We’ve Moved!

Shadesofthomaspaine.wordpress.com will no longer be updated. Rather, we’ve moved to shadesofthomaspaine.blogexec.com. BlogExec is a brand new, exclusive platform currently in beta testing that splits revenues with the bloggers, as opposed to most competing models. Hosting, site design and all the back end is handled by BlogExec, and all you have to do is write. I think its a great deal, and support has been excellent so far. Keep an eye out for BlogExec when it goes “public”.

Published in: on March 19, 2013 at 2:49 am  Leave a Comment  

Tesla Motors 2012 Q4 Report Shenanigans

These days, I await Tesla Motor’s quarterly reports with grim anticipation. I am always guaranteed some unexpected bit of creative accounting, employed to paint a brighter picture than reality would normally provide.

Q4 was no different, offering a rosy picture of 2750 vehicles rolling off the production line, with a Q1 2013 profit just around the corner. The revenue from automobile sales and cost of revenue were balanced, showing a sliver of a profit before R&D and administrative costs.

Proof of concept? I’m no so sure.

From 2750 cars, which were primarily Model S sedans, they claim $294,377,000 in income. That’s about $107,000 per car, while the MSRP of the sedan is between $50k-$90k.  I’m not sure how this worked out, but I’ll have to believe it for now. Evidently they sold a lot of premium options.

Their income statement didn’t look so bad until I saw the balance sheet.

Accounts payable is up $153 million in one quarter, now sitting at $343 million compared to $306 million in revenues. Their $306 million in revenue required they incur $430 million in expenses, so I would hardly call that a profit.

Furthermore, they have $452 million in long term debt, but were somehow able to pay only $85,000 in interest that quarter. That works out to a 0.07 percent annual interest rate. What is going on here?

Between questionable income and questionable expenses, what is credible? As I’ve maintained since first examining their financial statements, Tesla Motors is headed for a heap of trouble.

Independent of creative accounting, DOE loan vehicles and loads of free PR are the naked costs of building these electric cars. If Tesla incurred roughly $530 million dollars in expenses (including those accounts payable) while building 2750 cars, they should retail for an absolute minimum of $200,000 apiece. This is a far cry from their MSRP of $50-$90k. A 25% increase in efficiency, and a small reduction here and there in R&D is not going to close this gap, contrary to the sunny projections of their Q4 report. Cost cutting will have to be dramatic and draconian should they ever hope to turn a profit.

Published in: on March 2, 2013 at 10:15 pm  Comments (2)  

Its Always Time to Trade in Your Paper Money

The basic act of a person accepting paper money for goods or a day’s work is an act of faith.

It is a profession of faith in one’s politicians and government that the paper money will retain its value at least until you spend it.

Rest assured though that your money is backed by the full faith and credit of…whom exactly? Mario Draghi? Mervyn King? Ben Bernanke? All of the sudden, those banknotes starts looking more like paper and less like money.

My favorite thought experiment on this subject involves trying to exchange various historical forms of money today. Though golden tael have not been accepted as legal tender in the United States at any time, it is easy to imaginethat anyone could trade them in and get his money’s worth. Drop a few golden tael, and you’re driving off in an Escalade. 

Genghis Khan tael paper money

 Unfortunately, a paper currency that whose government was toppled by war has no trading value today. Nazi Reichsmarks and Imperial Japanese money are collectors items only. Even a well-managed currency can be destroyed by war.

Reichsmarks paper money

Paper money destroyed by war is just paper, and at best is worth some kind of historical value.

Robert e lee paper money confederate

However, should a currency use precious metal coinage, it doesn’t matter whose name is on it, what government backed it, and whether or not it is still in use. Gold British sovereigns, Spanish pieces of eight and Tyrian shekels are all chock full of value, despite being disused for decades, centuries or millenia.

Robert E Lee confederate gold and silver

It isn’t just war that can destroy a currency. Hyperinflation,  experienced in dozens of countries all experimenting with paper money, can make a paper currency’s value disappear, turning it into yet another historical curiosity.

Robert Mugabe Deutsch Marks

Saddest of all, though, are the United States gold and silver certificates. At one time you could take them to the bank and redeem them for face value in gold or silver. Twenty dollars of gold certificates could be redeemed for twenty dollars in gold. But then gold ownership was made illegal, and the paper gold became just that, paper. The silver certificates could be redeemed in silver as well, until 1968 when the Federal Government reneged on its promise. There was no war, no hyperinflation, just broken promises.

Old timer gold certificates paper money

The risks of paper money aren’t unique, though. Paper money is like any other paper asset, in that it depends on the integrity AND existence of the other party.

With any asset, you should always evaluate who your counterparties are, and whether or not you trust them.

  • Bonds/debt: counterparties are both the debtor and currency in which the debt is denominated.
  • Stocks: counterparties are the company itself, and the government in which the country is located.
  • Real Estate: counterparties are the government in which the asset is located and the neighbors to the property.
  • Gold and similar tangible commodities: NONE.
Published in: on March 2, 2013 at 4:54 pm  Leave a Comment  

How the Fed will Crash the Bond Market


When you or I buy bonds, we pay a certain amount of money to buy someone elses debt. In return, they pay us a certain amount of interest for a fixed period of time. The Federal Reserve can influence prices of debt by offering a certain risk-free interest rate. In this article, this risk-free rate is pictured as the Fed-O-Matic, a money-printing machine sitting on the desk of Lord Bankingstone, respresenting big finance. You put money in, it dumps more money into the bucket according to the rate of interest.


While the Fed-O-Matic pays good rates of interest, Mr. Rumplypump’s bonds aren’t worth so much. At the same time, anyone wishing to issue bonds is going to have to beat the Fed-O-Matic rate pretty handsomely, seeing as how the machine has absolutely zero risk.


When the Fed-O-Matic pays crappy rates of interest, Mr. Rumplypump can command high prices for his high-paying bonds. At the same time, anyone issuing bonds doesn’t have to pay very much interest to beat the Fed-O-Matic.



People saving for retirement, especially using 401(k)s, are routinely told to buy stocks early in their careers, and then as retirement gets closer, transition to safe, low-yielding bonds to guarantee income and avoid the possibility of a stock market crash. Assuming stable interest rates, this is a good strategy. However, wildly fluctuating interest rates resulting from an activist central bank can play havoc on the bond market.


Mr. Roflpants gets burned when he buys bonds during a zero-interest-rate policy (ZIRP), and then has to sell his bonds during a period of more typical interest rates. If prevailing interest rates double, the same bond is worth half as much. The recent news that the Fed is reconsidering its money-printing extravaganza bodes ill for the bond markets for several reasons.

