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Fracking – the hydraulic fracturing of the deep earth and its cousin, horizontal drilling – is the new buzz word in energy today. It has been spread by journalists and correspondents and NGOs to the general public. What is this strange word's impact on our own lives?

A simple, four stage answer would include: 

  • jobs
  • energy
  • imports
  • environment


          Much ink has been spilled of late on the question of the Chinese stock market, her economy and the effects these may have upon your portfolios.

Let review the facts and leave the fear to the mongers. Many thanks to this week’s Economist for their lead article, ‘China and the World Economy’.


                    Positives Aspects


          The US exports less than 1% of GDP to China. Exports are driven by demand. If Chinese demand for US products dries up, the US impact will be nominal.

          Chinese GDP grow has slowed from 8% to 4%. If we discount their rather dubious figures by 50%, they have a growth rate of 2% (down from 4%): in line with US growth.

          Chinese stock markets are less than 30% of their economy. They are widely known as legalized casinos. Fundamental analysis has no value.

Fewer than 20% of Chinese participate in this ‘punters game’. Those who do borrow heavily to make bets and walk away. This debt is less than 1% of countrywide debt.

Real estate is far more important to the Chinese economy and psyche. While it too is a punters arena, less debt is used or available. Residential remains positive.

Banks have been told to hold lower reserves, at 18%, vs. US banks at 6%.

Massive capital reserves remain on banks and government ledgers. These are available as economic buffers or currency plays (never a wise choice).

The government remains in surplus – unheard of in these United States of Debt…


          Negative Aspects


Government debt remains high at 250% of GDP. Compare this to the US at 90% of GDP. Chinese debt has doubled since ’08. US debt has quadrupled.

Furtive attempts to curtail the stock market have failed. Currency exchange ‘adjustments’ have failed. Speculation remains rife in their stock market.

The Party controls as much as it can – sometimes effectively, oftentimes ad hoc, stumbling from one crisis to the next.

They think they know more than they do. Sound familiar? Pride falls the hero every time.

While the home of capitalism, the Chinese are still ‘remembering’ the rules of the capitalist game. They disagree with much and offer a ‘third way’.

While this way worked well in Singapore, it has yet to be applied effectively in the larger realm of The Middle Kingdom.

Xenophobic or racist, the Chinese have a view towards others that is domineering and demanding. They are not shy of reminding us all that theirs is the oldest civilization.

Private capital flight has increased, moving offshore to the ‘near China sphere’.

Commodity consumption is falling. The economy is transitioning from an export nation to a consumer nation.

Chinese production is shifting, as a result. This will take a decade or more. Her population is both ageing and stabilizing. Demands are shifting to the youth and the aged.

Construction demand has slowed at most levels. ‘Empty cities’ must be filled as older ones are refurbished and renewed.

China consumes 50% of global aluminum, nickel and steel production and 30% of cotton and rice. As it becomes a producer of these materials, it imports less.

Export nations – Germany, Australia, Brazil, Argentina, Mexico – are suffering the consequences. Korea, Singapore and Taiwan suffer less.

The Asian 1997 crisis comes to mind. But today, these nations have no currency flight issues as they are no longer pegged to the USD. They are more elastic.

Global trade has declined as a result of reduced Chinese raw materials demand. This impacts export nations more than import nations (USA).


There is no final answer here. The fear of a domino effect are potentially realistic. If China falls into recession or depression, the global economy may follow suit. As global demand dries up, other nations’ economies shrivel. Europe and the US have no ‘capital elasticity’. Each can raise interest rates as their economies do better; neither can reduce rates lower than 0%. Or can they…


Currencies may collapse as faith disintegrates in the Euro and the USD.


Fascist political choices are cropping up in Spain, Greece, England, Russia, the Middle East and, worst of all, in the US. If these ner-do-wells become leaders, rational behavior is replaced by ideological idiocy. Hatreds easily become war.


Of course, the planet will eventually freeze over in the next Ice Age, too. The seas may rise with temperatures over a thousand years, too. The hidden mufti may appear. The Frog God will swallow the moon (Aboriginal). The great cycle of life and death will consume all.


You have to choose your enemies well. There is a low likelihood of dominos, despots or deluge. While interesting dinner talk, the real world involves more prosaic challenges and opportunities. As I write this, the Dow has dropped by 350+ points. This brings it back to October of 2014. I recall the worry then of slow growth, declining demand and diminishing investment opportunities. I said ‘so what?’ then and repeat it today.


