Ecclesiastes

1

1 The words of the Teacher, son of David, king in Jerusalem: 2 “Meaningless! Meaningless!” says the Teacher. “Utterly meaningless! Everything is meaningless.” 3 What does man gain from all his labor at which he toils under the sun? 4 Generations come and generations go, but the earth remains forever. 5 The sun rises and the sun sets, and hurries back to where it rises. 6 The wind blows to the south and turns to the north; round and round it goes, ever returning on its course. 7 All streams flow into the sea, yet the sea is never full. To the place the streams come from, there they return again. 8 All things are wearisome, more than one can say. The eye never has enough of seeing, nor the ear its fill of hearing. 9 What has been will be again, what has been done will be done again; there is nothing new under the sun. 10 Is there anything of which one can say, “Look! This is something new”? It was here already, long ago; it was here before our time. 11 There is no remembrance of men of old, and even those who are yet to come will not be remembered by those who follow. 12 I, the Teacher, was king over Israel in Jerusalem. 13 I devoted myself to study and to explore by wisdom all that is done under heaven. What a heavy burden God has laid on men! 14 I have seen all the things that are done under the sun; all of them are meaningless, a chasing after the wind. 15 What is twisted cannot be straightened; what is lacking cannot be counted. 16 I thought to myself, “Look, I have grown and increased in wisdom more than anyone who has ruled over Jerusalem before me; I have experienced much of wisdom and knowledge.” 17 Then I applied myself to the understanding of wisdom, and also of madness and folly, but I learned that this, too, is a chasing after the wind. 18 For with much wisdom comes much sorrow; the more knowledge, the more grief.

2

1 I thought in my heart, “Come now, I will test you with pleasure to find out what is good.” But that also proved to be meaningless. 2 “Laughter,” I said, “is foolish. And what does pleasure accomplish?” 3 I tried cheering myself with wine, and embracing folly–my mind still guiding me with wisdom. I wanted to see what was worthwhile for men to do under heaven during the few days of their lives. 4 I undertook great projects: I built houses for myself and planted vineyards. 5 I made gardens and parks and planted all kinds of fruit trees in them. 6 I made reservoirs to water groves of flourishing trees. 7 I bought male and female slaves and had other slaves who were born in my house. I also owned more herds and flocks than anyone in Jerusalem before me. 8 I amassed silver and gold for myself, and the treasure of kings and provinces. I acquired men and women singers, and a harem as well–the delights of the heart of man. 9 I became greater by far than anyone in Jerusalem before me. In all this my wisdom stayed with me. 10 I denied myself nothing my eyes desired; I refused my heart no pleasure. My heart took delight in all my work, and this was the reward for all my labor. 11 Yet when I surveyed all that my hands had done and what I had toiled to achieve, everything was meaningless, a chasing after the wind; nothing was gained under the sun. 12 Then I turned my thoughts to consider wisdom, and also madness and folly. What more can the king’s successor do than what has already been done? 13 I saw that wisdom is better than folly, just as light is better than darkness. 14 The wise man has eyes in his head, while the fool walks in the darkness; but I came to realize that the same fate overtakes them both. 15 Then I thought in my heart, “The fate of the fool will overtake me also. What then do I gain by being wise?” I said in my heart, “This too is meaningless.” 16 For the wise man, like the fool, will not be long remembered; in days to come both will be forgotten. Like the fool, the wise man too must die! 17 So I hated life, because the work that is done under the sun was grievous to me. All of it is meaningless, a chasing after the wind. 18 I hated all the things I had toiled for under the sun, because I must leave them to the one who comes after me. 19 And who knows whether he will be a wise man or a fool? Yet he will have control over all the work into which I have poured my effort and skill under the sun. This too is meaningless. 20 So my heart began to despair over all my toilsome labor under the sun. 21 For a man may do his work with wisdom, knowledge and skill, and then he must leave all he owns to someone who has not worked for it. This too is meaningless and a great misfortune. 22 What does a man get for all the toil and anxious striving with which he labors under the sun? 23 All his days his work is pain and grief; even at night his mind does not rest. This too is meaningless. 24 A man can do nothing better than to eat and drink and find satisfaction in his work. This too, I see, is from the hand of God, 25 for without him, who can eat or find enjoyment? 26 To the man who pleases him, God gives wisdom, knowledge and happiness, but to the sinner he gives the task of gathering and storing up wealth to hand it over to the one who pleases God. This too is meaningless, a chasing after the wind.

3

1 There is a time for everything, and a season for every activity under heaven: 2 a time to be born and a time to die, a time to plant and a time to uproot, 3 a time to kill and a time to heal, a time to tear down and a time to build, 4 a time to weep and a time to laugh, a time to mourn and a time to dance, 5 a time to scatter stones and a time to gather them, a time to embrace and a time to refrain, 6 a time to search and a time to give up, a time to keep and a time to throw away, 7 a time to tear and a time to mend, a time to be silent and a time to speak, 8 a time to love and a time to hate, a time for war and a time for peace. 9 What does the worker gain from his toil? 10 I have seen the burden God has laid on men. 11 He has made everything beautiful in its time. He has also set eternity in the hearts of men; yet they cannot fathom what God has done from beginning to end. 12 I know that there is nothing better for men than to be happy and do good while they live. 13 That everyone may eat and drink, and find satisfaction in all his toil–this is the gift of God. 14 I know that everything God does will endure forever; nothing can be added to it and nothing taken from it. God does it so that men will revere him. 15 Whatever is has already been, and what will be has been before; and God will call the past to account. 16 And I saw something else under the sun: In the place of judgment–wickedness was there, in the place of justice–wickedness was there. 17 I thought in my heart, “God will bring to judgment both the righteous and the wicked, for there will be a time for every activity, a time for every deed.” 18 I also thought, “As for men, God tests them so that they may see that they are like the animals. 19 Man’s fate is like that of the animals; the same fate awaits them both: As one dies, so dies the other. All have the same breath; man has no advantage over the animal. Everything is meaningless. 20 All go to the same place; all come from dust, and to dust all return. 21 Who knows if the spirit of man rises upward and if the spirit of the animal goes down into the earth?” 22 So I saw that there is nothing better for a man than to enjoy his work, because that is his lot. For who can bring him to see what will happen after him?

