My, my, there certainly is a bit of Fed nonsense on this thread.

First, the Fed is a GOVERNMENT operation. Allow me to bore you with a few facts I posted 2 or 3 years ago --

---- start dry recitation of important Fed facts ----

The Federal Reserve System Board of Governors is a FEDERAL AGENCY created by federal law. All 7 members of the Board are nominated by the President and confirmed by the Senate for 14 year terms. The System BoG formulates monetary policy. The System BoG is where reserve requirements are set, where the discount rate is set, and where rules and regulations are adopted.

The 7 System BoG members are a PERMANENT MAJORITY of the 12 member Federal Open Market Committee, the other 5 members being the President of the NY Fed and 4 other regional Fed bank presidents each serving one year terms.

Regional Fed bank presidents are appointed (subject to approval by the System BoG) by each regional Fed bank's 9 member Board of Directors, 3 of whom are appointed by the System BoG (none of these 3 may be an officer, director, employee or shareholder of any bank,) and 6 of whom are elected by the member bank "shareholders" (3 of these 6 may not be an officer, director or employee of any bank.) One of the directors appointed by the System BoG is designated by the System BoG as Chairman of the Board and another as Deputy Chairman.

The 3 "bank" representatives on each 9 member regional Board are excluded from the process of appointing the regional Fed bank's president.

The Chairman of the System BoG is also the Chairman of the FOMC. The FOMC implements System BoG monetary policy. The FOMC is where fed funds target rates are set, where margin rates are set, and is responsible for open market operations to carry out policy.

The System BoG and the FOMC are where ALL of the actual power of the Fed resides. The 7 System BoG members nominated by the President are an absolute and permanent majority of both the BoG and the FOMC. They hold and exercise ALL of the power of the Fed.

---- end quick summary ----

Any and all ridiculous conspiracy theories about the Fed being somehow "private" notwithstanding. It ain't. Never has been.

And don't bother with regional Fed bank "shares," they're nothing more than the deposit needed to become a Fed bank member. If you owned any such "share" as a private individual, you would be horrified.

The Fed was designed to allow some private input (a good thing,) but that's it.

Would we be better off without the Fed? Without a doubt, but that ain't what we've got.

Second, there is no mystery about where the 4 trillion expansion of the Fed's balance sheet went. It financed the federal government's deficit. Period, end of story.

When the guys on the FOMC's trading desk buy $X billion of mortgage debt or US Treasury debt (creating money by crediting the sellers' accounts) what happens?

99.9+% of those sellers are institutions -- mutual funds, pension funds, hedge funds, banks, etc., etc. -- who just sold some bonds to the Fed. They now have cash to put to work. What are they gonna do? Buy other bonds. It's their (private-sector) job.

Not stocks. Not real estate. Bonds.

They might buy other mortgage bonds, they might buy corporate bonds, but mostly the money migrates to US Treasury bonds. Maybe not from the first seller, but from some subsequent seller.

Proof? The change in privately held US debt from 10-1-08 to 10-1-14 was 7 trillion -- from 5.8 trillion to 12.8 trillion. (Never mind the higher numbers frequently thrown around, those include 5 trillion of useless "trust fund" bookkeeping entries.)

So, independent of Fed "help," we (the US government, such as it is) actually managed to peddle 3+ trillion of debt to the public and world at large. The Fed bought the other 4 trillion or so, give or take.

Can we get away with this forever? No.

Has the Fed holding interest rates down created asset shifts among private investors? Without a doubt. But, these happen all the time and will continue.

Could the US have borrowed the whole 7 trillion without jacking interest rates up significantly, absent the Fed? Not likely.

Will the 12.8 trillion be slowly inflated away? Absolutely. We've already gotten rid of maybe one trillion of original value at the time of issuance with the ~2%/year inflation of the last 6 years. More to come.

Every year of 2% inflation destroys 250 billion of value. If inflation going forward is 3%, it only takes 3 years to destroy a trillion of current bondholder value. 20 years of that and 13 trillion is only worth about 5 trillion in today's dollars.

But, with an average maturity on the whole 12.8 trillion pile of about 5 years, there's a reasonably long fuse on it.

