Sunday, September 30, 2018

Tesla Settlement Reeks Of Washington Corruption!

To Americans who accuse Washington of being a hotbed of cronyism and collusion, they need look no farther than the settlement between Elon Musk and the SEC which reeks of government corruption. So much for Trump draining the swamp! For all the turmoil and damage Musk has spread upon investors it seems rather than jail time or any meaningful punishment he will receive the equivalent of a slap on the wrist. Those that were skeptical that the US regulator would do anything have been proven more or less correct and as a bonus for Musk he has been allowed to neither admit nor deny guilt which means the settlement now makes any potential criminal case against Musk more complicated. Musk is set to make far more than the amount he was fined when the markets reopen and shorts are squeezed out of their positions with huge losses. This sends an absolutely horrible message to all investors looking for justice.

Musk Shows A Smile Upside-down?
Apparently protecting the exorbitant stock price of Tesla and those holding long positions took precedence over the law and justice. Steven Peikin, co-director of the SEC’s Enforcement Division, said in a statement. “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.” According to the posted settlement filings on September 29, the SEC Musk will step down for 3 years as Chairman and pay a $20 million fine. Tesla will also pay a $20 million fine and the total $40 million in penalties will be distributed to harmed investors which will be overseen by a court-approved process.

In what constitutes a slap in the face for the average American who would be thrown in prison for committing such an egregious act of securities fraud Musk will also have to step down as Chairman of Tesla for a term of three years. He will, however, be able to remain at his post as CEO. Another part of the agreement relates to corporate reform and calls for the company to appoint a total of two new independent directors to its board and an almost laughable part of this agreement covers how in the future Musk would also have to get approval or clearance for all his future tweets that "contain information material to the Company" from its board.

Martha Stewart In Custody
Musk should be gleeful this will most likely postpone the demise of Tesla for a while. For the record, he was treated much better than Martha Stewart who was found guilty in lying about a stock sale back in 2004. This is a far cry from how Martha Stewart was imprisoned when a federal jury found her guilty of obstruction of a government investigation into her sale of ImClone Systems Inc. stock in late 2001. The stock trade at its center involved a relatively small amount of money. Stewart avoided a loss of about $51,000 by selling nearly 4,000 shares of ImClone stock on December 27, 2001, rather than the next trading day, when the stock tumbled after regulators rejected the company's application for a key cancer drug.

This was touted by the government as a "big win in its pursuit of white-collar crime." Martha Stewart who used her image of domestic perfection to build a multi-million-dollar company was sentenced to five months in prison plus an additional five months under house arrest and 19 months probation. She also received a fine and court fees, adding up to $30,000. At the time an industry analyst said Martha Stewart Living might not be able to survive as a going concern, but that Stewart having already sold at least $45 million of her company's shares would in all likelihood remain very wealthy. In doubt was whether Stewart, who resigned as CEO before the trial, would be able to run the company with a felony conviction on her record and how she would fare in civil lawsuits based on the conviction.

In short the SEC as a representative of our government, Washington politicians, and Wall Street have rushed out and put lipstick on this pig in an attempt to cover up the wrongdoing of another insider and their comrade in arms. Consider this proof that we live in a different time from those days when many former executives pleaded guilty or found themselves facing trial, from companies that have come to represent the excess of the 1990's stock market boom such as WorldCom, Adelphia, Tyco, HealthSouth, and Enron. Having cost ordinary investors billions of dollars with his manipulative, fraudulent tweet and played a game with their money seems to have little in the way of consequences for Elon Musk. It seems this is as close to getting away scot-free as Elon could ever hope or imagined if corruption was not the flavor of the day.


Footnote; A day after publishing this article I changed the title to better describe the point I'm trying to highlight. this is something I rarely do. The prior title was, Washington A Hotbed Of Cronyism And Collusion!

Thursday, September 27, 2018

Noose Tightens Around The Necks Of Tesla And Musk!

Musk Should Be Feeling The Pressure
While the price Tesla stock has been trading at may give the impression Musk may eventually get past his recent problems reality indicates otherwise. It seems the noose is slowly tightening around the necks of Tesla and Elon Musk. While the iconic CEO has pushed a rosy scenario of future growth it has been a while since we have heard any good news flowing from Tesla and shareholders should be worried. In a head-to-head comparison in Motor Trend, three reviewers compared the Tesla Model 3, Chevy Bolt, and Nissan Leaf in a test, and only one person picked the Tesla. Many people would be surprised to know that the reviewers were comparing the base versions of the Leaf and Bolt, which cost $30,000-35,000, to the fully loaded Model 3 that costs more than $60,000.The pressures being applied are coming from all directions and calling into question just how stable and well anchored the company really is. Below is a list of a few of the problems nibbling away at Tesla's credibility and affecting future sales.
  •  Competition Rapidly Improving
  •  Debt Soaring While They Burn Through Cash
  •  Production Problems Continue
  •  Quality Problems Increasing
  •  Service Problems Leave Customers Unhappy
  •  Design Beginning To Stagnate
  •  A Malaise Is Settling Over The Auto Sector
  •  High Turnover In The Executive Suite
  •  A Rash On Publicity Questioning Elon Musk's Mental Stability
  •  Possible SEC Action Again ts Musk And Tesla For Stock Manipulation
  •  A Series Of High Profile Crashes Have Drawn Huge Attention 
  •  Buyer Subsidies Are Being Cut And Set To Expire
Adding to the pressure is that Ford recently made an important announcement of its plans to eliminate some of the company’s most well-known cars in North America, including the Fiesta subcompact, Fusion midsize sedan, Taurus large sedan, and the C-Max van. According to Ford’s quarterly earnings statement, this decision has been made following years of declining car sales. Dropping other models will allow the company to devote more resources to SUVs and trucks which have surged in popularity while consumers lost interest in passenger cars, which no longer have a monopoly on good gas mileage. More important to Tesla is that Ford's new marketing direction will allow Ford to expand into more electric vehicles bringing 16 battery-powered vehicles to market by 2022.

Volkswagen May Be Sporting A Game-changer
An article by Mike Shedlock via MishTalk, recently detailed how another powerhouse, Volkswagen, has launched a new electric vehicle initiative based on its new modular electric drive matrix. Volkswagen claims the technology platform developed specifically for electric vehicles or MEB will enable it to achieve a price-service ratio that will be instrumental in transforming the electric vehicle from a niche product into a bestseller. Volkswagen's ELECTRIC FOR ALL campaign will focus on putting 27 attractive MEB models at affordable prices on roads across the world by the end of 2022. Volkswagen contends it has placed its entire production knowledge in this platform designed from the outset to be 100 percent, uncompromisingly electric and that transferring this know-how to the electric age is a game changer.

