Friday, November 9, 2012

News from the Network, Vol. 5, No. 45

We're going to try something slightly different this week with the news items. The reason is because (we just got flagged by the Committee for Redundancy Committee) there is an internet petition to Congress to reform the Federal Reserve and pass a Capital Homestead Act asap, and we don't want you to fall asleep and fail to sign the petition just because you got bored with the incredibly erudite and in-depth analysis contained in this week's blogitorial.

Here's the news:

• Consider signing a petition to initiate reform of the Federal Reserve so that it serves the needs of real people like us, instead of politicians, and get a Capital Homestead Act passed. You can get to the petition by clicking on this link. It takes less than half a minute to sign, although you might want to take a full minute to tweet the link or post it on your FaceBook page. Consistent with the "laws and characteristics" of social justice, keep in mind that this is an initiative to REFORM the Federal Reserve, a necessary institution, so that it serves the needs of actual people, not "End the Fed" even though it has been egregiously abused to fund government growth instead of economic growth in which all people can participate in and benefit from.

• We have had a number of very interesting discussions this week on how to move the Justice University Concept forward. Recently we learned that a CESJ founder was appointed as a director at a grant-giving foundation, which opens up some possibilities for funding a number of initiatives under the Justice University umbrella, and begin the great task of reforming academia.

• This week we signed CESJ's speakers bureau (which we intend to merge into Justice University as soon as it becomes feasible) up on "Radioguestlist.com," a free internet booking service (although there are paid services, too; they do have to make money like the rest of us). Since it costs nothing to join or use the service, and you can withdraw at any time, we're giving it a try. We'll let you know how it turns out. We've already submitted one suggestion to a radio show based in Minnesota and Texas (we're not going to ask) about applying JBM and JBL concepts to small business. Don't send us anything right now, but if you think you'd like to be a member of CESJ's speakers bureau, you might want to start preparing your resume and materials now. Your subject and (of course) the presentation will have to conform to the principles of the Just Third Way, and there will probably be an audition of some kind, but that's just to ensure quality and conformity with the ideas.

• We just learned that Debra Murphy of Idylls Press in Ashland, Oregon, is revamping her whole system, and expects to launch her new website in (we believe) January of 2013. We'll keep you posted, especially since her products — "classic" Catholic fiction — are fairly complementary with CESJ's non-fiction and UVM's fiction.

• We got a very nice compliment this past week on the forewords to UVM editions of the fiction of Robert Hugh Benson and John Henry Newman. A schoolteacher who has been reading books to her 8th graders (such as the sadly out of print The Pushcart War) said they were well written, informative, and gave a needed added dimension to novels that today's readers might otherwise overlook. Since all the forewords are written from the perspective of the Just Third Way, this was particularly gratifying.

• We expect to launch CESJ's new website in the near future as well, so stay tuned for developments.

• As of this morning, we have had visitors from 61 different countries and 50 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the United Kingdom, Australia, and India. People in Slovenia, France, the United States, Canada, and Portugal spent the most average time on the blog. The most popular postings this past week were "Thomas Hobbes on Private Property," "Aristotle on Private Property," "Romney's Speech," "Why Not Capitalism?" and "Is Binary Economics Practical?"

And Now for the Blogitorial:
As of this writing (a little after noon, Eastern Standard Time), the stock market is up somewhat after two days of serious drops. "Strong consumer data" is being given the credit, but that, frankly, is nonsense. We're more than a month into the heaviest-hitting retail selling quarter of the year, with people making plans to snag bargains for the holidays, seasonal employment is kicking up in anticipation of "Black Friday" in a couple of weeks — and sales are still seriously off for many businesses — even Universal Values Media's novels and CESJ's new releases are down a bit from the prior period, a rather startling development for November when these sell, if not like hotcakes, at least like warm pies.

What's the real story? Given the drastic drop of the previous two days and the speed with which trades can be carried out with computers, it's pretty obvious why the market is up: the short sellers are taking profits. They can't risk the market starting to turn up too much, or they stand to lose money rather than make it.

It works like this. In a normal "long sale" in stock market gambling you buy something with your own money or on credit ("on the margin"), hold it until the price goes up, sell it, and take a profit. You then pocket the money, after using some to pay off the loan you took out to purchase the shares. This is not true investing, but speculation. Fortunately, losing in this kind of deal hurts only you and anyone who lent you money, and then only to the extent that you or your creditor put money in. Nobody can lose more money than they put into a long sale, and the potential for profit is, in theory, unlimited, as there is no upper limit to a price (in theory).

In a "short sale" the story is a bit different. It's still gambling, of course, but it's "looking glass gambling." Where in ordinary stock market gambling the potential for profit is unlimited and the loss is limited, in short selling the potential for profit is limited, but the loss potential is unlimited.

It works like this. In a "short sale" in stock market gambling you either use shares that you own or, more commonly, borrow shares from somebody else. You then sell the shares and wait for the stock to go down in price. When the stock goes down to where you think it will go down no further, you buy back the same amount of shares that you borrowed (or more, if you think it's going up again and want to make a double profit), and return them to your portfolio or to the person who lent them to you. Your profit consists of the difference between the price at which you sold the shares, and the price you paid to replace the shares.

You can see the limited profit potential. The most money you can make on a short sale is the difference between what you sold the shares for and what you had to pay to replace them. Even if the stock price drops to zero, you can't make any more than what you sold the shares for in the first place.

The potential loss, however, is unlimited. You expect the shares to go down after you sell them . . . but what if the price goes up? You automatically lose your "investment" — the amount for which you sold the shares — plus whatever it costs to buy replacement shares to return to the lender.

For example, you borrow a block (100 shares) of a "penny stock" for 25¢ a share. You sell the block, realizing $25.00 on the sale (we're ignoring broker's fees and the sneers you would get for a lousy $25 investment). The next day the share price goes down to zero. You buy back 100 shares of the stock for nothing, return them to whoever lent them to you, and pocket your $25.00 profit.

That's if things work out. Suppose, however, the next day the stock shoots up to $100.00 a share. You have to buy 100 shares at $100.00 a share to replace what you borrowed and sold — $10,000.00. You managed to incur a loss of $9,975.00 for your $25.00 bet. What if the share price goes up to $1,000.00? Make that a loss of $99,975.00 suffered for a potential maximum gain of $25.00.

This is called "smart investing."

Anyway, that's why we think the stock market is up — the short sellers can't wait any longer to start buying back the shares they sold, or they could lose money instead of making it.

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

#30#

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