Having been a willing professional participant in the investment world for 30+ years, I can be calloused regarding daily events. We have seen this more than a dozen times in my tenure. As an investor for 20 years prior to 1985, I have even more boring experiences. Yes, wealth can be wiped out. This happens when debt overpowers, not when stock markets gyrate. Want to worry? Worry about excessive governmental debt around the globe. This keeps me up at 4 am…


Events in China indirectly effect our portfolios in the short term. Debt and taxes hurt us all far more deeply. Power plays by Game of Thrones politicians are fearful and can be hurtful. The dynamic of demand and consume will drive economies, despite the sturm und drang of regulations and revisionists.


Over the Labor Day weekend I am reading: Why Information Grows: by Cesar Hidalgo, a Chilean professor at MIT. He offers a refreshing, if complex, answer to the question, ‘Why does the evolution of ideas, life and planets differ from the expected? Physics says that decay is the norm. yet this is clearly false. Why?


I’ll let you know!


Eat wisely.

Sleep well.

Love with abandon!


As we begin the pre-season scrimmages for laudator-in-chief (one whom we praise), jerseys, cleats, marriages and new running backs are all the rage. We discuss current team standings and possible super bowl matchups. The bookies run spread. The first pre-season games have begun with much attendance: 24M ain’t a bad crowd for the Mad Men in The City.

            Where you are born, whose you’ mamma, how you use your cell, where God fits into your world, how you managed a state or firm, how much millennials learn and earn and what you think of flags and foreigners: these are the burning issues of today. Cold or hot, it’s always about the weather. Who’s on first?

 Meanwhile, Rome burns while the fiddlers tune up their woodies.

The absolutely critical issues of today are economic:

            We are in the 7th year of an economic recovery that begs forgiveness. It is paltry, poor and penurious.

Fewer workers today have full time jobs, more have part time – at best.

            Well paid, skilled jobs go unfilled, while a few unskilled workers receive a mandated, absurd wage.

            Housing sales have only now clawed back to 2007 levels. Fewer qualify for smaller homes with higher costs. Renting or sharing is more affordable.

            Declining energy prices, while prompting a fine summer driving season, should be encouraging consumer sales. Nothing of the sort is happening.

            Deflation scares are ruminated upon by old bulls in the field. Young bulls couldn’t describe inflation or its opposite.

            Most important: debt is booming while equity languishes. Government balance sheets (a real misnomer) are awash in red. Energy companies have $2T+ in debt.

            Debt markets are four times the size of stock markets.

            While gross income for both govvies and energy companies are up, they cannot service the carry, revealing massive sink holes in net income. Where’s the net?

            Regionally, Europe, the Americas, the Middle East, China and Russia are flat out broke. Fiscal stimuli and foolish ideologies have broken the banks.

            I suggest worrying less about stock markets, more about bond markets. Current hair styles fade in comparison to currency piles.

            Dependencies are being built into the social fabric. Boomers and millennial have their hands out.  Billionaires and unions are on the take. Education tweaks its Latin meaning: lead from ignorance becomes  lead to. Taxes become The Great Equalizer. Trust those who know, go about your business, nothing happening here, nothing at all. Hate your neighbor as you hate yourself.

            All is not well in Bedlam or Gotham. We await Superman. We shall reap what we sow. Folks, the economy has to undergo significant change – in expectations, taxations and regulations. Within a generation the debts of our fathers will be visited upon their children. No one will save them from their folly, or ours.

            Listen to those who encourage self-worth, the entrepreneurial spirit and fewer regulatory bombasts. Ignore the bromide crowd. They are sharing their dyspepsia. We share a responsibility as citizens to make informed decisions. We the people. We the people does not mean those in government…



The original 1960s British TV show by this name –quickly named TW3 – was produced by David Frost. They would spoof the news, the media and themselves. In the US, the first (and only) season had Gene Hackman, Jack Paar, Henry Fonda and Allan Alda. The put on was satirical and timely. Would that we had such a show today. SNL hardly compares.