While only two auto manufacturers are mentioned above, other companies are pursuing similar adjustments in marketing and these major players will put Tesla's feet to the fire. Diesel-gate the Volkswagen emissions scandal, also called "emissionsgate" that began in September 2015, when the EPA issued a notice of violation of the Clean Air Act to Volkswagen has in some ways pushed forward the call for electric vehicles. The German automaker had programmed turbocharged direct injection diesel engines to activate their emissions controls only during laboratory emissions testing but further tests showed they were emitting up to 40 times more NOₓ in real-world driving. Volkswagen deployed this programming software in about eleven million cars worldwide, including 500,000 in the United States, in cars built from 2009 through 2015.

Electric Vehicles continue to make up only a small part of auto sales. however, it is estimated that over 100 different electric cars are expected to hit markets by 2025. Only weeks ago Audi unveiled the E-Tron, an all-electric crossover and just one of its two new electric cars due to hit showrooms later this year, during a big bash in Tesla's backyard. After years of looking at all-electric concepts, the German luxury brands are finally launching products to compete head to head with Tesla. Mercedes-Benz revealed its own electric crossover earlier this month, the EQC, and BMW is also showing off another Tesla-fighting concept model. Audi's first fully electric auto will be made in Brussels and will arrive in the U.S. during the second quarter of 2019. It is important to note that all these companies will highlight styling and have no plans to take a backseat to Tesla.

History shows the automobile sector is an area where many have failed and promising investors a carrot in the future will only take Musk so far. One great example was the Delorean. I have become predisposed to discount, and have actually grown a massive aversion to "media hype", this is one reason you should color me skeptical. The city where I live, like other cities across the world, has a long list of bold men herald and declared to be "gods gift to business,"  many in the end flew too close to the sun only to crash and burn. Elon Musk appears to be struggling and the ramped up competition translates into Tesla getting little relief as both its stock price and bonds feel the heat of those many investors that are growing more skeptical of the company's ability to weather the coming storm.


Footnote; The first link below takes you to a negative overview of the company and the second is put out by a "rouge" mechanic that puts salvaged Teslas back together.  Both YouTube pieces merits watching.
 https://www.youtube.com/watch?time_continue=5&v=VfpVkRgjg-k
 https://www.youtube.com/watch?v=NuAMczraBIM

Monday, September 24, 2018

Washington Post - Influence And Power Wrongly Placed!

Influence And Power Wrongly Placed!
The Washington Post is by far Americas most influential newspaper and its subtle ability to influence, shape, and mold the opinion of Americans cannot be overestimated. Day after day those working for the Washington Post are quoted time and time again as experts and authorities as they appear on talk-shows and news-feeds spreading their message. This amplifies their spin and in many ways determines the focus and direction in how we view issues. Almost as frightening as the concentrated power of which I write is the fact is Jeff Bezos CEO of Amazon and the worlds richest man is the person who owns and controls the Washington Post. To be blunt, the Washington Post controls the narrative put before us and Jeff Bezos, the epitome of a person who rises to the top in unregulated capitalist systems where money rewards people who are comfortable with exploiting and harming others should not be wielding such power.

It is not a coincidence that the Washington Post has broken many big stories that move the needle of public opinion in huge ways. This is done "over time" meaning that while many of these stories don't immediately wow us they seem to rapidly spread throughout the mainstream media taking on a life of their own and eventually have huge ramifications that can be so subtle they go unnoticed by the average American. A story about Roy Moore the former Chief Justice of the Supreme Court of Alabama and the Republican nominee in the 2017 special election in Alabama to fill the Senate seat vacated by Jeff Sessions was first published in the Washington Post on November 9, 2017. They reported that Moore had initiated a sexual encounter with a young girl in 1979 when she was 14 and he was 32 years old. The allegations of sexual misconduct dumped out a month before the election while never proven spread like wildfire as the term "pedophile" went viral causing Moore to lose to Democratic candidate Doug Jones.

The reason this is so important is that it effectively undermined President Trump and as a bonus, it reminded the electorate and women especially that Trump "does not respect women" and flipped a very valuable vote from an evenly split Senate. Also, it helped to fuel the "MeToo" movement that was raging at the time due to high profile revelations relating to Harvey Weinstein and other powerful men acting like pigs. This has continued and is expected to be a force in the 2018 elections. In an article titled, "The Marginalized Voices Of The #MeeToo Movement" the Post took a victory lap of sorts on December 7, 2017 by pointing out that when Time magazine recognized the #MeToo movement as its Person of the Year, it solidified just how much of a cultural moment we are in when dealing with sexual harassment and assault allegations against powerful men. Unstated was how the growth of the movement has further polarized our divided nation. Even the mention of this movement in a negative light can get a person to be cast off a show or dis-invited to an event, this was recently experienced by Norm McDonald after he made a few comments that appeared in the press.

Another example of "Post power" is still in play and that is their timely article which again the Post was "first to break" concerned Christine Blasey Ford, a professor at Palo Alto University and how she was accusing Supreme Court nominee Brett Kavanaugh of sexual assault. She says Kavanaugh tried to force himself on her at a party when they were 17-year-old high school students. Following the article others rapidly appeared often referring to the piece in the Post and the words rape and descriptions of how she at the time feared he might kill her slipped into the narrative. Stories quickly sprouted about how Kavanaugh’s nomination was in serious jeopardy and how he must be stopped and how unless Ford’s allegations are discredited, it seems virtually unthinkable that he would be approved. Kavanaugh has forcefully denied the allegation of the decades-old sexual assault which now has become a key part of his increasingly nasty Senate confirmation battle.

Not Everyone Sees Kavanaugh As Far Right
Circling back to the crux of this article, the danger here is having influence and power controlled by someone wishing to manipulate the way the public thinks, again the ramifications and even the timing of the allegations against Kavanaugh are massive. President Trump selected Judge Kavanaugh to replace Justice Anthony M. Kennedy, who is set to retire. If confirmed, Judge Kavanaugh would cement a conservative hold on the court. A big issue here is timing because if a Trump nominee is not approved by the 2018 elections and the Democrats take control of the Senate they will have the power to block future picks.

Many people do not realize it but the Washington Post is without a doubt the most pro-establishment among all large mainstream publications, not only do they defend establishment narratives but actively attacks anyone who challenges them. By this I mean it serves the wealthy and the powerful which can only exist with nonstop advertising to convince the American public that the "overall status quo" is in their best interest. The Washington Post is used to manufacture consent for that system; for the economic system, for the wars which prop it up, for the politicians which the plutocrats own and operate, for the political system which wealthy insiders have infiltrated every level. The propaganda they dish out can be very seductive, they simply add in a few gentle jabs to embarrass their enemies and then stir the power of suggestion.

