Friday, December 30, 2011

Forecast for 2012

I am probably in a minority of one in making the following forecast, but here it is for what it is worth.

Let me start with the apparently not very important countries, explain why I am doing so, and then move to the more important countries, and finally to what implications all that has for the management of your savings and wealth.

Established democracies (India and Indonesia) are being threatened by fascist forces (in one case Hindutva, in the other Islamist), though the established structures have so far proved resistant to fascist agendas. Expect the threats and attacks to continue, and let us hope that these democracies continue to weather the attacks.

Budding democracy in Nepal is threatened by Hindutva forces that want to restore the corrupt and incompetent monarchy. Here, one can only hope and pray, as the basic shape of what is to come is not clear.

Emerging or struggling democracies in North Africa and the Middle East face the possibility of having democracy nipped by Islamism (for example, Pakistan, Iraq, Tunisia and Egypt). In these countries, a particular Islamic ideology (Salafist or similar) is being imposed by violence on the population without anyone in authority seeming inclined or able to counter that, in order to nurture political, cultural, religious and social openness in these countries.

So what will happen if the anti-democratic forces in such countries succeed in imposing their agenda? The countries concerned may have an initial period of stability and even prosperity, but stagnation will soon ensue, and it may then take three generations before they liberate themselves from the hold of such forces.

China’s new generation of leaders, led in all probability by Xi Jinping and Li Keqiang, will have an interesting time helping determine and working with their new team. While they will have the support of the existing leaders, who will step down but remain available and influential, the key question is whether they will together be able to steer China through challenges it has never before faced in its history: a population gradually but inevitably becoming more open to the outside world at the same time as the growth rate falls below 8% and therefore begins to unleash social and political tensions as unemployment rises. It is not at all clear to me that China will find it easy to negotiate these challenges. There is therefore a very real danger of China taking to internal repression and/or external aggression.

Untoward developments in any country will further weaken confidence in emerging markets, and pull out from them even more money, both domestic and international.

That applies also to the European Union, though I am more optimistic about that. I expect that the 17 nations which have decided to go ahead with fiscal union will proceed with it, at least the important ones among them in the next three to six months, though it will take perhaps up to two years for everything to be agreed. Naturally, if the Euro project falters, then that will pull money ≈ out of the Euro area also.

Where will all the money pulled out of these countries go to? To the US and UK, where it is already headed in a significant though not yet substantial way.

The UK economy will begin an upswing for structural reasons from some time in 2012 (and the timing of that will depend to a certain extent on how well or badly the Olympics go from a financial and business point of view).

The US economy has already begun its upswing, as I stated publicly some months ago in my speech in Phoenix. This will continue. American banks will start lending to businesses again, and US businesses should do well, at least in the US itself. While unemployment will fall, it will regretfully not fall in proportion to economic growth, due to reasons I have detailed elsewhere.

President Obama will therefore have a recovering economy to boost his prospects of re-election, but a resistant rate of unemployment to mar his prospects.

While he will be tempted to focus all his energies on domestic issues in order to try and win the Presidential race, his chances of actually reducing unemployment and ensuring a victory depend entirely on whether he can take the international initiatives that will reduce unemployment - that is, by means of a world trade agreement that provides a level playing field for all countries, and does not unfairly privilege countries which improperly exploit their human resources, and avoid looking after their environmental and ethical responsibilities.

For the last three decades or so, unethical and environmentally-unfriendly practices have driven global "growth". This may be the crucial year which determines whether our leaders turn our back on that kind of growth and put growth on a new basis which is sustainable and just.

We are going into a year that could be dangerous or exciting, depending on how our leaders respond to the crises that are facing us in principle, and will face us even more in actuality this year.

So much for global politics. What about global economics? Here too we are in an unprecedented situation, with at least one of the best economies in the world now offering a negative rate of return for government bonds - in other words, investors are paying that government to keep their money for them, and losing money in order to do so, presumably on the basis that it is better to have a guaranteed (small) loss than the prospect of much bigger losses elsewhere (e.g. in equities).

What am I talking about?

