The Power of Women in the Economy

The Power of Women in the EconomyMark Dennis is offering another free educational workshop entitled “The Power of Women in the Economy” at 6:00 p.m. on Tuesday, October 16, 2012 at Café at the Hamptons in Fernandina Beach, located at 95742 Amelia Concourse.

“Women are shaping the economic landscape and taking on more financial responsibility than ever before,” says Dennis. “Longer life spans, lower earnings, and their roles as caregivers take a big bite out of retirement assets for women as a group, placing many of them at risk of poverty in their golden years. Only about one in three women have any sort of financial plan in place to help them navigate these challenges.”

This workshop is designed for women (and the men who care about them) to learn more about unique financial struggles faced by women and how to avoid or overcome these planning obstacles.

Topics discussed at the workshop will include:

    -Why the economic crisis is a “wake-up call” for everyone’s retirement security – and what you can do about it.
    -Why women are (and should be) more involved in household financial and investment decisions.
    -How to feel more confident and better informed about important financial choices.

Seating for this free workshop is limited and reservations are highly recommended. Reserve seats by calling Mark Dennis at 904-491-1889 or reserve online at

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How Hopeless is our Love Affair with Real Estate? Objective reasons to own Real Estate

Follow objective reasoning for owning Real Estate

Like my friend and fellow contributor Mark Dennis has been approached on numerous occasions about the right time to buy real estate, I am constantly bombarded by readers, friends and family on both sides of the ocean why I have not gotten back in the saddle of real estate after I offloaded all my real estate assets between 2002 and 2006. My reasons for this conscious reluctance are mostly embedded in age financial liquidity requirements. I’ll get back to that later.  For now I want to talk about the real estate bubble that won’t fully burst.

Philosophically, culturally and financially the American Dream has always centered around the attainability of prosperity in which home ownership played a major role. As much as the claim goes that Americans have a love affair with automobiles, I think they put homeownership on a pedestal beyond sensible adoration. Still after half a decade of declining real-estate prices, oftentimes wiping out all already remortgaged equities, I can’t believe how many people are still excited about the real-estate sector as they purchase their houses salivating over the potential of higher prices ahead. Recent surveys expose that 4 out of 5 Americans consider it financially smarter to own than rent.  Many are still in the speculation mode as they search for deals among the heavily discounted homes, waiting for a rebound at any moment. Really, Americans have never fallen so deeply in love with any other asset class.

Sure, the country has had its flings with other bubbles such as a full fledged mind-boggling romance with the tech sector? However, that experience was different; it was based on lust rather than love. Lust for the big profits. After the tech bubble burst, the average investor wanted to hear nothing about a company name ending with “.com” – even when great opportunities came around. What started as a hot affair ended in years of bitterness and feelings of betrayal.

Not so much with housing! After years of disappointment and anger, our hearts still seem to skip a beat at the proposition of rising home prices, however local and location related the opportunities are. Would I buy a distressed property in New York City. Probably yes, because the laws of supply and demand in that city are extremely favorable compared to for example rural anywhere USA. Would I buy a distressed property in the Washington DC area? Only if I can unload it in the next 3 months. Washington DC is hot, because the government has managed to politicize the economy for now, which means that large governmental control is desired, attracting hundreds of thousands to the area in search for a government job. This formula runs out of space when economic output cannot sustain the burden of a bloated government any longer, at which time the DC area will turn into large suburban ghost towns.  On a side note, I watched the first episode of NBC’s new series “Revolution” and wondered in what existing suburban ghost town they filmed this episode. If you get a chance, tune in, it’s worth looking at your potential future, of course without all the personal drama that script writers need to add to the scenes to keep the audience interested.

In any case, the entitlement culture “because I deserve it” was born sometime in the 1980s and grew exponentially since then fueled by cheap money and easy terms. And in spite of sobering events of the first decade in the new century such as 9-11, Katrina, tsunamis and the 2008 crash, entitlement, like a birthright, still draws many Americans to potentially bad financial decisions with the promise of luxurious lifestyles in fast cars. After the Y2K tech burst, our crush on technology and internet turned into hate for a while, and some of the recent Facebook victims, may once again experience anger; but those crushes usually pass.

But with real estate, emotions are still burning hot. There is something different about real estate as an investment or consumable asset. It’s our obsession with consumption – and as a result, debt – which makes us so vulnerable to its temptations. The thrill of a real-estate investment holds our hand and tells us, “It’s OK to spend more and get a bigger house.”  If you don’t believe me, turn on the tube (sorry…. HD flatscreen!) and watch an episode of House Hunters on HGTV. The majority of these “hunters” choose the most expensive option out of three (practically always substantially above their set budget) and justify their choice in terms of resale value (profit).  Very dangerous considering that recent statistics have shown beyond a shadow of a doubt that median household incomes between 2007 and 2012 have dropped from $54,489 to $50,054, a decrease that does not even include potential inflation corrections. Source

I always try to be realistic and fair about life’s idiosyncrasies, which includes the human propensity to overcompensate. And real estate  is definitely an area where we like to overcompensate  for what presumably ails us. Real Estate pulls our heartstrings; it’s the place where we look for happiness, family, values, relaxation, peace, raising children, showcase our life’s accomplishments and so much more. Bringing all these emotions into a buying decision is almost a guarantee for a heartbreak somewhere down the line. And when it does, it’s always devastating.

So here are three of the major reasons why real estate gets us every time:

1. Real Estate implies simultaneous consumption and investment. This is one of the only investment vehicles where you get to consume while also investing in hopes of a future gain. Besides real estate, almost nothing else offers this combination. If you buy GM or Ford stock, they’re not going to send you a new truck to drive around for a few years. If you put $50,000 in Exxon or BP they are not going to give you gasoline “free” to put in your vehicle.

Yes, there are a few other assets classes in this category of esoteric consumables, such as collectibles or art, but the majority of us will never enjoy a picture on the wall as much as a nice $500K house. With real estate, we can spend and “invest” – and boy, you know how much our culture loves to spend.

2. Real Estate allows  some justification for bad financial decisions. For example you know you can only afford the $300K house to live in, but if you look at it as an investment, then the $400K house becomes an even better deal. In the long run, real-estate values must always go up, right? So by purchasing the $400K home, you’re making a sound decision for the future. Real estate allows us to flip our logic on the correct decision. The larger home becomes the forward-looking purchase; the house within our means becomes the poor decision.

These blinders are even more useful when purchasing a second home. You might not be able to make it to your Amelia Island condo more than twice a year, but if you look at it through the rosy lens of investment, it’s all right. It’s not just a rarely visited condo which you don’t really need, it’s an investment, including all the fees, maintenance and property taxes! Therefore the magic of real estate allows us to transform excess into wisdom.

3. Real estate allows us to invest without saving. The whole principle behind saving and investing is to consume less today with the promise of prolonged consuming in the future. Real estate allows us to completely avoid the first half of this equation. We can borrow money now (sometimes with no money down) and can still invest for the future. With real estate, we don’t have to consume less for the promise of greater future wealth. In fact, we consume more by purchasing yet another product, a house. We used to buy a home to raise a family and over the years a well maintained property became a lifelong savings account. Selling the home when retirement arrived, was a way to cash in your savings account for the golden years.  That is no longer the case when real estate is “abused” as a speculative producer of income.

Reality has come home to roost

Real estate became the modern American dream in the 1980s. It became a way to continue spending and living frivolously beyond our means, while at the same time deluding ourselves that our extravagant lifestyle was an investment.

