The Big Picture

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• It Only Takes $20 Million to Start a Public Bank
• Choose Yourself by James Altucher
• Home Building Improving But Still At Low Levels
• The Smartest Man in Europe
• 10 Weekend Reads

It Only Takes $20 Million to Start a Public Bank Posted: 08 Jun 2013 10:30 PM PDT 40% of the World's Banks are Publicly Owned Ellen Brown – author of Web of Debt, and the soon-to-released book  The Public Banking Solution gave some stunning statistics at last night's Public Banking Institute conference: 40% of banks in the world are publicly owned (for background on what public banking is, see this and this).  Public banks are mainly located in the BRICs (Brazil, Russia, India and China).  And all of the BRICs have fared much better during the credit crisis than the U.S. and other Western banks There are now 20 American states banks with pending public banking bills Brown notes, "For $20 million dollars, a state or local government could buy a bank, and put in all your revenues.  Then you'd be protected.  And then you could decide what you're going to do with your money." In the best years, the U.S. financial sector made 40% of all corporate profits. This is bad, given that economist Steve Keen has shown that "a sustainable level of bank profits appears to be about 1% of GDP", and that higher bank profits leads to a ponzi economy and a depression University of Maryland political science professor Gar Alperovitz – former Legislative Director in the U.S. House of Representatives and the U.S. Senate, and Special Assistant in the Department of State – also spoke at the Public Banking conference. Alperovitz said that the "bottom up" approach of public banking will work faster than breaking up or nationalizing the banks.  Why?  Because if you break them up, they'll just regroup and then take over the system again. (We obviously have to break up the giant banks as well) Alperovitz notes that there is a "massive new economy movement" moving from the ground up.  For example: 40% of U.S. population – 130 million Americans  – are already members of coops of one kind or another, including credit unions 10 million people are involved in worker-owned companies.  That is 3 million more than involved in labor unions for private companies Credit unions have more capital collectively than any one of the big 5 banks Alperovitz ended on this inspiring note: We may be the starting point of an emergent movement that will overcome. A member of Iceland's parliament pointed out that Iceland's main banks used to be public, but that the politicians let them be privatized a few years before the crisis. Matt Taibbi also spoke at the conference. Taibbi said that things have gone wrong because people haven't been paying attention to what the big financial players have been doing: We have abdicated responsibility to learn  how our world is being run. Taibbi also says: When they cross the line and no one notices it … they keep crossing lines. The financial sector knows that no one understands what's going on, so they keep pushing the envelope further and further … getting into more and bigger criminal schemes. Taibbi noted that a Federal Reserve bank found that you would need at least 70,000 to 80,000 people to audit one of the big banks to the extent that small banks are audited. He says that the big banks themselves can't even audit their own operations. They  don't know how interconnected and intertwined they are, or what operations they're really engaged in. Taibbi said we are in a dire situation: If we don't do something soon – if the public isn't educated quickly about how bad things are getting – we won't have a chance to do anything about it in the future. However, he notes that we have more power than we realize, because – underneath their air of invincibility – the big banks are very fragile and "extraordinary vulnerable". Every time there is any bad publicity, any expose about what they're really doing, any question that the government won't unconditionally and forever prop them up, investors flee from their stock and their market cap plummets. Taibbi said: Their lives are in our hands. Taibbi supports public banking as a better alternative … because it is much more transparent than the current American banking system.

Choose Yourself by James Altucher Posted: 08 Jun 2013 02:00 PM PDT Choose Yourself by James Altucher The world is changing. Markets have crashed. Jobs have disappeared. Industries have been disrupted and are being remade before our eyes. Everything we aspired to for "security," everything we thought was "safe," no longer is: College. Employment. Retirement. Government. It's all crumbling down. In every part of society, the middlemen are being pushed out of the picture. No longer is someone coming to hire you, to invest in your company, to sign you, to pick you. It's on you to make the most important decision in your life: Choose Yourself. New tools and economic forces have emerged to make it possible for individuals to create art, make millions of dollars and change the world without "help." More and more opportunities are rising out of the ashes of the broken system to generate real inward success (personal happiness and health) and outward success (fulfilling work and wealth). This book will teach you to do just that. With dozens of case studies, interviews and examples–including the author, investor and entrepreneur James Altucher's own heartbreaking and inspiring story–Choose Yourself illuminates your personal path to building a bright, new world out of the wreckage of the old. Choose Yourself by James Altucher from JamesAltucher