Denmark's Central Bank has just placed government bonds with three-, six- and nine-month terms, and gained 2.32 billion Danish kroner (approximately EUR 310 million). Two of the three bonds offer investors a return of less than zero per cent - the State will have to pay back less money than it has been lent. The interest for the three-month bonds is minus 0.21 percent, while the interest for the six-month bonds is minus 0.07 percent. Meanwhile, if you were interested in Italian government bonds, those were offering over 9% interest. That is now the gap between bonds from an "unsafe" economy versus bonds from a "safe" economy. Expect more such offers from governments, but weigh them carefully.

Stupid quesiton, but why did not the Danish investors put more of their money in gold? Because even gold might still be over-valued in the current circumstances. Why not more money then in real estate? Because current prices regarding that may turn out to be a bubble too.

So what is the best way of investing? Spread your portfolio as wide as possible, forgetting growth and focusing solely on protecting the value of your savings or wealth. The worst investments might well turn out to be, as I have said for a long time, in the so-called "liquid investments" (i.e. in quoted instruments), which are most exposed to a fall in value. And the best investments might turn out to be those you make in real businesses, producing real goods and services, run by people you know and can trust. But don't forget that it is the US market which is the only one that is guaranteed to grow - unless something extremely stupid is done by America's leaders.

As we go through the swings and roundabouts, and the ups and downs, of 2012, let's do our best with our money and our talents, but let's keep in the forefront of our minds that this life is temporary.

What matters to us eternally is whether we are living our lives on the basis of developing a relationship with God, or whether we want to run our own lives in defiance or ignorance of God.

May Jesus the Lord bless and guide each of us on our path as we consider these things. Sphere: Related Content

My first American Christmas celebration

For family reasons, I had to be in the US over Christmas this year, which gave me the opportunity to observe and celebrate how Americans "do" Christmas.

On the sunday before Christmas, our friends took us to Lake Avenue Church in Pasadena, one of the megachurches, and it was quite a moving experience, not least because the orchestra is first-rate, and would be first-rate even for a professional one (this one is of course a purely volunteer one - quite extraordinary.

On Christmas Eve, we returned to the Church for the midnight service, which was candlelit - totally magical.

Even for a die-hard anti-christian (me), it was something to see these so well done, balancing the performance aspects with things that involved the participants, whether singing or prayer or passing the peace....

On Christmas Day itself, our hosts had family together in order to read the Bible together, and to talk to God (and listen to God) together.

We were also at two different Christmas parties. One was a relatively straightforward evening, not unlike any other family celebration, though the father of the house has the hobby of being a gourmet chef, so the food was excellent (though I speak from first-hand experience only regarding the vegetarian dishes, of course; for the non-veg dishes, I am simply reporting the views of the others there).

The second party was quite extraordinary (at least from my point of view): there were about 50 people there, family and friends, all ages; there were drinks and quickbites to welcome everyone, then a parlour game involving accepting a random number, which indicated the order in which one could go to the tree and pick a packed present and share the excitement of presents being opened - but the next in line could ask for any of the "open" presents, which added to the piquancy of the occasion! - but all the presents were fun so it all went very well. This was followed by about an hour of carolling led by a choir from a nearby public school (very good). No idea how late some of the other stayed, but we took off at about 9pm as I am an early bird.

On mentioning the above to another American friend, here's the response I had: "I'm happy you enjoyed your first-ever American Christmas Party. I don't really think that gathering should be considered a typical American Christmas Eve. The family and friends part, absolutely! I can only speak from my own personal experiences and say that my childhood Christmas Eve's were roast beef and mashed potatoes, and I'm certain we children provided all the Christmas carols!!!!! And our "Santa Claus" only brought pajamas for all the children and we were expected to put them on, fall asleep and let the adults have some fun!!"

Well, all I can say is, thank God I wasn't offered that cuisine, or I would have had to be content with mashed potatoes. And the idea of Santa presenting pyjamas to the little ones so they can be sent packing seems like a good bit of respite for the adults, but no fun at all for the children!

It was quite interesting to see how many homes and how much of the public spaces were all lit up for Christmas - and it is sad to reflect how Indian homes are being lit less and less now for the Indian festival of lights, Diwali.

