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Archive for March, 2009

This past week I had the opportunity to perform magic and give the audience member an experience to remember.  You see, I noticed one of my Facebook friends wrote on her status "Sandra (not her real name) is not having a good week."  I decided to do something about that.  She was at the dance studio at the front desk where I was taking a lesson and I got there a few minutes early.  I said to her "I think I can make the end of your week a little better."  She agreed to let me give it a go.

I said to her "Imagine you are in Victoria, BC, at Beacon Hill Park.  It is a flower garden and you are wandering down the garden paths in amongst all the flowers.  You stop and turn to your left and see a flower.  What do you see?"

"A carnation," she answers.  I repeated it back to her, and then took out a notepad of post-it notes and wrote down the flower on the notepad.  I folded it up, removed it from the notepad and placed it on the counter.

I then asked what other flower she sees.  She replied with a lily.  I again wrote it down, folded it up and placed it on the counter.  I repeated it 3 more times and she named a rose, a lilac and a tulip.  I then took all five pieces of paper which were folded up and held them in my hands (the words on each were hidden because I had folded them up).  I shook them up in my hands.

I said "Sandra, you then close your eyes and lean forward to pick a flower."  I offered her the choice of packets of paper and she closed her eyes to reach forward to take one.  She took it, opened it up and I asked her "What flower did you pick?"

She opened up the paper and answered "A rose."

I replied "Sandra, it is no accident that you selected a rose.  It was written long ago that is what you would pick.  For you see, what I have with me is an envelope."  I opened a notepad and removed it.  "Please take this envelope and open it up."  She did, and inside was a note.  "Open up that note and read it aloud," I instructed. 

She unfolded the note and then read it out loud.  It said Sandra, you will choose a rose.  March 26, 2009.  Let me tell you, she was impressed by that one and really appreciated it.  I believe I succeeded in giving her end of week a bit of a boost.

Update

I performed the trick again tonight, but I changed it a little bit for another girl down at the dance studio.  I knew it was her birthday today, so I decided to make it extra special.  I did the same effect  as per above and she ended up selecting a red rose (that was the exact flower she named, including the color).  When I handed her the prediction, it said "Amanda, on your birthday you will receive a red rose.  March 27, 2009."  Then, beneath the prediction, there was a picture of an actual red rose.

Let me tell you, she was also very impressed.  It’s not often that I stumble across a trick that draws such a powerful reaction.  But this one clearly does and it will now stay in my repertoire.  With great power comes great responsibility.

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To buy or to rent

This comes from the Peter Schiff blog.  It helps explain why I rent rather than own.

I have been a renter for a while. People used to laugh at me for renting my house because I was throwing money away on renting. I had to remind people that I wasn’t throwing money away because I had a great place to live and I did not throw money away on food, on clothing, so I wasn’t throwing money away renting a place to live. I needed to live some place.

But off course the mentality was "you are throwing away money because you are foregoing all the profits associated with home ownership." In my mind it wasn’t profits that I was throwing away but expenses and headaches.

I knew as an educated consumer looking at real estate realistically that economically I was better off renting then buying. But everybody else assumed that they were better off buying because they assumed appreciation.

What they forgot to understand was that assets were already overvalued based on what we could rent a similar house for.

So if an asset is already overvalued based on rental alternatives or cash flow, why should that asset appreciate? That was the flaw in their analysis.

At some point in time when real estate actually becomes cheap enough that renting is no longer economically better then buying , then I might decide to buy a place. For a lot of people renting makes more sense then buying.

Yep.

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Inspiration

People sometimes ask me where I get inspiration for some of my effects.  There are a couple of answers.  One is that sometimes an idea just comes to me, like when I was waiting in line for lunch and thought of the idea for a trick involving fortune cookies.  Sometimes I am actively playing around with an effect, thinking of ways to make it better and through working the routine over and over, I refine it to make it work.  This occurs both in practice and actual performances.