All this adds fuel to an atmosphere that constantly warps our perception of the Trump administration when coupled with a constant barrage of headlines such as "Trump Decides To remove National Security Advisor And Others May Follow" or, "Trump To Fire McMaster As National Security Advisor, WaPo Reports But White House Denies." These often well-laundered stories tend to repeat vague rumors and innuendos which feed into the narrative the White House is in chaos but not only are most of these articles untrue they usually seem to loop back on themselves. These articles described as news continually jolt the emotions of both those on the left and the right reinforcing the polarization that grips our nation but leaving nobody to blame.

This type of reporting does not stop at attacking Trump but extends into our feelings about the world including our view of Russia, North Korea, Iran and even issues like trade. It all seems a bit ironic that it was the Washington Post which was the first to print these stories that you would normally expect to flow from a source closer to home such as a newspaper in the city or state where the event took place or the accuser lived. While this is inconclusive in proving that they were prefabricated of wrongdoing. it can be taken as proof of the power the Post wields. I contend the Washington Post has power far beyond just reporting the news but has the ability to plant an idea like you would a seed then shape public opinion utilizing various tools and even coordinating the timing to maximize their impact.

One of the best descriptions I have ever read of Jeff Bezos calls him the most crafty plutocrat alive and stated he purchased the Washington Post so he could shape America's agenda. The neo-liberal Orwellian establishment that Bezos is building his empire upon has been greatly enhanced by using the long-trusted US newspaper as a propaganda mouthpiece and a tool to propel his agenda forward. This is why we should all find it very troubling that Jeff Bezos is also a contractor with the CIA and sits on a Pentagon advisory board all part of doing everything he can to cozy up and ingratiate himself to the establishment on which his empire is built. This includes kicking WikiLeaks off Amazon servers in 2010 and dovetails in a creepy way with Amazon’s involvement in surveillance systems and digital “assistance” devices like Alexa.

It amazes me that average Americans still have a difficult time internalizing the fact businesses are dying and workers are getting poorer as Bezo's empire continues to grow. Bezos is happily collaborating with depraved intelligence agencies, manipulating and propagandizing Americans, and expanding the gulf between the rich and the poor all in his effort to garner more wealth. In our system where money rewards sociopaths and money equals power the plutocrats that form alliances with each other and with defense and intelligence agencies to ensure the continuation and expansion of their empires have little concern for the average American.

Saturday, September 22, 2018

Will China Find Africa's Population Growth Problematic?

Now and then we see stories about how China is expanding its influence on the African continent and how it covets and needs the natural resources located there. It will be interesting to see whether China will do something down the road to limit the expansion of Africa's population. Call it in an act of racism or self-preservation but it is very possible that in coming years China may find the projected explosion of the continent's population in conflict with its own interest and take some kind of action to reduce it. Having tried for years to control its own population's growth it is very possible China could develop a unique even harsh strategy to deal with this "pesky" problem.

OROB Will Create Massive Conflicts
China's "One Belt, One Road initiative" an all-encompassing and confusing project that was initiated four years ago will reshape world trade as it unfolds and the relationships China has with many countries and the African continent. Also known as OROB. It consists of two major parts or projects that are known collectively as One Belt, One Road, or Belt and Road, or the New Silk Road. According to Chinese state media, some $1 trillion has already been committed to OROB, with another several trillion due to be invested over the next decade. The plan aims to pump this huge sum of money into railways, roads, ports and other projects across Asia, Africa and Europe.

With this in mind, a potential conflict looms in coming years as Africa's population soars. A huge number of people may try to leave the region that suffers a history of political instability, corruption, and famine. It is only logical to assume many of those born there may decide to exit the continent in search of greener pastures and the promise of a better life. The exodus of millions of people from one area and into another is often greeted with hostility. As the door to Europe continues to close the road China builds to expand into Africa could become one of the few options left to escape the misery of being born in the wrong place at the wrong time. The unintended consequence of creating a backdoor into China will probably result in a harsh response from a government not known for its compassion.   

Going Forward African Population Will Soar
This article was inspired and in reaction to an excellent article by Taps Coogan that was published by The Sounding Line. Coogan states, "As we have noted on a number of occasions, Africa’s population is in the midst of a rapid expansion. For the first time in recorded history, the population of Africa is expected to rise from between 10 to 15% of the global population to nearly 40% by the year 2100. "The article which details the rapid growth brings into focus a major shift in the world's population points out that even before factoring in the negative effects climate change may create Africa’s agricultural yields are substandard and even if they can be brought up to the same level as the developed world, that won’t be enough to meet the needs of Africa’s surging population,  According to most estimates Africa will become increasingly dependent on food imports going forward.
 
Racism and tribalism are not qualities limited to western culture and throughout history, a lack of respect for the indigenous people in areas being developed has resulted in them being displaced or worse. An example is the fate of the American Indians that were not only pushed off their land but were killed in huge numbers. Genocide, the intentional action to destroy a people in whole or in part, is not as rare as we would like to think. In the future, it is likely mankind will add more than a few ways to accomplish this possibly without proof of the act or having to take responsibility. If this prediction comes to pass do not be surprised if the future of those born in Africa dims even further.


Footnote; The article below explores China's OROB initiative
http://brucewilds.blogspot.com/2018/02/chinas-bold-one-belt-one-road-agenda.html

Thursday, September 20, 2018

The ECB And Draghi Are Starting To Grasp At Straws

While much of the world is focused on trade wars when looking at the future value of the Euro it is important to keep in mind several key elements of "currency relativity." Bloomberg recently suggested that most likely the ECB’s economic forecasts projections would be downgraded and the ECB has confirmed this. The forecast has been adjusted lower cutting 2018 and 2019 GDP from 2.1% and 1.9% to 2.0% and 1.8%, respectively Draghi assessed that the expansion is "still solid" while noting that "uncertainty around the inflation outlook is receding." This comes at an important time for the Governing Council of the ECB which was thought to be prepared to marginally wind back stimulus.

Euro Leaps Higher Against Dollar As Draghi Talked
The concession that growth is slowing dampens the excitement of those that have been warning us we were about to be in for a hawkish surprise. Surprisingly the spin on lower growth caused the euro not to leap higher because Draghi also stated the ECB projects "significantly stronger core inflation." Apparently, this coupled with the latest miss in U.S. inflation as CPI  came in lower than expected added fuel to the spike. The mood was also boosted by Draghi's positives comments regarding the fact that so far all the major Italian ministers and the PM have said they will respect the EU’s budgetary requirements.

As of yet problems in Italy have been contained and have not had much effect on Europe. Italy with its newly-installed government has started taking an increasingly conciliatory tone with regards to their budgetary intentions. Despite this seemingly new approach from the populists, eventually, a clash between Italy and the EU seems inevitable. Such a clash would elevate grave concerns over Italy’s fiscal discipline and heightened fears over the nation’s intentions of paying debt held at the ECB. While people would like to probe Draghi on his views on the matter and what mechanisms the Bank has to counter any potential Italian crisis, this is a subject Draghi will most likely avoid by being nonspecific and referring to the general rules already in place.