            Our news has been of strum und drang. Not that this has changed very much… The stock market has had a loss for the year. China has devalued its currency in a desperate bid to ward off recession once again (remember 2008’s billions in make work projects?). Russia toys with its neighbors like Kremlin dolls. The Middle East is, well it is less the Middle but it remains the East, certainly. Oil prices have dropped again last month, after a sustained rally following the Thanksgiving downward spike. Election season has begun – far too soon for some, just in time for many. In the absence of meaningful sports, the Potomac patter has replaced Deflation gate. Egomaniacal leaders insist upon their all seeing vision while even more maniacal leaders-in-waiting drag their egos before the cameras to spout meaningless refuse.

            What is one to do? Worry resounds around us in all directions. Fires burn heartless hearts. Want depraves the guilty and drives the guileless. Sometimes you just want to bury your head in a book! ‘Make the World Go Away’.


            Change is difficult. We want to be steady. We want normal, new or old. When things change, we worry. What will happen to me? Can we survive? What ever shall we do?


            Yet change is normal. As the French say, ‘le plus c’est change, le plus c’est le meme chose’. The more things change, the more they remain the same. Perhaps there is some cultural comfort here. The beauty of French culture, language, society, politics is  acceptance. We were once on the streets of Paris and confronted with a massive protest march. The participants carried flags and sang songs – while enjoying a spring day, ‘une sandwich’ and each other’s companionship. The cause was important, but so was the day off from work…ennui replaced anger. We could learn something here.

            We compare our live to the past. Wasn’t life simpler, easier, quieter, less costly then? Well, actually it wasn’t. Think back to your childhood. Compare a day then to a day in your grandchild’s life today. You played in the street with a stick and a ball; you ran home to supper when mother called. You may have watched TV an hour a week, if permitted and if your folks had one. You wore your sister’s hand-me-downs. You had a job at 10 as a paperboy or a babysitter – and gave all the money to your father. The food you ate was either from your backyard or from a can. Your folks earned barely enough to support you. You used a slide rule. You rode a bike – or walked – to school. When you got out of high school, you got a job, got married and had children. Of course, your folks had it much harder: they were children of the Depression or were first generation immigrants. They collected tin and paper during The War. They knew hunger first hand. Want to go back further? Live expectancy for your grandparents was less than 40 years, for their parents it was 30 years.

            Give yourself a break! We live in the best of all times. We are giving our children and grandchildren far more than we could have considered possible. Food is cheap and healthy. The air and water is cleaner than it has ever been in human history. Health and medicine are easily and readily available across our nation – for a pittance. We live longer, healthier, happier, wealthier lives than our parents or grandparents could imagine. 98% of US citizens deemed living in poverty today own at least one TV and a car. 45% own their own home. Economic migration continues. 57% of those who live in poverty move upwards (60% of those who are in the richest docile move downward). All are eligible for food stamps, free healthcare and cash support. Immigrants continue to come to the US for the same reasons own ancestors came here: opportunity. Less than 1,000 people each year renounce their US citizenship. No one really knows how many come to the US for citizenship – millions each decade to be sure.

            Your family is the center of your life. Your community and church are the core of your family. Your city and state provide you with roads and education in exchange for a nominal tax. The nation remains the economic, cultural and social Middle Kingdom of humanity, despite Chinese claims to the contrary. Yes, there are many dangers. They pale in significance to the dangers of WW1 or WW2 or the Depression or the Soviet Union. Yes, we have enemies – we also have friends. Knowledge, as fostered by universal education, allows each of us to strive towards ‘live liberty and the pursuit of happiness’. We are not assured of the success of our pursuit. Some pursue and achieve far better than others. So be it.

            The media seems to grasp for stories each summer. A lion in Africa becomes more important than achievements in medicine. Grouchy old men – and women – disturb others with their testosterone problems. Talking heads reveal a complete absence of substance. The banks of the Potomac are covered with the litter of protestors and politicians. Ignore as much as you can. Listen to the story not told. Pay attention to those around you. They will be gone soon…

  Eat wisely.

 Sleep well.

Love with abandon.


2015 Stella Awards

In case you don’t think America is just a wonderful place that rewards, via the courts and a jury of their peers. People even for their stupidity, read below…worth the effort.

 For those unfamiliar with these awards, they are named after 81-year-old Stella Liebeck who spilled hot coffee on herself and successfully sued the McDonald’s in New Mexico, where she purchased coffee.  You remember, she took the lid off the coffee and put it between her knees while she was driving. Who would ever think one could get burned doing that, right?

