All that glitters can be better than gold

People have been talking about investing in gold for a while now. As Peter Schiff likes to point out, in the Roman Empire an ounce of gold purchased a Roman citizen a toga (suit), a leather belt, and a pair of sandals. Today, one ounce of gold will still buy a man a suit, a leather belt, and a pair of shoes. So gold is definitely a long term inflation hedge. But here are the cons of investing in gold and some other inflation-hedge options.

Cons of Gold:

1) Gold has large volatility and long periods of time (like 20 years around the 80s) when the prices won’t go anywhere.

2) From a contrarian standpoint, we hear way too much about gold now in days. Everyone knows about Cash4Gold etc. For your cash-type ready-to-use money, other useful commodities that have not increased in price as much as gold yet might be better. Oil, Iron, copper, etc. are all great inflation hedges for the same reason as gold. No one can print them. They take hard work to find and unearth, and thus have intrinsic value. And they are not on late night infomercials… yet.

Option 1 – Better -than- gold Tier I stocks

Asset-backed / Necessary-Goods stocks: Gold is *only* an inflation hedge. In the long run you are much better off with a company that is producing something useful, since, over time that company can be worth more, not just the same. So for example any asset backed / commodity stock (oil, energy, food) is a better inflation hedge. The value of any asset backed /commodity company will get automatically adjusted for inflation, which will be reflected in the stock price. A better hedge against inflation is a company that sells something that people will always need, even when they are broke and thus, has a competitive advantage. So they can quickly pass along price-increases and potentially grow your money profitably. Examples of companies like this might be Johnson and Johnson, 3M, etc. On top of inflation-adjustment, you will also see the usual returns/ losses of investing in businesses. It might get hard to decouple the two, but you won't be "wasting" your dollar because of inflation.

Option II - Even- better inflation hedge – Tier II Stocks

Necessary-Goods Companies with High Leverage: The dream inflation hedge would be in a company that apart from selling ever-needed products with a steady stream of earnings (what we call the Tier-I stocks) and having some competitive advantage is also heavily leveraged. Then if inflation does happen, they would able to easily pay back their debt in much cheaper dollars. Now you’ve got a hat-trick - a company with real value, that make something people need, has pricing power and is actually taking advantage of inflation to pay off their debts. Warren Buffett’s purchase of Burlington Northern is a brilliant inflation hedge as it satisfies all these criteria to the T. Large moat, steady earnings, asset based, highly leveraged, and good potential for growth.

Aside: Alternatively, you can take on personal leverage as well, you might be able to find a company that satisfies the dream criteria above AND pays a dividend that will cover the cost of margin for example. Also just taking large loans can make a good inflation bet since you would be able pay them back for a fraction of their original "value". This assumes two things though. 1) You can continue to make the payments. 2) You invest the money in something of value. For example you could buy a house on a highly leveraged basis, subsidized by Uncle Sam.

Option 3: Best bang for your dollar-buck? – Tier III stocks

Highly-Leveraged Necessary-Goods Companies outside the US: The third option is to could invest in tier-II stocks outside the US (the Euro or the Yen for instance) if on top of inflation you are worried about the dollar losing value because of a demotion from its current place as a global currency standard. A global currency standard means that if a French bank and an Indian bank need to conduct a transfer, they would both have to transfer their currency into dollars, transfer the money and then back again. The same is true for buying oil. This means that there is an additional "artificial", if you will, demand for the dollar effectively raising its intrinsic value. There are now talks about replacing the global standard with the Euro, or Yen, or a "bag of currencies" - if this happens, there will a related devaluation of the dollar, which has nothing to do with inflation. For this you could check out countries that Peter Schiff recommends in his book “Crash Proof”. Australia and New Zealand come to mind.

These are fun times we live in. Smart moves can give über -smart returns.

Move the world - lessons for tomorrow's leaders

TED has some of the best talks ever - the content, the message and the delivery are unparalleled. Needless to say, some of the best brains of the world contribute here. This is an exemplary instance of such a skill:

http://www.ted.com/talks/hans_rosling_asia_s_rise_how_and_when.html

Here, Hans Rosling, Professor of International Health at Karolinska Institute and Director of the Gapminder Foundation, which developed the Trendalyzer software system gives a mind blowing talk on how and when Asia will catch up to the Western super powers. Its a powerful talk. Watch it once for the message and then watch it again to learn. He owns the presentation, he owns the stage and he owns the audience . For those of us wanting to be the future movers of the global economy, what can we learn from it?

