They’re Magically Delicious

The idea behind this commercial is to relive one’s youth through cereal consumption. Do we really care that now it is “whole” wheat? It is still a huge sugar load that will eventually zap your energy when your blood sugar level crashes. The reason that so many dietitians advocate many meals a day, or substantial snacks, is that eating products like this lead to sugar highs and crashes. You need a snack at 11 and 3 to keep up your sugar level in the blood. But if you have meals higher in protein and fat, the meal stays with you. 

Experiment on yourself. Have a high cereal/carbohydrate breakfast and see how hungry you feel at 11. Then the next day have a higher fat breakfast like eggs with meat and see how you feel at 11. Most people will be less hungry. 

Why do the cereal companies want you to eat their product? Obviously they make money. 

Cereal	Per Box	Per Ounce
Quaker Oatmeal	2.19	12.2
Grape-Nuts	3.49	14.5
Pop-Tarts	2.19	15.6
Raisin Bran	3.43	17.2
Quaker Natural	5.29	18.0
Quaker Crunchy Corn Bran	2.99	18.7
Corn Flakes	3.39	18.8
Wheaties	3.99	22.2
Shredded Wheat	3.69	24.6
Cocoa Puffs	3.69	24.6
Froot Loops	3.69	24.6
Cheerios	3.79	25.3
Frosted Flakes	3.79	25.3
Corn Pops	4.07	27.1
Kix	4.99	27.7
Rice Krispies	3.79	28.1
Cinnamon Toast Crunch	4.25	30.4
Special K	3.79	31.6

http://www.amyx.org/wazfag/cereal.htm

Here is what the author of this chart had to say about boxed cereal costs:

Normally one would not eat these colors. How do the prices of cereal compare to other foods, like meat?  Well, whole chicken, at $1.29 per pound, is 8.1 cents per ounce; chuck roast, bone in, is 12.4 (both cheaper than Raisin Bran); New York steak is 40.6 cents per ounce; and top round (London broil) is 24.3.  I suppose we might expect a higher quality cut of meat to be more expensive than breakfast cereal, but it could come as a shock to learn that for the same price you pay for Cocoa Puffs or Froot Loops, you could be eating London broil.  Either that, or you can’t compare Raisin Bran and roast beef.

While these figures are from 1999, I doubt that the relative comparison has changed much. 

Try a little experiment the next time you go to the grocery store. Take a calculator, or use your phone and take the price of the boxed cereal and divide by the ounces—then multiple by 16. That is the price per pound. Then go to the meat department and compare. 

I did this in the mountain community where I live. The Lucky Charms cost $6.66 a pound. Hmm. 

The most expensive cuts of meat were 8 to 12 dollars per pound. Perfectly fine sirloin was $4.99, and you could get 2 pounds of chicken for $6. Or one could get 2 1/2 dozen eggs instead of one pound of that cereal. Lucky Charms were not a good value. 

No, this post is not about health, although I will tag it as health. I will also tag it as what this post is really about—propaganda. 

Whenever you see an ad, for anything, they are trying to persuade you to buy a product. Advertising is expensive. Only brands with high profit margins are going to be advertised by the manufacturer. (Of course there are ads by retailers that advertise a product at a cheap price to get you into the store. You can do well if you take an ad, buy those items in the ad that you need, and then leave the store. The store will lose money. Do this to every store and then shop for those items not on sale that you still need.)

Quit watching ad-supported entertainment as much as you can. It is not free, it costs you more than paying for your entertainment. You may think you are not being influenced, but you are. This is a part of leaving Babylon the Great. 

I will talk about propaganda this week. Tomorrow I will have an old video from the 50’s that talks about propaganda.

Argh

Boehner wins! At least that seems to be the consensus of this article.

House Republicans, already worried about possible primary challenges in 2014, are pleading to keep that number below $1 trillion, even if it is by a hair. Still, they know it’s likely to come in a shade higher. The safe bet is just over $1 trillion for the final number. A bit less, and that’s a notable win for Boehner.

 Why do I say argh?

The first reason is that this is not a tax increase. It is a 3 trillion dollar tax cut. The Bush tax cuts are due to expire next year. This means 4 trillion in revenue over 10 years. (They spread everything they do over ten years to make the changes sound larger than they are.) But now the tax cuts will be extended, unless you are wealthy. These tax increases are already baked into the CBO (Congressional Budget Office) deficit estimates, so the deficit will go up over the next 10 years by 3 trillion.

Argh.

I won't even mention the fact that the CBO has ever unrealistic assumptions about economic growth.

Argh.

What about spending cuts? Apparently they come later. Here is a quote from the article:

“A lot of the big entitlement savings comes in the 10-20 year budget window, not the next 10 years,” a Democratic aide said. “Everybody will need to get on board understanding that. Paul Ryan and the Obama budget are the same on health cuts for the next 10 years.”

This is what is usually called a lie. But the article seems to hold this as a truth of some sort. Yes, Ryan and Obama are proposing similar cuts in Medicare, but Obama double counts these cuts as he allocates these savings to pay for ObamaCare.

Argh.

New spending cuts you ask? Nope.

Spending cuts will be crucial to this. The floor for new spending cuts is simple: replacing the $1.2 trillion in automatic cuts set to kick in if the two parties can‘t cut a deal before year’s end. Republicans will insist these are real and imminent to swallow the rest.

