Tuesday, July 9, 2013

Poker at the Geo-Political Economic Casino

Most of my business is directly related to the US bond market.  The Treasury yields dictate where rates are.  In just the past few weeks we’ve seen a spike in these rates and everyone wants to know what is going on.  No one wants to know more than I do because if I can’t lock my loans in at rates comparable to where we started, I might loose the deal altogether.  I don’t want that, the borrowers don’t want that and the people working on the loans at the banks don’t want that.  I’m not sure the banks themselves actually care at this point but that’s a debate for another day.

Side note: For anyone who says that interest rates going up doesn’t affect the real estate market, please send them my way and I’ll explain how very wrong they are.  The value of real estate isn’t directly tied to where interest rates are at.  There are many more factors to what pushes the Real Estate market, such as the economy or loan availability.  But don’t discount the interest rate factor when someone is buying or looking to buy a home.  Especially when loan qualifications are as tight as they are now, a higher interest rate can easily disqualify or persuade someone away from either a purchase or refinance.  One of the key factors to this recent Real Estate recovery is the low rates.  It allows more people to afford to purchase a home.

Having dealt with interest rates for the past 13 years I’ve come to the conclusion that trying to guess what rates will be tomorrow, or better yet next week, is a complete gamble.  It’s very much a kin to Texas Hold’em poker.  You can have all the information and factor in the hard evidence (in this example, the hard evidence would be the cards that the dealer plays; the flop, the turn and the river) but there’s still a tremendous amount of luck because you don’t know what is going to happen in the world tomorrow.

We’re in global economy and as such the things that happen halfway around the world can affect the bond price.  You might be thinking that bonds are just another type of stock but it’s not.  It reflects the confidence to which the world has in the United States of America and its financial stability versus the rest of the world.  Even with all the bashing that the USA has taken, we’re still the best and strongest economy in the world.  The recent downgrade of US Treasury bonds only reinforced this.  I’m not saying it was a great thing for our bonds to be downgraded but comparatively looking at the rest of the world, EVERY country was / has been taking a financial hit.  After all the smoke had cleared our bonds are still the strongest and safest investment in the entire world so it didn’t matter.  Being downgraded will only affect us when there is another institution that provides a more secure product.

At this point, I hope you’re saying, “What about that poker reference you made?  I like poker, get back to that.”  I’m glad you said that.  I like poker too and it’s a hell of a lot more fun than trying to quantify boring numbers.  Since US bonds are the global standard of baseline investments; politics and global happenings drive bond prices.  Countries and companies all over the world buy US bonds.  Hell, even our own Federal treasury buys bonds, which can get really confusing.  But we’re in the era of money meaning nothing.  All money represents are numbers on a computer.  We no longer use the “gold standard” where our money was backed by a physical thing.  The truth is we can, and do, print more and more money every day.  Eventually it will catch up to us but by then maybe we’ll either get so sophisticated that we’ll be in a utopian socialist society or aliens will have attacked and the human race will bond together as one, work for the benefit / survival of the species and not compete to see who has the most wealth.  Oh come on, who am I kidding.  It’s in our nature to covet what others have and to compete to be king of the hill instead of working together to building the hill higher. 

Let’s get back to poker…

I introduce to you the “World Financial Poker Palace” where countries, religions, various groups of societies, multi national corporations and sometimes individuals come to play to see who will control the world.  We’re going to skip over the side games where smaller countries and factions play to gain enough money and power to sit at the Main Table.  To sit at the Main Table is the ultimate goal.  What’s fun about the Main Table is that it doesn’t just decided one thing.  The main table tells us who’s in power, who’s got money, who’s making global decisions and whose voice is the loudest when the global decisions are being made.  This Hold’em game is a game inside a game.  Did you ever want to know who speaks first at the G8 conference or who’s directing the meetings at the G20 meetings?  Who has the most influence in front of and behind the scenes at NATO conferences?  Seating placement at the United Nations?  All decided at this game.  Even what everyone is going to go eat at lunch is decided at this game.  It’s very important.  Oh, you don’t want spicy Shawarma for lunch; well I guess you better hope the Middle East isn’t winning at the break.

This isn’t a game that’s played at 50 – 60 hands per hour.  This table plays hands that last for months, if not years.  This is the Big Boy table.  The fate and rule of the world lies in what happens at this table.  The game has been going on for centuries.  Sure, sometimes you get a run of a few quick hands.  But for the most part, the more patient you are, the better your results will be (similar to my last post, patience and money go hand in hand).  Being the smartest and most patient doesn’t always win you each hand of poker.  This is still Texas Hold’em.  Sometimes being lucking can be just as good as being smart.  As much as it depends on how you play the cards you’re dealt and the cards that are played on the table, it’s the games going on between the players which are the most intriguing. 

Let’s get to the players and see where we are at:

The dealer has dealt the cards and here’s what everyone has around the table.
1)      Fed / US Treasury = AcQc
2)      Middle East = 7s2s
3)      Euro = 8c9h
4)      Corporations / Stock Market = QdQs
5)      China = Js10c
6)      Israel = 5s7c
7)      US Worker = KhKs
8)      Home Owners / US Housing Market = Kd8d
9)      North Korea = 4s4h
10)  Russia = As10s

The cards have been dealt.  Right out of the box, it looks like this is going to be an exciting hand.  It seems everyone has at least something to play with.  This is often the case when the world is in turmoil.  In the mid-90’s it seemed like Corporations / Stock Markets kept getting dealt pocket AA’s.  For a while, the EU was hitting on every flop.  Let’s not forget the Housing Market run that kept stealing pots and winning every all-in.  The game is more interesting when there’s no clear bully at the table.  The globe might not feel as safe and secure but the game is certainly more intense.  The blinds have been set and the action is to spot #1, the Fed / US Treasury…

With AQ-suited, they’re in.  They just call the blinds since their in first position and want to see how the rest of the table is going to play.  Normally they might raise but there’s a lot of money on the table at the moment and they want to see who’s in this hand.  If they were in a later position, this would definitely be a raise but they’re going to see who’s in.  The Fed plays cautiously and usually stays in hands too long and is often dead money.  But when you’re able to “re-load” your stack by printing more money, it’s easy to play the long game and see as many flops as you can.  Besides, if the Fed says or gives away even the slightest impression, good or bad, all the other players will react aggressively.  They’re the “grinder” at the table and it’s best for them to act stoic.  Fed / US Treasury CALLS.

