Joe Discovers the Only Perfectly Efficient Christmas Gift

Did you know that Economists hate Christmas? Okay not really, but it does frustrate them. Want to know why? It's not because we get left out at the company Christmas party, although we usually do...... Unless you want to talk about efficient resource allocation at a Christmas party. This would be popular at some Christmas parties, like an economic department Christmas party at a University. However, as hard as it is to believe this, most people don't want to talk about efficient resource allocation at Christmas parties. Or on blogs for that matter - but since you've already had your Christmas party, and now you're bored with nothing better to do so you're still reading this blog, we'll explain.

It's all about efficiency. Economists love efficiency. If you have two resources, labor and capital, you want both to be utilized efficiently while making your product. Suppose you have 10 machines and each requires one person to operate. If you only have one person the process is inefficient. If you have 10 people and only one machine it's also inefficient.

Now let's suppose Joe Shareholder wanted to get a big screen TV for his living room, but not any big screen TV, he wants a Dynex 40" 1080 LCD HDTV listed at $499 on Best Buy online because he knows that LG actually makes this brand so it should be a great product for less money. Okay, suppose Joe's brother Moe gets Joe a Samsung brand television for $200 more? Sure, it's a great TV also, but does Joe derive an extra $200 worth of pleasure from watching this more expensive TV? If not then there's $200 worth of inefficiencies in this gift. What if Joe gets a Christmas sweater with actual reindeer antlers on it? While Joe admits this would be a sweet Christmas gift, he might only wear it once/twice per year to Christmas parties where he will try to corner others to tell then why this sweater was an inefficient gift? He might derive only partial pleasure from this gift whereas a Dynex TV would offer full pleasure.

You see, there are too many inefficiencies in Christmas to fully satisfy efficiency-loving economists. It's a problem. Just give cash then? That's too boring. Give unnecessary gifts? That's too inefficient. So what does this mean for Joe? Joe wants the Dynex TV so JoAnn can come over and watch movies on his big screen TV. Not any movies, but scary movies where he could "calm her nerves" by placing his arm around her and holding her hand to offer help and support in this season of giving. (Even if it is after a Christmas party in which she talked with others about something other than efficient resource allocation, who also don't have reindeer antlers on their Christmas sweaters) Joe understands that not everyone will give each other Dynex TV's, however, so he came up with the perfect idea: A subscription to the JoeShareholder newsletter. Oh wait, JoeShareholder doesn't have a newsletter. All you have to do is give this blog to your friends. There you have it. We've satisfied economists everywhere, and you've satisfied your needs for Christmas gifts. Efficiency = Joe Shareholder.

Time Magazine Names Helicopter Ben Person of the Year! Joe Names him Wool Puller of the Year

Ronald Reagan once warned to never trust a man who says, "Hello, I'm from the Government and I'm here to help." Joe Shareholder once warned to never trust someone who says, "Hello, I'm from a quasi-government agency and I'm here to help". That's right, the Federal Reserve isn't really a government agency. (Joe, halfway house) It's more like a banking cartel that happens to print money and establish monetary policy for the US Government. Anywho, when Joe Shareholder found out that Time Magazine named Helicopter Ben the 2009 Person of the Year, potato chips went flying at the computer screen, behind the computer screen, down the back of the computer desk, and all over the baseboards. Grease doesn't come off the screen very well by the way. Back to business now. Actually, it's not really that surprising considering how many people think this recession is over, and also how many people have gotten wool pulled down so far over their eyes they get market-disorientation-disorder (MDD). Joe Shareholder gave Ben an award also, "Wool Puller of the year, 2009". Until now, Joe didn't realize one of the main commodity investments of the Fed is wool, which is used to pull down over your eyes. Back to business again. What is surprising, however, is how the Federal Reserve Banking Cartel has been able to pull this off, er, over for so long now. With wool consistently over your eyes, it's surprising the US Taxpayer hasn't struggled to free itself to see clearly yet. Apparently to Time Magazine it's become comforting in this cold weather storm. Which isn't over by the way.

