Monday, February 25, 2008

There Will Be A Gap... posts. My daughter has decided to enter the world early, so I'll be out of touch for awhile. Keep your eyes on the DJIA, on Pakistan, on the credit markets and keep building your ties to your community and neighbors. I think we can muddle through for a number of months - unless your income depends on real estate work, but just in case, make sure you are prepared for asymmetric events.

Saturday, February 23, 2008

Book Review: World Made By Hand


Jim Kunstler's new novel World Made By Hand is a tale of a former software company exec dealing with his small piece of a world in collapse. He lives in a small town in upstate New York, a community that has been ravaged by disease, cut off from reliable communications as transportation networks have collapsed and slunk into lassitude. Into this isolated world comes a band of refugees, what would have been dismissed as a religous cult in pre-Collapse times, and then commences the tale of how one man, Robert Earle, begins the long, hard work of building something new on the ruins of the old world - a world darker, more dangerous and more violent than anything he ever knew as a younger man. World Made By Hand deals as much with the psychology of hope and the frictions and comfort of small town life as it does with the violence ever-present in this new era. There is a lyricism to his words that can be haunting and much of what is left unsaid looms large in the reader's mind.

The Tale

There is not as much "backstory" as I would like - but then again I am a sci-fi fan and have always enjoyed tales of collapse and catastrophe. That's not the point of this novel. Kunstler, in my reading, is trying to specifically avoid falling into this sort of "doomer porn" niche fiction and build a story that illustrates how hope, love, jealousy, anger and hard work will play out in this new world.

Coming from a small town, I can relate somewhat to much of what Kunstler describes - how the once-solid infrastructure of small-town America might be rebuilt - but that it will not be easy and small town life, while it may have many benefits, is not a utopia by any means.

I don't want to give away any plot spoilers, so I'll relate my views of some of the characters.

Robert Earle - I found myself coming to like the main protagonist. It took awhile. He seems to walk in a fog of sadness at first, gets a bit preachy and carries around some vague sort of generational guilt associated with the crash. That said, you can understand his mindset a bit and it is refreshing to watch him break out of his lassitude.

Wayne Karp - A former truck driver who has found a position of power in this new world. I liked him. I know people like him - men whom post-modern society has condemned to the margins of society, men who will be tossed in jail for fighting, drugs and other petty crimes. Kunstler avoids the easy stereotypes and cliches (well, until that final gruesome scene - I'll let you be the judge there) and Karp comes across as a hard-ass, but in his own way he is a leader of a community that is trying to salvage something from the ruins. In world where the networks of authority are much looser, the raw talents of violence, charisma and leadership shine through. He's a small-scale Napoleon, given his chance to shine in a different kind of revolution. He takes his power too far though...

Brother Jobe - A religous leader trying to do right by his flock. Kunstler had a chance to really fall back on cliches and sterotypes with Brother Jobe as well - and didn't. Here we have a complex character who has kept his sense of humor in the face of all that has been lost.

Stephen Bullock -I liked his character as well. Here we have someone who was wealthy in the pre-Collapse world, but who saw what was coming and prepared for it - and remained wealthy and important as the collapse rolled over the country. He is driven, intelligent and does right by his people. The fact that he is laying the groundwork for a new feudalism can be seen - and everyone involved knows it. That said, he is offering a sense of purpose and security in a world with little enough of both. A fascinating man.

There are many others that shine through in this tale - Loren, Jane Ann, Britney - and they are well done. Others serve as spear-carriers or snapshots of Kunstler's animus against car culture. One of my favorites was the old man who has kept his car functioning in the face of the end of the petroleum era. There was a sort of Ayn Rand feel to these slivers of the story (and I mean that in a good way - one of the things she did very well in Atlas Shrugged were these one or two page out-takes that had a very real, very human feel to them, used to illustrate a point). I was pleased with the characterization and pacing. Kunstler weaves his tapestry well.


I give it an A-. This is an excellent story of a formerly upper middle class management-type and how he has adjusted to very "reduced circumstances" (in a strictly material sense).

The sense of sadness, loss and torpor can be cloying at times. I found myself wanting to yell at the book - "Come on! Get off your asses and save what you can!" Then I recalled the many stories out of the old Soviet Union and how many in the older generation never adapted to the fall of the USSR, that they would just sit there, sunk in dreams of the past, letting others pick up the pieces and build a new Russia. It does make me wonder what will happen to my fellow Americans when this debt-fueled, television-induced trance finally breaks during the coming storm. Many will not be emotionally or pschologically prepared to deal with it at all.