Would I have another Christmas in the US? Yes, gladly, though I suspect that this might be my only one in the USA, as we don't have any of our close family there, and Christmas is, like Diwali, more a family time than anything else. Sphere: Related Content

Monday, December 19, 2011

Why the US is becoming the country in the developed world with the least freedom

Why would a free country vote to abolish its freedom?

Because freedom is essentially something that resides in the hearts and minds of people, and all the institutions that are created, maintained or modified by a people reflect basic attitudes and beliefs for which they are prepared to work and, if need be, to die.

US freedoms were built, like they always have to be built, from the inside out. They are also dying from the inside out.

Once any group of people stop believing in the importance of freedom, or stop being willing to work and die for freedom, then freedom gradually or swiftly dies.

That is what we have been witnessing in this generation, the 2nd or 3rd since America started rejecting its own "soul" (for a discussion of what constituted that soul, see Dr. Vishal Mangalwadi's THE BOOK THAT MADE YOUR WORLD, Thomas Nelson, USA, recently published).

But why do I say that the US is becoming the least free country in the developed world?

Because US legilators have just passed, with an astounding two-thirds majority, a bill with the suitably military name of "HR 1540", which gives the US President power to detain "terrorist suspects" indefinitely. Such suspects, who can be arbitrarily arrested, include U.S. citizens on American soil.

Till recently, Bush and Obama claimed to have the legal power to do these things, but it was not clear whether or not they actually had this power, because their claim rested on obscure and contentious issues in law, custom and Constitution.

Following the passage of HR 1540, however, there can be no further challenge to such Presidential claims. Earlier, Presidents did not indubitably have that power, though they claimed it; now that power has indubitably been given to them by American lawmakers, duly representing the American people.

Why does HR 1540 constitute the end of US freedoms? Because it is the Administration that now defines what is a terrorist, as well as who is or is not a suspect. Any "suspected terrorist" can be arrested at any time, and kept under detention indefinitely - without trial and without bringing her or him before any court: no explanation or defense of the action is necessary at all.

I doubt that President Obama will misuse this authority (though he could of course do so, and there is very little apart from his own conscience now to stop him).

But what will prevent future Presidents from defining as "suspected terrorists" anyone who is a meddling journalist, political opponent, or social activist?

The US's record on freedom is not unblemised. Consider McCarthyism and the resulting vilification and hounding of "suspected Communist sympathisers" from the 1940s to the 1950s.

So what does it take to maintain freedom? The willingness to invest time, effort and (some, at least minimal) money to ensure that public policies and administrative actions are fair, just, and in the public interest.

Given the march of Mammon since a nice man (Ronald Reagan) unleashed it, public spiritedness has declined, and politics has become the province of the huckster, the cowboy and the con artist. That is an inevitable consequence once a culture starts enshrining greed and worshipping money instead of probity and public interest.

Can the US be returned to freedom? In the next few years, probably yes - though it will require at least tens of thousands of people willing to make huge sacrifices to restore the freedoms that have been lost as a result of the passage of this bill.

Want to know how far the US has fallen from its traditions of freedom? Most Americans did not even know that HR 1540 was being discussed, and had no idea what it portended.

My conclusion: Americans have fallen away so thoroughly from their "soul" or their heritage that they have become totally focused on their "security" and have abandoned any interest in even knowing about threats to their freedoms.

How do I know that?

Well, were you watching the blogosphere and the US media???

How much discussion of HR1450 did you see? Sphere: Related Content

Global framework for financial services finally looks set

Finally, it appears that all the combined tactics of the contra lobby has resulted in no paralysis of the move towards new global regulation of the financial services industry:

Of course, much remains to be done in strengthening this global framework. For example, America's Dodd-Frank legislation created an Office of Financial Research, which was given the responsibility of gathering information that financial institutions have till now withheld from regulators, for the purpose of identifying systemic risks to the financial system; this kind of responsibility needs to be extended, one way or another, to the global level.

Overall, however, the acceptance by the USA of Basel III, as the new rules are called, is to be welcomed and should help stabilise the global financial system.