  • Clearly, the value of existing bonds will crash. As the bond market crashes, the stock market won’t look as attractive. The low prices on existing debt and good rates of return on new debt will move money out of stocks and into bonds.


  • Imagine what will happen when Treasury bond rates are 6% instead of 1%. The United States would be forced to pay roughly a trillion dollars a year in interest on its $17 trillion debt. This would increase the deficit by roughly a trillion dollars, likely reducing trust in US debt. The US government, looking for buyers of yet more debt, without the Fed as its biggest customer, will be forced to raise interest rates further. Higher rates lead to bigger deficit. Bigger deficit leads to higher rates.


  • Higher interest rates will also cause mortgage rates to increase, meaning the mortgage payment for a given size of home loan will increase. Seeing as how the mortgage payment size is what decides whether someone can buy a house, home prices will necessarily have to come down, other things being equal.

At first, the end of the Fed’s money printing experiment will be read by investors as a sign of recovery, and commodity assets like gold and silver will probably suffer. Then, as interest rates rise and the Treasury bond market bubble deflates, those stores of value won’t look so bad and will likely rebound. Should things unfold in this way, there will be a good buying opportunity for gold and silver between the announcement that QE3 is ending and the inevitable increase of interest rates that will follow.


Published in: on February 24, 2013 at 8:24 pm  Comments (14)  

Its time for State of the Union Bingo!


Click the board to zoom in!

Published in: on February 13, 2013 at 12:51 am  Comments (1)  

How Not to be a Rock Star

After listening to a bit of radio pop, I determined that music is having an identity crisis. I hear “rockers”, and “hipsters”, and generally guys who fit into specific, predefined slots that existed long before they did. It seems fake. It seems inauthentic. So is it the music, or is it the musicians?

Obviously, “fixing” the mistakes of singers has become universally accepted, which lends a mechanical, robotic feel to vocals. Here’s Beyonce sounding boring.

All the repeated phrases are exactly identical to the previous ones, which sounds hypnotic and unnatural. I feel like a few humanizing errors would help the song sound more like an actual performance. Compare Beyonce to a recording of a real person singing.

All this isn’t to say that singers aren’t the only offenders. I’d never heard of this until yesterday, but evidently the drums you hear on a lot of recordings aren’t in any way related to the drummer. This way, if you sound bad, you can just replace all your bad sounds with someone elses drum samples. Really? Really.

I admit, this program is neat, but are the sounds that the computer makes while the guy slaps his knees in any way wonderful or lovely? Sure, this “fixes” bad drummers, but this production convention keeps you from hearing this guy, should he ever be reincarnated.

That being said, John Bonham wasn’t the fastest drummer, or the most technically accomplished, but the man flat out sounded wonderful. He brought big, booming sounds, swaggering beats and appealing, creative phrasing. But is it really modern drum production’s fault? ZZ Top wasn’t totally awful during their foray into drum machines.

So what is it? What makes me gag when I hear yet another precious tenor croak over glockenspiel bells? What is it about new music that keeps ending up with this iPod commercial sound?

Maybe its the musicians. I certainly don’t feel like the best of the best today comes close to the best of the best of yesteryear.

So where is this guy? Where is the 2013 version of Freddie Mercury?

First thing I notice about Freddie, he’s singing using his real voice, not just to say he didn’t use Autotune, but that the dude was comfortable with what he actually sounded like. He just practiced singing, got good at it, and used his real, normal voice. No one seems to do that anymore.

Let’s compare to Chad Kroger of Nickelback.

What the hell, Chad? No one sounds like that naturally. That “voice” you use is your rock star voice. It is honestly a problem if every musical statement you make is in an affected, faked voice.

So, back to Freddie. What else is he doing right?

He is not caring the slightest bit about what you think about him. He is committed to singing well, putting on an excellent show, and making good music. Guy in the third row doesn’t like him? Ask him if he cares. Despite wearing a black and white catsuit, you get the sense that it is actually him that you are seeing. The guy is totally authentic. 

The music he’s playing is the music he really, really wants to play. Just like this guy.

This is key. You can see how excited he is about his song, because he loves it. His performance is real.

On the other hand we have these guys.

Why are they wearing suspenders and hats, and trying to sound like sensitive Woody Guthrie?  They are not actually Okies, these guys were born 27 years ago in New Jersey. Their whole image is affected, including their musical style. It’s put on, just like their hats and suspenders, probably because they think it will make them popular. As opposed to Freddie, I get the sense that these guys don’t care what they’re playing so long as you pay attention to them. If wearing clown noses got Youtube hits, they’d have clown shoes, too.

This exact movement of ultra-authentic, super-earnest Mumford and Sons music is backlash against the fake projected image that Nickelback subscribes to.Unfortunately, instead of not projecting a fake image, they decided to project a different fake image. Fortunately, Mumford and Sons do actually know how to play their instruments, and perhaps if they got over themselves, they could play really nice music like these guys.

Notice there is very little theatrical emoting or faux-pained expressions. They’re just playing really well and not going through great histrionics to be “authentic”. Ralph Stanley is pretty sure that he’s actually a country boy.

So what gives? Why aren’t there the Beatles, or Led Zeppelin today? One possibility is that you can’t really make a living being a gigging musician like you could 40 or 50 years ago. Demand for live music is small, since recorded music actually sounds good (as opposed to 50 years ago).

As opposed to the Lumineers, the Beatles were able to actually pay their bills playing music. Furthermore, many of the venues in Southern California are “pay to play”. Rather than the club paying musicians, the musicians pay the club! This interview with the Beatles really demonstrates their workmanlike approach to music.

Notice in the interview that the Beatle’s actual job, supporting the traveling and living expenses of four men, was to play shows in clubs. Playing music in 1960 was a viable form of employment. Ringo even says “when you get home early in the morning from a job”. Likewise John Bonham, who was ultimately drummer for Led Zeppelin, supported himself playing drums for years and had a reputation for being easy to work with.

Notice too, the Lumineers’ statement “If you succeed right away, you rely on external forces to tell you if something’s good or bad. For us, we were forced to form that on our own, which helps us now.” As if that were a bad thing! This is in direct contrast to George Harrison’s imperative given to him by the German club owner to “mach Schau”, or put on a show. If you want to survive as a musician, you need to please your audience. Say what you will about art, but this dynamic of professionalism led to some terrific music down the road.

Like the Beatles, Jimi Hendrix made his living for years as a working musician starting about 1962. By the time he was famous, he’d been a pro for six years, and it showed.

