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To the point, forget about all the graphs, charts and illustrations that you were shown back in school by your economic, business and finance professors. Why? Because the most important ones are those they failed to show and tell you about and just how important they are to markets, GDP and economies. In fact, they are so important that they would turn every other economic thesis upside down - starting with Adam Smith's, Enquiries into The Wealth of Nations.
Not going to say much more; other than, it is very clear that Smith and his subsequent CULT believers have missed the point entirely, having no clue as to what "Wealth" really is - we leave the rest for to you to figure out. Dr. Peter G Kinesa July 29, 2013
No kidding, we guess Marc's finally starting to figure out what we have been saying for years. Sooner or later the abstract economy's - positive-sum game - is going to have to reconcile with the physical economy - a negative-sum game. The outcome of the imbalance correction will be brutal.
Or perhaps Marc picked up a copy of The Limits to Growth and discovered a practical application - Oprah calls it an "ah ha" moment when the penny finally drops.
First Financial Insights
July 27, 2013
When the penny drops...
Some folks take a little longer to get it. But when they finally do, it is like it was their idea in the first place. Sound Familiar?
As Dr Kinesa points out in his recent article, there is a lot of analysis and navel-gazing required to sort out the problems of both Greece and Detroit, who share many similarities. By the way, a better title may be "Greece, the New Detroit?"
Why don't we just state the obvious here? That is about the differences between recent economic successes of China and for some time Japan, and failures of centres; such as Detroit, Greece, Portugal and others. Imagine over the years, that the winners actually have had a "economic business plan" that they execute to, by using both free and centralised policies and tactics. ( seems they also better learn and apply MBA thinking?) Meaning that over reliance on "invisible market forces" to attain the optimal economic state is not a panacea, in fact, it is plain foolhardy - results speak for themselves.
Anyway, when a National Business Strategy is employed, it creates a different outcome because it focuses the nation or centre on simple stuff like; What can we do better then others? Where can we build long-term sustainable comparative advantages? And that's where all that weaknesses, strengths, opportunities and threats thinking occurs, breeding realistic paths forward.
Bottom line; we see that the winners are executing successful National Business Strategies that have little to do with whatever is trending in the Schools of Economics. Imagine!
That's our short take on it - but never forget what you paid for free advice.
PLATINUM WEALTH PARTNERS
July 25, 2013
Hard to believe that is was almost fifty years ago that the streets of Detroit were the centre of civil rights riots in America. Even then, the city was gasping to survive as an exodus of people, industry and jobs was well underway. Nothing was done back then, or since, to turn the tide, so Detroit simply continued to crumble into the destitute urban wasteland pictured today.
Other countries and cities should pay close attention to what happened here - and why comparisons to Nauru and Easter Island are really not that far-fetched. The question becomes when will we ever wake up?
Lets see if we can make sense of this. Now let's say China holds 1trillion in 10 year bonds and decides to cash or redeem their whole position. What could possibly happen? The Fed wires a one trillion freshly printed electronic dollars to China and takes back the bonds. So instead of holding an IOU due in ten years it now holds an IUO that is due on demand - albeit it is less than 10% of US's GDP or in other words all the goods and services output of the US economy for one month. Not much by some measures.
Anyway, now if China decides to convert these dollars immediately to other currencies it actually shoots itself in the foot because by depressing the US dollar they make their exports substantially more expensive to American consumers. Demand for Chinese goods would collapse in the US, that could shut down China's domestic manufacturing causing massive unemployment, and in turn social unrest followed by political change. Somehow it is hard to find a winner in such drama and both sides are thus inter-dependent - strange bedfellows indeed! .
There is a lesson - the best credit terms maybe negotiated by the creditor's biggest debtor - so borrow a lot! But somehow, Ben Franklin and Shakespeare's wisdom also seems to ring true: neither a borrower nor lender be...
PLATINUM WEALTH PARTNERS July 22,2013
Or, just tell them to go fly a kite
In the end, this a funny money game where the on-going idea is to keep the process going, regardless of the final outcomes. The outcome is the same as anyone playing musical chairs - when the music stops someone gets left holding the bag. This is obvious as when resources are depleted money in all forms won't buy much. Dr Peter G Kinesa July 22 ,2013
JAPAN -- What if the water becomes contaminated?(read more - The New York Times)
What? Their water is radioactive?
