The Amazon and the Outback

Amazon rose so much in share price, to over 40x earnings at the moment.  How much are they going to grow?  People are willing to pay $25 billion dollars to get access to a revenue stream in the $600 million range with very thin profit margins (~3%).  Typical market overreaction, amplified by the fact that there is very little other good news to invest in.

On the other hand, Australia is considering a drop in interest rates, so I am taking a hit on the Australian dollar. I still think it's a good longer term currency play, even though I am losing in the short run.  Where are those Australian dollars going? The yen is still off of its high against the US dollar.

Gold keeps trawling upward as the stimulus grows and Russia and China are making a lot of noise at Davos about the insufficiency of the US dollar to serve as the world's reserve currency due to irresponsible spending and lending.  It's going to be amazing if they can avoid a serious drop in the US dollar.  I don't know if owning gold really makes logical sense, but I still feel like it's worth holding onto just because the possibility of a quick gain is worth the risk of the modest drop it might take.

Wither the Yuan?

Now that Geithner is going combative on the Yuan, will the Chinese let it float?  It's really hard to predict what effect that will have on the world. The real purchasing power of most currencies will drop pretty hard for Chinese made goods. Which is just about everything at the moment.

There are a couple of funds that track the Yuan. Currencyshares notably does not have an ETF that tracks the Yuan. The Dreyfus Wisdom Tree fund is out there (CYB). I held it for a little while in 2008 but it didn't really trade very much (note the stepwise like graphs), so I got worried about it and dropped it.  I also thought it should pay some sort of yield like the Currencyshares funds.  Anyway, the latest prospectus showed up again today and I am thinking about jumping in again. 

Consider the Aussie

The Australian dollar is trading about 10% over its 5 year low versus the dollar. It's had a serious drop over the last 12 months as many hedge funds have unwound their positions in the Yen carry trade (borrowing Yen at low interest rates to buy Aussies and invest those at high interest rates).

I hopped in this morning. I am hoping the kanagroos have gold in those pouches, as I dumped some of my AU to buy the AUDs. I was hoping to end with a more painful "g'day" style joke, but I just can't bring myself to do it. This is a family blog, after all.

Economics.

First day that Obama's in charge and it sucks about the economy. I liked Obama especially for his foreign policy approach, aka get the heck out of Iraq. I am not such of big fan of his Keynesian madness. It may get us out of this hole, but it's a huge risk. If it doesn't work, we are going to have a crushing debt that is only going to be solved by inflation. A lot of people that don't save money don't care about inflation. I want people to save more money so that they do care about it. I don't even think this recession is a bad thing. If I were spending twice as much money as I had, and then I stopped, I think that would be a good thing. Yeah, it's less than I was spending before, but all of that spending I was doing before was deficit spending, so it was hurting my future ability to spend. People get too focused on the metrics, like the GDP, which is a total bullshit number anyway. Our job is not to protect the GDP number that counts things like me borrowing money. The government needs to be creating the climate for jobs to be created and the country to actually produce things.

I remember when Walmart became the largest company in the US. My uncle cried. He worked for Walmart (as a contractor), but he said there is something incredibly wrong with the economy when the largest company is just a distributor of stuff that isn't made here. Wealth is just flowing out of the country. Now the Keynesians want to borrow more money from overseas (where people still save money) so that all of that interest we pay (currently a huge part of the taxes we pay) will continue to float overseas. This is insane.

I hope the one thing that this recession brings is the fall of Keynesianism. People still think that massive government spending got us out of the great depression. It didn't. It made it longer, because it took longer for the market to correct itself. All Keynesianism is good for is for preventing social unrest when the economy is weak. That is a worthwhile goal, to add some buffer to the drops, so that we don't get shocked into a revolution. However, to think that it actually has some positive effect on the economy as a whole is wrong. If you want to invest in the economy, you should spend the stimulus money on things that are going to make money. Factories, research, education, etc.

The simple fact of the economy is that real wages in the US and Europe have to drop to get closer to those in the rest of the world. We can't artificially pay people here more by borrowing money from overseas to drive up asset prices. It just doesn't work. That the solution to it is somehow to borrow more money from overseas...no way.

