Tuesday, May 29, 2012

Interest Rate Primer

Interest Rate Primer

This is a Quick Primer On Interest Rates and how to read the medium to long term economic outlook for many countries by looking at them.

The first thing to look at when looking into interest rates for any particular country (or corporation, for that matter) is to look at their credit rating.  Unlike an individual credit rating, governments (sovereigns?) and corporations are rated by entities like Moody's and S&P. 

To get a feel for the general economic outlook for the world, look first at the counties that are rated highest.  Germany and the US are generally rated AAA or AA+.  These are good ratings.  The interest rate on their bonds over the next few years can tell if the country, and the world economy, is expected to do well. 

If countries with good ratings are paying 1% to 3% in interest, it is an indication that it is easy for them to sell their bonds, and that is the key to this whole puzzle. If it becomes more difficult for a particular bond to be sold, the interest rate on that bonds will go up.  If the smart money starts going into stocks, or gets invested somewhere else, there is less money available to buy their bonds, and the interest rates will go up.  Conversely, if the global market is expected to do poorly, with no growth (or even a recession), money will move to the safety of bond markets and governments will be required to pay less interest to sell their bonds. 

In general, the interest rates for the next few years on German and US bonds can be used as a rough guide to world economic growth for the next few years.  Subtract 1% from the interest rate and look at what is left.  In the case of US 2 and 5 year bonds, currently the result is a negative number. This tells me that the outlook for the next 5 years or so is a slight negative growth (We are currently moving into another recessionary dip). Note that I am talking about real growth, not what is advertized.  The difference should be obvious if you have read my previous economic articles.  The nation has been in a very slow downward trend since 2008.

In looking at countries with "less than good" credit, again, a higher interest rate indicates investors are less willing to buy the bonds.  This could be looked at as a reluctance because the investors are not certain the government will be able to repay the debts. This recently happened as Greece defaulted on its debts earlier this year, and has happened with smaller government bodies around the globe, from time to time. 

Returning to the situation in countries with good credit, one of the most obvious harbingers of a coming recession is what is called an inverse yield curve.  This is when the yield on long term bonds is less than on short term bonds.  In good times, investors will buy short term bonds, believing in a short time they will be able to move their money back out of the bond market into stocks and things that will make them more money. In bad times, they will seek long term bonds to keep their money safe until the recession is over.  More people buying long term bonds means their interest rates go down more than short term bonds, resulting in an inverse yield curve.

Looking at sudden movements or trends in the interest rates can reveal market trends before the more obvious indicators do.  In May, yield on the 2 year US bond went up, as the yield on the 10 year US bond went down.  This tells me that people are moving money from shorter term to longer term bonds, out beyond 5 years.  It tells me that we are moving towards a dip in the economic climate that will last beyond 5 years.

Now, all of these observations and forecasts are based on what other investors see.  I don't have a crystal ball to look through, but rather, I look at this through the eyes of other people, and they don't really know the future either.  They do, however, collectively, have a much greater insight into what is happening behind the scenes and around the world, in economics than I would have myself.  I just use this technique to distill their collective knowledge and vision into something a lay person like myself can use.

Thursday, May 24, 2012

Gun advice for the newbe -5

Follow up advise and re-considerations

Over the past couple of months I have had to do some reconsidering of the 9mm automatic vs the 357 revolver.  Also, it seems the prices have gone up in the past couple years, and you will need to budget an extra $100, unless you were just real fortunate, as I was, in finding good quality low cost firearms. 

One of the biggest re-considerations I had to make is in the area of economics and reliability.  Or economics of reliability.  While at the low end, where I live, a revolver is likely to cost about $100 more than an automatic, shooting a dozen rounds of a particular ammo through it is sufficient to say it is reliable.   Shooting 4 dozen rounds of a particular ammo through an automatic is also sufficient, if it never jams once.  I recently came across a troublesome gun and had to shoot off about 3 dozen rounds in the process of troubleshooting it and repairing it, and will now need to shoot 5 to 7 dozen rounds through it to prove its reliability. That is personal defense ammo, not practice ammo, so it will cost upwards of $70 to insure this firearm is reliable. 