That’s right;  these are awards for the most outlandish lawsuits and verdicts in the U.S. You know, the kinds of cases that make you scratch your head.  So keep your head scratcher handy.

Here are the Stella’s for 2015

* SEVENTH PLACE * Kathleen Robertson of Austin, Texas was awarded $80,000 by a jury of her peers after breaking her ankle tripping over a toddler who was running inside a furniture store.  The store owners were understandably surprised by the verdict, considering the running toddler was her own.

Start scratching!

* SIXTH PLACE * Carl Truman, 19, of Los Angeles, California won $74,000 plus medical expenses when his neighbor ran over his hand with a  Honda Accord. Truman apparently didn’t notice there was someone at the wheel of the car when he was trying to steal his neighbor’s hubcaps.

Scratch some more…

* FIFTH PLACE * Terrence Dickson, of Bristol, Pennsylvania, who was leaving a house he had just burglarized by way of the garage.  Unfortunately for Dickson, the automatic garage door opener malfunctioned and he could not get the garage door to open.  Worse, he couldn’t re-enter the house because the door connecting the garage to the house locked when Dickson pulled it shut. Forced to sit for eight, count ‘em, EIGHT, days and survive on a case of Pepsi and a large bag of dry dog food, he sued the homeowner’s insurance company claiming undue mental anguish.  Amazingly, the jury said the insurance company must pay Dickson $500,000 for his anguish.  We should all have this kind of anguish.

Keep scratching. There are more…Double hand scratching after this one.

* FOURTH PLACE * Jerry Williams, of Little Rock, Arkansas, garnered 4th Place in the Stella’s when he was awarded $14,500 plus medical expenses after being bitten on the butt by his next door neighbor’s beagle – even though the beagle was on a chain in its owner’s fenced yard. Williams did not get as much as he asked for because the jury believed the beagle might have been provoked at the time of the butt bite because Williams had climbed over the fence into the yard and repeatedly shot the dog with a pellet gun.

Pick a new spot to scratch, you’re getting a bald spot..

* THIRD PLACE * Amber Carson of Lancaster, Pennsylvania because a jury ordered a Philadelphia restaurant to pay her $113,500 after she slipped on a spilled soft drink and broke her tailbone.  The reason the soft drink was on the floor: Ms. Carson had thrown it at her boyfriend 30 seconds earlier during an argument.

Only two more so ease up on the scratching…

*SECOND PLACE* Kara Walton, of Claymont, Delaware sued the owner of a night club in a nearby city because she fell from the bathroom window to the floor, knocking out her two front teeth. Even though Ms. Walton was trying to sneak through the ladies room window to avoid paying the $3.50 cover charge, the jury said the night club had to pay her $12,000…oh, yeah, plus dental expenses.

Go figure. Ok. Here we go!!

* FIRST PLACE *  Absolutely brilliant! This year’s runaway First Place Stella Award winner is: Mrs. Merv Grazinski, of Oklahoma City, Oklahoma, who purchased  new 32-foot Winnebago motor home.  On her first trip home from an OU football game, having driven onto the freeway, she set the cruise control at 70 mph and calmly left the driver’s seat to go to the back of the Winnebago to make herself a sandwich. Not surprisingly, the motor home left the freeway, crashed and overturned.  Also not surprisingly, Mrs. Grazinski sued Winnebago for not putting in the owner’s manual that she couldn’t actually leave the driver’s seat while the cruise control was set. The  Oklahoma  jury awarded her, ARE YOU SITTING DOWN, $1,750,000 PLUS a new motor home.

Winnebago actually changed their manuals as a result of this suit, just in case Mrs. Grazinski has any relatives who might also buy a motor home.

If you think the USA court system is out of control, be sure to  pass this one on.


If the aim was to choke the US shale industry, the Saudis have misjudged badly, just as they misjudged the growing shale threat at every stage for eight years. “It is becoming apparent that non-OPEC producers are not as responsive to low oil prices as had been thought, at least in the short-run,” said the Saudi central bank in its latest stability report.

“The main impact has been to cut back on developmental drilling of new oil wells, rather than slowing the flow of oil from existing wells. This requires more patience,” it said.

One Saudi expert was blunter. “The policy hasn’t worked and it will never work,” he said.

By causing the oil price to crash, the Saudis and their Gulf allies have certainly killed off prospects for a raft of high-cost ventures in the Russian Arctic, the Gulf of Mexico, the deep waters of the mid-Atlantic, and the Canadian tar sands.

