Why the change in Facebook's news feed?

Although I only have a few hundred followers or 'likes' between my personal and business pages on Facebook. I had resolved to work harder on them, because I recognized great potential value there. Now, Facebook has removed most of that value, and I believe it was deliberate.

Until recently, when you made a post to your Facebook page (business or personal) it would show up on all your friends news feeds, unless they went to the extra effort of blocking you. The significance of this for a business owner is huge. If you have a business page with several thousand followers or 'likes', you could reach the same size audience as a good sized direct mail campaign, at no charge. The fine folks at Facebook must have realized this and decided they needed to put a stop to it immediately.

Now, your news feed on Facebook will only show updates from people with whom you've had some interaction recently (a post on their wall, message or something). You can change the setting so that you'll see all of the posts on your personal page, but there's no fixing the business page, and most people will likely go on using the default setting, having little interest in or knowledge of the omni-setting.

I guess Facebook believes they'll sell more ads if they severely limit their users' ability to communicate for free. Maybe they're right, but I doubt it. My own use of Facebook, as a form of business communication, will likely drop off instead of increasing, as it has now lost much of its potential value. Well, there's still Twitter, and Facebook has now created an opening for an ambitious potential competitor. I really can't argue about the price, but I don't believe the gatekeeper mentality will serve Facebook or its users well in the long run.

The Case for Democracy

The situation in Egypt has put U.S. policy around the world under the microscope once again. People are rallying in the streets, demanding freedom and democracy. Surely, the land of the free and the home of the brave must support that. But wait, the current autocratic leader has been a good friend to the U.S. for thirty years. In return we helped them build a very formidable military machine. The waters are quite muddy.

Some argue that we should tread lightly. If true democracy comes to Egypt, we may wind up with a regime similar to that in Iran or Gaza. The problem with those comparisons is that Iran is far from a true democracy and the thugs in Gaza still rule largely through intimidation.

Free democracy is about more than one citizen; one vote. Freedom of assembly, speech, freedom of the press and rule of law are all absolute requirements. These are the freedoms that guarantee that even if good ideas are put down today and bad ideas are implemented, the good will be back and the bad will fall by the wayside. The power of the people to communicate, observe, evaluate and speak out is what keeps a society moving forward.

We should not be concerned about who might come to power in a free and fair election in countries like Egypt. We should concern ourselves with whether or not their next election and the one after that, and the one after that will also be free and fair and whether the people will be able to interact and speak freely in between.

The United States is at its best when it is a beacon of freedom and hope, not simply an instrument of preserving order. It should always be our position that governments, including their militaries, are servants of the people and that church and state be separate. We may not be able to dictate these things, but we can voice and promote them at every opportunity. The separation of church and state is not ant-religion, it’s anti-autocracy. After all, if someone who claims to speak for God or Allah, is in charge, what’s the check on his or her power? The rule of law must apply equally to all citizens of all religions or no religion. It is not the role of government to determine God’s or Allah’s will, but to protect the rights of individuals on Earth.

We need not be hostile toward countries or populations that don’t exhibit our values, but neither need we be shy or apologetic about what our values and beliefs are. As for me, I don’t believe that the people of the Middle East or Northern Africa or anywhere else are genetically pre-disposed to autocracy and/or theocracy. It may take them generations to work it out, but if we help them keep free, open, honest conversation going, they will work it out. In the tug-o-war between freedom and order, order has been vastly over-rated I think. I hope that U.S. foreign policy starts trending more American in the future.

Why isn't oil soaring on MIddle East unrest?

Before things blew up in Egypt, pundits and market mavens were predicting $100/barrel, even $200/barrel oil coming very soon. Two weeks into the uprising in the country that controls the Suez Canal, oil has barely budged and is currently at around $90. What's the deal?

Well, perception and emotion can be very powerful, but reality usually wins, especially in a market that's as "just in time" as the petrol market. It's much cheaper to leave oil in the ground than it is to store it, long term, in tanks above ground. For that reason, there's not a lot of "extra" petrol sitting around, so when you get a spike in demand, you can get a rapid spike in price as immediately available supplies dry up. By the same token, if demand drops even a bit, you can find yourself with a lot of excess inventory and nowhere to put it. Prices can drop just as fast as supply is unloaded on the cheap.

There is a threat of supply cut off, but it hasn't yet materialized. In addition, the historic cold snap in the U.S. has caused thousands of flight cancellations, school cancellations, business closings and has kept a lot of people who would otherwise be traveling, hunkered down at the house. The increase in energy being used for heat is not offsetting the huge amounts of petrol that are not being used for transportation.

If the situation in Egypt simmers down without anyone disrupting operations at the Canal (and there doesn't seem to be any party that would benefit from such a move), expect to see oil drop 5-10% in a hurry. If the canal is shut down, a huge spike up, and in the meantime a very gradual downward trend as what is actually happening slightly beats out what might happen.

Republicans should take the bait on the President's tax code proposal

Never mind the controversy over extending the Bush tax cuts. I think the much more intriguing development regarding taxes was President Obama's proposal to simplify the tax code. The knee jerk reaction from opposition politicians and pundits may be "What's he really up to?" The better approach is "Let's do it!"

