As the threat of a Government shutdown looms, another important deadline, one with more individual implications, is looming.
While we do not pretend to understand the workings of the Affordable Care Act, we do understand that it will have a dramatic impact on both the health care industry and individual budgets, an impact that is difficult to calculate.
As a public service here at The Mint, we are embedding a calculator created by the Kaiser Family Foundation which will give individuals and families a general idea of how Obamacare will affect their premiums:
In any event, it is important to understand that, barring Congressional action to the contrary, anyone who does not have coverage in place before January 1, 2014, will pay a penalty on their tax return equal to $95 or 1% of their 2013 income, whichever is greater. If you do not have coverage, this government website can help guide you:
But you must act fast as, according to Gary North, whom we must thank for providing this information, the above link will no longer be available after midnight tonight as the government run health insurance exchanges will go live.
Again, you must have a health plan in place before January 1, 2014 to avoid paying a penalty on your 2013 taxes.
Autumn is upon us here in the Northwest. As in most places, it is a refreshing return to the dance of life that we will live together over the next nine months under the requisite cover of rain and cloud.
If occurrences in nature can be trusted as future economic guidance, we are setting up for a phenomenal year in terms of production. Salmon runs up the Columbia basin, which were once nearly extinguished altogether, are crushing all previous records this year, and word is that the Tuna catches in terms of quantity are staggering. Corn yields further east in Minnesota are on pace to increase even on a decrease in acreage planted.
Even the Mushroom pickers are reporting a bumper crop.
Mushroom picking; illustration to III tome “Pan Tadeusz” circa 1860 by Franciszek Kostrzewski
Nature is doing its part to provide for us on any number of fronts, despite what Malthusian apologists and central planners may say, the only thing holding humankind back are the restrictions that it places upon itself.
Chief among these restrictions is the unnatural monopoly that exists with regards to the production of money and credit, which paradoxically are one in the same in the current “debt is money” scheme under which the entire financial world operates. For the uninitiated, the monopoly that we speak of is that of the Central Banking institutions, which have been given unchecked authority to manipulate (notice our choice of terminology in place of the more quaint verb “setting” which is normally propagated) short (and now long term) interest rates as well as to determine what serves as legal tender.
Add to these monopolistic practices the ultimate authority to collect taxes and the extent of the monopoly which Central Banks have been granted becomes clear.
Given the existence of this monopoly, it is little wonder that those who make their living by working closely with money and debt, as we do, or those who hold a large amount of money and debt instruments examine the actions of the Central Banks with a great deal of anticipation and scrutiny.
The Central Banks are not to be watched because they have anything special or relevant to offer in the form of clairvoyance or enlightenment, rather, they are to be watched in the same way a pack of dogs must be watched when boarding an airplane, for their movements, while unproductive, tend to bother and in the worst of cases, cause harm to the rest of the passengers.
Against this backdrop, the captive watchers of the Federal Reserve were somewhat surprised this past Thursday that the Central Bank decided to delay their much anticipated “tapering” operation. The decision to leave the current amount of money printing (Quantitative easing, that is) at current levels, which amount to roughly $115 Billion per month, was welcomed with a certain degree of shock by those who were certain that the program would be discontinued in light of the recent strength in the US economic data reports.
Entitlement: Why the FED will Raise the Target Rate Before Tapering
The decision did not surprise us, however, for the following reason. The Quantitative easing program has essentially become an entitlement in the sense that it guarantees the credit system a buyer of last resort for the current level of mortgage backed and other securities which the FED purchases from their holders. Were this program to be dialed back, it is clear which entities would be hurt by the action. Entitlements of this sort are nearly impossible to take away once they are in place.
On the other hand, the other tool that the FED would theoretically use to signal it was responding to strong economic data by working to tighten credit (something that will not occur within the next three to five years, no matter what the FED does), is by manipulating short term interest rates via the SOMA and POMO. They are more likely to test the waters by letting rates drift higher as this is an action that does not necessarily have direct consequences for certain market actors. While some of the consequences are predictable, they are in the end indirect consequences, which give them less the feel of an entitlement, which is what the QE program has become.
In any event, by espousing a policy of giving “Forward Guidance,” which theoretically gives juice to existing policy actions by providing certainty to market participants as to how long certain policies will be in place, the FED is now, monthly, placed in the impossible position of showing the world how much its “word” is worth, as Forward Guidance only works if that guidance is actually reliable.