Naturally, we will need to see the final form of Basel III before detailed comments can be made or its overall effectiveness assessed. Sphere: Related Content

Sunday, December 18, 2011


A full-throated command to a drilled mass
I remember it dimly from parade grounds seen in childhood
the assembled drumbeat of feet disintegrating into hubbub, obscurity and dust.

But there is also a subtlety, addressed to individuals who turn their backs
to go boldly where the facts lead them astray
from the main stream of conformity, and its gathered strength.

So it was that two men, smiling, frowning, angry, polite
said to me, their minds and lips nimble
far from skirmishing with anything that might sound even vaguely like
that word strong, separating me from a field where I with them had toiled and struggled.

FAIR? No, sir!
HURTS? Yes, sir!

(Really, sir!)

Reluctancy turns me round and about
spins me dizzy
till I do, eventually, stagger to attention,
take the deepest breath
and, softly as asssisted strength, whisper
“Dismiss”, and shake from my feet the dust. Sphere: Related Content

Friday, December 09, 2011

Orthodox views of the current situation versus my views of the current situation

Analysis just issued by one of the best-known financial houses says that we should expect a growth rate of 2% in the US in 2012, zero growth in the Eurozone, and that, "in light of the dramatic shift in the worldwide balance of power, the hopes of the struggling industrialized countries rest on the emerging markets".

The house in question does not seem to have noticed that, while emerging markets may at least be growing, they are now growing at a sharply decelerating rate - and that their slowed rate of growth means that all their so-called "power" will be needed to fight their own social and political problems. Whether that "power" will be enough for those purposes depends on how "dramatic" the slowdown is - as well as on the wisdom of the leaders concerned.

Briefly, the BRIC countries: Brazil's economy will be substantially hit; Russia's will be hit too, but how much it is hit will depend on energy prices; India's will probably be hit least; China's will probably be hit most.

Other emerging markets will mostly stop emerging, and will probably largely "de-emerge" or sink, as they usually tend to do in troubled times. Sad and tough. But there it is.

The Eurozone's "tiny but structurally important" decisions taken yesterday indicate very little of what will actually happen, because the decisions (which appear to be boringly technical) will need to be approved by their Parliaments (and even the UK Government may be forced by developments to have a referendum regarding whether or not to finally join the Eurozone - I have said that the country should have structural recovery in 2012, but there are other factors which are too much to go into here).

If, as I expect, the Parliaments of the 17 Eurozone and non-Eurozone countries which have decided to commit themselves to a treaty for deeper economic integration over the next three months to negotiate and may require referendums in countries such as Ireland. If the Parliaments concerned do not approve, then the uncertainty about the Eurozone will continue. My guess is that for psychological reasons, some of the Eurozone countries which are most committed to the present course will attempt to rush agreement through their Parliaments. The timing and weight of the countries which first get this through, and the timing and weight of any countries that do not, is what we have to watch. Meanwhle, markets have reacted initially positively, marginally, while the propaganda barrage has been skeptical.

The US will almost certainly grow at more than 2%: how much more, I cannot say - as that depends on what is happening in the rest of the world. But the surprise for the US economy can be expected to be on the upside, in spite of the fact that the various existing stimulus measures are expected to run out, and in spite of the impending race for the Presidential election. That growth is also why Obama has a fighting chance of getting re-elected (I should say that I am neutral regarding his continued Presidency, and I am "equally neutral" on anyone else . whether from his party or from the Republicans - getting in as the next President: the US system is now so corrupt that I do not think it makes much difference who is President).

BTW don't believe what Obama will say in an interview to be broadcast tomorrow about an economic fix for the US taking years to be effective. I greatly doubt there is any chance of a real economic fix till there is a proper crash, as there is no sign that anyone in a position is authority is even contemplating any economic fix at present: everyone is focusing on how to hang on to or consolidate their own power.

Of course, what Obama means by an "economic fix" is not clear. If he means "for growth to return", he is likely to be surprised, as I indicate above.

