Financial Newsletters

I get a number of "hard money" newsletters. Most of them are free. They, of course, want me to also subscribe to their paid newsletters. Usually I do not.

One paid newsletter I do get is The Sovereign Individual. I will not be renewing. (I subscribed because I wanted a "free book" that came with the subscription.) The reason I will not renew is that if they really could predict which stocks to buy they would not need my subscription money. They would already be wealthy and retired on the French Riviera, or wherever hard money newsletter writers go when they retire. Here is their profound advice for which I paid the "greatly discounted" price of $50:

Imagine owning McDonald's as it joined the New York Stock Exchange in 1965 and was on the frontier of fast food convenience. A $2,250 investment in 100 shares at that time would today be 74,360 shares worth nearly $5.9 million. 

Wow. This is true of course, but is it relevant to their investment advice? Or maybe if you had bought 100 shares of Apple in the late 90's when it was $5, today that $500 investment would today be $40,000! They continue:

These kinds of opportunity await investors in the frontier. Any one of the names inside Mark's frontier portfolio could be the next McDonald's, 

Of course you could have invested in Control Data, MCI, Global Crossing or maybe Enron. These kind of companies are probably also in Mark's portfolio. Can an individual investor pick individual stocks and beat the market? I doubt it. 

What is the best investment advice? I discussed this in an early blog post, Golden Dreams. 

Get out of debt. Have a 6 month cash reserve. Until you have done this you should not invest. This might mean you need to rent your home instead of buying it. The Real Estate crash is not over quite yet. 

The Game

I remember a game we played in High School history class. Colored chips were distributed randomly through the class. After the distribution the value of the chips was announced. We were then divided into three groups based on the value of the chips we held. I was one of the wealthy ones. 

We were allowed to tax ourselves and do whatever we wanted with the proceeds. We gave the chips to the most popular boy in class. This allowed him to go to our higher group. (He ended up in Hollywood I think) Alas, this meant one poor girl was demoted to the middle group. I was sorry for her, but not sorry enough to do anything about it. We had our charismatic leader now, we would rock that class. 

The rules allowed so to do whatever we wanted so we redefined what each chip was worth, but did not tell anyone outside our group. We then tried to trade chips. The rest of the class did not know what we had done, but it was obvious we had done something and no trades took place. I tried to con my friend Mario, but he was not fooled. Our lying caused the marketplace to crash. 

The analogy was that this was how society worked. I was not convinced at the time that this was how society works, and am still not convinced. However, looking at the world of today I am not so sure. The elites run the country and if they win in their speculations they keep the money, if they lose they are bailed out by us. Heads they win; tails they do not lose. 

Is our whole society structured like the game I played in High School? If so the only way to win is not to play. In one school that is exactly what they did. They divided all the chips equally and ended the game. 

The game is rigged to make you distrust the elites. But the main flaw is that the distribution of "chips" in society is not random. It is to a large degree based on talent. Still, there are those who game the system like our fearless leader in our group. The more rigged the system, the less each of us will play. 

Sometimes you just got to leave the system, and leave Babylon behind. 

This Is Russia

Most of us would not consider throwing trash out of our car. It is culturally imprinted on us. This imprinting by the old on the young is not all bad. It is how we learn. But each culture is different. 

I remember walking with my fiancé in Russia. She dropped something on the ground. I was horrified. She did not understand my concern. This was normal. There were, in fact, no trash cans to throw things away in as we are used to here. When she understood my concern she said that in America she would not litter.  

When in Russia you do as the Russians do was her idea. She has now adopted the American cultural imperatives with regard to litter. Seeing how clean (relatively) America was in its public spaces showed her how it should be. Of course her home in Russia was always spotless, but the public areas were, and are, a mess.

On our last trip to Russia we passed an informal dump. It was just a place near my mother-in-law's apartment. In America the landowner would have been forced to clean it up. As a landowner I have been forced to do this on two occasions. People just want to avoid the fees for the dump, and a neighbor is so convenient! My nephew did not even notice it. When we pointed it out to him he said, "This is Russia." 

Each country has good and bad aspects to its culture. But as the Hebrew proverb says: 

If everyone cleaned his own doorstep, all the streets would be clean.

How clean is your doorstep? Or is this Russia? 

I am posting this on the day we will leave for Russia, so no doubt if I am able I will blog from there. I have a number of posts ready to go and in a queue. If I am able I will post regularly from Russia, if the internet is better than it was last time! Hopefully there will not be an interruption in my vital blog posts! 

Oh, and any burglars that might be reading this, I have a house sitter! 

Build Your Own Toaster?

We are very dependent on society, we could not survive independently. 

Will the Markets Collapse?

We are headed for a crisis. Readers of this blog know I am optimistic. We can trust our leaders to do the right thing and tell us the truth: 

On March 29, when speculation swirled that Portugal needed a bailout, Prime Minister Jose Socrates denied — again — that that would happen despite clearly unsustainable market pressures.

“I’m sick of saying we won’t” be requesting help, he told journalists.

Just eight days later, in a chastened appearance on national television, Socrates did just that.

For Jean-Claude Juncker, the prime minister of Luxembourg, the threat of immediate market turbulence means the usual norms of transparency don’t apply.

“When it becomes serious, you have to lie,” Juncker, who as the chairman of the regular meetings of eurozone finance ministers is one of the currency union’s key spokesmen, said in recent remarks.

There is an old cliché from the era were currencies had a fixed value. It is called lying like a finance minister before a devaluation. Can we trust anything that any politician says?-maybe a few here and there. Juncker told the truth in this quote when he admitted he would lie. I suppose he could be lying when he tells us he lies, like that old Star trek episode with the androids.

If you want to know why no one is hiring, consider the risks associated with investing right now. You cannot trust anything that anyone says. I began the crisis with 16 employees. Now I have 8. I have zero plans to hire anyone. Far more likely is that I will let more go, maybe doing their jobs myself. 

Like the Androids in the Star Trek episode, the logic of lying leads to shutdown. There is a lot of trust inherent in the market place. If we enter an era without trust the markets will stop. 

This is the risk in our current situation, if no one can trust the markets, no one will trade. And if no one will trade then the whole edifice collapses. This is not what I expect to happen but it could.