I refuse to believe there is actually a lack of talent in this generation of musicians, because that makes no sense. Rather, it seems there might be a lack of opportunity for musicians to develop and grow in the rigorous, professional environment that existed 50 years ago. This environment provided immediate crowd feedback, nightly practice and enough pay to make it all worthwhile. Perhaps its this missing element that leaves all but the neediest musicians pursuing something else.

Published in: on February 12, 2013 at 3:07 am  Comments (1)  

The Law of the Jungle takes hold in the United Kingdom

In Great Britain, they have around 700-800 murders per year, around half of them committed with a knife. Here’s the breakdown in Scotland, where they tend to stab each other.

Scotland Murder Stats


Starting with the Pistols Act of 1903, and ending with the near total ban of handguns in 1997, legislation in Britain has had the desired effect of reducing shooting deaths to nearly zero. However, they’ve just been replaced with stabbing deaths, which is no consolation to anyone.

The charts above show how a century of gun control didn’t end violence, it only ended gun violence. Looking at Britain, we get a glimpse of what violence in the United States might look like if guns were absent. Rather than being a post-gun Utopia, the dynamic of violence might more closely resemble the pre-gun Middle Ages.

Before guns, the world belonged to the young, strong, men. After guns, the weak and the old and have been able to assert themselves on equal ground with even the largest and strongest. Eliminating guns from a civilized society seems to eliminate civilization from society, since once again the Law of the Jungle becomes the law of the land.


18 year-old boys commit over 9000 crimes per 100,000 boys. For shame, 18 year-olds.

Taking away guns from everyone (even criminals), makes the dynamic of violence entirely unfair, tilting the tables in favor of the typically young, male assailants and away from older, weaker victims trying to defend themselves. In a knife or fist fight, young strong males clearly have every advantage; men are typically 2 to 4 times stronger than women of the same age.

It is hard to tell a middle-aged, 90 pound woman that she’s perfectly safe now that the thugs are only carrying knives.

Published in: on February 4, 2013 at 7:35 pm  Comments (4)  

In 2013, what’s old may become new

In my short lifetime, I’ve seen a digital revolution that has changed every aspect of doing everything, and a medical technology revolution that performs what might as well be called miracles.

Simultaneously, though, there are forces that could be pulling us back to a pre-technological age.

Firstly, in our magnificent digital age, people’s entire lives become digitized and therefore vulnerable to electronic attack from anyone, anywhere. Bank accounts can be emptied, identities stolen, sensitive messages intercepted and redistributed anywhere in the world with proof positive of its authenticity. With the advent of professional Chinese hackers working ’round the clock, even large businesses and governments aren’t safe.


Betcha he wishes he used the 3rd grade security approach of passing notes.

Probably the most conspicuous, headline-grabbing incident of 2012 involving cyber-security was the exposure of CIA Director David Petraeus’ affair with his biographer. He had sent incriminating emails, which of course last forever and are undeniably his.

So what is to be done if even the director of the CIA can’t keep a secret? How am I, some random dude supposed to keep things secure? I think we might just have to resort to doing things under the radar the old-fashioned way.


Dwight Eisenhower knew all about foiling cyber-hackers when he was writing his love letters.

How about a hand-written note? Sure a note can be stolen, but a hacker will at least have to get out of his chair to intercept your communications. Also, its a sheet of paper without all the digital timestamps, proof of ownership and relative undeniability. I’ll bet in ten years there will be secure electronics alongside a system of paper memos for ultra-sensitive information.

So what about these pesky antibiotic-proof bugs? Well, since they’re being bred in hospitals because of overuse of antibiotics, we’l have to end that practice and go back to the old way of cleaning things off. Antiseptics.


They used to murk all those bacteria with a carbolic acid sprayer like this one.

In the 1850’s folks figured out that carbolic acid would pretty much fry those little suckers. And it still does, regardless of credentials. Carbolic acid, and a host of other true antiseptics will kill just about everything dead. Iodine, rubbing alcohol, hexachloraphene, hydrogen peroxide, these are the old-schooly arsenal of medicine, still just as effective as they were 150 years ago. Problem is you can’t drink the stuff like antibiotics, because it will kill you, too. They are all “external use only”.

So I suspect we’ll see a resurgence in popularity of the primitive system of stone-cold killing everything in the operating room, rather than trying to kill the germs with antibiotics once they get in a wound.

There was a brief period in which digital information was the most secure, foolproof method, and likewise antibiotics were miraculous in their effectiveness, but in 50 years our enemies have adapted, possibly to the point where regressing to more primitive methods may be necessary.


Published in: on February 4, 2013 at 2:16 pm  Leave a Comment  

What do we need 300,000,000 guns for?

•First, the Wall Street Journal article

A strange thing happened in Mexico; Mexican drug gangs beat the police.

With enough men and enough guns, the drug gangs resorted to a tactic that sounds totally bizarre to American ears: they shot police for no other reason than that they carried badges.
•This had a surprising, awful effect.

The surviving police simply quit their jobs. It didn’t take too many calculated murders of their co-workers to make them think twice about putting on a uniform.

This sounds utterly bizarre, but organized crime can easily shut down a police department. The absolute number of policemen is relatively small, and the deterrent effect of shooting on sight is certain to kill morale.
•And so, for a time, the people of Mexico were terrorized by drug gangs operating with impunity.

Why was this possible? Why didn’t the citizens fight back?

Buying a gun in Mexico is very difficult and expensive, and if you do get one, it is probably a .22 single shot that isn’t much good against Mexican drug gangs with body armor. Ultimately, in the lawless regions of Mexico the “good guys” got some firepower and started shooting back.

The moral of the story is clear; the police are limited in numbers, and in normal circumstances are adequate.

However, if all that stands between organized crime’s ability to operate with impunity are a few good men, those few won’t be enough. An armed citizenry is an insurance policy and a deterrent for those who might attempt a similar coup in the United States.

So, when someone asks why someone needs a high-powered semi-automatic rifle with a 30-round clip, one only needs to look to our gun-controlled neighbor to the South, and the mounds of dismembered bodies.

Published in: on February 2, 2013 at 5:27 pm  Comments (4)  

We have a Murder Control Problem, not a Gun Control Problem

In light of a coming ban on “assault weapons”, I decided to look up just how many people were killed with rifles of any kind. I’m not going to take a wild stance, come to your own conclusions. These are facts without any lipstick.

All of these statistics come from the FBI, and I proportionally doled out of the “unknown weapons” to each category.

From the charts below, we see handguns are the weapon of choice for murder in the United States.