The Middle East is a mess.  They’re never paying attention to what’s going on.  They have to be nudged to even look at their cards.  They’re talking to China and Russia who are on completely different ends of the table.  They’ve also got a friend from North Korea walking up behind them asking to see what they’re playing with and they have to turn around to say hello.  They’re telling the table how they just got divorced and won’t ever make that mistake again; meanwhile they just started dating the crazy 20 year old secretary from their office and can’t help but tell you how much in love they are in.  They’ve got new money.  Oil is literally coming out of their ass and they’re spending the cash like a NFL player on his first contract.  They’ll CALL because even though its 7-2 suited, they think they have a great hand.  If they catch their suit, they’ll have a flush (not thinking that ANYONE who may have the same suit will beat them).  They could fall ass-backwards into a low straight and if the cards are low slop, they’ll destroy anyone who’s bluffing with high cards.  They’ll CALL because they have the money but no brains.  They’re second at the table when it comes to big risk / big reward, just behind North Korea.  Middle East CALLS.

The Euro (Europe / European Union) is sitting with a hoodie, glasses and earphones in.  Their techno-pop music is so loud in that you can hear it even with the headphones in.  Their glasses make it hard for them to see and since they’re mirrored lenses they almost give away their hold hands each time.  They’re a lot of style but no sense and they look foolish.  Everyone else at the table is thinking, just play poker and stop with the nonsense.  But it’s Euro, what are you going to do?  The sweatshirt is too confining and they don’t have the flexibility because the sweatshirt keeps them isolated.  They thought all this would keep them from distractions, influence of other players, focused on the game and hide all their “tells”.  In fact, it’s done just the opposite.  They struggle with indecision and they haven’t won a hand in a while so their different parts are getting restless.  When times are good and they’re winning hands, Euro is a monster.  But what makes them powerful is also what makes them weak.  The stronger economic countries want to call but Turkey and Greece want no part of an iffy hand.  Euro FOLDS.

Corporations always seem to get a good hand.  Queens are strong.  QQ is not a complete powerhouse and a foolish player may not know how to handle a strong but vulnerable hand like this.  Fortunately for them, Corporations are the usually the one of the smartest players in the game.  While most would slow play QQ’s to see what comes out on the flop, Corporations know that’s the easiest way to get caught.  All it takes is someone with a pocket Ace to be in and the flop could kill them.  Corporations RAISE by tripling the blinds.

China is usually in.  They’ve got money and are very hard to read.  Unfortunately, they’ve taken a few hits lately.  They’ve changed the face of the government but it’s still the same basic Communist leaders running their seat.  The last few hands have shown weakness and there are rumors that their fancy suits and high-end Rolex watches are knock-offs.  With massive cities being built with no one living in them and two-thirds of the rapidly growing population living in poverty, no one is really sure if China is as strong as it has been over the last few years.  Many players at this table owe them money so they’re not to be messed with but corruption rumors and their constant push to become the world’s other superpower, they may be stretched thin at the moment.  China CALLS the new bet only if to hold onto the perception of power.  By no means is this a bad bet, they’ve got a hand.  I’ve seen a lot of hands won with J-10 off-suit.  It’s a sneaky hand but you better know when to bail on it.  China CALLS.

Israel is going to call anything.  They won’t be seen as weak and they’ve got money and power.  And let’s face it, they’re a bit crazy.  For anyone who chooses to live in a neighborhood where every one of your neighbors wants to not just kill you but wipe your people off the face of the earth, to stand your ground is very important.  It almost doesn’t matter what their hand is.  5-7 off suit?  No worries.  Israel CALLS.

US Worker is sitting on Kings.  The second most powerful hand you could have pre-flop.  The problem is the US Worker is stupid and usually makes the wrong decisions.  They created Unions which have become fractured, bloated and corrupt.  They’ve allowed corporations to out smart them at almost every decision.  They’ve refused to evolve with the times.  They’re the classic example of “walking over dollars to pick up pennies.”  The US Worker is not in the game because of what they build anymore, it’s that they’re greatest asset to the table is that they’re the biggest consumers.  They don’t build “things”, they build debt.  Their tactics 40 to 60 years ago were tough and hardnosed.  They were strong players.  Now the US Worker is just barely holding on to their seat at the table.  KK is the best hand they’ve seen in a while and they have to see what happens.  They should re-raise to knock more people out of the game but they’re too scared.  US Worker CALLS.

The most uncertain player at the Main Table is the Home Owners / US Housing Market.  K-8 suited isn’t a powerhouse but is a very workable hand.  They’re struggling to stay at the Main Table.  10 years ago, the Housing Market was killing everyone.  They were the big stack at the table and everyone wanted to be their friend.  They could do no wrong.  They’d flop straights, three of a kind and even full houses.  Then, starting in 2008, they hit a run of bad cards.  They couldn’t buy a hand.  In the last few years there have been signs that they’ve gotten back on their feet but the Real Estate market is on real thin ice.  They might not have been caught cheating red-handed but something was the cause for their winning streak and then sudden collapse.  A collapse the coincided with the casino looking over their shoulder and making sure they were playing by the rules (funny how winning streaks stop when the refs are calling the game tighter).  Lots of fingers were pointed and claims were made but no one was sent to jail or got kicked off the table.  The Fed / US Treasury threw in their support as a backer so other players backed off for a while but they haven’t been the same in years.  HO / USHM is extremely conservative now but you can tell they want to jump back in and liked to play aggressively.  As this hand is being played, it seems like Home Owners / US Housing Markets are trying to calculate how much money their next paycheck is going to be so they know if they can be risky and aggressive or fold and wait until the next hand.  With a hand like K-8 suited, they need to see the flop.  Begrudgingly they CALL.

Next is North Korea and they FOLD immediately.  For a while they were making a lot of noise.  NK is a dangerous but foolish player.  Lil’ Kim is playing with family money but worse, never learned to play properly.  NK is the guy who watched his father play a few hands of semi-high stakes poker at a friend’s house but never really learned how to play the game well or at the casino.  Anyone can be a stud at a home game.  Casino playing is totally different.  He knows the basics but doesn’t know when or how to bluff to truly get what he wants or to consistently win hands.  He’ll bluff pre-flop with too high of an opening bet and if no one has a good hand, everyone will fold and he’ll win.  This makes him think that “power poker” is the way to play and that you can bully a table.  Since he’s won a few hands this way, he doesn’t fear going all in with a pair of 7’s or Jack-Queen suited.  Sure he’ll win some blinds and maybe even bully a few hands after the flop but sooner than later he’ll get caught by one of the other players who have been at this game a lot longer than him and really knows how to play.  Picking up a few junk hands makes you feel good but you’re really just playing with dead money and don’t know it.  China tries to be a wise sage to NK but he doesn’t want to be told how to play.  It’s only when China sees that he’s overplayed his hand and is so short stacked that he can’t play another round, does China pull him aside and tell him to cool down and be patient.  China knows how NK will play and uses it to their advantage.  Let NK make the big bluffs and stupid moves, all the while China can watch the table and see how the others are playing.  To China, NK is almost as important to have sitting at this table as their own bank roll.  NK is another tool to use.  Unfortunately North Korea had just been caught a few too many times lately and as much as he’d love to go all in with 4’s, he’s short stacked and can’t afford the raise.  There are too many players still in the hand and too much risk vs reward to go all in with just 4’s.  He still wants to be sitting at the Main Table and see another round of blinds so that he can possibly catch a pocket pair of aces.  North Korea FOLDS.

