For anyone watching BitCoin on the sidelines, we all knew that something would eventually scare the speculators. link
BitCoin is a peer-to-peer token transfer system, that seems to be totally independent of any central banking authority. But if you can't trust our own digital wallet to manage your BitCoins, you go to a broker to help you store and transact with others.
But alas one of these institutions had their users' password hashes stolen. So anybody with a weak password, like 'password' or '123456', will likely have lost their BitCoin Stash. The administrators are rolling back transactions, and alerting those involved in any transfer in BitCoins of the occurrence. Plus they have initiated a password reset for all their users.
You never hear about this shit from the Banking system, not because it doesn't happen, but because a loss in faith of the system could be devastating.
Anyway, I still have faith my PC will generate me a BitCoin, one day!
Monday, 20 June 2011
Sunday, 12 June 2011
There's gold in that there supernova
The M51 Supernova was observed last week, from 25 Million light years away. Our own galaxy gets one every one hundred years or so, and we are overdue as the last was in 1601. It's also thought that a gamma ray burst from a supernova 44 Million years ago made two thirds of the earth's species extinct.
Note that all the naturally occurring elements heavier than iron are fused into existence during the violent burst of a supernovae. Including that rare and long coveted element Gold (Au).
Saturday, 11 June 2011
In Debt we Trust
Local news this morning, Australian first home buyers are most relaxed with the high debt burden to acquire their first home (Link to genworth press release). Its painful irony that debt appetite of the home buyer is the sole reason for the huge capital outlay one needs to buy property in the first place.
The report goes on to say that 39% or Australian first home borrowers are using half their income to service their debt. The average age of the first-time home borrower has risen on average from 27 to 30, in those countries surveyed.
The above chart comes courtesy of Steve Keen of the University of Western Sydney, his blog debtdeflation.com, is always a good read. Keen claims that the run up in house prices is simply an appetite for debt, and that the coming collapse in home prices is a symptom of an economy that can no longer service these debts.
This contrasts nicely with of debt appreciation shifting from the private sector to the public. Some theorize that the weak recovery since the GFC is solely attributed to a debt fueled government stimulus.
The report goes on to say that 39% or Australian first home borrowers are using half their income to service their debt. The average age of the first-time home borrower has risen on average from 27 to 30, in those countries surveyed.
 |
| Australia vs US private debt to GDP ratio as % |
This contrasts nicely with of debt appreciation shifting from the private sector to the public. Some theorize that the weak recovery since the GFC is solely attributed to a debt fueled government stimulus.
Friday, 10 June 2011
Core Deflation in the AUD, not yet...
This little graph comes courtesy of the Reserve Bank of Australia, and shows a slowing in the growth of the money supply and consequently credit growth in this country. Or is that the other way around?
Note growth declines began well before the GFC. Demonstrating an apatite for credit was already at its peak, long before asset markets began their collapse. During height of fear, some freshly printed money flowed into the banking system. But it had little or no effect on turning around credit growth. This money was likely to have been exported, in search of a return.
I'm not sure how this correlates with the rise in the Ausssie dollar. The dollar's rise has in part to do with the commodity markets. But the carry trade has brought us hot international currency looking for reward in our comparatively high cash rate, currently 4.75%!
Looking forward to seeing this graph for the 2011/2012 figures. With the property market cooling, credit expansion may actually fall into the negative. Given our excessively property-focused consumption economy.
Thursday, 9 June 2011
Sliding down hubbert's peak
Big news upon waking this morning is this Gulf of Mexico oil discovery.
"This is one of the largest discoveries in the Gulf of Mexico in the last decade," Steve Greenlee, president of ExxonMobil Exploration Company
So that should be enough to make the US a self-sufficient oil producer for the next ten years? No, 700 million barrels of oil equates to a month of consumption in America. Just ten days of world oil consumption at current rates.
The above graph shows just how much this new discovery contributes to the energy mix in the coming decades. Specifically the green Line. Note that the crude price needs to stay above $90/barrel to bring these kinds of deep water discoveries to market.
The graph, in my opinion, is highly optimistic. Any growth in energy production hinges on the light blue and red areas. These are estimated future reserve figures given by OPEC countries, who are quite secretive. We also rely on numbers that plucked from thin air (red) called "Fields yet to be found". How can anyone quantify a contribution by oil fields that haven't been found yet!