And truly that is the epitome of bubble thinking. If you’re planning on retiring in some decent level of comfort in the future, there’s only one way to go about it. That involves curbing your spending today and investing wisely and diversified for a better tomorrow. I know. It’s a tough pill to swallow, but that’s just the truth. And that is why real estate is not in my foreseeable future. There are still too many corrections in the pipeline. Just to mention a few. Fernandina Beach, like so many cities, counties and states are struggling to make their budgets balance in a tough economy and do not hesitate to raise taxes while limiting services to a population that is increasingly wondering how to pay for it all. Direct and indirect taxes are now confiscating almost 2/3 of our annual incomes. Insurance companies, pressured by a growing number of natural disasters are seeking compensation in premiums or pull certain homeowners packages out of the markets. Utilities, especially those depending on oil are looking at substantial rate increases. Many grids and utility structures are reaching the end of their functional life cycle and we’re looking at major expenditures to keep them offering the level of service we have grown accustomed to. Life is getting more expensive by the day and especially ownership in real estate takes the brunt.

Will I avoid real estate altogether and cut my love affair with it forever? Not necessarily. If I find a great investment, I’ll probably go for it. But I’ll be very honest with myself and purely approach it as an investment.  If a real-estate deal is the best investment available (versus other properties, as well as all the options of asset diversification), go for it, but keep in mind that real estate is not a short term liquidity anymore.  Don’t be deluded by one of the three reasons above.

City Commissioner Meeting Agenda for September 4, 2012

City Commissioner Meeting Agenda for September 4, 2012It is time for the Fernandina Beach City Commissioner Meeting to be held on September 4, 2012. The meeting will be held at City Hall on Ash Street in the historic district at 6:00 PM.

However, before that meeting begins, there is a Public Hearing at 5:05 PM regarding the percentage increase in millage over the rolled-back rate necessary to fund the budget and the specific purpose for which ad valorem tax revenues are being increased.

I. Millage rate for operation expenditures
II. Millage rate for voter approved debt


2012/2013 Budget Book

Other items on the agenda include the usual requests to be heard and the formal adjournment.

Regular Meeting Agenda
1. 6:00 PM Call to Order
3. PLEDGE OF ALLEGIANCE and Invocation by Bruce Malcolm, American Legion Chaplain, Post 54.

4.1 PROCLAMATION – CONSTITUTION WEEK – Proclaims September 17-23, 2012, as “Constitution Week.” Ms. Jane Collins, Regent of the Amelia Island Chapter of the Daughters of the American Revolution, will be present to accept the Proclamation.
4.2 PROCLAMATION – ASSISTED LIVING WEEK – Proclaims September 9-15, 2012, as “Assisted Living Week.” Mayor Filkoff will present the Proclamation at Savannah Grand on September 10, 2012, to kick-off “Assisted Living Week.”
4.3 PRESENTATION – SANDPIPER BEACH HOMES ANNEXATION – Marshall McCrary, Community Development Director, will provide a presentation regarding the annexation of the Sandpiper Beach Homes.

5.1 APPROVAL OF MINUTES – Regular Meeting – June 19, 2012; Special Meeting – July 10, 2012;
Work Session – July 10, 2012; CRA – July 17, 2012; Regular Meeting – July 17, 2012; Work Session – July 24, 2012; Special Meeting – August 2, 2012; Regular Meeting – August 7, 2012; Special Meeting – August 13, 2012; Work Session – August 13, 2012; Work Session – August 20, 2012; Regular Meeting – August 21, 2012.
Synopsis: Authorizes a Mutual Aid Agreement between the City of Fernandina Beach Police Department and the Nassau County Sheriff’s Department for a period of three (3) years.
Synopsis: Authorizes a 1-year agreement with Aetna Behavioral Health, LLC, to provide employee assistance services to the employees of the City of Fernandina Beach and their families beginning October 1, 2012.
Synopsis: Authorizes the City Grants Administrator to submit a FRDAP grant application to request $60,000 to renovate the tennis courts at Central Park.
Synopsis: Indicates the City’s support of the Shore Protection Project, its willingness to serve as a local sponsor, and its ability to provide the local match.


Synopsis: Approves amendments to the City’s Purchasing Policies and Procedures.

Synopsis: Approves the amendment to the Electric Franchise Fee Agreement with Florida Public Utilities.


10.2 REPAYMENT OF THE F2 LOAN – this item is placed on the agenda at the request of Commissioner Corbett.


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Hot Air Stimulus from the Fed

QE3 is making some financial traders smile

Another hot air round of stimulus is rising up

Traders and people who try to predict the short-term movements of the stock market–that is, every market participant except real investors–pay a lot of attention to every utterance from the Federal Reserve Board. They eagerly try to read between the lines of the opaque comments in the Federal Open Market Committee minutes, hoping to see if the Fed plans to stimulate the economy a bit further and give stock prices a temporary boost.  Imagine their excitement last week when they read this obscure piece of FOMC wordsmithery:

“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.”

Okay, maybe that wasn’t exactly ‘plain’ English, but it’s about as clear as the Fed gets to saying that if the economy doesn’t get busy and start recovering at a faster pace, we’re going to get some stimulus come September.

The first surprising thing about this is that jobs growth was surprisingly strong in July–163,000 new jobs were created in a month when many people are on vacation.  Meanwhile, the National Association of Realtors reported that sales of previously-owned homes jumped 2.3% in July, 10.4% over the pace seen in July 2011.

The second surprise is that it seems like the Fed has already done just about everything it CAN do to encourage economic growth.  A quick check shows that if interest rates get much lower, banks will be paying you to borrow from them.  The government is already experiencing this happy state.  In a Treasury auction around this time last year, the government’s Inflation-Protected Securities sold at an aggregate negative interest rate–meaning that borrowers were paying their Uncle Sam for the privilege of lending him their money.

In fact, there are several possibilities.  One is for the Fed to cut the interest it pays to banks who are parking their excess reserves, to encourage a lot of lazy money to get off the couch and get itself lent out to households and businesses.  The Fed could also engage in a third round of Quantitative Easing.  Under QE3, the Central Bank would invest its own money in longer-term Treasury Bonds, forcing down long-term interest rates.

But this might actually be an example of a more effective stimulus: hot air.  That is, the Fed can depart dramatically from its normal circumlocutions and include, in its minutes, a direct statement about how serious it is about boosting economic growth.  That gets traders and short-term opportunists excited. With such easy-to-read tea leaves in front of them, they call in trades, buy stocks, boost the market, generate a bit more optimism in the corporate sector–and the economy gets a quick jolt without the Fed having to reach into its pocket.  It hasn’t worked so far, but Fed Chairman Ben Bernanke will make a widely anticipated speech on Friday–his second shot at creating a hot air stimulus for the U.S. economy.

Do Candidates Have a Clear Grip on Economics?

Where will we be in five years?

This morning I did something I hardly ever resort to these days. I read the local Newspaper, as the front page was covered with promises and moans from incumbent and prospecting politicians on the issue of how to steer the county and city economy for the next four years and beyond. My economic’s professor a long time ago insisted that every economy is local. Of course the year was 1970 and he had never heard about online sales, the iPhone or the world wide web. And that is a bit the impression I get from local politicians after reading their wishful wannabe statements and promises in this morning’s columns.

First there was freshly appointed city manager Joe Gerrity pulling his hair on how to sell higher property taxes and franchise fees to local residents and businesses, while having promised to keep both at previous levels. Apparently Mr. Gerrity, who held a commissioner position in our community until 2008, the year of the economic unraveling, sees no evil in blaming previous commissions for the financial dire straits the city reportedly is in. He is clearly operating on the austerity end of the issue, which undoubtedly feels like a catch 22, but I cannot find any indication that solutions for economic progress scores high on his agenda.