Moral of the story? Now is probably not the time to buy bonds. Any kind of bonds. If (not when) yields rise, the market value of the principal falls. (Quick, very round number example -- 3% current yield bond ---> 6%, current principal value of 100 ---> 50.) Ugh.

10 to 30 years is a long time to wait for principal to be paid off at par. Kind of like waiting for a delinquent customer to pay for his wife's beautiful new kitchen out of his estate.

So you are saying the 18 trillion in debt is really 13 trillion? What is the other "trust fund" about?

Where you say "if" the interest rates/yields rise. Seems to me that will be when inflations gets too hot?

The SHTF when the entitlements come into full bloom that and interest on the debt goes above zero or near zero.

The 4 trillion does not hit the economy equally so those close to the spigot have put that money into stock,RE, and buybacks. Are you saying that is not the cause of the stock market and RE going up so much with an anemic economy?

Pat--great video.

I'm reminded of an essay we had to write in a history of psych class. We were to look at ideas that were happening, in terms of human thinking trends, when darwinism popped up. Then figure out what they had in common to see how the idea popped up.

The conclusion the students were supposed to get is that history wrongfully portrays big ideas to a single person, like they had a massive single hand epiphany out of the blue. Rock star style figure head.

Econ--I took a closer look at The Fed in terms of staff. All I saw were a group of very academic economists. It's actually way less scary then it's been portrayed to me by most (not here on the forum) --owners of vaste fortunes manipulating economy for their own benefit.

But you mention doing things another way--any ideas? What would you change? Any other countries system you like?

Side thought, but I have been looking at past cases where countries at war have used good quality mass counterfeits bills as a weapon, to instill hyperinflation in the country they are at war against. Wowza!

http://http://militaryhistorynow.com/2014/08/08/funny-money-the-amazing-history-of-wartime-counterfeiting-2/

Hi, Pat, yeah, all sorts of people are really sloppy about the total NET public debt.

It's 12.8 trillion. The other 5 trillion is the bogus set of "trust funds" (99% SS and Medicare) which just contain special US debt. Can't get a dime out of them without selling regular new US debt to the public (or the Fed) to redeem the special US bonds held by the trusts.

Meanwhile, the bogus "trust funds" are both an asset of the US SS and Medicare systems and a liability owed by the US to SS and Medicare. Net? Zero. A 5 trillion wash.

Every single business day excess FICA tax revenue comes in to those "trust funds" and is IMMEDIATELY sent (by law) to the Treasury's general fund in return for a special T-bond (by law.) Routine daily Treasury book-entry transaction.

The 5 trillion is just the running total of excess FICA revenues which have already been collected and spent on other stuff.

Excess FICA tax amounts are the same as any other dollar collected. The "trust funds" get a special IOU from the US government. They contain zero cash.

That 5 trillion is really just the tip of the 100+ million of unfunded SS and Medicare liability. It's the only part of the unfunded SS/Medicare liability that actually appears on the US balance sheet.

As for interest rates, they obviously have to rise at some point. The Fed will likely be very, very careful, they don't want to dig another hole to fall into.

Some sort of entitlement reform has to happen or the 5 trillion of "trust fund" debt will shortly (over say 10-15 years) become ACTUAL public debt (that would be the 18 trillion total) and to that we can add another half-trillion/year or so, increasing to a trillion+/year, forever.

Barring extraordinary growth, that's probably not sustainable. Never mind that high debt levels are themselves a constraint on growth. And never mind that moderate inflation will destroy 250 or 400 or 600 billion of existing debt value per year. We'd by losing net debt-ground every year.

Not good.

As for the 4 trillion, it financed government debt. Proximity to the "spigot" doesn't matter. The Fed bought debt issues from the open market -- that served to keep long rates a little lower than they otherwise would have been.

Stocks discount future earnings, which have been fairly robust over the last 5-6 years, despite crummy 2%-plus-or-minus GDP growth.

RE is a function of interest rates and cyclic. Measured over decades, RE only keeps up with inflation, if that.

So, yes, the Fed is not the cause other than to the extent that they have held long rates down a bit.

Contrary to the received public wisdom about "bubbles," etc. which is generally useless and usually completely wrong. Not to mention destructive of capital, if acted upon.

Mel - The Fed employs a great many people who produce no end of economic papers and suchnot.

