A black detective tells it like it is

Having been involved in prison ministry for many years as a chaplain, I was pleased to learn via an e-mail from reader Sandy S. that a black detective in Shreveport, Louisiana has written a book debunking the often-voiced 'racist' theories about the causes of crime and violence.

The Shreveport News-Star reviewed it.

Rodney L. Demery is a Shreveport homicide detective who has served in law enforcement for 25 years. He’s also an author, and his second book calls for a reassessment from black leaders and the black community over where blame lies for death in their neighborhoods.

“This book came from frustration. Crime scenes are real. Blood is real. Dead people are real. Violent crime is real, ” Demery said. “What makes that frustration is when you see people who are supposed to aid you in that — when I say you, I mean me, a detective — engage in something that has nothing to do with it.”

. . .

While blacks accounted for 13 percent of the U.S. population in 2005, they were victims in 15 percent of all nonfatal violent crimes and nearly half of all homicides, according to the U.S. Bureau of Justice Statistics. About 93 percent of black homicide victims and 85 percent of white victims were killed by members of their own race. Those are percentages Demery quotes often.

. . .

“White people are not killing black people,” he said. “I’m sure you can come up with sociological theory that says white people have created this system that has forced black people into these desperate situations to kill each other. Well, I kind of reject that notion. The reason I do is because I am the person who’s there. I know the person who shot this person or killed this person is a black person. You can’t make me understand how an oppressive white person has anything to do with that.”

There's more at the link.

I couldn't agree more that those who cry 'Racism!' at the drop of a hat when discussing the crime problem are generally full of it.  The situation's far more complex than any one factor, and while I've no doubt race does enter into many crimes, I suspect it's far less important than other elements.  I hope Detective Demery's book helps to enlighten many people about that reality.  Since he's also black, perhaps he can get through to those of his race who won't listen to people like me, because our skin color differs from theirs.

Peter

Larry hits one out of the park

My friend and blogbuddy Larry Correia has written a devastating response to the outcry over the Duck Dynasty brouhaha.  It's funny, biting, savage and iconoclastic - but what else would you expect from Larry at his best?

Go read.

Peter

Mike Rowe on alternatives to college

Mike Rowe, of 'Dirty Jobs' fame, has conducted a video interview with Reason magazine that takes an insightful look at our current higher education mess.

Rowe ... worries that traditional K-12 education demonizes blue-collar fields that pay well and are begging for workers while insisting that everyone get a college degree. He stresses that he's "got nothing against college" but believes it's a huge mistake to push everyone in the same direction regardless of interest or ability. Between Mike Rowe Foundation and Profoundly Disconnected, a venture between Rowe and the heavy equipment manufacturer Caterpillar, Rowe is hoping both to help people find new careers and publicize what he calls "the diploma dilemma."

Rowe recently sat down with Reason's Nick Gillespie to discuss his bad experience with a high school guidance counselor (3:20), why he provides scholarships based on work ethic (6:57), the problem with taxpayer-supported college loans (8:40), why America demonizes dirty jobs (11:32), the happiest day of his life (13:14), why following your passion is terrible advice (17:05), why it's so hard to hire good people (21:04), the hidden cost of regulatory compliance (23:16), the problem with Obama's promise to create shovel ready jobs (33:05), efficiency versus effectiveness (34:17), and life after Dirty Jobs (38:24).

There's more at the link.

Karl Denninger backed up Mike Rowe's perspective in an article over the weekend.  He cites a report by the St. Louis Fed, and points out:

If you elect to go to college there is only a one in four chance that (1) you will finish and (2) you will work in a job that actually renumerates you for having done so.

In other words there is a three in four chance that you'd be better off not having gone to college at all, because (1) your earnings power is not enhanced by having attended and (2) you wouldn't have the debt -- or spent the funds -- to go.

Again, more at the link.

Here's the interview with Mike Rowe.  Highly recommended viewing.

There's some very useful information there.  I found its emphasis on education for a trade or technical career very interesting, because in South Africa, where I was raised, the system was heavily oriented in that direction.  University study was encouraged mainly for those who really needed a degree in their chosen career field.  There were institutes of technology at various levels, ranging from school to tertiary education, where one could qualify in a trade or a practical, hands-on career field.  It was similar to the German system of technical colleges and universities, and modeled on it to a certain extent.  Many young men and women who were not academically suited to a university environment learned useful career qualifications through this alternate technical education system, and were highly prized by employers.  Others completed apprenticeships in heavy industry, frequently offered in conjunction with institutes of technology.

