Efficiency World

If you’re not 10 minutes early, you’re 10 minutes
later. Or so I like to tell my students. Of course
at the time I was running a little behind schedule and
was speeding to make up for lost time. I knew I had
to get gas and food before I started teaching class
and was doing pretty good until I got to the gas
station. And there one of the most reviled people
held me up for a precious three minutes in the gas
station as she;

1. Sat there and pondered which cigarettes shouldwould buy
2. Sat there and pondered which lottery tickets shewould buy
3. And then proceeded to pay with nothing other than
a…

check.

As this person was no doubt a communist plant sent
here to grind our production of GDP to a halt, it got
me thinking of a concept or “world” I had thought of
called “Efficient World.”

The whole idea is what if we got rid of that 20% that
was holding up the remaining 80% of us? I mean if we
took out all the stops, the bottlenecks and the
slowpokes, what would happen to our labor productivity
and efficiency and thus standards of living if we just
got rid of them. We wouldn’t “dispose”
of them, as much as pay them off to go live on an
island somewhere and get out of our way. What would
happen?

The most obvious effect I think would occur in our
transportation system. There would be no “gawker”
effect as efficient people would not have such boring
lives that a common car crash would constitute
entertainment. The left lanes would be free and clear
for those who are passing to pass, not to soak up the
left lane in their Buick Regal. The speed limit could
effectively be raised to 90 MPH because we could
handle it and know how to drive. Roads would have 5
lanes on each side because we would refuse to tolerate
a rush hour. And five lanes may not be necessary as
most of us in Efficient World would drive cars and not
ride buses or drive mini-vans or SUV’s, thus damming
up the roads. Arguably there would be no rush hour as
in Efficient World people would (foreign concept) LIVE
NEAR WHERE THEY WORK! And even that might be too much
of a commute, because more citizens of Efficient World
would work from home because there’s really no reason
in corporate America today to have an office.
The price of oil would plummet because we’d use so
little of it.

I also forecast there would be no grocery stores, only
convenience stores as most people in EW would
subscribe to the highest level to Adam Smith’s law of
specialization and never cook their own food.
Refrigerator sales would plummet as we’d eat out all
the time, because it would not only be cheaper over
the long run, but probably better for us. And as
other areas of labor became so specialized, many
chores and tasks we do ourselves would be outsourced
to specialists.

And lines, the elimination of lines. I wouldn’t have
to wait for Tilly with her 50 items in the 10 item
only “express lane” as her children grab random
tooth-rotting goodies from the check out lane
increasing her grocery count to 76. And when I want a
beer, I don’t have to wait for Brandi McSuburbangirl
to sit there at a packed bar debating with herself,
“Gee, what do I want…let me see…” only to order the
inevitable cosmopolitan 2 hours later. People in EW
know what they want before they get in line thereby
avoiding holding the rest of us up.

And kids. There would be no kids. Kids are
inefficient. If you had a kid you would be taken out
of EW and moved to KIW (Kid Infested World), where you
can fly on planes with screaming babies, disease
infested adolescents, and you could bear the full cost
of educating your children as only those with children
would be paying for the schools. Thus, by default
meaning there would be no schools in EW. Only
colleges. And all the colleges would be for the hard
sciences. None of the sociology or philosophy stuff.
Hard core, efficient stuff like accounting and
engineering and computer programming. Heck, economics
would be considered the “weaker” of the studies. Oh
it would be amazing.

And the government budget alone would be a fraction of
what it is now. With no schools, a booming economy,
skyrocketing labor productivity, an efficient
transportation grid, all math, science, engineering
and accounting majors, the tax base alone would put
the US to shame. GDP would reach $40 trillion in
three years, income per capita would be about $4.7
million per person, and without schools, social
security, medicare and Medicaid, I think government
revenues would account for about .4% of GDP,
contrasted with nearly 34% here in the US today (and
contrasted with 60% in Sweden).

Anyway, long story short, I often opine and dream of
world of such efficiency. Of course it will never be
realized, but at minimum, for the rest of us that
dream of an EW world, could you smokers whose
retirement plan consists of lottery tickets AT LEAST
UPGRADE TO A DEBIT CARD????

