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Week Ended July 21 2013

 DR. PETER G. KINESA'S 
INTERNATIONAL INSIGHTS

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The Marc Faber Blog: Somewhere down the line we will have a Massive Wealth Destruction

Just a short post noting that Marc's 50% prediction is in line with what we suggest is a possible valuation adjustment in our July 17th comments on Paul Krugman's Blog - Prophecies of Maestrodamus.

Not a hard one to figure out as it is really just "present value mathematics" whereby if long 30 year bond rates double, then their market value dips by 50%. Very straightforward mathematics that no amount of economic theory nor policy measures can override as it is simply a hard conceptual constraint. Mathematics cannot be persuaded, legislated nor negotiated with - and that should come as no surprise to anyone.

Down the line, looks to be a scary turbulent road ahead. 

We will post more comments from this blog later on.

PLATINUM WEALTH PARTNERS

July 21, 2013

What waits down the line?

By every account, all negotiations with mathematics have resulted in a win-lose situation. Some things are just absolute.

Dr Peter G Kinesa

July 21, 2013  

Bloomberg BusinessWeek - The Social Media Bubble is Quietly Deflating

Just a few months back, you may recall, along with Jim Rogers, we raised concerns about Facebook and generally the whole social media industry, referring to it as a generational fad and having difficulty seeing how a sustainable business model could be developed. Moreover, whether such tools or derivatives could find useful and profitable transitions into business markets. Guess what? Looks like the markets are tuning into Mr Rogers and ourselves as VC (Venture Capital) funding has plummeted to 2% this past quarter.

As one insider notes; what a business - "thinking about how to make people click ads"  And that pretty well sums up the industry's "Critical Success Factor" and how you build any sort of Sustainable Competitive Advantage around it, remains a puzzle.

Anyway we still believe that the big ticket, high margin objects just simply requires good ole face to face contact -  a little of that human touch!

INVESTORS INSIGHTS - February 18, 2013  

JIM ROGERS - Facebook is not an Investment, it's a Waste of TIME  

PLATINUM WEALTH PARTNERS

July 20, 2013

Not a Happy Camper

Comparing the social media frenzy to the dot-com bubble may not be such a good analogy, albeit in both cases you can observe that common sense gave way to a strange fear of missed opportunity combined with unrealistic expectations. The other common ground was that object business measures, standards and principles no longer applied . Market history repeated again.

And for some strange reason this won't be the last time. Humans? Go Figure?

Dr Peter G Kinesa

July 20, 2013  

Bloomberg - Spanish 10-Year Bonds Decline as Italian Yield Rises to 4.48%

In light of our market alert, regarding Portugal's Bonds, earlier this week, along with the growing concern for adverse circumstances in Europe, even more focus is now being given to European Bond Markets. Market activity in these markets may now have greater bearing on the global financial system than US treasuries. No kidding?

Similar to Japan, bond values and rates in the US appear to be hand-cuffed at low levels for some time. Moreover, enjoying the reserve currency status allows the US to gather the loose liquidity in the global system and harbour its flight and fright capital, thereby easing any upward rate pressures. Plus, an interest rate increase state-side would be absolutely devastating to the US economy at this juncture - and just pour gas on a stumbling economy's fires. 

Underlying the European bond markets are chronic diseases that  show no signs of abating - in fact there is growing evidence to the contrary. Like Japan and Middle East countries, Europe suffers from a physical economic overcapacity issue that cannot be resolved by abstructionist economic measures. Limited and declining physical economic inputs can only lead to one result - declining economic outputs. All of which is made worse as populations grow and per capita output consumption ratios thusly sink even further. Bad "Real" News!

Particularly after Cyprus, we are seeing signs of desperate central bankers pulling out devious last stops to cure the terminal economic cancer. The markets in Greece, Spain, Italy, Ireland and Portugal are at the greatest risk of crashing global bond prices. They are "bonded" by a common concern with a staggering rippling potential affecting markets with traumatic head to toe  effects. 

Our main message here - this one ain't over yet; 'cause, "it ain't over, 'til its over"  

PLATINUM WEALTH PARTNERS

July 19, 2013

A Bonding Crisis - the future is yet to come...

While the rest of the world may think that the FED is the driver behind global rates, largely because of the US reserve currency status and its trading volumes - we are not so certain, and believe as Grandma use to say "the devil is in the details - at Lehman Bros?" And so when all hell breaks loose; something small and overlooked is often perpetrating the angst.

Of course, then there was Yogi's wisdom - a great "Bondplayer" too  

Dr. Peter G Kinesa

July 19, 2013

The New York Times 

The Prophecies of Maestrodamus

Paul Krugman

Comments:

"I know one thing; that I know nothing" Hmm. I think we could all learn from one of Socrates’ last thoughts - but you never know!