Australia is well placed to supply natural gas to an energy hungry economy, but this too requires energy intensive processes in order to ship to far off markets. But switching energy intensive economic activities from oil to natural gas power is a long way off.
The writing is on the wall for anyone who looks at this subject deeply enough.
"This is one of the largest discoveries in the Gulf of Mexico in the last decade," Steve Greenlee, president of ExxonMobil Exploration Company
So that should be enough to make the US a self-sufficient oil producer for the next ten years? No, 700 million barrels of oil equates to a month of consumption in America. Just ten days of world oil consumption at current rates.
The above graph shows just how much this new discovery contributes to the energy mix in the coming decades. Specifically the green Line. Note that the crude price needs to stay above $90/barrel to bring these kinds of deep water discoveries to market.
The graph, in my opinion, is highly optimistic. Any growth in energy production hinges on the light blue and red areas. These are estimated future reserve figures given by OPEC countries, who are quite secretive. We also rely on numbers that plucked from thin air (red) called "Fields yet to be found". How can anyone quantify a contribution by oil fields that haven't been found yet!
Australia is well placed to supply natural gas to an energy hungry economy, but this too requires energy intensive processes in order to ship to far off markets. But switching energy intensive economic activities from oil to natural gas power is a long way off.
The writing is on the wall for anyone who looks at this subject deeply enough.
Wednesday, 8 June 2011
Deflation: Enemy Number One?
Some very early notes I have, when I first starting trying to understand this subject were:
"Inflation and Deflationary phenomenons are a direct result of the money supply"
I have found little evidence to draw me away from this view, so far. Because if you were to view money as any bulk commodity, supply and demand metrics are at play here. Just think of money as the commodity that one uses to acquire commodoties! But deeper in my notes is also this statement:
Is this stuff rocking your world? Thats just the opening paragraphs too! If it's not, watch the low budget documentary. "Money as Debt". To better understand some of the underpinnings of our money system, and why the second of the above statements carries such weight.
"Inflation and Deflationary phenomenons are a direct result of the money supply"
I have found little evidence to draw me away from this view, so far. Because if you were to view money as any bulk commodity, supply and demand metrics are at play here. Just think of money as the commodity that one uses to acquire commodoties! But deeper in my notes is also this statement:
"Deflation is worse for growing an economy than inflation"
My observation is that central bankers around the world are shit scared of deflation. But I haven't questioned why the above notion is true. Until now.
This article on mises.org (another dense read), takes a couple of passes to really get the gist. Its a revelation, and has me scratching down extra notes in that little book of economic truisms. Like:
"Firms and households can successfully produce any quantities of consumers’ goods at any price level and with any nominal quantity of money"
"A fiat money regime considerably facilitates the re-distribution of resources within society. It allows the owners of the printing press and their political and economic allies to enrich themselves far quicker and at much lower cost than any other producer in any other field."
The prevailing assumption about the evils of deflation are centred around consumption and investment. Mainly, how will consumers consume and investors invest with an expectation of a fall in the monetary value of real good or service?
This first part of the question is answered simply. Profit, which is the spread between the wholesale price and its retail. That being, deflation, in an enterprise works both sides of the ledger. Just don't be holding on to stock for too long!
The second assumption are investors. They can forget capital gain. But for value investing, cash flow or capital appreciation as measures of business success, are secondary. For its year on year profit growth that ultimately determines business success. I often look at a debt/asset ratio too, just to see how much a company is burdened to its financiers. So in deflationary investment markets, the dividend becomes an investors solace.
The most interesting part of this article is the discussion of debt. Deflation is very bad for both lender and borrower, as both parties are likely to take a punishing toll. Inevitably, deflation means debt restructure. A very bitter pill for both government and finance to swallow. So all central bank tools to pursue an inflationary path are being enacted.
It can be argued that the sole reason for quantitative easing is to turn around deflating markets, like property. Two decades of economic growth has been driven by mountains of debt in all world markets. One would argue no amount of inflationary push by printing money will turn around the deflationary effects of the current fashions in paying down our debts.
This first part of the question is answered simply. Profit, which is the spread between the wholesale price and its retail. That being, deflation, in an enterprise works both sides of the ledger. Just don't be holding on to stock for too long!
