San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Friday, April 27, 2012

Anxiety About Spanish Bonds Is Wasted Anxiety

Many, if not most, stock market gurus have explained the "correction" that took place in the stock market this month as being directly related to concerns about the Eurozone in general and Spain in particular.  Last summer we were worried about Greece.  This summer we are being told to worry about Spain.  I have already addressed the Greece issue ("So What If The PIIGS Default", 12/23/11) so today I will address Spain.
Unlike Greece, Spain is a major player in the economy of the world.  Spain represents the 12th largest country in the world, in terms of Gross Domestic Product.  The Spanish GDP is $1.5 trillion.  A default on the part of a country of this size could have a bit more of an impact upon other countries around the world than a Greek default would. 
How bad is the Spanish debt?  Total Spanish sovereign debt presently represents 69% of Spanish GDP.  For comparison purposes, the total debt of the US is about 100% of US GDP.  In other words, Spanish debt as a percentage of GDP is considerably less of an issue for the Spanish than our debt should be for us. 
Much has been made about how the interest rates paid on Spanish debt spiked earlier in the week.  The yield on a 10 year bond is 5.7%, considerably higher than yields on ten year bonds in the US and some other Eurozone countries.  Focusing exclusively on the yield does not paint the entire picture, however.  This past week Spain auctioned $1.1 billion Euros in 2 year notes and $1.4 billion Euros in 10 year notes.  The bid-to-cover for the 2 year note auction was 3.3.  The bid-to-cover on the 10 year note was 2.4.  If you are not familiar with the concept of bid-to-cover, it simply refers to the amount of money that was willing to purchase a bond compared to the amount of bonds sold.  For every Euro of Spanish 10 year bonds sold this past week there were 2.4 Euros willing to buy.  That hardly sounds like a crisis.  The average bid-to-cover for 10 year US Treasury notes is about 3.0.  If bond investors were really worried about the future of Spanish bonds, why would so many be willing to invest in them?  Could it be that they simply have an attractive yield, compared to other Eurozone debt?  I think so.
An additional point that was often ignored in reports about the Spanish debt auctions is the fact that the Spanish government has now issued 76% of its long term debt for 2012.  Over three quarters of the debt they planned on issuing in 2012 is already sold, and we are only a third of the way into the year.  Spain should have no trouble selling the rest of its debt and meeting its financial obligations.  All of the hand wringing was wasted energy. 
Something that practically everybody seems to be forgetting as they analyze Eurozone debt is the fact that the "high" rate of interest being paid by countries like Spain, Ireland, and Italy is not really that high.  A 5.7% yield on a ten year note would not have been considered high until recently.  Ten year US Treasury notes have fluctuated greatly over the years.  The yield in 1950 was 2.3%, 1960 was 4.9%, 1970 was 7.8%, 1980 was 10.2%, 1982 (the modern high yield) was an astounding 14.4%, 1990 was 8.1%, 2000 was 6.7%, 2010 was 3.2% and presently the yield sits right around 2%.  Compared to our recent history, a 5.7% yield on Spanish ten year bonds does not sound unreasonable at all.  But, does a high rate of interest on government debt have a negative impact upon the economy?   Many of those who are running around in a panic today believe that to be true.  What does history teach?
From 1982 through 1991 (the ten year period immediately following the highest yield on US debt in recent history) the S & P 500 averaged +16.8%/year in total return.  From 1982 through 2001 (the twenty year period immediately following the highest yield on US debt in recent history and including the first year of the "tech meltdown" in the stock market) the S & P 500 averaged +15.4%/year.  If "high" rates of interest on government debt bring about reduced economic activity, it is hard to see how the stock market could have done so well during a period when interest rates on US debt were at their highest in modern history. 
Many economic gurus seem to want a repeat of 2011 in 2012.  Therefore they are looking to the Eurozone and expect that news out of there will bring about a "correction" in our market later in the year, after reaching nice highs early in the year.  Don't believe them.  There is no correlation between what happened last year and what might happen this year.  Any anxiety that you might have about Spanish bonds and their impact upon the US stock market is wasted anxiety.  The truth is that corporate profits are rising dramatically and stocks are getting cheaper every day. 