Still we could attribute much of our current mess to too many who believe they know - then later we find that even simple notions were somehow forgotten. Or a fog had set in. (- R. S. McNamara).

Despite what may be economic headlines today, Greenspan's legacy may be his contribution to our current low interest rate trap - that has lasted for much too long. Getting out of it could trigger a massive deflation of financial assets - causing an unprecedented ASSET VALUE WRITE-DOWN. Evaporating years of value in moments.

A mere 2% rise in rates, for example, could deflate financial assets by as much as 50% - wiping out the equity boxes of financial intermediaries and banks , while creating massive unfunded pension and insurance fund liabilities on the basis of marked to market accounting calculations. =ing HUGE liquidity CRUNCH.

Moreover, the total value of US federal debt could grow substantively with a mathematical pen stroke, which has little to do with deficits or economic theory and activity. And I don’t even want think about what could happen if rates should revert to levels over their historic mean; it would be devastating.

So it seems that the Maestro knew how get us into this trap, but did not know how to get us out of it - but then again "who knows?" And as far as we know, he's still on first...

INVESTORS' INSIGHTS

Juky 17, 2013

I don't know?

ALJAZEERA - (English) Worldwide PC sales keep sliding

Lenovo (China) Top PC Maker???

Bad news for everyone, except China as they take the leadership position in another market that has long been dominated by American makers for decades. Who do we blame this on? Management? Tablets? Consumers? Or China's low cost producer strategy for an industry where products are becoming commoditized, as it really does not take that much to do the reverse engineering. Again China is following a "national business strategy" much like Japan did from the 60's onwards in automotive and consumer electronics.

But the real issue is what good is the WTO? How does it ensure that everyone is on an equal playing field when labour, environmental, and health standards are barbaric is contrast to North America. Add to all that a fixed currency to the US dollar and this game becomes a one horse race.

But who loses big time? North American and European union and salaried workers. In fact, in America the real hourly wage, according to St Louis, FED statistics have not risen much since 1982! So, where are the unions???

Beyond all this meaning more doom and gloom for the ordinary American worker, here 's list of PC makers facing tougher times as this saturated market begins to consolidate. Smaller players will be forced to merge or simply fade away into the sunset - while margins face continued presures from commoditization.

TOP Five PC Makers
  41% (est) Market Share

Lenova
Hewlett Packard
Dell
Acer
Asus

INVESTORS' INSIGHTS

First Financial Insights

July 16, 2013 

Those were the days - "in our home towns... and they ain't coming back"

- Bruce Springstein

Feeding the Dragon:Why China's Credit System Looks Vulnerable

Feeding the Dragon: Why China's Credit System Looks Vulnerable

click above

THE BIG MAMA OF ALL CREDIT CRUNCHES

This article reflects a Chinese financial system that is on the brink of a biblical credit collapse   - "The Big Mama of all Credit Crunches"  To be expected, from a system that operates on the outermost margins in every respect and oppresses its population in order to support a elite few who run and control the "party" (pun intended). An oppression that has been well documented by the Epoch Time; Nine Commentaries on the Communist Party, and many others. 

As history has proven regimes like this, (the former Soviet Union being a recent example) fall apart from within, due to inefficiencies, atrophy, and wasteful policies that are unsustainable physically, politically, socially and morally. Briefly, here is a short list of items that should draw deep concerns from all investors, businesses, economists and world leaders.

Oppression of human rights, dignity, freedom of information and expression are the hallmarks of an  evil totalitarian system leading to ruthless atrocities for which there is no accountability. We need to look no further than the controls that are placed over the Internet to see clear evidence of restrictive tactics over information and communication flows as indicators of a totaltarian attitude.

Lack of financial transparency is pervasive to domestic, private and government accounting systems and numeric outputs. No faith, whatsoever, can be placed on any the financial or economic information generated by these entities. They are all students of the Bernie Madoff's School of Accounting - and we know, when unregulated, where that leads. 

China is desperate for non-renewable resources in order to sustain its inefficient economic system and unsustainable growth. Its simple self-evident strategy of exploiting it massive labour pool, to achieve huge pricing advantages on exported goods creating trade surpluses, then realizing billions in US treasuries, that are in turn used to buy resource based entities around the world is clear. China also perverts capitalism's principles, by using Sovereign Funds, that are not comparable to corporations in any way. They have no accountability to stakeholders, markets or financial measures of success - thereby, undermining all concepts of free, fair and open trade and related principles of comparative advantage. Where is Mr. Krugman when we really need him?  Where is the Conscience of a Liberal? 

China's currency is also fixed to the US dollar, given it an unfair advantage in trade that allows it to maintain this economic-political strategy of labour exploitation and oppression, leading to the reserves of US currencies needed to secure supplies of non-renewable resources. It works to the party's primary advantage, with little trickle down to the people of the country. 

