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You Break It, You Buy It !

it was on the News so it must be the Truth...?

I used to have an easy chair with foot stool in my office I named “Complacency” and I have a Fire and Ice Chair called “Damn the Torpedoes”. “Complacency” looked like new. It looked like I never sat in it, which was the case. The soft leather was immaculate, no wear and tear, dull beige. It looked comfortable and inviting. Every day when I passed by “Complacency” I thought: “One day I’m going to fold into you and take a nap in the daytime, stare at the ocean waves rolling in, enjoy warming rays of sunshine and let the world be what it wants to be.”
But after several years I realized that I would never sit down in “Complacency”, no matter how inviting she was. I gave her away because I realized that I will always be drawn to the one with sloppily repaired legs, scratched armrests and partially torn fabric, and a spring on the verge of popping through the seat. “Damn the Torpedoes” is uncomfortable, which is why she keeps me on my toes (literally). She gives me no comfort while I watch the dangerous fiction that is called news these days go by on my computer screens.

I apologize for all the metaphors. Two of my heroes passed away this week with my wife’s birthday celebration smack in the middle of them. A bit unsettling. Two originals who were only 56 years old and full of spit and vinegar, each pushing mankind on their own levels to new heights. My kinship with them is portrayed in this wonderful short video Here is to the Misfits.

I concede that dealing with those losses gives me very little patience dealing with the nonsensical ideas and notions that come from newscasters and reporters parroting the commoditized words of politicians and community leaders on both sides of the fence, when looking at the uncertain world we live in. But in any case this rant has been a long time coming.

News these days is at best a façade and at worst a very dangerous misinterpretation of facts, facts you will only uncover if you come out of Complacency and start peeling away the layers of the message until reality unfolds.
What worries me is that News is consumed and mentally accepted by most of the audience it seems, leaving us all at great risk when the realities become apparent.

Four news issues that got me really fired up this week.

Completely inconsequential compared to the passing of two of my heroes, there were four news issues that got me really fired up this week.

First there was the witch hunt perpetrated on a local business owner on behalf of 13 Turtle hatchlings killed on Fletcher a couple of weeks ago, allegedly caused by a small inn keeper not turning off her lights, who has now “resolved to walk away” from her business as a result of the sub human treatment of the accusing parties. In her own words: “I cannot fight city hall and the infinitely powerful Amelia Island Turtle Watch Association.”
Of course this is not my fight but the ulterior façade of the story is that 13 hatchlings died unnecessary, so let’s put the blame on someone. However when you start peeling the layers of the entire incident away, the blame issue becomes much more dimensional than portrayed, even more so when noting that out of a harvest of 330 some newborn turtles, 13 hatchlings were apparently distracted by light, while the other 315 hatchlings from the same 2 nests made it safely to the water, instead of to the road. Peeling the layers away in order to get to the real story is what a justifiable society does, not scan the outside, render a verdict and move on.
The reference to “fighting city hall” in this context is particularly disturbing to me, as I have heard this same phrase on many occasions lately in reference to businesses closing up or moving to the county.

Also not my fight but equally disturbing was a local Newspaper reference this week to the arrest of a well known local Fitness Instructor. What particularly upset me was that most on the front page of the article was about an entirely unrelated arrest 10 years ago, which was in such detail that it might as well put a target on the man’s forehead that says GUILTY. Come on America, does “Innocent until Proven Guilty” still means something? And by the way, can anyone tell me what happened to Felix Solis? Someone told me all charges were dropped?

Another goody two shoe witch hunt that makes me breath fire and ice, is this ongoing stupid Jax Channel 47 TV attack on restaurants in the Greater Jacksonville area. This week the reporter apparently found a roach in a Town Center establishment. Good Heavens….what else? Get on with your pathetic life TV47 and maybe get someone in your master control control to pay attention when the commercial break is over and it’s time to switch back to general programming instead of giving us black space for 30 seconds or longer. I have dined in restaurants across the globe, from dives to Michelin 3 Stars. On a recent trip to New York we dined with street vendors and Upscale establishments. A roach in a restaurant kitchen is as “normal” as a rat in the New York Subway, unless you apply so much chemical kill in the kitchen, that we all succumb to terrible diseases. Of course it’s disgusting to see a roach in a kitchen, but it happens, more often than not actually. Look at the fruit and vegetable vendors in this video and learn that surviving in this beautiful world of ours requires a lot of creativity and perseverance before you randomly (or maybe not so randomly) abuse your exposure power to kill someone’s already challenged dream to stay open in today’s economic climate .

And then last but not least, I have a huge concern when news becomes a pre-packaged opinion for everyone without knowledge on the matter. It was on the News, so it must be the Truth.

This one came at the tail end of the week when the US Senate postponed until next week the Vote on the Currency Reform of Fair Trade Act or the Let’s Piss Off China Act, because they are our largest creditor. Why? Well if this Act is passed it will institute a process allowing the US Commerce Department to levy tariffs when it is believed that the Chinese currency units are undervalued and therefore disadvantageous to US businesses. Kind of like the TSA airport person not letting you board a plane because you look like an unshaved terrorist. But most Americans reading the headline here conclude that:

• China is responsible for US unemployment.U
• China is taking advantage of “our” goodwill.
• The US government is going to fix the situation by making the Chinese pay up.
• Therefore, the Chinese government is bad, and the US government is good.
• Once fixed, US manufacturing jobs will be kick-started, and it will be happy days again.
• Thank goodness the U.S. government looks after us or we’d sure be in a lot of trouble. We should vote these folks back into office!

Mind you, I said most Americans…not ALL Americans. And with this opinion in mind, most Americans will then quickly move their attention to the next headline about a semi-celebrity with a wardrobe malfunction or an idiot football player who uses his iPhone to Tweet the question “Who is Steve Jobs?”

But let’s quickly look at the biggest danger this kind of ignorance has in store for us by peeling the blooming onion of what Washington is trying to impose on us vis-a-vis China.

Layer One of the Onion: It’s an election year.
Both the Republicans and the Democrats are eager to dodge blame for the dead-cat economy by laying that cat on China’s doorstep. The propaganda machine has already caused a majority of Republican voters (55%) to now view China as an active enemy. Making the bill more likely to pass is that the Democrats are desperate to re-engage the trade unions that were so helpful to them in the last elections – therefore it’s no surprise that the Currency Reform of Fair Trade Act bill is cosponsored by senators from three heavily industrialized, unionized states.

Layer Two of the Onion: Blame is written in the rearview mirror.
Sure the Chinese have been manipulating their currency. You would do too if you saw that your debtor (the US) was frantically trying to water down the purchasing power of the currency you were holding the debt in. So what did the Chinese do?
Well, for one they bought US Treasury bills in great quantities. But guess who sold them those Treasuries? Why, that would be the US government.
And why did the US government have to sell such excessive quantities of Treasuries? Because the US government is addicted to spending.
And why is it addicted to spending? Could it be because the US public demands so much more from its government than was ever envisioned in the foundational days of the republic.
The Chinese – along with a bunch of oil sheiks – simply have lately filled the gap between what US citizens were expected to pay in taxes or willing to buy in the way of Treasuries, to cover the government’s mad spending.

