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Mark's Market Blog

6-9-13: The NSA is watching you.

By Mark Lawrence

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QE has taken over the markets again, and we're back on the path upwards. Right now. This state is, imho, very unnatural and the markets are developing a tension like a rubber band stretched too far. There will be a price to pay for this, I think, but not immediately. Perhaps there will be more pressure on bond prices and another leg down, but Bernanke and his Japanese, Chinese, Korean and European friends have their printing presses running overtime and that will continue to dominate for an extended time. The Japanese are playing for all their marbles, they will not let things get out of hand. Until they have no more control, then things will get very bad very fast.


S&P 500 December 15 2012 to June 7 2013

The jobs report came out. The US added 175,000 new jobs last month. We also added 420,000 new people to the labor force. So our unemployment rate also went up from 7.5% to 7.6%. This "recovery" simply isn't generating any jobs. We're seeing the emergence of a new class of citizen, uneducated, unemployed or underemployed, unable to participate in our economy at any meaningful level, welfare dependent, and breeding. It's past time for a major push for ubiquitous teenage birth control in this country. I was recently told by someone on the religious right that abortion is evil, that birth control is just another form of abortion and that the Earth is not overpopulated, the Earth can easily support 12 billion people. While I tend to agree that abortion is evil, particularly at the levels of 3,300 infants killed each and every day, I cannot equate birth control with murder; and the statement that the Earth can support 12 billion humans

Francois Hollande, the staggeringly unpopular president of France, announced Friday that the Euro crisis is over. Every major country in Europe is in recession, unemployment continues to rise, youth unemployment in most countries is at spirit-crushing levels averaging over 20% Eurozone wide, and budget deficits continue to go up. Eurozone unemployment is now 12.2%. Spain and Greece, two countries with aging populations, have youth unemployment well over 50% - were I a Spaniard in my 20s, I wouldn't stick around to be stuck with no job and huge debts to pay off for the care of my unemployed or retired elders, I'd leave. Were I a young Greek, I'd already be gone.

In spite of the Bank of Japan's best efforts, the Yen continues to appreciate and the Japanese stock market continues to drop. The Yen, recently at 101 per dollar, has risen almost 5% in two days to 96. The Japanese stock market is off 20% from the recent highs of a few weeks ago and is now officially in a bear market. Abenomics is in trouble. But I've already predicted: the Japanese government is committed and boxed in, they will double down. Will it work? In the short run, the next several months, I expect it will. In the long run throwing money at your banks and stock market does not create manufacturing jobs or real wealth for your middle class. Like most, I believe Japan is in serious trouble: they have national debt that's 250% of GDP, a shrinking population, and the ratio of retirees to workers keeps going up. They're applying current economic theory about growing populations to a population that's fundamentally shrinking. I believe this will end badly. And if we follow with the same policy decisions as they have, which so far we have been doing, then eventually we will wind up with the same result.

Many countries in the world find themselves with aging populations, more and more retirees than workers, and little or no inflation. Current thought is that the world needs a healthy dose of inflation to get the debt under control, but no matter how much money is printed by the central banks of Europe, the US and Japan, we don't seem to be able to generate inflation. No one knows why this is, but there is a new study showing that countries with aging populations don't have inflation; inflation, which Milton Friedman said is "always and everywhere a monetary phenomenon" seems to be a combination of monetary policy and a young, growing population. Here in the US our policy makers have decided to quietly encourage illegal immigration because the new immigrants are young and fecund. However, it seems in a mature post-industrial economy the young must also be educated, and our illegals aren't - they are not participating in our economy at a level that would help generate inflation. However, having a growing population means we probably could generate inflation by simply writing checks to everyone every month.

A fire broke out in a chicken processing plant in China. As is relatively normal for China, the doors were locked, the interior of the building was "complicated," and half or more of the workforce was unable to get out. At least 119 people died in the fire. This is China's worst industrial fire in decades, so it will not be surprising to read in a few months that the business owner was arrested and executed.

Privacy? We don't need no stinkin' privacy: The Patriot act created a secret federal court - the U.S. Foreign Intelligence Surveillance Court - that can grant secret wiretap orders. This week one of these secret orders leaked by ex-NSA employee Andrew Snowden, it was a 3 month renewal of an order for Verizon to supply the NSA with, well, everything. This is reported to be a part of a program called "PRISM." Under PRISM the NSA is collecting 2,100 terabytes of data every hour from Microsoft, Yahoo, Google, Facebook, Paltalk, Youtube, Skype, AOL, Apple, and every phone carrier. Your computer likely holds about half a terabyte, so the NSA is filling up your hard drive roughly every second. Several Senators were asked about this program; Diane Feinstein (D-CA), chairwoman of the Senate Intelligence committee said the Verizon renewal was a standard practice that's been ongoing for seven years; "It's called protecting America." Next time you're thinking of googling fertilizer bombs, perhaps you should think again. btw, Google, Yahoo, Apple and friends deny that the NSA has direct access or back doors into their servers. Apparently the NSA is using Israeli companies to bug internet service providers and intercept search requests and such before they even get to the Google servers. There are even claims that the NSA has modified several major internet switches to "seize and save all personal electronic communications." They're also making use of a little-known 1986 law that says emails that are stored on servers and are more than six months old can be read without any warrant.