Consultants Wood Mackenzie say the major oil and gas companies have shelved 46 large projects, deferring $200bn of investments.

The problem for the Saudis is that US shale frackers are not high-cost.

As discussed in December, this is not a fight between the US and the Kingdom of Saudi Arabia. It IS a fight between KSA and Iran.

Everyone in the Middle East will lose: they will lose market share, capital, investment and self-esteem. Do they care? Probably not: this is an Islamic dog fight to the death. Sunni vs. Shiite, and very narrow branches of each dying tree: Wahabbi vs. Uluist. The outcome may be catastrophic or cathartic or simply a whimper in the dark.

Meanwhile, we will pay less at the pump and at the light switch, despite the EPA.


Proofreading is a dying art, wouldn’t you say?


Man Kills Self Before Shooting Wife and Daughter   This one I caught in the SGV Tribune the other day and called the Editorial Room and asked who wrote this.

It took two or three readings before the editor realized that what he was reading was impossible!!! They put in a correction the next day.


I just couldn’t help but send this along. Too funny.   Something Went Wrong in Jet Crash, Expert Says   R eally? Ya think?


Police Begin Campaign to Run Down Jaywalkers  Now that’s taking things a bit far!


Panda Mating Fails; Veterinarian Takes Over  What a guy!


Miners Refuse to Work after Death   G


Good-for-nothing’ lazy so-and-so’s! They must be UNION !


Juvenile Court to Try Shooting Defendant   See if that works any better than a fair trial!


War Dims Hope for Peace   I can see where it might have that effect!


If Strike Isn’t Settled Quickly, It May Last Awhile   Ya think?!


Cold Wave Linked to Temperatures   Who would have thought!


Enfield ( London ) Couple Slain;   Police   Suspect Homicide   They may be on to something!


Red Tape Holds Up New Bridges   You mean there’s something stronger than duct tape?


Man Struck By Lightning:   Faces Battery Charge He probably IS the battery charge!


New Study of Obesity Looks for Larger   Test Group   Weren’t they fat enough?!


Kids Make Nutritious Snacks   Do they taste like chicken?


            Sorry ‘bout the failure to fail – it ain’t happening. Expectations for the demise of humanity are greatly exaggerated. The destruction of Mother Gaia has yet to be brought about through mankind’s abusive exploitation. Despite our every attempt to exterminate homo sapiens as a species, we remain.

            Why this constant failure to fail? Where have all the scary monsters gone – there is only so much room under the bed!

            The human population has stabilized across much of the planet: Europe, Asia, the Americas (exception, USA). Only northern Africa and the Middle East continue to grow significantly. While predictions are a cult unto themselves, the global human population may cease to expand within a generation. Its growth rate has declined precipitously. The general statement (much overused) of a married couple with 2.1 children being the ‘point of perfect replication’ is becoming the norm. The figures for Japan, Europe and Russia are well below this: 1.4 – 1.8, while China is at 2.0. As people die, fewer are being replaced by newborns. Simplistic, yes, but valid.

            Natural resources have yet to approach the point of exhaustion – far from it. We extract more from our Earth than ever while discovering more. Pricing mechanisms – supply and demand and efficiencies of design and use – turn the tide away from exhaustion to excess. Crude oil production is at 88M bbls/day and the price has collapsed as new supplies acquired at lower cost flood the market. Re-cycling has reduced demand for a myriad of basic materials. Better automotive technology means we drive more miles, exhaust less as ownership costs decline.

            The horrors of biotech – epitomized by GMO – are really our very best friends. ‘Food is more abundant today than ever before in history’, according to Ronald Bailey, author of The End of Doom. Global food production has more than tripled over the past 50 years, while the population has simply doubled. The newest edition of efficient food production is far more significant. It allows the introduction of Vitamin A to remove rickets from the global population, along with childhood blindness. GMO rice and grains use far less fertilizer and water with a concomitant increase in acreage productivity.

            The Green Revolution of Norm Borlaug exemplifies these trends. Biotech enabled by more efficient exploitation of natural resources has allowed humanity to grow – and do so more peacefully and healthier and wealthier.

            The Big Bad Wolf – whose name constantly changes from global cooling to global warming to climate change – is nowhere to be found. 24 years of steady to slightly declining global temperatures since the last great volcanism, Mt. Pinatubo in 1991, are directly associated with a 30% increase in atmospheric CO2. Where’s the beef? ‘Climatologists’ look under the ocean and under the bed, to no avail. The science is settled: it is not science but religion.

