I’m leaving for Sweden Wednesday June 17 to spend some time with family and friends, and then bring Hampus and Linus to Texas for the summer!

Once is random, two is a coincidence, three is a pattern.

Ernie, I thought you were in Denmark..!?

Don’t bail them out. Please. Let them go into bankruptcy and figure out who they are. Charles Wheelan can put it better than I can:

The Naked Economist

-mag

Ted Turner totally owned Lou Dobbs on CNN today. It was beautiful..!

The Fourth Republic

Instant Gratification versus Delayed Gratification. If Patience is a Virtue, then Impatience is a Vice. “You better have it today cause tomorrow you might not get a chance.” Today’s culture has become one of sooner rather than later. It’s what it’s all about. That’s why we max out our credit cards instead of saving up for purchases, and that’s why we spend our cash today instead of putting enough in our 401(k). Why can’t we wait for anything anymore? Why are most people acting like teenagers? Why don’t we accept our own responsibility? Why do we deem this behavior acceptable? Why is it so hard for us to do the right thing?

For one, the marketing experts’ continuous bombardments through the years have worn down our defenses. It’s hard to turn a deaf ear to the beautiful music of must-have messages. Secondly, like teenagers we want to be like everybody else. If other people can have it, we lower our own standards. Thirdly, we have the issue of short-term thinking. Most everybody is guilty of this. The auto industry and the union both wanted us to drive SUVs so they would be better off. We bought them to make our family safer, but at the expense of other people’s families. In the process, we made the Saudis richer and ourselves poorer. Now the auto industry and their unions want us - the taxpayers - to bail them out, just like we did the banks. Again, we’re supposed to bail out the guys that got us into trouble the first time. Immediate gratification. So why were we so short-minded? Why did we buy houses we couldn’t afford? Why did the banks borrow us the money to do it? Why did the government encourage the banks to borrow us the money? Because of short-term thinking. A donut today is better than two tomorrow.

We have ended up living in denial that there even is a future and we have not been adequately financially educated to make the correct long term decisions for ourselves. A few people out there are making a lot of money from our misery. We need to make sure our children are better off than we are. Take control over your own life! Seize the opportunity today to control what you can, and then work to increase that circle of control. Put the long term into perspective. Figure on it. Put in in a spreadsheet. Experiment. Ponder it. Do it! All of us will be better off, well maybe except the ones that are living of your misery right now.

Read on about Instant Gratification.

Love this poster!

Over the last year I have seen two words in the news more than any others. Trust and Fear. In our technologically and socially advanced time it’s striking to see that when push comes to shove, it’s all back to the basic - the good ol’ emotions. We react almost panic-strucken to events around us, worried and scared that even worse things are around the corner. Who knows, the unknown is out there, out to get us all. The herd of humanity has been driven by fear down to levels where we soon can’t stand it any more. It makes you wonder, why don’t we just all collectively run off the cliff together? The only ones that don’t fear anything are the ones that already are at the bottom! The rest of us are scared to death about losing our jobs, losing our house, and losing our precious flat-screen TV. It’s pathetic when you think about it. How did we get here and how are we going to get out of this? How can we build trust again? First of all, let’s realize that America created this economic catastrophe and guess what: America will get us out of it. The Bush administration has long ago used up all their credibility and the Obama administration will have a less than optimal starting point. Chaos at Wall Street and Main Street. Over ten trillion in debt. An environment in despair. And we put all our trust to one man. Like he is the Messiah that will save us all. Like it was the Republicans fault and now the Democrats will save us. Like we don’t have roll up our sleeves and save ourselves! Get ready for a change - and how about making that change yourself first. Talk to your family and your neighbors. Decide on what’s important for you. Do you really want to make decisions based on fear? Why not seize on the opportunity to build some trust. We will always have the politicians we deserve - because we keep electing them! Let them know what you think should be done in order to build trust - and here’s my list:

1. Ensure the rest of the world - our customers and vendors - that they can trust us enough to do business with us again. We won’t make it without them. If they think all they will get from us is protectionism, weapons and worthless pieces of paper with our dead presidents on them, they certainly will not trust us. Fortunately for them, that’s a loss of only 5% of the world’s population. We need them much more than they need us.

