June 2013 - W.C. Varones

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6.28.2013

So much for that "smart diplomacy"

7:55 PM 3
After being bitch-slapped by Hong Kong and Russia, Obama gets bitch-slapped by Ecuador:
"Ecuador will not accept pressures or threats from anyone, and it does not traffic in its values or allow them to be subjugated to mercantile interests," government spokesman Fernando Alvarado said at a news conference.

In a cheeky jab at the U.S. spying program that Snowden unveiled through leaks to the media, the South American nation offered $23 million per year to finance human rights training.

The funding would be destined to help "avoid violations of privacy, torture and other actions that are denigrating to humanity," Alvarado said. He said the amount was the equivalent of what Ecuador gained each year from the trade benefits.
Didn't America get some respect in the world back in the old days?

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6.27.2013

Trader Joe’s ~ You’re So Close to Nirvana

3:24 PM 0
Belo Horizonte ~ I found a gas station that sells unbelievable premium beer here in Belo Horizonte. In a country where light lager rules, the micros, Belgians and and local micro brew movement is taking a stand. It just happens to be at a Petrobras gas station, and I don’t mind.

The gas station even sells the finest Anderson Valley, Sam Adams and Rogue offerings as well as one of my favorite breweries in the world, Brew Dog out of Scotland whose mission is to replicate California’s IPA movement in the UK. Fantastic beer.

But the purpose of this post is to point out how Trader Joe’s teases to appease. Those that shop there in California will recognize this light lager offering from the Netherlands called Oranjeboom:

It’s a very satisfactory light lager if that’s what you are in the mood for. But I also found this ambrosia here in Brazil that TJ's fails to offer:


That 14 means what it advertises. This is a 14% “light” lager that is reeelllyyy graaatteee. I’ve had 3 so farrr and these stufffff are ggggrraaaaaattttt. Cave...saw...today...... theyyyy weeeeerrrr beaaauuuutttt…..beaaattii…….cool. Neeway, try (SCORE LIONS!) Oranjebooms 14, it’ssssss the wetlhdgfjhafljghkfalghklaru,…………………………………………… ………………………………………………………………..zzzzzzzzzzzzzz zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
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Supreme Court doesn't give gays the courtesy of a reacharound

6:04 AM 5
Celebrating the Prop 8 ruling? Not so fast. The Supremes didn't rule on Prop 8 at all, just that Prop 8 supporters didn't have legal standing to challenge the lower court's ruling against 8. And since Governor Jerry Brown and Attorney General Kamala Harris don't like Prop 8 and refused to defend it, there's no one to take the case to court.

In fact, the ruling undermines the California initiative process by allowing the Governor and Attorney General to refuse to defend anything they don't like. How about Prop 13? Legal professors are already saying this opens a door to kill it. Somebody sues against Prop 13 in federal court, Brown and Harris refuse to defend it, et voilà, game over!

Gay marriage advocates deserved their day in court. They probably would have gotten Prop 8 ruled unconstitutional. They didn't get it. This was a trick by Brown and Harris that backfired, and a punt by the Supremes.
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Brazilians LOVE soccer

5:36 AM 1
Sign post in the Horto neighborhood of Belo Horizonte.

Riot: Brazil scored 2, Uruguay scored 1, Protesters scored 0. When Brazil wins an international soccer match ain't nothing going to stop the party or make people care about political issues afterwards. Thank goodness they won though. Had they lost things might have gotten nuts.

UPDATE: the destruction and violence I didn't witness was extraordinary yesterday here in Belo Horizonte. It's surreal how I can mingle in a section of the city that is in pure euphoria because of a soccer win while a nearby section of the city is in complete turmoil and violence.

I had a cab ride today with a cabbie that went off on how absurd this soccer tournament (Confederations Cup) is and how it's so negatively impacting the average Brazilian. Fifa is a mafia and I am pleased with the population that is rising up to illustrate this even if I somehow end up sections of town where all that matters is the game. That's a peculiar conundrum.
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6.25.2013

John Bogle: Social Security is the new fixed income

7:07 PM 0
With last week's epic bond slaughter, and the brutal 14% face-ripping that Apple bond buyers just got in two months, it's worth listening to the advice of sages on bond investing.

Here's Vanguard legend John Bogle: Are retirees holding too many bonds?
“Social Security's the greatest fixed income you'll ever get,” Mr. Bogle said.