Now for the truth about Ben Bernanke, lift the wool up for a second to see these previous posts:

• Ben Begs the Chinese to Become Communist
• Super Ben Saves the World from Collapse
• Credit Crisis is Over, Excess Liquidity Crisis Begins, see Reason #2
• Ben Bernanke vs. Joe Shareholder, Inflation vs. Deflation

Newsflash to Time Magazine, the Federal Reserve Banking Cartel doesn't place the US taxpayer first on the priority list. Sure, they care about the US Taxpayer, but kind of like how Tiger Woods cares about mistress #4. He sees her from time to time, and has moments in which the two are very close, but at the end of the day, she's not his top priority. The Federal Reserve and Tiger Woods have other similarities also, but this is a family friendly blog, so you won't find them here. Back to business a third time. The Federal Reserve Bank exists for one reason, and that is to protect the interests of the big banks. Joe Shareholder's brother, Moe, recently discovered the Federal Reserve Bank's priority list:

1. Goldman Sachs (Fed's AAA minor league ball club)
2. JP Morgan Chase (Fed, only under a different name)
3. Citigroup
4. Bank of America
5. Morgan Stanley
6. Destroy the US Dollar
7. Wells Fargo
8. Bank of NY
9. Ruin the US Dollar
10. Sacrifice Lehman
11. Turn the US Dollar into fancy green toilet paper
12. American Express
13. US Taxpayer (but mainly when bailouts are necessary)

What does this mean for Joe? It means Joe better end this post....and quick. Indeed, black helicopters are starting to swirl up above.....Lincoln Towncars with tinted windows are starting to appear in strange places, from strange places, and Joe's inbox is starting to get flooded by .gov email addresses, which should really be .quasi-gov email addresses. Whoa, what's this? An email from JoAnn saying "Help Me!" An email from JoAnn's mother titled, "strange men in shades standing at my door", and an email from Joe's mother "house broken into, but nothing is gone...strange". Email from Moe titled, "phone's bugged!". Before we all start shouting Kum Bah Yah about the recession being over, first check to see if your eyes are itching.

House Passes Financial Takeover Bill

Just yesterday the House passed a financial reform bill in order to keep "too big to fail" corporations from wrecking the US economy. This mammoth 1200+ page bill was no different from any other our fearless leaders have passed in the last year. In other words, yes, a warehouse dolly was necessary to transport the bill into the house floor; yes, a propane fueled forklift was necessary to hoist it up to the table; yes, the House members were in the gym the night before lifting weights (the bill tied to the barbel was used in place of weights); and most importantly, NO, NOBODY THAT VOTED FOR THIS BILL HAS READ IT. It's unclear whether the phrase "too big to fail" is in reference to the companies posing systemic risk or simply referring to bill itself. (Joe, if you haven't read it, sign it, and if it's too large, pass it.)

Anyway, this bill still needs to clear the Senate, so don't be surprised if you see DC Senator's coming to a Gold's Gym near you very soon. Especially Harry Reid. Anyway, this bill gives the government unprecedented authority to simply break up any corporation, anytime, anywhere, anyway they want to if they feel it poses "systemic risk" to the economy. Is that confusing to anyone else? Worst of all, it doesn't even need to be a financial company. Any company period. (Joe government over-reach) So who decides whether a company poses systemic risk? They do. Most likely House Financial Services Committee chairman Barney Frank (D-MA) and Senate Banking Committee chairman Christopher Dodd (D-CN) will have a large say in this process as heads of financial regulatory committees, along with the Obama Administration.

Alrighty then, what you don't know is that these two Congressmen actually played a very large part in blowing up the sub-prime bubble in real estate which caused this very depression, or recession, or whatever we're calling it now. There will be much more on this on my next post when I publish a book review on one of the most fascinating books I've ever read. "Architects of Ruin", by Peter Schweizer. Simply an amazingly informative book. Barney Frank blocked several attempts by the Bush Administration to reign in Fannie Mae and accused Bush and several Senators from both parties of "not caring about affordable housing". Fannie Mae and Freddie Mac are quasi-government agencies that were hijacked by the liberal agenda of offering loans to anybody that wanted one.

Here's how they work:

1. Mortgage Lender or Bank originates a loan with a home buyer.
2. Mortgage Lender/Bank sells loan to Freddie/Fannie to free up cash to originate more loans.
3. Freddie/Fannie, then package loans and sell to investment/hedge/pension funds or banks or slice up the loans into derivatives and sell the pieces.

Fannie and Freddie created explicit goals to buy trillions of dollars of sub-prime loans (loans to people who wouldn't have otherwise qualified for a loan) from mortgage brokers and banks. Most of the time these sub prime loans required very little or even no money down, and were even offered to many jobless earning unemployment benefits! Lenders didn't care. They simply immediately sold the loans to Fannie and Freddie, looked the other way, and tucked the commission firmly in pocket. Anyway, Barney Frank covered Mae's Fanny and was defender #1 for this agenda-driven organization. Christopher Dodd was simply bought out by various groups represented by Fannie and Freddie (see attached Coutrywide Scandal) and refused to regulate these government agencies. Bottom line, Peter Schweizer argues that it wasn't runaway capitalism that took the economy down to the canvas, but rather runaway government with an agenda.

