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The Financial System is Destroying the World Economy

Discussions about the economic and financial ramifications of PEAK OIL

Re: The Financial System is Destroying the World Economy

Unread postby KaiserJeep » Thu 26 Jul 2018, 19:00:35

Pops: Yeah, well several differences exist. I was a lifelong electronics hobbiest, so I skated through the circuitry part of EE, and didn't enjoy the math/physics/chemistry/quantuum mechanics. Being one of six kids, I had to pay for my own education, and the GI Bill was one way, but my daughter knew she was going to college. Then my kid got a new Jeep in HS but we made her work and make payments. But she was wise enough to not come back to Silly Valley, where she could not succeed with an undergraduate Biology degree. So she worked for the American Red Cross, then got into the health insurance biz as a customer advocate. But she bought a car, established a credit rating, and then bought a condo with a mortgage. Now she is Mommy track, her husband is in IT at UW Madison.

I'm fine with her life choices, so is her mother. We have in fact made her the next trustee for the real estate trust we have created to conserve the family wealth. She will have to select one of her kids as the next trustee.

But she's out of the tech career path I stayed with for almost 40 years of school and employment. Her husband will not likely ever be employed in Silly Valley, either. I'm fine with that, too.

But her kids will grow up with a Nantucket home to vacation at. Maybe two if the wife and I manage to build the 1, 2, or 3 cottages on the family land, also going in the trust. We will of course be conservative and not go into debt, building one at a time.

Money's just not worth what it once was, and you need appreciating assets. But things are SO DIFFERENT from when I was a kid, in ways that I could not have imagined. I was playing with vacuum tubes at age 12, and remember the awe I felt at a six transistor AM radio that fit in a shirt pocket. Not to mention an electronic calcularor, or a laptop PC, or a cell phone. Or a trip to the moon.

Edit: GHung, the accumulation of wealth is a VERY Darwinian process. It is a proven survival trait.
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Re: The Financial System is Destroying the World Economy

Unread postby GHung » Thu 26 Jul 2018, 19:10:55

Right, KJ. We humans have been subverting and doing end-arounds of Darwinian processes for centuries, if not millennia. WTF is Darwinian about being able to hire other people to do your killing because your daddy was rich?
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Thu 26 Jul 2018, 19:57:03

KJ, I'm not making any judgment, just saying your basic story seemed to fit the study, maybe I'm wrong.

GH, I guess I dragged this toward education and income by ranting on increasing wealth inequality and the lack of class mobility, and what happens to what's left of political stability with the end of growth, AKA: DOOM!

Frankly I'm not all that motivated or envious of money or afraid of not getting by. I'm more interested in doing something interesting and frankly could never really settle on what. I walked away from the best money I'd ever made because of a version of the Peter Principle I guess: I'd risen to the level of my unhappiness. I had a pretty good little company but it required me to be a manager rather than a creative and I just didn't wanna. So bye-bye 9.9, lol
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Re: The Financial System is Destroying the World Economy

Unread postby Tanada » Thu 26 Jul 2018, 23:08:01

KaiserJeep wrote:Money's just not worth what it once was, and you need appreciating assets. But things are SO DIFFERENT from when I was a kid, in ways that I could not have imagined. I was playing with vacuum tubes at age 12, and remember the awe I felt at a six transistor AM radio that fit in a shirt pocket. Not to mention an electronic calcularor, or a laptop PC, or a cell phone. Or a trip to the moon.


That sparked a memory, I can still picture the first time I saw an electronic portable calculator. My sister got it for her 16th birthday, it had a red LED display and was about 1.5" thick (9V battery) by 8" wide and 3.5" high. The thing is the 'institute of higher learning' I went to had large demonstration slide rules in all the math classrooms so the freshmen could learn what those log and trig tables in the back of the textbook were for and the first college computer I learned to use was a punchcard in/out machine for the mainframe using FORTRAN.

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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Fri 27 Jul 2018, 05:02:18

Outcast_Searcher wrote:
Newfie wrote:THIS is what I rant on about in reference to the 0.1% wealth. It is not real, fake I tell you, fake.

So Zuckerburg lost $16 Billion? FB $120 BIllion? I don’t think so.

Here is the analogy, a close analogy. Let’s say you invested $1 million with Bernie Madoff. Bernie sends you letters saying everything is rosey you now have $10 million. Then it crashes and you have zip, $0. How much did you loose? $1 million, not $10 million. You did not loose $9 million because it never existed in the first place. Same here except it doesn’t go to zero. Back to the analogy, Bernie had SOME real assets. FB is not at zero, it still has some real assets.