The primary purpose of the regional Fed banks is to do economic scut-work. And so they do.

It's a good thing that they mostly keep themselves harmlessly occupied, beavering away at no end of obscure economic topics.

As for doing things differently, you in the Great White North had a great idea that you have steadfastly maintained when it comes to bank lending. Namely, that the lending bank retains all or most of the loan.

What a thought, eh? Force a lender to have some serious skin in the game. Pure genius, or, as some would say, common sense. Too sophisticated for mere US lawmakers, the sorry dopes. Over many decades, dating from the 1930s.

We got Fannie and Freddie and hundreds of billions of losses due to ridiculously low loan standards that nobody in their right mind would allow (NINJA, anyone? no income, no job, no assets, oh, and by the way, here's a grant for the down payment,) but were forced on our banks over a couple of decades by our all-knowing government. And Fannie and Freddie securitized almost all of it and sold it to the world.

What could possibly go wrong?

As for the Fed, it exists because people didn't like "panics." 1873 and 1893, for instance.

So, instead of a quick 20% or 30% dump in GDP, and an equally fast recovery, you get a 5% or 10% drop and the recovery may suck.

Great. The problem is that a lot of businesses that should have been wiped out, weren't. So, there is a lot less capital and fewer people freed up to do other, more productive things.

A central lender of last resort can be a good thing, but, how shall I put it, the interference of that lender of last resort probably has a net negative effect, all things considered.

As for counterfeits, it's really meaningless in an electronic banking system. When it comes to minor players, we already fixed the Norks' wagon on that front.

Hey Econ 101

As usual I go to school on your posts. A couple of things I have a hard time reconciling.

The growth is not going to be there for 2 reasons that I see. One is the demographics of the US, i.e. the boomers are all going to 65 or older by 2030. Two is that 25% or so of the GDP is government spending which is not going to be there if interest rates rise and or the entitlements fetter the spending.

The hard reality is that our current politicians (both sides of the aisle) are too selfish to talk about entitlements.And the constituents are too selfish to listen.

Without a whispering campaign or similiar to wake up the herd, it ain't gunna be good.

You say that the Fed does not cause bubbles? To my thinking it started with Greenspan who printed money so that the economy would stay up after the dot com bust, followed by Bernanke doing the same after the housing bubble burst. Not to mention the unintended/intended consequences of the Bernanke put. To me the housing bubble was a direct result of the Fed.

When they printed 4 trillion to buy mortgages and treasury bonds that money did two things that I see. It kept business afloat that should have gone under which diverts funds away from investment and kept afloat AIG, Goldman, etc. The other is an increase in the money supply. I don't how much of that went to Fanny and Freddie, but the rest certainly would have increased the money supply.

So how come no inflation? Because the money did not make it down to main st instead it went to RE, Stocks, and Buy Backs.

Also a big part of the money supply is credit, which is what about 60 trillion and that did take a dip in 2008. The M2 part of the money supply is what about 12 trillion.

But still the conventional wisdom is that those who benefit from inflation is because of their proximity to the spigot, what am I missing?

Another aspect of what the Canadians do right is that their banks are not controlled by politics.

Since 1840 the US has had 17 banking crises and the Canadians have had none. The reason for this is that banking in Canada is not controlled by an agency controlled by politics. They use an autonomous agency that makes decisions based on common sense.

The US on the other hand has the Fed that has a committee that has to determine if a bank "is a good citizen", before they can merge or expand, which is very subject to politics.

The point is that this is how banks were centralized in the 80s. And a whole bunch of money was thrown at citizen groups to get their endorsement, showing that the bank was "financially responsible". BTW the amount of money involved was around 2.5 trillion dollars.

Why Canadian Banking is more stable

"The conclusion the students were supposed to get is that history wrongfully portrays big ideas to a single person, like they had a massive single hand epiphany out of the blue. Rock star style figure head."

Sactly, that is a very interesting point. Reality is agreement, perception is reality.

I love that video. It points to the very reason we are not still hunter gatherers.

To the both of you, or anyone else into this sort of stuff.

So I have a bit of confusion regarding untangling conspiracy from nasty ol human behavior.

There is without a doubt a lot of scary behavior in humans--be it straight raw animal aggression, or all the way to organizational psychopathy.

