The Greatest North American Holiday is Upon Us

11/27/2013 Portland, Oregon – Pop in your mints…

Inflation in asset prices is beginning to appear at a breathtaking pace, and, while $1000 Bitcoins and 10% month over month increases in the London property market appear to scream “bubble,” the truth of the matter is that we are just getting starting.  The Federal Reserve and every other Central Bank on the planet have given up on any sort of meaningful restraint, and there are Trillions of fiat currency units that are just looking for a reason to stir up what passes for economic activity circa 2013.

There will be plenty of time to watch numbers tick higher and even more plentiful opportunities to be had for ventures of all sorts in the weeks and months ahead.  Today, we must pause, reflect, and give thanks.

For tomorrow is Thanksgiving.

"The First Thanksgiving at Plymouth" (1914) By Jennie A. Brownscombe
“The First Thanksgiving at Plymouth” (1914) By Jennie A. Brownscombe

Thanksgiving is the Greatest North American Holiday, for, in an age where most holiday traditions can be only dimly observed beyond the lights of commercialism, it is one of the few that most purely reflects its heritage.

And what a heritage it is.  While the general idea of “Thanksgiving” has existed in religious and other faith centered communities from time immemorial, the Thanksgiving that we will celebrate tomorrow traces its origins to a three day feast held on the Plymouth Plantation in November of 1621, which was the culmination of a series miraculous events that came to pass for a group of Pilgrims who boarded the Mayflower in mid-July, 1620 and brave companions from the Speedwell who were determined to carry on despite the Speedwell springing a leak and being forced to turn back to England.

The Mayflower, like many ships of the day, was a trading ship, and the Pilgrims, who were English Dissenters (to give one an idea of conditions in England, Guy Fawkes Night had occurred a mere 15 years earlier, and religious tolerance was non-existent on the isles), were on their way to freedom having been financed by merchants eager to tap the riches of the New World.

The journey was perilous, and the storms in the North Atlantic took a heavy toll on the ship and its passengers.  At least twice during the more difficult stages of the journey the idea of returning to England was debated.  Frankly, anyone who has been on a journey that has become imperiled by weather conditions will understand the nature of such conversations.

The Mayflower, as we now know, pressed on and landed in the New World on November 11th, 1620.  After a difficult journey, they had now arrived on land, and their true perils were about to begin.

After failing to find land suitable for a settlement, the advance party again boarded the Mayflower and sailed down to what is now known as Plymouth Rock, where they found an area that was ideal for both settlement and agriculture.  As it turns out, the Patuxent tribe had inhabited this land until a plague wiped out all but one of its members just four years earlier.

The surviving member of the Patuxent tribe was named Squanto, and he was to play a key role in making the first Thanksgiving possible.

In November of 1620, the Pilgrims set about the first order of business to be tended to before the winter would set in, building a common house (in what turned out to be our own strange homage to this event, we spent today racing against the winter rains to complete a tree house/play structure/deck in our backyard).

Over the winter and early spring, 49 of the 101 who had made the journey on the Mayflower (during the journey, two perished at sea and one baby was born) had perished, and the prospects for the coming spring were grim, as there were now just 20 adults and 30 children.

It was then that a series of miracles began to occur.

First, a Native American named Samoset, who spoke English well enough to communicate, came to the settlement to welcome the Pilgrims.  Samoset then went to get Squanto, who was at first hesitant to come near to the settlement, as he had been captured and sold into slavery twice by English ships prior to this encounter.  However, he had been observing this group of Englishmen and found them to be quite different than the others.

{Editor’s Note:  You can read a bit more of Squanto’s fascinating story here.}

Squanto taught the Pilgrims how to grow corn and other key survival tactics to the new inhabitants of his native land, who he now called his people.  He then brought Massasoit, the chief of the Wampanoag and the leader of the tribes of the region.  Massasoit provided foodstuffs to the Pilgrims and agreed to a peace treaty with them that would last for 50 years.

With the aid of the Native Americans, the Pilgrims survived and, in the fall of 1621, had a bountiful harvest.  They declared a feast of Thanksgiving that lasted for three days and was attended by Massasoit and 90 other Natives.  It was a feast of Biblical proportions in the sense that it was a true tithe, where the first fruits of the season were brought together and enjoyed by all in the community.