Another source of inspiration is through watching other performers.  Historically, when I first started magic, the two performers who influenced me the most were Lance Burton and Guy Hollingworth, two very smooth performers.  Later on, as I added mentalism, I added Alain Nu to that list.  While I like the work put out by Derren Brown, his style of performance is not similar enough to mine to say that he influenced me even though I now perform several of his tricks.  But Alain Nu… his style is very close to mine.  I learned my Invisible Deck/Watch effect from him as well as my Zodiac effect.  His personality is similar to mine so he’s another source of inspiration.

You might want to check out this video of him.  If you’re too lazy to watch the Youtube video, then the summary is that he does a demonstration of dodge ball effect.  Several members of a basketball team throw balls at him, but he dodges them while wearing a blindfold.  It’s a neat video and I find it very entertaining.

Now, as you readers will know, a few weeks ago I did a dance performance on Feb 14, 2009.  I recently signed up to do another one.  I’ve got the song picked out, I think that the dance is going to be an easier (slower) one.  Now this past Friday, I headed down to the studio and started chatting with the instructors during the various dances during the course of the evening.  I started saying that I have the song picked out and am looking forward to doing another routine.

I then said "But I would like to put a twist on things."

"Alright," the instructor replied.  Remember, I did this twice with two different instructors as the one I will be working with is not yet determined.

"So, rather than doing just a dance routine, both myself and my follow will do it… blindfolded!"  Drawing from my inspiration from Nu, I thought it would be neat to do a routine blindfolded and would be an interesting twist on things.  But I wasn’t serious; I didn’t actually think that anyone would seriously go for it.  After all, a dance performance is a performance of dance while doing it blindfolded is more of a trick.  The venue doesn’t fit quite so nicely.

But here’s the thing.  When I told it to the first teacher, she didn’t protest at all.  She seemed to mentally work through how it would work.  I stopped her and said "I’m just kidding" but it sure seemed like she was thinking it through.  I then told the second teacher the same thing.  A blindfolded routine.  I let her think it through and she looked like she was taking it seriously even though I wasn’t serious.  I then said I was kidding, but again, she didn’t protest about the impossibility of it, either.  It was almost as if she were picturing it.

So that kind of backfired on me.  It was meant as more of a joke.  But maybe, just maybe, my reputation for doing the impossible is starting to make these things plausible in the minds of the people I interact with.

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For all the talk I’ve been hearing about deflation in the financial media, I have yet to experience it personally (as in, benefit from it).

For you see, I just got notice today from my apartment complex that my trash collection fees are going up.  Last year, my rent went up.  I expect my energy costs to keep rising.  When do falling prices start to work in my favor, rather than against me?

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I was waiting in line for lunch last week when I got the idea for a new magic effect.  If you’re reading this blog, don’t tell other people about this effect.  I present here to gather feedback on whether or not this would be a good idea.

This is the first unique effect I have ever invented.  I am sure that no one else is doing it (note: I’m not actually sure about this).  But here is the effect:

You and I are out to lunch, or perhaps dinner, at a Chinese restaurant.  It is near the end of the meal and we start to talking about countries of the world and the ones we have traveled to, and the ones we would like to travel to.  I then say to you "I want you to think about traveling.  Think about new cultures, new experiences, new adventures.  If you were to travel to a country, think about what it would be.  Think about the name of that country over again in your mind."

The check comes and being that this is a Chinese restaurant, it comes with fortune cookies.  You pick up your fortune cookie and I pick up mine.  You crack open your fortune cookie, pull out the fortune, and on it reads the name of the country that you are thinking of.

Personally, I think that would be an awesome effect.

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I saw a link posted on Facebook that is an editorial out of the Globe and Mail.  The writer is talking about the recent Jon Stewart (of The Daily Show) / Jim Cramer (of Mad Money) feud.  Allow me to quote an excerpt:

Jon Stewart did what no one else has done so far. He pointed an angry finger of blame at an individual, and he didn’t let the culprit slip away. It was a symbolic public beheading, and as popular as those always are. And wouldn’t you know, it also managed to improve Mr. Stewart’s own ratings.

