Friday, May 22, 2009

Teaching Yourself Economics in 90 Minutes

The news is filled with reports of high unemployment, deficits, inflation, deflation, and bailouts. There are conflicting news stories and commentaries on the causes (deregulation, fear, greed, low interest rates, etc.) and the solutions (government spending, bailouts, borrowing, bankruptcy, etc.) Much of what is being said is propaganda to support the agendas of people whose interests are not necessarily your interests. To sort out the wheat from the chaff, I recommend you do some study of your own so that you can analyze what they are saying.

The reason much of the information is contradictory is because there is bias in the world view of the writers. Richard Maybury identifies 5 different paradigms: Keynesian, Marxist, fascist (corporatist), monetarist, and Austrian. My bias is that the Austrian view is most accurate. The Austrian view has a theory of business cycles and has correctly forecast past downturns and today’s mess. Do your own self study based on how much of your own time you want to invest.

90 minutes or less

The comic book version takes about an hour:

even if you don’t want to bother reading it, someone else (a non-native English speaker) will read it to you

There are some longer text primers like this one by Gary North

6 hours or less

If you have more time, the best beginning economics book I’ve ever read is “Economics in One Lesson” by Henry Hazlitt. That’ll take you a few hours, depending on how fast a reader you are.

A good book by rep that I haven’t read is “Whatever happened to Penny Candy” by Richard Maybury

If you want to read the books that predicted the current crisis, there’s Crash Proof by Peter Schiff (very accurate) or Financial Reckoning Day by Bill Bonner and Addison Wiggin (less accurate, but gets the gist).

If you want to read an analysis after the fact, there’s “Meltdown” by Thomas Woods. I haven’t read this book, but it has strong reviews and Woods writes very clearly.

More than 6 hours to invest

If you want to get into scholarly work, then the Austrian theory was developed by Ludwig Von Mises and furthered by Murray Rothbard. Their books are at the site

In the end, you can invest months studying. But for the quick down and dirty – which will put you ahead of most journalists (stenographers for government mouthpieces) who write for the Times or Newsweek -- the comic will put you ahead of 95% of everyone else.

Friday, January 16, 2009

Prophetic Sci-Fi Writer?

A radio interview with science fiction writer David Brin has stayed with me many years. The theme was about how we should stop resisting state and corporate spying but work on getting that technology to the general public to use as a means to enhance freedom. It was years ago, and apparently, he must have been flogging a book (1999) on his theme "The Transparent Society" (which I haven’t read). But his premise is bearing out: there's no stopping the privacy invasion, but freedom can be enhanced by technology in the hands of ordinary people. Enter: cell phone cameras in the hands of private citizens are being used to resist tyranny. Butler Schafer's horizontal society is evolving.

Wednesday, January 30, 2008

HOT COMMODITIES by Rogers (Review)

Book: Hot Commodities
Author: Jim Rogers
Subject: Investing

In Hot Commodities, Jim Rogers gives us an introduction to the world of commodities investing. Of the different asset classes available to investors, the commodities class receives little attention from average investors or the institutions that sell investment services. However, Rogers references studies that show that commodities give comparable returns to stocks. Moreover, he explains how stocks and commodities traditionally run in inverse cycles: when stocks are in a bull market, commodities are often in a bear market and vice-versa. Since long term bull and bear markets can run in cycles of 13 to 18 years, sticking to either to the exclusion of the other means your investments can needlessly languish due to ignorance of how to diversify into commodities.

The book is divided into four parts. First, Rogers familiarizes the reader with the history, terminology, and mechanics of how the commodities markets work. In the next section, he analyzes the demand side of the commodities market in the growing economies of Asia, especially China. The third part of his book analyzes specific commodities including oil, gold, lead, sugar and coffee. And the final section of his book is a collection of reference charts and graphs of different indexes and histories.

