2011-04-27

Economics in parable

种桑误国的感想

版本一
齐国本是一个海边的小国,姜太公初封时地不过方圆百里,而且很多是不适合粮食生长的盐碱地,粮食生产和人口都不多。
春秋战国时期,齐国一跃成为东方超强。究其原因,与管仲的粮食战略有很大关系。
鲁国和梁国是齐国的邻国,其百姓善织绨。绨就是一种丝线做“经”,棉线做“纬”织成的纺织品。管仲劝齐桓公穿绨料做的衣服,并且让大臣都穿。一时间,齐国上下以穿绨为时尚,国内绨价大涨。管仲趁机诱使鲁梁与其贸易并且出价远远高于市场价格。鲁国和梁国在与齐国通商的过程中大发横财,遂举国种桑,放弃农业生产。
与此同时,管仲大力发展齐国的农业生产,增加粮食储备。待时机成熟,管仲又劝齐桓公改穿帛料衣服,再不让老百姓再穿绨。管仲义闭关不与鲁梁通商。几个月后,鲁梁之民饿馁相及,此时国君幡然醒悟,然而为时已晚,粮贪不可能在短时间内产出,不得已归顺齐国。管仲用同样的方法制服了楚国和代国,分别是高价购买楚国的鹿和代国的狐皮。

另一个版本
很久以前,一个大国的皇帝命令大臣们都必须穿丝制衣服,而自己的国家只准种粮食不准种桑树。这个国家的的丝价就猛涨,大臣们都穿丝制衣服又带动了本国的有钱人都穿丝制衣服,这个国家的的丝价就涨得更高。于是,其它小国就纷纷种桑养蚕不种粮食,卖丝赚银子,不亦乐乎。过了几年,这位皇帝又突然命令全国人只准穿布衣,违者严办.并不准卖粮食给其他小国。这样这些小国的人就纷纷饿死或发生暴乱。而这位皇帝就轻易“赚取”了这些小国。
The Google translate is messy, but it's a simple story. One ancient kingdom started importing a lot of silk, while simultaneously banning domestic production and ordering food production, causing the price to rise. The silk exporting kingdoms cut back on food production and planted mulberry trees to grow more silk. Eventually, the importing kingdom stopped importing, causing the silk price to plummet, and stopped exporting food, causing the silk exporting nations to starve. The county producing food was able to conquer these countries without firing a shot.

Liu Jun Luo used this story to illustrate the strength of U.S. agricultural production.
The video is in Chinese, if you want to watch and the embedding doesn't work, here's a link to watch it. It's a children's cartoon, so one can get the gist from the images.

Socionomics Alert! SETI Closes!


SETI Institute to shut down alien-seeking radio dishes
Lacking the money to pay its operating expenses, Mountain View's SETI Institute has pulled the plug on the renowned Allen Telescope Array, a field of radio dishes that scan the skies for signals from extraterrestrial civilizations.

In an April 22 letter to donors, SETI Institute CEO Tom Pierson said that last week the array was put into "hibernation," safe but nonfunctioning, because of inadequate government support.
Blogger Vox Day wrote an article more than two years ago about the popularity of fantasy versus science fiction, based on socionomics.
It is a fairly well-accepted idea that science fiction is an expansionary phenomenon. Its Golden Age is not only simultaneous with the great American economic expansion of the 1950s, but its general theme of onward and upward combined with its ardent technophilia and utopian politics is entirely in keeping with a bullish mindset. Indeed, the very construction of the vast space fleets and galaxy-spanning civilizations inherently assumes massive economic growth exceeding anything that has ever been seen before in the entire history of Man. Most modern fantasy is of a similar bent, in that it tends toward the utopian, the progressive, and the economically expansive. The world of Harry Potter, for example, is a peaceful and wealthy one in which children are viewed as economic burdens and the source of sub-normal consumption capacities rather than as the productive resource that they have historically been considered in less fortunate times.