4

1 Again I looked and saw all the oppression that was taking place under the sun: I saw the tears of the oppressed– and they have no comforter; power was on the side of their oppressors– and they have no comforter. 2 And I declared that the dead, who had already died, are happier than the living, who are still alive. 3 But better than both is he who has not yet been, who has not seen the evil that is done under the sun. 4 And I saw that all labor and all achievement spring from man’s envy of his neighbor. This too is meaningless, a chasing after the wind. 5 The fool folds his hands and ruins himself. 6 Better one handful with tranquillity than two handfuls with toil and chasing after the wind. 7 Again I saw something meaningless under the sun: 8 There was a man all alone; he had neither son nor brother. There was no end to his toil, yet his eyes were not content with his wealth. “For whom am I toiling,” he asked, “and why am I depriving myself of enjoyment?” This too is meaningless– a miserable business! 9 Two are better than one, because they have a good return for their work: 10 If one falls down, his friend can help him up. But pity the man who falls and has no one to help him up! 11 Also, if two lie down together, they will keep warm. But how can one keep warm alone? 12 Though one may be overpowered, two can defend themselves. A cord of three strands is not quickly broken. 13 Better a poor but wise youth than an old but foolish king who no longer knows how to take warning. 14 The youth may have come from prison to the kingship, or he may have been born in poverty within his kingdom. 15 I saw that all who lived and walked under the sun followed the youth, the king’s successor. 16 There was no end to all the people who were before them. But those who came later were not pleased with the successor. This too is meaningless, a chasing after the wind.

5

1 Guard your steps when you go to the house of God. Go near to listen rather than to offer the sacrifice of fools, who do not know that they do wrong. 2 Do not be quick with your mouth, do not be hasty in your heart to utter anything before God. God is in heaven and you are on earth, so let your words be few. 3 As a dream comes when there are many cares, so the speech of a fool when there are many words. 4 When you make a vow to God, do not delay in fulfilling it. He has no pleasure in fools; fulfill your vow. 5 It is better not to vow than to make a vow and not fulfill it. 6 Do not let your mouth lead you into sin. And do not protest to the temple messenger, “My vow was a mistake.” Why should God be angry at what you say and destroy the work of your hands? 7 Much dreaming and many words are meaningless. Therefore stand in awe of God. 8 If you see the poor oppressed in a district, and justice and rights denied, do not be surprised at such things; for one official is eyed by a higher one, and over them both are others higher still. 9 The increase from the land is taken by all; the king himself profits from the fields. 10 Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income. This too is meaningless. 11 As goods increase, so do those who consume them. And what benefit are they to the owner except to feast his eyes on them? 12 The sleep of a laborer is sweet, whether he eats little or much, but the abundance of a rich man permits him no sleep. 13 I have seen a grievous evil under the sun: wealth hoarded to the harm of its owner, 14 or wealth lost through some misfortune, so that when he has a son there is nothing left for him. 15 Naked a man comes from his mother’s womb, and as he comes, so he departs. He takes nothing from his labor that he can carry in his hand. 16 This too is a grievous evil: As a man comes, so he departs, and what does he gain, since he toils for the wind? 17 All his days he eats in darkness, with great frustration, affliction and anger. 18 Then I realized that it is good and proper for a man to eat and drink, and to find satisfaction in his toilsome labor under the sun during the few days of life God has given him–for this is his lot. 19 Moreover, when God gives any man wealth and possessions, and enables him to enjoy them, to accept his lot and be happy in his work–this is a gift of God. 20 He seldom reflects on the days of his life, because God keeps him occupied with gladness of heart.

6

1 I have seen another evil under the sun, and it weighs heavily on men: 2 God gives a man wealth, possessions and honor, so that he lacks nothing his heart desires, but God does not enable him to enjoy them, and a stranger enjoys them instead. This is meaningless, a grievous evil. 3 A man may have a hundred children and live many years; yet no matter how long he lives, if he cannot enjoy his prosperity and does not receive proper burial, I say that a stillborn child is better off than he. 4 It comes without meaning, it departs in darkness, and in darkness its name is shrouded. 5 Though it never saw the sun or knew anything, it has more rest than does that man– 6 even if he lives a thousand years twice over but fails to enjoy his prosperity. Do not all go to the same place? 7 All man’s efforts are for his mouth, yet his appetite is never satisfied. 8 What advantage has a wise man over a fool? What does a poor man gain by knowing how to conduct himself before others? 9 Better what the eye sees than the roving of the appetite. This too is meaningless, a chasing after the wind. 10 Whatever exists has already been named, and what man is has been known; no man can contend with one who is stronger than he. 11 The more the words, the less the meaning, and how does that profit anyone? 12 For who knows what is good for a man in life, during the few and meaningless days he passes through like a shadow? Who can tell him what will happen under the sun after he is gone?

