California’s Drought Hits Wallets – and Health

AMA3-28-15It takes nearly five gallons of water to cultivate a single walnut – more than it takes to grow a head of lettuce. But in drought stricken California, the water it takes for those and other fruit and vegetable crops is in drastically short supply – and that has effects far beyond the borders of the Golden State.

The entire state of California is in the throes of a drought of epic scale, with conditions ranging from “abnormally dry” to “exceptional drought” from North to South. Drought conditions have persisted for so long that even heavy rainfall does little to mitigate the problem.

California’s water shortage has many causes, some related to climate change and shifting weather patterns, others entirely due to human interventions. In a heavily populated state, residential consumption is part of the problem. According to new statistics reported by Mother Jones, Palm Springs residents account for a staggering 700 gallons of water per person per day.

In less affluent areas, consumpti0on is significantly less. Riversiders use around 300 gallons a day, and in working-class Long Beach residents use under 200 gallons a day. But although residents are warned to limit toilet flushes, restaurants are asked not to serve water unless a customer asks, and the “drought police” issue citations for watering lawns, the big consumers of the state’s finite water supplies are large corporations, industries and tourist attractions.

Fracking, mining, golf courses and Disneyland may be among the leading water consumers in the state. But a major part of California’s water goes to agriculture. The state is the little known “breadbasket“ of the United States, responsible for producing the bulk of the produce the rest of the country eats every day.

California produces 95 percent of all US broccoli, 92 percent of the country’s strawberries and 90 percent of its tomatoes. But while those crops are also grown elsewhere in the country, California leads the nation in the production of nuts. Accounting for 99 percent of all almonds and walnuts and 98 percent of pistachios, California dominates the US nut market.

And nuts take a lot of water. Drought conditions are threatening to create a shortage of almonds and push prices up for all nut sand nut products such as pistachio ice cream and almond milk. And while the drought’s impact on nut production may seem extreme, it’s just one example of the impact drought conditions in California will have on the rest of the country – and the world.

Economists expect California’s drought to push prices for most of the fruits ad vegetables America consumes every day to near record levels. That’s not counting the higher priced organic versions of these products, which are generally higher under all conditions.

It’s not just the drought that creates higher prices. The cost of bringing those fruits, nuts and veggies to markets across the country also plays a role, in pushing prices out of the reach of some consumers.

And that could have a major impact on other aspects of American life. Dietary guidelines old and new emphasize the consumption of fruits, vegetables and nuts as the cornerstone of healthy eating. All of these are rich in nutrients and healthy fats that contribute to heart health, weight loss and a strong immune system. They’re potent weapons in the fight against obesity and the leading causes of death in the US – but if they’re priced out of the budget of many Americans, that could change.

Getting Americans to eat their veggies has long been a frustration for nutritionists and healthcare professions –even in the best of times. But the higher prices caused by California’s drought could push people toward less healthy alternatives – and that, some economists fear, could have a long term effect on the health care system.

The effects of the drought may prove to be a boon for other agricultural states, though. The production of some of California’s leading crops could shift to states in the South and Midwest where water is more plentiful and cheaper. That could also draw other commercial enterprises away from California, which could boost the struggling economies of states suffering from a stagnant job market and limited opportunities.

But what won’t happen right away. It takes time for crops to grow and get to market, and for other kinds of businesses to set up operations. There may be ways to reduce the impact of California’s drought on the heath and the pocketbook of American consumers – but those changes are a long way off.(Top image:Flickr/EvgenyDodorov)

Read more from The American Monetary Association:

Wikimedia Fights NSA For Your  Civil Rights

Millennial Entrepreneurs Change the Economic Game

The American Monetary Association Team

Final_AMA_Logo-150x1502

AMA

Wikimedia Fights NSA For Your Civil Rights

AMA3-26-15The National Security Agency’s domestic surveillance operations hit the headlines last year to a volley of outraged objections from civil libertarians in the US and abroad. But while the news coverage has faded, the spying hasn’t – and a new lawsuit filed against the agency by the ACLU on behalf of an unlikely coalition of plaintiffs aims to change that.

As Newser reports, the new suit, called Wikimedia vs NSA, was filed on March 10 2015 by civil rights watchdog the American Civil Liberties Union. The named plaintiff, Wikimedia, is the parent of popular online encyclopedia Wikpedia and several other online “wikis,” or online information communities.

Wikimedia isn’t alone in challenging NSA’s right to spy. Joining the online information giant is a long list of plaintiffs committed to human rights and civil liberties including the Global fund for Women, the National Association of Criminal Defense Lawyers, PEN American Center. Amnesty International, Human Rights Watch, the conservative think-tank the Rutherford Institute and the Washington Office on Latin America.

The suit challenges the NSA’s domestic operations as a violation of US cttizens’ First and Fourth Amendment rights. But it also alleges that the Agency’s snooping puts the entire Internet communications structure at risk with its “upstream surveillance” practices.

In the old days, government snooping was accomplished by simpler means, such as intercepting a target’s mail, tapping phones or bugging rooms. In the digital age, though, it’s possible to expand the scope of spying on a mass scale, simply by tapping into the structures everyone uses every day to conduct business and make personal connections.

That’s what “upstream surveillance” does. The Wikimedia suit, which also names the Department of Justice as a defendant, calls it the “suspicionless seizure and searching of Internet traffic” on US soil by NSA and its related intelligence agencies. Upstream surveillance involves is accomplished by tapping directly into the physical “backbone” of the digital communications structure that connects the US with the rest of the world.

By jacking into the actual cables and routers that carry Internet communications, NSA can capture enormous amounts of data from communications while they’re in transit, either domestically or headed out of the country. The operation seizes both business and personal communications indiscriminately in a search for tens of thousands of search terms it considers sensitive.

NSA isn’t alone in this operation, though. Investigative reports revealed that ajar US telecommunications carriers were only too happy to help, making their hard and software available to the snoops – and also, their customer databases.

Wikimedia and its fellow plaintiffs charge that by tapping the “backbone” of the Internet, NSA threatens the very foundations of democracy itself. By capturing masses of data without grounds for suspicion, they say, NSA is violating constitutional protections against unlawful search and seizure, and threatening personal privacy and intellectual freedom.

That’s why Wikipedia heads the list of plaintiffs in the case, which also names the US Department of Justice for giving NSA the green light on its domestic spying efforts. Wikimedia stands for freedom of expression and information – and the expansion of knowledge. It’s those principles that NSA threatens most, they say, by compromising people’s right to privacy and the ability to share information without the fear of government intrusion.

But it’s precisely that freedom that concerns NSA and the other major players in the intelligence game, such as the CIA and State Department. The claim that free sharing of knowledge and information lets terrorists hatch plots and grow cells of followers that could one day destroy the country. Putting as many communications as possible through the sieve of red flag search terms is essential to protect the nation.

Whether those concerns are founded or not, the NSA itself fell victim to the free flow of information when former contractor Edward Snowden famously blew the whistle on its domestic spying operations. Details hit the headlines and well-publicized investigations began, shining unwelcome light into the shadows surrounding the nation’s number one spy.

As a new report from the consumer site Common Dreams points out, documents leaked by Snowden specifically name Wikimedia as a good surveillance target due to the high volume of traffic related to its sites. Now the online information collective is fighting back,  not just for the privacy of individual Internet users – but for the security and freedom of the Internet itself.  (Top image: Flickr/ju-x)

Read more from The American Monetary Association:

Virtual Reality Technology: big Changes for business?

Can Apple Turn Gold Into Profits?

The American Monetary Association Team

Final_AMA_Logo-150x1502

AMA

Virtual Reality Tecnology: Big Changes for Business?

AMA3-24-15No more real estate agents? No more brokers and financial advisers and money managers? Those jobs and many others could be obsolete in the next five years, thanks to advances in digital technology that put many of their functions into the hands f users who can take full control of a range of financial transactions with the click of a mouse.

Online financial management isn’t mew. For years, a variety of websites and apps have been helping users find and buy homes, trade stocks, conduct banking transactions and more. It’s possible to browse home listings, apply for a mortgage and conduct credit checks in minutes – and get 24/7 support for all those things on any device you choose.

Advances in video and “smart” applications are pushing the envelope even farther, though, with even more sophisticated uses that promise to bring major changes to the way we do business in just about every sphere of life. Leading the way: virtual reality and artificial intelligence applications that can eliminate distance and streamline decision-making.

Some forms of VR-inspired technology are already in use. In real estate, for example, its now possible to take “virtual home tours” of properties via videotaped walkthroughs of homes up for sale on a listing site. Video technology also lets doctors consult on cases and examine patients that are halfway around the world.

But advances in VR tech make it possible for an individual to be “present” in places miles away, with a 350-degree view of surroundings in real time – and to virtually move in space. That technology has enabled fathers far from home in military deployment or other job situations to be virtually present for the birth of a child or milestone family events. It’s also allowed consulting doctors to “sit in” on medical procedures and surgeries.

Thanks to Amazon and other online retailers, the concept of the “recommendation” engine is already familiar: based on your previous choices, the site you’re browsing offers other suggestions you might like. But artificial intelligence is getting even smarter, with the potential to mine a user’s history for clues about what they’re looking for and construct an entire catalog of potential choices – all on its own.

In combination, those technologies have the potential to forever change the way the world does business – not just for large corporations or specialized industries, but for the average consumer in daily life. They have the potential to save money, reduce energy waste – and out users in control.

That could eliminate a wide range of professions that evolved to assist people in handling complex transactions that until recently, they really couldn’t do easily on their own. Take real estate, for example.

In pre-digital days, a prospective homeowner usually needed the services of an array of professionals to finalize a home purchase: agents with access to property listings, mortgage bankers, and more. The process could take weeks or even months.

Today, many of those tasks are accomplished via online listings, mortgage pre-qualifying applications ad more. And with advances in virtual reality technology, they may well be accomplished entirely online at the user’s leisure, with virtual home tours that let browsers try out the property by uploading images of their own furniture and décor, or by adding landscaping and other features to the scene.

Smart technology on the site would also store a detailed set of user preferences to make new recommendations – and initiate bids or financial transaction right from the site, without the need for an agent, broker or other third party professional at all.

These technologies are now in their early stages in a variety of other consumer and business related environments too. It’s possible now to “try on” glasses, hairstyles and even new facial feature before plastic surgery – just by uploading a photograph. The fashion world also embraces aspects of VR and AI tech to show buyers outfits and accessories before they buy – and make other recommendations based on those choices.

Widespread applications of VR and AI technology could eliminate the “middleman (or woman): in many situations, with less need for travel and professionals to bring two parties together on a deal. Since information is available to everyone, any consumer can make educated decisions about finance, commerce and more.

Advances in VR and AI applications are coming fast, putting the world of tomorrow into the hands of consumers today – and offering them more control than ever over the decisions that shape their lives. (Top image:Flickr/webtrends)

Read more from The American Monetary Association:

AMA115: Learn About The New Advances in Regenerative Technology with Patricia Cox

Millennial Entrepreneurs Change the Economic Game

The American Monetary Association Team

Final_AMA_Logo-150x1502

AMA 115 – Learn About The New Advances in Regenerative Technology with Patrick Cox

 

Jason Hartman invites Patrick Cox on to the AMA show to talk about the Apple watch, stem cell technology, and why the FDA is holding back on amazing advances in the scientific and medical community. Patrick Cox specializes in the field of transformational technology and has worked closely with scientists all over the world. You can visit Patrick at PatrickCoxDNA.com to see him experimenting on himself and creating brand new muscle tissue.

 

Key Takeaways:
4:10 – There’s a lot of scientific advances going on, but the media has always been bad at reporting science.
9:40 – Right now there are drugs that can cure common life-threatening diseases, but the government takes a long time to approve them.
15:10 – The FDA banned a natural product that reduced inflammation and one of Patrick’s friends had a stroke because he couldn’t take the plant anymore.
22:30 – If the FDA is the problem, what are other countries doing in the regenerative field?
26:00 – Patrick gives his opinion about the Apple watch.
28:00 – Big technology companies are supporting medical companies, which can help with a lot of roadblocks the medical/science community is currently experiencing

 

Tweetables:

“The problem is that the media has never been good at covering science. The profits in big media have disappeared.”

“The SSA is underestimating our lifespans.  It would make the debt over hangings appear even worse than we think it is.”

“It was thought that damage to the heart caused by cardiac events couldn’t be repaired, but we know that is not true.”

 

Mentioned In This Episode:

http://www.patrickcoxdna.com/

https://www.mauldineconomics.com/

 

Transcript

Jason Hartman:
It’s my pleasure to welcome Patrick Cox to the show. He’s editor of the transformational technology alert at Mauldin Economics and we’ve had John Mauldin on the show before. It’s great to be talking to Patrick about some interesting stuff today. We’re going to be talking about Apple’s new smart watch. We’re going to talk about longevity and what’s going on in that field and, you know, how this all interplays with the economy. Patrick, welcome, how are you?

Patrick Cox:
I’m fine, thank you, Jason.

Jason:
Good, good. It’s good to have you. Just give our listeners a sense of geography and tell us where you’re located.

Patrick:
I’m on Marco Island or maybe in Marco Island, which is about the same latitude as Miami. I’m on the west side of the state off the coast from Naples.

Jason:
Okay, fantastic. So, you’re in Florida, good, good stuff. What are you covering mostly in the transformational technology alert newsletter.

Patrick:
Bio-technologies, disruptive bio-technologies for the most part.

Jason:
And what’s the hot topic of the day? There’s so much going on out there. It’s really just an exciting time to be alive.

Patrick:
It is. It’s actually overwhelming. It is my job to keep track of it and I’m not sure that I do, frankly. There’s so much going on. The point that I try and get across to people is everybody knows Moore’s law. Everybody knows that microcircuits double in power at a given cost every 18 months to 2 years. Well, bio-technology is actually making faster advances. The cost of a genome is falling at twice of the rate of, genome sequencing, is falling at twice the rate as the cost of a chip.

We’re seeing this across the board and all kinds of tools in bio-technology, but we’re not hearing about the results for a variety of reasons. One is that the FDA won’t let companies involved in the research say anything, really. So, you really have to dig to find out what’s going on, but it’s worth it because it’s going to have a profound impact on everybody’s lives.

Jason:
Is the FDA just saying that would be like a forward looking statement and it’s kind of like a public company in a quiet period, is that why they’re not letting people talk?

Patrick:
Yes, that’s part of it. It’s a big part of it. The FCC and FDA are both very restrictive. My wife is a nutritional biologist and she calls this phenomenon information hoarding and just about everybody in the profession hates it, but if you’re apart of a business, you’re really restricted in what you can say, what kind of forecasts you can make.

Jason:
Okay good, well, what are some of the exciting things? It’s interesting that you say, it’s more exciting than what we’re hearing. Most people would think probably that would be the opposite. You know, they’d think, there’s all these people out there promoting their wears and trying to get attention in the market place, but it’s actually a little bit more quiet than the reality, I guess, huh?

Patrick:
Well, you know, part of our problem is the media, which has never been good at covering science, is disintegrating. The profits in big media have disappeared. I’m proud to say I actually played somewhat of a role in that. I was at Netscape when we destroyed the dominant paradigm and did away with the monopoly and information dissemination that was keeping the old media in power and now that’s gone.

As a result of that, however, the number of journalist who are covering science, even badly, has diminished. You have to read the journals, you have to be attending the conferences, you have to be talking to scientists to know what’s going on, but it’s worth it because we’re seeing true revolution in human life and the important thing to understand though it’s a continuation of a revolution that’s been going for 100 years, during which time average health spans, life spans, in North America have doubled, but that will accelerate.

Jason:
It’s interesting the distinction you just made. It maybe more important that the health span has increased so much more than the life span, because, you know, people are living healthy, active lives right up until the day the croak and now if we can increase that life span and health span, move it up another 20-30%, that would be pretty amazing. Big implications for the economy too. Both positive and negative, I’m not sure.

Patrick:
Absolutely and you’re right, it’s a two-edged sword, but the pain is largely political. Right now the social security administration is underestimating our actuarial lifespans, because it would make the debt over hangings appear even worse than we think it is. The only solution to that given a rapidly falling birth rate and a rapidly expanding older population is that we invest longer, we work longer, and all of that is possible with technologies that already exist. I’m not speculating about what’s coming around the corner, by the way. I’m telling you right now, if we had the permission to roll out these technologies, we can increase lifespans by decades.

Jason:
So, what’s stopping us from rolling out these technologies? Is it something as simple as FDA approval or what?

Patrick:
That’s a big part of it. Forbes magazine estimates that for every approved drug, the pharmaceutical industry spends $4 billion dollars. Now, some people say that’s too high and it’s only $1.5 billion dollars, either way, it’s crushing. Fortunately, the Japanese who are farther along this road, they have a much larger older population and even lower birth rates in America and Canada has just recently done away with phase 2 and phase 3 clinical trials in the area of regenerative medicine, which may be, arguably, the most important area of medicine today, stem cell medicine. We’re seeing, out of necessity, governments begin to recognize the need to start looking for cures instead of trying to stop therapies from coming to market, which is essentially what the FDA is doing today.

Jason:
Milton Friedman did some writings about the FDA years ago.

Patrick:
He was a friend of my, by the way.

Jason:
What an incredible friend to have, boy, wow. You must have had some conversations with him. Wow. I would have loved to talk to him if I could go back. You know, he did some really good writings about the FDA and what you’re saying is very reminiscent of that. Why is the FDA getting in the way like this?

Patrick:
Well, this is the nature of bureaucracy. If you know Friedman, you know the iron triangle. Bureaucracy once created doesn’t want to go away. In fact, it’s on impulses to self-interest. I mean, bring up some other economists if you look at the public choice school, George Mason, bureaucrats and politicians act in their own self-interest and that essentially leads to the institutionalization of these organizations, which have enormous power over everything that we do.

So, for instance let’s take viruses, there is a, there are several new technologies, brand new platform, completely new sciences that are off the radar. The average medical journalists are not hearing about them, DNA vaccines, and then these contragate nanomole ligand structures, which are in fact nanotech machines, either one of these technologies, both of them have been proven in multiple animal models and because they work in fundamentally different ways than the small molecule drugs, which is what we think of in terms of drug discovery and approval.
\
I’ll just tell you they were working people. These companies can’t for legal reasons, but they were working people, but instead of rushing them to market, instead of helping these companies bring these new technologies to fight influenza, Ebola, HIV, herpes, the government is obsessed with not being put in the position where they let something through that may have some side effect later on, which is an absurd position to take when so many lives are at stake.

Jason:
Yeah, it really is. So, we’ve heard a lot of talk about super bugs and the scary proposition of these bugs, you know, these viruses becoming immune or bacteria I should say.

Patrick:
They do adapt. Viruses also can adapt, but normally when we talk about super bugs it’s bacteria.

Jason:
Right, absolutely. So, it’s interesting what you said about the viral aspect. You know, of course, all we really had for viruses, so far as I know, is interferon, which is, of course, massively expensive.

Patrick:
It doesn’t work.

Jason:
Yeah, questionable too. Give us maybe your top three, if you would, your top three technologies that would extend life, extend health. I would just assume all the creators of these technologies would just be pushing, pushing, pushing the FDA to get it out there.

Patrick:
Yeah and it’s really dangerous. If you offend the FDA, there’s no telling what’s going to happen because, bureaucrats and the FDA are human, they’re no different than any of the rest of us, I don’t want to paint sort of conspiracy, but they are, many of them are really well meaning and dedicated to public health, but they are incentivized to avoid any kind of risk and what that leads to, institutionally, is way too much caution, especially in these days of personalized medicine. In the old days, you know, if you took a drug and it only worked half of the people and 20% got sick, it was failed. It was not allowed on to the market.

Today, we can take, with a small test, you can check gene expression and find out whether or not this cancer drug will work for you or not and give the drug just to those people who need it and for whom it works, but the FDA has not adjusted to the new model of personalized medicine. Cancers, there’s half a dozen new technologies that right now are paying tens of millions of dollars and waiting slowly through this swamp like labyrinth of regulatory process to get them to market, but I predict when they make it, which is in the next five to ten years, cancer will be come a minor irritation. It will be, essentially, solved. I think cancer is already solved.

By the way, since you bought up super bugs, bacteria, I think we will see clinical trials in the next six months that prove that is beating, both in terms of systematic infections, but also in terms of hospital acquired infections, there are topicals that can be used in surgery that will do away with most of them. This is a non-problem that media loves to, you know, the big scare story, and they’re incapable of looking at the science and tracking the companies that have solutions. There is one in particular that I’ve been following for five years that’s just getting very close right now.

Jason:
What’s the name of it?

Patrick:
That’s Cellceutix.

Jason:
So, that’s one. Do you have two more sort of leading things?

Patrick:
I’ll give you two more, you know, people pay me a lot of money for this, so that’s all I’m going to give you, but one, because I haven’t been able to actually include it in the portfolio, which is an alkaloid, which is being researched and moved forward by the Roskamp Institute in Sarasota, Florida. Roskamp is the world’s leading neurological research group. It was founded by Robert Roskamp who made an enormous amount of money by providing assist living facilities to mostly to Alzheimer’s patients and when he retired, I dunno 10-15 years ago, he put 100s of millions of dollars into an institute, hired two of the scientists who were responsible for the most important discoveries in Alzheimer’s and gave them probably the best equip lab in the world. I don’t know how many PhDs there are now, close to 100.

The best tools that exist, the most modern equipment, and they’ve been looking at various approaches to Alzheimer’s and someone came to them with an accidental discovery, which is an alkaloid related to nicotine called anatabine. Now, they were as skeptical as I was when they first heard this, but they did the tests and what they found was it was the most effective anti-inflammatory agent ever discovered. Nothing comes close. Nothing comes close. It knocks down CRPs and because it’s a national product, it was available for hundreds of thousands of people to use, but we know that it knocks down your C-reactive protein panels to useful levels.

So, for me, it did away with my arthritis almost immediately, changed my life. So, for four years this was available and was expanding rapidly through word of mouth for the most part. A friend of mine here on the island ran out about a week ago, he was using it, one of the effects of using it was to control really serious supraventricular tachycardia and within days of running out, because the FDA decided it was going to have to go through an approval process about 3 months ago, he had a stroke and other people are saying Crohn’s disease remanifested itself, arthritis.

This is a national product that everyone in your audience has eaten multiple times. It’s in tomatoes, eggplants, the nightshade family, the solanaceae plant family. This is a remarkable discovery, which I think is going to be worth many years of additional health span, but the FDA decided based on a study that showed, beyond shadow of a doubt, that it prevents long-term brain injuries following a concussion, traumatic TBI brain injury, that it was obviously a drug, therefore it had to be approved.