1. Mastering the art of Presenting <----- Leadership skills

TED or not-TED, every talk you give is momentous. For those 15 minutes, every single person in the room eagerly gives you their undivided attention. At least they want to. So do your audience a favor and deliver. Expectations are high and attention spans are low. You can grab on it, unleash their imagination and take them on a guided tour of your choosing. You need to use everything within your disposal to your advantage. Its not just the slides and a memorized speech any more. You have your whole body - use it. Body language, facial expressions, actions and motion can all be used to communicate. Use articulation - customize tone, speed, volume and emphasis to the point at hand.

Watch Hans walk around stage, use facial expressions, actions and gestures to deliver this talk - he even uses props! Pay extra attention to how he matches his voice to the speed of the animation to convey excitement. He engages you and you are simply drawn in.

Professionally, what can your talk do? Talks are where you plant a seed for powerful change, unveil your expertise, initiate collaborations and bag deals. Not only do passion for a venture and level of knowledge come through, but people will know if you are a natural leader. They are after all witnessing an ultimate test of leadership - can you make people listen? You can establish your stance, making it natural for people to fund your ventures, or recommend you to the C-level . It also a natural icebreaker - you have given them a easy opening line- "nice talk"! Professionally, you need not only excel at giving talks- but you should be seeking them out.

2. Data Showcasing <----- Product placement

All data are not created equal - some are more interesting than the others. Having said that, even if you have the most important message in the world, it will be lost if you don't know how to showcase it. The era of pie charts and excel figures are long gone. Apart from being clear and to-the-point, your graphs need to be alive, dynamic and the center-of-attention. They need to capture attention, help understanding not confusion. Your data contains the meat of the message - serve it tastefully.

How can you boost your business via a talk? This is the man's product - Trendalyzer is a software for animation of statistics. Clearly, he had a very interesting message. This would have been an amazing talk - simply for the message. But he didn't just stop there. Neither did he parade his wares. Hans has a great product and he knows it. He highlights the features of his product by simply using it remarkably well.
Aside: Notice how he casually acknowledges and offhandedly cheers Trendalyzer new owner and Gapminder's business affiliate, Google. Everyone likes to be remembered.


3. World Changing <----- Stepping up your game

It appears to take more than just in depth know-hows and covetable soft skills to be a successful business leader. What is it that sets these visionaries apart? There is a trend these days - aspirations to set make a venture bigger than just the product, to integrate business models with the ever changing socio-economic patterns of today's society, or simply put, to include the guy-in-country-next-door in what you do. Such social moves is not necessarily just a feel-good holier-than-thou reaction or a cosmetic move to erase the popular notion of evil corporations, or even a use-behavioral-economics-to-increase-sales effort, but a necessary step in the evolution of capitalism or a good business. The world is getting flatter, the economy more global and thus capitalism more innovative. Capitalism not only lifts the entire society economically but thrives with the overall health - successful businesses open up doors for new ventures, more capital flow helps create new capital, and great ideas inspire new ones. Enterprise success, like happiness, is addictive. You can see this happening in India right now. Ever since India opened its business doors in the 90's the country is booming, the middle class expanding and the overall health is improving. Measures to uplift society at large is more than a admirable goal - it makes long-term business sense. You are simply making the playing field better. So this new trend, creative capitalism specifically, is a inevitable, but nonetheless brilliant, step in upping the anti. This is what sets the Googles, the Microsofts and Whole Foods of the world apart. Capitalism doesn't work against society - properly executed, it works for the society.

Hans could have used Trendalyzer to track statistics of shoppers and predict hot retail stocks for the holidays- this would have also been quite useful, informative and interesting. From an advertising and clientele point of view, this actually makes more sense. But, he reached out to a wider audience, used his business to impact the world and reached out at TED. By seamlessly integrating a socio-economic message into the product over his entire talk, he made Trendalyzer stand out without ever once mentioning the product. None of this appeared fake or superficial. Here is a visionary entrepreneur and he CARES. Far from suffering for his actions, he now has random blogs blog about his product and obscure scientists think about using Trendalyzer. Absolutely brilliant.

What global impact will your venture have?

Health Care - Where Can I Get A Life Boat?

