Investing, economics, finance and random thoughts.
craigr
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Homepage: http://www.crawlingroad.com
Posts by craigr
Fighting Inflation by Making Cheaper Coins
May 18th
From the not-as-witty-as-he-thinks department:
Will Nickel-Free Nickel Make a Dime’s Worth of Difference?
“Making coins from more cost-effective materials could save more than $100 million a year, which isn’t just pocket change,” said Dan Tangherlini, the Treasury Department’s chief financial officer.
That Dan Tangherlini. What a card! Is that the best the PR flaks at the Treasury Department could come up with?
Still, industrial porcelain, embedded with an identification chip, is seen as an outside possibility. A more likely candidate: an aluminum alloy, used by other countries for coins. But any switch is likely to be controversial. (emphasis added)
The aluminum alloy part is concerning enough, but not nearly as bad as an RFID chip inside the money. I analyzed RFID applications and vulnerabilities in the past as an information security researcher. My feeling afterwards is that there would be a big push for RFID in all money to remove the ability to have anonymity in cash transactions. It would first be put out into the public as an “anti-counterfeiting” measure. From there it could be stepped up easily to require banks to scan all money to check for “counterfeits.”
Banks could then refuse to accept money that couldn’t be RFID scanned as a risk control measure. This would then force stores to want to RFID scan money given to them so they are not left holding the bag. Finally, having money dispensed from banks and ATMs linked to the person who took the money out could be done. Why? Well, nobody would want to have non-RFID money because it could be counterfeit and the stores wouldn’t take it. Once this is done the circle of tracking the cash can be closed completely.
What then? No anonymous cash transactions could be accomplished. Links between cash could be made between people. Bills could be tracked from the bank to the ATM to the pocket of a person to a store and back to the bank. All RFID checked along the way. Every purchase could be tracked and, if necessary, a few quick keystrokes could disable the money in someone’s pocket by marking the RFID identifier as invalid in a central database.
Not plausible? No, it’s completely plausible.
The point of the metal in the coins is that it is a commodity value just as gold and silver are. The reason the nickel and penny are worth less is because the dollar is worth less. The markets are not fooled by this kind of rhetoric of saving money. As for RFID in the money? Yikes. I don’t want to consider the implications.
Permanent Portfolio Discussion Forum
Apr 29th
Thanks everyone for checking out the new forum. We have almost 200 messages in just two days. Come on over and join the discussion:
Permanent Portfolio Discussion Forum
We have some really knowledgeable posters and great questions. Thanks for participating if you have already.
Be Ruthless!
Apr 27th
I am seeing recent books from old authors touting this or that new investment idea. Their previous advice may have been off the mark, but this time they’ve got it all figured out. And just think, they are willing to sell you their wisdom for the low price of $12.95 in soft cover or a low monthly subscription fee.
No thanks.
People should be absolutely ruthless when it comes to assessing investment advice. An attitude of guilty until proven innocent will serve them well.
Be ruthless when looking at what an investment guru is saying. Maybe they did change their tune, but what is to say the new tune is right this time either? How did their advice work in the past? Was their economic thinking sound? Did they tell you to do things with your money that in hindsight were very risky? Did they make predictions and how did they turn out? Don’t rely on what they said their predictions were, go back yourself and read what they said and compare it to what actually happened. Be ruthless about the accuracy.
Also, don’t be lulled into “Aw, schucks…” apologies about how off they were before and how much they’ve learned their lesson. Those kinds of statements don’t get your money back. Early in my investing career I learned this lesson the hard way. Following a popular investment guru cost me money that didn’t need to be lost. I wasn’t ruthless enough in questioning the advice I was getting. I am now.
Investing is not a popularity contest and investors are not graded lower for coming off like a skeptical jerk. Be a jerk. Be ruthless. Question everything a guru says and why they are saying it. Make them prove what they are saying is true – Every last word of it.
Investors that are ruthless in assessing where to put their money put the odds in their favor. Unleash the ruthless investing jackass that is deep inside of you. You’ll be better off for it.
New Forum
Apr 25th
I have started a discussion forum on the Permanent Portfolio investment strategy here:
Permanent Portfolio Discussion Forum
The forum is just starting and changes will be made as it goes forward. Please keep your conversations civil!
Happy Birthday Thomas Jefferson…
Apr 13th
Some quotes to remember this fine man:
A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned – this is the sum of good government.
Commerce with all nations, alliance with none, should be our motto.
A strong body makes the mind strong. As to the species of exercises, I advise the gun. While this gives moderate exercise to the body, it gives boldness, enterprise and independence to the mind. Games played with the ball, and others of that nature, are too violent for the body and stamp no character on the mind. Let your gun therefore be your constant companion of your walks.
Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition.