Throw in a couple of insanely and massively misguided wars and a bunch of other entitlements and it rapidly becomes clear that absent the Chinese, the Fed would have started printing money like crazy long ago.
Absent the Chinese (and a handful of other nations) buying US treasuries, you might want to remember the old store sign, “You Break It, You Buy It.”
Well, we broke it and without the Chinese, it is ours and our children’s children’s children who will be buying it.

Layer Three: It’s Déjå Vue All over again
For those of you old enough to think consciously two decades ago, it was the Japanese who were being accused of being currency manipulators and worse. The situation with the Japanese then and the Chinese now offers a powerful corollary that reveals that all the arm-waving over China’s currency manipulation is much ado about nothing. I could go into all the details of how stupid it is when governments start intervening in currency markets, but suffice here by saying that historical record does not point or prove a plausible short or long term advantage. Au contraire, history showcases only examples of unsustainable government folly. Besides…anyone glancing at the one-year performance of the Shanghai Stock Index can clearly see that the long crash in China has already begun, just like it did in the early 1990s in Japan.

Layer Four: China is the least of the problems being faced by US manufacturing.
US manufacturing is suffering from shortsightedness, not Chinese ingenuity. US Manufacturing jobs have declined since since 1970s not because of Taiwan, China, Japan, Korea, Indonesia, Mexico or any other would be recipient of our wrath. The exponential increase of computational power is the unstoppable culprit and the creative destruction of technology is about to take things to a entirely new level, thanks to 3D printing; actually it would call it 3D duplication. Watch this video as it explains America’s Future in the World:

Even after watching you will probably not understand how exactly it works, but you may understand the consequences for our lives, employment and what US technology could really mean to the world if it were our focus, instead of being cry babies complaining that these countries are stealing our jobs.

And yes there are now 3D printers that “print” other 3D printers. In short, the future will be increasingly dominated and enhanced by technology – and that technology is speeding at us far faster than most people can imagine… or many business can even prepare for. Anyone who tries to cling to the past will find themselves clinging onto little more than wreckage.

Layer Five: Actions have consequences.

Summing up the data, at present the US exports about $92 billion worth of goods and services to China, and China exports about $364 billion back into the US, for a net trade deficit of $273 billion in China’s favor. Sounds like a big deal, doesn’t it? Well it’s actually peanuts when you zoom out your focus a bit. And here is why.

Imports from China 2010

The US economy as measured by GDP rang in at $14.7 trillion last year. While the following is not exactly an apples-to-apples construct, it is useful for comparison purposes to mention that the Chinese manufacturing deficit, therefore, amounts to just 1.8% of the US economy.

To put that number in perspective, the US currently exports about $105 billion in petroleum products but imports $432 billion a year from countries such as Canada, Saudi Arabia, Mexico, Venezuela, Nigeria, and Iraq (the top six sources of US oil, in order of importance – is it just me or can you see a potential problem in that list?), leaving a $327 billion deficit there. Again, compared to the US economy, petroleum imports represent 2.2% of it. Again, that’s substantial for anyone group, but not an overwhelming factor in the broader context of GDP.

So why are Tariffs turning into a leading news headline?

Because Washington needs to detract from the other economic developments that are endangering the nation’s recovery. The US Government figures on inflation talk about 3.2%, which would equal $470 billion off the $14.7 trillion GDP.  HOWEVER, if Shadow Stats is correct – and there is no reason to doubt their statistic – actual inflation is running at about 7%, so the number rises to $1.03 trillion… in other words, an awful lot of currency units. Add to that the $2.16 trillion the Government intends to collect in taxes and there are literally a trillion or so reasons for the government to make you focus on a tangible enemy.

Given that the bottom line of the Chinese trade deficit is not all that consequential, enactment of the Currency Reform of Fair Trade Act is sure as hell going to have repercussions and consequences leading to a Global trade war. Once that shot is fired, the consequences, while unpredictable, are almost certain to be dangerous. That the politicians would even think about risking getting into a pissing match with the world’s largest holder of US debt and very likely setting off a global trade war at this crossroad in history is stunningly scary to me.

And that’s why I write the real stories behind the headlines until “Damn the Torpedoes” crashes and burns.

Wall Street Volatility is Going to the Streets

Take Back Our Country is a Message in itself

I get a couple of hundred emails every day and a good percentage lately is from people who ask why we don’t publish more on the financial markets and frankly the only answer I can give is: I’m getting bored by manufactured “volatility,” so much actually that I’m not even active in the market anymore, not even shorting a bunch of stocks like Kodak or AMR (American Airlines). The same jojo is operating in the foreign exchange markets. It’s just too volatile and in my case it has become a bit boring.

I only look at the market on my Mac Dashboard on Friday afternoons these days and what I see is the same cycle “repeat, rinse, repeat” week after week. A message about a weaker than expected job creation in September and the market crashes a couple of hundred points. Except of course big oil that sees a job lift of 103,000 as a reason to up the barrel price. Some light in the tunnel of the European debt situation, never mind that it still is the headlight of an oncoming train, and the market jumps a couple of hundred points and every analyst is predicting the start of a rally. This morning Yahoo Finance had two contradicting stories about oil prices, listed right next to each other.
As far as I’m concerned the market is full of forecasters in financial and economic fields that have swallowed their predictions a couple of dozen times in recent months. And I think it is rather stupid that some of them try to draw medium or long term implications from single day fluctuations. We’re just living in highly volatile times, fed by alternating fear and greed.

When confusion becomes the daily grind

Europe will remain a big question mark until they run out of road to kick the can down to until it sinks in the Mediterranean. I see it as living on a one way dead end street or if you want Cul-de-Sac. This afternoon the Dow closed at 11,103 and the S&P at 1,155 and everyone is worried. Less than 2 weeks ago there were days the Dow fell way beneath 11000 and Armageddon was reportedly on our doorstep. We are all in the process of learning how to kick our problems into next week, month or year, which accounts for fear in one week and greed in another and that creates a highly volatile environment.

Right about exactly a year ago we were in a similar volatile market at about the same levels. The Piigs in Europe were frontpage news, the budget deficit frightening, none of the stimuli were working, the housing market was dead and the industrial nation governments collectively started kicking cans down the road by essentially pushing new bills into the market place. We’ve seen since then grocery spending almost double with less items in the shopping cart. Oil was $82 a barrel 52 weeks ago and the gas price per gallon was an average $2.80. Today at the same price per barrel, the gallon price remains close to $3.50! The Banks are sitting on $1.5 trillion in untouched cash from government stimuli and for the first time in history mortgage rates have dropped below 4%. Will it increase demand for housing, new or existing? Not a chance. First of all, you will have to give the banks your first born as collateral if you want to qualify based on the outdated credit rating system, and secondly….times are just too volatile for most people to commit to the long term.

