Investment Cycle

Boom to Bust and Back

My experience in 50 years of stock market

watching is that there is usually an index leader

that usually precedes the fall of the whole market

If you listen and watch carefully for signs that a

particular part of the economy is doing

extraordinarily well and then start following an

index or a basket of stocks in that area of the

economy you will probably notice a decline that

will preceed the whole market by several months

-

Early in 1999 the Technology Stocks reached their

High and started to fall.Within a year the S & P

Index and the rest of the Market started to crash.

It reached the bottom in 2002 [It was not caused by

9/11] 

The Technology Bubble Greed had caused a

 Recessionon the Bush watch. He wanted it over

 fast. He cut Taxes of the Rich and lowered interest

rates on mortgages to pump up construction.

It work so well that they kept them low and

invented new types of 100% mortgages including

the ARMs and other sub prime contracts.

Brokers sold them any way they could to earn

the big commissions. They sold the bad

mortgages to banks. Bankers get rid of

them to private investors as securities and raise

more money. The bubble grew ever bigger until the

 Builders finally built too many houses. Supply out

stripped demand and prices started to fall.

The bad mortgages began to default and prices

fell farther.The mortgage securities started to

fail and in the fall of 2008 the cards came

tumbling down. Greed had again hurt the

working man and made the Bankers richer.

The Taxpayer bailed out the big banks and

unregulated Capitalism had come full cycle

again.Greenspan said we just missed the signs.


Now we know what to look for. We don’t need to

overregulate the banking system. As they say in

 Battleship Galactica “This has all

happened before and it will all happen again”

As Cassius observed in Julius Caesar.

“The fault, dear Brutus, is not in our stars,

But in ourselves, that we are underlings.”

The lesson to be learned is that is possible to

foresee the turn in an economic cycle.

Follow as many indexes as you can that

measure important segments of the economy.

When you see one that is booming too much in

excess of the general economy you wait until

it makes a dramatic change in direction.

Then you move your investments in the Stock

Market into fixed income investments.

When the stock market falls substantially

(wait at least a year) you start to move your

investment back into different types of Mutual Funds until at least 80% of it is invested. Then you wait

for the next Boom and do it all over again.

This is not an attempt to make exact market 

timing.That is not possible. You simply want to ride the curve up and get out.  Then get in again when

 you spot another annomally after enough time for the Market to reached bottom [ about a year on 

average]. This is a lifetime method for investing. It is not a short term adventure.

Copyright © William Hodge 2010

The Room by Ray Melnik

The post below came from my Website

http://paxvillage.com/

I am thinking about building a new website

and wanted to put my blogs here where I

started blogging so I would not lose

them in a process of changing over

and they would still be available for reading.

Ray Melnik and I became friends on Face book.

He has a brilliant and logical mind and I have

enjoyed exchanging ideas in conversations with

him. I was delighted when he was gracious enough

to send me autographed copies of three of the

books he has written.

When Ray sent me a copy of his book The Room

I expected it to be Science Fiction and it was.

But It was a lot more . It is also a Love Story and

it is a story about family relationships and the

consequence of the decisions that are made.

The protagonist and narrator of The Room is

Harry Ladd, a recently-divorced wiring technician of modest means

.

At the heart of the story is Harry’s interaction with

his dying mother, who suffers from the delusion that

she is living 24 years in the past. She thinks Harry is

twelve years old and she keeps asking him about his

absent younger brother, Malcolm, whom she wants

to see. It involves adult concerns of a man who is

father, brother, son, divorcée and lover in his new

romance with Lacie.

“If multiple universes were true and somehow

two of those universes could lightly touch, creating

a bubble, what would be the consequence of

decisions changed in the past”.

This concept is the Science that furnishes the twist

in the fiction. What happens in the future if different

choices are made in the past.

http://www.emergentnovels.com/synbook.htm

It is a very enjoyable read and I recommend it.

Minimum Wage and Social Progress

Minimum Wage 

I do some of my writing by
conducting a kind of discussion

Forum on my FaceBook page.