Respectfully, I disagree to at least some extent.

To the extent that Zuckerberg could have unloaded his FB stock (over time) without meaningfully impacting the market, then that wealth was "real". So, if he wanted to liquidate $1 billion in FB stock over the course of, say, 3 months, to diversify -- it's likely VERY reasonable to assume he'd get roughly 99% of the average market price over that time.

For example, people own houses. Though not liquid at full price, isn't their worth "real", or the bulk of their worth? Or used cars. Or stocks or bonds or gold coins or art etc. -- more liquid than houses for sure, but certainly not anything remotely like worthless.

I have a diversified investment portfolio worth X. Because I'm conservative financially, I tend to keep close enough to half of it in near cash (money market funds and the like). (I'd far rather be a happy guy who can eat every day and pay the bills than have X more dollars by being aggressive and lucky. If that's cowardice, I'll stipulate to that. I call it prudence for a retiree.)

Now, is the half in near cash worth .5X but the half in things like stock index funds and gold and stock option spreads worth zero? I beg to differ. I could choose to liquidate the non-near-cash portfolio on day D without moving the markets I'm involved in by even .1%. For the options, I might move that more like 1% in some cases, but not enough to get excited about (remembering the put-call option parity concept).

...

Bottom line, just because assets aren't liquid cash or near cash and aren't even close to being spent doesn't mean they're "fake" or "unreal" IN ANY WAY. They're just less liquid than cash, and far more volatile in value than cash. Major markets trade about 250 days a year, very reliably.

Was the roughly 10X I gained on holding MSFT calls for the last half of the 90's "unreal"? (I'd always rather be lucky than smart). For the 80% of the position I was fortunate enough to exit when the government filed the antitrust lawsuit on them, it certainly didn't seem unreal. It was deposited just fine. It bought other assets just fine.

If an small to mid-sized investor had gotten out of the Madoff scheme, say a year before it was exposed, they would have gotten "full asset value" for their withdrawals, since Madoff wanted the scam to stay undetected. So would the assets they withdrew have never existed? NO, because the cash would have spent or earned interest, etc. just fine.



All this is true. You make nothing in the stock market until you cash out. It’s much like sitting at a roulette table, it does not matter how much you were up at one point if you didn’t stop and cash out then but went in to loose it.

Look at my example of a contractor in bankruptcy, his equipment, real estate, contracts, etc contribute to his worth.

And your own example points to the difficulty, if Z wanted to take out 1 billion and he did that over 3 months to not effect the market value. Yes, it needs to be done slowly, and even then will likely effect the share value. Otherwise the very act of cashing out would collapse the winnings.

So Z and a whole lot of other investors didn’t “loose” anything, their winnings decreased while still at the roulette table.

So Z is sitting with $77 billion, no $61 billion he can’t readily touch. He can’t eat it, he can’t even sell it freely. It brings him prestige, he gets to have lots of toys because you can buy lots of life’s amenities with a tiny fraction of this amount. But it’s not $77 billion or $61 billion in anything real. It’s a concept.

Now Z is still rich by any standard. He likely will not loose it all, even though that sort of thing has happened. So what does this mean to us?

Suppose he decided to be the world’s #1 philanthropist. Suppose he decided to liquidate all his holdings and distribute that wealth evenly across the world. At best it would be $20/person. Even in the Congo that would be a one time > 1% bonus. And he can’t remotely do that because it would crash the stock.

When you look at all those charts that talk about the 0.1% or the 1% much of that wealth is not real. It’s this fake ballon money of over inflated stock market, tulip futures. If you worry about this stuff, if you compare yourself to these folks thinking they are truly proportionally better off than yourself, then you are needlessly depressing yourself or getting worked up about a largely meaningless concept. I think you can, to a smaller but real extent, say the same about the 10%, because their wealth is in retirement, and over inflated house values. A 10,000 sq ft McMansion that costs a fortune to heat and cool is not an asset, the 1,000 sq ft bungalow that’s easy on the pocket is an asset. These stock valuations only make sense within the confines of the game in which they accumulate, like Monopoly money it’s not truly valuable in the real world of food markets, not stock markets.

That’s why I have ceased to get all wrapped up in the terror about the 1% or 0.1%. They are no more happy than I am, likely less. Isn’t that what’s important?
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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Fri 27 Jul 2018, 05:06:12

Pops wrote:"Value" is whatever the market says it is, we price in future value all the time. Bernie had nothing tangible except expected returns: future value.

