Tuesday, December 30, 2008

Sowing the Seeds of a Potential Future

I'm moving carefully these days. There's every reason for me to believe that I will have an extremely difficult time earning a living in 2009. 2008 was no picnic and the local, national, and world economic situation has deteriorated further. I want to believe that I have a future but all signs tell me that what lies ahead is bleak and very limited.

Pushing back against this dire scenario are several key factors. I am tied into a greater world filled with people that still have desires and needs. No matter what the news announcers and newspaper writers prophesies contain, I still participate in a relatively vibrant community, in the wealthiest nation on earth. I suppose that should add more promise to my future than if I were squatting on a section of sidewalk in Port au Prince.

People around me are certainly having their share of difficulties. Most are still employed but many are unhappy with the jobs they have. Others are out of work but still remain a part of support systems that keep them afloat. I am not a part of any of that yet I have some work, at least as of today, and something else. I have my fields.

Galena Fields 13233

I am not talking about fields in the sense of acreage like you would find on a farm. I own no land whatsoever. What I do have are what I consider to be fields of contacts, knowledge, and acquaintances. Month after month, year after year, my whole life I have been working with people, helping people, and leaving behind an impression of me in places far and wide. I do not count these accomplishments and relationships as laurels that I can sit back and rely on. In reality they are only dormant seeds, seeds that may never even sprout.

But like seeds, each contact I have made, every business card I have given out, and every person I leave an impression with helps me cultivate a sense of who I am and what I am capable of achieving. Each conversation that people have with me has left them with a distinct impression of who I am as well as their importance to me. This is all I can do. It is what I have always done and it has brought unique results in far darker times and places than the present.

Michigan Barn 00001

In the same way that a smart farmer will often grow different types of crops in her fields, I also plant seeds of many varieties. Over the past few years I have planted various types of seeds in the form of investments. Some of my investments are like orchards that yield fruit in the form of dividends every season. While the trees themselves are not necessarily as stout as they were a year ago the dividend fruit continues to ripen and fall into my hands.

In the next few weeks I will even take full ownership of my tractor, actually a relatively new car. This is one of the most important tools on my farm because it allows me to plant seeds over greater distances and provides a means for me to bring home the harvests. I sometimes even use my car like a farmer might use a tractor, to fertilize the crops planted earlier in the season.

My computers, business website, online and physical photo galleries, and even this column all serve a similar function. It is this complete farm and the ways I have intertwined them that make my work an organic, growing being.

I am completely aware of the possibility that not a single person may act on their knowledge of my existence and abilities. Times are hard, people are mostly concerned with their immediate survival, the continued existence of their small businesses, and their personal plans, hopes, and dreams. My business card in the pile on their desk, my phone number in their directory, or just the slightest memory of their interactions with me is nothing greater, or less, than a seed planted out in a field waiting for a drop of rain and a ray of sunshine.

Rainbow near Makawao 00002

All this is why I continue to go out and meet more people, search my community and the Internet for more opportunities, and prepare for multiple eventualities. I may not succeed at this life after all but I certainly do not plan to give up without one hell of a struggle during every day I have left available to me. If for no other reason I owe it to all those seeds I planted out there and especially to the one or two that will certainly sprout one day soon.

Sunflowers 00010

Monday, December 29, 2008

The Future of Energy, Now Playing In Japan

Power Plant 050039s

Although the power companies may not want you to understand this, you will soon be able to go off-grid. This would mean doing without monthly bills from the electric or gas company. More importantly, it would change the entire appearance of our landscape, oceans, and atmosphere.

Currently thousands of Japanese homes obtain their electricity from fuel cells that use hydrogen. These fuel cell units are already installed right outside homes all over Japan. The excess heat from each fuel cell is used provide the home with hot water.

Panasonic, Toshiba, and Toyota are about to start mass-producing these fuel cells.

The Japanese government is even subsidizing the purchase of fuel cells, for very good reasons.

One of the concerns often expressed about the expanded use of hydrogen is the safe transportation of this highly explosive gas. Scientists and ordinary citizens were equally concerned about having large truckloads of hydrogen on their roads. The latest Japanese hydrogen-powered fuel cells eliminate this concern. They actually create the hydrogen they consume.

A unique part of the fuel cells used in some Japanese homes is called a "reformer." This device creates hydrogen from natural gas. Since gas lines are already running through most major developed cities there is no need to create additional infrastructure to support hydrogen fuel cells in the home.

Furthermore, Japanese scientists are refining the fuel cells to allow them to extract hydrogen directly from water. This even eliminates the need for natural gas lines.

This same source of hydrogen can also be used to re-fuel hydrogen-powered vehicles.

Hybrid Coca Cola Truck, Annapolis 062151

In fact the same fuel cell that powers your car could be used to power your home. While we are away at work each day, most electrical appliances do not require any more electricity than a small battery can provide, with the exception of refrigerators. More efficient refrigerators could be powered by solar panels or wind energy during that time. When we arrive home we could connect the fuel cells in our cars to our homes.

In another scenario you might even consider staying connected to the power grid, but selling any excess electricity generated by your home back to the power company.

Larger fuel cells could be combined to provide power for commercial and industrial applications.

What are some of the future benefits to a society that adopts the fuel cell model?

#1 A reduced need to build and maintain huge power-generating grids and infrastructure. These are made up of power lines, substations, power stations, fuel transport ships, trucks, trains, mines, and oil wells. Societies would no longer have to worry about major blackouts, oil spills, leaks from nuclear power stations, or the problem of where to put radioactive waste.

Metropark Station 002779

#2 Reduced greenhouse gas emissions. Fuel cells do create some carbon dioxide. However studies in Japan are finding that widespread adoption of fuel cells will eliminate the need to build new power plants. This will result in far less air pollution and carbon dioxide emissions from those major sources.

