Saturday, February 6, 2016

The State of Rink Rats

This is the time of year for The State of the Union, The State of the State, The State of the City, The State of Mind, The State of the University, The State of the NFL, The State of whatever. How are we doing? What we want? Do we have a clue?

What is the State of Rink Rats in February 2016?

Not bad, readership is up, our network of information grows every day, our reach into the world of You Tube is developing, and we are informing and irritating people every week. The Swami had a record of predictions in 2015 that was second to none.

But we have a way to go, writing needs to get better, timeliness of publication needs to improve and above all else our mission is an ongoing effort.

FINANCE 101 -  Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a pack of gum that costs $1 in a given year will cost $1.02 the next year. As goods and services require more money to purchase, the implicit value of that money falls.

Monetarism theorizes that inflation is related to the money supply of an economy. For example, following the Spanish conquest of the Aztec and Inca empires, massive amounts of gold and especially silver flowed into the Spanish and other European economies. Since the money supply had rapidly increased, prices spiked and the value of money fell, contributing to economic collapse.

Today, few currencies are fully backed by gold or silver. Since most world currencies are fiat money, the money supply could increase rapidly for political reasons, resulting in inflation. The most famous example is the hyperinflation that struck the German Weimar Republic in the early 1920s. The nations that had been victorious in World War I demanded reparations from Germany, which could not be paid in German paper currency, as this was of suspect value due to government borrowing. Germany attempted to print paper notes, buy foreign currency with them, and use that to pay their debts.

This policy led to the rapid devaluation of the German mark, and with it, hyperinflation. German consumers exacerbated the cycle by trying to spend their money as fast as possible, expecting that it would be worth less and less the longer they waited. More and more money flooded the economy, and its value plummeted to the point where people would paper their walls with the practically worthless bills. Similar situations have occurred in Peru in 1990 and Zimbabwe in 2007-2008.

Central banks have tried to learn from such episodes, using monetary policy tools to keep inflation in check. Since the 2008 financial crisis, the U.S. Federal Reserve has kept interest rates near zero and pursued a bond-buying program – now discontinued – known as quantitative easing. Some critics of the program alleged it would cause a spike in inflation in the U.S. dollar, but inflation peaked in 2007 and declined steadily over the next eight years. There are many, complex reasons why QE didn't lead to inflation or hyperinflation, though the simplest explanation is that the recession was a strong deflationary environment, and quantitative easing ameliorated its effects.

Inflation is generally measured in terms of a consumer price index (CPI), which tracks the prices of a basket of core goods and services over time. Viewed another way, this tool measures the "real"—that is, adjusted for inflation—value of earnings over time. It is important to note that the components of the CPI do not change in price at the same rates or even necessarily move the same direction. For example, the prices of secondary education and housing have been increasing much more rapidly than the prices of other goods and services; meanwhile fuel prices have risen, fallen, risen again and fallen again—each time very sharply—in the past ten years.

Inflation is one of the primary reasons that people invest in the first place. Just as the pack of gum that costs a dollar will cost $1.02 in a year, assuming 2% inflation, a savings account that was worth $1,000 would be worth $903.92 after 5 years, and $817.07 after 10 years, assuming that you earn no interest on the deposit. Stuffing cash into a mattress, or buying a tangible asset like gold, may make sense to people who live in unstable economies or who lack legal recourse. However, for those who can trust that their money will be reasonably safe if they make prudent equity or bond investments, this is arguably the way to go.

There is still risk, of course: bond issuers can default, and companies that issue stock can go under. For this reason it's important to do solid research and create a diverse portfolio. But in order to keep inflation from steadily gnawing away at your money, it's important to invest it in assets that can be reasonably be expected to yield at a greater rate than inflation.

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics has reported.  Over the last 12 months, the all items index increased 0.7 percent before seasonal adjustment.
Over the last 12 months, the CPI-U advanced 2.0 percent, in L.A.

IS THE MARKET ACTUALLY RIGHT? - What makes these falling prices unnerving is that it's hard to tell a simple story about what is driving them. It could be that the markets are moving according to their own internal logic, driven by money managers' psychology, with their habitual toggle between fear and greed turning back toward the former. More frightening: The markets could be pricing in some darker facts about the outlook for the world that economists don't fully understand.

In the past, when signals were so negative, there usually was a clearer story to tell. In the summer and fall of 2011, markets were tumbling on fears that the union using the euro currency would dissolve; in 2008, it was fears that the global financial system would collapse; in 2000 it was on the realization that stock prices, especially for tech companies, had gotten out of line. ... China's once-blockbuster economic growth does seem to have slowed a good deal, though it's not clear why that should have enormous effects outside China.

