Meridian's blog

Ever since meeting the venerable Henry Wiengarten at the annual Triple Gold Conference in New York early in 2008, I have taken quite an interest in how the movements of the planets affect what happens here on earth. Many people dismiss this as pure bunk, but as a person whose University education is in the field of Engineering, I am convinced that planetary motion does exert pushes and pulls on the earth as it rotates about in the Universe along with the planets. We humans are merely objects made up largely of water and carbon, both of which are easily influenced by electrical forces and gravitational forces. We humans are the ones who influence the markets with our buying and selling decisions on a day by day basis. Hence, by watching how the planets interact with each other, we can get a sense of what to expect. Read more »

I continue to ponder the deeper meaning of the situation involving Russia, Georgia and South Ossetia. A recent article in the newspaper THE INDEPENDENT written by journalist Askold Krushelnycky further made me ponder the situation.

I am now convinced that the world is concerned that Vladimir Putin and his right hand man Dimitry Medvedev are intent on flexing their muscles and making a push to establish a Russian Empire. Let's face it, Russia does have natural resources and it does have some military power, so what's to stop it from expanding its reach at a time when global powers are otherwise pre-occupied with the threat of a stagnating global economy?

Mr. Krushelnycky in his article notes that Russia may now have its sights fixated on the Ukraine. The following is an excerpt from the article: Read more »

Call me a cynic, call me a skeptic. Whenever a hotspot flares up in the world, I invariably find myself exploring for deeper meanings instead of just accepting the perspective offered up by CNN.

The current situation involving Georgia, Russia and South Ossetia has certainly given me plenty to ponder.

As a brief history, as the Russian empire expanded in the 18th and 19th centuries, the tribal people of Ossetia generally sided with the Russians instead of trying to fight them. In the 1920's, this loyalty seems to have been rewarded when Russia established the South Ossetian Autonomous Region which today lies inside the breakaway Republic of Georgia.

As the Soviet Union began its fade to black as the Communist model failed, Georgian nationalist leader Zviad Gamsakhurdia began locking horns with South Ossetia. Violence flared in 1990 as South Ossetia declared its intention to secede from Georgia. When the Soviet Union officially failed in 1991-1992, South Ossetia ramped up its separatist rhetoric. Clashes followed and casualties mounted

Fast forward to the present and we see that the situation has again flared up. But this time, the dynamic is different and this invites a series of questions. Read more »

They say that numbers don't lie. While this may be partly true, give these same numbers to politicians and crunch them through some econometric models and what pops out the other end could be nothing but a bunch of meaningless nonsense. But, correctly packaged and tastefully delivered, this nonsense could be enough to alter people's thought patterns.

This is a nutshell is what economist John Williams and his organization www.shaodowstats.com is all about.

Take for example the Consumer Price Index. After WW 2, CPI was devised to provide a measure of a fixed basket of goods so that contracts and wage increases with unionized auto workers could be hammered out. But in the late 1980's the Maestro – Alan Greenspan – suggested a "few changes" with the help from folks at the Council of Economic Indicators. He reckoned that if the price of steak went up, people would substitute hamburger instead. Hence by purchasing hamburger, one's cost of living would go down. The notion did not fly at the time, but during the Clinton administration, the idea of geometric weighting was introduced. So, if something went up in value, it was given a lower weighting based on the presumption that people would buy less of it. Thanks to this mathematical chicanery, Social Security payments today are quite a bit less than what they would have been if the constant basket of goods method had been maintained. Read more »

Remember Harry Dent? If not, go to your local bookseller and order a copy of the Roaring 2000's. I first read this book right after Y2K – the biggest non-event ever. But what intrigued me with Harry Dent was his look into the future. He predicted that the first 10 years of the new millennium would be a rip-roaring event that would see financial markets zoom higher. Was he right? Well, partly so. What he failed to see was that people would opt to chase real estate purchases instead of stocks and mutual funds. But, that being said, the DOW and the S&P actually did do quite well. They just did not go as high as he thought. Mr. Dent now admits that he did not envision Oil rising through $100 a barrel and he did not envision in 1999 (when he wrote the book) that we would find our way into a sub-prime mess. To his credit – who could have envisioned such a thing back in 1999? Read more »

The father of modern economics (Adam Smith) in his writings elaborated on comparative advantage and competitive advantage. Competitive advantage would occur if I could make a product at a lower hourly wage than you could. Quite likely I would end up getting more business than you. Comparative advantage comes about if I can grow something or produce something more easily than you can. For example, who could produce lamb chops easier – New Zealand or Alaska? Obviously New Zealand because they have the climate, the pasture land etc... to support herds of sheep. I think you get the point.