Murder bar chart by weapon 2011

Handguns are the favorite weapon of murderers with a burly two-thirds vote.

Murder pie chart 2011 by weapon

Here is the same data, but with handguns totally deleted to show how a miraculously effective handgun ban would look (though murderers are notoriously bad at following laws).

Murders 2011 US by weapon no handguns

Interestingly, when murderers go to #2 on their list of weapons, they choose a knife over a different type of gun. This is another cheap, easy to use, easily concealed weapon, so it appears that convenience takes precedence over lethality.

When murderers go to number 3, they just use their hands and feet. Once again convenience takes a front seat. Amazingly, it isn’t until you get past hammers and clubs and get to #5 on the list that murderers finally resort to shotguns. Rifles roll in at #6. Given the headlines lately, you’d think such a supposed killing machine would be more popular for…killing?

So, the brooding assault weapons ban, which focuses so heavily on scary black rifles, seems to be pointed in the wrong direction. But still, I just can’t see anyone talk seriously about knife control.


I decided to look up murder weapon statistics in a country where guns are basically illegal. It turns out that gun murders, naturally, are decreased, but the profile of murder weapons bears a striking resemblance to the last chart above. From Scotland, we see this:

Scottish Murders by weapon

Here’s actual murder stats from Scotland, where we see knives in the #1 slot.

Furthermore, people continue to blame the weapons, rather than the murderers themselves, as “Jimw” commented on an article highlighting the knife murders in Scotland. Evidently, if we took all the knives away there would be no violence.

Jimw: The knife culture needs to be addressed big time. We should not forget that it is probably fair to say that anyone caught with a knife has probably carried one many times before they have been caught. On that basis there should be no sympathy shown and heavy custodial sentences should automatic , and hard. Take these people to some remote island and let them work of the land for a month or two , or out to disused oil platforms with nothing but seagulls and seals for company.  A few weeks there , and finish sentence at one of her majesty’s   ‘hotels’ should help them rehabilitate.

Good luck making kitchen utensils illegal.

Published in: on January 26, 2013 at 10:36 pm  Comments (1)  

The $16 Trillion Dollar Question: This is Why We’re Poor

How did it become necessary for Mom and Dad to both work to make ends meet?

The reality is that prices haven’t really moved, but wages for basic labor have fallen by over two thirds since 1960. If we still used the old silver dimes, quarters and dollars, this is what prices would look like today (every dollar of old silver coinage contains $24 worth of silver in todays money).

Here’s how the price of a nice suit has changed since 1960, in terms of old-school silver dollars (not at all).

Inflation clothing

Here’s how gas prices have “skyrocketed”. It looks like the problem is with the dollars, not with the gas.

Inflation gas

Looks like housing prices are still the same. I’d love to see 10,000 real silver dollars, too.

Inflation Housing

And the truth comes out. You have to work more than three times as hard to get the same amount of “coin” these days.

Inflation minimum wage coins

How did this happen? We lost sight of how we got rich in the first place, and legislated ourselves into poverty. 50 years of mismanagement has gradually eroded the American way of life. It may seem unbelievable, but just compare North and South Korea.

Wealth is freedom, and freedom is wealth.

Published in: on January 25, 2013 at 11:48 pm  Comments (4)  

This is why printing money isn’t going to work, in pictures.

Japan has a bold new plan to print a bunch of money. The United States has a brilliant plan to print a bunch of money. Guess what Europe is planning to do? Print money!


Our boy is keeping the faith. Good thing, since no one else believes this bill is worth anything.


I guarantee you that 500 billion dinars is worth a fortune………cookie.


100 million? No, thats a milliard, or “billion” in English. You could pay off Dr. Evil with just one of these bad boys.

All those zeros must be making that kid rich!

No. I guess he was just taking out the trash. Good thing he saved the rubber bands.

Ten million pengos. Practically worth its weight in paper.

Five hundred trillion dollar fine for littering.

When thirteen zeros won’t do…call inflation walrus!


And this is why our Fed won’t save us with their printing presses. Others have tried, all have failed.

Published in: on January 25, 2013 at 4:41 am  Comments (13)  

What the hell is the Federal Reserve, and why should anyone care?

Shortest possible story, the Federal Reserve is a bunch of guys that decide how much money to print and who gets it first.

Why does that matter?

Morally, we’ve accepted that property belongs to an individual and that stealing is wrong. Moreover, we’ve agreed that counterfeiting money is a form of stealing, only benefiting those printing the money (or anyone getting that printed money for free or at a discount).

So we agree that counterfeiting hurts everyone but the early adopters, but our legislators decided that giving that same counterfeit authority to a club of banks would best serve the public interest.

Supporters of the counterfeiting system say that a flexible money supply is critical to a modern economy. How then is private counterfeiting harmful, while officially sanctioned counterfeiting is beneficial? It’s not, and here’s why.

Imagine a single dose of money, counterfeited into existence and given to a bank.

  • Initially the bank will be richer, make some loans, make some profits and generally be better off. Long term, the counterfeit shakes out through the system and has no real net effect except that there are now more dollars circulating. Prices rise, wages rise and nothing is any different.

Imagine a continuous drip of money coursing through the banks, into the general public.

  • Prices will continuously rise, wages will continuously rise, and a larger and larger proportion of the nation’s wealth will be concentrated into the hands of the banks and their friends. After all, if anyone got a billion dollars a day for doing nothing, they could sit at home, loan it out and charge interest. Eventually, they would own everything.

A brief look around today shows that this is exactly what has unfolded since the faucet of money at the Federal Reserve was turned on in 1913. The vast majority of companies, property and wealth are held by an extremely small number of privileged people with the best access to this free money. As the money flows downhill, eventually reaching a laborer, all of its relative advantage is gone, since the prices have long since risen to soak up any higher wage.

The multiple rounds of bailouts doled out to the banks by the Federal Reserve only furthered this phenomenon, and it should be no mystery as to why they are doing just fine.

The alternative is the morally sound alternative. By enforcing the right of citizens to hold private property, and not have it slowly stolen from them is the answer. It is moral imperative that no organization should have the authority to devalue the property of citizens. The true democratization of money is the answer, and the clearest heirs are non-denominated gold and silver coin. To use a denomination, like a dollar or Euro means its value is derived from its name and its legitimacy bequeathed by an organization. Only scientific weights and measures are incorruptible.


Published in: on January 24, 2013 at 1:43 am  Leave a Comment  

Roast your own coffee, and save some money


Back in the early 20th century, when coffee beans might spend months or years in transit from the remote mountain slopes of South America and Africa, coffee was shipped unroasted or “green”. Since coffee only begins to lose its flavor once it is roasted, this practice shielded consumers from the burnt sawdust flavors so familiar to coffee-drinkers today.

