Other recent entries in this blog:
08 March 2009
There's No Fool Like A Gold Fool
I saw on TV last week that a new kind of tupperware party is all the rage in
California: ladies bring their old gold jewellery - or possibly in Beverley
Hills their dinner services - have them assayed on the spot by a dealer's expert
and get paid out with checks. Because of the high gold price, they seem to think
it's manna from heaven. One lady was getting a check for five hundred bucks
or so, and you could see that she'd be straight down to Macy's for another new
pants-suit even flashier than the one she was wearing.
I don't know where to start. It reminds me of what they did in London in the
second world war, when all the ornamental railings outside people's houses were
melted down to make gun barrels. It seems the antithesis of civilization; and
what about the men who gave these ladies the rings, baubles, necklaces and chains
they so cavalierly throw away. Did they give their permission?
Apart from the moralising - perhaps I'm just jealous of anyone who has got
so many gold rings they can afford to get rid of a pile of them - I can't think
of a sillier way of throwing money away. The dealer must be laughing all the
way to the bank; apparently he was giving a 30% discount on the market price.
There were about a dozen ladies around the table on the TV clip - so if he paid
out six thousand dollars he made himself a profit of two thousand five hundred
and seventy one dollars, plus a free hot meal by the look of it. Not too bad
for an evening's work, even with the price of gas as high as it is; and he didn't
even have to wear a necktie.
When you buy a new gold ring - well, OK, when your next randy prospective husband-not-to-be
buys you a gold ring - the price will be something like 50% to 100% higher than
the cost of the materials to reflect the workmanship, the carrying cost for
the shop, and profit for all concerned. Let's take 75% as a median and say that
the swooning swain coughed up five thousand dollars for the ring. That means
the gold was worth $2,857. Then you're going to sell it at the tupperware party
for $1,999; let's be generous because of the easy arithmetic and say you get
two Gs for it. You've actually lost 60% of the value of what you have sold.
I can't imagine myself selling any of the tiny store of precious objects I
keep locked away in my bedroom: they mean too much to me; they're part of my
history and so full of memories. And they're worth more every day, I remind
myself, at present. But if I did have to sell them, surely I would do it on
e-bay or I'd go to a specialist jewellery dealer, when I would get something
closer to their true worth.
Oh well. Easy come, easy go, I suppose!
23 November 2008
Please Securitize Me
Reading last week about the 'alternative alternatives' investment sector -
weather derivatives and so forth - it came to me that the markets are missing
out on the biggest and most stable income flows of all, that's to say your salary
and mine.
Right now the banks won't lend, stock markets are in terminal free fall, and
most countries are going to go bust, so it's really hard for all those unemployed
brokers and analysts to earn enough money to feed their Porsches and keep their
lovers in cocaine. So here's my idea.
Let's say you're a Belgian dentist, with an income flow of a quarter of a million
dollars a year (you're not a very good dentist) and you need extra cash to buy
a new high-tech chair. You go to the dentists derivative agency and they rate
your future income stream and bundle it with all the other Belgian dentists'
income streams. Hey presto, there's a new security called Belgian Dentists A
which can be bought, sold or traded.
You get an issuance fee of the present value of 1% of the forward income stream,
say USD100,000, which buys your new chair and then some, and agree to pay 1.5%
of your annual income to the broker for ever. The broker then sells Belgian
Dentists A to the market, making his turn, and makes a market in it.
A whole industry has been invented overnight, with brokers, analysts, underwriters,
traders, rating agencies, credit default swaps, you name it. You're home free,
because you don't owe anybody anything. If you decide to go AWOL and grow tomatoes
in Wales for a living then Belgian Dentists A will take a hit, but AIG will
pick up the tab courtesy of the US Treasury.
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Latest
25 entries from all other blogs:
14 June 2009
WHO Declares TIEA Pandemic
19 April 2009
A Penny For Your Thoughts
05 April 2009
Thank You, Gordon, Now Here's The Money For Your Bus Home
04 April 2009
A New Economic Order
23 March 2009
About Geese And Golden Eggs
22 March 2009
Asset protection, bearer shares and anonymity
19 February 2009
Time To Tax The Vegetarians!
15 February 2009
Better The Devil You Know!
03 February 2009
Orwell, You Were Wrong - But Only By 25 Years
18 January 2009
Break Out The Champagne! Bring On The Dancing Girls!
17 January 2009
How Do You Achieve The Lifestyle Of Complete Freedom Without Having The First Million In The Bank?
19 November 2008
You Don’t Know Until You Go!
09 November 2008
A Keynesian Vacancy The IMF Can't Fill
02 November 2008
You Can't Escape; Resistance is Futile
28 October 2008
Why the Financial Crisis Doesn't Really Matter
19 October 2008
Tax Harmonization Is Coming!
14 October 2008
The British Government’s ‘Ill Considered’ Use of Anti-Terrorist Financing Legislation against Iceland and the Wider Implications
12 October 2008
How To Commit Collective Financial Suicide
07 October 2008
How and Why You Should Buy Physical Gold Offshore
22 September 2008
Scam Busters: Second Citizenship and Passport
07 September 2008
EU Defeated By Bean-Counters
05 September 2008
Offshore Banking: Failure to Open a Bank Account
31 August 2008
A New Lord Of Taxation
29 August 2008
How to Avoid Envy by Keeping a Low Profile
21 August 2008
High Yield Offshore Investment Programs: Do They Exist?
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