Home Building Improving But Still At Low Levels Posted: 08 Jun 2013 10:00 AM PDT Construction Improves, Yet Is Still Historically Low click for giant graphic Graphic courtesy of NYT   Norris: “Home construction is booming in the United States, but it remains severely depressed. That seemingly contradictory statement was illustrated by construction spending statistics issued this week by the Census Bureau. In April, spending on the construction of new houses and apartment buildings reached an annual rate of $195 billion. As can be seen in the accompanying charts, spending on home building is up 40 percent over the last year. That is the largest such increase since the early 1980s. In the housing boom that preceded the Great Recession, such spending never rose more than 25 percent over a 12-month period. But that rate of spending is down more than 60 percent from the peak, reached in 2006, and is lower than spending as far back as 1997.” Why do we keep shooting ourselves in our collective national foot?     Source: Construction Improves, Yet Is Still Historically Low FLOYD NORRIS NYT, June 7, 2013 http://www.nytimes.com/2013/06/08/business/economy/census-reports-home-construction-has-improved.html

The Smartest Man in Europe Posted: 08 Jun 2013 06:30 AM PDT I have been reading this (for lack of a better word) series from Byron Wien for many years. I remain unsure if The Smartest Man in Europe actually exists or if it is a clever ruse that allows Wien to say things at arm’s length that perhaps he would not be able to if he had to sign at the bottom (and initial here, here . . . and here). Even if The Smartest Man in Europe is a mere literary device, it works well. I find the insights to be atypical, though I sometimes disagree with swaths of it. Regardless of whether or not this is a fictional person, it works well as a piece of commentary. The piece is quite long, and you should definitely head over to Barron’s to read it in its entirety. However, I am becoming increasingly interested in the contrarian idea of a European recovery. investors hate Europe, and that has me licking my lips. We have exposure through a few ETFs and Global allocation models — and as of June 1, we now have a 15.44% exposure to Europe — and that might tick higher eventually. Here is Byron Wien: “Everyone thinks Europe is hopeless and I can understand why. The European Union is a flawed concept and it may not survive in the long run. There needs to be much more convergence, both economic (which is possible) and political (which is impossible), but a major change in attitude has taken place this year. Until recently the policy makers believed that increasing taxes and reducing spending was the way for the weaker countries to solve their deficit problems, but that was clearly the wrong idea. From a political point of view the austerity approach was impossible because the people in these places wouldn’t accept what their governments were trying to impose on them. Punishing the people for past economic mistakes also made no practical sense. Europe was in a recession and the austerity policies were only going to make conditions worse. Unemployment was becoming a serious social problem and job creation had to be a priority. As we moved into this year the policy makers, even Angela Merkel, began to understand that austerity was the wrong course and that restoring growth had to be an objective. “Europe is in a kind of equilibrium now which is likely to be sustained by the expansive monetary policy of the European Central Bank. This should continue at least until the German elections in September, resulting in a definitive pullback from austerity. Merkel can only win if she moves away from her hard-line policy stance. Conditions are continuing to improve in Italy even though Mario Monti is no longer in charge. The unions still have too much power in France. François Hollande is beginning to realize that he must restore business confidence by introducing policies that take a positive view of growth. Germany will have to be tolerant of larger budget deficits in Spain, France and Italy. “In the meantime most investors have reduced their European exposure. Who would want to invest in a place where a recession was underway and likely to get worse? Money managers had been so preoccupied with that idea that they failed to recognize the pullback from austerity which could lead to the restoration of growth. During the last few years European companies, like their American counterparts, have become vastly more efficient. Unemployment in Europe is 12% and part of the reason it is so high is that companies are getting the work done with fewer employees, so profits should improve considerably on any increase in revenues. Stocks are priced assuming conditions will get worse and I see them getting better – not everywhere and not in every sector, but if you are a careful stock picker you can make money. “The most important factor is that almost no investor likes Europe now and that enhances the opportunity. Two years ago everyone was worried that the European Union was going to break apart. That was never going to happen over the near term because everyone had too much to lose, especially Germany, which has been the biggest beneficiary. Now most people realize Europe is going to muddle through at least for a while, but few people are buying European stocks to take advantage of this conclusion.” Good stuff, regardless of whether its from the Smartest Man in Europe, or just a clever old codger here in the United States . . .   Source: The Smartest Man in Europe Byron Wien Blackrock via Barron’s, June 7 2013 http://online.barrons.com/article/SB50001424052748703578204578531602393359138.html

10 Weekend Reads Posted: 08 Jun 2013 03:30 AM PDT Good Saturday morning. What you need is a restful, recharging weekend. To send you in that direction, may I suggest you spend some time with these longer form journalism pieces? They will inform, entertain and educate you. Feed your brain: • On Being an Octopus (Boston Review) • What does it mean to have “predicted the crisis”? (Noahpinion) • Google is the General Electric of the 21st century (FT.com) • Join Wall Street. Save the world. (Wonkblog) • List of common misconceptions  (Wiki)  [Warning: Massive timesuck] • In China, an Empire Built by Aping Apple (NYT) • How the GOP lost young voters (Politico) • The Domestic Surveillance Boom, From Bush to Obama (Mother Jones) • A Small World After All: A new book sheds light on how little of the world we see through our browsers (Book Forum) • Why ESPN is so good at televising spelling bees, poker, yachting, and other non-sports (Quartz) What are you doing this weekend?   Profit cycle vs GDP Source: Investing Caffeine

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