Friday, February 27, 2009

Some Perspective

This is truly an amazing time.
Sometimes the mirror must be held by a comedian.
From Youtube

Thursday, February 26, 2009

I Like to Think I Am A Weener

For those who are not familiar with "Sheldon" Check this out!!!

The Economic Drug Debate

I have never understood the modern right-wing anti-drug policy.

For the purposes of this polemic I will not separate hard and soft drugs. Even though I am generally anti-cocaine, I believe the argument holds for all drugs.

First lets make one thing clear: almost all of the negative effects of the drug trade have nothing to do with the drugs themselves. Though cocaine does rapidly age your heart it does not cause people to break into your car to steal your leather jacket. As well as creating high levels of un-motivation, heroin causes significant constipation; it does not cause people to rob corner stores that should be selling lotto scratchers.

Yes, it is possible, and arguably common, to overdose on harder drugs, but this is, undeniably, a result of lack of control/regulation in the manufacturing process.

In fact, prior to prohibition, overdosing was almost unheard of as these drugs were never refined to the point of causing overdoses. The over-refining of opium to heroin was unnecessary when it was legal to import a couple of hundred pounds of the stuff. The refining of heroin was a result of the simple fact that G-men are more likely to catch you if you import a hundred pounds of low grade opium than if you import a couple of pounds of high grade heroin. The pharmaceutical importation is the same.

Which brings us to the basic economic situation.

The pharmaceutical cost of a fifty dollar hit is about sixty cents. The fence will give the junkie approximately 10% of the original value on stolen goods. Therefore the junkie needs to steal $500 dollars worth of goods in order to get their $50 dollar hit that has a pharmaceutical value of about 60 cents.

This is worth repeating. The cost to you and me for that junkie's 60 cent hit is 500 bucks.

A hypothetical: what would happen if the government produced the drug and sold it to the junkie for a single dollar?

Well, the first thing that would happen is that governments at all levels would recover 25-30 per cent of their law enforcement budgets (or keep the budgets the same and dedicate those officers to the pursuit of rape, murder, fraud, &c.).

There are millions of lists of the positive fiscal results of ending prohibition and my intention is not to provide another here.

My intention is to underline the insanity of forcing us to suffer a $1000 dollar loss (ultimately it is us who pays: chiefly through increased insurance rates) for a buck's worth of drug.

It is not the drug that causes the junkie to steal the $1000 dollars worth of goods to pay for the one dollar's worth of narcotic, it is prohibition that causes it. It is prohibition that leave the control and taxation of narcotics in the hands of organized crime. Make no mistake, it is controlled and taxed. It is controlled with an iron fist and taxed up the proverbial ying yang --by organized crime.

It does not make sense that the pro-business right wing takes a pro-prohibition stance. Even if you consider the modern Christian Right: where in the bible does it say that you should not smoke pot?

The numbers do add up. It does not make sense.

Grow your own

There is a growing meme on the 'net regarding an interesting baby step towards ending the indefensible prohibition of marijuana.

A "Grow your own" policy.

Simply stated, it would be 100% legal to grow and smoke your own pot. It would remain illegal to sell, import, export or give to minors. But the near harmless activity of growing and smoking a natural herb would be open.

I can see it now: a pot of pot in every home. I like it. For those who are not familiar with it, cannabis is a beautiful plant. It is basically pest resistant, meaning that no pesticides are required.

Though, I recommend keeping it from your family cat --'specially if the little meower knows where you keep your emergency stash of Cheetos. That's right, you will come home to find the door to that cupboard over the fridge open, assorted debris strewn about the kitchen and a smiling kitty lying on its back proudly showing off its bright orange beard. Cheetos will never, again, be safe.

I would add that you should be able to share your harvest with whomever you wish as long as it is not part of a transaction that could be considered trafficking. eg. no trading pot for guns, sex, meth, &c.

This would be an interesting first step that could bypass decriminalization --to which I am philosophically opposed.

LOL --Kudlow Kills Me

He is on CNBC right now saying that we are about to see a new bottom. (Big head shake).

The simple fact is, a bottom will not be reached until investors actually think (believe) that good, safe companies are both good and safe. Until that confidence returns their will be no bottom.

It has nothing to do with the confidence of the president, or the confidence of the fed. Rescuing the right companies is a start. It might help accelerate the stabilizing of those companies; but, until the consumer sees securities of large banks as being as safe as treasuries a bottom is no where in sight.

That is not to say we could not hit a bottom, but anyone who believes they can see a bottom is smoking a prohibited substance.