The story ends with an almost esoteric flavor to it. I took it as the hints of new path for human civilization, one that reaches deep into the mists of human experience for news ways to interpret nature and explore what talents the human race may have abandoned over the last few hundred years of focus on material, industrial civilization.

Buy it and read it. It is well worth the investment.

Friday, February 22, 2008

Blowback Sucks

Nice way to frame this: "...many rioters blame the U.S. for trying to spread democracy in the region..." Yes ma'am. Thank you for telling me what to think.

Huh. I wonder what they'd be saying if the region being discussed was a separatist Vermont?

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Thursday, February 21, 2008

World Made By Hand, Delivered by Amazon

Got my copy of Kunstler's World Made By Hand yesterday. I'm through chapter 18. So far a decent enough tale. A little too much ennui on the part of the townsfolk (though I think I see it serves as a plot point - I'll have to read more) and, for me at least, not enough back story on how they got to this point. I can fill it in because I've been a Peak Oiler since reading Twilight in the Desert several years back, but I wonder if that will limit the market penetration for what so far is an otherwise fine story. A full review will follow.

Wednesday, February 20, 2008

Speaking of Blowback

Speaking of Blowback, it looks like our friends in the U.K. have decided it was time to play Russian Roulette - with a 9mm auto:

U.K. Will Miss Non-Dom Residents When They Leave
by Matthew Lynn

Feb. 20 (Bloomberg) -- It has taken 30 years for London to build its reputation as a haven for the world's wealthy, and as a financial trading hub.

And how long has it taken to damage it? Less than 30 weeks.

In October, Chancellor of the Exchequer Alistair Darling announced a plan to introduce an annual levy of 30,000 pounds ($58,000) on the ``non-doms,'' as non-domiciled tax residents in the U.K. are known.

Since then, the plan has come under fierce attack from the financial establishment. Even Trade Minister Digby Jones said it has hurt the country's appeal to foreigners.

The consequences of Darling's plan may prove disastrous.

Targeting the "non-doms'' in the U.K. would be like Germany attacking the car industry or Venice banning tourists. One of the U.K.'s most lucrative industries is servicing the rich. There is nothing to gain by trying to change that now -- and much to lose...

Sometimes it seems like those in power - be they corporate managers, coaches or policy-makers - try to go out of their way to sh*t on an idea, just because they like the smell. The U.K. doesn't make many things anymore. The U.K. doesn't have a world-class biotech or pharma or mining industry. North Sea oil has gone into depletion. They sold off Westinghouse Nuclear just as new plants were about to be built.

(In the interests of full disclosure - I actually am managing a project where we are using a U.K. firm as our primary contractor to manufacture nuclear material shipping packages, so they are not bereft of manufacturing infrastructure - it's just that there is not enough to power the country.)

The only thing they have left is a reputation for a stable government and, up until recently, policies that encouraged wealthy foreigners to live in Britain and manage their money there.

Paraphrasing a concept I read about in The Sovereign Individual a decade ago, what is the marginal cost for a millionaire? Certainly not 30,000 pounds per year. The U.K. should be making it MORE attractive for foreign wealth to plant itself on her shores. Instead, and I assume this is some sort of response to populist pressures, they have decided to take an axe to the Golden Goose.

The Goose won't die immediately, of course, but the U.K. has now given an opening for other competitors to move in. What if Monaco reworked her tax laws and financial infrastructure? Or Slovenia? We may look back ten years from now and be able to say that this was a key tipping point in the economic life of modern Britain.

An Analogy

We'll end with a parable. This is not meant as some anti-tax screed - just as a reminder that humans respond to incentives. Plus, the numbers are off. Using 2006 tax data, Man #10 would be paying 65%, but why quibble:

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.” Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free.

But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

“I only got a dollar out of the $20,”declared the sixth man. He pointed to the tenth man,” but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than I got”

“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up.

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

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

For those who understand, no explanation is needed.

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

California DeathWatch (Part Three)

Unfortunately, reality is rearing its ugly head in the Golden State:

Vallejo On Brink Of Bankruptcy
VALLEJO, Calif. -- by John Boitnott, Web Producer, NBC 11

The city of Vallejo is on the brink of becoming the first California city ever to declare bankruptcy, City Council members said Tuesday.

Vallejo may run out of cash as early as March, council member Stephanie Gomes said.

"Not only that, but now we have 20 police and fire employees retiring because they are afraid of not getting their payouts," Gomes said. "That means we have another few million dollars in payouts that we had not expected. So the situation is quite dire."

