The trouble with jdate

These days one Jew isn't expected to marry another.

This is a freedom of choice past generations never had.

However, like most freedoms it isn't one most people today have had to earn. It's the result of years of struggle between parents and children at a time of social change.

Consequently, when one Jew enters into a relationship with another it carries with it a sense of being something special.

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JDate gives Jews the 'freedom' to choose from thousands of available people who share the same religion.

It makes it easier for Jewish people to enter into a relationship with one other.

The fact that both people are Jewish can even help sustain the relationship; it can start to feel like eating chocolate without gaining the pounds.

However, this heightened sense attraction to each another can turn out to be illusory:

"What did I ever see in him?"
"He was Jewish?"
"Oh, yeah."

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Meeting the right person doesn't always have to be an impossible task. But by making it easier to start a relationship with someone on the basis that they share the same religion is a very sandy beach on which to build the family home.

Too often the relationship will escalate too quickly and then everything comes tumbling down.

Dollar may keep falling, reality says

Two facts explain why the dollar will keep falling for another generation at least.

Americans don't like saving. Japanese like saving.

This is cultural. This won't change.

If anything, this cultural gap will widen over the next 50 years as the Japanese population ages terribly and becomes even more thrifty.

But what does American indulgence have to do with the dollar?

A currency is like a reality check. It's one of the few things the government can't influence directly (unless they do something to influnce it directly).

Every time Americans swipe their credit cards at the cashier they're chipping away at their nation's credibility with overseas investors.

The only way to make up the monthly payments is to attract foreign money and this attraction rises when the dollar becomes cheaper.

And so the market bids down the dollar, every day.

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The dollar should only weaken as a last resort. After all, it's the currency most people use around the world to facilitate transactions and a weaker dollar is reducing the incomes of people around the world.

This is bad for the world, by the way.

There is no feasible solution to the problem other than to impose upon Americans the idea that by spending more than they earn will hurt them, their friends, family and future generations.

The odd frown shown upon those who spend too much would be a cracking start...

You've seen one bubble...

Two months ago I predicted that oil prices would eventually drop. It turns out I was right... for the wrong reason.

I thought that a recession in the U.S. economy would be the cause of slowing demand and falling oil prices.

It turns out that a speculative rise in prices was cut short by speculation that prices wouldn't rise any more.

Another bubble bites the dust.

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Everyone touts the benefits of a free market without truly understanding the consequences of what they endorse.

They emphasise the positives without weighing them with all the possible negatives.

Quite often negatives are not actually seen as negatives.

Bubbles in stock prices, home prices or any prices are seen as a way of letting the market breathe.

Until greed is permanently eliminated from the English language, too much freedom will always be a very dangerous thing.

Why Kerry won't win

Polls are quite useless, but they're not completely useless.

The most useful message they provide is one of voter apathy.

In large, this isn't apathy towards George W. Bush, but towards John Kerry.

After all, Kerry is the one who has the mountain to climb. He's the one trying to dislodge the incumbent.

If there were even the slightest indication that Kerry were about to become the next U.S. president, you would expect the polls to have caught some whiff of it. They haven't.

What the polls are telling us is that a lot of people do not see John Kerry as someone for whom it's worth taking an hour out of their working day to go and vote. (Note: why does this election have to fall on a Tuesday? When an election is this close it makes sense for the largest number of potential voters to have the chance to go and cast their vote.)

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Politicians thrive on momentum.

John Kerry needs more time to build enough momentum to win.

For John Kerry time is running out.

Only a miracle can save him now...

Oil & the bigger picture

In case you were wondering, oil prices will stop rising... eventually.

Now more than ever it's looking like only one thing can stop this uncontrollable rally.

A recession in the U.S. economy.

While this is not likely to happen soon, it will become an ever-growing reality by early 2005.

A global economic slowdown has been in the works since the start of 2004.

Rising oil prices will likely be the last straw.

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The idea of a confluence of factors giving rise to the recent surge in oil prices is a very worryng predicament.

You would think the world has managed to figure out how to prevent oil prices from rising too rapidly.

It hasn't.