7

1 A good name is better than fine perfume, and the day of death better than the day of birth. 2 It is better to go to a house of mourning than to go to a house of feasting, for death is the destiny of every man; the living should take this to heart. 3 Sorrow is better than laughter, because a sad face is good for the heart. 4 The heart of the wise is in the house of mourning, but the heart of fools is in the house of pleasure. 5 It is better to heed a wise man’s rebuke than to listen to the song of fools. 6 Like the crackling of thorns under the pot, so is the laughter of fools. This too is meaningless. 7 Extortion turns a wise man into a fool, and a bribe corrupts the heart. 8 The end of a matter is better than its beginning, and patience is better than pride. 9 Do not be quickly provoked in your spirit, for anger resides in the lap of fools. 10 Do not say, “Why were the old days better than these?” For it is not wise to ask such questions. 11 Wisdom, like an inheritance, is a good thing and benefits those who see the sun. 12 Wisdom is a shelter as money is a shelter, but the advantage of knowledge is this: that wisdom preserves the life of its possessor. 13 Consider what God has done: Who can straighten what he has made crooked? 14 When times are good, be happy; but when times are bad, consider: God has made the one as well as the other. Therefore, a man cannot discover anything about his future. 15 In this meaningless life of mine I have seen both of these: a righteous man perishing in his righteousness, and a wicked man living long in his wickedness. 16 Do not be overrighteous, neither be overwise– why destroy yourself? 17 Do not be overwicked, and do not be a fool– why die before your time? 18 It is good to grasp the one and not let go of the other. The man who fears God will avoid all extremes. 19 Wisdom makes one wise man more powerful than ten rulers in a city. 20 There is not a righteous man on earth who does what is right and never sins. 21 Do not pay attention to every word people say, or you may hear your servant cursing you– 22 for you know in your heart that many times you yourself have cursed others. 23 All this I tested by wisdom and I said, “I am determined to be wise”– but this was beyond me. 24 Whatever wisdom may be, it is far off and most profound– who can discover it? 25 So I turned my mind to understand, to investigate and to search out wisdom and the scheme of things and to understand the stupidity of wickedness and the madness of folly. 26 I find more bitter than death the woman who is a snare, whose heart is a trap and whose hands are chains. The man who pleases God will escape her, but the sinner she will ensnare. 27 “Look,” says the Teacher, “this is what I have discovered: “Adding one thing to another to discover the scheme of things– 28 while I was still searching but not finding– I found one upright man among a thousand, but not one upright woman among them all. 29 This only have I found: God made mankind upright, but men have gone in search of many schemes.”

8

1 Who is like the wise man? Who knows the explanation of things? Wisdom brightens a man’s face and changes its hard appearance. 2 Obey the king’s command, I say, because you took an oath before God. 3 Do not be in a hurry to leave the king’s presence. Do not stand up for a bad cause, for he will do whatever he pleases. 4 Since a king’s word is supreme, who can say to him, “What are you doing?” 5 Whoever obeys his command will come to no harm, and the wise heart will know the proper time and procedure. 6 For there is a proper time and procedure for every matter, though a man’s misery weighs heavily upon him. 7 Since no man knows the future, who can tell him what is to come? 8 No man has power over the wind to contain it; so no one has power over the day of his death. As no one is discharged in time of war, so wickedness will not release those who practice it. 9 All this I saw, as I applied my mind to everything done under the sun. There is a time when a man lords it over others to his own hurt. 10 Then too, I saw the wicked buried–those who used to come and go from the holy place and receive praise in the city where they did this. This too is meaningless. 11 When the sentence for a crime is not quickly carried out, the hearts of the people are filled with schemes to do wrong. 12 Although a wicked man commits a hundred crimes and still lives a long time, I know that it will go better with God-fearing men, who are reverent before God. 13 Yet because the wicked do not fear God, it will not go well with them, and their days will not lengthen like a shadow. 14 There is something else meaningless that occurs on earth: righteous men who get what the wicked deserve, and wicked men who get what the righteous deserve. This too, I say, is meaningless. 15 So I commend the enjoyment of life, because nothing is better for a man under the sun than to eat and drink and be glad. Then joy will accompany him in his work all the days of the life God has given him under the sun. 16 When I applied my mind to know wisdom and to observe man’s labor on earth–his eyes not seeing sleep day or night– 17 then I saw all that God has done. No one can comprehend what goes on under the sun. Despite all his efforts to search it out, man cannot discover its meaning. Even if a wise man claims he knows, he cannot really comprehend it.

