Thursday, October 27, 2011

Silver 101

Many people do not understand the purpose of silver away from the formal dinner table.  Traderslog.com requested that we write an informative article on the other precious metal in an attempt to shed some light on the subject.  If you know someone who asks "What is the point in owning silver?" this could be a helpful article to forward along.  Click on the coins to view the entire piece.


Tuesday, October 25, 2011

Follow The Money.....

Why are we fighting in Libya?  Ask the average, well-informed American news watcher and they will undoubtedly answer; "We need to get rid of that awful Qaddafi."  But was Qaddafi awful?  The most sure way to find the answer to why anything is happening is to follow the money.

For 50 years the US had a middle eastern policy that was structured in the following fashion.  Pick a leader who will answer to US demands, covertly assist him in taking control of the nation, then give him the means needed to suppress his people.  As a reader are you uncomfortable with that?  Do you not believe us because 60 Minutes has failed to report this news?

We suggest readers turn off major news networks and turn on their own ability to think for themselves.  Some books that would assist in this process are Confessions of an Economic Hit Man and The Creature From Jekyll Island.  Simple minded future serfs will write off these notions as conspiratorial in nature.  This is not the case.  Deeper analysis will show that your trusted sources for news and information are the true conspirators.  Power, money and control drive humans at all levels of society and the top of the pyramid is no different.

Confessions of an Economic Hit Man will give you an absolutely excellent understanding of the petro-dollar's 1971 rise to power.  Monetary history available on this site will help you see that the Bretton Woods accord broke apart on August 15th of that same year.  The rise of the petro-dollar allowed the US to remain in control with reserve currency status.  All petroleum trades were settled in dollars.  Consider Perkins' account of the US Treasury's involvement in the OPEC leader's operations detailed in Confessions.

Due to the outright abuse of the dollar commodity rich nations have been shunning the accepted reserve currency.  China and Russia will begin bilaterally trading basic commodities this year.
So for a moment pretend you are the leader of a nation that produces 2,000,000 barrels of oil per day and you are tired of listening to your US masters as you watch them losing power internationally.  You are a UN recognized sovereign nation and you have amassed gold reserves of nearly 200 tones.  As a smart business man you decide to conduct trade on the open market and not by blackmail of a failing regime.


So again we ask, why is the US in Libya?  What is most disturbing is that we will likely fight to keep power in this region until we exhaust all resources.  The US citizens will never understand what is really happening.

Sunday, October 23, 2011

Choices.....

Most people have no idea that economics is the study of choices.  Simply put, people's choices are guided by incentives.  When there is no incentive, growth disappears.  Worst of all, disincentive causes an economy to shrink on the margin.  This triggers pain for citizens and often incentivizes leaders to pursue more stringent and extreme measures as power threatens to slip from their control.

Taking this line of thought into consideration it is no surprise that the US commercial property market is in complete disarray.  During a cycle of easy credit, low rate short term loans were modeled with optimistic growth assumptions in order to justify a greater number of projects than would normally be needed.  Today we are left with a dramatic number of overpriced loans maturing.  Creditors are facing the reality that the income assumptions used are no longer accurate.

Lets have a look at this example noticed on a recent trip to Miami Beach.
This high-rise, beach-front building is overloaded with condos that were sold at the peak of the credit boom.  Most of the building is in foreclosure and the units must be auctioned or sold at a loss which takes time. The bottom floor of the structure is composed of retail space.  Starbucks is the anchor tenant but half of the space remains vacant.

Retail space remains vacant for only one reason; the price per square foot is too high.  In defense of this landlord, he would probably explain that due to the cost of construction and expenses associated with the building he can not budge on his asking rent.  He is telling the truth but the reason for this can be traced back to the local government not the developer.

These days the cost of cement and labor are in line with expected reality.  Where developers struggle is the overwhelming burden of insane regulation.  The American's With Disabilities Act required this particular developer to install a wheelchair lift to provide handicap patrons access to the shops.
The cost of this lift effects the overall cost of the structure and in turn increases the per square foot rental rate.  This is only one example of the excessive number of useless requirements that prevent productive use of assets today in America.  The citizens have asked for this level of regulation but seem to be unwilling or unable to support the increased operating costs associated with it.

Everything comes back to basic economic choices.  While the citizens turn to government for more regulation as an answer to every problem they should not be surprised that commerce continues to grind to a halt.  What we are left with is handicap accessible, lead free, eco-friendly, OSHA approved, code compliant buildings with no tenants.