So what does this mean for Joe? Barney Frank and Christopher Dodd were supposed to be monitoring financial institutions already.......but they weren't.....so we're giving them more power and oversight.....??? (Joe Einstein, "the definition of insanity is to do the same thing over and over again and expect a different outcome") We'll see what happens, but Joe is skeptical. Speaking of skeptical, JoAnn is nervous because she believes Joe might be ring shopping. (She also caught him talking to his friend Joe Weller the other day.) If it doesn't stop soon, she's going to have to financially regulate him.

Tiger's not out of the Woods Yet - But the US Dollar Might be

Since early March the dollar has been dropping faster than Tiger Woods' endorsement deals...will; and Congress has been taking a 9 iron to the greenback like scorned Swedish women to SUV windows.

So here's the deal. Normally the stock market dictates the direction of the US dollar. Investors flee to currencies as a safe haven from a falling stock market. (Joe's dog, dog wagging the tail) Lately however, the US Dollar has interestingly been calling the shots and dictating the direction of the stock market (Joe's dog, tail wagging the dog). Indeed, steep drops in the dollar are strongly correlated with a rising stock market due to the fear of inflation. These increases in the stock market are reflecting the nominal value of the dollar, not the real value. Even if the market goes up, the value of your retirement could still be dropping (Joe's dog, tail not wagging at all anymore, but drooped in between its legs and hunkered down in depression).

This can't last forever, however. Despite the Federal Reserve's loose monetary policy and Gov's best efforts to whack the greenback and spend its way out of trouble, (Tiger Joe Woods, yes, Joe's his middle name, or it should be anyway) it appears the US Dollar free fall may be over for now. Why? Just this week Japan - the number two economy in the world - announced a large scale quantitative easing policy (or government spending) which should dilute its currency relative to ours. (Japan wants a weak currency because it strengthens their exports) Also, Japan's debt to GDP ratio is actually MUCH worse than ours right now, so it's bad debt position coupled with a ramped up quantitative easing plan should help soften its currency. So there you have it. The stage is set. The top two economies in the world in a race to see who can beat down its currency harder and faster and turn it into fertilizer. (Joe's dog, tail now straight up in the air, squatting position).

Another interesting phenomenon that happened Friday after I initially wrote this post, was the dollar's surge on a much improved November unemployment report. The diminished job loss announcement launched the dollar like you-know-who's tee off because of rate increase speculation. Ben has previously stated he wouldn't raise interest rates until jobs were actually increasing rather than decreasing. This may or may not happen soon. It will be interesting to see if the jobs report for December drops down again, or if the trend line of improved job numbers continues. Construction and manufacturing job losses were still quite high, but government and health care jobs both saw increases last month.

What does this mean for Joe? An increasing dollar value would ease inflation fears, but also throw cold water on Gold Bugs somewhat. I recently posted a comment on Marketwatch.com to short gold, and received 6 thumbs up and 34 thumbs down, so who knows, I might be way off on my Gold projections. A strengthening dollar would seemingly drop the price of gold, but the future of the US Dollar is very uncertain and fragile still.

What else does this mean for Joe? Joe doesn't have a dog, but could use the companionship since JoAnn hasn't accepted his latest offer yet to marry him before hyper inflation gets a hold of ring prices. Since he believes the dollar might start to stabilize, he's nervous now that she has a pretty good counter argument. The pressure's on for Joe Shareholder. Doggonit.

Credit Crisis is Over, Excess Liquidity Crisis Begins

Just last week Dubai World announced it can't meet it's debt obligations over the next several months and has asked creditors to accommodate a 6 month "standstill" or postponement in debt repayment of about 60 billion dollars. (Joe, can I do that with credit card!) This announcement pummelled stock markets all over the world on Thursday with some European and Asian markets dropping between 3-5%. The US market dropped almost 2% when trading resumed on Friday. So how did this rapidly emerging economy of Dubai crash? (Joe party attendees at White House) Let's look behind the scenes.

Reason#1: In '95 the financial world was exuberant about the emerging market of Mexico, and invested heavily in Mexican debt which offered a yield of about 12%. Investment banks were all over this 12% offering like Tiger Woods on a fire hydrant at 2:30AM. 12%! Too good to pass up! Well, the bubble popped and the Mexicans had no option other than to default the debt (Jose, left with the check at the end of the mole-sauced meal, but no pesos with which to pay for it). Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, and Chase Manhattan (now part of JP Morgan Chase), who sprayed out money like water from damaged fire hydrants while ignoring the risks of possible default were on the verge of losing tens of billions of dollars. What happened after that? Robert Rubin, a Wall Street fat cat and executive of Citigroup lobbied for billions in bailout money. The Republican Congress told Rubin to take a hike but Slick Willy Clinton, who had formed strong alliances with Wall St democrats Rubin at Citi and Jon Corzine of Goldman Sachs (who recently lost a gubernatorial bid in NJ), committed bailout money from the US Treasury. (if Joe daddy says no, just ask JoAnn mommy).