Who should complain? Not North America because it too benefits from the cheap exploited labour with lower cost good on the shelves at Walmart, Costco, Target and others, hence containing domestic inflation and low interest at the Fed and other Central Banks. The other big losers however have also been the hard-working American union members and middle class that forged the spirit and heartland of a great nation. Their jobs and way of life were traded away by these unsavoury business practices.

Low interest rates also lead to high asset valuations in Western nations and can thus be tied to the cheap labour exploitation of millions and massive loss of American jobs - so everyone (elites?) had or has an interest in maintaining the status quo of these trade practices, even though they are definitely unsustainable while benefiting so very few on both sides of the Great Wall.

Water shortages are becoming headline news; the importing of water is becoming essential to feeding the Chinese economic machine. Pollution, unbridled and unregulated economic growth are the drivers behind this need. Water and oil are the two essentials of modern industrial-consumer complexes, shortages as Jim Rogers so astutely  noted will lead to wars. There are no reasons to doubt Mr. Rogers conclusions. No reasons.

Add further, the climatic chaos created by the growth economic mantra and you do nothing but reduce the supplies of fresh water through pollution, warming and upheaval of the natural systems of the planet. Without fresh water supplies, you cannot feed people, armies or politicians - the final outcome is not hard to figure out.

Gorbachev recognized that the Soviet Union was doomed and could not compete with the West because it did not have the accounting measures to manage responsibility centres at all levels of enterprise. Without management accounting measures, you cannot manage what is not measured; leading to sloth, inefficiencies, moral bankruptcy and wide-spread corruption. Ultimately, the Soviet Union's system collapsed and Glasnost was needed to bring transparency, democracy and accountability to its economic and political systems.

Today, there is growing evidence that the Chinese system also suffers from the lack of accountability along with the management and financial yardsticks needed to properly manage its economic, social and environmental activities. Ghost cities, tell us that there is little expectation of economic payback or return on investment for such projects. Pollution pervades all aspects of life, leading to huge long-term health and environmental concerns; eventually they impede all forms of industrial and agricultural activity. Add to this, the poor management of national finances such as, gold purchases at historically high prices, over-exposure to US treasuries and above market purchases of resource companies by Sovereign Funds, are a few of the disconcerting practices that infer a lack of financial controls and understanding. 

Synthesizing the analysis, we should bear in mind a number of considerations:

One, at the meta-economic level the hard constraints of a finite planet will prevail on exponential economic growth in resource depletion and over-population. No nation can escape the consequential  pending disaster to occur when the fragile balance of populations, resources and the bio-sphere is broken and lost forever. 

Two, the business cycle of expansion and contraction comes into play sooner or later, with its unavoidable reversion to the mean theory. Thus, when China faces this mathematical reversion, after extreme growth rates - the other side of the equation could be just as powerful to the detrimental contraction side of activities .

Three, leverage is a useful and beneficial way to spark accelerated growth making everything look easy at the time. But, the when the wheels come off, the downward push is even faster and harder. Every generation, it seems, must relearn the perils of debt and how their related bubbles have created untold pain and suffering when the party came to an end.

Four, societies where oppression and corruption are everyday parts of life, with little in the way of transparency and accountability, do not survive. Internal and external forces historically come to bear, that results in dramatic social, political and economic changes - this is a law of nature that returns systems back to the their equilibrium. In China's case; this could be termed as a return to a balance between its cultural Ying and Yang!   

What we see then is a system that has many deep troubles, where possible unrests and breakages could occur at any moment, with its credit leverage fuelling a " The Big Mama of all Credit Crunches" that changes and brings about a long overdue Glasnost  to a nation that has been operating far beyond its equilibriums of Ying and Yang in so many respects. That, by rules of nature, must revert to the mean.

The rest of the world should be prepared for major adjustments when this dragon lies slain by the consequences of its unsustainable beliefs and practices. To be forewarned, is to be thusly forearmed.

Dr Peter G Kinesa
May 10, 2013      

Chinese Credit Crunch - Dragon Slayer

Marc Faber - "EVERYONE SHOULD OWN A PIEROGI FARM"

Marc Faber - "EVERYONE SHOULD OWN A PIEROGI FARM" 

You can probably tell by now that we have a little bit of a sense of humour around here. It was Churchill who once said, "a joke is a very serious matter" so we take his thought to heart and use it to uncover perspective and a sense of sanity. Anyway, we are having a little fun with  this story as we received over one thousand email enquiries from folks wanting to contact our realtor in South Kiev for his farm listings.