The second assumption are investors. They can forget capital gain. But for value investing, cash flow or capital appreciation as measures of business success, are secondary. For its year on year profit growth that ultimately determines business success. I often look at a debt/asset ratio too, just to see how much a company is burdened to its financiers. So in deflationary investment markets, the dividend becomes an investors solace.
The most interesting part of this article is the discussion of debt. Deflation is very bad for both lender and borrower, as both parties are likely to take a punishing toll. Inevitably, deflation means debt restructure. A very bitter pill for both government and finance to swallow. So all central bank tools to pursue an inflationary path are being enacted.
It can be argued that the sole reason for quantitative easing is to turn around deflating markets, like property. Two decades of economic growth has been driven by mountains of debt in all world markets. One would argue no amount of inflationary push by printing money will turn around the deflationary effects of the current fashions in paying down our debts.
Tuesday, 7 June 2011
Hire Cycles
One bike share programme is being hailed a success, while another a failure. But the statistics would suggest the opposite.
Just lifting this data off each of the two scheme's webiste:
* Toronto and Brisbane both share mandatory helmet laws
Despite all the bad publicity, Brisbane's Citycycle is doing pretty well when compared to other new cycle hire schemes. Commercial success is not likely to be either City's core objective here. So keep with the faith. Cycling is the superior transport model in the congested inner urban landscape.
Just lifting this data off each of the two scheme's webiste:
| Brisbane | Toronto | |
| Subscribers | 4700 | 1700 |
| Stations | 100 | 75 |
| Bikes | 2,000 | 1,000 |
| Trips | 40,000 | 10,000 |
| Subscription/yr | $60 | $95 |
| Population | 2,013,000 | 5,113,000 |
* Toronto and Brisbane both share mandatory helmet laws
Despite all the bad publicity, Brisbane's Citycycle is doing pretty well when compared to other new cycle hire schemes. Commercial success is not likely to be either City's core objective here. So keep with the faith. Cycling is the superior transport model in the congested inner urban landscape.
Economic Transport
This tweet came to me via my local bicycle lobby group:
'Every bicycle km ridden saves society 25 cents in the dollar, every car km driven costs society 60 cents in the dollar' Jan Gehl
So the author is an architect, with experience developing public spaces. His emphasis is for a more compact people friendly environments. A resident of Copenhagen, who advocates the bicycle front and center in urban planning. But where do these figure come from?
Well I've heard some good statistics that may give this claim weight. Such as:
But when the above areas of the economy (Health and Transportation), account for only about 12% of GDP, these numbers start looking shaky.
So much of the benefits of a truly cycle friendly city verge on the intangible. How much would people pay for clean air, or a more sedate, human centric public thoroughfares. I know the city's personality would change, but would economic prosperity?
Property values are at premium prices along bike paths, crikey! This is not a saving, its more like a cost!
The numbers just don't add up! Help!
'Every bicycle km ridden saves society 25 cents in the dollar, every car km driven costs society 60 cents in the dollar' Jan Gehl
So the author is an architect, with experience developing public spaces. His emphasis is for a more compact people friendly environments. A resident of Copenhagen, who advocates the bicycle front and center in urban planning. But where do these figure come from?
Well I've heard some good statistics that may give this claim weight. Such as:
- The cost of 1 km of highway can build 200km of bike path
- Cyclists halve their risk of coronary heart disease
- The average american spends more on car transportation than they do on food.
But when the above areas of the economy (Health and Transportation), account for only about 12% of GDP, these numbers start looking shaky.
So much of the benefits of a truly cycle friendly city verge on the intangible. How much would people pay for clean air, or a more sedate, human centric public thoroughfares. I know the city's personality would change, but would economic prosperity?
Property values are at premium prices along bike paths, crikey! This is not a saving, its more like a cost!
The numbers just don't add up! Help!
Monday, 6 June 2011
Negative GDP the result of Positive Frugality
Australia’s Economy Shrinks Most in 20 Years as Floods Hurt Coal Exports. The Independent
While single reasonings make the headlines, there is a far more sinister set of numbers driving our GDP downward. For raw material exports account for a small fraction of Australia's GDP. And like the US, Australia is a service-oriented economy, which makes up 75% of its total GDP.
