When computers meant main frames, IBM was it.  It could not transition to PCs, and although it tried hard, it lost its software dominance to MS and its hardware dominance to Dell and others.  IBM is still around, but it no longer dominates the computer world.  MS in turn dominated the computer software world, but could not make the shift to the internet, where Google now dominates.  Still another technology jump is underway—the combined advances in cloud computing and smart phones.  I call them P-clouds, personal clouds of immense power floating around an electronic portal that fits in your pocket.  Quite soon, the “phone” in your hand will be all the computer that most of us need and most of our data and applications will live somewhere else on the net.  Lap tops will go the way of desk tops, word processors and main frames.  What companies will dominate this next round?   Apple?  Google?  Maybe, but I suspect that it will more likely be some companies that most of us have not yet heard much about.  Does anyone have any ideas about what companies those might be?  Let’s hear some brainstorming so we can retire and live on that yacht!"

Posted in SeekingAlpha.com, Sept. 15, 2010

With all due respect, one can not make an economic analysis without a political bias.  People buy, spend, and save, within the rules made and enforced by governments.  Our individual opinion about these government rules, i.e. laws, forms our “political bias”.  In order to think about economic issues, one generally takes the facts and forms a model from them.  Then one tests that model, searching to understand events and predict the future, in order to individually survive and prosper, and perhaps to suggest improvements to the laws that govern our world.

Thus, a criticism of political bias is misplaced as all economic analysis has a goal of suggesting improvements to the system being analyzed, i.e. a political bias.  Rather, the more appropriate criticism would be a reasoned disagreement with the facts selected, their meaning and significance, or the suggested individual acts or rule changes.

The Federal Reserve has chosen not to disclose much of its dealings with private financial players.  We (or at least I) do not know who is receiving funds and under what conditions, or what collateral the Fed has accepted.  Therefore, I believe it quite appropriate to investigate and speculate as to what Fed is doing.  What else can one do in that regard?

Every investor on the planet knows that the USD carry trade is feeding the world stock market rise.  Even the IMF has publicly stated this.  Stock prices and the USD have moved in clear inverse relationship since the US matched Japan’s “zero” interest rate.  In other words, the US is provided cheap funding for the stock and commodity rally.  We do not know the exact mechanism for this, yet, it appears clear that low overnight loans by the Fed at close to zero interest are showing up as stock and commodity purchases in South Africa, Australia, and India and even in the US.

Mr. Practical has suggested one possible mechanism for this.  If you believe that there is a different mechanism then please articulate your theory, and we can consider it.  Thank you.  Bill.

Great article, like nothing else on the web.  Philosophy mixed with hard economics, and so much else.

My own humble hope of late:  how can we stop this relentless advance towards war?  War that comes from desperate people who have been led to believe that they deserve a living standard that reality does not justify.

The only time in the last 100 years that worthless debt has been liquidated in any economically worthwhile way was World War II.  Over 100 million people died.  This is not the best way to engage in the creative/destruction of capitalism.  Bad investments, bad loans must disappear, even if people suffer in the short term.

But so far, no one seems to have learned the lesson. 

My new point:  government deficit financing and stimulus programs drives jobs to other countries.  Here’s how:  by borrowing, or encouraging borrowing with artificially low interest rates, governments create jobs where none would exist.  This supports higher wages than the actual economy would justify.   The cost of real estate, services, transport, etc., all increase.  Faced with increased costs companies move jobs to lower cost areas.  So, not only do deficit financing and stimulus programs move jobs forward in time (at great cost later), but they also move jobs geographically to lower cost areas by increasing local costs.

This is what has happened during the last 100 years as jobs have moved, first from Western Europe to North America, then to Japan, and then to China.  This process has left behind countries where wages and real estate are too expensive for those countries to compete, and so government deficit financing and stimulus continue, and in fact, have accelerated.

This is such a sad tragedy.  Is there no one who understands what is going on, and who has the courage to deal with it, other than juggling debt balls in the short term and hoping it will all work out, with the ultimate result of fear, blaming others, racism, nationalism, despotism, and war?

I hope that the central bankers and government economics are right and that I am wrong.   I hope they are smarter than I am.  Making money on trades is fun, but it pales in importance to simple things of life.  What good is wealth, if we lose our world?

Thank you.   Bill

You might want to search "dollar carry trade".

