Archive for July, 2011

What Should I Do To Protect My Money If There Is A Debt Default?

Posted in Finance on July 28th, 2011 by Phil Ferguson – 2 Comments

NOTE:  This post is part of an ongoing education series.  This information is for educational purposes only.  This information does not constitute investment advice.  No rational person would make investment decisions based on a blog post.  Please consult with your financial advisor before taking any action.  If you do need help with your investments contact our sponsor – Polaris Financial Planning.

I have been thinking about doing a post on this for several weeks but just could not seem to do it.  Now I have a question from a friend and blog reader….

Hey Phil,
Would love your take on how one might hedge against this nearly inevitable debt default (or the massive threat of one) that is setting upon us. With a likely reduction in our credit rating, an increase in the cost in borrowing money and a massive hit against the stock market, how might one shift their money to avoid losing their shirt again? – JB

I agree with many economists that our national debt is getting big and we should find a way to slow it or reverse it.  I also agree that if it keeps growing it will cause problems for our long term economy. (charts from Wikipedia)
We have had higher debt before and we can work our way out of the problem.  It is simply spending more than we bring in.

However, the potential of a self inflicted financial bullet to the head is probably the most incredibly stupid political stunts I have seen in my entire life.  Contrary to what Sarah Palin and other tea baggers say this IS a big deal. If the limit is not increase the debts will keep piling up – we just wont pay the bills.  It would be like a homeowner that decides to stop paying their mortgage because they think it is too big.  The debt does not go away!

Congress could meet and raise the debt limit in just a few minutes and this short term problem goes away.  They have not done this because, some want to use the threat of default as a lever to get what they want.  If default was no big deal then there would be no leverage.

There are two main problems with default: 1) The US may not be able to pay interest on US bonds 2) The US may not be able to fund promised services like Social Security payments, medicare payment, government wages.  currently interest on the debt is a small part of the budget because of the low interest rates.  (via wikipedia)

Budgeted net interest on the public debt was approximately $240 billion in fiscal years 2007 and 2008. This represented approximately 9.5% of government spending. Interest was the fourth largest single budgeted disbursement category, after defense, Social Security, and Medicare.[86] Despite higher debt levels, this declined to $189 billion in 2009 or approximately 5% of spending, due to lower interest rates. Average interest rates declined due to the crisis from 1.6% in 2008 to 0.3% in 2009.

Since the US has never been in this position, no one knows what will get paid and who will decide.  However, if US bond payments are not met it will likely shock global bond investors.  They will see US bonds as a much higher risk and expect higher returns.  This could result in a dramatic increase in the interest expense to float new bonds and the effect could last 10 to 20 years.  I would expect the total interest payments could grow to 10 -15% of our national budget in a few years.  This would be the case if the US only misses (pays late) on a payment or two.  If the payments are delayed further or not made at all the result could be that no one buys new US bonds.  This could result in financial trauma not seen for 80 years.

If investors require much higher rates on new bonds the value of existing bonds could drop quite a bit.  The simple way to roughly figure this amount is to take the change in rates times the duration of the bonds.  So… If you have a $10,000 new 20 year US bond that pays 4% ($400 per year or $8,000 in 20 years) and a new one is issued next week that pays 5% ($500 per year or $10,000 in 20 years) no one would pay you $10,000 for your bond.  They can get a new one that pays 5%.  To get someone to buy your bond you have to mark it down by about 20%.  There are much more fancy ways to figure the amount but, this will work for our purposes.

Based on the above analysis I would not have a large percent of my portfolio in long term bonds.  Since most of my clients have limited exposure to long bonds I don’t expect this to be an issue.  The correct amount of long bonds you should have will depend on your specific situation and this should not be considered investment advice.

Stocks are much harder to predict.  I expect that the US market may have large swings over the next couple of weeks but will make 8 – 11% over the next 20 – 30 years.  A short term drop could happen if no deal is made or the market could jump up if last minute talks create a compromise.  I have no way to know.  I own the stock market for long term investing and would not make any changes at this time.

Is Ireland Divorcing The Catholic Church?

Posted in Catholic Church on July 28th, 2011 by Phil Ferguson – Comments Off

via The Telegraph.