With that in mind, it would behoove retirees to pay more attention to dividend-paying stocks in a retirement account.

“Dividends go up virtually every year with two exceptions: the Great Depression and 2008. I don't think that's likely to happen again,” Mr. Bogle said. 
Traditional asset allocators have rules of thumb like that your equity exposure should be 100% minus your age, e.g. a 30-year-old should be 70% equity and a 70-year-old should be 30% equity. I think that's bunk, and it seems Bogle agrees. Perhaps such a model could be defended when real interest rates are significantly positive, but with nominal rates still near all-time lows, I wouldn't touch fixed income with a 10-foot pole.

Bogle has a great point: use your Social Security income for the fixed-income portion of your portfolio, and allocate the rest to stocks (and precious metals, obviously). Unless, of course, you've saved enough that you'll be means-tested out of Social Security, in which case you'll be well-off enough to weather the volatility and you'll still want the real return and inflation protection of stocks over the puny nominal yields of bonds.


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A Socialist's Response to Protest

5:12 PM 1
Belo Horizonte ~ Former Brazilian bank robber, and current socialist Brazilian President, Dilma Rousseff has, in response to the protests SWEEPING the nation of Brazil, called for numerous changes that actually violate the constitution of Brazil. This seems so familiar to this American. But the difference from the response in the United States is the opposition parties (yeah plural, crazy that) have expressed extreme outrage bordering on traitorous declarations. This is very refreshing after witnessing the Republican party not really express anything other than the sound of their swallowing while on their knees. Dilma backed down from her requests. It's nice to see a real opposition party instead of the Democratic Republican representatives we have in Boehner, Graham and McCain. Although from what I've understood from the current administration, no one avoids using teeth better than they.
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6.24.2013

HSBC BRAZIL ATM TRAVEL ADVISORY

10:33 AM 0
Belo Horizonte ~ If you have an HSBC USA account that you regularly use in Brazil, be advised that last month HSBC Brazil lowered the daily limit one could withdraw from an account from 1000 reals ($500) to 200 reals ($100). HSBC USA still has a daily limit of $500 but HSBC Brazil explained to me today that FOR MY PROTECTION the limit was reduced to 200 reals and it was not possible to get more than that. In further banking comedy HSBC defines a day as a business day which on the weekend is from Friday at 8AM until Monday at 4PM. One is only allowed to withdraw a total of 200 reals during that period. An entire weekend for 4 people on $100. Grab the Let's Go Brazil book!

This makes it impossible to use HSBC to get cash to pay for my needs. A hotel costs more than 200 reals a night, the cab to the airport is 90 reals, a typical dinner for 4 is 150 reals and the bus costs 3 reals here in Belo Horizonte. Further in Brazil the credit card fee is generally paid by the customer instead of the vendor like in the USA. So if you use your Mastercard here, the cost of the purchase is 3 to 5% higher depending on the vendor's mood.

What HSBC is stating to their depositing masses is that they are not needed for them to make money. This makes sense because when your The World's Neighborhood Drug Money Laundering (NOT EVEN ALLEGED!) Bank, then why do you need silly depositors. All you need is legal immunity in the USA to launder Mexican drug cartel's money and you've got a new business model. Cut services and attrition will take care of your ridiculous depositor overhead.

HSBC used to be a fantastic bank to use in Brazil because all the services they provided but those have all slowly been cut and since I don't deal in the drug trade I guess I'm not the type of customer they need to keep.
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6.23.2013

Glasnost, a quarter century on

1:25 PM 1
Charlie McDanger:
Imagine you're talking to somebody from 1988 and you tell him that in 25 years, a US intelligence agent will reveal state secrets, be labeled a traitor and a spy, and flee to Russia. And a majority of young Americans will be rooting for him.

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Brazil Protest - Belo Horizonte

7:26 AM 1
From the communication I'm getting from the states the image the news must be presenting is total chaos in Brazil. The protests are definitely real and dangerous but in typical Brazilian fashion it only impacts a small area of each city while the rest of the areas act as if nothing is happening.

