Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Archive for the ‘Austrian Econ’ Category

Can We Get Ahead by Picking Each Other’s Pockets?

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Here is an excellent post from the Mises.org crew.  As a further enticement, here are the mini-headlines with in the post:

C + I + G = Baloney

Victims of a Failed Economic Theory

Government Spending Is a Parasite on the Private Economy

Or, in a paragraph:

The key fallacy embedded in Keynesian economics and the GNP equation is the idea that government spending adds to an economy’s health. In reality, the opposite is true: government spending subtracts from an economy’s health. The real economy is the private economy — there is no other. Government spending must come out of the private economy.

Written by heyercapital

June 29, 2010 at 11:34 am

Greece is the word

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I remember last Thanksgiving talking with the family back in Iowa about the Greece debt situation. It had just started to bubble to people’s attention, but at that point it wasn’t a “problem.”  It was just a reminder that we weren’t out of the woods yet in terms of unwinding the credit excesses around the world.

Today, finally, the equity markets are acting as if they are tangentially aware of Greece. (In the world of investing, equity takes a hit before creditors.  Therefore if the creditors are nervous, shouldn’t the shareholders be too?)  The rating agencies cut Greece’s sovereign debt to ‘junk’ (below investment grade) and downgraded Portugal. Who’s next?  Spain? Ireland? Italy?  The list goes on…  California? Municipalities?  Pension funds?  Is there a reason Germans are starting to check the serial number prefix on their Euro currency bills before accepting them as a tender?

Action plan:

1) Always invest knowing where the exits are.

2) Understand the Austrian Business Cycle Theory. (Start with Mises.org.)

3) Accept the fact that we’ve been through credit deflations before. They are not cured by new legislation. In fact, meddling always makes them worse and extends and exacerbates the pain.

Written by heyercapital

April 27, 2010 at 11:04 am

more “boom and bust” cycles coming

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Here’s a quick video from my buddy Aaron Task interviewing Lakshman Achuthan, on why buy and hold is dead.  There are more more “boom and bust” cycles coming.  Those of us who adhere to the Austrian, free market school of economics, understand this as well.

He addresses the symptoms that as more debt is piled on the economy, the subsequent economic recoveries get weaker and weaker from the debt load.  It’s not a “Bush” or “Obama” political management issue.  It’s a decades long trend, that doesn’t end well once we enter debt saturation.

Written by heyercapital

March 29, 2010 at 10:01 am

Happy talk

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I think it was the movie “Demolition Man” with Stallone describing a future dystopic society the prohibited speaking negatively about conditions.  Certainly the movie was more about explosions and Rambo’s positively unVictorian courting of the female lead character than a thorough discussion of why we, as humans, always want to hear the good news affirming that we are right and correct in our decisions, instead of being correctly told we’ve made incorrect decisions.

I think there’s an inverse economy of scale in telling people they’ve screwed up their financial lives.  If I’m talking with a man, one-on-one, over a cup of coffee, we can constructively discuss the errors he’s made and encourage positive actions.  If the man brings his wife (or vice versa) the conversation must include many points of justification as to why mistakes were made, and how it was a good idea at the time, or gulp, my broker told me he sold that to everyone. Emotionally, we don’t want to be wrong in front of a crowd.

How does one warn an entire nation that the path is wrong?  Our government has destroyed the value of our currency by 99% since the Federal Reserve was created by the banking interests. Our future obligations for Social Security and Medi-welfare will require Soviet level tax policies.  Financial asset bubbles have been popped, yet the same failed actions that extended the Great Depression have to be experienced by another generation.

I encourage you, dear reader, to unplug your TV. Stop being told what news means. Start using the internet selectively to read the news yourself and discern meaning yourself.  Broadcast information has to be made happy and unoffensive enough to placate the masses. Narrow-cast information, as in the internet and blogosphere, by the nature of its creation and necessity of avoiding dilution, is direct and poignant.  Stick with the new media.