Massasoit and governor John Carver smoking a peace pipe
Massasoit and governor John Carver smoking a peace pipe

And the rest, for better and for worse, is history.

Thanksgiving is a time to celebrate the miracles that occur in the lives of each and every one of us.  It is a time to reflect upon the people and the providence that have provided for us in miraculous ways throughout the year.

For each circumstance in which we live is a miracle simply because it is, and our lives are tapestries that are woven together by the Creator of such awe inspiring beauty that any difficulties encountered along the way simply pale in comparison to the whole.

Thanksgiving is a time to step back and celebrate this tapestry with the Creator, and, when contemplated along with the abundance that fills our lives if we would only pause, reflect, and open our eyes, join together with our loved ones and all of humanity, lifting songs of praise and Thanksgiving to the Father of us all.

As it was at Plymouth in the fall of 1621, so let it be with us tomorrow, for it is what our present circumstances call for each and every day.

Happy Thanksgiving

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 27, 2013

Copper Price per Lb: $3.18
Oil Price per Barrel:  $92.25

Corn Price per Bushel:  $4.17
10 Yr US Treasury Bond:  2.75%
Mt Gox Bitcoin price in US:  $1,067.29
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,238

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  16,097
M1 Monetary Base:  $2,516,700,000,000

M2 Monetary Base:  $10,921,000,000,000

Planning and Execution of Business Strategy

11/21/2013 Portland, Oregon – Pop in your mints…

The gift of time we have been given here at The Mint has not been wasted.  In a way, it has given us a chance to reevaluate what we are doing and how we can best serve humankind.  Now that we have discovered the key to reversing the effects of climate change without limiting human reproduction or dooming large swaths of land to “conservation,” we wish to encourage others to embrace these ideals and employ them to their benefit.

How can we accomplish this?  By assisting them not only with strategy planning, but execution of said strategy.  It is perhaps a little known fact that there is very little, if any, bad strategy that makes it past any form of group debate (bad strategy is almost always born in a vacuum and dictated).  What tends to go badly is the execution of said strategy.  It is then commonplace to pin the blame of what was really a failure to execute on the only one without a voice and a job to save, the strategy itself.  Voila!  Bad strategy.

Strategy is generally good because it does not just guide action, it demands action.  It may come as a further shock that, while there are a great deal of tasks that are associated under the umbrella of the English word “work,” it is almost at the point that one acquires a job and is remunerated for it when they stop what we call action, or striving forward to improve conditions so that less work must be done to achieve the same or superior results.

Sadly much of the work done today is aimed at maintaining and increasing efforts to justify why the “work” must be done.

Action is progress, work is, well, work.  This is not to say that all work is like this, but it is a nasty tendency that is the byproduct of the insane “debt is money” currency system that we trade and save in, a system that, in just over 40 years of widespread operation, has distorted incentives to the point to where GDP is increased by increasing debt, which by definition is consumption, not “Product.”

But we digress, as we are excited to help you personally and your organization stop working and start progressing.  How can we do this?  Read on…

The Mint Strategy Planning and Execution Services for Individuals and Businesses

The local and national economy is undergoing a large scale reset which will impact nearly every business model.  This is creating both challenges and opportunities that may be a once in a generation event.  Are you an individual, business owner or division head in need of fresh ideas from an outside perspective?  If so, we invite you to have a Mint.

Here at The Mint, we offer both group and one on one strategy sessions for small to mid-sized companies who wish to grab hold of the opportunities that await them as their larger counterparts go the way of the dinosaur.  Initial consultations will generally last one hour and can be done via email, over the phone, or in person if located in the Portland area.

The purpose of the strategy session is to brainstorm with you about your business and the challenges and opportunities you face.  It is often best done outside of one’s normal office environment, as being surrounded by day to day tasks (we call them distractions) often stifles creativity and blinds one to what is occurring outside one’s own four walls.

Battle of Borodino 1812 by Louis Francios, Baron Lejeune
Napoleon at Borodino, poor execution, and plan B was even worse!

While strategy is important, what is even more important is the execution of a strategy.  Strategies, from the battlefield to the boardroom, are well thought out, detailed plans.  Plans that can be utterly useless and counterproductive if there are persistent errors in executing it.