It’s the middle class that’s getting hammered and considering the voracious  appetite of still expanding governments on national and local levels, the middle class is looking at getting taxed out of existence. And that puts a damper on the essence of our democratic society. Because frankly there is no democracy if there is not a large middle class. The problem is that too many are still hoping that miraculously the days before the 2008 crash will return, and therefore none of the underlying behaviors that caused the crash nor basic economic fundamentals have been addressed.

So instead of reporting on Wall Street’s volatility dance, I look at the ongoing and widening display of anger and confusion of tens of thousands of protesters who are currently roaming the streets of Downtown New York, with a movement into Washington as was reported today, because even though they seem to not have a clear objective for their actions according to the ridicule of the mainstream media, it only takes one messianic person to bring them together in their effort to Take Back Our Country and market volatility could turn into something much more serious.

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China’s Impact on the World Stage — Part III

Grauman's_Chinese_Theatre,_by_Carol_Highsmith_fixed_&_straightened

Grauman's Chinese Theatre, a different culture

Before China, there was Japan. From the 1960s to the 1980s, Japan was on a roll. They had one of the highest economic growth rates in the world, according to PBS. Their manufacturing prowess grew to be the envy of the world. Their stock market soared 373 percent between 1980 and its peak in 1989, according to Knowledge@Emory.edu. And, like China today, there were predictions that Japan would overtake the United States as the largest economy in the world.

We’re still waiting.

Along with its stock market, Japan’s economic miracle came crashing down in the 1990s. By the end of 2010, the Japanese stock market, as measured by the Nikkei 225 index, was down an astounding 73 percent from its 21-year old 1989 high, according to data from Yahoo! Finance.
As happened in Japan, extrapolating past performance may be hazardous to your wealth. Will China suffer a similar fate? If it does, what will that do to world financial markets? In this final installment of our series on China, we’ll look at three issues facing China that are an outgrowth of their strong economy and how these issues may affect you.

MANAGING THE ECONOMY

China has deftly managed its economy over the past three decades to produce spectacular growth and improved living standards for its people. In fact, economic growth has contributed to more than 500 million Chinese people rising out of poverty since 1981, according to The World Bank.  Growth, however, has its price.
Strong economic growth can lead to problems such as inflation, social and economic inequality, and a growing pile of foreign exchange reserves. Let’s take a closer look at each of those three issues.

Inflation
Inflation is a major threat to China’s future success because if it gets out of control, the population may revolt. In August 2011, inflation rose by 6.2 percent from a year earlier – well above the government’s 4.0 percent target. Worse yet, food prices rose 13.4 percent from a year earlier and, for a country that needs to feed 1.3 billion people, that’s a big problem.
Rising food prices are particularly difficult for China to stomach (pardon the pun), because the average Chinese household spends about a third of its disposable income on basic food, according to the Financial Times.
If you want to know why inflation is a threat to national stability, go back to 1989. The Financial Times said, “Inflation of nearly 20 percent is considered a key contributing factor to the 1989 student protests that culminated in the bloody military crackdown in and around Beijing’s Tiananmen Square.”

Social and Economic Inequality
While China’s economy has grown more than 90-fold in the past 30 years, the gains have left a widening gap between the “Haves” and “Have-Nots.” Chinese Premier Wen Jiabao said back in February 2011 that rising inequality is threatening social stability, according to a Bloomberg article.

Can you imagine what would happen if even a small percentage of China’s 1.3 billion people turned against the government?  Civil unrest has been on the rise in recent years. As Bloomberg reported in citing data from Sun Liping, a professor of sociology at Beijing’s Tsinghua University, “‘Mass incidents,’ everything from strikes to riots and demonstrations, doubled from 2006, rising to at least 180,000 cases in 2010.”

So, how do you keep 1.3 billion people calm and restrained? According to Nicholas Bequelin, a China researcher for Human Rights Watch in Hong Kong, China’s been doing it “through a combination of economic growth, social reforms, and political repression.” Time will tell how long that lasts.

Foreign Exchange Reserves
At $3.2 trillion, China has – by far – the largest foreign exchange reserves in the world, according to The Wall Street Journal.
These trillions were built over the years through China’s trade surplus, foreign direct investment, and capital inflows betting on currency appreciation. On the surface, large foreign exchange reserves sound like a good thing, and, in some ways, it is. The downside is that it exacerbates inflationary pressure, according to Bloomberg.

In an ironic twist, the U.S. has been a beneficiary of this massive reserves buildup. China had to park their cash somewhere so where did they turn? To the U.S. treasury market! At the end of June 2011, China was the largest foreign holder of U.S. Treasuries with more than $1.1 trillion filling their balance sheet, according to the Treasury Department.
Viewed another way, China has been a big reason why the U.S. has been able to run up trillion-dollar budget deficits while keeping interest rates low – we have China as a willing buyer of our paper.

With China needing a large liquid market to park its reserves and the U.S. needing a big buyer of its paper, these countries have the ultimate “too big to fail” global relationship, said Andy Rothman, an analyst in Shanghai for the investment bank CLSA as quoted in The New York Times.

Conclusion

China is so large and growing so fast, that it will impact the world in major ways for the foreseeable future. Its success or failure, its twists and turns, will reverberate throughout the financial markets and affect everything from the level of interest rates to the price of soybeans to the volatility of the S&P 500 index.

Will China stumble at some point? Probably. The big question is how will their potential tumble cascade throughout the world and affect each of us personally?  The diligent will continue to research world events and closely monitor their investment choices.  In a globally interconnected world that is getting smaller by the day, who can afford to do otherwise?

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A Problem has a Solution but a Predicament has an Outcome

Catch the Fish and Drown in the Process

Every problem has a solution but every predicament has an inevitable outcome. Try to find a solution for a predicament and you’re wasting your time. Last night the four of us at SearchAmelia had a birthday dinner at Arte’s Pizza in downtown Fernandina Beach. We love the place and when the Ritz Carlton, Amelia Island’s Executive Chef Thomas Tolxdorf and his family sit at the next table for pizza, you know you’re at the right place for some real exceptional Italian food.

During our table conversation that covered everything under the sun from local politics, to grandchildren and the economy (of course) Lawrence made an observation that I have heard quite a lot lately; the one that says: “At least the price of gas is slightly coming down, instead of going up.” And he is right: fueled by all media announcements the public expected the gas price to be $4 or more by now, so $3.50 seems like a deal.  It also underscores that public sentiment is easily manipulated considering that exactly a year ago the barrel price was in the same $78 range as today, but the gas prices at the pump were a national average of $2.80. Today’s national average is $3.50 per gallon. Is it profit taking, or is it a way to make us aware that energy inflation in one year has reached a 25% level?