The company is in fact, the spin-off company, which is Rock Creek pharmaceuticals is in fact taking it through the drug approval process, but the FDA has apparently pressured the company to take the nutraceutical from the market in order to give them the IND, initial drug development, permission. So, now it’s off the market and it’s just a catastrophe. That’s one.

The other one, now we’ll go to the other end of the spectrum, which is stem cell medicine and that’s bio-time energy. If you’d like to see some of the stuff that they do, I have a web page called PatrickCoxDNA.com. If you go to that web page you’ll see pictures of my fiberglass skin cells taken from inside my left arms, which were engineered to become identical to the embryonic stem cells that I came from and then engineered into cardiomyocytes, heart muscles, heart muscle cells. I, in fact, have a video of my rejuvenated heart muscles cell beating in a dish in Northern California.

Jason:
You really do like being the guinea pig. This is interesting that you do your own stuff. I love it. This is great.

Patrick:
I do. I could tell you more. There’s a lot more than this, but those cells, those rejuvenated, those are essentially zero year old heart muscle cells where as my heart muscle cells are 63 years old. We know from animal studies and we know from experiments that if you introduce those cells into an aging animal, which I am, that they can graph and they express growth proteins that then repair the heart.

So, until recently it was thought that damage to the heart caused by, you know, cardiac events, could never be repaired, but we know now that is not the case. There are a number ways, GDF11 is a protein that the English scientists have proven can be used to rejuvenate the heart, but these heart muscle cells in this video were just one of many. We can essentially, bio-time, take your cells, take them back in time to become immortalized embryonic light stem cells, and then engineered them to become anything you need.

They have a subsidiary in Israel, which is working on retina fills to replace blindness caused by macular degeneration and we know that works. It’s only a matter in time before that goes into clinical trials. It could be knee joints, connective tissue, it could be liver or kidney, there really is no end to this. So, rejuvenate medicine is really the biggest breakthrough of our era.

There’s lots of more traditional kinds of medicine that I discussed before, cancers, I think Alzheimer’s we have a really good handle on. It won’t be one solution, it’ll be a number, because dementia is actually a lot of different conditions caused by a lot of different conditions of aging, but we’ll get that. So, that type 2 diabetes, obesity, all of these conditions are in fact solvable many of which with generative medicine, but that takes us to the end of hayflick limit, which is the number of times naturally that our cells can replicate. It’s about 120 times, which is why, you know, these ultra centenarians that we read about live to be about 120, sometimes 122.

Jason:
So, is it replication is only once a year? I thought they replicated, you know, every 90 days or something.

Patrick:
No, it really depends on the cell types and there are some tricks whereby the cell will replicate once and that cell will then split, but essentially you have 120 telomeres in each of your cells. When you’re a kid, when your healthy, you have no inflammation, no fibrosis, you have perfect myocardial function, we’re on the solar cycle. As we get older, as we get sicker, inflammation, and all these other factors that start to affect the way we age, then we will accelerate that process. Typically, then they will localize one organ, burn through all your all your telomeres, completely stop replication, and you’re die, but regenerative medicine can fix that. So, really what we’re looking at is the end of the traditional 120 year limit.

Jason:
Amazing. This is really interesting stuff. When do you think we’ll see the dam-break at the FDA? And if it’s FDA that’s the problem, you know, what other countries are doing this stuff and using these technologies?

Patrick:
Japan is leading the way. Japan, because they, Japan made a decision, and were criticized for it at the time, to not to bring in a bunch of immigrants, because they were afraid that these people would not assimilate. They were afraid that were going to bring people who were essentially hostiles for the Japanese tradition. At the time they were accused of being racist, etc. Now..

Jason:
They’d probably love some immigrants. They’ve got a huge demographic problem over there.

Patrick:
Well, it’s not clear that they would. I mean, they could, but they’re very selective. As a result of that, I don’t remember what their birth rate is, but I think it’s about 1.2, their population is plummeting. At the same time, their older population is growing and getting older, so they know they can not keep the promises that they have made to their older population…

Jason:
Neither can we, but we have the reserve currency so we can just print it. Yeah, that’s another discussion. I agree, I’m just joking.

Patrick:
But, they face their problem. That’s one of the reasons the Japanese have been so focused on robotics is they knew they don’t have the labor to take care of all of these older people, so they put a huge amount of money into robotics that can help care for older people once they’re no longer capable of taking care of themselves. However, that’s not going to fix everything, so they have really begun to reform to their regulatory process and started to think about encouraging important technologies rather than just discouraging them, which is what we, in essence, are doing in America and also in Europe.

wThose are beginning to change. This necessity is forcing governments, even Great Britain for example, despite the fact on the surface they have national health care program, they’re broke, and the people hate the health care system in practice, though not in theory; so they’re beginning to deregulate a lot of various different medicines that are strictly regulated in the United States. So, your question, when will the FDA reform? I think it will be shamed into it when other countries start to take business away from American and begin to pull people through health tourism.

Jason:
It makes me wonder, you know, if I should be flying over to Tokyo to get some kind of longevity treatment, you know?

Patrick:
Well, at some point, this is October 1st that these new rules kicked in, so it’s going to take a little while, but the first clinical trial for stem cell therapy is already scheduled in Japan.

Jason:
Well, before you go, just talk to us of the significance of the Apple watch. You know, this whole quantified self-movement is pretty interesting and I think we just got a huge new tool coming our way that’s going to make it even more interesting.

Patrick:
Right, my interest in..I’m really exciting about this, but it’s not specifically about the Apple watch, more it is about the entrance of Silicon Valley, the IT crowd, into health care, because, you know, I worked in Silicon Valley and I have friends still stay in contact with them, the IT world moves fast. When something is happening, people work long hours and they rush, they want to be the first to the market. So, we saw what happened when Google spinned off 23andMe, tried to push genomics, genetic sequencing, interpretation for health into the market, which is they just ran up against this wall of FDA which basically lend to disaster.

That was a good thing, because it signaled to the industry what they were up against. Now we’re seeing with Apple, they’ve already withdrawn their health app and it’s probably for regulatory reasons. I don’t think it’s actually a bug in the software.

Other people are also entering into this phase by-times in-health applications. This really interesting startup with Eric Schadt from Mount Sinai genomic center in conjunction with the Weizmann Institute in Tel Aviv, which is the master databank of all genomic knowledge. Rafael (41:56-41:57) is the CTO who built really the first search engine, Excite, and is also very well known in the Valley and is now on board with this project.

What this means is we’ve got tech folk now coming up against the roadblock of regulatory resistance and that’s a good thing, because these people don’t take no the way the medical industry does.

Jason:
That’s great. So it’s really like a new vibe, you know, it’s like the tech community is different than the AMA, which has wanted to preserve it’s monopoly, it’s business, and so forth. It’s just a whole different vibe, it’s a different mentality, right?

Patrick:
It is, Google has announced they have a new startup with one of the board members from Genentech, who says we want to cure aging. When Google wants something, they pull out the stops, which means for the first time in our lifetimes, the medical establishment has allies in this desperately important task of reforming our regulatory agencies.

Jason:
And it’s interesting because the tech companies really have something to bargain with when it comes to the government. Google can just agree to let the NSA run rampant through the servers. *Laughter*. They’ve got something to trade, unfortunately. Of course, I’m being massively sarcastic and I hate that idea, as I’m sure you do, but I just had to throw it in for morbid humor if nothing else, but yeah, it’s really interesting, it’s really interesting. Well, Patrick, give out your website, tell people where they can learn more about your newsletter.

Patrick:
Well, if you go to Mauldin Economics, there will be some link. You know, I actually don’t know the URL.

Jason:
Okay, so just the general website, Mauldin Economics. We’ve had John on the show a few times, so you guys do great work there and keep it up. This is an interesting conversation.

Patrick:
Thank you.

Jason:
Thank you.

Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

Millennial Entrepreneurs Change the Economic Game

millennial entrepreneurs change economic gameMillennials get a lot of press lately – most of it bad. This generation of new and recent college grads keeps on making headlines for its staggering student loan debt, problems fitting into the working world, and lack of interest in traditional “adult” goals.

But many Millennials are turning those very negatives into positives, with a rising interest in entrepreneurship that could change the American economic landscape forever.

The Millennials – those born between about 195 and 2005, make up the largest demographic group n the US today. Their numbers eclipse even those of the legendary Baby Boomers born in the surge of domesticity and prosperity that followed the Second World War.

Today’s Millennials are the children and grandchildren of that famous generation, which made its own much-publicized mark on the American cultural scene by challenging traditional attitudes about sex and identity. Like their parents and grandparents, today’s Millennials face criticism from an “establishment” that sees them as selfish, uncommitted and ignorant of the protocols of adult life.

It’s true, many milennials are leaving school with thousands of dollars worth of student loan debt. Because of that, many are opting to live at home or with friends to save money. The employment picture is muddy for these new graduates, too. Many can’t find jobs in their fields – or jobs at all.

Employers complain that Millennials don’t fit the workplace. They don’t understand work culture and traditional expectations for the 9 to 5 world. They’re more likely to jump from job to job, ignore unwritten “rules” and show little interest in getting ahead. That means that as a group, they’re also delaying the traditional milestones of adulthood: buying homes, getting married and having children. That is, if they pursue the se things at all.

And just like previous generations did with the Millennials’  Boomer parents and grandparents, today’s traditionalists despair, dismissing these new grads as a lost generation with no hope of achieving what their parents did.

But do they want to? Not necessarily. Just ask Brian Maida, a New Jersey native profiled in a recent article from Next Shark. At the tender age of 27, he’s a flourishing real estate investor, who spent two years post-college living at home to save up the $14,000 that would let him buy his first property. Leveraging that investment, he bought another – and is now on track to purchasing his third rental property.

Maida isn’t alone. According to a recent Huffington Post article, 60% of Millennials consider themselves entrepreneurs – and fully 90% recognize entrepreneurship as a mentality. The reasons for these attitudes may have their roots in the 2008 housing collapse and overall economic downturn that followed, when jobs were scarce and unreliable and owning a home didn’t really offer any security for the future.

That made creating your own job a more attractive possibility – and it takes those often criticized attitudes toward work and the o-called adult world to make it work. Living at home allows new entrepreneurs to save money and incubate startups. Rejecting the stereotype of the workplace opens the door for new ideas and innovative approaches. And the Millennials’ much-publicized love of technology gives thee new endeavors global reach.

The rise of the millennial entrepreneur has implications for the US economy overall – and for the ideals its culture holds dear. Why bother with college if you can start your own company with the click of a mouse? And why bother with traditional workplace protocols when your job may well disappear in another recession?

Home ownership is at a twenty year low, with little likelihood of rising much, since Millennials choosing to live on their own are opting to rent. Many of them are skipping car ownership entirely. And marriage and family are going on hold – for many, permanently, with implications for retail, education and employment.

Entrepreneurial startups may open new doors for everyone, with opportunities for employment of a different kind and new contributions to the economy in the form of new products and services. While not all Millennials are opting to strike out on their own, the impact of a wave of entrepreneurship by people in their twenties could last for decades.

Like their parents and grandparents, the Milennisals are defying cultural norms. And like the Baby Boomers, too, the attitudes and choices these young people make have the potential to change the social and economic landscape in ways that can affect everyone – for many years to come.  (Top image Flickr/StependePolo)

Read more from The American Monetary Association:

AMA114 – The Universal Life Insurance Scam with Richard Proteau

Can Apple Turn Gold Into Profits?

The American Monetary Association Team

AMA logo

AMA 114 – The Universal Life Insurance Scam with Richard Proteau

 

Richard Proteau is the author of Unraveling The Universal Life Scam (The Shorter Truth) and talks to Jason today on the show about universal life insurance and why it’s almost always a bad investment (unless you’re extremely wealthy). Richard talks about some of the differences between US life insurance and Canadian life insurance, does a break down on premiums, and more on today’s AMA episode.

 

Key Takeaways:
2:30 – Richard explains the various types of life insurance you can have.
6:10 – There’s always a state versus federal regulations war going on in the US.
10:30 – Richard explains what 108 is and talks about universal life premiums.
18:00 – Insurance companies are influenced in creating the best contract possible, but what’s on paper may not actually be what’s reality.
22:40 – MERs, management expense ratios, are not shown on the contract and can fool the consumer into thinking they have a better deal than they really do.
26:45 – Richard says buy insurance for the right reason. Jason and Richard both agree that insurance is not a good investment.

 

Tweetables:
“We always have this battle in this country of states rates versus federal government.”

“In Canada, we’re 40 years behind in terms of regulation of life insurance.”

“If you own an estate, permanent insurance is the only tool that can help your estate. Term insurance will not help.”

 

Mentioned In This Episode:
Unraveling The Universal Life Scam (The Shorter Truth) by Richard Proteau

http://www.consumerights.ca/

 

Transcript

Jason Hartman:
It’s my pleasure to welcome Richard Proteau to the show. He is the author of Unraveling The Universal Life Scheme (The Shorter Truth). I have long thought that life insurance is life insurance and that’s great, but it’s not necessarily an investment. However, there are some distinction that we are trying to make for you here n this interview and I think the conclusion at the end will be that it is not an investment for most people, but there are a select few where it makes sense. So, Richard, welcome, how are you?

Richard Proteau:
Very good, you?

Jason:
Good, good. It’s good to have you on the show. Tell our listeners where you’re located.

Richard:
I’m in New Glasgow, which is in Nova Scotia, Canada.

Jason:
Fantastic. I’ve been up there and that is a beautiful part of the world. No question, but it’s probably kind of cold right now where you are.

Richard:
We’re in the northern part, so the weather is a little bit gentler than other regions of Canada.

Jason:
So, you have been in the life insurance business for many years, right?

Richard:
25 years.

Jason:
This kind of seems like maybe you’re outing some of your colleagues or some of your industry who is really marketing universal life as an investment. Is it an investment or is any life insurance an investment? Actually, sorry Richard, before you answer that question I’d like you to just give our listeners an overview of the different categories of life insurance, if you would.

Richard:
Well the insurance, the basic insurance that you have would be term insurance, which is traditionally used to insure your income on a temporary basis. Usually the insurance will stop at age 75 or 85, then you have permanent insurance, which comes in all kinds of flavors and usually you will have whole life, which can be guaranteed. Usually you’ll will pay it over a 20 year or 10 year payment and everything is guaranteed there. So, what you see on the illustration is what you get and then you have what we call participating whole life where you participate into the profit of the participating funds of all the policy owner of this type of product and then you have the universal life, which comes also in different flavors and that’s basically your different type of product you have available to you on a temporary or permanent basis.

Jason:
Okay, so what you’re saying there are three basic types of life insurance and then under one of those times, there are different types of universal life, right?

Richard:
Yes, there’s going to be three types, which is your traditional universal life, which is basically an universal life built on interest rate assumption. The investment or interest incidents and then you have the index universal life, which is linked to an inequity index, but that process has a cap, what they call a minimum and a maximum. Now, I have to say that in Canada, I didn’t write about this product because the index universal life is not available in Canada. It’s available in the United States and then you have your variable universal life, which is basically where you invest in equity-type of investment. Now, a big different between Canada and the United States. In United States, your variable universal life is considered a security. In Canada, it’s considered an insurance product. So, in terms of disclosure and information given to the owner is quite different. It’s a lot more disclosure to be done if an investment is considered a security versus considered an insurance.

Jason:
Does that require a different type of license by the person selling it to you?

Richard:
No, in fact in Canada, they instate an insurance agent licenses and an insurance agent can sell a variable life, a universal life. I think it’s the same in the United States because, well, insurance of variable life, variable universal life, has been considered security. The supreme court in the United States I think has exempted it under the investment advisers act, so when insurance agent sell universal life…

Jason:
So, the investment advisers act, this was probably a huge lobbying push by that very, very wealthy industry to get all sorts of laws passed in their favor I’m sure.

Richard:
Yes, well, you know, it’s quite interesting if you look at the regulatory environment between the United States and Canada, which I’ve done quite a bit. United States, you had quite a bit of a war between state and the federal government on who is going to regulate insurance based on the fact does the business of insurance fall under federal regulation or state regulation. So, what you’ve seen involved in the states is that they decided that the verbal universal life was a security, but that the companies selling it didn’t fall under the company investment act and the investment advisers act indifference to the state is saying that it was up to the states to legislate there.

Jason:
Very interesting. Yeah, we always have this battle in this country of states rates versus federal government.

Richard:
It’s a good battle in the states, because it forces changes and war is a great catalyst for change and this is what is pushing the United States regulation forward. In Canada, this has not happened, so therefore we’re 40 years behind in terms of regulation of life insurance.

Jason:
So, is that being behind good or bad? I would kind of wonder. I would wonder.

Richard:
It’s extremely bad, because we basically now for example in Canada, we just the regulators for the different provenance in Canada are recognizing that insurance is sold to what we call intermediaries called managing general agent, MGAs, while in the states it’s been recognized in the regulations for quite awhile, right. So, we’re very far behind in Canada. This is very bad in terms of consumer protection for the consumer in Canada.

Jason:
Let’s go back to the first question I asked you about whether or not it’s an investment. I just think it’s really quite interesting how this industry has turned an insurance product into an investment product. Does it qualify as an investment or is it really just insurance? I mean, look, if you want to have insurance, fine, get some insurance. I mean, I have lots of insurance policies that have nothing to do with investment, they’re just insurance for protection.

Richard:
Well, insurance is a great asset, it’s great to protect your estate, protect your income, protect yourself. I always said that insurance is about giving away risk, it’s not about taking risk. So, for most people and most consumers, insurance is insurance. You should keep your insurance separate from your investment. Yes, if you’re wealthy, very wealthy, and you can take quite a bit of risk, then insurance can become a way to create wealth. It can be an investment strategy, but for most people it is not an investment.

Jason:
I’m so glad you clarified that. So, first of all, how do the very wealthy use insurance? I mean, I know they have what’s called captive insurance companies sometimes and those can be used as an investment and a tax shelter I believe too, but is that what you’re referring to when you say the very wealthy can use insurance as an investment?

Richard:
In Canada, because I can only talk there in Canada, because this is where my experience has been working with a very wealthy clients. I’m seeing insurance being tailored to take advantage of tax laws and this is where they created the lies is taking advantage of the tax environment using life insurance. Sadly sometimes we push the envelope too far and we get into what we call tax avoidance and in Canada, for example, the sell of universal life was subsidized by the tax payer, because the department of finance looked the other way on some very advantages self-concepts like the 108.

Jason:
Did you say 108?

Richard:
Yes, the 108 was the leverage concept where basically a person can put premium into universal life policy and leverage the premium back, borrowing against the premium and get it back. This was done in Canada quite a bit, because the insurance company what they did is say, okay, you put the premium in the universal life, we’re going to guarantee you a rate of 8% if you borrow this premium back at 10%. Now, since they can deduct the interest at 10% as a tax expense, your net costs falls down 5%. So, for the insurance company, they charge a lone rate of 10, credit 8, they make a profit of 2 and the policy owner can basically is net costs 5% and he is credited 8, he’s going to make 3% profit as the tax payer that basically pays for this concept through the laws in tax revenues. So, this is how in Canada the sell of universal life was basically a subsidized and if you’re very wealthy to do this and can take the tax risk associated with a tax avoidance strategy, then yes, it’s very good for you.

Jason:
Very interesting. So, the tax payers again are subsidized another class of people. Sounds familiar.

Richard:
This was, you know, there was millions and millions of dollar premiums sold on that basis and it’s just last year that the Mr. Funds of Canada basically said that was enough and they stopped that practice.

Jason:
Very interesting. Okay, good, so what else would you like people to know about this? I mean, when you talk very wealthy and those it can be an investment for, how wealthy do we need to be? I mean, what are we talking about? We’re just talking about upper middle class here, we talking about Mitt Romney wealth, what are we talking about?

Richard:
Very wealthy, usually people that are taking advantage of the policies in knowing this $50,000 – $200,000 a year in premium and this is really just something the small policies that I’ve seen. I’ve seen millions of dollars in premiums being put into a type of arrangement, so when we see the universal life sales report in Canada, universal life sales are increasing. How much is it a reflection of those tax concept and how much of it is a reflection of regular people buying this type of product. I think it’s queued towards the very wealthy.

Jason:
Yeah, very interesting. Okay, so if someone is spending a $100,000 in premiums annually, then it can start to make sense, right?

Richard:
If they’re willing to take all the risk associated and what’s interesting there, the risk, was tax avoidance, but even the wealthy when they look at investing in a universal life, they have to cheat a little bit for them to work, they were offered an 8% guaranteed interest rate, right. For most people that type of concept would not be available so therefore what’s created at the universal would be in relation to what’s available into an equity or into an interest rate or into a bond rate or so they would take the full risk of those investments. Here it was basically fixed, the game was fixed.

Jason:
So, Richard, let me just explain something that I’ve always struggled with about this stuff, you know, these insurance companies are not stupid, they have financial engineers, they have brilliant quants, and MBAs, and just brilliant number crunches working for them who figure out how to structure these policies, and I just don’t see how they would structure something that is not a great deal for them. That’s the first part. So, I would think, you know, with these policy payouts that they’re really expecting inflation in the future when they start to pay these out so they can pay them back in cheaper dollars or people borrow money from the policy and cheaper dollars or they pay out, you know, for a loss obviously on an actuarial level. So, that’s one side of it, but the other side of it is and this is just such an irony to me because I’m a real estate investor and I love real estate investing and think it’s the most historically proven asset class in America, what do the insurance companies do with the money? They invest in real estate. It’s just such an irony to me.

Richard:
Well, this is worse, if you buy universal life, you don’t see those real estate returns, because you’re the one decided where the money is going to be invested, that’s the whole principle of universal life versus participating whole life policy where, yes, in the participating fund, there’s a real estate holdings, then you’re going to basically have some real estate returns there, but for universal life where you’re the one deciding where you invest the money, you don’t have access to a real estate type of return.

Jason:
But the insurance company does.

Richard:
The insurance company does, but under excess that they get from your premium that you’re paying on their profits, but not you as a person that is and no owner of a universal life policy, because that’s the whole purpose of a universal life policy is to separate the insurance from the investment, but what’s interesting here, this is what’s on paper, this is how the universal life came about, but in reality what you found is there’s always a link between insurance and investment and you see this through the contract where there’s always back doors where the insurance company have been too aggressive over their cost of insurance and really go after your cash values to pay themselves back and this is another reason why I don’t like insurance as an investment. Why would you take such a risk?

Jason:
Richard, a lot of this trickery is done in what’s called the illustration, right, and the illustration, that’s the page where you see all these numbers in the policy when the salesman is selling it to you, right?