At The Mint, we do not want to see that happen to any of our clients, and our hope is that we will find something practical that we can assist with in aiding you with said execution of your shiny new strategy, such as seeking funding or streamlining processes.

That said, we consider the strategy session to be sacred and confidential, and it will never be reduced to a petty sales pitch.

We are carrying out this exercise chiefly because we want to play a small part, if possible, in invigorating our local and national economy.  We have an international MBA, hold the designation of Certified Treasury Professional, and 18 years of experience in finance and accounting in various industries and would love to hear from you!

If you are interested, please send and email to davidminteconomics@gmail.com with your industry, approximate annual revenues and assets, and the biggest challenge you see on the horizon as well as your preferred method of contact (phone, email, in person) and, of course, a way to contact you.

Let The Mint help you avoid approaching Waterloo or Gettysburg unprepared or, should you find yourself at Borodino, let us help you plan your retreat.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 21, 2013

Copper Price per Lb: $3.18
Oil Price per Barrel:  $95.09

Corn Price per Bushel:  $4.23
10 Yr US Treasury Bond:  2.78%
Mt Gox Bitcoin price in US:  $736.79
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,242

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  16,010
M1 Monetary Base:  $2,662,000,000,000

M2 Monetary Base:  $10,895,800,000,000

Bitcoin Stars in a Senate Hearing

11/19/2013 Portland, Oregon – Pop in your mints…

Bitcoins: What they are and how to use them
Bitcoins: What they are and how to use them

The virtual currency known as the Bitcoin has achieved what has become a badge of honor in the finance industry, it has become the subject of a Senate hearing.

Senate hearings have, in the past, starred noble characters such as MF Global and its lead actor, John Corzine, who still roams free after punting roughly $1.6 Billion USD to another Wall Street leading man, Jamie Dimon, who remains the head of JP Morgan, who added a $13 Billion fine to its list of greatest hits related to its dealings with other entities during what has become known as the Financial Crisis of 2008.

And who can forget the Gorilla, Lehman’s Richard Fuld, who starred in one of the earliest versions of such hearings and gave us the phrase, echoed by insolvent bankers throughout the world, “why us?”

As the Bitcoin has no central authority to speak of, the Senate Committee on Homeland Security and Government Affairs called Jennifer Calvary, head of the Financial Crimes Enforcement Network, Edward Lowery of the Secret Service, and Mythili Raman of the Justice Department to testify on its behalf.

As may be expected by three persons who are cast in the role of antagonist to anything offering anonymity to private citizens, a privilege that the government refuses to recognizes, they expressed concern about “what could happen” and “who may be using” virtual currencies such as Bitcoin.

However, the antagonists did show a measure of empathy for their crypto-foe, the same way viewers feel empathy for characters like John Q or Walter White.  While taking the government line that what people may do with Bitcoins may be bad, the Bitcoins themselves are generally harmless and, in fact, may provide a great benefit to society.

As pageantry that generally accompanies a finance related Senate hearing unfolded, the Bitcoin market went ballistic, touching $900USD before the elevator moves inherent in the Bitcoin/USD (or any other debt based currency) market took hold and thrust it back to $600, it is now climbing past $700 as we write.

While it is interesting for Senators to listen to how various branches of government propose to regulate Bitcoins, it is clear that, while they may have a glimmer of a chance of understanding the technological framework of Bitcoins, they have no clue what it means in the monetary realm, for they do not understand money.

Alas, much of humanity is in the dark as to monetary theory.  It is for this reason that we started The Mint, to explore this deep “mystery” that lies in the wallet of each and every one of us.

Along the way, we have found gems for those who would pause and listen, such as the key to reversing the effects of climate change, and why Bitcoins are the gold standard of digital currencies.

To be sure, Bitcoins have an Achilles heel, but it is not what many people think, want to know what it is and when to get out of Bitcoins?  Someday we will give them away, for now, it will cost you $0.99 USD, or 0.00141 BTC to find out.  Please pick up our hastily written guide to Bitcoins, which, to our knowledge, is the only one that has examined Bitcoins through the lens of monetary theory with clarity and coherence.

Bitcoins:  What they are and how to use them

All we can say for the moment is that Bitcoin is a buy, you can sort out the details later.