Looks like a "run" on the "retirement bank" is getting underway in Vallejo. Considering how vulnerable many communities are to health care and pension payouts, this may be a trend worth watching. Probably Vallejo will be able to patch something together, but in the face of stagnant or declining house prices, it will be tough for them.

UPDATE: More on the slow-rolling budget crisis in California -

Governor orders cuts in state agencies now
By Judy Lin, Sacramento Bee

Gov. Arnold Schwarzenegger on Tuesday ordered additional cuts across the state bureaucracy that will slow down state hiring and nonessential service contracts – a move he said could save the cash-strapped state $100 million by June 30.

The governor ordered all agency secretaries and department directors to immediately begin reducing their current budgets by 1.5 percent by cutting nonessential services and activities. The order, which takes effect immediately, directs secretaries and directors to find savings, whether it's on personnel, travel or equipment...

...He likened the deficit to a triathlon with one portion finished – the midyear cuts. Lawmakers, he said, still must deal with more challenging cuts to the 2008-09 fiscal year and agree to his call for a constitutional amendment that would establish a rainy day fund and tie state spending to revenues.

"There should not be one single day's rest," Schwarzenegger said.

But for the second time in less than a week, Assembly Republicans rejected a Schwarzenegger-backed proposal to eliminate a tax break for some owners of boats, airplanes and motor homes. The break allows owners to take possession outside the state's boundaries and avoid California sales taxes if they leave them out of state for a specified period...

Tuesday, February 19, 2008


Stratfor has an interesting take on potential Russian responses to the declaration of independence by Kosovo:
...the Kremlin’s allies would see the inability of Moscow to defend Serbia as an exposure of Russia’s international weakness. In their eyes, Russia would have abandoned Serbia — not once, but twice. NATO and the European Union have now absorbed — or at least determined the future of — all of Central Europe, the Baltics and the Balkans. If Russia — after 17 years of diplomacy — is unable to protect an ally, then what exactly is a relationship with Russia worth? If Russia’s aura of inevitability is shown to be nothing more than a facade of bluster, why would anyone seek Russian protection rather than making their peace with a still-expanding European Union and NATO? ...

Stratfor then goes on to list the many ways in which the independence of this tiny sliver of Europe (about the size of the county I was born in) could unravel much of Putin's efforts over the years to reassert Russian power, ending with this:

...The only way that Putin can prevent any of this from happening is to strike back — quickly, and in a place that matters deeply to Europe.

Huh. Another round of cyberwar and saber-rattling in the Baltics? Pressure on Georgia?

And we also may just need to designate March 2008 as the Official Blowback Month, as here in the FutureJacked Bunker, we are expecting Hezbollah to engage in retaliatory strikes against Israel and/or the United States in response to the hit on Mugniyah.

Could get interesting out there folks.

Monday, February 18, 2008

The News Is What We Say It Is

One More Good Man Ignored

One more good man walks away from public service, moving to a private foundation in an effort to actually get things done. And when the crises finally hit? Who will be there to pilot the ship in the storm?

Walker Resigning GAO Post To Lead New Public Policy Foundation
By David Clarke, CQ Staff

David M. Walker, the U.S. comptroller general and head of the Government Accountability Office, announced Friday that he will resign in March to lead a new foundation focused on long-term public policy challenges.

GAO serves as Congress’ chief investigative and audit arm, probing waste and fraud in government programs and detailing the long-term budget problems facing the government. Walker has headed the agency, which has more than 3,100 employees and a budget of nearly $500 million, since November 1998. His 15 year-term was not set to end until 2013.

Walker, 56, has repeatedly warned that the government faces a long-term fiscal crisis as the baby-boom generation retires, driving up spending on Medicare, Medicaid and Social Security.

Summed Up Nicely

James Kunstler gives us a traffic report on this road to fiscal calamity we are traveling:

Shoes Dropping
...This is roughly where we are, and where the banks stand today. They are pretending to have money and desperately cadging loans from all comers to keep appearances up, but the loans can't come in fast enough. The appearance of confidence is crucial (as it is, of course, in any "con" game) to keep the investors (depositors) at bay. If a bunch of investors (depositors) all got nervous about the solvency of a given bank, they might try to slip in there during business hours and withdraw or redeem their "money" and perhaps translate it into items of value like gold coins, bottles of vodka, or cases of 9 millimeter pistol ammunition. And if enough of this bunch showed up at the same time, we would see a phenomenon called a "run" on a bank. And after that started at one bank, the thing Franklin Roosevelt called "fear itself" could easily spread to depositors in other banks pretending to be okay... and that would be the magic moment that the USA discovered it was no longer a rich nation...