#3 Greatly reduced amounts of wasted energy. Many of the ships, trains, or trucks now carrying loads of fuel would no longer be necessary. All the energy that escapes from electrical power lines and substations would no longer need to be generated in the first place.

#4 Reduced dependency on brutal military dictatorships supported by oil revenues.

This revolution in energy will take place faster than the leaders of most industrialized countries now realize. In the same way that cell phones are able to bring the benefits of telecommunications to poor nations, without the need to build massive infrastructure, fuel cells will soon bring electrical power to rural villages without the need to build huge power plants and giant electrical towers. Fuel cells are the way of the future, now visible live in Japan.

Friday, December 26, 2008

China Finally Admits Shoddy "Tofu" School Construction

The Chinese government finally gets around to admitting that thousands of schools were poorly built.

Beijing 2008

After a campaign of intimidation and payola designed to keep this story away from the Olympic Games limelight, the brutal Communist Chinese dictatorship finally admits their corruption policies resulted in the deaths of thousands of schoolchildren.

Tibet Protests Paris 2

Here are my original posts on this topic:

Chinese Government Corruption

Chinese Architects Question School Construction

Tuesday, December 23, 2008

One Man Chooses Suicide over Crisis

NEW YORK (Reuters) - A French executive who invested with accused swindler Bernard Madoff was found dead in an apparent suicide on Tuesday, reportedly distraught over losing up to $1.4 billion (950 million pounds) in client money.
It is unlikely that Thierry de la Villehuchet is the first person to end his life as a result of Madoff's massive theft of funds. After all, suicide rarely makes the front page news. In trying to understand Monsieur Villehuchet's final act you can be sure some specialist will cite a prior mental weakness or some other failure in the man's life. The fact is, we probably will never know what his last thoughts consisted of, he apparently left no final words behind.

New York City from 10,000 meters 60003

In the meantime Mr. Madoff walks around New York relatively freely. Like the rogue Pakistani nuclear scientist, Dr. A. Q. Khan, Bernard Madoff faces only house arrest at the present time. Madoff simply must be home by 9PM in the evening.

Some crimes are more monstrous than others, our society usually recognizes this. In this country we also believe that people are presumed innocent until proven guilty by a jury of their peers. However Mr. Madoff has already admitted his crime to his brothers. Despite the confusing paper trail, most reasonable people can assume that most of the money invested in Mr. Madoff's fund is truly gone.

By some measures 70% of the world's wealth has vanished in the past year.

What then are the rest of us left with?

We have a trade system based primarily on trust but major institutions no longer trust anyone. Our impotent government leaders seem to have decided that printing more worthless money is an acceptable solution. That and offering zero percent interest rates. Wow.

The only short-term response our grossly overpaid executives can come up with is sending their employees home without pay. To add misery to the punch many of these workers know there will be no jobs to return to in the new year. What a wonderful holiday season that makes.

We have a leader from a badly defeated party apparently doing everything possible to make his successor more likely to fail. In his almost non-existent response to the eminent collapse of many U.S. businesses, Mr. Bush is behaving like a snickering schoolyard bully.

Two very populous nations in South Asia, India and Pakistan, look increasingly ready to engage in another major war, possibly with nuclear weapons this time. Oh, great.

Nuclear Blast 1945

A band of pirates from a crumbling Third World cesspool has nearly shut down a major shipping channel.

This trend seems destined to worsen. It seems as if civilisation is pitching itself over a cliff, soon to follow Monsieur Villihuchet into the final abyss of no return.

It the words of a young person I know, that really sucks.

Speaking of young people, what are we leaving for them to inherit? Financial disaster, mass unemployment, a nuclear war, and seas ruled by pirates. All we need now is a plague, pestilence, or perhaps a meteorite slamming into earth.

EYC Parade 076579

Life has become a real, live major disaster movie of the genre Irwin Allen made popular. Both frightening to consider and maybe a little fascinating to watch, if the disaster wasn't happening to us personally. Which, unfortunately, it is.

Oh, well, at least there is sure to be something interesting to write about tomorrow, heh?

Adieu, Monsieur Thierry Magon de la Villehuchet. Dormez en paix.

Washington Post article
Le Monde article

Some People Knew About the Madoff Scam in 2001

My parties have all the big names and I greet them with the widest smile
Tell them how my life is one big adventure
and always they're amazed when I show them 'round my house to my bed
I had it made like a mountain rage with a snow white pillow for my big fat head
And my heaven will be a big heaven, and I will walk through the front door
- Big Time by Peter Gabriel

This is an article about Bernie Madoff, published in 2001:

Monday, May 7, 2001

Don't Ask, Don't Tell
Bernie Madoff is so secretive, he even asks investors to keep mum


Bernie Madoff might as well hang that sign on his secretive hedge-fund
empire. Even adoring investors can't explain his enviably steady

Editor's Note: If knowledgeable investors cannot explain an investing strategy, make a note of that fact.

NYC 12629

Two years ago, at a hedge-fund conference in New York, attendees were
asked to name some of their favorite and most-respected hedge-fund
managers. Neither George Soros nor Julian Robertson merited a single
mention. But one manager received lavish praise: Bernard Madoff.

Editor's Note: Beware of those receiving lavish praise.

Folks on Wall Street know Bernie Madoff well. His brokerage firm,
Madoff Securities, helped kick-start the Nasdaq Stock Market in the
early 1970s and is now one of the top three market makers in Nasdaq
stocks. Madoff Securities is also the third-largest firm matching
buyers and sellers of New York Stock Exchange-listed securities.
Charles Schwab, Fidelity Investments and a slew of discount brokerages
all send trades through Madoff.