The Non-SOTU

I was not going to comment on Obama's Tuesday night speech as everything that could be said would be said. That said, "Holy crow can that guy deliver a speech!"

Really, his theatrical ability to fill the roll of the leader is unlike anything I have ever seen (or is it "scene").

In comparison Little Bush looks, well, bush. And, the Republican rebuttal was a joke. If you haven't caught The Daily Show's comparison to Mr. Rogers' Neighborhood, I recommend it.

That's all. I am not going to add to the plethora of dissections that are out there. Yes, he needs a better fact checker, but who cares. What theatre. If you haven't seen it, pop over to Youtube and check it out.

The Market Moves on Small Investor Confidence

I don't know why this well known fact is not discussed more. You will never hear it on Kudlow; you will never read it in the Financial times (though this is a recommended read); and you will never hear it from a politician.

But, the simple fact is: major moves --and by that I mean up or down trends that last years-- by the market are driven by little old ladies in Cadillacs, by portfolios owned by hair dressers, and postal delivery workers.

Institutional investors are there, they have always been there and always will be. That the institutional investor is sitting in cash (the average seems to be about forty per cent) is of little consequence.

The biggest problem is that safe investments are no longer safe. The list is long and you know the names, GM, Citi, AIG, &c.

When holding Citi Stock is unsafe the un-savvy investor flees. And when the small investors flee en masse they take key billions with them. These are the extra billions that puts the market over the top (or under water).

This is the important thing: If the institutional investors were full invested it would make little difference. Sure, the Dow Jones Industrial Average would probably return to 1999 levels; but, without the return of the little old lady from Pasadena that is all that would be accomplished.

Is it "Chicken before the egg?"

Will the, despite Cramer's best efforts, uneducated investor return? That is the big question. In the 1930s that investor never returned. Till the day they died, my grandparents never bought stock --treasuries were all the risk they could stomach-- they were not alone.

I think they will return. But, and this is a big but, they will not return until they are confident that safe companies are, indeed, safe.

When will this be? Nobody knows. Anyone who says they know is either a liar or suffers (if that is the right word) from self dellusion. It could be as little as two or three years (if Obama gets lucky with his programs) or it could be a generation.

It will happen, it will come back. But it might be a good time to get a government job.

I wonder if the post office is hiring.

Tuesday, February 24, 2009

Late to the Party

A year ago I had never heard of Gillian Welch. I guess I am not alone, but that is a shame, this woman is a great, great singer songwriter check her out at You won't be disappointed.

The Poop

The first grandiose statement of my return:
The government doesn't really want the banks to lend all that money.
How can I say this? Well think about it. The first thing that happens during a credit crisis is that people take money out of circulation, they stop spending. In order to float the economy and keep money moving (even accelerating) the mint has to print a dollar for every dollar that is removed from circulation.

This is why printing buckets might not necessarily be inflationary.

Then as people start spending again the mint must print less at the same pace to keep from having a flood of dollars in circulation (definite inflation).

Well, should the banks, tomorrow, start lending the hundreds of billions that they got as part of the TARP funds the fed will immediately lose control, the economy will be flooded with dollars and a loaf of bread will cost $17.50.

What are the banks supposed to do with the funds? Nothing.

That's right, nothing. They are supposed to sit on them. It is capitalization: nothing more, nothing less.

Now the banks don't like sitting on funds, so it was only natural that, under the previous administration, they would dole it out --massive parties, billion dollar bonuses, private jets. (Big head shake) The simple fact is that the banks lent out a multiple of their capitalization that was unsustainable and as they are not able to reduce the loans (how many houses can a bank own?) they have to correct the equation by increasing the other side of the balance sheet --their capitalization.

I think Citi gets this. BoA? I am not so sure.

One thing I can tell you is that they will not be nationalized before healthcare --can you imagine?

I'm Back

Well, it has been almost a year since my last flurry of posts and, once again, I find myself sitting here ready to rant. "Where did I go?" you might ask. Well, despite the Obama's election being terribly exciting and despite the history making nature of it, there were so many voices that I felt I would be doing a disservice by adding mine to the mix. And I was busy with my day job.

Speaking of which, I came across an anonymous blog the other day detailing the mismanagement of a start-up company. I highly recommend it: Never Turn A Short Con Long

I have learned more about economics since I started this 'net-rag and have lots of questions to pose (and a few answers too).

Well, as the song goes, "I'm back in the saddle again..."

Woo hoo.