This writer believes there are three issues with the market: 1). China, 2). Oil, 3). Donald Trump

OVERHEARD: Bob Dole, the nation's senior Republican, tells friends he is unhappy that Mike Bloomberg might run. Dole thinks that would just elect Ted Cruz, producing a dangerously right-wing government. Dole thinks a Bloomberg candidacy would divide moderate voters with the Democratic nominee -- providing a clear path for Cruz, assuming he's the nominee.

SHOULD I CALL IN SICK? - Is there a good litmus test for when I should keep away from the office?

If you have a fever, chills, or sweats, it’s advisable to stay home. But it really depends on how you feel. What I usually tell people is to stay home if you’re so weak you can’t get your head off the pillow.

If I do go in, how do I keep everyone else from getting sick?
Wash your hands carefully—that’s one of the key factors. Cough into the crook of your elbow, not into the palm of your hand, so you won’t spread germs when you touch things.
How long do germs stick around after I cough or sneeze?
They last on doorknobs and desks for several minutes minimum, but they can persist for several hours.

Will it help to wipe down my desk?

There is a benefit to doing that. Your desk does carry germs, especially when you eat on it, like I always do. Wiping it down periodically with an alcohol-based solution is a good idea.
What about more obsessive behavior, such as opening the bathroom door with a paper towel? Or refusing to touch the elevator buttons?

People use the towels to get out of the bathroom, because other people use the bathroom and don’t wash their hands. That’s not going overboard. But the elevator buttons stuff—I touch the buttons, and I haven’t died from it yet. There are germs around. What are you going to do, live in a bubble?

Disinfect Your Desk

Stock Your Desk (and Fridge) with:

The skins are full of vitamin E, which may enhance the immune system’s response to cold and flu viruses. Pack almonds in an empty Altoids tin for portion control. Other snacks high in E you can easily store at your desk: sunflower seeds, peanut butter, and fortified whole-grain cereal.

Green tea
The polyphenols in green tea are potent antioxidants that fight off infection. But don’t add milk: It binds to the compounds, hindering their benefit.

Berries, kiwi, carrots, and red bell peppers.

All fruits and vegetables have antioxidants, but the ones with the darkest, richest colors have the most.

Greek yogurt

The probiotics in Greek yogurt make it worth stashing in the office fridge; they help your digestive system and may reduce the severity of colds. Make sure to buy only brands that contain “live and active cultures.”

Hard-boiled eggs, orange juice, and milk

Vitamin D found in these foods helps stimulate the immune system. Sunlight’s the best source of D; try taking a 10-minute walk in the afternoon.

Yes, You Really Need a Flu Shot

Americans are flooding the government with appeals to have their student loans forgiven on the grounds that schools deceived them with false promises of a well-paying career. In the past six months, more than 7,500 borrowers owing $164 million have applied to have their debt expunged under an obscure federal law that had been applied only in three instances before last year. Since the law doesn’t specify what proof is needed to demonstrate a school committed fraud, the Education Department has begun a month long negotiation to set clear rules, including when the department can go after institutions to claw back tuition money. Officials say they are still trying to grasp the potential taxpayer bill, as the cost of forgiveness could ultimately be in the billions.

HIGHER ED TOP 10: State-led student loan financing programs, campus sexual assault and degree completion incentives are among the top higher education issues likely to dominate state debates this year, the American Association of State Colleges and Universities says in a policy brief looking at 2016. The No. 1 issue on the list should come as no surprise: keeping college tuition affordable. "With mounting public alarm over the growth of tuition rates and student debt burdens, state lawmakers will likely continue to negotiate tuition freezes or tuition increase caps with higher education officials in exchange for funding increases - or, at the very least, a promise not to reduce funding. State lawmakers will also explore other avenues to ease the burden of college costs, such as increasing financial aid and reducing textbook costs," the AASCU said. The brief:

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to: Christie Brinkley (62) Huntington, NY; Harry Wayne Casey (65) San Francisco, CA; Gene Hackman (86) Santa Barbara, CA; Curtis Strange (61) Alexandria, VA.

WORTH LISTENING -  KQED Radio's "California Report" now running The Guardian's devastating investigative series: "The County: The Story of America's Deadliest Police force,'' a close up look at Kern County -- where 13 were killed by police in 2015. "Among all U.S. counties with five or more officer-involved killings logged by the Guardian in 2015, Kern County saw the most deaths per capita."

