Misallocation Of Resources

Misallocation of resources is a subject that gets some, though not too much, attention in most comprehensive courses on economics.

Where there is competition for something - time, energy, sex, food, shelter - and there is scarcity of those things, then the economic allocation of resources is a key concept intelligent human beings apply to get the best use of everything that is available. Having one significant thing can mean ending up with an adequate supply of the others.

Brunei Qintar box

Alan Greenspan’s infamous ‘moral hazard’ statement when he was explaining to Congress about the consequences of bailing out certain favoured banks, quite deliberately generalizes the idea that there is this, by his form of words, esoteric, philosophical risk involved. He could have said that when someone can eat as many lollies as he wishes, that person could get morbidly fat and sick. That is, If he were to remain alive in the first place. There was this other, attendant phrase tossed about at the time - do you recall the one: ‘an economy on drip-feed.’

When you succeed in actually flatlining an economy, though, but you insist that the thing is still alive, there is also such a thing as necroconomics. Well there is now anyway.

A dead economy needs nothing. It doesn’t matter if there is scarcity of something that might have been important when the economy was alive. It’s dead now and needs nothing to continue to exist as an artefact. And that is the real reason there is so much derivative trade around - the economy intrinsically does not ever require actual delivery of anything now.

And so we have succeeded in separating - or liberating, in some people’s minds - economics and finance entirely from the real world of humans.

Why ever even pay lip service to a rising stock market? Or strong bond prices as an indicator of low risk?

The misallocation of resources sees things like what just happened with Treasury Wine Estates - a global wine seller focussed on Australian masstige wines. They are going to write down $260 million in value, and you know what, they have also drained (stuck down the drain) vast quantities of wine because they really can’t sell it at the price they want! So they are just going to ‘disappear it’ all wantonly away.

Not a Treasury Wine Estates box...

Personally I find it hard to buy just one case of Penfolds Grange, but these geniuses have not only bought lakes of it but they are going to throw it all away and write off the money they spent.

Money free = crazy people gone bananas even worse still.

But then you do have to ask - especially in respect to the Fed's behaviour - what if it wasn’t accidental misallocation at all but quite deliberate misallocation designed by someone not interested in keeping the USA intact as a unique power; and certainly as a unique monetary power at that?

You do have to ask that… I mean it would be breathtaking if it were a designed scheme.

It is breathtaking enough that misallocation due to mindlessly supporting the consistently same handful of lying thieving scheming parasitic banks, is actually occurring without anyone trying to stop it.

And there is also a consistent tactic exposed by people exercising power - the creation of artificial scarcity through wanton destruction. Why isn’t there dramatic increases in employment? Substantial increases in private consumption? On the one hand you have the standard lunatic politician and his media master talking about the need for austerity and not spending more than you have, and then turning around and, being a monopoly holder of seigneuriage, issuing the greatest amount of debt money ever in the history of the whole of Mankind.

No. There is definitely madness and method.

But you see, here is where the whole thing falls apart right under everyone’s nose but the crooks won’t see it because they are themselves fatally mesmerized by the very glitzy power they have over stuff they can readily industrialize: you can only create artificial scarcity but you cannot ever ‘create’ genuine scarcity…

Yes, you can substitute and flagrantly lie about what you are proferring. But you can’t say a thing works when it doesn’t and then yourself expect it to behave according to your own lie.

And yes you can indeed mind control large swathes of the public a lot of the time too. But you can’t alter the absolute utility value of things that have genuine functional utility. Oh yes, some people will die not putting the food to their mouths. You can’t lead a horse, and anyway, not your problem.

Today’s world is about the accurate thinker discerning the difference - and accepting that he might have to make adjustments to his erstwhile cherished beliefs - when he sees authentic facts side-by-side with nonsense put up by the establishment which seeks to fudge the value of demand in the face of a real scarcity. Not everyone is going to get to this point of objective self-reflection about ideas.

It would be nice to think that come some morning very soon, all the favoured banks and all of their fictional assets will disappear, that is, become worthless and more particularly, the sway they hold over the politician will come to an end too. The latter won’t happen. At least not easily. The former has already happened. In terms of purchasing power over genuinely scarce things with real utility, it has already happened. It is a delusion practised on the uncritical, that this is not so. But people have been made to believe that the globalized industrial complex - ‘the Borg’ - is able to manufacture and produce anything at will and with lubricious ease as if it were all just any simple commodity. And this is hugely erroneous.