One of my favorite quotes of Ayn Rand comes from We The Living:

"Do you believe in God, Andrei? No. Neither do I. But that's a favorite question of mine. An upside-down question, you know. What do you mean? Well, if I asked people whether they believed in life, they'd never understand what I meant. It's a bad question. It can mean so much that it really means nothing. So I ask them if they believe in God. And if they say they do—then, I know they don't believe in life. Why? Because, you see, God—whatever anyone chooses to call God—is one's highest conception of the highest possible. And whoever places his highest conception above his own possibility thinks very little of himself and his life. It's a rare gift, you know, to feel reverence for your own life and to want the best, the greatest, the highest possible, here, now, for your very own."

My new favorite question is "Do you believe that the government should provide health care?" I think the answer to this question tells me more about a person's view on individual liberty than anything else I could ask.

Anyway, if the health care public option bill passes after the debate in the Senate floor... I think I'll be ready to admit that we are all on a sinking titanic and start looking for a life boat.

Check out this extremely interesting article on religion and it's impact on the economy:

Satan, the great motivator

Here is a tidbit that should interest everyone:

"... Their results show a strong correlation between economic growth and certain shifts in beliefs, though only in developing countries. Most strikingly, if belief in hell jumps up sharply while actual church attendance stays flat, it correlates with economic growth. Belief in heaven also has a similar effect, though less pronounced. Mere belief in God has no effect one way or the other. Meanwhile, if church attendance actually rises, it slows growth in developing economies."

If that doesn't motivate you to read the entire article, i don't know what will!

On HealthCare

Here is and interesting interview of David Goldhill, the author of the stunningly coherent article "How American Health Care Killed My Father". If you have ever been confused the the debacle that is our health care system, this is the article for you. How is it that doctors can't be bothered to wash their hands properly? How come the doctor gives you a stunned stupid expression of incomprehension when you ask what something costs? Why is my health care stuck to my employer instead of to me? How is it that both doctors AND insurance companies claim their not making enough money? I literally felt the confusion fall away when I read this article, I highly recommend it. And I'm super grateful to APOS for sending it to me.

Video below:

Comical discomfort with the human body.

This is outrageous and funny all at the same time:




The poor guys just trying to get his morning pick-me-up and suddenly the cops are involved. I personally think its obvious enough that this was not crime that the arresting officers should be liable for grief they've caused the guy. It sounds like the state has zero chance of convicting him, but it could be an interesting jump off point for a discussion of property rights. The guy was in his own home on his own property. The person who saw him was IN HIS YARD. She was peering into his home early in the morning. What obligations does a person have the power to impose on you without your knowledge simply buy peeping into your window? How does the fact that she was and is free to make it a habit not to look into people homes apply to the question? How would the situation change if she was standing on the public right of way? Would it change at all? What percentage of people do you suppose could be arrested for the same crime of daring to be naked in their own home without bolting all the shudders? My guess is its north of 99.99% and the people aren't guilty likely have some deep seated issues.

BTW by what stretch of the imagination are we supposed to believe that the mere, momentary sight of another human being sans clothing could somehow damage either the woman or the little boy?

We're all just folks, one built same as the last. If you don't like the view move along.

The Buisiness of Marriage 2 - The Plot Thickens

Posted as a comment on The Business of Marriage

On the surface, it might appear as though the State's authority to approve a marriage is required because of its needed involvement when things go south in a bad marriage. Legal separation, custody battles, the traditionally-required alimony become the State's problem when two not-so-happy-ever-after-the-wedding parties decide to break up a marriage. So we can try to conclude right here that a State needs to authorize a union just so it can "fairly" unauthorize it.

"But aha", cry Apos and Trisco (they both actually and separately did, when I presented this argument to them), "why can't marriage then be just like another business contract? A contract that can be drawn up between two separate parties, albeit with a notary present, and doesn't require a license , State's approval, definitely no tax breaks and can still be a legal basis for fairness when the parties break the contract!"

That's a great point. So why can't a marriage just be a business contract? Lets dig deeper.