It is interesting to consider, then, that Burroughs published both his Tarzan and his Barsoom novels during the pre-war recession of 1912-1914. Howard published the first 18 Conan stories in the midst of the Great Depression of the 1930s, and John Norman’s Gor novels hit the height of their popularity during the extended economic morass of the 1970s. Both Tolkein and Lewis, of course, published their classic works in the 1950s, but they did so in a post-war England that was not enjoying the manufacturing boom that was taking place in America at the same time.
With Game of Thrones airing on HBO, a show based on a fantasy novel, there's confirming evidence in the entertainment sector. However, the closing of SETI is a stronger confirmation of this argument and I see at least three effects of social mood interacting here.

First, the search for extraterrestrial life is a perfect example of positive social mood expressed through openness to foreigners/others.

Second, this very unsuccessful effort is tied to peoples' beliefs about the world, i.e. people must believe there are extraterrestrials to find and they must think about them, despite no evidence, and they must also believe that these beings will be friendly, rather than hostile. Recent movies such as Monsters, Battle: Los Angeles and Skyline are just a few that have come out in the past 6-8 months, and all portrayed aliens as hostile or threatening. I don't know the plot of Super 8, but the trailers suggest a less than benign alien being.

Third, there's the economic component. Resources are scare and cuts must be made. Any budget cuts could fit this story line, but for socionomic reasons, it makes sense that an effort such as this would be cut. It is almost science fiction itself, given that it is, at this point, no different than ghost hunters or a scientific search for proof of God's existence, save for the millions in funding and high tech equipment. It is an act of faith carried out by a part of the scientific community, and it has met negative social mood head on.

2011-04-25

Energy, regulations driving food costs in China

Officials in quandary on prices of vegetables
But retail prices in many community markets in Beijing, a major consumer of vegetables produced in Shandong, have not fallen accordingly. Wang Wanli , a vendor at the vegetable market in the Tuanjiehu community, said cabbages now sold for 1.6 yuan a kilogram, when during good times they sold for three yuan.

"The purchase price might be lower, but you still need trucks for transport, and rent is always rising," he complained.

Professor Li Guoxiang , of the Chinese Academy of Social Sciences' Rural Development Institute, agreed that high transport costs, which include increasing diesel fuel prices, and rising rent for stalls in markets had offset the wholesale price drops.

"The two ends cry and the middlemen laugh - that's how we describe China's farm produce supply chain today," he said, implying that most of the benefit had gone to traders while growers sold at low prices and consumers paid high prices.
I'm not even sure the middleman is happy with this arrangement.

2011-04-18

True Finns can thank social mood

Is it a coincidence that the True Finns win a resounding victory in the Finnish election and the following day fears of a Greek default ignite? Only if you haven't been watching the yield curve on Greek and Portuguese bonds. Yields have been moving higher this year and the True Finns victory and the high yields are both results of negative social mood.

Here's a Finnish editorial on the True Finns' victory, EDITORIAL: Timo Soini rewrote the electoral history books
The success of the True Finns was even more emphatic and dramatic than anyone, with the possible exception of Soini at his most optimistic, had dared to expect.
Soini and his troops effectively channeled and ignited a sense of protest that has long been smouldering in the public mind.
With his own haul of more than 43,000 individual votes in Uusimaa, Soini became the most popular candidate in the entire country, even if his tally fell far short of the massive 60,000 and more collected by Sauli Niinistö (National Coalition Party) four years ago.

The National Coalition Party, too, enjoyed a historic victory of a kind, albeit not with a historically high share of the total vote.
For the first time in the party's history, the National Coalition became the largest grouping in Parliament, with 44 seats. Despite suffering a loss of six seats from the previous elections, the party chairman Jyrki Katainen, as prime minister designate, will be the first who is charged with attempting to form a new government.
True Finns tapped into the social mood and won big. How did the forces of moderation perform?
To add still more to the sense of history in the making, on Sunday the Centre Party achieved a historic result, in that they suffered a defeat of unprecedented proportions and went from being the largest party in the country - with the prime minister's portfolio - to a rather distant fourth and an immediate exit into opposition.
There is no doubt that Prime Minister Mari Kiviniemi and the Centrists were left to shoulder the responsibility and the blame for the support of eurozone countries that have got into difficulties.
When Finland joined the euro, the Centre Party was in opposition and opposed our entry into the eurozone.
The opposition benches also beckon for Anne Sinnemäki and the other Greens, who lost seats and votes.