It doesn't work for my "business" because my "good will" is not transferable, I am the asset. But for a brand, the value is in the name, facebook could sell computers for example based on their brand recognition. Google and Apple did it with phones, million other examples.


I think we largely agree. “The value is what the (stock) market says it is” with the caveat that works only within the confines of that game. Step outside the game, where 90% live, and it’s meaningless. We are watching rich kids play monopoly, and getting jealous of their fake money. Silly.
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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Fri 27 Jul 2018, 05:09:23

GHung wrote:This entire discussion is based on status as the result of wealth and income, not on social status born of who one is (character), what one does (goes to community or other non-financial contributions), one's worldview and outlook, or simply one's understanding of things as they are (wisdom?). A society that values little beyond one's financial status (or what growth-based accomplishments that can enable) is largely fucked.
So here we are.


Amen to that
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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Fri 27 Jul 2018, 05:13:26

Tanada,

And those slide rules helped you visualize the relationships and helped you understand the value of “significant figures. Instead of just spitting out meaningless numbers.
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Re: The Financial System is Destroying the World Economy

Unread postby KaiserJeep » Fri 27 Jul 2018, 06:12:07

So today we are discussing the theoretical financial woes of Zuckerberg, who has had to address the "fake news" scandal by hiring 30,000 "moderators" to edit out the fake info being posted.

Reality is truly a slippery subject nowadays. Many of what were once legitimate news sources are now hollow shells of their former selves, repeating fake news from sources they "trust" on the web.

This Sikh guy Ravinder Bhalla was on the PBS News discussing the death threats he has recieved after being elected Mayor of Hoboken NJ.
Image
...death threats from people who believe he is a Muslim. Sikhs are not Muslims, but won't prevent some bigot from trying to shoot the man because he doesn't know that, or knows but doesn't believe it. Because you see, towel heads are the enemy.
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Re: The Financial System is Destroying the World Economy

Unread postby onlooker » Fri 27 Jul 2018, 07:55:35

"Reality is truly a slippery subject nowadays. Many of what were once legitimate news sources are now hollow shells of their former selves, repeating fake news from sources they "trust" on the web."
Absolutely. It seems now every source and everybody is coming out like a "legitimate" source of the news. Even on twitter, you have people debating what is the "real" news. I personally, like to rely on more than one source for the news and like more stories that can deliver many facts and eyewitness (sensory) accounts to allow a viewer or reader to confirm the veracity of the story and interpret it better.

I think also, what cannot not be disputed is that every country is biased in its news coverage to favor its interests and narrative. Within the US, of course we have news outlets which are clearly either pro Democrat or pro Republican. So, I think its up to everyone to utilize some critical thinking skills and delve deeper into any particular news story and its slant of that story. Gone it seems also are the days of truly non biased objective news reporting.
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Re: The Financial System is Destroying the World Economy

Unread postby Ibon » Fri 27 Jul 2018, 08:11:27

We get a lot of academics visiting us at our resort many of whom are doing taxonomy, these days on more obscure taxa like micro moths or micro caddis flies or micro orchids. These are the categories where there are still a lot of new species to be described and abstracts submitted for peer review and eventual publication and acceptance. I was reflecting the other day how this global network of academia in taxonomy still functions. In the last year we have had American, Canadian,Russian, German, Dutch, Mexican, Panamanian and Belgium ecologists doing taxonomy. If you take any category, for example new world scarab beetles, the specialists doing taxonomy are spread all around the world and they know each other and review eachothers work and collaborate. These folks are aging and not being replaced in many universities but the network globally is still quite robust. Increasingly we are seeing private individuals doing the taxonomy no longer funded by institutions, kind of like back to the 19th century when folks like Darwin and Wallace would have to find a wealthy patron to finance their explorations.

Why do I bring this up? This hierarchical structure and peer review is still viable and of course there is some bias and jockeying and ego but all in all it works. Compare this whole legacy network you see in taxonomy to the news media and the internet were any bullshit can be spewed. There is basically no internal mechanism to filter through all the fake bullshit and bias and distill this down to factual news communication. 50 years ago we had 3 networks on TV. Today hundreds and the internet makes every stooge an expert.

This is severely degrading our culture. It makes for a very stupid electorate, one very easily manipulated. Perhaps all of this is not an accident?
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Re: The Financial System is Destroying the World Economy

Unread postby Cog » Fri 27 Jul 2018, 09:51:09

Gdp is 4.1% second quarter. I guess doomers and never trumpets will have a good cry today.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Fri 27 Jul 2018, 10:39:08

It is funny to see how we look at things differently, I say "the 1% have outsize, undemocratic political power/influence" and others hear "I'm jealous of their money."