9

1 So I reflected on all this and concluded that the righteous and the wise and what they do are in God’s hands, but no man knows whether love or hate awaits him. 2 All share a common destiny–the righteous and the wicked, the good and the bad, the clean and the unclean, those who offer sacrifices and those who do not. As it is with the good man, so with the sinner; as it is with those who take oaths, so with those who are afraid to take them. 3 This is the evil in everything that happens under the sun: The same destiny overtakes all. The hearts of men, moreover, are full of evil and there is madness in their hearts while they live, and afterward they join the dead. 4 Anyone who is among the living has hope–even a live dog is better off than a dead lion! 5 For the living know that they will die, but the dead know nothing; they have no further reward, and even the memory of them is forgotten. 6 Their love, their hate and their jealousy have long since vanished; never again will they have a part in anything that happens under the sun. 7 Go, eat your food with gladness, and drink your wine with a joyful heart, for it is now that God favors what you do. 8 Always be clothed in white, and always anoint your head with oil. 9 Enjoy life with your wife, whom you love, all the days of this meaningless life that God has given you under the sun–all your meaningless days. For this is your lot in life and in your toilsome labor under the sun. 10 Whatever your hand finds to do, do it with all your might, for in the grave, where you are going, there is neither working nor planning nor knowledge nor wisdom. 11 I have seen something else under the sun: The race is not to the swift or the battle to the strong, nor does food come to the wise or wealth to the brilliant or favor to the learned; but time and chance happen to them all. 12 Moreover, no man knows when his hour will come: As fish are caught in a cruel net, or birds are taken in a snare, so men are trapped by evil times that fall unexpectedly upon them. 13 I also saw under the sun this example of wisdom that greatly impressed me: 14 There was once a small city with only a few people in it. And a powerful king came against it, surrounded it and built huge siegeworks against it. 15 Now there lived in that city a man poor but wise, and he saved the city by his wisdom. But nobody remembered that poor man. 16 So I said, “Wisdom is better than strength.” But the poor man’s wisdom is despised, and his words are no longer heeded. 17 The quiet words of the wise are more to be heeded than the shouts of a ruler of fools. 18 Wisdom is better than weapons of war, but one sinner destroys much good.

10

1 As dead flies give perfume a bad smell, so a little folly outweighs wisdom and honor. 2 The heart of the wise inclines to the right, but the heart of the fool to the left. 3 Even as he walks along the road, the fool lacks sense and shows everyone how stupid he is. 4 If a ruler’s anger rises against you, do not leave your post; calmness can lay great errors to rest. 5 There is an evil I have seen under the sun, the sort of error that arises from a ruler: 6 Fools are put in many high positions, while the rich occupy the low ones. 7 I have seen slaves on horseback, while princes go on foot like slaves. 8 Whoever digs a pit may fall into it; whoever breaks through a wall may be bitten by a snake. 9 Whoever quarries stones may be injured by them; whoever splits logs may be endangered by them. 10 If the ax is dull and its edge unsharpened, more strength is needed but skill will bring success. 11 If a snake bites before it is charmed, there is no profit for the charmer. 12 Words from a wise man’s mouth are gracious, but a fool is consumed by his own lips. 13 At the beginning his words are folly; at the end they are wicked madness– 14 and the fool multiplies words. 15 A fool’s work wearies him; he does not know the way to town. 16 Woe to you, O land whose king was a servant and whose princes feast in the morning. 17 Blessed are you, O land whose king is of noble birth and whose princes eat at a proper time– for strength and not for drunkenness. 18 If a man is lazy, the rafters sag; if his hands are idle, the house leaks. 19 A feast is made for laughter, and wine makes life merry, but money is the answer for everything. 20 Do not revile the king even in your thoughts, or curse the rich in your bedroom, because a bird of the air may carry your words, and a bird on the wing may report what you say.

11

1 Cast your bread upon the waters, for after many days you will find it again. 2 Give portions to seven, yes to eight, for you do not know what disaster may come upon the land. 3 If clouds are full of water, they pour rain upon the earth. Whether a tree falls to the south or to the north, in the place where it falls, there will it lie. 4 Whoever watches the wind will not plant; whoever looks at the clouds will not reap. 5 As you do not know the path of the wind, or how the body is formed in a mother’s womb, so you cannot understand the work of God, the Maker of all things. 6 Sow your seed in the morning, and at evening let not your hands be idle, for you do not know which will succeed, whether this or that, or whether both will do equally well. 7 Light is sweet, and it pleases the eyes to see the sun. 8 However many years a man may live, let him enjoy them all. But let him remember the days of darkness, for they will be many. Everything to come is meaningless. 9 Be happy, young man, while you are young, and let your heart give you joy in the days of your youth. Follow the ways of your heart and whatever your eyes see, but know that for all these things God will bring you to judgment. 10 So then, banish anxiety from your heart and cast off the troubles of your body, for youth and vigor are meaningless.

12

1 Remember your Creator in the days of your youth, before the days of trouble come and the years approach when you will say, “I find no pleasure in them”– 2 before the sun and the light and the moon and the stars grow dark, and the clouds return after the rain; 3 when the keepers of the house tremble, and the strong men stoop, when the grinders cease because they are few, and those looking through the windows grow dim; 4 when the doors to the street are closed and the sound of grinding fades; when men rise up at the sound of birds, but all their songs grow faint; 5 when men are afraid of heights and of dangers in the streets; when the almond tree blossoms and the grasshopper drags himself along and desire no longer is stirred. Then man goes to his eternal home and mourners go about the streets. 6 Remember him–before the silver cord is severed, or the golden bowl is broken; before the pitcher is shattered at the spring, or the wheel broken at the well, 7 and the dust returns to the ground it came from, and the spirit returns to God who gave it. 8 “Meaningless! Meaningless!” says the Teacher. “Everything is meaningless!” 9 Not only was the Teacher wise, but also he imparted knowledge to the people. He pondered and searched out and set in order many proverbs. 10 The Teacher searched to find just the right words, and what he wrote was upright and true. 11 The words of the wise are like goads, their collected sayings like firmly embedded nails–given by one Shepherd. 12 Be warned, my son, of anything in addition to them. Of making many books there is no end, and much study wearies the body. 13 Now all has been heard; here is the conclusion of the matter: Fear God and keep his commandments, for this is the whole duty of man. 14 For God will bring every deed into judgment, including every hidden thing, whether it is good or evil.