Thursday, April 26, 2012

Greg Dobbs Steals From Citizens Of Northern Ireland

Monday's issue of the Denver Post has a "Guest Commentary" from Greg Dobbs.  Greg Dobbs is a Denver based correspondent for "World Report" on HDNet television.  The title of his column is "Where they take care of their sick--and ours".  Dobbs announces that he is alive and well "after I collapsed and almost died more than a week ago from massive internal bleeding."  At the time he collapsed and almost died he was in Belfast, Northern Ireland.  When he collapsed he was rushed to Royal Victoria Hospital or, as he calls it, the Royal Vic.  There he experienced "two angiograms, two endoscopies, CT scans, X-rays, a colonoscopy, and that tiny alien capsule that I swallowed, the PillCam." 
What caught my interest about Dobbs' story is the financial side of the deal. Anyone who has ever received a hospital bill for the type of extensive services Dobbs received knows that it would be well above $100k.   He goes on to say, "And the cost?  The emergency parts---the ambulance, the ER, the transfusions---came with no charge.  The rest?  Oh, since I only came to Belfast to shoot a television news segment and don't pay taxes and thus am not insured, I'll pay all right, but since the model for hospital revenue isn't based on market-driven, sometimes price-gouging profit centers, I won't pay through the nose."  There you have it.  A good part of Dobbs' medical bills are being paid for directly by the taxpayers of Northern Ireland.  Of the remaining balance, the taxpayers of Northern Ireland will subsidize his bill to ensure that it will be lower than what the free market would bear.  Dobbs is jubilant about this state of affairs.  Who wouldn't be?  He just committed theft and got away with it.
Dobbs speaks in glowing terms about how the "health care system" in Northern Ireland is superior to the system in the United States, where medical service providers actually care about making a profit.  He goes on to describe what he calls the "biggest difference between the two health care systems" when he says, "This one is open for everybody.  Residents don't have to assess and agonize over the cost because they don't have insurance.  If they need medical care at any level, they just go.  As I did.  And get fixed. As I am."  What a country!
Dobbs seems incapable of understanding that nobody works for free.  Or, at least, nobody works for free for very long.  Eventually the bills have to be paid and even Ghandi himself would have to close his business if he did not generate a profit.  Dobbs seems to believe that the health care providers in Northern Ireland have repealed the iron-clad rule that a profit must be realized in order to continue operating.  It is hard to believe that a man of his intellectual stature could be so confused, but he actually seems to believe that the government of Northern Ireland has somehow managed to create a golden medical goose that continues to provide free services to anyone who needs them, without regard to costs.  Dobbs also seems incapable of recognizing that when services are "free", the demand for those services increases exponentially.  When the demand for those services increase exponentially the costs associated with those services increase as well.  Somebody has to be paying the bill.  Nothing is for free.  Of course we all know that the taxpayers of Northern Ireland are paying his medical bills.
Greg Dobbs speaks in glowing terms about the health care system of Northern Ireland primarily because he was able to get the taxpayers of that country to pay his medical bills, or at least a good portion of them.  He took advantage of the immoral laws of that land and forced people he does not know to pay his personal expenses.  Even worse, he is happy about this.  Imagine the reaction of the readers of the Denver Post if Dobbs had described his experience in real economic terms.  Imagine the reaction if he had confessed that he used the coercive power of a powerful syndicate in Northern Ireland (the government) to extract income from people in their district (citizens) to pay for his protection (medical care).  Then we would all recognize his arrangement for the payment of his medical bills for the immoral agreement that it is.  But, in this day, when almost nobody is capable of seeing economic issues accurately, Dobbs rejoices in his theft.  Pity the poor citizens of Northern Ireland.  After Dobbs' article I am thinking about traveling there, getting "ill", and having my gall bladder removed for free!  Maybe we could all make Northern Ireland a medical vacation location.  I am sure the citizens of that land would not mind.  After all, it is not theft when the government sanctions it.

Wednesday, April 25, 2012

Does God Have An Opinion About Economic Systems?