T-bills are trading at a yield of nearly nothing, the same prices at the depth of the financial crises in the past year. (Perhaps I should add, the crisis has not gone away or been papered over, instead, it is just part of people’s awareness.)  The weak Greeks have screwed something up overnight, and the Dubai petro-princes have discovered that even foolish loans have to be repaid.  The risks of the world haven’t gone away, and the Congress’ Federal Reserve continues its war on savers at a time when we need savings.

 

Written by heyercapital

November 27, 2009 at 7:06 am

Posted in Austrian Econ, Econ

inflation vs deflation

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Estimates are that global government banks and agencies have shoveled against the bubble upwards of $30 Trillion (that’s a ” T “) in direct aid and indirect guarantees.  Does that mean we’re facing a hyperinflationary hell?

Not necessarily.  If the trillions upon trillions were in the form of currency, then we’d be on a direct path through Thermopylae. Instead, the vast vast majority of the aid is in the form of credit reserves and contingent taxpayer guarantees.  So long as the reserves remain just that — reserves — and are not put into general use, then their effects on the system are limited only to keep zombie banks (and their creditors & establishment owners) above ground.

Behind the curtain — think Wizard of Oz — the central banks are trying to figure out the best way to remove these reserves from the system.  And government/central banks have never been able to time that shift correctly.  Fortunately, the public’s unwillingness to borrow and the bank’s unwillingness to lend keep the reserves out of reach.

(BTW, I facilitate the local Dave Ramsey Financial Peace University course. Believe me, people are increasingly very unwilling to borrow.  I mean not a thin dime  ever, ever again.  And we’re teaching our children that too. There are inter-generational consequences to this extended crisis.)

 

Written by heyercapital

November 16, 2009 at 9:25 am

auto-economic-asphyxiation

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Retail sales fell last month, despite the “cash for clunkers” taxpayer transfer to the auto companies.  As it turns out — don’t tell Washington this and burst their bubble — but when poor people (that drive old cars) sign up for a boatload of consumer debt on a rapidly depreciating new clunker and a new monthly payment, they don’t actually run to the mall right away to spend like mad.

Austerity is the new ‘in.’  But now that Congress has shifted the demand curve back to present, expect a vacuum-collapse in auto sales now that the layer of demand is instantly removed.

Before they get too far with the “cash for house clunkers” program, recall that something like 30% of Americans would sell their house if they could get a good price.  That’s a heck of a price overhang and pending supply.  Do the world a favor and laugh out loud whenever someone on the TV or in polite company says, “Housing prices are coming back.”

Written by heyercapital

August 13, 2009 at 7:32 pm

an acute example of government’s pernicious inflation

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Letter Re: One Way to Visualize Inflation and Dollar Devaluation

Sir,
Let’s look at a way to visualize inflation. Let’s say you had a $1,000 bill in 1900. At that time, this would be the equivalent of letting the government safeguard [about] 50 ounces of gold for you.

In 1933, Franklin D Roosevelt devalued the dollar, and as a result gold’s price rose from $20/ounce to $35/ounce. Equivalently, you could also say the 50 ounces of gold the government held for you now became 28.57 ounces of gold. The government stole 21.43 ounces of gold from you overnight!

In 1971, Richard Nixon ended the Bretton-Woods gold standard for good, and by 1974, gold had risen to $200/ounce. You now had 5 ounces of gold. Thus, between 1971 and 1974, the government stole 16.43 ounces of gold from you.

In 1999, gold bottomed out at $250/ounce. You now had 4 ounces.

With gold nearing $1,000/ounce today, you are down to 1 ounce. Over the last 10 years, the government has stolen roughly 3 ounces of what little gold you have left.

Now instead of paper money, visualize that you did indeed have 50 ounces of gold in your safe in 1900 and that year after year the government broke into your home and stole gold from your safe at this rate. Would you find that acceptable? – CRW

http://www.survivalblog.com/2009/07/letter_re_one_way_to_visualize.html

Written by heyercapital

July 30, 2009 at 8:58 pm

Posted in Austrian Econ, Econ