I Will Be Writing the Book

I've decided that with this blog, not to mention the score of bloggers I know and are willing to advertise for me, that I will write the book about what I saw behind the scenes of the housing crash during my days in banking simply because I don't need a publisher in that I already have the network by which to publicize it. The sample chapters I sent to publishers I posted here (back track from 3 if you're interested in reading 2 and 1).

However, until my book comes out this is more or less a power point, abbreviated version of what you can expect.

My Conspiracy Theory About Conspiracy Theories

I theorize that people who subscribe to conspiracy theories do so because they don't have the ability to be as smart and as intellectual as they like. Deep down inside they don't believe it, they just spout it off to either sound "smarter than you dumb schlepps that don't know any better" or to antagonize people.



Still, a sign that it's high time to move out of the US is that the most popular theory is that 9-11 was an inside job.

From Frank!

You all know Frank! I haven't looked at it yet, but I'm just going to post it assuming Frank maintains his Aussie Intellectual Titan status.

Here's what he sent me.

How the Recession Might Be Felt

An interesting chart from The Economist shows how unemployment is distributed across the nation.



Can anybody see the correlation between unemployment and some major economic phenomenon occurring now?

BIG FOOD!

There's Big Oil.

Then there's Big Tobacco.

And there's always Big Business.

But a new villain has emerged to terrorize and impoverish the poor and middle class;

BIG FOOD!


Yes, Big Food!

Obviously a conspiracy of all the Farmer Joe's out there, forming cartels to jack up the price of food! And all just so the "man" can keep us down! Thus I say we start a congressional investigation and slap a multi-billion dollar lawsuit on those bastards! And then price caps! And then Hillary can make sure Big Food doesn't enjoy any of these windfall profits that they so obviously conspired to create when we create a special tax!

DOWN WITH BIG FOOD!!!

DOWN WITH BIG FOOD!!!

The Captain's Adventures in Arizona

Thought I'd share with you guys my pictures from Arizona, for something lighter on the weekend. To get the full effect of my trip right click here and open this in a separate window while continuing to read below.

Here's me finishing up busy season, it had been a rough year, taxes started, had to revamp my classes to reflect any changes in the tax code for 2008, plus dance classes were starting in a week. I needed to relax and take a vacation;


So I hopped on a plane embarking for Pheonix, Arizona. Rumor had it there were lot's of fossils of varying kinds out in the state, but more importantly there was some serious hiking to do. Additionally I had a friend I could crash with and not pay for a hotel (though I sleep in my car most of the time when on vacation). For some reason a red line was following the plane all the way there;


Anyway, I got there and as luck would have it another friend of mine who lives in Pheonix proper was taking off for North Carolina. She said if I house sat the dogs I could just crash there, thus providing me a central location to launch my adventures from. These are the dogs.



I then went for a hike with my buddy, Le. We climbed Skull Mesa which was a formidable hike. Le had to go to the bathroom every 15 minutes and this was pretty much the most common site on the hike. Thus I took a picture of it because this literally was what you would see the most.



This is me with my new favorite shirt I got for Christmas



This is Skull Mesa in the background and Le in the foreground. I didn't take this picture for the mesa, but because this is one of the rare times Le wasn't peeing.



This is Le after the hike...and maybe some whiskey.


I also hiked Sabino Canyon out in Tucson. Rain had come in, but the sun was setting allowing for this kind of contrasting picture.





And while I was not able to find any fossils, I did find a freaking sweet ghost town near a crossroads called "Two Guns." It was weird, lot's of buildings, these are just a couple, but there must have been some sort of commerce going on back then in that area.







There was a lot more to the trip, saw the Petrified Forest, Painted Desert, found some petraglyphs, saw the airplane graveyard outside Tucson and lot's of cacti. Lot's of cacti.