Not just a passing concern nor high speculation, but a possibility that can be assigned some level of probability. Perhaps something you would not normally be concerned with when thinking about markets, however a wide-scale disaster of this sort could cause an unprecedented collapse in Japanese securities' markets. The nature of this disaster could make significant portions of the island nation just unlivable.
Anyway we remain skeptical about what authorities are disclosing and this lack of transparency,promptness and accuracy does not create a lot of confidence in competencies. We are assigning much higher levels of risk because we fear the unknown, unknowns that could emerge out of nowhere. Try to explain to clients why you didn't see this one coming,
Anyway, for sure, we are staying away from coastal properties as long-term investments. To be forewarned, is to be forearmed - invest wisely.
There is little doubt that the debate about how to calculate inflation will rage forever - and governments will always manipulate this calculation - and economists and bond markets seem to put the faith of the universe in this completely subjective and arbitrary number's calculation. Why? It is politically convenient - and as long as everyone believes it is the truth; perceptions are then realities, regardless.
So for the most part, we are cynical about this number but do our own calculations based on hard and soft commodity prices (ex-gold,) - because these are the driving inputs of the global economic machine and the numbers are less affected by political allocations and influences. It also ignores the value-added and services included in the CPI, as these items will be less relevant as resource scarcities take hold down the road.Without inputs, there are no outputs - that simple.
In the end, no method is without flaws, but it makes a whole a lot of sense to first, do your own rough calculations and to secondly, calculate the inflation numbers for economic inputs and as well as traditional outputs (CPI), if you want to minimize the chances of being blind-sided by the Bond market.
One other secret - preform these calculations based on geo-political regions and include population growth and hard and soft commodity reserves. Then the picture becomes a whole lot clearer. Then you can say to me the next time we meet...
Not a hard one to figure out as it is really just "present value mathematics" whereby if long 30 year bond rates double, then their market value dips by 50%. Very straightforward mathematics that no amount of economic theory nor policy measures can override as it is simply a hard conceptual constraint. Mathematics cannot be persuaded, legislated nor negotiated with - and that should come as no surprise to anyone.
Down the line, looks to be a scary turbulent road ahead.
We will post more comments from this blog later on.
PLATINUM WEALTH PARTNERS
July 21, 2013
What waits down the line?
By every account, all negotiations with mathematics have resulted in a win-lose situation. Some things are just absolute.
Just a few months back, you may recall, along with Jim Rogers, we raised concerns about Facebook and generally the whole social media industry, referring to it as a generational fad and having difficulty seeing how a sustainable business model could be developed. Moreover, whether such tools or derivatives could find useful and profitable transitions into business markets. Guess what? Looks like the markets are tuning into Mr Rogers and ourselves as VC (Venture Capital) funding has plummeted to 2% this past quarter.
As one insider notes; what a business - "thinking about how to make people click ads" And that pretty well sums up the industry's "Critical Success Factor" and how you build any sort of Sustainable Competitive Advantage around it, remains a puzzle.
Anyway we still believe that the big ticket, high margin objects just simply requires good ole face to face contact - a little of that human touch!
Comparing the social media frenzy to the dot-com bubble may not be such a good analogy, albeit in both cases you can observe that common sense gave way to a strange fear of missed opportunity combined with unrealistic expectations. The other common ground was that object business measures, standards and principles no longer applied . Market history repeated again.
And for some strange reason this won't be the last time. Humans? Go Figure?
In light of our market alert, regarding Portugal's Bonds, earlier this week, along with the growing concern for adverse circumstances in Europe, even more focus is now being given to European Bond Markets. Market activity in these markets may now have greater bearing on the global financial system than US treasuries. No kidding?