On the county level the Newspaper “introduces” four hopefuls vying for 2 commission vacancies, all of whom are projecting that the economy is their top issue for election. Here too, there is much talk about amputating the budgets, and very little on how to develop economic attraction.

Understandably incumbent candidate Boatright sees merit in continuing his path of contribution as commissioner over the last four years by keeping taxes low and services adequate with just a cautious nod to making the business permitting process less cumbersome then it is right now. The song remains the same for Boatright, whose priorities evolve around ad valorem tax and an afterthought that reads: continue to work on economic development. Nothing however deals with the economic direction.

Overstreet, Boatright’s challenger claims his experience in charities and social clubs to be a proper foundation for what ails the county. He calls his campaign about the future, as elusive as that may be, and the budget as his top priority. Great words but not very inspiring for people that have accepted that things are different now; we’re not pre-2008 anymore. On the topic of economy he walks essentially the same path as his competitor; easing the permitting process and the life of the small business owner. All true and commendable, but no spark of excitement that deals with real economic issues.

Pat Edwards seeks confirmation of his knowledge and abilities in the fact that he has lived in this county for 39 years, which on my notepad makes him a member of the old boys club, which knows so well what’s good for us. Citing his civic commitment record and business sense as markers for electability, Edwards is the first one to bring up support for the Nassau Tomorrow Plan developed by the NCEBD, a plan that at least has some concise direction on how to develop jobs for Nassau County. A sardonic smile invaded my face when I read that Edwards considers it a novel idea to ask residents what they want the Board of Commissioners to spend their tax dollars on. Even though that was the origin of what a democracy originally was based on, in today’s world a myriad of potential consequences come to mind and makes me burst out in Machiavellian laughter. For starters….Think bribes, Mr. Edwards.

Last but not least there is newbie Ronnie Stoots, a thoroughly honest and talented man with vision. And yes, in the interest of the truth, Ronnie is a good friend whom I met  several years ago through music and his financial advisory business. Wonderful guitarist, gifted songwriter and keyboardist/vocalist for the Beech Street Blues Band, Ronnie has a heart. He also has a mission, which unfortunately did not come forward in this newspaper presentation. Yes, the article mentions new ideas in areas of job creation and skill. He mentions regional streamlining of education with the job market needs and he brings back to the table a proposal to create real incentives for the small businesses in Nassau County to add at least one employee a year. My vote goes to Ronnie Stoots, not because he’s my friend, but because he’s capable and understands that we live in a different world then just a short couple of years ago. The paradigm has shifted and most of the old guard hasn’t been made aware yet that the future of Nassau County lies in light manufacturing, technology, bio-diversity, transportation and storage logistics and TOURISM

YES, nobody mentioned TOURISM

Of course here on the beach I realize that tourism does not count across the Thomas Shave bridge, because until recently it was just swamp land. But guess what, the marshes hold a great attraction for many people staying on Amelia Island. Daily I have guests taking boats to go fishing in the marshes and the river. Many once visitors to AmeIia Island have purchased land and built homes in Oyster Bay Harbour and North Hampton to name a few. The island is an important economic engine to the county, but somehow I get the impression that that is not a popular stand.

And just one page down (pg 4A) in the same newspaper, Gil Langley of the Amelia Island Tourist Development Council cites that tourism on island in the second quarter has grown by almost 6%. Remember we’re living in a bad economy!? The Omni Amelia Island Plantation is in the middle of investing almost $100 million dollars in upgrades, improvements and expansion, The Ritz Carlton, Amelia Island is finalizing a $65 million improvement investment, even noted novelist John Grisham has chosen the island to invest a couple of million dollars in residences on the beach. It should be a wake up call for local politicians when private businesses and individuals invest these amounts in local real estate to live or operate a business. They spend a lot of money on research, surveys and studies before committing these type of funds.

This area of Northeast Florida is in the spring of nationwide discovery. It’s not only accessible by car and air from across the country and the world, it’s also still pristine.
Our top 3 visitor markets are currently 1. Atlanta , 2. Orlando and 3. Jacksonville; but we haven’t even scratched the surface of New York, Boston, Chicago visitors.

Even our little Inn on the beach books in line with these findings, but we also see that more than 35% of our reservations are now coming from Canada, the West Coast, New England, the heartland and yes, Europe.
I just hope that somehow one or more of these new commissioners understand the market that tourism operates in. To give you one little hint: Rayonier, often mistaken for one of the largest employers in the county, employs less than 300 workers. Both the Omni and the Ritz have close to double that amount of employees…each.

Imagine how many employees a well planned waterpark in the county could feed. Even a convention center/expo facility, race track….?
But I am digressing. You got the picture…or not.
Choose wisely voters of Nassau County. Just remember, 5 years ago there was no iPhone yet. Times are-a-changing rapidly and many of the old guards may not have caught up.

Where the Political Tires Meet the Road

Almost as crazy as this story

Freedom for Motorcycle Mamma

I have been reminded on several occasions now that things are getting serious on the election front, but somehow I can’t find excitement for the topic anymore. As an economist who staunchly supports the belief that only the political choice for a free-market economy can give us a chance to get back on track after we have crashed hard, I recently went to listen to local Republicans and Democrats on their soapboxes reiterating why they are the only sensible choice available for the upcoming Nassau County elections, and my report is even more sobering then I thought.

No matter what denomination or gender took the microphone, they all approached economic issues the way Russia and China did for the better part of last century: a centralized command of the economy. It never worked and it never will work, no matter how you approach it. Even Cuba’s 81 year old leader Raul Castro admitted this last week when he set Cuba on the trail of a free market economy.

A central planning of economic forces is impossible considering the human genome. And yet this morning I learn that the worst bunch of them all, Congress, now wants to reign in and assume the powers of the Federal Reserve. There was a brief moment that I felt like comedian Lewis Black in a moment of utter disbelief when he looks like he wants to implode after running out of air. Not because I think the Feds under Bernanke run a fine and balanced institution. On the contrary. They have been instrumental in facilitating the banking consortiums in their effort to eliminate Mainstreet Middle Class USA.

But considering the devastating monetary power the Feds already have assumed in what once was a free economy, combining monetary policy with economic policy in a body of self centered nitwits like Congress, means essentially pulling the plug on us all. In short giving more economic and monetary power to Congress will result in a majestic acceleration of inflation, just because politicians don’t want to hear that we have anywhere from $50 to $100 trillion in unfunded liabilities for Social Security, Medicaid and other Social Entitlements.

Even though the Feds are always willing to start up the presses and print more greenbacks, in the hands of Congress, those presses will show friction burns in no time flat.

Even if no-one seems to wanna settle the inflation/deflation debate since the crash of 2008, hiding behind the eager opt-out of too many variables, the real reasons and answers have political implications, which both sides of the issue will blindly resist in favor of their own partisan arguments and views. And so I found myself once again getting into protracted arguments with people who don’t want to listen. As an economist I’ve long taken the stance that price destruction in certain assets classes, such as real estate, can make various inflation estimates look low, but that doesn’t mean life has gotten any cheaper for the average Joe. I would say rather the opposite: many of the investment assets people were relying on to guard or increase their wealth have trashed their savings, even as the actual cost of living keeps rising. And here it gets real scary because when government also controls the money supply, inflation will be the inevitable outcome.

The Republic has become an Empire and America has become the United States with a centrally controlled economy, light years removed from the principles this country was founded on. And it seems that here in Nassau County we’re still preaching the same old gospel of government control over economic opportunities.

