Quote: Nassim Taleb on the modern Stoic sage

“Seen this way, Stoicism is about the domestication, not necessarily the elimination, of emotions. It is not about turning humans into vegetables. My idea of the modern Stoic sage is someone who transforms fear into prudence, pain into information, mistakes into initiation, and desire into undertaking.” –Nassim Taleb, Antifragile

 

 

 

 

 

 

 

 

Gold Market Volatility

GMO Emerging Thoughts: Present and Emerging Risks to the Gold Trade - By Amit Bhartia and Matt Seto

The notion of gold as a hedge against systemic risks is flawed. We believe that the concept of gold’s role as an insurance policy needs to be narrowed significantly.

Last year we argued that relying on conventional wisdom to analyze gold price movements is naive. Conventional wisdom would lead us to believe that gold price movements are driven solely by the actions of developed markets’ central banks. We believe this view is misinformed and that the available data does not support it.

In that paper, we argued instead that the key driver of the significant rise in gold prices since 2000 has been the emerging markets consumer. Between 2000 and 2010, consumers in emerging markets accounted for 79% of total demand. Conversely, ETF purchases accounted for only 7.5% of demand and central banks in aggregate were net sellers.

This expanded framework demonstrates that gold is also positively exposed to pro-cyclical factors in the emerging markets. Moreover, given the cyclical challenges gold’s key consumers may be facing, the value of gold as insurance should be questioned.

Over the past 13 years, the impact of emerging markets on gold prices was unequivocally positive: emerging markets drove gold prices higher. However, this has not always been the case through history and, we believe, will not always be the case going forward. Emerging markets can be both a positive and a negative driver.

 

 

 

 

 Source:  http://www.valueinvestingworld.com/2013/04/gmo-emerging-thoughts-present-and.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ValueInvestingWorld+%28Value+Investing+World%29

 

 

 

 

 

 

 

 

 

 

Peter F. Drucker: Small is better

Ads by InstantSavings      

Dis-economies of scale

While we often read about economies of scale, we proably should pay more attention to the dis-economies of scale.

When a solid sphere doubles its radius, its surface area increases 300% while its mass goes up 700%. The same ratio seems to affect organizations. 

As they grow, the center becomes more remote from the surface-the part that actually is in contact with customers, competitors, and new technology. The gravitational pull of the increased mass draws more and more efforts inward where they focus on internal processes, procedures, rules, expenses, and politics.

Internal forces soon overwhelm the organization's ability to respond intelligently to external events. 

As Jack Welch puts it, the company "has its face toward the CEO and its ass toward the customer." An odd posture to be sure since as Peter Drucker has preached for a half-century "the only profit center is a customer whose check hasn't bounced." 


Costs Versus Expenses 

It is counter-intuitive to include expense control as one of the driver's of dis-economies of scale. How can saving money be bad?

There is a big difference between costs and expenses. 
Accountants, for example, rarely quantify the costs (in lost revenue) of inertia, strategic indecision, or product delay. They can easily calculate money saved using less expensive materials, but they rarely capture the erosion in brand equity which results from using inferior materials. Accountants are willing to spend time to save money even though we know that is usually better to be first to market.

If effective employment of intellectual capital is the key success factor in the new economy, then should training and education be an expense or investment? And where do most accounting departments put it?

Furthermore, most cost containment exercises are Mickey Mouse. They focus on little items like office supplies, travel, and training budgets. As such they are Band-Aids and placebos. Managers get to feel like they are doing something while big issues are ignored.

Moreover, an expense focus is a continuation of a nineteenth century mindset. It presumes that customers are grateful to have something rather than nothing. But the days are long gone when the typical customer will happily lineup for black Model T's simply because they are cheap. We have, as consumers, come to expect more choices and new products. Squeezing out expenses threatens a company's ability to compete on these other dimensions customers care about.

But what's the first lever executives reach for when trying to improve profits?

For 40 years after the end of Prohibition Schlitz was America's best-selling beer. Then they decided to change the formula so it would brew faster (i.e. cheaper). The new formula changed the beer's taste and customers deserted in droves. By 1984 nobody drank Schlitz anymore.