The Falling Capital by ~Latuff2

My friend sent me a funny link about CNBC that brought forward a few thoughts about assets. What I am about to write you can and should safely ignore as it is likely to have little to no impact on your life. If you know me, you already know I don’t know anything and carry my cross like everyone else in the world. If you don’t even know me, how can you take what I say as anything of value, anything to use as basis for even a simple decision. Please apply this test to all the noise that comes at you at hundred miles per hour from all the sources of your information. It is actually fun to find the hidden assumptions, the flaws in arguments, the hard-to-notice issues with the opinions given out so freely by everyone. Find issues with what I say, and I’ll thank you.

I only watch CNBC, keep an eye on the papers, and the Internet to gather clues about public feelings. Don Chu’s eloquent points about the fractal nature of humanity come to mind here because just as we have good days and bad days, so does the society. Our aggregate public feelings appear in media. As an example, jokes are only funny because we can relate to them. These feelings in today’s complex and constantly changing world cannot be internalized without one keeping both eyes and ears open and watching and listening on all frequencies. Often the clues are subtle, insignificant and sometimes I cannot even verbalize what I’m “hearing” but I don’t stop listening. My only limitation is time. CNBC plays its vital role in filling in the picture of public sentiment. All of the networks cater to their audiences so well, that we can easily approximate the mood of the audience by simply keeping an eye on the media catering to that audience.

Why did I think about assets? Actually, I don’t like that word at all. The reason is debt. Assets can be acquired with debt. It is not difficult to have significant assets balanced by significant debt. I like the word capital much better. Much of the media, your neighbors, everything you see screams “assets.” Assets are visible and quantifiable. Debt is a hidden, private matter. Of the various definitions of capital, I like this one “any form of wealth employed or capable of being employed in the production of more wealth.” This concept is too basic, I agree. However, often the very basic and simple ones contain more energy than complexities (who would have thought tiny atoms could produce so much energy).

The first challenge is the preservation of capital which encompasses everything we do to make sure that whatever capital we have does not turn into nothing as a result of everything that happens around us. Public sentiment is critical for this because after all the vehicles for storage of capital only work if someone out there is willing to accept them in exchange for something we need. I lived through a period when currency turned into nothing after the collapse of the Soviet Union. Every day I would take the money I earned with my friend and buy something, anything I could buy (cheese, butter, dollars, etc.) because the next day that money would buy less. To contrast that, I was speechless when I visited the Vatican and realized how the Roman Catholic Church had preserved its wealth throughout centuries, changing regimes, wars, and changes in public sentiment. It is a superb lesson in wealth preservation which even includes sovereignty. Contrast that with someone trying to hold on to their property during the gold rush. Keeping in touch with the world and public sentiments is critical for taking the necessary measures ahead of time to protect one’s capital.

The second challenge is employing the capital to produce more wealth. I actually consider this an easier challenge than the preservation of capital but there is nothing easy about this. CNBC and millions of “advisers” are ready to give us that one perfect method that will surely increase our capital. They (referring to the money machine) even convinced a lot of people to borrow someone else’s capital (mortgage or margin put into stock market). They “help us” with enormous amounts of data (real-time quotes, hundreds of statistics, derived metrics, research reports, derivative instruments, etc.), with “education” contrasting investors with speculators (no real difference here), with language (buy and hold, dead cat bounce, MBS, ABS, CDS, etc.), and everything else one would ever “need” to turn capital. The US government wants constant turnover of capital because at every turn increases can be taxed. If capital is not turned (artwork passed from one generation to another), no worries as there are laws to tax the transfer. I still cannot understand how the capital gains are taxed fully but capital losses are only used to offset gains (+$3,000 break). People unfortunately do not often understand what capital is because we sometimes start out with negative capital (student loans, mortgages, etc.). By the time we create enough value to pay off these loans by helping someone else turn their capital, time (our most valuable resource) becomes depleted. CNBC, the mutual fund companies, the government, our friends, this blog, and nothing else in the world can tell you how to preserve and increase your capital. Once this became clear to me, CNBC and all forms of media and information took their proper place in my mind.

Federal Reserve by ~Venar

After years of focusing on nano-economics (too small to call it micro) of my little family, I went on a pleasant trip down the macro-economics lane today. At the end of it I realized that I must have slept through the undergraduate class on Federal Reserve monetizing the nation’s debt because I was “surprised” to see almost a trillion dollars of Treasury obligations on the asset side of the Fed’s balance sheet. Its Annual Report is about 400 pages but the numbers on page 315 are fascinating when contrasted with the numbers on page 322. This video provides a very basic overview of what money is, how it’s created and destroyed.

These are some simple observations:

1. The dollar is backed by debt obligation of our government – no debt > no dollars.
2. Gold mining could not produce enough gold to sustain the growth we needed giving way to the current system.
3. I understand the home mortgage deduction (and why it’s not a home mortgage full repayment deduction). Mortgages are good things as far as our system is concerned. The bank does not need a foreclosed house because that cannot be used as collateral with the Fed to meet the reserve requirements.
4. All other governments are married to the almighty dollar. For example, Russia had to spend billions of dollars in foreign currency reserves to defend its Ruble.
5. We pay thin air for the natural resources and efforts of other countries (oil from middle east, for example).
6. Our current troubles are in part from bad loans getting in the way of the money multiplier.
7. I would need another lifetime to begin to understand the current and past monetary systems, let alone make recommendations for changes.