There was actually a third winner in this election: Finnish parliamentary democracy.
Voter turnout improved appreciably from the figure in 2007, to reach 70.4%.
This gives a strong mandate for the work of the new Parliament.
Turnout up, moderates out, nationalists in. Expect more of the same in the ensuing European elections. Although the parties in and out of power may shift from left to right, anti-bailout policies will be espoused by most of those who outperform expectations.

Recall that last month in Germany and France, the parties in power were dealt losses. This headline from the Guardian tells you all you need to know about the results: French local election gains for socialists and far-right.

2011-04-16

Here come the True Finns

Who are the True Finns? While the party seems to espouse typical Northern European economics, it sets itself apart with pro-Finnish populism and nationalism. The media hasn't done a good job covering them, surprise surprise, but here's an article that at least offers some objective views mixed with commentary. Timo Soini, True Finn in sheep's clothing
Demonstrating a mastery of the background to political issues, his answers to questions are usually to the point. But he is also an outspoken populist intent on surfing the wave of ambient discontent with a ready supply of simplistic responses to complex questions.
Here's the most important section:
His main hobbyhorses are Finnish withdrawal from the European Union and restrictions on immigration. He also believes that Finland should abandon the Kyoto Protocol and that the Church should oppose same-sex marriage. Soini is very careful to distinguish himself from racists, and often refers to his Roman Catholic faith (he converted to Catholicism when he was a student in the 1980s) as proof of his conviction that all men are equal.

Soini has become a darling of the media

His detractors have remarked that his demagoguery appeals to a xenophobic section of the electorate, and that he deliberately allows these voters to believe that he represents their values. In reality, Timo Soini’s line on immigration policy has little to do with his success, which is primarily due to his ability to reach out to the growing fringe of voters that have given up on politics.
Here's the socionomic explanation and the media's ignorance of it in a nutshell. The party has taken on positions that are unpopular with the European elite, namely anti-immigration and anti-EU, which according to the elite means they are just a bunch of ignorant racists. In fact, the party is tapping much deeper discontent, voters dissatisfied with Finnish society at a fundamental level, enough so that supporters are those who would rather leave politics.

The focus on the party's immigration and social positions, however, are a sideshow to the main event, which is the ongoing bailouts in the Eurozone. There's an election in Finland today and the outcome could affect the current European policy.
The True Finns, he said, would probably tone down its rhetoric as a condition of joining government. The Social Democrats, who are critical of the bailout plan but supportive of the EU, would be even easier to get on board, he said.

"Either it's a pre-condition for them to support Portugal in the next government, or at least not to vote against it... I'm sure that Finland will be in line with other European countries in the next government," he told Reuters.

The True Finns have said they have no intention of backing down from their opposition to the bailout plan, but political analysts said the party and its charismatic leader, Timo Soini, would probably compromise if needed.

"It would be strange for a party to grow so much but not want to use that power and enter government," said Kimmo Gronlund, research director at Abo University.

Support for the True Finns has nearly quadrupled since the 2007 election. Analysts say many Finns have become disenchanted with the other main parties, as combinations of those three have run the country for decades and voters feel they have lost touch with the people.
Note the party's rise right in tune with social mood. Politically speaking, if the choice is accept an unpopular bailout or stay out of government (60% of Finns oppose a bailout), I suspect taking the second option would result in True Finns winning first place in the following election.

2011-04-13

While the U.S. is navel gazing

the Chinese are looking to attract talent.

`Peacock' plan unfurled to give Shenzhen tech edge
Shenzhen will spend up to 500 million yuan (HK$594 million) annually over the next five years to draw overseas professionals to the city's new energy, internet, biotechnology and industrial sectors and boost its competitive edge.

The ambitious "Peacock Initiative" campaign will see the the municipal government spend 300 to 500 million yuan each year on living allowances and research subsidies to attract some 10,000 talents in high technology, finance, logistics and culture, Xinhua News Agency said.