If you have kids or relatives approaching college age who haven't thought much about career prospects or earning a living, may I suggest you could do a lot worse than sit down with them to watch that interview, and talk about it afterwards?

Peter

A timeless comedy classic

I laughed like a drain the first time I heard 'Ti Kwan Leep'.  I recently came across this full version of The Frantics' original Canadian radio skit (not the abbreviated version broadcast in the USA on the Dr. Demento show), and laughed all over again.  Enjoy!

There's also the 'Boot To The Head' song, which followed this skit on the album of the same name.





Peter

A poignant musical backstory

I'm sure most of my readers will be familiar with Harry Chapin's folk rock classic 'Cat's In The Cradle'.  What I hadn't been aware of was the backstory to the song, as told by his widow and their son.  I came across this video clip today that provides both, and I thought you'd enjoy it as much as I did.

May we all take to heart the message of that song.

Peter

The anatomy of a financial bubble

We've heard a great deal recently about economic 'bubbles' - when a commodity rapidly becomes over-priced, leading to a market collapse. We saw a 'housing bubble' before the 2007/08 financial crisis, and we're seeing one right now in the stock market. (To illustrate:  "Since 1990, the P/E multiple of the S&P 500 has appreciated by about 2% a year; in 2013, the S&P's P/E has increased by 18%!")

John Mauldin, in his latest 'Thoughts From The Frontline' newsletter, draws upon his latest book to illustrate the stages of an economic bubble.  Here's an excerpt.

Anatomy of Bubbles and Crashes

There is no standard definition of a bubble, but all bubbles look alike because they all go through similar phases. The bible on bubbles is Manias, Panics and Crashes, by Charles Kindleberger. In the book, Kindleberger outlined the five phases of a bubble.  He borrowed heavily from the work of the great economist Hyman Minsky.

(As an aside, all you need to know about the Nobel Prize in Economics is that Minsky, Kindleberger, and Schumpeter did not get one and that Paul Krugman did.)


Stage 1: Displacement

All bubbles start with some basis in reality. Often, it is a new disruptive technology that gets everyone excited, although Kindleberger says it doesn’t need to involve technological progress. It could come through a fundamental change in an economy; for example, the opening up of Russia in the 1990s led to the 1998 bubble or in the 2000s interest rates were low and mortgage lenders were able to fund themselves cheaply. In this displacement phase, smart investors notice the changes that are happening and start investing in the industry or country.


Stage 2: Boom

Once a bubble starts, a convincing narrative gains traction and the narrative becomes self-reinforcing. As George Soros observed, fundamental analysis seeks to establish how underlying values are reflected in stock prices, whereas the theory of reflexivity shows how stock prices can influence underlying values. For example, in the 1920s people believed that technology like refrigerators, cars, planes, and the radio would change the world (and they did!). In the 1990s, it was the Internet. One of the keys to any bubble is usually loose credit and lending. To finance all the new consumer goods, in the 1920s installment lending was widely adopted, allowing people to buy more than they would have previously. In the 1990s, Internet companies resorted to vendor financing with cheap money that financial markets were throwing at Internet companies. In the housing boom in the 2000s, rising house prices and looser credit allowed more and more people access to credit. And a new financial innovation called securitization developed in the 1990s as a good way to allocate risk and share good returns was perversely twisted into making subprime mortgages acceptable as safe AAA investments.


Stage 3: Euphoria

In the euphoria phase, everyone becomes aware that they can make money by buying stocks in a certain industry or buying houses in certain places. The early investors have made a lot of money, and, in the words of Kindleberger, “there is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.” Even people who had been on the sidelines start speculating. Shoeshine boys in the 1920s were buying stocks. In the 1990s, doctors and lawyers were day-trading Internet stocks between appointments. In the subprime boom, dozens of channels had programs about people who became house flippers. At the height of the tech bubble, Internet stocks changed hands three times as frequently as other shares.

The euphoria phase of a bubble tends to be steep but so brief that it gives investors almost no chance get out of their positions. As prices rise exponentially, the lopsided speculation leads to a frantic effort of speculators to all sell at the same time.

We know of one hedge fund in 1999 that had made fortunes for its clients investing in legitimate tech stocks. They decided it was a bubble and elected to close down the fund and return the money in the latter part of 1999. It took a year of concerted effort to close all their positions out. While their investors had fabulous returns, this just illustrates that exiting a bubble can be hard even for professionals. And in illiquid markets? Forget about it.