In the meantime, I made the following comment in an e-mail yesterday:

I have come to think of money as some kind of a complex score in a game – and not much more. The higher the score, the better the player is at the game. Since the game rules are far out of my reach, I try to waste as few cycles as possible on changes I cannot implement but at least two elements bother me:

1. The devastation brought upon many people who fail in the game (real suffering from game “score” issues)
2. The incredible amounts of time (of our life – the real value which we cannot increase in any way) spent in playing the game for maintaining or increasing our scores

One more element bothers me but I did not mention it. People who are not the best at the game (myself in the list) sometimes feel that they are not good for anything. That could not be farther from the truth. My mother never had or paid attention to money and she was …. again searching for words to represent her true greatness.

When others say that time is money, I think the reverse. Money is time, actually. It’s the effort spent every day on earning a living. Here I have to say I feel bad for seniors who after decades of work got 50% cuts in their retirement accounts in the past year and are considering to continue working longer. They have every right to be mad at the system, the government, the brokers, the cheaters, the fund managers, and everyone else because time is what they have lost. Money can be created, but time cannot be created.

Unfortunately, time cannot be taxed (it would be a form of slavery). Therefore, it is converted to money which is then taxed. As a citizen of this great country, I actually like to pay taxes at all levels of government. The higher the tax bills, the higher our score and the better we’re playing the game. My earlier observation is not about the country but for the world as a whole.

Around the same topic, I must remember my uncles living in a small village where my father grew up. There was one little non-functioning store there at the time. Their basic existence revolved around the bounty of the land and their animals which were loved like family members – no money, no tax, no government, hardly a road, no shopping malls, no technological innovation, no Internet, no computer, no indoor plumbing (in the earlier years), no gym memberships, no stocks or bonds, no fancy cars or elaborate houses, but still a pretty happy life.

fairytale house by ~Siska92

I bought a house for $150,000 eight years ago and had a loan of $120,000. The value of my house increased to $350,000. I took advantage of the situation and refinanced, being a conservative person, only borrowing $280,000 at a favorable 5.5% rate fixed for 30 years paying $1,600 per month for the mortgage and another $400 per month for real estate taxes and insurance. I was conservative and spent the $135,000 of home equity that I took out on improvement to my home (new kitchen, new bathrooms, hardwood floors, finished basement, and a small swimming pool for the little ones). This caused my tax bill to increase by $200 per month due to higher assessments. After a few years, the real estate market crashed and my house is unfortunately now only worth $180,000. I still owe $270,000 and have to pay $2,200 per month to live in “my” house. My choices are a) continue paying the high monthly payment with a giant negative balance sheet or b) rent a place for $1,200 per month, let the bank have the house and start from a clean slate.

I wish the situation was as nice as the above description. Here are a few additional realities:

• All my neighbors got foreclosed and my whole neighborhood has been downgraded whereas before I thought I lived in a decent part of town.
• My town is unable to meet budget demands and has to increase taxes to pay its bills.
• I actually spent the money on Made in China products worth $0 today and a GM vehicle that’s lost a lot of its value instead of home improvements.
• My bank let me borrow up to 100% of equity so I borrowed the full $350,000.
• The loan I got had a variable interest rate and my payments are more than $2,200.
• The $30,000 stock portfolio cushion that I had is now only worth $15,000.
• I am about to lose my job even though I work hard. They say that the company has to cut back because of the economy.
• I also had a credit card balance of $38,000 and student loans of $24,000.
• Even though my wife really loves to shop, we just cannot afford to buy anything any more.
• I had never signed any contracts before buying this house, let alone the sixty thousand mortgage documents they made me sign at the closings.
• I’ve called the bank every month for the last six months asking for help or a way to get me out of this pickle.

What are my choices? I think I better let the bank have the keys, declare bankruptcy if I have to, move out into the $1,200 a month apartment and hope I can find another job so I can pay the rent before the economy gets any worse. How is any of this bull shit they talk about on TV going to help me this month? I voted for Obama to make a change but so far I see more of the same. There is little they can do to make me stay in this house given the reality I am facing.

NYSE by ~liquidsunshine1024

While reading a post from Daily Speculations, I thought of many reasons why the markets are so fascinating. I think it important to be fascinated for the right reasons. Here’s the partial list for me:

1. Markets offer a unique perspective on life and events. This perspective cannot be appreciated by those who do not follow the markets. Here I mean the stock, bond, commodity, currency, real estate and other financial and investment markets. At a basic level, these provide the vital signs (blood pressure, temperature, weight, etc.) for the state of affairs in the world. I believe everyone follows a few markets whether they know it or not. For example, people may follow the clothing or shoe markets, the grocery market, the cell phone market, the job market for a particular profession, etc. I find that these folks miss out on the unique perspective gained from seeing the interrelated cycles in the various financial markets across the globe.
2. One cannot know everything about every market which makes it very exciting to never run out of new knowledge to discover and learn. Time is the only limiting factor. I believe that “What has been will be again, what has been done will be done again; there is nothing new under the sun. (Ecclesiastes 1:9)” but it is our own discovery that makes the journey so exciting. Newton did not create the forces in mechanics, he simply explained them. Copernicus did not move the earth from the center of the universe, he discovered that was not the case. Similarly, in the markets there is always something new to discover, something that is obvious to another person or something that has been explained incorrectly in the past. The one difference is that the new discoveries, large or small, allow us all to affect the functioning of the markets. Imagine a long book where the sentences you have not read change as you read each new sentence.
3. Markets force the issues that people are otherwise unable to force through political, commercial, or not-for-profit means. I believe this is one of the reasons Soviet Union did not have such markets. They provide the environment for natural selection of the healthy from the unhealthy.
4. Markets provide the means for a very large and powerful industry capable of shifting massive amounts of wealth around the ecosystem. The mechanisms are so large and so complex that I think of these as not too dissimilar to the building of the pyramids. Millions of people go to work each day making infinite improvements to these modern day pyramids.
5. Markets provide the means to diversify and preserve purchasing power in the absence of an alternate method or mechanism to store and transfer purchasing power. Soviet Union could not afford to store purchasing power because of the overall inefficiency of the machine. What is amazing is that even those of us with little wealth, no stocks or bonds, participate in the markets in one way or another.
6. Markets provide the means to examine, learn and better understand ourselves. Some of us learn who we are. Some of us learn who we want to be. Some want to get ahead at all cost, others simply want want to preserve capital. I continue to learn a great deal about myself by examining my thoughts, actions, and results in the context of the never ending stimuli from the markets.