Another example would be to ask who can produce ethanol easier – Brazil or the USA? Answer is Brazil because their climate naturally is supportive of massive amounts of easily grown sugar cane which lends itself very well to ethanol production. But don't tell that to Mr. Bush, for you see he has showered the US ethanol industry with a ~ 50 cent per gallon subsidy on all ethanol made. This has caused wild gyrations in Corn prices and by default Wheat and Soybean prices too as these grains have found their way from the food table to the ethanol plant. This has then caused dislocations across the whole food spectrum, not just in the USA but around the world. Small wonder then that the recent WTO talks failed on the issue of agricultural subsidies. Developing nations want to maintain control over their agriculture rather than lower their tariffs to allow subsidized goods in from the USA. By nurturing a strong domestic agriculture sector, these nations are hoping to insulate themselves from future wild gyrations on global grain futures markets. I must admit, I can see their point. Read more »

This is shaping up to be one of the worst weeks ever for the US taxpayer and the US Constitution. President Bush has now given Treasury Secretary Paulson the go-ahead to prop up the feeble Fannie and Freddie duo. Think about it…..with the stroke of a pen, Mr. Bush has agreed to print sickening sums of money that will undermine the stability of the US Dollar for years to come. Whatever happened to "we the people"? Now there are reports circulating that foreign investors are holding massive amounts of Freddie and Fannie shares. Hence the reasoning for this un-precedented bailout. These are the same foreign entities that have been financing the run-away trade deficits that America has been proudly sporting for the past decade or more. These are the same foreign investors that by purchasing America's Treasury Bonds have financed the war in Iraq and the invasion of Afghanistan.

America is broken. America has now been reduced to groveling at the feet of its masters – the foreign countries who finance its trade deficits and who hold its Fannie and Freddie shares and its Treasury Bonds. America is now gutting itself and falling on its sword in order to appease its masters. "We the people" are now "we the subservient". Read more »

The much talked about, much heralded Beijing Olympics are set to kick off in a week's time. This week, a story on the British Broadcasting System (BBC) caught my attention and made the hairs on my neck stand up.

It turns out there is a bigger issue at play that just smoggy air that could hurt the athletes. Turns out Chinese authorities are bracing for possible terrorist attacks and have installed anti-aircraft guns along with a host of other weaponry.

I seriously hope nothing of the sort happens, but if it does it will sweep China into the realm of America's war on terror. The implications of such an event are staggering and too complex to discuss at this point. But, if something of the sort does happen, the already shaky global financial system will suffer another body slam. I am keeping my eye on Gold for if something nasty does unfold in China, we will see the price of Gold do well as money gravitates to the safety of a hard physical asset with stable value.

I invite feedback on this issue from visitors to this site. The question is – what do you think the implications will be should the Beijing Olympics be marred by a terrorist incident? Read more »

House insurance is something we all have to safeguard against disaster. Now, keep this theme in mind as I attempt to spin a tale of possible horror and mayhem.

Let's suppose there is a house and it sits on a potential earthquake zone. Inside the house lives a normal everyday family. There has never been an earthquake on this ground before, but experts warn that it could happen.

Now, let's suppose you approach an insurance company and you make moves to take out an insurance policy on the house. Remember, you do not live there. You just know it sits on a potential earthquake zone and that there could be an earthquake. If there is and if the house is destroyed, you would be able to collect on the insurance policy. True, it has cost you money to purchase this insurance, but you are quite certain that an earthquake will come and you will get to collect.

Now, let's say you mention what you have done to your buddies on the golf course. Being profit seekers, they too approach the insurance company and they too take out insurance policies on the same house that you did !! The insurance company collects even more fees and is quite happy to do so because there has never been an earthquake on the ground where the house sits and as far as the insurance company experts are concerned there never will be. Let's suppose your buddies tell a few friends about their strategy. These friends make their way to the insurance company and they too take out policies on this house. Cha-ching!! Cha-ching!! The insurance company has made a serious amount of money selling these policies. Read more »

I received a copy of this letter from one of my business partners yesterday.