Some folks on Wall Street think there's more to how Madoff (above)
generates his enviable stream of investment returns than meets the
eye. Madoff calls these claims "ridiculous."
But what few on the Street know is that Bernie Madoff also manages $6
billion-to-$7 billion for wealthy individuals. That's enough to rank
Madoff's operation among the world's three largest hedge funds,
according to a May 2001 report in MAR Hedge, a trade publication.
Editor's Note: "More than meets the eye" is a euphemism for lying.

What's more, these private accounts, have produced compound average
annual returns of 15% for more than a decade. Remarkably, some of the
larger, billion-dollar Madoff-run funds have never had a down year.

When Barron's asked Madoff Friday how he accomplishes this, he said,
"It's a proprietary strategy. I can't go into it in great detail."

Editor's Note: Every legitimate investment has up and down cycles and those who manage actual investments must tell you more than "I can't go into it in great detail."

Nor were the firms that market Madoff's funds forthcoming when
contacted earlier. "It's a private fund. And so our inclination has
been not to discuss its returns," says Jeffrey Tucker, partner and co-
founder of Fairfield Greenwich, a New York City-based hedge-fund
marketer. "Why Barron's would have any interest in this fund I don't
know." One of Fairfield Greenwich's most sought-after funds is
Fairfield Sentry Limited. Managed by Bernie Madoff, Fairfield Sentry
has assets of $3.3 billion.

A Madoff hedge-fund offering memorandums describes his strategy this
way: "Typically, a position will consist of the ownership of 30-35 S&P
100 stocks, most correlated to that index, the sale of out-of-the-
money calls on the index and the purchase of out-of-the-money puts on
the index. The sale of the calls is designed to increase the rate of
return, while allowing upward movement of the stock portfolio to the
strike price of the calls. The puts, funded in large part by the sale
of the calls, limit the portfolio's downside."
Editor's Note: This strategy only works when new investment money keeps coming in.

Among options traders, that's known as the "split-strike conversion"
strategy. In layman's terms, it means Madoff invests primarily in the
largest stocks in the S&P 100 index -- names like General Electric ,
Intel and Coca-Cola . At the same time, he buys and sells options
against those stocks. For example, Madoff might purchase shares of GE
and sell a call option on a comparable number of shares -- that is, an
option to buy the shares at a fixed price at a future date. At the
same time, he would buy a put option on the stock, which gives him the
right to sell shares at a fixed price at a future date.

The strategy, in effect, creates a boundary on a stock, limiting its
upside while at the same time protecting against a sharp decline in
the share price. When done correctly, this so-called market-neutral
strategy produces positive returns no matter which way the market

Using this split-strike conversion strategy, Fairfield Sentry Limited
has had only four down months since inception in 1989. In 1990,
Fairfield Sentry was up 27%. In the ensuing decade, it returned no
less than 11% in any year, and sometimes as high as 18%. Last year,
Fairfield Sentry returned 11.55% and so far in 2001, the fund is up
Editor's Note: 2001 was a very inconsistent time for almost all investments.

Those returns have been so consistent that some on the Street have
begun speculating that Madoff's market-making operation subsidizes and
smooths his hedge-fund returns.

How might Madoff Securities do this? Access to such a huge capital
base could allow Madoff to make much larger bets -- with very little
risk -- than it could otherwise. It would work like this: Madoff
Securities stands in the middle of a tremendous river of orders, which
means that its traders have advance knowledge, if only by a few
seconds, of what big customers are buying and selling. By hopping on
the bandwagon, the market maker could effectively lock in profits. In
such a case, throwing a little cash back to the hedge funds would be
no big deal.

When Barron's ran that scenario by Madoff, he dismissed it as

Still, some on Wall Street remain skeptical about how Madoff achieves
such stunning double-digit returns using options alone. The recent MAR
Hedge report, for example, cited more than a dozen hedge fund
professionals, including current and former Madoff traders, who
questioned why no one had been able to duplicate Madoff's returns
using this strategy. Likewise, three option strategists at major
investment banks told Barron's they couldn't understand how Madoff
churns out such numbers. Adds a former Madoff investor: "Anybody who's
a seasoned hedge- fund investor knows the split-strike conversion is
not the whole story. To take it at face value is a bit naïve."

Madoff dismisses such skepticism. "Whoever tried to reverse-engineer, he didn't do a good job. If he did, these numbers would not be
unusual." Curiously, he charges no fees for his money-management
services. Nor does he take a cut of the 1.5% fees marketers like
Fairfield Greenwich charge investors each year. Why not? "We're
perfectly happy to just earn commissions on the trades," he says.

Perhaps so. But consider the sheer scope of the money Madoff would
appear to be leaving on the table. A typical hedge fund charges 1% of
assets annually, plus 20% of profits. On a $6 billion fund generating
15% annual returns, that adds up to $240 million a year.

The lessons of Long-Term Capital Management's collapse are that
investors need, or should want, transparency in their money manager's
investment strategy. But Madoff's investors rave about his performance
-- even though they don't understand how he does it. "Even
knowledgeable people can't really tell you what he's doing," one very
satisfied investor told Barron's. "People who have all the trade
confirmations and statements still can't define it very well. The only
thing I know is that he's often in cash" when volatility levels get
extreme. This investor declined to be quoted by name. Why? Because
Madoff politely requests that his investors not reveal that he runs
their money.

Editor's Note: Too much secrecy is not a good thing. Transparency is better.

"What Madoff told us was, 'If you invest with me, you must never tell
anyone that you're invested with me. It's no one's business what goes
on here,'" says an investment manager who took over a pool of assets
that included an investment in a Madoff fund. "When he couldn't
explain how they were up or down in a particular month," he added,
"I pulled the money out."