If your reasons for being fascinated with the markets are not listed above, feel free to mention them. I would encourage everyone at any age to pick up this subject. You never know… it might help you make or save a dollar or two in the process.

Monopoly by *Aldalambe

“Remember when we play Monopoly, there’s you, me, and the bank? Now imagine if there was another player (let’s say mama) who borrowed from the bank a lot of money to buy a property. So, you and I have some money, but mama has no money because she bought the property, and the bank has no money because it lent the money to mama. Now you come to pass Go, but the bank has no money, should we give the bank money?”

His initial reaction was no we shouldn’t because that’s our money. But then I mentioned to him that if the bank had no money, the game could not go on. It was fascinating to see his face as he internalized our conversation. He suggested some decent solutions one of which was to take some paper and make fake money with it.

This description is unfortunately not too far from reality the way I see things. The only solution that is being suggested is to basically print more money. Sure that may cause the game to continue but I fear that we’ll not only pay more in taxes to cover the massive deficits, but also we’ll pay in cut programs and jeopardized future initiatives, and most importantly in further dilution of our currency and our reputation. I won’t even mention the moral hazard issue and a number of other issues.

I understand that the alternatives are not easy. However, remember that the people who bought the houses and paid the incredible inflated amounts for them, paid these sums to another player(s) in this economy. Where did this money go? To be sure, some of it got invested in Lehman stock (and other instruments including houses with inflated values) and lost its value but certainly not all of it has been lost to depreciation of values. Take a look at this graph about the money supply.

I’m not an economist but in my humble opinion, if we print more money, we’ll simply dilute the value of the dollar in the long run even more (read groceries more expensive and retirement accounts able to buy even less) and we’ll perpetuate the bubbles exacerbating their effects. I have faith in Secretary Paulson and Chairman Bernanke and hope that they have excellent teams at their disposal. However, I believe Congress needs to take its time in crafting a solution to the fundamental issues. This decision is too big to be made in a week because this country is too big to fail.

In the meantime, we’ll just continue playing the Monopoly game on our kitchen tables, since there’s no room for us at the table where the real games are being played in our name…

Battle Over the Market by ~WesternWitch

The recent volatility in the stock markets around the world has put me on an emotional roller-coaster. The governments are doing what they can to prevent a global recession/depression but are they solving any fundamental issues? Absolutely not!

I think of every country as a family. The United States family has an enormous working potential and earns a lot of value for all the good that it creates every day. Every morning it wakes up, goes to work, creates new value, earns a salary and puts that into its “bank account” from which it pays its bills. Because of its hard work, this family has earned a lot and has invested a lot over the years. It is a generous family and provides significant aid to others. It invests in different initiatives to help the kids get better education and to provide decent health-care for most. It even provides some benefits for its senior members. This family also likes to live well and because it has a solid reputation, everyone lends it money. In the recent decades, the lifestyle of this family has required it to accumulate an amazing amount of debt. In the past few months, some of the family members have acted irresponsibly and this family is helping them out. However, since it already has a huge amount of debt, it must borrow more to help them out. This is how I see our current situation (in very simplistic terms). As long as we have major national initiatives with hefty price tags (Iraq war, Social Security, Medicare, MANY MORE….), as long as we spend as much as we spend, and as long as everything we buy is made outside the family, we’re perpetuating the situation.

The main question is how can this family get on a stronger financial foundation with a system that can withstand high levels of shocks and uncertainty in foreign countries?

First, we need to produce innovative new products, services, and technologies to be exported. These must be produced here in America. We need to produce new energy sources cheaply, new medical technologies cheaply, new drugs, new computers, new knowledge, and everything else that we can innovate and sell. We must produce these competitively here in the US! You ask how can we make something cheaper than in Asia/Africa where labor is much cheaper? We do not need to make it cheaper. We need to make it better. Let’s invent even better machines that can do the work. Then let us produce many things China, India, Russia and every other country wants to buy, let us buy less from them and more from our internal producers, let us innovate so we can be the cheapest producer in the world with the highest paid workforce, let us create jobs in research so we can invent the new energy sources, let us get rich as a family!

Second, we need to cut wasteful spending of our governments. This is a long-term issue. Outdated programs should be replaced with new innovative interesting programs that people need. Let’s make it an initiative to run the programs as effectively as possible with objectives and achievement bonuses.

Third, let us create incentives for people to OWN rather than pretend to own. Most people have a mortgage against their homes. Instead of having a tax incentive to have a mortgage (the home mortgage deduction) why not have a tax incentive to not have a mortgage? Instead of giving businesses advantages to go overseas for labor needs, let us reward those who have all-American teams. Instead of taxing people’s estates, let us come up with creative incentives for people to build estates. Let us fund financial education and discipline from middle school to graduate school, so people will not borrow when they cannot repay. Instead of promoting sales of cheap Chinese made products, let us have sales of American made products.