Stage 4: Crisis

In the crisis phase, the insiders originally involved start to sell. For example, loads of dot-com insiders dumped their stocks while retail investors piled into companies that went bust. In the subprime bubble, CEOs of homebuilding companies, executives of mortgage lenders like Angelo Mozillo, and CEOs of Lehman Brothers like Dick Fuld dumped hundreds of millions of dollars of stock. The selling starts to gain momentum, as speculators realize that they need to sell, too.

However, once prices start to fall, the stocks or house prices start to crash. The only way to sell is to offer prices at a much lower level. The bubble bursts, and euphoric buying is replaced by panic selling. The panic selling in a bubble is like the Roadrunner cartoons. The coyote runs over a cliff, keeps running, and suddenly finds that there is nothing under his feet. Crashes are always a reflection of illiquidity in two-sided trading — the inability of sellers to find eager buyers at nearby prices.


Stage 5: Revulsion

Just as prices became wildly out of line during the early stages of a bubble, in the final stage of revulsion, prices overshoot their fundamental values. Where the press used to write only positive stories about the bubble, suddenly journalists uncover fraud, embezzlement, and abuse. Investors who have lost money look for scapegoats and blame others rather than themselves for participating in bubbles. (Who didn’t speculate with Internet stocks or houses?) As investors stay away from the bubble, prices can fall to irrationally low levels.

There's more at the link.  Very useful and recommended reading.

Peter

Code Red

That's the title of John Mauldin's new book, published a few days ago.

Here's an excerpt from the book's Introduction.

The money printing that central bankers did after the failure of Lehman Brothers was entirely appropriate in order to avoid a Great Depression II. The Fed and central banks were merely creating some money and credit that only partially offset the contraction in bank lending.

The initial crisis is long gone, but the unconventional measures have stayed with us. Once the crisis was over, it was clear that the world was saddled with high debt and low growth. In order to fight the monsters of deflation and depression, central bankers have gone wild. Central bankers kept on creating money. Quantitative easing was a shocking development when it was first trotted out, but these days the markets just shrug. Now, the markets are worried about losing their regular injections of monetary drugs. What will withdrawal be like?

The amount of money central banks have created is simply staggering. Under quantitative easing, central banks have been buying every government bond in sight and have expanded their balance sheets by over nine trillion dollars. Yes, that's $9,000,000,000,000 - twelve zeros to be exact. (By the time you read this book, the number will probably be a few trillion higher, but who is counting?) Numbers so large are difficult for ordinary humans to understand.

. . .

In the bizarre world we now inhabit, central banks and governments try to induce consumers to spend to help the economy while they take money away from savers who would like to be able to profitably invest. Rather than inducing them to consume more, they are forcing them to spend less in order to make their savings last through their final years!

Savers and investors in the developed world are the guinea pigs in an unprecedented monetary experiment. There are clear winners and losers as prudent savers are called upon to bail out reckless borrowers. In the US, UK, Japan, and most of Europe, savers receive close to zero percent interest on their savings while they watch the price of gasoline, groceries, and rents go up. Standards of living are falling for many and economic growth is elusive. Today is a time of financial repression, where central banks keep interest rates below inflation. This means that the interest savers receive on their deposits cannot keep up with the rising cost of living. Big banks are bailed out and continue paying large bonuses while older savers are punished.

. . .

Bernanke understands that the world has far too much debt that it can't pay back. Sadly, debt can only go away via:

1. defaults (and there are so many ways to default without having to actually use the word!);
2. paying down debt through economic growth, or
3. eroding the burden of debt through inflation or devaluations.

In our grandparents' age, we would have seen defaults. But defaults are painful, and no one wants them. We've grown fat and comfortable. We don't like pain. Growing our way out of our problems would be ideal, but it isn't an option. Economic growth is elusive everywhere we look. Central bankers are left with no other option but to create inflation and devalue their currencies.

No one wants to hear that we'll suffer from higher inflation. It is grotesque and not what central bankers are meant to do.  But ... inflation is exactly what the central bankers are preparing for us. They're sparing some the pain of defaults while others bear the pain of low returns. But a world in which big banks and governments default is almost by definition a world of not just low but (sometimes steeply) negative returns. As we said in Endgame, we are left with no good choices, only choices that range from the merely very difficult to the downright disastrous.

. . .

Ben Bernanke, Mario Draghi, Haruhiko Kuroda, and other central bankers are manning their battle station using ugly means to get the job done. They are punishing savers, encouraging people to borrow more, providing lots of liquidity, and weakening their currencies.