There was Mr. Stewart, nailing Mr. Cramer to the videotaped proof of his own bone-headed calls, advising people to buy Bear Stearns (to cite just one example), only days before the company collapsed, then lying about how wrong he was. As if the truth is meaningless, as if it’s all a game – except, as Mr. Stewart pointed out, “it’s not a [bleep]-ing game” when peoples’ lives and jobs and retirements are at stake.

Will Jim Cramer lose his job, or at least resign? If he doesn’t, should a couple of CNBC executives be placed in stocks for letting him speak crap on air again and again?

We can’t blame others for our own mistakes. But we can punish them for making it so easy to behave like fools.

If you read the entire article, the writer goes on to state that the market failed, capitalism failed, people on Wall Street need to be punished.  Cramer should be punished.  Bernie Madoff, who bilked people out of billions, is not enough.  The cheerleaders on CNBC should be punished.

That was the crux of Stewart’s interview, the people on Wall Street knew what was going on and CNBC knew as well.  They should be punished for incompetence or conflict of interest (cheerleading while the boat was sinking).  Anyone who is leverage 35:1 is surely going to get clobbered.  Cramer and CNBC should have known that, or were even in collusion.

Before I continue, I should point out that I like Jon Stewart.  I think he’s really funny, I have watched his show for five or six years.  But he, too, has his own hypocrisy issues.  The title of his show is fake news and he claims to be nothing more than a comedian, but he misquotes his political dislikes all the time and slants his news against Conservatives far, far more than against Liberals.  I could see it when Republicans controlled the government, but they don’t anymore.  And his coverage is still heavily slanted against those with whom he disagrees with.  And his show is very political in nature, it does affect people’s actual views.  In fact, it’s quite easy to tell that’s what he is trying to do by using comedy as his communication medium.  So the claim that all he is "is a comedian" is either disingenuous/ignorant at best or deliberately deceptive at worst.

Having said that, Congress and the media are now out on a witch hunt to attempt to vilify evil doers in the market.  Specifically, financial corporations overleveraged themselves and are now paying the price (ie, they borrowed beyond their means).  But really, how is the government taking the high road on this one?  As we saw in my previous posts, credit expansion applied again and again and again is what leads to the boom and bust cycle.  Corporations and business couldn’t even borrow out excess money leading to the boom/bust cycle if money wasn’t constantly injected into the system.  If the regulators of the money supply weren’t constantly tinkering with the money supply and distorting the gross market rate of interest, then lenders and borrowers wouldn’t even be able to do it in the first place.

Why do governments and central banks expand credit?  To win votes, mostly.  When the market starts to expand, governments take credit.  When it collapses (due to the side effects of the policies that they themselves implement), the blame game begins.  Thus, where are the columns and calls for tighter controls on the money supply?  What about restricting rules and regulations for credit expansion?  Where is the regulator of the Federal Reserve (who are supposed to be the regulators but whose policies add fuel to the fire)?  What about repealing the Community Reinvestment Act?  Or re-instating Glass-Steagall?  The uptick rule (not sure about that one but it probably caused more damage than it helped)?

Private enterprise deserve to be vilified, and rightly so.  All these companies that made reckless loans and failed to protect the interest of their shareholders should not be bailed out.  But what about looking at the government that has failed the general public for so long?  That really angers me because the people elect officials to public office and their gross incompetence hurts the very people they were elected to serve.  They then chase rabbit trails, ignoring the real issues and setting up the rest of us for the next crisis.

Mark my words, there will be another crisis.  The markets will adjust, the economy will start to expand and credit will expand again.  The boom will start and will finish with a bust.  And once again, the government and media will look for people to blame, but will be largely ignorant of themselves.  When you give someone the power to print money and circumvent the rules of money (the market consists of millions and millions of people, the government maybe a few hundred), you’re setting yourself up for failure.