Secondly, the revolver is much easier to clean.  No disassemble, just brush it out and oil it up.  Most automatics require disassemble for cleaning.  To a former military man as myself, this is second nature.  Not to most people.  Hence, the revolver is simpler to use and maintain. 

Between those two considerations, I now must favor the 357 for anyone who wouldn't normally have a gun but needs one now in these increasingly dangerous times.  Sure, it won't have the firepower and it isn't really a good carry gun, but if those are what you want, they come with a much higher budget.  These article are all about the minimalist gun in the home. 

The remainder of this article, while it may be of interest to others, is mainly aimed at new owners of 357 revolvers.

Over the past couple of years, there have been some improvements in ammo.   But to understand these improvements, you must first understand the relationships in energy, recoil, and shock.  As those things are somewhat beyond the scope of this article, I will try to give a very, very sketchy and brief overview of them.

If you want to skip this part, my former advise, of making a decision on a personal defense ammo that is within your budget and sticking with it, is still good.  But if you are thinking about a more effective line of ammo, here is a quick overview of the considerations. 

More velocity and more bullet weight (measured in grains) makes more effective ammo.  But increasing both will increase recoil dramatically.  Increasing velocity while maintaining same bullet weight increases effectiveness while increasing recoil proportionately.  But too much velocity (or too little, for that matter) means the bullet is more likely to pass right through the bad guy and take a lot of its energy with it.  Thus modern defense ammunitions use an "engineered" bullet that is almost guaranteed to expand to 40% or more over its original size, to insure it delivers maximum shock almost immediately on impact. 

Now there is no combination that performs best in every situation, and no ammo that is guaranteed to perform the best, so you may have to do some reasoning for yourself. How much recoil can you handle?  If you can handle 357 ammo, great.  But that puts you in about 20% of the population.  For the other 80% of us, after practicing with standard 38+P practice ammo (see note1)  for a while, make a decision, can you handle twice the recoil? If so, there are some light 357 loads that you might want to try.  (See Note2)  If not, go with a good 38+P personal defense ammo.  Hitting the target is much more important than what you shoot at it.

There are two tests to see if you are proficient at using your weapon and not going overboard on hot ammunition. 

Test number one I call Load, Roll and Shoot. In this simple test, load 4 or 5 rounds and leave one or two empty chambers.  Without looking at the weapon, roll the cylinder and close it, so you aren't sure where the empty chambers are.  While shooting, if the barrel jerks (usually down) when you click on an empty chamber, you are flinching as you shoot.

A second and more complex test, for proficiency, is to see if you can fire  5 bullets into a 5 inch circle at 5 yards in 5 seconds.  This is a scaled down version of a test created by a guy named  Richard Mann.  I read his article in a gun magazine.  The test is a good one.  He developed it for really well trained shooters drawing a subcompact pistol from a concealed holster.  Here, I recommend it, without the drawing from concealed holster and stuff, as a yardstick just to see if you can consider yourself basically proficient on your weapon. 

NOTE1:  For practice ammo, I use "Winchester White Box," sold under the name "USA" and I use JHP's, just because they are easy to find around here. They cost about $20 for a box of 50.  Because of the cost and the light recoil, this is what you should be firing most of the time.  This is also a reasonably effective defense round, should you decide to just go with one and only one type of ammo.  (Remember, this article is for those on a budget.)

NOTE2:  The following types of ammo should produce a recoil somewhere about halfway between a 38+P and  fully loaded 357 round.  They should each be about 50% more effective than what I used as my standard practice ammo.  I did a calculation (no particular units, just comparison) on what I expect the recoil to be for each of them, using the manufactures specifications.  For reference, I added practice ammo and full load 357 ammo afterwards. 