Yesterday I attended the Confederations Cup match Mexico vs. Japan in Belo Horizonte. Walking to the stadium was an event. The military police, what they call the police here that carry guns, were out in full force and so where the protesters demanding free health care and the cancellation of the World Cup and Olympics here. It was extremely tense. But past the police checkpoint that only let those with tickets continue the scene was total Brazilian soccer celebration. It was a different population of people at the game and most were Brazilians there to cheer on the Brazilian national team even though they were playing a thousand miles away in Recife. It was a blast really. Nothing would be happening in the game and all of the sudden people would go crazy all over the stadium because Brazil had scored. And even when Mexico scored their 2 goals it was like a home game for them. The Brazilians went crazy. No one knows how be happier or have more fun than Brazilians. Which is why it’s a startlingly contrast to get a call around halftime from my wife telling me that the police are brutally attacking the protesters about a quarter mile from the stadium and that I had to be very careful.

The game ended and the scene where I walked through where there were hundreds of protesters was very creepy when I exited. They were all gone, the street was soaked and there were hundreds of heavily armed police with full combat gear on. What happened to the protesters? I could only get this blurry picture for fear I’d lose my iPhone but I hope it conveys the scene.

I had to walk probably a mile to get to civilization that wasn’t under mart1al law to try to find a cab or bus. It was on a main road and everything seemed normal. So much so that in surreal fashion this guy pulled up do some shopping. That’s a Ferrari.

I jumped on a bus that would take me through downtown and to the other side of town where I was staying. Everything seemed normal. There was nothing indicating there were even protests going on. It was disconcerting really. I mean I don’t want to be around violence but I also don’t want to be around such efficient elimination of a protest.

I was dropped off at Minas Shopping which is an American-esque mall where I sought out some sustenance. Again everything was normal, people were dressed to go out and there was a guy on guitar at Almana Que while people drank beer and snacked on lovely Brazilian fare. My phone rang with my frantic mother in Chicago telling me to get to the airport immediately to escape the carnage that is happening ALL OVER BRAZIL. I explained to her what I was seeing and she calmed down a bit.

It’s a curious thing, on the one hand the protests are of course valid in their protests against government corruption but they are interfering with what Brazilians enjoy most, soccer. Also these are people protesting to cancel the greatest event there is in soccer, the World Cup. I’m not sure they are fighting the right fight. It might be a total mafia scam, the World Cup (for another post), but no one loves soccer more than Brazilians so I’m not sure these protests are correctly targeting.

I’ll be here Wednesday for the Brazil vs. Uruguay semi-final and it unfortunately should be a riot. I’ll try to take more pictures this time.
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6.21.2013

Brazil is Just a Riot These Days

4:25 PM 0
Reporting from Niteroi, Rio de Janerio, Brazil: I had a lovely evening 2 nights ago when hundreds of thousands of Brazilians rose up to protest a .10/.20 increase in bus fares, or so I was originally told. I found out later that the Brazilian masses are actually protesting the absurd corruption that is being exhibited in Brasilia and the latest scandal which caught a bunch of congress folk breaking many laws only for the congress to introduce legislation that made those illegal acts legal. It's funny how when the people's candidate is elected, Dilma, the administration becomes more corrupt than the previous. Kind of like the good ol'US of A. Except here when the new administration exhibits behavior that is criminal the people rise up, close bridges and ferry terminals and express their general dissatisfaction with the situation.

I was actually really angry with the situation initially because these protests ruined my dinner plans in Rio, for the love of God! But upon further review I realized that the Brazilian population is far more active and caring (avoiding using the word Progressive at all cost here) than the cows and sheep that are the population in the US. The Democrats would be screaming revolution if the the Republican administration did what the Obama administration is doing today. Thanks goodness that even when the socialist revolutionary candidate is elected here, they don't turn off their brains.

I've recently developed a strong melancholy because of the state of the democratic world. I often visit Brazil, but it's been 2 years since the last time, and to see that democracy may still have a chance with people who pay attention to corruption is very refreshing. In the USA democracy is dead, zealotry rules and that doesn't usually end well.

I'll try to comment more on the world of Brazil while I'm here but it gives me hope when hope was dearly lacking.

Good day,
Negocios Loucos
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The signs were there; you should have bought connections before

6.20.2013

Whatever happened to the Schumer-Boehner Reich Flight Tax?

Mr. Market, meet Mr. Minsky

11:00 AM 0
Ben Bernanke would have done well to study Hyman Minsky's financial instability hypothesis before he set about trying to centrally plan the markets.
The second theorem of the financial instability hypothesis is that over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system.