Those joining the scheme will be eligible for overall subsidies ranging from 800,000 yuan to 1.5 million yuan. They will also enjoy privileges such as medical insurance, children's education allowance and employment opportunities for spouses.

Special assistance on immigration and housing will also be provided.

Apart from individuals, the scheme will also recruit talented teams, with each standing to get up to 80 million yuan in subsidies for research and business development.

Fifty teams along with at least 1,000 individuals will be brought to the city under the scheme, attracting a total of 10,000 talents, the Shenzhen government said.

2011-04-09

Dr. Joseph Tainter presentation

Parts six and seven are the question and answer session.
Part One

Part Two

Part Three

Part Four

Part Five

Part Six

Part Seven

Marc Faber on King World News

Always interesting to hear his take on the situation.
Marc Faber, Thursday, April 7

Beijing villa sales drop, but average price up

北京别墅成交量大跌 “千万级”拉抬均价
Transaction volume fell 74% year-on-year, but average price climbed to 30,611 yuan/square meter. The article notes that there are four groups of houses in the market: 5 million yuan and lower, 5-10 million, 10-20 million, and more than 20 million. In terms of USD, that's about $750,000 at the bottom level and $3 million and up at the top end.

Transactions lead prices; if the market is slowing, prices will come down in the coming months.

ICBC customers traded 24,400 tons of gold in 2010

In precious metal business, ICBC is leading the peers by posting a turnover of 24,400 tons, an increase of 23.6-fold from 2009
Amazingly, only 1500 tons were traded in the first half of 2010!

This is old news from January, but gold volume has probably picked up considerably in 2011.

Gold is not a bubble, but it is at bubble levels of activity in China. There are ads for precious metals, from trading to banking services, at the subway and in apartment buildings.

Beijing taxi fuel surcharge up 100%

If you take a taxi in Beijing, in addition to the stated fare, you have to add 1 yuan as a fuel surcharge. As of today, the surcharge is now 2 yuan.

China to hike the poverty line

谁是中国的穷人, or, Who are China's poor?
在2010年国家统计局统计公报中,这条线划在了年均纯收入1274元,按此计算,年末贫困人口为2688万。日前,中国扶贫开发协会执行副会长林嘉騋在接受《人民日报》海外版采访时表示,今年的贫困线或将上调至1500元,贫困人口总数“再回到九千多万甚至上亿都有可能”。“中国有上亿穷人”,这一事实并不令人惊讶。对照世界其他国家,中国政府发布的贫困线标准一直被认为严重偏低,导致不少人“被脱贫”。国务院总理温家宝就曾公开表示,如果按照国际标准计算,中国仍有1.5亿贫困人.
Google Translate version (edited due to glaring translation errors):
National Bureau of Statistics 2010 communique, the line drawn in the average annual net income 1274 yuan, the figure was 26.88 million at the end of poverty. Recently, the China Association of Poverty Alleviation and Development, executive vice president of Chia-mare to accept the "People's Daily " Overseas Edition interview that this year's poverty line or will be raised to 1,500 yuan, the total number of poor people "go back more than ninety million or even 100 million Are possible. ""China has over 100 hundred million poor ", a fact not surprising. Control of other countries, the Chinese government's poverty line has always been considered a serious low, resulting in a lot of people "were out of poverty. " Premier Wen Jiabao had said publicly that, according to international standards, China still has 150 million poor people.

如此悬殊的差异使得中美两国穷人的生活基本不具备可比性。根据两位美国学者的研究,在美国政府定义的穷人家庭中,46%已购买并拥有自己的房子,他们平均每家有一个门厅、三个睡房、一个半浴室、一个车库;73%的家庭拥有汽车,其中近三分之一有两台或以上的汽车;美国穷人的孩子,不仅没有营养不良问题,而且他们获得的营养物质和中产阶级家庭的孩子一样,都超过了需要的标准,乃至普遍超重。

但在中国,贫困线之下的人们是真正的绝对贫穷。一些国际比较的研究结果显示,与其他国家相比,中国的贫困线标准几乎是世界最低的。2011-2015年,越南农村贫困户标准为人均年收入480万越南盾以下,折合人民币约1500元,而2010年越南人均GDP为1162美元,仅是中国的四分之一。