It seems we're just as vulnerable now as we were 10 or even 30 years ago.

Good intentions

When religious leaders speak passionately about something their very show of emotion is sometimes enough to prompt a reaction by those listening.

The Rabbi's Yom Kippur sermon got me thinking.

He got me considering doing things I hadn't thought of doing before; such as attending a protest march in the street.

What I realized is that he got me thinking of doing things I neither wanted to do nor had ever thought of doing before.

This concerned me.

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While someone living a comfortable life has no strong incentive to correct the inequalites of the world, someone who is far less well off is very easy to convince of the need to take some form of 'action'.

What shape and form this action might take is left up to listeners.

Sitting in a New York church, I wasn't amongst a crowd of people likely to engage in any form of violence protest.

However, if transplanted into the Middle East or any other place where violence and poverty are far more widespread, I might expect a different response.

In a region where religion and religious beliefs are enbedded in everyday life, religious leaders have far more reponsibility.

This means they need a game-plan. If they don't then their good intentions could result in an even more violent world.

Addicted to debt

Everybody has something they are prone to liking too much for their own good.

For the government, debt falls very neatly into this category. Given the opportunity they just can't get enough of it.

For people in power only a short period of time, going deeper into debt is a win-win situation. The more they spend, the more popular they get, at the expense of people they aren't accountable to.

But all is not lost, right? The U.S. economy will grow faster, making the government finances healthier?

Wrong. For two big reasons: the war on terror and baby boombers.

These are two problems that can't be fixed and have huge costs associated with them.

Add to that modest economic growth not capable of generating the types of tax revenues enjoyed in past upturns and you get a very nasty surprise ahead.

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At the moment we are enjoying low interest rates, mainly because of low inflation. However, this has only made it easier for the government to get it's fix of debt without anyone noticing.

Until now.

Record government deficits have made headline news but they're still not that interesting to most people. That's mainly because it doesn't affect the majority of us.

This is going to change, fast.

The first thing we are going to notice is that the government's huge borrowing requirment isn't going to go away as quickly as it did in the past.

Then we are going to notice higher taxes and this is going to make things a lot worse.

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You know things have gotten really bad when the government starts raising taxes. It's something they are loath to do and usually end up regretting (i.e. they get the boot, first chance people get).

This is going to happen in the very near future. When it does people are going to blame the government and they should. Only thing is, it's not the present leaders they should pin the blame on but those from the past.

** Afterthought **

An absurd moment at today's testimony by Fed Chairman Alan Greenspan to the U.S. Senate had certain politicians lauding "His Excellency" for bringing with him the solutions to all the future debt problems: Pay as You Go.

This scheme, whereby the working population funds the retirement costs for the present elderly, is a very leaky boat.

The debate is a debate and not a problem with a unique solution. There are a number of solutions to the problem.

The first unambiguously positive step is to get people more active and eduacated about investing. Once people understand that they are responsible for their future wealth they can go ahead and ensure they have enough of it.

Rising oil prices give central bankers a lift

While many of us look on in despair at the rising price of oil, Alan Greenspan and his friends are enjoying every minute.

Why?

Because rising oil prices are doing the job most central banks need to do but resent doing: raise interest rates and damp rising demand.

The dilemma for most central banks is how to achieve price stability while not jeopardizing economic growth. This is not an easy task and more often than not entails sacrificing one for the other, making central banks very unpopular when the situation gets nasty.

In the past year central banks around the world have been on tightening mode. Global economic growth was getting to the point where it might generate more inflation than necessary. Things needed to be kept under control. So central banks, armed with their interest rates, starting raising.

Higher interest rates always make central banks unpopular. After all, most people need to borrow money to buy a home, a car or whatever. Savers always look to alternative means of outperforming the saving rates a bank offers, so they aren't going to complain too much either way so long as the stock market is given a chance to provide them with a decent return.

The issue for central banks is how to keep everyone happy. How to make everyone better off.

The rising price of oil is a convenient scapegoat for everyone and this includes the central banks.

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It's important to remember that rising oil prices are not the same as rising inflation.