Last at the table is Russia.  You say, RUSSIA?!  Where have they been?  They’ve been very quiet.  They were once a mainstay at the Main Table for years and then in the 80’s and 90’s they were relegated down to one of the side tables.  They’ve very quietly moved back to the Main Table and are starting to make moves.  Say what you will about the Cold War, at least you knew where USSR stood.  Now it’s a little different.  Who are their allies?  What are their short and long term agendas?  Who’s really running the country?  Knowledge is power at the poker table.  No one, not even Russia’s friends, knows what they’re up to.  How much and why are they backing Iran?  What’s their involvement in the Middle East and what do they hope to accomplish?  Would they like to see a proxy war held in the desert to analyze the American and Allied Force’s capabilities against their own hardware (that by “chance” fell into the opposition’s hands)?  Or just let America waste resources?  How’s their relationship with China work?  Europe has various ties to Russia and depending on which part of Europe you speak to, you’ll get different opinions to what the Russian agendas are.  They seem to be cooperative and engaging on the world stage but at the same time, Russia does what Russia wants to do.  Putin sits at the table with a fox fur coat on with no t-shirt, wearing an absurd gold chain that would make Mr. T proud and has a New England Patriots Superbowl ring hanging from it; all the while Putin says he has no idea about having / owning / stealing a New England Patriots Superbowl ring.  Russia is that old enemy you see at a seedy bar.  You’re not really enemies any more but you don’t truly know where you stand.  You’ll ask, “Hey, we’re cool right?” and Russia responds with, “Of course we’re cool.  That was all in the past, no worries.” Then Russia turns to the bartender and screams so the whole room can hear, “Get this asshole over here a beer!  On me!”  You don’t really know if they’re joking or have just insulted you in front of a room full of people.  You also don’t know where all this money he’s flashing came from.  He’s got a tab going at the bar, but just a few years ago he couldn’t afford the cover charge to get in.  Russia with A-10 suited CALLS.

The raise comes back around to the Fed / US Treasury.  With A-Q of clubs and having already called the blinds, they want to see the flop.  Fed / US Treasury CALLS.

It’s a surprise the Middle East even knows it’s their turn.  Their food order just came so they’re even more distracted than before.  The Muslim Brotherhood completely misplayed Egypt.  Many of the other countries are involved in some sort of civil war or at the very least civil unrest.  Their phone is ringing and they “Gotta take this call, my friends.  Just one second.  Hello?  Hellllo?  Who is this?  Makmoud?  Joel? Who?  I cannot hear you, I’m playing cards.  Say your name again?  Who?  Yes, I can talk.  Sam?!  Oh, yes Sam.  How are you my friend…” while still on the phone, they look at their cards again.  “No, hold on.  I’m in the middle of a hand.  No, no, no bother.  Give me one second.”  At this point even the Middle East’s friends are pissed (you can imagine Israel going, “This is what I’m talking about!”).  After holding up the game, annoying every player at the table and making a fool of themselves, the Middle East throws their cards in and FOLDS. 

We finally get to the flop.  With the Middle East, Euro and North Korea out, we’ve got a seven-way hand.  The flop comes:

Ad / 8c / 6d

The Fed / US Treasury is now going to slow-play this flop.  They CHECK.

Corporations know this is a bad flop for them.  A flush is a long shot and with seven players in, they’ve got to feel someone has paired that Ace.  They do the only thing an aggressive, rule pushing, heartless player would do…they RAISE the pot in hopes of scaring off weaker hands and finding out if someone has a literal Ace in the hole.

China sees nothing of value at this point.  Again, they’ve got their own issues at home and they’re smart enough not to throw good money after bad.  Besides they’ve won quite a few hands of late and their sitting pretty with most of the other players at the table owing them money.  There’s no reason to chase this hand.  Championship poker players know when to fold can be more important than when to bet.  China, looking to be the next great superpower, FOLDS.

Israel couldn’t be happier.  They’ve flopped an open ended strait draw.  The Ace will set up for a monster beat if they can catch their straight and someone stays in thinking that a pair of Aces is going to win the hand.  The potential flush draw is worrisome but that’s why it’s called gambling.  The Middle East is already out so they feel a moral victory already.  With the Middle East out, they don’t feel the need to be as aggressive with the table so they just CALL at this point.

US Worker is screwed, only they don’t know it.  They know that the Corporations / Stock Market are probably bluffing.  They’ve played with each other long enough to know that the Corporation’s aggressive betting is probably a ploy to see who’s got an Ace.  The US Worker puts them correctly on a pair.  The US Worker is going to call but they are taking for granted the Fed’s initial check as weakness.  Also, they’re not looking at the other players as threats.  The odds of one of the other five players having an Ace are fairly high.  They should fold and wait for a better, safer hand to make their move on but this is the US Worker.  It’s comprised of US citizens with US educations; they’re not as smart as they think they are or once were.  US Worker CALLS.

Home Owners / US Housing Market actually have a strong hand.  Stronger than the US Worker.  Their K-8 of diamonds has them one card away from the high-card flush hand.  Like Israel, they hope the Ace is keeping players in the hand.  The only problem is the Housing Market has been hit hard lately.  They need a win and are a little more desperate than you’d think or hope.  With values recently rising again, Home Owners are feeling more confident.  Forget the fact that there are some shaky reasons for rising values, such as low inventory and an influx of investor money which will temporarily skew values more rapidly.  They want a win so badly, especially before signs of rising interest rates kick in and take back some of the gains that they’ve made.  They’ve also paired their 8 which opens up other possibilities if they don’t hit their flush draw.  Home Owners / US Housing Market is making a play, they RAISE.

Russia sees all this action.  “The action is the juice,” as Tom Sizemore says in HEAT.  Russia CALLS.

The Fed / US Treasury is more than happy to see all this money hit the table.  They’re sitting on an Ace pair with a Q kicker AND a possible, runner-runner flush draw.  Fed / US Treasury CALLS.

Corporations / Stock Market aren’t going anywhere.  They’re pot committed at this point and they’re the one player that luck usually shines down on.  Besides, when they’ve made poor decisions before and lost major hands, they’ve gone to the Fed and US Worker to trick them to believe that their livelihood is so valuable to the USA (and the world) that they needed bailing out when their chip stack was low.  They have no fear of loosing a hand.  They literally play with other people’s money and take their cut.  Corporations / Stock Market CALLS.