Sunday, February 17, 2008

The Secession Meme, Again

Well, here we go. What next for the Basques, Scots, Walloons, Northern Italians, Corsicans, et al?

Kosovo Declares Independence From Serbia
By NEBI QENA and WILLIAM J. KOLE, The Associated Press
Sunday, February 17, 2008

PRISTINA, Kosovo -- Kosovo's parliament declared the disputed territory a nation on Sunday, mounting a historic bid to become an "independent and democratic state" backed by the U.S. and European allies but bitterly contested by Serbia and Russia.

Serbia immediately denounced the declaration as illegal, and Russia also rejected it, demanding an emergency meeting of the U.N. Security Council.

President Bush said the U.S. would work to prevent violence after the declaration and the European Union appealed for calm, mindful of the risk that the declaration could plunge the turbulent Balkans back into instability.

Friday, February 15, 2008

Hello Pot

... this is President Putin calling.

Putin is one interesting guy. While his recent statement about energy supply routes is farcical, it does reflect a pattern, in my opinion:

Putin: Energy routes avoiding Russia are 'stupid'
[RIA Novosti, Thomson Financial, 14 February; Reuters, 15 February] Russian President Vladimir Putin, in his annual press conference at the Kremlin, described Western efforts to find alternative routes for energy supplies that avoid Russia as "incorrect", "stupid" and "unprofessional". He said that Europe and the USA were "trying to find new routes for delivery of energy resources, bypassing Russian territory, and correspondingly put pressure on these countries." Putin added, "I think this is an incorrect policy, stupid, not to mention unprofessional."

This, from the guy who has already wielded the Energy Sword multiple times against his natural gas customers in the past couple of years. That's funny.

What's not so funny is the pattern. Putin appears to be doing unto the U.S. what Reagan did unto the USSR back in the 1980's. Russia was strapped for cash (remember the grain sales to the USSR back in the 1970's and 1980's and the debts that piled up form that?), was depleting her oil and was embroiled in a long war with no clear path to victory in Afghanistan. Reagan would make bellicose comments now and again, pursued a very aggressive military program and the Russians rose to the bait, spending themselves into bankruptcy. (That's one version of the story, others place most of the credit with the Pope, the Democratically-controlled Congress, Peak Oil, etc.)

Today, Russia is flush with oil money. Russia spent the 1990's collapsing down to a much simpler military regime (out of necessity, not out of choice) and so has a far lower level of expense there. Russia has cash while the U.S. has massive debts and foreign wars, Russia can fly a few bombers around, tweaking the U.S. and our allies and prompting unbelievably huge sums to be spent countering this new "threat." Here's hoping the political elites in the U.S. don't let themselves be yanked around by this guy. Fiscally, things are bad enough already.

Basic Math

For those struggling with just how massive the federal debt crisis is becoming, here's a motivational poster to help:

Your Friday homework assignment - get an estimate of how many U.S. soldiers have seen direct urban combat in Iraq and Afghanistan over the past half decade. Then, look at the types of available jobs and make assumptions for three tracks - a miracle economy and return to the late 1990's type of exuberance, a muddle-through scenario of 2% growth and a Japan-style drawn-out credit crunch.

Now ask yourself, what will be the state of mind of these intelligent, young, motivated individuals who return home in each of these scenarios. Keep that in your back pocket in the coming years as a reference.

Here's hoping they (the banks, wealthy family corporations, the Fed) find a way to stabilize the credit system (I have no idea how the banks can do it at this point, short of a massive debt forgiveness plan, which would destroy their balance sheets, but allow for their potential customers to get back into the credit expansion game through new loans).

Thursday, February 14, 2008

Watch Quick

If you need an example of how the celebrity talking heads are used to form opinions in the U.S., watch this YouTube compilation of Jim Cramer's various "analyses". It may not stay up long, as Jimbo, CNBC and will certainly lean on YouTube to pull it...

Bank Implode-O-Meter

Check out Aaron Krowne's newest offering - the Bank Implode-O-Meter.

This is the biggie, folks. If the banks hold, then what we regard as modern finance can piece itself back together. If the banks go, then we are entering uncharted sociopolitical territory.

When Faced With Trouble...

As human beings, when faced with a crisis situation, we can act forcefully, making hard choices using the best information we have at hand and work to mitigate the consequences (when I was raised up, it was called "being a man" - but that is so terribly politically incorrect these days) or we can obfuscate, lie, whine, beg for handouts and do everything in our power to deny, deny, deny the fact that our actions have played a large role in landing us in the crisis.