Energy, Economy and Environment

Energy, oil if you will, has been the cornerstone of our explosive economic growth over the last century. Without oil we’d probably still be a civilization of farm communities and homegrown tooling industries. The triumvirate of Economy, Energy and Environment creates a  very interdependent balancing act. If the economy is bad and energy prices too high, choices may shift and people will heat their homesteads with wood from massive tree cutting and the economy fall into a depression. So, big oil is not going to let that happen. They know that there is a delicate balance point where people will seek to limit their expenses on energy with alternative options. Bicycles, scooters, mopeds, e-bikes are looking at sales of 500 million units in the next 5 years, hybrid and electric cars are getting public approval and attention and even walking to the supermarket or cornerstone is becoming more popular. Shopping becomes a once a week concentrated effort, the thermostat goes up or down a bit more depending on the season, GI showers become popular again. Life in general becomes a little less wasteful for a while, until things look up again.

These fluctuations hurt the oil industry and energy companies down the pipe because, just like governments, they operate on a perpetual growth model. So when demand falls, prices slowly come down a little, at least for a while.
A keen observer of the markets however knows that oil is a highly speculative commodity, so if oil prices today have fallen to near $78 a barrel, claiming Europe’s debt crisis roiling markets and falling personal incomes in the U.S. are suggesting slack demand for fuel, further embellished by the perceived “strength” of the dollar, the price of oil comes down, but only a bit. Because other factor muddle with supply and demand such as October is usually a slow month in the oil business. The North American summer driving season is over, and it will be a couple of months before heating demand perks up and travelers set out for winter holidays.
SO….don’t be surprised that gas prices at the pump are still $0.70 per gallon higher than a year ago when the barrel price ranged in the same $78 arena. Public sentiment is taken into consideration, so if the public expected the gas price to be $4 or more by now, $3.45 seems like a deal.

Coming back to the interdependency of economy, energy and environment, The first E, the economy, has been getting a lot of attention because our modern financial system is dependent on perpetual growth. As all money is loaned into existence it carries with it the critical obligation to pay back both principal and interest. As long as an economy grows at a 2% rate, servicing the debt isn’t much of a problem. But it’s a different story if the growth of the economy slows or goes negative into a recession.

Perpetual growth requires Energy and there are limits to the rates of energy consumption growth and resource replacement.
The predicament is that the money supply has been growing exponentially, requiring the economy to grow rapidly to service the debt, and consequently has forced our use of energy to grow exponentially as well. Since this situation cannot be sustained beyond depleting reserves (reserves that can be extracted economically), both Economy and Energy have landed in the category of predicament, rather than problem.

And if we don’t solve the problem of exponential debt-based money growth, we will have to suffer through the inevitable outcomes. Since the government is still focused on seeking solutions to predicaments, inevitable outcome scenarios are only waiting for one of the many triggers to be pulled.

Existentialism and the Attraction of Sliding Glass Doors

The Trainwreck Parallels

Wall Street has been laying the tracks to our Train Wreck

I have lived most of my life being attracted by opportunities that come from slipping through quick moving sliding glass doors. And as the plots of my life have been unfolding I realize more and more, essentially because numerous people keep pointing it out, that I have done a lot more than most people do in a lifetime. As plots unfolded quickly over the years, some more interesting than others, some more mysterious, more frightening, more crazy, more fulfilling, it was not until the recent economic downturn that I have been able to step back from daily distractions to observe unfolding dramas and recognitions in the world we live in. I admit that I had some help figuring it out reading Paulo Coehlo’s 65 million copy novel the Alchemist, as we walked parallel roads through life.

Now that I am no longer quite so young, I have become more acutely aware of events that can send anyone’s life in a tailspin or… an entirely new direction, filled with new priorities that trump all that came before it. Love, disease, tragedy, opportunity, change; there are many unexpected, uninvited and unwanted events that come up in a lifetime; many of which could have been controlled and adjusted if there had been a plan, a script of some sorts. No I’m not talking about a plan that smothers, neither am I talking about tragedy striking or a deadly disease. There is no plan for that. I’m talking about unwanted pregnancies or having the opportunity to get a college education or a sporting career slide by, because puppy love gets in the way, or mom’s cooking is wonderful. Don’t laugh…I have met thousands of people whose lives never unfolded because there was a short term attraction that stood in the way, when the time was right to spread their wings or slip through a sliding glass door.

As a child of the sixties, sandwiched between two super powers in a Cold War I became intensely aware early on that life always inevitably will morph into a process of incremental downward grinds, leaving an existential nothingness. With that in mind I have always scripted my life to be a rousing adventure of sorts that has taken me around and across the world many times over. Besides of course travel and experiencing culture at the roots level,I always enjoyed the added benefit of meeting many interesting people, seeing breathtaking sceneries and panoramas and being a participating witness in some historic moments on various levels.

When I read French philosopher Jean Paul Sartre in my early high school years I knew that my life would follow the road of existentialism, without realizing the unintended “victims” I would leave behind as I moved at top speed around the world. Victims mostly, who could never adopt, let alone adjust, to the essence of this school of thought. Loosely translated existentialism portrays that, bad health and accidents that can strike anyone at any time aside, we are the actors, authors, producers and directors of the lives we ultimately live. Consequently I have always put emphasis on the next scenes of my life. How do I want them to play out and what can I do to accomplish that? And yes words like egocentric and egotistical have been thrown at me on more than one occasion, mostly by companions with a nesting gene.

Excessive amounts of money or an abundance of toys were never part of my life’s equation, because in my early experience, when I had ready access to both, I quickly learned that both slow you down. And you can not be slow when a sliding door to opportunity quickly opens and closes. Watching TV, playing games, being glued to other people’s lives as they unfold, was never part of my scenery. Because of that I have never given it much thought why so many people cast themselves as walk-on characters in their own lives, and not as the lead.
Is it fear, is it laziness, is it comfort zone behavior, is it being locked up in a closet of our own doubts and lack of confidence? Is it because by the time we get around to thinking such thoughts, we are already so hidebound by past experiences that we can no longer dream of more interesting roles or paths to follow?
Over the years I have met so many people engaged in a private dialogue along the lines of, “I have tried to learn another language and failed, so that’s not for me.” Or, “I’m too old for something that radical, I’d rather play golf on my Sundays!”  or… or…  The ability of humans to create reasons to avoid action is literally infinite.

Over the years I have come to accept that some people supposedly envy me for my travels and experiences, because they never had a good enough reason to change. Deep down however, most people are happy with the way things are in their lives. Having been in business for myself over the past 31 years, I have heard thousands of people, friends and family talk about making changes, but when it comes time to take action, nothing ever happens. They resolve themselves to hunkering down in a ditch of their own making, hoping against hope to muddle through until the passage of time fills the ditch in, usually with them in it.

Yes, I’m older now and happy where I am. Amelia Island is Paradise for those who see its beauty and its community for what it is. I grew up in the hills of Southern Holland near the German and Belgian borders, a respectable distance away from the ocean, but very early on realized that water was my lifeblood. Not a lake or a river; only that vast powerful ocean would do, if not on it, than at least at view’s distance. I need to see the water, hear the surf, taste the salt in the air and feel the ocean breeze coming from thousands of miles away. I need to feel the fine sand between my toes. I had to travel thousands of miles across oceans and land and work hard for many years to get there. And that’s where I come to the essence of this essay.