Israel is a little worried that with so many people in, there could be a flush draw out there but other than that, this is playing into their hands.  Israel CALLS.

The US Worker couldn’t be more screwed.  They’re sitting with dead money.  There’s only one card in the deck that would help them.  You just want to shake them and tell them to WAKE UP DUMMY, READ THE TABLE.  They’re gambling it all that a K comes out on the turn or the river.  They don’t even realize that a K of diamonds is probably the worst card they could see.  That might give them three-of-a-kind but it would also put in play a flush.  Luckily, or maybe not so luckily, HO / USHM is holding the Kd.  Foolishly, US Worker CALLS.

In an unprecedented and exciting hand, we’ve still got six players in.  Fed, Corps, Israel, US Worker, HO / USHM and Russian are all still in.  Next comes the Turn card:


This is where boys become men. 

The Fed / US Treasury just caught two pair.  They believe they’ve got this hand won.  Like normal, they’re a step slow and don’t realize all the hands that could have them beat.  They’ll have to play smarter as we get to the end.  The Fed / US Treasury RAISE.

Now we’ve got a game…Corporations / Stock Markets just hit three-of-a-kind.  Corps have lucked out again.  They know what the Fed is working with.  They always know what the Fed is working with.  They’ve got the Fed cornered and right where they want them.  The only card that could help the Fed / US Treasury is another Ace.  Sure the Ace would give the Fed / US Treasury AAA-over-QQ full house and would beat them but then they can just plead “too big to fail” and force the Fed to give them back the money they’ve lost.  They’re in a possible no-lose situation.  Corporations / Stock Market RAISES. 

As much as Israel would love to stick around and see if they could out draw the rest of the table, the stakes have gotten too high.  After all they’re one of the world’s smallest countries but one of the most powerful.  They’ve got to be smart and other than Russia, all the other players are supposedly friends of theirs.  They’ve fed the pot enough.  They might be the most aggressive but they’re also smart.  Israel isn’t a foolish country.  They’ll live to fight another day.  Israel FOLDS.

It’s almost too late but the US Workers finally wise up.  They realize that there’s at least an Ace out there and they’ve been throwing away money since the flop.  They are FINALLY getting out now.  They’ve been know to go down with the ship but hopefully they are learning and evolving in 21st century.  We can only hope so because if they don’t, the US worker is going to be uneducated and so far behind the rest of the world, they’ll be nothing to work on or create.  The US Worker FOLDS.  Better late then never.

Home Owners / US Housing Market is riding this hand out.  There’s too much money in the pot to fold when they’ve got the top flush draw.  Unfortunately they also think their pair of 8’s can make something.  If another 8 comes out, they’re screwed because that would give Corporations a QQQ-over-88 full house while HO / USHM thinks they have trip-8’s.  Again, they need a win and a Home Owners / US Housing Market recovery is what will fuel the USA economy’s recovery.  Another pot committed hand that has to CALL.

Russia has been watching all this action and almost can’t contain itself.  Especially the fact that the only players left are American tent-pole institutions.  America still doesn’t know what to make of Russia and if they’re our friend, enemy or associate.  They harbor US fugitives with technicalities.  Russia supplies our enemy with weapons.  They invade sovereign nations, which they claim either are still under Russian rule or are threats to Russian security (remember Georgia, not the state but the country).  Other than the Chinese, there’s not another former (or soon to be) superpower that would love to see the USA in complete turmoil.  The Chinese interest in the USA’s successes is exactly that, INTEREST.   We owe China so much money that they don’t want the USA to stop paying our bills.  Russia doesn’t have that concern.  We don’t owe Russia billions of dollars.  They’ve done their job in this hand by watching the different parts of the US economy weaken each other.  Besides, Russia has worked so hard to get back to the Main Table; they’re not going to throw away a hand with a pair of Aces.  There’s a good case to be made that they have the winning hand but it’s probably a long shot.  That is one of the advantages of going last in this round.  They’ve seen that even with their pair of Aces, they’ve got a weak kicker and probably can’t win.  Like China, they worked hard to make it to the Main Table and they’re in this for the long haul.  If folding now keeps them in the game, that’s what they’ll do.  Russia FOLDS.

So here we are.  The only players left are

1)      Fed / US Treasury = AcQc
2)      Corporations / Stock Markets = QdQs
3)      Home Owners / US Housing Markets = Kd8d

The table is playing:

Ad / 8c / 6d / Qh

Next is the river…

And that’s where we are, on the 9th of July, 2013.  We’re waiting for the River card to be played to see who wins the latest hand of Geo-political Texas Hold’em.

Right now the winning hand seems to be the Corporations / Stock Market.  Things always seem to fall in their favor, don’t it?   Home Owners / US Housing Market need a win, but not necessarily this way.  The only way for HO / USHM to win is on a dangerous flush draw.  What seems like positive gains in value could easily result in a double, some would say a triple, dip recession.  If the values of homes are truly inflated due to investor money and abnormal lack of inventory, this is not a long term win.  The recent spike in interest rates will have an adverse affect on the home prices as well.  For all the economic numbers that have come out recently, I don’t see where the growth and improvement is sustainably taking place.  The jobs report on July 5th was only around 40,000 better than expected (estimated to be 150 -160k and was closer to 200k new jobs).  But the unemployment percentage rate didn’t change and the feeling on main street doesn’t seem to make me believe the average worker is doing better or has gotten a better job.  It feels like a seasonally high employment figure, maybe counting on more part time hires for the summer months and jobs for kids on summer vacation. 

A conversation I had with someone just the other day was telling because we both said, no one that we knew was getting hired to a job that was a “career job”.  I know it’s a small sample but I’m not hearing from friends and associates that they’ve found a great new job that they’ll be at for years to come or a job that will grow with them through the years.  I still feel we’re in a stagnate economy where the average worker’s income isn’t enough to pay for the cost of living.  It’s hard to say there is new job creation when America isn’t creating anything new.  During the tech boom, we had new high paying jobs.  Sure, many of those went away when the tech bubble bust but it still left a lot of new jobs and careers that are still here.  The problem now is that there isn’t a new industry that’s creating jobs.  While the tech bubble left us the internet and all of its possibilities, the housing bubble left us only empty houses and debt.  It seems that we’re just hiring back workers that were laid off during 2008-2011.  There’s a great number of hidden or ghost unemployment figures as well as a massive under-employment problem.  The US department of labor considers full time to be 30 hours a week but anyone who works a 30 hour a week job will tell you 30 hours is NOT full time.  The rhetoric that “Obama-care” is keeping labor hours under 30 a week, so-as not to qualify companies as having 50+ full time employees, which in turn is the cause for much of this under-employment is simply not true.  More than 90% of companies that have over 50 full time employees already have health care. There’s a small percentage of businesses that may be playing this full time / part time game due to new mandatory healthcare laws but that shouldn’t have much affect on the under or lack of employment.  Also, we haven’t seen the effect of workers that have fallen off the employment / unemployment stats.  Many people have fallen out of the workforce and once the economy truly makes a comeback, those people will be counted as they re-enter the workforce.  That will be another hurdle to overcome down the road. 