People would roast the beans themselves in a cast iron skillet and mill them in a hand-cranked grinder. Reading about this romantic notion, it occurred to me that this might just be a holy grail of coffee drinking, seeing as how freshly roasted, freshly ground beans would lose none of their flavor before being brewed.

So, I went to the internet forums, and saw which purveyor of green, unroasted coffee had the best reviews. Sweet Maria’s is probably the most mentioned, but Caracolillo Coffee Mill had the best reviews, and the best prices. I jumped, and bought 9 pounds of green coffee.

I bought 3 pounds of Mocha Java, 3 pounds of Mexican Turquesa, and 3 pounds of Zimbabwe AA Salimba Estate, which unarguably has the most exotic name. Everything was like 6 bucks a pound. Compared to the $12 a pound they charge for fancy coffee elsewhere, it was awesome. Not to mention, this stuff can sit in a bag for a few months before I roast it and it will be fine.

Note: don’t bother trying to chew on a green coffee bean. They taste like nothing.

So, naturally, I roasted some Zimbabwe AA Salimba Estate first because of the cool name. Starting with a cup or two of beans, I started in a skillet, but moved on to the oven after determining that it was going to take a really long time to get an even roast on low heat. 400 degrees for a few hours brought out a rich, brown tone in the beans.

The house filled with a pleasant woody smell with a hint of coffee, and soon I was grinding the beans in my blender, which worked shockingly well.

This morning, I brewed the beans in my coffee maker. The product was, first of all, really great. It was heavy, quality coffee, so there was clearly nothing wrong with the beans. The roast was about right, and it had lots of delicate flavors like chocolate and fruit that you aren’t accustomed to tasting so strongly in even the best coffees. There was spiciness and smoke. It was tasty, it was fun, and I’m up a few bucks over a foil back of Starbucks.



Published in: on January 18, 2013 at 3:13 am  Comments (1)  

Conflicting deflation/inflation trends

Inflation- more dollars chasing fewer goods

Deflation- fewer dollars chasing more goods

I’m making three assumptions based on demographic evidence.

  • In the next 20 years, there will be roughly the same number of people working, as demographic patterns show, and there will be far more retired people.
  • This means that the average amount produced, both per worker and nationally, will remain about the same.
  • However, this will be achieved with a larger share of beginning and mid-career people, as opposed to the older (and therefore disproportionately expensive) Baby-Boomers.

My general take: since retirees and entry-level employees don’t make as much money, there will be less money chasing the same number of goods, putting a deflationary pressure on prices.

Deflation is unacceptable in a debt-based economy such as our own. Here’s some of the reasons why:

  • Private debt becomes more expensive as wages fall, reducing demand.
  • Public debt becomes more expensive as tax revenues fall.
  • Real profits and incomes decrease, reducing tax revenues.
  • Paper profits in terms of capital gains decrease, reducing tax revenues.

So, deflationary pressure created by lower cost of production, coupled with patent refusal by central banks to allow deflation, will invite further dollar-debasement in order to keep nominal incomes and tax revenues up.

This should be interesting to watch as the printing presses get their exercise.



Published in: on January 13, 2013 at 5:36 am  Leave a Comment  

Which Pokemon would taste the Best?

Ordinarily, I would write something about inflation, politics, freedom or sound currency. Possibly personal finance, and occasionally food.

However, there are some questions in this world that take primacy, and must be answered thoroughly.

And, so, which Pokemon, then, would taste the best?

To answer any subjective question, we need to make a few assumptions.

  • Firstly, we assume a human, Western palate, which may be a bad assumption since Pokemon are Japanese in origin. However, I can only answer for Western tastes.
  • Secondly, I will assume that all obviously male mammalian Pokemon will taste bad, seeing as how every male wild animal that I’ve ever eaten wasn’t winning any flavor contests.
  • Thirdly, we assume we are only eating the familiar, first generation Pokemon like Pikachu and Charizard.
  • Lastly, we will assume that the younger adult “evolution” of each Pokemon will taste superior to its later, older versions, since this is a pattern observable in every animal from fish to birds to mammals.

And so, using these relatively defensible positions, I will start by eliminating the Pokemon that are obviously not going to win.

That includes all the inedible Pokemon, all of these guys appear to be made out of rocks, flames, electricity or lava. No good:

  • Geodude, Magnemite, Gastly, Onix, Voltorb, Electabuzz, Jynx, Magmar, Ditto, Porygon, Omanyte, and Kabuto.

Poisonous Pokemon:

  • Nidoking, Grimer, Koffing

Mammalian predators. Cats, dogs, lions, muscular, murderous creatures. No mammalian predators are tasty. None:

  • Meowth, Growlith, Abra, Cubone, Hitmonlee, Lickitung, Kangaskhan, Eevee, Jolteon, Flareon, Mew, Mewtwo


  • Mankey

Rodents and Insects:

  • Rattata, Pikachu, Sandshrew, Zubat, Diglett, Caterpie, Weedle, Paras, Venonat, Scyther, Pinsir.

Amphibians and reptiles:

  • Poliwag, Slowpoke, Bulbasaur, Charmander, Squirtle, Ekans, Machop, Dratini

That leaves several families of Pokemon that have a shot at the tastiness crown.

The clear winner of the vegetarian kingdom is Bellsprout. He is the only plant that even appears edible at any stage of life, beating out Oddish, Exeggcute and Tangela.

Of the waterborne Pokemon, Krabby wins, since crab is truly delicious and has a shot at the absolute win. Krabby beats Seel, Horsea, Goldqueen, Staryu, Magikarp, Gyarados, Lapras, Vaporeon, Tentacool easily. He only beats Shellder by a hair, because it is unclear if he is edible or inedible. If Shellder were an oyster, he would give Krabby a run for his money, but being that it is unclear, the win goes to Krabby.

Of the airborne Pokemon, Psyduck is the winner, since he and Farfetch’d, also a duck, are the only type of bird that we already choose to eat. Pidgey, Spearow, Aerodactyl and Articuno lose immediately for this reason. Psyduck is clearly fat and unathletic, lending him tender, juicy duckiness. However, Farfetch’d carries his own garnish, a leek or spring onion, which adds convenience and flavor to his particular brand of Pokedelicacy. In the end though, Farfetch’d is a burly looking mallard, earning his keep as a fighting bird, and would probably be stringy and tough. Psyduck fights with his mind, leaving his body tender and flavorful.