The strong lesson I took from the book is that you cannot be a dilettante commodities investor. Whereas you might buy a stock being totally ignorant of how to value it and watch it rise in market price because a lot of other ignorant investors are bidding it up, in commodities you are working against professionals in a very simple market. There are not lots of nuanced measures to interpret like price-to-earnings or book-to-sales in stocks. In commodities, there’s just one: supply versus demand. If the demand for a commodity outstrips supply, the price will go up. If the supply exceeds demand, it will fall. You make money either way by making accurate readings of the available and new supplies versus the current and future demand. The other powerful factor in commodities trading is that you are buying on margin. In other words, you only have to pay for a small percentage of the commodity lot you buy. This presents opportunities for huge gains or losses in a very short time.

Buying on margin is the source of the horror stories of the amateur commodities investor. For example, the rules of the exchange might allow you to buy LONG $100 worth of a commodity A for $5 (different commodities have different percentages). Buying long means you are speculating that the price will go up. If the price does go up to $105, you can sell your contract and you’ve made a 100% gain! However, if the price falls to $95, your entire investment could be wiped out as all accounts are cash accounts that have to be settled at the end of the trading day. To make money investing in commodities, Rogers recommends study and specialization. In other words, he advises speculators to become experts in a single market like copper or sugar and to put in the study to learn just how much of the stuff is out there and how it gets used.

Current returns place us today in the midst of a commodities bull market. Rogers happened to have predicted its advent fairly accurately and places its beginning in 1999. The historical trend is that the long term commodities bull will last around 18 years placing us somewhere in the middle of the current run. As evidence of these facts, many commodities like gold, oil, corn, sugar, plutonium and copper have doubled in price or increased in value by many multiples of their 1999 value. By comparison, the S&P 500 has languished in the same territory over that period and the NASDAQ has never recovered its peak value. A sensible definition of true investing (as explained by Professor of Finance Michael Rozeff) – as opposed to speculation – requires diversifying your wealth across as broad a range of the asset classes as possible to get the average value of the markets. To that end, I can recommend Roger’s book as an excellent introduction to an education in commodities.

CRASH PROOF by Schiff (Review)

Book: Crash Proof: How to Profit from the Coming Economic Collapse
Authors: Peter Schiff, John Downes
Subject: Financial

Review by Robert Jackson

Peter Schiff's CRASH PROOF is an easy-to-read narrative that gives the author's prediction of the coming collapse of the American standard of living and his prescription of how to safeguard or even enhance your material well-being as it unfolds. Schiff's background is president of an investment fund group and being the contrarian prognosticator on several cable television business programs.

The book is laid out in 2 parts, the first two-thirds describing the macro economic trends to support his prediction and the last third covering his advice to readers on how to thrive in the midst of a crumbling American economy.

My introduction to Peter Schiff was through You-Tube as I watched him on a cable business show accurately predict the housing bubble collapse we are now experiencing even as his position was being ridiculed by the other talking heads on the show. After reading another review of this recently released book, I decided I wanted to read it for myself to find out what his insights were on the present growing global financial crisis. The book is easy reading and interspersed with amusing metaphors that make his analysis understandable to readers without deep financial literacy.

Schiff begins by laying out background knowledge in understandable terms. He explains money, savings, consumption, investment, inflation, the housing bubble, the trade deficit and the other vocabulary in a way a neophyte could understand. He then explains how the American economy has evolved to its present condition citing the theories of classical economists such as Say and Mises. In an amusing metaphor, he compares the American economy to an inhabitant on a deserted island with a few other Asian inhabitants, making it clear to the reader that if the Asians are catching cleaning cooking and serving the fish, the American is not an "indispensable" member of this economy as the "consumer of the meal." For those of us with a good memory of the 1970's, he makes a good case for the return of "stagflation" which is characterized by rising prices even as the economy shrinks in size, two conditions that are not supposed to happen together in the models of Keynesian economics.

