Author: s4k

Harassing Airbnb and Detroit Residents

Detroit quietly banned Airbnb. Airbnb is used by middle/lower class people as supplemental income. Bureaucrats in Detroit have nothing better to do so they actually sent cease and desist letters to home owners.
The new zoning ordinance states the following:

“Use of a dwelling to accommodate paid overnight guests is prohibited as a home occupation; notwithstanding this regulation, public accommodations, including bed and breakfast inns outside the R1 and R2 Districts, are permitted as provided in Sec. 61-12-46 of this Code.”

David Bell, director of the Buildings, Safety Engineering & Environmental Department (BSEED), began backpedaling soon after:

Detroit homeowners have been able to rent out a room in their homes for more than 100 years and we don’t believe the new ordinance was intended to take away that right. The ordinance as written appears to ban all homeowners from having even their own friends and relatives stay at their homes if that friend or relative is paying them rent. The public was never told that was intended. I have asked the law department to review this question and give BSEED guidance.
Media reports that enforcement efforts have begun under this ordinance are false. Over the last two years there have been a few enforcement actions that have involved Airbnb properties, but those tickets have arisen from other complaints or violations related to those properties.
Until the law department review is complete, BSEED will not be ticketing homeowners for renting out rooms in their own residence, whether through airbnb or otherwise. BSEED and the administration will be working with City Council to resolve these issues.

History of US Government Income

Despite record tax collections since 2012 the US government still runs a deficit each year…

Mandatory spending is consuming the US government income (future estimates by the CBO).

Let’s just say promises will be broken one day in one form or another.

Make America Debt Again

The US government is about to go into spending hyper drive.

Their projection are based on low interest rates for the next 10 years.

I don’t believe the great bond market that started in 1981 is over just yet, but the idea of predicated interest rates out 10 years is absurd. The one thing we learn from history is this- interest rates can spike rapidly.

Etienne Mantoux on Keynes Multiplier Theory

Etienne Mantoux died a week before World War II ended. The multiplier is taught in economics 101. Etienne Mantoux was not a fan of the multiplier.

This brings us to the multiplier theory, under which Keynes merely develops some reflections due to R. F. Kahn on the incremental effects of a capital investment. Obviously the movements of capital entailed by investing a certain sum devoted, say, to the execution of a given public works program, will not be confined to the original sum, and a certain amount of additional investments will result, after a varying interval of time, from that initial outlay. The sums invested will more or less rapidly permeate the structure of production, first leading to expenditures among enterprises, and later, when they reach the consumer through payment of wages or other income, causing a demand for consumption goods, which in turn will step up demand for intermediate goods, and so on.
Most analyses of this highly complex phenomenon assume, as we have seen, that all the factors of production are employed. In that case a new investment can only have the effect, in production as a whole, of transferring factors from one branch to another, most often from the consumption goods to the production goods market. It then becomes difficult to speak of net secondary effects of the initial investment, since their addition does not go to augment total output. Kahn’s multiplier measured the ratio of the immediate increment of employment, due to a given investment, to the total increment. Keynes here defines his investment multiplier as the ratio of the total increment of income brought about by a given increment of investments, to this original increment (Y income, I investment, multiplier k=ΔY/ ΔI).
One might first point out that it is very hard to tell what moment to choose for evaluating the final result Y. The interval between the initial outlay and the time when the money invested reaches consumers is not only highly variable, but scarcely amenable to averaging without recourse to some concept like the “Austrian” theory’s “period of production”— apparently not very congenial to Keynes. His “period of production”, defined in terms of the time elapsed before increased demand for a given product expresses itself in a diminished elasticity of employment, looks very much like a petition principii. But the effects of the multiplier, approximate as they are, are indubitable. Far more debatable is the function making the multiplier depend on the propensity to consume. The latter is equal, by definition, to 1-1/k. since income is divided between consumption expenditures and investment expenditures.
Given the definition of the multiplier, the propensity to consume therefore becomes equal to 1-1/k, which amounts to saying that as the propensity to consume approaches unity, meaning if the community applies the totality of its income to consumption expenditures, the secondary effects of a primary investment would approach infinity. Remarkable!

Platinum-Looking for an Entry

As a long term buy and hold, platinum looks like a winner.


Platinum is one of the world’s rarest metals. All the platinum mined to date could fit into an average size living room. The biggest producer of platinum is South Africa, accounting for nearly 80% of the supply. The largest consumer of platinum is the  jewelry industry (51%) followed by auto catalysts (21%). Since most of the supply is coming from South Africa going long platinum is like going short the South African government. Each day that passes South Africa is looking like a future Zimbabwe.
Anglo American Platinum is one of the largest producers of platinum. Their web site is information overload. I had to dig through to find out that the AISC hidden in the foot notes.

Will GE Survive?

General Electric has been in free fall since Q2 2017. This is despite a roaring bull market in stocks last year.

I can summarize GE’s problem in two charts.


There operating cash flow has gone negative.
More importantly though, they have to much debt. When assets and liabilities get this close I get suspicious of accounting games being played to make it look like you are not buying a stock with negative equity. For instance ‘Goodwill assets’, ‘other long-term assets’, etc are high on their balance sheet. Digging deeper you could discover you are buying shares in a company with negative equity.
Amazingly, despite these deteriorating financials, the stock went side ways in 2016 all the way through the first quarter of 2017.

The Bullish Case For Gold

Putting aside central bank mischief for a moment.
Just supply and demand.
Below is the world mine production total.

Mine production is at a record high. So why be bullish?
See the mine production per country.

China and Russia, two of the largest producers are net importers. China in 2017 imported about a 1,000 metric tons. Not a single ounce of gold leaves China. When you take away China and Russia, the production picture looks very different.
Gold bottomed in 2016 at about 1,050$/ounce. The mining shares are a disaster. You can’t give them away. In the next five years, the prices of these stocks will be a multitude higher than they are at present.