Bleak Global Marketplace: Nowhere to Invest, Shorting the Yuan

As the amount of money in the financial markets grows compared to the amount of worthwhile investments, it’s like having more and more rich people standing on a shrinking platform…

… the basic idea behind an investment — be it in stock or bonds or whatever — is that it’s a bet. Someone in the economy has an idea for a new business or other project, and is either borrowing money or trying to raise equity to give it a try. If you buy a stock or a bond, you’re basically saying you think that looks like a good bet: If the project is successful, you’ll get dividends form the stock or service payments from the debt, and the value of those instrument will go up on the financial markets.

When the rich have excess money, this is how Econ 101 says they store it: in new projects that lead to new growth and new jobs. __ All That Money and Nowhere to Put It

Where is venture capital going?

These days the big money is swinging back away from the BRICS, with money fleeing Russia, China, Brasil, etc. seeking any safe haven in a storm.

Of course you have $billionaires like Paul Allen, Peter Thiel, Jeff Bezos, and others who always seem to know where to put money to build winners — creating entire new markets and making a lot more money. More conservative $billionaire: Cascade Investments (Bill Gates)

But too many rich people — and apparently most investment advisors and financial journalists — are more like “one-trick ponies” when it comes to good ideas. Witness all the “woe over low oil prices,” for example, and tell me that the financial class is not comprised of idiots.

Is George Soros Thinking About Shorting the Chinese Yuan?

“A hard landing is practically unavoidable,” Soros told Bloomberg Television last week on the sidelines of the World Economic Forum in Davos, Switzerland. “I’m not expecting it, I’m observing it,” he said, referencing his China outlook.

Soros’ ties to seismic currency bets date back to 1992 when he accurately wagered that the pound would fall in value, forcing the British government to withdraw the currency from the European exchange rate mechanism. He also successfully bet against the Thailand baht ahead of the Asian financial crisis in 1997, which pushed several Asian economies to brink of sovereign default.

Although Soros hasn’t directly threatened to bet against China’s yuan, his reputation as the investor who broke the Bank of England might have been enough to draw Beijing’s attention. __ Soros vs. China Round I

Certainly that would be one gamble that Soros could take that is in line with some of his past successes.

Startup Ecosystem Compass Rankings

Startup Ecosystem
Compass Rankings

Russian Startup Situation Bleak

In Russia, the billionaires have lost over $10 billion and counting. In fact, if not for Russia’s black market and off-the-books economic activity, it is not clear that there would still be a Russia at this point.

The economic costs of Russia’s more aggressive foreign policy continues to pile up. The government tried to put a positive spin on it. For example GDP shrank 3.7 percent in 2015, but it was forecast to fall 3.8 percent. What was less publicized was that the trends in late 2015 showing accelerating economic decline. Industrial production, fixed investment and inventories are all rapidly falling. At the end of 2015 retail sales were declining 15 percent a month. All this points towards even greater GDP decline in 2016. Unemployment has remained at about five percent but widespread (and very visible) poverty is growing because of underemployment, inflation and pay cuts. That explains why average family income has fallen over ten percent so far and inflation (over ten percent a year) is reducing consumer purchasing power further. A lot of this increase has been caused by escalating food prices. The official poverty rate was up to 15 percent by the end of 2015 while the actual rate is believed to be nearly twice that. Some parts of the country have an official poverty rate of close to 40 percent. Foreign and local economists do not see this decline halting for another two or three years. That assumes that the price of oil will remain low, Western sanctions remain in force and foreign investors will continue to stay away. The economic damage has been so great that Russia has fallen out of the top ten of world economies. The government budget is shrinking as well but some government spending has not been cut much, if at all (like the military, intelligence services and police). There are big cuts in construction and maintenance of infrastructure (housing, transportation, utilities) and cost-of-living increases for millions of elderly pensioners. The fall in the value of the ruble (against foreign currencies) had led a growing number of foreign airlines to halt all service to Russia and a growing number of foreign companies are shutting down their Russian operations. Now, because of Turkey shooting down a Russian warplane last November, Russia has imposed a lot of economic sanctions on Turkey, a major trading partner. While these will hurt Turkey, the Turks do not have international sanctions imposed on them like Russia does and can find outer customers and suppliers. Russia is not so fortunate and will suffer more economic damage because of the sanctions on Turkey. __ Russia Just Getting By

Some wise investors in North America are investing in young minds. Rather than wasting their contributions on politically correct left-wing indoctrinating universities, they are funding smaller colleges and universities that seem able to encourage the creation of more independent minds.