Year After Year Of Little Growth (click to enlarge)

For years the Euro-zone has enjoyed a solid trade surplus from its dealings with America. It is pure folly if they think realigning the Euro-zone with China will result in the same kind of beneficial relationship. To make matters worse, it could be argued that the meager growth the Euro-zone experienced has come mainly from two areas and is neither balanced or has much further potential. Some of it has resulted from the influx of shall we say, "mainly unwanted" immigrates flowing into the area that needed to be housed and fed. And much of the rest from ECB stimulus. This slowing has occurred as the euro area trade surplus declined to the lowest level in four years in July, exports dropped 0.8 percent month-on-month, while imports grew 1.3 percent. Figures from Eurostat show the trade surplus fell to a seasonally adjusted EUR 12.76 billion from EUR 16.47 billion in June. This was the lowest since June 2014, when the surplus totaled EUR 12.22 billion.
The reality is that after years of doing "What Ever It Takes" Draghi must about be at wit's end. Draghi became the focus of the world at a speech in London on July 26, 2012, when the ECB President gave an account of the euro-zone economy as bond yields of weak euro-member governments were soaring. At the time many traders held grave doubts that EU-level institutions could get their act together in time to avert disaster. In the historic speech Mario Draghi pledged to do "whatever it takes" to protect the Euro-zone from collapse, this included fighting unreasonably high government borrowing costs. As Draghi sought to convince international investors that the region’s economy wasn’t as bad as it seemed. He then made the momentous remark:
“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
While the ECB might have sidestepped the collapse of the euro over recent years many of us skeptics believe it will ultimately result in a major devaluation of the euro with devastating side-effects for those holding the currency. The title to this piece referring to the ECB "grasping at straws" alludes to the idea no real solutions exist for the Euro-zone as it confronts the grueling challenges before it of remaining competitive in the global marketplace while a critical currency problem brews within its mist. Much of this relates back to the flawed way the euro was created and its failure to become a "truly unified" economic union. Draghi's stand continues to be that the euro is indispensable and is strong, because societies want it and that it is in no one’s interest to doubt its continued existence and even discussing its abolition is harmful.

This year six Euro-zone countries may break the European Union’s budget deficit rules which probably gives them little room to help by expanding spending. Belgium, Italy, Austria, Portugal and Slovenia, the Draft Budgetary Plans (DBP) pose a risk of noncompliance with the requirements for 2018 with France falling upon the same problem. The rules say that EU countries should have budget deficits below 3 percent of GDP and public debt below 60 percent of GDP. Italy, which has the second highest debt in the EU after Greece at more than 130 percent of GDP, to voice concern was singled out as particularly troubling.

John Mauldin, chairman of Mauldin Economics, thinks the flashpoint for the next crisis is likely to be in Europe, especially Italy and the choice of Europe in coming to terms with whether to put a lot of bad debt on the balance sheet of the European Central Bank or deal with defaults and the contagion that flows from them. If not addressed the Euro-zone breaks apart and we’re going to get a 50% valuation collapse. “Greece,” he said, “is a rounding error. Italy is not" This means Brussels and Germany are going to have to allow Italy to overshoot their persistent debt, and the ECB is going to have to buy that debt. It seems that until now, a program known as "Target 2" has been the salvation of the euro and responsible for preventing countries from collapsing.

Since 2015 we have been again witnessed capital fleeing to the north as a result of Draghi starting QE in 2015 and the Bundesbank starting to buy back bonds on the market. The Italian central bank is dependent on the ECB and has to buy Italian government bonds. German investors have to exchange these bonds for euros in Italy and transfer the money via Target 2 to their German bank. The growing differences in the Target 2 balance sheet is the result of the Germans, who own the Italian bonds dissolving them in Italy and transferring the money to Germany. Italians have also added to the capital flight as they liquidate their bonds and send their money abroad. This translates into enormously huge debt claims on the German side where this year they have already reached a trillion euros which is about 25% of German GDP. 

These German Target 2 claims are not covered by any securities. If Italy or Spain withdraw from the Euro-zone, the Germans will be left holding worthless paper. This has not generated much unrest in Germany only because the Germany people have great confidence in the Bundesbank. At a press conference on 26 July this year, Draghi said about Target 2: “It has nothing to do with the movement of capital from country to country” and the clearing balances cannot be overdrawn as long as no one leaves the Euro-zone. This translates into, Italy must not leave the Euro-zone! Italy's debt amounts to 2.3 trillion euros and its liabilities in Target 2 rose in June 2018 to 481 billion euros from 164.5 billion euros in 2015. This means that Banca d’Italia owes the Bundesbank almost half a trillion euros!

So, we have Draghi, the Italian who uses his position to save his country, and on the other, there are many German economists who criticize Target 2 and see it as a check that cannot be cashed. Still, the slowing of the Euro-zone economy means the ECB appears once again to be on auto-pilot and has postponed the idea of raising rates until other central banks raise theirs the ECB is safe hiding in plain sight but if the Fed moves even a bit higher all bets are off. Weakness in the euro almost certainly will result in a stronger dollar which could be the catalyst for the emerging market crisis to spread to the rest of the developed world and evolve into a global deleveraging event. Again it is difficult to ignore the fact the euro remains very vulnerable.



Footnote; While like all fiat money the dollar is nothing to brag about at this time the other options are even less compelling. When placing a value on a currency we are talking about "relative value." The argument that currencies are trading in a false paradigm extends past simple manipulation and is bolstered by their being sheltered from the storm of volatility by existing in a rather closed system in which wealth tends to become trapped. The article below argues that it is to early to count the dollar out because of its status as the worlds largest reserve currency by which all others are judged.

http://brucewilds.blogspot.com/2018/08/currencies-continue-trading-in-false.html

Wednesday, September 19, 2018

Is Housing Sector Joining Autos In A Slowdown?

Two of the biggest and most solid drivers of the economy over the last several decades have been the housing and automobile manufacturing. New data shows that after three ugly months earlier in the year a small rebound occurred in July. August numbers were expected to see those gains consolidate but the picture was extremely mixed with housing starts spiking 9.2% month over month while permits plunged 5.7% during the same time period. The data highlighted below emphasis just how mixed and cloudy the housing picture has become.
  • The surge in Starts is the best month since January 2018
  • The plunge in Permits is the worst month since Feb 2017
The fact is housing was overbuilt in 2008 with many people owning more than one house. Demographics, as well as the student debt weighing upon many young people, has created a drag on housing. While housing has not again reached the torrid pace we witnessed before the crash, because of super-low mortgage rates, easy financing, and a slew of programs to help first time home-buyers, the housing market has become more elevated than it should be. It is important to note that this has resulted in the premature death of many houses that in the past would have been renovated rather than demolished. Houses that are in areas of weak demand, poorly constructed, or even simply been allowed to fall into disrepair have become victims of the wrecking-ball far before their time. In many ways, a lot of what we are witnessing is the result of misguided housing policies topped off with malinvestment.