Well, here we have an economy faced with serious challenges. Many malinvestments and mistakes have been made. It is the first great economic crisis where Baby Boomer leadership will be tested. The best information will be needed to make accurate judgments and to review the effects of policy decisions.

The response?

Shut down one of the main supplies of economic information...

Due to budgetary constraints, the Economic Indicators service ( will be discontinued effective March 1, 2008.

Swear to God I am not making this up. Congress just handed out free booze-and-hooker money to every man, woman and abortion in the United States. Money is being pissed down a rathole in Afghanistan and Iraq. But economic numbers and trends won't get funded. The kind of information that investors and the economically literate use to project trends is being yanked. Yes there will be other numbers that can be used and yes, for those with the resources to dig, there will be ways to reconstruct that lost data, but of all the things to downsize when faced with a recession, you go and cut economic data?

Makes one immediately wonder if things are much worse than we are being told. And people in power wonder why conspiracy theories flourish.

"Facts do not cease to exist because they are ignored." - Aldous Huxley

Deflationary Dynamics Growing Stronger

There's a great quote in Mish's post Blacklist Domino Effect About To Hit Florida. It sums up one of the most devastating aspects of deflation:
The key point of this mess, not even mentioned in the article, is the domino effect. Anyone who purchased a unit and has closed on it is now trapped. There is no one to sell to because no financing is available.

It doesn't matter if you have good credit, bad credit or no credit - unless you can pay cash, your loan options in parts of Florida are very limited and becoming more so every day. That's the kind of death spiral that gives macroeconominists shaking fits.

Wednesday, February 13, 2008

Nukes Ahoy

Another aspect of small (and in this case, mobile) nuclear power generating stations. Lot's of advantages in a world of expensive electricity and aging grids.

Floating and submerged nuclear plants in the news in Norway and UAE
by Rod Adams, Atomic Insights
It is getting increasingly obvious to oil exporting nations that nuclear power plants offer an intriguing investment opportunity. Russia recently inked a deal with Bulgaria to build a couple of new nuclear power reactors, investors in Alberta have been looking hard at using nuclear power in the oil sands region, and this morning I came across two stories about floating or submerged nuclear power plants for both Norway and the Gulf Cooperation Council (GCC) states...

There are decades of experience in floating nuclear power sources (think nuclear subs and aircraft carriers). They are robust, safe and proven. If/when we do get a collapse in "business as usual" expect the logjam to break and creative solutions like this to abound.

Will it be enough to stave off the worst consequences of a Peak Oil world? We'll get to find out...

A Picture is Worth a Thousand Words

Check out Mish's new post entitled Where Is All The Oil Money Going? Amazing series of photos. The implications of this great wealth shift are becoming all too apparent.

Monday, February 11, 2008

Gravity is Your Friend

This is an engineer's wet dream...

Poor Mexico

Here's a story out of the Tucson Citizen that left me scrambling to look up how to say "ironic" in Spanish:

Sonoran officials slam sanctions law in Tucson visit
by Sheryl Kornman

A delegation of nine state legislators from Sonora was in Tucson on Tuesday to say Arizona's new employer sanctions law will have a devastating effect on the Mexican state...

..."Mexico is not prepared for this, for the tremendous problems" it will face as more and more Mexicans working in Arizona and sending money to their families return to hometowns in Sonora without jobs, she said...

Now, picture Mexico half a decade hence. PEMEX's exports will be minimal at best. Mexico's young population will have few prospects and quite probably work prospects north of the Rio Grande will be dim as well.

Hmmm, let me see - a population of intelligent, hard-working young men and women in a country whose #1 export at that time will certainly be drugs. Energy supplies will be vulnerable to disruption - both geologic and explosive - and this will hurt your industrial base and especially any efforts to "grow" their way out of their problems.

Makes one wonder what life will be like near the border in the coming years.

Sunday, February 10, 2008

More Monkeywrenching

Another example of how the "Fear and Panic" being peddled by a variety of government and corporate entities over the last seven years has enabled the very terroristic actions that the "remedies" they've been selling were designed to thwart...

Bomb hoax prompts helicopter evacuation of North Sea oil rig
David Lister, Scottish Correspondent , Times Online

A bomb threat made by a 23-year-old woman instigated a full-scale evacuation from a North Sea oil rig 130 miles off the coast yesterday.

Police began an investigation after the evacuation of 161 of the more than 500 people on board the Safe Scandinavia, a floating accommodation block that forms part of an oil installation off Aberdeen. Police were waiting to question the female employee last night after she was detained by the rig’s manager and flown to the Scottish mainland.

A spokeswoman for Grampian Police confirmed that it was investigating “an alleged incident on a North Sea installation”.