Was it a wake up call for the organizers that there were more people playing the popular French ballgame Pétanque adjacent to the election tents? Not as far as I could tell, but the weak turnout to both events, indicated for me that people simply don’t care anymore or are confused about any alternative options. I filmed both events with the intention to air the candidates on this website and possibly the City’s PEG channel, but while watching the raw footage it struck me once again, that none of the candidates by any stretch of the imagination would benefit positively from such broadcast. Very few of the Republican candidates came with the message that government needs to get out of people’s lives, something that is obviously very close to my personal beliefs. Yet almost all of them tooted their own horns about past accomplishments, experience and job qualifications, while all the while I kept thinking, that was then, this is now!!!

We have entered a completely new world where few to no answers from the past make sense anymore. I want to know who has the vision and creativity to tackle the problems with effective solutions. I want to hear how, what, when, where and how much. Then I will tell you Who.

For now I’m going to leave you with a not so pretty tax story of which I have seen a number of iterations over the years, but this one goes a couple of steps further in explaining the dynamics of an insane system, which is why I wanted to include it here.

Taxes and Beer for Everyone

Suppose that every day, ten men go out for a beer and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.00
The sixth would pay $3.00
The seventh would pay $7.00
The eighth would pay $12.00
The ninth would pay $18.00
The tenth man (the richest) would pay $59.00
So that’s what they decided to do. The men drank in the bar every day and seemed quite happy with the arrangement, until one day the owner threw them a curve.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.00.”
Drinks for the ten men now cost just $80.00.
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get their “fair share?”

They realized that $20.00 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
• The fifth man, like the first four, now paid nothing (100% savings).
• The sixth now paid $2 instead of $3 (33% savings).
• The seventh now paid $5 instead of $7 (28% savings).
• The eighth now paid $9 instead of 12 (25% savings).
• The ninth now paid $14 instead of $18 (22% savings).
• The tenth now paid $50 instead of $59 (15% savings).

Each of the six was better off than before! And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
“I only got a dollar out of the $20” declared the sixth man. He pointed to the tenth man, “But he got $9!”
“Yeah, that’s right,” shouted the seventh man. “Why should he get $9 back when I got only two? The wealthy get all the breaks!”
Wait a minute,” yelled the first four men in unison. “We didn’t I get anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that fellow citizens is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.

Budget Realities Strike the Council on Aging’s Transportation Services

Buget Realities Strike the Council on Aging's Transportation ServicesNassau County, FL – COA Transportation, a service division of The Council on Aging of Nassau, continues to provide Transportation Disadvantaged (TD) and Nassau Transit (NT) services for Nassau County riders. COA depends heavily on State and Federal grants to run both programs, and projects will receive about $60,000 less funding for the coming year. In order to work within that budget and continue service to an ever growing need for rides, some adjustments to schedules and rider contributions are needed. Rider co-pays have not gone up in the past 10 years but the cost of fuel has almost tripled in that same time period.

COA Transportation is making a recommendation on August 18th, 2012, to the Local Coordinating Board, which provides oversight on behalf of the Commission for Transportation Disadvantaged, the following increases for co-pays:

    Ambulatory riders, from $1.50 per ride to $2.00 per ride one way.
    Wheel Chair riders, from $2.50 per ride to $3.00 per ride one way.
    Medicaid riders remain unchanged at $1.00 per ride (per Federal Regulations)

Note: Some riders have sponsorship from supporting agencies and are not required to have a co-pay but contributions are always gratefully accepted!

These rates are consistent to recent increases made by the Jacksonville Transit Authority for similar service within the Jacksonville area. In addition, trips into Jacksonville and trips from Hilliard to Fernandina will only run on Monday, Wednesday, and Friday starting August 1st. Passengers who had previously scheduled rides on other days will have their rides honored during the transition period. COA Transportation also will limit appointments to Jacksonville facilities that are more than five minutes from the main I-95 corridor as far as John Turner Boulevard, to cut down on mileage. Exceptions to the rule will be approved by the Transportation Manager on a case by case basis.

Nassau Transit schedules are also being adjusted to fit budget forecasts, taking into consideration ridership over the past year. Although there are minor changes planned to the early morning and late afternoon routes, the most noticeable changes will be during the mid-day runs, where ridership was almost non-existent. Since beginning Nassau Transit, there is now service to Florida State College Jacksonville North Campus in addition to the downtown campus, and by request students can by dropped off/picked up at the Yulee Campus. Fares are still $1.00 per ride. Routes are designed so that riders from either side of the county can transfer to buses going to and from Jacksonville. Schedules are posted on and can be obtained from any COA driver or at the Transit stops.

New Transit schedules will be effective August 1st, 2012.

COA Transportation logged over 650,000 miles and provided roughly 70,000 rides over the past year (Transportation Disadvantaged and Nassau Transit) and will continue to provide as many rides as possible within tight budgets. With a little help from rider contributions and modest restrictions to high cost trips, it is our goal to maintain a high level of service and on-time performance for the coming year.

The Council on Aging is a 501(c)3 non-profit agency, the highest level of charitable organization. We enrich the lives of senior citizens everyday in many ways, delivering critical services to Nassau County seniors in five categories including Meals on Wheels, COA Transportation, In-Home Care, and Adult Day Health Care, while operating two senior recreation centers.

More information is available on our website

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Between Jake Barnes and the Wide Blue Yonder

Who didn't build what?

Hemingway’s Jake Barnes shared his experience with the compulsion to flee overseas as an interpretation of green grass and high tides, somewhere over the next hill or so. Hemingway worded it as “Listen, going to another country doesn’t make any difference. I’ve tried all that. You can’t get away from yourself by moving from one place to another.” Of course Hemingway, who was born today, 113 years ago in Oak Park Illinois, made this alter ego observation when in his twenties, disillusioned by a war on a global scale, the perfect embodiment of the aimlessness and perpetual dissatisfaction of the roaring twenties Lost Generation.

Jake Barnes of course is the main character in Hemingway’s “The Sun Also Rises”, arguably Hemingway’s most important work, which is placed in the Spanish City Pamplona during the annual running of the bulls and bull fights.
No need to expand on the novel here, other than, if you haven’t read it, it’s still not too late, considering that the world once again is dealing with another Lost Generation.

But Jake Barnes referred to his personal dilemmas when referring to the uselessness of “moving to another country”. His observation was neither driven nor abstracted from national megalomania and the growing omnipotence of government.

I received a good number of number of reactions on my observation that it may be a smart move to look at the expatriation option before Obama’s Health Care Plan reaches 2014. Most of the questions were laced with the concern about being powerless to change the the course this country has taken in recent years. There is also a frightening lack of courage to face the consequences of standing up against the administration and its enforcement bullies. Yet the main question is: What can really be done to change the course of this nation?
Well the most important thing is to stand up for what you believe in…and face the potential consequences! People say, you cannot fight the government and if you’re talking violence I totally and emphatically agree. Governments these days have incredibly advanced weaponry that will take out a sizable militia in the time it takes to boil a cup of water in a microwave. The only way to force change after ignoring government’s folly for so long, is the Ghandi way.

I am more than ever convinced that Obama’s administration has now landed this nation in the same quicksand as Europe entered 30 years ago when I left. If there is anyone out there who still has reservations about this than they should read and understand what Obama said and meant when he uttered “Somebody Else Made That Happen“. All the credit for individual achievement goes to collectivism. Obama tossed a hunk of juicy steak to the ravenous masses and received an enthusiastic response when he declared, “If you’ve got a business – you didn’t build that. Somebody else made that happen.”