Overall It Appears Auto Sales Have Topped
As for the auto sector, while we have not seen a massive amount of information about it recent numbers confirm a malaise is settling over the auto industry. After more than a century-long run, giant automakers like Ford was the first to boldly face the obvious: The demand for traditional cars is beginning to dry up, thanks to the evolving tastes of millennials and baby boomers. Ford announced plans recently to eliminate some of the company’s most well-known cars in North America, including the Fiesta subcompact, Fusion midsize sedan, Taurus large sedan, and the C-Max van. According to Ford’s quarterly earnings statement, this decision has been made following years of declining car sales.

Ford's plan to eliminate selling most of its cars in North America except for two models will allow the company to focus on their “winning portfolio” in the United States, Canada, and Mexico. The Detroit automaker plans to continue manufacturing the Ford Mustang and a new Focus crossover that the company plans to release next year. That vehicle will be assembled in China and imported to the United States. Dropping other models will allow the company to devote more resources to SUVs and trucks which have surged in popularity while consumers lost interest in passenger cars, which no longer have a monopoly on good gas mileage, also their new marketing direction will allow Ford to expand into more electric vehicles bringing 16 battery-powered vehicles to market by 2022.

Circling back around to the intended focus of this article, it is likely jobs will be lost in both these important sectors of the economy in coming months. This will in itself create an economic headwind that affects overall growth. Many trends are expected to feed into the coming slowdown such as smaller housing units and self-driving cars as well as a slew of new car sharing programs. As the auto sector moves into the future we will see a reduction in the number of cars produced in and for America and as most production lines are retooled for new vehicles it is likely more automation and robots will be used. None of this bodes well for those predicting the economy will continue humming along.

                                                                                           E-mail this blog post to a friend

Footnote; Below is the link to a recent article about housing 
http://brucewilds.blogspot.com/2018/09/the-housing-picture-is-not-brightening.html

Tuesday, September 11, 2018

Amazon Is A Threat To Our Democracy And Capitalism

The title of this piece is bold and may seem like an exaggeration but in previous posts, I have written about several of the cozy arrangements Amazon enjoys with our government and some of its new initiatives are taking the company to a new level. It must be noted Amazon's lust for power appears without limit. The deal Amazon is now trying to push through Congress grossly exceeded anything it has undertaken in the past and would place the company in a position to threaten our very democracy. The technology giant which is no stranger to sweetheart deals and has lined the pockets of its CEO Jeff Bezos at taxpayer expense is quietly moving in a direction that is destined to create even more controversy. Amazon is on the verge of winning a multibillion-dollar advantage over rivals by taking over large swaths of federal procurement.

Amazon Is Moving To Place Beyond All Control
This brazen move makes it increasingly difficult and almost impossible to ignore the fact that Amazon's CEO Jeff Bezos owner of America's most influential newspaper, the Washington Post, has embarked on a mission to quietly grab more power. When you couple the voice of the Washington Post with a company so deeply involved with discovering and archiving detailed files and information about individuals and politicians across America you command a great deal of muscle and clout. Because of this and some highly effective lobbyist, the federal government seems unable to stop giving Amazon, even more, advantages over the brick and mortar stores that line the streets of our communities. This has become a dagger into the heart of the capitalist system and is allowing Amazon to flourish while removing the ability of other companies to compete.

Congress under the cover of darkness has started down the path to change the federal purchasing plan that would result in Amazon’s most lucrative government handout yet. The language buried in Section 801 of the House-passed version of the National Defense Authorization Act would in effect move Defense Department purchases of commercial off-the-shelf products to online marketplaces. The House Armed Services Committee Chairman Mac Thornberry, argues it is needed to save money over the burdensome current system and that some IT equipment could be purchased more cheaply on the open market than through the current GSA’s “schedules.” The plan calls for developing an online marketplace platform through which federal agencies can buy products such as paper clips, bottled water, computers, office furniture and more in the same way any business would.

The legislation calls for a platform designed to “enable government-wide use of such marketplaces” which rules out all small players unless they employ a procurement and supply management firm big enough to serve the entire U.S. government by offering multiple suppliers for a massive number of products with constantly changing selection and prices. With all Amazon's influence, it is not an accident that Amazon Business is the company best positioned to exploit what is basically monopoly control over a great deal of the $53 billion in federal purchasing for the commercial supplies bought through no-bid contracts. As to whether this becomes law in the future the fact that Amazon got it through the house should cause us great concern and is proof of the company's ability to manipulate Washington  All this reeks of corruption and constitutes a major shift in power that would set up opportunities for abuse not to mention massive control over suppliers.

Even the suggestion of a pilot program is just another way for Amazon to wedge its foot in the door. It is important to remember by simply providing the platform necessary for companies to sell through to their current customers Amazon would extract money from those third-party sellers and collect billions of dollars annually. Typically it receives 15 percent to 20 percent of the proceeds from such sales, which means a huge revenue stream for Amazon for doing basically nothing while vendors are forced to cough up as much as half their margin. This would prove devastating to many small businesses. Amazon would also get an enormous amount of data on agencies which they could then use to identify top competitors and drive them out of the marketplace with increased fees or other rules changes. And it means many discounts that are normally negotiated for bulk rate purchases would flow not to the government and taxpayers but would be diverted into Amazon’s pocket.

This is only one of several initiatives Amazon is currently pursuing behind the scenes to quietly extend their hold over America. The people of this great country are only beginning to see how Amazon has begun to reshape America as the number of brick and mortar store closings increase on a daily basis. Fortunately, more and more articles are beginning to be published criticizing Jeff Bezos and Amazon for its abusive policies and calling it out for accountability. It is time for our government to stop subsidizing this monster it has allowed to grow and take shape and recognize it for what it is, a power hungry job killing exploiter that is destroying communities.

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Footnote; Below are the links to several other articles about Amazon.
 http://Online Transaction Fee Could Blunt Amazon's Edge html
 http://brucewilds.blogspot.com/2018/07/amazom-shipping-rates-deemed-to-low-too.html
 http://brucewilds.blogspot.com/2018/04/trump-and-bezos-face-off-clash-of-titans.html

Monday, September 10, 2018

Investors Would Be Wise Not To Fixate On GDP


GDP Shows Recent Strong Growth  In GDP
Investors would be wise not to fixate on America's recent GDP and accepting it as a sign or verification the economy is hitting on all cylinders. If investors fall into the trap of focusing on the GDP and lock onto this number as a confirmation all is well they may be in for a huge surprise. The fact is the GDP is a poor reflection of the quality of economic growth. It is also important to remember that a lot is happening across the world and the troubled economies of both the EU and China will feed into near-term market moves. When you throw in trade wars and the fact central banks are beginning to see they must deal with the problems flowing from years of QE it becomes easy to make an argument that caution is in order.