            Oddly enough, as food and health availability improve, education and human rights often follow suit. A wealth increase from starvation ($2/day) to subsistence ($4/day) makes a huge difference. Augment this with improved agricultural tools, power sourcing and basic medicine for pre-natal, infant and women’s health. Education becomes affordable and desirable. Stable home and house encourage savings. This can lead to inexpensive communications tools – cell phones -that empower farmers and merchants. Movement from the rural to the urban world ensues, as does closer ties and communication between citizens. This can lead to nascent capitalism (it can just as easily lead to nepotism in its thousand forms). Environmental awareness, known as conservation, becomes an acceptable norm as wealth grows. Family size is reduced, initially because fewer surviving workers are required; ultimately because young couples begin to factor in the cost of children to their world views.

            Fear is the only selling point for the pessimists. Facts simply refuse to support their way of life. Facts are dangerous because they tell the truth. Fear is far more dangerous because it manipulates the truth.

Each time you read or hear of a ‘well founded’ fear, ask yourself, ‘what are they not saying when they say this?’ Recall Sherlock Holmes in The Hound of the Baskervilles. His clue was the silent watchdog.

            Suggested reading:

                        The Rational Optimist by Matt Ridley

                        A World of Wealth by Thomas Donlan

                        Its Getting Better All the Time by Julian Simon

                        The End of Doom by Ronald Bailey


You recently asked me whether your portfolio had exposure to China. You had expressed concern about the economic challenges of Greece and China. We briefly discussed the Chinese ‘long view’, their understanding that the Middle Kingdom was just that, that the Han were the Chosen Ones, that the center of the world was in their nation, that the other humans were, at best, Doppelgangers.

            Let’s dig a little deeper. The Chinese markets are really three: Shenzhen, Shanghai and Hong Kong. The 1st is their NASDAQ, the ‘fleet of foot’ high risers and fast fallers. The 2nd is their DOW, the large cap world of banks, industry, energy, etc. HK is a different beast in that it has been around far longer (100+ years, vs. 25), is much deeper and enjoys the participation of global players. The MSCI, the most liquid and played of the global indices, recently refused to admit #1 & #2. They are, as The Economist would call them, a punters world: composed entirely of retail players. It is a gambling den, simple. These taxicab drivers, bellmen and minor government officials are deeply involved in the Largest Casino on Mainland China. Fewer than 5% of the daily volume is international, by design. Liquidity is defined by the companies and government participants – each can add liquidity or withdraw it during the course of the day. No global institution is willing to submit to such a racketeering realm.

            The national leaders of China have encouraged full participation in the markets since 2008, just as they have provided significant liquidity to the same markets. Give a punter a few grand in chips and he will play his entire fortune on the game, no matter what its size. You could not design a more rigged game. The Party has partitioned off the garbage of the SEOs (state owned enterprises), put these shares to market and told the gamblers to have a field day. They have.

            Over the past 8 months the game has been called. Fewer chairs each song, fewer chips each dice roll. As a result, the markets have dropped by 40%. This has now become global media noise. You are a smart guy; you understand math. If a statistical series drops by 40%, what is the probability that it will drop further? What is the probability that it will change direction? The same statistical series event happened with oil 11/14 – 3/15: a drop of 55%. What happened? This was absolutely outside the realm of supply, demand, politics and economics. Ebola ran the same course. The Plague did the same – three times in 120 years – in the late Middle Ages. No series runs a complete course to zero. Life on the planet has approached extinction on at least five occasions (once to 90%+ ) only to rebound in renewed form and energy. It is nearly impossible to destroy a mathematically diverse event. No series perfectly repeats itself, either: history is not constant, nor is it unintelligent. The human race learns at several levels, not least of which is survival.

            There is more liquidity in the fracking capital markets than in all of Greece. The average family income in China has risen tenfold in 25 years, to $7K/year. The same figure here is $56K. While the Chinese markets are the 2nd largest in the world, this is only in trade volume, not in absolute stock value. It may be the 2nd largest economy in the world – it is far from becoming the 2nd most vibrant economy in the world.