2. Establish programs to build our way out of this crisis - in an environmentally correct way. Our infrastructure has been neglected for too long and it’s about time anyway. One by-product will be that we put millions of people to work in production and they in turn will put even more people to work in service and support sectors. Another one will obviously be a healthier environment, which after all is even more important than our economy! Take T Boone Pickens up on his wind programs, make use of the natural resources we have - and build out the nuclear and clean-coal programs - or tell me, what alternatives do we really have?

3. Lower corporate taxes to slow or at least stop the flight to low-cost countries. Why do we voluntarily force away jobs that can be done here when we instead can keep the money in the country?

4. Pave the way to the American dream for the future generations. Provide world-class health care and education to all children and end the ridiculous practice of linking access to college funds to parent’s incomes. Of course, we must also provide the world-class health care to our veterans that got injured fighting our wars for us.

5. Establish a price-discovery mechanism for financial assets. See Jeff Miller’s article.

6. Lat but not least, remember that we got into this mess largely because of lack of regulation. Even Greenspan has admitted that capitalism isn’t bright enough to regulate itself. So implement intelligent and transparent regulation legislation that includes trading the by now infamous derivatives on regular exchange, instead of over the counter - or *under* the table.

Hi,

I want you to take a look at : 24/7 Wall St.: Obama, Broke Now, And More Broke Every Day: Credit Default Swaps On US Debt

The American people has mandated Barack Obama, the new President of the United States of America to lead them towards the future. A future where the USA lives up to its creed of liberty and justice for all, builds relationships with other nations and accepts its responsibility as leader of the free world. The history is past and we now have to work to make our and our children’s future better. The speech John McCain gave in Phoenix last night said it all. I wish more politicans could be like him: Gracious, serene, and tolerant. That’s Respect, right there. Of course, there will always be fear-monglers and people looking back but right now the momentum is in the hands of the creative, striving, can-doers.

Food that’s good for you:

100% Natural Orange Juice
Any Tea
Apples
Beets
Broccoli
Cocoa-based Chocolate
Corn
Cranberries
Four fruits per day, especially bananas, avocados & melon
Grapes
Oats
Olive Oil
Onions
Raisins
Red Wine
Salmon, Cod or Bass
Soybeans
Spinach
Tomatoes & Tomato juice
Walnuts
Whole-grain bread & cereal
Yogurt (Low-sugar)

-mag

We are wired to fail. At least most of us, the ones with normal brains. We think too much, analyze too much and adjust too much. Some of us get in to credit card debt and others try to time the stock market. Get a pair of Small Cap Value Index funds - domestic and international - then put your investments on autopilot and forget about them. Pronto! Read on:

http://www.financialpost.com/money/wealthyboomer/story.html?id=f505b387-0cd5-477f-b1a4-14c4f359685b

-Magnus

Do we give our four-year-olds vodka and guns to play with? Even Alan Greenspan and Bill O’Reilly now think we need government to increase regulation. Greenspan was shocked that capitalism failed to regulate itself. Ha. Does he have kids? Come on. It’s just amazing how people and even countries can fail to learn from other’s experiences. We just had to bang our head into the concrete wall all on our own. Now… let’s stop trying to sub-optimize ourselves, our city and our country. There’s a whole world out there and we need them to buy our stuff and vice versa. The international community needs to  work out a financial system for the future, one that both ensures oversight and an even playing field. As for the American people, roll your sleeves up and get your hands dirty. There’s no such thing as a free lunch and it’ll hit hard when the general public realizes that…

-mag

The current economy gives great opportunities for investing. It’s practically buy one get one free! But don’t give your money to the fund managers. Instead, invest in index funds. Low-cost index funds. It pays in the long run, and that’s what you’re in for when it comes to retirement. My employer has an S&P 500 index fund with an overall cost of 0.18%. Look for something like that, preferably with even more stocks. 70% US stocks and 30% International. Unless you’re close to retirement, then you need some bonds in there as well. Rebalance every year to keep the right balance. Never ever ever have more than 5% employer stock.

Thank you Fareed!

Went sailing today with some colleagues in the Annapolis bay. Great fun..!

dsc00038.JPG

dsc00031.JPG

dsc00034.JPG

dsc00036.JPG

dsc00035.JPG

-mag

Scott Adams alludes to one of the major changes that affects our investing and thereby the economy as a whole. It’s a lot easier to act with herd mentality when anybody can execute their market orders  with a moment’s notice…

http://www.dilbert.com/strips/comic/2008-10-16/

-mag

And here I thought the republicans were the big tax-cutters.