Notional Benefits, Real Problems

Take this everyday example of the center becoming a drag on performance.

The organization decides "leverage its buying power" to reduce costs. At the outset, everything sounds great. Centralized buying promises increased profits because costs will go down while responsiveness and quality will not change one iota. With great fanfare, a new purchasing process is put in place and new experts appointed to oversee it. But the benefits are only notional.

The purchasing staff quickly makes suppliers aware of the new decision criteria. The latter get with the program and focus on delivering low costs. Quality service and responsiveness usually suffer because they are less quantifiable than price and because the purchasing unit is too removed from the action to gauge the non-quantifiable dimensions of the product. (If they can't graph it, it doesn't exist).

Often, the central buyers become an internal police force- shoving standardization on diverse business units so that order quantities can be increased and inventories managed more efficiently. But standardization can create products that fail in the marketplace because they are neither fish nor fowl.

GM experienced this when they consolidated platforms. In theory this allows multiple divisions to utilize the same basic components with immense savings in research, engineering, and tooling. The result was the Cadillac Cimmeron-a Chevy Cavalier with minor changes and a high price. Not only did it flop in the marketplace; it inflicted grievous harm to Cadillac's image as a premium product. 

Even today, standardization has created look-alike models which have strong appeal to no particular segment. GM sales are lackluster. They keep losing share.

Ford faced similar dilemmas as it pursued the white whale of the "world car"-a single model that can be sold in dozens of countries in great quantities. But the Ford Escort was too bland and under-powered to sell at a profit in the US. At the same time, it was too large and expensive to be successful in Latin America and Eastern Europe.

Centralization also creates political problems. Like courtiers around the throne HQ staffs create suspicion between the center and the market frontier. They usually have influence, sometimes they are responsible for some expense lines. But they do not have responsibility for any whole project. The line managers, who do have that responsibility, have to deal with the marketplace and the central staff. No surprise, often the latter gets the most attention.




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Peter Drucker has written of management's "degenerative tendency" to focus on internal and operational data, to the exclusion of the more important and more strategic information about customers, competitors, and technology. Centralization and defused authority feed this tendency and exacerbate the problems it causes. 





From:

Mostly Politics and Business

Sunday, July 25, 2004 -  prior to the bankruptcies after the 2008 credit crisis.

In History Departments, It’s Up With Capitalism

Kendrick Brinson for The New York Times

Bethany Moreton, who wrote “To Serve God and Wal-Mart,” with Stephen Mihm, author of “A Nation of Counterfeiters.”

April 6, 2013
In History Departments, It’s Up With Capitalism
By JENNIFER SCHUESSLER


A specter is haunting university history departments: the specter of capitalism.

After decades of “history from below,” focusing on women, minorities and other marginalized people seizing their destiny, a new generation of scholars is increasingly turning to what, strangely, risked becoming the most marginalized group of all: the bosses, bankers and brokers who run the economy.

Even before the financial crisis, courses in “the history of capitalism” — as the new discipline bills itself — began proliferating on campuses, along with dissertations on once deeply unsexy topics like insurance, banking and regulation. The events of 2008 and their long aftermath have given urgency to the scholarly realization that it really is the economy, stupid.

The financial meltdown also created a serious market opportunity. Columbia University Press recently introduced a new “Studies in the History of U.S. Capitalism” book series (“This is not your father’s business history,” the proposal promised), and other top university presses have been snapping up dissertations on 19th-century insurance and early-20th-century stock speculation, with trade publishers and op-ed editors following close behind.

The dominant question in American politics today, scholars say, is the relationship between democracy and the capitalist economy. “And to understand capitalism,” said Jonathan Levy, an assistant professor of history at Princeton University and the author of “Freaks of Fortune: The Emerging World of Capitalism and Risk in America,” “you’ve got to understand capitalists.”

That doesn’t mean just looking in the executive suite and ledger books, scholars are quick to emphasize.
The new work marries hardheaded economic analysis with the insights of social and cultural history, integrating the bosses’-eye view with that of the office drones — and consumers — who power the system.

“I like to call it ‘history from below, all the way to the top,’ ” said Louis Hyman, an assistant professor of labor relations, law and history at Cornell and the author of “Debtor Nation: The History of America in Red Ink.”