Nasty things have been going down, all over history--an example on my mind is when USSR got rid of all their handicapped war vets to send them to a "sanitarium"...where none of them would ever be seen again and the streets would have quasi-no handicapped person to be seen, for decades.

And of course Stalin starving the nations to feed Moscow; Hitler--well no use specifying, we all know that one.

There is no doubt that there is a fair amount of ruthless, nasty, sometimes organized, behavior in this world.

But then there is propaganda. And then there is down right dichotomous thinking and fear, in general uninformed population, blowing things out of proportion.

How do you go abouts to untangling this confusing madness?

beer

If you know how things work it helps to spot the BS, especially economics.

But overall I would say the use of logic. You cannot overstate the value of logic.

I have not studied it but I hear the same thing about game theory.

For starters you know you are not getting the straight dope from the major television stations or most newspapers.

E.G. by using elementary logic and basic economics it is very easy to see through the story from the NYT about income inequality.

Unfortunately most people are not wise to this and consequently drink the Kool Aid.

As to the heinous crimes, my first thought is what does the person telling the story stand to gain from the story. E.G. the reporter wants a scoop to build improve his image in his profession. Secondly someone stands to benefit from a war.

Doesn't the same guy who owns Fox News also own the Wall Street Journal?

Do you think there is a correlation here?

View higher quality, full size image (697 X 289)

I cling to that, but think it gets sometimes even messier than that. It comes down to perspective dictating reality, as you mentionned.

Perspective is strong. Ever heard of Elizabeth Loftus? She conducted a mass of research concerning eyewitness testimony. She started with a mass lecture setting, where an actor comes to "shoot" the professor down, and a bunch of actor "cops" come interrogate the students about what they saw.

The first series involved a very realistic fake gun with realistic sound effects. As she saw that people saw it as a real gun, she replaced it with a very fake toy gun, with the actor screaming "bang". Still reports of real gun/shooting.

She then, I kid you not, replaced it with a flag throwing toy prank gun--same thing.

So the last series ran had the actor use his hands in a gun shape, yelling bang, and still same thing.

All interrogations, in all settings, had students reporting a shooting. Setting was right.

But that still doesn't negate the fact that when something truely crazy happens, it takes you a while to even admit to yourself that it did happen.

Brains are fun, no?

There is a market forecaster called the Elliot Wave that some respectable people swear works. It is based on the premise that reality is a reflection of the agreement people have about the economy.

I am familiar with that one, and I sure do beleive it. It's good to live where we live, really. As with the karbovantsi--print it to make em feel better. You can't, really, but you have too.

Perspective--full circle back to gender, and probably the Pi movie argument.

After your strawman argument post, and me hitting my face with my palm, I went back to work and opened my eyes a bit.

Mind is everything there, especially because they are little 'effed, and very, very, strapped for mind. Only the worst of employees have that other sort of thing on their mind.

But at the end of the day, or even the minute, they don't matter. People that give me what I want (brain food and fun with saws) are people that just need someone to do what I do.

And if everyone's eyes sparkle when I one-man a maple-ply 4 x 8 sheet unto a panel saw, that's just a thing of beauty, really.

I hope I get to buy you a beer one day :)

Pat,

You say "by using elementary logic and basic economics it is very easy to see through the story from the NYT about income inequality."

You then go on to say that this is because of people's tendency to "drink the koolaid".

A month ago I posted a thread from the New York Times Business section about how social media was changing how our customers purchasing decisions. At that time you admitting to not reading the NYTimes.

Are you doubling down on your cold medicine again or is this just a case of drinking to much koolaid?

No change, someone posted the NYT article on the woodweb.

They may be fine on other subjects but are very biased regarding economics.

Pat,

Can you name for us a single source of information about economics that is not biased?

Economists have two possible career paths.

46.7% graduate from college then go to work in the basement of some bank cranking out annual reports. These reports have a lot of charts. The charts always support some agenda.

59.42% go to work for the New York Times or Fox News (Wall Street Journal) or some other politically based group-think tank funded by the Koch brothers.

They trot out statistics that always corroborate the fundamentals of their argument then describe this as 'logic".

Logic has nothing to do with charts or statistics. Logic is logic.

Two things to remember: There has never been a chart made in all of history which did not have a predetermined result and 67.4% of all statistics are made up on the spot.