Remington Golden Saber     recoil=153    This is a fairly easy to find ammo

Winchester PDX1 Defender     recoil=166 

Buffalo Bore  38+P HeavyLoad   recoil=157  This ammo can be used in a 38, but I don't recommend it due to the excessive stress it would put on the weapon.  It is also hard to find, unless you order it. 

 Practice ammo  (Winchester White Box)    recoil=119

Full Load 357 ammo ranges from about 180 to around 200.

Monday, May 21, 2012

Oddsmaker's Outlook

So, Europe is looking like a slow motion train wreck.  The economic outlook on the continent as a whole is slowly growing dimmer, as half dozen of the weaker countries reject austerity measures.  They have declared they don't want to live within their means and the stronger countries are slowly getting weary of carrying their dead weight. This is a harbinger of the prophesy found in Daniel ch 2.

While the true "Four Horsemen of the Apocalypse" will not ride until after the Rapture (see note), foreshadowing events of their arrival seem certain to arrive before the Rapture, and very likely in the next couple of years. I said before that I would post a forecast of some of the disasters that might befall this world, and some details about them. So here are some odds, with short explanations of each type of event.

Currently Barrak Obama has about a 40% chance of being reelected.  There is better than a 50-50 chance that this would be followed by the Executive Branch of our government imposing draconian measure to stifle free speech and press, an immediate move to embrace Islam and persecute Christians, financial chaos, and movement towards a police state.  These items will be simultaneous to an uprising among various factions of the citizens.  Black "support groups" (such as the "New Black Panthers."  Self serving parasites, in reality,  using "Black Liberation" as an excuse for their dastardly plans) demanding a free lunch and an end to accountability for criminal actions.  Socialists (unions), anarchists, drug gangs (that is pretty much all major gangs today), and busy-body liberals (like the "occupy" movements) will all rise up trying to get their slice of the pie.  Until it all comes crashing down.

In 2014 and beyond, there is about a 10% chance a weather related phenomenon (like el Nino) will create havoc in the agricultural world and cause world wide famine. We are on the verge of that today, resulting from the weather disruptions of 2011. And even without some disaster, wheat has doubled in 7 years and because of the droughts last year cattle are up 30% this year, with no sign of any relief anywhere.

There is an ever increasing chance of pandemic.  This is because of transportation, the over use of antibiotics (giving rise to germs that don't respond to antibiotic treatment) and because of the introduction of various species into areas of the world where they had not been before.  Note that this pre-rapture pandemic will be of an ordinary nature, and normal measures taken by individuals and communities will be somewhat effective against it.

Each of the next 3 years, there is about a 3% chance that a major solar flare will impact earth, killing a major electrical power grid, and leaving millions of people without electrical power for weeks or even months.

There is a very likely chance that as the money flees European banks (this money flight is happening now, in slow motion) for the "safety" of eastern or US banks, the European Banking system, and indeed, the entire European Union may collapse into chaos. (again, this will be in accord with Daniel ch2) This may happen within the next year, and indeed, I'll be surprised if they last until Christmas.  If this follows the pattern many of us see in prophesy, the collapse will lead to the rise of a dictator that will bring order, by and Iron Fisted rule, to the European continent.

In each of the above scenarios, the Islamists will almost certainly rise up against Christendom, attacking governments, churches, civil infrastructure, and anybody who tells the truth about them. They will attempt to take advantage of a weak moment in history to bring in the new Caliphate and summon the 12th Imam (our Antichrist) to rule the world for their moon god (called Allah).

In each of the next several years, the odds the Rapture will occur in any particular year will rise, starting at about 4% for next year and increasing to about 10% per year by 2020.  While no man knows the day or the hour (or even the year), the season is upon us, and the Bible gives unmistakable signs that it is to happen soon. 