For investors who aren't put off by such secrecy, it should be noted
that Fairfield and Kingate Management both market funds managed by
Madoff, as does Tremont Advisers , a publicly traded hedge-fund
advisory firm.
Editor's Note: This kind of scam will be repeated many more time in the future. In fact there are several similar hedge funds operating under the exact same principles right now.

Saturday, December 20, 2008

Lakshmi on my Shoulder

Lotus 19087

I have written about these strange circumstances before so I extend my apologies to those experiencing a sense of deja vu. Around 20 years ago I met with some Jain businessmen in a very old part of Madras (now Chennai), India. These men hired me to advise them about ways to use a new telephone service available in their district. This is the story of what happened during that meeting.

I was working in India as a computer consultant in the late 1980s because there was little demand for Internet consultants in the U.S at that time. A group of Indian businessmen interviewed me in Washington, DC and asked me how soon I could be ready to fly to New Delhi. Two weeks later I was in Calcutta.

Market Day,  Purulia District 00018

It was during my second trip to India that I visited Bangalore and Madras. It required a long train journey south from New Delhi. I traveled Third Class, as I recall, and ended up on the top bunk of the 3-tier system for most of the journey. The bunk immediately across from mine was occupied by a popular Islamic Imam. Several hundred people were there to see him off in Delhi and at one station more than a thousand people waited to greet him during the short train stop.

My Website as a Graph

By the time we arrived in Bangalore I had seen much of central India in great detail. There were also those long conversations with the Imam, which I will never forget. I stayed with friends for a few days and then journeyed on to Madras, again by train. Servants of the Jain businessmen greeted me in Madras and took me first to a large computer convention downtown.

I did not have an assigned booth but instead went around to all the vendor's stalls. It was my job to explain a new phone service being offered by Videsh Sanchar Nigam Limited (VSNL). Most computer people were doubtful that anyone would want to spend that much money for high-speed phone services (ISDN) to North America and Europe. Nevertheless I attracted a following of nearly 100 interested students and young computer technicians. They tailed behind me as I went from booth to booth trying to sell VSNL services. When I spoke everyone would go suddenly silent and listen carefully to the services I proposed. It was like an old Smith Barney television commercial.

At first I tried to sell people on the idea of creating video-conferencing services for businesses and families. My second suggestion was for computer programmers in India to begin collaborating with the people that write software code in the United States. Finally, I suggested they could use this new phone line to provide telephone support for U.S. firms that needed English-speaking call center staff. These ideas were a combination of suggestions that I first proposed in my original interview in Washington, D.C..

After I made all the rounds to every vendor in the large hall, the convention operator eagerly offered to allow me to address a large group in a very small meeting room. I gave a short talk in that very hot and stuffy room. Since it was around lunchtime, many in the back of the room were eating. If you know anything about food from India, and the effects of heat on young men, you can just imagine the atmosphere in that small space. At just about the time I was about to pass out, during a long question and answer session, the Jain's driver came and whispered in my ear. "It is now time for your meeting, sir." he whispered. I thanked the assembled group, gave out a few more business cards, and quickly left the room.

An funny black British car whisked us into an old section of Madras. We ended up on a street full of small, private computer schools. Keyboarding and computer software classes were the primary services offered in this district. Most of the schools were owned by Jain businessmen. (Briefly, Jainism is one of the oldest known religions in India. Jains are known for encouraging people to learn and perhaps become scholars)

These businessmen had already received good reports of my talks at the convention that morning and my earlier talks in other Indian cities. They were ready to invest in all the proposals I was suggesting. As soon as the phone lines could be installed they wanted to start opening call centers in every major city in India. They needed my help to determine the curriculum they would need in order to teach the right skills to all the workers in these call centers.

During this meeting one of the oldest Jain businessmen in the room said something very curious to me. He said, "You have Lakshmi sitting there upon your shoulder. I can see that clearly. You will always bring success to the people that listen carefully to you. The places where you work will be very successful, at least while you are working there."

Great Horned Owl 15414

It took me many years and many different jobs to understand what it meant to have "Lakshmi on my shoulder." Today I clearly understand what that means but back then I only knew that this old man had spotted something about me that I did not know.

India, especially southern India, has since grown to become one of the largest call center locations in the world. There is a massive amount of collaboration between the software developers in other parts of the world and those in India. The sons of those Jain business school owners continue to operate huge networks of business schools all over India. Some of the people that stood in that stuffy meeting room taking notes during my talk have gone on to build firms known today as Wipro, Infosys, and Tata Communications.

Despite how some in western nations feel about outsourcing, I do not regret a single thing about the lessons I taught in India two decades ago. In fact, if I could help start something that big, something that created so many jobs for so many people, I would do it all again, if asked.

From all I can tell, Lakshmi is still sitting there on my shoulder.

Lotus 19087

Friday, December 19, 2008

Death of an Industry and perhaps a Nation

It's a miserable day outside here where I am working this morning. Dark skies and rain make it difficult to feel positive about the day. The weather should not determine how I feel but I am human and weather impacts the mood of humans.

Classic '66 Pontiac Le Mans Dash 072845 Classic '66 Pontiac Le Mans 072844

The largest employers around here are in real trouble. Many businesses are closing and empty store fronts are common on Main St. The restaurants are empty at dinner hour. The idle clerks of the stores that remain open look desperately out their windows. This region is in a time of crisis, like so many other places in the world today.

Unlike most of my neighbors I still receive and read a daily newspaper. The few remaining newspaper writers tell me the auto industry is about to fail in the big continent north of where my new home is. I remember going to college near an auto factory. Those assembly-line workers made incredible hourly wages when the only jobs I could find paid $3.50 an hour. The cars they built devoured gas at the rate of 10 miles per gallon way back then.

These modern chariots required large amounts of steel so there was a smelly steel mill down in the valley near my school. Those steel workers were paid excellent wages too. I remember a man who shoveled coal dust all night telling me he made $15.00 an hour.