I have decided to use one of the

discussions on my FaceBook

Wall to share with my Blog readers

on my Pax Village Blog

This is one of those times

Wednesday, March 31, 2010

William Hodge

Louis: How are you on minimum wage?

Do you agree with it, do you think it is

too low and do you have a dollar figure

in mind?

William Hodge: If the minimum wage was sufficient for housing, food and clothing, healthcare and retirment income, we would at least eliminate poverty for those who could work

Anything less is would be exploitation by the 

wealthy.

Louis: And you propose what to get there?

Capping corporate profit margins? Limiting

personal wealth? What’s the missing link?

William Hodge: Either provide government

programs to guarantee a social safety net,

or raise minim wage to a level of Social Parity

and guarantee everyone a job. Pay for it by

taxing Corporate profit and personal income. The Constitution provides that Congress can Tax, borrow, or create money to meet the objectives set out for Government in the Constitution as listed in the Preamble.

Louis     Aren’t those one in the same?

Why don’t we just make all the janitors

in the country CEOs? Sounds fair to me, no?

William Hodge: So that would make you a

Communist wouldn’t it Louis.

Who knew? I personally believe in the

accumulation of wealth. Extradinary achievement deserves extradinary reward.
You just should not do it by exploitation 

 You seem to  have a very limited view of what is possible.

Louis Ayoub: It wasn’t meant to be taken as a

literal solution. My point is that CEOs

(not the ones you think inherited the post)

have more responsibility, knowledge, skills,

education, and such then janitors.

Tell me how capping a CEOs income and

redistributing it would work? If there

is a minimum wage is there a maximum

wage too?

William Hodge: Actually a minimum wage

has no connection to a maximum wage.

If you provide for the distribution of life

essentials for all members of the community,

the maximum wage is determined competition

for the surplus production. How it is 

distributed will be determined by the  market demand for available skills responsible for

producing the goods and Services.

The wages of Entertainers,Sports Heroes,

Creators of innovative and productive

ideas are often determined by the demands

of their fans andconsumersThey are usually

in the position of being a Personal Monopoly

and can get what the traffic will bear.

Others must get paid according to demand for

skills and service. The common denominator

is that all must pay taxes on income to the

level necessary to provide Social Parity for all.

The rest is reward for success.

Louis:  William, lets get real. I don’t

believe in either a minimum or a maximum.

William, you can not cap one end of a

cylinder and expect to contain anything from

escaping out the other end. If you have a

minimum wage and expect it to have a useful

effect you have to dictate a maximum wage

as well. I’d love to see the Hollywood crowed

embrace that one!!!!! LMAO

Lets say I have a food canning plant. I am the

CEO and I make $10M a year. I pay my minimum

wage earners the going rate. William, what do

you suppose happens when the government says

its time to increase the minimum wage so that 

minimum wage earners can afford the very food

they are canning?  Yes, the price goes up so I can

make my $10M and then we are right back where

we started. The low wage folks are not ahead one bit….

I’ll ask you once again Willie, “what say you

is the maximum wage in America?”

Louis: One more for you Willie. What value

do celebrities bring to the community? Don’t

you think they are over paid for their true

communal value. They actually benefit the rich

as they just help sell more over-priced products

so the fat cats can get fatter.

William Hodge: Louis, Your logic is faulty.

You cannot use physics to argue a sociological

problem. You are not talking about a 
compression of gasses in a cylinder.  At best

 you may be talking 

about DIVIDING of the Pie.

The individual wage is a predetermined cost. Other cost of  production will be added to the expense.  The efficiency of

 your management skill

 will determine the profit and that will determine your wage. How much you earn will be more a result of you skill than your desire.

Your obsession with the earning power        

 of celebrates is irrelevant. Their market value [income] is set by public demand for their skill.

Their income is taxed as is yours.

