Grimm's Tales of Grim Times

Wall Street bankers remind me of a particular fairy tale.

This couple live a meager existence until the husband saves the life of an elf and is granted a wish. He wishes he and his wife could be an Earl and Countess so they would have status and money. It's all good until the wife tells her husband he should have wished they would become King and Queen since he could have wished for anything.

The husband finds the elf and asks to change the wish. It's granted and they become powerful and wealthy. That is, until the wife decides that Emperors and Empresses have even more power and money and asks her husband to find the elf and change the wish again.

The husband does it and now they are rulers of the far and wide and mega-wealthy. But, the wife figures out that even the Emperor and Empress have to listen to the Pope, so she asks her husband to change the wish again.

The husband finds the elf and asks to upgrade the wish to Pope (for his wife). To his surprise, the elf complies. The wife is now Pope and has power to dictate to millions of people. Financial tributes pour into her. But it's not satisfactory when she finally realizes that even the Pope has to submit to God.

So she asks her husband to ask the elf to make her God. They argue about it until he's worn down. He finds the elf and makes the request.

When the husband returns home, he finds they are back in the meager circumstances in which they started off. All the other wishes have become null and void.

The endless quest for more money, higher successes, and faster profits finally did in the economy. Yet, fairy tales seem to mete out more justice than does real life. In real life the leaders of our world wide economic Ponzi scheme are still earning large salaries, getting bailed out of their troubles, and giving themselves bonuses. What's the answer to this?

In the next blog entry, I'll tell you about two completely opposing views on how these economic ills can be fixed.

When I see something like this in the Cary News, I know the recession has officially come to Western Wake County.

Look at the first image. It's not just the price that screams Discount Bin, it's the kooky lettering, the giant $2, the fact that they didn't use the more sophisticated '$1.99'.

The last time I saw Valu spelled without an 'e' I think I was in a dollar store. The graphics on the second image are deliberately unfancy, purposefully plain to convey the image of thrift.

Morrisville is in a well-yuppized area, an area able to support more than a few upscale local magazines, restaurant chains, boutiques. We were a test market for the McCafe. You can find dentists with memory foam chairs here, spas with nationally-recognized accolades and $150.00 hair colorings.

My grocery bill went up about 30% when I moved to Western Wake county from Durham county. And now, have I finally seen the first hint of recession in Cary/Morrisville/Apex/Holly Springs.

Well, maybe the second hint. The first was probably when a new, state-of-the-art Kroger cried uncle in the grocery store wars last year and closed down.

What do you really value?

Let's look at a fun social/marketing experiment on value.

I'm playing a game on Facebook called "Hatchlings". You collect Easter eggs around the site which hatch into pets: colorful fish, cute pachyderms, googly-eyed chihuahuas. Each egg you collect makes your score go up, and you can watch how you do against the Facebook community. Some eggs are "limited editions" which, or course, are hard to find. As your egg count amasses, you earn credits to "buy" other limited edition eggs from a warehouse.

When my husband first heard of it he asked me what you got for your efforts.

"A picture of an egg." I told him. "And later a picture of what the egg hatched."

So why are more than 770,000 people are signed up to play a game that just gives you pictures? Some even paid to become premium members.

And why are so many advertisers paying to be patrons of the game? There are 26 pages of them. (When you patronize an advertiser, you get credits for warehouse purchases.)

Surely the players are getting something beyond colorful eggs and cute hatchlings. By figuring out what they get, we can tell a lot about value, not just for games, but for any purchase.

About half my Facebook friends play the game. Some are addicted (you know who you are). I'm asking if you'll comment on what you get out of playing. Here's things I can think of:

The Treasure Hunt
I play the game just to see what comes next. When will I click on a basket and find a Limited Edition egg? What will hatch from it? Last week I wildly ran my score up to 1000 shells because the Warehouse eggs that cost 1000 shells were grayed out and I couldn't see what they were until I had earned enough to buy them. When I got there, I gifted my purchase to a player who I knew would appreciate having it more than I would. Like a gambler, I just want to see what the next card, next spin, or next click will bring.