That was in the 1960s and 70s.

Way back then we knew that cars could get better gas mileage. Buick had begun importing something called an Opel Izuzu and there were new Volkswagens and Renaults for sale. Most people I knew did not drive them but their children often bought such cars used. The auto executives in Detroit were only planning to build larger vehicles after the failure of such models as the Ford Pinto and Chevy Vega. People did not feel safe in small cars and gasoline was cheap.

In the late 1970s the Arabs pulled a fast one and stopped selling oil to America. Suddenly people could not fill those big cars at the neighborhood service centers. The oil embargo was quickly ended but some people remembered how vulnerable the shortage of gas made them feel. About this time young Americans started to buy more Toyotas, Datsuns, and Hondas. People did not realize that this was the beginning of the end for the old U.S. auto firms of General Motors, Ford, American Motors, and Chrysler.

Cousin Mike and I

As a little boy I was raised on income my father received from a job at General Motors. Many people in my little town earned a living selling GM, Ford, or Chrysler cars and trucks. Neighbors worked at steel mills that sold to the car companies. Bankers lived off interest from car loans and home mortgages. Many of these homes were bought by auto workers like my father.

Other people in town lived by selling groceries, hardware, and services to people like my father. Even the doctors in town made a significant amount of income from the auto worker's health insurance payments. The largest source of income for local newspapers was auto advertising.

It may sound odd to people today but this small town was located in eastern Pennsylvania, not Michigan or Ohio. The auto industry once supported many areas of the United States, not just the upper midwest.

Much of this story is about to end next year. The remaining Detroit-based auto manufacturers are going to close their U.S. operations in 2009. My college degree is worth nothing in a failing nation. All the people in the North that still depend on their business will be thrown out of work at once. Some will move south to the increasingly crowded cities in Florida, Georgia, and North Carolina. The people that remain in the North will encounter more crime and poverty as this nation slides into a 2nd Great Depression. It is inevitable and almost a natural thing but that does not make it any more pleasant to crawl through on your hands and knees.

Wednesday, December 17, 2008

Apple's future vs Bernard Madoff's past

Two men seem to be dominating the current news cycle. One of them, Bernard Madoff, has allegedly been taking new investor's money and using it to pay departing investors for years. The other fella, Apple's Steve Jobs, has been using profits to build a solid business based on reliable consumer products and the software that runs those tools. Mr. Jobs has also been at this effort for decades.

Apple logo and Thomas Jefferson 000299

Both men are now moving out of the picture, one likely to jail and the other possibly to a well-deserved retirement. It makes perfect sense for the investors in Madoff's firm to panic and run to their lawyer's offices. It is completely absurd for investors in Apple Inc. to suddenly sell their stock. In both cases I suspect the reason investors are panicking has more to do with a failure to closely examine the books.

Madoff apparently operated in secret, that lack of openness should have raised a red flag among shrewd investors. Fund managers that gave Madoff a billion dollars or more without knowing how the money was being invested should be prosecuted along with him. The Securities Investor Protection Corporation notes that Mr. Madoff kept falsified and unreliable records. The argument "Well, everyone else trusted him with their money, why was it wrong for me to trust Mr. Madoff?" simply does not hold water.

I am a small investor yet I can and do look at the detailed records of the funds and equities I own. I examine the public statements. I personally look at how effectively the products and services are delivered to market. In many cases, I actually use the products and services of the firms where I invest my money. My clients literally send me to work in the largest markets where consumer products and services are sold.

This brings us to Apple Inc.. This consumer products firm has been gaining market share year after year. It is by far the dominant producer of very popular portable music players. In 18 months Apple has gone from no position to #3 in the lucrative smartphone market.

Blackberry Bold iPhone.jpg

Additional services, such as the Apple's
AppStore for iPhone applications, are growing at a very healthy pace. In the field of personal computers, it appears to be gaining an additional one percent market share at least every 12 months. That last effort is even being accomplished without a significant corporate marketing operation. Finally, Apple's books clearly show that it had nearly 25 billion dollars cash in the bank at the end of September, 2008.

Investors running away from Apple Inc. based on a rumor about the health of any single employee, even if that employee is the CEO, have clearly failed to study the details of their investment. It is easy to understand Apple's wise decision to walk away from IDG's increasingly greedy convention business. They can surely get more value for their marketing dollars in other venues. Apple's success is hard won on the shoulders of thousands of dedicated employees and millions of loyal customers. There is no sign they are abandoning the business and every sign that quite the opposite is happening.

All the evidence presented so far by parties large and small can lead to only these conclusions. Investing in Bernard Madoff's firm was foolhardy and clearly a risk not worth taking by any experienced fund manager. Investing in Apple Inc. is an intelligent choice that any fund manager can clearly see will lead to future growth.

Note: After many years, the author confidently continues to hold shares in Apple Inc. and other solid investments.

Mortgage Assistance Program Failing

The Washington Post informs us this morning that the Federal government's program designed to prevent rising foreclosures has received only 312 applications since it was created in October. In other words, more and more people continue to lose their homes despite (or because of) the best efforts of the Bush Administration and Congress.

"...the problem is that the program's success hinges on the lenders' willingness to participate. "

Therein lies the fault with the program and the source of the problem in the first place. Banks, mortgage firms, and credit card firms have been flashing easy money signs before nearly every single consumer for years. They are now up to their ears in bad loans. Every consumer cannot be expected to be a skilled loan issuer, they must rely on the advice of bank officers.

Spies First National Bank 00004

Those who seek to pin this problem on the borrowers themselves have never attempted to read the full terms of any mortgage or credit card agreement. Experienced tax lawyers tell this author they can barely decipher the wording in the documents that accompany a mortgage or credit card. The borrower is at the mercy of the lender in every case.