I recently asked my partner Judie in our Monday morning meeting, how she felt about the economy and where we’re heading and she simply said: “We’re heading exactly where you and Ric (I miss your analytical research brother Ric) have been writing about over the past 3 years or so. It’s going to be real tough here for a long time.”
I asked her that question because we agreed a long time ago that we would respect each others opinions, even in writing, which cannot always be easy for her because I am a grass roots libertarian (no not liberal dumbwit!) whose beliefs, views and actions are deeply anchored in the sanctity of the individual, light years ahead of the political aberration called “the greater good” syndrome that seems to be prevalent these days. I am convinced that the future of our civilization hinges on the right of individuals to pursue their lives in decency and elective support of each other, rather than commanded support. The greater good syndrome that is strangling the sanctity of the individual comes from people who prefer to follow status-quo life scripts – scripts of such stark simplicity and fear, that they can be readily summed up on their tombstones – a kind of muddling through to the final scene, exit stage down. And for those who still have no clue about the oncoming trainwreck that started on Wall Street now 3 years ago, I’m sorry to say, muddling through in the next two decades or more is not going to be easy and not for the faint of heart. Are there answers? Of course there are…always, but they may not be on your doorstep or at the edge of town.

While for the old and weary it may be too late for a complete rewrite (take it to the limit one more time), it’s not too late for the young – especially here in the US where dissolving expectations about the American Dream affect whether a young person views themselves as successful or not.
The latest census data last week showed just how those expectations are being dashed. A Forbes article on the topic said:

“In record-setting numbers young adults struggling to find work, are shunning long-distance moves to areas of opportunity to live with Mom and Dad, delaying marriage and buying fewer homes, often raising kids out of wedlock. They suffer from the highest unemployment since World War II and risk living in poverty more than others – nearly 1 in 5.
New 2010 census data released last week show the wrenching impact of a recession that officially ended in mid-2009. It highlights the missed opportunities and dim prospects for a generation of mostly 20 and 30-somethings coming of age in a prolonged slump with high unemployment.”

If there was ever a time to toss life scripts involving the whole “just getting by” story line into the trash, it is NOW. No matter your age, you need to be thinking in terms of living the life you really want(ed), because at this point there are few if any safe routes to follow.

Again, that’s not saying there aren’t opportunities, but rather that it’s going to take more effort – probably a lot more effort – than was required during the long economic expansion following World War II. There were a number of reasons for that boom – technology, a downtrend in taxes, an inexpensive work force, education, an opening of global markets – but for the last decade or more, that boom was increasingly fueled by explosive levels of government spending, creating massive credit dependency and enormous sovereign debts around the globe.

The story of the next decades will be one of unwinding excess and not through the honest action of default, but through inflation that strikes a knife in the economic heart of the nation – the formation of capital that is so critical to future growth. Simply, it will be a period of decline and the paring back of the American Empire. We have been writing about the signs on that wall for quite a few years now.

As always however throughout history, for those willing to act boldly, to roll up the sleeves in much the same way as the early explorers and movers did upon arriving on the North American continent, it usually is also a time of great opportunity. That opportunity may have to be captured in a different area of the country, a different field of knowledge, or even in a different country, but that should be just a detail. Success or survival will largely depend on the ability to acquire an appreciation for cultures and customs; an appreciation that comes natural to those of us who slip through a sliding glass door once in a while.

Gold and Other Unusual Signs of our Times

Which pill colors your point of view in today's matrix

With gold going through a “correction” at $1,656.10 today and the faint of heart panicking once again, it is at least interesting to analyze the economy through the lens of some unusual indicators.

But first to all you cry babies with gold deposits: Get a hold of yourself and top off your gold reserves with some more shiny metal at a better rate. None of the fundamentals have changed in recent weeks or months that led to gold’s rise. Ask yourself if anything at all has changed from a macro-perspective on “tangibles”. Has our sovereign debt been vaporized? Is Greece any further away from default, now that the Germans are increasingly disapproving their leader’s support for Greece? Is the Chinese economic bubble any sturdier, or is it still leaking air? Has Japan, the world’s largest sovereign deadbeat based on the ratio of government debt to GDP, done anything to alleviate its crushing financial and demographic challenges? If your conclusion is, well….nothing has changed, than you got your answer.

So why did gold correct this week? As acceptance of a long term economic downturn grabs a hold of investors around the world, commodities are considered at risk and are being thrown over the side by those without a solid grasp on the fundamentals. My suggestion: Stay cool, calm and collected because you may be able to buy more gold at better prices and, and for latecomers to the game, to average down.

It seems we now have passed the line to a Matrix-like world where actual and virtual realities are interchangeable. No need to actually do anything to solve problems, but rather just script a make-believe solution in the media, announce it to the world, and the matter is done…until the next curve in the road.

Wall Street has been doing this for a long while and the Swiss recently did it, by promising to buy euros in endless quantities in order to keep the Swiss franc from strengthening past the 1.20 euro mark. The market apparently bought it, even though in reality, the “solution” is impractical for any real length of time.
The same applies to the Feds promise to keep the interest rates around 0% through at least 2013. Living up to that promise will require the Federal printshop to ink up some $2 trillion in funny money. We have reached the point where “pretend solutions” may no longer do the trick however.

We may have reached the point where real life scenarios tell us more about the state of the economy than anything Washington or Wall Street wants us to believe. Already since the recession of 1993 have we known that we should have more faith in non-standard economic indicators as a substitute for official figures, which have proved all too fallible time and again. Here are some lesser known economic indicators that reveal the state of the global economy and what to look for as signs of improvement.

The Speed at which a contractor returns your phone call.

Getting a contractor to return a call in a booming economy can drive you to drink. Try it today and be amazed at how quickly they put you on speed dial. By observation, the quicker a contractor returns your calls, the worse the economy is doing. Within 24 hours, you’re in a recession; if they call you without prompting, that’s a depression.

The Attraction to join the Military
There are numerous examples in our little Kingsland to Jacksonville region of the country how young men and women try to escape unemployment by applying for military duty. Nothing however reveals the economy like the Marine Advertisement Index which shows how the Marines toughen up their recruitment videos to scare off potential recruits, when too many applications have been received and it’s time to slow down the attraction. By the way, all the military services has been exceeding its recruitment quota, even the army, which struggled just a couple of years ago when the economy seemed strong.

Garments and Apparel
Harsh economic times seem to drastically alter people’s psyche in the area of garments and accessories. Neck ties for example not only get skinnier and less colorful in a bad economy, sales of ties shoots up dramatically as well, as men seem to want to express to potential employers that they are willing to work hard.
Men’s underwear is apparently another indicator as sales drop substantially during economic hard times. Industry observers compare it to driving your car another 10,000 miles before trading it in?!
The hemline index has already a long established history since the 1920 as skirts get longer in economic downturns and shorter when thinks look up.