A win in this hand of poker for the Fed / US Treasury would keep the lending rates low.  The recent rise in student interest rates will not be good for the economy.  As described, a rise in the mortgage rates will not be good for the economy either.  The difference between a win for the Fed and a win for the Housing Markets is that the Fed can control their rates and can keep their interest rates low for however long they feel necessary.  The Housing Markets’ interest rates are based on the yield of the US Treasury so it’s imperative that a win for the housing markets include Bond yields to stay low, which has not been the trend in the last few weeks.  In fact we’ve seen the highest rise in rates over the past few weeks than we have in anytime in the past decade.  The Home Owners / US Housing Market need a sustainable win.  Even the mention of “if” the economy gets better and the misunderstanding of Quantitative Easing (To quickly clarify, means that the US government isn’t going to turn off the switch to their massive buying of debt, it just means it will gradually start to pull back “if” the economy is sustainably better in September.  It’s an out plan, which every institution has to have a plan for the future, nothing has been written in stone about when it will start.)  This shook up the markets so quickly that rates shot up by half a percentage point in just one week.  Then when a stronger than expected jobs report (which I just described as dubious at best) sent the yields and mortgage rates up another half a percent.  In less than a month rates that were at all time lows of 3.5 – 4% are now 4.5 – 5%.  This has killed a huge refinance market, which was propping up the economy and helping to lower the average person’s debt but also killed a huge source of mortgage refinance activity which was creating a lot of disposable income and jobs.  This is why it’s key for the Housing Market to get the win in this hand so that we can sustain recent gains.

I’ve read some articles and watched some commentators that have suggested the government to stop buying debt and let the market find its current “real” value.  This would help the economy recover faster.  I don’t see how that’s true because we just saw what a taste of the “real” market conditions would look like and it wasn’t good.  I don’t believe that’s a credible plan.  Almost instantly we’ll go back into a recession.  I wonder where these economy “hawks” were when the US was bailing out the financial institutions that have only consolidated and insulated themselves so that they could become bigger and make more money.  Wasn’t that the problem before, “too big to fail?”  In 2008 when the economic crash began is when we should have let banks fail.  Now that they’ve been propped up and their value is at record highs, we have the same “problem” that we had before, too big to fail.  Except now the banks are bigger.

I don’t know the River card.  I don’t know what will happen with our economy.  I do know that what will happens with the various factions of the US economy (Fed / Housing / rates / jobs) will affect the entire world.  As you can see, this hand of poker has left us playing alone with the world watching.  The rest of the world is still reeling or dealing with their own economic problems.  The US economy was the first to start to fall into a recession.  My hope is that it is going to be the leader when it’s time to get out of this mess.  Europe, China, Russia, South America are all examples of economies that are getting hit and are experiencing what we went through five years ago.  These other countries and areas are now catching up (or should I say, falling down).

Playing this river card is going to be key for the last three players.  We need money to move in one direction or another, stagnant money is not good for anyone.  At the same time we don’t need one of the three US players to be taken out.  This is why they tell you not to sit down with friends.  At some point all the chips will be in the middle.  It’s a long car ride home if one friend busts the others out of the game.

I’ll say one thing; the Geo-Political Poker room is never boring.  

Wednesday, June 5, 2013

Wealth VS Rich and How Can I Get Some?

How does one become wealthy?  How do you create wealth?

Not just rich but wealthy.  There’s a big difference, as only the great Chris Rock can explain.  Simply put, there’re a lot of rich people running around in the world but wealthy people, there’s only a few thousand of those in the world.

Sports stars are rich.  I do mean STARS, like Manning, Brady (whose wife makes more than he does per year and has a longer earnings period), Jordan, Kobe, Shaq, Lebron, A-Rod, Verlander, Messi, Ronaldo, etc.  These are the athletes that are truly rich.  Rich as in, their families will be taken care of long time after they retire. 

Presidents are rich.  Some before taking office but most earn their money after they are president.  Through speaking engagements and use of their name alone will get them multi million dollar deals per year. 

Most CEO’s these days are rich.  The income gap between what the average worker makes and the heads of the company they work for grows each year.  Some are in charge of old companies like Bob Iger of Disney or Alan Mulally of Ford and some are upstart kids like Facebook CEO Mark Zuckerberg.  All these guys are rich.  Some are “super” rich. 

Wealthy is a whole other bracket.  Take the Guggenheim Partners.  They just recently bought the Los Angeles Dodgers for 2.15 BILLION dollars.  They’re a firm that manages over 125 Billion in assets.  Wealthy is being able to drop a billion dollars in cash and it not affecting you.

Bill Gates is wealthy, duh…but follow my train of thought.  When you’ve got a company whose products (in some manner) are in 80-90% of American homes, you’re wealthy.  

The Mars Family.  Yes, even something as simple as candy can be the start of an empire.  Why invest in oil or real estate when there is a holiday dedicated to buying and handing out candy?  Halloween, Valentine's Day, Christmas, Easter, etc.  I can't think of a holiday where candy hasn't wedged itself into.  The three Mars family members that are listed on the Forbes 100, are each said to be worth 17 billion.  Each.

When you’re trying to get a table at an exclusive restaurant and they say they’re all booked so you go and give the maitre d’ a blank check and tell him that you just bought the BUILDING, that’s wealth!  Wait…I think that was Bruce Wayne in a Batman movie.  Before I move on, can someone please tell me how Bruce Wayne became so rich?  His dad was a doctor.  Even the best doctors only make a million or so a year.  Thomas Wayne also dabbled in city planning (as doctors usually do) but that alone couldn’t have made him “F-U” money.  Did Bruce’s parent foresee a tragic death for themselves and have the most profitable life insurance policy ever?  The Wayne family seemed to have a long history of only-children which would to avoid diluting the Wayne fortune between siblings.  Somehow I became obsessed with this question and here’s how the Wayne Family is so rich.  I still question the continued viability of Wayne Enterprises.  Bruce Wayne’s “project” of being Batman must hemorrhage money, but yet the company seems as strong as ever.  I’ll leave this for my comic book blog to address…

Anyway, what was the question again; oh yes “How Does One Become Wealthy?”  It’s actually pretty simple.  While rich can be a crap shoot of the genetic lottery (where as you’re the best basketball player in the world) or you come up with an idea that will revolutionize society (create an app or website like Facebook or Twitter); rich can be obtained with a little hard work and a lot of luck.  Wealth is much easier but alas, harder to obtain.  All it takes to become wealthy is Time and Patience.  That’s why most wealth or wealthy people come from “old money”. 