The President has proposed just 3 tax rates ranging from around 8% to 24% as well as a cut in the corporate tax rate. This would be offset by eliminating deductions and loopholes, including the sacred cow; mortgage interest deduction. I think that's a giant step in the right direction.

The mortgage interest deduction, like so many other deductions, credits and exemptions, is designed to short circuit market forces and influence behavior. This is a tactic that true free market proponents should oppose anyway. The mortgage interest deduction is based on the flawed premise that everyone should own a home. Furthermore, it doesn't encourage home ownership, it simply encourages mortgages. After all, once your mortgage is paid off, you no longer get the deduction. Will doing away with the deduction hurt home prices? Probably. Homes values will be based on a home's value, rather than on a combination of the value of the home and the value of a tax deduction. That's not a bad thing in the long run.

I would propose a new deduction however, for medical expenses. This should be a straightforward deduction and not some convoluted scheme based on a qualified account with restricted access. This could open a whole new field for lenders. If you have to take out a 20 year loan to pay for your surgery, at least you can take a tax deduction for the payments - interest and principal.

I would stand firm against any form of consumption tax whether it be on just gas or broader, unless it completely replaces every other tax. Even then, I would wait for a constitutional amendment forbidding the return of the income and payroll taxes.

The average American doesn't have the time or the resources to wade through our current 10,000+ page monstrosity of a tax code looking for exemptions, loopholes and credits. Free market proponents should applaud a tax system that doesn't attempt to influence where, when and how you direct your resources. The government's role is to be referee, not chaperon. Imagine what might happen to productivity if big business made investment decisions based on what consumers want and need rather than on what the government would like them to blow money on.

I'm willing to give the President the benefit of the doubt and assume he has determined that the American people aren't interested in a care-taker government and has decided to change course. Regardless of what may or may not be going on in his head or in backroom discussions with advisers, he has tossed a ball to limited government proponents. Take it and run with it. Never mind who might get the credit or benefit politically. The only way it results in a second term for President Obama is if the U.S. prospers as a result. Is that so bad? Do the right thing. You might be surprised at the results.

Gold Play

With gold making another run for $1400/oz, should you start buying some if you haven't already? If you already own some, should you start selling? When it comes to policy and politics, I rarely, if ever find myself in agreement with multi-billionaire investor, George Soros, but when it comes to the gold market, I believe he's got this one right. He may be evil from my socio-economic perspective, but he's not stupid.

Soros has called gold "the ultimate bubble" and is, in fact, gradually reducing his holdings. He has wisely, not predicted a top or a time frame for a decline. Bubbles are by nature, unpredictable. I'm not going to call a top either, but there are some fundamental things you should know about gold if you're going to play the game.

It's often said that gold has "intrinsic value". That is, that it has value apart from speculative trading or as a currency. That's true. It has intrinsic value to those who actually consume it, like jewelers and space craft manufacturers. But the market price, at the moment, is not being driven by consumers. It's being driven by investors/speculators and that portion of the price is entirely subjective. Contrary to the old real estate adage, they are producing more gold and very little of it is actually consumed. In fact, one could say the only gold that's truly consumed is that small fraction of production that gets shot into space. Much of it is now being purchased by people who just want to store it, or have someone else store it, simply to make them feel better.

At some point, the guru of the week is going to tell folks it's time to sell. Who is everyone going to sell to? It could be days, weeks or years, but when gold falls it's going to fall fast and far. You may be waiting for a "top". So are millions of other people. Good luck with that. At least it looks cool.

So, what should you be investing in? I'm not an investment adviser, so take this as the opinion of just another member of the Peanut Gallery, but if I were trying to preserve currency, I'd buy inflation adjusted Treasuries. If I'm trying to preserve wealth, I'm buying things that I, or my heirs, can actually use regardless of the economic situation. After all, the true value of wealth lies in how it contributes to your quality of life. That's a call only you can make.

Our day of reckoning may never come

Everyone likes to talk about our nation’s deficit, the national debt, unfunded liabilities. Politicians and pundits declare the situation unsustainable and predict dire consequences for inaction. Yet, inaction continues. I believe that in many cases, individuals in a position to fight for change decline to do so because they believe that eventually, things will come to a head and we’ll be forced, as a nation, to take drastic action. There will be a day of reckoning. A day when we wont be able to take another step, or draw another breath, without first fixing our financial problems. Unfortunately, it’s probably not going to go down that way.

The evidence is all around us. There has been no reckoning in North Korea, Cuba, Venezuela, Burma, Somalia. These and other chronically impoverished nations illustrate that things are never so bad that they can’t get worse. Even in countries where people resort to eating tree bark to try to avoid starvation or sell their own organs to pay back loan sharks, the powers that be remain the powers that be.

So how do you break the will of an entire nation’s population and keep it broken from generation to generation? There are many variations on the theme, but generally speaking, you convince people that self-interest is not only insignificant, but immoral. You sell them on the idea that they exist to serve others, which by definition is everyone except themselves. Then you become the interpreter, communicator and executor of exactly what “others” need them to do.