Richard:
Entirely. In fact, a lot of research has proven that when consumer is considering buying a universal life policy is the decision is based strictly on the illustration. So, therefore what you have, the problem that is created is company influence into creating the best illustration possible and this can turn into a real problem, into what I call a scam. So, the first problem that you have is when you look at an illustration, let’s say 8% rate of return, because you’re going to have a stated rate of return.

This illustration rate is based on a constant rate of return, but in fact, you’re going to get what we call a volatile rate of return. Your rate of return will vary year to year and this is where, if you were to buy something right into one lump sum payment, make no deposit and no withdrawals, right, the sequence of returns would not impact the amount of money that you will have at the end. This is what we call in mathematics the cumulative law of multiplication.

For example, if I have $2 and I multiply this by 4 multiplied by 5, I’m going to have the same amount if I take the $2 multiply it by 5 and by 4, but in life insurance, this does not happen, because you make premium year to year or monthly to monthly and also cost of insurance is deducted month to month. That means that this law does not apply and therefore the sequence of return is very important, so if you get very low returns at the beginning and high returns at the end, you will get a cash value that is lower than what was created at the end and if you get high returns at the beginning, you’re going to get the opposite result.

So, when you look at this, what you find is – I always say you look at your illustration, the illustration rate, this is your bench mark curve, okay, and the problem that you have is and the second problem that happens is you have what we call MER, which is management expense ratios. Now, in Canada, these expense ratios are very high, they’re going to be in the 4% range. They can go up to 12% and these are not reflected on the illustration, so when you see an 8% rate of return, you the consumer have to make the mental calculation and say, well, this not 100% its truly 12% and therefore what company has done and this is interesting, and you know, I always say I don’t want to go into a lot of math, but I always say, listen, if your illustration rate is your benchmark at the end, what you should have is the same 50% probability to have higher cash value and 50% probability to have lower cash value, but this does not happen, why? Because the interest rate that you’re assuming is too high versus what truly can happen and the easiest way to explain this is if you’ve assumed 12% total so that 8% plus the MER of 4, okay, you have to select a minimum and a maximum and in my analysis I’ve selected – your rate can vary from plus 25 to minus 25 so therefore if you do plus 25, you’re doing 13% above the 12% that’s been illustrated, but if you do minus 25, you’re doing minus 37%, so therefore if you do minus 25 is going to take you three years at plus 25 to get back your loss.

Jason:
Unbelievable. Yeah.

Richard:
So, therefore, it means the illustration isn’t possible what is illustrated can not happen, it’s unachievable and this is the big problem. The second problem that we have is since MER are not reflected on illustration, what the companies, we call this smoke and mirror illustrations, smoke and mirror results, and this is a statement that they can fractalize that they’re designing those products and this is what they said they’d create and they create this very easily since they still have a universal life with an MER of 3%, I can increase the MER to 4%, this will have no impact on the cash value illustration.

Jason:
What is the number you’re saying? Did you say MER?

Richard:
MER, management expense ratio.

Jason:
Management expense ratio, MER, okay.

Richard:
MER, which is basically a loan that’s taken from your investment. So, every year they’re going to take, let’s say in this case, 3% of your investment and pay themselves from that. So, what you have here is since those MERs are not reflected on illustration, you don’t see them, but what the company can say is well, I’m not going to take 3%, I’m going to take 4%, this is not going to show on the illustration, because MERs are not shown there, but I’m going to give it back to you as a bonus of 1%, but the bonus now is shown on illustration, so what they’ve done basically is increased your illustration rate artificially by 1%.

Jason:
Unbelievable. How is this legal? How can they get away with this, because they have good lobbyists, let me guess, good lobbyists, good lawyers, and good PR firms, right?

Richard:
It’s unbelievable. In Canada what has been done, like, I’ve fought against this, we had one company that create what we call even went further in creating better cash value, we were at the time in the cash value war, everybody was fighting to create better cash value in the illustration, they created conditional bonus based on new earning 8% return, but you the consumer don’t see this, the MERs, so it’s true they base it on 12% return. Now, the kick is if you do the illustration at 8%, concentrate the return, the bonus will be created at 100% of the time, but in reality you can not achieve a constant rate of return like this. Your rate will fall below and above, so maybe you’ll get this bonus 50% of the time or 25% of the time, but you won’t see that on illustration and this is what I call a real scam. That is a real fraud. It’s showing something that can not achieved and this approach that has been done in Canada sadly, I don’t know why deregulators did not intervene, I still don’t know why, it’s a very, I agree with you, in Canada, the insurance lobby is very big, very powerful.

Jason:
In the US it’s even more powerful, I’m sure. It’s just ridiculous what happens. You know, these big companies have all the advantages and they can just deceive you, they can take advantage of you, and they’ve got all the tools and the power to do it. It’s amazing. Do you have a place on your website, Richard, where, you know, this is sort of hard to understand on an audio format, do you have something they can look at or is it just in the book or is it on your website, some sort of visual example of this?

Richard:
It’s in the book, you see the tables, I have very simplified and very easy to see and understand. I agree with you, it’s very difficult to talk about this verbally when it’s easier when you have the numbers in front of you, but on the site, I would say no, you really have to purchase the book and sit down and read it.

Jason:
So, I think the advice here, if you want life insurance, get some life insurance, I would just say get some term insurance, you know, and have insurance, just like your car. You might disagree, go ahead.

Richard:
If you need insurance, buy it for the right reason. I always say, you know, if you have an estate, permanent insurance is the only tool that can provide for your estate. Term insurance will not solve this problem, so permanent insurance in that situation is a great product and you should use it, but don’t use it as an investment. It’s not for you, you’re going to be – you can not achieve a better result in universal life when you more charges, when you pay commission that is worth 190% of the initial premium when you have all kinds of loads that are not even guaranteed where the insurance company can increase those loads contractually, why would you take such a risk? It’s a big investment risk.

Jason:
Yeah, it’s a good point and it’s a good question. Very good. Well, Richard, give out your website and tell people where they can find more and get the book.

Richard:
The book is available on Amazon, you just input the title and you can get it there, and basically I’m a consumer advocate in Canada and our site if people want to visit it is http://www.consumerights.ca/.

Jason:
Excellent, consumerights.ca?

Richard:
One r.

Jason:
Yeah, okay, you combine the rs, I see what you did. Good, good. Good stuff. Well, Richard, thank you so much for joining us today.

Richard:
Yes, thank you.

Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

Can Apple Turn Gold Into Profits?

AMA3-10-15Gold – that ancient standard for wealth and beauty – has had a roller coaster ride in the world’s money markets lately, trading down from last year and struggling against other commodities in global investing. But a new maneuver from Apple Corp is poised to change all that, as the computer giant positions itself to become the world’s third largest consumer of gold.

Though gold is now trading at just over $1600 per troy ounce, that’s down from last year’s $1200 or more in US dollars. Given the volatility in the world’s currency markets, though, the “gold standard” still has value as a solid backup for the shifting fortunes of central banks in countries around the globe.

Gold trading stays strong thanks to the world’s top gold consumers. China leads the world in buying gold, grabbing more gold in a year than is actually mined througo9ht the world. India comes in a close second; its Sripuram Golden Temple alone is made of 1.5 tons. of gold.

Now, with the launch of its new line of smart watches, Apple may be claiming the third spot on that list.

Already riding high on $180 billion in profits from its wildly popular iPad, iPhone and super-trendy computer products, Apple plans to launch its new line of smartwatches in April 2015. Entering a field already populated by competitors from Samsung, Galaxy and others, Apple’s smartwatch promises to send and receive text messages, run a myriad of apps and – oh yes, tell the time.

On the low end, the smartwatch will be available for purchase at prices comparable to the iPad. But on the high end, Apple is courting a different kind of consumer with the Apple Watch Edition, which is expected to sell for $4,000 and up.

Why the jump in price? The Apple Watch Edition comes encased in gold. Not gold plate, but two full ounces of 18-carat gold. And Apple anticipates producing a lot of the Apple Edition Watches – and if that happens, the company could provide a much needed boost to the gold trade everywhere in the world.

According to a recent article from Gold Eagle, a trade site for the gold market, the Wall Street Journal reports that Apple plan to produce 1 million Apple Editions per month in the second quarter of 2015 alone. If that happens it could mean a massive boost to the gold trade worldwide – and good news for investors and banks.

Those projections may be overly optimistic. After all, the Apple Edition is a niche luxury item. But if Apple does produce this high end watch in the numbers it expects, that’s 24 million troy ounces of gold a year – approximately, as Gold Eagle points out, 746 metric tons.

Worldwide, about 2500 metric tons of gold are mined each year. So if Apple’ production estimates are right, or even close, the company would be using about 30 percent of the world’s gold supply to make the Apple Edition model alone.

In many ways the estimated impact of the Apple Edition Watch product on world gold markets is speculation. Even for a company known for its line of cool, high-end devices, the Apple Edition comes with a hefty sticker price – and it remains to be seen whether consumers will bite.

But Apple has never been shy about pricing its products higher than its competitors – and it still outsells them, creating a massive international presence that generates more revenue than many small countries. It is, as Gold Eagle points out, the ultimate validation of the “if you build it, they will come” strategy.

So perhaps it’s no surprise, then, that the company that Steve Jobs built could stand with two of the world’s largest countries in terms of gold consumption. The Apple Watch Edition may not be for everyone – but if it performs as expected, the company’s newest tech toy could be good news for consumers, investors and the world’s gold markets. (Top image:Flickr/sillijude)

Sources:

Holmes, Frank.  “Could Apple Buy a Third of the World’s Gold?” GoldEagle. goldeagle.com. 2 March 2015.

Read more from The American Monetary Association:

What’s Next For Fannie Mae and Freddie Mac?

Students Strike Against Loan Debt

The American Monetary Association Team

Final_AMA_Logo-150x1502

AMA 113 – How Peer To Peer Is Freeing The World with Jeffrey Tucker


Jason invites Jeffrey Tucker on to the AMA show to talk about the peer to peer economy as well as Bitcoin. Jeffrey is the CLO and founder of Liberty.me and he is also the Director of Digital Development for the Foundation for Economic Education. On the show, Jeffrey talks about his book Bit by Bit, the up and coming peer to peer world, and much more.

 

Key Takeaways:
2:20 – Jeffrey explains what peer to peer means.
5:20 – Jason talks about how the Cuban people make extra money by serving food to tourists in their own homes.
12:40 – There are a lot of costs associated with regulation and that hurts the economy further.
15:45 – Plane tickets are roughly the same price from 25 years ago.
25:00 – Bitcoin is relatively private as long as your public address isn’t attached to it.
30:20 – Top-down planning is slowly beginning to erode.

 

Tweetables:
“It’s been about 40 years since the US has attempted anything like a serious deregulation of anything.”

“The entire craft beer market came about as a result of deregulation in the late 1970s.”

“The problem is you can’t deregulate and still maintain the power of the federal reserve and that’s the problem.”

 

Mentioned In This Episode:
Fee.org

http://tucker.liberty.me/

Bit by Bit by Jeffrey Tucker
Kitchensurfing
Eatwith
Blue Apron
Munchery
TaskRabbit
Fiver
Uber
Lyft

 

Transcript

Jason Hartman:
It’s my pleasure to welcome Jeffrey Tucker to the show. He is founder and chief liberty office, I love that by the way, CLO of Liberty.me. He is a distinguished fellow of the foundation for economic education and former executive editor of Laissez Faire Books. Author of Bit by Bit:How P2P is Freeing the World and you’ll learn all about that in this interview. Jeffrey, welcome, how are you doing?

Jeffrey Tucker:
Good, everything is great today.

Jason:
Good good, glad to have you on the show. Give our listeners a sense of geography by telling us where you’re located.

Jeffrey:
Right now I’m speaking to you in Auburn, Alabama where it’s nice and warm and pretty even though it’s allegedly the middle of winter, I can go outside and in short sleeved shirts, so it’s very nice.

Jason:
Fantastic, good stuff. Well, tell us a little bit about your book if you would Bit by Bit: How P2P and is P2P in this cash Peer to Peer or Person to Person?

Jeffrey:
It could be either, but mostly it’s rendered as Peer to Peer. The idea is to disintermediate our exchanges, which is to say that we don’t have to have third-parties any more with trust relationships between. We establish our own trust relationships one by one. This whole thing really come about I would say mostly since 2008. We saw a glimpse of it earlier in things like Napster where we saw file sharing, eBay, which is just a wonderful global market place for buying and selling goods. It’s like a universal garage sale or something like that. It was really wonderful, because we didn’t have to have intermediaries intervening at our capacity to trade. Also there’s what’s called equipotency in the peer to peer economy so that I could be their buyer or seller or service provider or a service consumer. I can be the make movie or I can watch movie, I can be a driver of a cab, or take a cab. We all have the same tools and that’s very beautiful kind of system and it changes the character of capitalism.

Jason:
I really does, doesn’t it? I know we’re going to talk about Uber, Lift, AirBnB, the sharing economy and how that just disintermediates. People, you know, these lending platforms where people can burrows and lenders can just meet up online. It’s amazing.

Jeffrey:
Yeah, there’s monetary aspects to lending economy. You’ve got all the new cryptocurrencies. I was just looking at one of my favorite sites, Brave New Coin. They have about 68 cryptocurrencies that are out there trading, buying, and selling. It’s very lovely. No body imagined such a thing five years ago. We didn’t even know cryptocurrency was possible, but as you say, in the lending institutions, you’ve got crowdfunding platforms like Indiegogo, Crowdfunder, KickStarter, and the money lenders Lending Club and Prosper and Cuba(#4:02?) and all of these thing. It’s true across the board. It’s even true in service provision like food. So, you’ve got real sharing sites and Kitchensurfing.

Jason:
Tell us about the meal – well I mean, I know you’ve got Couchsurfing, I don’t know about the meal sharing though, Kitchensurfing? What’s that?

Jeffrey:
We all know what happens at the dinner party, I mean, the dinner party system don’t go on that much anymore. The most we do is invite people over for chips and dips, but there are people who like to cook and there are people who like to eat fancy meals and maybe don’t want to pay restaurant prices. Well, now with peer to peer economy, you can turn your own home or apartment into a restaurant once a week, once a month, or once a quarterly, whatever you want to do, just by listening to the fact that you’re serving some dish you really like. People can sign up to come and pay for it.

Jason:
What a great way to meet new friends or maybe a new significant other.

Jeffrey:
These things are so popular right now.

Jason:
I didn’t even know about those, wow. You know Jeff, I tell you, it reminds me of my visit to a very, obviously, very oppressive country, but I don’t know, Michael Moore seems to like it and that’s Cuba. Years ago, one evening while we were in Cuba, you can get permission from the government, which is not easy to obtain I’m sure you would imagine that to make extra money by hosting dinners in your house. It’s really hard to do and there’s all kinds of restrictions, but if the government allows you to do this, I mean, it’s the complete opposite of what we’re talking about, you can basically turn your home into a restaurant occasionally and invite people over and they can pay you to have a meal there.

Jeffrey:
You know, I think I knew about that. I’ve had many people who have visited Cuba tell me all about this that these…since you’re not allowed to have a large scale enterprise or at least it’s heavily discouraged, yeah, you get to these restaurants operated out of houses. It’s funny you mentioned that, because that’s the first thing I thought about too when I found out about these sites I can Eatwith and Blue Apron, Munchery, and these kinds of thing was is funny, as you say, it’s almost the opposite here.

The problem is the regulations and the official economy are so strict whether zoning laws or health regulations and taxes and all the rest of it have made opening the restaurant really difficult and made them more expensive than they otherwise would be. So, you don’t have the kind of range of options that you should and are true free market. So, now you have the peer to peer economies swinging in with these apps and allow you to do basically what you’re doing in Cuba and everybody loves it. It’s funny, it’s sort of bringing back the dinner party in a lovely way.

Jason:
Yeah and the people are in Cuba are so desperately poor because of their oppressive system that they need to do things like that. Here it’s done more by choice and maybe for more social interest and things like that, but that’s fascinating. I mean, speak a little bit more and I’ve thought about this a lot Jeffrey as to how it change the character of markets and of capitalism. It’s quite fascinating the way things are just flatting getting decentralized, disintermediated. I think it’s an incredibly exciting time.

Jeffrey:
Yeah, it’s a very mutual stage of capitalism. You have to have gone through everything we went through from the industrial revolution to the gilded age all the way to the digital revolution to arrive where we are now where we are really able to connect person to person geographically no contiguous basis, you know, anywhere in the world. If you have a smart phone and an internet connection, you can become provider or a service consumer wherever you are from anyone to anyone is kind of amazing. I’m particular impressed with the service economy, you know, things like TaskRabbit are very interesting.

Jason:
Oh, yeah. Another one or Fiver.

Jeffrey:
Fiver or Odesk or Elance and there’s so many of these things, Freelancer.com.

Jason:
The government is got to be just freaking out. They’re thinking, “How do we tax all of this?” You know? It’s so hard to watch and control.

Jeffrey:
Right, the very nature of these state and local sort of certification rules is to try to restrict the number of producer. Well, the P2P economy and the sharing economy or whatever you want to call it, is really exposing all these rules and regulations for the absurdities that they are. I don’t think you can maintain them really anymore. With TaskRabbit, I can, if I’m good at fixing sinks and I got nothing to do this weekend, I can just put available that I am available on Saturday to come fix your sink if there’s a problem. I get a notification on my smartphone, I’m over there, I get the money, and move on. There’s nothing any of the local regulators can say about. It’s wonderful, because it’s kind of exposing the efficiencies and the absurdities sort of the old fashioned central planning that we’ve been living under.

Jason:
Now, Milton Friedman spoke a lot about the idea of licensure. He argued, as I recall, that it shouldn’t exist. For example, I hold a driver’s license, I hold a real estate license, I don’t know what other licenses I might have, I probably have some others, would it be better to just have all of this stuff be unlicensed? I always think as a Libertarian, I would love to see the government regulate a lot less stuff. I’d like the government to be maybe a good 70% smaller and when you say that to people, they think you’re crazy most of the time, but I don’t think so, because I think with the tool we have nowadays, with the internet, with these types of tools where people can review things and reputation becomes really important.

Maybe with insurance companies stepping in rather than, you know, have the building inspector inspect the building you want to build, of course, it needs to be safe. I love the idea of being able to walk into all of these buildings and not have to worry about them falling on my head and killing me and, you know, that’s because the government is there to do inspect it. I go to restaurants and almost never get sick from eating in all of these restaurants, but that’s a really cumbersome process and it increases the cost of everything and it just puts pressure on people and inflation and causes crowding and so forth, because there’s a limited supply and you gotta wait in line at the restaurant and it’s an hour and a half for a table and all of this kind of stuff. There’s so many implications. It’s just incredible.

Jeffrey:
I think everything you just said is absolutely true and I would also add to that when government steps in to try and guarantee the quality of service, what it does, as you say, crowds out a private services. We need to have a world in which we’re responsible for radiant services in which markets are basically regulating. That’s really the effective way to go about it. I talk about some of these kinds of cases in my book on the P2P economics, it’s called Bit by Bit, but just yesterday on the Foundation of Economic Education website talked about the particular case of child care. So, here you have a perfect opportunity for the P2P economy just to really become amazing. You’ve got an empty nester, she’s at home, she’s got space, she’s ready to take care of people’s kids for money. She could just register at a website and get customers immediately and build a business.

Well, the regulators are so strict and so strictly enforced that it’s not possible to do that. In fact, childcare is the most regulated industries in the country and as a result, there’s a massive shortage of childcare and the prices are astronomical and mostly it’s not even worth it anymore if people are going to work and put their kids into daycare, so they end up staying home, sacrificing that second income that people so badly need, and now you have, you know, President Obama saying, oh, let’s fix this. Not through deregulation, which is what we really need, but with a national program of daycare. So, he has to bring all the beauties and merits of the post office to child raising, essentially. This is not the way..

Jason:
We know how good the post office is.

Jeffrey:
Yeah, we don’t want to go this way. I wrote this article that came out, actually it’s up there I think on Fee.org. It’s the top article today and I could only find one or two other pieces on the entire internet that’s used to draw attention to the costs of the these kinds of regulations and how the regulations, which have been going on so intensely since the 1960s, are really responsible for the national childcare crisis.

Jason:
Here’s part of the problem, you know, it’s the old idea of you can’t hear the dogs that don’t bark and unfortunately and I think this is why people on the left or even in the center or even on right, frankly, which isn’t even the right anymore. The right is like the middle and the left is really left usually nowadays. You know, they just don’t get it. You can’t really quantify and see the cost of all of this government regulation. People go about their lives and they think, you know, wow, I’m pretty safe to go to restaurants and get in an taxi and walk into buildings and have them not fall in my head, but the question is, they’re not asking the right question. How much less expensive would this be? How much better would it be? How much convenient would it be? How much more abundant would it be if the government had a much smaller impact on these things?

Jeffrey:
You’re so right to draw attention to these unseen factors and what I find depressing about it is there’s really essentially no public debate about issues like childcare. We’re trying to see some debate about things like school choice and compulsory school in laws and zoning laws and these kinds of things, but we’ve got a long way to go. I think it’s been about 40 years since the US has attempted anything like serious deregulation of anything. Most of it happened under Jimmy Carter in the late 70s, but because of that deregulation we now experience beautiful cellphone markets and low price of gasoline after the oil deregulation and pretty good airplane service except for the TSA, thanks for airline deregulation and the entire craft beer market came about as a result of deregulation in the late 1970s too.

So, just last night I was at a bar and they had four or five local beers that were really fun to drink and enjoyable to hear the names and their proprietors are really proud of them, but that wouldn’t exist if it were not for the deregulation of the 1970s, but it’s been a long time since we’ve really explored this area.

Jason:
Well, I’ll tell you one thing that really is probably easier to see and most people can comprehend. I did a really interesting study on this by the way or at least, I thought it was interesting and that is airline deregulation. So, everybody complains about getting on a plane, you’re packed in like a Sardine, etc. I remember when I was a kid and my mother would send me from LAX, Las Angeles where I lived at the time, back east to New York to stay with my grandparents for the summer, many summers. I would go back there and I remember being conscious of the price as a kid.

It would cost about $500 for that airline ticket and now it still costs about the same price within in that range, it’s about the same price, the difference is though the quality of that trip has definitely diminished. I mean, remember the old commercials for Continental, you get three feet before your two legs in coach. I mean, nowadays you’re lucky if you get 12 inches, but what’s interesting about it, Jeffrey, is I went back and I did some inflation calculations calculating for inflation and, you know, a first class ticket today is about the same price adjusted for inflation as a coach ticket was back then and the experience except for TSA and the Gestapo feeling you up is relatively the same experience. I would say first class compared to coach then.