Recession Time

Many years ago I worked at the police department on campus to put myself through college where they had this kind of "campus cop" program. There we'd patrol campus, do building security and a whole host of other various security duties, but when Christmas time rolled around the campus was dead. Absolutely nothing going on as all the students had left. Thus you'd be patrolling a graveyard of a campus with absolutely no action to speak of, so we'd come up with songs to stave off the insanity. Songs such as "Zone Patrol"

"It's Zone Patrol

Yeah, zone patrol

Fetch me a scotch and a kaiser roll.

Protect the campus while you take a stroll.

Listen to guys talk of Robert Dole

Just let me outta here, I'll sell ya my soul

Cause it's zone patrol

Yeah, zone patrol."

Other such toe tappin' ditties like "Wilson Gate" "Williams, Nothing More than Williams" and "Check Out Time" were created by many a men on many a patrols. They never went platinum, but they were still popular with the kids.

Regardless, I think it's time for a new song given this latest Jim Dandy chart;



"Recession time

Yeah, recession time

Hey, fetch me a scotch with lemon and lime

Buy me a beer with a quarter and a dime

Listen to dat kid make dem stupid rhymes

Now don't you bitch and don't you wine

Cause it's recession time,

Yeah recession time."

(This was a heavily plagiarized version of the song "Check Out Time")

We'll Just Go Overseas

I always found, even at a young age, the concept of banning smoking from every facet of life to be stupid. If people want to smoke, let them smoke. If people want to do drugs, let them do drugs. If two guys want to marry each other, then let two guys marry each other. And if I want to have a drink in a Chicago speakeasy in 1930, let me have my drink. It is the basic principle of Libertarianism, heck, FREEDOM, that if they ain't hurting anybody else then it's none of your damn business and you should let them do it. Sorry to curse.

Anyway, the people that go on crusades to impose their moral view on the rest of the world is not just relegated to religious folk, the anti-smoking Nazi's are also a perfect example, and the psychology of these people is what intrigues me. Since when did somebody else have the moral authority to tell me what to do and what is right or wrong. I've thus concluded folks that lecture other people about what they should or should not do have nothing better going on in their lives and somehow derive a sense of worth or purpose on going on these crusades. Again their desire to inflate their egos and makes themselves feel better by going on a crusade supercedes the cause.

Alas, why I was just laughing my ass off when I saw this picture from The Economist;



So, for all you anti-smoking nazi's and truth.org people, you won in America with your lawsuit, now you just must carry the crusade overseas and deal with the remaining 5.7 billion people and 175 other nations on the planet.

Ain't globalization grand?

Two Observations About Movies

So I wanted to see Rambo. I will admit it, I wanted to see Rambo. Never got around to it.

Also wanted to see In the Name of the King. Never got around to that one either.

And it occurred to me that it is becoming an increasingly rare instance that I go see a movie and would surmise the same of Gen X men. The reason being two fold and thus I tender my theories for commentary;

1. Gen X has no "manly man" heroes in the cinema. The Baby Boomers had Schwartzenegger, Sly Stallone, Charles Bronson, Bruce Willis.

What have we got?

Carrot Top and Adam Sandler.

Even "our" heroes of today are aging boomer heroes;

John McClane
Rambo
The Terminator

The closest thing we have to a "he-man" hero is Jason Bourne and you don't see him carrying heavy machine guns around. I'll grant Jason Statham some credit as well, but again, he hasn't achieved the cult status of his boomer predecessors.

So aside from "Live Free or Die Hard" or "Rambo" there really isn't a lot of movies compelling me and my Gen-X male colleagues to go sit through a movie.

2. That whole "sit through the movie" thing. I'm finding it increasingly difficult to drive to a megaplex in a mall, spend hours looking for parking, only to fork over $9 for something I can inevitably get on Netflix or buy from Wal-Mart for much cheaper and watch on a big screen TV or LCD projector.

Additionally it is in the comfort AND SILENCE of my own home. No little kids with their mothers trying and failing to discipline them. Nobody talking in the theater. Just me, my martini bar, my humidor and maybe the occasional female lieutenant of capitalism.

Regardless, I sense a trend. With home theater entertainment having the technical capacity to outdo a movie theater (because you are sitting that much closer to the screen) not to mention Gen-X men are aging and we no longer have the testosterone to go out all the time and are finding the comforts of home, comforting, you are going to see less and less of them going out to the movies.