You see, contrary to what academics such as Michael Woodford, who is credited with originating the Forward Guidance principle, might say, the word of an organization and/or individual, like a debt instrument, can also be discounted based on the prevailing belief as to the extent to which the promises of the individual and/or organization can be trusted.
While the actions of the Federal Reserve, whatever they may be, are for some reason seen as immediately effective is beyond us. In our models it is clear that any action taken by the FED with regards to interest rates does not significantly impact price and wage levels outside of the financial sphere for three to five years. Nevertheless, the Federal Reserve actions are observed by algorithms which “think” differently than we do, and it is these algorithms which drive large scale equity trading circa 2013.
Fiscal Policy vs Price Levels: Why the DC Budget/Debt Ceiling Paralysis Matter Not
Perhaps even more ineffective and innocuous to the economy in the short term than Federal Reserve action are the actions that are taken (or not taken) by the Federal Government.
The news is currently ablaze with the current scenario in Congress which has managed to entangle the Federal Budget, the Debt Ceiling, and Obamacare in the same line of debate. This type of stalemate in terms of budget matters is absolutely normal and to be expected of technically bankrupt entities.
The past three years, which have seen at least two other debates around the debt ceiling as well as various sequesters, furloughs, disastrous tax and fiscal policy, and arguably a complete failure of any inkling of “Forward Guidance” out of the Federal Government, have taught the economic community one very important lesson:
Despite members of each party assuring the public that the outcome of these debates and any failure to act will destroy the economy, whether these debates are resolved or not is of little consequence. The reason that they are inconsequential is that the major actors in the US economy, which are and always will be at least one step ahead of both politicians and central bankers, have already discounted the true impact and likelihood of government action by tacitly adjusting their activities to adapt to the inherent uncertainty.
So relax, the no matter what the FED or Congress do or fail to do, the risks remain firmly on the upside for at least three to five more years or the day that the current “debt is money” system fails, whatever comes first.
Copper Price per Lb: $3.29 Oil Price per Barrel: $102.77 Corn Price per Bushel: $4.54 10 Yr US Treasury Bond: 2.62% Mt Gox Bitcoin price in US: $140.00 FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD! Gold Price Per Ounce: $1,337 MINT Perceived Target Rate*: 0.25%
Fine wines have always commanded a premium on restaurant menus, but have you ever stopped to consider the other side of the trade on a romantic dining experience?
Tempranillo Photo credit: Mick Stephenson
Fine Wine Investing
Today we begin a short series on investing in Fine Wine. Fine Wines as an investment opportunity may sound like something that well heeled folks with large estates and walk in wine cellars are equipped to dabble in. However, as with many things the rich do, they tend to do it because there is money in it.
The market for Fine Wines is remarkably stable and refreshingly uncorrelated with other asset classes, which is why the rich, apart from bragging rights, have no qualms about storing a portion of their nest egg in corked glass bottles.
Today, the stability and out sized price gains in the Fine Wine market are available to almost anyone willing to invest. The best part is, you don’t even need to build a wine cellar or worry about your retirement account spilling in an unfortunate accident or being accidentally enjoyed at a candlelight dinner at home. You can now invest in Fine Wines as you would any other asset class, via the internet.
You still own the wine, naturally, you just don’t need to deal with the hassle of transport and storage. All you need is a minimum investment of 5,000 British pounds and a bit of information.
If you would like more information on this investment opportunity, which is available through one of our partners, simply email us at: davidminteconomics@gmail.com with the word “WINE” in the subject line.
For the moment, we present the following information as a brief overview of the market of Fine Wines. While it should go without saying, we present the following information as a general overview and cannot and will not comment upon whether or not Fine Wines are appropriate for each individual’s investment situation, this is a decision that must be made by the individual. However, if you or someone you know determines that Fine Wine investing is agreeable to their taste, we will gladly facilitate the transaction.
Enjoy!
WINE MARKET ORIGINS
From its origins as an exotic drink, wine has become a long standing commodity, with a lineage that dates back to the Greek empire and beginning of trade in 1600 BC. The ancient Greeks carried wine throughout the Mediterranean coast, with Europe leading the way in consumption, production and movement. A major transformation occurred when Napoleon III requested a classification of best Bordeaux wines in France in the year 1855. Following this, wines were classified on a recognised price-based ranking, leading to the grading of the world’s finest wines.