Similar to Japan, bond values and rates in the US appear to be hand-cuffed at low levels for some time. Moreover, enjoying the reserve currency status allows the US to gather the loose liquidity in the global system and harbour its flight and fright capital, thereby easing any upward rate pressures. Plus, an interest rate increase state-side would be absolutely devastating to the US economy at this juncture - and just pour gas on a stumbling economy's fires.
Underlying the European bond markets are chronic diseases that show no signs of abating - in fact there is growing evidence to the contrary. Like Japan and Middle East countries, Europe suffers from a physical economic overcapacity issue that cannot be resolved by abstructionist economic measures. Limited and declining physical economic inputs can only lead to one result - declining economic outputs. All of which is made worse as populations grow and per capita output consumption ratios thusly sink even further. Bad "Real" News!
Particularly after Cyprus, we are seeing signs of desperate central bankers pulling out devious last stops to cure the terminal economic cancer. The markets in Greece, Spain, Italy, Ireland and Portugal are at the greatest risk of crashing global bond prices. They are "bonded" by a common concern with a staggering rippling potential affecting markets with traumatic head to toe effects.
Our main message here - this one ain't over yet; 'cause, "it ain't over, 'til its over"
PLATINUM WEALTH PARTNERS
July 19, 2013
A Bonding Crisis - the future is yet to come...
While the rest of the world may think that the FED is the driver behind global rates, largely because of the US reserve currency status and its trading volumes - we are not so certain, and believe as Grandma use to say "the devil is in the details - at Lehman Bros?" And so when all hell breaks loose; something small and overlooked is often perpetrating the angst.
Of course, then there was Yogi's wisdom - a great "Bondplayer" too
"I know one thing; that I know nothing" Hmm. I think we could all learn from one of Socrates’ last thoughts - but you never know!
Still we could attribute much of our current mess to too many who believe they know - then later we find that even simple notions were somehow forgotten. Or a fog had set in. (- R. S. McNamara).
Despite what may be economic headlines today, Greenspan's legacy may be his contribution to our current low interest rate trap - that has lasted for much too long. Getting out of it could trigger a massive deflation of financial assets - causing an unprecedented ASSET VALUE WRITE-DOWN. Evaporating years of value in moments.
A mere 2% rise in rates, for example, could deflate financial assets by as much as 50% - wiping out the equity boxes of financial intermediaries and banks , while creating massive unfunded pension and insurance fund liabilities on the basis of marked to market accounting calculations. =ing HUGE liquidity CRUNCH.
Moreover, the total value of US federal debt could grow substantively with a mathematical pen stroke, which has little to do with deficits or economic theory and activity. And I don’t even want think about what could happen if rates should revert to levels over their historic mean; it would be devastating.
So it seems that the Maestro knew how get us into this trap, but did not know how to get us out of it - but then again "who knows?" And as far as we know, he's still on first...
Bad news for everyone, except China as they take the leadership position in another market that has long been dominated by American makers for decades. Who do we blame this on? Management? Tablets? Consumers? Or China's low cost producer strategy for an industry where products are becoming commoditized, as it really does not take that much to do the reverse engineering. Again China is following a "national business strategy" much like Japan did from the 60's onwards in automotive and consumer electronics.
But the real issue is what good is the WTO? How does it ensure that everyone is on an equal playing field when labour, environmental, and health standards are barbaric is contrast to North America. Add to all that a fixed currency to the US dollar and this game becomes a one horse race.
But who loses big time? North American and European union and salaried workers. In fact, in America the real hourly wage, according to St Louis, FED statistics have not risen much since 1982! So, where are the unions???
Beyond all this meaning more doom and gloom for the ordinary American worker, here 's list of PC makers facing tougher times as this saturated market begins to consolidate. Smaller players will be forced to merge or simply fade away into the sunset - while margins face continued presures from commoditization.
TOP Five PC Makers 41% (est) Market Share Lenova Hewlett Packard Dell Acer Asus
First Financial Insights
July 16, 2013
Those were the days - "in our home towns... and they ain't coming back"
"I've got sunshine on a cloudy day; when it's cold outside I've got..."