因此有人提出,中国的贫困线更应该叫“活命线”。北京大学政府管理学院教授顾昕就认为:“可以断言,生活在我国低收入标准之下的民众,都处于绝对贫困甚至赤贫的状态;而生活在贫困标准之下的民众,应该处于极端赤贫的状态。”
Google Translate version:
This disparity between the two countries makes the basic life of the poor are not comparable. According to two American scholars, the definition of the U.S. government in poor families, 46% have purchased and have their own house, they average house has a foyer, three bedrooms, one and a half bathrooms, a garage; 73% families have cars, of which nearly one-third have two or more cars; American poor children, not only did not malnutrition, and their access to nutrients and middle-class children, more than the required standard, even the generally overweight.

But in China, people below the poverty line is the real absolute poverty. International comparative study showed that compared with other countries, China's poverty line is almost lowest in the world. 2011-2015, the Vietnamese standard of rural poor households to 4.8 million VND per capita income below RMB 1500 yuan, and GDP per capita in 2010 was $ 1,162 in Vietnam, only a quarter of China.

It was thus that China's poverty line, more should be called "survival line." School of Government, Peking University, Professor Gu Xin to think: "It is certain that standards of living under the low-income people in our country, are in a state of absolute poverty or extreme poverty; and standard of living below the poverty population, extreme poverty should be at the extreme the state. "

China mircoblog wars

In China, competing Twitter-like services are known as 微薄 (wéibó), which literally translates as micro blog. A Twitter knockoff named Fanfou (饭否) was shut down during the Xinjiang riots last year and to the best of my knowledge, it lost its first-mover advantage. Sina (SINA) appears to have taken the lead, with 56% of the microblog market. It's service was running off of its Sina.com domain, but this week it launched Weibo.com to give the service its own identity.

Tencent (0700.HK) has also stepped into the market though, and it is a heavy hitter. It's QQ messaging service is a monster, with over 600 million registered users and concurrent users peaking at over 100 million. It also offers music, streaming TV and movies, games and more through the platform. It also has social networking services and has now added microblogs. Tencent basically offers everything you can imagine and more, although it seems many of the components are not most popular.

Tencent isn't the only competitor. NetEase (NTES), Sohu (SOHU) and Baidu (BIDU) are among those looking to take market share. One battle tactic is the capture of celebrity microblogs, who attract millions of followers.
China’s Microblogging Celebs Blow Past Western Stars
Rumor: Baidu to Overhaul Microblog Platform, Poach Celebrities

Here is an in-depth Chinese article covering the topic: 微博之战——争夺中国人的“意见”与“关系”

No housing bubble in China?


Land transfer payments hit 76.6% of local government revenue.

Marc Faber nails the collapsing U.S.

I'm working my way through the Collapse of Complex Societies. Marc Faber has probably read this book, but even if he hasn't, the arguments echo in this segment. It's after the midway point, when he begins to discuss the breakdown of the system.

One of Tainter's arguments (I'm not finished with the book) focuses on the marginal productivity of complexity. As complexity rises, there are benefits to society, but like all things, at a certain point, increased complexity leads to losses. I haven't reached any counter-points by Tainter, but at this point, breaking down the system, such as decentralizing some aspects of society, or reducing the geographic area under control of the society, etc., should produce increased returns. Historically, the behavior of people in similar circumstances shows this to be the case, as pieces of the Roman Empire sought to break away, for example.

Marc lays out the dysfunction in the U.S. system. On the one side, many people do not produce and take from the government. On the other side, there are wealth producers who feel they are cheated by the system. Think about the incentives inherent in th U.S. system. Does government policy create incentives for more unproductive behavior, or less? Does government policy encourage business to invest at home and play by the rules? Or does it encourage them to move business overseas, along with their assets? Think of all the middle layers of bureaucrats needed to operate the system. Think of all recent geopolitical events, such as 9/11. The U.S. spends more money, time and labor on security, for no increased benefit. It now has three wars underway, none looking successful. All of these policies dumping money and blood in the desert are only designed to prevent greater losses, not generate positive returns.