As for the government’s concerns regarding Bitcoin’s inherent anonymity in the monetary realm, we propose the following Quid pro quo.  Rather than the public being obligated to respond to the straw man argument of “If you have nothing to hide, what are you worried about?” what if the public’s retort to the government became a universal, “if you have nothing to fear, what are you worried about?”

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 19, 2013

Copper Price per Lb: $3.16
Oil Price per Barrel:  $93.43

Corn Price per Bushel:  $4.17
10 Yr US Treasury Bond:  2.71%
Mt Gox Bitcoin price in US:  $772.00
FED Target Rate:  0.09%
Gold Price Per Ounce:  $1,274

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  15,967
M1 Monetary Base:  $2,515,000,000,000

M2 Monetary Base:  $10,867,000,000,000

 

An Ode to the Veterans We’ve Known

11/11/2013 Portland, Oregon – Pop in your mints…

2012 - Another defeat to the Land of the Free
A Salute to the Veterans we have been privileged to know

With most of the markets we follow taking a breather for the holiday, save the Bitcoin, which bows to no sovereign and raced up to $383 today, we turn our gaze and tip our hats once again to veterans, not just those of the United States, which has specifically set aside this day to honor them, but of all men and women who have thrown themselves into the face of danger and worked in extremely difficult conditions to defend a national ideal that they believed in with all of their heart.

Here at The Mint, we wish to honor them by remembering the four veterans that we have known, three have passed on and one remains.  Each story is woven in with our own, and has changed the course of history for us.

First, there is our Grandfather Collins, who, as World War II raged on, managed to memorize the eye chart so that they would allow him to enlist in the Army.  While leaving our grandmother behind with countless other young women in the same situation at an Army base in Kansas, he boarded a troop transport which zigzagged its way across the Atlantic Ocean, dodging German U Boats, while sleeping on a rack with many other men, packed in like sardines for roughly 18 days until they safely reached their destination in England, where, as an ambulance driver he witnessed first hand the casualties returning from the D-Day invasion of Normandy.

“They didn’t tell us, but you could see they were mounting something big,” he told us of the preparations for D-Day.  He mentioned that they would ride bicycles 20 miles for a beer at the Pub on weekends.

When VE day arrived, he said they were allowed to stay in some of the finest hotels in Paris, but he was extremely anxious to get home to his young bride and could not enjoy it as one might imagine in retrospect.

Next, there is our other Grandfather, Victor, who enlisted in the Army early on in World War II and was sent to the Pacific Theater of operations.  While all of the Veterans we knew passed for difficult things, it was he who had the most difficult time.  He was an excellent baseball player in the Army and had the bad fortune of rupturing his spleen while playing ball in Hawaii.  While the surgeons were able to successfully remove it, they sewed up his abdomen with a sponge still inside!  The incision became so infected that they shipped him back to San Francisco to be operated on once again as he was close to dying.

When he recovered from this ordeal, he was sent into back to the Pacific Theater and, from what the family knew, contracted malaria and got lost in the jungle.  It was not until much later, after he had passed away, that we found out that he had actually been a Japanese POW and, at the end of the war, weighed just 98 pounds and again was at the brink of death.

They sent him on a train to his uncle’s farm in western Nebraska, where, fortunately, he was nursed back to health.

Third comes Edgar, our Grandfather Victor’s brother (our great uncle), who fought Germany’s Rommel, the Desert Fox, in Northern Africa.  Uncle Ed’s observations of the war that he related to us were that dentistry in the field involved a drill that was powered by a stationary bike.  As such, it was best to have a cavity filled when the men with the best bicycle legs were able to help.

He also observed that water was scarce, and it vexed him as to how the villages they visited during the war, who seemed short of water then, had grown to tens of thousands of people some 40 years later.  He and his wife, Ethel, were featured in the Reader’s Digest as a letter Ed sent to Ethel was found among a bag of US Army mail that had been found 40 years later.  It had words cut out of it to prevent the letters from giving away troop positions and planned movements that the servicemen may have inadvertently included in the letters to their sweethearts.

Ed often said that if any of us youngsters were drafted, he would pay for us to go live in Canada.  After the events of 9/11, he recommended that we read The Haj in order to understand Arab culture.