So, maybe didn’t change too much, but there’s so much into the equation, oil prices, and airlines and Wall Street crookery and all these kind of stuff, but what do you say to the people who say that, you know, the reason we had the great recession a few years ago, the reason we had that financial crisis was because deregulation. It’s all the fault of Glass-Steagall and they’re just not regulating Wall Street enough. I think there’s a big dog’s that don’t bark problem there, but what are your thoughts?

Jeffrey:
I don’t know how you could regulate Wall Street more than it’s regulated, actually. There are hundreds of regulatory agencies and the entire system is basically cartelized by insiders. I mean, that’s the way Wall Street works. Within my amount of just top-down rule making, the whole thing is ripped to be exploded essentially by the P2P economy. I would love to see real deregulation actually take place. It hasn’t taken place. The only kind of deregulation and, they call it that, but it’s not really that that we’ve had with regard to finance and money occurred with the early 1980s. The problem is you can’t really deregulate and still maintain the power of the federal reserve and that’s the problem.

Jason:
Tell us about that, what is the problem there for government? They want to control the money, so why can’t they deregulate?

Jeffrey:
They want to control the money and they want to have a massively flexible monetary policy and so normal forces of competition and market pressure for responsible lending are really in place, that’s why we keep going to these booms and busts. That was the real for the real estate bust or the real estate boom, it wasn’t regulation really, it was sort of unleashing a wild and reckless monetary policy with lots of moral hazard, because it’s public, private, regulatory agencies like Fanny May and Freddie Mac and zero interest rate policies. The funny thing is we learned nothing from that entire experience in the 2000s.

All of these policies created a massive bubble that exploded, so rather than letting the system sort of radical deleverage and get it on a sound basis, the fed got busy and reduced interest rates to zero, created three or four trillion dollars in new money, stuffed the banks full of bunch of fake capital and a lot of that new money is following into the shadow banking system and creating an asset inflation that I think is unsustainable. I mean, I worry sometimes that we are repeating the same mistakes of the 2000s right now.

Jason:
Of course we are and you said something very telling at the beginning of that thought. You said, Wall Street, you couldn’t regulate it any more than it is probably, but it has become an insider’s game and so, again on that dogs that don’t – you can’t hear the dogs that don’t bark concept is what they’ve done through regulation is they’ve created these insider semi-monopolies for all of the big corporate talkarcy-type players, because nobody else can compete.

If you have say a medium size business and you’re an investment banker and you want to go up and you want to, you know, take it to the big time and say you’re an investment banker in Orange County, California where I am from as an adult, okay, and you want to take it big and you want to open up shop on Wall Street, you want to get in the game that Goldman Sachs plays in, right, good luck. You don’t have the lobbyists, you don’t have the clout, you don’t have the money to pay for the regulatory compliance. I mean, that’s how these big companies keep and maintain their monopolies through regulation. They grouse about regulation, but secretly they love it.

Jeffrey:
They’re the ones riding the regulations. I mean, Wall Street is regulated by government for Wall Street and Wall Street comes to government to regulate it. They want a cartel. This is a good example of this, the capitalists are not friends of capitalism.

Jason:
Well, they’re not really capitalists either.

Jeffrey:
In the financial market these days, it’s not even clear to people what they own and what they don’t own. It’s not even clear to anybody what anybody owns anymore. Many times it’s these securities are hypothecated, you know, swirling around inside our banking system. It’s all just become unclear. I mean, sometimes, when you start looking at the financial of the large banking houses, it really does look like a house of cards, it’s pretty darn scary. Sometimes it doesn’t seem, I don’t even know how it’s really sustainable, but this is not how a market should work, really, and this is why I’m optimistic about things like cryptocurrency and P2P economy and the idea of issues and securities on the block chain to allow access and to purify the system in the way and make it more market friendly and consumer friendly. That’s definitely not the system we have today.

Jason:
Well, it definitely isn’t, so tell us what your thoughts are about that. I’ve said many times on my show, I love to be wrong about Bitcoin and I hope I am, I just don’t think it’s going to have a great future, because the powers, the federal reserve, and the government, and central banks around the planet are not going to sit idly by as this new competitor that is really taking their power away raises up. I mean, I hope I’m wrong, I hope decentralized currency happens. I would love nothing more than to be wrong about this, but we’re talking about the most powerful forces in the world that they are competing with.. I mean, they’re just not going to let it happen, right?

Jeffrey:
You’re certainly right. They’re trying their best to regulate it, but what’s important about block chain, economics, and cryptocurrency is that you can regulate it as far as you have kind of a constant switching between national currency and cryptocurrency. That’s the mechanism that they’re using to regulate Bitcoin right now, because they can say, who can be able to exchange business, you can’t be able to exchange business and when you’re moving to dollars to Bitcoin and back again or whatever coin it is like when Litecoin, Darkcoin, Dogecoin, anything, Peercoin, Namecoin. It’s the back and forth that becomes subject to sort of their sort of cohesive control, but once you’re in the crypto ecosphere and stay there and are willing to accept your income in that and stay within that realm, there’s very little way that any government in the world can touch, because cryptocurrency lives on a distributed network, which is to say it’s a ledger that lives in the internet cloud and it doesn’t pay any attention to geography at all.

You can move your money around anywhere essentially instantly, so there’s no way they can regulate it anywhere near the extent they regulate national currency and let’s not forget too how incredibly unsuccessful governments have been even at regulating national currencies. I mean, the biggest black markets in the world operate entirely based on dollars, which are attached to the physical world. You’d think if it were possible to stop black markets that attacking dollars, physical dollars, would be the way to do it, they’ve never been able to manage to do that, so how much more difficult is it going to be in the crypto world?

Jason:
I mean, they’ve been unsuccessful, I mean, you can certainly argue that they’ve been unsuccessful regulating their own currencies in the sense that they debase them, but what do you mean about the black market? You mean with drug dealers and human trafficking? I mean, they can’t know where the dollars are?

Jeffrey:
Well, yeah, of course the drug markets are a gigantic..

Jason:
Isn’t the whole point is the currency gives people freedom. It is untraceable, that’s what I like about it. They say that Sweden may become the first cashless country. There’s almost no cash transaction there. Almost everything is on a credit card and while that is convenient and I use credit cards constantly, I love the convenience of them, but boy, I like having that back up of cash, because it’s private!

Jeffrey:
I agree with that. Well, if you like the way dollars are private, cryptocurrency is infinitely more private than that as long as your public address is not attached to you, you can move around in any kind of crypto..

Jason:
I heard that they trace Silk Road guys through the block chain. I mean, can’t they just go back through that block chain and trace them?

Jeffrey:
They got the Silk Road guys because Ross Ulbricht posted his email address on a public form.

Jason:
It always comes down to some dumb thing like that.

Jeffrey:
What’s funny about that Silk Road case is now there are at least a dozen other Amazon style drug market places that have popped up since. They arrested Ross and shut down Silk Road one and they’re a vastly larger business. The crackdown that they did didn’t do anything but advertised the technological possibilities to the world. The market has matured so much in the last two years. It’s actually breath taking.

Jason:
So, what do you say to the price of it? I mean, why is the price of Bitcoin so low now?

Jeffrey:
I have a hard time with the term so low, because when I first began to look at Bitcoin, it was, I guess I began to notice it about the time it was $1 and many early miners of the Bitcoin space immediately sold all their Bitcoins, because they thought there’s no that it could ever achieve dollar parody, surely it must be a gigantic bubble now, you know? This is only three and a half years ago, something like that, maybe as much as four years ago. We’re talking about a very short period of time and for it to be sitting now at $250 is something that’s just awesome and amazing.

Jason:
But why did it go down from, what, what was the high, $1,200?

Jeffrey:
Yeah, $1,200 was last year. Why did it fall? I think there are really three reasons and the exact weighting of these reasons are hard to tell. One is that the miners had bought so much equipment on such high leverage, because of zero interest rate policies, they all began to sort of expand their facilities way beyond what was sustainable. So, when they would mine their cryptocurrencies they’d immediately convert them into dollars just to serve their debts. That put a lot of downward pressure on Bitcoin in particular.

Jason:
That’s interesting, because the same thing happens with, I don’t want to say real currencies, but I’ll say real fiat currencies, how’s that?

Jeffrey:
Yeah, it’s a very interesting interaction between the real economy and the synthetic economy, I guess you could say. There’s still..In that sense, Bitcoin is subject to sort of business cycle booms and busts just because the miners have to buy equipment and they have to pay for large facilities and heat and cooling, all the rest of it. So, there’s that and the other thing is you’ve seen so much merchant adoption in the last year in Bitcoin, but it’s not taking the form of people accepting Bitcoin and keeping them or paying them out to employees, but the form that it’s taken in is that big processing firms like BitPay and Coinbase are receiving Bitcoin and then giving merchants the dollars.

So, that’s put a lot of selling pressure. We’re seeing essentially the adoption of Bitcoin outpace the algorithm at creation of Bitcoin, so that’s changing the pricing structure. That put a lot of downward pressure. I’d say the third big force is that a lot of people are really afraid right now. When you’ve got governments running around saying down with Bitcoin, we’re regulate Bitcoin, We’re going to arrest you if you use it, you might be subjected to money laundering. Everybody gets kind of scared. So, this is contributing to the selling pressure. People are happy to accept it, because, of course, it’s a fraction as expensive and so much faster. You’re exchanging real property instead of just promises to pay. That’s all very exciting, but as soon as they get it, they’re ready to move back into a national currencies and that’s putting a lot of selling pressure on the price.

Jason:
So, what’s next for this? You know, whether it be the sharing economy, whether it be Uber, which by the way I want to mention something about Uber just for a quick moment. I love the idea of Uber, but I tell you, Uber is acting too much like Wall Street firm for my tastes. They’ve got all sorts of lobbyists that they’re trying to make so Lyft and other companies can’t compete with them. It’s like, here we go again.

Jeffrey:
Yeah, capitalists will be capitalists, right. This is what they do. It’s extremely annoying. I look at these things as being rolled out in phases. Uber is a very impressive company at first, now it’s become very conventional, so now we’re waiting for a better replacement which will then also become corrupt and so on.

Jason:
Creative..Thanks for Joseph Schumpeter though, creative destruction is just, as long as the government and the system help it, it’ll keep happening and that’s good. It’s good for the consumer. It’s good for everybody.

Jeffrey:
This is also why I come up with it like that. We can’t expect perfection to arrive at one iteration. It’s going to be an ongoing process. What my book traces is a kind of trajectory and how technologies is helping us get gradually towards a world of self-determination and individualism and peer to peer economic structures that operate outside of the nation state and I don’t think we’re going to get there this year, next year, and the next ten years, but I’m looking at a trend line and I think that’s extremely significant, but all of it is counter to the sort of 21st century model of top-down planning and command of control and that’s what I think we’re seeing gradually erode and by gradually I mean, pretty quick by historical standard, but still bit by bit.

Jason:
Right, right, very good. Jeffrey give out any websites you want people to have.

Jeffrey:
Sure, so I’m a distinguished fellow at the foundation for economic education at Fee.org. You can go and read my article on child care there right now. My book, Bit by Bit, is available at Amazon. I’m posting also every day at a website at a company I started, Liberty.me and my own particular sort of real estate there is Tucker.Liberty.me and there you’ll find a vast archive of writings. So, thank you for having me on your show and I’m happy to catch up with you again sometime.

Jason:
Excellent. Well, thank you so much for joining us Jeffrey.

Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

What’s Ahead for Fannie Mae and Freddie Mac?

AMA3-7-15Fannie and Freddie are still headed for the chopping block.

The demise of those venerable home loan agencies Fannie Mae and Freddie Mac might not seem to matter to anyone who’s not looking to buy a house. But some market watchers worry that the dismantling of the nation’s biggest mortgage backers could push the entire US economy into recession.

For decades, Fannie Mae (real name: Federal National Mortgage Association) and her younger brother Freddie Mac (the Federal Home Loan Mortgage Corporation) have been the mainstay of the US mortgage industry. Together they account for over half the home mortgages in the country, and over 90 percent of new loans.

Fannie Mae originated back in 1938, a product of the post- Depression New Deal that promised better lives and financial security for Americans. Offering home loans with terms up to 30 years, Fannie Mae made it possible for more Americans to buy homes by leveraging future earnings.

Freddie Mac entered the picture much later, in 1970. Its creation allowed the government to expand its reach into the mortgage business and capture a larger share of the secondary loan market.

Fannie and Freddie in themselves don’t create loans. They buy loans, repackage them and offer them on new terms, often through secondary servicers such as banks and other kinds of financial institutions. Because loans originated by these two agencies are long term and government backed, they offer the best option for many first time homebuyers to get a mortgage.

But Fannie and Freddie’s dominance of the US home mortgage market also contributed to their potential demise. Loans backed by these two agencies played a major role in creating conditions for the housing collapse of 2007-2008, when millions of unprepared homeowners fell into default and foreclosure.

Facing collapse thanks to so many failed mortgages, Fannie Mae and Freddie Mac ended up with a government bailout of $187 billion. Both agencies were placed into conservatorship, with outside oversight of their lending activity.

As the dust settled, the government took a harder look at the lending practices – and practitioners – that contributed to the crisis. Along with creating new legislation to protect consumers and pursuing criminal and civil cases against Bank of America and other leading lenders, lawmakers began calling for the demise of Fannie Mae and Freddie Mac.

Since 2012, several bills, originated largely by House Republicans, have proposed various plans to dismantle the two megalenders, or at least reorganize them into a single, largely privatized agency. Though none of those has passed, the current administration is still on board with the idea as a way to forestall another housing crisis.

That means that Fannie and Freddie will one day be things of the past – and as they exit the scene, so might their long term fixed rate loans, which made home buying accessible to cash-strapped buyers and investors. And that’s what has financial experts and economists concerned.

With Fannie and Freddie gone or restructured with more privatization, home loan options could change too, with a greater emphasis on shorter term adjusted rate mortgages. And that, along with the new tighter standards, could shut even more buyers out of the process – unless they have cash in hand. Fewer home sales translate into lower home prices, which could ultimately lead to another round of crisis for the housing market.

And that, some fear, could contribute to a slowdown in the economy overall, as housing sales flatten and so do housing related industries. If that happens, it could have a ripple effect on employment and retail sales that would affect everyone.

It’s not clear what the future holds for Fannie and Freddie. Though some lawmakers and economists call for the government to get out of the mortgage business completely, these two agencies still dominate the home loan landscape. And since there isn’t a clear plan or timetable for the changes, buyers can’t adjust their expectations accordingly.

For now, though, some real estate experts and financial advisers are encouraging consumers to buy while they can to secure the loan products they know – before Fannie and Freddie are gone for good. (Top image:Flickr/EGuideTravel)

Read more from The American Monetary Association:

AMA112-The Gold/Oil Ratio with Mark Lingerheld

Students Strike Against Loan Debt

The American Monetary Association Team

Final_AMA_Logo-150x150

AMA 112 – The Gold/Oil ratio with Mike Lingenheld

Mike Lingenheld appears on the AMA show today to talk about what’s happening in the oil industry. He talks to Jason Hartman about different gold ratios and that there are gold/oil correlations to economic crises. Mike and Jason also do a deep dive and talk about the European economy as well as the dollar being the reserve currency.

 

Key Takeaways:
2:10 – What’s happening with oil right now?
5:00 – Saudi Arabia isn’t hurting economically due to their vast savings from the oil industry.
8:15 – Gold and silver does an accurate job in reflecting current inflation.
12:30 – Whenever the gold and crude ratio goes above 20, there seems to be an economic crisis.
15:30 – Mike thinks the US dollar will be the reserve currency for the next 15 years, at least.
18:40 – If Greece wanted to exist, it wouldn’t be the end of the world.
20:45 – If Spain were to exist, there would be problems. Mike explains why.

 

Tweetables:
“I don’t think the market will find a bottom in oil until the sense of inventories have peaked.”

“Every time the gold/crude ratio has broken 20 there has been some form of crisis and we’re are in that scenario now.”

“The Swiss are essentially just breaking down all their secrecy laws and anybody who wants access can get access.”

 

Mentioned In This Episode:

http://www.forbes.com/sites/michaellingenheld/2015/01/21/texas-saudi-arabia-and-the-collapse-of-oil/

http://cupandhandlemacro.com/

 

Transcript

Jason Hartman:
It’s my pleasure to welcome Mike Lingenheld. He is managing editor of Cup & Handle Macro research. He recently had an interesting article in Forbes entitled, “Texas, Saudi Arabia, and the Collapse of Oil” and it is nothing short, at least in my opinion, astonishing what has happened with oil prices. Mike, welcome, how ar eyo?

Mike Lingenheld:
Good, Jason. I’m doing well. Thank you for having me today.

Jason:
Yeah, good. Well, I hope you can give us some insight into this craziness that is happened with oil. I mean, I think it surprised everybody. I mean, I predicted it would decline, but not this much.

Mike:
No, it’s really startling and it shocked a lot of investors and there’s at least 3 trillion dollars in investment hanging in the balance. It’s a very important move for the market.

Jason:
Yeah, a trillion dollar market, wow, that’s very significant. Well, first of all, tell our listeners where you’re located.

Mike:
I’m located in Connecticut outside of New York city.

Jason:
Good stuff. What is going on? I mean, your article, just maybe speak to the title of the article, Texas, Saudi Arabia, and the collapse of oil. Why that title?

Mike:
The broader market has been very focused on oil as commodity for some time, probably since the summer of 2014 and it’s really a matter of, as an investor, the short oil trade, I don’t necessarily think it’s over, but 60% move is obviously substantial. I think the next derivative of that move will be the impact on the producers and not only the companies that do produce oil, but also the regions and Texas and Saudi Arabia certainly, probably the two most prominent oil producing regions in the world, at least in my estimations. A huge percentage of their economy comes from oil.

Jason:
So, there’s a lot of theories floating around and on the face of it, I think the sort of simple view would be, “Gosh, this decline in oil, it really sucks for the Middle East. I mean, Saudi Arabia is really going to be hurting from this.” But then I’ve heard other theories that say, “Saudi Arabia loves this, because what they want to do is they wanna get the US to sort of just curtail it’s oil production and then they’ll have that market back.” What do you make of those really opposing ideas?

Mike:
Saudi Arabia is certainly very interesting and obviously has gotten more interesting now that King Abdullah has past away.

Jason:
Yeah, I was always wondering what that would mean, if anything, to this.

Mike:
There’s a lot of uncertainty in the region now. I know President Obama just stopped there on his way back from India.

Jason:
By the way a good criticism for Obama. He didn’t have any time to go to France oddly, but anyway..

Mike:
So, really I think a lot of the blame has placed on Saudi Arabia certainly by OPEC members, by oil producers in the US, and with the assumption they’re just floating the market with supply and I actually think it’s a lot more complicated than that for why oil has declined and I think the general perspective is that they’re trying to shake out Shell producers in the US and certainly that’s part of it, they want to maintain market share, but alternatively; I don’t mean to get conspiratorial about this, but it behooves them to punish Russia so to speak. I mean, the Sunni-Shia struggle across the Middle East, especially in Syria, Vladimir Putin is really the only thing standing between the west, between..I can’t think of the force..oh, the UN security council, excuse me, yeah, the UN security council. The only thing standing between an intervention in Syria from the UN security council is Russian. They’re one of the..

Jason:
It would seem, you know, like I had a guest on recently who talked about really this is all about the futures market and that’s how you manipulate oil prices and the US is doing this on purpose to hurt Russia, to hurt China, and you would to think to hurt Saudi Arabia. It just seems like it would totally hurt the Middle East, that would be my initial view of it.

Mike:
Saudi Arabia has been such a huge producer for so long that they have ample savings stocked away and they’re obviously a low-cost producers, so they can withstand this pressure a lot better than say, like Venezuela, for example.

Jason:
Venezuela is really in trouble. I mean, they were in trouble before this, but now they’re really, really in trouble.

Mike:
So, it behooves Saudi Arabia to maintain market share even if it comes at some short term costs, really.

Jason:
So, what’s going to happen? I mean, you think oil is still going to decline, right?

Mike:
My general outlook would be that oil still has room to fall. I think moves like that typically end in a very violent fashion when there’s major capitulation and I think really the market will find a bottom once there’s a sense that inventories have peaked. Inventories in the US are obviously elevated and the other major sources and demand in the world also, you know, China is the other big player..actually to bring in an interesting fact, I believe for the first time since the 1940s the US is not the largest importer of oil in the world now, it’s China. No body really knows what’s happening with Chinese stock piles, so the demand half the equation is really unclear, but I don’t think the market will find a bottom in oil until the sense of inventories have peaked and I don’t really see that just yet.

Jason:
Tell us about the gold to oil ratio. I mean, what does that tell us? All these ratios are very interesting. You look at the gold to silver ratio, the gold to oil ratio, you know, I guess you could have gold to coffee ratio and the soybeans to oil ratios. I’m not sure all of that have any meaning, but I think some of them do.

Mike:
Yeah, absolutely, before getting into gold/oil, you mentioned gold and silver. There’s a correlation that I have found between gold and silver and break even inflation in the US, pretty much the real time barometer of what the market is pricing info forward inflation. 10 years out the correlation between that and gold denominated silver is really remarkable and I think that..

Jason:
Okay, let’s hear about that. So, what is the ratio again, what is this one?

Mike:
Gold and silver.

Jason:
Gold/silver ratio and what does it mean for inflation/deflation/disinflation/stagnation, what does it mean? What does it tell us?

Mike:
Silver has much more youth in industrial production whereas gold has really no industrial use, so gold therefore is much more monetary asset and when the price is moved relative to each other, that really mirrors the market pricing and inflation. It’s a good real time barometer. I mean, what’s the best metric for inflation we have? It’s really CPI and that is backward looking and can be revised for some of them, so we really don’t have an accurate real time gauge and I’ve found that gold/silver does that job remarkably well.

Jason:
What is that ratio now? What was it before? Give us some reference points.

Mike
Yeah, gold/silver right now is around 71.

Jason:
So, 71 ounces of silver to one ounce of gold?

Mike:
Correct.

Jason:
Okay.

Mike:
And in just say June of 2014, before the movement in oil really got started, it was around 62 ounces.

Jason:
62. Alright. So, does that tell you where silver and gold are going?

Mike:
Not necessarily. They’re related metals, so it’s a relative value play. I will say that oil is also a good way to gauge inflation just because of its impact every, you know, it’s included in the cost of production in every commodity, every business uses oil, so it has major deflation/inflationary tendencies and the last two 50% declines in oil in 1986 and 2008, the following year gold rallied at least 25%, so I think that’s probably pretty telling and reasonable bullish gold here.

Jason:
You’re bullish on goal, but interestingly, you don’t think that inflation is coming real soon. It sounds like you think it’s ultimately coming, but there may be a couple of years of, you know, where we don’t see inflation in any significant way, right?