In particular, over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy with a sizeable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make position by selling out position. This is likely to lead to a collapse of asset values.
We certainly wouldn't call this a period of "prolonged prosperity" or "good times," but Bernanke's policy of 0% interest and massive money-printing has had much the same effect on asset markets, dampening volatility and encouraging leveraged speculation in asset markets. Which works... until it doesn't.




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Markets freaking out as Zimbabwe Ben hints at eventually pulling out

6.19.2013

James Gandolfini dead at 51

5:09 PM 0

Greatest series-ending scene ever:



Best analysis of that scene here.
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6.16.2013

Get your rocks on

7:23 PM 0
The Economist has a column Rocks for the Long Run that discusses a new research paper showing great long-term real returns to hard commodities (agricultural commodities, not so much).



Besides having strong long-term returns, the article points out the very volatile price cycles.  This is a good thing for long-term investors, because every down cycle is an opportunity to load up at low prices, and positions can be trimmed in the up cycles.

We were fortunate enough to sell a large position in the Pimco Commodity Real Return Fund (PCRIX) in mid-September near the QE3 announcement highs.  We've been very slowly value-cost-averaging in since then.  Once fully invested, we'll set up a semi-annual portfolio rebalancing between commodities, domestic stocks, and foreign stocks, to take advantage of the differing price cycles, trimming what's up and adding to what's down.  We expect this strategy to produce lower risk, and quite likely higher returns, than a stock-only portfolio.

See also: In trashing gold, Warren Buffett makes the case for gold, and Gold and asset allocation: less risk, more return.
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6.14.2013

Almost heaven, West Virginia

3:20 PM 0
Two years ago, we brought you one of West Virginia's most famous sons, the bath-salt-abusing transvestite goat molester.

Today brings news of the pastimes of the best and brightest at West Virginia's elite private universities:
At about 1:30 a.m. on May 1, 2011, the fraternity was having a house party both Louis Helmburg III and Hughes were attending, according to a complaint filed Jan. 23, 2012, in Cabell Circuit Court.

Helmburg, who played for Marshall University’s baseball team at the time but wasn’t on the Thundering Herd’s 2013 roster, claimed Hughes became intoxicated and attempted to “shoot bottle rockets out of his anus on the ATO deck.”

When doing so, Hughes startled Helmburg, who then jumped back and fell off of the deck of the fraternity house and was injured, according to the suit. He was lodged between the deck and an air conditioning unit.

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The Chinese called. They want their gold.

6.04.2013

Baby boomers become suicide boomers

4:49 PM 2
WaPo: Baby boomers are killing themselves at an alarming rate.
[...] an alarming trend among baby boomers, whose suicide rates shot up precipitously between 1999 and 2010.

It has long held true that elderly people have higher suicide rates than the overall population. But numbers released in May by the Centers for Disease Control and Prevention show a dramatic spike in suicides among middle-aged people, with the highest increases among men in their 50s, whose rate went up by nearly 50 percent to 30 per 100,000; and women in their early 60s, whose rate rose by nearly 60 percent (though it is still relatively low compared with men, at 7 in 100,000). The highest rates were among white and Native American and Alaskan men. In recent years, deaths by suicide has surpassed deaths by motor vehicle crashes.

As youths, boomers had higher suicide rates than earlier generations; the confluence of that with the fact that they are now beginning to grow old, when the risk traditionally goes up, has experts worried.

It's mostly a story about how the spoiled generation's self-esteem ran into the buzz saw of reality. But of course Alan Greenspan makes an appearance:
Combine high expectations with a faltering economy, and the risk goes up.

“We know that what men want to do is work — that’s a very strong ethic for them,” Arbore said. “When their jobs are being threatened, they see themselves as still needing to be in that role; they feel ashamed when they’re not able to find another job, or when their home is being foreclosed on. . . . The idea that so many of us in this country have been brought up with — that you work hard, you get your house, you get your American dream, everything is rosy — it hasn’t worked out. A lot of these boomers aren’t going to earn as much money as their parents did. They aren’t going to be as secure as their parents were. And that’s quite troubling for the boomers.”

HT: IP Freely
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6.03.2013

Are Scandis the most ironic people on earth?

3:48 AM 4


HT: Capitalism

To be fair, Krugman got his Nobel before he abandoned economics to become a political hatchet man, and for a topic that had nothing to do with deficit spending. And Obama received his Nobel before he started drone striking children, for his outstanding achievement in having an awesome aura.
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