PRESENT DAY INVESTMENT AND MARKET PERFORMANCE
The traditional notion that wine investment is about buying two cases of young wine so that, after a period of maturation, you drink one case and sell the other to finance both may have a certain romantic appeal.
As an investment philosophy, though, it is heavily discounted by today’s serious investor. Investment is all about risk and good investment choices are made when the exposure to risk is clearly understood.
Fine wines has been one of the strongest areas for investment in recent years What may surprise many is that an investment in fine wine has consistently been a low risk investment opportunity compared to oil, the FTSE 100 and even gold. Combined with strong absolute performance and low correlation to other assets, that has led wine to find a home in many serious investment portfolios.
Those interested in accessing the fine wine market have more options available to them than ever before with a range of tax-efficient structures available. The timing looks opportune too: prices came off significantly in 2011, leaving the possibility of a substantial upturn in the medium term, and inflationary fears are enhancing the attractiveness of physical assets.
There is very little correlation between financial markets and fine wine prices. For example, whilst many stocks, shares and markets crashed during the financial crisis of 2008, most wines continued to significantly appreciate in value. Whilst wine prices are not always free of volatility, the market tends to be far more resilient than many traditional investments that investors go for. The reasoning behind this is actually very simple. Fine wine is a completely tangible asset, a luxury product in which supply is always exceeded by demand. As a particular vintage wine is consumed, more of that wine cannot be produced, so the wine appreciates in value.
Fine wines frequently outperform share indices, for example between May 2010 and May 2011, whilst the FTSE 100 appreciated by 15.6%, the fine wine index increased by a considerably higher 21.1%. The Live-Ex 100 Fine Wine Index is the industry’s main performance benchmark, and represents the price movement of the 100 most sought-after fine wines. The price index is calculated on a monthly basis, with the vast majority being Bordeaux wines. Over the last 25 years the very best wines have appreciated by 15-25% per annum, a staggering return on investment very difficult to find anywhere else without very high risks.
THE FINE WINE MARKET AND SUPPLY AND DEMAND
It is the underlying supply and demand characteristics of wine which make it attractive as an investment proposition. On the supply side, Bordeaux (considered by many to produce the only investment grade wine) is a finite geographical area in France with an essentially fixed number of wine producers (châteaux). The initial supply of wine is therefore finite, and over time can only fall as bottles of the wine are consumed.
Meanwhile demand tends to rise, for two reasons. First, the quality of the wine improves over time as it matures, making it more attractive to drink. Second, global demand continues to rise as new markets for the wine open up. In the last 25 years alone we have seen Japan, Russia, Korea and China ‘discover’ fine wine and consume it in large quantities, with countries such as India and South America yet to come ‘on stream.’
Intrigued? More to come on this interesting and exciting opportunity.
Are you interested in successfully marketing a product or service? Today we take a small deviation from monetary matters to provide our faithful readers with some advice on marketing. The articles linked below are must reads for anyone positioning a product or trying to close a sale circa 2013.
The first article, by Peep Laja, founder of Markitekt, is on nine things to keep in mind when working to influence purchasing decisions. Taken together, they will dispel any number of myths that you may be currently laboring under:
While influencing purchasing decisions is paramount, it is equally important to close the sale once one senses that the decision has been made. But how can you close the sale when you are not present at that crucial moment? Your packaging must do it for you!
Finally, an article that is near and dear to our hearts here at The Mint. While advertising on Social Networks is necessary to get the ever shrinking attention span of consumers directed at your offering, what appears on Social Networks alone is hardly perceived as authoritative.
Independent blog reviews, on the other hand, give an air of authenticity to what is being said. After all, reaching out to a well known blogger and having them review your offering takes a bit more time and effort than simply posting on Facebook:
And there you have it, three articles that we hope will challenge and enrich your marketing experience as well as helping to focus your limited time and resources on things that matter to consumers.
Most persons in the financial industry, and likely beyond may recall that a mere five years ago, the Lehman Brother’s bankruptcy filing rocked the financial markets and served as the official notice that the blind 25 basis point hikes in the FED target rate that had passed as “monetary policy” during the go-go years of the early 2000’s were not exactly what the economy ordered.