Accelerating inflation usually happens when the economy is growing out of control, not when oil prices rise (the 1970's was an exception to this rule).

Global inflation picked up in the past year, making central banks nervous.

Rising oil prices have come just at the right time. Why?

Higher oil prices will help cool demand and keep the economy from generating too much inflation.

It's easy to forget that a large part of the reason why oil prices have risen this far is because of increased demand from China, not to mention the summer driving season in the U.S.

Higher fuel costs will act to correct the pickup in demand, without causing central banks to break a sweat.

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We don't live in the 1970's anymore.

We are't experiencing the type of oil price shock that will tip the global economy into recession.

What we are seeing, however, is a convenient way for central banks to get out of doing their least favorite job: raising interest rates.

Investing 301

Investors are getting smarter.

They're still pretty stupid, but they're getting smarter nonetheless.

There used to be a time when investors would lose money when stock prices fell. That doesn't always happen now.

Some investors still complain about the low value of the stock market.

That's because their methods of investing haven't changed in decades. They need to catch up or forever lack the wealth they need to survive into old age.

Some people never get the chance to learn about how to invest and that's a shame. It's a shame because they will live their lives without job security and a sufficiently large pension.

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Investing isn't just about the stock market.

Investing is about stocks, bonds and currencies (in ascending order of importance). When you invest in the stock market you need to be aware of what's happening in the other two since all three interact with each other on a daily basis.

Investing is about the future and being able to correctly predict where all of these prices are going to go.

The majority of investors hope prices will move in one direction, and that's up.

Unfortuntaely for them, prices also go down.

The way around this is to trade derivatives.

The derivatives market started in the 1970's, became big in the 1980's, got even bigger in the 1990's and keeps getting bigger. So what's it all about?

Essentially, trading in derivatives allows you to benefit when prices rise or fall.

Not everyone expects prices to move in the same direction.

If you expect the price of apples to fall you would want to agree to sell apples to someone at a certain point in the future at today's price. If that person expects the price of apples to remain the same as today or to go higher then they will happily enter this agreement with you.

Of course you don't need to trade with someone else directly. You can sit at home at trade on the web.

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Investors today understand the importance of reading the financial press to understand when is the right time to buy and sell stocks.

If they broadened their knowledge of how the financial markets work they can avoid getting burned when stock prices (inevitably) fall.

One way to be wise of events on the horizon is to monitor leading indicators! But that lesson is for another day...

The writing on the wall

People write a lot of things on the walls of a public lavatory. Some consider this to be vandalism. To me it's occasionally a source of inspiration.

This morning, while in a sedentary position at our office's facilities, I came across the following message:

Think about the future

I'm not sure what the person was thinking when they wrote it, but it got me thinking about a lot of things.

Firstly, how often we think about our future really depends on our age.

If you're in your 20's you probably don't think too much about your future; you're too busy spending money to worry about not having enough of it once you get older.

If you're in your 30's you're probably thinking about nothing but your future; who you're going to be with and how much money you're going to need.

Once you're in your 40's what you do tomorrow is as important as what you're doing today.

In your 50's the future is now.

In your 60's the past has caught up with you.

Above 70 and you're enjoying the moment like you were 21 again.

You're probably going to live a very long life; at least until you're 70, hopefully longer.

You don't know exactly when you're going to die and that's a problem.

It's a problem because you don't know how much you're going to need to see you through. Given this dilemma people tend to overcompensate and put a 'little extra' away. How much extra is determined a great deal by your culture.

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After reading the message on the wall I also though about how much we should be thinking about the future.

Should we always be thinking about the future? Probably not.

Should we never think about the future? Not unless you're over 70.

What if we don't think about the future enough? What then?

I know I don't think about the future as much as I should. But how do I know that? When is it enough?

I fear that it will never be enough. It's hard enough to manage my life right now, let alone my future as well.

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My future is becoming increasingly important as each day passes and so the less I think about the future each day the more costly it's becoming.

I should probably do something about it. Maybe tomorrow...

Tax rant

A quick back of the envelope calculation:

-- A single person earning $110,000 loses about $27,000 to taxes.
-- A single person earning $52,000 loses about $10,000 to taxes.