In other words the spending cuts in this proposal are less than the cuts already made. No new spending cuts.

Argh.

They will also count the winding down of the war as a "cut." This has already been counted once in the CBO estimate, so let's count it again.

Argh.

There is some talk about minor Medicare cuts, so I continue in being guardedly pessimistic. Since most people will not examine the details of whatever budget deal is made, there will be a spurt of false optimism when we pretend everything is fine. 2013 may not be as bad as I thought, but that means 2016 will be worse.

Argh.

Frédéric Bastiat, an early economic writer, had this observation about economists: “The bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”

This obvious truth is the exact opposite of modern economic thought, like Keynes, who said, "In the long run we are all dead."  

Argh.

Here is Karl Denninger's version of these hard truths. 

How Does Financial Fraud Work?

The New York Times summarized a report that tells us how Lehman Brothers was able to keep its dire financial situation under cover:

According to the report, Lehman used what amounted to financial engineering to temporarily shuffle $50 billion of assets off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money.

...

But Lehman used aggressive accounting in its Repo 105 transactions: it appears to have structured transactions such that they sold securities at the end of the quarter, but planned to buy them back again days later.

The effect of the accounting was to artificially and temporarily lower the firm’s debt levels to hit certain targets, making the firm look healthier than it really was.

This is the same kind of financial “creativity” that led to the Enron bankruptcy. Note the date on the news article. This has been known for 2 1/2 years, yet no one has been prosecuted. I am beginning to wonder if what one insider I saw interviewed said is true. He said that the reason no one has gone to jail is that all these shenanigans are legal. Surely we are not that corrupt—surely?

Max Keiser has suggested that this kind of financial confusion is common, and done with the approval of the accountants to hide the true situation from the regulators. I know Keiser has good sources because of his background, or he could be guessing; I hope he is wrong. The only way we will find out is if there is another crisis.

In the meantime I suggest that you get ready for the end of the world when the Mayan calendar ends on December 21 prepare for a prolonged period of financial troubles. Make sure by your hard work that you would be one of the last to be fired in a crisis. Start now.

Here is the Max Keiser Report:

His Prices Are Crazy

Hewlett-Packard recently wrote down 5 billion of a 10 billion dollar purchase of the British Company Autonomy. This was just one quarter after writing off 11 billion for the purchase of EDS. Both EDS and Autonomy are computer science service companies. In the case of EDS it looks like a case of overpaying, but in Autonomy there may have been fraud: 

HP said on Tuesday it discovered “serious accounting improprieties” and “a willful effort by Autonomy to mislead shareholders,” after a whistleblower came forward following the ouster of Autonomy’s then-chief executive, Mike Lynch, in May.

Naturally HP stock is at a 10 year low. This might not affect you or me directly, but if, or as, more and more of these examples become known, it will cause trouble in the economy.  

How common are these kind of irregularities?

I never lived in the North East, so I never had a chance to shop at Crazy Eddies—known for their “crazy” commercials. “Eddie” was even crazier that the casual observer would have thought. The entire company was based on fraud. The CFO (Chief Financial Officer) and a convicted felon says that fraud is easier today than in the 80’s. He seemed almost envious of modern CFOs. Sam Antar is interviewed by Lauren Lyster on Capital Account: 

The Market Is Failing

Note that I did not title this post “The market is FALLing.” That may be true as well. But the market is failing because the “powers that be” are cheating. I have been reading an interesting article on the current situation we are in. One quote from it summarizes the problem with modern “economics.” 

Of course, people respond to such distortions.  When the government fixes the price of something too low, then people will hoard or export it.  If the price is fixed too high, then they will flood the market .”

Because of these market distortions lots of very odd things are happening—like the very low interest rates that are the current “market” price.

When I googled market failing, this picture appeared. As a Mac guy I could not resist using it

The second part of the article points out that under the almost gold standard pre-1913, the interest rate was 3 to 3.5%. After the creation of the Federal Reserve, interest rates were anything but stable—varying from 18% in 1981 to 1.7% today

With the artificiality of our system today you cannot rely on prices to be rational. In the real estate field, these artificially low interest rates mean that we cannot trust the “market” prices for real estate. The low interest rate raises the “market” price of real estate. The market is so corrupted that investors have no real idea what anything is “worth.” 

Based on current rents, real estate in many markets looks cheap. Many foreign investors are right now buying rental housing in selected markets. Will these rental rates continue? No one knows. The last time any nation tried to buy up US real-estate was the Japanese in the 80’s. It ended badly for the Japanese. 

In a market where prices cannot be trusted, the rational thing to do is not to participate as much as possible. Self-sufficiency is nearly impossible in our modern culture without great effort. Instead of making investments that may be no more than putting your money in a bag of holes, as one prophet put it, try to become more self-reliant. 

We all make fun of the neighborhood boy, who if things do not go his way, takes his ball and goes home. But if the boy is bullied, or the “rules” of the game make it impossible to play, then going home is the totally rational thing to do. 

How does fraud work? Capital Account has an interview with a psychologist college professor who tells us how the rationale works. It involves, surprise, surprise, self-justification. I will have several more interviews on the subject of fraud over the next few days.