Cleffa, predecessor of the more famous Clefairy, came from space. God knows what he tastes like, but it would be miraculous coincidence if a Cleffa were even digestible.

Of the 100% fat Pokemon, Chansey or Jigglypuff are close, but I’m giving this one to Jigglypuff because Chansey lays eggs, and mammal fats generally taste better than fish or reptile oils. Not a winner, but I guess you could deep fry in Jigglypuff lard.

Finally, there are five herbivorous quadrupeds, Ponyta, Drowzee, Rhyhorn, Tauros and Snorlax. These guys could be crazy tasty, since things like cows and deer often taste the best. Ponyta is a horse. Out. Rhyhorn is a rhino. Out. Tauros is always male, and is therefore out since male mammals generally taste bad. Snorlax eats way too much, is immensely fat and never exercises, so Snorlax is very likely to taste great. Drowzee is rather fat, but feeds on dreams. Given that “you are what you eat”, Drowzee probably tastes weird, since all of my dreams are totally bizarre. Crown goes to Snorlax.

So, between Psyduck, Snorlax, Krabby and Bellsprout, there must be a winner.

Krabby, I choose you.

Published in: on January 10, 2013 at 2:03 am  Comments (4)  

150,000 jobs a month just isn’t going to cut it

The key number of holding the unemployment line, in terms of population growth, is 150,000 a month. That is 1.8 million jobs a year, and I agree that it does hold the line on unemployment, in the sense that there will not be fewer jobs per person as time goes by.

However, 150k isn’t leading us up and out of the depression.

In 2008, there were 138 million employed out of 304 million people, or 45.3 percent participation. Today there are 134 million people employed out of 311 million, or 43 percent. If the same proportion of the population were employed today as were employed in 2008, there would be 7 million additional working people.

So what’s it going to take to really be “cured”? Let’s make some assumptions.

Imagine that we have a totally lost decade, and we only dig ourselves out by 2018. Thats 5 years to get all this done.

Assume we have 334 million people in the US by 2018, which is generally in keeping with historic growth.

So, at 45.3 percent participation, we will need 151 million jobs, or roughly 17 million more jobs than we have today.

The math is simple now.

Given 60 months to gain 17 million jobs, we need to see 280,000 new jobs per month to recover in 5 years, or about double what we are currently seeing.



Published in: on January 9, 2013 at 1:48 am  Leave a Comment  

Why You Shouldn’t Believe in Paper Money

There is a persistent, derogatory dismissal of hard-money, pro-gold “dinosaurs” by many modern economists, stating that a modern economy does not require, and would actually be damaged by a stable means of exchange, citing gold’s lack of “flexibility”.


Hella flexible currency

Certainly, paper money or even electronic money is flexible, seeing as how it costs nearly nothing to produce as much of it as you want. However, this flexibility and inherent valuelessness are the very weaknesses of paper money, further worsened by the clunky, vulnerabilities of central planning.

This “flexibility” of central banking is not a sophisticated arsenal of tools, as it is so frequently painted up to be, but a blunt instrument.  A “flexible” money supply has always meant an ever-expanding money supply, since deflation predictably hurts debtors (and the state is frequently a debtor).

Clearly a state would never impose hardship on itself, and the state almost always has undue control over its own central bank. With one of two possibilities mostly eliminated by political reality, the printing press can only run, which explains how the dollar has lost 95% of its value since we started central banking in 1913.


As you can see, “flexible” means “constantly expanding”
Thanks to http://www.thefalconpost.com

Possibly the greatest vulnerability of central planning, however, is the planners themselves. At some point, every country has its worst president, every company has its worst CEO, and necessarily, every central bank has its worst chairman. This is the problem with placing an entire nation’s (or even a group of nations like the European Union!) money in the hands of central planners. The careful work of generations of central planners can be totally undone by a few poor decisions by one bad chairman.

If paper money is not first destroyed from within, very often it is destroyed from outside. While Confederate gold and silver are worth a fortune, their paper money’s value was destroyed by war. The value of the paper money of Imperial Japan, Nazi Germany and Tsarist Russia were all destroyed by war.  Without its government in existence, how can paper money be backed by its government’s full faith and credit?

These are all vulnerabilities that are never addressed, and cannot be addressed in a system using paper money. These same irreparable flaws are unimaginable in a system of gold and silver coin.

Published in: on January 7, 2013 at 11:41 pm  Leave a Comment  

Where’s my QE?

Quantitative easing, or the willy-nilly printing of money, supposedly started in September of 2012 at the rate of 40 billion a month. Then in December, another 45 billion in money printing was supposed to kick off. By now, we should have added at least 200 billion to the Federal reserve balance sheet.

But take a look at this.

The balance sheet has shown some increase, but only about 100 billion dollars worth. It seems that the first half of the month is spent buying, while the second half of the month is spent selling, basically holding the line. In fact, over the past year, the Federal Reserve Balance sheet has been totally flat; $2.92 Trillion in January 2012 and $2.92 Trillion today.

People worried about rampant money printing (like me), should be a little surprised to see the Fed’s balance sheet flatlining like that (and believe me, I am suprised).

QE1 and QE2 are clearly visible, but QE3 and QE4 are almost undetectable.

So what gives?

The impact of unrestrained money-printing is unquestionably recognized by professional central bankers, they MUST know this. After having witnessed the basically-zero effect of the first two rounds of money printing, its entirely possible that guys like Bernanke are having second thoughts about the supposedly positive effect of money printing, and are unwilling to risk further debasement of the currency.

There is another possibility, since the Fed is composed of a large number of clever dudes; they may be using creative accounting to hide the rapidly increasing money supply.

So, heres their balance sheet with week over week changes.

It appears they are basically shuffling stuff around to fund their 85 billion a month in purchase. The big move was selling 95 billion in central bank liquidity swaps to buy 88 billion in mortgage backed securities.

A central bank liquidity swap is where a central bank (lets say Estonia), sells a bunch of its currency to the Fed in exchange for dollars. That is to say, the Fed buys their dollars, and this shows up as an increase in their assets. At a later date, Estonia buys their money back, reducing the balance sheet, reducing the balance sheet.

So, as our loans to foreign countries mature, we shift the loans to our domestic banks to purchase mortgage securities, with no net increase in the money supply. It seems like this should raise foreign interest rates while dropping domestic interest rates.

I’ll need to have a look at the chief beneficiaries of the mortgage security purchases to see where that 88 billion a month is really going, but my suspicion is that they are going to Treasuries, since that is the gentleman’s agreement between the Fed and the megabanks. So, foreign central bank interest rates may increase to keep US government borrowing rates low.