-- A couple earning a combined $185,000 lose about $47,000 to taxes.
-- A couple earning a combined $130,000 lose about $30,000 to taxes.

-- Anyone earning above $288,350 loses 38.6% of each dollar to taxes.

Do these numbers make sense? Do you see a problem here?

John Kerry does. Why?

The thrust of his argument goes something like this:

"The U.S. economy is being undermined by a rising budget deficit, the prospect of ballooning interest rates, unfairly high taxes on the poor and unfairly low taxes on the rich."

His solution: tax the rich more and tax the poor less. Put the proceeds into public healthcare and education. There will be plenty to go around. Share the wealth!

Firstly, why is the budget deficit rising? Didn't Clinton sign a balanced budget not long ago?

The point here is that in 2001 the economy went into a tailspin for the first time since Clinton was in power. The stock market lost a lot of ground and the 9/11 terrorist attack left investors gob-smacked. Is it any wonder why the fundamentals of the U.S. economy are so out of sync?

What is easy to forget is that when an economy is performing badly the government is the first to suffer. The less people earn, the less they spend and the less the government receives in tax revenues. The upshot is a rising budget deficit. The government is borrowing to cover it's spending commitments; commitments made when the economy was doing a lot better than it is now.

The irony of all this is that the economy is being run by people who remain in office for a short period of time. This is usually part of the problem, not the solution. What we have now is a situation where things look bad and will probably get better. They will get better irrespective of who is in power. Anyone who thinks otherwise is kidding themselves.

The only lasting difference those in power can make is in the distribution of income. Some might say this is government getting in the way. Others might say it's the government righting wrongs. The truth of the matter is, as always, somewhere in between.

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What is crucial is that government not intefere excessively.

What I see when I look at the calculations above is a situation where a moderate redistribution of wealth is taking place already.

Financial market truisms

On average, the following are true (corrolory in italics):

Stock prices move up and down for all the wrong reasons.
You can't anticipate the reason why a stock price will move next.

With currencies, all you know is what just happened.
You can't predict the direction in which a currency will move next.

Bonds and stocks are being traded by the same dumb people.
All traders are not as smart as they should be.

Tomorrow's news is today's news.
Don't trade on news you read in the printed press.

Taking risk is inevitable.
Don't expect to see your initial investment again.

Time is the hardest thing to buy.
Use all of the time you have to your advantage.

The only information that matters is private.
Don't trade on something you read about in the public domain.

Always confirm what your instincts tell you, never trust them.
Think, then act!

Read all the news, even the made-up stuff.
Be aware of what everyone else knows.

Don't do the same thing you did yesterday.
Avoid making systematic errors.

Vote for Blog!!

I'm going to try and make this point as concisely as I can. It's a point I think needs to be made and it's a point that might seem obvious once it's been made.

My point is this: we no longer need a single political leader to run our country. In fact, we no longer need politicians. We can govern ourselves. How?

We will be (self-)run by Bloggers. The collection of thoughts and writings of people around the world will help shape the society in which we live.

Blogs will be organized into specialized communities. Each community will comprise individuals who specialize in a particular field. They will decide and vote on laws. The debate and the final vote will rest on each seperate individual, not on individuals who represent the interests of others.

What I'm trying to say is this: it's become easier for us to go online and be involved in a debate that we will finally vote on than have someone do it for us. This gives us a far greater incentive to get involved in the debate than to just sit on the sidelines and let others decide for us. Apathy is not an option.

Doctors, teachers, police will all be organized by experts in their field. Changes to the way they are run can be debated and decided upon by an all-inclusive discussion and final vote.

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There needn't be a reluctant choice for President, Prime Minister or Mayor. They are someone who we don't entirely trust.

We are capable of running our own society, determining our own future. This is something that most people are willing to work towards.

Change is now really possible.

Imaginary trivia about Wesley Fogel, successful Hollywood actor

Married to Marisa Tomei, 13 years his senior. They don't have any children.

His birthday is on December 8th.

