Dave Gonigam – May 16, 2012
- Watch your language: The unlikely offense that could get your bank account frozen
- Greek bank run: Addison on how the entire euro experiment is “in jeopardy”
- Dollar jumps… for now. But what about your purchasing power?
- Come on Eduardo, there’s no shame in it: Facebook co-founder’s savings from giving up his U.S. citizenship
- Soros’ latest gold move… a grim economic indicator from NASCAR nation… preparing for a zombie apocalypse in Vancouver (uh-oh)… and more!
“Apparently,” writes journalist Jeremy Scahill, “the First Amendment had an exception about Yemen in it that I missed.”
Violate that exception as of today and the federal government might deny you access to your bank account. Seriously.
This is of no small interest to us here: More than two years ago, Addison wrote in Apogee Advisory about how the place is a tinderbox. Nearly half the population is under 16. Nearly half is in poverty. There’s almost no arable land. “Oil, which accounts for 75% of government revenue, will likely run dry by 2020,” he noted.
Sure enough, the place blew up during the Arab Spring last year. The longtime U.S.-backed dictator Saleh was chased from office, agreeing to a U.S.-brokered “transition.”
As part of that “transition” a Saleh stooge named Hadi won an election in which he was the only candidate.
Having pronounced the election “successful,” Secretary of State Hillary Clinton ensures that Hadi, like Saleh before him, collects beaucoup bucks and weapons to do Washington’s bidding.
Yemenis, realizing they were had, are restive.
So the president issued an executive order this morning — authorizing the Treasury Department to freeze the U.S.-based assets of anyone the feds believe “engaged in acts that directly or indirectly threaten the peace, security or stability of Yemen.”
Included are “acts that obstruct the implementation” of the “transition” agreement.
“In other words,” writes Salon’s civil liberties blogger Glenn Greenwald, “the U.S. government will now punish anyone who is determined — in the sole discretion of the U.S. government — even to ‘indirectly’ obstruct the full transition of power to President Hadi.”
As part of this transition, the U.S. military has carried out more drone strikes in Yemen this month than in the preceding 10 years combined. Yemen is also the place where last fall, a U.S. drone summarily executed a U.S. citizen — with no trial or other vestige of due process, merely the president’s say-so.
Would criticism of these policies constitute an act that “directly or indirectly threaten[s] the peace, security or stability of Yemen”? Probably not.
Not yet, anyway. But if you’re the sort of person who doesn’t like the government freezing his assets, we pass this along as a public service.
In a rerun of yesterday, the major U.S. indexes are up a bit — traders having set aside their worries about Greece.
Of course, by the close yesterday, all those gains were wiped out, and then some — thanks, we’re told, to “news” of a bank run in Greece.
We put “news” in quotation marks because even now, nearly 24 hours later, nobody has a clue what’s going on. Here’s a sampling of media coverage…
CNBC: “Greek depositors withdrew 700 million euros ($900 million) from the nation’s local banks recently, said President Karolos Papoulias, though the exact timing of the transfer was unclear.”
Wall Street Journal: “Greek depositors withdrew €700 million ($898 million) from the country’s banks on Monday… Greek President Karolos Papoulias told the country’s political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some €800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures.”
London Telegraph: “Citing a secret government document, [Papoulias] said Greeks were already pulling £80 million a day out of the country’s banks. Almost €1 billion (£795 million) has been withdrawn since the last elections, on May 6.”
From this we can deduce that ordinary Greeks withdrew a large but indeterminate sum of money sometime in the last 10 days. Maybe.
Don’t be surprised if there’s a repeat of yesterday’s late-day drop: The wild card this afternoon could be the release of minutes from the Federal Reserve’s meeting last month.
“The whole experiment is in jeopardy,” Addison writes of the euro in The Little Book of the Shrinking Dollar.
“The differences between the fiscal trajectories of the various eurozone states are of degree only, not direction. In this game, we’d put our bets that Germany — the last AAA standing — will call the shots. And they could well kick Greece or one of the other paltry PIIGS outta the union.”
As this forecast unfolds in real-time, hot money is again fleeing for the greenback. The euro is down this morning to $1.274.
