Archive for December, 2011

The only sane Iran proposal

December 8, 2011 2 comments

Iran has a lot of folks nervous, and I can understand why. A response seems appropriate – but what kind of response?

Off the top of my head there are four categories of response that we could do: Aggressive, Passive Aggressive, Binding, Endearing. We already do the Passive Aggressive thing – sanctions – and they don’t work. They injure the Iranian people, but not the Iranian government. Their gov’t has the Chinese and Russians to provide for them. Worst of all – the sanctions give legitimacy to the Iranian gov’t in the eyes of the Iranian people. I mean, it’s pretty intuitive for them to say, “Hey, the US is doing these sanctions to keep you poor, but don’t worry, we’ll get back at them for you.”

Aggressive response? That would be another Iraq. That’s worked out so well for us and the Iraqis. In the end, we’d just be hurting the Iranian people even more. Sure, we could eliminate that one regime, but several others would take its place. Worst of all – it is only temporary. Sooner or later they would rebuild. This should be the last option and we can’t initiate it. We can always do this option later if needed.

Endearing? Impossible for the US at the moment because of the Passive Aggressive technique.

The only sane proposal:

Binding Response – this would be where we remove the sanctions and allow our businesses to do business with the Iranian people. Specifically: remove tariffs on all goods shipped in from Iranian merchants. Become Iran’s biggest trade partner. They may not like us any more than they do now, but the entire populace would have a vested interest in not being enemies with us. Do you think their gov’t officials don’t have relatives that want to trade with us? You bet they do.

What about Israel?

Israelis are tough, smart and motivated. We should treat them like adults and let them do what they think they need to do. If they want us to park an aircraft carrier in a harbor and have a nuke missile sub nearby in case something happens to that carrier – sure. Nukes tend to hurt large areas and Israel is awfully small. The X-Rays from a nuke blast alone would almost certainly harm that ship – an act of war against us. If a country were to attack Israel, they’d have to use conventional weapons.

Why I like this proposal:

It does two things that I think are important:

  1. It treats the Iranians and Israelis like adults. This is a level of dignity we’ve denied both countries since WWII.
  2. It harms nobody and actually helps a developing country, while creating bonds that the developing country will be loath to break. This translates into security for us.
Categories: Politics, The USA

The Weekend at Bernie’s Global Economy

December 2, 2011 Leave a comment

Prop that dead body up! Booya!

The markets have sure been on a wild ride – particularly since the end of September and early October. I like watching all those neat little charts. I work very long shifts overnights and so I get to watch Asia open up and close, then Europe open up and about the time I get home to go to bed the US opens. What I’ve noticed is that the markets – regardless of which markets – have all had a behavioral change.

How it was:

Asia follows the US. If the US goes up, they go up. They’re heavily manipulated, so sometimes they buck the trend, but generally they imitate the US. Europe imitates Asia for about 3 hours after opening, then they go up right before the US opens, and after that they follow the US until they close.

Always, there would be some industries doing well and some that weren’t – and this was influenced by economic reports and the health of large corporations in any given industry. It was very rare to have days where all the stocks in the major indexes were ALL up or ALL down. There could often be a majority, but not unanimity.

How it is now:

The pattern of who follows who still holds true, but a new thing has started – goosenecks. This is a description of a chart where the index is low or flat all day and then at the end it suddenly skyrockets, followed by a little dip before it closes. The result looks like a swan swimming from left to right. It used to be that these only happened when something splendiforously fantabulous happened economy-wise. They were very rare. Nowadays, they are common.

So what’s up?:

Central Bank interventions – that’s what’s up. So here’s how this works: Asia opens up (Australia first, then Japan, then Shanghai and Hong Kong. India is inbetween these and the EU) and their stocks imitate what the US did the previous day. If the previous day for the US was down, then their stocks will trend down by similar amounts until one of their central banks intervenes. Suddenly, and for no reason – ZOOM! Up go their stocks – led by banks. Then the EU opens up (3:30AM EST) and their indexes follow whatever Asia was doing right at the moment – so usually up, with banks leading. Then, they drop for a bit until about 11am GMT -1 and suddenly the ECB or IMF jumps in and ZOOM! Up go the EU indexes.

Unlike Asia, EU intervention ALWAYS comes with some sort of rosy sounding headline. Today’s is this:

Europe stocks rally on crisis-resolution hopes

Wrong. Last week there was an occurrence of this kind of BS and German 1yr bonds actually had a NEGATIVE yield. That means that the expected payoff for purchasing one was that you would LOSE money. Who invests in something that  guarantees a loss? The ECB does.

So, then the US futures get excited because the EU markets are all excited and the US markets open with gains, but immediately start dropping off. Around 10:30 to 11:00 AM EST the Fed hops in and pumps some cash into banks and presto! Instant rally. Of course there are the appropriately rosy articles that come out about how everything is going to be fine in the EU and then some fluff story about our own debt and spending troubles getting in hand, etc, etc, blech.

The economy is a dead body and the central banks are propping it up.

What this means for regular Joe:

Don’t be in the stock market. Keep enough money in the bank to cover your expenses and keep the rest in cash or whatever you like, but don’t leave it in an institution that dabbles in that mess. All banks invest in the markets, and when the central banks finally get to the point they can’t prop them up any more these banks are going to implode. When that happens, you can forget about 401K plans, pensions, IRAs and any other savings you might have tucked away.

People like to talk about hyperinflation and whatnot – and that is a clear possibility given what the central banks are doing – but the first thing that will happen is that you won’t be able to get to your money. For this reason, have most of it on hand in cash. Don’t mess around with risking it in some bank’s hands.

When will trouble start?

I can’t say for sure, but consider this – if things really do turn around and economic indicators (particularly producer’s indicators) get better, unemployment gets back down to 5%, and wages start increasing while prices decrease – then put your money back in. Until that stuff happens (and I don’t think it will for the foreseeable future), don’t risk your money with somebody else.

Categories: Europe, Politics, The USA