Retail sales, have gone backwards due to the household savings rate ticking upward. Economists generally applaud debt deleveraging, but the consequences can quickly become a snowballing of deflation. The Half-yearly sales, and deep discounting, may in fact get shoppers out for next quarter's GDP figures, but it won't help the prosperity for Australian retail. Lets not to forget that the Internet economy is robbing Australian retail, because even with the extortionate postage costs, its still cheaper to buy online.
Secondly Property Prices have peaked in pretty much all capitals, except federal government land (Canberra). So the decade long Greater Fool property market, or buy and flip is over for the moment. But this also bad news for the armies of tradespeople around the country. The idea that one can mortgage to increase equity in their homes with new swimming pools or extra bedrooms is a fools game now.
Lastly the strong Aussie dollar is sending our hard earned money overseas. Australians are going to Europe and America for their holidays now. Inbound tourism is flat too, tourists from all over the world can find much cheaper alternatives to our offerings. Leaving resorts all around the country to vie for a smaller slice of the tourist dollar.
While single reasonings make the headlines, there is a far more sinister set of numbers driving our GDP downward. For raw material exports account for a small fraction of Australia's GDP. And like the US, Australia is a service-oriented economy, which makes up 75% of its total GDP.
Retail sales, have gone backwards due to the household savings rate ticking upward. Economists generally applaud debt deleveraging, but the consequences can quickly become a snowballing of deflation. The Half-yearly sales, and deep discounting, may in fact get shoppers out for next quarter's GDP figures, but it won't help the prosperity for Australian retail. Lets not to forget that the Internet economy is robbing Australian retail, because even with the extortionate postage costs, its still cheaper to buy online.
Secondly Property Prices have peaked in pretty much all capitals, except federal government land (Canberra). So the decade long Greater Fool property market, or buy and flip is over for the moment. But this also bad news for the armies of tradespeople around the country. The idea that one can mortgage to increase equity in their homes with new swimming pools or extra bedrooms is a fools game now.
Lastly the strong Aussie dollar is sending our hard earned money overseas. Australians are going to Europe and America for their holidays now. Inbound tourism is flat too, tourists from all over the world can find much cheaper alternatives to our offerings. Leaving resorts all around the country to vie for a smaller slice of the tourist dollar.
Sunday, 5 June 2011
Saturday, 4 June 2011
Books and Mortar
News in Australia, is that the last handful of Borders bookstores are closing their doors in two weeks. Borders is a relatively new player in the retail scene, bringing a war chest for expansion with giant retail outlets Australia wide. They started here with a three stories tall flagship store here in Brisbane city, a stones-throw from the central mall.
No its not exactly a secret that book retail is a tough market, the cheaper, online giant, Amazon has and increasing slice of the bookworm pie. But thats not entirely the reason Borders went belly up. You see Borders and Angus Robertson the other big book retail outlet, were both owned by REDGroup.
REDGroup was not a book seller, it was a private equity firm. AKA investors, with an all too common business model.
No its not exactly a secret that book retail is a tough market, the cheaper, online giant, Amazon has and increasing slice of the bookworm pie. But thats not entirely the reason Borders went belly up. You see Borders and Angus Robertson the other big book retail outlet, were both owned by REDGroup.
REDGroup was not a book seller, it was a private equity firm. AKA investors, with an all too common business model.
- Raise a whole lot of money through debt markets
- Buy majority stake in some well respected brand name
- If there is still debt left over, aggressively grow that business and attempt be the dominant player
- Transfer all that debt on to the balance sheets of these trading entities.
- Hope these businesses can grow ahead of that crippling debt.
Friday, 3 June 2011
Degrees of Scam
http://inflation.us/ has a documentary called College Conspiracy. Which puts together a very clear argument against the prevailing assumption that a college degree is a ticket to continued prosperity. It draws a picture of US tertiary education system as a government sponsored scam. And like any business sector, is hell-bent on growth economics ahead of quality. But a constant in the film is student debt. Many students, especially in the US, exit their studies with a hefty mortgage on their brains, before they can even start thinking about debt for property.
But what got me was at 30:50, an unnamed individual enters the screen and touts that the Industrial age does not have long to go and that a Psychology degree is worthless when our species regresses to scratching around for food and water. Oh and the dollar will be worthless due to hyper-inflation anyway.