Source: Yahoo Finance

-mag

The 11-12% jump for the Dow and Nasdaq today shows how ridiculously short-minded the American investor has become. We are way past the quarterly reporting period addiction and so deep into instant gratification that we go into an insane buying frenzy on a daily or hourly notice. And I’m not talking about Wall Street investors now, I’m talking about regular Joe’s that is trying to time the market with their 401(k) funds. What do you think will happen tomorrow?

Remember the post “Credit Crisis passing? Stock market bottom? Prepare for reentry.“..? One can almost think that nobody out there read that blog posting :-). What we need is trust, and an up and down roller coaster on Wall Street will not give the rest of the world any more confidence that the we Americans, that got us all into this mess in the first place, have learnt anything at all. Anyway, to make it easier to find information, here are some links (compare to historical rates):

1. LIBOR rates

2. Treasury Bills (Fed Statistics, Buy Treasury bills here)

3. 30-day commercial paper (A2/P2 non-financial) (Explanatory Article from Financial Week)

So, if you missed out on today’s craze, don’t worry. Look forward instead; slow and steady wins the race. The next few months are going to be interesting. Speaking of cycles, check out Harry S. Dent Jr’s book “The Great Boom Ahead” where he discusses the concepts of Generational waves (or cycles). In particular, he points out that most people reach the peak of their spending power at the age of 46. And guess when 80 million baby-boomers will reach this age? I’ll let you think about it and comment.

Cheers,

-mag

The Universe, the solar system, the earth and its seasons, the moon and the tides, night and day… cycles are a natural phenomenon. The economy behaves in a similar way. Because of how our collective psychology work, we experience cycles in the economy. Markets go up and down, and right now we are experiencing what some people think is “The Perfect Storm” of downsides in cycles, meaning that many factors, many of them cyclic, line up at the same time to bring the economy to a standstill. For an introduction to economic cycles, read this article from Investopedia:

http://www.investopedia.com/articles/technical/04/050504.asp

Then check out the article on Stock Market Bottoms on Wikipedia:

http://en.wikipedia.org/wiki/Stock_market_bottom

From CNN today:

“It’s ($10,150,603,734,720) a very big symbol. It’s a complete failure of the system. It’s the most powerful country in the world with a conservative government for the last eight years, and it’s running the biggest debt ever.”

/Svet Stauber, Switzerland

Laura Rowley comments on Robert H. Frank’s book “Falling Behind: How Rising Inequality Harms the Middle Class.”

Consider housing. “Top earners have more money, so they build bigger mansions,” Frank notes. “The middle-class doesn’t care, but the new mansions shift the frame of reference that defines what people just below the top consider desirable or necessary. So people just below the top build bigger.

“Their spending, in turn, affects others just below them,” he adds, “and so on, all the way down the income ladder. As a result, the median size of a newly built house in the U.S. is more than one-third larger now than in 1980, even though real median family earnings have scarcely risen since then.”

http://finance.yahoo.com/expert/article/moneyhappy/42215

Laura Rowley: Wilcox argues that savers who are dutifully contributing to their 401(k) plans face a real risk, because they won’t pay taxes on the money until they retire. “It’s easy for me to imagine 10 years from now a political candidate saying, ‘We have all these people with $3 million in their 401(k) plans and we need to impose taxes on those people and shore up Social Security for people who didn’t have access to these 401(k)s,’” he says. “It’s a big fat target for politicians.”

http://finance.yahoo.com/expert/article/moneyhappy/113568;_ylt=AjgGdYhfMgPVYZLOJFChq1q7YWsA

a) Jimmy Carter, Bill Clinton, Barack Obama, ACORN, Community Reinvestment Act (CRA) & Democrats in general that made it easier for poor people to become homeowners and then blocked the republicans from changing that policy. (NY Times Article, Video)

b) George Bush, John McCain, Paul Wolfowitz & Republicans in general that spent all our money on the Iraq war while they at the same time advocated small government and stayed clear of regulation and market forces. (More, Fox News)

c) US politicians in general for bailing out Wall Street and those wealthy bankers and investors instead of following the will of the American people and let nature and capitalism has run its course.

d) Alan Greenspan & The Federal Reserve in general for creating a derivatives bubble instead of putting American currency and financial system first.

e) George Soros & speculators in general that benefitted from the market going up… as well as the market going down…

f) Freddie Mac & Fannie Mae that guaranteed anything. With these guys as back stop, anything goes.