I'm wondering if I'll all be more productive after I read the new David Allen book.


I have to finish that one before "What Would Google Do?" is delivered.


I wonder how many more blogs I need to start making money? :-)

Portfolio Analysis

Wow, markets are being crushed today. GLD and NEM are good hedges today, even my oil holdings took a huge hit. I bought some more oil today...I think we'll make it back to $50/barrel in a year or so. The real question is when is the dollar going to drop? It's going up relative to the Euro, but I think it will ultimately suffer in comparison to commodities (inflation). That simply has to be the consequence of printing more money (aka, having the Fed buy T-bills). I plan to sell gold as it rises and buy more commodities in general (that's why the portfolio seems really gold heavy at the moment). I am not going to be buying any individual US equities for a while. For growth stocks I'd look at Amazon again if it goes back down to $35. For everything else, I am looking to see who can keep the dividends up and evaluating utilities.

Current non-retirement account holdings:
Tax free money market: 14.2% (Seven day yield at a pitiful 0.14%)
BKF (Brazil Russia India China ETF): 6.4%
DBA (Agricultural Commodity ETF): 7.7%
DBO (Oil ETF): 12.7%
EWY (SKorea ETF): 11.6%
GLD (Gold): 19.2%
NEM (Newmont Mining): 16.5%
TNP (Tsakos Energy Nav): 11.7%

$15B down the oil drain

Warren Buffet put $230M in for 10% of BYD (leading cell phone battery manufacturer rolling out electric cars.) For $25B you could start 10 of those companies in the US (and invest the remainder in Tesla). The govt could get warrant coverage on the investments so we could convert to stock if anyone ever IPOs again. We could use the profits to pay a portion of the lost pension benefits. The government already operates several venture funds for military purposes, so it's legally sound. These 3 Detroit behemoths aren't going to be competing on the world stage.

The simple way to save money

I am sick of people saying that clipping coupons is good way to save money, if you really want money, here are your options:

1. Move to a cheaper house/apartment - your biggest expense is the best place to save.
   
2. Buy a cheaper used car with a good warranty.
3. Get a better paying job or a second job (like cooking at home).
   
4. Don't tithe- it's for suckers only- Gods don't want money, they can make their own.
5. Travel cheaply, stay with friends.
6. Stop buying expensive things. You don't need them.
   

Go faster...

Great plan from New Hampshire for making sure everyone is making progress. I don't know if getting out early is the big benefit, but...

"We're simply telling students it's okay to go at their own pace," he says. Especially if that pace is a little quicker than the status quo.

That sounds great!


Nearly four years ago, New Hampshire began an initiative called Follow the Child. Starting practically from birth, educators are expected to chart children's educational progress year to year. In the future, this effort will be bolstered by formalized curricula that specify exactly what kids should know by the end of each grade level.

Wow...

Racism sucks

There is a great way of stating the obvious. I am disappointed by this New York Times article and the apparent contradictions it supports. First this claim is made:
"When New York City set a uniform threshold for admission to public school gifted programs last fall, it was a crucial step in a prolonged effort to equalize access to programs that critics complained were dominated by white middle-class children whose parents knew how to navigate the system."
This sounds like a great move to me. Take something that lets whiny parents get their way and replace it with an objective standard.

"The move was controversial, with experts warning that standardized tests given to young children were heavily influenced by their upbringing and preschool education, and therefore biased toward the affluent."
Hmmm...there's something wrong with this: "Tests are influenced by upbringing and preschool and therefore biased toward the affluent". The use of the word "biased" there is very misleading. They don't claim that the tests are biased- the claim that the results are influenced by prior education, and thus those who have had access to better preschool education do better. What sort of test do they propose that wouldn't exhibit this? I submit that any test that doesn't reflect this must be biased in some other way.

What exactly are we talking about here? We are talking about putting children in classes that move at a pace that will keep them stimulated and interested in learning. One that is not too fast nor too slow.