But here it is in a nutshell:  investors borrow in US dollars at low interest rates, they then exchange the USD for foreign currencies and put the money in New Zealand bank accounts at higher interest or buy stock in other countries.  Because they must sell USD to do this, the USD goes down (more USD sellers than buyers).  Since the stock markets are correlated, the US stock market goes up along with the foreign markets.  Thus, the USD falls when stock markets around the globe, including the US markets, go up.  When the process reverses, the opposite happens.  Investors sell their stock and pay back their USD debt.  To do this they must buy USD.  More buyers than sellers makes the USD go up at the same time world stock markets go down.  Basically, when investors like to take risks they borrow and sell USD, and when they don't feel like being risk takers they pay off their debt by selling stock and buying USD.   Anything that changes the risk/reward perceptions can change the direction or extent of the carry trade—for example, changes in interest rates, government intervention in currency markets, or stock market price changes.

The global carry trade used to be mainly in Japanese yen.  If the US were to raise short term interest rates then the negative USD/stock correlation would disappear.

What no one has explained to my satisfaction yet is the relationship between the USD and the Yen, since both are currencies with "zero" overnight interest rates.

 Also, I have not yet read any articles that discusses the fact that currency exchange rates are changed by the carry trade when trades are increasing or decreasing.  A constant flow carry trade would have no effect on currency exchange rates (as the number of borrowers would be offset by an equal number of debtors paying off loans); that is, the carry trade effects currencies because the level of borrowing is increasing or decreasing.  Thus, the carry trade has a built-in tendency to lead to bubbles and violent blow outs.  In effect, once there are no longer enough new borrowers, the currencies reverse to economic fundamentals, causing traders to close out their loan positions, and leading to market downturns.  The bubbles end eventually, when there are no new players to keep it going.  To play the carry trade one must be ready to jump out and stay out.  When?  No one knows.

One interesting aspect of the carry trade (and discussed in an earlier article by someone else here on Seekingalpha) is that the low interest rates of the lending country that were designed to stimulate local investment often do no such thing.  Instead, the money goes overseas to invest in other countries and even in the businesses of competitors of struggling businesses in the lending country.  Of course, the carry trade does profit local financial organizations and some investors.  In other words, in this global investment world, low short term interest rates are good for the financial sector but do little for the local manufacturing sector, other than create cheaper currencies while the carry trade is on-going.

I really enjoyed this article and poem.  I would add these thoughts: 

1) Fame, houses, cars, money.  These are NOT goals.  The real goals are the feelings we believe that these things will bring us.  For example, if you want a red sports car, what you really want is a feeling—superiority?  love?  peace?  The car may bring you a feeling of superiority, but not a feeling of love or peace.  If you do not get the feeling along the way to acquiring the thing, you will never get the feeling when you get the thing (despite all the commercials to the contrary), so get clear on the feeling that you want, and find a way to get that feeling along the way.  The confusion about things and feelings and which of the two are the actual goal, is the main reason achievers do not always achieve happiness.

2) Habits are more powerful than goals.  Change your habits and you will find it easy to achieve your goals.  You will do it automatically.   You can change your habits quite easily (other than the most powerful addiction habits like smoking, drinking or overeating). 

All of these things will be in my next book, if I ever write it.  Cheers!  Bill

Science fiction short stories, and other thoughts, by William L. Ramseyer. I hope that you find something useful, and I want you to know that you have, without doubt and without question, what you need for a more powerful life. Thanks for coming by!   WLR

I am the real you/me

And everyone yes

I am apart from your/my

Plastic ripping mess

1968

You did not want to give me your name

You knew what I would do

Write it on a piece of paper

And burn it

I have seen what happens

To those who have names

They must pay taxes

Constantly explain what their name means

And how to spell it

Nature gives us a skull

This is the edge of our universe

But the star inside

Blows out through the holes in our world

Especially through our mouth

11/2/09

In Spring a young man’s fancy turns to love

In old age it turns inward

Towards his bowels

As his live gets longer

So doe his list of things he should not eat

People do not have much time

And they have their own problems

And so they do not want a long answer

When they ask, “how are you?”

They want to know that old age won’t be as bad as they fear

Just a grandpa smile and a “doing well” will work just fine

1/20/09

I am difficult to be around

But that’s how it is

In a world like this one

Where even poets have to pay taxes

11/3/09

There is only one time to do anything--now

A person who does things does not know the difference between planning and doing, because that person does what they start

To maximize your life: increase irrational faith, reduce rational fear. Without dreams you can never wake up