These three brave men above went on to live long, full lives and, while we have recounted some of the difficult things they were called to live during World War II, they did not doubt the call of duty which was given to their generation, and were glad to have served, and even gladder to be home when it was over.

The final veteran that we’ve known is a friend and former colleague who left the company before we did to occupy a UN post in Geneva.  We went to visit him once and he led us on a hike through some of the hills leading up from Ouchy, a nearby village, where at the top, we took in a pot of fondue and enjoyed the views over Lake Geneva.

We knew that Ryan, our friend, had been in the military before we knew him.  During our ascent over short rock walls and past cows donning bells, we took the opportunity to ask him about his experiences.  He was the leader of a tank unit in desert storm in 1991, and recalled how he would have to run up to holes in the sand to see if there were any Iraqi soldiers that had survived in their foxholes in the desert as the tank units advanced.  Not for the faint of heart.

The sacrifices of men like Collins, Victor, Ed, and Ryan all too often go unrecognized and, even more often, are not recounted, even by the very men who lived through the horrors of war to their immediate families.

We tip our hats to them and to all veterans across the United States and throughout the world of all nations, for they have demonstrated that at times it requires uncommon valor to keep the light of freedom burning in this world.

May they be remembered fondly and often, and may those who made the ultimate sacrifice rest in peace.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 11, 2013

Copper Price per Lb: $3.25
Oil Price per Barrel:  $94.87

Corn Price per Bushel:  $4.29
10 Yr US Treasury Bond:  2.75%
Mt Gox Bitcoin price in US:  $383.00
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,282

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  -0.2%
Dow Jones Industrial Average:  15,761
M1 Monetary Base:  $2,515,000,000,000

M2 Monetary Base:  $10,867,000,000,000

Bitcoin going Viral as The Mint Receives the Gift of Time

11/9/2013 Portland, Oregon – Pop in your mints…

For those who have not yet taken notice, the USD/Bitcoin ratio now sits at $322, after touching a high of $395 today.  For those who are unfamiliar with what a Bitcoin is, we strongly encourage you to read our brief primer on Bitcoins entitled “Bitcoins:  What they are and how to use them.”

Bitcoins: What they are and how to use them
Bitcoins: What they are and how to use them

While the title itself is cryptic by design, the book is a straightforward analysis of not only what Bitcoins are, but also what their design and function as money means.  Now that we have a bit more time on our hands (more on that below), we hope to return to edit and update this volume.  While the Bitcoin itself is unlikely to change, there are now many more applications for it than there were when we penned it back in April of this year.

The combination of they monetary premium and technology has made the Bitcoin industry run on jet fuel, and it won’t slow down anytime soon.   The simple reason is that Bitcoins are a bizarre yet perfect form of equity that, like Twitter, is more of a public service.

In the case of Twitter, the need to randomly comment or blow off steam at someone else’s running digital commentary may only be marginally, if at all, profitable, but the value of it as a tool that people will rarely pay to use is priceless.

In the case of Bitcoin, the need for a means of exchange which can both hold a large portion of the monetary premium and be completely portable and ethereal is self evident and, while the Bitcoin itself generates no revenues, its value as a tool that people will use but not necessarily pay for is priceless.

Contrary to most of financial theory, discounted cash flows cannot capture the concept of value, as much of what people value in this world cannot be neatly summed up in financial models.  The Bitcoin falls squarely into this lofty realm where finance fails and dreamers soar.

{Editor’s Note:  If you would like assistance investing in Bitcoins or Bitcoin related ventures, please write us an email with the word BITCOIN in the subject.  There is much to be done and, consequently, much money to be made in this nascent industry that is moving like a wave across the earth}

Time on our hands

We have recently been notified that we are soon to be relieved of the burden of what is best described as our day job.  Over the last year, we set out to work ourselves out of a job through a series of process improvements in the Treasury Department.  Shockingly, it worked.

While on one hand the prospect of quickly ramping up our other activities (The Mint being one of many) is daunting, it is also exhilarating as we are of the peculiar breed that lie awake at night and early in the morn and watch a light show of ideas cross our mind.  Some we are able to capture and quickly act on.  Others we take note of and treasure them in our heart as we await the time that they come around again in and present themselves ever more brilliantly to our mind’s eye.

