Hello Mr. Wolf, won't you please sit down?

[Rob Tucker]

By all means, please explain in as many ways as possible how this will affect Hawaii and Puna.

Mahalo,

Punaweb moderator

[PaulW]

http://en.wikipedia.org/wiki/Stock_market
The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring).

It's not a scam.

[gtill]

Rob, with the # of retirees with 401s in Puna, any discussion of how we're getting screwed since moving away from supposed security to a big crapshoot. With the govt right in the middle of it all!

Plus Jays threads have been some of the best for real rural living tips in Puna.

[JWFITZ]

Paul is providing a link to the stock market for some reason. This isn't so applicable, except to provide a sense of scale. The derivatives market is vastly larger, as it is leveraged at a 10 to 20 to 1 ratio on more or less every large transaction in the world. This is how you end up with such fantastic numbers. What are they based on? Well, no one really knows. Here is the problem. Paul may have insight that the rest of us, or investment bankers and hedge fund managers, or the major players of the IMF or the WMF, or elsewise do not, for the central issue in our world economy is that no one knows rightly how to value these very obtuse instruments. For Puna, the major danger is different. It is easy for large players to create the illusion of real capital to entice interests. We must resist this illusion.

Two reasons this is critical to Puna.

1) Since the majority of large development projects such as the one projected at Punaluu are funding in large measure by mega-organizations such as(I believe)M. Lynch, in that case, it's important to understand while they can leverage the purchasing power to back the development, they cannot maintain the staying power(collateral) to fund it long term. We need to examine in a very critical manner the viability of such ventures in the context of their, and our, future. This would apply to any corporate venture anywhere in our district, as their balance sheets are suspect. This involves large scale agriculture interests. Since we are selling out our small scale agriculture interests as residential property, apparently without remorse, we need to be very cautious elsewise.

2) Gordon is dead right. We cannot be encouraging dead weight. Our roads can't take it. Our hospitals can't take it. Our real estate markets can't take it. Our entitlement programs can't take it. Hawaii facing a massive and underestimated budget shortfall. We must build a local economy that isn't reliant on selling new expensive houses to people off the island. We must work towards our own economy which is not dependent on outside capital, while some profiteer by selling off our common good--we have to really look ahead and understand we're on our own.

Understanding the economy on a global scale goes a long way to understand where our economy will be a year from now. Without that understanding, we are wholly uninformed.

[Rob Tucker]

Years ago I adopted what I thought to be a rather brilliant strategy for defending my financial interests - it largely has worked extremely well for me, perhaps until now.

My strategy was: Do not do any business with any New York City based firms. (Won't bore you with the obvious reasons I came up with this.)

What bums me out now is that while I have not personally lost a nickel in these current events the scale and scope of the malfeasance and corruption is well capable of taking me off at the knees simply because a lowering tide lowers all boats.

Here in Puna my business is at a standstill because my clients are not getting loans. So I am actually particularly interested in how the meltdown will affect us here in Puna. For my purposes I am investing as much time and cash as I can muster and putting it into my farmland to bring it to production. I may simply be forced to change careers - which doesn't bother me too terribly - I expect changes.

Not being a sophisticated investor though I wonder if for most local folks a strategy of investing locally is a better idea. Should we form our own micro bank?

As for understanding the economy enough to predict where we will be a year from now is a tough bet. I expected the current meltdown a decade ago and the rickety wagon just keep on rolling. One immediately is faced with the simplist of questions: Are you an optimist or a pessimist?

[PaulW]

I provided the link because that's where the quote comes from.
The quote explains why the derivatives market seems so large.

It's a bit like a bookie system; the bookie takes in large amounts of money but most of it passes through his hands and he keeps a small percentage.

It's nothing to be scared of.

[JWFITZ]

Predicting the economy is not a hard bet, at all, as long is one is not captivated by wish fulfillment. There are those who have 40 years of timing markets, and I haven't personally missed a beat in 15. Still, it takes a lot of effort, bordering on obsession. It takes a temperament not so interested in profit but accuracy. I had instinctively a real distaste for financial issues until reading Soros's "Alchemy of Finance" about 10 years ago. This radically changed my attitude towards such things. His central maxim was that the only thing that could make financial activities tolerable to a human being with humanitarian tendencies was to look at finance as a real time experiment: that one's profits or losses expressed in an empirical manner whether one understood the factors that drove society or not. Quantum fund out performed the markets by nearly two orders of magnitude. We can say Soros, and Rogers, knew what was going on. They still have a bit to say.

I'd suggest it's worth listening to.

Where's my investment today? In sweet potatoes. That's where I think things are going.

Oh, so you can be an optimist if you understand and adapt, and a pessimist if you don't. It's ironic in the extreme that at this moment those who have grounds for optimism sound like pessimists(ahem) and those who sound like optimists are likely to take it in the shorts. They should be bummed, indeed.

Have we evolved to the point where the PunaBucks currency makes sense all of a sudden? Wow, that was fast. . .

[gtill]

Rob, going into farming now would be a very good move. As a major advantage would be the waiwe on your lot. Google terra preta that Jay was talking about, and it has become accepted in academic and real time agriculture. Nothing but charcoal in some instances will grow crops.

I'd bet a grant from UH would be possible.

[JWFITZ]

A grant is hardly necessary. It's pretty easy to demonstrate that a stand of guava used or charcoal could cut one's need for fertilizer/compost by half. I'd hardly stand around and wait for a grant anyway. It will take three solid years to get a farmstead up and profitable. I'm 18 months into the whole thing at this point and happy to report solidly on track. I should food self sufficient at some standard of living in 4 months, food and fuel self sufficient in 9--food fuel and revenue self sufficient in 16.

Hell yes, I'm an optimist! There is a lot of opportunity in this new world once one resigns oneself to the notion that the old world isn't coming back.

[PaulW]

If you're an optimist then what does that make most of the people in the financial world, who expect a recovery within a year or two?

No, I'm not in denial!