Our Irish parents and grandparents would find astonishing the acidly anti-clerical views expressed in the Republic of Ireland today. The land that once called itself a foremost Catholic nation and most loyal ally of the Holy Father is awash with sentiments that seem to veer between Ulster Paisleyism and the Spanish republicanism of the 1930s.

One newspaper published a photograph of the Pope in full regalia, with “Persona Non Grata” superimposed on his image.

The airwaves are full of bitter remarks supporting Taoiseach Enda Kenny’s attack on the “disgraceful” Vatican, and recommending every anti-church measure from the dissolution of the monasteries to the expulsion of the Papal Nuncio and the severing of all links with the Holy See. (The recall of the Papal Nuncio this week marks the lowest point of relations between Ireland and Rome.)

It looks like it will get worse as the people of Ireland wake from their long sleep to find their pockets have been emptied and their children have been raped.

One correspondent wrote that it was his ardent hope that the Catholic Church would follow the example of the News of the World, and hold a “last Mass” before shutting down.

I love it!

The Taoiseach, meanwhile, has been met with standing ovations for his salvo against the Vatican for failing to respond with sufficient concern to the clerical sex abuse scandals as described in the Cloyne report.

His justice minister, Alan Shatter, is introducing a highly controversial Bill which will compel Irish priests to disclose the secrets of the confessional where paedophilia is mentioned: failure to do so could result in a five-year prison sentence.

Why would the be allowed to keep it secret?

This is decidedly not the Catholic Ireland in which I grew up, where politicians were falling over themselves to kiss bishops’ rings, and where one of Enda Kenny’s party predecessors as Taoiseach declared that he was a Catholic first and an Irishman second. However, the breach with the Church has been a long time coming, and for the majority of Irish citizens it is welcome.

There was too much deference to the authority of the Church within the state, even if it was, for historical reasons, sometimes understandable.

There was a long memory of the “Saggart Aroon” – the “Darling Priest” who had stood by the people in dark Penal Days and who became, especially after the break with the Crown, a kind of native nobility. In my family, my mother was inordinately proud of an uncle who was a canon in Co Galway, with a stable of hunters and a splendid wine cellar.

Didn’t it show he was just as good as the gentry!

But all power becomes, eventually, overweening, and the clergy’s power grew too great. This new fierce mood of Irish anti-clericalism is all part of the reaction.

Although some details of Kenny’s speech have been challenged – the state itself failed to implement guidelines about child protection, and there will be a conflict over the seal of the confessional – his oration is a remarkable example of a political leader expressing the collective mood: that the laws of the Irish Republic stand above canon law. And that the Irish prime minister does not take dictation from the Holy See.

The Vatican is not best pleased with this development, and sent a cool response about its “surprise and disappointment”. But the Vatican is a bit like the British Empire: it has diplomatic relations with 179 states. It takes time to get around to all of them, however individually compelling.

There are now calls to remove the Catholic Church from every element of Irish public life, and this is supported by a growing secularist movement. Contrary to supposition, though, state and Church in Ireland are already separate: the constitution, although it mentions God, makes no mention of the Catholic Church, specifically affirms that there may be no religious discrimination, and rules that no religion may be endowed by the state.

However, there is a difference between state and culture: the state construes laws, but the culture draws on history, memory, family, folklore. Despite constitutional separation of Church and state, there remain religious traditions, such as the broadcast of the Angelus on national radio, the prayers that open Dail sittings, and the existence – even dominance – of faith-based schools, which secularists seek to abolish.

Such sweeping changes could occur in what was once Catholic Ireland: the state could become as secularist as France, with all allusion to the Almighty officially excised. Yet even in France, the holy days continue, with Pentecost and Ascension and All Saints, and Lourdes attracting millions.

The Church in Ireland will never be what it was, but the faith, at grassroots level, will not disappear. The people will climb the holy mountain of St Patrick, and come in their thousands to the shrine of Our Lady at Knock, and beggar themselves to provide children with first communion regalia; and when there is a tragedy in a small town, the church and parish priest will still be at the centre of the community, offering age-old comforts, not of the Vatican, but of the faith.

Fox News Wants To Know What You Think About The Ground Zero Cross

Posted in atheists on July 27th, 2011 by Phil Ferguson – Comments Off

Here is the cross that gOd saved.  Around 3,000 did not get his attention but this cross beam of steal is seen as a miracle.  Now christian leaders want to place this symbol at the epicenter of a religious attack.