Now lets take this one point to its logical conclusion. If there were hyper-inflation, wouldn't that mean that ones educational debts would be inflated to nothing along with a worthless currency? The rest of the documentary sounds a bit hollow now. Crippling debt AND worthless currency? No you can't have it both ways.
These gold hoarding inflation hawks, with end of the world prophecies, make things hard for the rational world to make sense of the future.
My thoughts; we badly need a good harsh recession. Its when adversity strikes, that ingenuity, creativity and efficiency become more important for success. Thus. This entrepreneurial spirit is unlikely to come from any formal qualification. So remember kids, find your passion first, then plan your steps to better profit from it.
But what got me was at 30:50, an unnamed individual enters the screen and touts that the Industrial age does not have long to go and that a Psychology degree is worthless when our species regresses to scratching around for food and water. Oh and the dollar will be worthless due to hyper-inflation anyway.
Now lets take this one point to its logical conclusion. If there were hyper-inflation, wouldn't that mean that ones educational debts would be inflated to nothing along with a worthless currency? The rest of the documentary sounds a bit hollow now. Crippling debt AND worthless currency? No you can't have it both ways.
These gold hoarding inflation hawks, with end of the world prophecies, make things hard for the rational world to make sense of the future.
My thoughts; we badly need a good harsh recession. Its when adversity strikes, that ingenuity, creativity and efficiency become more important for success. Thus. This entrepreneurial spirit is unlikely to come from any formal qualification. So remember kids, find your passion first, then plan your steps to better profit from it.
Thursday, 2 June 2011
Market Volatility, forget Buy and Hold
The world market gyrates today into the negative, given the headline that economic growth is projected to be slower than anticipated. But for the equity investor, the last two years have been dismal. Especially when one looks at the leading indices in inflation adjusted terms.
Central banks in the developed world are in a race to the bottom, devaluing their currencies, in an effort to stave off the deflationary effects of a recession, and to regain some industrial competitiveness in the world economy. But not Australia, somehow we are proud of our strong dollar. Commodities have been where all this newly minted hot money has found a temporary home. Billions of investment dollars have landed on these shores to secure untapped coal, gas and iron ore in Queensland and Western Australia.
So why then has the All Ords gone nowhere. Even with a strong Aussie dollar, and core inflation at a record low, the ASX All Ords can't keep its nose above 5000 for anything more than a day or two
Because its impossible to find a good industrial, retail or financial that is thriving on the international stage. Simply put, the Aussie dollar is killing everything EXCEPT mining.
Retailers are hurting, because the strong Aussie buys more on Amazon then it does here. Any business who exports, is looking to offshore their operations. And banks are the first to show the cracks, with some negative price figures in our housing market.
Investing on the ASX is a risky business now, speculative punts, while hedging on safe utilities, may be your gain on what is a turbulent era for the investor.
Wednesday, 1 June 2011
Duolopolies collude
Our local supermarket opened last week after a metre of river sludge inundated it in the January 2011 floods. Whats interesting are these discount vouchers both majors are dropping in our letter box.
Its great for you local community, and I'm sure cashflow at all these chain stores in the inner south are up. But I'm sure profitability isn't.
But what may be good for us, is not for the independent grocers who are hearing crickets instead of cash registers. This is the third week now that a 10% discount has been offered. And I'm sure this phenomenon isn't a common occurrence, anywhere in supermarket retail.
But we Australians have become accustomed to teaser discounts namely in store brand Milk and Bread. We are not paying the true costs associated with these staples. Lets hope that it does not mean the slow destruction of these industries, before we realize a long-run discounts do have an underling cost.
Its great for you local community, and I'm sure cashflow at all these chain stores in the inner south are up. But I'm sure profitability isn't.
But what may be good for us, is not for the independent grocers who are hearing crickets instead of cash registers. This is the third week now that a 10% discount has been offered. And I'm sure this phenomenon isn't a common occurrence, anywhere in supermarket retail.
But we Australians have become accustomed to teaser discounts namely in store brand Milk and Bread. We are not paying the true costs associated with these staples. Lets hope that it does not mean the slow destruction of these industries, before we realize a long-run discounts do have an underling cost.
 |
| Get em while their hot! |
Subscribe to:
Comments (Atom)