The best and quickest example of this comes from Indiana Jones and the Raiders of the Los Ark, said by Belloq “Look at this. [holds out a pocket watch.] It's worthless. Ten dollars from a vendor in the street. But I take it, I bury it in the sand for a thousand years, it becomes priceless...like the Ark. Men will kill for it.”

If you have Time and Patience you can turn the simplest of things into wealth.  The trick is usually having a bit of money to start with.  The following is a story that was told to me about how a man became wealthy.  All it took was a little bit of knowledge, a little bit of money and then the patience to wait over time which caused him to be extremely wealthy (Keep in mind inflation / worth of money at the time of this story and that this wasn’t the sole investment this guy made.  It’s an example of a wealthy decision.).

During the real estate crash of the late 1980’s / early 1990’s there were more smaller / individual / local banks which held the mortgages against people’s homes.  Now a days this probably wouldn’t happen because 1) banks don’t hold mortgages any longer, they’re mostly packaged in groups and sold on Wall Street as investment instruments, or 2) banks that do hold mortgages are so big, there wouldn’t be a way to go to them with this proposition nor would one person have the power to sign off on this type of plan.  In the crash of the 90’s here’s what one man did.

This investor had connections with a local bank.  The investor was talking to the manager of the bank.  Over the course of their conversation the bank manager told the investor about all the loans that they had which were either “under water” or the borrowers weren’t paying their mortgage.  To the bank, these were toxic assets.  The investor shrewdly saw an opportunity.  The investor inquired to see if the bank was willing to sell him the NOTE on these properties for a discounted amount.  The bank, who saw that the borrowers weren’t making the payments or they were going to have to go through costly foreclosures proceedings, said sure.  They’d sell these “worthless” notes for pennies on the dollar.  So the investor said, “How much can I get for $100,000?”  The manager took him to the basement and said, “For $100,000, take whatever you can carry.”  The investor reviewed a few of the boxes of NOTES.  He didn’t take much time actually going through each file but got a good sense of what these were.  Many of the NOTES were from local houses here in Los Angeles and so he grabbed a few boxes and the sale was complete.  The bank got some capital back and the investor had ownership of these “worthless” NOTES. 

This is where time and patience kicks in.  The investor went through each of the files.  He contacted each borrower.  Some had abandoned the property and some were truly just junk.  There would be some foreclosure proceedings that he’d farm out to companies that handled that type of business and even on the ones that were junk, he didn’t loose too much money on them considering the overall cost.  But the ones he made contact with, he spoke to the borrowers to see what they had planned.  He wanted to find out if these were borrowers who fell on hard times or maybe if these were properties that lost value and to the current owners it wasn’t worth paying the mortgage.  This is when the investor started to play the long game.  He’d already spent the $100,000 to acquire what was between $3 - $5 million in face value of the notes so he wasn’t loosing any additional money.  He didn’t have shareholders to report to so whether the loans performed at a certain rate and time, it didn’t matter.  He told the borrowers to forget making payments.  He told them to not worry about the payments for now, but he’d keep track of the interest that accrued.  He told them to live in the house.  Take care of it.  They were still the owners.  When it came time to sell, that’s when he’d collect at the full face value of the NOTE and include all the interest that accrued over time.

Knowing that real estate will always go up in value over time (especially Los Angeles), the investor knew that one day the properties would regain their previous value.  He also knew that not everyone was trying to “scam” the lenders but the economy was in recession.  People would eventually find jobs and life would get better.  Many would want to move to other homes.  In the meantime, if the borrowers lived in a home that they still owned they’d take care of the home more than if they rented the home or it sat vacant.

Sure enough, the economy turned.  Home values went up.  People either refinanced or sold their homes and that’s when the investor cashed in.  Multi-thousand-dollar (50 – 200k) NOTES that he paid $500, $1,000 or maybe even $5,000 for, eventually were paid back in full and with the accrued interest.  With these kinds of profits, only one out of ten needed to pay off.  I assure you his record was better than that.  From just one $100,000 investment the investor would never have to work again in his life.  All it took was time and patience.

Why tell this story?  Turning 100k into a few million, albeit impressive, how is that “wealthy”?  Mainly because this is a story on how one becomes wealthy.  It’s a mindset and a way of looking at the world.  As I said in the beginning, rich is hard work and luck.  Wealth is something more.  Wealth is something greater.  A few million is not by itself a wealthy man made.  To turn a profit of over 100 times the starting cost, that’s wealth.  The investor barely lifted a finger or broke his back creating this wealth.  The luck needed was minimal.  If you consider what all the outcomes could have been, there wasn’t much luck at all.  Property values always go up.  People take care of things if they own it.  Seeing the economy over the long term and knowing that hard times don’t last forever.  These are all things that the wealthy consider when making their moves.

I remember when I first started doing a little stock trading in the early 2000’s.  This was right before the internet bubble crashed.  While I was trying to learn about what tech stock would make me the quickest profit, I would read about Warren Buffett and Berkshire Hathaway.  There were articles written about him and about his aversion to investing in these internet startups that promised to make people into millionaires.  He was described as a dinosaur that would soon die out in this new technology age.  Needless to say, while I and untold thousands of investors lost billions of dollars on tech stocks, Berkshire Hathaway value has quadrupled in the last 13 years while it’s hard to find a tech startup stock that’s either in business or worth a fraction of their all time high value.  Don’t be confused about a 4x improvement.  This is a stock that was at $45,000 per share and now sits at about $167,000 per share.  It’s not a penny stock that went from a $.50 to $2 based on “good news”. 

To become rich, you’ve got to work for your money.  When you’re wealthy, you’re money works for you.

Wednesday, February 6, 2013

Is It Time to Refinance or Purchase?

Yes. Refinance now. Don’t be a dummy. With rates averaging around 3.5 – 4% on 30 year fixed money, you’d be a fool not to take it.

This is not an advertisement for anyone to refi, well I guess in a way it is. Seriously, rates are so low that you’re basically getting free money. After conversations with my well respected friends and clients (not just the bums I drink and hang out with) and researching where the markets might go this year and the near future, now is the time to do something.

Forget all the technical talk. Rates are so low in comparison to any time in the last 30+ years. Here’s a basic graph that I pulled just to show what I mean:

There are far more technical graphs around, feel free to search them out, but you’ll find the same information.

To get a rate that’s below 4% is historically impossible, especially for a 30 year fixed loan. This is money that is locked in and will be a close to free as you’re going to get. God forbid rates get lower, you can always refi again. This is cheap money and I’ll debate anyone who wants to argue the merits of waiting.