My friends at the American Atheists are suing to try and prevent this…

For the record, yes, we oppose (as we always have) the inclusion of the WTC Cross in the WTC memorial in NYC, and are now plaintiffs in a lawsuit for it’s removal (or, alternately, atheist inclusion into the memorial).

As you may remember, the buildings were made from girders crossing each other, and in the rubble some Christians found a pair of girders still welded that closely (not exactly, but closely enough) resemble a Christian Roman Cross.

The cross has become a Christian icon. It has been blessed by so-called holy men a few times, and presented as a reminder that God, in his infinite power of goodness, who couldn’t be bothered to stop the Muslim terrorists, or stop the fire, or hold up the buildings to stop 3000 people from being crushed, cared enough to bestow upon us some rubble that resembles a cross. Ridiculous.

This cross is set to be included in the official WTC memorial. No other religions or philosophies will be honored. It will just be a Christian icon, in the middle of OUR museum. This will not happen without a fight.

We love this country, and our constitution. We honor the dead and respect the families, which is why we will not allow the many Christians who died get preferential representation over the many non-Christians who suffered the same fate. This was an attack against America, not Christianity, and Christianity’s does not deserve special placement just because the girders look like their religious symbol.

We will pay for our own memorial of equal size inside the museum, or the museum will not include the cross. Equality is an all-or-nothing deal.

I love it, “Equality is an all-or-nothing deal.”

Go here to take the Fox survey.

This short clip is from ABC News.

Norway Youth Camp Equals Hitler Youth – Glenn Beck

Posted in Idiots on July 27th, 2011 by Phil Ferguson – Comments Off

via CNN.

…the camp “sounds a little like, you know, the Hitler Youth or whatever. Who does a camp for kids that’s all about politics? Disturbing.”

Yeah that would be one sick mother!

…politically-oriented camps are being organized in several U.S. states by chapters of the “9/12 Project” — an organization founded by Beck himself in 2009.

YUP!  One sick mother.  Glenn Beck please go away.

The Colorado 9/12 Project hosted a “Patriot Camp” for kids in grades 1-5 earlier this month, featuring programs on “our Constitution, the Founding Fathers, and the values and principles that are the cornerstones of our nation.”

And in August, the Danville, Kentucky, chapter is holding a “Vacation Liberty School” that organizers pledge “will help your children understand where we came from. Understand where we went wrong. Understand where the fork in the road was, and which path we should have taken.”

Dear Angry Lunatic: A Response To Chris Hedges – By Sam Harris

Posted in atheists, Idiots on July 27th, 2011 by Phil Ferguson – 1 Comment

via the Sam Harris blog.

Chris Hedges goes off the deep end and blames the murders in Norway on “Secular Fundamentalists”.  Here is what Sam Harris had to say….

Over at Truthdig, the celebrated journalist Chris Hedges has discovered that Christopher Hitchens and I are actually racists with a fondness for genocide. He has broken this story before—many times, in fact—but in his most recent essay he blames “secular fundamentalists” like me and Hitch for the recent terrorist atrocities in Norway.

Very nice.

Hedges begins, measured as always:

The gravest threat we face from terrorism, as the killings in Norway by Anders Behring Breivik underscore, comes not from the Islamic world but the radical Christian right and the secular fundamentalists who propagate the bigoted, hateful caricatures of observant Muslims and those defined as our internal enemies. The caricature and fear are spread as diligently by the Christian right as they are by atheists such as Sam Harris and Christopher Hitchens. Our religious and secular fundamentalists all peddle the same racist filth and intolerance that infected Breivik. This filth has poisoned and degraded our civil discourse. The looming economic and environmental collapse will provide sparks and tinder to transform this coarse language of fundamentalist hatred into, I fear, the murderous rampages experienced by Norway. I worry more about the Anders Breiviks than the Mohammed Attas.

The editors at Truthdig have invited me to respond to this phantasmagoria. There is, however, almost no charge worth answering in Hedges’ writing—there never is. Which is more absurd, the idea of “secular fundamentalism” or the notion that its edicts pose a greater threat of terrorism than the doctrine of Islam? Do such assertions even require sentences to refute?