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At this point, we’ve now looked at central banking and the role that it plays in inflation.  The Federal Reserve has the ability to inject or remove money into the economy.  The question now is why do they do it?

The Gold Standard goes away

As I alluded to in my other post, in 1971 the United States went off the gold standard.  Whereas before bank deposits were backed by a hard tangible asset, now they are backed by paper securities (ie, nothing tangible).  They are based upon the issuing "government’s" perceived ability to guarantee that what is being used as currency is a valid currency.  There still are actual deposits in the bank, but they are things like bonds, treasury securities, and so forth.  Stuff I don’t understand very well.

But what this means now is that the Federal Reserve can inject money into the system at will.  It can write a check against itself (out of thin air) and increase reserve requirements, or lower the short rate (interest rates that you always hear about on TV) or make open market purchases or sales.  I won’t go into the details of each of these, I will just say that doing any of these things can make more money appear in the market.

Booms and busts

So, why is this such a big deal?  Why does injecting more money into the system turn out to be bad?  Well, as we saw earlier, monetary inflation drives down the purchasing power of the base unit of currency.  But it also distorts the market.  It does so in the following way:

  1. Let’s say that the day before the market has new money injected, the market forces set the value of all goods in production.  These are always in flux, but the market adjusts.  Goods x will cost money y.  Bankers have to make an estimate based upon the borrower’s ability to repay.  Borrowers look out into the market and based upon current conditions as well as how much money is available, whether or not they should start new projects.  The amount of money in circulation is M, the amount of goods is G.
  2. The day the market has new money, P, injected by a central bank, the amount of money in circulation is now M + P.  Banks are more willing to make new loans, borrowers can get credit easier; after all, more money is available.  New projects start up, companies are formed.  The economy gets moving again because of credit expansion – credit is process of borrowing money you don’t have with the intention of paying it back.  This is the beginning of the boom cycle.
  3. But there is a problem with this scenario.  It is true that new companies are being formed, loans are being made and people are making money.  But the market has been distorted.  The amount of total money in circulation = Total(M) = M + P, but the amount of physical goods on the day before credit expansion is the same as there was after credit expansion.  In other words, whereas before M was chasing G, now M + P is chasing G.  Borrowers take out money on the belief that M + P would be chasing G + new(G), but that belief turns out to be false.  There is no new(G).
  4. Inflation now sets to start in and prices begin to rise.  This benefits the financial industry the most because they are closest to the credit expansion.  They are making loans on new money and reaping the benefits.  Producers and consumers are at the tail end of this credit expansion and for them, they get new stuff at first but then start seeing the buying power of their dollars decrease.  That means that ham-and-eggers like you and me get the short end of the stick on this one.
  5. More and more stuff is being produced by the economy, but again, the economy does not expand at the same rate that the money supply did.  So, while the economy is expanding, it was not based upon rational market allocations of capital.  It was based on the belief that there was more of a market out there than there really was.  And eventually, the market figures it out.  That’s when the bubble bursts.

    And it always bursts.  Always.  There is no question about this.  The Dutch Tulip Craze, the South Sea Bubble, the Mississippi River gambit, the real estate bubble from 2001-2007…  When the market sees that there is not enough actual demand (as opposed to perceived or illusory demand) to consume all of the excess supply, prices drop.  And they drop fast.  I can’t explain why, but as the old saying goes, the bull climbs up the stairs but the bear jumps out the window.  What that means is that markets climb slowly but the collapse quickly, wiping out tons and tons of wealth.  The truth hurts and when reality sets into the market, panic ensues and everyone gets a lot poorer.  The bust has begun.

When the bust begins, there is really not a lot the government can do to stop it.  The market is bigger than the government and things will adjust to where they should be to allocate all of the sufficient capital that is in circulation.  While it is sometimes true that the net standard of living may be higher at the end of the bust than it was at the end of the previous bust (ie, the start of the boom), it is not true that it is higher than it would have been had markets been allowed to naturally grow and allocate capital rationally without artificial credit expansion.

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