2013 is going to be a defining time when it comes to politics and economics crossing paths. The country, and the world, is trying to figure out how to come out of this depression we’ve just gone through (and could easily fall in again). Our country’s politics have never changed so quickly and have never been so easily seen. The 2012 elections and analytical data clearly shows where voters are headed and which voting blocks are growing, which are shrinking and what the future generations believe in. By that I mean, we’ve got a Republican base that’s loosing its traditional footholds to a Democratic majority. Clearly, not every issue is the same but a shift is happening right before our eyes.

Again, I can have hours of debate and write pages of why and what both the Dems and GOP are doing to create this shift. Eventually the gridlock in Washington will stop and the country will start to head into a direction (trying to stay non-partisan but facts are facts and we will be going into “a” direction). As both the economy and politics of the day move forward, so will rates. Take advantage of these rates.

It might seem hard to make any payments. (Trust me; I know from personal experience that we’re living in hard times and every dollar counts.) But if you can make it through this rough patch and come out with a house, owner occupied or non-owner occupied, with rates at 3, 3.5, 4 or even 4.5% you will have set yourself up for success in the future.

No one has a crystal ball, but reality tells us that values will go back up and inflation (of some kind) will kick in. A $1,000 payment now will seem a lot less in five to ten years. So take the plunge and refinance or buy your properties now. You’ll be glad you did.

Thursday, June 21, 2012

Between Gods and ATMs...

Those are some brave bastards over at Moody’s…

Just the other day I was consulting with a Rabbi. No, don’t jump out a window or think that someone has taken over me or this blog. He’s a client of mine.

As I was saying, I was TALKING to this Rabbi and we were joking around. I’m working on the third of three loans for him over the past year. All of which have been with Wells Fargo. I won’t bore you with tons of details but let’s just say that each loan has been harder to get than the next.

Why? That’s a good question. Nothing has changed with the Rabbi’s / borrower’s credit, income or assets. All that has happened is time. Time has gone by. With time, lenders get a chance to make changes. Sometimes the changes are good and sometimes the changes are bad. An average person who glances at the news, would think, “Hey, I bet they’ve made it easier for people to get loans.” Sure, why not? It’s an election year. Both sides of the isle want to be seen as fighting for the little guy. I’ve read a lot of great (and bad) ideas tossed around, claimed that they’re being pushed forward or mandated into affect. FHA streamlines, HARP, HARP 2.0, HAMP, Freddie / Fannie relief programs, etc. These all sound great and have some great guidelines AND you’d think what would be any risk to the lenders since these all seem to be backed by the government.

Guess what, the BANKS WILL ONLY DO WHAT THE BANKS WANT TO DO. They don’t care what programs come out. “Oh, you think you qualify for the 115% CLTV program, guess what we only do that on loans we originally underwrote. What? You originally got your loan through one of the 200+ banks that have gone under like WaMu or Indymac or Countrywide? I’m sorry, you’re going to have to fuck off.” Actually I made up the fuck off part. They don’t even give you that personal decency. They just say no. Or how about the lenders like Chase, Bank of America or CITIbank who have either discontinued or shrunk their wholesale down so low, they really don’t have a wholesale option. If you thought that independent mortgage brokers where bad, wait until you get a taste of glorified tellers trying to take a loan app and fighting frivolous conditions. They wouldn’t know what a 4506t is from 1120’s are? How about the use of rental in come on exiting properties or cash out / value seasoning on new purchases?

Back to my Rabbi story, we only have one condition left. Wells Fargo never asked for this condition before on the other two loans but now they find it so pressing that the loan has been held up for weeks working on this. I can’t get into details but let’s just say, it doesn’t matter. The question / condition doesn’t have any bearing on the borrower’s ability to pay the loan back, question the quality of the borrower, affect the value of the property, change the borrower’s income in any way. We’ve even shown that this is how the borrower has been conduction transactions for the past 3 years. And again, THEY DIDN’T ASK FOR IT THE LAST TWO LOANS that where done within this year.

So I ask the Rabbi, how about a little good word with the man up above just to get us moved along. To my dismay, he said it doesn’t work like that. Besides, the banks only think they’re god.

That’s been stuck in my head. Same as how which ever brave sole was the person at Moody’s who dared to allow a downgrade in the ratings of 15 major banks, will have an ice pick mysteriously stuck in their skull.

Maybe banks are the new gods. First off, there’s actual proof of the person / people who run the bank. For instance, I could actually touch and see Jamie Dimon, head of Chase. Hell we don’t even get visions of Christ on things anymore, a smear of butter on toast which looks like Tim Teebow has taken that racket over. Secondly, BANKS DO WHAT THEY WANT TO DO and what's best for THEM.

Sure the new HARP 2.0 says you can go unlimited CLTV, which means you have to call up the investor on your second to see if they are willing to subordinate to a 150 – 200 – 200+%? Yeah, that sounds like a bank, let me say yes to extending credit to something where we have no equity percentage (actually that does sound like a bank, only they usually save that for millionaire business).

Including the Rabbi’s loan, I’ve got three or four other loans that are all clear of conditions except one stupid thing. They have the insurance but it needs to have the new bank’s name on it as the loss payee first, which should be illegal because in the few days that this is switched technically if the house burns down the lender loss payee is incorrect, but why get into technicalities. How about another loan that the borrower is worth millions and makes millions and has other loans with this lender but they want to have the quarterly filings of the borrower’s business, even though I’ve given them the tax extension form. If I had quarterly filings, I’d have the damn tax returns. So I give them a P & L for 2011 and even through the first quarter of 2012 but now they want a Balance sheet. I gave them one for the current year, but no, they need one that coincides with the 2011 P & L. And don’t forget this charmer, they now need every page of any bank account listed. If it says 1 of 50, they want all 50 pages. I’m sure those boiler plate pages are what is causing all the fraud in this business. Or better yet, the pages that say, “This page is intentionally left blank.”

This is how I feel by the end of the day. I don’t wonder why anyone in this business doesn’t kill themselves; I wonder why it doesn’t happen more!

Back to Dimon for a second, why are we even wasting our time with him? Congress loves nothing more to make it seem like it’s doing something. Meanwhile if you watch this charade, these government officials are kissing his ass so hard, I’m surprised they don’t make gay porn out of it. Dimon is in charge of a bank that is now one of the largest institutions in the world and was credited for not making the same “bad choices” that these other banks had made. Meanwhile he was brought to share with the world the reasons that Chase has lost (not misplaced and will find again, gone) 2 BILLION – 7 BILLION dollars of their clients money. And he’s the “best” of them!!!!!! Before each committee member starts to ask questions, they address him like he’s god’s gift to banking. He’s just lost 2 BILLION dollars. A monkey with a dart board couldn’t screw up that bad. What’s worse is that they’re not telling him what to do, they’re ASKING him what his thoughts are on what went wrong and what laws / regulations should be in place to prevent such catastrophic losses.