GOOD READ - DIANE REHM BOOK OUT LAST WEEK -- WashPost Style section cover story, "Diane Rehm, loud and clear on life, love and death," by Karen Heller (online: "Diane Rehm's next act: Using her famed voice to fight for the good death"): "Her voice sounds ancient and fragile, as though dragged through shattered glass and gravel. She was diagnosed almost two decades ago with spasmodic dysphonia, a neurological disorder that causes spasms of the vocal cords and should have axed her career. Instead, it helped distinguish her from the dulcet chorus of NPR voices. 'The Diane Rehm Show' ... is heard ... on nearly 200 stations. ...

"Now 79, ... Rehm announced last month that she plans to leave the show ... Dec. 31, giving her time for an extended victory lap. ... Her new memoir, 'On My Own,' recounts her husband's decision to end his life in June 2014 after his physician was legally barred from helping. John Rehm was diagnosed with Parkinson's disease in 2005 ... The experience sparked her advocacy in the right-to-die movement.

OUT AND ABOUT – Rink Rats good friend Joe Zanetta hosted a dinner party the other night, at the dinner he named Franklin Roosevelt and Ronald Reagan as the two best Presidents of the Twentieth Century. After some discussion and some lovely Port, our good friend changed his view to Franklin Roosevelt and Theodore Roosevelt. Common sense has prevailed.  

SUPER BOWL SUNDAY - MARK LEIBOVICH on the NFL is N.Y. Times Magazine cover for Super Bowl Sunday -- "The Membership: How Roger Goodell and the 32 owners of the N.F.L. created the most powerful sports league in American History": "As with any empire, there is a sense that for all its riches and popularity, the league is never far from some catastrophic demise. You hear talk of the N.F.L.'s 'existential' challenges over player health and safety; the nation's growing concern over concussions and degenerative brain disease; the drop in youth-football participation; lawsuits, regulatory roadblocks and disruptions to the broadcast model that the league's modern business has been built on."

NFL PICK OF THE WEEK – Sunday 2/7 6:30 PM ET, CBS: Carolina Panthers (17-1) vs. Denver Broncos (14-4). It is simple give the points (6) and take the overs (+44), Panthers 27 Broncos 20. Season to date (11-9)

COLLEGE HOCKEY GAME OF THE WEEK – Saturday 2/6 5:00 PM ET, FSD: #5 Michigan Wolverines (16-4-4) at Michigan State Spartans (7-18-2), down year for Sparty, but they will give Big Blue a tough game, still Michigan wins 4-3. Season to date (4-6).


(NHL, Feb. 6) Chicago Black Hawks (35-16-4) at Dallas Stars (33-14-5), Chicago 5 – 3.

(NBA, Feb. 6) Oklahoma City Thunder (38-13) at Golden State Warriors (45-4), a big Super Bowl eve matchup, Warriors win 101 - 95.

Season to date (14 -10)

MARKET WEEK - A frigid January for initial public offerings is pointing to a hard winter for fledgling companies seeking to go public. Investors and analysts attribute the dearth to the global stock-market rout of the first two weeks of the year, which signaled a broad retreat from risk by investors. The news comes as some of the biggest names in the hedge-fund industry are piling up bets against China’s currency, setting up a showdown between Wall Street and the leaders of the world’s second-largest economy. Currency headwinds have also dogged the biggest names in the technology sector and once again loom large in the current earnings season.

Alphabet Inc. (GOOG) just knocked Apple Inc. (AAPL) off its pedestal as the world’s most valuable publicly traded company. The share price of the company formerly known as Google popped in after-hours trading Monday following a strong earnings report, sending its market capitalization to $550 billion. By comparison, Apple’s market cap is currently $538.7 billion.

Apple surpassed Google back in 2010 when each company had a market value of less than $200 million. That was before Apple released the first iPad and several successive generations of the iPhone, which has become the company’s dominant product, accounting for 66 percent of its revenue. The company’s stock has been hurt by flat sales and an unclear story about what will drive its next phase of growth.

Alphabet’s earnings report for the last quarter of 2015 represented the first time the company has broken out its so-called moon-shot ventures, such as Google Fiber and its self-driving car initiative. Those ventures have little or nothing to do with the company’s core search-advertising business, but they represent some of its biggest bets on the future. Alphabet’s new corporate structure now allows their performances to be judged separately.

Next week: Words of the month and The Bubble

Until Next Sunday, Adios.

Lompoc, CA

February 6, 2016


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