Mike:
Correct. The US dollar is a really deflationary headwind impact and it’s the world’s reserve currency, so it impacts the global economy. Producer prices in China are negative. China has been exporting deflation for a long time and that’s continuing. There’s just a lot of forces, especially the decline in oil is very deflationary and finally wages haven’t gone anywhere, there are actually decline, the growth is decline I should say, to extremely low levels and wages are a huge percentage of CPI, so my short-term outlook is definitely deflationary. At some point, you know, maybe when the commodity cycle bottoms things will pick up again, but in the mean time, deflation is king.

Jason:
That’s so interesting, because it seems like inflation is such a good business plan for governments. It really gets them out of everything. It’s almost hard to see how we can have much in the way of deflationary pressure when the amount of money creation over the last eight years has been nothing short of phenomenal. Speak to that if you would.

Mike:
The presses by which money creations inflation is really, there’s a demand component as well and I just don’t think demand or credit has really come anywhere close to where we need it to be in order to see inflation.

Jason:
Do you think that’s because the banks are still, I mean, in my view, post-financial crisis, I think the banks over corrected. I think they were too liberal on their lending before, way too liberal, but I think they really over corrected. Would you agree with that assessment and is that still part of the credit impact now?

Mike:
Yeah, I say banks were very reluctant for a long time and I think that’s..I think they’re more willing to lend now, especially when you see things like sub-prime auto loans, which they’re either offering seven year loans for cars now at just obscene rates, which I think is a function of QE among other things, but..

Jason:
Soon we’re going to have 40 year car loans.

Mike:
Yeah.

Jason:
Just kidding.

Mike:
It’s crazy.

Jason:
So, in other words, what kind of rates are you talking about? What are people paying for these seven year car loans?

Mike:
I don’t have any numbers off the top of my head, but the fact that their duration for a car loan is that high.

Jason:
You could justify it on a high-end car, you know, a brand new high-end Mercedes or Bimmer, you know, like a seven series or a S-class. I mean, they’ve had that type of stuff.

Mike:
Absolutely, but I think that the numbers show that the growth in auto loans was really coming from used cars and it’s just really the bottom of the barrel in terms of quality and I think that’s ominous and I’m actually in the process of writing something on that, so stayed tuned.

Jason:
Interesting point. I think you’re right about that, by the way. Okay, go ahead with your thought though.

Mike:
I really wanted to bring it back to gold in terms of crude oil, which is what we touched on a little while ago before I went on a gold/silver tangent, but every time since 1990 that the gold/crude ratio has broken above 20 there has been some form of crisis and we’re are certainly in that scenario right now. Currently one ounce of gold will buy you 24 barrels of oil. The chart has really exploded. In September of last year it bought you 13 barrels. I think the only crisis, so to speak, it did not predict was the NASDAQ bubble in 2011, but the Euro sovereign debt crisis, it was above 20. The great recession obviously in 2008 was above 20. Asian currency crisis in 1998 and the Latin America savings and loan crisis in 1994. It just seems to be a really good barometer of crises.

Jason:
See, when you say crisis, you really got to tell us what type of crisis, because crisis come in so many flavors, right? For us to act, we gotta know what flavor is coming.

Mike:
I hear you 100% and that’s I spend my time thinking about honestly. The only one that really had a material impact on the US was the great recession was 2008, actually. Even in 2011 during the Euro crisis the SMP finished high around the year, just did not impact US stocks, but I really think this ratio speaks to the market pricing and safety versus growth. Obviously gold is not a consumable commodity, its purposes are really financial more than anything where as oil is consumable and used in all forms of economy activity and when the ratio gets really screwed like that, I just think it has kind of ominous..it’s not a great sign for the prominent market.

Jason:
What do you say to people who, you know, there’s this whole school of thought and I think these people are just largely kind of wrong, that the US is going to lose its reserve currency status, the dollar is just being debased and I mean, the complete opposite has happened. What do you say to people like that and I want to ask you, because you talk so much about gold, I just gotta ask you, Mike, about Bitcoin and whatever your thoughts are on it.

Mike:
Absolutely. The US dollar is not going to lose its reserve currency status in the next 15 years. I think it’s typical to make predictions beyond that not that I think it will happen, but yeah, there’s really no challenge. I mean, obviously the Euro is the second most liquid currency and I don’t see any reason to own Euro at the moment. Renminbi is obviously the existential threat, so to speak. I think China has plenty of problems of their own including excess debt and I believe I saw this morning in terms of Swift volumes of currency transactions around the world, Renminbi is now the number five just surpass Canadian dollars and that’s great that it’s out there. It incorporates the Chinese economy into the global economy a little bit more, but China, like I said, China has plenty of problems and the Renminbi is just not going to cut it.

Jason:
I agree. I agree. Plenty of problems in so many ways. I mean, possible government instability, civil unrest, population problems, Japan has major demographic problems too.

Mike:
Especially if you think about it, sorry to interrupt, the primary reasons the US dollar is the world reserve currency is that the US has rule of law, its legal system is second to none, and it also has the most powerful military. It has 14 aircraft carriers that can, you know, put substantial US forces on the ground at any part of the world very quickly and I don’t..you know, China has one aircraft carrier, I guess now, and the bureau of law is certainly suspect. Again, I just don’t see any threat.

Jason:
Finally a guy who agrees with me. Thank you. I used to, you might not agree with me on the gold part, because I’m not a gold bug. I own some, but I just don’t think it’s a big deal. I think the dollar is really the thing, maybe not because it’s so great, it’s just that everything else is so much worse, you know, from the negative side rather than the positive side possibly, but people say, “Well, the dollar is not backed by gold.” Well, yeah, but it’s backed by aircraft carriers, fighter jets, the largest economy in the world, the largest brand name in the world in terms of a country, great rule of law, certainly we have our complaints about it, but compared to what?

Mike:
Exactly, compared to what? I would say the two alternatives, so to speak, the safe heaven currencies if you’re not including gold and what I’d like to point out, US dollar was the best performing currency last year, but gold is actually number two, but anyway, the two alternatives have traditionally been Switzerland is obviously one with the banking secrecy laws.

Jason:
Well, I don’t know if you have that any more though.

Mike:
Well, that’s the point I’m getting to. The other would be Singapore, which is kind of a new comer to the game, they also have very strict banking laws and makes it attractive to investors for that reason. Just this morning we had the Singapore monetary authority come out and say that they’re going to increase stimulus and that chart really looks dreadful. It looks like the Singapore dollar is going to decline substantially and as everyone knows by now, how could you really trust the Swiss national bank, which reneged on its promise to defend the Euro Swiss currency. While it did appreciate the Frank I understand, at the same time, they’re essentially just breaking down all their secrecy laws and anybody who wants access can get access. I don’t know that it’s going through yet, but it will shortly.

Jason:
So, what do you make of the Euro and of Europe in general?

Mike:
You know, it’s a great question. Euro has fallen along the way. I actually think in the short-term it may raise, but I think the next leg of this crisis, I think the market is fairly well prepared for Greece. I mean, if the Greece wanted to exist, I think it will obviously create some volatility, but it wouldn’t be the end of the world. The really troubling aspect..

Jason:
Well, especially with the election they just had. You know, they’re moving, I mean, of all things that seem so stupid, but it’s really hard to talk people out of entitlement. They just don’t want to give them up. You know, Greece moves more to the left and then I believe their new leader came out and said something to the effect of, it’s just not that important to pay back their debts.

Mike:
The real problem is that there’s a political part in Spain called Podemos who were celebrating the election victory in Greece, because they hold very similar principles and while the market could currently withstand a Greece exit, but Spain there would be no way and I really do think that the raise of political extremism across Europe and obviously the Charlie Hebdo tragedy is just going to boost that. I mean, extremism is certainly in a bull market era and I don’t see that stopping any time soon.

Jason:
Yeah and that is really scary. I think that is quite possibly the biggest threat the world faces. I don’t know if I’m being way over bold about that, but that concerns me greatly.

Mike:
It concerns me greatly as well and there is a political party in Germany that started very similar circumstances in the 1930s, late 1920s I guess.

Jason:
You’re talking about Hitler, of course. Yeah, right. It really is very scary. So, what would happen to the Euro and Europe in general if there was a Spanish exist? I mean, I was in Spain, last time I was there was about a year and a half ago and I was just so unimpressed, I gotta tell you. I think that country is just, sorry Spanish listeners, I think that country that the whole ethic is kind of lazy. I mean, France is that way too. Listen, it’s a European thing, except for the Germans, but then again, they even have six weeks of vacation and I was born in Germany, okay, but this socialist bent and this entitlement attitude is just very destructive.

Mike:
I think the problem with a Spanish exist would be just the intermingling of the banks and if it hit Spain very hard, obviously it’ll spread to France and ultimately the economy that you really can’t touch Germany, it’s just very intermingle there, and the ECB is essentially already maxed out on how much support it could provide and if there’s a deterioration, what could they do? They could do a lot of things I guess, but I don’t know that any of them would be productive.

Jason:
Yeah, wow. The Euro is just, it seemed like a cool idea way back when, but I just think that’s a really tough thing to do, you know, to put all those countries together like that.

Mike:
It’s very tough to do and they can’t, I mean, you can’t do it half way. It’s either going to be, you know, the banking systems are going to be integrated, socially they’re going to be integrated, all this stuff and really they just kind of used the common currency and it’s very nationalistic other than that, which I know is George Soros sticking point.

Jason:
Yeah, good stuff. Okay, good, well, give out your website if you would and tell people where they can find out more.

Mike:
Right, I am managing editor, like you said, of Cup & Handle Macro. My website is http://cupandhandlemacro.com/.

Jason:
The name by the way, Cup & Handle is from the chart, right?

Mike:
Yeah, cup and handle is a very classic and powerful technical signal. If you’re looking for it actually just to give your listeners a free sample here if you want to see a very classy example, go to a weekly chart of the dollar in Indonesia Rupiah right now. There’s one of the best cup and handle formations I’ve seen in a long time there and it portends very negatively for Indonesia and I think that currency can weaken a lot, but yeah, Cup & Handle does come from the technical signal and I produce a weekly newsletter, which is free. You can sign up on http://cupandhandlemacro.com/, comes out via Marketfy and also publishing on Forbes now, which is where you came across my article. I’ve got three or four articles up there now and I expect one soon on sub prime auto loans.

Jason:
Good stuff. Well, Mike, thanks for joining us.

Mike:
Thank you for having me, Jason, I appreciate it.

Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

Students Strike Against Loan Debt

AMA3-1-15The much-discussed US student loan debt load has hit $1.2 trillion, and in spite of government-sponsored debt forgiveness and other measures, it isn’t likely to shrink. Now, a group of students is taking matters into their own hands by simply refusing to pay off loans they claim is predatory and excessive.

The Corinthian 15, as the group of rebels is being called, are students who were enrolled in the troubled for – profit Corinthian College system, which includes several campuses. Claiming they were manipulated into taking out loans and subjected to high-pressure tactics by Corinthian, they took the radical step in late February 2015 of telling the Department of Education that they simply were not going to repay their loans – ever.

That’s a different move than defaulting, which is what happens to the majority of student loans as students struggle with making payments for a while and then simply stop. The Corinthian 15 have taken a very public stand that highlights both flaws in the student loan system and in the Band-Aid efforts to help indebted students.

Student loan debt hit student of all kinds, ages and educational paths. Rising tuition in traditional four year and community colleges have forced more and more students into debt to complete their education. Though millennials fresh out of college are the most obvious face of the student loan crisis, older career changers are also being hit hard, and so are seniors who have unpaid debt from college days long ago.

The problem is even worse for students in the rapidly expanding for-profit educational systems, which typically feature workplace oriented training in fields like technology and health care. These institutions typically target the “non-traditional” student: low income, minorities, single mothers returning to school, or veterans starting anew career after leaving the military.

For-profit schools, like their state sponsored and nonprofit counterparts, offer students financial aid in the form of federal student loans, backed up by private loans when those don’t cover all costs. Schools pressure students to take out large loan packages, and, say students, pressure them to stay enrolled so they have to keep on taking out more loans.

The dropout rate for students in for-profit colleges is high – typically much higher than in traditional schools. Students in these programs often aren’t familiar with the world of college, or have work and family commitments that make it hard to attend. But even if they leave school without completing the program, they still owe on the loans – and the school keeps the money.

That’s what the Corinthian 15 are talking about in their refusal to pay back loans that they say were predatory and unfair in the first place. The Corinthian College system is now collapsing, and if it closed, their debt would be wiped clean. But the US government is stepping in to restructure Corinthian in a new direction – and as long as it’s viable, their debts to it will still be outstanding.

The problem with Corinthian Colleges is an extreme example of the issues facing indebted students, whose struggle with debt can compromise their earning power, credit and lifestyle choices for years to come. Students deep in debt can’t buy houses, take out loans for major purchases, or in some cases even pay rent. Compromised credit from loan defaults can hurt job searches. New graduates may postpone marriage and children as they struggle to get out of debt.

Current debt relief efforts don’t help much. Government backed loan forgiveness programs are available but not for all. Current forgiveness and loan restructuring plans are offered mainly to holders of federal loans, not private ones – and then only after payments have been made for a period of years. Outright forgiveness is offered, but only to those who choose certain public service careers. For those whose loans are mostly private, few options are available – and the debt can devolve to family members who have cosigned.

Private debt assistance efforts such as the Debt Coalition, which buys the loans of needy students who can’t pay them off, are springing up around the country, but their efforts aren’t making much of a dent in that $1.2 trillion.

The Corinthian 15’s stand comes at a time when educators, financial experts and economists are calling for a better way based on a model of public, tuition free education for all. Better use of educational subsidies and funding, they say, would make college more affordable and accessible and reduce the impact educational debt has on the housing market, employment and the economy as a whole.

But student debt is big business, and it’s entrenched in the current educational system. Change, if it comes, will likely be slow – unless more students take inspiration from the Corinthian 15 and stage a revolt of their own. (Top image: Flickr/lgargerich)

Sources:
Johnson, John. “Students In Debt, It’s Time to Strike.” Newser.  28 Feb 2015

Pyke, Alan. “The Insane Story of How a For-Profit College Hoodwinked Students and Got Away With it.” ThinkProgress. 28 Feb 2015

Taylor, Astra. “A Strike Against Student Debt.” The New York Times. 27 Feb 2015

Read more from The American Monetary Association:

Do New Laws Erode Financial Privacy?

Deflation and Oil Prices: Should Investors Worry?

The American Monetary Association Team

Final_AMA_Logo-150x1502

Do New Laws Erode Financial Privacy?

AMA2-28-15Where financial privacy is concerned, you can run, but you can’t hide.

There was a time when offshore banking was the smart choice for investors, corporations and just about anybody who wanted to keep assets safe from the prying eyes of authorities. Swiss bank accounts and deposits in places like the Cayman Islands acted as tax havens and preserved the privacy of account holders both legal and not so legal, no questions asked.

But that kind of tax free privacy may be coming to an end, thanks to some wide ranging new laws enacted in the US and abroad. Though the new legislation claims to target tax evasion and return lost revenues to their rightful owner, the government, it’s also raising concerns about the possibility of absolute loss of financial privacy.

At issue are those foreign bank accounts held by US citizens and corporations. They’re widely used to shelter money, stocks and other assets from US taxation – and to launder money from a variety of illicit operations. Whatever the purpose, they’ve historically existed beyond the reach of the IRS.

But that immunity has come to an end, thanks to a new US tax law called the Foreign Account Tax Compliance Act, or FATCA. This law, enacted in 2010, requires US citizens to report all holdings in foreign banks to the IRS.

And if accountholders don’t comply? FATCA also requires foreign banks holding those accounts to report accounts held by US citizens to the IRS, with a variety of penalties for those that don’t report.

The US expects to reap millions in taxes off these assets through FATCA. And while financial experts and investors see the move as stripping away the last vestige of privacy in financial dealings, a long list of countries ratified the law between 2012 and 2014, with more planning to implement it in 2015. Those countries include Switzerland and the Cayman Islands, two nations most favored by foreign account holders.

The scope of FATCA could have far reaching implications. A growing number of Americans are choosing to renounce citizenship and live abroad to avoid harsh US tax laws, and that number could increase. Corporations using foreign accounts, both legitimately and as “shells” for tax evasion, could move their operations and accounts to places that haven’t signed off on FATCA.

Those places may be harder to find, though. While FATCA originated in the US and targets accounts held by American citizens and corporations, it inspired an international variant called the Global Account Tax Compliance Act, or GATCA.

GATCA originated in 2014 with the France-based Organization for Economic Cooperation and Development, a multinational cooperative for promoting economic development and coordinating the domestic and international policies of its member states. This act requires reciprocal sharing of tax and account information among all participating nations.

This means that accounts held by any foreign nationals in any participating country are to be reported to the account holder’s home government. By early 2015, representatives of 51 countries had signed off on GATCA, with more expected.

The passage of both these acts, and the number of countries endorsing them, has critics worried that financial privacy as we know it is effectively eliminated. Though governments have long used means both legal and illegal to get at the assets of various corporations and individuals, some worry that if FATCA doesn’t get you, GATCA will – and the number of places that don’t endorse either one is dwindling.

It’s worth remembering though, that both FATCA and GATCA target only bank held assets such os cash, stocks and other financial instruments. Physical assets, chief among them real estate, aren’t on the radar.

That means it’s possible to secure money by putting it into a solid asset like real estate, which is exempt from reporting – but only as long as it doesn’t generate an income. That income, in the form of rents, leases or other fees collected from use of the asset, does have to be reported – which puts the asset holder right back in the crosshairs of the new reporting laws.

FATCA is widely despised as a blow to financial privacy, and many worry that its global counterpart will deliver that final blow, making it impossible to keep assets and records of financial activity from government intrusion. That’s why for many, foreign real estate investing is becoming the only asset management you can bank on. (Top image: Flickr/cooperweb)

Read more from The American Monetary Association:

The Dollar Becomes a Crowded Trade

Will Deflation Derail World Economies?

The American Monetary Association Team

Final_AMA_Logo-150x150

The Dollar Becomes a Crowded Trade

AMA2-25-15The US dollar continues to trade strong in world markets. But as it continues its climb, some market watchers worry that it might be time to put on the brakes.

According to a recent article from Business Insider, the dollar has become what’s known as a “crowded trade” in the international money markets. What’s more, it may be the world’s most crowded trade, the darling of speculators and eager investors convinced of its long term strength in a world of volatile currency shifts that make the dollar’s stability more appealing than ever.

While the dollar’s surge is a testimony to that very stability and long-term value, it doesn’t always bode well for international commerce and domestic prosperity. And in a crowded trade, there’s always a time when the crowd disperses.

A crowded trade, in the world of international investing, is one that attracts a large number of investors and speculators, all holding to a set of convictions about the market itself an the continued rise of the asset in question.Trades become crowded when that asset gets suddenly hot – the price appreciates fast and quickly attracts a flock of speculators and long-term investors convinced of its money making potential.

That’s what seems to be happening with the dollar, whose surge in popularity comes at a time when other major currencies are facing problems at home and abroad. In the face of those currency woes, the dollar becomes a safe alternative. Argentina’s 2014 debt crisis boosted the dollar’s popularity on both the legitimate and black currency markets.

Facing international disapproval and economic troubles at home, Russia has seen a steep decline in the value of the ruble. Worries about its long-term stability, Russians of all income levels began converting their savings and investment into foreign currency – mainly the dollar – whenever possible. Russian banks experienced shortages in foreign currencies, and black market trading surged back.

In Europe, too, the Eurozone is suffering financial setbacks. A majority of the Zone’s member nations dare either headed toward or already in periods of deflation, with flattened prices and slowing economic growth. The euro is trading lower than its leading competitors, causing the European Central Bank to ponder a round of quantitative easing that would put more euros into circulation.

Those moves, along with Switzerland’s decision to let its franc float against the euro and other currencies in world trading, have triggered talk in investing circles of an impending “currency war” of increased volatility in world markets and aggressive maneuvering by central banks.

It’s in that uncertain environment that the dollar sits at the top of the currency trading heap – maybe little too high, in the opinion of some economists and financial experts, who worry that the current “dollar rush” could collapse all too quickly.

That’s why they’re calling for some restraint on the dollar’s strong showing. A strong dollar sounds like a good thing, but may actually not be. The downside of a crowded trade is what happens when the asset takes a tumble – a scenario that’s been likened to a crowded theater with only one exit. What happens when everyone decides to leave at once? In the monetary world, the equivalent is a quick unloading of the underperforming asset.

Against a very strong dollar, other currencies trade weaker. That can affect international commerce and financial transactions of all kinds, including pricing of goods sold internationally and the management of dollar denominated debt held by countries around the world.

Easing off on the dollar’s surge would give world markets a chance to find balance and forestall a rush to abandon the dollar when its trading slows. But the fate of the dollar and its future as a crowded trade depends largely on the decisions of the Federal Reserve, which has observed that a strong dollar could harm US interests abroad and slow the economic recovery at home.

The Fed is in the process of tapering off its own most recent round of quantitative easing, an intervention aimed at keeping interest rates low in order to stimulate the economy’s recovery, and under new leadership is taking a cautious approach to major shifts in monetary policy.

As Business Insider points out, the landscape of international finance is constantly changing. World events and domestic upheaval make long-term predictions a risky business. But for now, as the dollar flexes its muscles on the world stage investors with an eye to future returns are happy to join the crowd.  (Top image: Flickr/SqueakyMarmot)

Read more from The American Monetary Association:

AMA111: Six Steps To Wealth With Linda P. Jones

Will Deflation Derail World Economies?

The American Monetary Association Team

Final_AMA_Logo-150x1502

AMA 111 – Six Steps to Wealth with Linda P. Jones

 

Jason welcomes Linda P. Jones to the show. Linda is a podcaster and financial expert who teaches others how to have a wealthy mindset and how to build wealth the right way. She became a multimillionaire by the age of 39 and talks to Jason about her stock market background, six steps to building wealth, and where the US dollar is going.

 

Key Takeaways:

2:30 – Linda realized early on that mutual funds weren’t going to make her rich.

4:30 – People who are overly cheap or frugal do not have a wealthy mindset.

9:30 – Linda shares her story on how she made money in stocks.

14:20 – Even if you have a full-time job, having a side hustle is a great way to begin creating wealth.

16:45 – About every 8.5 years the US sees a financial cycle.

20:50 – Linda is a big fan of gold and silver and she explains why they’re a great investment.

25:10 – The only reason the US has so much power is because they have a monopoly on money.

 

Tweetables:

Nobody ever got rich saving money. They got rich by creating money, by creating opportunities. That’s how wealth is created.

If people just save money and put it in the bank at 1%, it’s going to take 72 years for it to double.

The price of gold is going to have to re-adjust to its true price of what it should be trading at.