Sunday's Denver Post had a front page feature article on the changing face of evangelical Christianity. In particular, the article was dedicated to showing how evangelical Christians are no longer exclusively Republican. According to this article, evangelical Christians are increasingly turning to the Democratic Party. A photograph on the front page was a picture of a woman named Rachel Pater who was identified as a case manager for a Denver based "Lesbian, Gay, Bisexual, Transgender, Queer, and Questioning" group. Later in the article a man by the name of Tony Jones is identified as pastor of an "emergent church" in Minneapolis that goes by the name of Solomon's Porch. What he said caught my attention. He said, "Progressive politics talk a lot about caring for the poor. There are six verses about homosexuality in the Bible, and over 3,000 verses about caring for the poor. There's nothing in the Bible about free market capitalism." Really?
There are only two types of economic systems in the universe. Either people are free to do what they want to do, trade with whom they want to trade, and keep what they earn, or they are not. When people are not free to do what they want to do, trade with whom they want to trade, and keep what they earn, they are always subject to some sort of coercive government action that restricts their freedom. The government program asserts that people are not free to do what they want to do, trade with whom they want to trade, and keep what they earn. The first system is free market capitalism and it does not presently exist anywhere in the known universe. The second system is socialism and it is the economic system, to varying degrees, of every country in the world.
Tony Jones' first mistake is to believe that free market capitalism actually exists. His second mistake is to believe that it exists in the United States. His third mistake is to believe that the Bible says nothing about it. His fourth mistake is to believe that socialism is morally good. His fifth mistake is to believe that God approves of socialism. His sixth mistake is to believe that the Bible teaches socialism.
Jones wants some sort of government enforced wealth redistribution economic system. He wants this so that people and groups that he prefers are able to legally steal money from people and groups he dislikes. Jones refuses to admit that government does not create any wealth. Jones refuses to admit that anytime the government gives something to one group it must first take something from another group. Jones refuses to admit that anytime government takes money to pay for things that are not directly related to our right to life, freedom and our own property, it is engaged in the act of theft. Jones refuses to admit that he wants the government to steal, on his behalf. Now, does God have an opinion about stealing? Does it matter to God if the stealing is done by an individual or by a group called government? Although I am certainly no expert in the Bible, it does seem to me that God has an opinion about stealing and it is not favorable. It seems to me that God and the Bible would reject all forms of socialism because all forms of socialism are based upon theft from one group and transfer of wealth to another group, less the government's cut for handling.
I do not believe the phrase "free market capitalism" appears in the Bible. I also believe that the word "Trinity" does not appear in the Bible but I know that Christians believe in the doctrine of the Trinity. I also believe that the word "rapture" does not appear in the Bible but I know that Christians believe in the doctrine of the rapture. So I believe I can posit that simply because a word or a phrase does not appear in the Bible it does not follow that the Bible does not teach that particular thing. Simply because the phrase "free market capitalism" does not appear in the Bible does not mean that economic freedom is not taught in the Bible.
Free market capitalism is the only economic system that does not involve stealing from my neighbor, in one form or another. Free market capitalism is the only economic system that allows for human beings to go about their business of making things, selling things, buying things, serving others, realizing profits, sufferings losses, voluntarily giving to the poor, and keeping what is their own. I know that socialism is not taught in the Bible. If there are only two economic systems, and there are, then the only thing left is free market capitalism. What I have just described above sounds a lot like the system of economics found in the Bible. Biblical characters are generally free to work, save, invest, donate, and keep what they earn. Biblical examples where the State restricts the freedom of people and extracts their income to transfer to another  group are always given as negative examples. Think of the children of Israel in Egypt, for example. They operated under socialism. They were not free. They had their wealth and labor stolen and given to a politically preferred group. They operated under a system similar to the one we have in this country and God had to deliver them from it.
Tony Jones is dead wrong. The economic system assumed to be the correct one in the Bible is nothing other than free market capitalism. As noted French economist Frederic Bastiat said, "And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun:  May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works."