It is my personal opinion that Japan, another huge international economy, which has quietly tried to stay out of the spotlight when it comes to trade may be damaged by problems spilling out of China. Up until now, Japan has done a rather good job of allowing China and Mexico to absorb the bulk of Trump's trade tantrums and tariffs. By constantly reminding us Japan is a longtime ally that stands with us against China and North Korea. Prime Minister Shinzo Abe's administration has walked a tightrope. Decades of experience has taught Japan that when it comes to trade issues it is best to maintain a low profile because it is a game they cannot win.

Still, the links and ties between China and Japan are strong and problems in China do not bode well for Prime Minister Shinzo Abe's administration as it attempts to balance snowballing social security costs and increased defense spending. When we look closely it is easy to see the concern within Japan that the economy is just getting by. Abe has had to promise a stimulus package to offset the negative impact of a planned increase in the nationwide consumption tax beginning in October 2019, making it unlikely that Japan will shed its status as having the worst fiscal health among advanced economies anytime soon. Sadly, what is seen by many as "a good economy" is simply an illusion build of massive deficit spending.

Federal Spending Is Skyrocketing (click to enlarge)
Here in America, many investors point to an improving GDP as proof of an economic rebirth, however, it is difficult to ignore that the national debt is not just growing but it is exploding. A recent report issued by the Office of Management and Budget that went largely unnoticed titled the “Mid-Session Review” paints a far bleaker forecast of the deficit going forward than originally predicted. The illusion of a robust economy has been propelled forward by the sheer mass and sum of economic growth rather than its caliber or quality.

This spending has been exacerbated by the stupidity of Congress passing an Omnibus Spending Bill with little thought as to how the spending would play out. It has now become apparent that over the final weeks of fiscal 2018, the government is slated to embark on a spending spree of historic proportions as federal agencies look to spend $140 billion more than they expected to receive prior to the bill being passed. I concede that rushing to spend this money as fast as possible should bolster things over the near term but may prove extremely wasteful. Circling back to the crux of this article is the fact we have allowed numbers that mean "nothing" to seep into how the gross domestic product (GDP) is calculated all in an effort to create the illusion of growth.

In 1962 Kuznets, the father of the GDP formula emphasized that we must keep in mind the difference between quantity and the quality of growth. He made clear a distinction exist between cost and returns. This translates into the reality that the number we are spoon fed and await with such glee has little to do with real growth but often simply mirrors or is merely a reflection of monetary pumping. The GDP number fails to highlight a slew of important factors that feed directly into our standard of living and the health of our economy. The landscape of our economic future becomes far more uncertain when putting into perspective how flawed the GDP number is. It is not in any way an accurate forecaster of growth and should not be considered an indicator confirming a trend or real strength in the economy. It should be noted this is not a problem occurring just in America but across the world.

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Sunday, September 9, 2018

Ignorance is bliss! - Creating A World Of Calm Serenity

Let Us Declare This As The Truth!
As we look around it is not difficult to understand the origin of the saying "Ignorance is bliss!" This article is a tribute to all those cute little sayings and witticisms that have laced their way through our culture and give depth to our vocabulary. While I will only highlight a few it should be noted that many more exist and they and often the result of generations of tried and true lessons pounded into the collective heads of mankind. Now back to the title of this article, "Ignorance is bliss!"  The lyrics from a song that was popular years ago indicated that "things get a little easier once you understand." Sadly this is not always true and sometimes understanding an issue only reveals the complexity hidden under the surface.

This Chart Is Scientific Proof The Link Exist
Statistics show that in recent years many Americans have dropped out of the workforce and are retiring early and it is not because they are rich but because they can. Like many people, I often think about just giving up and chucking it all. Oh, how sweet it must be to know little of the risk and hazards that surround us and to be totally oblivious as to the dangers lurking around every corner. Envision the joy of living in a state of mind that allows you to awake each day to a world of calm serenity.  The chart to the left proves and shows without any doubt the scientific correlation between ignorance and happiness does exist. This explains a lot about life and leaves little doubt as to the benefits of a lazy mind.

A Reassuring Lie Has Many Fans
It is often hard to quantify just how intelligent the masses are but, it is safe to say many people could not qualify as a rocket scientist. I strongly suggest it is not by accident the phrase "an inconvenient truth" came about or that "da Nile" is not only a river in Egypt.  Denial is a place or state where many people live out much of their life. Truth often has a sharp edge to it and is unbending which makes it rather exhausting to tolerate. This means it is often not very reassuring to question what we are told and far easier to go with the flow or accept the general consensus that the person you are following actually knows where they are going.

An Ugly Reality Can Lurk Just Below The Surface

Some of the drawbacks related to pursuing knowledge alluded to above may be only the tip of the iceberg in explaining why so many people choose the well-traveled path of being happy with what is, rather than thinking about what could be. I salute those who pick to live their life in a place where the color of the sky is of their choosing. The only problem with choosing the path of ignorance is the possibility that the illusion might collapse at any time if reality chooses to raise its ugly head. My research, however, indicates that a few witticisms have been created to cover even those situations, such as, "Don't worry be happy!"

We live in a world where Goldman Sachs is busy claiming to be doing God's work and a broad swath of mainstream media claims to be standing upon the moral high ground while spinning the news to suit their needs. Considering this it is hard to find a good anchor. Nowhere to be seen on CNBC, Bloomberg, the WSJ, or any other status quo propaganda media outlet is much that resembles honest or thoughtful information. Their job is not to analyze or seek the truth. Their job is to keep their government patrons and Wall Street advertisers happy while keeping the masses sedated, misinformed, and pliable.

After years of economic propaganda, artificially inflated stock prices, dishonest accounting, laced with pandering and outright lies we find Washington and the media have hollowed out our culture lulling most unsuspecting Americans to sleep. The rest of the world has not fared any better. Few among us no matter how dumb or how dense think the world would not be better off if they were in charge and calling the shots as ruler supreme. One thing is very clear, the issues a person would make their priorities if they held such a station of power speaks volumes as to what they value and what they hold dear.