This set a dangerous precedent on Wall Street as risk was being spread across taxpayers while reward was still privatized and dished out in large bonuses. Over the next four years, similar instances occurred 3 more times in the form of South Korean bonds, Russian debt and even private institutions which owed money to Wall Street banksters. In all three cases, Rubin was instrumental in siphoning money from the US taxpayer into Citibank and its Wall Street allies under the guise of "systemic risk to the financial world". (Where have we heard this recently?) Fast forward to 2008, when Bush's Treasury Secretary Paulson proposed hundreds of billions of TARP money (Joe up the ante) - ratified by Congress -to these very same investment banks to avoid "systemic risk to the financial world". So where does Dubai fit into this? It's the same thing here - emerging economy gets expansion money and then falls on its face and can't pay it back. NO problem, US Taxpayer to the rescue. So where is Rubin now, who was so instrumental in bailing out Wall St in the '90's? He's an advisor to Obama. Furthermore, Summers and Geithner, who were proteges of Rubin, are in Obama's inner circle. Any guess what will happen to this Dubai World debt if it can't be repaid in 6 months? (Joe Vitale, Bailout City BABY!) This will not be the last government to default bonds during this crisis.

Reason #2: A good chunk of the blame goes to Rubin, Clinton, Treasury Dept and Congress for establishing a bailout culture on Wall Street. But, the Fed is not without blame as it creates excess liquidity when rates are too low LIKE THEY ARE NOW. Indeed, these same investment banks can borrow at .25% right now from the Fed and chase high yields such as Dubai offerings during a time in which banks need cash. Who wouldn't take advantage of this cheap and easy money, especially when the losses are absorbed by taxpayers??? The Federal Reserve bank needs to be abolished if free markets are again allowed to work properly. Because of this excess liquidity, the credit crisis is over now, but a new crisis has emerged. A spending and bubble crisis. ALL OF THIS FREE LIQUIDITY IS CREATING BUBBLES AROUND THE WORLD as investment banks are sniffing out high returns with little regard for risk. Make no mistake about it, these bubbles will pop as we saw this week with Dubai. Then the real pain will begin. (Joe anything getting struck by SUV's at 2:30 in the morning) The Fed should be abolished. Wall Street must become responsible, and Pres Obama and Congress must get tougher on allowing markets to work freely. (Joe, for the good of the kid, tell him no occasionally) The recession isn't over, we're very much still in the thick of things.

So what does this mean for Joe? Joe is very wary of these so called "emerging market" bubbles forming after the Dubai incident. Joe has decided to stay away from emerging markets, but also wonders whether the stock market has become an equity bubble from excess liquidity. Other bubbles could include expensive commodities such as gold and oil. Don't get me wrong, Joe doesn't mind holding the check at the end of the meal (especially if he's eating a meal with JoAnn), but unless he's the one ordering the burritos, he shouldn't be shelling out the pesos.

Abe's Thanksgiving Proclamation

Washington, DC, October 3, 1863

The year that is drawing toward its close has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added which are of so extraordinary a nature that they can not fail to penetrate and soften even the heart which is habitually insensible to the ever-watchful providence of Almighty God.

In the midst of a civil war of unequaled magnitude and severity, which has sometimes seemed to foreign states to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere, except in the theater of military conflict, while that theater has been greatly contracted by the advancing armies and navies of the Union.

Needful diversions of wealth and of strength from the fields of peaceful industry to the national defense have not arrested the plow, the shuttle, or the ship; the ax has enlarged the borders of our settlements, and the mines, as well as the iron and coal as of our precious metals, have yielded even more abundantly than heretofore. Population has steadily increased notwithstanding the waste that has been made in the camp, the siege, and the battlefield, and the country, rejoicing in the consciousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom.

No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy.

It has seemed to me fit and proper that they should be solemnly, reverently, and gratefully acknowledged, as with one heart and one voice, by the whole American people. I do therefore invite my fellow-citizens in every part of the United States, and also those who are in foreign lands, to set apart and observe the last Thursday of November next as a day of thanksgiving and praise to our beneficent Father who dwelleth in the heavens. And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners, or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the imposition of the Almighty hand to heal the wounds of the nation and to restore it, as soon as may be consistent with the divine purpose, to the full enjoyment of peace, harmony, tranquility, and union.In testimony whereof I have hereunto set my hand and caused the seal of the United States to be affixed.