Speaking in the most general terms, Schiff's solutions lie in getting your personal wealth out of the U.S. dollar. His book goes into some detail (including offering his own investment group as agent to make these investments for you). For the most part, he's addressing people who do have some wealth as opposed to people who are already deep in debt or in dire straits. But he does offer some common sense advice usable even to penny savers.

The book was written some months ago at the peak of the housing bubble and well before the alarms in the banking sector that began happening this past August. So we are treated to his accurate analysis of the collapse of the housing bubble as confirmation of his insight. Still, the window has not closed on his advice though the opportunities he's talking about could disappear quickly in the short months ahead. Overall, I can recommend "Crash Proof", and will continue to find it handy as an introductory reference of how to invest in some non-mainstream ways.

Monday, May 07, 2007

Global Warming Remedy

Connecticut senator Chris Dodd appeared on Meet the Press yesterday (May 6th) and announced his plan to fight global warming with increased corporate taxes and regulations! Now who could have guessed that?

Saturday, May 05, 2007

Spiderman 3

My usual rule is to keep low expectations about movies, especially adaptations and sequels. But the Spiderman movie franchise is my favorite, bar none, and I thought the first sequel was the best superhero movie ever made. As a result, I couldn't contain my excitement to see the 3rd movie. When I walked out of the midnight show, I was not disappointed.

Director Sam Raimi's affection for Spiderman is obvious. It also nearly undid his movie this time around. While it was fantastic to see so many well-rendered characters from the Spiderman mythos like the Stacy family, Venom and Sandman, there were so many characters and subplots that a couple of times I disengaged from the movie as I actively wondered how he was going to tie all of the elements together. This was the exact problem of the third X-men movie. There were too many new characters and subplots. The ending did not make sense, and I wasn't even able to get through a second viewing of characters I loved without falling asleep.

In this movie, Raimi successfully wraps thing up in a heroic last half hour. While the weakest of the three movies, it's still one of the best of the genre. If the first movie was a 9 of 10 and the second a 10 of 10, this one is a solid seven.

Global Warming Hysteria

I should not be surprised, but the success that the global warming zealots have had in convincing Joe Public that the carbon dioxide coming out of their cars will end life on earth is just incredible.

Of all of Mencken's hobgoblins that the elites could use to keep the public agitated and manageable, the idea that human beings will be able to manage the climate of the entire planet seems so preposterous that I find it inconceivable that it could be believed. People who never passed a Geometry or Chemistry test in high school will argue with you until they're blue in the face of how "the scientists" are right, and "we've got to do something." The frosting on the cake is they believe that the same state institutions that can barely manage entirely man made traffic control or central banking systems will somehow know how to manipulate the climate to save the beach houses of upper class people.

The more of a whopper you try to put over, the better chance you'll pull it off, it seems.

Wednesday, October 25, 2006

To Vote or Not to Vote

An old timer, a vet of WWII, called C-Span yesterday to make known his irritation with the 50% of the population who don't vote. But if you simply explore his scenario a little further, whether more or fewer people vote won't affect the outcome of the election in a significant way. Whether 1000 or ten million Americans vote, they're only two outcomes to most of the questions that were already pre-determined before any sheeple enter the voting booth. So the question becomes what difference does it make, especially where these hack candidates are concerned?

On the other hand, I get a vicarious joy at voting against referendums for bond measures and tax increases, so in terms of personal enjoyment, it's not a total waste of time.

Thursday, October 19, 2006

Hess for Governor of Arizona

Kudos to Barry Hess for his performance in the AZ governor's debate. His presence in the debate forced the republocrat and demopublican to actually debate ideas like elimination of Arizona's state income tax.

Accordingly, I have no problem with libertarians who participate in state politics. Without a doubt, their efforts are educational, as I learned about libertarianism in large part because of the campaigns of Harry Browne. Nor do I have a problem with anarchists who want no part of the process. That's the beauty of self-ownership. You get to make up your own mind, and those people who don't like the way you think can go take a flying leap!