There is a lot of mythology spouted in the market, and people such as Bain & Co, for instance,  are very good at employing it. I mean, seriously good at it. But it is still mythology and you can’t reliably invest based on media and market myths. The world is still a competitive place. Poroshenko is finding this out in spite of his being a person of goodwill who cannot begin to fathom the duplicity of his advisors.  He is going to find out there is a problem with money alone as the guarantee of access to utility.

Orit Gadiesh from Bain would not be allowed in here

People in financial institutions buy and sell money as a way of avoiding spending money. Spending money is what people do when they see utility today and have to spend to get it. People know perfectly well on some occasions that prices are falling or that the currency is gaining exchange value, for instance, let’s say - so why don’t they just wait until whatever thing they want is cheaper before they spend money to buy it? Because of the utility it represents to them today.

Present era bankers make the too obvious presumption that ‘people want money,’ and that therefore if they give themselves a lot of it, and deprive the wider market of it generally, they will induce scarcity of money and thereby ensure their power over the whole of society at large as people scramble for scarce money. But people just want utility. Money isn’t scarce at all. Particular forms of it are scarce.  

Chinese Cafe Cash

Armin Van Buuren in Jo'burg this week
(real marketing, real audience, real sales)

It is really very hard to talk about well-known investment situations right now because the ones that appear in the media are highly questionable to me, but have all the boilerplate elements that make them seem utterly not to be questioned. (e.g. never question Kanye West...)

You can’t fight the marketing push from some of these people.

But if you are an individual, with power to make decisions over you own money, however small or large, then you will want to read this blog. And not be swayed by the media fairy tales that are everywhere these days.

When I was starting out on my own (I did have uncles and aunts in fairly large scale international business) the simple rule I observed was that very old one about going to where the money is. But when I go back even farther in my personal experience, to when I watched my uncles do business, it was all very much more basic still. Money revolved around mid-mornings at the Chinese cafe where Vestey talked to Asian merchants about his cold storage units, and late late nights when the shipping containers were all accounted for and the cash was counted in the same cafe, on the same round, worn-down, marble Chinese cafe table.

The money was on the table.

Where the deals are done

Sure today 'the App is in the cloud…' But the money is still on that table.

Someone I am doing some reasonable sized business with right now just ended his email to me with: ‘enough of business, I want to do some relaxing stuff too.’ Back to the Chinese table you see.

Today we have ‘binaries,’ ‘CFD’s,’ ‘Apps,’ ‘Forex,’ and every other kind of investing situation or derivative imaginable. You can, apparently, invest in anything so long as it doesn’t involve a real profit whereby you get to earn a calculable dividend that relates to the equity price paid.

In the old days there was this old hawker, outside that Chinese cafe, but you could buy what he sold and have it delivered to you inside the cafe by the cafe itself - which was pleased to do it, too. His dish? ‘Tak Yee’s fried soup.’ It came wrapped in newspaper. There is no way to describe what ‘fried soup is,’ suffice though, to say that no accountant or modern media editor or stockbroker would credit such a thing as existing.

Which just shows you what little these clowns really know about anything. Because there really is such a thing as ‘fried soup,’ but only those who have experienced it can know what it is.

I’m about to realize a profit on some cases of Taltarni Shiraz that are around ten years old (in the bottle) now. The wine though is undervalued at the price. And that is because things like Sassicaia - admittedly a great wine - take all the publicity and they take it away from many other small wine-makers of equal skill and quality of product. Not that this is necessarily a bad thing, because you can move in an out of positions that whilst all of them go up, some of them are cheaper to enter in the first place, but the others are better as far as liquidity is concerned.

Will last a hundred years - and go up
in value every year.

Buy some cases of Taltarni or Cape Mentelle or Langhorne Creek for small money, turn them into cash after a few years, buy a case of Sassicaia, and after another ten years you will be a millionaire by opening a restaurant and vending the Sass in glasses, or rolling the proceeds into the discount on bonds then. Oh yes, there will be a crash in the stock markets between now and then but not yet. And that is why you need to be taking positions in the hard stuff now that will keep its value through the ‘unforeseen’ disturbance to come. This is the unforeseen disturbance that is, of course, utterly inevitable because Wall Street is such arrant nonsense right now. And so are the governments that pander to it. And the criminal ‘banks’ that have no money, take no risk, and want taxpayers to bail them out when their inside deals go sour. Which they, strangely enough, always do.

The Deaf Signing App

You all still hanging in the business scene? Maybe the stock and bond trading scene? Well, you ought not to ever be trading bonds, just investing in them; you trade equities.

Deaf Signing App screenshot

Me, recently I’m watching the live webcams pointed onto the charging bull in Wall Street every now and then. You can see mostly younger backpacker types around the big statue, some taking pictures. When you look at official publicity shots you see the well-dressed figures, though there don’t seem to be any of these around the charging bull anymore, from looking at the live webcam streaming.