 

Mentioned In This Episode:

Money Love by Jerry Gillies

http://www.lindapjones.com/

 

Transcript

Jason Hartman:

It’s my pleasure to welcome Linda P. Jones to the show. She is America’s Wealth Mentor and she is the only financial expert who teaches the important of having a wealthy mindset before and during your wealth building. Linda teaches the savvy wealth-building knowledge that Wall Street didn’t teach her that made her a multimillionaire at the age of 39. She’s a contributing author to three number one bestselling books on Amazon, host of the Be Wealthy and Smart podcast and winning of the bronze Stevie award for Maverick of the Year for her revolutionary approach to  financial education. So, I’m looking forward to having her on today and discussing some of these ideas with her. Linda, welcome, how are you?

 

Linda P. Jones:

Thank you, Jason. It’s great to be here. I’m great.

 

Jason:

It’s good to have you. Where are you located? Give our listeners a sense of geography.

 

Linda:

I’m in the Palm Desert area. It’s called Rancho Mirage. It’s between Palm Springs and Palm Desert.

 

Jason:

Been there many time. Good, good stuff. So, you have six major areas that you focus on, is that correct?

 

Linda:

I do. I really learned that our six steps to wealth and from my childhood I always want to be wealthy, I grew up among people that were very wealthy, but we were middle class and I wanted to know how do people do that and sort of became my life’s mission to discover how that happens. I tried different things. I went into the investment industry. Listened to what they said to do and realized that if I buy mutual funds and wait my entire life, I’m never going to be reach.

 

Jason:

Yeah, mutual funds, I mean, they’re just a scam, aren’t there?

 

Linda:

Well, they are not always a scam, but they definitely are not going to get somebody to a super wealthy level. They might be able to give you some growth above and beyond what you can get certainly at a bank and other places, but they definitely are not the end-all, be-all  for wealth building.

 

Jason:

Tell us what you’ve learned and let’s dive into these 6 steps.

 

Linda:

Okay, well the first step I learned was that millionaires were always feeding their mind with positive things about how they could really think bigger, how they could put positivity in their mind, and realize that they could achieve a lot more than they thought was possible. So, step number one is to create a wealthy mindset. So, it’s really about being grateful for what you have, but also just deciding what’s going to be in your mind. Instead of letting the TV and negative media feed your mind, it’s about you putting in there what you want to be in there through different statements that you want to put in there that you create and write down and commit to memory. You know, allow that to really be your belief system.

 

Jason:

Yeah, I think that’s very true. I remember many years ago we hired a speaker of a great old book by the way, I wonder if the guy is still around, he’s name was Jerry Gillies and he wrote a book called Money Love. It’s definitely an old book, it was quite a while ago, and I remember a group of people from my real estate brokerage hired him to come in to speak to us and he had us do the wealthy mindset activity of imagine you’re at the wealth level that you desire and imagine we’re at a cocktail party and talk, act, be that person. The funny paradox about this is that certainly we all need to be prudent and wise with our money, right Linda, but being cheap and being overly frugal is definitely not a wealthy mindset, is it?

 

Linda:

It’s not and, you know, there’s a big trend right now toward frugality and what I call frugalism, which is living in a 200 sq ft home and not having a drink with your friends, but camping in the woods for your fun activity. I mean, that’s all well and good, but you know if you’re focusing on becoming frugal, there’s only so much you can cut out before you’re actually living in the woods, right? So, I’m not a big fan about being frugal. I am a fan of being careful and smart with your money and smart with how you spend it and invest it, but I think that this frugalism, this whole sort of trend is really getting out of hand.

 

Jason:

Frugalism is getting out of hand, I love it. So, yeah, because it makes you focus on the wrong thing, doesn’t it? I mean, I like to say to people, nobody ever got rich saving money.  They got rich by creating money, by creating businesses, by creating opportunities, by creating rental housing for people. That’s how wealth is created. It’s not created by saving money. I mean, certainly you need capital to do a lot of these things and you need to save to get to that point, but what’s the distinction there. Maybe help our listeners understand the fine line.

 

Linda:

That’s the prefect segue into the second step, because actually my second step is save an nest egg, but I agree with you, it’s saving an nest egg for the purpose of capital. It’s not saving for the purpose of saving. You know, if people just save money and put it in the bank at 1%, it’s going to take 72 years for it to double. So, just saving alone, you’re exactly right, it’s not going to work, but when you realize that you have to have some sort of side invested or what I call a side hustle where you have to have something on the side where it’s going to grow your money faster, that’s really what the saving is all about; is to get it in the investment.

 

Jason:

Yeah, to develop capital to do the investment, okay. So, is there is more to step two then?

 

Linda:

No, that’s pretty much it.

 

Jason:

Okay, how about number three?

 

Linda:

Step three is to find a mentor and that’s something that you’re great at and it’s something that I started became good at as well, just really directing people, what are the steps, what are the things you need to do, because, sadly, a lot of people that are writing books are actually journalists and have never created wealth and I think that there’s a huge distinction there, because I will read people and I’m sure you’ve done the same thing, Jason, where you read these financial books and you go, “Where is this person coming from?”

 

Jason:

Oh, they’re so basic and just dumb.

 

Linda:

And they are not going to get people to their goal, they’re not going to, like you said, they just tell you to save money, you’re not going to become wealthy.

 

Jason:
It’s amazing how we could even pick on without even naming names, I think our listeners know who they are, a lot of the gurus that you see on television, really, their place just doesn’t work. I mean, it’s amazing how they became so popular. I almost think that that might be a conspiracy, you know, to provide misinformation to the masses so that the powers that be can stay in power.

 

Linda:
Well, you know, it’s an interesting point and that would be a very fun topic to talk about on another show, but I think that, you know, I never heard about FICO scores until, and I was in the investment industry a long time, I never heard FICO scores discussed and all of the sudden it just became the focus on television, you know, and all these topics that, yes, it’s important if you want to buy a home and a good credit, but it’s not the end-all, be-all of wealth building. There was very little time actually spent talking about what you’re going to invest in that’s going to grow your money and create wealth for you and that’s what I love about what you do is, you know, talking about real estate and getting people to understand that’s an important vehicle for them.

 

I don’t have any one particular vehicle that I am a fan of. There’s many that I am a fan of, of course, I made my money in stocks originally, then when on to make some very nice money in real estate and, you know, there’s other things as well. I’m a big believer  in gold and silver even though right now we’re having a little bit of difficult. I think that’s more a currency war than it is an investment issue, but I really think that once you understand what’s going on with the currency people can invest like billionaires who are buying up a lot of gold and silver right now.

 

Jason:

When you talk about stocks, I mean, that just amazes me because literally in all my years, as I mentioned off tape before, I have never met anybody who wasn’t an insider who created any real and significant wealth on Wall Street, investing in stocks, bonds, and mutual funds. What did you do? Tell us what happened and how you did it?

 

Linda:

Well, I was looking at how to invest and, you know, it was really interesting because Wall Street would always say don’t buy individual stocks, they’re too risky, and I was actually in the mutual fund industry, so I was actually talking about diversified portfolios all the time and really believed in that, but I also saw that wasn’t going to get to the higher compounding levels that were going to build true wealth and I really understood that you needed to invest in a money engine, which is actually step four of the six steps to wealth.

 

So, I looked around at what are the different money engines that I could invest in and I tried some real estate, I tried some foreclosures, they actually went well, but my returns weren’t quite what I was hoping for. At that time, I noticed the stock market had been going up 30% for a couple of years, this was the early 90s, and I’m like wow, what’s up with that? Because there’s all this really hard work I was doing in real estate and I’m like, you mean this is a paper asset that I could invest in and if I knew what I was doing and picked the right companies this might even work? I started to, I read how to make money in stocks and I would buy Investor’s Business Daily and follow that religiously and..

 

Jason:

Were you a dividend stock investor or either one?

 

Linda:

No, at that time the tech stocks were doing very well.

 

Jason:

So, we’re talking what, the dotcom bubble? Is that the era?

 

Linda:

The dotcom bubble, tech stocks, and internet stocks and basically concentrated in that area, and yeah. There were several companies that did extremely well.

 

Jason:

Okay, so that’s interesting. So, you really pretty tolerant of investing in speculative stuff, you know, where you’re just buying simple for capital appreciation. You know, you say you like gold and probably silver too, I don’t know if you said silver, but those assets don’t produce any cash flow at all, they’re purely one dimensional. You’re just buying them, you know, buy low, sell high is the business plan. That’s it, there’s nothing else to it, wait for the dollar to collapse. It kind of surprises me that you’re tolerant of that. I don’t know, as I’ve aged I’ve become such a cash flow investor.

 

Linda:

Well, I think that’s a good thing and I think that’s also a result of interest rates being so low and I think that interest rates were not quite so low at the time I was investing so it wasn’t so critical to be getting those higher rates by looking at dividends and other things, but I think since interest rates have come down so low, it’s become a critical part of investing and a critical, you know, part of the compounding equation.

 

Jason:

So, you had some good timing on some tech stocks or dotcom stocks in the early, like, 2000 era, right?

 

Linda:

Yeah. (#12:07?) one million and then it doubled in the next year. So, made a million dollars in one year the next year, so…

 

Jason:

Did you do private placement or simply trading stocks online type stuff?

 

Linda:

Just trading stocks.

 

Jason:

So, no private placement memorandums, right? Any IPOs?

 

Linda:

Nope, no IPOs.

 

Jason:

That’s great to hear. You’re the first person that I know of who has done that, so that’s awesome. Okay, next step?

 

Linda:

Next step is to compound it at a high rate. So, couple of things here. One thing is that you need to get to some higher double digit returns in order to really build wealth for yourself and that’s what you do and what you teach and also incorporating the smart use of leverage. So, a lot of people are saying don’t have any debt, debt is bad. I really found that debt is a tool and leverage is a tool and leverage is something that gets you a higher rate of return.

 

So, as you know, but let me go through for the listeners just a simple example, if someone paid $100,000 for a home and that home went up 10%, it’s worth 110,000, they made 10% on their money. If, however, let’s say another person just put down 10% on a $100,000 home, that home went up 10%, now they’ve made a 100% on their money just by having that leverage they actually dramatically their rate of return and that’s the power that leverage has. That’s why real estate over the years has been such a great investment. One of the reasons..

 

Jason:

Oh, leverage just rules. I mean, the old Archimedes’s quote, he said, “Give me a lever long enough and I’ll move the entire world.” Leverage is a very, very powerful tool and real estate really is the most leverage friendly asset class, so that’s a great thing, yeah. Okay, good.

 

Linda:

Absolutely. So, I think compounding, you know, if people are smart with their leverage and if people are smart with their use of debt, you know, debt can be used to get into a business as well, which businesses compound at a high rate and 77% of the wealthy have actually made their millions through owning a business.

 

So, I’m really a proponent of having a business and even if you work in a corporate situation having a side hustler, because that’s how I started, you know, I was full time working, traveling at a very business job and family life and started all this stock investing on the side. That’s why I recommend that people start their business is just with a little side hustler or their real estate with a side hustler.

 

Jason:

Side hustler, most people would say moon lighting. I love how you say side hustler. It’s great. It’s awesome. Good, good stuff. Okay, great, what else? We’ve got two more steps maybe?

 

Linda:

One more.

 

Jason:

One more, okay.

 

Linda:

the 6th step is to protect your wealth. So, the great thing about leverage is that it can get you higher compounding rates, but as you know, the downside of that is if you’re in the wrong place at the wrong place, it can work against you. So, a lot of people, you know, in the 2008 crisis were leveraged to the hilt and were, you know, just playing the same game and not seeing that money actually moves in cycles and that cycles actually come and repeat and, so, many people were caught looking the other way were highly leveraged and when values dropped, you know, had some really significant financial issues. So, I want people to really be aware of protecting their wealth and realizing that you don’t wanna have that leverage, you don’t want to have your foot on the accelerator floored on the leverage the whole time. You want to back off of that as you have some success.

 

Jason:

Absolutely. Great points. Linda, tell people where they can find you and learn more?

 

Linda:

They can find me at LindaP.Jones.com or on my Be Wealthy and Smart podcast on iTunes.

 

Jason:

Fantastic. Where do you think the economy is going? There’s been a lot of talk about deflation recently. I have been on the side of inflation for many years just with all the money creation. I just got to think we’re going to have some inflation, but it’s kind of a mixed bag. Lately, you look at oil prices, it’s really pretty amazing how cheap oil has become.

 

Linda:

I agree. Well, I we’re definitely having a bout of deflation here and where we are in the cycle would say that we’re probably do at the end of this year for some interest rate hikes, which will get us another kind of situation like we had in 2008 again and I’m not trying to be a huge predictor, but I’m just saying that about every 8.5 years we do have cycles that tend to repeat and so, I think that we could see some inflation come back in later on this year. We could see things to pick up and heat him and the fed raise interest rates, which can be a real problem.

 

Jason:

So, we’ve got a bout of deflation, but ultimately you think it will become inflationary, then?

 

Linda:

I do. I think it’s going to balance itself up the other way where we’re going to have some interesting rate issues.

 

Jason:

It seems like most of the economists out there think we’re going to have low interest rates for awhile and you seem to disagree with that and the reason the rates would go up is because of inflationary pressure, most likely, but one of the problems seems to be that a lot of this money that’s been created, I should say currency, it’s not really money; money is something real like gold, but a lot of the currency that’s been created out of thin air over the past several years, it hasn’t really hit the streets and it’s just in the hands of the banks and this is why we’re not seeing much inflation. What are your thoughts about that?

 

Linda:

Yeah. I think it’s surprising that we haven’t seen that because there’s just be so much money printing. I mean, the quantitative easing has been astounding. I think we’re going to see another round of that and that’s probably going to lead into the higher interest where they eventually do see it start to show up in the economy and start to heat up the economy too much.

 

Jason:

So, any thoughts on timing for this?

 

Linda:

Toward the end of this year, around October of 2015 into 2016.

 

Jason:

So, we’ll have sort of a deflationary bout in until then and then we will start to see inflation raise at that point?

 

Linda:

I think we could see interest rates start to go up, yeah, in October.

 

Jason:

So, if you want to secure long term three-decade-long fixed-rate debt, do it sooner rather than later, it sounds like. What other thoughts or advice would you have, Linda or just where things are going, anything, I thought I’d just leave it open for you.

 

Linda:

Well, it sounds like you’ve been educating your listeners about gold and silver and what real money is, which is fabulous thing because not many financial experts are doing that and I really believe that we’re in a different game than we’ve ever been in before. With this quantitative easing, we’ve had the government printing money unlike ever before and when you have an oversupply of anything, it’ll eventually will cause the price to drop.

 

So, I do think that while right now the dollar is very strong, we’re also seeing all the bricks, countries find alternate funding, they’re funding ways to trade with each other without using the dollar. They’re getting their own Swift system. I mean, all of this interbank trading with these other countries is now going online, which we never had that before. They were forced to use the dollar before as the petrol dollar as the world’s reserve, but as we get farther down the road here, I think we’re going to see that these other countries are not using the dollar. Eventually that will catch up with the dollar and, as you said, real money is gold and silver and what a better time than right now to pick up as much as you can.

 

Jason:

I have to say though, Linda, I’m not much of a gold bug. I mean, I do own some. I think I’ve got all of the four major metals now. You know, I have invested in it over the years, but I think it’s too speculative. Again, I just go to that cash flow point and the fact that I don’t get any income from gold, I don’t get any tax benefits, you know, it’s just like this very simple buy low, sell high speculative strategy and I’m afraid of the way the central banks and governments around the world manipulate gold prices. It seems like they’re winning. They’re really the most powerful entities on earth. It shouldn’t be this way. Like philosophically, I agree with you, completely, but I’m just looking at the way the world is even though it’s not right that it is that way.

 

Linda:

There’s only so much supply and demand. Unlike the dollar, you can print paper money till the cows come home, there’s no limit to how much paper money you can print, but gold and silver don’t have that ability and so, what’s happening is as people are taking possession of gold and not just allowing paper contracts and gold to be sold, but they’re actually wanting the physical gold, if you’ve followed the news this week, they were four countries that just asked for their gold back. So, we’re starting to see countries wanna have it in their possession. They’re starting to lose faith in paper money. It’s just starting to crack and so what people need to realize is right now the price of gold and silver is below what it actually costs to take out of the mine.

 

So, this is a manipulated price. This is a manipulation of the central bank to make the dollar strong right now, which because gold and silver move inversely to the dollar that’s made them go down, not because they’re not in demand, not because they’re not rare, but because it’s a manipulation, but that can only continue for so long. As soon as their is no more supply to deliver, those prices will change and they will reflect the accurateness of supply and demand, which right now is completely artificial.

 

Jason:

Okay, so, that’s a really good point that you bring up. So, why can’t that manipulation go on forever? I mean, it’s been happening for decades. It sort of brings me to that saying that, you know, having a stock background when you were in the financial services business, the investor complaining that, you know, the market is irrational, I’m right, the market is wrong. Well, you know, the answer is, well, the market can remain irrational a lot longer than you can remain solvent. I’m just afraid that they can just manipulate for a long, long time.

 

Linda:

Well, the reason they can’t, Jason, is because of the supply. So, what’s happening is every single futures contract that is coming due for gold right now is being request in physical. So, before they used to just roll over paper contracts of gold and silver.

 

Jason:

I think that’s a Ponzi scheme. I really believe and, you know, tell me I’m crazy, but I think COMEX is, you know, it’s just my opinion, I have no proof, but I would just venture to guess that could well be a Ponzi scheme that could crack at some point.

 

Linda:

Yeah, wouldn’t surprise me either. I mean, basically they were trading paper for something they didn’t have, they didn’t have enough to actually be able to deliver it, so as this is starting to heat up and as more people are demanding the physical gold and silver, eventually we’re going to not be able to deliver and there’s going to be default on the delivery of those future’s contracts and when that happens, the price of gold is going to have to re-adjust to its true price of what it should be trading at, not this suppressed, artificial price.

 

Jason:

Yeah, very interesting. It’s going to be very interesting to see how this plays out, but right now, you know, amazingly America still seems to be in the position of being the brink’s truck of the world. The Russian economy is falling apart rapidly, Greece is falling apart again, Europe is socialist disaster. We can grouse all day about how the US is so poorly managed and so in debt and everything is wrong, but look around, who’s any better off? You know, any major country, I mean. There’s not much out there.

 

Linda:

There’s not much out there and..

 

Jason:

Russians are just getting a hold of every dollar they possibly can, you know, they look at that as better than gold, interestingly.

 

Linda:

Well, I think that this, you know, these sanctions that happened against Russia and then Russia struck back and then the United States, you know, made the dollar very strong, which just tanked oil prices, which made Russia’s oil and currency drop. So, they’re, you know, in between a rock and a hard place. I mean, they are a real mess, but understand that the only reason that the United States had this power is because they had a monopoly on money, so now..

 

Jason:

Well, it also had the monopoly on being the biggest military the human race has ever known and that’s how it keeps that and enforces that monopoly.

 

Linda:

That’s right, but as these other countries, as China and Russia and Brazil and all the bricks decide to trade amongst each other without the dollar; for the first time ever in history, this is taking away the dominancy of the dollar. It’s just happening right now, so it’s too early to see it, but to my view that’s what’s going on right now and that’s why the dollar is so strong is that, I think, the federal reserve is doing it can to prop up the price of the dollar, because it knows that it can’t do it for every much longer. So, it’s going to do it as long as it can, because its days are really numbered.

 

Jason:

It’s an interesting debate. I’m just concerned that they can kick that can down the road for the next three decades, but maybe they can only do it for another three years. Who knows. We will see, we will see. It’s really, Linda, when you really look at it, it’s really illogical and that’s why it’s just darn hard to predict this stuff, because they’re all sorts of other forces outside of it beside math. If it were just about math, the dollar should have collapsed by now. Very, very interesting discussion with you today. Give out your website one more time.

 

Linda:

It’s LindaPJones.com.

Jason:

Linda Jones, thank you so much for joining us today.

 

Linda:

Thank you, Jason, my pleasure.

 

Announcer:

This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit   www.hartmanmedia.com   or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

Will Deflation Derail World Economies?

AMA2-23-15Low prices delight consumers. But those falling prices may signal darker days ahead in the form of deflation, which flattens economies and leads to long-term recession. As prices drop and sales flatten in many of the world’s leading economies, experts fear a global epidemic of deflation that could have long-term effects on local and international commerce.

Consumers don’t like inflation, but central banks do. Inflation means higher prices and a sense that money doesn’t “go as far as it used to.” But a little inflation keeps commerce humming and debts being paid. It helps a country’s economy avoid deflation, which has a less obvious but more detrimental effect on local development and international trade. For government run central banks, the magic number for inflation rates that keep economies afloat is about 3 percent.

Deflation accompanies falling prices. Unchecked, it can create the dreaded “deflationary spiral” in which prices drop, but consumers don’t buy. That creates a surplus of goods and supplies that aren’t being used. To move them along, prices drop even further. But if people still don’t buy, the cycle continues, spiraling down into a hole of stagnation and recession.

When that happens, less money circulates in the economy. Consumers buy less and have more trouble paying down debt. That happens on a national level, too, as counties going through a round of severe deflation struggle to manage their own indebtedness. Let unchecked, long periods of deflation can plunge a country into economic chaos for years.

The current epidemic of deflation is hitting well-off countries in North America, Asia and the Eurozone. According to a recent article from The Economist, inflation rates in many of those countries is running well below the sweet spot of 2 percent – or is likely to do so in the near future.

In North America, Canada and the US are still seeing significant economic growth, but their inflation rates are still low – and falling oil prices are threatening to push them even lower. But the economic giants of Asia are seeing more trouble ahead.

In china, the inflation rate is below 1 percent. Japan’s rate is significantly higher, but a variety of factors affecting Japan’s national and international financial health threaten to push it down. In other Asian countries such as Thailand and Vietnam, deflation has already settled in.

The situation in the Eurozone is worse. As the Economist reports, 15 of the Eurozzone’s 19 member states are already in deflation. The most public face of the Eurozone’s economic troubles is Greece, but prices are flat for major categories of goods in more prosperous members such as Spain and Britain as well.

What’s behind the worldwide wave of deflation? One easy target is falling oil prices, which have dropped at times to prices under $100 per barrel in world markets. But the drop in oil prices actually has an upside – and oil price shifts are only one of many factors contributing to the threat of a round of deflation.

Lower oil prices mean savings for consumers in the form of lower gas and heating prices. The cheaper packaging of goods like cleaning products and soft drinks also passes on savings o buyers. That means consumers have a title more money available to buy other things, or to pay down debt. Governments benefit in the short run, too, from collecting more taxes and tariffs on energy consumption and usage fees from corporations.

