What do all these zeros mean?

Do you ever read the financial news and feel that you have no sense of what all these zeros mean? Do you have trouble getting a grip on what those millions, billions and trillions actually represent? John Allen Paulos in his book “Innumeracy” suggests the following thought experiment. Without doing the calculation guess how long a million seconds is. Now guess how long a billion seconds is.

A million seconds is twelve days. A billion seconds is almost 32 years!

Modern Finance

Young Chuck moved from New York to Texas and bought a donkey from a farmer for $100. The farmer agreed to deliver the donkey the next day. The next day he drove up and said, “Sorry son, but I have some bad news, the donkey died.” Chuck replied, “Well, then just give me my money back.”

The farmer said, “Can’t do that. I’ve already spent the money.” Chuck said, “Ok, then, just bring me the dead donkey.” The farmer asked, “What are you going to do with him?” Chuck said, “I’m going to raffle him off.”

The farmer said, “You can’t raffle off a dead donkey!” Chuck said, “Sure I can, watch me. I just won’t tell anybody he’s dead.”

A month later, the farmer met up with Chuck and asked, “What happened with that dead donkey?” Chuck said, “I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.” The farmer said “Didn’t anyone complain?” Chuck said, “Just the guy who won. So I gave him his two dollars back.”

Chuck moved back to New York and became a senior executive at an investment bank!

Sobering Statistics

• Number of times the S & P 500 closed up or down 5 percent in a single day in 2008: 17
• Number of times between 1956 and 2007 it did this: 17
• Year that the stock market first regained its 1929 pre-crash peak: 1954
• Average number of years after the beginning of a severe economic downturn that economic growth resumes: 2
• Average number of years until unemployment reaches its peak: 5

Rick Santelli

Thank you, Rick Santelli of CNBC, for voicing the growing frustration of the “silent majority” of many successful Americans.  There are deep philosophical differences between the fundamental values on which this country was established and where the Obama administration and new Congress are rapidly taking the country.

These are not abstract academic debates about Keynesian economics and the concept of limited government.  This is a nation of free individuals who make responsible choices and take risks carefully in their lives to achieve success over a lifetime.

Federal intervention in markets affects all of our lives, and will do so for generations to come.  It rewards failure, not success.  It rewards political connections, not responsible choices.  It punishes success through politically motivated government transfers of wealth.  Instead of encouraging and recognizing private charity toward others, it rewards reliance on government.

The Icelandic meltdown. Regrettable but predictable

Take one part hubris, one part arrogance, one part ego and add $120 billion. What do you get? Iceland! The world’s first hedge fund disguised as a nation.