liberty, we have to show what free people can do. We need evidence to support the truths we hold to be self-evident. We have to advertise. Putting something double the size of the Burj Khalifa where the World Trade Towers once stood and building a Corvette that can top 300 mph would be a start.

~ P. J. O'Rourke, from Of Thee I Sigh: Baby Boomers Bust

When I Grow Up, I Want to Be a Crony

Why be a taxpayer, when you can be a taxspender?

Debt Bomb

Lemon of the Week: PIMCO High Income

Would you be interested in buying a closed end mutual fund that traded at a 70%+ premium to net asset value even if it yielding 10%? I know I wouldn't. But investors in the closed end fund PIMCO High Income (PHK) are doing just that to buy a leveraged junk bond fund. What could go wrong here? The fund is only 30% leveraged to go with its 70% premium, along with an expense ratio of 1.16%. Just imagine what will happen to investors should the premium shrink or its junk bond portfolio perform poorly.

The first mission of investors is to manage their risk. This fund seems off the charts risky to me and won't find a place in portfolio. I come from the investing should be like watching paint dry or grow school of money management. Roller coaster rides are not for me.

Niall Ferguson: The Six Killer Apps of Prosperity

1. Competition

2. The Scientific Revolution

3. Property Rights

4. Modern Medicine

5. The Consumer Society

6. The Work Ethic


Today we have the welfare state destroying the work ethic, cronyism between government and business degrading competition, and property rights continuing to be eroded by government. We are still advancing forward through the efforts of the few with the scientific revolution, modern medicine and the consumer society.

Ferguson's three questions:

1. Is the west deleting its own apps?

2. Does the sequencing of the download matter, and what happens when countries get the sequence wrong?

3. Can China continue to prosper without private property rights?

P.T. Barnum is Alive and Well, and Living in New Jersey

According to the New York Times, John Corzine is unlikely to be prosecuted for his role in the collapse of MF Global, and to celebrate his good fortune Mr. Corzine is contemplating starting a hedge fund based on his trading prowess.  Rumor is investors are chomping at the bit to invest with this wizard of Wall Street (well, not really).  Anyway, we though it would be a good idea to help him come up with a name for his new endeavor:

Son of MF Investments

Black Box Investments

Madoff, Bozo & Corzine Investors

Toxic Paper Capital Management

Up in Smoke Investments

The Presidential Pardon Perpetual Income Fund

The Nifty Fifty Basketcase Fund

The Falling Knife Capital Opportunity Fund

The 'La Dolce Vita' Sinking Market Fund

The House Always Wins Fund

Can't Miss Partners

The Bet the Farm Market Neutral Fund

The Fickle Finger of Fate Investment Partners

The Mythic Myopia Fund



Readers, please feel free to chip in with your ideas.

"I simply do not know where the money is... I do not know which accounts are unreconciled or whether the unreconciled accounts were, or were not, subject to the segregation rules."
- Jon Corzine

3D Printing a Custom iPhone Case

Sunday Verse: Charles Bukowski

16-bit Intel 8088 chip

with an Apple Macintosh
you can't run Radio Shack programs
in its disc drive.
nor can a Commodore 64
drive read a file
you have created on an
IBM Personal Computer.
both Kaypro and Osborne computers use
the CP/M operating system
but can't read each other's
handwriting
for they format (write
on) discs in different
ways.
the Tandy 2000 runs MS-DOS but
can't use most programs produced for
the IBM Personal Computer
unless certain
bits and bytes are
altered
but the wind still blows over
Savannah
and in the Spring
the turkey buzzard struts and
flounces before his
hens.

~ Charles Bukowski


Grouch: Not one of Buk's better poems, but a reminder of just how fast today's whiz-bang technology  falls on the trash heap of history.

Quote of the Day: The evil, evil Charles Koch

If your struggling car company wants a government bailout, you’ll probably have to build the government’s car – even if it’s a car very few people want to buy.

Repeatedly asking for government help undermines the foundations of society by destroying initiative and responsibility. It is also a fatal blow to efficiency and corrupts the political process.

When everyone gets something for nothing, soon no one will have anything, because no one will be producing anything.

~ Charles Koch, from Why We Fight for Economic Freedom

Grouch: I encourage readers to read the entire editorial just to see how diabolical this man truly is. This will help you understand why he's so hated by progressive thinkers in our society.

Corporate Freeloaders

Maybe we should take a big chunk of money away from the government and let the taxpayers keep more of their earnings.

Markets in Everything: Who's Your Daddy?

In a sign of the times, New Yorkers might see this truck cruising their streets offering quick DNA tests. The DNA tests, which cost between $299 and $575, require a simple cheek swab from each participant and lab analysis. Results are available in a couple of days. I'll leave it to reader's imaginations as to why this service would be in high demand.