I have been involved in a small handful of things over recent years, but by far the best of them is a Deaf Signing Intepreter App. It doesn’t stop at deaf signing but includes all interpreting on the platform. The business model for this is sound. There hasn’t been any publicity so far that I am aware of, and yet, it will make its way probably all the way up to one of these large Apple or Google transactions pretty much unheralded along the way. Because in the world of ‘Apps’ it is the business model that is the key thing, in other words how the sales revenues are derived - and this is regarded by clever proprietors as their secret. And it should be.

So I am watching some stock exchange announcements to do with things like ‘Bulletproof Cloud Systems.’ And these things all talk in the several millions. But they don’t look anything like the Deaf Signing App in that I never am able to see where they get their one-to-one sales lines from. It always seems there is one single ‘major’ contract that is said to be worth millions. I’m not a fan of this kind of thing. There is, ‘moral hazard’ around the place there…

Contact me of you ever get a rush of blood to invest in something that will make you a millionaire overnight. Alternatively, stay away from the investments where you can see there isn't really scope for lots of sales of the product or service. Deaf people spend money. And there are 70 million registered deaf people in the international federation. At the moment, institutions they come into contact with, pay around $175 an hour for an hour and a half minimum for the services of registered interpreters. The Deaf Signing App is a cost replacement thing. And it already makes money but it hasn't been widely launched yet.

Next post - how to make a million in thirty minutes just by drinking coffees.

Vapour Trance

So, ‘our’ security services have been so unbelievably fantastic, that they warned their governments all over the Western World, that ‘Sunni rebels’ were going to start invading Iraq and scaring the army ‘we’ trained and set up so well (at some cost), that they pretty much all upped and ran away when it mattered.

DJ Nigel Good (not the politician!).
Hoodie yes, but not a terrorist.

And doubtless, they - the security services - amassed all of this intel by bugging private citizens everywhere.

I can’t wait to see what happens next - this time I’ll be stockpiling lots of packets of chips and other snacks and cases of Coca Cola to see it all on CNN as a few months of ‘shock and awe’ unfold once again. I would like some comedian ‘embedded’ in with the army this time so that I can enjoy a touch of that comic relief that has become so much a part of um, the modern era of James Bond movies.

Frankly though, right now I have a lot more important and serious things to do than worry about what fallen empires want to charge around the place and do in their gerontion years.

A friend of a very close business associate of mine is right now getting Armin Van Buuren onto a huge soundstage in Johannesburg and he is waxing lyrical and clearly he is quite excited about being the promoter. Damn. I’d like to be over there at the moment but I have ‘things going on’ here right now myself.

Same attitude as Nero fiddling while Rome was burning? Maybe.

But I think I will stick to entertainment while television says things are serious. I’m ‘doing Canada’ at the moment...

Amr Hachicho - Canadian DJ.
Arab, yes, but not a terrorist.

Amr Hachicho (a kid from Qatar now working in Canada), is particularly catching my attention right now for the quality and consistency of his work. And I notice the stupendously brilliant Nigel Good is doing some stuff also for Canadian artists. His version of Myon & Shane 54 ft. Natalie Peris’ Outshine is staggeringly good material - if you like vapour trance.

Vapour trance?

It’s something originated by a famous scene envisaged by the American Steel Industry’s conceptual artist Syd Mead many years ago: in the future people imbibe vapours and listen to advanced digital music that enhances their personalities and brains.

Technology is moving very very fast. The tobacco companies produce their ‘e-cigarettes’ that deliver nicotine vapour, and the American bacon industry has an App that wakes you up with the sound and smell of sizzling bacon. What will they think of next.

The world of just a few years from now will once again be quite different to what we are all seeing around us at the present. I would try to be moving with the social cutting edge… Style, music, technology.

Actress in Cannes, in new Rolls Wraith.
Not a (Chinese) terrorist.

Me, personally, my biggest concern is why anyone would buy white leather for the insides of their Rolls Royce Wraith - how long will the stuff last looking new like you want it to?

St. Petersburg Hotel
Russian, yes, but no terrorists there either.

I saw someone on the Bear Chat boards recently talking about how the ‘rich have different rules to the rest.’ Not sure that they do, but there was someone in my ancestral history who ‘made an eternal covenant with the Goddess of War.’ And I too shall be playing by those rules. I’ll not be going to war. Not now, not any time soon, not any time, in fact. Hey, I like guns. I like to shoot at inanimate targets for fun. And I’m a really really good archer, as it happens.

But I’m not interested in doing wars.