All We Need Is a Little More Money

Come on all! Just open up your pocket books a little more!

Valentine's Day Advice from the Captain

Economists of the male persuasion, lend me your ears.

Valentine's Day as we know is merely a wealth transfer created by corporate America. But sadly one cannot even consider it a genuine "wealth" transfer in that technically no wealth is being transfered. For the most common items purchased for our beloveds do not maintain their value.

Roses, for example. Dead in three days. Sure some crafty florists will give you the packet of chemicals you're supposed to put in the water that might make them last four days, but in the end they're dead.

Chocolates. Need I say more? They don't last one day.

Romantic dinner? Last's one hour.

Alas, what is the good economist to do on Valentine's Day? Never fear, the Captain is here and has all the answers to make your Valentine's Day not only romantic, but economic too!

First off, jewelry is a GREAT Valentine's Day gift that is both economic AND romantic.

Now you might say, "But Captain, jewelry has no functional value whatsoever. It has no utility. It is a lousy gift and it's way too expensive."

Ahhh, but that is where you're wrong young Padawan. For jewelry is primarily consisted of gold and gold is a commodity that you can invest in in case the economy melts down. So not only do you have a hedge against a collapsing dollar, but in case of economic Armageddon you have an emergency currency to buy your way out of the country.

So certainly feel free to buy your loved one jewelry and lots of it. Just make sure she understands that if the economy collapses or gold breaks $2,000 an ounce she'll have to hock it and melt it down. (Don't worry, she'll find the fact you're hedging against potential calamity in the economic future sexy!)

Secondly, booze. Specifically cognac or other high end liquor. Again, you'll be showing your loved one that you care more than the average guy, because in case there is hyperinflation, bottles of liquor have the traits that make it a good substitute currency;

It's divisible.
Everybody wants it and accepts it has value.
Stores well and maintains its value.

Of course she won't be able to drink it, but she will be so enamored with the care and thought you put into it that she won't even think about that as she's ripping off your clothes.

And finally, poetry. Ah yes, poetry.

For if you were to look into the box of keepsakes women keep, they do not keep the jewelry or the car you bought them. They keep things that are made by little children. Like drawings and pictures made of crayon. Silly things that are not expensive. Thus, why not make a silly thing that is free with your own hands and will ultimately be kept longer than the flowers or the chocolates? And poetry is just the thing.

The poetry does not have to be good. Matter of fact the worse the better. You do not have to spend too much time on it, it can be as bad;

"My darling babe my heart goes oozy
Your beauty makes me all woozy."
and so forth and so on.

Of course you can make a more refined poem, but it is unlikely to be any more successful than the schmaltzy one.

Therefore fellow aspiring, junior, deputy, official or otherwise economists of the male persuasion, make your Valentine's Day not just a romantic one, but an economic one!

Who Supplies the US with Oil?

In light of Hugo Chavez's complaints that Exxon Mobile plans on taking back what he stole from them (I love how he paints himself as the victim here) and how he's threatening to cut off the US from his oil, I thought it would be of benefit to all the junior, deputy, aspiring, official or otherwise economists out there to review just how much the US imports from Venezuela;


I also thought that Hugo might like a vocabulary lesson. Today's word is called "fungible."

Meaning, "If you don't want to sell us your oil. Fine. We'll just buy it from somebody else. And we'll probably not pay any more for it since by you supplying a different country really doesn't lower the global supply of oil and thus has no real effect on supply and thus price."

Of course you really could affect the price of oil by not selling oil at all. That would increase prices. But then half of the Venezuelan budget would go unfunded.

And then how would Hugo bribe the masses then?

"Free Internet Access" Should Be FREE!

OK, just a little bit of help here for you coffee shops and cafés out there.

If you advertise free internet access, then make it free.

Don’t make people spend the time to park their car, find a space, walk into your place, buy some stuff, sit down, fire up the laptop and then;

1. Have your internet access down.
2. Make us jump through 8 hoops “registering” to use your internet access.
3. Require us to sign up with T-Mobile or some other phone provider.