As we have one other time in our life, on September 10th, 2001, we are faced with the choice to either carry on in the 9 to 5 world or to pause and chase these ideas to their conclusion, watching where they lead and enjoying the ride as we chase them there.

These types of choices, frankly, are too much for us to bear, which is why we leave them in God’s hands.  It is He who opens and shuts doors.  Our job is to pursue the ones that are open until He shouts “enough!”

What we do have on the horizon, along with a number of projects that are providently moving towards fruition, are the preparation of a class on Deuteronomy, a 20 page biology article to edit, and any number of tasks that, while each one on its own would appear to be from different fields, when taken together make up the colorful tapestry of our life, as we blindly chase through the open doors with only one clear mandate:

Help people.

If you care to join us on this adventure, feel free to drop us a line.  You never know what we might accomplish together!

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 9, 2013

Copper Price per Lb: $3.25
Oil Price per Barrel:  $94.60
Corn Price per Bushel:  $4.27
10 Yr US Treasury Bond:  1.75%
Mt Gox Bitcoin price in US:  $322.90
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,289

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  -0.2%
Dow Jones Industrial Average:  15,761
M1 Monetary Base:  $2,515,000,000,000

M2 Monetary Base:  $10,867,000,000,000

Guy Fawkes Day Quickly Becoming an International Holiday

For those who let the 5th of November go unmarked, as so many still do, by all means, do carry on.  “For those who see what I see, and feel what I feel…

Guy Fawkes, the last man to enter Parliament with honest intentions

Apart from taking the name “Guy” and enshrining it so deeply in the English language that today many commemorate him without even knowing it, the actions of Guy Fawkes on November 5th, 1605, for those today who have taken time to connect the dots and draw the parallels between the time Fawkes lived in and our own, now serve as a somewhat unlikely rally cry for freedom.

In modern-day jargon, Guy Fawkes would be labelled a terrorist and no doubt be on many a no fly list.  His bank account, telephone, and electronic communications would be monitored, and his Facebook friends would be suspects along with him.

In Fawkes’ day, taxing beards and regulating dress codes was high on the government’s priority list, a far cry from innocent government actions which we take for granted today, such as taxing tanning beds and regulating health insurance.

The more one reflects on what occurred over 400 years ago, the more one begins to understand why it still resonates with those who love freedom across the planet, as the million mask marches which took place today demonstrated.

For better or worse, Freedom is one of the few God-given rights of humankind.  It is so basic and vital to our existence that one tends to assume that all people think alike on the matter, as they would access to food and water supplies.  It is so vital and ever-present that one does not take notice until it is credibly threatened.

Whether you don a mask or not, we wish you a Happy Guy Fawkes day, may we all cherish our God-given freedom, and may those who choose to don a beard continue to do so in a duty-free manner.

Fine Wine Investing – The London International Vintners Exchange

11/04/2013 Portland, Oregon – Pop in your mints…

For those of you who thought we had forgotten to complete our mini-series on Fine Wine Investing, we admit that we nearly did.  Between the excitement of Halloween and painstakingly formatting the print version of our Economic and Philosophical Treatise, a proper completion of the Fine Wine series nearly escaped the steel trap of our mind, until today!

Throughout this series, we have dabbled into a world that, for a time, appeared to be the playground of those with a penchant for refinement or those with enough money to appear refined.  After all, mustn’t one have an intimate knowledge of the Bordeaux region and at least have heard of Robert Parker;s nose before daring to invest in Fine Wines, an asset class which not only carries principal risk, but the risk of direct consumption?

Today, thanks to the world’s leading electronic exchange for fine wines, the Liv-ex, price discovery is now within grasp of the commoner.

The London International Vintners Exchange, or Liv-ex, is like COMEX for Fine Wine.  Since is was established in 1999, it has performed an important public service, as do all exchanges, it allows the commoner a peek into the most recently discovered price points for certain vintages, which can greatly aid them as they begin their adventure in Fine Wine Investing.

Understanding the Liv-ex is crucial to today’s serious Fine Wine Investor.  The following are excerpts from a recent report on the market.  Enjoy!