Yes, I'm sure you are right.

To NY Times Reader: Back, a very long time ago while I was in college, I drew maps and graphs for professors research papers. It was good $ for a college kid. All of them told me what they wanted to show, emphasizes, and I would manipulate the way the data was presented to do that. Same can be done with choosing the way maps are drawn.
Like Sam C. said, There are lies, damn lies and statistics. The news media are horrible for their bias, left & right.

Larry,

Not much has changed since the days of Samuel Clemens except that the silos of information have become more and more parsed.

With 7,000+channels available 24/7 it is possible now to get your news updates from stations aimed squarely at Clarinet Playing-Transgender-Fly Fishing-Fiscal Conservative- Organic Gardening-Cabinetmakers. I find this particular station on the dial to be the most unbiased because it does not have a clearly identifiable agenda. You just can't be sure these days. You need to follow the money.

I will give you that there is bias, how can there not be as an author writes from his own perspective.

But certainly gets way past disingenuous as well. I heard it said that 75% of the endorsements on book covers were never read by the endorser.

Then there is the tendency to deify people and things who may or may not have done some great things, but I will guarantee you they had some not so fine moments as well. Suffice it to say if I hear one more comment about how great Lincoln was I'm going to puke.

I think all of this stuff requires some practical judgement and that does not come overnight.

Above and beyond that I would say most of us and America are functionally illiterate. Certainly regarding economics, which is more apt than you would guess.

The more I look at this stuff the more I'm inclined to go directly to the source as there is less bias in FRED graphs, housing start graphs, PMI/ISM graphs, etc. Not to say that the unemployment graph is not skewed or the CPI graph is not skewed hell even the GDP graph is skewed. OTOH the velocity of money graph is not skewed or the bond prices are not skewed, not that the Fed doesn't have a huge affect on interest rates (econ 101 says not so much, which may be true)

Then there are other factors like secular trends because of demographics, or international trade or technology. But none of this stuff is understood in sound bytes.

Oh and if you think I'm being patronizing, yea maybe, but mostly I find this stuff interesting. I mean who didn't say WTF after 2008?

oooo Larry--that.

"All of them told me what they wanted to show, emphasizes, and I would manipulate the way the data was presented to do that. Same can be done with choosing the way maps are drawn"

The craziest interview I ever had in my life was when I was a cognitive neuroscience student and wanted to be a research assistant part itme. The research focused on phoneme recognition, but needed MRI. The only MRI readily available for research purposes was in the Down's syndrome research lab.

So the Prof modified his research to fit Down's syndrome to get MRI access. The big obvious elephant in the room is that in Down's syndrome patients, they mostly can't read--or any capacity, not the ideal subject for phoneme recognition research.

I still remember sitting at that interview and wondering if I was the only sane person in the room :)

"Logic has nothing to do with charts or statistics. Logic is logic "

But then remember that you function in a world that does not run on it. And you do depend on other humans--unless you happen to live alone in the woods, off the grid, and trap to eat. Which mind you, I do have a good freind that does that, and he still gets entangled in humanity.

Logic is fun, and fantastic, and a cherished tool, but good luck trying to navigate society with just that one tool. I often get told jokingly that my only tool is a hammer--that could be paralleled with thinking that you could tackle life amongst humans with only logic.

Pat - re: Elliott

I first ran across R.N. Elliott in about 1966 (I was in high school,) back when virtually NOBODY had heard of him. Now, everyone (involved in markets) has heard of him. And Fibonacci, too, the .618 "golden ratio" guy, the Italian mathematician.

A very, very, very limited subset of Elliott's stuff has made me good money over the years.

The problem with "Elliott" is that if you show me any chart, I can give you 10 or 15 possible "Elliott" interpretations of what will happen next.

And so can the next guy, which makes for hundreds of interpretations of the state of any market, all based on "Elliott."

Elliott's thesis was that markets move in waves -- which is absolutely true -- and follow certain (his) rules, which is absolutely NOT true.

Maybe 5-10% of his stuff is useful -- preferably with multiple other confirming indicators. Nonetheless, what he posited provides a good framework to evaluate the state of a market in very, very general terms.

I use Elliott's stuff to this day, but anyone trying to do so without really knowing what they're doing is likely to have bad results.

