Designing better futures

Policy Swans captured on video and other trivia: Nixon, 90% S&P Earnings declines, gold controls

Sometimes looking back helps us remember how things have changed and how perhaps they may change again.  From the always interesting Zero Hedge Richard Nixon justifying tariffs and price controls.   It also has a "don't worry about the dollar decline as it will only affect those who buy non-american and travel abroad." 

Scary stuff any thoughts on how far away we are from it today?

The big picture has a nice post showing the 90% decline in S&P 500 profits. 

And the first time ever for negative S&P 500 earnings.

I just put a Norwegian Krone & gold currency overlay position on a friends portfolio.  We will see how this insurance policy works out in 2-3 years.

Here is a little video with FDR putting on the Gold hurt that caused people to lose 50% on their gold by controlling the sales prices.  Please note that "blame the banker" rhetoric never goes out of style.

Here is an Ad for an $8,300 Chrysler from the 80's. Amazingly the thing gets 40MPG Hwy back then.

My first car was a 1968 cadillac limo similar to the one below, which was handy for driving about with ones freinds growing up in Iowa gliding by the corn fields.

The Best Political Series: House of Cards

Fire up the netflix/torrent video pipe of choice. The best example of political television comes from the BBC.  If you like your characters direct and with a wicked Machiavellian streak there is none Finer than Ian Richardson playing Francis Urquhart the Prime Minister in the BBC Series House of Cards.

It doesn't get better in terms of devious characters and a marvelous introduction into politics as it probably really is. The pleasant American supposition of doing the public good is missing, but the pursuit of power is on clear display.

House of Cards sets the bar very high for any political drama or political character you may ever see again.  Consider the current bailouts and other games a foot these days while watching.  There is nothing better than a crisis as a pretext for the exercise of power.

What are you paying attention to? Equity tricks & Fed Magic or the dependency ratio?

Some things in the world appear to be changing rapidly, yet one should focus on the big picture.  Magic is the art of deception.  This video takes the trick out of the magic and yet still amazes.

After watching this, think about your own perceptions as filtered through the media's "today" focus.  My suggestion for information is a healthy diet of 1 part news :3 parts book, research and exposure to other fields of thought in order to maintain perspective. 

This is part of a series in Wired magazine on Magic and cognitive science that is well worth considering.

The point is that we hold our cognitive skills in greater esteem than they deserve.  Reality is a perception.

Consider these perception biases when seeing reports from whatever captures the media's attention today or this millisecond. While focusing on a few billion $'s of losses or bailouts sloshing around here or there, the background of many developed countries "dependancy ratios" have changed significantly in the last 30 years.  Here is a little snippet from an older Harvard Business article. 

Demographics are mostly inevitable, but discussing a dependency ratio that moves at a constant rate hardly merits CNBC's attention.  My bias is for Charlie Rose interviews which offer more considered views on serious matters.

Our current economic issues are happening to a country and world that is slightly different than the 1930's etc.  That chart of this bubble or that bust should be considered interesting, but limited.

My  bias is for structural similarities to the panic of 1893.  A useful source for thinking about these things is Kindelberger, that man knew his bubbles and their causes.

The big picture is changing drastically and yet attention and energy is focused on the current day to day details.  Enjoy the economic show, as taxpayers we all paid for premium tickets, but what happens to automakers and the major banks is really just a sideshow in the context of the next 20 years.

The Berkshire Bill, a modest central banker 2.0 proposal

This weekend is the Berkshire Hathaway annual meeting.  As a native Iowan, I always like to see lads from the Midwest do well by doing right.

So in the Swiftian tradition, I offer the following business proposal. 

These days Washington has an interest in nationalizing all and sundry, but particularly focuses on the broken down and downright dysfunctional.  For those teabaggers and others more fortunately named, how about opting out of Dollars and dodgy central bank behavior altogether by voting with your wallets.

Before the advent of US central banking in 1913 there were thousands of currencies issued by local banks.  Bank Notes traded at discounts to one another based on distance and the perceived faith in the issuing institutions. 
The US Federal reserve with its quasi public-private shadowy ownership is taking some rather questionable assets on to its books.  You can opt out of this by holding another currency. 