What 's more revealing is the breakdown of the top five countries we received enquiries from:

Greece -  23.4%

Newfoundland (Canada) -  17.4%

Italy - 12.6 %

America - 8.6%

Japan - 6.9%   

Next week we are going to start selling global retail franchises - "Faber's Farm Fresh Pierogies" - billions served. 

Have a great day!

Dr Peter G Kinesa
March 8, 2013

Marc selling, and Me (inside cooking) at Pilot Mobile Outlet

Marc Faber - "SELL EVERYTHING" - A Correction Could Start Any Day

Worth watching Marc dodge Maria's skeptical questions in this CNBC interview. We are not  being as analytical as Dr Kinesa's in his post today about the mathematics and logic of everything. In fact, we go along with Faber and Kinesa  foreseeing stormy markets ahead as we plow through this  "Ice Age " in valuations trapped by rates being too low, for too long - with no easy way out of the trap. 

When you listen to Dr Doom and the best bets he can put forward are the Ukraine and Viet Nam; you get a real sense that things are pretty tough. He does like the resource sector, but does not point to any specifics. Technology stocks are also on his watch list  - have consumer gadgets and applications peaked?

Who knows as consumers, according to recent studies, certainly do not seem to be as concerned about the environment anymore - that puts a damper on green tech as well.

Oh well, who has a retail pierogi farm or franchise for sale? 

First Financial Insights
March 4, 2013

Pierogi Farms Cheap!  - Exceptional South Kiev Investment Properties

$50,000 US - 10 Acres

Contact Ivan Jureychuck

Cabbage Roll Farms Realtors 

Is France Business Hell - Against Crony Capitalism

Is France Business Hell?

Actually, I don't know if it is or isn't,  for I have never had the opportunity to do business with the Devil. What we do know is that the breakdown in civil safety nets, contracts and trust - leads to social unrest; and in turn political upheaval; and finally geo-political engagements and hostilities. Europe has a long history of strife amoung its member countries and most people foolishly think that today things are now different.

We don't. For in desperate times, caused by water, food and materail shortages, unemployment, overpopulation, climate change and economic instability, desperate people do desperate things. So just add France to the long list of countries that are showing signs that are now well past "peak prosperity" and are now heading towards the social-political-economic graveyard. Where their cities will look like Detroit, and their beaches host more fishermen than  tourists.

Dr Peter G Kinesa
February 28, 2013

Bonjour - Mr. Satan!

INVESTORS' INSIGHTS - Jim Rogers:Facebook Is not an Investment, It's a Waste of Time

INVESTORS' INSIGHTS - February 18, 2013

"I told you we should LISTEN -"

Failing to listen. The list of corporate failures that can ultimately be blamed on this seemingly simple, but so often overlooked human attribute, has draged down so many of the once great and mighty. Reminding all of us, of the costs associated with thinking we know it all - when we are drunk in our current success. When in truth, the only thing that we can ever certainly know in this deterministic world  - is that we know nothing . 

So we continue to humbly listen, again and again and again.

Dr Peter G Kinesa

February 21,2013  

Jim Rogers: Facebook Is not an Investment, It's a Waste of Time

Click Above

Jimmy in this phone conversation says he is neither long nor short Facebook; he is simply just not investing. In investment parlance this means, he thinks the stock is garbage and would not touch it with a ten-foot pole. We agree.

First, Facebook ascribes to one of the worst American business practices and has little "human touch" in its business model. American businesses that fail on the world stage are often swept away by global competion because they do not have a High Touch with their customers. Any company that does not have a real person available to assist customers with service issues is doomed to fail - it happens all the time. The first rule of business success: "Listen, listen, listen, and then when you have heard enough, listen again and again and again " 

And the second rule that follows: Don't let your accountants run the business - need we say more? 

Second, its software is not intuitive, particularly for business, and again faces customer service challenges that will turn this market off in the early going. This market is where the real money is made.  They will not return once they have been turned off.

Facebook faces powerful copycat competition from the likes of Google, Twitter, Microsoft and others, who have other complimentary platforms where the combined functionalities of hardware and software configurations create synergies that could easily see Facebook's consumer markets stolen. Moreover, these powerful competitors have a strong presence and trust in the more lucrative commercial markets that are critical to long-term success and profits. We don't see a lot of businesses tying their destinies to what is perceived be to a kid's fad and consumer product. 

It is unlikely that Facebook can hold its valuations. The markets may give it a couple years, at most, to generate commensurate profits. Right now, that appears highly unlikely considering the tough competition in its most lucrative markets.

We go beyond Jimmy and expect this puppy to sink well below $10 in the next 12 to 18 months. More so, if interest rates climb in this period. So don't waste your time or your money on the long side of this hyped-up generational fad.

First Financial Insights

February 18, 2013

High Tech minus High Touch, Spells Disaster