Manarin Investment Counsel, Ltd.

Greg Mankiw's Blog
Post: Give me $1 billion to cut the budget deficit

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Understanding Derivatives-"A Primer"  - Author Unknown
  

Heidi is the proprietor of a bar in Detroit ..

 She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

 To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

 Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers' loans).

 Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit .
 
 By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.

 Consequently, Heidi's gross sales volume increases massively.
 
 A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit.

 He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral!!!

 At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS.

 These "securities" then are bundled and traded on international securities markets.

 Naive investors don't really understand that the securities being sold to them as "AAA Secured Bonds" really are debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb!!!, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.
 
 One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.
 
 Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

 Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and Heidi's 11 employees lose their jobs.

 Overnight, DRINKBOND prices drop by 90%.

 The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

 The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the BOND securities.

 They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

 Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

 Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.

 The funds required for this bailout are obtained by new taxes levied on employed, middle-class, nondrinkers who have never been in Heidi's bar.
 
 Now do you understand?

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"Real Estate is all about location, location, location.  It will take some time to work through the issues in places like Vegas, Florida, Phoenix, and California.  But, the fundamentals tell a much different story for us slow and steady Midwestern folk here in Nebraska and Iowa."    Aron Huddleston
MarketWatch Article By Steve Kerch

The 5 states where housing will recover first
And the five states that will lag all others

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For a neither financial nor economic moment, check out the following:

Click here: Sistine Chapel

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Great article!

Congress Rediscovers the Constitution Posted by Roger Pilon If the new Congress to be sworn in on Wednesday is the Tea Party’s cardinal achievement so far, its most symbolic achievement will unfold the next day, when the first order of business in the House will be a reading, aloud, of the Constitution – by all accounts, for the first time in the nation’s history...(Link to article)

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Let me get this straight . . . .

We're going to be "gifted" with a health care
plan we are forced to purchase and
fined if we don't,  

Which purportedly covers at least
ten million more people,
without adding a single new doctor,
but provides for 16,000 new IRS agents,  

written by a committee whose chairman
says he doesn't understand it,  

passed by a Congress that didn't read it but
exempted themselves from it,  

and signed by a President who smokes,  

with funding administered by a treasury chief who
didn't pay his taxes,  

for which we'll be taxed for four years before any
benefits take effect,  

by a government which has 
already bankrupted Social Security and Medicare,  

all to be overseen by a surgeon general 
who is obese,  

and financed by a country that's broke!!!!!  

'What the hell could
possibly go wrong?'

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Author: anonymous.

Anyone can understand this:  Why did Bernie Madoff go to prison?  To make it simple, he talked people into investing with him.  Trouble was, he didn't invest their money.  As time rolled on he simply took the money from the new investors to pay off the old investors.  Finally there were too many old investors and not enough money from new investors coming in to keep the payments going. Next thing you know Madoff is one of the most hated men in  America  and he is off to jail.Some of you know this.  But not enough of you.  Madoff did to his investors what the government has been doing to us for over 70 years with Social Security.  There is no meaningful difference between the two schemes, except that one was operated by a private individual who is now in jail, and the other is operated by politicians who enjoy perks, privileges and status in spite of their actions.   Do you need a side-by-side comparison here?  Well here's a nifty little chart.   BERNIE MADOFF SOCIAL SECURITY Takes money from investors with the promise that the money will be invested and made available to them later. Takes money from wage earners with the promise that the money will be invested in a "Trust Fund" (Lock Box) and made available later. Instead of investing the money Madoff spends it on nice homes in the Hamptons    and yachts. Instead of depositing money in a Trust Fund the politicians  transfer it to the General Revenue Fund and use it for general spending and vote buying. When the time comes to pay the investors back Madoff simply uses some of the new funds from newer investors to pay back the older investors. When benefits for older investors become due the politicians pay them with money taken from younger and newer wage earners to pay the older geezers. When Madoff's scheme is discovered all hell breaks loose.  New investors won't give him any more cash. When Social Security runs out of money the politicians try to force the taxpayers to send them some more; or they cancel S/S to all those who paid into it. Bernie Madoff is in jail. Politicians remain in  Washington .. With fat medical and retirement benefits. 'The taxpayer: That's someone who works for the federal government but doesn't have to take the civil service examination.'           ~ Ronald Reagan   "If you put the federal government in charge of the  Sahara Desert , in five   Years there'd be a shortage of sand.      ~ Milton Friedman

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Six Modest Proposals Source: blog.american.comYesterday my wife forwarded a chain-email to me that made a lot of sense. It proposed an amendment to the Constitution that would read as follows: Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators and/or Representatives; and, Congress shall make no law that applies to the Senators and/or Representatives that does not apply equally to the citizens of the United States. There are some problems with wording that would have to be...

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