But, who to trust? The Peso? Come on that thing is a bit fluey?!!!  The Canadian dollar is just a rag doll dragged around by the US dollar. The Euro is looking a little frayed around the Eastern edges. The Brits are setting rates at 315 year lows.  The Swiss franc smells of an off cheese under a mountain of old bank debt.  I like the Norwegian Krone, but have a softness for Scandinavia, that you may not share. 

Meet: your new central Bank manager

Berkshire Hathaway

Perhaps it is time for a resurgence of private currencies.  I propose the Berkshire buck= BH1.  The Berkshire buck (berky) is a note representing a 1:100,000 of a share of Berkshire Hathaway.  A single trusted party will purchase shares of Berkshire Hathaway and hold them on reserve against the published supplies of Berkies. So the current Berkshire buck would be worth about USD $0.93 as of Friday May 1, 2008.

 The holding ratio would be fixed and audited.  No issuer shenanigans and inflation at the Berkshire issuing treasury.  The Berkshire treasury and central bank have one mandate,  keep a constant 1:100,000 ratio of shares held to notes issued and outstanding.

C-Note be damned! Behold, the B-Note.

Berkies are freely traded and easy to mark to market.  Berkies hold an Aa2 rating better than many countries.  They own a 20% stake in ratings agency (Moody's), kind of like being your own reserve currency.

Setting this up as a  business is pretty straightforward, you hire a bank note printer such as Giesecke & Devrient Gmbh.  They will be desperate for business with the Zimbabwe hyperinflation market gone.  Next, get the legal framework drawn up and then work some distribution angles. 

Issuing currency or (securities) as such is illegal in the US.  So just produce them offshore and wait for them to leak into the country, like Dollars and Euro's do globally into other countries.

It works as a business because of breakage.  Over time notes get lost etc.  This attrition could cover the printing and running cost of the currency.  $1-2billion in Berkies could yield 1-2% a year for the producer from breakage, hey that is $10-20m/year alone. 

If that wasn't enough income you as the central banker could fix an annual discount rate of 1% of the date of issue on the note.  This approach has been used to stimulate economies by increasing the money velocity in many economies.  If the company Berkshire Hathaway ever paid a dividend the central bank could retain it, yet another source of income.

Berkshire has a big positions in Costco, Well Fargo and AMEX which could be great physical BH buck distribution partners.

Central banker 2.0: inflation is a passe income method and don't even mention buying toxic assets.

In terms of income, the BH central bank could advertise on the notes.  Sell space on the lower denominations for consumer goods and premium products on the high end notes.  Wouldn't a Mercedes or Gucci brand want to be on a few BH100's. Wow, talk about value and a halo effect for marketers or a brand?

The lower denominations could become collectors items, do I hear 1BH buck Pokeman marketing magic, nothing like a little liars poker for the tykes.  Marlboro man on the 5BH sounds about right for the price smokes for a butch American currency.  Cologne companies could put scratch and sniff decals on BH50 notes.  The central bankers returns could get interesting fast and money velocity would equate to eyeballs for markets.

You probably haven't seen a 500 Euro note, unless you dabble in the arms or drugs trade on the weekend to make ends meet (damn that bonus). The markets for higher denomination notes are a bit unsavory such as the black market which has an interest in high denomination bank notes.  Printing +$1,000 Berkshire note would have high demand but could get dicey so be careful, don't want to taint the brand equity.

So there you have it, a "value" currency, the Berkshire buck.  You have nice Midwestern gents as trustee central bankers in Warren and Charlie.

FYI, take a look at the notes, I put Charlie on the BH100 as he likes Ben Franklin and doesn't get much air time.  Also note the "All seeing eye" on the 1 Berky note has a nice eyeglass to improve its vision.  Please don't tell the illuminati :), the name dollar has been around as a brand for awhile. 

On another note (pun intended), I built some 3.0 sharpe trading systems and am looking at working with a proprietary trading shop using commodities, debt, forex and volatility.  Anybody know what a "good" deal is these days?