These simple math features are why there is no ‘global contagion’ to the Chinese markets. As Shakespeare said in a slightly different situation, this is ‘full of sound and fury, signifying nothing’. Notice that the Chinese market collapse has been going on for months and only now is the media fretting about it. They have nothing else to worry about during the quiet summer months.

The most worrisome people on the planet these days are: George Soros, Al Gore, Vlad Putin. The 1st is intent upon destroying capitalism. The 2nd is intent upon destroying capitalism. The 3rd is intent upon destroying capitalism. GS will do so in the capital markets; AG will do so in the education arena; VP will do so in Mitteleuropa. Each is a small man with Napoleonic designs. Each has leveraged his ability far beyond his skill set. Each is deadly as a viper.

If you want to worry, worry about them. Your daughter, a very intelligent young woman, is fairly convinced that humans are the scourge of the Earth. Many highly educated members of her generation agree, wholeheartedly. Far more attention is paid to race and income inequality than to the Russian bear. My professional world of money management’s greatest challenge is in finding competent young participants to whom we may pass the baton when we retire or pass on. Few seem interested these days. These are design features of GS’s, AG’s and VP’s Brave New World. Entitlement trumps Entrepreneurship. Entertainment politics holds sway as intelligence takes a back seat to sleight of hand and mouth.

Of course, Aristotle had similar worries 2,200 years ago: ‘the youth of Athens are run rampant. They care more for wine and song than for politic and achievement’. Series do continue and do not repeat. We shall constantly improve our well being, as individuals and as a race for our lifetimes, I certainly believe. Your daughter will be one of the New Leaders of her own new World, defined by their own expectations, giving slight attention to the three stooges/scourges above mentioned. She and her friends are far too intelligent and far too caring to fall for that gibberish.

Does your portfolio have exposure to China. I shall make every attempt to do just that. Buy when blood runs in the streets!



            Each morning I read the Wall St. Journal and The Economist, either on line or on paper. Today’s headlined stories have a common theme, one that resonates with many and permeates our culture.


What shall we fear today? Russian intellectual incursion into Bulgaria? The planet’s temperature exceeding 2 degrees Celsius in 85 years? Chinese cyber warfare?  FIFA’s coming elections? Excess debt in Greece, China, California or… ?. Stock market plunges in Europe, Wall St. or China? Safety of our personal medical records? Private college bankruptcies? The price of eggs?


The list is exhaustive. These few headlines are simply the current batch. Every day we are told to be afraid, be very afraid. It is amazing that we can even get out of bed without danger – perhaps we cannot! 

Surely goodness and mercy will follow us to the ends of our days! Certainly we live in a cleaner, healthier, wealthier, safer, happier world than our parents’ or grandparents’ world – than we are led to believe. If you have been to our offices, you have seen one of my favorite books prominently displayed for all to peruse: It’s Getting Better All The Time, by Stephen Moore and Julian Simon. You may know Mr. Simon as the fellow who bet Dr. Carl Erlich $10,000 in 1984 that the prices of a basket of commodities – to be chosen by the good doctor – would each be lower a decade hence, refuting his argument of global scarcity. He won handily, although he was never paid… The point is this: scarcity is a matter of conjecture. Supply and demand elasticity is profound, which means prices and supply are dancing a Tango with no predictability, no knowable results. Simplistic jargon is the enemy of knowledge.


Fear is an easy story to tell. It requires no previous knowledge (as does ‘supply and demand elasticity’). It is easy to describe in words and in the elevator. It works with sound bites. While usually groundless, it can be ground shaking. Our emotional response can be both overwhelming and spontaneous. Our response is also uncontrolled. Fight or flight, we are trapped in the ultimate Hegelian dialectic of every predator/prey in Earth’s long history. We require an act of faith in reason to overcome the chemical charge. Reason is intellectual. Fear is chemical. You may have lost the battle before it has begun if your response to fear has to be considered before accepted. You have no choice but to fight or flee.


Yet fear’s greatest enemies are facts. Facts are universally agreed upon. They are the atoms of which the world of humanity is composed. They distinguish us from beasts. They are our fleeting contact with the Eternal, with God, with our humanity. Each of us must engage each day in Milton’s battle. Take down Paradise Lost from the bookshelf. Download it – it’s free – and read his tale of good and evil. It is Gilgamesh told once again. It is the Baghavad Gita. It is Star Wars. As humans, we are embattled with the Dark Side and its Death Star. We can succumb to its universal appeal or fight with the few weapons we have. Reason is a strong weapon. While it can be weakened with disuse, it remains formidable. Faith is our strongest: faith in ourselves, our family and community, in our nation, in our Creator. Unbounded faith can lead to black holes, just as twisted reason can destroy worlds. Strength of purpose – integrity – offers us rescue. Integrity of beliefs and of person urges us to consider, with due reflection, before we run raging into the night. We are neither Vampires nor Undead. We have the gifts, the sword and sheath, of reason and ethic.