Lipstick Sales Doubled in the recession following 911
This one is a long tested indicator, as is the fact that movie visits and popcorn consumption see a major upswing when the economy is down. Women turn to lipstick instead of more expensive indulgences like handbags and shoes during the rough times, or….they still get these items at bargain prices from pre-owned redistribution websites like eBay, Craigslist, Amazon and others. In the world of movies, 2009 was the best year ever. That should say enough.

The Second Hand Car Salesman Indicator

This one has actually two components. One is the speed of discounting and the other one is the speed of closing the deal. Since 2008 discounts have increased dramatically and I have heard many stories in recent years of driving off a car lot within an hour. Obviously a supply and demand scenario, but one dictated by the buyer’s market syndrome of a weak economy.

Beer and Baked Beans
Consumers move to canned goods to save on food expenses during hard times. Baked beans are a classic recession food staple, while organic foods loose a lot of customers when the economic goes down. Supermarket budget (store) brands are up 25-30% as people are substituting on a large scale. From 2008 through 2010, employment in the beer industry fell 12% versus 2% for Europe as a whole, as people try to save money by drinking at home. The other side of the coin? This is costing many jobs in the hospitality industry and severely depressing tax revenues. In Europe 260,000 people lost their jobs in the hospitality industry in recent years because of this.

The Haircut Indicator

Imagine having your hair dresser cut your hair shorter so you can save money over time through fewer salon visits. Not entirely a foreign concept of course, because it seems logical that during flush times women are more likely to get their hair cut, dyed, and groomed more frequently. Actually L’Oreal, the world’s no.1 hair dye manufacturer, saw the sales of its hair color products surge some 30 percent in a year, concluding that women in a recession buy unusual dye including red and copper while metallic colors soared 47 percent. A beauty specialist said people seek to escape reality in a recession, and dyed hair offers a kind of fantasy image. I wonder if the same applies for dog grooming salons where you shell out an easy $45 for your pooch every time you walk in.

Infidelity and Prostitution Benchmarks
Extramarital affairs and the price of prostitution are telling us that there is still plenty of economic trouble ahead. British website illicitencounters.com counts 617,055 users in the UK up from 300,000 just 2 years ago. The Web site crunched its traffic and membership numbers and found that there was a big increase when there was a turning point in the FTSE-100 index, which measures the leading companies listed in London. When the market collapses, people plot affairs. And when the bulls rage, the same thing happens. When it is trading sideways, they stick with their partners.
Also in countries where prostitution is legal, the economic downturn has led to a 2/3 price collapse and an 30% increase of supply.
No chance to get this type of indicators here in the US, but this benchmark may well be a valid way to get a snapshot of the economy. If prostitution was legal in all countries, it would probably make a good index for central banks to track.

The Hot Waitress Index

This one is a little disturbing as it is wrong on all levels of discrimination, but even I cannot deny the underlying premise: The hotter the waitresses, the weaker the economy. During our recent vacation to New York and Washington, we were driven by numerous cab drivers who could have fit the Overeducated Cabbie Index profile. Smart, well educated and on top of their ambassador/historian game, as in my opinion a career cab driver should be.
In a bad economy the “in demand” index shifts dramatically and when it comes to restaurant or bar help, models or aspiring hot looking actresses, once thriving on the generosity of their friends in the scene for hookups— such as hosting events, marketing brands on luxury car and boat shows or modeling—are now hunting for work, pushing those with less striking genetic gifts into unemployment. A disturbing trend, but one that indicates that we’re not out of the woods by any means.

The global economy is going through traumatic upheavals and all the traditional ways of measuring the state of the economy seem to be about as useful as a bottle of suntan lotion in a blizzard. The foregoing indicators maybe unusual, but can say a lot about where the economy is heading.

Economic Witch Doctors Focus on Wrong Problems

The Euro went drastically down to 1.206 to the dollar today.

Are the economic witch doctors addressing structural global economic problems with placebos instead of surgical knives? Are the world’s economic leaders focused on solving the wrong problem related to Europe’s sovereign debt woes?

As you may know, Greece and several other European countries are in debt up to their eyeballs. Much of their debt is held by European banks and there’s a big worry that if Greece or some other countries default, then some European banks may face major write-offs that could severely jeopardize their viability.

Unfortunately, what the powers that be in Europe are doing is akin to you going to the doctor and being treated for severe back pain with a heavy dose of pain medication. Rather than “heal” your back, the pain killer simply “masks” the pain.

Last week, five of the world’s leading central banks announced a coordinated action that made it easier for European banks to borrow U.S. dollars to help fund their loan needs, according to The Wall Street Journal. This move addresses the “liquidity” of European banks, but not the “solvency” of them. In other words, it helps ease the symptom of the problem without actually solving the problem.

Simply put, a liquidity problem means you are short on cash and unable to meet current payments due. Typically, it’s a temporary situation that’s resolved by a loan or selling an asset to raise cash. By contrast, a solvency problem is much different. It means you have a structural defect and your revenue/assets are not high enough to support your expenses/liabilities. In effect, your business model is unsustainable. Frequently, it leads to a restructuring or bankruptcy.

In Europe, Greece has both a liquidity problem and a solvency problem. And, by extension, the banks heavily exposed to Greece and some of the other weak euro zone countries may be facing a solvency issue if they don’t raise additional capital.

So far, European leaders have been unable to agree on a once and for all solution to solve the liquidity and solvency problems facing the euro zone. Until they make the tough decisions, we may be stuck in this volatile market environment a bit longer.

If You Build It, They Will Come. Well…Maybe.

Not only too much fixed investment, but also too status ambitious

Build it and they will come, seems to be an appropriate description of China’s economic growth model. Just one look at Shanghai’s waterfront or train station is enough to leave visitors believing China’s infrastructure can rival anything in the world.
Consider this 2011 photo of downtown Shanghai along the Huangpu River. Twenty-one years ago none of this was here. Now these buildings are among the world’s tallest skyscrapers.

Fixed Investment VS Consumption Spending

A significant amount of China’s growth over the past 20 years has come from what’s called “fixed investment” as opposed to consumption spending. Fixed investment includes tangible things like roads, bridges, trains, buildings, and machinery and accounted for 46% of China’s GDP in 2010, according to the Financial Times. The June 30 launch of the Beijing to Shanghai high-speed train is a good example of fixed investment. It cost $33 billion to build, reaches a top speed of about 200 mph, and connects the two major cities in less than five hours, according to The Vancouver Sun.

Fixed investment is good from the standpoint that it equips a country with the tools and resources needed to grow and be productive. However, too much fixed investment can lead to overcapacity and strained budgets.
Rather than continuing to rely on building and infrastructure for its growth, the Chinese government has developed a plan to re-balance its economy from investment and manufacturing towards consumer consumption and services, according to the Financial Times.

Ironically, this would put China more in line with the U.S., where consumer spending accounts for about 70% of demand in our economy, according to The Wall Street Journal. In China, the comparable private consumption number is 34%, according to the Financial Times.