Bomb disposal experts were placed on stand-by and up to a dozen RAF, Coastguard and civilian helicopters scrambled to the rig after the decision to evacuate all personnel was taken by the operators at 9.20am. Police emphasised that the incident was “not considered terrorism-related”. By the time the alert was later declared a hoax, workers had been airlifted from the platform to two nearby rigs...

Something to Remember

Fabius Maximus shines a little light on the coming great transition to What Comes Next in Let us light a candle while we walk, lest we fear what lies ahead of us and his words are worth remembering in the long decade to come...

More Musings on the Cusp

I'm still not totally convinced the final top is in - but evidence mounts on a tremendous amount of tension in the various economic and social systems that mold our world.

For instance, take the grain commodities:

Wheat traders say new futures limits change the game
By Mark Weinraub

CHICAGO (Reuters) - Expanded daily trading limits and sharply higher margin requirements to trade soaring U.S. wheat futures have changed the game and left traders wondering how the market will react.

"It is a very big deal," said Vic Lespinasse, a veteran grain market analyst for Illinois Grain, a brokerage house. "I do not know what is going to happen."

The three major U.S. grain exchanges said in a coordinated statement late on Friday that they will raise the daily trading limit in wheat futures to 60 cents per bushel from 30 cents, starting with the February 11 trade date...

This could turn into a very big deal - not just from the point of view of the speculators and the financier class. If commodities blow off and collapse, instead of boom up and stabilize, that is going to affect farmers all across the U.S. Midwest like a hammer to the head. It will affect what gets planted - as will fuel and pesticide costs. If we continue to boom, then the movement of wealth into the pockets of regional producers and smaller towns might actually help cushion some of the blows headed our way in the form of a recession. If it busts, then we'll have problems in the food supply chain like nothing we've seen since the War of Secession. I am not hyperbolizing there. Farmers have a chance to actually do more than scrape by. We have a chance to raise up a new generation to replace the one rapidly dying off. We'll see how it shakes out, but any time you mess with limits and margin requirements in a market, you are playing with fire. We'll see.

If nothing else, use the free access handed out by EWI and check out their Daily Commodities Service and at least get their take on things to add to your mental toolkit.

Cisco's CEO talks socionomics, as related by Kevin Depew (hat tip to Mish):

4. We're Talking Ourselves Into This Slowdown
Cisco (CSCO) last night warned that revenue growth in the third quarter will fall to 10%, well below the 15% level most analysts were expecting. And just who or what is to blame for this revenue slowdown? According to Cisco Chief Executive Officer John Chambers, we have no one to blame but ourselves.

Sure the overall slowdown in the U.S. and Europe is being felt as much by Cisco as other companies, but it's not a "real" slowdown, according to Chambers, but an imagined one. On the company's conference call, Chambers said, "I think we are actually talking ourselves into this slowdown."

He then used what he called "the treadmill example" to illustrate how we are responsible for the company's missed forecast. "Over the last three or four months, I felt pretty good about business until I got on my treadmill and then I quit early because of the pessimism that exists in the market.

We'll simply point out that, in a sense, Chambers is right: we are talking ourselves into this slowdown. The question is, why? Because, that's what happens in every slowdown. Remember, social mood drives social action; social action does not drive social mood. This is counterintuitive, but a negative social mood de-motivates people to produce more, purchase more and behave generally in an upbeat manner. A positive social mood, on the other hand, motivates people to produce more, spend more, take on more credit and expand businesses.

Exactly. If this realization is being publicly discussed by the CEO of a major U.S. corporation, then imagine what is being discussed behind closed doors? Now that said, I'm sure similar conversations were had back in 2001 and Armageddon did not ensue. That said, we still had one good bubble left in us - Housing. And that is dead.

We could discuss Iraq, the "stimulus" package or other newsie items, but my time is short for blogging this evening, so let's just end with me begging you - if you have not already done it - please make sure you have, or are getting, your financial house in order. Have a Plan B, have Plan C and definitely have a Plan D.

Wednesday, February 6, 2008

Stay Tuned

You may not see more than one or two posts until next week. I am pitching some intellectual property to potential investors today and then have to attend a funeral.

Unless markets completely go off a cliff, should be business as usual - both good and bad.

Don't forget - EWI's Free Week for their Commodities Services starts today.

Tuesday, February 5, 2008

Socionomics By Any Other Name...

...would still provide you with a planning matrix.