In the struggle to understand, we are often told of distinctions between right and left, red and blue, God and Mammon, East and West, good and evil, ‘ the devil and the deep blue sea’. This framing allows the story to be told in a simple manner. It is the basic tool of all storytellers since ancient times. It is a false dichotomy. Very few things in our world are simple, fewer are simplistic, none are two-sided. Every story has the glint of a diamond, with brilliant colors emerging with the storyteller’s skill. We first learn with a simple tale, then it is embellished with back-story, with color, with romance and intrigue. Thus each poem, novel and script becomes real. In the non-fiction world of news and politics and science, storytelling is often lost. A good editor will encourage a reporter’s tale; a typical editor simply works to a deadline. Story becomes fear. Fear sells advertising. Next story.


In the struggle to dominate, simplistic dominates color. Fear sells. Move on. Organization is bereft of depth. Clubs are encouraged. Defense is raised, to attack a perceived enemy. My final point here is complex: dig below the surface of any story that interests you. Ask questions. Check facts. Know the writer and the source. The battle is not about left or right. It is not about the environment or capitalism. These are false fronts, Potemkin villages portraying a fiction (a Potemkin village is like a Western movie set with nothing behind the storefronts). These urge you to view things – issues – as either/or, good/bad. These are tools of deception.


The real game is power. Dichotomies allow the powerful to manipulate the story until it is no longer a story – it is a tirade, a polemic. The distraction is far more important than the truth. If you are so distracted that you swallow the line, you are caught. You are sold the fear. You buy the product. Your ignorance is their bliss. They laugh at your chains. They have forced you into the age old fight/flight choice. Your have become the animal in their cage. You are their infidel, to be destroyed at their whim.


Reason. Think before you respond. Yes, the markets will be down significantly today. Perhaps for the summer. Understand how things work. Rather than be worked, work information to your advantage. As Baron Rothschild said in 1874, as the streets of Paris were in flames from the Communard attacks, ‘Buy when blood runs in the streets’. Warren Buffet has been stirring the pot recently; follow his advice: ‘buy when everyone else is selling, sell when everyone else is buying’.


Above all, charm the bastards!


Eat wisely.

Sleep well.

Love with abandon.



Mr. Lincoln was shot during a performance of a hit stage play last night and died in the early morning hours. The play remains a huge success across the Eastern Seaboard. Please consider our advertisers products.

In so many words, the death of the president was announced to the nation 150 years ago. The stories ranged from a review of the play to the story’s placement on the front page next to an ad for The Elixir of Love. Funny how the media views the world through its own lens.

Of course, we do the same today. The media tells their stories: ‘if it bleeds it leads’.

We readers digest what we choose, as we wish. You could easily imagine these headlines from central China 600,000 years ago:

Fire and Light

Ug brought light into his cave today with a burning branch. Ms. Ug promptly cooked a meal for the first time.

Heavens Angry

Ug tempted Fate and brought destruction upon his fresh meal by an ignorant wife.

These headlines from today’s press, stand out from the crowd.

While related to energy as a whole, they have their own significance:

Yucca Mountain, NV Declared Safe for Nuclear Storage

US Natural Gas Potential Increases Again, to 2,505 Trillion.

Global Leader in Oil & Gas Production: USA

US Senate Rejects Wind Energy Tax Credits

US ON Verge of Energy Independence–on-verge-of-energy-independence–peter-kenny-171324902.html.

IPCC, Oregon Governor, Join Al Gore in Sex Scandals Parade

Founder of Greenpeace, Patrick Moore, Remains Climate Change Skeptic

Perspective. It changes how you view your surroundings. Today’s intention is far less about the substance of the stories above, far more about the manner is which they are presented. Just as locating a headline next to an ad for sex therapy helped to sell papers in 1865 New York, so too does the title of a story today help sell the idea globally. The story could be told from exactly the opposite perspective, as long as it sold…!

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