By requiring customers to jump over all these hurdles you essentially are making them pay for your internet access with their time and summarily pissing them off.

For example I go to Caribou Coffee and fully endorse them. It’s easy, I go in, turn on the laptop, plug in and I’m on the internet. Pretty much every other place you will have to go through trials and tribulations just to get maybe 15 minutes of “free” internet access.

Additionally, view it this way. Internet access is an amenity, like your furniture. Yet you don’t make us register or have a T-Mobile account to sit on the couch. You don’t make me register if I have to use the bathroom. So if you want us to have a pleasurable experience at your venue, how about you cut it with the 6^th grade games and make your internet access genuinely free.

Har har for Hugo

Oh, that whole "nationalize the oil industry" think kind of backfired didn't it?

Silly socialists.

Tricks are for kids!

Correct Answers to HR Interview Questions

As you know the Captain believes (sincerely) that human resources is literally one of the largest threats to future economic growth, the American way of life and in short, western civilization. It reigns over a vital bottleneck of the economy (the labor market) and is manned by ineffectual, incompetent bitter people whose primary motivation is NOT choosing the best people, but to derive a high from wielding power over others.

But, even though HR and their bureaucratic minions may seem to bode ill for you, me, and pretty much anybody else who took and passed calculus in high school, there are ways to circumvent HR because they are, after all, some of the dumbest people on earth.

Here is a GREAT tutorial on how to handle all those stupid HR questions. You know, questions like,

"Where do you see yourself in 5 years?"

Answer - "Not here because corporate America is so unreliable in terms of long term employment I presume I shall be working for your competitors or collecting welfare because you've made it impossible to work anywhere and maintain sanity."

"Have you ever had a disagreement with your boss, how did you resolve it?"

Answer - "Yes, I had another baby boomer boss ask me to put together a MS Excel spreadsheet because he "Didn't have time to learn Excel."" I said, "OK, pay me all the social security I've given you and we'll talk."

THere are others, but you get the idea. If a "profession" has to resort to this as their primary means of qualifying labor, you know it isn't a "profession."

Of course, there is a revolutionary idea I had and I actually do follow. I don't know why more people don't do this, but I surmise it's because we've all been brainwashed to think the labor market is a one sided coin.

Refuse to be interviewed by HR.

You see, no matter what the unemployment rate is, companies and corporations still need employees. No matter how bad it gets, they still need us as much as we need jobs. Most people don't realize this and go in and totally short sell themselves, looking at a 9% unemployment rate.

But what if,

just what if,

people were fed up enough with the pretentious, arrogant, morons in the HR department and simply refused to interview with HR?

What if there was a general groundswell movement wherein youth, graduates, employment seekers, the future life-blood of all corporations, all of the sudden got an ounce of self-respect and said,

"You know something, I no longer am interviewing with HR. If you want to consider me for a genuine position within your company, then you have me talk to the hiring manager or boss. Not some idiotic 23 year old HR ditz who graduated 2 weeks ago from some worthless HR program and doesn't know jack about my job, let alone my industry."

You mock me, but consider this;

"Have you ever gotten a job through HR?"

And now you see there is really no downside to refusing to interview with HR.

Nobody gets a job through HR. They offer NOTHING to the potential candidate, the potential talent, the potential future leader and innovator a means to get into the company. It's like having some super popular "prom queen" chick in high school threaten she'll never go out with you - she would never go out with you in the first place, ergo the threat is hallow.

And so, I hope with this little post, that it may start a trend, or at least instill some self-respect to job-seekers, to refuse to deal with HR. Not just for something as noble as "principle" but something as simple as practicality, because, well, exactly what has HR done for prospective candidates except waste their time?

Some Chartage

I like charts!
Yes I do!
Yes I do!

I like charts!
How 'bout you?
How 'bout you?



Yes, remember, globalization is bad for America. Even if a cheap dollar makes our exports all that much more affordable to foreign nations and might be the only thing that will lessen the blow of a recession.