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.

Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs. Read more »

In my previous 2 blogs I noted that author Charles R. Morris is the first writer out of the starting gate to tackle the issue of the "debt meltdown" in a head-on manner.

Here now is what Mr. Morris has to say about the current situation we face…

...the late 1990's saw the emergence of the "quants" on Wall Street – people with advanced degrees from Ivy League schools who practiced a very different brand of calculus, who could carve up old fashioned asset classes into new exciting creations.

...when these new creations were combined with the newly created Fannie Mae and Freddie Mac organizations the "pass through" mortgage was created. The concept of Collateralized Mortgage Obligations (CMO's) and Collateralized Debt Obligations (CDO's) soon followed. Read more »

In my previous blog I noted that author Charles R. Morris is the first writer out of the starting gate to tackle the issue of the "debt meltdown" in a head-on manner.

In this blog I offer you a glimpse of what he has to say about the 1980's and 1990's.

...the truth is that monetarisn (with its premise that money supply was the answer to all things) did not break inflation, Volcker did by using every possible weapon at his disposal including verbal jawboning.

... The demonstration of what America would do to protect its currency changed the world's impression of US economic management. Read more »

In a blog posted to this site on April 27, 2008 ( scroll down about 5 pages and read it), I referenced a man called Avner Mandelman. Mr. Mandelman often writes in the Canadian national newspaper The Globe and Mail. In late April he was cautioning about the severe impact even marginally higher interest rates could have on the murky world of derivatives and credit swaps.

Now he is warning about the rapidly escalating situation in Iran. And sure enough, when I did a Google search on "mass graves Tehran" I found a story in the Asia Times online edition. Here is a snippet from that article…

This past weekend, a senior Iranian general, Mir-Faisal Bagherzadeh, said his country was digging 320,000 graves for American soldiers scheduled to fight in Iran. "In implementation of the Geneva Conventions, the necessary measures are being taken to provide for the burial of enemy soldiers. We have plans to dig 15,000 to 20,000 graves for each of the border provinces, or a total of 320,000," he said, pointing out that some of them would be mass graves, if necessary. This was "to reduce the suffering of the families of the fallen in any attack against, and prevent the repetition of the long and bitter experience of the Vietnam War".

These may sound like big words - similar to those barked by Saddam Hussein and his information minister Mohammad Said al-Sahhaf in 2003 - but they carry real impact on the psychology of American troops. Iraq - with its weak army and corrupted regime - was impossible to chew for the Americans. Nobody can imagine how difficult a war would be against 65 million Iranians, with a well-trained, well-armed military indoctrinated with Shi'ite Islam and a strong sense of purpose against the "great Satan". Read more »

Author Charles R. Morris is the first writer out of the starting gate to tackle the issue of the "debt meltdown" in a head-on manner in his new book The Trillion Dollar Meltdown.

I have now finished reading this book and I can tell you that I was so engrossed in what Mr. Morris had to say I read the entire 169 pages in one afternoon, stopping only periodically to refresh my Gin & Tonic so I could continue facing the harsh reality of what Mr. Morris had to say.

In this blog (and the next few to come) I will try to give you taste of what Mr. Morris has to say by quoting excerpts from his book. Bottom line – this book is a must read. Go to your local bookseller in Canada or the USA and get it…today !! Read more »

Campaign 2008 has come to Canada. While we cannot vote in this Presidential election, it looks like we are going to have seats on the 50 yard line and see the action up close.

One of the plays expected from the Obama team is a policy move to bring in a low carbon fuel standard. This policy will effectively see refiners and gasoline marketers who use Canadian oil sands crude penalized because this crude oil emits "bad stuff" into the atmosphere when processed. In a recent article in the Globe and Mail, journalist Shawn McCarthy references a chart that compares the various types of oil. Oil from the North Sea (Brent Crude) emits 494 kg of Carbon Dioxide (CO2) per barrel of Oil processed, Arab Light Crude 517 kgs, Nigerian Crude 541 kgs, Mexican Crude 557 kgs, Canadian Tar Sands Crude 568 kgs and Venezuelan Crude 579 kgs. The important observation here is that Canadian Tar Sands Crude emits only 10% more "stuff" than Arab Light Crude. These data tell me that Tar Sands Crude is hardly worthy of being further maligned by a carbon fuel standard policy. Read more »