Copyright © William Hodge 2010

We are Social Democrats

American Social Progressives are not Socialist.

written by William Hodge

Socialism is a political and economical ideology

that intends to create a society free of class- and

other differences, wherein the means to produce

everything is controled by the state, and thus 

everything produced is subsequently

distributed by the state.  Socialism under this

description would be an economic ideology just as Capitalism is an economic ideology.

If the Political form in use were a Dictatorship combined with this definition of Socialism then the socio-economic system would be Communism. The purpose of the Communist State was to take control of the means of

Producing Goods and Services until the classless Society was established. At that point the people of this classless Society would control the means of production and the State would wither away. 

Unfortunately for the classless, those who had the responsibility for running the temporary government prove to have more class priviledges 

It is very difficult to surrender Privilege

once gained . Dictatorships do not wither with grace.

American Social Safety Networks were never meant to be a classless Society.The United States is a Representative Democracy as a 

Political form of Government. The Economic system is primarily Capitalism, an economic system characterized by private or corporate ownership of capital goods, by investments

that are determined by private decision, and by

prices, production, and the distribution of goods

that are determined mainly by competition in a

free market. 

In theory the economic gain by the individual depends on the level of ownership he has in the means of production in the economy and by

his level of work and contribution to the productionof goods and services. It is the desire to maximize  the personal gain that contributes to the efficiency of the Capitalist system of production.

In addition to its economic system, the Government is also a provider of Goods and Services. The government maintains a Military system to defend the territorial integrity and 

the protection of its citizens from aggression by other government entities.  It provides

infrastructure(roads, bridges), education, healthcare and a retirement system for the old and disabled and military veterans. It provides some welfare for the poor and various other systems to protect the wellbeing of its citizens.

The money for providing these goods and services comes from taxing the income from goods and services created in the Capitalist economic system. The goods and services

provided by government constitutes the social part of the economic system of our Representative Democracy.

Most Democratic forms of government have a hybrid form of economic system of both Capitalism and Social Parity. Capitalism creates an efficient production of goods and service and Government services provide a safety network

for all of the citizens under the authority of the Government.

Copyright © William Hodge 2010

Supreme Court Threatens Democracy

The Supreme Court Ruling allowing Corporations to spend unlimited funds in Political Campaigns creates a grave danger to democracy in the near term First because it allows Corporation to blackmail elected officials by threating to spend huge amounts of money on negative advertising if the elected official does not vote their way on some particular legislation. This will be applied locally and nationally. 

They more often not do not have to actually spend the money because the elected official will cave. Survival is usually more powerful than than principle. 

But I believe the imbalance will only survive for a decade or two. Heavy handed use of power often brings its on failure . The key will be to make sure the actual voting process of democracy is protected. 

 If we can do that, I would not fear the demise of Democracy. America has grown from a Revolutionary Representative Democracy run by White Male Property owners to one run by Universal Suffrage. It is true that special interest play too big a role, but they did even in the first Congress after the Constitution was ratified. 

I am afraid it is a price to be paid for the Capitalist Economic Structure and limited Capitalism is necessary for efficiencyand innovation.

Capitalism failed under the Dictatorship of Fascist and Socialism failed under the Dictatorship of Communist Russia. Neither Capitalism or Socialism will thrive under Dictatorship in the long haul. Communist China and Autocratic Russia will both fail without the input from the people who actually make any system work. 

There will be some dark days but Democratic Capitalism combined with a Social safety net is the the model that will survive and prosper. 

The hardest part will be the adjustment to the rapid change that will be force by Science, Technology and Innovation. The greatest danger is not so much special interest as it is changing interest. 

But America has grown from Agriculture to Manufacturing to Information technology. Much more change is yet to come and we will not what it is until it is. 

 We have gone from growing things to making things to knowing things about how to make our machines to do things. We will have to make sure that our machines serve all and not just the Rich and powerful. 

But if we have faith in ourselves and find value in our fellowman, We will control the future and guide it to a better world. If we can balance competition with Cooperation, we will build a dynamic economy that will keep advancing productivity with a Society that will better  protect "the least of these" 

William Hodge.