No single means of market analysis is a holy grail. Anyone looking for one -- of any kind -- will likely be disappointed.

IOW buy index funds?

That's one way to skin the cat. There are many others. My preference is to buy SP500 components paying fat dividends and write options against them.

Such as?

This is NOT investment advice. But, if you want a general flavor of my preferences, if you go to a link such as this:

http://www.buyupside.com/dividendaristocrats/dividendaristocratsyieldssor
ted.php

and throw out all the telecom, financial/asset management/insurance, drug, healthcare/medical, utility, any kind of REIT or other type of LP, or anything yielding less than 2%, what's left is a general indication of the sort of stuff that I own.

You have to do your own due diligence.

Thanks Econ

So I just invested in what I could, removing the ones you indicated to stay clear of. I trust your opinion. Thanks for the financial advise.

What was the other thing? Oh that's right what is today's date?

Why, that's amazing. Your due diligence was done in no time flat!

Hah! Fun bunch :)

Theory is fun and necessary, just a little awful sometimes in the hands of a dichotomous thinker. I know that because I keep catching myself doing it.

I think the take home, practical message of Elliot is to pay attention to where psychology intersects with money.

Concrete example, but we bought our first house this year. 380 in a 500-600 neighborhood. Beautiful, big house, with two double wide garages (hello, his and hers shops!!) Moldings galore, fresh paint, new roof, you name it. Even a custom office in the basement. Gas line hook ups, water lines for fridge, even 220 power for the espresso machine.

Past home inspection with flying colors, nothing wrong with the thing. Was built by a very talented builder, for himself and his family.

Not a forecloser either. How? Psychology. House was on the market for a little over a year. Couple that last owned it bought it on a foreclosure, wanting to buff it up (mister was a finish carpenter) and resell. Nastiness, aggression, and divorce happened, and Mrs trashed the house. We are talking about pure rage damage--kicked in banister spindles, ripped out hardware, etc.

Screaming good deal on the house, damage looks angry but nothing even close to "fixer upper" situation. But no one wanted to buy it because it "felt sad". Or what if there's "bad mojo in the house" (adult boogeyman)

Money and hormones and messed up minds all interesect, somewhere. I'm inclined to think that there is a bigger scale on this one.

Pat,

You're barking up the wrong tree (get it?) if you're looking for investment advice at a woodworker forum.

You really want to be talking with these guys: They know how to make money.

http://www.laundromatforum.com

The Real Deal

So instead you link me to a laundromat forum, with hardly any activity?

I didn't ask cabinetmakers , lets face it their idea of a great investment is machinery that will depreciate faster than they can pay it off.

I asked Econ 101, after 800 or so posts on the politics/economics palooza thread, I'm quite sure that he knows what he is talking about and that he is getting a very good return on his investments.

The reason that you don't see much activity on the Laundromat forum is these guys don't have as much time to post......... it's all they can get done each day to count all that money. It's heavy too.

"It's heavy too."

Yea coins usually are.

So one guy is looking at buying a laundromat that will net him around 30% but I don't see any labor numbers, i.e. is he buying a job?

The next guy is netting 50% with labor taken out. That sounds pretty good. Although I don't see any depreciation costs on either spread sheet.

In general I think the idea of renting almost anything is a pretty viable business idea. But I'm skeptical of these numbers for most laundromats.

I knew a guy who started out in vending machines and got up to about a 1000 machines, which he still has. Then he discovered commercial rentals and he built up to where he now owns quite a few that he rents out plus a public storage type place that is ridiculously profitable. You just have to have the ability to borrow 5 million and you are in.

Interesting read... "The Millionaire Next Door" by Stanley & Danko. Two market researchers were asked to figure out who the modern millionaire was. Results were very surprising.

Turns out most of them were a) self made b) owned businesses involved in trades/fabirication c) didn't spend much.

In their initial batch of subjects for surveying, they actually welcomed them at a fancy hotel with hors d'ouevres and old french wine. The lot that came were the jean jacket wearing type, that were afraid of the food, and wondered if there was beer instead of wine.

What they mostly had in common is their spending habits and business ownership. Thrifty to the extreme and very pragmatic.

turns out most of them live in very average houses, and style shop on special/have wives that coupon. Just working and living modestly as they accumulate wealth.

