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Mark's Market Blog

10-6-13: Government shutdown.

By Mark Lawrence

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The government shut down. The market is fluctuating as people remember to stay invested for the big jump in the stock markets when a deal is made. That's about it for world news this week.

S&P 500 April 13 2012 to October 4 2013

The government shut down. Without their help, apparently we're unable to see or appreciate Half Dome, Old Faithful, The Grand Canyon (south face. We're still able to see the north face), the WW II and Washington Monuments. Maybe they'll put a huge sheet over the Washington monument. I understand and appreciate the idea of National Parks; I just don't understand why they need fences and gates and entry fees and park rangers armed with automatic weapons. Maybe we're worried that the N.Koreans will sneak in one night and steal Half Dome. The Treasury department says they will run out of borrowing authority on October 17th; imho it's a near certainty the shutdown will last at least until then. This is a minority view, most on Wall Street thought someone would blink in a couple of days. Democrats are livid - they think their 51% means the republicans should just roll over, instead of a minority holding everyone else hostage. Ironic - they're dedicated their agenda to minority rights; apparently only their minorities, however. In the meantime, fear of a US default where we miss a payment on our bonds is slowly starting to grow.

The post office defaulted on a $5.6 billion payment for retiree health benefits. What's next? Much hand wringing in congress and posturing, but nothing will really be allowed to change - no low traffic post offices closing, nothing like that. Stamps will almost certainly go up in price soon. And post office retirees will be dumped into obamacare and given a monthly stipend to help them pay, thus turning the post office's problem into our problem. Sweet.

The secretary general of OPEC accused the west of making more money on oil taxes than OPEC makes pumping it. "The G7 is generating more revenue from tax on our oil than our member countries. They can increase taxes and blame Opec and everyone will believe them." Both allegations are correct - taxes are about a third higher than OPEC profits, and everyone believes it's OPEC's fault.

Obama had a phone call with Iran's new president. The primary result: Israel's threat of attack is now neutralized. I seriously don't get why 70% of jews voted for this guy. If Obama is able to reach some sort of agreement with Iran, the resulting flood of oil onto the market should drive gas prices down quite nicely.

Europe's youth unemployment is spreading getting worse - they're going to have a lost generation. Since these are the guys who are supposed to be paying for the social welfare state starting in about 10 years and continuing for another 20 after that, Europe's problems are only getting started. They are inevitably going to default on their entitlement promises.

Marriage is dead. Already more than half our children are born to unwed mothers. Now Obamacare has massive marriage penalties build in for the middle class - if you aren't married, you likely each qualify for assistance with your mandated and required "free market" insurance, but if married your joint income probably disqualifies you. This new marriage tax is about $4,500 per year on a 20-something couple each making $20,000 - serious money for these people. A 60-something couple each making $30,000 per year loses $10,500 if they marry. Basically marriage for such people costs them a year's gross income every decade or even less.

Obama is widely credited with the destruction of the middle class - well, at least among the people I know. It's not true, the middle class has been in decline for 45 years. Eliminate the top and bottom 20%, call the rest the middle class. It's not pretty. What's the solution? That's controversial. Many think it's higher taxes on the rich and bigger subsidies for the rest, along with a "living wage" rule - if you work 40 hours, you make a "living wage," perhaps something like $40,000. I'm pretty clear that job losses for the uneducated will continue and increase, there is no economic program that will change that basic fact.

I had a realization recently. We're being cultural imperialists, at high cost, in a stupid and ineffective way. Many Americans have no interest in education, with the result that our education systems are dangerous, inefficient and largely unsuccessful. My new idea: compulsory education ends at 7th grade. After that you can attend classes up to age 21, but you have to sign up, and if you don't do the work you get dropped. We need to convert our public middle schools and high schools into something that resembles a junior college. We need to stop forcing teenagers into classes that they hate, that they cut, and where they don't learn anything. They're already on the streets most of the time, it's time to stop spending $10,000 per student per year to force horses to drink.

Like the idea of eating bugs? You probably thought, "no!" but you actually already pay a premium price to eat some bugs - lobster, shrimp, crayfish, crab. Now startups are forming to learn how to farm caterpillars, grubs, grasshoppers. The current idea is to grow them, dry them, crunch them into powder and add to flour. Bugs are typically 70% protean, and are already very popular in Asia and South and Central America.

Are you color blind? Take a free on-line test. I got 18, a decent but not outstanding score. It's like golf, lower is better. Women tend to do better than men.

There's something called the Kessler Effect - if you have a lot of satellites in low earth orbit (LEO) and somehow one blows up, the debris can destroy a 2nd, causing more debris, then a 3rd, and within a couple days the debris has exponentially built up and destroyed pretty much everything in LEO. A few years ago the Chinese sent up a satellite then destroyed it with an anti-satellite missile, and there were fears everything would come down - communications, spy sats, internet, GPS, everything. It didn't happen, we were lucky.

In the movie Gravity a missile takes out a satellite and the Kessler effect happens. There's a space shuttle mission repairing the Hubble - both get destroyed. Sandra Bullock and George Clooney are space walking at the time and, for a little while, survive.

I thought the movie was excellent. See it in 3-d. Generally I'm not a big fan of 3-d, previously only Avatar did a good job imho. Gravity does too.

Fun science: If the Earth were the size of a period ".", the Moon, a quarter the width of the Earth, would be about half an inch away. The Sun would be the size of a golf ball located about 6 yards away. Jupiter would be the size of a pea about 30 yards away. Pluto, smaller than our moon, would be 250 yards away. The nearest star would also be the size of a golf ball, located about 1000 miles away. If you hollowed out our actual Earth then replaced the innards with golf balls spaced 1000 miles apart you would have a decent scale model of the galactic arm around us - you would need about 275 golf balls spread throughout the empty interior of the Earth. And a few hundred peas and sand grains to stand in for planets. There's a lot of empty space out there.

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