Now the bankers and other lenders do not want to participate in the only recent proposals that might save their skins. Unlike rats, it seems they are willing to remain stubbornly on the ship until it slips beneath the waves. They also seem not to care if they drag the entire nation down into the whirlpool with them.


The Washington Post article

Tuesday, December 16, 2008

What Does Zero Percent Interest Mean to You?

The U.S. Federal Reserve set their key interest rate to "a range between 0 and .25%" today. What will that mean for the average person in the U.S.?

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It may mean the interest you might be paying on any credit card balances will go down. There is a small chance your mortgage payment will drop slightly. If you own or work for a business that requires loans at certain times, that cost of borrowing money may be reduced.

Do not count on any of that happening soon, if ever.

Remember, after the U.S. government bailed out many major banks this past fall those banks still refused to loan money to all but those that really do not need loans. Banks and credit card firms do not have to do anything they are afraid to do, even if the U.S. taxpayer is giving some of them the money required to stay in business. There may be a slight improvement in that situation when the Federal Reserve decides on new rules for credit card issuers on Thursday.

Credit card firms recently rolled out rather large interest rate increases on credit card balances. They are unlikely to reduce those rates anytime soon. You can also expect them to keep reducing credit limits.

If you really need a car and try to get a loan to buy that car, new or used, you still probably will not qualify for that loan. Banks simply do not want any more loans on their already cooked books. They are still afraid that many loans will not be paid back.

Businesses that need loans to expand will still not be able to get those loans. Therefore you can expect layoffs and job losses to continue where you work.

What you can expect is that prices at the gas stations, grocery stores, and many other places will stay low or even go lower. Zero interest-rate policy or Zirp usually puts the brakes on price inflation. However, low, low prices is not necessarily a good thing. It means that the U.S. economy will take longer to recover. That would mean you or someone you know that really needs to get a job will have to wait longer for that important phone call.

U.S. firms and wealthy investors have no incentive to make new investments or hire people if those actions will not result in greater profits. Foreign firms and other countries, whether you like them or not, may decide to invest elsewhere if the return on their investments in the U.S. is 0%. Foreign investment may be our only hope if so many U.S. financial firms remain on the brink of collapse.

The Federal Reserve's move did stimulate the stock market today. Investors may think they are seeing a glimmer of hope that their stock portfolios will rebound. In all liklihood the hedge funds will just wait for this brief rally to sputter out and then return to selling in order to pay off their investors that want out. After all, it will be the common citizen that pays for Bernard Madoff's 50 billion dollar theft just like we were made to pay $4 per gallon for the oil speculator's profits this summer.

The only thing set to go up next year is the pay of all federal government workers, by an average of 3.9%.


Washington Post story
Government Central
Reuters article

Saturday, December 06, 2008

What Could Mr. Bush Do Now?

So what could Mr. Bush possibly do that would give unemployed Americans hope between now and January 20th?

Eisenhower Executive Office Building 00035

Here are ten bold ideas:
  1. Ask the firms that recorded the greatest profits in 2008 to voluntarily donate 10% of those profits towards job-creation and training efforts.
  2. Declare that he and VP Cheney will forgo their 2008 pay and invite the wealthiest CEOs (oil, pharmaceutical) and U.S. Senators in the U.S. to do likewise. The money saved should go directly to efforts to reduce the growing number of layoffs and re-train the unemployed.
  3. Order the U.S. Dept of Labor to publicly admit the actual rate of unemployment is 15%, not the fudged numbers of almost 8%.
  4. Order the managers of all Federal agencies to double their efforts to fill all non political-appointee posts between now and January 20.
  5. Ask his Executive Office staff to man an employment hotline to interview new job candidates revealed by #4. Use Executive office funds to sponsor additional job fairs in every major city.
  6. Ask the credit card firms to voluntarily reduce interest charges by 5% on all debt for three to six months.
  7. Ask the presidents of all U.S. colleges and universities to make additional efforts to open their doors to the unemployed seeking to learn new skills.
  8. Demand that major offshore companies and ex-pats either pay their fair share of taxes on money earned in the U.S. or face sanctions.
  9. Order the Department of Justice to begin a major investigation into the causes of the current crisis.
  10. Pardon no white-collar criminals that committed acts of political corruption, financial crimes, and gross corporate theft.

Those are my ideas but I am sure that more intelligent people can quickly identify one hundred other holiday gifts that would go a long way towards lifting this nation out of the quagmire caused by all the rich people's efforts to hoodwink the common, hardworking U.S. citizen.

Wednesday, December 03, 2008

Using Your iPhone (or other Smartphone) To Avoid Traffic

Anything that won't sell, I don't want to invent. Its sale is proof of utility, and utility is success. - Thomas Edison, inventor

UPDATE 22/12/08: Avego offers iPhone users a tool, Avego Shared Transport, that allows commuters to grow carpools. Avego web site

Locate the Avego Shared Transport at Apple AppStore

In my last article on this topic I described a new tool that allows people to save time on their daily drive to and from work. Essentially this tool is a software application that helps people find a better way to get to work each day. In addition, there are advanced features that reward frequent users for avoiding major traffic jams and saving fuel. These rewards include cash credits towards debit or credit card accounts or coupons to use towards your next gas purchase.

The application can be used to save driving time by anyone anywhere through a web browser on the Internet.

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However, to qualify for credits users run a form of the application on a GPS-equipped smartphone like Apple's iPhone, the RIMM Blackberry, Google's G1 or other similar GPS-equipped phone models. People who have any type of mobile telephone and a GPS navigation unit in their vehicle also may participate. The incentive program is open to any business, government agency, non-profit organization, and individuals.

