Category Archives: Economics

Insurance for Rockets

“You’re looking at one loss that can give you a hit of $400 million, and annual market premium is $750 million. One loss that burns more than 50% of the annual income for the entire market.”

http://qz.com/775481/how-to-insure-something-that-blows-up-once-every-twenty-times-you-use-it/

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Management Consulting

Former Management Consultant describes the management consultants. I had an experience early on in my career where someone describes consulting as a process of telling you what you already know and then charging a lot of money for it.

http://www.theatlantic.com/magazine/archive/2006/06/the-management-myth/304883/

I think it is still an excellent early career choice for most people, the individuals who went into consulting seem to have the most ‘exit’ opportunities and most diverse networks, which is ultimately more important than skill or aptitude, even in trading.

And if anyone remembers the EPICLY timed Bankers vs Consultants rap battle:

Soon after, the global economy collapsed. #Shocker

Tax Tips

When you get rich you’re going to need these tips. Than you can donate to the site!

http://www.bloomberg.com/news/articles/2012-04-17/how-to-pay-no-taxes-10-strategies-used-by-the-rich

Edit: Related to taxes, an impressive example of the power of compounding and deferred taxes:

Imagine that Berkshire had only $1, which we put in a security that doubled by year-end and was then sold. Imagine further that we used the after-tax proceeds to repeat this process in each of the next 19 years, scoring a double each time. At the end of the 20 years, the 34% capital gains tax that we would have paid on the profits from each sale would have delivered about $13,000 to the government and we would be left with about $25,250. Not bad. If, however, we made a single fantastic investment that itself doubled 20 times during the 20 years, our dollar would grow to $1,048,576. Were we then to cash out, we would pay a 34% tax of roughly $356,500 and be left with about $692,000.

Source: http://seekingalpha.com/article/3438006-berkshire-hathaway-importance-deferred-taxes

 

“Abundance” All Over Again

@ReformedBroker piece entitled “Abundance” has really been resonating in my Twitter stream and for good reason. It’s an excellent piece but somehow oddly familiar to me. A little google search and I found it’s actually a theme written quite extensively by @todd_harrison from Minyanville.

His tag line is that we have deflation in things we DON’T NEED (TV’s, phones, NetFlix, Facebook) and inflation in things we NEED (education, healthcare, housing) He calls it “inflastagdeflation”.

http://www.minyanville.com/businessmarkets/articles/Wal-Mart-Stagflation-Bear-Stearns-Merril/6/20/2007/id/13158

That article was written in 2007 and he has continued to write about it, from 2014 with an excellent chart:

http://www.minyanville.com/special-features/random-thoughts/articles/Todd-Harrison-Prepare-for-the-Return/5/5/2014/id/54796

inflastagdeflation

I’m still trying to wrap my head around WHY exactly this malinvestment occurs?

Edit: I wrote a long, winding hypothesis and decided to delete it. I’d rather hear your thoughts/comments/links. 

Middle Class Rage

Very interesting article from FT on middle class rage at elitism , 1%, yada yada yada. Ever see the movie Elysium? That’s what they are afraid of.

http://www.ft.com/intl/cms/s/0/135385ca-c399-11e5-808f-8231cd71622e.html#axzz3ySxhQYI5

h/t @modestproposal on Twitter for posting

Here’s a summary from Karl Marx on failure of Capitalism:

1. Inevitability of monopolies, which eliminate competition and gouge consumers and works.

2. Lack of centralized planning, which results in overproduction of some good and underproduction of others, encouraging economic crises such as inflation, slumps, depressions.

3. Demands for labor-saving machinery, which force unemployment and a more hostile proletariat.

4. Employers will tend to maximize profits by reducing labor expenses, thus creating a situation where workers will not have enough income to buy the goods produced, creating the contradiction of causing profits to fall.

5. Control of the state by the wealthy, the effect of which is passage of laws favoring themselves.

Redistribution or war or Elysium. Welcome your thoughts!