Does that mean I don't realize my envy or other people are projecting their envy on me?

From this side, I hate messing with money, I hate estimates and billing and even timekeeping. I put some little money in the bank but there it sits, might as well be under the mattress for as much as I pay attention. I don't fantasize about buying stuff because I can afford most everything I want, I don't even buy the occasional superball ticket anymore, I have Kindle Unlimited instead. I don't want a yacht (or 10) and the best money gig I ever had I quit. I do 2 things for money, design and remodeling because I like the process and I'm definitely not getting rich. So at least from my conscious vantage I don't feel jealous.

The main reason I rail about trump, among others, is he's convinced people (or at least normalized the view) that corruption is a virtue. He even gave them to believe he would change the game when he's the admitted king of corruption. Paraphrasing: I know the game better than anyone, give politicians money so they are there when I want something.

Guess I have to hand it to him, he's validated my view
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Re: The Financial System is Destroying the World Economy

Unread postby onlooker » Fri 27 Jul 2018, 10:52:51

They're is nothing neurotic about being aware of the unequal and unjust economic system. How the playing field is titled so heavily towards those with lots of money. How it is getting more and more difficult to make ends meet for so many people around the world. These are clearly realities of the world we live in. I am NOT asking for a redistrubtion of wealth. I would if I could request that our species lessen its impact on the Earth which sustains ALL life. Because has things are transpiring everyone in the coming future will suffer from these impacts.
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Re: The Financial System is Destroying the World Economy

Unread postby Cog » Fri 27 Jul 2018, 11:39:19

Interesting that pops reactivated his account right before midterms but was inactive for a year. Guess his kids wanted dad to get a hobby. In this case, fear that his free ride might go away.
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Re: The Financial System is Destroying the World Economy

Unread postby KaiserJeep » Fri 27 Jul 2018, 12:04:14

Pops, you called Trump "the admitted king of corruption". You will not hear me debate that, I pretty much agree. In fact when Trump denies anything, he does so with a sly grin to tell you he is lying.

But consider the alternatives. Bubba Clinton looked you straight in the eye and told lies you wanted to hear and believe. Richard Nixon didn't tell enough lies and was visibly ashamed when he did relate one, and looked down. Both Bush's lied poorly. Obama lied all the time and blamed all his failures on white racism. Hillary Clinton and Bernie Sanders lied so much and so constantly that they confused themselves. I still believe that Ronald Reagan tried to do the right thing all the time, and let other people lie for him, after buying a little time.

At least with Trump, you know where you stand, and he really does not have a hidden agenda. But if you think he was arrogantly bad before he became POTUS, wait until after his second term. By then, his runaway mouth will be so big it will match his ego in size, and the next POTUS will be catching all of his ire, whether he is an R or a D.

Consider that a reasonable case can be made that Trump is the most effective POTUS since FDR. Which is a whole different thing from liking the man. I expect that even his wife and kids don't like Trump the man.
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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Fri 27 Jul 2018, 12:10:36

KJ,

At least with Trump, you know where you stand, and he really does not have a hidden agenda.


A while ago I described Trump as “more honest which Ibon called me on. I didn’t have the right words to describe my thoughts. I think you did a much better job with this post.
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Re: The Financial System is Destroying the World Economy

Unread postby GHung » Fri 27 Jul 2018, 12:21:08

KaiserJeep wrote:...........
But consider the alternatives. Bubba Clinton looked you straight in the eye and told lies you wanted to hear and believe. .........


Why did you call him "Bubba"? Because of his accent? Because he's a Southerner?
Just askin'.....
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Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Fri 27 Jul 2018, 12:25:01

GHung wrote:
KaiserJeep wrote:...........
But consider the alternatives. Bubba Clinton looked you straight in the eye and told lies you wanted to hear and believe. .........


Why did you call him "Bubba"? Because of his accent? Because he's a Southerner?
Just askin'.....

Because he's a slick lying politician, who pretends to be a "good old boy"?
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Re: The Financial System is Destroying the World Economy

Unread postby Cog » Fri 27 Jul 2018, 12:27:13

Has trump been convicted of the crime of corruption? You never trumpers and Dems need to help me out here since I must have missed the trial.

I do remember Bill Clinton being disbarred for committing the crime of perjury. Is that what we are talking about?
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