So, without being immediately, brazenly inflationary, the Fed seems to be continuing the game of transferring its printed money to the Federal government via the megabanks. Nothing new here, though the QE program appears to be a transfer program, rather than a money-printing operation, which should help keep a lid on inflation.




Published in: on January 7, 2013 at 12:02 am  Leave a Comment  

I Trust Emeril

Lately, I’ve been cooking more, and my fiancee has encouraged me to try new recipes. Naturally, I turned to the internet.

As is typical, the internet is bristling with an excess of information, and as is also typical, there is no reliable way of determining if something is any good. Since McDonald’s is still in business, I can’t always trust reviews. A 5 star recipe sometimes involves boiling noodles and slopping on condensed soups, while a promising recipe might only receive three stars. What is a man to do?

Well, I love New Orleans cooking, and Mr. Emeril Lagasse is a luminary in the already world-famous New Orleans food scene.

I was skeptical at first, seeing as how he made the mainstream. I worried that he might be slapping the Emeril name on any recipe hack that paid him, and that his brand might be diluted.

Not so.

My formula is as follows.

Say I want a vegetable lasagna. I searched “vegetable lasagna emeril”.  I came up with this. 

Say I want a garlic roasted chicken. I googled “emeril garlic roasted chicken”.  I got this.

You want cheese grits? How about “emeril cheese grits”. Kaboom.

Try some “Emeril bread pudding”. This stuff has spiced cream. Come on.

So far, I have yet to get a dud. That lasagna is the best lasagna I’ve had. The chicken is the best chicken, the cheese grits, likewise. I think I actually wrote an article about the bread pudding that you can read here.

Anyhow, the conclusion I’ve come to is that if you are searching for a recipe, you will not be harmed by adding the word “Emeril” to your search field. I’ve grown to trust the man.

Possibly the best feature of most of Emeril’s recipes is that they aren’t highbrow to the point of being difficult. I will admit the lasagna recipe is big production, but the chicken and cheese grits are totally normal recipes. You don’t need to have infused oils, expensive spices or unusual produce. The difference is a couple ingredients, strategically added. The guy works with mid-to-low level grocery store type ingredients, and comes up with great stuff. We’re talking yellow squash, garlic, onions and some red pepper.

Anyhow, this strategy has worked for me, every single time, and I recommend it to anyone.

Published in: on January 6, 2013 at 2:36 am  Leave a Comment  

Here’s How to Balance the Budget

Some facts first, before I debunk any notions about balancing the budget with subtle changes to our current system.


The Federal budget is around 3.7 trillion dollars for next year, probably more.

There are 134 million people working in the United States that pay all the taxes. Yes, corporations pay taxes, but who pays the corporations? Individuals.

So, to pay for 3.7 trillion in spending, those 134 million people would each have to come up with around $27,600 dollars in taxes. The average job in the United States pays $48,300. Thats a lot of blood from not very many stones.


So, now imagine we do have to balance the budget, since someday we will have to do just that.

Firstly, the state budgets are mostly okay, so those won’t have to change much. However, the Feds have to change things up.

$7.7 trillion in wages were earned last year, minus the trillion or so dollars already paid in state income and property taxes. So, with the $6.6 trillion in remaining income, lets do the math.

Assume I did a lot of boring Excel calculations here, involving lots of data mining from IRS websites and census information.


So, it turns out that this simple tax scheme balances the budget.

The Balanced Budget Tax Code (no deductions, now!)

All income under $20k is taxed at 35%

all income between $20k and $39k is taxed at 40%

all income between $39k and $62k is taxed at 60%

all income between $62k and $100k is taxed at 70%

all income over 100k is taxed at 90%

Boom, the budget is balanced, and all we had to do was impose mind-numbing tax rates on everyone. Clearly, you can see this is a far cry from the current trench warfare in Congress going on about whether the top rate should be 35 or 39.5 percent. The average tax burden would have to be 57% for EVERYONE to balance the budget.

Some might recommend sticking it to the rich and leaving the poor alone, but that would require 100 percent tax rates on all income over 100k, 90 percent on $62000 and above, and 85 percent tax rates on income over $39k. That’s not going to work either.

Ultimately, we will either have to cut the government we have, or pay for the government we have. Personally, I don’t want to pay those rates for what I’m getting, and I don’t think anyone else does, either.

So, the concept of balancing the budget by fiddling with a few percent here, and closing a loophole there and cutting a little bit of waste isn’t going to cut it. Any kind of discussion that doesn’t involve ruinous increases in taxes, or dramatic, disruptive decreases in spending won’t do the job. Congress painted themselves into a corner, and its time for everyone to admit it.


Published in: on December 14, 2012 at 3:54 am  Leave a Comment  

High wages are a symptom of a good economy, not the cause

If you are in excellent shape, you will have a lower heart rate than a person who is out of shape. For instance, when I ran track and cross-country , my resting heart rate was 36. Today, I hover around 60 or 70.

A low heart rate does not cause someone to be in good shape, it is a symptom of good physical condition. If a normal person were to take drugs to drop their heart rate that low, they wouldn’t suddenly be in good shape. They would likely die.

Similarly, high wages are a symptom of a healthy economy, but that being said, high wages do not cause a healthy economy. They are a symptom. High wages, when arrived at by coercion, generally lead to a shrinkage of the local economy as people with money and ideas go elsewhere. When people are deciding where to start a business, they won’t pick an expensive labor market unless there are other advantages. All other things being equal, people go to a cheaper state or country to do their business.

So what exactly causes this symptom of high wages?

An extremely healthy economy, with an excess of opportunity, will experience a shortage of personnel as businesses have too many profitable opportunities to pursue, and eventually run out of qualified people to hire. When employers are missing out on too many profits to leave a slot open, they will resort to headhunting other employed people and offering them higher wages. It is that environment that is most beneficial to the employee.

The opposite case is what we are seeing now, where thousands of people apply for a single job, employers cut benefits, and take record-breaking profits. It is a lack of ultra-profitable, new investment opportunity that is keeping so many Americans sidelined, or at the mercy of a low-paying job. In China and India, and other poor countries, labor abuses are often criminal, but desperate people take the jobs anyway. It is lack of opportunity that promulgates this misery, not a lack of regulation. The developed world avoids these worst kinds of labor abuse not because of moral superiority, but because people have better opportunities. Parenthetical to every description of labor abuse, of pathetic wages and inhumane conditions, are the thousands waiting outside the factory gates to take the abused worker’s place.