The dollar index — of which the euro makes up 57% — is up to 81.24. The “DXY” has risen for 13 straight days, something it’s never done before.
Thus it stands at the high end of the range where it’s traded since Fed chief Ben Bernanke gave a wink to the world in Jackson Hole, Wyo., in August 2010 and all but said “QE2” was in the bag.
“The best wool that the feds can pull over your eyes is that they have all this under control,” writes Addison in the book. “They don’t.”
“They’ve got prejudices and working theories, but remember, there’s nothing hard about the ‘science of economics.’”
“If you hear CNBC or Bloomberg declare: ‘Prices are up 10% over the past year.’ don’t just switch off the TV and shrug.”
“Instead, acknowledge that ‘last year’s dollar is worth 90 cents today’ and work on what you can do about it when it comes to your own wallet and your bank account.”
The book has ample guidance to help you do so. In fact, our publisher Joe Schriefer counts 47 solutions. (He shares five of them with you right here.) Some are easier to implement than others. But no matter your net worth or your income, you’ll find plenty of take-aways you can put to work the moment you set the book down.
And for a limited time, Joe’s worked out a way to get you a copy of the book — free. Learn how to get your own — on us — at this link.
Gold is sinking further toward Vancouver speaker Marc Faber’s potential target of $1,400-1,500.
At last check, the spot price was $1,540 — below its low set at the end of last year.
Silver, for the moment, is holding above its year-end 2011 low… barely… at $27.42.
George Soros quadrupled his gold exposure in the first quarter, according to his latest 13-F filed with the SEC.
His stake of 85,000 GLD shares during Q4 2011 grew to 320,000 at the end of March.
That’s still a far cry from the 4.67 million shares Soros held at the end of 2010. He dumped almost all of it in the following three months… when gold still traded between $1,340-1,440. Even at today’s “relatively” depressed price, that looks like a bad trade.
Soros also loaded up on J.P. Morgan Chase during the first quarter. Yeah, that’s working out really well right now.
The morning’s read on the housing market: Meh. The Commerce Department says housing starts grew 2.6% last month… essentially offsetting a 2.6% drop the previous month.
Permits — a better indicator of future activity — fell 7%, largely offsetting an 8.8% increase the month before.
Activity was strongest in the South, weakest in the Northeast.
There’s now a number on the savings Facebook co-founder Eduardo Saverin will achieve by giving up his U.S. citizenship: $67 million.
Bloomberg figures it this way: Saverin owns 4% of the company, which has 1.9 billion shares outstanding. When he surrendered citizenship last September, shares were privately auctioned for $32.10. The IPO this week could be as high as $38.
The difference between the last two values works out to $448 million. Apply 15% capital gains tax — which goes up at the end of this year — and you get $67 million.
A Saverin spokesman challenges Bloomberg’s methodology and sticks to his story that came out this weekend: “His motive had nothing to do with tax and everything to do with his desire to live and work in Singapore.”
We’re not sure why Saverin and his minions are so determined to downplay the tax angle. “The United States is the only developed country taxing its citizens regardless of where they live,” Addison writes in The Little Book of the Shrinking Dollar.
No matter: Saverin’s move has inspired much weeping and gnashing of teeth. “Rather than paying back, he is moving on,” complains Yale law professor Bruce Ackerman in the Los Angeles Times.
“I don’t agree,” Addison says via email this morning, “with Ackerman’s assertion that Saverin should ‘pay back’ anything. Rather, the U.S. should have a tax system that makes it attractive for him to want to stay.”
Heads up if you’re joining us in Vancouver this summer: Watch out for zombies.
The 5 has been on zombie alert going back more than 18 months. More recently, we took note of a course at Michigan State instructing students in “Surviving the Zombie Apocalypse.”
Now comes a new section on the website of British Columbia’s Emergency Management office: Evidently, it’s Zombie Preparedness Week in Canada’s westernmost province.
“The threat of zombie attack is a popular phenomenon around the globe,” the site says, “and with it comes the message to ‘be prepared.’”