Likes to go scuba diving in the pacific.

Bought the basketball court on University Plaza and 10th street in Manhattan.

Has apartments in London, Tokyo and New York.

Is afraid of heights.

Only buys champagne that costs at least $1,000 a bottle.

Doesn't like going to parties.

Invited Steven Spielberg to his apartment in Tokyo to talk about making a movie there.

Always wakes at 7am in the morning.

Wants to fly to the moon one day.

Lacks any strong religious beliefs.

Works out 2 hours a day in the gym.

Always eats at the same restaurant when he's in Tokyo. It's called 'Qahwa'

Has had corrective laser surgery three times.

Never had plastic surgery.

Has his teeth whitened once a month.

His favorite color is magenta.

Doesn't like dogs. Loves cats. He has no pets.

His best friend is Brad Pitt.

Buys all his shoes from Prada.

Follow the money

"Don't get too excited about the Japanese economy just yet."

Who said that?

Was it you? A billionaire investor? The government??

None of the above.

It was... the money supply (the red line).

"What's that??"

Who said that? Was that you? I thought so...

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The money supply is the blood pumping through the veins; the lifeblood of the economy. Without good blood circulation the body withers and dies.

Japan's economy has been suffering from bad circulation for a while now. Money isn't working it's way through the system as it's supposed to. Much of this is down to structural problems; banks have been so heavily indebted that paying off their dues has distracted them from getting on with what they do best: making money.

How does a bank make money?

Easy. It creates loans or 'promises.' The more that people promise to pay back the bank in the future the more money that is being spent today. That's how money is created, literally out of thin air.

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The trouble with Japan has been a lack of confidence. People don't have the confidence to go up to the bank and say "gimme as much as I can carry and I will be back this time next year with that and more, much more." Instead, they shy away from the risk, choosing to hide what they have under the pillow.

This won't do.

The Bank of Japan can only do so much to help. Much like a drip being applied to a patient, it's not enough to get the body on it's feet again. It requires not just other methods of treatment but also belief on the part of the patient that a recovery is truly on the way.

I'm optimistic but not yet convinced.

Look at the growth of the money supply again. When it takes off you'll know the patient will have found it's feet again.

** Afterthought **

If you were to compare with a chart for the United States you will see an example of a much healthier economy. This patient is well on the road to recovery. All of the cheap money the Fed has been supplying the U.S. economy is finally being used for the purpose it was originally intended: the creation and circulation of more money. Long may this blood lust last!

A pointless exercise in money-making

If this were a financial market report you would probably stop believing everything that's being said right about now, since at this point the story is supposed to give a reason for why the market is moving in a particular direction.

I use the present continuous form 'moving' since market reports are written during active trading.

Markets trade continuously. When one market closes another opens. The money never stops flowing. Neither does information. But information can lose it's value as quickly as it was gained. The person who finds the information first can make money from it. Other traders are left guessing and sometimes their instincts can be as reliable as the information itself.

So where does the journalist fit into all of this?

A journalist is supposed to report the facts. These facts are supposed to help explain why prices rise and fall. Better still, they may help to explain why prices may rise or fall in the future. But prices move on information. Where is this information coming from?

Remember, a journalist is not supposed to trade. They must remain neutral observers to the market. This means they won't have ready access to the type of information market participants do. So how can someone who is not in the market know what's moving the market? They ask someone who's in the market. This is where the problems start.

Any single individual in the market, no matter their size, will make darn sure not to reveal their information to other traders. Most important of all, THEY DON'T TELL JOURNALISTS! What they do tell journalists is 1) what they want to tell the journalist and 2) what the journalist wants to hear, i.e. something believable. This is why market reports should not be believed and certainly not traded on.

Summer: time for ice-cream

It's tough to sell ice-cream.

Not only is it a highly competitive market, but you are also competing with the toughest competitor of all: Mother Nature.

Ice-cream sellers are at the mercy of the seasons.

The demand for ice-cream waxes and wanes with the months of the year.

So does the price.

To try and get people to eat ice-cream when they otherwise wouldn't, you need to make it cheaper; everyone has a price.