Kevin Depew nails the coming roll-over in mass social mood in a recent 5 Things You Need to Know:
3. The Sea Change in Social Mood the Models Failed to Predict

Over the weekend we ran across an interesting article in the Financial Times discussing how it is the ratings agencies failed to accurately predict the wave of foreclosures and loan defaults now spreading across the credit spectrum.

The problem lies, as do nearly all financial problems, with the models. It turns out the mathematical models used by the ratings agencies to predict future default rates simply failed to account for a profound shift in social attitudes.

As Bank of America (BAC) CEO Kenneth Lewis noted recently, "There's been a change in social attitudes toward default." People are walking away from their homes but keeping their credit cards and auto loans.

This is not what the models predicted. In previous decades households more readily defaulted on unsecured loans (credit cards and car loans) first, and stopped paying their mortgage only at the bitter end. Part of the explanation for this is related to the continuing shift in social mood toward debt repudiation and the relative attractiveness of scaled down living. And some of it is simply a rational response to deflation and negative home equity. Why fight to save something that is going down in value?

This, of course, is how a deflationary credit contraction feeds itself. Financial institutions will be forced to update their models to account for shifting consumer behavior. The net result: less credit available going forward...

DJIA 12,500 looks like it has given way. Time to review your portfolio of stocks, assets and your network of friends and associates. We are going to be moving into a transition period where all the old models will fail to one degree or another.

Monday, February 4, 2008

Free Week at Elliott Wave International

FYI, for those of you following commodities (oil, the grains, etc.) then you will want to take a few minutes each day and check out Elliott Wave International's Free Week for their Commodities Forecasts.

For those that have signed up for a Free Week in the past, you know what you get. For those who haven't, you get the exact same access as paying subscribers for a limited time - allowing you to test drive EWI's analysis for yourself. This FreeWeek of EWI's Commodity Forecasts starts Wednesday, February 6 at noon Eastern and ends Wednesday, February 13 at noon Eastern.

It takes only about 30 seconds to register with them (and most of you probably already have EWI club member accounts, so even that won't be necessary) and then you are teed up for access that would normally cost you a nice chunk of change.

Well worth your time, in my opinion.

Who's Providing the Code Inputs for your Wetware?

It's Monday, the DJIA is above 12,500, allowing me to relax a bit and reflect on THE tap root of all human experience - be it love, war, commerce or ritual - the human brain. I've long been puzzled over the "who" behind human consciousness. It's lead me to read Korzybski, R.A. Wilson, Robert Heinlein, Ayn Rand, C.S. Lewis, Grant McFetridge, and a host of other authors great and not-so-great.

If that seems a bit far from 4GW or the housing crash, please note that everything we experience - everything - is through the lense of this glob of matter between our ears. Whether it is a Pathan who's honor has been offended rising up with an axe to "right a wrong" or a graduate of Wharton conning the State of Pennsylvania to invest in complex CDOs, all motivations are filtered through our minds - wetware, as opposed to the software that drives otherwise inert piles of silicon and metal.

As D.E. Harding's book "On Having No Head" reminded me, all of these "things" we see "out there" are really being experienced through the filter of our mind. All that stuff across the room from you is really being experienced inside your mind. I won't bore you with my interpretation. For those of you who are inclined to experiment, try Harding's Pointing Experiment and see what results.

I tell you that to give you some sort of context as to why I like to keep one eye open on consciousness research and other work that tries to get a handle on how the human mind works. Which leads me to relate two bits of flotsam that floated ashore on the sea of the internet this morning. First, we have a report from George Ure over at UrbanSurvival. Please note that George's site doesn't have direct linking to paragraphs, so look for the title "Memeering" on the report dated Monday, February 4th, 2008.

George refers to work done by a group operating under the name "Halfpasthuman". They run a bank of servers and intricate software to filter and collate language use all across the internet (mainly in online forums, if I understand it correctly). Their thesis is that human language changes in advance of events "out here" in the "real world". They've made some amazingly precise calls on the markets and in the world of current events (and by that I mean calling major turns to the day, weeks if not months in advance). In the interests of fairness, they've also made some calls that did not pan out. That said, the operating theory is fascinating. And so are some patterns they think they've found in internet traffic over the years (from a short report entitled Meta Arts - Memeering):
Over the course of the past several years of our linguistic sweepings study, we have become aware of many organized groups who also are sweeping/mining/polling for their own purposes.

Approximately 3/three years ago, we thought that we were picking up some new form of internet monkey-mind business, though at that time it was even questionable that a pattern was actually developing. Sort of like seeing the faint hint of where the foot print in the sand was just prior to the wave having washed over it. That is all it was, just faint 'footprint residues' within our linguistic aggregations...