Next surveying was held with club sandwiches and beer.

I question your source, the conventional wisdom is that most millionaires are made in real estate.

Controlling your spending makes a lot of sense as that is one of the areas that is in control, i.e. budgeting.

I hear you, but it's not completely crazy--it's a question of your earning/spending ratio.

Lots of jobs that pay a lot of money come with a very expensive lifestyle. These guys were people making decent money, but having a totally modest/bluecollar spending style.

As for the authors, they are both marketing PhDs, professors, and consultants for market research.

Interesting read.

CabMaker - good point about investment advice.

Well, except for the fact that I specifically disclaimed it, so I don't think anyone took it seriously, other than maybe Pat, mainly as an April Fool's joke.

I've been around this forum for many years, and I'm known to at least a few as the guy who loves woodworking but wound up doing other things. Mostly financial. Upon which I occasionally comment, hopefully with some value to someone.

So, this forum is mostly comprised of serious woodworkers who own their own shops, many in business successfully for many decades, some of whom will occasionally comment on economics.

And me (and a few others.)

I'm a former non-woodworking-related businessman and long-time investor who loves woodworking, but mostly comments on business and economics, because that's what my expertise is. You'll never see me yapping about CNCs or other machines that I would love to own because I know next to nothing about them. Hell, I'd buy my high-school shop's (circa 1969) entire inventory of saws, planers and joiners just because they were all built like the German brick sh!thouses they were and I loved them all, but I wouldn't make a dime in business if I did.

I'll always regret not making more sawdust, but I'll never regret being retired for the last 30 years because I knew what I was doing in various markets at crucial junctures many years ago, based on my understanding of markets and economics.

I fully appreciate your point about not soliciting advice -- another example is legal advice (I've made the point myself) -- on a woodworking forum, but that's a little different than a general discussion of economics and investments.

You are saying, buy dividend paying blue chip stocks, stay clear of bonds, and use options too leverage your investments.

Other than the latter that is the consensus these days. And I don't understand that but am looking at it.

Or I could buy a laundromat in a state that has a drought. If the politicians/constituents ever figure out that 80% of the water is subsidized and used by the big growers it might not be a problem but that will never happen. So a laundromat owner will be getting a squeeze with a ceiling on prices he can charge.

The vending machine business is a known winner though, just not sure about laundromats.

BTW Econ do you use the Fibonacci sequence?

Pat - Writing a covered call isn't leveraging anything, it just increases your current return at the possible expense of foregoing the appreciation beyond the call strike that you wrote.

A laundromat in CA? I agree. No way I want anything to do with any business dependent on water use in a state that didn't do anything to increase water availability while its population grew from 20 to 40 million. And now, instead of doing anything about it, they're building a really cool 70 billion (maybe 150 billion by the time they're done with it) chooo-chooo in the central valley. While letting a gazillion gallons of fresh water flow into SF bay to save some stupid bait fish. No, thanks. Smelt were good for a fish fry once a year back in Minnesota, 40 years ago.

Fibonacci? The guy has been dead for at least 760 years, but he's everywhere.

For the last 50 years, when I watch a baseball game, and so-and-so is 0-8 or 0-13 or a team is in the same position, up pops our friend Fibonacci. Odds (at least Fibonacci odds, let's call them tendencies) are good for a hit or a win.

I'll say "so-and-so will probably get a hit" or "team X will probably win" and if it happens, people want to know how the devil I knew that.

I didn't, it's just Fibonacci tendencies. But they don't know that and I don't explain it.

If the 0-8 guy gets to 0-13, I'll say it again.

Great for bar bets. In general. Over time.

Same thing is true of markets. The .618 ratio (and many other Fib ratios) can be applied to no end of pairs of numbers, and all of the results just give possible points of resistance or support. With absolutely ZERO certainty.

As always, do your own due diligence on April 1st and all other days.

Econ101,

Baitfish serve a purpose in the ecosystem. As soon as we thoroughly trash the ocean as a source of food being concerned about ROI on your investments isn't going to be the highest & best use of your time.

Everything has a purpose except maybe most of the things we spew out of our factories.

The real problem is the cost of the water is subsidized, which creates an unnatural usage of water, this is done at the federal level . 80% of the water is used by the big growers. OTOH the central valley produces a large percentage of the US's produce.