If you have a smartphone all you need to do is download the application and use it to learn more about your daily drive to work. After a few days the application will start to offer you suggestions for how to save time or fuel by using a different route or perhaps leaving for work at a slightly different time. Because the application uses real-time traffic information, you can benefit from different suggestions on different days of the week, all year-long.

Besides the immediate time-saving benefits available to each user, entire metropolitan areas benefit from reduced traffic congestion. Whole nations will benefit two major ways:
  1. From the combined fuel-savings earned by many users.
  2. Through the reduced need to build more roads.
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Each week users can generate a report that shows them how much time they saved by using the application. The report will also include relevant time-saving suggestions such as using public transportation, car pools, or van pools.

Car pools and van pools that want to attract more members can register even with the application to reach out to people in their local communities. Contact information will appear in the weekly reports generated by the application. People who belong to a member organizations will also be reminded of programs available to members of that organization. For example, government employees will be made aware of certain programs they may qualify for.

(to be continued...)

Links to other Traffic Software Applications and Related Web Sites

Avego web site

Smarter (and Healthier) Planet Blog




Tuesday, December 02, 2008

Use Smart Grids for Traffic, Energy and Money Saving

In the same way that researchers at energy producers are seeking to create "smart grids" researchers trying to solve traffic problems need to develop smarter solutions. For example, global positioning systems (GPS), traffic cameras, satellite observation, and traffic flow detectors must be used to advise fuel and logistics firms of the best times to efficiently move large trucks. Besides saving fuel this would decrease the chances of accidents involving hazardous materials or large trucks.

Public and private partnerships must encourage the use of smart traffic grids to help any business that operates 24 hours a day. Government and private workers must be given financial incentives to use these smart grids. Dial an 800 number and learn the best times and route to make your commute to work. Get a small bonus if you do this and actually use the knowledge gained. We could program GPS navigation systems to calculate the fuel and time costs of driving to work at 6AM versus 9AM. People willing to participate would get gas cards or credits for driving to work during the most efficient commuting hours.

Fort Lauderdale, Florida 48577

Urban planners need to be provided with the best information so they can locate any new offices or government buildings where the traffic flows more freely. Urban renewal projects need to be completed where the roads and public transport systems will best serve the residents. It may make sense to offer tax incentives to encourage businesses to relocate, rather than building more roads.

London, Hong Kong and other cities already use tolls and wireless systems to financially coerce commuters to use public transportation. A more interesting way to accomplish the same goals is to provide economic incentives to cooperative employers and employees. Change workers hours or provide metrocards, like agencies in Washington, DC already do. Encourage at least some or even more telecommuting among those employees that prove they will responsibly work from home. Reward commuters for avoiding traffic jams.

When van pools or other park and ride systems are given the technology to avoid traffic jams more people might see the value in using them. Feedback through this same technology would allow urban planners to determine the best places to create HOV lanes. While it may sound complicated logistics providers and airlines already employ skilled professionals that accomplish much of the same in their heads. Hold a conference for airline and trucking traffic managers and use the knowledge gained to develop software and hardware solutions commuters can easily use.

The latest smartphones including Blackberries, iPhones, and Google's G1 permit relatively easy development of software that use electronic maps and GPS. The next logical step is to initiate development of applications that not only encourage the use of smart traffic grid information but provide financial incentives for doing so. Download and use a new application that helps you get to work faster and receive a discount the next time you go to fuel up. It is likely that computer, telecommunications, and energy firms would be more than willing to go along with such programs if only to be a part of the publicity they would receive in return.

Follow-up article about Smartphone applications designed to relieve traffic congestion

Blackberry Bold iPhone.jpg

Monday, December 01, 2008

The Real Terrorist Threats

Over the past few years the U.S. and many other nations have already been struck repeatedly by terrorist groups wielding terrible weapons of mass destruction. These weapons include structured investment vehicles (SIV), hedge fund short sales, variable rate mortgages, and usurious interest rates. Corporations, corrupt politicians, and immensely wealthy individuals appear hell-bent on fleecing the U.S. Treasury out of every last taxpayer or borrowed dollar.

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In return, Wall Street and Congress suggest that we simply print more money, pawn more debt off on China, and give executives more money to pay outrageous billion-dollar bonuses to the criminal managers that cooked up these massive debts. Men in black suits want more money to make payments on their private jets and tax havens while laborers are sent home to watch TV and drink.

Ordinary citizens are being laid-off by the hundreds of thousands, losing homes to foreclosure, and being asked to pay more and more interest on any debt they may have incurred.

The corporate-owned news media tells us to go after Lashkar-e-Taiba (aka LeT, Lashkar-e-Tayyiba, Jama'at-ud-Da'wah), al Qaeda, Iran, and Hizbollah while U.S. and Europe's bankers and business leaders plunder government treasuries. Insurance giants like AIG demand bailouts but refuse to stop awarding huge bonuses to inept executives. Investors that did buy shares in once legitimate corporations wake up to find all their money has vanished in a Chapter 11 bankruptcy filing.

There seems to be almost no way out of these circles of financial hell that make those in Dante Alighieri's The Divine Comedy look like paradise.

It will be next to impossible for the incoming U.S. leadership team to fix these problems during the 4 years they have in office. Hoovervilles, that is tent cities of unemployed and hungry people, grow larger every day in downtown Los Angeles and private campgrounds across the land. Older and older children are forced to move back in with elderly parents living on fixed incomes. Those fixed incomes are based on a rapidly disappearing Social Security program and vanishing pension funds. The elderly who planned to live on investments are now working at gas stations, discount stores, and fast food restaurants.

How can families work their way out of debt when blatant age discrimination and a failing health care system conspire to physically destroy them?

Educated older people with real skills are denied work in their specialties because firms cannot afford to pay for their mandated group health insurance policies. The few inexperienced younger workers that remain can no longer turn for advice to the trained people that built the businesses.