These are some major initiatives, but if you think through the myriad of government policies, you will find the same scenarios repeated over and over. More administrative positions, more rule compliance, etc. Spending more money to deliver the same results, or worse, spending more on a failed program in the hopes of obtaining a better result.

It's not limited to government either, think of the billions in student loans and rising cost of higher education; the higher cost of healthcare; the higher cost of research and development that produces less breakthrough discoveries. Tainter identified these as being at the point of generating diminishing gains back in the late 1980s. On healthcare and education, we are now at the point where spending additional money actually increases the loss to society.

Monetary printing designed to prop up the economy is part of the dysfunction. Without money printing the economy would contract to its sustainable level and there would be "no" wealth for the rich and "no" transfer payments to the poor or the retired. (There would still be money of course, but the amount of losses would staggering. Even now, the U.S. government is borrowing 40 cents of every dollar spent. ) The money being pumped into the economy by Bernanke & Co. is inflating a blown-out tire. Some people are using the time bought by the printing to move assets overseas, some are moving out of paper currency and into stores of value, the ultimate being gold.











2011-04-08

Newmont for income

I purchased Newmont Mining (NEM) at a bit higher level than where it trades today. They've made a great move this week, committing themselves to raising the dividend along with the price of gold.

A New Day for Newmont: Gold Producer Makes Game-Changing Announcements
Yesterday, Newmont Mining (NEM) held its analyst day and made a couple of important announcements, one being that it expected production to grow from 5 million to 7 million ounces over the course of the next five years or so, and the other that it would boost its dividend 20 cents for every $100 increase in the price of gold. At today's gold price that means it will pay a divided of about a dollar, which is a yield of approximately 1.7%. But for those folks who are willing to own the stock over time, a $2,000 gold price would create about a 3.5% running yield on a purchase you made today.
You have to skate where the puck will be, not where it is. Miners will produce a lot of income if the price of gold continues to rise, while some other dividend payers of today may decline in the face of inflation. A stock such as NEM is a good balance to a conservative portfolio that lacks metals exposure. This won't be the best gold stock to own, but it's

2011-04-06

New mystery disease in China: Negative AIDS

'Negative Aids' leaves mainland sufferers, officials in the dark
The Health Ministry dismissed claims that many people across the mainland were suffering from symptoms such as swollen lymph nodes, bleeding under the skin, rashes, sweating and aching joints. Repeated HIV tests on the patients had proved negative, prompting some to say they are suffering from "negative Aids".

One man told the New Express newspaper that his mother had been experiencing numbness in her limbs, rashes and aching joints since a blood transfusion three years ago.

He had contracted the same mysterious disease after coming into contact with her blood in an accident. He had lost 30kg in six months and often vomited after eating. His wife and son later complained of the same symptoms but doctors could not tell what was wrong with them. Another man, from Guangzhou, said he developed a cold, followed by aching joints and hair loss, three days after he had a one-night stand with someone he had met on the internet.

A 32-year-old man from Shenzhen said he felt pain all over his body after casual sex and his "muscles seemed to be melting slowly". But mainland Aids experts, after two rounds of study, believed they were not suffering from the disease.

Buffett takes a direct hit on CNBC

I figured the Munger story wouldn't die, but now things have heated up quickly, with a guest on CNBC taking shots at Buffett. Here is Michael Steinhardt on CNBC:












ZeroHedge transcribed some of the conversation in Michael Steinhardt Tells The Truth, The Whole Truth, And Especially The Truth About The Greatest "Con Job": Warren Buffett
"Here in America's the biggest thing we have to worry about is how long it will take for Buffett to come down to earth where he should have been a long time ago, so people like you begin to realize his reality and get off some cloud."

"What is Buffett’s reality,”

“His reality is that he is the greatest PR person of recent times. And he has managed to achieve a snow job that has conned virtually everyone in the press to my knowledge…and is remarkable that he continues to do it.”

“Really,” Quintanila responded with a shake: “so outperforming the S&P, I don’t know how many hundred times, over the course of his portfolio…doesn’t matter?”