And if you wanted to see how relatively "fake" the housing wealth was in the US, you needn't look further than the above chart. My favorite is the RGDP vs consumer spending. It directly explains the third chart. If you don't work, you borrow to pay for what you consume.

Funny, But Good!

Never heard of this, but Frank (you all know Frank!) sent this to me.

Maybe you have a kid that doesn't want to listen to their economics professor, but they might listen to Arnold. Not exactly advance economics, but still a good basic for everybody to watch.

How SWPL's Can Predict Bubbles

SWPL (or "Stuff White People Like") when I first read their site I found to be viscerally HILARIOUS. I would just guffaw and heartily so because I found the stuff just so damn funny and so damn accurate. On a deeper level though I didn't really know why it resonated with me so well, but after sitting here at the hospital waiting for a buddy of mine to come out of the urgent care, my super awesome economic genius mind has come up with it.

SWPL exposes the fake, shallow tastes of either faux intellectually elitists or the brain-dead, automotonic herds and delivers to them the mockery and insult they so richly deserve.

For example - "Grad School." HOW GREAT IS THAT? You have some idiot that chose an undergrad degree that was so worthless, they go back for MORE of the same. In reality they are an idiot, BUT, because they have a masters in "fillintheblankhere" they think they're smart.

Or for the "brain-dead herd of lemmings" crowd - Professional sports. Again, how great is that? You have some idiot whose entire LIFE'S WORTH is based on whether or not one group of big guys throws the ball better than another group of big guys, discernible only through the color of the jerseys they wear. But, ohhhhhh wrath upon thee that dare insult the team that these morons have vested so much emotion, psychology and (foolishly) cash into simply because they wear the blue jersey!

But the ultimate kicker for SWPL is that these people are COMPLETELY oblivious to their idiocy. They don't realize they're being made fun of and most of them even think they're smarter than the average person (ever go to a "wine and cheese party?") They just plain don't get the fact that they are the butt of the joke.

Of course there's a problem. SWPL's are not some small group of people. They're the majority of people! And because this is a democracy and a relatively free market we genuinely intelligent people must suffer their idiocy.

For example television.

Um, please somebody explain to me why there are GLEE PARTIES?????

You want TV shows to throw parties over? Try Firefly. Try Cowboy Bebop. Try Venture Brothers. Try classical Bugs Bunny. Try Hogan's Heroes. Try Family Guy.

But GLEE????

Another example - the movie industry.

Why am I relegated to marginally good movies starring Jason Statham and cartoons like Despicable Me? Why is it for every "Saving Private Ryan" there's a score of "Eat PRay Love" or "Sex in the City 14" movies?

Going green anyone? Great, I get to pay higher gas prices, higher heating bills, higher electric costs all because it's fashionable to hate fossil fuels.

Even voting patterns.

Why do I have to face a 9+% unemployment rate and a doubling of the national debt?

Because Obama and socialism is just the latest SWPL craze.

Now I could go on, but hopefully I've managed to do two things;

1. Entertain the regular and genuinely intelligent readers that visit the ole Capposphere and
2. Anger and insult SWPL types to the point you might actually be listening now BECAUSE

I am going to lay down some super economic genius that is going to benefit EVERYBODY.

401k's are SWPL.

Yes, sorry to say, 401k's, 403b's, IRA's and whatever other retirement plan you've put together for yourself is SWPL.

Now, this is not to say saving for retirement is foolish, it's not. BUt what we have here is the "brain-dead herd SWPL" members flooding a market to the point purchasing stocks in the US just plain ain't worth it. Specifically, since the government gives tax breaks to invest in (primarily) stocks, what has happened is by default the government has ordained stocks as the defacto retirement vehicle.

Now I've pointed this out before and to great lengths. I also pointed it out probably 5 years ago and the article, though pure genius, went nowhere (because it wasn't SWPL). But now MAYBE, JUST MAYBE, people will listen to me.