You can’t do it all at once. Especially if a country has had a taste of free market success. You start out small, with the simple idea that sharing is better than not sharing. Then you make sharing mandatory, through the tax code. Then you just continue to increase the amount of mandatory sharing, being careful to bestow the fruits of the sharing on people who are supportive of your agenda. By the time they realize that there’s very little left to share, you are in control of all the nation’s critical resources and much of the population is convinced that their own personal well being is not important anyway.

It’s also helpful to convince the population that the situation is much better than it really is, or that relatively speaking, they are doing alright. You do this with propaganda, misinformation and censorship. This worked pretty well for the Soviet Union for a long time. Then the fax machine came along and ruined everything. People behind the iron curtain started getting news about all the cool goodies in the west they didn’t have access to. However, if the developed world sinks into the muck of stagnation and mediocrity together, what are we going to compare our situation with? Future generations may just conclude that whatever they’ve got is as good as it gets.

Left to their own devices, individuals don’t operate exclusively in self-interest mode or common good mode. We switch from one to the other and back again as the situation changes from minute to minute, day to day, year to year. But the default mode has to be self-interest. We have real life case study after real life case study to show that making the common good paramount and imposing it from a central authority leads to nothing but misery. Yet we continue to pursue it because it’s what we’ve been taught in school, in church, at work, by just about everyone in a position of authority since the day we were born.

The collectivist movement is like carbon monoxide; sucking the life from the blissfully unaware. If we continue down this path there wont be a big climactic crash. There wont be an “I told you so.” moment. We will simply drift farther and farther down in quality of life as our sense of self and the will to fight for it gradually fade away. I guess the good news is that civilization wont last forever powered by a bunch of dull drones. It too will fade away, new alliances will be made and new societies will arise, but we’re talking centuries, not decades.

The alternative is to demand that the government take less and do less; a lot less. I don’t mean just not asking for more. I mean demanding less, because there will be resistance from those who actually want to promote that downward spiral. They honestly think it’s best for humankind to live as more of an orderly hive than a bunch of selfish individuals. Ironically, selfishness is the only thing that can save us from ourselves at this point.

How to manage inflation

With the Federal Reserve "monetizing the debt" or printing money and buying up Treasury securities from banks, it's time once again to review inflation strategy. Let's assume for the sake of this article that we're going to get an inflationary period in the near future. Maybe we will, maybe we wont, but let's just say we will. How do you deal with it? There are things that both retailers and consumers can do to cushion the blow.

First let's look at retailers. Assume that each time you place an order for inventory, it's going to be a little more expensive. For the sake of simplicity, let's say you normally keep a one-week supply of inventory on hand. Bump that up to about 8 weeks and keep it there. Why? Because once you've got that overstock, when you place your next one-week order and you see the price has gone up, you can raise your retail price on your entire stock and maintain a decent margin. You also will have the option of holding off on a price increase for a week or two and perhaps undercut your competitors for a bit. When the inflationary cycle dies down, and it will, and you notice prices haven't gone up for a few weeks running, start reducing your orders and getting back down to normal inventory levels. This is why inflation tends to drop off quickly when it's run its course. A lot of retailers will be doing the same thing and orders to suppliers will suddenly drop off a cliff. Your margin on your most recent purchases will be smaller, but your older stock should help make up for that. You'll also have a chance to build up some cash, since you'll have several weeks of smaller than normal inventory outlays.

What about the consumer? Well, retailers that employ the above strategy are going to be taking advantage of some nice profit margins on many of their products. They'll want to entice you into the store by offering "loss leaders". That is, they'll be willing to offer a few items at or even below cost in the hopes that you'll buy a few of the more pricey items while you're there. If you want to be thrifty, be flexible. Stock up on those loss leaders. Different stores will have different items on sale, so you may want to shop at several. You may also want to adjust to the idea that you may be having chicken for dinner 4 times in a week. An inflationary period is no time to be finicky. Take what they're giving. Stock up on sale items. If you don't have a pantry, make one. It might be a good idea to get a big freezer if you've got the room. You can apply the same strategy to more than just groceries. If the home improvement store has a super-sale on something related to a project you were planning on getting to "one of these days", jump on it. Your new kitchen faucet is still going to be worth one kitchen faucet no matter where inflation goes.

If you're on a fixed income, you may want to look for free-lance opportunities to supplement your income for a while. However, be careful. Fully investigate any offer before you sign on. There will be plenty of scammers trying to take advantage of consumer anxiety. If a deal sounds too good to be true, it is.

The most important thing to remember is Don't Panic! Keep a cool head and look for opportunities rather than obstacles. An inflationary spiral is a readjustment in the value of currency due to gross budget mismanagement. It wont last forever and you can navigate it. Knee-jerk reactions to this kind of financial upheaval almost always makes the situation worse. Politicians and policy wonks will be calling for things like price and wage controls. Don't go for it. Getting our currency situation back under control is going to be bitter medicine, but tighter government control over the free market is just snake oil. It's okay to be angry and frustrated and hold our leaders to account, but blame the player, not the game.