Market forces can overcome the forces of nature. The poor ice-cream seller, however, is at the mercy of both.

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To the casual observer, the price of ice-creams might seem to be very predictable. In the summer, prices will rise. In the winter, prices will fall. Not too complicated.

Now take the entire economy and you get a very complicated picture indeed.

Every market is affected by the seasons. Not all of them to the extent of the ice-cream seller, but the seasons play an important role in explaining why prices rise and fall.

It's important for policymakers to distinguish between factors that are seasonal and those which reflect a more fundamental shift in the economy.

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A lot of emphasis is put on the price of fuel. Anyone who owns a car needs to buy fuel. When more people want to drive in the summer, the price of fuel is going to rise. Like in the case of ice-cream, this is soley due to the fact that temperatures are rising and everyone is hitting the road. Like the demand for ice-cream, this won't last.

When making a decision on interest rates, policymakers need to be able to consider the current strength of the economy compared to any other stage of the business cycle. Seasonal changes should not be allowed to influence this decision.

Like the ice-cream seller in the winter, things can and will improve without the help of anyone else.

The price of ice-cream that doesn't include seasonal variation is the only way to guage the true strength of the market. This applies to the whole economy too.

Inflation is our friend

Inflation has gotten a lot of bad press lately.

It's as if we would all be better off if it would just go away. Then we wouldn't have to worry about rising interest rates, right?

Wrong.

Looking at the inflation rate of a country is a good way to guage it's economic health.

Assuming a country isn't engaged in war or some other political turmoil, inflation is one of the best ways to know when the economy is strong and when it's weak.

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Every economy is capable of producing more each year. At the same time, consumers demand more and more. They always want a newer TV, car or house. This is what causes prices to rise.

Looking at a country like Japan, where prices are falling, you might think people there are enjoying lower prices each year. Unfortunately, they're not.

Much like a sick patient, where the temperature is dropping, Japan's economy is also sick.

The best way to cure the disease and is to get people spending and spending more each year. To get people wanting to spend their income on new and improved products, instead of sticking with the old TV and saving their money for a rainy day.

Japan backs off

Japan hasn't weakened the yen in April or May. Why?

They haven't needed to. Why?

The market has weakened the yen all by itself. Why?

The answer depends on who you ask.

An investor might say expectations of rising US interest rates make Japanese assets less attractive.

An analysts might say the yen was overbought, and did not reflect economic fundamentals. After all, Japan's economic growth was always expected to slow over the course of the year.

Of course it's a combination of factors that influence the currency market in the short-term, since currencies move up and down (and up again) all in one minute!

The Japanese government says as little as possible, knowing their every word is being watched by everyone in the market, eagerly waiting to know where to next place their bets.

Still, it's comments by government officials that are responsible for the large part of short-term currency market moves. The market makes money on what the government says. That's how it works.

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Japan's decision to back away from the currency market means fewer purchases of US assets with the money used to intervene in the market. So far this has not created too much cause for concern.

But markets are always looking for ways to make money. It's a sure bet the Japanese government won't allow the yen to strengthen too far against the dollar. Many traders prepare to benefit from short-selling the yen as Japan prepares to get back in the market.

Let's talk Japanese

Speaking is the easiest thing to do.

Speaking in a different language can seem the hardest thing in the world.

It really depends on the person; in particular, their application and motivation to learn and use the language.

Some people learn a new language quicker than others. This can come with a stronger motivation to learn the language or a better ability to apply the language to their way of life.

In any case, the more practice the better.

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I've been 'exposed' to the Japanese language for the past 5 years. While I have fallen short in application, my motivation to learn the language has remained strong. It's a fun language to learn. It's more fun to use. It's just harder to use a language than it is to learn.

It never ceases to amaze me how easy it can be to translate a simple sentence from one language to the other but how difficult it can be to do this in a conversation.

When speaking in a different language it's best to listen, think and speak in that language. I often find myself thinking in English, translating this into Japanese and then speaking in Japanese. This makes me look slow and can often disrupt the flow of a conversation. Many kind people have patiently suffered my lacklustre conversations.