g) Lehmann Brothers, Bear Stern, Merrill Lynch and other Wall Street Investment Banks that sold worthless derivates that were bundled with highly rated mortgages in infinitely complex packages.

h) Country Wide, Wachovia, Washington Mutual and other Main Street Mortgage Banks that were happy to sell regular home-buyers way too much house as the loans were guaranteed by Freddie Mac & Fannie Mae. They should have verified us loan-seekers better..!

i) Hedge funds that short sold us into this mess by artificially driving up stock prices.

j) Real Estate Appraisers that appraised house prices as high as possible to make their cut higher in collaboration with mortgage brokers.

k) Selected underwriters like Moody that swore mortgage securities were worth way more than they turned out to be.

l) Greedy and fraudulent mortgage brokers that pushed way too much house and interest on people that can’t afford it and banks who were misled in order to maximize their own share.

m) Jim Cramer and financial advisors in general that told people to sell their stocks and invest in safer instruments.

n) The Educational System that didn’t teach the people enough about financial matters.

o) Low-income house owners that wanted more house than they could afford, for high interest, interest-only loans with 0% down, no matter if they had poor credit or even a recent bankruptcy.

p) The self-fulfilling prophecy of individual Pension-fund (401k) investors who sold their stocks when they panicked over dropping prices which in turn led to more and more and more people selling their stocks as well… and so on.

q) The economists of America that didn’t warn us that this would happen. I mean, isn’t that why we have these guys around anyway..?

r) The American People that voted all these incompetent politicians into office in the first place, refused to buy American-made cars, and that insisted on buying low MPG SUVs that made us dependent on the Saudis.

s) The Saudis that took all our money and gave us expensive and environment-ruining oil!

t) The Chinese that also took all our money and gave us plastic toys in exchange.

u) The Russians and Venezuelans that don’t play fair and is increasing their economic and military influence as we speak.

v) The Swiss and German bankers that own half of America. Or did, before they realized that their derivates are worthless.

w) The French… that… surely did something mean again… because we know how they are..!

x) Those sneaky Iranians without who we wouldn’t have to worry so much about our Israeli friends.

y) The illegal immigrants that came here and stole my job!

z) The employers that rather employ illegal immigrants than high paid Americans.

aa) The unions of America driving up salaries so high that Americans became unfavored compared to sweatshops in Asia.

ab) The Global economy, NAFTA and those evil capitalists that outsourced my job to India.

ac) The stockowners of publicly traded companies that craved ever higher profits, dividends and an increased stock price, even if that means the board had to hire a CEO that outsourced American jobs to India.

ad) The greedy elite investors, CEOs and their clique that created a pyramid scheme transferring billions from the bottom to the top, while at the same time taking out millions in bonuses and gold parachutes.

ae) Greed in general and the idea that what is good for the individual is also good for society.

af) Anybody but you because you are living in denial..!

ag) Our psychological reactions are to blame, we can’t help it.

ah) God who created man to his like.

ai) Some of the above.

aj) Anyone or anything else that is not mentioned above.

ak) All of the above.

al) None of the above.

Re-establish trust.

Top Guns Trading recommends too look for three indicators:

1. LIBOR needs to get back to normal in order for the banking logjam to break.

2. T-bill rates must rise before we can say things have calmed down.

3. 30-day commercial paper (non-bank) must get back down below 3%.

http://www.topgunstrading.com/section_detail.php?service=ma&section=t442

I think it is pitiful how our elected officials in general and our presidential candidates in particular go to extremes in order to mislead the public. It is un-presidential and below them. Is it too much to ask for some *real* Straight Talk? Do they think they can’t win with out this crap? Is winning more important than the truth? The people is fed up of being lied to. Demand honesty from your people you elect as your leaders or have them fired on November 4.

The referees keep a lying tally…:

http://www.factcheck.org/elections-2008/the_whoppers_of_2008.html

A big problem right now is the advent of online employee-controlled 401ks. Regular folks can and do go in and change allocations from stocks or mutual funds to bonds overnight when they reach their pain threshold which only means that  the next day another few million people will reach their pain threshold… and so on. It’s a self-fulfilling prophecy. In our attempts to individually save ourselves, we collectively commit suicide. Don’t you love herd mentality?

So, if everybody now could just pretty please change their allocations back to stocks, say… ehh hrrm, Tuesday, then we will all be fine.