Done at the city of Washington, this 3d day of October, A.D. 1863, and of the Independence of the United States the eighty-eighth.

Abraham Lincoln By the President: William H. Seward, Secretary of State.

Joe's Portfolio gets Fueled by Syntroleum Corporation

Okay everybody, so maybe my last stock pick (here) hasn't worked out too well..... yet. (Joe Edison, "I didn't fail, I just learned 2000 ways to not invent the light bulb"). Speaking of light bulbs, we're about to head into the dark, cold, winter, where plenty of natural gas will be used for home heating and power. Couple that with a weak US Dollar and UNG should still perform for you even though the ETF has diversified a little and is not completely invested in gas futures now. That's beside the point however - the point here is to make money. That's why Google pays us the big bucks to place ads in margins. So Joe, what's the next stock to double in price? Simple, it's Syntroleum Corporation - stock ticker symbol SYNM. Please do not continue reading if you're not interested in making money, but if you are, turn off the TV, let the dog out, lock the kids in the attic with Balloon Boy, and locate the "buy" button on your computer screen. I can't believe this stock has dropped this low, but it has, so now we get to profit from it. SYNM

Meet SYNM:

Syntroleum Corporation (SYNM) and Tyson Foods Inc (TSN) created a 50/50 joint venture company called Dynamic Fuels LLC. The purpose of this joint venture is to leverage patented technology from Syntroleum to convert Tyson's chicken grease into synthetic biodiesel fuel. Dynamic Fuels LLC is currently constructing a plant in Geismar, LA which is 75% complete now. Construction is scheduled to be completed sometime in February 2010 and full scale production will begin mid-2010. While there are currently facilities producing biofuels from foods/plants such as corn, this is the first large scale plant to produce synthetic biodiesel from waste products. (John, cousin of Joe, one man's trash is another man's treasure) Both Tyson Foods and Syntroleum should benefit from this joint venture, but Tyson has a market capitalization of around 5 billion dollars so a profitable joint venture would have greater earnings impact on a small technology company like Syntroleum with a market cap of under $200 million. Dynamic Fuels already has a contract in place with the US Department of Defense to supply jet fuel for its planes. Click here for more information and a short news clip on Dynamic Fuels LLC.

So how should you play SYNM going forward? It depends on what you think the market will do in the next couple months. There's a strong correlation between the price of oil futures and SYNM, so if you believe Ben Bernanke will continue to destroy the US dollar, it would be a good idea to invest now because we'll soon have rampant Zimbabwe-esque hyperinflation. However, if you think Ben's shell game will flop, global oil demand will stay depressed, the US dollar will stabilize, and commodity and equity prices will crash down again, then you might want to wait. While there's no way to predict the long term future with 100% certainty, we do have some knowledge of what can happen in the short term even in the midst of a stock market crash. Let's turn back the clock to Sept '08. A company called Global Resource Corporation (GBRC) - which extracts oil and gas from petroleum based products such as tires through microwave radiation - finished constructing a large scale reactor in Sept '08. Take a look at the two year graph for GBRC to see how the stock performed leading up to the reactor's start-up date of September 29th 2008. (Dates are at the very bottom of the graph)

As you can see the stock price more than doubled from around $1 at the beginning of September '08 to almost $2.50 by the end. This compared to the Dow Jones which lost around 10% during the same time period. So the stock performed great just before the start-up date, but why did the price crash when production started? No clear answer here, but most likely simply a case of "buy the rumor, sell the news". Long term profitability was in question in the midst of so much uncertainty (Joe Senate Majority Leader in next year's election), so speculators dumped stock soon after production began. The point here is that even if the market tumbles again, SYNM should perform well, especially right before plant completion and large scale production begins. That said, this should be a nice long term hold in Joe's opinion.

So what does this mean for Joe Shareholder? Right now the stock market has ballooned to a 52 week high based on questionable fundamentals. (Joe's fire, leaves burning brightly at the top but no logs underneath) Bottom line, this fire could be doused at any time. So, before plowing blindly into it (JoAnn shopper on Black Friday), and getting trampled at the exits by people trying to get out (JoAnn shopper during Black Friday), and losing all your money, (JoAnn shopper by the end of Black Friday) it might be a good idea to wait and watch this one for a few months and buy any steep dips in SYNM. Joe plans to set "limit" buy marks and enjoy the ride.