"...last year, there was no citywide cutoff, so available seats were distributed to the top scorers in each district. Some districts that had many spots or few applicants welcomed children with very low scores."
If we have children that don't know their alphabet in a class where everyone else is reading, that is missing the point of leveled education. But I see a much larger access problem that the Times missed- why do kids have to apply? Just test them all and put them in appropriate classes. Kids can learn how to count and other kids can learn how to add.

“They’re trying to push Hispanic kids and minority kids away from gifted program,” said Judith Amaro, a parent leader in District 6.
Now that just sounds idiotic. What does race have to do with a test? If I make a test where you have to be able to add 2+5 to get into the gifted addition class, the test doesn't care what race you are. Still, racism exists- see Obama in West Virginia. So people that don't understand the nature of the test, assume that any different performances of people across racial groups must be racist. It's really sad.

I still question Ms. Amaro- why would you want an underqualified kid in the gifted addition class?

I think the bigger problem with gifted programs is that it's all in. It should be differential by subject and you should have to keep qualifying. Check kids again every year. Check the pace at which they are learning.

“a group of professors and luminaries — including Deborah Stipek, the dean of Stanford’s School of Education, and former Gov. Mario M. Cuomo — deplored the practice in a letter to the chancellor and mayor. Testing young children for gifted classes most likely will increase inequities,” read the letter, “and undermine educational opportunities for all children
Far be it from me to say that the dean of Stanford's School of Education is wrong, but she is wrong. Gifted classes aren't magical bunny treats for rich kids- they are classes designed to run at a faster pace for kids that are ready for them.

If you want to fix the problem, spend money on Head Start and offer free preschool for the disadvantaged. Don't pretend the problem doesn't exist by pretending that kids who aren't ready for school are ready for school.

Too Rad

Radiation medicine sucks: CT scans are killing us! We're an over-medicated lot.

I think this bit neatly sums up a lot of what's wrong with health care in the USA:
"Some say part of the blame lies with physicians who have financial interests in imaging facilities. "There is statistical evidence that indicates that more scans are ordered when a physician has a financial interest than when he doesn't," said Moore.

Defensive medicine also plays a role, with some doctors ordering the tests to stave off accusations that they withheld the most cutting-edge technology from their patients.

In other cases, overuse results from worried patients and from parents demanding CT scans that may not be needed. "

So we have:
1) Doctors increasing income by ordering more care
2) Doctors lowering lawsuit risk by ordering more care
3) Patients demanding care they don't need

Resulting in: more Americans being killed by their healthcare providers (see graph). It sounds utterly cynical, until we change those three things, maybe people should get less care than they do.

I know my grandmother was more or less sent on a path to death by her doctor, who misdiagnosed her broken rib as a heart condition and gave her more pills to take- that sent her on a downward spiral. Ironically, to my argument, perhaps an x-ray would have done some good there, as she didn't have that much time left to develop a cancer.

Overall though, people need to be a little less optimistic about medicine and doctors. Those bright colored commercials for prescription drugs really do make people think there's a magical cure out there for everything. Even diseases that might not exist, like fibromylagia. It reminds me of Irritable Bowel Syndrome, which is a fancy way of saying your stomach hurts and you have constipation or the opposite, and your doctor doesn't know why. Except, in fibromylagia, all of you hurts, and your doctor doesn't know why. It sounds very very similar to arthritis to me- except that the (mainly) women that get it fight the arthritis diagnosis because they don't want to feel old. Of course, now Pfizer is marketing a painkiller called "Lyrica" (sounds like the name of a girly folk music concert?) to treat it. It doesn't actually cure anything (reminds me of the old Chris Rock bit on AIDS) it just alleviates a symptom.

And please don't get me started on the "Restless Leg Syndrome".

I'm 34 and I'm already achy- it ain't f-ing fibromylagia- I'm just getting old. Get used to it, ladies. It doesn't get any better.

And just because you name a symptom- it doesn't make it a disease. For example- depression is the symptom, serotonin deficit is a cause. We can't have people walking the streets saying they have headachitis. It just doesn't make any sense.

Anyway- that's phase one of my health plan- educate the people of the old USA so they aren't so overconfident in their medical science. That should save enough money to fund phase two...