"In a world obsessed with the crazy frivolities of celebrity, reality television, sporting events and royal births, the real important events affecting human conditions are lost in the noise of a dysfunctional media
- we need to grow up fast"
First Financial Insights
While the news may come as a shock to some, this much anticipated event is just another cut in the demise of this once iconic American city. It was the industrial centre, a heart and soul of culture, a symbol of America and its "enterpride" that had worked to win wars and put the nation at the top of the global economic stage. Its primary automotive products changed, forever, the way we worked, lived and transported the essentials of commerce and livelihoods, from here to there. The old saying was "what's good for General Motors is good for America," signifying just how critical this industry and city had once been to the nation's economy. Many questions and words will be written regarding the whys, hows and whats of the industry's turn of fortune and the city's plight. Some could point to globalization, poor management, foreign competition, social decay or a host of other reasons and combinations thereof. Still what is clear is, despite the best minds, efforts and resources: it happened! - creating even bigger concerns - How many more Detroits are there? Is this just the beginning? What next? As for sure, sound and stable economies cannot be linked to only soft, intangible and abstract industries, such as social media and entertainment - hot air can only be exchanged for so much, and particularly, as the scarcity of key economic raw materials begins to play a larger hand in global economic activity. Perhaps, it is also time to wake-up and have a close look at how global competitors run their economies to create their sustainable comparative advantage. Apparently, they have relied less on the ideals of free enterprise and apply "National Business Strategy" to set the actions, programs and goals for their endeavours, which in some cases, results in de facto slave labour conditions. Leading us to believe that free trade - is really an oxymoron. Free for whom? So there is certainly much more analysis that needs to be done -including what and why levels of government and management failed to address this problem in the early stages. It is a situation that did not just occur overnight, but was apparent to many and allowed to fester for many years. And how many more cities are waiting in the wings? So we will continue to monitor the events here, and also what appears to be an emerging trend nationally, More importantly we stress, this is a global economic disease that has spread to European countries such as Cyprus, Portugal and Greece, along with nations in the Middle East who are at the forefront of social and political upheaval. Is the abstructionist's economy finally falling into the grips of a finite planet's physical constraints. The logical conclusion is yes. So - What Next??? Dr Peter G Kinesa July 20, 2013
These graphs at the very least are disturbing - at worst, they paint a dismal picture of the prospects for the human condition and related species in the years ahead. Can we say that they reflect a direct relationship to our industrialization, pollution, unbridled growth policies and overpopulation of the planet in the last 250 year? No we don't believe that the evidence can distinguish between acts of man or God. The planet does go through swings in climate as evidenced by geological and other forms of scientific evidence - so we may argue that this is just the normal cycles of nature playing havoc with the grand designs of human policy and activity. On the other hand, there are just too many correlations that lead one to believe that nature is not just acting on its own accord. We probably have something to do with the trends. Trends that need to be counter acted in some way, before it's too late, regardless of weather (sic) they result from acts of man or God or both. In any case, it will require the acts of man to stabilize or reverse these trends, otherwise the circumstances of the planet will not support the life forms of its current inhabitants. We fear however, that the line to buy the inconvenient truths will remain short, as it fights with the inertia of years of economic growth, devolpment and a supporting cast of fairy tales. So be it! Dr Peter G Kinesa July 20, 2013
Europe shifts back into the spotlight this week, as Euro bond yields could soar higher and then reverberating around the globe as jittery traders push the button. Bond Vigilante's may be in for an early Christmas Bonus - long before the.summer is over. It is unlikely that equity markets can protect themselves if the bonds decide to take cover. Safety first, and every man for himself. First Financial Insights July 12, 2013 Financial Times - Portugal's Bonds Soar 7.9% - MORE Euro Troubles
Just add another country to the list of European nations that are seeking "national salvation" as 10 year bonds rose to 7.9% this past Friday, settling back to 7.27% - up 53 basis points. Again the neo-classical economists have no solutions and no plan, other than to print money and provide bail-outs. Nor do they even remotely understand that the underlying issues stem from physical economic constraints - too many people and too few resources. So the economic cancer that came to the forefront in Greece, is masticating around the continent, remember Cyprus just a few short months ago .