A marriage is a legal union of two individuals. The State has to be in the dirty business of this union because it has put itself in the dirty business of approving of who is legally an individual! The State is in one's life to begin with (that's right ...at the moment when you were born and had no idea of what's right and what's wrong - in the hospital...right after you blink your pretty little eyes at your loving mom). Must to Realism's outrage and Nihilism's delight, you don't really exist as an individual until the State grants you an existence license in the form of a birth certificate. And in fact, it's even consistent in handing out a nice tax break, albeit to your parents, for your recent appearance in this world. The State is there to begin with - without this birth certificate, you cannot get a drivers license, a passport or hell, even a marriage license. Since we all have implicitly accepted this power of the State to authorize the existence of an individual, by extension we have to accept (damn, logically, for rationality's sake, we have to demand !) the State's power to grant the union of two individuals as a single entity (and again by extension, demand a tax break for the same).

You cannot drink, travel, drive, earn, move, own, marry, and technically exist, without the State's consent.

Realism squirms and Nihilism shrugs as we walk away with our driver's license secure in our pockets.

ps: As a side note, it is very interesting how the tax breaks encourage the traditional role of a female as a home-keeper. The tax breaks, when filing as a couple, help only those whose incomes are very lopsided (maximized when only one person earns). In fact, if you have a spouse who makes the same amount (albeit extremely low), you are better off filing separately. Being single, why do I know this? Coz,I am suspicious of Govts. trying to nudge the masses. With nudge comes power (and we all know with great power comes current squared times resistance :P). And marriage is a classic instance of this.

What Is Property?

When it comes to property rights, it is easy for me to follow the logic that when you CREATE something, like a sword or a painting or a piece of furniture, that it belongs to you*. I can also follow the logic that when you trade what someone has created at some agreed price, that it now belongs to you. However, I have a difficult time following the logic of land rights, or rights to anything that none of us created. Anyone have an opinion about this? I would love to be able to understand this better!

*you can be an individual or an organization

What Do You Deserve?

We live in a world where everyone talks about how the weak deserve food, deserve money, deserve happiness.. that it is our moral obligation to make sure that they get these things. But what about those people who create their own wealth, who create their own means to food and who create their own means to happiness.... why do we think that these people don't deserve to keep what they have created?

Mental vs. Physical pain.

I often hear the idealogy (and I am paraphrasing) : “People should be free to do whatever they want, as long as it doesn’t hurt an innocent third party” .

I really like this idealogy, and I feel it is the correct ideaology to have -- deep down this rings true in my soul. However, as a practical man, and a man who thinks about how to implement this in a government, I sometimes ask very pressing, even annoying questions about what this means. We cannot build a government on what we “feel” is right, but rather must have a logical and rational basis for our beliefs.

To this end, I’d like to discuss the concept of “hurt”. What does it actually mean? “To hurt” is defined as “1) cause physical pain or injury to; 2) cause mental pain or distress to; 2) feel mental pain or distress; 4) be detrimental to” accodeing to the dictionary on my Macbook.
We can see two key things in the definition of hurt, physical and mental pain or distress. Let’s focus on these two.

In physical pain or injury, there is some impediment that causes an inability to act in a manner that one sees fit. If someone breaks my leg, it means that I cannot walk or run, even if I want to. for instance. To a large extent we are very familiar with what physical pain and injury means.

However, the same is not true for mental pain or distress. Suppose I tell someone that they are ugly, we can kind of intuit that this causes mental pain or distress. However it is much more complicated because we don’t actually see the effect on the person directly, but must see it through their actions and behaviors.

Now, whenever I discuss the idealogy above, I am always flummoxed by why physical pain is almost always the only definition of hurt that is considered. Oftentimes, mental pain is said to be something that can be “just gotten over”. But I think if we take a deeper look things are not as clear.

First, who says that mental pain can be just gotten over? If so, the area of psychology would not exist, and people would be able to get over experiences from their childhood easily -- but clearly not. Painful incidences and memories permeate the present and influence behavior -- and some, people, if not all, cannot control how these past incidents influence and bias their current decision making.

Secondly, if we look at the biology of the brain, aren’t memories stored in neurons? Thus memories change the physical nature of the brain by causing certain neurons to fire etc. Now if someone sets your neurons in a particular way which causes you to not be able to do what you want, then isn’t that a physical hurt akin to a breaking of the leg? Perhaps we cannot set the neurons to certain values, but we can say stuff to the person and that could set the neurons.

As I said, I really like the idealogy stated above and I want this idealogy to become more prominent in the government. However to do so, we will have to ask the hard questions and not rely on just our intuition to tell us what is “hurt” and what isn’t -- as always, we should let rationality and logic be our light. And by we, I mean all those who believe in this idealogy and want to see it shine forth, of which I count myself one.