However, Hedges’ latest attack is so vicious and gratuitous that some reply seemed necessary. To minimize the amount of time I would need to spend today cleaning this man’s vomit, I decided to adapt a few pieces I had already written. But then I just got angry…

I sent the following to Truthdig:


After my first book was published, the journalist Chris Hedges seemed to make a career out of misrepresenting its contents—asserting, among other calumnies, that somewhere in its pages I call for an immediate, nuclear first strike on the entire Muslim world. Hedges spread this lie so sedulously that I could have spent years writing letters to the editor. Even if I had been willing to squander my time in this way, such letters are generally pointless, as few people read them. In the end, I decided to create a page on my website addressing such controversies, so that I can then forget all about them. The result has been less than satisfying. Several years have passed, and I still meet people at public talks and in comment threads who believe that I support the outright murder of hundreds of millions of innocent people.

In an apparent attempt to become the most tedious person on Earth, Hedges has attacked me again on this point, and the editors at Truthdig have invited me to respond. I suppose it is worth a try. To begin, I’d like to simply cite the text that has been on my website for years, so that readers can appreciate just how unscrupulous and incorrigible Hedges is:

The journalist Chris Hedges has repeatedly claimed (in print, in public lectures, on the radio, and on television) that I advocate a nuclear first-strike on the Muslim world. His remarks, which have been recycled continuously in interviews and blog-posts, generally take the following form:

“I mean, Sam Harris, at the end of his first book, asks us to consider a nuclear first strike on the Arab world.” (Q&A at Harvard Divinity School, March 20, 2008)

“Harris, echoing the blood lust of [Christopher] Hitchens, calls, in his book ‘The End of Faith,’ for a nuclear first strike against the Islamic world.” (“The Dangerous Atheism of Christopher Hitchens and Sam Harris,” AlterNet, March 22, 2008)

“And you have in Sam Harris’ book, ‘The End of Faith,’ a call for us to consider a nuclear first strike against the Arab world. This isn’t rational. This is insane.” (“The Tavis Smiley Show,” April 15, 2008)

“Sam Harris, in his book ‘The End of Faith,’ asks us to consider carrying out a nuclear first-strike on the Arab world. That’s not a rational option—that’s insanity.” (“A Conversation with Chris Hedges,” Free Inquiry, August/September 2008)

Wherever they appear, Hedges’ comments seem calculated to leave the impression that I want the U.S. government to start killing Muslims by the millions. Below I present the only passage I have ever written on the subject of preventative nuclear war and the only passage that Hedges could be referring to in my work (“The End of Faith,” pages 128-129). I have taken the liberty of emphasizing some of the words that Hedges chose to ignore:

It should be of particular concern to us that the beliefs of Muslims pose a special problem for nuclear deterrence. There is little possibility of our having a cold war with an Islamist regime armed with long-range nuclear weapons. A cold war requires that the parties be mutually deterred by the threat of death. Notions of martyrdom and jihad run roughshod over the logic that allowed the United States and the Soviet Union to pass half a century perched, more or less stably, on the brink of Armageddon. What will we do if an Islamist regime, which grows dewy-eyed at the mere mention of paradise, ever acquires long-range nuclear weaponry? If history is any guide, we will not be sure about where the offending warheads are or what their state of readiness is, and so we will be unable to rely on targeted, conventional weapons to destroy them. In such a situation, the only thing likely to ensure our survival may be a nuclear first strike of our own. Needless to say, this would be an unthinkable crime—as it would kill tens of millions of innocent civilians in a single day—but it may be the only course of action available to us, given what Islamists believe. How would such an unconscionable act of self-defense be perceived by the rest of the Muslim world? It would likely be seen as the first incursion of a genocidal crusade. The horrible irony here is that seeing could make it so: this very perception could plunge us into a state of hot war with any Muslim state that had the capacity to pose a nuclear threat of its own. All of this is perfectly insane, of course: I have just described a plausible scenario in which much of the world’s population could be annihilated on account of religious ideas that belong on the same shelf with Batman, the philosopher’s stone, and unicorns. That it would be a horrible absurdity for so many of us to die for the sake of myth does not mean, however, that it could not happen. Indeed, given the immunity to all reasonable intrusions that faith enjoys in our discourse, a catastrophe of this sort seems increasingly likely. We must come to terms with the possibility that men who are every bit as zealous to die as the nineteen hijackers may one day get their hands on long-range nuclear weaponry. The Muslim world in particular must anticipate this possibility and find some way to prevent it. Given the steady proliferation of technology, it is safe to say that time is not on our side.