One of the knocks on China is that the growth in fixed investment has risen faster than GDP and this could cause problems with too much capacity and too much debt to fund those investments. Should China falter in its effort to re-balance its economy, it could lead to domestic problems that ripple out to the rest of the world.

There’s an old saying that when the U.S. sneezes, the rest of the world catches a cold. Given China’s strong growth and massive size, we should be concerned about China sneezing, too. How they manage the re-balancing of their economy over the next few years bears close attention.  because if it does, a polite “Gesundheit” will not save us.

Swiss Declare Currency War – a Commentary

The Swiss Corckscrew is ready for a currency war

When there’s turmoil in the stock market and/or in the geopolitical environment, investors sometimes flee toward perceived “safe havens”  or currency alternatives in the hope of protecting a portion of their assets. In particular, the Swiss franc is very popular these days. While there’s no guarantee that any investment will be free from risk, the following assets have at times been on the receiving end when circumstances get tough:

•    U.S. dollar
•    Swiss franc
•    Japanese yen
•    U.S. Treasury securities
•    Gold
Sources: Goldline.com, U.S. Census Bureau

For example, Europe’s debt woes have soured investors on the euro (the European common currency) and pushed investors to the Swiss franc. This flight to the franc has been so strong that in early August, the franc hit a record high against the euro, according to The Wall Street Journal.

Unfortunately for the Swiss, the high value of the franc created countrywide economic problems. The Wall Street Journal said the soaring franc, “pushed some weaker Swiss exporters into bankruptcy, and sent others scrambling to slash prices to hold onto business.” In addition, “Tourists, an important source of income for the Swiss economy, now find it more expensive than ever.” Essentially, the strong franc created domestic havoc in the little Alp country.

Last week, the Swiss National Bank decided enough was enough. The bank announced that it would cap the value of the soaring franc and, “buy euros in ‘unlimited quantities’ whenever the single currency fell below 1.20 francs,” according to The Wall Street Journal. Within minutes of that announcement, the value of the franc plunged 8 percent against the euro, according to Bloomberg.

Without getting mired in the details, this was an extremely bold move by the Swiss and could lead to, “a currency war, in which a growing band of countries will seek to lower the values of their currencies to protect their economies,” as reported by The Wall Street Journal.

Dramatic currency intervention like this adds one more wrinkle to the uncertain worldwide economic environment. While we can’t control situations like this, we can keep them on our radar and adjust for them within our investment portfolios along the way.

9/11 –  Ten Years Later

The past week was filled with remembrances of that tragic day 10 years ago when we lost nearly 3,000 of our loved ones and the country lost its feeling of peace and security. We will never forget the grief, the heroism, and the pulling together of the nation as we all tried to heal in the days and months following that fateful event.

Much has changed since then and, in a way, we all lost some of our innocence and perhaps some of our optimism. But, as Americans, we are a resilient nation. We’ve endured tragedy and war before and we always found the strength and the courage to overcome. The pain of the terrorist attacks is still with us, the images still vivid, the effects still lingering, but persevere we do and prevail we will.

While it pales in comparison to the human toll of 9/11 and its aftermath, the U.S. financial markets and the economy have been relatively weak in the years since that day. Here are some examples:

  • Over the 10 years between September 10, 2001 and September 9, 2011, the S&P 500 index rose only 5.6 percent — that’s a compound average annual return of only 0.6 percent excluding dividends. Source: Yahoo! Finance
  • Over the 10 years between September 10, 2001 and September 9, 2011, the price of one ounce of gold rose 581.8 percent — that’s a compound average annual return of a whopping 21.2 percent. The rise partly reflects inflation concerns, currency debasement and a general flight to safety. Source: London Bullion Market Association
  • The U.S. experienced two recessions since 2001. Source: National Bureau of Economic Research

From the terrorist attacks and their aftermath to the sluggish economy, it’s been a difficult 10 years for our country. And, just like it has taken time to process the 9/11 tragedy, it will take time for our global financial system to deleverage and cleanse itself. And as this unwinding continues, there will be setbacks. But, over time, our human spirit will strengthen, our economy will improve, and the world will be a better place.

China’s Growth Powers the World – What Happens If They Falter? Part I

China's Great Wall, a remnant from another Imperial Era

As China’s phenomenal growth has vaulted it to a top position among the world’s economic powers, what are the consequences if their economic engine begins to falter?  Perhaps the more appropriate premise should be “when” rather than “if.”

For instance, a colleague told me a story that one evening back in June, after a long day of playing tourist in Shanghai, China, he flipped on the TV and was pleased to find CNN. After a few minutes, a story came on about Chinese artist and political dissident Ai Weiwei. That day, Weiwei was released by the government after nearly three months of detention for “alleged economic crimes.” Just as soon as the story about Weiwei came on the air, the TV screen went black. About 90 seconds later, CNN returned to the air in the middle of a new story.
Yes, TV censorship is alive and well in China!

“Toto, I’ve a Feeling We’re Not in Kansas Anymore”

China, of course, has been in the news for years as its economy has roared and moved the country to the second largest economic power behind the United States. Yet, for all its might, there are some glaring holes that might trip it up over the coming years – with media censorship being just one.

Given China’s importance in the world’s growth story, this is an opportune time to further ponder the Middle Kingdom and the potential for a stumble that could affect the markets. The United States has certainly managed to trip over its own economic shoe laces, so why should China be immune from a similar possibility? This is the first of three stories.

China Rises Again

China’s surge is really a case of déjà vu. For much of recorded history, China was the world’s largest economy. Even into the early 1800s, it accounted for 30 percent of the world’s GDP, according to The Economist. But, like many empires before it, China spectacularly flamed out over the next century. By the mid-1970s, the disastrous reign of Mao Zedong had come to an end and China was near rock bottom.

In 1978, new leader Deng Xiaoping laid out a vision of economic reform that has propelled China to unprecedented growth. Since then, China has massively reshaped the world order as its growth and demand for resources affects everything from auto production, to corn prices, to funding the U.S. budget deficit. Earlier this year, China overtook Japan as the world’s second largest economy behind the U.S.
With that very brief historical background, let’s review some facets of China’s phenomenal rise and what that may mean for you. We’ll first look at demographics.

Exploring the Demographics

Incredibly, China’s GDP has grown at an average annual rate of 9.3 percent since 1989, according to Trading Economics. However, changing demographics could cause this growth to slow in coming years.

You may be surprised to know that between 2000 and 2010, the U.S. population grew faster than China’s (9.7 percent in U.S. vs. 5.8 percent in China, according to the Financial Times). For the past 20 years, China’s economic boom has been partly fueled by urbanization – rural folks moving to the cities in search of higher paying jobs, plus a supposedly endless supply of cheap young workers. As it turns out, that supply may be coming to an end.

China has had a one-child policy since 1979 and it resulted in the “non-birth” of about 250 million babies, according to Time Magazine. As a result, China’s population is aging rapidly. Today, 12.5 percent of China’s population is over 60. By 2020, it will hit 20 percent and by 2030, it will hit 25 percent, according to The Economist.