Now that the U.S. consumer has all but stopped spending the downward economic spiral will do nothing but accelerate. What people do not understand is that cash stuffed into a mattress or held in savings accounts paying almost no interest shrinks rapidly. Saving some money is a wise thing to do but 70% of the U.S. economy is based on consumer spending. If no money is going around no new jobs will come around. People who can afford to do so must be encouraged to invest somewhere or there will be no future economy.

Shortsighted corporate leaders blindly look to laid-off or debt-swamped consumers to increase spending. Japan's Minister of Economic and Fiscal Policy, Kaoru Yosano, put it quite bluntly in an interview with the Financial Times, "...if someone asks me, 'What do you want to buy?' would take me a week to think..I have a car, two refrigerators, three TVs..." Furthermore, these same corporate leaders are freezing salaries, lowering credit limits, and closing plants near and far.

Trickle down economics is no answer but the future of the planet does demand more immediate investment in renewable sources of energy, education, and public works infrastructure.

Nuclear Blast 1945

The real weapons of mass destruction are not nuclear or biological weapons, they are unemployment, high interest rates, lack of health insurance, corporate greed, and corruption. These WMDs will wipe out the hard work and lives of generations of people faster than any terrorist attack. Supposedly very intelligent people, including business executives, government officials, and university professors all worked together to develop and implement the policies that landed the world economy in this deadly trap. A socially responsible new generation of educated professionals must now step up to the plate to hit policy home runs to bring the world back to a winning streak.

Where Does Love End and Hate Begin?

Almost 200 people were killed in the recent atrocities in Mumbai, India (Bharat)

Hindu Nationalists such as the BJP are now crying out for action against Muslims in Pakistan. Almost certainly someone is going to get killed in act of retribution for what happened in Mumbai. In fact, war between Pakistan and India could erupt and killing hundreds of thousands or people.

And yet in the past there have been terrible acts committed by all sorts of nationalists, Hindu extremists (The Partition, Orissa), Christian extremists (The Crusades, WWII, et al), Jewish extremists (Zionists in the West Bank) and even Fundamentalist Latter Day Saints (Polygamous Mormons). All religions except perhaps Buddhism, when taken to the extreme by a small subset of followers, appear to lead to shameful acts. Should we not examine the general role of all nations and religions before we single out any one?

Purulia District, India 00024

I do agree wholeheartedly that Islamic Fundamentalists are certainly taking the lead in current murderous events but cigarette manufacturers led to the killing of at least 10 million last year alone. We must work to stop pogroms or genocide wherever they occur.

It is usually not correct to single out any one nation as the perpetrator of a crime perhaps caused by a few citizens. The chaos that allows certain groups to thrive in certain regions of the world does need to addressed.

You will seldom find a religious leader or even a college professor willing to take up this topic before students. And yet the topic of why people kill each other or themselves is perhaps one of the most relevant subjects related to human society.

What Causes Us Not To Kill Each Other?

Certainly the ideas of compassion and kindness appear to be nurtured in loving homes with two parents and perhaps several brothers or sisters. A young man or woman is far less likely to lash out violently against neighbors or strangers if all they have learned is caring and consideration for others.

As long as families continue to communicate they appear to build strong communities. Family ties also allow people to spot those who run into trouble.

Individuals that are treated poorly at home are far more likely to treat others harshly. We know that for certain at this point in our understanding of sociology.

Where Does Terrorism Begin To Grow?

After leaving home many people face economic or physical hardship, for a wide number of reasons. Years of struggle and suffering can certainly turn a good person into a sociopath, but even then the chance that one disturbed person will harm others, or many others, is quite slim. They are more likely to harm themselves.

However, when many disaffected people are gathered together by one or more leaders with malevolent intent serious damage to society is very likely.

Right now, in some part of the world, a leader is teaching his followers to hate another group of people that hold different beliefs. Some of the more ardent followers may choose to follow-up on these teachings by purchasing weapons or bomb-making materials. More deaths and misery will soon follow.

How can we prevent these people from inciting and carrying out such violent acts?

We can begin by taking more care in raising our children. In addition, families can and should maintain closer contact and lines of support with those who have left the home to go live in the world. Finally, we can speak out against religious or other organization leaders that encourage hatred and incite violence in our societies.

These may seem like small acts that individually amount to very little. However they will work to counter the small but repeated negative lessons that build groups of murderous criminals like those that attacked Mumbai.

What Other Forms of Mass Murder Threaten Human Society?

There is also the subject of subtle murder and mayhem to consider. The executives in-charge of the world's cigarette manufacturing plants hardly appear to be the leaders of a genocidal movement. Yet the World Health Organization has clearly determined that many millions of humans die each year as a result of cigarette smoking.

Humans also die from car accidents, auto exhaust, and gunshot wounds. But unlike cigarettes, motor vehicles and guns can be proven to have at least a few redeeming qualities. The tobacco found in cigarettes and all other tobacco products appear to bring about a soothing, slight form of relaxing intoxication, all while slowly killing the smoker and those around or inside her.

The murderous effects of tobacco are absolutely proven. Any perceived benefits from tobacco are far outweighed by the physical, medical, and even fire destruction.

Very recently a young man haphazardly tossed a cigarette into a pile of leaves near a home he was visiting. The home burned to the ground, killing three of the young man's friends. The young man did not intend to kill his friends. The cigarette manufacturer did not intend to kill those three people. Nevertheless the habit of smoking led to the fire that killed three very promising young lives and negatively impacted many others.

Deadly fires caused by cigarettes and cigarette lighters are still very common all around the world.

Deaths from lung disease and cancers caused by cigarette smoking are a major cause of all premature deaths.

Many of these needless deaths can be prevented in the future simply by encouraging young people not to start smoking.