I must say this article has been in the works for longer than you might imagine and was quite challenging to write. It takes a great deal of effort to put together such a profound piece of drivel and I hope I got the balance right. I find both solace and comfort in the idea that I'm not nearly as stupid as many of the people who occupy this world. Thank goodness the bar has been set so low because it creates a situation where it becomes much easier to compete. Sadly, this double edge sword leaves us living among people that are not too bright and unburdened by the worry of reality. I must admit it is rather ironic we who claim to see the bigger picture often envy their happiness?
                                                                         
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As a final thought to ponder below is a link to; Always Look on the Bright Side of Life - Monty Python's Life of Brian  
                             https://www.youtube.com/watch?v=SJUhlRoBL8M

Saturday, September 8, 2018

China's "Postal Rate Break" Feeds Into Fair Trade Issue!


Sewing Needles On E-bay For $0.99
The landscape of retailing in America can take us down an interesting path when buying something as simple as a needle and some thread to sew on a button. Most of us have not purchased a simple needle and thread for a long time, maybe decades, maybe never. These are not expensive articles to manufacture but what is shocking is that you can buy them cheaper from a company in China and have them shipped directly to your home for far less than you can buy them here in America. The question is how or why. The needles pictured on the right can be bought online from a seller in China for $0.99 or $3.99 from a seller based in "LA, United States" at your local store you pay around $5. This means local stores here in America can’t compete which results in more retail jobs disappearing or just hanging on with lower pay and benefits being reduced. Also when foreign online sellers pluck a sale away from American brick and mortar stores they are not collecting or paying any sales tax or income tax like importers located in the USA. 

Companies have repeatedly pointed out the rates that have been set by the United Nations Universal Postal Union or UPU currently allow a small package to be shipped to a customer in America from China for far less than it can be shipped across town. Reuters reports that the U.S. State Department said it would push for foreign postal carriers to pay the U.S. Postal Service more to deliver small parcels within the United States. It added that if insufficient progress is made with the UPU the U.S. Secretary of State will make recommendations for future action which would likely include adopting self-declared rates. The rates have been a longtime issue and a source of complaints from UPS, many American companies shipping here in the states and even Amazon.  They have rightfully claimed that because they give foreign companies a huge advantage in pricing they are unfair and harm American businesses. 

In the latter part of 2016, the National Review ran a piece calling for America to stop subsidizing foreign postal systems for both economic fairness and national security. It stated the Postal Regulatory Commission was slated to determine whether the new proposed rules of the UPU were consistent with the mission of the U.S. Postal Service. While it is difficult to find what was decided or how anything has yet to change the article made it clear what the commission decided could go a long way in either making us all safer and more secure.  Currently, the international postal-package system enables terrorists, drug dealers, and Chinese e-commerce companies to abuse us at our expense. A big problem here is the proposed new rules mirror the old rules with a few minor changes meant to mollify the growing number of critics here in America.

Under the current rules set by the UPU, the charges the USPS is allowed to charge foreign postal services to deliver packages they send into America (called terminal dues) are set ludicrously low for certain countries, among them China. Under UPU rules China, the world’s second-largest economy currently enjoys the same break on terminal dues as do Gabon and Botswana. This means that the USPS actually charges China's post office less to deliver a package from China into the U.S. than it charges a U.S. business or customer to deliver a similar size package within the 48 states. The post office is losing money on every package it delivers from China and then has to pass the cost on to its American customers and U.S. taxpayers.

Adding to the insanity of working under the rules set by the UPU the USPS is compelled to deliver all packages from foreign sources even if they have not passed any customs inspection, and even if the post office has no information about what the package contains or where it originated. This means under UPU rules, our post office has become a mule for international drug traffickers. As the traffic in international postal packages has exploded in the past decade due to e-commerce, so too has the ability of drug traffickers to flood the U.S. and the world’s postal systems with packages containing flakka, fentanyl, and other drugs. Again, much of this is flowing out of China. This is not just a gift to the world’s drug dealers but opens the possibility that terrorists could also exploit this flaw in security.

Why this has gone on for so long is disturbing but President Donald Trump issued a memorandum on "terminal dues," or rates one country's postal service pays another for finishing an international delivery and the State Department has finally signaled changes are necessary. Trump's memo states, "The current system of terminal dues distorts the flow of small packages around the world by incentivizing the shipping of goods from foreign countries that benefit from artificially low reimbursement rates," It is not clear if this memorandum is tied to recommendations, not yet made public, of the postal task force Trump set up this year to examine USPS's business and linked to a study of the low delivery rates Amazon currently enjoys.

The bottom-line is the UPU doesn’t care whether its rules pose a threat to the U.S.or other countries but internal postal regulatory commissions should. America should rapidly move to declare the UPU status quo isn’t consistent with the mission of the USPS in terms of postal rates and preserving our economy, our health, and our national security. Such a ruling would no doubt set off a firestorm at the UPU and within the U.S. State Department which has until now largely turned a blind eye to the dangers inherent in the international parcel-post system, for fear of creating a diplomatic brouhaha but it is the right thing to do.

Friday, September 7, 2018

"Job Friday" Highlights The Role Of Jobs In The Economy

The first Friday of each month is typically the day when the BLS releases its latest jobs report that is watched closely by economists and investors. The report is seen as a key indicator of whether the American economy is on track and where it is headed. Within the numbers are subtle reminders that Americans don't just want jobs, they want "good jobs" and this means full-time work that pays well and has benefits. Today few occupations are totally secure from the wave of labor-saving technology currently in the pipeline. This means it is the job of those we have sent to Washington to create or paint a vision that shows how America can integrate labor-saving devices into a job-creating bonanza or at least an economy that is sustainable going forward.

Amazon Moving Rapidly To A Robot Work Force
Many Americans feel Washington has failed in some way or another to protect jobs. For decades policies have allowed or even encouraged manufacturing jobs to leave the country. Recent reports make it increasingly clear that automation is not going away and minimum wage policies only accelerate and drive the trend of replacing expensive human workers with robots. Amazon the behemoth retailer known for cutting prices and exploiting brick and mortar retailers often boast of its cost-saving move to utilize more robots and cut human jobs. The fact that last year more than 7,000 stores closed their doors, more than twice the amount of stores that opened in the same time period is not a reassuring sign.

Several new technologies headed in our direction scream more economic disruption ahead. One writer I follow has pointed out on more than one occasion how self-driving vehicles is a game changer. Self-driving semi rigs able to safely maneuver and fill the nations interstate highways during the night when traffic is light will reduce daytime congestion but also greatly reduce the number of people paid to drive these vehicles, this is a major occupation that pays relatively well. The ramifications of self-driving vehicles will extend into areas such as taxi jobs and potentially change the relationship most American's have with their automobile a mainstay of modern life in this country. Imagine not having to own a car or reducing the number of automobiles in your family because a safe and secure ride is available at the push of a button.
 