We have now reached the point where it doesn’t matter it its economic ignorance or malice, fact is that a free economy, the power that this nation was built on, is no more.
The real problem however is that I don’t see fury in the other camp. I don’t see anger coming from the deep passion that once personified America. Obama’s influence on America has helped transform it into a place where formerly free people are being denied the “inalienable right” to live as individual entities with individual hopes, dreams or goals.  Neither are Americans any longer free to pursue personal success or happiness without government interference or censure, an enormous amount of pity roadblocks.  And if they do overcome, those successes are now being publicly put down as not really personally achieved.  Obama’s tactical delivery advocates for collectivism versus individualism and that my friends is truly the beginning of the end for this nation that invented a free enterprise economy and experimented with a new form of government called Democracy.
But to all those readers who did not stand up against the politicalization of the economy when there was still time, your choices are now:
a. live as good as you can in Obama’s world
b. walk away into the wide blue yonder while you still have time
c. join or create a phyle that can develop enough non violent opposition to carve out a legitimate place in this new country no longer protected by the constitution.

I would think that most people have already settled into option A by accepting whatever comes their way, whether Obamanesque or Romneyesque. Feed them slavery in bite sizes and they will get used to the idea in a glow of collective happiness. Sports, religion and alcohol serve as the Kool-Aid.

Option 2 is mostly considered un-patriotic in today’s America and only the solution of those who know and understand. But
Option 3 is basically home-grown and comes in varieties. The one that stands out in my mind is the lifestyle of the Amish and especially the education and tax war they have fought (and won) against state and federal authority.

The following is an excerpt from a friend’s note, who has chosen to remain anonymous in his insider knowledge of Amish History.

• A peaceable people – a society in which the bearded men refuse to wear moustaches because such were worn by the military men of Switzerland (and the Netherlands) hundreds of years ago when these sects reared up and began to be noticed – the Amish refused to pay either state tax or federal Social Security, or to permit their children to be trained in government schools.
The government, in turn, ordained that these were among the worst of social Fifth Columns, undermining the very basis of statist sovereignty. Heads were decreed to roll,  after all no one was allowed to reject the Education Department’s latest approved textbook!
As so ordered, the Amish appeared in court, stated their disbelief and disapproval of statist education, taxation and welfare, and declared that the State of Pennsylvania and the US government were simply, flatly, wrong to demand compliance with any such ungodly nonsense. They insisted that training children would remain the family’s duty and right, and that the poisonous dogmas of overweening American government would have no part in it.
Of course, the court ordered government schooling and tax-paying to commence at once; the Amish said that they would not comply. End of discussion.

Well not really. They were, in the manner of good old American jurisprudence, found guilty as charged and sentenced to serve time in the Federal Penitentiary – presumably to become penitent for their intemperate insubordination. In an act calculated to incite flight and afford an opportunity to act with the deadly force for which both Pennsylvania’s and the federal government were renowned, the prime defendants were released upon their own recognizance. They simply promised to present themselves to begin their sentences on the required dates.

Came the date, the men were all present and accounted for, each with his neighbor who had driven him and accompanied him as a spiritual and emotional bulwark in what appeared to be the beginning of bleak, lengthy imprisonments. The convicted men were indeed incarcerated.

But then came the miracle:

After a relatively short while, the inimitable geniuses in the uppermost ivory towers of government began to feel a dull, gnawing anguish that what they had done was not only wrong, it was obviously wrong, and even each of the most common dolts to whom the elective franchise had been given could see this without the least reflection or hesitation.
How, in fact, could the all-knowing, beneficial, father-like (uncle Joe-like) government justify incarcerating the men folk of a community that was, above all, peaceable and harmless?

In this event, the governments could not, and the governments caved, starting with the federales. They sent craven lackeys to the incarcerated with a “deal” that had been cooked up in Washington, DC, in which these folks were provided with a “get home free” card, courtesy of the IRS and the then-nanny-state’s equivalent of today’s Department of Education.

At this remove – and this is certainly not any kind of “scholastic” interest of mine, nor am I able to remember all of the details after laying the subject down twenty-plus years ago – I cannot recall whether the first concession was that the Amish could legally avoid paying FICA and income tax, or whether their children could be “educated” in local one-room schoolhouses in which eighth grade would fulfill their duty to government, if not to God.

In these eight grades, the children were expected, in the case of boys, to come out knowing how to do the math to frame up a timber barn; the girls were expected to know how to figure recipes, scaling ingredients from between two to fourteen (!). They all were expected to learn the German of their fathers (Pennsylvania Deitsch) and the English they would need to go about in the world of the “English.” (Their cash crops were not their grain crops – a third of which went to feed the horses and oxen used to till, plant and harvest – not the fecundity of their kitchen garden vegetables, but their livestock, the raison d’être of the Amish farm. Bartering with each other, they demanded from the English cash on the barrel head.)

The Amish one-room schoolhouse provides pretty good “training,” and radically above the scandalous non-standard of modern American “education.”
Absolution had been granted from FICA and federal tax based on the fiction that all the Amish did day in, day out amounted to “charity,” voluntary service, and not “work.” Only a government apparatchik could devise such an Animal Farm reversal of the plain truth. Therefore, no income tax could be levied on all this charity work (nor Social Security, already long since pronounced by the Supreme Court to be nothing but a tax).

Indeed, if you venture into the environs of Lancaster, Pennsylvania, today, you will find men selling fine oak dining sets, travel trailers, horse harnesses, and plant air and diesel engine repair services, all for a “donation.”

Now I’m the first one to keep an eye on reality and know that Amish, Mennonites and to a much lesser degree Indian Tribes, Mormons(?) and many other “subterranean” quasi religious groups have to various degrees fought government on tax and education issues. And by and large won some of the battles. But remember the key words are peaceful and harmless.

I hope Jake Barnes was right and Americans will take back their country; even if it would mean partial secessions of like minded groups.

There is a flipside to the coin called Employment Outsourcing

There is much more to outsourcing than meets the eye

There is much more to outsourcing than meets the eye

With political rethoric reaching crescendos, especially in the Obama Campaign, accusing Romney to be a leader in Employment outsourcing to the extent that it almost equals national treason, it seems like a good idea to point out that outsourcing is an economic move, not treason or even unpatriotic.

Here is for example the announcement from Airbus that it will establish a manufacturing facility in the United States to assemble and deliver A320 Family aircraft. A move that creates some 1,000 jobs at the Brookley Aeroplex in Mobile, Alabama.

It will be the company’s first U.S.-based production facility. Airbus stressed that the assembly line, which will create jobs and strengthen the aerospace industry, is part of its strategy to enhance Airbus” global competitiveness by meeting the growing needs of its customers in the United States and elsewhere.

The facility in Alabama will assemble the industry-leading family of A319, A320 and A321 aircraft. The company said construction of the assembly line will begin in summer 2013. Aircraft assembly is planned to start in 2015, with first deliveries from the Mobile facility beginning in 2016. Airbus anticipates the facility will produce between 40 and 50 aircraft per year by 2018.

The motivation for Airbus to expand in America,” said Fabrice Brégier, Airbus President & CEO lies in the fact that the U.S. is the largest single-aisle aircraft market in the world – with a projected need for 4,600 aircraft over the next 20 years – and this assembly line brings us closer to our customers.
Alabama Governor Robert Bentley said: “We owe thanks to so many people who helped make this effort a success. This project will create 1,000 stable, well-paying jobs that the people of this area need and deserve.
Airbus is the largest export customer for the U.S. aerospace industry.  Since 1990, the company has spent $127 billion with U.S. suppliers – $12 billion last year alone.