The new history of capitalism is less a movement than what proponents call a “cohort”: a loosely linked group of scholars who came of age after the end of the cold war cleared some ideological ground, inspired by work that came before but unbeholden to the questions — like, why didn’t socialism take root in America? — that animated previous generations of labor historians.

Instead of searching for working-class radicalism, they looked at office clerks and entrepreneurs.

“Earlier, a lot of these topics would’ve been greeted with a yawn,” said Stephen Mihm, an associate professor of history at the University of Georgia and the author of “A Nation of Counterfeiters: Capitalists, Con Men and the Making of the United States.” “But then the crisis hit, and people started asking, ‘Oh my God, what has Wall Street been doing for the last 100 years?’ ”

In 1996, when the Harvard historian Sven Beckert proposed an undergraduate seminar called the History of American Capitalism — the first of its kind, he believes — colleagues were skeptical. “They thought no one would be interested,” he said.

But the seminar drew nearly 100 applicants for 15 spots and grew into one of the biggest lecture courses at Harvard, which in 2008 created a full-fledged Program on the Study of U.S. Capitalism. That initiative led to similar ones on other campuses ...

While most scholars in the field reject the purely oppositional stance of earlier Marxist history, they also take a distinctly critical view of neoclassical economics, with its tidy mathematical models and crisp axioms about rational actors.

Markets and financial institutions “were created by people making particular choices at particular historical moments,” said Julia Ott, an assistant professor in the history of capitalism at the New School (the first person, several scholars said, to be hired under such a title).

The history of capitalism has also benefited from a surge of new, economically minded scholarship on slavery, with scholars increasingly arguing that Northern factories and Southern plantations were not opposing economic systems, as the old narrative has it, but deeply entwined.

And that entwining, some argue, involved people far beyond the plantations and factories themselves, thanks to financial shenanigans that resonate in our own time.

In a paper called “Toxic Debt, Liar Loans and Securitized Human Beings: The Panic of 1837 and the Fate of Slavery,” Edward Baptist, a historian at Cornell, looked at the way small investors across America and Europe snapped up exotic financial instruments based on slave holdings, much as people over the past decade went wild for mortgage-backed securities and collateralized debt obligations — with a similarly disastrous outcome.

Other scholars track companies and commodities across national borders. Dr. Beckert’s “Empire of Cotton,” to be published by Alfred A. Knopf, traces the rise of global capitalism over the past 350 years through one crop. Nan Enstad’s book in progress, “The Jim Crow Cigarette: Following Tobacco Road From North Carolina to China and Back,” examines how Southern tobacco workers, and Southern racial ideology, helped build the Chinese cigarette industry in the early 20th century.

Whether scrutiny of the history of capitalism represents a genuine paradigm shift or a case of scholarly tulip mania, one thing is clear:
“The worse things are for the economy,” Dr. Beckert said wryly, “the better they are for the discipline.”






Source:  http://www.nytimes.com/2013/04/07/education/in-history-departments-its-up-with-capitalism.html?nl=todaysheadlines&emc=edit_th_20130407&_r=2&

Our Greed Gets Us In Trouble

 

Scams, Rip-Offs and the Psychology of Greed

Suppose you won a million dollars in the lottery, and in order to collect your winnings, lottery officials required you to enter a special vault that was protected by a high-voltage electrical barrier.

Would you attempt to enter that vault for a million dollars, or would you walk away and forfeit your winnings?

My guess is while most of you would probably walk away, a few of you would attempt to enter that vault. After all, no risk, no reward right?

Amazingly, every single day, people are performing the equivalent of the aforementioned lottery analogy by entering a vault of scams, despite all the obvious warning signs.

And guess what happens? They get electrocuted...metaphorically speaking, of course.

But why? Why do so many people continue to fall victim to obvious rip-offs and scams both online and off? Personally, I find it beyond comprehension that so many people can be that gullible - but the evidence suggests they are.

A couple of years ago, I remember reading a story about the arrest of the notorious spammer, Robert Alan Soloway. How notorious was he? It is estimated that he sent out billions of e-mails a day. Yes, I said billions with a "B."