This recent run up in the stock market from a DJIA of 7,000 to 12,000 has people very happy and excited. The problem is that the reason you buy stocks is NOT because you will sell them for more in the future. You buy them because of the profits they will (hopefully generate)

To measure this ratio of the price you pay to the profits you'll make, there is a thing called the P/E ratio. It takes the price of a stock and divides it by the earnings per share, showing you essentially how much you are paying in stock price for $1 in earnings. The higher, the worst the deal, the lower, the better.

Now the average has been since 1880 a ratio of roughly 15. Meaning you paid $15 in stock price for $1 in earnings. However during the peak of the Dotcom Bubble the P/E peaked at 45. That bubble burst, bringing the ratio down to 22, STILL NOT A GOOD DEAL.

But, ANOTHER SWPL fad came in - home ownership and condos and mcmansions!

THis drove the P/E ratio up again to 28, only until we found out the SWPL fad of buying a house you can't afford was not a sustainable economic behavior.

The Dow Jones dropped to 7,000 and with it the P/E ratio reached 14!

HURRAY!!!! LOOK AT THAT!!! THE STOCK MARKET IS ACCURATELY VALUED!!!!

NOT UNDERVALUED

ACCURATELY VALUED.

And so what do people do with stocks that are neither a steal nor overpriced, but just sanely valued?

A buying frenzy.

They drive the Dow Jones back up to 12,000 because SWPL's like to pay high stock prices for low earnings resulting in a P/E that is now around 24, implying a 30-40% overvaluation (denoted by the latest quick jump at the end of the chart).

Now Professor Robert Shiller, who is a real intellectual, not only provided this information, but logically concluded stocks are now overvalued again.

But ohhhhhh, my goodness! The SWPL's don't like that! They want stock bubbles! They want happy fuzzies for everyone! They want unicorn 401k's where you never have to work and solely rely on forever increasing asset prices to pay for your retirement. And they go out of their way to find a rationale or reason to continue living in SWPL Land.

Well, there's just one more problem with that guys.


See, while arguments can be made about whether you use earnings, EBIT, EBITDA and other things that aren't the bottom line, ultimate what drives stock prices are DIVIDENDS.

Because (and here's the economic lesson of the day), it is the only real cash flow a stock generates.

Oh, sure, you may sell the stock to another person generating a capital gain. But that didn't come from the stock. It came from another person. And the only reason that person paid you money for that stock is why?

Because the only thing a stock really generates is dividends.

And it is here, the only one TRUE cash flow that makes it to the stock holder and the only one TRUE cash flow that provides a stock with value that the situation is dire.

Below is the "dividend yield" for the S&P 500. This mathematically is the dividend per share divided by the price per share. In other words the rate of return you can expect from dividends.

And while the history of the dividend yield shows a rough average of about 5%, notice the general trend downward?

It reached a low back in the Dotcom bubble of 1.8%. Wow, that's a GREAT return! Let me get my checkbook out!

Of course there was a dose of sanity when the stock market collapsed this last time around, driving the dividend yield up to a whopping 3%.

But oh no. We can't have that! That's not SWPL! SWPL's like over valued stocks! We don't want any of those icky yuck gross dividends! And so with the reinflation of the stock market bubble the Dow Jones magically doubled in 2 1/2 years with no real economic growth, no real improvement in our economic future, sending the dividend yield back to 2%.

Now economists can go ahead and pull out their hair (like I did) about why the American public just plain doesn't get it and keeps on investing in overvalued markets. They can rack their brains asking, "did these people NOT just go through two massive bubbles??? Did they not learn their lesson? How did they DOUBLE the value of the stock market when the economy is in such dire shape and there's really no economic hope for the future?" But they will simply increase their blood pressure.

For there is no "logical" or "sane" reason these bubbles persistently and constantly form. It's much simpler. It's the same thing that causes people to make "going green" a hobby. It's the same thing that sends millions of people to fork over $10 a ticket to see mediocre movies. It's the same thing that makes people listen to something as boring as public radio.

It's SWPL!

Enjoy the decline!

It is Better to Be Nice Than Right In America

So I was interviewing for a job. And one would think logically, that if you could document through writing, research or what have you that you were one of the handful of people out there that saw the housing crash coming and could have saved this potential employer millions of dollars, they would want to hire you.