In a matter of months, an entire industry that had been operating in a nearly infallible uptrend since the early 1970’s began to retool itself to cope with significant downside risk.
The Lehman event took place on September 15th and, while it did not exactly catch the US Treasury and the FED off guard, it did catch them without the resources or authority to do anything about it. As Phillip Swagel details in this piece “Why Lehman Wasn’t Rescued,”:
“Lehman failed before TARP was passed or even proposed to the Congress. This meant that the Treasury Department had no legal authority to put government money into the firm or provide a guarantee for its obligations. This changed with the passage of the Emergency Economic Stabilization Bill on Oct. 3, 2008, which provided $700 billion in TARP financing to be used to purchase troubled assets (used in the end mostly to purchase preferred shares in banks).”
Swagel goes on to state that the cases of both Bear Stearns and AIG, whose subsequent bailouts caused Lehman stakeholders, amongst others, to cry foul, differed on one very significant count:
“To all eyes, the problem at Lehman was one of solvency while the issue in the other two cases was liquidity. The Fed’s actions on Bear and A.I.G. were thus appropriate in its role as a lender of last resort and the same with its caution at Lehman.”
And so began the cascade of minifailures which have become collectively known as the Financial Crisis of 2008, as liquidity was provided to the solvent while the insolvent went quickly into history’s dustbin.
At The Mint, we refer to this odd period of time as “August and Everything After,” with apologies to the Counting Crows. It was a time when the industry threw in the towel, and the prevailing current became one of loss avoidance.
Today, just over 5 years later, we believe that we are at a similar inflection point with regards to tendencies in the financial markets, hence our tagline “August and Everything After All Over Again,” only this time, the tremendous risks in the financial system are not on the downside, where everyone is looking for them, they are on the upside, where few dare to tread.
The few who have tread confidently on the upside risks, despite the commonly held beliefs to the contrary, would have nearly tripled their money by doing something as mindless as going long the Dow circa March 2009, when it appeared the Dow companies themselves were to be swallowed up.
At this point in time, the upside risks are hidden from most. While the stock market continues to churn out an impressive performance, a more significant trend has been playing out in plain sight: Private investment activity is going through the roof.
While publicly traded equities get nearly all of the airtime, it is becoming clear that the advantages of being a publicly traded company are being outweighed by the regulatory burden and incredible scrutiny that public companies are under. To sum up the plight of public companies circa 2013, they are easy targets.
The answer for many has been to “go private,” and go private they have, from Ford to Blackberry, companies that once basked in the public limelight have found that going private may be just what the doctor ordered.
To accentuate this trend, today is the day that a key provision of the JOBS act takes effect, allowing private companies and startups to solicit accredited investors publicly rather than needlessly lurking about in the shadows as they had done since the days of the Great Depression.
The Role of the Federal Reserve
The Federal Reserve, in direct violation of Natural Law
FED observers watched in near disbelief last week as the US Central Bank declined to “Taper,” which means to scale back the amount of money that they simply print and hand to holders of US Treasuries and Mortgage Backed Securities, citing downside risks.
In observing the FED, we can confirm that the economy currently faces unimaginable upside risks, as they are paradoxically always the last to react to market realities which they have unwittiningly created.
The FED and their observers labor under a belief that is both accurate and woefully misguided all at once. It is true that the Federal Reserve, in regulating short term interest rates and the base money supply, has nearly unchecked influence on the level of economic activity anywhere that dollars are used in exchange. This is a simple reality of the insane “debt is money” monetary system that the world suffers under. The primary issuer of the debt determines how much money there is.
They are wrong in thinking that the FED is clairvoyant in any sense of the word and can somehow time their interventions to achieve desired effects on the underlying economy. In this sense, the FED is always the last to react as it has no idea what the true timing of the cause and effect of their policy decisions are. While they have produced reams of academic work to prove their theories, in practice, it is nothing more than guesswork with the benefit of hindsight.
This is also why the FED will only “taper” when nobody cares whether or not they taper, i.e. when there is so much money flooding the system that the dangers are clearly on the side of hyperinflation. Inflation, in their mind, is much easier to fight than the deflationary spiral the the Lehman event triggered five short years ago.
They are right in the sense that in a hyperinflationary environment, the monetary system simply needs less juice, where a deflationary environment threatens their stranglehold on the world’s monetary system.