In the long term, though, continued low prices overall keep the economy stagnant. If prices stay low, so do wages, and the job market suffers. Debt, both personal and national, gets harder to pay. People buy less, and the economy falls into s pattern of stagnation and paralysis that’s difficult to turn around without artificial intervention.

That’s when the central banks step in with quantitative easing – a plan to stimulate growth by pumping money into the economy, manipulating interest rtes, or both. The US Federal Reserve is in the closing stages of its latest round of Quantitative Easing since the massive housing collapse of 2008 plunged the country into recession. That stimulus involved the buyup of billions of dollars worth of mortgage backed securities and bonds in an effort to push interest rates low and keep money moving.

Now, the European Central Bank is rolling out a similar plan to buy treasury bonds and other kinds of securities in an effort to get more euros into circulation, The Bank of Japan is planning its own initiative to keep inflation at a comfortable rate and forestall deflation. Other countries are mulling similar interventions to stop the slide,

It’s too early to claim that deflation will dominate the world’s economies. The US dollar is trading strong in world markets against other currencies, which also affects international commerce and pricing, and other factors – including oil production – are constantly in flux. But for consumers in general and investors in particular, it’s worth remembering that falling prices may have rising costs.  (Top image: Flickr/PhilipTaylor)

Read more from The American Monetary Association:

Deflation and Oil Prices: Should Investors Worry?
Swiss Franc Fallout Ripples Round the World

The American Monetary Association Team

AMA logo

Deflation and Oil Prices: Should Investors Worry?

AMA2-18-15Oil prices are falling, dropping below $200 USD for a barrel of crude. And while that makes US consumers happy, the tumble in prices is fueling worries of a looming round of deflation that could ripple throughout the economy and trigger another round of intervention by the Federal Reserve.

Because petroleum products play an enormous part in the economy as a whole, the ups and downs of the oil industry affects just about all major sectors. In areas where Big Oil has a high profile, jobs, housing and local retail and manufacturing are buoyed – or potentially sunk – by the boom and bust cycle of worldwide oil supply and demand. That’s why the recent fall in oil prices has economists and financial experts concerned about the possibility of a “deflationary spiral” that could eventually require another round of government intervention.

For consumers, the major concern is inflation – higher prices, and a dollar that doesn’t go as far as it used to. But the consequences of deflation may actually be greater. The “deflationary spiral” that financial experts fear begins with a drop in prices, as we now see with oil.

But although that drop should mean that people buy more, they may not, choosing to wait instead for even lower prices to come along. If that happens, there’s an excess in the production of various commodities. To move that inventory along, prices drop even more. But if consumers still aren’t buying, the cycle continues to perpetuate itself, spiraling down and down.

A healthy consumer economy is driven by the willingness of people to buy things. And if that doesn’t happen, the whole structure is weakened. Consumers delay spending, and debtors have a harder time securing debt. And because energy is a linchpin of that structure, the drop in oil prices could signal the beginning of a deflationary spiral and threaten another recession.

When a sluggish economy threatens recession, it may be time for government intervention in the form of quantitative easing, as the Central Bank artificially manipulates interest rates and the flow of money to keep major sectors moving. That’s what happened during the troubled years following the housing collapse of 2008 when the Federal Reserve instituted not one, but three rounds of easing. The last of these, dubbed QE3, involved the buying up of $85 billion in mortgage-backed securities every month to keep interest rates low and encourage buying.

As the economy began to stabilize after the housing crash, the Feds began a gradual taper off of the stimulus in 2014. But now, some economists worry that deflation triggered by the drop in oil prices could mean another round of easing to prop things up. But according to a recent report from Business Insider, the current drop in oil prices may actually make that kind of intervention less likely – and it may not even lead to the usual consequences of deflation. In fact, the opposite may be true.

As Business Insider points out, lower oil prices benefit consumers, who will pay less for gas and heat. Lower gas costs free up household income for buying things or paying down debt. As people buy more gas, the government is able to collect more in taxes and tariffs on those transactions. While the “deflationary spiral” paradigm depends on consumers’ reluctance to buy, even when faced with dropping prices, in reality, spending less for gas probably means people will be spending what they’ve saved in other ways.

Lower oil price alone aren’t likely to cause problems for central banks, unless prices in other major sectors also start to drop. Low oil prices help to keep inflation down, and because consumers can buy more and pay down debt, the two major consequences of inflation – a slowdown in buying and problems with covering debt – probably won’t happen, except in certain areas of the country where the drop affects the performance of local oil producers.

In those areas where oil production is a major contributor to the local economy, a slowdown could mean a drop in housing prices and loss of unemployment as well as the decline of local businesses. But in those areas where oil is sonly one of many enterprises in a diverse economic picture, those effects are likely to have little impact. (Top image:Flickr/cliftonsteed)

Source:

Udland, Myles. “Three Reasons Why Lower Oil Prices Won’t Lead to a ‘Deflationary Spiral,.” Business Insider. businesinsider.com 1 Feb 2014.Insider. businesinsider.com 1 Feb 2014

Read more from The American Monetary Association:

AMA 110: Learn Visually with Jeff Desjardins from Visual Capitalist

Bitcoin Ponzi Scheme: New Coin, Old Scam?

The American Monetary Association Team

Final_AMA_Logo-150x150

AMA 110 – Learn Visually with Jeff Desjardins from Visual Capitalist

 

Jason Hartman invites Jeff Desjardins on to the American Monetary Association podcast today to talk about the neat infographics Jeff’s company produces. Jeff is the president of Visual Capitalist and many of his infographics have been featured on Ink Magazine, Business Insider, Wall Street Journal, and other news outlets. Jason and Jeff talk about Visual Capitalist, Bitcoin, and more on today’s episode.

 

Key Takeaways:
2:15 – Jeff explains what Visual Capitalist is.
5:45 – The infographics that Jeff’s company produces are usually based on complex topics people have a hard time grasping.
8:30 – Advertising with Visual Capitalist is more cost effective than on more main stream media websites.
10:40 – Jeff talks about his favorite infographic that he and his team worked on.
14:50 – Jason and Jeff talk about Bitcoin in this segment.
15:45 – Jeff explains the hype cycle in technologies.
19:55 – Jason would love to be wrong about Bitcoin, but you simply can’t invest in it just yet.
21:00 – A lot of people learn best visually, so Jeff would like to produce more content for them in the future.

 

Tweetables:
“When you provide someone with an ah-ha moment, they’ll love you forever.”

“People get really excited about new technology as it comes out and there’s that whole sort of hype phase to it.”

“You know what the dollar is backed by? Aircraft carriers, fighter jets.”

 

Mentioned In This Episode:

http://www.visualcapitalist.com/

 

Transcript

Jason Hartman:
Hey, it’s my pleasure to welcome Jeff Desjardins to the show. He is the president of a really cool company that I discovered maybe a month/month and a half ago. It’s called Visual Capitalist and you know there’s an old saying that a picture says a thousand words and that’s probably never more true than on this website, because they have some great visual content to illustrate issues, alternative investments, and so forth. Jeff, welcome, how are you?

Jeff Desjardins:
I’m great, thanks.

Jason:
So, you’re located in Vancouver, Canada. I will be there in just about 10 days, skiing in Whistler, so I’m looking forward to it.

Jeff:
Perfect, so is everybody else here. We’ll also be up the hills as well.

Jason:
Yeah, it’s a beautiful place. I’ve been to Vancouver and Whistler many times. Good stuff. Well, how old is Visual Capitalist?

Jeff:
We launched about three years ago and when we first launched it was more the idea than the current distribution mechanism. We thought we could work with different companies and explain complex issues around them using these visual and eventually it morphed into what it is now, which is a media website featuring content each day.

Jason:
Are you a graphic designer? I mean, what’s your background that you would start a company like this? How did you happen to do it?

Jeff:
I wish I was a graphic designer. Sometimes our team does such great things that I have no idea how exactly it is done. My background is in advertising and media. I’m really good with putting together the message and understanding the background of how to really tell a story and how to communicate complex issues in that sense, so I work with our team along with other members of our staff to really get that message out, but really the expertise lies with our designers who are amazing and we’re so lucky to have.

Jason:
Good, good stuff, but I mean, what did you see out there? Were you reading and studying, I mean, you do a lot of coverage of things like federal reserve and central banking and you’ve got visual elements to make that rather complex issue of monetary policy pretty understandable for people. Were you just interested in the topic and you decided, hey, this is so hard to learn this stuff, wouldn’t it be nice if we had a visual component to it?

Jeff:
Yeah, I had actually seen infographics and data visualizations and they had caught my attention quite a long time ago, even in the mid 2000s this stuff was kind of coming out and I was always enthralled by it and I always found it was super easy to learn using it and I guess what happened was I consulting for some different investment industries and found the type of company a lot of people were producing was very difficult to understand and one big problem is a lot of the people that are retail investors and even institutional investors, they’re looking to absorb all these different chunks of news throughout the day and they’re overwhelmed with emails and information and it’s just a big overload.

We wanted to create something that people really enjoy looking at and they are able to retail the information that they remember and when you can provide someone with an ah-ha moment when they’re trying to read something about something that normally confuses them, you know, they’ll love you forever, so that’s really what we’re trying to do with our content.

Jason:
It’s definitely got that good viral component, no question about it. Tell us about some of the stuff you cover on Visual Capitalist. I mean, you’re a news organization in a sense, aren’t you?

Jeff:
Definitely, definitely.

Jason:
But, like, you don’t cover current events? Well, yeah you do. Ebola, what’s ahead for 2015, so I guess it’s not maybe as pressing as the news, but you cover current issues, for sure.

Jeff:
So, our work is generally designed to cover issues that are relevant at a time and there’s a bit of a lead time when you’re putting together the graphics, so when we..

Jason:
But, harder than a story, right? Text or a podcast, for example, or a news report on the news, yeah.

Jeff:
Exactly and today, you know, everyone is so good at that on the financial blogging side, so when something happens, so for example, central bank cuts its rates today like the Canadian bank did today, you know, we don’t have time to really respond to that as fast as the regular blogger that can just update something in WordPress and then boom it’s good to go in 5 minutes. S

o, from our perspective, we want to tackle issues that are sort of lingering things that people have trouble understanding and really wanna learn more about and stuff that is always constant, so when you’re talking about something like the history of gold or the history of currencies, these are things that are relevant and have a shell life for years and when we tackle things that are more news related, you know, that’s generally topics that are, they’re going to be in the news for awhile.

So, things like Ebola, obviously, were in the news for a month or two or if you’re talking about events with central banks with the deflation and inflation argument and things like that, people are going to be looking at the stuff for years and it’s going to be relevant for a long time. So, even though it’s created today, it’s still stuff that can be looked at in the future.

Jason:
Yeah, no question about it. So, what is the business model behind it? Is it typical like any news organization, you know, you sell advertising or what?

Jeff:
Yeah, that’s definitely a part of it. We’ve recently moved to where it’s creating more of an editorial calender where we’re covering topics that we think are going to be important and relevant at a certain time. So, as an example of this, at the end of November in 2014, the Swiss central bank was, sorry, Switzerland had a referendum on using gold. Yeah, exactly. So, we knew that date was coming, so in our editorial calender we set it up so, before that, we had sort of a gigantic piece that explained everything that you needed to know about that event, so in that case, it ends up being relevant, timely with this news event, and what we did is we sought out a sponsor that would be interested with coinciding with that message, which is going to get a lot of viral spread, a lot of social media spread, and I think we were able to find I think in that case a bullion dealer that wanted to coincide with that message and it did really well over 500 or 600 shares and it got posted in a lot of places like Zero Hedge and all of these different website that feature this kind of information. So, it’s a win-win for us and for our sponsors to be able to have that sort of viral thread.

Jason:
Yeah, yeah, but I mean how do you support your business and pay your staff off the viral thread. I mean, the advertising component is one, but what else has to happen for it to work? I mean, you can’t really monitor that pass around rate, can you? To be able to tell advertisers, look, how much exposure you got with this, you know, particular piece or can you?

Jeff;
Yeah, these are good questions. The way that I would describe it to someone that we’re talking to as a potential sponsor or a client is that, look, if you’re trying to reach quality investor audience and if you want to advertise in certain places, so let’s say you wanna have an advertisement on maybe Business Insider or on Wall Street Journal all these other areas, it’s going to cost you a pretty penny to do that. What we offer is by putting together this sort of really shareable and possibly viral visual image that explains something that people want to understand that you associate yourself with, we can get your branding and logo in a bunch of different places that would normally cost a lot of money to be advertising on and get tens of thousands or maybe even hundreds of thousands of views in the process. So, we’re able to get that exposure by having our content picked up on dozen and dozen of websites that get a lot of exposure themselves.

Jason:
That’s great. So, you’ve got that ride on the coat tails and pass around type phenomenon going for you, for sure. You know, when you talked earlier about how it takes longer to produce these pieces, because they are graphical and they require, certainly, some creativity and imagination to them as well as the actual design work, how long does it take you to produce one of these?

Jeff:
Yeah, for sure, we typically tell people it’s about three weeks, but realistically we can do it in a day or two if we have nothing else going on and we have our whole team working on it. So, it really depends on the situation. We’ve even done it in the past where there was..in Canada, there was an election that happened and over night we had someone in the office, overnight, compelling all the results for the election and creating a graphic to be ready to go the next morning. So, it is possible to do it on very short timelines, but it definitely takes some planning and commitment from the team to do it. So, when we’re trying to figure out deadlines and that kind of thing, it usually just depends on how pressing it is and what other work we have going on.

Jason:
Take us in to some of your favorite pieces that you’ve done and let’s talk about those and maybe learn some good stuff.

Jeff:
Yeah, for sure. One of my favorite pieces that I’ve helped put together the content for was one that we put together, I believe at the end of the summer of 2014 when there was a lot of buzz about the Tesla gigafactory that was being built in Nevada or that is being built in Nevada.

Jason:
The battery factory, yep.

Jeff:
So, we found that a lot of people sort of understood the concept, you know, they wanted to build more batteries so that they’re able to bring down the cost of building each battery and that’s going to allow them to sell the different models of Tesla, so what we did was we wanted to basically show that in a more useful and intuitive way as well as going against into some of the business aspect and as well as going into the supply chain and where they’d be able to procure the different commodities that they need to build that, so we put that together and we were able to bring on a sponsor of a cobalt company and also a graphite company and both of those materials are used in lithium ion batteries and both of them have supply issues around them based on where they come from, so we wanted to involve them in there and to show how the raw materials affect the overall battery construction as well.

So, we put that together and released that at the end of July in that particular one, because it was a story that not many people had dove into those aspects of sort of the commodities and the procuring of raw materials and things like that. We were able to get some really nice spread through Ink Magazine used it and so did Cnet and a really big German newspaper I noticed was quoting my name the next morning as well. You know, by covering those kinds of issues, it’s really a sweat spot for us, because it’s educational, it’s timely, it’s relevant. It tells people something that they didn’t know and it sort of helps break a story in an area that we have lots of expertise about and then it also does really well for our sponsors as well.

Jason:
It’s interesting when you talk about the Tesla too. Wall Street Journal did an interesting piece and it seems like it would be a good one for you guys about how the electric car is the higher polluted than good old internal combustion engine with gas, right. You know, it’s because certainly coal, you know, 40-50% maybe of the nation’s energy comes from coal, so that’s an issue and then also the construction and the batteries and so forth. That was an interesting comparison that the Wall Street Journal did. I thought it could be illustrated visually very well.

Jeff:
Yeah, no, it’s interesting and a lot of people forget this as well, because when they think about these things they don’t think about where their electricity comes from, so it really depends where you are in the world, locally, and that makes a difference. So, for example, up here in Vancouver the vast majority of our power is from hydro, so if you were to use an electric car here, it’s going to be a different story than if you’re going to be doing it from an area where, oh, this guy just used a bunch of electric, okay, add more coal on to the stack into the plant, right? So, that’s a much different thing, but yeah, people need to realize that if you’re using a battery-powered car, recharging that battery takes power and you need to get that power from somewhere.

Jason:
Yeah, it sure does. I mean, it’s funny how people get so self-righteous about that and they think they’re doing such a great thing, but it’s really not good at all. That’s fascinating. I think you could illustrate that visually very well and there’s so many things you can illustrate visually very well. I love some of your stuff on monetary policy, but you know, Bitcoin is an interesting one. I actually predicted several months ago at a bunch of my friends that are just die-hard Bitcoin freaks, I call them, they’re like cult members and I would love nothing more than to be wrong about Bitcoin, but I don’t think I’m going to be wrong.

So, I predicted when it was like it, I don’t know, about $420-$430, I predicted it would go to $250 and it went right down past that, below $250. What are your thoughts on Bitcoin in general? I mean, I love the idea, I’ve done many, many shows on it, but I just don’t think that anything that does not have the blessing of the most powerful forces on earth, governments and central banks, will ever stand a chance of surviving, you know?

Jeff:
Yeah, it’s a great question. I love talking about Bitcoin, but I think, I guess I have a couple of points on it, one point is that I think it’s going to be interesting, because if you look at something like technology hype cycles, which applies to all kinds of different technology, it sort of shows that, and we have a little graphic on this somewhere on the site as well, but it shows that, you know, people get really excited about new technology as it comes out and there’s that whole sort of hype phase to it and then it takes some time for people to be able to implement that technology and for its uses to grow and, as a result, all that initial hype sort of dies down and what’s called the trough of disillusionment and then it slowly works its way back up as all the engineers and all the inventors and all the people in our society that make things work as they work with this new technology to actually make it into something. A good example of that is something like 3d printing, right, where everybody got really excited about it and then it sort of fell off the map for a little bit and no one was talking about it, but now there’s starting to be some really interesting uses for it.

Jason:
Oh, 3d printing is going to change the world. I love it, yeah.

Jeff:
Exactly and Bitcoin is right up there as well, but the problem is there’s a lot of talk about it and obviously with the price of Bitcoin that created a lot of interest as well, especially in 2013 and with the events with Silk Road and all of these different things. So, it’s in the news, everyone’s talking about it, but right now and if you talk to VCs and you talk to, you know, tech people, they’re so many people that are working on it right now in terms of finding away to make it a solution for everyday consumers and they’re working at creating all of these different apps and adding new layers of technology onto the block chain and doing all of these really interesting things, so I would not be surprised if it pops up a little bit later on sort of when you least expect it when someone comes out with one of these apps, you know, the Uber of Bitcoin apps or something like that that’s really going to make it accessible to people and change things. In the short term, I think you’re right with regards to central banks and governments being the not giving their blessing, but in the long term, especially block chain technology is fantastic and..

Jason:
But that’s not unique, you know, like anybody can do block chain. It’s not unique to Bitcoin and Bitcoin is not private so all of the privacy advocates and, you know, Libertarian people who don’t want the governments intruding on their life, which I can’t say I blame them, I’m one of them, but you know, cash is far more private than Bitcoin.

Jeff:
In a way, in a way, but I mean Bitcoin..

Jason:
That’s how they busted Silk Road is they followed the block chain, right?

Jeff:
Right, but you can also, taking proper measures, you can keep Bitcoin complete private and anonymous, but it does take a certain amount of effort. Definitely random people that are buying drugs off Silk Road might not have been able to take all the security measures.

Jason:
Or hiring hit men.

Jeff:
Exactly.

Jason:
Scary stuff.

Jeff:
I wouldn’t recommend it.

Jason:
Yeah, I wouldn’t recommend it either, but it’s interesting as a concept to talk about it and to think about, but yeah, I just think we’re talking about the most powerful entities on the planet – the central banking and the governments cartel. The gold bugs love to say the dollar is not backed by anything, but I think they’re so wrong. You know what the dollar is backed by? Aircraft carries, fighter jets.

Jeff:
The use of force.

Jason:
Yeah, it’s unfortunate, but it’s just reality. I’m not saying it’s right. I don’t like it any better than anybody else, but it’s the reality of the world. I don’t know, am I wrong?

Jeff:
No, but the interesting thing about Bitcoin is there are some people that are bearish on Bitcoin itself, but bullish on block chain technology, creating a revolution in currency in some way that we can’t see yet or creating a revolution in other areas of well. So, that’s why it’s so interesting about it is it’s very rare you have some sort of new technology emerge sort of out of nothing, right.

Jason:
Yeah, it became big pretty darn quickly. It’s pretty amazing, yeah.

Jeff:
Yeah, those are really the two points for me is A) that it’s separating Bitcoin from block chain is sort of important just because, as I say, there are people that are bullish on one and bearish on the other, but also two, I think with regards to, from the technology stand point, a lot of times there is this through of disillusionment that people go through with any new technology like look at virtual reality, right. That died down and now everybody all of a sudden again is excited about the oculus rift and that is something that was 10 years in the making, so…

Jason:
Right, right. Well, we shall see, we shall see. Again, I’d love to be wrong about this. You know, again, you can’t invest that way or even save that way if you don’t call Bitcoin an investment, but you call it just a savings mechanism, store of wealth…

Jeff:
Or a speculation.

Jason:
It’s just so speculative. I mean, you just can’t rely on anything like that, so anyway. So, the website, I mean, I guess I don’t have to ask you to give out the website it’s just VisualCapitalist.com, right?

Jeff:
You’re correct.

Jason:
Good stuff. What’s next for you guys?

Jeff:
What’s next for us and it’s something that you sort of alluded to at the beginning that you’re asking me about whether it’s a news site or not and that’s where I really wanna take it is I wanna be putting out 5-10 things a day and I know that it seems ambitious from the visual standpoint and also keeping up with today’s news standpoint, but I really want to have daily repeat visitors. People that are checking out the site multiple times a day to see what ‘s new and to keep up on their news and information, because people learn the best in different ways and a lot of those people learn visually and so taking everyday concepts that are important in the news and with what’s happening the world and distilling it down into charts and infographics and data visualizations that people can understand, you know, eventually more interactive. That’s really where we want to go and we want to build that daily audience that is on our site all the time and when I think of something like other websites that I visit, I mean, I’m visiting them 3-4 times a day to get updated on my news. I’m checking it when I’m in transit or when I’m at home or when I wake up in the morning and that’s what I want people to have with our site.

Jason:
Yeah, good, good stuff. Well, I wish you well with it. It’s a really cool site and it’s a really great way to learn things. Check it out folks, VisualCapitalist.com and Jeff, thanks for joining us.

Jeff:
Yeah, thanks so much.

 

Bitcoin Ponzi Scheme: New Coin, Old Scam?

AMA2-10-15The Bitcoin is looking more and more like traditional money every day. In just a few short years, the upstart digital currency has gone from a mere novelty to a multimillion dollar trading commodity subject to many of the ills that plague “real” money backed by national and international banks. The latest step: a massive “Ponzi” scheme that bilked millions from Hong Kong Bitcoin investors.