This unprecedented global monetary experiment has only just begun, and every central bank is trying to get in on the act. It is a monetary arms race, and no one wants to be left behind. The Bank of England has devalued the pound to improve exports by allowing creeping inflation and keeping interest rates at zero. The Federal Reserve has tried to weaken the dollar in order to boost manufacturing and exports. The Bank of Japan, not to be outdone, is now trying to depreciate the yen. By weakening their currencies, they hope to boost their exports and get a leg up on their competitors. In the race to debase currencies, no one wins.

Emerging market countries like Brazil, Russia, Malaysia, and Indonesia will not sit idly by while developed central banks weaken their currencies. They are fighting to keep their currencies from appreciating. They are imposing taxes on investments and savings in their currencies. Countries are turning protectionist. The battles have only begun in what promises to be an enormous, ugly currency war. If the currency wars of the 1930s and 1970s are any guide, we will see knife fights ahead. Governments will fight dirty, they will impose tariffs and restrictions and capital controls. It is already happening and we will see a lot more of it.

. . .

The arsonists are now running the fire brigade. Central bankers contributed to the economic crisis the world now faces. They kept interest rates too low for too long. They fixated on controlling inflation, even as they stood by and watched investment banks party in an orgy of credit. Central bankers were completely incompetent and failed to see the Great Financial Crisis coming. They couldn't spot housing bubbles, and even when the crisis had started and banks were failing, they insisted that the banks they supervised were well regulated and healthy. They failed at their job and should have been fired. Yet governments now need central banks to erode the mountain of debt by printing money and creating inflation.

Investors should ask themselves: if central bankers couldn't manage conventional monetary policy well in the good times, what makes us think that they will be able to manage unconventional monetary policies in the bad times?

There's more at the link.  Bold, underlined text is my emphasis.

As if to confirm the book's forecast, today the New York Times headlined a report 'In Fed and out, many now think inflation helps'. Here's an excerpt.

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama’s nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

. . .

All this talk has prompted dismay among economists who see little benefit in inflation, and who warn that the Fed could lose control of prices as the economy recovers. As inflation accelerates, economists agree that any benefits can be quickly outstripped by the disruptive consequences of people rushing to spend money as soon as possible. Rising inflation also punishes people living on fixed incomes, and it discourages lending and long-term investments, imposing an enduring restraint on economic growth even if the inflation subsides.

“The spectacle of American central bankers trying to press the inflation rate higher in the aftermath of the 2008 crisis is virtually without precedent,” Alan Greenspan, the former Fed chairman, wrote in a new book, “The Map and the Territory.” He said the effort could end in double-digit inflation.

Again, more at the link.

I've lived in a high-inflation economy for many years, back in South Africa. I've seen how it can devastate one's financial planning, and cripple those living off their savings or fixed incomes, such as pensioners.  To give just one example, the very nice bachelor apartment I rented in Cape Town for R60 per month in 1978 - the equivalent of US $25-$30 in those days - today rents for R3,500, an increase of about 5,700%.  Thanks to the effect of inflation (amongst other influences) on the exchange rate, the South African Rand buys a lot fewer dollars than it used to, so the higher rent is now equivalent to US $250 or thereabouts.

Inflation is disastrous - yet our economic masters appear to be actively embracing the concept as the only way out of the debt crisis.  I think that particular cure will prove much worse than our present fiscal disease, but they won't listen to people like me.  We're not among the 'elite' whose opinions they value.  We don't count.  Ours not to reason why . . . ours but to suffer the consequences of their hubris.  We can only hope and pray that it doesn't lead to nemesis, because the latter is no respecter of persons or station in life.  It'll nail all of us.


Peter

He who has ears to hear, let him hear . . .

The title is Biblical, but the wisdom to which this blog post refers is worldly. Specifically, I'm talking about an article Karl Denninger wrote this morning. Here's an excerpt.

A deliberate and full-throated refusal to both consent to and promote deficit spending is the only peaceful means remaining, I am convinced, by which we the people can force the government to break the medical monopolies and balance the budget, which they must do right now, not five, ten or 15 years out.

Remember folks, Social Security Disability is due to go bankrupt in two years, and that's just the first of many of the "big sucks" to come.  That's not five, ten or 15 years in the future -- it's effectively right now and unless we cut the crap the start of the big suck is, at the outside, that close.

In reality it's even closer because of Obamacare and what is happening there ... The only way to delay what is now an impending crackup would be to suspend the individual mandate (and I expect them do exactly that, kicking and screaming all the way, despite all of those delays being flatly unlawful including the ones already granted.)

. . .

But even if the mandate is suspended for a year it won't matter, because SSDI is staring us straight in the face and getting the legislation passed and break the medical monopolies, which is the only act that can stop the implosion, will take the better part of a year if we start now.