To understand the depth of the incompetence of the FED and Central Bankers at large, one need only look to their latest hero, Michael Woodford. Mr. Woodford wrote a book titled “Interest and Prices: Foundations of a Theory of Monetary Policy” in which he deals with problems of zero bound rates and quantitative easing, ideas that were being toyed with back in 2003 when the book was published as mere theory. Now, they are part of a Central Banker’s everyday life, and Woodford’s book is considered their bible.
The base of Woodford’s theory, which we have come to know as “foreword guidance,” is that when monetary policy is accommodating maximum liquidity and the system still lacks it, policy makers must resort to telling market participants what they will do, essentially tying their hands in the future, in order for liquidity to exceed its theoretical limits. This is the only reason why Ben Bernanke now holds a press conference after FED policy meetings, so that this theory can be implemented.
Woodford’s theory of Foreword Guidance, like Quantitative easing, is further evidence that the current monetary system has failed. It has failed in the sense that even unlimited amounts of debt masquerading as money cannot satiate the need for liquidity in global markets, which are so disconnected from actual physical conditions that it is impossible to tell which projects are a net benefit to humankind and which take humankind further down the path to fantasyland, where all play and no work promises a lot of pain and scarcity down the line.
The risk in the “After August” period is to the upside, and central bank notes will become irrelevant as the global economy goes into overdrive and a new monetary system will be tacitly agreed upon by all participants.
When the Central Bankers of the world look up from Woodford’s textbook, they may catch a glimpse as the Tsunami of liquidity washes their currencies away.
The FED has nearly doubled the base money since 2008, are re you ready for it to multiply?
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair…”
Preamble of “Recalled to Life”, the First Installment of Charles Dickens’ 1859 novel, A Tale of Two Cities.
We’ve always liked this preamble. While the story that follows it is no slouch either, the preamble alone is worth the price of admission. In economic terms, these 60 words may be priceless, as they have played no small part in the over 200 million copies of A Tale of Two Cities that have been sold.
Today, it is our intent to become the next in a long line of writers to piggy back on Dickens’ famous preamble by way of framing our recent tablet purchase experience and extrapolating it into brief commentary on the short term fates of technology giants, a category that barely encompasses the importance of these two companies, Google and Microsoft
First, a bit of history in which we shall reveal our age. Our first experiences with a computer came circa 1984 at the tender age of 10 when HP still had versions that relied on something of a small cassette tape to store and transport data. These machines were quickly overcome by the likes of the Apple IIe. Those were the days when green text on a screen was enough.
In our limited tech worldview, Apple was king until Microsoft’s Windows OS came onto our radar, followed by Word and Excel. In retrospect, while Word Perfect and Lotus (or Quattro pro) were the word-processing and spreadsheet choices du jour, Microsoft seemed to have a knack for sitting back and getting things right, ceding the first strike advantage and using their earlier competitor’s as a prolonged market research experiment before introducing a superior solution.
While it is a slower strategy and sacrifices the opportunity to seize early adopters that become entrenched in their competitors ecosystems, it has worked in every arena where Microsoft has tried it.
Fast forward to today. Microsoft was not even on the radar as the iPod/iPhone revolution again showed that Apple still retained its uncanny ability to be the first to market. Apple parlayed this victory into again seizing the first strike advantage in the tablet space and sending a raft of innovations to market before their competitors could fully grasp what was occurring.
Yet as any well-trained general will tell you, having the first strike advantage and winning a war are two different things.
Roughly in November of last year, we observed that it was time to begin shorting Apple. We were late to the call but nonetheless, it has played out. At the time, all we could see were Apple’s shortcomings based on our purchase of an Android phone which to us seemed clearly superior and more economical than its Apple counterparts.
Over the summer, as if by accident, we stumbled upon yet another nail in Apple’s short-term coffin: The Surface.
We attended the Microsoft store grand opening in Portland over the summer as an obligation. However, once the hype was finished, we decided to take a stroll through to see what type of weak offering Microsoft was throwing money away at. In our mind, Microsoft had thrown in the towel.
We walked out of the store with a Surface RT (the watered down version of Microsoft’s version of the iPad) and a completely different perspective. The Surface did everything, and a bit more, that we had hoped the iPad would.