Among the myriad of Internet schemes he was involved with, he sent out e-mails claiming he would send as many as 20 million e-mail advertisements in two weeks for $495.

And gullible consumers fell for his scams hook, line and sinker. Authorities estimated he raked in approximately 1.6 million dollars from his illegal enterprise.

Which brings me back to the question...Why? Why do people continue to fall for this nonsense. We've all heard the warning cliches, since we were children:

"Let the buyer beware."

"If it sounds to good to be true..."

Phishing Anyone?

For example, with all the talk in the media nowadays about identity theft, how is it possible that so many people continue to fall for "phishing" scams?

For those of you not familiar with phishing scams, it's basically a spam e-mail or pop-up advertisement stating words to this effect:

"We suspect an unauthorized transaction on your account. To ensure that your account is not compromised, please click the link below and confirm your identity."

Phishing is designed to steal your personal information, credit card numbers, bank account information, Social Security number, passwords, or other sensitive information.

If you get an email or pop-up message that asks for personal or financial information, delete it immediately. Whatever you do, DO NOT click on the link in the message. Legitimate companies DON'T ask for this information via email.

Another scam that people continue to be victimized by, that always leaves me scratching my head is the "Nigerian Letter Scam." This classic scam has been been around for decades. Here's how it works:

Nigerian Letter Scam

You receive an e-mail from someone claiming to be a Nigerian official, relative or the surviving spouse of a former king or prince. Con artists offer to transfer millions of dollars into your bank account in exchange for a small fee. If you respond to the initial offer, you may receive some "official looking" documents. Typically, you're then asked to provide blank letterhead and your bank account numbers, as well as some money to cover transaction and transfer costs and attorney's fees.

Sensing another easy payday, the con artists keep stringing you along making up excuses for the delay of the transfer, and asking for more and more money. And in some instances, you may even be encouraged to travel to Nigeria or a border country to collect your riches. Of course, there really wasn't any money to begin with, and you can kiss the money you sent them goodbye.

A word of warning...there have been reports of people traveling to Nigeria to meet with these con artists and being murdered.

So, why with a worldwide communication medium like the Internet, where news both good and bad travels at the speed of light do people keep getting ripped-off by same old scams? And why do the con artists who orchestrate and commit these scams do so?

In my opinion, it comes down to one thing - greed. Or as David Hannum once stated, "There's a sucker born every minute." (And yes, it was Hannum who originally coined that phrase, not PT Barnum as has been erroneously reported.)

The Demon Greed

In her book Greed: The Seven Deadly Sins, author Phyllis Tickle states:

"Greed is a sin we see readily in others, but rarely acknowledge as our own--and therein lies its power."

And Chinese philosopher Chuang Tzu once stated:

He who considers wealth a good thing can never bear to give up his income; he who considers eminence a good thing can never bear to give up his fame. He who has a taste for power can never bear to hand over authority to others. Holding tight to these things, such men shiver with fear; should they let them go, they would pine in sorrow."

But this quote by Janwillem van de Wetering is my favorite:

"Greed is a fat demon with a small mouth and whatever you feed it is never enough."

The Psychology of Greed

I completely agree with the aforementioned quotes, and I think they accurately explain why people like Bernie Madoff - individuals who have so much want so much more. It's almost like they're drug addicts - junkies addicted to material wealth, and they'll do whatever it takes to get that next fix - including rip-off family members and friends.

In fact, in his article "Looking at Greed as an Addictive Dysfunction," psychotherapist Mel Schwartz writes:

"The saga of the Bernard Madoff debacle, AIG bonuses and the host of other repugnant behaviors actually reveal a terrible dysfunction in our culture, which has now come to our screeching attention. We are a society that is addicted and ultimately maddened by our obsession with profligate abundance and extravagance. How inconceivable is it that a man who has attained so much success and wealth and earned the rewards of privilege and prestige, feels compelled to ruin himself and his investors in his vainglorious attempt to have yet more? When is enough yet enough?

Madoff is a sick man; not simply due to the devastation that he unleashed on so many, but because his craving is no different than a junkie prepared to do anything for their next fix."