As I pointed out this is a financial-economic move, yet politicians in France  will use it in the same way as their US counterparts and cry foul for outsourcing of French jobs to Mobile Alabama. If we add up all the foreign companies with offices and production facilities here in Florida alone, we should remember that wherever these companies are headquartered across the globe, these countries “lost” some 300,000 jobs because management thought it financially more attractive to move some production overseas. Even though it may be hard to swallow for diehard patriots here, we should remember that Anheiser Busch is now owned by a Belgian brewery and Chrysler Motors is really FIAT.

The Impact of the Travel Industry

On another level there is the travel industry which has proven recently to reverse negative employment trends. In an industry that employs 7.6 million in the US alone, it is important to note that since the employment recovery began in March of 2011, the travel industry has created 271,000 new jobs and has created jobs at a pace that has been 26 percent faster than the rest of the economy.

There a two main reasons why employment growth in the travel sector has been outpacing the rest of the economy in recent years:

• jobs in the travel industry cannot be outsourced abroad
• jobs in the travel industry cannot easily be replaced through automation

Yes, the travel industry is also experiencing a slow down, because of economic problems in Europe. Still the travel industry is more internationally engaged than most sectors of the economy, which is why it is important for US policymakers to enact sensible long-term reforms that will make it easier for travelers from other areas of the world, such as Latin American and Asia, to visit the United States.  It takes the spending of roughly 33 overseas visitors to support one US job. As an island tourism destination Amelia Island needs to take heed in these numbers.

I had the relative pleasure this morning to hear all the GOP candidates for the upcoming August 14 elections to give their “spiel” in Central Park in Fernandina Beach. As a matter of fact, we video taped it. I heard the word experience out of everyone candidate’s mouth as the most important contribution to their plea of being elected. No one that I heard mentioned creativity in finding solutions to the socio economic problems of our times. Almost everyone was proud of their 25 or 30 years of being part of the respective boys and girls clubs of past standing. Candidate Weinstein thought it was important to mention how much money he was throwing into a campaign that at best would bring him a $28K job per year. Some candidates were touting the always popular election promise to bring manufacturing jobs to the county, and I think back to an impressive presentation a couple of days ago, given by AC MacDonald, general manager at the local Rayonier plant for the European American Business Club. The company has a major impact on Nassau county’s economy, yet has only 275 or so people employed – because that’s all it takes for them to be successful at this stage of the game.

All in all I did not hear any candidate talk about tourism; about developing travel marketing plans, infra-structures, long term employment and educational opportunities, in spite of the fact that both the Ritz Carlton Amelia Island and the Omni Amelia Island Plantation have enough confidence in our tourism future to invest a combined quarter of a billion dollars in their properties.

And that lack of vision  is discouraging, when our tourism potential is so much greater than any other business sector in the county, that is either already over-presented in the Greater Jacksonville Area, or is simply geographically at a disadvantage.
It is not good enough to call for change. We already fell for that misnomer 4 years ago in Washington DC. There is place for some new thinking far beyond the “good ole’ boys clubs. Every economy is local and it is time to pass on the torches and start presenting creative long term solutions, answers and directions for our future.

Budget, Budget, Who’s Got the Budget?

Budget, Budget, Who's Got the Budget?Contributed by: Suanne Thamm

SearchAmelia occasionally receives contributions and opinion pieces from Suanne Thamm and this is possibly one of her best:

If it weren’t so serious, it might be funny. City Manager Joe Gerrity and the Fernandina Beach City Commissioners appear to be engaged in game of catch with a hot potato, otherwise known as the FY2012-13 budget proposal. No one seems anxious to have his or her name associated with what looks like a loser for city government and city taxpayers.

Former interim city manager Dave Lott did much of the preparatory work with city departments to formulate a budget proposal. He even made the presentation as Deputy city manager at the June budget workshop, outlining the work accomplished through two complete passes through the budget. When Lott left city employment, City Manager Joe Gerrity assumed full responsibility for formulating a balanced budget for the commission’s consideration. But Gerrity claims that without guidance from the FBCC, he can’t do much more. The various commissioners, however, feel that Gerrity has not given them enough information or options to be able to give him that guidance. In short, no one wants to claim this ugly baby.

So Who’s on first, I Don’t Know is on second, and …wait a minute …has Vaudeville made a comeback in Fernandina Beach? If we sell tickets at City Hall, maybe that’s the way we can make up the budget shortfall!

When Gerrity interviewed for the position of city manager he cited his first concern as the budget and his second employee morale. The very preliminary draft budget presented back on June 26 showed that even with spending cuts of $1.1M, the city’s budget would experience a shortfall unless revenues can be increased. Since internal recommendations call for cutting 10 full time and 2 part time positions, eliminating pay increases for unionized employees and merit increases for salaried employees, the city manager’s draft budget hasn’t done much for improving employee morale, either. Rumor has it that the new city manager hasn’t even walked around city hall to meet the employees yet. Probably because he doesn’t want to get to know them before he has to let them go.

During one of Manager Gerrity’s first public appearances, Mayor Arlene Filkoff asked, “So whose budget will you present to us?”

Gerrity responded without hesitation, “It will be my budget.”

This should be excellent news for Dave Lott, who at least won’t have this turkey hung around his neck. Dave, you may have been the winner after all!

Somehow a hush falls over the commission chambers when the city manager asks for input on ways to raise revenue. The only commissioner brave or foolish enough to offer up ideas publicly so far has been Tim Poynter, and he is facing what looks like a tough re-election, too. When he resurrected the idea of charging for beach parking, other than support from Mayor Filkoff, he received at best lukewarm interest from the other three commissioners to “consider” the issue.

Other possible sources of revenue include increased franchise fees and increased millage rates. When Lott and Gerrity presented those possibilities, commissioners were quick not to betray by any facial or hand gesture that they would look favorably on these options. Even when Poynter tried to get them to narrow down the choices, they just stared straight ahead. Would the Tea Party or the Liberty Dwellers ever support them again if they approved even a small increase? Is it more important to appease their special interest groups than provide for the general welfare of the city? I guess we’ll find out.

Meanwhile, Commissioner Corbett announced to everyone that he’d be gone 3 weeks this summer during budget cycle. Since he campaigned on the slogan of being a watchdog, not a lap dog, that seems a bit strange. Unless he has just decided to vote no on anything he doesn’t like without offering any alternatives. Commissioner Sarah Pelican is the City Commission’s representative on the Nassau County Economic Development Board. You would think that if anyone would have some good options to bring to the table, it would be Sarah. Maybe she is only keeping her powder dry for the moment. Jeffrey Bunch will or won’t be running for re-election this fall, so he may or may not be willing to take on controversy. That leaves the budget hot potato in the hands of the only two commissioners who at least try to explain to the citizens why they take the stands they do.

Meanwhile back at city hall, the phones don’t work, the employees are all trying to guess who goes and who stays, and which is the better fate. Complaints are coming in that young children and small dogs are getting lost in the unmown grass on city property, and the recent storm have underlined in bold the need to do something about drainage and streets.

Let’s hope that at Tuesday’s budget workshop (5:30 p.m., July 10) this unproductive game of “you go first” with ideas to increase revenues ends. In his interview for the job of city manager, Joe Gerrity said, “If I had wanted to make policy, I would have run for one of your seats.” If that is so, then it is up to him to propose a balanced budget, whether it enhances or detracts from his popularity in the community. That’s what a manager does. The commissioners will then have to take the heat for supporting lay offs, cuts in city services, or increases in taxes or franchise fees. Or, if they have better ideas, they can enlighten us all. But for Gerrity to expect the commissioners to come forth at this stage to tell him what to cut or to raise fees is a bit disingenuous. After all, the commissioners have no detailed knowledge of the internal workings of the city, nor should they under the City Charter. Only the city manager knows what is working well and what is not working at all. So I guess that hot potato is in his hands… at least for now.