Microsoft had done it again, as it had in the ’80s and ’90s, while it stung to watch the masses flock to the mirage of iParadise, it bode its time and learned from the iPad’s weaknesses.
What is the iPad’s weakness? In an attempt to generalize our thoughts on the matter, we will simply state that the iPad is for digital consumers while the Surface is for digital producers (such as ourselves). In layman’s terms, if one needs to browse and respond to emails with text, the iPad is sufficient. If one needs to elaborate documents, spreadsheets, and the like, the Surface is everything you had hoped the iPad would be.
The iPad is not a laptop, nor is the Surface, but the Surface is much closer.
While the Windows 8 OS still requires years of app development and a bit of training, it is a dream in the tablet environment once mastered. It does all of the logical things that we had hoped the iPad would. It allows you to easily toggle between open apps and, more importantly for those of us who grew up managing a Windows desktop, if sufficiently allows one to manage in this environment to feel at ease.
Beyond that, the Surface tablet keypad is superior and Skydrive (Microsoft’s response to the iCloud), is extremely intuitive and allows one to make simple edits on a browser if necessary.
Microsoft has once again shown that its strategy of biding time can pay big dividends. While it has a long way to go to reach the penetration levels of Apple’s iEcosystem, Microsoft has quietly introduced a superior product in the tablet space, and while it is no longer time to short Apple, it may be time to once again go long Microsoft.
A final question must be addressed here. Why has Microsoft chosen to offer a tablet when for years it offered simply software and relied on third-party hardware?
It is simple, and a fact that must not be overlooked when analyzing technology offerings. The tablet (and smart phone), as the Internet browser once was, is now the main portal to the digital world. Microsoft’s offering of the Surface is as important as its offering of Internet Explorer was, which is why the company is almost giving them away.
For with the Surface and Windows 8, Microsoft not only has Apple’s market share in its sights, but Google as well, and if things continue to progress along this path, Google will find that tablet producers will sidestep its gates at every opportunity.
“For the day of Yahweh is near all the nations! As you have done, it will be done to you. Your deeds will return upon your own head. For as you have drunk on my holy mountain, so will all the nations drink continually. Yes, they will drink, swallow down, and will be as though they had not been. But in Mount Zion, there will be those who escape, and it will be holy. The house of Jacob will possess their possessions.”
Anyone who has taken time to read the Bible, specifically the Old Testament, has no doubt encountered text similar to that found in the first sentence in the above excerpt taken from the prophetic vision of Obadiah.
It refers to the fall of nations. For years we were somewhat vexed as to what this would mean. It is clear that history itself appears to be a constant rising and falling of nations as weaker or “evil” nations fall and stronger, more “just” nations take their place. What would happen, then were all of the nations to fall at once?
What at first appeared vexing is now clear. The nations, all nations, are mere constructs of men. As we have described in this space, at best the nations may be seen as a response, albeit misguided, to humankind’s inherently anarchic surroundings. Yet as human constructs, it is inevitable that the nations, rather than improving over time, are bent on self-destruction from their inception.
Indeed, this is the case today. When nations appear to be getting stronger, this is a result of an increase in human cooperation fostered on a base of trust and free trade. Over time, the nations unwittingly work to erode the base of trust and free trade that humans have formed. Once the people realize this, they inevitably work to throw off the yoke of the nation, and begin to walk in the Kingdom of God.
Such is the rise and fall of nations, and if the vision of Obadiah and countless other biblical prophecies come to pass, the ultimate fall of all nations is a sure thing.
We recently returned from Bolivia, which, for the geographically challenged, is a relatively large country located in the heart of South America. Our better half hails from this land that extends from the peaks of the Andes to the Amazon basin, and we have more than a passing interest in the goings on there.
What we observed in Bolivia this past trip can only be described as an economic boom. While the economy has been on the uptick for a number of years, what we saw this year was well beyond an uptick. During previous visits, we witnessed the construction of major roads along with an insane number of apartment complexes being constructed. On this trip it was evident that the parks are now being maintained and the number of western style shopping malls and other spaces had greatly increased.
The homogenization of Bolivia, as we are fond of calling the phenomenon of globalization, is well underway.