Worse yet, the working age population will start to decline in about 2015, according to the United Nations. Fewer workers supporting a growing elderly population is not a recipe for economic growth.

Of course, China could reverse its one-child policy and rev up population growth, but that would likely cause other problems such as food shortages or environmental issues. As the demographic shift causes the labor market to tighten, wages have already started to rise, according to The Economist. That puts pressure on inflation and makes the country less competitive. While it’s easy to look at China’s growth over the past 30 years and extend it for another 30, changing demographics is one of several hurdles that could put the brakes on growth.

In our next installment we’ll look at the challenge of moving China’s economy from one led by exports and investments to one led by consumption. As a preview, we’ll talk about the perils of relying too much on infrastructure investments and how that could lead to excess capacity and bad debts.

Consequences of Corporate America’s Unwillingness to Self Regulate

Blown Away by the Sound of TV Commercials?

“Turn it down a bit, that’s way too loud”, her voice pleaded from the bathroom sink. “Turn it up a bit, I can’t hear” she said when she turned off the bathroom light and came into the bedroom. Of course she was talking about the noise levels on the TV and the annoying habit of commercials being broadcasted at twice the decibel level than the show you’re watching.
There’s probably been a few nights where you’ve been watching your favorite show, or just flipping through channels, and before you realized what’s happening, you fell asleep as the sound of the TV droned on. And then, without warning, a commercial comes on the air and shrieks you back into consciousness. Very unpleasant, but at least it tells you to turn the darn thing off.

Apparently it’s a problem that many people have been clamoring about for some time and in a world where advertising and programming execs had any sense at all, this problem would have been taken care of a long time ago by a self regulating industry. After all, it’s already hard enough to find the right sound balance for two people with a different set of ears, let alone having to deal with this annoying volume increase during commercials. And if commercials and TV promos are blocked together in a program break, the remote control gets a tickle attack. And so, since the corporate nitwits once again did not listen to their customers’ wishes, this issue of non concern turned into yet another LAW on the books.
Congress listened and last December they officially passed the CALM Act signed by Obama on December 15, which is specifically meant to address the fact that TV advertisements are way too loud in relation to the regular programming. Since it’s a definite pet peeve of mine I have been keeping an eye on potential changes in the world of broadcasting, since this CALM Act will be enforceable by December 14 this year. Sadly I have to report that so far NOTHING has changed. I still carry a shimmer of hope that the Fall Season programming will bring better balanced sound levels, but I don’t have high hopes so far.

Another Government Agency at the Trough

CALM stands for Commercial Advertisement Loudness Mitigation Act, or CALM Act . I swear they must have some clever word smiths employed in Washington to come up with these acronyms.
And that’s exactly where my beef starts. The Federal Communications Commission (FCC) had nothing about regulating the volume of programs or commercials in its operating charter. It correctly assumed that Broadcasters and program producers would see the benefit of complying with their customers’ wishes,  and therefore left them with complete latitude to vary the “loudness” of the program material. But when mounting complaints of the TV watching public were arrogantly disregarded for a long period of time, the whole issue became politically viable. The industry claimed that “high end” equipment could regulate the sound volume through devices such as Automatic Gain Control Circuits, Limiters, Filters and Audio Compressors and there was no reason to self regulate. Of course they complete ignored one major fact. All the complaints came from Main Street, where the average TV does not carry these expensive features.

So the Government stepped in and produced the CALM Act, which will create another monitoring and reinforcement department inside of the FCC, with a staff, vehicles, an office, expense accounts and a budget. And the Tax Payer, the same one who complaint, now has to carry the financial burden of yet another government service that should not have been necessary in the first place.

And that fellow Americans, is just a small token of the sad vicious circle we’re in, where corporations that exist because of their customers, ignore these customers wishes or complaints, who then ask their political representatives to do something to protect them against the corporations. As we all know, politicians live by numbers and if the number of complaints is substantial enough, they’ll climb the soapbox and demand action. The consequence of this course of events is what I call capital destruction: Money paid out to structures and lobby interests that should have never even seen daylight, let alone be the cause for yet more government involvement. If corporate America wants less government, then it needs to embark on a major course change towards self regulation. If they don’t, the public will accept that government’s job is to regulate every minor annoyance out of their lives as they develop an implicit sense that, when problems arise, the way to fix them is to beg Congress, pass a law, wait for new irritations to arise, then wash, rinse, repeat. Personally I think that consequence is far more grating and obnoxious than volume manipulation from advertisers on the idiot box, but Corporate America doesn’t seem to get it. No wonder my wife watches most of her shows now on her Mac without commercial interruptions and many of our friends DVR their shows. Like John Popper sang: There is a Price to Pay.

Business Development Pros in NE Florida Seek Input from Public

NCEDB's Steve Rieck and Nicole White

NCEDB's Steve Rieck with Executive Ass't Nicole White

Earlier this week The Nassau County Economic Development Board, a participant in the JAXUSA Partnership, hosted McCallum Sweeney Consulting, a firm specialized in site selection services and economic development consulting to companies and organizations worldwide, to explore future economic opportunities in Nassau County.

The meeting was part of the initial phase of “Innovate Northeast Florida”, a program launched by JAXUSA Partnership, formerly Cornerstone Regional Development Partnership, and the 7 County Northeast Florida Regional Council. The focus group was conducted by Steve Rieck, NCEDB Executive Director and served as a presentation of Nassau County, FL to the consulting team. The consulting team then met with two Nassau County companies who discussed the strengths and weaknesses of doing business in the county. Similar focus groups and individual company interviews were conducted throughout the region with government, civic and business leaders throughout this week.

Mr. Rieck and Dan Camp, TerraPointe Project Manager, will serve as Nassau County representatives on the steering committee for the nine-month project that will result in three in-depth reports for the region:

1. a SWOT analysis providing a detailed evaluation of our region’s competitive strengths and areas for improvement,

2. a target sub-cluster definition Report – containing detailed profiles of each target cluster and sub-cluster and

3. target implementation plans – recommending specific community development, workforce development, business development and marketing actions for each target audience, including a timeline, budget and metrics.

Announced earlier this year and funded by the Economic Development Administration (EDA) and WorkSource, the study will help the region’s economic development organizations identify the most promising business sectors that will stimulate future economic growth and create detailed marketing and business development implementation plans to attract and grow those industries in the region.

JAXUSA Partnership and the Northeast Florida Regional Council invite all residents and businesses of the seven county Northeast Florida region to participate in a survey to share their opinions about the future of our economy. The initial survey takes approximately 10-minutes to complete, with the option to complete a more detailed survey of another 1`0 minutes. All survey responses will be aggregated and held in strict confidentiality. To complete the survey please visit www.innovatenortheastflorida.com.

Interested parties may contact Nicole White, Executive Assistant at the NCEDB at (904) 225 -8878 or check out their recently completely renewed website at www.expandinnassau.com