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Same Old Song – With a Different Beat

It's the same old song and will be throughout the summer

It’s a tired tune so far this year, but the song of the ongoing European debt crisis was accented by the familiar refrain of the American healthcare debate as the Supreme Court weighed in. Although financial markets were singing the blues last week during the initial announcement of the Court’s mostly positive ruling on the Affordable Care Act (“Obamacare”), stock prices later jumped up by 2.5% on Europe’s announcement of a bold move to rescue debtor nations. Specifically, it was news about plans to create a single banking supervisor who could prevent future banking crises by having authority to capitalize the European banks. The song is not quite over though, as debate will continue over specific terms of the new euro-zone bonds.

Meanwhile in the U.S., healthcare and related stocks reacted mixed to news of the ruling on the Affordable Care Act. Anticipating reimbursement for some expenses, hospital stocks generally surged on the news, as did those of Medicaid-focused firms. Health insurers, however, lost ground.  Expect economic and political ramifications to continue developing in the coming weeks, months, and even years. This debate clearly is not over, despite the high court’s ruling.

Home Sales Rise as Gas Price Falls

New home sales rose 7.6% in May, bringing the annualized pace to 369,000 and reaching a new two-year high. The National Association of Realtors also announced that pending home sales rose 5.9%, achieving yet another two-year high. However, a shadow inventory of foreclosures is still a bit disconcerting.

Although it has not been welcome news for energy stocks, the recent decrease in the price for gasoline has been welcome relief for drivers. The average price nationwide is down 10 cents to $3.47 per gallon. The SE is enjoying the biggest decline. Local gas prices are now around $3.13 per gallon, and 10 of the cheapest states for gas are all in the south. Some Jacksonville locations are rumored to be selling gasoline at less than $3.00 per gallon.

A Peek at the Coming Week

Friday’s labor report

•    Nonfarm payroll growth has slowed considerably in recent months, and recent jobless-claim data has not been encouraging.
•    The unemployment rate in May ticked up to 8.2%.

Independence Day
Stock and Bond markets close early on Tuesday and will be closed all day on Wednesday in observance of Independence Day. Many of us will have this time off to spend with family and friends. It is a great time to reflect upon citizenship and the great freedoms we enjoy as Americans. Have a safe and happy Fourth of July!

Germany has only Machiavellian Options for Europe

Germany's Machiavellian Options

Germany has no good choices in the ongoing European Debt Crisis. The logical choice, however, is to agree to grant a banking charter that allows printing of more Euros versus the much more ominous option of accepting joint liability for its weaker, less disciplined partner nations.  If peripheral Europe keeps its word and becomes thrifty, the common currency will be saved by printing more Euros to buy time for the Eurozone. In that event, the increase in the money supply can slowly be reversed. If, however, as is much more likely, the Emergency Funds are used to monetize irresponsible spending, Germany, and to a lesser degree the Netherlands and Finland, will have a less onerous way out.

And even though Angela Merkel does not believe in printing money to allow nations with loose financial policies to continue living beyond their means, I believe that German policy makers will eventually realize that their long term interest lies in allowing euros to be printed. And whenever that realization comes, sooner rather than later, Germany and the other northern euro nations will have no choice but to do something. If they don’t do something, the euro will end abruptly in a chaotic manner. That will plunge Germany, Netherlands and Finland into disarray with their neighbors.

This analysis sounds Machiavellian, and it is. If Germany does what I think it will eventually do, the foolishness of long-term oriented bond buyers will lead them, like lambs to the slaughter, into European sovereign debt. Bond buyers, having their investments temporarily juiced by newly printed euros, will eventually lose everything if they don’t get rid of the bonds in time. That is not much different than what is going to happen to buyers of Treasuries in America.

Obviously, no politician is going to admit that this type of planning can or will happen. But, every policy maker in Europe, Germany, and even America has been concentrating on survival by forcefully kicking the can of worms farther down the road. The practical short- to medium-term effect of massive back-door monetization of European debt will be appreciation of precious metals and stock investments. European bonds are likely to appreciate dramatically in the short to medium run. American treasuries are likely to collapse as safe-haven demand is pulled out from under them.
Capital now hiding in the U.S. will flow back to Europe. That will deprive the U.S. economy of capital, spurring Fed Chief Bernanke into another disastrous attempt to print new capital.

Being quite familiar with the German philosophy of life, it is of course possible that German policy makers will do the “righteous” thing, by continuing to refuse to allow the printing of money, and stay the present course. But recent experience with American policy-makers, and politicians of all stripes on both sides of the Atlantic, is that they won’t. They will compromise in an effort to avoid chaos. If they do stand on ceremony, “safe haven” non-euro currencies and bonds, like the Swiss franc, Japanese yen, and U.S. dollar, are going to appreciate somewhat more in the short term. One big problem however is that Japan and the U.S. are not really safe havens. Their debt problems actually exceed those of Europe and are only perceived less because of intrigue and press ignorance. Even Switzerland is not completely safe. Its small central bank has been massively intervening in the currency markets, and will take a huge hit on hundreds of billions of soon-to-be deeply depreciated euros. Obviously the franc is going to suffer from that.

So here again the 3 options Germany faces:

A) taking joint liability for the debts of the less disciplined countries,

B) allowing the printing of new Euros or

C) Doing nothing and facing the status quo until it all falls apart.

Accepting Joint Liability while the less disciplined countries will only pay lip service to austerity and re-structuring, will lead to a chaotic end of the Euro experiment and the ensuing obligations will drag down the German economy for decades to come.
Printing more Euros will reveal the real issue of monetary debasement, which is intrinsically wrong and will invite severe reactions from other global players such as China, who as Europe’s biggest trading partner holds loads of trade obligations in Euros and Dollars.

Those are the only two ways to keep the euro going for a few more years. Joint liability or money printing. In the absence of one or the other, the weak nations are going to break off, and the euro is going to die in an uncontrolled death.
Assuming that nothing is done, and the euro does collapse, stock indexes, like the Dow Jones Industrial Average and the S&P 500 will dramatically fall, as European banks sell off everything they own. The CAC, DAX and FTSE are likely to fall even more. In that scenario, the only good longer-term investment will be precious metals, especially gold, as people lose faith in all fiat currencies.

The cards are on the table

The outcome of the game cannot be changed, only the timing. And that’s what a lot of people including the media don’t understand. Inevitable is not synonymous with imminent!!! Inevitable does not mean today or tomorrow, but keep in mind that there is a huge difference between a year early versus a day late, when the proverbial dodo hits the fan.

Federal Reserve Continues to Twist (in the wind?)

The Federal Reserve's Twisted Dollar policies

The Federal Reserve's Twisted Dollar policies

Opting to maintain the status quo, the Federal Reserve elected to continue Operation Twist for another six months. However, Fed chairman Ben Bernanke did indicate he will “carefully consider” other measures. One wonders what else ol’ Ben could possibly have in his toolkit at this point. The Fed’s latest action is largely symbolic and indicates only that they are engaged and willing to do something rather than sit idly by and be perceived as doing nothing. Any substantial benefits to the economy from this latest move, however, are foggy at best.

After adding $400 billion over nine months, the Fed will add another $267 billion in long term Treasuries to its portfolio, selling an equal amount of short-term notes to finance the transaction.  Anyone can see this does nothing to pump new money into the economy.  It simply shuffles funds from one place on the balance sheet to another, which conjures up visions of deck chairs and a certain infamous “unsinkable” ocean liner.