I will let the reader judge whether this award-winning journalist has represented my views fairly.

I hope Truthdig readers appreciate the irony here. In his latest fever dream of an essay, Hedges declares that Christopher Hitchens and I (along with our pals on the Christian right) are incapable of “nuance.” Amazing. Nuance is really what one hopes Hedges would discover once in his life—if for no other reason than it would leave him with nothing left to say.

I don’t think I have ever met anyone so determined to live as a Freudian case study: To read any page of Hedges’ is to witness the full catastrophe of public self-deception. He rages (and rages) about the anger and intolerance of others; he accuses his opponents of being “immune to critiques based on reason, fact and logic” in prose so bloated with emotion and insult, and so barren of argument, that every essay reads like a hoax text meant to embarrass the humanities. A person with this little self-awareness should be given a mirror—or an intervention—never a blog.

An editorial (rather than psychoanalytic) note: Hedges claims that I “abrogate the right to exterminate all who do not conform” to my rigid view of the world. I’m afraid this is true. I do, as it turns out, abrogate that right. But Hedges surely means to say that I “arrogate” it. Advice for future skirmishes, Chris: When you are going to insult your opponents by calling them “ignoramuses” who “cannot afford complexity,” or disparage them for being incapable of “intellectual and scientific rigor,” it is best to know the meanings of the words you use. Not all the words, perhaps—just those you grope for when calling someone a genocidal maniac.

Leaving no canard unemployed, Hedges accuses me of being a racist—again. In truth, he has raised the ante somewhat: My criticism of Islam is now “racist filth.” It is tempting to own up to this charge just to see the uncomprehending look on his face: “You know, after a lot of additional study and soul-searching, I realized that you are right: My contention that the doctrines of martyrdom and jihad are integral to Islam, and dangerous, is really nothing more than racist filth. Sorry about that.”

However, the response I offered years ago still seems in order:

Some critics of my work have claimed that my critique of Islam is “racist.” This charge is almost too silly to merit a response. But, as prominent writers can sometimes be this silly, here goes:

My analysis of religion in general, and of Islam in particular, focuses on what I consider to be bad ideas, held for bad reasons, leading to bad behavior. My antipathy toward Islam—which is, in truth, difficult to exaggerate—applies to ideas, not to people, and certainly not to the color of a person’s skin. My criticism of the logical and behavioral consequences of certain ideas (e.g. martyrdom, jihad, honor, etc.) impugns white converts to Islam—like Adam Gadahn—every bit as much as Arabs like Ayman al-Zawahiri. I am also in the habit of making invidious comparisons between Islam and other religions, like Hinduism, Buddhism, and Jainism. Must I point out that most Hindus, Buddhists, and Jains are not white like me? One would hope there would be no such need—but the work of writers like Chris Hedges suggests that the need is pressing.

As I regularly emphasize when discussing Islam, no one is suffering under the doctrine of Islam more than Muslims are—particularly Muslim women. Those who object to any attack upon the religion of Islam as “racist” or as a symptom of “Islamophobia” display a nauseating insensitivity to the subjugation of women throughout the Muslim world. At this moment, millions of women and girls have been abandoned to illiteracy, forced marriage, and lives of slavery and abuse under the guise of “multiculturalism” and “religious sensitivity.” This is a crime to which every apologist for Islam is now an accomplice.

I have participated in many debates over the years and engaged many of my critics. In fact, I once debated Hedges at a benefit for Truthdig. You can watch our exchange here. I am happy to say that these encounters are usually very pleasant—for even when they grow prickly on the stage, the exchange in the green room is generally quite warm. My meeting with Hedges was a notable exception. In fact, Hedges is the one person I have told event organizers that I will not appear with again for any reason—which is a pity, because his inability to present or follow an argument makes everything one says sound incisive. The man is not only wrong in his convictions, but dishonest—and determined to remain so. I trust this is a consequence of his most conspicuous quality as a person: sanctimony. There is a main vein of sanctimony in this universe, and it appears to run directly through the brain of Chris Hedges. He has staked his claim to it and will follow it wherever it leads. The results can be seen weekly on this page. And I’m sorry to say that this is why I stopped writing for Truthdig years ago.