Created in 2008, Bitcoin went public with its first transaction in 2009. Touted as the first completely democratic, decentralized form of currency, the digital coin was welcomed as a way for anybody to conduct transactions anywhere in the world in private and independent of the regulations and control of traditional banking.

In the years since that first Bitcoin transaction, the cybercurrency has had a dizzying run that saw it accepted for transactions involving things like in vitro fertilization, luxury cars, travel, college tuition, real estate – and drug dealing. Bitcoin even entered the international currency markets, trading for prices reaching as high as $200 against established currencies including the dollar, euro and yen.

Established banks in the US and abroad took a wary view of the Bitcoin, with state bank in some countries refusing to deal with it – and others declaring it an outright threat. But still the Bitcoin continued to flourish, thanks to private Bitcoin exchanges that sprang up around the world, primarily in Asia.

The Bitcoin suffered a massive wave of bad publicity that in some ways validated the claims of its worst critics when in 2014 the digital coin was implicated in the takedown of the huge online drug marketplace Silk Road. Run by the notorious Dread Pirate Robert, the site was meeting place of buyers and sellers of all kinds of illegal goods and services – and to no one’s surprise, the virtually anonymous Bitcoin.

The FBI and international authorities shut down Silk Road and confiscated its stash of Bitcoin, to be later distributed among the agencies involved in the operation. Bitcoin survived – but so did its reputation as a tool for illegal activity and money laundering.

Bitcoin transactions take place with the help of Bitcpon exchanges, online sites where users can exchange hard currency for coins and vice versa. The most prominent of these, Mt Gox, failed spectacularly in 2014, amid reports it had lost nearly 745,000 BTC (Bitcoin), which at the time was worth about $400 million. Since then, several other independently operated exchanges have sprung up, including Bitstamp and Bitfinex.

The Mt Gox incident was the best-known case in which a Bitcoin exchange folded, taking masses of money with it. But Mt Gox wasn’t directly implicated in fraud. Now, though, the Hong Kong based exchange MyCoin, is – as the world’s newest coinage becomes implicated in a type of fraud that’s nearly a century old – the Ponzi scheme.

Like Mt Gox, MyCoin closed down abruptly in the early day of February 2015. The online exchange completely disappeared – taking an estimated $386 million USD in client investments with it. And events leading up to that vanishing act strongly suggest an updated version of the venerable Ponzi scheme.

The Ponzi scheme, named for Carlo Pnnzi, a con man who perfected it back in 1920, is an investment scam that makes its money not from investing clients’ money in profitable investments, but from bringing in more new investors. Eventually the scheme collapses without a constant stream of new participants.

That seems to be what happened with MyCoin. Investors told local authorities that not log before it vanished, the company changed its trading rules, forbidding investors from exchanging all their Bitcoins unless they brought in new investors.

Cases like MyCoin, Mt Gox and Silk Road point up the fact that, by its very nature, Bitcoin is a largely unregulated – and unregualtable – currency. But those highly publicized struggles also serve as a reminder that in just a few short years, the digital coin has made significant inroads into the world’s financial structure.

As investors keeping a close eye on the fate of the dollar and other “traditional” currencies are realizing, the Bitcoin is here to stay – and it’s a force to be reckoned with. (Top image: Flickr/BTCkeychain)

Sources:

Baipal, Prableen, “ A Look At the Most Popular Bitcoin Exchanges.” Investopedia. investopedia.com. 19 Nov 2014

Kelleher, John. “Bitcoin Mass Hysteria: The Disaster That Brought Down Mt Gox.” Investopedia. investopedia.com. 2 Sept 2014

Rosenfield, Everett. “$386M Allegedly Missing, As Investors Fear Bitcoin Ponzi.” CNBC Investing. cnbc.com. 9 Feb 2015.

Read more from The American Monetary Association:

Swiss Franc Fallout Ripples Round the World

Can a Strong Dollar Stifle Profits?

The American Monetary Association Team

Final_AMA_Logo-150x1502

AMA 109 – Learn About The US Job Market with Ahu Yildirmaz

 

Ahu Yildirmaz is the Head of the ADP Research Institute. She has some great insight about the workforce market and gives the audience a sense of where the job growth is really happening in the United States and why. Ahu talks about how there’s a lot of growth happening in both the South and West regions in the United States. Ahu also tells the audience that there is a gender gap between male and female hiring rates and explains why this might be on today’s show with Jason Hartman.

 

Key Takeaways:
2:15 – Ahu talks about where she gets her data from in the employment reports that ADP produces.
5:25 – Are people working more full-time or part-time hours? Ahu breaks it down.
9:00 – Northeast and Midwest are lagging in terms of job growth.
12:45 – Texas is doing exceptionally well right now.
14:45 – Job growth is happening a lot faster for men than for women.
16:15 – Why is there a gender gap? Ahu and Jason give their opinions on the matter.
20:25 – When the economy is not good, employers are looking for people with experience so they don’t have to spend resources on training new arrivals.
22:45 – Ahu thinks robotic technology will be good for the job market.

 

Tweetables:
“The South added the most jobs and grew most quickly followed by the west.”

“Almost 70% of the new jobs created in Sept came from South and West.”  

“Texas is really the tiger state not only in the South, but nation wide.”

 

Mentioned In This Episode:
ADP.com

 

Transcript:

Jason Hartman:
It’s my pleasure to welcome Ahu Yildirmaz to the show. She is head of ADP Research Institute and you’ve certainly heard of ADP. They are the very large payroll processing company and they have a lot of interesting information on jobs and what’s going on in the employment markets, so it’s a pleasure to have her with us today. Ahu, welcome, how are you?

Ahu Yildirmaz:
Thank you. I’m good, Jason.

Jason:
It’s good to have you and you’re coming to us from New Jersey I believe, right?

Ahu:
Yes. That’s where our headquarters are.

Jason:
Good. Tell us first of all your data that we’re going to talk about and dive into today. Where are you getting the data from? Is it just ADP clients or is the data broader than that?

Ahu:
You know, ADP pays 1 and 6 US workers.

Jason:
Wow. That’s amazing.

Ahu:
That is amazing. So, what that means that we have access to 24 million US employee level database, then what we do, we partner with Moody’s Analytics every month to produce our employments reports. So, based on 24 million employee data set we model it according to DLS weight for the national job numbers. So, our job numbers come from, derived from, empirical data sets and we do publish every month, two days prior to government, the national employment numbers.

Jason:
Okay, great. So you publish before the government. I love that. Fantastic. So, overall, you know, we hear a lot of debate, Ahu, about, you know, the Obama administration would like everybody to believe that unemployment is down, but there are a lot of questions in the way that is counted, right? There’s the labor force participation rate, which, you know, to me seems to be a pretty valid way to look at things. They have the whole issue of the discouraged workers coming off the unemployment rolls and maybe you’re the wrong person to ask, I’m not sure, because you don’t really deal on the unemployment side, you only deal on the employment side, but if you have some comment there, it’ll be appreciated.

Ahu:
Well, our unemployment rate is more than the job numbers, right. We have to look at the labor participation rate as well as the population growth assumptions. So, different assumptions and different numbers come into the picture, but we report is the net job numbers, net added new jobs into the economy and that’s factual data.

Jason:
Excellent, excellent. So, are we doing better or worse?

Ahu:
I think we’re doing better. We look at the past 12 months, we are adding, on average, 200,000 jobs per month and in September we had another good month. US economy added according to our ADP national employment report, 2,000-13,000 private sector jobs and, again, this is very consistent with the growth we are getting the last 12 months and the good news is that the job gains are growth based across all industries and all company sizes.

Jason:
What about the issue of underemployment? There are complaints about that, about how with college degrees and masters degrees are working at coffee shops and not fully employed and many companies have been reducing hours to navigate around ObamaCare, making workers part time, contract, you know, there’s all sorts of complexities with this, of course, so I just want to ask you about that, because, you know, the interesting thing about what ADP does you know how much people are making. You actually write their paycheck, so is that amount is going up or is it going down, especially as it relates to inflation?

Ahu:
Yes, that’s a very hot topic and not the mention that last Wednesday we launched a new report from ADP Research Institute, which we call ADP workforce vitality report. In this report, what we do, we go one step further, we put down the employment numbers and we look at in terms of the wages, industries, hours worked, as well as gender income groups, who creates these jobs, what are these new jobs. So, it’s not just one job number, but we’re going to be able to dig further what kind of jobs are being created in the marketplace.

So, I can tell you from our first report that when we look at the growth in wage rates, we see an acceleration in the wage growth, so that’s good news, but we also have to look at whether these new jobs are coming from millennials or are they low paid jobs versus high paid jobs. For example, the sectors like retail, leisure, and hospitality versus fiance and technology companies and those are mixed.

Jason:
Okay, so, the results are mixed. Anything more on that though or?

Ahu:
Sure, again, in September both goods and serving producing industries have solid gains, but manufacturing and trade transportation and utilities added the most job. So, manufacturing, trade transportation, and utilities that includes retails jobs are very much consumer driven, but also more low paid jobs, but on the other side, manufacturing jobs are more mid level in ComCharts and we had a very good month in terms of manufacturing in September. There’s a sector for leisure and hospitality where we known that it is most employed by millennials, young aged, and low-waged jobs and definitely that’s a big part of job creation that we have been seeing lately.

Jason:
Okay, good, good. So, I like hearing good news about manufacturing. I like that a lot, because manufacturing is a very important base part of an economy. So, when we break this down by regions and states, tell us what the picture looks like in various states and regions around the US.

Ahu:
Yes, regional patterns remain in place and very much consistent what we have been observing past 12 months. In line with the US figures for September job gains remain fairly steady in most regions and states of the country, but again, the South added the most jobs and grew most quickly followed by the West. So, South and West are the regions really doing well and we still see that Northeast and Midwest are lagging in terms of the growth. Just in terms of the numbers, the South accounted for 42% of net new jobs followed by 25% generated in the West. So, what this means is almost 70% of the new jobs created in September came from South and West.

Jason:
That is absolutely staggering. I mean, I don’t know if the listeners are really understanding how big of a deal that is. I mean, that is just a staggering number that, you know, somewhere around 70% of job creation is coming from those two regions. So, you know, when we break that down, I guess the first thing we could say is people like warmer weather, because that’s what they get, but you know, the old rust belt economies and the business unfriendly states in which those rust belt economies are affiliated with, you know, that’s not where mostly where the action is.

There are a couple of exceptions and bright spots in everything that I know, but you can break down the West for us and that includes California, it includes Oregon, Washington, probably Arizona, Nevada. How do you divide that region? Do you include all of the four corner states, because I would think that California isn’t as much as a contributor to that.

Ahu:
Yes, but let’s remember that technologies still continues to drive the job growth in the West and established tech centers in California, but definitely Oregon and Washington now show that gains and they are holding on to gains, so it’s not only California, Oregon and Washington are definitely helping on the West side and this is mostly driven by technology, because this (#10:52?) has all the large big tech firms and they continue to hirer and it’s a very dynamic from the South. South has completely different story.

Jason:
So, tell us about that, that’s interesting, and certainly you’ve got Washington, no state income tax, you’ve got Oregon with no sales tax living on the border is probably paradise, because you don’t pay anything. I know people that go back and forth. They shop in one place, live another, and it’s quite a good deal, but what’s the different in the dynamic with the South and the West?

Ahu:
The population growth is more than twice as strong in these regions for both West and South relative Midwest and Northeast. So, stronger population growth translates into stronger demands for a variety of consumer services and housing as well as stronger labor force trends, so this is valid not only for South, but for West as well. So, both of these regions benefit from stronger demographic, but when it comes to the South, we see more dynamic industries.

The South is gaining from manufacturing and much of it is related to order sector and definitely oil energy related sectors and high tech companies are huge particularly in Texas. So, Texas is really the tiger state not in the South, but nation wide and it drives a huge growth coming from different sectors. High-tech, oil related energy related activities as well as population growth really drives the housing activity at a faster pace compared to the other states.

So, it’s a mix of all. Then we have the sunshine state, Florida, where we see a lot of hospitality, tourism activities helping to overall job numbers, whether it’s part time or full time, it helps with the job creation in that state. These are mostly, again, high turn over, low wage, young aged jobs, but leisure and hospitality, we see huge job gains, especially in South driven in Florida.

Jason:
Very interesting. Okay, good, good. Let’s talk about gender for a moment and then I want to get into different sectors, so how are the two genders doing in the job market? I’ve heard a lot of reports that during the fiance crisis men really struggled and women were the beneficiaries. I don’t know exactly why it was, but I remember reading a lot of articles like that.

Ahu:
Jason, the recovery continues to be he-recovery. Last Wednesday, as I mentioned, we launched our new report and you will see the numbers how the rate of wage growth differs between men and women and our data shows that the rate that wages are changing for men and women differ and what is more interesting during 2011 and early 2012, wages declined for both men and women at the same rate, but once the economy started recovery the pace changed and what we see is that the rate is much faster now for men and I have to say to gap is widening. It’s not closing.

Jason:
Really? That’s interesting, because I think one of the reasons men suffered so much during the financial crisis was because a lot of those jobs were housing and construction related jobs where there were just massive layoffs, but now you’re saying the men are doing better than the women in the work force.

Ahu:
In terms of the wage growth, yes.

Jason:
In terms of wage growth, okay. So, what do you attribute that to?

Ahu:
I mean, again, as the economy gets better, as you said, as we start adding more full time jobs and when it comes more across broad manufacturing, high-tech jobs as well as the construction jobs, the demand for that type of workers increase and that puts the pressure on wages. Just to give you an example, there’s a shortage in the US now for US truck drivers and that skill set and we had a similar gap in terms of the skill set in construction too. Those are mostly male-focused sectors and that puts the pressure on the wage growth.

Jason:
How does it put pressure on the wage growth, though?

Ahu:
So, when the economy gets better we see that some jobs are still being chilled. There’s a talent gap, skill set gap, in the job openings and job fillings and most of these jobs are related to male-dense sectors like transportation, utilities, as you said, construction and as the demand for these skills go up we also feel the pressure on the wages for these kinds of jobs therefore the wage growth accelerates and these are mostly jobs that are being filled by men. That could be one reason.

Jason:
Okay, okay good. So, what is your overall feeling about this. I know this is obviously a charged issue when you hear these stats about how women only make, you know, 73% of what men make. I think there are some interesting ways to dissect that, but I wanted to ask you your thoughts on it.

Ahu:
My personal thoughts on that, probably women..we may be less demanding. It depends. So, it’s hard for me to answer this question, but from a supply perspective, from a job creation perspective, they’re not seeing much difference. This could be something acute, this could be something related to women behavior in the job market, but this is my very much personal opinion, Jason. It’s hard for me to really connect that to a resource.

Jason:
Sure, sure and I’ll share a couple of mine and you’ll have some comments on them, because, you know, as an employer, over the years I’ve hired hundreds of people and I think there’s a lot of self-selection that goes on and that may just be for whatever cultural reason, but I have definitely noticed and, you know, I don’t even hire for this kind of position anymore, but when I used to put an ad in, I’ll say the ‘paper’, you know I’m talking 10 years ago and further back than that, but if I put that ad in for a receptionist position, invariably it would be a 100% or 99.9% female applicants whereas if I put an ad in for outside sales, it would flip and it would be 70% male and maybe only 30% female. So, a lot of this is really a self-selection issue, isn’t it?

Ahu:
That could be, that could be. I agree, but it’s also related with the educational level.

Jason:
Well, educational, I mean, women are beating hands down, aren’t they? The men better get on their game here, because they’re losing! You know, you look at law school enrollment, business school enrollment, and it’s like 55% + female. I mean, I’m not sure why that is either, you know?

Ahu:
Yes, but also personal priorities similar priorities definitely make it a big role for women in the labor force.

Jason:
Most definitely. So, when you look later in one’s career, when someone is, you know 35,45, or 50 years old in the workforce and then you look at those statistics, many times women leave the workforce for maybe 7-10 years and I don’t now what that average is by the way, but there are some stats on that. I’ve certainly read them before, you know, then you question, well, are people paid…is their age dictated by their number of years of experience? Certainly not as much as it used to be, but that is part of it, isn’t it?

Ahu:
Absolutely. Absolutely and also the economy plays a major role. When the economy is good, we have more flexibility hiring and taking risks from employer perspective, but when the economy is not good like the past couple of years, I think employers became more selective and did not have patience to really train the worker on the job. So, when the economy recovers and gets better you will see a much more flexible labor market for both genders.

Jason:
So, what happens? Is it they’ve had to cut their training departments and they just don’t have the resources to train people or as the economy improves what will happen there, why will there be more flexibility? That’s an interesting point.

Ahu:
It’s related to training course, but it’s not all about that. You have to produce the same amount of output now with less headcount or you don’t have the flexibility to increase your team, to increase your labor force, because of the uncertainty. I definitely felt that in my own team when the economy was uncertain, they wanted to, you know, be more careful about bringing a new person in the team, but when we get more certainty, more relaxed about the economy, we will feel less pressure and we will be able to bring more workers into the labor force so that they would have time and money to train them and prepare them for the job.

Jason:
So, Ahu, go ahead and give out your website and then I have one final question for you.

Ahu:
Our website is ADP.com/research.

Jason:
Research. Excellent. You’ve got some great material here and I wanted to ask you just your thoughts on robotics. You know, on the show we’ve been talking a lot about the self-driving car and obviously transportation. You mentioned truck drivers earlier. That’s a huge part of the workforce, but so many other areas where we’re probably going to see a pretty major, major impact from robotics. Are you talking and thinking much about that at ADP and seeing any of the effects of that yet?

Ahu:
This is very much interesting and timely. I just had a great conversation with one of my colleagues from ADP Innovation Lab. We have an innovation lab at Charleston, New York and I was there a few weeks ago and we actually talked about this specific topic. It will be interesting to wait and see how it’s going to shape, but from labor market perspective I always believe while it will impact some sectors in a negative way, it will definitely create new jobs, new job titles, and boost some of the other related sectors. So, we have to wait and see how that’s going to come into the labor market numbers.

Jason;
Yeah and my general thoughts on that people are always fearful of new technologies, because they do displace workers for a period of time, but then ultimately those workers certainly find something else to do and they create a new thing and someone certainly has to manage the robots if they don’t take over the world and manage us, which they might, but I think the future is very bright in terms of that, but the hard part is that adjustment cycle that takes maybe two years whenever any new major thing happens there’s a fall out and a readjustment period and a re-training period and that’s the part that really hurts most people, so the best thing to do is, you know, stay with the trends and constantly upgrade your education and I’m sure you’d agree with that, right?

Ahu:
Completely agree, but there’s also a big job for the corporations partnering with the universities so that we can prepare the new graduates to these unknown jobs for the future, so if they get into some private program and partnerships with universities, corporations, and with the help from the government, I think we can part working towards preparing the workforce for those undefined, unknown roles and the positions for the future.

Jason:
Absolutely. Well, good stuff. Well, Ahu, thank you for giving us some great insights into some of this and sharing the ADP research with us. We appreciate having you on the show.

Ahu:
Thank you.

Swiss Franc Fallout Ripples Round the World

AMA2-7-15Fallout continues from the Swiss National Bank’s recent decision to drop it cap on the Swiss franc’s value in trading against the euro. This latest salvo in what’s being called the new currency wars is having some surprising effects not just in Switzerland’s European neighbors, but also the rest of the world, including the United States.

The Swiss move to drop the cap on the franc came in mid January 2015 in response to The European Central Bank’s plan to institute a round of quantitative easing that would get more euros in circulation and boost European economies. Immediately after the cap was removed, the franc surged in value and the euro dropped.

That plunged Switzerland into some quick efforts to shore up its own economy, which seemed poised to fall into recession. Some brokerages failed, and the government embarked on a rapid round of buying up foreign currencies, including lots of euros, in an effort to weaken the franc’s strong showing. The effects of the suddenly surging franc were felt in neighboring Eastern European states like Lithuania, whose national debt is franc-denominated. Those countries with franc=denominated debt may be forced into buying up more foreign currency to shore up reserves as the franc continues to float.

There were consequences in Western Europe too. One of the most surprising of these is the unexpected boost to the profits of German brothels, where Swiss clients make up about half the clientele since the currency change. Since the franc is still trading strong against the euro, it goes much further for services of all kinds, including those of prostitutes.

But German houses of ill repute aren’t the only enterprises feeling the effects of the new valuation of the Swiss franc. It’s even affected the US dollar and virtually any US company doing multinational trade in this increasingly globalized world. And the ripple effects from the rise of the franc demonstrate just how interconnected that world really is.

As we’ve reported here before, some large US concerns have been touched by the rapidly changing states of the euro and the franc. US based megabank Citigroup, one of the world’s largest international currency traders, took a moderate hit, measured only in the millions, from the franc’s surge. And even the computer giant Apple saw a dip in its last-quarter profits thanks to the weaker euro.

The same issues face many other smaller companies doing business in the international community. The euro, along with the dollar and yen, and yes, the Swiss franc, are widely viewed as the stalwarts of the global currency world: stable and secure monies that can survive the fluctuations of the market. But those markets are increasingly volatile – and in the “currency wars,” many bets are off.

That’s why the US dollar, long the world’s go to currency for stability and strength, has also been caught up in the ongoing euro-franc drama. In recent trading the dollar’s value fell against the euro, even as the euro was regaining some strength against the Swiss franc. The dollar’s tumble in value actually benefited the franc, which still continues to ride high even as the euro regains some strength thanks to the efforts of the European Central Bank.

The franc/euro/dollar dance may not be just a result of market forces at play, though. Even as the ECB planned a round of bond and security buying to get more euros circulating, speculation arose that the Swiss National Bank might be actively intervening to manipulate the value of the franc against the euro – and indirectly, against the dollar too.

Most Americans have never heard of the rumored “global currency war” – and most never will. But those skirmishes being played out in Europe and the rest of the world involve the good old greenback – as well as the many of the goods and services it pays for, that are taken for granted every day.

The current situation is another demonstration of the interconnectedness of the world’s money markets. And that interconnectedness affects businesses small and large, from brothels to iPhone sellers and beyond. (Top image: Flickr/imagesofmoney)

Sources:
Porgione, Sam. “Dollar Falls vs Euro on Swiss Bank Speculation, Optimism on Greece.” Reuters. 5 Feb 2015

Sheahan, Maria. “German Brothels Are Booming, Thanks to the Swiss Franc.” Business Insider via Reuters. Business Insider. businessinsider.com 6 Feb 2015.

Read more from The American Monetary Association:

US Banks Hit By Swiss Franc Fallout

Who’s Winning the Currency Wars?

The American Monetary Association Team

Final_AMA_Logo-150x1502