Indeed, as one toggles the GDP of Bolivia on the embedded chart below, courtesy of tradingeconomics.com, the warp curve of economic growth that we have observed in our travels there, which began in 2005, just before Evo Morales (whose policies can only be described as Neo-Socialist) was elected, is confirmed by GDP figures.
As we descended into Viru Viru, the interestingly named airport in Santa Cruz, we struck up a conversation with a young man who was working as a commercial diver in Oman. In the course of the conversation, we remarked that Bolivia appeared to be in the midst of an economic boom.
When we asked our fellow weary traveller his opinion as to why the Bolivian economy had entered into its most recent growth spurt, he simply replied, “se fue la DEA.” Which means, the DEA is gone.
The DEA (US Drug Enforcement Administration, for those unfamiliar with the show Miami Vice) had occupied the rich agricultural land of the Chapare, which, while not ideal for growing coca leaves, enjoys a humid climate in which nearly anything will grow quickly, for nearly 33 years when Morales ordered them to leave during a diplomatic spat with the US in November of 2008. It was a long-standing grudge that Morales, a coca farmer himself, had against the agency which he saw as an imperial force which harassed the simple farmers in the region that was his adopted home.
A quick glance at the GDP graph above seems to indicate that the DEA’s departure, which was completed in early February of 2009, appears to have been the catalyst that sent the Bolivian economy into overdrive.
Not only that, but when one overlays the Latin American GDP in the graph above, it is clear that not only Bolivia, but all of Latin America has experienced a similar GDP warp curve and attendant development in their infrastructure and consumer amenities.
While it may appear that a simple injection of drug money, which now flows somewhat unhindered into the country in search of the now abundant coca leaf (the raw material for cocaine and other illicit drugs) would account for this unprecedented growth, the phenomenon has coincided with another US policy that has paralleled the time frame in which Bolivia has been “DEA free*.”
Ben Bernanke’s printing press, which kicked into hyperdrive circa 2008 and has not stopped since.
While places like Hong Kong and China receive a great deal of attention for their respective currency pegs to the US Dollar, the Boliviano (the Bolivian national currency) is also pegged to the US Dollar in a similar 7:1 fashion. As such, the Bolivian economy, which until recently has had a relatively low-level of consumer debt, has taken the dollars that Bernanke had intended to stimulate the US economy, and put them to work rather than throwing them down the black hole of their banking institutions.
So what is the ultimate catalyst for the explosive Bolivian and Latin American GDP growth over the past five years, the DEA leaving Bolivia or US Monetary policy? Either way, it is clear that despite the Socialist bent of many Latin American countries, there is a flashing green light to invest in them as long as these two conditions persist, for they are like rocket fuel for these largely cash based economies with dollar pegs fixed to their national currencies.
“Viva mi Patria Bolivia…como la quiero yo!”
*Morales has deployed his own military to fulfill the role of the DEA in their absence, however it is evident that they are not as zealous in their persecution of the coca leaf as their American counterparts.
Today marks the beginning of the Jewish high holiday Rosh Hashanah, a celebration of the new year, a celebration of the creation of the world.
We are convinced that the Messiah, Jesus, is returning. We are equally convinced that it has not been given to any man to know the exact time of his return.
What we do know is that we will know the season of his return. The interpretations which we have heard of Jesus’s declaration recorded in Matthew 24:36 generally center around the premise that some sort of series of great catastrophes will be unfolding and a series of signs will be in some stage of fulfillment, implying that these things will mark the season of Jesus’s return.
Here at The Mint, we subscribe to a much simpler and more profound understanding of this scripture, drawn from an understanding of the Jewish wedding ceremony. Jesus will arrive during the fall season in the Northern Hemisphere.
In fact, based on the timing of His death and resurrection, the Passover, we believe that His triumphant return will logically take place over Rosh Hashanah. The celebrated Feast of Trumpets.
Feast of trumpets by Aleksander Gierymski (1850–1901): Painting of Hasidic Jews performing tashlikh (ritual washing away of sins) on Rosh Hashanah, placed on the banks of the Vistula River in Warsaw.
Not necessarily this fall, mind you. For it is impossible to know for certain. If one were to attempt to pick a specific year, the logical choices would be one of the upcoming Jubilee years, 2018 (starting on Rosh Hashanah 2017 on the Gregorian calendar) or 2068, or the final year of the 6000 year Jewish Calendar, 2240.