Not so.

Spoke with a recruiter who was one of the few that took a look at my resume and had the cajones to be forthright with me and say, "Captain, you scare people. You have too many things going on in your life and the fact you put in your resume that you predicted the housing crash scares people even more because you're not a team player."

Which threw me off a bit, because I was thinking that ESPECIALLY in this market, banks and other financial service firms would LOVE to hire somebody who could have predicted this. You know, that if you spent all of $100,000 on me say, 4 years ago at Citigroup I could have saved them $14,000,000,000 (not to mention the egregious severance package their former CEO got). That's a pretty good ROI. But ahhh, that is where you go thinking again.

For there are times that I sit here in the US and often wonder how is it that our economy is any more efficient than North Korea's. How, with the Pointy Haired Bosses of the World the US manages to eek out an additional 3.2% RGDP per year every year, when it has practically been every US employee's universal experience to see a train wreck like the housing crash coming, they futilely sound the whistles and alarms only to have the Point Haired Boss Conductor of the train SPEED UP.

And the only way I can rationalize this is that American society has become so obsessed with not insulting people, not making anybody feel the slightest bit on edge, than we put being NICE ahead of being RIGHT.

I'm sure there are anecdotes and stories abound (which I'd love you to post about and e-mail in) where being nice is put above being right. The housing debacle is just one such example. Approve everybody, borrowers or builders, regardless of their ability to pay and regardless of their ability to sell the properties. Or where I see wait staff tolerate people's crap who whine a gripe about their food not cooked to their anal retentive demands.

Regardless, I've always kind of had this theory in the back of my head, but I hadn't recently thought about it until I saw this book consistently on the top of the NYT's best seller list; The Secret. (and yes, I know it is under the Advice Column, but I couldn't find the Economist chart with it that showed it #2 for the overall list).


The whole idea of this book is, very simply, if you wish it to happen and think nice little fluffy bunny rabbit thoughts of ice cream and flowers, it will come true. And not only that, they contest that it's a "secret" that has given all the power to all the power brokers in the world and made millionaires and billionaires who they are. No, Bill Gates didn't think or answer the demand of an economy, he just thought happy thoughts and poof Microsoft was formed. The only reason I know of this stupid book is because my buddy Chico is hooked on it. And sadly he has yet to make his millions (but don't worry, he keeps wishing it will happen...AND IT WILL, BECAUSE HE KNOWS THE SECRET!)

Regardless, the fact this book is on the top of the NYT's best seller list only confirms what I fear; The US population would rather be lied to and believe in a fairy tale instead of face the harsh realities of life and make real progress. And that kind of thinking is dangerous because putting what's NICE ahead of what's RIGHT is that it ignores reality.

Yes, it would be nice to think there isn't a housing bubble (you'd be amazed how many bankers think the recovery is "just around the corner.")

Yes it would be nice to think Beanie Babies and Tulip Bulbs and Dotcoms can perpetually go up in value forever.

Yes it would be nice to think that the Minnesota Vikings would win a Super Bowl.

And it would be very nice to think that Social Security and Medicare are not going to crush this nation's economy in about 10 years.

Yes that would be nice.

But try to point out those "nasty realities" at a party and you are summarily shunned or asked to leave.

Try to point out the Vikings do indeed suck, and you will be kicked out of any Minneapolis bar.

And try to point out that a person can't afford a loan, and you'll be lectured about not being a team player.

Of course this puts the American worker in a paradox. Do you do what's right, or what's nice? And unfortunately for most Americans, they don't have the option. They're not independently wealthy and can't tell the Pointy Haired Boss to shove it. They don't have rich parents and can therefore afford the freedom of speech at work or just not work at all. They have to put food on the table and make ends meet, so rather than point out the emperor has no clothes, they realize if they want clothes themselves, they better say they see a fully dressed emperor. Naturally there is a price to pay for such ignorance and idealism about being nice vs. right. And that is the recession we're about to go into.

But don't worry, if we all think really hard and wish it doesn't happen and master "The Secret" then I'm sure it will go away.