If he means "for the US political system to be sorted out so that growth is more equitably distributed", that is going to have to wait for spiritual, moral and ethical revival in the US population and particularly its leaders.

If Obama means things like Dodd-Frank to be effective, he is partially right, though it is already starting to bite - and whether it continues to bite will depend on political shenanigans. Sphere: Related Content

Wednesday, December 07, 2011

What are the advantages and disadvantages of Twilk?

One of my blog-friends has sent me a mail encouraging me to use this new-ish application ("ap") called Twilk.

On checking it out, I find nothing on the internet about the advantages and disadvantages of using this ap.

Here is what I find from the Twilk site itself about what the ap does and does not do:

"This application will be able to:
•Read Tweets from your timeline.
•See who you follow, and follow new people.
•Update your profile.
•Post Tweets for you.

This application will not be able to:
•Access your direct messages.
•See your Twitter password".

While what Twilk does NOT do is comforting, and I am comfortable about all the other things that Twilk is able to do (e.g. read my Tweets and see who I follow), I am not comfortable about Twilk's ability to "follow new people".

What does Twilk mean by "new people" (presumably people who I do not follow)?

HOW does Twilk find such "new people" to follow? Presumably via the people who I do follow?

If so, how does it get access, without their permission, to their contact lists?

Or does it automatically mail everyone who I follow and ask for their permission to access their contact lists?

Or does it do so more subtly by mailing them and inviting them to join Twilk?

Perhaps one of my readers can enlighten me? As usual, either via a personal email or via a response here.

Oh, and BTW, if you're wondering what Twilk actually does, all it does is "prettify" your Twitter site with the avatars of everyone you follow and everyone who follows you.

Not much use if you don't like the avatars concerned.

But if you do like the avatars concerned, does putting all these avatars on your Twitter page not also slow down the download of your Twitter page, specially in locations where only has a slow or shared line?

Thanks for any information you share. Sphere: Related Content

Why I am a Devolutionist

No, I am not referring to the devolution of political power from London to the UK's regions.

I am referring to Devolution as contrasted with Evolution.

Why am I writing this post? Essentially, because I have been challenged on this recently, and have never written anything on it.

Devolutionists are unconvinced by Creationism as well as by Evolutionism.

Why am I a Devolutionist and not an Evolutionist?

For two main reasons.

First, it is clear that, while mutations occur, the vast majority of these are "sub-normal" (so they don't survive) rather than "super-normal" (in fact, there is no evidence of any "super-normal mutations" at all, as far as I can discover at present). However, whatever the mechanism, it is clear that existing biological organisms can be arranged in "trees". If one discounts the human tendency to consider ourselves "superior" to other organisms, the "trees" can be arranged in a Devolutionary manner just as easily as in an Evolutionary manner. Consider further that humans can be killed pretty quickly, whereas "primitive" life forms (e.g. fungi and viruses) are extremely hard to eliminate. So on the basis of "survival of the fittest", fungi and viruses are more "survivable" than humans, so should they not be considered much more "advanced" or "fit" than us?

Second, physics came before biology; and physics is not dependent on biology, while biology is dependent on physics. The Second Law of Thermodynamics makes clear the principle of entropy. It is unlikely that the reverse of entropy, which is necessary for Evolution to take place, actually took place. Further, Evolutionists offer us no evidence to believe that the reverse of entropy takes place or has taken place anywhere, nor do Evolutionists offer us any reason why entropy should be reversed on earth, and only in relation to life forms.

Not quite QED, perhaps. But that is my thinking so far. Sphere: Related Content

Do we really need such research?

In another example of apparently entirely unnecessary research, Dr. Peggy Huang of Tulane University discovers that companies which agree to give their CEOs all-cash payouts, in case they step down, significantly underperform their competitors.

A cash-only contract in force during a given year is associated with annual stock returns over the subsequent three years that are 4.2% lower than the average returns of firms whose CEOs have no severance provisions.

Do we really need to know whether the returns are 4.2% lower, or 4% or 5%?

Isn't it obvious that, if I am a CEO with the parachute of a cash payout, that will tend to incentivise me to take less responsible actions than if my payout is principally in terms of shares which are blocked for say 5 years after I depart the company?