With $1.5 billion in excess bank reserves sitting at the Fed earning 0.25%, any further bond buys would be like throwing buckets of water on our already rain saturated Florida lawns (thank you, TS Debby).  Any newly minted cash from this operation simply drains right back to the Fed.
Even if the Federal Reserve is able to “twist” the long end of the bond market yield curve, will it really boost the economy, given the already record low interest rates?  On the other hand, anyone in the market for a home mortgage and who can pass muster with the latest stringent credit hurdles is looking at a fabulous buying opportunity with mortgage rates continuing to hover at all time lows.

Some Better News

Investment strategist Louis Navellier reminds us that all is not as gloomy as it may appear. In spite of disappointing economic data, a grouchy fed chairman, European debt woes, and a recent credit downgrade among financial stocks, there was one piece of uplifting economic news last Thursday.
The Conference Board announced that the index of Leading Economic Indicators (LEI) rose 0.3% in May.  This was significantly better than economists’ earlier expectations of a 0.1% rise following April’s 0.1% decline. Perhaps the best news is fully 7 out of 10 leading economic indicators actually rose in May, led by an increase in building permits.
The bottom line is this:  There is little doubt that continuous economic anxiety is depressing most investors. Perhaps a robust second quarter earnings announcement season will be the welcome rising tide that begins to lift the overall market and investor sentiments along with it.

A Peek at the Coming Week

U. S. data
• Look for latest reports this week regarding new-home sales, durable goods orders, pending home sales, consumer confidence, and consumer spending.
• The housing market is in a gradual uptrend, but don’t expect much in the way of consumer confidence here.
• Jobless claims are holding below 390,000 which is relatively good news. Any sustained movement above 400,000 would be very bad.

Keep an eye on crude oil prices.

• Crude prices recently dipped below $80 per barrel.
• Is too much crude being pumped from Saudi Arabia? Insufficient global demand? Does this signal an ominous turn for the global economy?  Keep a wary eye on further drops in the price of oil.

Dutch High Tech Company Opens US office on Amelia Island

The Little Box that does us Good!

During last Tuesday’s European American Business Club meeting at the Amelia River Golf Course, I was introduced to Dr. Pete Peterson, who heads up the office of a Dutch electrochemical technology company that recently opened its American subsidiary right here on Amelia Island.

IVIUM Technologies is headquartered in the Dutch technology city of Eindhoven, which is also the seat of Philips Worldwide, features “Solutions for Electrochemical Research” as its slogan.
During Pete’s introduction to the club members, a multi diversified gathering of entrepreneurs, artists, writers, marketeers, realtors and online business consultants from around the globe, it became rapidly clear that we were dealing with a company that is on the edge of technology, a mystery to most of us.

ACR’s Phil Griffin introduced Pete and IVIUM as “a company with a product line of little boxes that produce solutions that are good for us?!”

Many if not all of us in the audience were politely nodding in a state of confusion that sits somewhere between yawns of boredom and hunger pangs. If at all we would have an idea about the meaning of ElectroChemical Solutions, understanding little boxes as being good for us, is something we do not associate with other than in airplane crashes.
I was tasked for no other reason then that I was the only Dutchman in this group on this particular evening, to unravel the mysteries of “the little boxes that do good things”.

First stop was the IVIUM’s website where I learned that the company works on problems covering all facets of electrochemical science and technology: Corrosion Science and Engineering, Electrochemical Materials Science, Functional Materials and Nanoscale Electrochemistry, Electrochemical Power Sources, Electrochemical Pollution Control, Electrochemicals, Electrodics and Electrocatalysis, Electrometallurgy, Industrial Metal Finishing and Computer Networking and Instrumentation.

With my brain mostly Alpha wired, I was quickly on impulse overload while scanning the website, which is probably a candy store for electrochemists. But diving deeper into Google and the web, I started to learn that this is not an obscure little industry, tucked away in out-of-the-way places, kept at a safe distance from regular people. This is a global force of scientists interested in finding answers and solutions to how product components chemically inter-react. This is operating on the forefront of tomorrow’s technology. teaches me that Electrochemistry is a branch within the field of chemistry which involves the intersection between chemical reactions and electrical currents. Some chemical reactions can be catalyzed by the presence of an electrical current, and conversely, it is possible to generate electricity through the process of a chemical reaction. Chances are very high that you are benefiting from electrochemistry at this very moment, or that you will be at some point today, because it is the underlying process behind a wide range of things, from chemical signaling in your own body to the operation of a car battery for example.

Electrochemistry is about energy whether that concerns oxidation, corrosion, metal pitting, electro plating,fuel cells, nano materials and so much more. Electrochemistry is used in scientific laboratories, for processing and analyzing a range of materials. It is also used in processes such as electroplating, in which the property of electro deposition is harnessed, and in the operation of batteries, which utilize a chemical reaction to generate electrical energy. Another example of a natural electrochemical reaction is corrosion, especially iron oxidation, which is better known as “rust” among us lay people.

And that is what IVIUM offers to a rapidly expanding science; complicated hi tech boxes that read, analyze, run tests, and provide answers that a re potentially good for us.

From long ago I kind of remember that many biological processes, from blood clotting to the transfer of nerve impulses, are electrochemical in nature. The biological conversion of the chemical energy of food to mechanical energy takes place at an efficiency so high that it is difficult to explain without electrochemical mechanisms as well. But honestly, during the “tender” teenage years, the only chemistry I was interested in had very little to do with school.

And frankly, understanding the reasons behind the decision for IVIUM to open its US-Canada subsidiary here on island may have a lot to do with the chemistry of attraction as well.

Headlines Driving the Markets

A1a Wealth Management Financial Updates

Headlines are effecting the Markets up and down

Although Europe’s latest front-page headlines calmed markets last week, fresh headlines can push things either way.
A recent dismal employment report knocked equity investments off their feet, but by midweek, the market staged an impressive comeback.  What’s driving this schizophrenic behavior in the stock market lately? Some carefully crafted headlines from Germany and chatter about another round of quantitative easing (QE3) in the U.S. calmed jittery investor nerves. Even the bond markets breathed a sigh of relief.

Uncertainty leads to fear, and fear drives short-term market performance.

Slow & Steady Growth Ahead?

Last week, I commented on some of the economic indicators causing economic pundits to question whether the U.S. may be heading toward another recession. This week, the picture is looking brighter, as many data points indicate slow and steady growth is the more likely outcome.

• According to the Federal Reserve’s Beige Book, growth appears “poised to continue at a moderate pace.”  However, the Fed also reiterated its preparedness to act if “financial stresses escalate,” giving Chairman Bernanke a green light to initiate another round of quantitative easing if needed.
• Institute for Supply Management (ISM) survey numbers are holding above 50 and may be foreshadowing acceleration in coming months. This is not indicative of an impending economic contraction.
• Employment data is a lagging but surefire indicator of economic recovery (or recession), and latest jobless claims are holding at an elevated but noncritical range. Unemployment claims are down 12,000 to 377,000 following an upward revision last week. Jobless claims are not indicating an impending recession, either.

A Peek at the Coming Week

Slowing growth keeps data in focus.
• Wednesday’s upcoming retail sales report will garner plenty of attention. Do not expect much.
• Consumers are under pressure from low wage gains, slow income growth, and a low savings rate (< 4%). However, they haven’t fully retreated from spending.
Spain’s banking woes nudge Greece off the front page.
• Look for Greece’s parliamentary elections, part II on Sunday, June 17.
• Polls may or may not influence global trading.
• European headlines will continue to move markets in either direction.
• Uncertainty = fear = market volatility
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