Unfortunately, and particularly from our president, I hear arguments that “America does best when the middle class does best”. Honestly, it’s the other way around; the middle class does best when America does best.

When a guy pulling weeds for a landscaping company is able to start his own landscaping business without being attacked by city licensing agencies, labor unions, the IRS and the Equal Employment Opportunities Commission, the middle class is doing best. When someone is able to run a body shop without being bankrupted by a frivolous lawsuit, the middle class does best.

When a doctor has to give up his own practice because insurance and regulations make it a better deal to work for someone else, everyone suffers. It is lack of opportunity, and the threat of regulatory interference that is keeping the little guy down. The big companies can afford lots of regulation, and more regulation only closes their grip on their power and influence.

People may argue that regulation helps the consumer, or helps business, or both. Regulation, by definition, is the closing of an opportunity. If businesses are required to report to the IRS everyone that is paid more than $600 by that business, now instead of producing something useful, the business must produce paperwork for the IRS. That little window of opportunity for profit is closed, and is replaced by naked cost. If California furniture-makers can no longer buy oil-based varnish, their products will suffer, and they will be forced to forego some profit.

Every regulation, by definition, destroys some opportunity or another. Some are definitely opportunities that we won’t miss, like totally unbridled air pollution. But when the opportunity for making a certain type of truck is destroyed by regulation, the employer that made the trucks, all his employees and his customers lose.

When there are more opportunities than people, the people win. When there are more people than opportunities, the people suffer.

It is specifically and exclusively a shortage of labor that gives a worker bargaining power and a better living wage. It is only in high times when a worker can choose between multiple job offers.

Sadly, it is exactly the sort of laws that are being passed these days designed to “protect people” that will ultimately do the most harm. In a country where only existing business can exist under heavy regulation, profitable opportunities will be in short supply, and entrepreneurs and employees alike will suffer. Politicians refer to small business as the engine of growth, but the laws being passed lately are anything but fuel. Unless new and existing businesses are presented with fat opportunities for profit, hiring will never outpace the growth of the population.

With more regulation, employers get the pick of the litter. With more opportunity, employees get their pick of the jobs.

Which do you prefer?

Published in: on December 11, 2012 at 2:47 am  Comments (1)  

Selling Failure

Today, we have a neat article from Nelson Elliott, who among many things, is the creator of the marketing website Marketsaurus. This one ties in nicely with yesterday’s article, and it describes a specific method shysters on Wall Street use to snow their customers into thinking they’ll make big profits.

People say numbers don’t lie. That may be true, but there are plenty of liars who use numbers. For example, actively-managed mutual funds and other investment vehicles administered by “professionals” have a long history of failing to live up their hype or even the general market. But people keep buying.

How do these guys keep selling a failing record?

There are likely as many tricks as there are people selling actively-managed funds, but we’re going to look at just one trick used to sell crappy funds without technically lying: average return.

Shady funds like to brag about past performance to prospective investors (never mind that the past is no predictor of future performance). To do this, they want to make the numbers look as good as possible.
So, they have a choice between reporting returns by arithmetic average or geometric average. The differences between the two numbers can be remarkable. If you’re not vigilant, you can easily be fooled into thinking a fund performed better than it did.

Let’s imagine you put $100 into a fund that loses half of its value in the first year and then grows at 10% per year for another 9 years. What kind of average annual return did you get?


Wait. The arithmetic average is double what the geometric average is? How?

The difference is that the arithmetic mean just takes an average of every year’s number, without regard to your original starting point; the geometric mean compares the end value with the beginning value and how the original number would have to change every year to get to the same end point.

If you’re interested in the math, here are links on arithmetic average and geometric average.

If you just want to avoid shady investment managers, don’t invest in funds that talk about “average returns.” Instead, look for funds that calculate returns using “geometric average,” “compound annual return,” or “compound annual growth rate” (“CAGR”).

Even if you keep that mind, remember you’re buying for the future, not the past. If you believe a
talented manager will repeat his successes indefinitely, you’re statistically likely to be wrong. Since we don’t get to see the future, though, we invest on what we know and there’s no reason to invest in people we know are selling failure.

Published in: on December 9, 2012 at 4:22 am  Leave a Comment  

The Dow Jones has averaged near-zero returns since 1966

Let’s begin with the myth that the stock market has averaged 9 percent returns since forever. Its often quoted as a reason why its almost impossible to lose money if you buy and hold stocks. I disagree, and this article has some pretty basic analysis to show that maybe the stock market isn’t so great.

The Dow Jones Industrial Average is a basket of stocks with some doctoring of the numbers to adjust for dividends, stock splits and so on. Let’s see how it did since 1966.

Let’s imagine we bought the entire index in form of a mutual fund in 1966, for the low-low price of 950 bucks. I say mutual fund because everyone’s 401(k)’s are in mutual funds, so this is primary means that an ordinary person will invest in the stock market.


Wow! So in 46 years, your money went from 950 bucks to almost 13,000! You’re rich, right? Well, hang on there a second.

Mutual funds frequently charge about 1% annual fees, and you will pay taxes on that $12,000 gain, but only in the year that you sell. Lets assume, in that selling year, that you pay at the capital-gains rate of 15%. So, I reworked the numbers and below is a comparison between the original chart that just shows how the index did, and how your money would have performed under the burden of taxes and fees.


Wow! That’s like half of your money just went down the toilet to pay the Feds and the stock brokers. Well, you still did okay, since your 950 dollar investment still went up to like 6500 bucks, right? Well, not so fast, you see, a dollar in 1966 really bought a lot more than it does today. For instance, a deluxe Corvette cost around $4000 dollars. So, I’ve adjusted for inflation, using government generated statistics that are commonly regarded to be a gross understatement of reality. But, to be as conservative as possible, I used official statistics.


Whoa. Hang on there. That red line is so flat and tiny compared to the huge blue line soaring overhead, I can barely tell if I made money. So lets see that line, all by itself.


That clarifies it. What this graph pretty clearly shows is that from 1966 to the present, investing in the Dow was a money-losing proposition. For the brief dotcom boom of 1996-2000, the stock market was a great deal, more than doubling in real value, AFTER taxes, fees and inflation. Excluding these couple years, though, the stock market has been a money-losing machine for nearly 50 years. In the past 13 years, the market lost 25% of its value between taxes, fees and inflation.

So, I’m not sure where the stock market cheerleaders get their numbers, but mine tell a very different tale.

Published in: on December 8, 2012 at 6:16 pm  Comments (4)  

Fight Ad Fatigue!

Published in: on November 29, 2012 at 11:55 pm  Leave a Comment  

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