Dr Huang also says that all-cash contracts appear to be on the rise. If so, that appears to be a research finding worth having, does it not? True, but it would be more valuable if there was some accompanying analysis of WHY all-cash payouts are increasing when they are against both commonsense and research findings such as Dr Huang's.

Not to attack Dr Huang's research too much, I should point out that her research covered a sample of S&P500 CEO severance agreements between 1993 and 2007, and examined whether and how the existence and structure of severance agreements influences subsequent firm performance, CEO investment behavior, and the likelihood of CEO turnover. Her research shows that while firms with severance agreements tend to perform worse than firms without severance agreements, the structure of severance agreements also affects performance significantly.

Surprisingly, her research suggests that executives with severance contracts are more likely to be forced out of their firms - in her view because severance agreements, rather than promoting incentive alignment between CEOs and shareholders, actually exacerbate agency problems which lead to overinvestment and poor subsequent firm performance. She does not seem to examine whether companies whose value-set leads them to provide cash-only severance contracts are also companies whose value-set leads them to more rapidly dismiss CEOs (so should anyone really want to work as a CEO for a company which has such values?)

In another surprise, she finds that CEOs who are provided a cash-only severance package tend to "over-invest" in research. Over-invest? In research? Now that would be worth researching! Sphere: Related Content

Pope joins movement to ban the death penalty

Up to now, the Pope and the Roman Church have maintained a conservative stance on ethical matters.

Now they may have started down the slippery slope, with the Pope (and presumably the Church) now committed to opposing the death penalty.

From the point of view of most people who oppose the death penalty, life and death are of no ultimate value, so they seem to be against the death penalty mostly for sentimental reasons.

So the question to ask, from the viewpoint of society, is: does abolishing the death penalty for people who have undoubtedly committed murderer have any disadvantages?

Here are two:

1. because murderers are normally locked up for many years, jails become filled to overflowing; and

2. taxpayers have to pay for the food, exercise and security involved in looking after murderers for the years and years that murderers are in prison - and in a time of decreasing employment prospects, murdering one person and ensuring that you are caught can become an easy way of ensuring that you are looked after for many years (perhaps for the rest of your life) at the expense of taxpayers :)

Of course laws need to be reformed in relation to those accused of murder, so that only individuals where the evidence for murder is overwhelmingly clear are given their deserts.

Meanwhile, ironically, the most organised "death industries" (the suicide-help industry, the abortion industry, and the so-called "defense" industries - better described as the war industries) carry on their ever-widening and ever-more-profitable activities.

Few of these so-called liberals are willing to commit themselves to fight against organised death-mongering by the suicide industry, the abortion industry and the war industries. Sphere: Related Content

Tuesday, December 06, 2011

Brazil’s rapid growth shudders to a halt

As anticipated in my analysis, with which readers will be familiar:

The same was predicted for Russia and China - and for commodities; even worse for other emerging markets.

For India, I had anticipated that there would be a slowdown, but not to the same extent as in Brazil, Russia and China - unless the Indian government did something stupid. So far the government has resisted that temptation. Sphere: Related Content

Friday, December 02, 2011

Why are those who study economics less philanthropic?

Just over a month ago (on October 29, to be precise) I had posted a piece arguing that the addition of business ethics courses by themselves cannot reverse the systematic brainwashing of students in anti-human values done by business schools; what is needed is systematic examination, critique and reform of the values taught by business school courses, and even by the existence of expensive and elitist business schools:

As you probably know, there has been research underway for some time on the question of why economics students donate less than those who do not study economics.

According to the latest published piece of research, if someone who is not a major in economics takes an introductory course in microeconomics, that reduces the likelihood of her/his donating money to nonprofits by 2 percent; to make matters worse, if that sort of person takes an intermediate course, the likelihood of her/his giving to nonprofits goes down by 3.7 to 7.9 percent.

That's in an article by Yoram Bauman and Elaina Rose of the University of Washington, published in the Journal of Economic Behavior & Organization, volume 79 (2011), pages 318-327: Sphere: Related Content