The fact is in my area while we continue to hear about unemployment at sixteen-year lows many people remain underemployed and are struggling. The average American has good reason to worry not only about their job but the future opportunities available for their children. Let me make it clear, robots taking our jobs will bode poorly for the huge majority of society. The idea that those ultimately left with the decision as to how to divide the economic pie will be generous or fair is a little naive. History shows the ruling class tends to tilt the rules in their favor. Soaring economic inequality is already a major issue and the divide is most likely going to grow ever wider. When it is pointed out that entitlements are about to explode the deficit in coming years logic dictates the nation can no longer delay addressing this issue. While very important to voters creating good quality sustainable jobs is an area where Washington has failed to excel. 

Is A Robot Coming For Your Job?
Without jobs a glimpse into the future becomes very grim. The fear of being replaced by a robot or seeing your job being outsourced or eliminated is on the rise. Rest assured when push comes to shove those displaced from the job market are only able to scrape by will find they are only given enough to ensure they remain docile and behave. If it ever comes to the point where these people hit the streets in angry protest it is very likely they will be beaten into submission for the greater good, possibly by robots given the task to restore civil order. It should be pointed out that going forward those on the government dole or a guaranteed income may find they are at the mercy of a system where at any time benefits are canceled or cut.

Tied into Trump's solution to create new jobs and energize America's economy is the strong message that we must demand from other nations fairer trade policies that level the playing field. We cannot compete when other nations pay their workers little, degrade the environment, and often subsidize exports in various ways. This is a stand Trump shares with Bernie Sanders.  Like many backseat political strategist, I have grown weary of politicians failing to fulfill their promises or for that matter accomplishing much of anything. Even while we are told unemployment is at a sixteen year low and we hear companies are clamoring for workers something is definitely wrong and a series of polls indicate that a focus on job creation and the economy is where the attention of those in Washington should be.

After facing decades of stagnating or falling wages after adjusting for inflation it is little wonder why the average American feels insecure or downright betrayed. This was why many people voted for Trump, as a businessman they hoped he would have a strong real-life advantage over politicians in understanding how to create jobs. To be great a country must be economically strong. The key to any policy geared to creating jobs is getting the foot of government off the neck of small business. This means reducing the regulations strangling the nations most vibrant creator of jobs and where workers gain valuable work skills is a must. Tax reform and laws governing business must reduce the advantages mere size gives big business and its ability to destroy competition by mass alone. As it is big business will benefit most by adopting more automation and robot workers and this could bode very poorly for most workers and society in general.

Wednesday, September 5, 2018

Emerging Market Currencies Implode - Transfer Wealth

Iranians Stand In Line Waiting To Exchange Currency
In several emerging market countries currencies are imploding and people are in total panic. This is because in what seems a blink of an eye they are seeing years of savings become worthless or vanishing into the deep hole of inflation. This is because when a currency implodes or fails, wealth is transferred from those improperly invested to survive such an event to those positioned to benefit. A key reason inflation has remained so low since 2008 and during a time central banks have tried to paper over problems by expanding the money supply is because people have been willing to store their wealth in paper instruments. The good people of countries like Argentina, Venezuela, Iran. and Turkey that held on to their country's currency have been financially raped as the currencies have fallen in value. Today they are far less wealthy compared to people in countries that have seen their currencies remain stable.

This can and should be taken as a warning that it is very important where we store the wealth we have accumulated over the years. An article presented to me some time ago delved into the subject of high-earning Americans, where their wealth came from, and just as importantly where it was stored. This got me thinking about the so-called wealth effect as well as how all that wealth was held. The really big earners in recent years have benefited greatly from the surging stock prices as much of their income has come from financial markets and gains in equities. Many people seem to think this is the way things will continue and the hope of our future. When you have more than you need or want to put money away for a rainy day where do you store it? If you rated people on a "wealth chart" by how many tangible assets they owned you might be shocked to find much of the wealth people own is in paper and this can be full of risk. In our world today the possibility of cyber-crime or cyber-theft takes this to even a higher level.

Safely Storing Away Wealth Can Be Difficult!
In many ways "paper wealth" is merely the promise of future value. Unfortunately, this leaves much of society and many rich individuals vulnerable to rapid financial loss if the tides of fortune shift or if values rapidly change. Currently not only are we faced with banks paying little in the way of interest but we must also deal with the fear they or the government might reach in and seize part of our money. This tends to encourage people to pull their money out of banks and other safe investments in search of higher yields we have driven up stock prices. Some of these stocks have reached unbelievable multiples.

The reality is that most people do not understand money and wealth. Myths about both run rampant and become intertwined with deeply rooted personal feelings passed down from parents or acquired. These feeling often muddy and skew how people deal with wealth. An example would be anyone who felt deep down that money was the root of all evil would react to winning the lottery far differently than someone with the belief that you can buy happiness. I have even heard poor people say they didn't see much point in winning a lottery of  several hundred thousand dollars because "that's not much money." When the B word "billions" is so prevalent in society today it is understandable many people live with distorted values. 

Truth be told most people are not overly endowed with discipline this includes many people that amass a fortune. This often means that many wealthy people tend to "misplace" or lose track of where they have placed their wealth. Sometimes it is simply put into a system that is on autopilot. Years ago I purchased a property from a doctor on contract. The doctor having also bought the property on contract had me just send the payments to the man he bought it from so he would not be bothered. After many years I contacted the doctor to discuss a discount for a cash payoff and his accountant discovered the first seller had been paid off years before but continued taking the money he had no right to. The doctor was shocked and getting his money back proved difficult.

Americans Stash Money In Paper Promises  (click to enlarge)
Annuities, pensions, stocks and such promises of future payment tend to dominate the list of favorite vessels in which to store wealth and many of these are leveraged to maximize returns and garner higher yields on our investment. Cash is another option but holding it in your possession leaves one open to theft and means the money will earn no interest. What is often missing or overlooked is tangible fully paid for items and things that are likely to hold their value and in the direct possession of the owner. People tend to avoid tangible assets in their control because they are often inconvenient. Valuables can be a pain to have about and they often need to be insured which also calls attention to their existence.

When you subcontract out control of your wealth or turn it over to a money manager you often get promises but no ironclad guarantee. Confidence in a money manager can quickly be dashed, all the people invested with Bernie Madoff discovered just how suddenly things can go south and promises turn hollow. While it has become both fashionable and common in recent years to let someone else who knows and specializes in financial planning and markets to control this segment of our lives I feel it is a big mistake and a dereliction of duty. Wealth should come with a warning notice saying "Holder Beware This Commodity May Vanish Spoil Or Grow Obsolete At Any Time!"

For some time, I have felt the current trends that have unfolded since interest rates soared in 1979 to halt inflation have become unsustainable. This means that a new reset will have to occur at some point. You can expect promises to be rewritten and broken. Rules will change as we go through the wash. If I'm correct it will be interesting to see how a future reset which is again likely to involve a massive transfer of wealth will affect financial equality as many people see their assets rinsed away as society is put through the wringer.