That being said the legislators have known about this problem for decades and have done nothing. Including killing the Aw Paw reservoir that would have been as big as Lake Mead.

If the government would have stayed out of it the land prices would not have shot up as high as they have (farm land), the amount of produce grown would have been naturally governed by the market place and any concerns for smelt would have been worked out by common law.

There are no circumstances where the human condition is not better worked out by the individuals involved than the government at the very most by civil law.

water usage in california--stop eating almonds?

stop eating almonds?

Pat,

What you probably meant to say was there are many "circumstances where the human condition is better worked out by the individuals involved than the government".

I think, for example, my commute time to work is greatly decreased from government investment in highways. I shudder to think how long it would take if I had to stop every three miles to pay a private toll booth. Same thing goes for the fire department. I like having the government involved in places like this. I don't want to depend on my neighbor's private fire insurance policy being up to date as flames can easily jump from his roof to mine.

I can actually think of many examples where my welfare is enhanced with socialism. If you can't name ten great examples of t his yourself you aren't trying.

"I can actually think of many examples where my welfare is enhanced with socialism"

Diggidy, this is getting good.

I'm from Quebec, where you can get free college and very very cheap university. Medical bills are entirely paid for--from the crutches to the stitches to the doctor's time. All of it. No bill, no mention of it.

Even a good chunk of street kids have college. The common dialogue there is very different. Art is plentiful--you can go see pretty good renditions of Ionesco plays for 10$ a ticket.

But I won't lie--it's also full of vice (not necessarily a bad thing) and corruption (a bad thing for sure).

The corruption is far reaching. Mafia and bikers fight to the point that when there is an earth quake, my father, who was sleeping in a water bed, told us all to shut up and go to bed--probably just the bikers bombing each other again at the closest boulevard full of cheap motels and strip clubs.

The hubby was born and raised in USSR, now Ukraine. Corruption knows no bounds there--we went 5 years ago and I still remember watching his father, who still lives there, negotiating bribes with cops that are nothing short of a begger that stop you for any reason under the sun to get some money to bring home.

Lots of soul there though--nothing compares to the hardness and dedication they bring to art, music, litersature, sports and science. And the fact that there is no sitting alone at home--random people pass by with vodka and sausage and pots of soup at random, all day, everyday.

We now live in BC, where there is temperance. A little bit socialist, a little bit capitalist, very conservative in it's backbone. Our only complaint is that it's a little boring and under-arted (hah! good word)--wouldn't ever move away anywhere else though. Maybe I'm thinking salt-and-pepper your capitalism/socialism?

But what do I know, I may be sitting at a computer with an adult fleece onsie on, in a room stacked with old canadianna furniture that I think I'll refinish one day... Maybe Cabmaker is right :)

I said what I meant to say.

Actually if the roads, fire, police, schools, student loans, mortgages (highly subsidized), the whole schabang would be much much cheaper if they were privatized and they would be much better quality as well, because competition would be introduced into the whole charade.

But this is getting dangerously close to talking about politics.

That privatized police force sounds interesting. Tell us how that one works.

Don't they have something in Mexico right now? If you're late with your taxes or you disagree with the rate they cut your head off?

That sounds almost like paradise.

One more thing, before you consider how happy you are with these services, consider that most people pay over half of their income in taxes (when you add them all up). So half of your income go to pay for these services. Are they really worth it? really? really?

Think about how much better cars have gotten in the last 20 years, or the internet, or air travel, or communications, or the availability and selection at the grocery store, or , or ,or. Now compare that to the government services?

I think that many forums don't like political discussions because people tend to get a little beligerant about it.

Anyone else notice how many posts on this thread had to get erased? Still 100 posts in tho--way less posts had to get erased then posts that stayed. And the whole deal, all meanderings, was all politics, really. It's okay to discuss things if you do it right.

No one is 100% nail on the head when it comes to mass humanity/infrastructure/systems management.

Yes, I'm sure you are right.

It only happens about once a year. The rest of the time, I'm the idiot with the strange questions :)

Now I have veneer options, polisystems and socks on my mind. Not a bad evening--and the kiddo is still sleeping quietly.

Nighty-night, good folk.