Maybe you think this is all rumors and the NSA isn't really collecting all this data. They're also building a facility to store the data. As I reported a couple weeks ago, the NSA is building a new data center in Utah which will open in October and have initially 5 zetabytes of storage - that's 5 trillion terabytes, or 10 trillion of the hard drives in your computer. That's enough storage to save away five years worth of all internet traffic world wide. No doubt in three or four years it will be upgraded. The new data center has 1,000,000 square feet, 60 backup diesel generators with fuel for 3 days, and the classified Titan Supercomputer, which processes 20 million gigaflops per second. Your computer is a fraction of a gigaflop. IBM's Jeopardy-winning Watson computer is about 80,000 gigaflops - the Titan is 250 times as fast. The NSA also says they're working on a second generation supercomputer to be completed in 2018 that's to be a billion gigaflops, 50 times faster than the Titan and 12,000 times faster than Watson, enough computer power to break 256 bit encryption. This information all comes from an NSA press release.

Health: I'm on a new diet. I'm eating gluten-free, which means no wheat. No pasta, no pizza, no pretzels, no pastries, no breads. After some study I've decided that the new genetically modified (GM) wheat is poison and is responsible to a significant degree for the epidemic levels of obesity and diabetes in the world. There is now 30% more obesity in the world than undernourishment. In the US diabetes has tripled since 1990, and obesity, virtually unknown 50 years ago, is epidemic in every state. You remember "amber waves of grain?" That's all gone now, replaced in the last 30 years by dwarf wheat, the product of genetic manipulation and hybridization that created a short, stubby, hardy, high-yielding wheat plant with much higher amounts of sugars and gluten and many more chromosomes coding for all sorts of new odd proteins. Two slices of wheat bread raises your blood sugar twice as much as a snickers bar. The new wheat has been shown to be highly addictive due to having a protein that crosses the blood-brain barrier and mimics endorphins - people who can't stop eating wheat are given an opiate blocker like naloxone and suddenly they lose their craving. Norman Borlaug, the man who engineered this modern wheat, won the Nobel Prize for feeding hundreds of millions of starving people around the world by increasing wheat yields by up to ten times per acre. But his wheat is also making us fat and sick. One of my blog readers went gluten free about three years ago and lost 120 pounds. Dr.William Davis has put over 4,000 of his patients on a wheat-free diet and has found the average patient lost 27 pounds in the first six months. I've lost 23 pounds in five months, and I've also very noticeably become less sensitive to sugar - wheat was apparently making me pre-diabetic. I'm eating whatever I want, ice cream, rice, potatoes, cheese, tri-tip, any food any quantity; but I find my appetite has significantly decreased and I'm eating far less. Surveys find that 30% of Americans are now interested in eating gluten free. Curiously, there's a growing anti- anti-wheat faction, who claims that going gluten free is dangerous for most people. Their #1 claim seems to be you won't get enough fiber; #2 is about vitamins added to flour that you'll miss. 5,000 years ago no one ate wheat, and 500 years ago there was none in the Americas or sub-saharan Africa, but now somehow we can't live without it? If you want to learn more: article by Dr.Mark Hyman, Dr.Davis' blog, Dr.Davis' book.

Computer technology: I'm writing this blog with textpad, typing in the html commands by hand. Then I transfer files to the internet using FileZilla FTP client. This is all very '90s - but if you look at my source html it's very clean and readable, unlike pretty much any other web page on the net. So recently I decided it was time to try out the newest tools: shift-edit, CLEditor, CodeAnywhere, Bluefish, KompoZer. I didn't like any of them, and several messed up my code so that the display was wrong. Most of them think they write better code than I do. I'm trying to move myself over to the cloud and use only web-based tools, with the goal of deserting Microsoft once and for all sometime late this year. I probably won't quite make it: I'm already using Google Docs instead of Office, I can move my accounting from Quickbooks to an on-line service, and I can perhaps find an editor and FTP system that run in a browser and that I can live with, but I don't see how to manage photos or convert ebooks for my Kindle without decent software. Chromebooks are cheaper and kewler than Windows machines: I got an Acer chromebook for $199 at BestBuy a few days ago, and a Lenova Windows 8 laptop at BestBuy for $330 the next day. The Chromebook booted up in about 10 seconds. It wanted to know the password to my home wifi, then my gmail account, then my gmail password. 30 seconds later it was ready to go, all my browser history and bookmarks and passwords and extensions all loaded up - a brand new computer and in about 1 minute it looks and feels like all my other computers. The chromebook is pretty much only useful for running Chrome, but that means browsing, email, and google docs gets you more or less a Microsoft Office. The Windows machine took about a half hour to boot up, it wanted to know all kinds of stuff and it wouldn't go forwards until I answered. I've run it for a couple hours now and I still can't figure out how to play hearts. I can barely use the thing. I had to have a windows machine to run cad/cam software for my business, and I suppose it will be fine for that. To call Windows 8 a sucky POS is to do a grave disservice to decent, honest, sucky POS's the world over. Meanwhile Google is trying to seduce us, and frankly I'm seduced. My phone is a Google nexus 4, my tablet a nexus 7, I run Chrome on my home laptop, my office machines and my chromebook. Anything I change on one machine gets instantly updated on all of them. You can't tell my phone from my tablet except for size - same background screen, same apps, everything works the same and Google keeps them up to date with each other. I didn't set it up that way, Google does this automagically. Prices for Chromebooks, the Nexus 4, 7 and 10 are all artificially low as Google sells them basically at cost to help people get seduced. If you're looking for a lightweight inexpensive machine for travel and internet browsing, consider a Chromebook. Cheap, cute, no moving parts - my Acer 2833 has a solid state drive, not a hard disk. Meanwhile switch over to Chrome for your browser now and get with the new program. It's free, looks and feels a lot like Firefox, and has fewer bugs.

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