Here's the real problem - as Europe falls apart and bond yields move to 10% and higher in these "thinly traded markets," the fears will begin to take hold and grip the global markets as well. At the same time, the European economies are also starting to slip into one of the profoundest depressions ever to be experienced, as asset prices deflate and consumer disposal spending is over-burdened with huge increases in debt service costs. A One - Two body blow.
This could be the snowball that plunges the bond markets into a long bear-cycle. Expect the turmoil in Europe, to test the nerves of jittery bond traders in Asia and North America this week. And this could also trigger long over due downside actions in the equity markets around the world next week.
Seems like there is no where to run; no where to hide.For now.
What is it about these guys? One day, Dr.Kinesa, says oil could go to $500 a barrel because the finite physical constraints are going to cause economic problems, resulting in social disruptions, political turmoil and then geo-political upheaval . What can we say? We read the same articles or fools seldom differ...
Platinum Wealth Partners
First Financial Insights
July 11, 2013
Great Minds Think Alike
A few years back a Canadian economist - Jeff Rubin boldly predicted that oil could reach $200 a barrel sending shock waves through-out the financial world. This tells us a number of things: markets have short horizons, human cognition is flawed, and most folks simply do not understand that exponential mathematics and physics impose hard non-negotiable constraints. We do!
We agree for the most part, except JIM you forgot one important aspect of mining, that is many mines are polymetallic, so they extract many other minerals including gold in their process. Should gold gravitate to zero, these mines will treat it as a by-product, and thus only assign the incremental costs associated with the ore or even possibly leave it unprocessed for a period of time. If gold is a by-product then the full weight of production costs will not be attributed.So even at $50 an ounce, some miners may still be able to produce it on a break-even cash basis because the cost assignments are arbitrary.
Anyway we are happy you enoyed our article - "Gold is a Psychotic Placebo - NOT AN INVESTMENT." And by the way, we confirm that old story about gold mines - 99% of all stock mining ventures end up being worthless. And yes, it will be very hard for these sociopaths to attract capital in the future. That's one good thing for the greater cause - our future generations!
Platinum Wealth Partners
First Financial Insights
July 10, 2013 Faber and Rogers are still building physical gold positions regardless of what is happening - the US dollar is still a powerful medium that can be exchanged for real objects. Moreover, there are strong resource-based currencies offering a greater lon-term mineral diversification. It is still just too easy to get blind-sided by an object that depends upon the bouncing emotional neurons of the collective masses who do not even know how they will think one day to the next. Too buggy for us, when there are just so many better other places to garner safety,income and growth in global purchasing power terms. Dr Peter G Kinesa July 10, 2013
Somewhere Under A Rainbow
The Guardian - SuperFreakonomics is SuperFreakingWrong
This article brings out a number of salient points regarding the information propaganda game being played with climate change by the nefarious business press. Never, however, do Canadians forget that "the medium is the massage" - because media has the subtle profound power to define realities that don't actually exist. The list of outright lies built on misinformation with its brutal consequences are endless. Therefore, investors should, as a rule, have little faith in the objectivity of the mainstream business press that is sadly run by so many hidden agendas.
Climate change as pointed out in this article is being panned or suppressed with the passion of an addict who denies their affliction. The usual media suspects are mentioned, along with other crazies, who are promoting hair-brained schemes* to remedy irreversible damages already facing the bio-sphere. More false PROFITS!
*(Remember Get Smart? Let's Bring Down the Cone of Silence)
To invest effectively, the planet's hard physical constraints must be considered in any decisions we make. Denial or ignorance could be very costly. Is climate change that serious? The best way to answer the question is with the question: Why is, Mayor Bloomberg, spending $30 Billion on a seawall for New York City?
That's a serious - REAL Business Agenda...
Platinum Wealth Partners
First Financial Insights
July 9, 2013
Climate Change - could be bad for Business?
Reading between the lines, modern journalism has turned into a propaganda machine. The questions foremost in our minds: is for whom and why? And so, our democracies evaporate and freedoms disappear without a single vote being cast, nor a voice raised in anger nor a pitchfork held in defiance. So invisible.