That's the math folks.

There's much more at the link.

This is a must-read article, as far as I'm concerned. If you're at all concerned about the state of the US economy and where it's headed, you need to click over and read the whole thing.  I also recommend reading the comments beneath the article.  Some of them are also thought-provoking.

In short, I believe Mr. Denninger is right when he says that if we contribute to our highly-leveraged economy and society by joining in the current lemming-like credit-fueled 'race to the bottom', we're effectively dooming ourselves and our nation. His solution is to withdraw from the credit merry-go-round;  to live on one's earnings, not taking out loans, not keeping a balance on one's credit cards, but learning to live within one's means.  Pay cash.  (Obviously, there will be some situations such as medical emergencies where this isn't possible;  but for normal consumer items, the rule is, buy for cash or don't buy at all.)

Miss D. and I are working towards this as quickly as we can, and we hope to be there within the foreseeable future.  It'll be a big weight off our minds when we do.

Peter

The return of Al Fin

I'm sure many readers shared my disappointment when the Al Fin family of blogs 'went dark' early this year.  There was no explanation, and I'm sure many feared, as I did, that something nasty had happened to the author.

By sheer chance, today I came across a Wordpress blog:  'Al Fin next level'.  It's by the same author.  In the 'About' section, he writes:

I regret that I was unable to inform readers of those blogs of their closing in advance, or to provide a link to this blog. Google’s decision to deny administrative access to those blogs made those ordinary courtesies impossible.

Something must have happened to interrupt his ownership or management of those blogs.  I'm sorry it did, but I'm very glad to see he's back!

I'll continue to recommend Al Fin as one of the most interesting resources in the blogosphere.  I've updated my blogroll to reflect his new address, while retaining a link to the old Al Fin blog family.

Peter

So much for the minimum wage

I note that the minimum wage is again in the news, both in Washington DC, where an attempt was recently made (but vetoed) to force big retailers to pay a higher minimum wage, and in California, where a bill to increase that State's minimum wage awaits the Governor's signature.

As ammunition when you discuss the issue with your family and friends, here are two classic videos exposing the fallacy of the minimum wage issue.  The first is from famed economist Milton Friedman.

The second is from well-known reporter John Stossel.

There you have it.  Those who support a minimum wage are actually supporting a job-killing measure.  Ironic, isn't it?

Peter

Wisdom from Jeff Bezos

Jeff Bezos, founder of Amazon.com, has always been something of a maverick among successful businessmen.  I have a lot of respect for him.  He started a business with and from nothing, and has built it into what is today one of the most successful operations of its kind in the world.  A lot of people are envious and/or jealous and/or afraid of his success, and try to tear him down at any and every opportunity, but he keeps right on truckin' and doing what he does best.

Two articles have just been published containing his quotes and observations.  They're excellent food for thought.  The first is 'The 20 Smartest Things Jeff Bezos Has Ever Said', at The Motley Fool.  Here's an excerpt.

1. "All businesses need to be young forever. If your customer base ages with you, you're Woolworth's."

4. "If you only do things where you know the answer in advance, your company goes away."

5. "We've had three big ideas at Amazon that we've stuck with for 18 years, and they're the reason we're successful: Put the customer first. Invent. And be patient."

9. "In the old world, you devoted 30% of your time to building a great service and 70% of your time to shouting about it. In the new world, that inverts."

12. "We innovate by starting with the customer and working backwards. That becomes the touchstone for how we invent."

There's more at the link.

The second article, at Geekwire, is about an interview with Mr. Bezos:  'Jeff Bezos explains why Amazon doesn’t really care about its competitors'.

“If you have a customer-centric culture, that cures a lot of ills ... Let’s say you’re the leader in a particular arena, if you’re competitor-focused and you’re already the leader, then where does your energy come from? Whereas, if you’re customer focused, and you’re already the leader, customers are never satisfied.”

He continues, “If you’re customer-focused, you’re always waking up wondering, how can we make that customer say, wow? We want to impress our customers — we want them to say, wow. That kind of divine discontent comes from observing customers and noticing that things can always be better.”

. . .

“I don’t think that you can invent on behalf of customers unless you’re willing to think long-term, because a lot of invention doesn’t work. If you’re going to invent, it means you’re going to experiment, and if you’re going to experiment, you’re going to fail, and if you’re going to fail, you have to think long term.”

Again, more at the link, including the full 22-minute televised interview.

Both articles are highly recommended reading, particularly for those working in the business world, or who are (like me) self-employed or wanting to be that way.

Peter