Tuesday, April 24, 2012

Ten Things I Want To Be Illegal

Following up on yesterday's blog on tobacco smoke, I have decided to call upon my government, in exchange for my vote, to make the following ten items illegal.  Each one of these items is personally offensive to me.  When I detect the aroma of each of these items, it increases my chances of illness and death.  Each of these items is potentially carcinogenic.  Each of these items has the potential to cause illness that will then be treated by the public health system,  increasing taxpayer costs.  Each of these items is used by ignorant people who, unfortunately but for their own good,  need to be forced to behave with less self-destructiveness.  In the public interest, and for the public good, these ten things should be banned forever.
1.  Wood smoke:  When I smell wood smoke it makes me think of a campfire.  Thinking of a campfire makes me wish that I was camping.  Making me wish that I was camping reduces my work productivity and could result in the loss of my job.  If I lose my job I will become depressed.  If I become depressed I will visit my local mental health clinic and become a burden upon the mentally healthy taxpayers.  Hence, wood smoke (from my neighbor's fireplace) is a public health issue.  It must be banned.
2.  Barbecue smoke:  As a vegetarian I am highly offended when I smell the smoke of meat being cooked on my neighbor's barbecue.  I believe it to be true that the charcoal he is using is made from hardwoods harvested from a Brazilian rain forest.  The smoke itself is known to contain dozens of carcinogens, and not just in California.  The char left on the meat by the charcoal is a known carcinogen.  Eating the meat dramatically increases his risk for various types of cancer.  For everyone's best interest barbecues must be banned.
3.  Cutting grass:  When my neighbor cuts his grass I am forced, against my will, to run into my house and close all the windows.  When he cuts his grass I am attacked by grass pollen.  My eyes swell, my nose runs, and I am miserable.  Even the smell of freshly cut grass is enough to make me nauseous.  Either outlaw the cutting of grass, or outlaw grass entirely. 
4.  Lawnmowers:  The lawnmower used by my neighbor should be illegal.  All lawnmowers should be illegal.  They spew toxic fumes into the air, which I am then forced to breath.  The noise is an affront to my auditory sensibilities.  The gasoline used by them makes us more dependent upon foreign oil and, thus, subject to terrorist attack.  Lawnmowers are one of the most insidious devices ever created.  The lawnmower lobby knows that a pollution and sound free lawnmower has been invented but they use their clout with Congress to keep it from coming to market in order to maximize their profits. All lawnmowers should be illegal.
5.  Flowers:  Flowers are one of the most dangerous items in the yard.  As  a person who is highly allergic to bee stings, I am forced to carry around medication to treat a potential sting for most of the springtime.  I, of course, have no flowers.  But, my neighbor does.  Bees congregate all around his yard and swarm into mine.  My life is endangered every time I walk out my front door.  My neighbor might as well be shooting poisonous darts in my direction on a regular basis.  His lack of concern for me is unconscionable  His flowers should be illegal.
6.  Dog do-do:  It is offensive.  It stinks.  It pollutes the ground water.  I expect the water coming out of my tap to ignite into flames any day now.  Plus, the dogs offend my ears with their constant barking.  The politician who makes dog poop illegal is going to get my vote.  The politician who makes dogs illegal should become president.  This is, after all, a serious public health issue. 
7.  Perfume/cologne:  My olfactory receptors are constantly assaulted by offensive perfumes and colognes.  To stay healthy I ride a bicycle.  Many times, while out riding, a car will go by and the aroma of perfume will be so heavy in the air I can taste it.  I have to spit ferociously to clear my body of the toxins.  Perfume gives me a headache.  Not only that, we are all aware that single women hanging out in bars use perfume to attract men.  Once the men are attracted they are seduced.  Perfume is directly responsible for venereal disease and the destruction of the family.  Perfume needs to be outlawed.
8.  Dryer sheets:  I was sitting outside last night, enjoying a summer-like evening.  When what to my olfactory nerve should appear, but a sense of aroma, telling me dryer sheets were near!  My evening was ruined.  My mental health deteriorated.  I do not know for sure but I bet that there are numerous carcinogens in dryer sheets.  I got a headache and had to go inside.  Dryer sheets should be illegal.
9.  Bodily odors:  This category covers a wide range of items.  Use your imagination.  I am sure you can come up with a long list.  I have been on the verge of vomiting when in the presence of people who have personal hygiene that is so bad they stink like animals.  The government must ensure that everybody is clean, sanitized, and deodorized.  They government must guarantee that halitosis and flatulence be banished forever.  It is the only reasonable course of action.
10. Pheromones: Pheromones are little chemicals that all human beings excrete without our awareness. Many psychologists have come to believe that pheromones are primarily involved in sexual attraction. Therein lies the problem. Pity the poor man that comes under the spell of a woman's pheromones. He is like a pig being led to slaughter. He believes that the woman he has just met is his "soul mate" and he proposes marriage. Shortly thereafter, when the impact of the pheromones wears off, he comes to his senses and asks himself why the woman he has married is nothing like the woman he dated. It is obvious that pheromones are responsible for massive amounts of human suffering. The abolition of pheromones will require the abolition of the human race. However, I believe we can all agree, that is not too high of a price to pay for clean air, healthy bodies, and vibrant relationships.