Every government degenerates when trusted to the rulers of the people alone. The people themselves are its only safe depositories.
Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.
I am not a friend to a very energetic government. It is always oppressive.
He who knows best knows how little he knows.
History, in general, only informs us of what bad government is.
Timid men prefer the calm of despotism to the tempestuous sea of liberty.
The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.
To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhors, is sinful and tyrannical.
We may consider each generation as a distinct nation, with a right, by the will of its majority, to bind themselves, but none to bind the succeeding generation, more than the inhabitants of another country.
Honesty is the first chapter in the book of wisdom.
I do not take a single newspaper, nor read one a month, and I feel myself infinitely the happier for it.
The man who reads nothing at all is better educated than the man who reads nothing but newspapers.
I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.
If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be.
It is error alone which needs the support of government. Truth can stand by itself.
Never spend your money before you have earned it.
Central Banks Doth Protest Too Much…
Mar 25th
An interesting article considering the past two years I’ve heard pundits largely talking about how much gold banks were selling. The IMF announced big sales last year and the gold market didn’t budge. Other central banks snapped it right up at market prices:
Central Banks Stashing Away Gold at Brisk Pace
Central banks around the world added 425.4 metric tons of gold to their reserves last year, the biggest increase since 1964, according to the World Gold Council.
That represents a 1.4 percent gain to put their holdings at 30,116.9 tons in total. The increase was the first since 1988.
A 1.4 percent gain isn’t what I’d call Earth shattering. Yet, when I hear these central banks out pronouncing their faith in the US Dollar it makes me wonder if they really believe it themselves. They’ve got their frontman talking about the dollar being a great reserve currency, yet they’re wheeling gold bars out the back door into their vaults to diversify.
Actually that’s not bad advice. Maybe they’ve been listening to Harry Browne’s shows?
Is this actionable information? No. The Permanent Portfolio holds enough gold that I would just keep things as is. This is more of a piece of knowledge that confirms what many of us probably suspected already with respect to gold and central banks being large buyers.
Safe. Stable. Simple.
Mar 18th
Safe. Stable. Simple. These are the words Harry Browne used to describe his investment philosophy in his October 10, 2004 radio show. He pretty much nails it.
October 10, 2004 Investing Radio Show
Safe
A portfolio that is safe is one that is invested conservatively but also with strong diversification in case things don’t go according to plan. People work hard for their life savings. Why gamble those savings on some get-rich-quick investing scheme that can cost a big chunk of it if things go wrong? A portfolio that is safe does not mean tucking the money under the mattress. What it means is that investors buy things only that they fully understand for a very specific reason. Risks are taken where they should be and avoided where they add nothing to the bottom line. A portfolio invested this way can hold assets that are “risky” but own them in a way where the risks wash out over the long run and produce actually safer and more consistent returns through diversification. Safety also means following some basic rules of investing that will make it much harder to fall into many common investment traps.
Stable
A portfolio that is stable allows an investor to not panic when the markets are in serious turmoil. Stability doesn’t mean investors won’t ever take a loss. What it means is that the losses will be dampened so that the pain is tolerable and not driving the investor to waking up in a cold sweat. These situations, if they occur, can cause investors to make bad decisions about their money usually at the worst possible time. Stability in a portfolio means that investors can focus on their work and savings which is really driving most portfolio returns (especially early on).
A portfolio that is stable also means it is giving out reasonable market returns. A consistent return over the years can grow a portfolio greatly due to compounding. There is no need to reach for the brass ring for double-digit growth because that always means higher risks. Higher risks means less stability and a potential for doing much worse in the markets than what an investor is expecting. On the other hand, a more consistent growth can prove incredibly powerful if just left alone and a stable portfolio means investors will leave it alone. Since long term investment success is related to the ability to stay the course and not try to time the markets, stability in the portfolio is an important ingredient because it helps keep emotions in check no matter what the markets are doing.
Simple
I love simplicity, especially for investing. Complicated investing strategies and products can conceal many risky moving parts underneath. Many times these risks will not be discovered until it’s too late. Not just this, but often financial advisors will sell complicated strategies because it makes sure you keep them around to manage it all for a hefty fee. Investing does not need to be, nor should it be, complicated. There is a strong relationship between complicated investment approaches, lower performance and higher risks – All things you don’t want. Portfolios that are simple have lower management fees, lower taxes, lower chances of hidden risks, and can be managed without the use of a financial advisor with very little time commitment on the part of the investor. All of these attributes ensure a greater chance of long-term investment success.
There you have it. Safe. Stable. Simple. The three words that define the Permanent Portfolio. If you’ve never heard this radio show, you’ll enjoy it. Harry Browne discusses these and other important topics that are the foundation for growing and protecting wealth.