THE LIV-EX and the Financial Markets

Liv-Ex, London International Vintners Exchange, is the world’s one and only leading electronic exchange for fine wines, based in London, UK. Founded in 1999, Liv-Ex provides a marketplace and online platform for wine merchants, traders and brokers to trade wines freely and easily, just as it is done by equity stockbrokers.

Liv-Ex FEW Compared to other methods of fine wine procurement, such as auction houses, the main difference is that not everyone can trade on the Liv-Ex wine platform; only registered wine professionals/experts who have a proven track record in the industry are able to place bids (buy) and offers (sell) on the platform.

Only investment grade and blue-chip fine wines are traded on the Liv-Ex platform. Moreover, unlike auctions, no antique or collectible items are traded. Therefore, the majority of trades carried out on Liv-Ex are for French wines, usually from the highest rated vintages, mainly the more recent ones.

The Liv-Ex online wine platform also publishes its own price indices based on the amount of transactions made and has developed further into becoming the leading information source for fine wines; current prices, price fluctuations, historical stock data and the fine wine market in general.

Like any exchange, the Liv-ex has also produced a series of indices, which allow the casual observer to gauge the performance of the overall market for fine wines at a glance.  It is these indices that give us the  means to compare the Fine Wine Market’s performance with that of other major asset classes.  The results may surprise you.

The following are the Liv-Ex Fine Wine Indices:

• Liv-Ex Fine Wine 50 Index

• Liv-Ex Fine Wine 100 Index

• Liv-Ex Fine Claret Chip Index

• Liv-Ex Fine Wine Investables Index

• Liv-Ex Fine Wine 500 Index

The Liv-Ex 100 Index is the fine wine industry’s leading benchmark index and even listed on Bloomberg. It includes and represents the price movement of the 100 most sought after wines, for which there is a strong secondary market and is calculated on a monthly basis.

By looking at the trading history of the fine wine market in the last decade, one may notice FWI demonstrated excellent track record which is appealing to absolute return investors.

According to the Liv-ex, FWI has consistently delivered positive absolute return over every.  Next 5-year holding period since 2000. Figure 1 below also highlights that the average 5-year foreword performance since 2000 is as high as 111%!

While the returns on the Liv-ex 50 are compelling, they become even more compelling when considered within the context of other asset classes.  The report continues:

It is also worth to note that while comparing FWI with global equities, FWI generated significant outperformance to global equities over any 5-year investment horizon since 2000, with hit rate as high as 98%, as shown in figure 2 below.

FWI provides diversification benefits to global equities portfolio. Besides outperforming global equities, FWI also gives diversification benefits as the correlation of FWI to global equities is only 0.19.

Whilst the above suggest FWI is attractive, recent trend has been less encouraging. Not only has the correction of the FWI market started to drag down the recent returns and out performance, but the diversification benefits also seem to have been diminished.

 Like any market, the Fine Wine Market must be enjoyed in moderation, as out performance tends to attract attention which generally leads to…underperformance.

It is worth noting that the Fine Wine Market, while unique, has behaved similarly to that of Crude Oil over the past 10 years, as pointed out by this excerpt from a 2011 post in the Sizemore Letter:

From 1990 to 2010, the correlation between fine wine and crude oil returns was a staggering 90 percent!

What is the takeaway from all of this?  While Fine Wines now have an established exchange, corresponding price index, and are a nice way to diversify from equities, they may offer returns similar to other commodities.

In the end, returns are returns, and from a pure numbers standpoint, the higher the returns, the better.  From a semantic standpoint, it is much more fashionable to talk about one’s Fine Wine investments than crude oil in many social settings.  Given this criteria, the answer is clear:

Fine Wine trumps Texas Tea.

This concludes our brief yet informative jaunt into the world of Fine Wines.  Again, if you are interested in hearing more about Fine Wine investing, please email us at the address below.

After one last goblet, The Mint must carry on, for the Bitcoin has nearly doubled in price, and there is much to explore in the fine autumn that is upon us.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 4, 2013

Copper Price per Lb: $3.24
Oil Price per Barrel:  $94.62
Corn Price per Bushel:  $4.26
10 Yr US Treasury Bond:  2.60%
Mt Gox Bitcoin price in US:  $237.00
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,315
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.2%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  15,639
M1 Monetary Base:  $2,515,000,000,000
M2 Monetary Base:  $10,867,000,000,000