Monday, April 23, 2012

Anti-Smoking Zealots Trample On Basic Human Rights

The Jefferson County commissioners last week stated that they intend to extend the ban on public smoking to include not just buildings, but outdoor areas as well.  The stated goal of the commissioners is to eventually make smoking illegal in all public spaces.  As it is now, smoking is forbidden, under penalty of law, in all indoor spaces except your own residence and a handful of "cigar bars".  Outdoor spaces are still generally open to smoking, although smokers are required to maintain a specific distance from the entryway of special, governmentally protected, buildings.  In essence, the commissioners believe smoking needs to be banned anytime some anti-smoking zealot is able to detect the aroma of tobacco in the air.  This plan is nonsense and a ridiculous expansion of the police-state over the rights of law-abiding citizens.  It is clearly unconstitutional.
I did a little digging to try and find out about the dangers of "second hand smoke".  The various beliefs associated with second hand smoke are what are being used by the anti-smoking crusaders to attempt to bring about an eventual ban on all smoking, everywhere.  I was amazed to discover that these folks really believe that the mere ability to detect the aroma of tobacco means that their health is being compromised.  Amazingly, this opinion is supported by the US Surgeon General.  Here is what I discovered to be the truth. 
Tobacco smoke is detected by most human beings at a density of ~100ppb.  That means that one molecule of tobacco smoke in ten million molecules of air is sufficient for most humans to detect the aroma of tobacco.  The anti-smoking zealots would have us believe that any amount of tobacco smoke sufficient to detect is harmful to our health.  Is this assertion true?  Not quite.
The following quote gives some indication of just how far the anti-smokers are displaced from reality  Please consider the following two quotations.

Robert Matthews and Victoria Macdonald state that:
"PASSIVE smokers inhale the equivalent of just six cigarettes a year from other people's smoke, according to the largest ever study of actual exposure levels of non-smokers.  The figure, which undermines previous warnings about the dangers of passive smoking, is a thousand times lower than that faced by direct smokers, and so tiny that it could not be measured statistically. Results from personal air monitors carried by more that 1,000 people in cities across Europe reveal that even the most highly-exposed passive smoker inhales the equivalent of 0.02 of a cigarette a day - 10 times lower than Government-backed estimates.  The findings, published by an internationally respected UK-based team of air monitoring experts, are the biggest blow yet to the credibility of the Government's insistence that passive smoking causes fatal diseases."

In addition, a study from the Oak Ridge National Laboratory (link provided below) gives us some more startling information about the impact of passive or second hand smoke:

"OAK RIDGE, Tenn., Feb. 2, 2000 — Exposures to environmental tobacco smoke may be lower than earlier studies indicated for bartenders, waiters and waitresses, according to a study conducted by researchers at the Department of Energy's Oak Ridge National Laboratory (ORNL).
While people who work as wait staff and bartenders may generally be considered to be more highly exposed to environmental tobacco smoke, data from our study suggests that the situation is more complex," said Roger Jenkins of the Chemical and Analytical Chemistry Division.  
The study, which involved 173 people employed at restaurants or taverns of varying sizes in the Knoxville area, concluded that exposures to respirable suspended particulate matter (RSP), for example, were considerably below limits established by the Occupational Safety and Health Administration (OSHA) for the workplace.  
Subjects, who were non-smokers, wore pumps that sampled the air they were breathing while at work for a minimum of four hours. Researchers recorded a maximum RSP level of 768 micrograms per cubic meter. The OSHA standard for RSP is 5,000 micrograms per cubic meter over eight hours. Samples from the subjects were analyzed for ultraviolet absorbing and fluorescing particulate matter, solanesol, 3-ethenyl pyridine, nicotine and RSP.  
Other constituents of environmental tobacco smoke, sometimes called second-hand smoke, also were not present in the levels previously thought, Jenkins said. For example, a study published in the Journal of the American Medical Association in 1993 concluded that average RSP levels were 117 and 348 micrograms per cubic meter for bars and restaurants, respectively, while the ORNL study found those levels to be 67 and 135, respectively."
I believe it is quite obvious that the anti-smoking coalition is not based upon real science.  Junk science is the basis for their assertions.  Sadly, junk science often rules the day with politicians.  Let's hope that is not the case with this issue and that the right of a person to smoke tobacco is not trampled underfoot by those who have a personal vendetta against anyone that makes the decision to smoke tobacco.  Whether you are a smoker or not, a free country should not tolerate this type of political action.  If smoking is banned, what is next?  Eating? Drinking?  Sleeping?  Breathing?