“Earthquakes, tsunamis, floods, landslides, avalanches, interface fires, severe storms and hazardous material spills are some of the dangers that could threaten lives and cause extensive damage in British Columbia,” it goes on. “And while the chance of zombies a-knockin’ on your door is pretty slim, we do believe that if you’re ready for zombies, you’re ready for any disaster.”
The site includes links to several YouTube clips of preparedness steps, produced by the agency. They must be seen to be believed: We’re finally starting to understand some of the mock public-service announcements those Canucks on SCTV were doing 30-odd years ago…
We’re reasonably sure zombies will leave us untroubled in Vancouver the week of July 24. There’s still time to register and come join us for our best lineup of speakers ever, listed here. You’ll want to move quickly, though: We expect to be full up before the end of the month.
“Addison’s discussion about debt to GDP ratios with finance students at Towson University,” a Canadian reader writes, “reminded me of a class I taught many years ago (being a businessman, I volunteered with Junior Achievement to teach business basics to school kids).”
“Sadly, the current crop of Towson students seem as ignorant and misinformed about business, economics and finance as the Grade 8 kids I taught.”
“For example, a multiple choice exam asked my kids what the profit was when McDonald’s sells a $1.00 hamburger. All of them selected either 90 cents or $1.00 as their answer. They were shocked when I explained what it costs to make that hamburger and the few pennies left for profit after all costs are paid.”
“Most of the kids in my class were from upper-income families whose parents were either business people, professionals or well-paid skilled workers. Yet they knew nothing about business, the economy or finance. Nothing.”
“It is truly scary that my Grade 8 kids in Canada and Addison’s university students in the USA were so ignorant about what makes the world go round, and such ignorance is deeply embedded in our education systems.”
“But at least this explains why voters keep demanding their governments and unions do things that are sure to lead to economic and social ruin (Greece is a prime and current example).”
“If only we could force them all to read The 5 starting when they are in diapers.”
The 5: Hmmm….
“I have been using NASCAR attendance to tell me the truth about the supposed recovery for several years now,” a reader writes after yesterday’s episode, “since I live within half a mile of Bristol Motor Speedway and rent out space in my yard for campers.
“I have been doing this for over 10 years and never had a vacancy until last year. The one race that was run this year had the lowest attendance ever and I had nearly a third of my yard empty. Since I haven’t raised my camping rate ever, it all has to do with the economy and gas prices.”
“So I’ll believe in a recovery when the fans are back in my yard.”
“In November of last year,” writes a reader with a follow-up, “I read in The 5 that the Indiana Supreme Court had just shredded the basic right of its citizenry to defend themselves in their own home — a right dating back to the 13th century and the Magna Carta.”
“I was shocked to learn that six months earlier, the case of Barnes v. Indiana had gone almost unmentioned. As Indiana is my home, I was especially moved to prevent this ruling from taking hold.”
“Fortunately, despite the downplay given by the media, many of us here, myself included, objected loudly. Our state senators and representatives heard from us, and agreed, using words like ‘shocked’ and ‘appalling’ in reference to the ruling in their replies to me.”
“As a result of our efforts, Senate Bill 1 of 2012 was written to overturn the ruling; passed by an overwhelming majority; and, effective July 1, 2012, will become law, handing back the right of the individual to defend his or her home and property against unlawful entry by the police, using force if necessary.”
“I wanted to thank you for calling this incredible breach of justice to our attention. It was your action that informed me and doubtless many other Indiana residents of what was happening in our state. Thanks in part to you, we have stopped the court from stripping Indiana residents of a basic right. Others may complain of the nonfinancial content that we find in The 5 from time to time. I am not one of them.”
“Thanks for the financial advice, political heads up and always entertaining read.”
The 5: You’re welcome. And we invite you to join kindred spirits, wherever they might live, at the Laissez Faire Club.
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P.S. Congratulations to the segment of our readership who as of yesterday were up 54% in a little over a week as financial shares took a beating… and 71% in less than two months on a stumbling tech giant.
Just goes to show there are gains to be had whether the market’s up or down. Want to claim some for yourself? Here’s where to start.