Well said, Mr. Schwartz, well said. And I couldn't agree more. Bernie Madoff and his ilk are scumbags, plain and simple.

How to Avoid Being Scammed

So how can you protect yourself from being scammed?

First of all, you should realize, at some point in their life, everyone has been scammed at some level. And if you haven't yet been a victim, it's probably just a matter of time.

That being said, there are definitely some common sense steps that you can take to greatly reduce your chances of becoming a victim:

1. Unless you signed up to receive e-mail solicitations from a particular company, DELETE all spam. DON'T open it, and DON'T send scam artists your hard-earned money!

2. DON'T EVER respond to any e-mail or pop-up that asks you to login to your account to confirm your personal information. Legitimate companies would NEVER ask you to confirm your personal information via an e-mail.

3. DON'T EVER accept offers or business propositions at face value - not even from friends or family members. ALWAYS check things out with with the Better Business Bureau, Department of Consumer Affairs and the Attorney General.

In addition, websites like Scam.com and RipOffReport.com can be very helpful in avoiding scams.

4. Use common sense. Remember, if it sounds too good to be true, it probably is!

Canadian Junior Mining Companies, Independent Brokers, Have A Bright Future

Kevin Campbell Counterpoint: Canadian Junior Mining Companies, Independent Brokers, Have A Bright Future

Apr 5 2013, 03:19  |  includes: GDX, GDXJ

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Haywood Securities Managing Director Kevin Campbell is concerned by all the negative talk about the state of junior mining. In this reaction to an interview in The Gold Report with B&D Capital consultant Don Mosher, Campbell outlines the fundamental demand for commodities behind his conviction that this is a temporary, albeit viscous, downturn and that the TSX Venture Exchange, the industry and the experienced web of service providers that have built up around it are here to stay.
The Gold Report: As a managing director of investment banking at Haywood Securities, you're in a perfect position to report on the state of the junior mining financing environment. You called The Gold Report's March 25 interview of B&D Capital Consultant Don Mosher titled, "Strangulation by Regulation-Is the Venture Exchange on Its Deathbed?," alarmist. What is the state of the TSX Venture Exchange? Will it continue to serve the retail investor?
Kevin Campbell: The state of junior mining finance is abysmal. There's no question about that. The traditional sources of capital have all but evaporated over the last couple of years. Companies are seeking alternate sources of funding and in many cases are being successful. These sources include selling metals streams, selling royalties, hybrid debt, looking overseas, and all this is also leading to heightened merger and acquisition potential. The right companies will find ways to get by, but it's undoubtedly tough. Good management teams and good projects are going unfunded at the moment.
My concern is more around the public discussion of an existential threat to junior mining. I just don't believe that to be the case. It is an asset class like any other. It may be more volatile than others and subject to more extreme cycles. And we happen to be in a severe down cycle right now. Nonetheless, I believe that junior mining will remain an integral part of the commodity cycle going forward, and I believe in commodities going forward.
TGR: Are you saying that the challenges the junior miners are facing right now, particularly in finding funding, are simply cyclical? It has happened before; it will happen again and things will pick up.
KC: It all really comes down to flow of funds. The flow of funds from conventional sources has departed junior mining for the time being. But the demand for metals very much still exists. I think it comes down to some basic questions: Will there be more or less people in the world by 2025? Are they going to be more or less urbanized? Is their per-capita metal consumption going to be more or less than it is today? I think the answers point to the direction of enhanced metal consumption and more pressure from the demand side in the face of what has been a fairly anemic supply response thus far. I think there's reason to be optimistic and I think the cycle will see the flow of funds return. It just happens that we are in a trough where a lot of pain has been felt. I don't see any overall structural issue that would prevent junior mining from coming back to the fore at some point after this has all been cleansed and rationalized. One of my mentors in this business was let go from his mining role at a Canadian firm in 2001 with the explanation that mining was a "sunset industry." That sentiment is as nonsensical today as it was then.






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 Source:  http://seekingalpha.com/article/1322561-kevin-campbell-counterpoint-canadian-junior-mining-companies-independent-brokers-have-a-bright-future?source=kizur