NOTE:  For years I struggle with the question of whether Revelation 4:1 represents the Rapture of The Church and that ALL events of chapters 5, 6, and 7 occur after the Rapture. Until recently, I was not completely certain, and searched the Scriptures, other writings, and looked into the original language wording of some of those passages.  Now I am certain the actual events described in those chapters will occur after the Rapture, however, I am also convinced there will be forerunners, a foreshadowing of those events, in the years leading up to the Rapture.

Monday, May 07, 2012

The Coming Disaster - part-1

Will a world wide disaster destroy civilization? Or even a regional disaster destroy our nation? Will the end of the world come next December? Or TEOTWAWKI (the end of the world as we know it)? This is the first of a small series of articles I intend to write on the subject. The number of people preparing for TEOTWAWKI has risen dramatically in the past couple years, rivaling the Y2K scare. "Preppers" has become a regular show on TV in the past year, and even some of the warehouse stores are catering to the survivalist crowd.

A couple years ago, I made a general forecast of what disasters might befall this world, and came out with about 7% chance of some world changing event occurring in the following 12 months. I had intended to update that number the following year, but in truth there wasn't much change the year after, and it slipped my mind. Things have changed somewhat now, and I will make a similar forecast in the near future, but with a little more detail than the last one. But that doesn't mean I am not preparing. But I am not preparing for TEOTWAWKI. Those people are preparing for the end of the road. I am simply preparing for any sort of bump in the road.

God told the Church that He would spare them from the last hour of tribulation (and in truth, the idea that someone can prepare for that is laughable). But history shows that God will not spare His people from the little tribulations that occur along the way. In the past, there have been economic disasters, weather disasters, volcanoes, earthquakes, wars, famines, pandemics, and pestilences. In many cases, Christians (and Jews) did better than others, and in a few cases they fared worse. In Proverbs 6, the Bible tells us to "consider the ant" and in Luke 25:32-38 Jesus told His disciples that after He departed from them, to keep a sword and a purse (a weapon and money).

A couple days ago, the most important monthly economic factor came out. The monthly payroll report on how many jobs have been gained or lost in several areas of the economy. I look mostly at private sector jobs, and at manufacturing. This month, private sector added 130,000 after adding 166,000 last month. To break even, we need 200,000 each month, so this basically erased the gains we had made in some of the preceding months. In manufacturing, we need 20,000 a month to call it good news, and this month only got 16,000. With the exception of a few months here and there, when we buoyed up, the US and even the world economy have been slowly sinking. Oh, the numbers can be made to look good, especially for short periods of time, but the reality is that a few people at the top are getting richer, and most of us at the bottom are getting poorer. Some of it is a "great conspiracy" against us, but most of it is our own doing.

We the people spent, years ago, the money we need now, and we continue to spend more than we can afford. When I tell people what they actually need to do to get their financial house in order, they look at me like I am crazy and tell me "they deserve better." Well, maybe they do, but things are not getting any better, and in not too distant a future, their choices will be taken away from them. Still, the US economy is one of the most resilient in the world, with many layers of security and multiple safety nets and other safety mechanisms, so it is not likely to completely crash anytime soon. But in other places in the world, economic chaos is just around the corner.

Europe has likely already passed the tipping point, and there will be no rescue from a slow slide into disaster. Greece has already defaulted once, and may again. Spain, Portugal, Italy and possibly France may default sometime in the next couple of years. While a wholesale run on the banks is unlikely in Europe, a couple of small scale runs have already happened, removing more than a quarter of the deposits from banks in Greece, for instance. A repeat of that will likely happen in other countries, and each time it happens, it will require another bailout.

France and Greece just had elections. The people in those countries, asked to try to live within their means responded with a hearty "Hell No! Give us our freebies, consequences be damned!" They through out the governments that were trying to help them, and elected socialists. Things are not going to get better in Europe. Every time the Central Banks try to drag them back from the brink, it is harder to do, and has less of a lasting effect. As the situation worsens, one country after another will default on their debts, as Greece did, and people will pull their money out of that nation's banks ahead of such defaults. Where that money will go, I don't know.