Pride in Gamesmanship/Competitiveness
Again, the game scores one point for each egg you find. It displays how you rank against all the players and against your own Network (you join a network in Facebook, usually your city but could be something like your school). There's something compelling about having a high rank, and even more compelling is keeping the high rank once you get it.

Seeking Fame
If you make the top ten in either the general community or your network, your name will show up on the list that every user sees when they look at their Hatchlings page. There's a real high in knowing you are on that list, especially when you know your friends can see your name.

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This application is popular not because of the its technicalities, but because of the psychology behind it. The developer did a great job building into it the things that make people keep coming back every day. By the way, when I checked the developer's profile, I couldn't see the whole thing, but I did see that he just graduated from high school two years ago. I'm sure he has help with this application, it's too big for one person to handle, but still, -- nineteen years old -- dawgs!

When I say "credit", you think of . . .

Yesterday I faced the familiar question at a checkout line: credit or debit? These days I suppose you could be more proud of using a debit card than a credit card. It would be like saying: "I don't have to pay later, I have the money for this purchase right now. I'm a responsible budgeter." But it used to be the other way around.

In the 1970s, (in Canada at least, where I used to live), debit cards came out specifically for people who were either so young or such poor money managers, that they couldn't get credit. Yes, there was a time before this credit crunch when financiers were picky about who they gave credit to. You couldn't get a card if you didn't work full-time and have a good relationship with a bank. You couldn't get a card if you recently screwed up. Back then, when you told the clerk you were paying with credit, you could be proud that a bank thought you were responsible enough to be trusted with a card.

And before that, it used to be the other way around again. Credit was for losers after the Great Depression. That era ended for my parents when they bought their first home in 1952. My father told the bank proudly that he never had any credit. He always paid in full.

"If you never had any credit, how do you expect to get a mortgage?" The banker asked him. Dad was forced to get a Shell Gas charge card to be able to qualify for the home loan.

And before that . . . well, I learned on PBS the other day that lending first became a big business in Europe in the 1600s in Venice. But, lending at usury was seen as a sin, so those of Christian heritage were forbidden to do it.

Conspiracies that don't even need UFOs

I want to buy stock in some mining companies so I've been researching the market. If you're a follower of my blog you know that many analysts believe the gold futures markets are manipulated. I thought you'd enjoy some of the conspiracy theories I've read about gold and silver:

The Plunge Protection Team did it
During the 80's President Regan put together a group to monitor and protect the economy. This is a fact. They are called The President's Working Group on Financial Markets, but I think it was the Washington Post that gave them the beloved nickname in the subtitle. This conspiracy theory says the PPT has directed Wells Fargo and Goldman Sachs to buy massive gold shorts. Why? Because soaring gold prices would hurt the US dollar.

It's a plot to end communism
Back again to Regan's time, this theory says the USSR's wealth was tied up in gold and oil, so the US government worked inside to bring down the prices of those commodities. Prices went back up after communism fell. They've come back down again now, so, are we still trying to bring down Russia? Or is there some other country with vast holdings of gold and oil that we want to bankrupt?

There's no gold in Fort Knox
Let's go back to Presidents Johnston and Nixon. How did they fight in Vietnam without incurring a huge deficit? Theorists believe they spent all the gold in Fort Knox to pay for that war. This is why no-one can go inside Fort Knox anymore when there used to be tours there. It's also why Nixon ended the gold standard and let our currency float. Also, all the gold on the government's books is still priced at $42.00 an ounce -- what it was when we were on the gold monetary standard. Why hasn't it been repriced to today's value?

The Banks are doing it
This theory is a bit like the first one. Only instead of the banks shorting gold at the request of the government, they are shorting gold to protect each other's earlier short positions.

The Futures Market are naked
I hope you're not expecting an undressed trader. COMEX is the market where precious metals are traded. Say your firm buys mega ounces today for delivery in three months. When the trade comes due you either take the ingots or take the money for them. Unless you're a dealer or industry that uses metal, you would probably take the money. Conspirators believe COMEX is selling more shares of precious metal than it has. There's a movement afoot to get traders to take their earnings in metal rather than in cash to force COMEX's hand.