Me, I’ll be partying and drinking and having a good time far far away from any war-front, that’s for sure. You can do very well, financially, when fools choose to go to a war. Not if they go, by the way; the war is already happening. It started a while ago, and like Hitler discovered, as he won his war every step of the way until his machine became exhausted, and broke down, everything looked good right up until the very end.

A Bear Confessing To A Profit

What really is a bear? As far as significant investing is concerned...? Today, numerous people suppose that it is anyone who takes a position in the expected downside movement of a market, including therefore traders who have small or leveraged positions through retail operations who are taking a position in expectations of a symmetrical reaction (in price) downwards in response to negative fundamentals.

Outside my first office in Howard Street
Perth Western Australia

In reality though, a bear is someone who knows the correct value of proportions or whole amounts of capital (assets).

In today's world, political interests that can have overriding influence over a number of market conditions and even over price itself, subvert the simple idea that price reflects naked real demand versus supply.

Aboveall a bear is good at analyzing the whole picture. One should not be constrained by highly artificial constructs – the listed equity price, the apparent interest rate, stated inflation, even GDP numbers. A thing, has some value in your estimation because it can be sold at a profit. Other than time, that is all there is to it. The fact that few others can see even what the thing is, never mind how little it costs, should be of no major concern to you.

Today, a real bear can see value where others are not merely not looking, but would discard as important or valuable possibilities even if they could 'see' it or them in the first place.

The only thing to be said for standard short positions is that some of them provide a commoditised version of a 'sale.' Many sales, in fact. Selling is crucial to fundamentals.

In other words, I would try not to make the mistake of thinking all the time that everything is already commoditised and available for open trading. Some things are still privately traded. Some things are despised by the investment geniuses of the modern world. And these are the things that escape the megalithic monolithic 'economic' vision of the broad marketplace reflected by the incessantly chattering, if not downright nagging, media.

The tools of modern day economic warfare are all computerised and online-capable. If we were living a hundred years ago those of us wishing to make profits from un-exploited potential might use metal drills and hydraulics and special screwdrivers and so on. But by today, all the 'un-exploited potential' of that past era has already been exploited. Trading one side of an already over-inflated or elevated trading range is not 'being a bear.'

Here is the key question: although we see a low circulation or velocity of cash inside the domestic economy, the question is not 'where is the money,' but rather, where is the value?' The value is 'analyzable' by one's own mind and vision, but it is accessed by the tools of today.

Kelly Brook's legs

Take a look at the image presented by your typical exploitational advertisement – granted this one, I think, is used in places like Turkey, and not in the over-sensitive contemporary USA – the girl is not cheap, and the car is not cheap either. The ordinary 'customer' can afford neither. But the spray can of AXE APOLLO is purchasable by the average person. All three elements are valuable in their own ways. And they all have a financial value too. Human principles place the girl at the top, human ideas about art place the car second, and human imagination includes the relatively inexpensive can of spray inside the realms of the first two. You know, it is always the cheap small thing, when multiplied across a large number of humans using it, that has the highest (real) total profit potential. And that is something worth bearing in mind, when you are being a bear.

You may have observed how, now that monetary velocity has drastically slowed, those with profits and cash are also quite reticent about showing their hands. Certainly there is the listed world of megalithic internet equities – no profits, questionable sales, massive internet 'reach' - and big claims as to capital value. These people do show their hands. But that kind of stuff is not for the bear or the professional investor at all. Rid yourself of the urge to participate in some imagined 'glow' about how to make a profit. And yes, there are always exceptions that stand out – Apple may be one of them in that it has real profits, real sales, a lot of cash, and maybe potential yet remaining to be mined. You might even feel a certain 'glow' if you acquired an equity share in Apple. But it is expensive. Like the girl and the car.

'The cheap small thing...' What is it? Well, Aldus Manutius, when he invented running script, was able thereby to give a tremendous advantage to the Venetian transcript writers. The advantage of speed was paid for by wealthy patrons of trade, rather than by an immediately commoditised consumer market.

The world in which we live today, is not very far different, to the day and age of Renaissance Venice. The traditional Empires of Europe presumed themselves to be unassailable, the religious beliefs and ideas about Nature were solidly held in the minds of the cogniscenti of the times, and the sun turned unequivocally, around the Earth, which was the centre of the Universe. And if Man should fly, God would have given him wings. How quickly these things all changed. How small were the things that caused the change – they were just ideas. A handful of neurons firing in a new way. Oh yes, of course the human is a wonderful, complex, massively valuable thing within the midst of great and networked complexity; but ideas are the key to it all, the thing that makes any of it work satisfactorily. And it is not necessarily costly to have good ones.