Just to give you an idea, 2 Billion divided by 365 days is a loss of $5,479,452.06 per day. Let’s be generous. Loosing 2 Billion can’t be that easy, let’s divide that over five years and that comes out to be a loss of 1,095,890.41 per day. PER DAY. For five years. If Chase just gave that money to people, you’d have 1,825 millionaires.

To watch these elected officials, who most have no clue on what finance is, kneel down and cater to this guy makes me sick. Why are we even wasting the time and effort bringing guys like this to Washington? It’s like the baseball players that where suspected of using steroids. We didn’t learn anything that we didn’t already know. In fact, most of these players got themselves in more trouble by going. Anyone remember a finger waging Palmero saying he’d never used steroids, only a month later be caught using steroids?

Are banks the new gods? Have all the Rabbis, Priests and Clerics been supplanted by Tellers, Executives and CEOs? It sure seems like it. The government won’t do anything before it factors in the “cost” of its actions. “What will this mean in China / Europe?” No one really cares what China or Europe think, they just want to know what will happen to their respective economies and in return our economy.

North Korea and Iran represent a bigger threat to our country than any other combined factions. Why not just annihilate them? It’s not like we haven’t invaded other countries on less, for less? Because China wouldn’t be happy. Maybe they wouldn’t invest in our country or let us invest in their skilled slave labor force. We could go to Africa, they’ve got poverty all around but they’ve also got uncontrollable Warlords running things around there. Besides, their people aren’t skilled or live in huge governmentally built and funded cities. If the price is the same, investors will always go with the easier to control workforce.

Before I get too far off topic, you want to know a secret.

SHHHHHHH, come closer….

But you can’t tell anyone…..

The Chinese have no choice but to invest and deal with us. That’s what’s so funny!! We don’t even see it.

Oh, yeah, what are you going to do China? Invest in Greece? How about Spain? The Euro was a half hearted idea that works well when times are good but to have no real governing body or control over the different countries, it’s set up for disaster. Good luck Euro Zone over the next 10 years. You think our depression is bad? Our workers don’t take 2 hour siestas in the middle of the day as a part of our culture. You ever heard of a hard working Greek, other than ones that have immigrated to the USA. The Spartans are dead my friends.

We’ll skip over Africa because… really do I have to go into that again?

Russia? “You don’t see piranhas eating other piranhas?” – Rounders, great movie.

So what’s left? South America. Yeah that sounds like a place I should invest my money. With rigged elections and corrupt regimes whose main exports are Coffee, Cocaine and migrant workers? There’s some promise in that but you’re not betting on a strong horse.

The only thing they can do is continue to work with the USA. Now I’m starting to get way off track. Let’s circle this one for a landing.

We saw an extremely brave maneuver by Moody’s today. By downgrading the banks, not only has Moody become target #1 but also probably something that people will soon find or hear is irrelevant. The only prayer anyone is going to hear is the one from when Moody’s wakes up and finds the head of their dead president at the foot of their silk sheeted bed. And the banks will be saying, “Who’s your god now?”

Thursday, January 26, 2012

Space and Beyond

Listening to the GOP debates and now the back and forth between the candidates can make ones mind numb. Especially since the two main runners are Romney and Newt (yes I feel that Gingrich has made it to the status of a one name superstar). I could go on forever talking about politics and what I feel about each candidate but there was something said today that reconfirms a mindset that I just can't agree with.

Maybe it's a generational thing. Maybe it's my love for sci-fi. Maybe it's my hope that the world can be a better place and one day the people of earth will see that, like it or not, we are ALL from the same planet.

Newt stated that "in his second term as as president there will be a permanent settlement on the moon, and it will be American".

Avoiding the absurdness of the fact that Newt would have a second term as president, I'm more concerned about this American settlement on the moon. Whether or not we actually NEED this settlement is a different debate that time will tell. What disturbs me is that if we get to the advanced state as to be able to have this permanent settlement and could leave our home rock, Earth, is that we'd still be saddled with antiquated ideals that have held our world apart for at least the last 5000+ years.

I am and always will be a true red, white and blue American. But I also see that our world has become much smaller over the past few decades as technology has brought people from all over the world together. It's amazing to me that in seconds I could be online with people from all over the world. I could jump onto my Xbox and be playing Gears of War with someone from NYC or London or even Iran or China.

I truly believe that as the world becomes smaller, old school war will become a thing of the past. I don't ever think we will have a conflict on the scale and scope of World War 2. We knew very little of what Germany was doing in early 1930. The average person couldn't tell you what countries or providences made up the USSR in the 70's and 80's. Compare that to now, we know when there's the slightest unrest in the middle of an African desert. We might not do anything about it but we know. Twitter and Facebook can topple a corupt regime in Egypt at the same time a lonely man in Calabasas downloads what would normally be illegal porn from his office computer... I mean check soccer scores from the EPL (that's right, whew that was close). Anyway, my point being the world is a much smaller place. I could understand hiding under your desk at school due to the threat of a nuclear attack from a nameless / faceless enemy, but would I go to war with Han from Korea that I play video games with online and who sends me bootleg movies?

How does all this fit into an economic blog? Well, because like it or not, we're in an world economy now. On a day to day basis we feel the affects of what happens in Europe and Asia. We've got 24 hour economic news channels. I can trade stocks all over the world from my iPhone at any time of day. If anything is going to bring the world together it's going to be money.

To have a permanent fixture on the moon would take a massive amount of money. It would also be tremendously risky. What any shrewd person would tell you would be to bring in different groups and spread the risk out. I'd hope that we'd also bring in the best and brightest for such an endeavor and that would mean bringing together people from where ever they may be from.

This is the next step of exploration not just to see who can plant a flag first. The moon already has an American flag. Does that mean we own it? I don't think so. Besides, unfortunately and sadly a corporation will probably claim or be given ownership over anything new that is discovered. More than likely it will be a multi national corporation.

To think that a man who is running for president wants the USA to own the moon scares me. What are we going to do with the moon when we can't even fix the problems we have at home? Or maybe he's thinking of a good place to divorce his 3rd wife and leave her on this moon settlement.

We've learn from the past, that to become great we must work together. A massive undertaking, like living on the moon, is going to take a joint venture. As we are becoming one economy and one society, we certainly shouldn't forget our roots and heritage, but we should put aside old xenophobic fears accept that we need to work together. Instead of an American settlement we should have a human settlement. Believe me, when the aliens come to take us over as slaves or steal Earth's natural resources (the ones we haven't polluted) they won't care which part of the rock we're from.