Some new rules to keep your money safe

1. You may have read that anyone having a claim against Bernard Madoff (the broker who engineered the $50 million Ponzi scheme) had to show proof that they owned his investments. Some people had nothing to show.

We all get statements and assorted paperwork from our investments. We probably give them a quick look over then send them to the shredder. "If I need to look at my investments," we think, "I can always do it online."

But what if your bank or broker goes bye-bye, merges, or has to sell its assets to another company? You may not be able to get to your online records for awhile. You may want proof of your assets.

So, new rule: keep about a one-year's paper copy of all your financial records and statements, particularly transactions.

2. Have you ever heard of Satyam Computer Services? They're one of the largest outsourcing firms in India serving 66 countries and working for Fortune 500 Companies. Last week they admitted their books were cooked and the stock went into free fall. Some analysts thought the company would be shut down by Monday.

What if a foreign outsourcing firm has your financial or other personal information and the company goes into disarray. Think about it: disgruntled employees, massive layoffs, upheavals in supervision. And if a foreigner steals your data, you very well may not be able to sue.

So, new rule: If any call center needs your personal data, ask if you can still complete your business dealings without it. If you want to purchase something from a foreign firm, get a VISA gift card and use that instead of your credit card.

3. Lastly, my favorite charity experienced a 17% increase in need this Christmas over last. You can bet their contributions dropped.

So, new rule: If you're working, please find a charity you believe in, and become it's patron. They need you.

It's Suze!

Download Suze Orman's new book for free until January 15.

http://www.oprah.com/article/oprahshow/20081119_tows_bookdownload

The Underground Gold and Silver Market

The real cost of precious metals can be found on ebay.

That's what some traders have admitted.Ever since the summer, the "official" price of gold and silver, on the futures market, has decreased. But demand has been high which has lead to scarcity.

Here's an example:

Using last night's closing price, had I bought an ounce of silver on the futures market I would have paid $11.05.

Had I bought a one ounce American Silver Eagle coin (ASE) to hide in my flour bin at home, I would have paid $15.54.

Plus Shipping.

And I would have had to wait for it to come in.

And I would have had to FIND one first.

Real bullion -- bars and coins -- have always had a premium of less than 10%. These prices above have a 41% premium.

The average bid for that same coin on ebay this morning runs around $17.50 with free shipping.

Now here's the deal. If I wanted 500 ASE coins, I might be able to find them for as low as $14.68 apiece.

Let's see . . . I could then sell them on ebay for a profit of $2.82 apiece, times 500, equals $1,410 profit, less my shipping costs . . . maybe I could squeeze out a $1000 profit. But to sell 500 coins in lots of singles, doubles, tens and twenties, and ship them all would be a full time job. I'd really be earning my money.

Here's something scary. It used to be that a producer that only sold in bulk (a 5000 ounce minimum) had very good prices for coins. Good enough that someone with the money to invest could actually make the scheme above work. But when I checked today while researching this blog entry, A-Mark, one of these high-end dealers, had a price for ASE higher than any other place I looked (except ebay).

So back to my day job.

One good sign and two bad in Morrisville

The good (economic) sign is that restaurants are still busy. We waited in line at The Cheesecake Factory, and on a Monday night. For readers who live in places like New York city and Toronto, know that Raleigh/Durham eateries, at dinner, pretty much only fill up on the weekend.

Even The Cracker Barrel was busy for breakfast this morning (Sunday) BEFORE church.

Now the the bad signs. My hubby's favorite gas station hangout has decided not to open on Sundays anymore. Except for a few lottery ticket buyers and some gas sales, they just aren't getting enough business.

And here's a dew-line barometer of the economy if I ever heard one: our retired neighbor, who regularly dumpster dives around at the Morrisville big-item trash drop off said there's been nothing good coming in. Just Christmas wrapping and boxes, he said. No furniture, household goods, etc.