“Ooo, I’m not sure he’s done that. What he has done, and this is a great measure of the man’s wonder, is that he gave away two and a half cents for the first 70 years of his life- he gave away nothing- and then in one fell swoop gave almost all of his money thoughtlessly, to one guy. And from that moment on became the greatest advocate of philanthropy and pitched all the bumbling billionaires to do the same thing. That takes a special guy having given away nothing and then in one fell swoop ‘boom!’ he gives it all away and pitches the other yo-yos to give it away too. Now what does that say? I think that’s worth reflecting.”


ZeroHedge has coverage of the Munger story: Munger "Recuses Himself" As Frontrunning Focus Shifts To His BYD Purchase

Steinhardt has done the equivalent of saying the Emperor has no clothes. Given the current social mood, I suspect this will not pass unnoticed. ZeroHedge is already playing it up, but look for more articles and discussion, from a more negative angle, in the coming days and weeks.

And there's always this explanation of Warren Buffett from Kevin Depew, circa 2009:

2011-04-04

The fall of Warren Buffet, continued

Last year I wrote, The Fall of Warren Buffett and Another look at the fall of Warren Buffet. It was a look at the municipal debt situation and its relation to insurers owned by Warren Buffett and also comments by his associate, Charlie Munger. Now, there's even more mud being flung in the direction of Munger and David Sokol, who resigned from Berkshire Hathaway over an unethical stock transaction.

ZeroHedge has the scoop in Forget David Sokol, Is The SEC About To Tell Charlie Munger To "Suck It In"?
On March 31st, David Sokol appeared on CNBC Squawk Box (to the most distraught Becky Quick we have ever seen) in an attempt to explain why his purchase of of Lubrizol Corp, prior to Berkshire Hathaway's purchase of the Company, was perfectly acceptable. In attempting to provide evidence of this“perfectly acceptable” practice David Sokol said a curious thing (17 minutes 15 seconds in):

"I don’t believe I did anything wrong. Charlie Munger owned 3% of BYD before he asked me to go look at it."

Because we all know if everyone is doing it, then it isn't illegal or unethical. Especially if everyone is a member of the Berkshire inner circle. But if the SEC as is now widely reported, is about to make a public spectacle out of David Sokol (if not actually press civil charges because, well, the SEC doesn't actually pursue large scale securities fraud), shouldn't they be looking at ole' Charlie "Suck It In" Munger?
Elliot Wave International has a just released article titled, Why "Financial Heroes" Fall from Grace, about the fall of Alan Greenspan, which is perfectly timed given this revelation.

Warren Buffett is the ultimate icon of the bull market. David Sokol was seen as a possible successor to Buffett, but now he is gone. If his comments about Munger and BYD are true, then Munger may also be in trouble.

Note that from a socionomic perspective, I'm not concerned with whether Sokol and Munger's actions rise to the level of criminality or even if they are unethical. I am only focused on the shift in social mood and how it affects the public perception of these men. In an earlier post I wrote that Buffett could go from a hero to a goat, especially if the social mood is in a major decline. He has yet to be directly hit by a scandal, but his image is taking hit after hit.

At the least, his image may slip to that of other wealthy investors, such as Kirkorian and Ichan, rather than the popular icon of the investing public. At worst, any unethical slip or slightest legal transgression could be blown up into a major scandal. A lot depends on whether Mr. Buffett has made any mistakes, but the social mood will play a big role in how much scrutiny he receives and how any mistake is perceived. At this point, he has done nothing wrong, but his image is nonetheless tarnished because of the change in social mood.

2011-04-02

Gibberish conspriacy

Socionomics has a handy explanation for why a few people speaking gibberish would turn into a conspiracy theory that makes its way into the wider media.

Are U.S. government microwave mind-control tests causing TV presenters' brains to melt down?
In four high-profile cases, the latest involving fast-talking Judge Judy, the presenters have started off speaking properly but have then descended into undecipherable nonsense - looking confused and unstable.
The frequency of the 'attacks' - and the fact that recorded examples of the mental meltdowns have been popular on websites - has led to conspiracy theorists pointing the finger at shadowy government experiments.