...Be careful out there, the emotions you are experiencing *may* not be your own, or universe inspired. They may be planted...for someone else's purpose. The aware observer will be cognizant of how they are being affected by what is being place there for them to read. Of course the memeering designers recognize that the schooled mind will accept any kind of thing shoved down its pie hole, while the educated mind can entertain the idea without necessarily accepting it...or in this case, getting their emotional energy redirected by it...

George goes on to comment:

The answer to the first question is that the team has isolated three groups of meme. We'll call these an Anglo group of high sophistication, a Middle East/Islamic group which is more obvious in their efforts, and a third (or more) group(s) which we just call "Other" for now.

The second question, how to spot one is simple: Next time you go to a discussion forum and see a post which asks a rhetorical question that goes to some sensitive area of feelings/emotions, don't be sucked in to reading the 10-20 sentence emotion tweaking that is tied to it.

Or, if you read foreign forums/fora, be careful of posts that are formed this way and yet which don't make sense. Cliff and Igor seem to get a kick out of memeering done badly, such as translating what was intended in one case to be the concept of "bad taste in your mouth" to something akin to 'foul tasting bird'...

Now, as I've said in other posts, George Ure pushes the envelope and sometimes ventures off into territory with "evidence" that some would consider flimsy at best. While that may be true, that is also the only way truly new connections and discoveries are made.

I relate the above only because also this morning, I read a new post by John Robb over at GlobalGuerrillas:

From Mark Pesce's Hyperpeople blog:

Earlier this year, I was privileged to go “on tour” with Jimmy “Jimbo” Wales, the founder and public face of Wikipedia, as we crisscrossed the nation, talking to educators in Adelaide, Perth, Sydney and Melbourne. Everywhere we went, people asked the same question: why is Wikipedia such a success, while my wiki languishes? What do you need to achieve critical mass? The answer, Jimmy said, is five people. Five individuals dedicated to an altruistic sharing of collective intelligence should be enough to produce a flowering similar to Wikipedia. Jimbo has learned, through experience, that the “minor” language versions of Wikipedia (languages with less than 10 million native speakers), need at least five steady contributors to become self-sustaining. In the many wikis Jimbo oversees through his commercial arm, Wikia, he’s noted the same phenomenon time and again. Five people mark the tipping point between a hobby and a nascent hyperintelligence.

I suspect this observation applies to a much wider array of networked activity than just wikis...

I leave you with this thought. Every single mass communication medium has been co-opted at one time or another to get the consumers of said medium to behave in ways that certain manipulators want them to. This can be for noble purposes - "Let's all band together and smite the (insert name of national enemy here) into oblivion". It can also be used from commercial purposes - "If you don't drink (insert brand of beer here) then women will ignore you and you will die fat, alone and unhappy".

Is it so hard to believe that this new communications medium might be the subject of a new form of influence peddling?

I'm agnostic on this point at the moment, but if nothing else, it serves as a reminder to be careful consumers of the emotionally charged nuggets that we feast upon in the form of news articles, video clips, political jokes, "scholarly" articles and forum postings...

Friday, February 1, 2008

State-rot in Kenya

Well, Kenya, crossed another dangerous river. I don't know if they've quite crossed the Rubicon that leads them into complete State failure yet, but they are definitely suffering a serious case of State-rot. When the mechanisms of the state itself become targets, we are playing for big stakes.

Lynch mob hacks Kenyan policeman to death
by Nico Hines and agencies for the Times Online

A 3,000-strong mob armed with bows and arrows, spears, clubs and machetes has murdered a police officer in the violence-hit Rift Valley region of western Kenya.

The lynching took place near Ainamoi, after the officer was accused of wounding a civilian when police fired on protesters yesterday.

Peter Aliwa, a police commander, said it was the first reported killing of a policeman in the violence that has raged in Kenya since disputed elections a month ago. “The police officer injured three attackers before he was overpowered and lynched on the spot,” he said...

If Kenya goes, then we are dealing with an arc of instability reaching up the entire eastern seaboard of Africa. Next, picture what happens if the anchor of Sub-Saharan Africa, South Africa, cracks apart along tribal and ethnic lines, fueled by power shortages and economic turmoil...

New to the Blogroll

Some new sites have been added to the blogroll.

Javier Marti's Trendinews - a treasure trove of current events and futurist thought. Under Random and Useful.

Frank Munger's Atomic City Underground - a great blog following stories from the DOE complex, specifically ORNL. Fun stuff for us nuke geeks out there. Under Tech.

The Mandarin Word of the Day - just what it says. Never hurts to pick up a new lingo. Under Random and Useful.