Juggling Dynamite

All of our personal devices like watches, phones, ipods, flashlights, aerobic exercise machines, can all be powered by momentum and heat from the human body. We already have this technology–harnessing free energy for our own personal use is an obvious part of reducing waste and building up savings again in the household sector. I see a time where those who are physically active can sell their excess energy produced back to the grid. Financial savings and incentives that encourage physical fitness–imagine the sea change in human behavior…

Teen inventor Ann Makosinski took top honors in the Google Science fair for her battery free flashlight, powered by the heat of a person’s hand. Here is a direct video link.

No surprise here…

Despite a public promise and Presidential directive to crack down on mortgage fraud along with a $196 million funding increase to do so, a new report by the internal watchdog at the US Department of Justice (DOJ) finds that the Justice Department made mortgage crime one of its lowest priorities while overstating its success in prosecuting such cases.

The report released last week calls into question the agency’s stated commitment to hold people accountable for misconduct that precipitated the financial crisis.

The FBI considered mortgage fraud “as the lowest ranked criminal threat in its lowest crime category,” between 2009 and 2011, and by 2011, the number of agents investigating cases had fallen, as did the number of pending cases:

“DOJ and its components have repeatedly stated publicly that mortgage fraud is a high priority and during this audit we found some examples of DOJ-led efforts that supported those claims,” the inspector general wrote. “However, we also determined during this audit that DOJ did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements.” You can see the full report here: Audit of the Department of Justice’s Efforts to Address Mortgage Fraud.

With stock markets off to a rough start for the year, long-always prophets have been prominently featured assuring ‘little folks’ that all is well and the financial wizards have capital risk all under control. Valuations off the charts? Dividends pathetic? Business cycle long in the tooth? Volumes low? Volatility picking up? Never us worry… the best time to buy is every time we have any cash to give our sage and savvy financial managers, right? Why even Warren Buffett says he is finding attractive value don’t you know.

Time to sober up. The chart below casts light on the truth about dear old, folksy, Warren. His fund Berkshire Hathaway has long been much too large and US focused to be anything other than a broad market buy and hold, bell weather. Sure he loves to talk about his internal book value gains, but the fact is that investors in Berkshire aren’t holding a private fund that will redeem their investment when they wish to cash out. Berkshire investors hold publicly traded shares that move in near perfect correlation with the S&P 500. This means Berkshire holders have lost 50% of their investment value twice with the S&P since the secular bear began in 2000.

No wonder Warren praises the Bernank and says QE was a smart idea. Before QE, Buffett (and the other long-always masters) had their investment “genius” dilapidated twice as their followers rode wild volatility over a decade of flat to negative returns. The QE reflation trade has literally saved their investment reputations over the past two years. As valuations traded back to cyclical highs, Warren’s own net worth enjoyed a huge pop since 2011, now ranking him once more within the top 2 wealthiest people in the world. QE has been a wonderful recovery of billions!

But now the plot thickens. Since Buffett’s fund virtually is the S&P Index, and since Buffett can’t sell the majority of his market-moving positions even if he wanted to, his followers should be asking “what now?” With stock valuations back at notorious record highs, how do we protect our capital from the next bear market swipe? QE has been good to Buffett and company, no question. But investment genius? Give us a break.