How 3-D Printing Can Build a Custom House in 20 Hours

Yahoo News -- "An engineering professor, Behrokh Khoshnevis, at the University of Southern California, is really thinking big: He has figured out a way to build housing with a giant 3D printer. The apparatus, instead of being the size of your typical laser printer, would actually be somewhat bigger than the house it would build through a concrete layering system called Contour Crafting.

The professor explained the process in a speech at the TEDx conference, which you can watch above. (Start at 4:30 to see the animation demo.) In the video, the professor demonstrates how the machine lays down a concrete foundation, puts up walls, even inserts wiring and plumbing, and eventually constructs an entire building, which Professor Khoshnevis says can be completed in less than a day. (All that's left to add are doors and windows.) Robotics could even be used to add details like tiles, says the professor."

Quote of the Day: Voltaire

To learn who rules over you, simply find out who you are not allowed to criticize.

~ Voltaire

Why So Much Cheer on Wall Street?

Last Friday's 217 point rise on Wall Street was triggered by some good news on the jobs front. Trader's cheered a modest increase in payrolls, and politicians trumpeted (as they have other months) that we have finally turned the corner, and the recovery is ready to take off like a rocket.  But what do the numbers tell us?  Let's look st some historical data.

Not exactly a robust 3 1/2 years of job creation for the current resident in the White House.  Now let's look at the info represented in a slightly different format.

Again, hardly a reason for cheer in any recent news.  In fact, not much room for cheer since the Dotcom bubble burst in the late 1990s.  The lost decade of stock performance now threatens to stretch into two decades.  We can look to the usual suspects for the poor performance: aging demographics with an avalanche of Boomers set to retire, a poor educational system that fails to match skills to employment needs, the inability of workers to retrain for new careers, union quasi-wage controls that deter employment and send companies to source products from abroad, an outdated immigration system that restricts the entry of highly skilled workers (engineers, doctors, software designers, etc.), and last but not least, government regulations that deter employment such as minimum wage rules, high employment taxes (FICA, SSN), the burden of health care plans, the highest corporate tax rate among OECD nations (39.2%), and artificially low interest rates that punishes savers and subsidizes borrowers. Things have only gotten worse on many of these fronts in the past 3 1/2 years, or the past 12 years, or the past 20 years.

The recent stock market cheer, in my opinion, represents the triumph of hope over reality, and the fatigue of a sideways market for the past 10 years. In all likelihood a pullback is coming from these lofty level that are unsupported by the current economic reality. Expect a sideways market for the next 3 - 5 years while the economy works through the current round of excesses, artificial manipulations, and malinvestments. Only when politicians give up on trying to "fix" the economy will we see a sustainable turnaround and real recovery.

Quote of the Day: Thomas Sowell

The Miracle of 3D Printing: "Magic Arms"

From Venture Beat: "The heartwarming video above documents the story of a small child whose life has been radically changed for the better because of 3D printing technology.

Two-year-old Emma was born with a rare disease called arthrogryposis that makes it so she can’t raise her arms without assistance. Through the use of 3D printing, a Delaware hospital created a mobile plastic exoskeleton that now allows Emma to use her arms for many things.

3D printing ensures that a new exoskeleton can be created if Emma breaks or outgrows it. Emma is now on her second 3D-printed jacket and calls the device her “magic arms.”

The video was created by 3D printing business Stratasys, which recently merged with Objet in a $1.4 billion deal. A Stratasys 3D printer was used to create Emma’s jacket."

The 3D printing revolution is in its infancy and will dramatically transform manufacturing and medicine in ways no bureaucrat can foresee if left unfettered.

Evil Oil Companies: How Exxon Mobil Stiffed the Taxpayers

Can you believe that over the last 10 years Exxon Mobil had the nerve to only pay $1.075 trillion dollars in taxes on their profits of $352 billion? What an outage. Just think what would the price of gas be if they paid taxes equal to their profits, not 3 times their profits?

Computer Security Tips from Bruce Schneier

Bruce's main points:

1. The State of Encryption: "Not that great, and getting worse"

2. DNSSEC: It's In Your Future
The Domain Name System Security Extensions (DNSSEC) technology is all about cryptographically signing DNS information in order to provide a new layer of integrity and authenticity. The call for "DNSSEC Everywhere" was first raised in the summer of 2008, after security researcher Dan Kaminsky revealed that DNS was at risk from attack.

3. The Best Defense: Backup, AntiVirus, and a Good "Bullshit Detector"

4. Software: "All Equally Mediocre"