Yet it could be tomorrow, or the next day, as Rosh Hashanah has the element of uncertainty as to precisely when the new moon occurs. This detail fits nicely with Jesus’s declaration that we would not know the day or time.
With all of the things that are happening in the world, many have begun to speculate that the end is nigh.
Clearly, the end is always nigh, and calamities such as the ones humanity is currently suffering have always taken place to some degree ever since mankind chose to disobey God and turn their back on their Creator.
Today, with billions of us on the planet, these calamities are multiplied to a staggering degree. The good news is that God’s grace and mercy are experienced in abundance as well, and this will overcome all suffering and calamity as He daily establishes His Kingdom within and amongst us.
Rosh Hashanah may be the most important and least observed/understood holiday for anyone who is not Jewish. However, what occurs over the next nine days will set the tone for the coming year. They occurances are of such magnitude that the Jewish title, the “days of awe,” may be the only appropriate descriptor.
Under these circumstances, Jesus announced that He would not attend the upcoming Feast of Booths (Tabernacles), or Sukkot, the Jewish Festival which follows Yom Kippur, the day of atonement, which was the holiest day of the year. Jesus’ initial reluctance to attend the Feast, and ultimate decision to attend, has great significance, both for our understanding of the sixth sign and for Jesus’ future second coming.
As you may recall, Rosh Hashanah, the Jewish new year, marks a new beginning. The Jews believe that on this day the fate of each person for the upcoming year is written by YHWH in the Book of Life. The days (approximately 9) between Rosh Hashanah and Yom Kippur, known as the the days of awe, are spent in deep reflection, fasting, and prayer. It is a time of confession and repentance, it is a time of recognition that we are but dust, yet infinitely precious in YHWH’s sight.
The Jews believe that the fate which is written on Rosh Hashanah is then sealed by YHWH on Yom Kippur, at which point the Feast of Booths begins. It is our speculation that Jesus made the decision to ultimately attend the Feast of Booths to symbolically seal His fate. He would give His life for humanity on the upcoming Passover.
Yom Kippur is regarded as the Sabbath of Sabbaths, as such, it is only appropriate that the Jewish leaders who were looking for a reason to kill Him, would carefully observe Jesus in hopes of catching Him breaking their observance of the Sabbath.
As Rosh Hashanah begins, we hold fast to our faith, cleanse our minds and spirits, and resolve to love and forgive as God has loved and forgiven us. The Messiah is coming, the trumpet is about to sound!
As we stated before, what is currently occurring in Syria has serious implications for all of humanity, and with the weight of the world on his shoulders. Obama has chosen to do what any self-respecting statesman, circa 2013, would do. Mr. Obama has punted the question as to whether or not the United States should intervene via military action to the US Congress, who, it would appear, have been pulled away from their leisurely summer pursuits in an effort to inform themselves on the situation before they cast a vote on the matter.
What will they decide? The world is holding its breath in anticipation of the outcome of this latest political charade. For most thinking people, the answer is clear, the US should avoid a conflict that will not only trigger a series of inevitable side shows which are sure to include standoffs with China, Russia, and Iran, complete with Israeli sabre rattling in the background, but will most surely further bankrupt a government which has operated in the red without a budget, let alone a clear foreign policy, for five years running.
Fortunately for investors and unfortunately for the Syrian public and the world at large, the US Congress is not renowned for its thoughtfulness in such matters. While the British MPs took the high road and have prohibited their fearless leader from committing to military intervention, we would expect the US Congress to reluctantly authorize the use of force holding up an ambiguous “moral obligation” as the ultimate reason they have chosen to reluctantly order a military intervention.
Moral arguments aside, war, like zero bound interest rates and quantitative easing, is good for stocks and moneylenders and bad for everybody else involved. Should the US Congress authorize military intervention in Syria in their upcoming vote on the matter, we anticipate a short-term dip in equities, perhaps only a few days, which will present a tremendous buying opportunity.
The situation in Syria is lamentable and a blight on the basic humanity of us all. It is also a powder keg that threatens to further destabilize, were it possible, the fragile Middle East. Should the powder keg go off, equity values are likely to rise dramatically in the medium term against the backdrop of a widespread military conflict.
Unfortunately, price levels for everyday goods will rise even faster. While we hope for a no vote, it would be wise to anticipate a yes vote and plan accordingly.
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