The colleges below, for example, recieve most or all of their operating funds from donations of alumni — who tend to do well financially themselves:

College Highest % in fiscal year 2015
1. Deep Springs College (Big Pine, CA) 144.0%
2. Hillsdale College (Hillsdale, MI) 137.5%
3. Concordia Seminary (St. Louis, MO) 89.3%
4. Northland College (Ashland, WI) 81.1%
5. Louisiana Tech University (Ruston, LA) 76.5%
6. Anabaptist Mennonite Biblical Seminary (Elkhart, IN) 76.0%
7. Luther Seminary (St. Paul, MN) 72.2%
8. Virginia Military Institute (Lexington, VA) 68.7%
9. Catawba College (Salisbury, NC) 64.8%
10. Wabash College (Crawfordsville, IN) 63.6%
Source: Council for Aid to Education (CAE)

More about #1 on the list Deep Springs College:

Students spend two years studying an eclectic curriculum that includes ancient Greek, genetics, biology, music, philosophy, political science, mathematics, literature and international relations. There is no television, no mobile phone reception and limited internet access.

Tuition and board are free – each student receives a scholarship valued at about $50,000 – making this a cashless campus and one of a handful of free colleges in the US; rare, endangered islets amid a rising tide of fees, debts and drop-out rates. Endowments pay for half the $1.6m annual running cost; the rest comes through fundraising.

Students, however, must spend at least 20 hours a week doing “labour” to keep the college-cum-ranch ticking over: cooking, cleaning, gardening, milking cows, saddling horses, herding cattle, moving hay, butchering chickens, wiring cables, sorting library books, fixing vehicles. On top of this, they must administer college affairs: debating and voting on things such as amending the curriculum, hiring staff, sifting applications for next year’s intake, deterring coyotes (shoot them, according to a recent decision)… __ School for Cowboys

Another unconventional school worth watching and perhaps investing in, is Minerva in San Francisco.

n April 2012, Minerva Project received US$25,000,000 in venture funding from Benchmark Capital to create the undergraduate program that would become the Minerva Schools at KGI.[1][5] Stephen Kosslyn joined Minerva in March 2013 to serve as Founding Dean. Prior to joining Minerva, Kosslyn served as Director of the Center for Advanced Study in the Behavioral Sciences at Stanford University and Dean of Social Sciences at Harvard University. Kosslyn was responsible for hiring the heads of the four colleges in the School of Arts & Science and overseeing the development of Minerva’s seminar-based curriculum.[6] In July 2013, Minerva Project partnered with the Keck Graduate Institute to officially launch the Minerva Schools at KGI.[7]

… Students initially take four “Cornerstone Courses” that introduce “Habits of Mind” and “Foundational Concepts” that cut across the sciences and humanities. In a science class, for example, students develop a deep understanding of the need for controlled experiments. In a humanities class, they learn the classical techniques of rhetoric and develop basic persuasive skills. The curriculum then builds from that foundation. Minerva encourages students to use massive open online courses to learn what is typically taught in first-year courses.[16]

Why juxtapose the topic of unconventional colleges with the “problem” of wealthy investors having “nowhere to put their money?” Think about it. As Albert Einstein so famously said:

“The world we have made as a result of the level of thinking we have done thus far creates problems we cannot solve at the same level of thinking at which we created them.” — Albert Einstein

The modern elitist mode of thought has painted itself into a corner, leading to stagnation and collapse of opportunity. The human mind, however, is capable of so much more if given the opportunity and the kind of education and early childhood training that unleashes — rather than constrains — the human mind.

Better quality human minds, for example, would never have become mired in modern delusions such as the climate apocalypse cult, peak oil armageddon, multicultural political correctness, suicidal immigration policies, pandering to the lowest common denominator by virtually every social institution, and a relentless descent into corrupt populism that did not begin with Obama and will not end with Trump.

Good human minds are like leavening in the bread. A little goes a long way. But one must be willing to abandon conventional wisdom and make one’s own way. There is nothing for it, it must be done boldly.

It is never too late to have a Dangerous Childhood.

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