If you agree or disagree with anything I have said, feel free to comment. These are my humble thoughts and I know it would take an act of God for the government to agree. So, I will pray…

Assorted United States coins

Many families in the US are going through difficult times lately mainly because of the effects of the revaluation of real estate. Every day I hear about people being negatively impacted by the current downturn. I feel that with additional preparation, the struggling families would weather this storm better. I have already said that teaching finance, discipline and especially financial discipline should be a priority for our school system but that’s not going to happen overnight. In the meantime, here are my tips on preparing for a financial storm. You should get ready for a financial storm now even if it may seem like you’re barely coping with the current one.

Savings. In addition to your retirement savings and all other savings, make sure you set aside serious funds into a rainy day savings account. This account must increase with EVERY dollar you receive. This is a tax that you must pay to yourself and your family. If you have a family, the account balance should be enough to sustain your family for at least one year without earnings. If you do not have such an account, next time and every time you get ready to pay for anything, consider instead depositing the funds into the savings account. Never purchase new cars, houses, or anything else if you have not saved into this account the required sum. If you do not pay your family into a rainy day account, you’re likely to run into financial troubles some day. Never fund purchases out of this account unless your family is in a serious hardship and you see no other alternative. Replenish immediately after the situation improves.

Insurance. Never consider debt as your “insurance” for the difficult days. Just because you have equity in your home, it does not mean you’ll have access to these funds when you need them most. Just because you have a credit card with a high credit limit, it does not mean that you should use it or rely on it during financial hardships. Do not borrow against your retirement account just because that option may be available to you. Even bank accounts are not good enough in some cases (bank runs, lack of confidence in banking system). Cash on hand isn’t even good enough in some situations (hyper-inflation). Do you think your lines of credit will protect your family? Get enough insurance for your house, car, and other valuables to protect your family against disasters. Do not buy into income protection and other similar schemes because they are simply ways for others to build their savings accounts.

Debt. Get rid of your short-term debt. People who care about you do not care what car you drive or where your house is if your credit cards are choking your family every month. If you owe large sums on your credit cards or in other short-term loans but drive a new car, get rid of your new car, you cannot afford it. You have student loans, pay them off. I have heard most arguments in favor of one type of short-term debt vs. another. They are all bad! Pay them all off just as soon as possible.

Credit. Treat your credit score and credit rating very seriously as that not only matters when you ask for a loan but also in many other situations such as getting a job and renting a home. Low credit score means lack of discipline. Cancel your TV service, get rid of your cell phone, take public transportation, buy only basic ingredients for your meals, do not eat out until you pay off your creditors and improve your credit score. There are all kinds of complex ideas on how to increase your credit score. If you care about them, you are wasting your time. Live your life responsibly and you will not have to worry about this. That’s the fundamental fix.

People. If you care about your extended family, friends, your community and your country, start yourself a program of financial discipline if you don’t already have one. Get books from a library, take classes on this subject and discipline yourself and your family into financial stability. When you get into financial trouble, people around you are also affected very much. Your family, the state or the country may need to help you. If the whole country had acted in a responsible manner in the recent history, we would probably have avoided the current difficulties.

A lot of strong statements have been made above. Obviously, I fully understand the unique situations that people have. You know your situation best. I hope you realize that you have the ability to change that situation when it comes to your finances. It just requires your focus and attention.

In the real estate business, I have heard people crudely refer to these updates as “lipstick and bows.” As someone gets ready to sell a house, the real estate agent or the owner updates some key elements with inexpensive replacements. They also paint and perhaps do a few small touches here and there so the property looks better and sells easier. The advertisement will have a few nice keywords like “brand new appliances, new kitchen, move-in condition, etc.” that may sound like music to buyers who do not want the hassle of dealing with replacements. Add to this a showing complete with chocolate chip cookies from the oven and you’ve almost sealed the deal. I hope that the couple I met did not fall into the “lipstick and bows” trap. I especially hope that when you are shopping for a house, you pay little or no attention to appliances or the paint. Appliances, paint and a whole bunch of other finishing touches are inexpensive to replace.

I would go as far as saying that you should be even more careful when buying an older home with very new finishing touches. Are the owners trying to mask a larger problem? Why would they go through the expense of these finishing touches if the house was a great deal? Are they trying to get more money for cheaper goods?

When looking at houses assuming you have passed the location check which is the most important, I would suggest you pay attention to the structural integrity of the building, roofing, siding, decking, foundation, every component in its plumbing, electrical, and HVAC systems. These are expensive to repair and replace. Everything else can be considered some degree of “lipstick and bows.” I have heard of few non-professional home buyers who look under the bathroom sink or check out the basement first. Even home inspectors often miss critical steps like opening a circuit breaker panel to check for proper grounding. In this process, you need to also assess if the seller is good quality seeker and conscientious homeowner.

Furthermore, if the building and its main systems are in good shape and worth buying, you should invest in a home inspection which will more than pay for itself during your price negotiation. Having newer appliances and newer looking home makes it more difficult to negotiate the price down. A condominium price is even harder to negotiate because it has fewer systems or elements that could be used during such a negotiation. Therefore, a newer looking condo with updated appliances is perhaps the hardest to negotiate down assuming the asking price is around the market value for its location.

Considering these factors, the appliances which were purchased for $1,200 (cheaper models) to make it easier to sell the property could end up costing as much as five to ten thousand dollars more in the house purchase price. Furthermore, replacing these with stainless steel equivalents (nicer models) will end up costing a few thousand more. I hope the couple I met did not fall for this and I hope you never fall for this either.