Friday, November 21, 2008

Week of November 17th, 2008 the economy and poker statistics

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I have now been back visiting the United States for three weeks and I can not wait to head back to Botswana. I have never seen a bigger bunch of babies. In the past, years and years ago my understanding was the U.S. was a super power and looked up to by almost all other countries. Today as I travel the world, other countries tolerate the U.S. and its policies because of the U.S. has money or should I say has borrowed money. I am not talking about individual people. In that regard I have never been to a country that did not treat Americans with respect and dignity, I am talking policies and attitudes.

So what do I mean they are babies?

In the three weeks I have been in the U.S. the financial markets have tumbled about 15%, which is in addition to another 35% before I arrived. I did a little research to understand why. Here is what I found, for the last 10 years or maybe even longer the entire U.S. economy was running a Ponzi Scheme.

A Ponzi Scheme is a fraudulent investment operation that involves promising or paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. It is named after Charles Ponzi. A Ponzi scheme has similarities with a pyramid scheme though the two types of fraud are different. Please watch the following video to help understand and then read on.

Some basics you need to understand the U.S. economy today is driven by consumers. The money they spend drives America’s Gross Domestic Product (GDP). The U.S. is no longer a manufacturing country (They do not make the Goods that the world uses like they use to) and they are starting to lose their ability to be a service country as other countries citizens become better educated and have a stronger work ethic. (See picture of U.S. College Students verses China College Students above)

As I mentioned a Ponzi Scheme is when abnormally high profits are paid to investors out of money paid by subsequent investors. This scheme works well until you run out of new investors.

The problem with the U.S. Economy is that the housing market was built on a Ponzi Scheme. It was so obvious and yet no one wanted to stop it, because everybody was making money, or they thought they were.

The Federal Reserve lent money very cheaply to the banks. This put a lot of money into the market. Since the banks were getting this money so cheap they would lend it out very cheaply, this increased consumer demand. In a capitalistic society when demand goes up faster then supply, prices go up. Let us look at housing; the banks were lending money so cheaply almost anybody could afford a house, so demand for houses went up and the price of houses climbed rapidly. As prices went up more people wanted a house since they saw it was a great investment, and demand kept growing. In reality the increase in the home value was not real, sure one house in a neighborhood might sell for $300,000.00 but that does not mean if everyone wanted to sell there house at the same time they would all get $300,000.00.

Now the problem gets worse, both consumers and banks got even greedier, banks saw the value of house going up and wanted to participate in some of those gains. So they designed mortgages that made consumers payments very low to start, but very high after a few years. Then the banks sold these mortgages with the promise of higher payments in the future. This way banks or mortgage issuer made more money upfront and got rid of the risk. The consumers got greedy and bought houses that they could not afford, but since the mortgages were cheap on the front end and they knew the price of the house would go up they felt it was a safe bet. In a Ponzi Scheme, the trouble comes when there are no new investors. As time went on some home owners were forced to sell their homes because they could not afford the higher mortgage payments. This caused an increase in the supply of homes at the same time as people saw more homes for sales prices started to decline and this caused less demand, Supply out striped Demand. Each month more people had their monthly payments increase and could not afford their homes which put more houses on the market which increase supply even more and reduces demand even more, which droves the prices even lower. This was the start of the crash.

Many Americans that did not buy new homes as prices were going up got home equity loans they borrowed money to buy things. They used the inflated equity in their house as collateral. So instead of waiting until they could afford an item they borrowed money to buy the item. This drove a lot of the consumer purchasing for the last 10 years.

As the prices of their homes drop they could no longer borrow and thus had to spend less.

All of the above has caused the U.S. economy to fall off a cliff. Today this is affecting the whole world as most of the items the U.S. consumer buys come from over seas. In reality what you are seeing is the largest transfer of wealth in world history. In the past 10 years the people of the United States have transferred a significant amount of it’s wealth to other countries.

Why do I say they are babies? From CEOs to politicians to consumers, they all want to blame each other and none of them want to deal with the pain. Everybody wants handouts. Instead of fixing the problem and becoming a leader in the world, the U.S. is borrowing more money from other countries and throwing band-aids on the problem. The U.S. today owes other countries or its citizens over ten trillion dollars. Let me show you what ten trillion looks like.
$10,000,000,000,000.00, there are three hundred million people in the U.S. that is $33,333.00 each would have to pay to get the U.S. out of debt. The interest alone on ten trillion is three hundred billion a year. That means every year each American pays the government $1,000.00 just to cover interest in the debt.

So what is going to happen, one of two things?

One the U.S. people learn that they created this problem and fixing it will be painful, they need to stop living on credit, start saving, and most important created new technologies and products that other countries will want, this will be painful and take several years, pay down the debt give up luxury items and things will be great again.

Two they just keep borrowing to support an unrealistic way of life, at some point other countries will get concerned that the U.S, will not be able to repay its debt and the countries with money will want higher interest rates to lend to the U.S. which at some point will bankrupt the U.S. much like what happened in Russia and the U.S. will no longer be a supper power.

Living in Botswana I see people that are happy when they get the right amount of rain so the crops will grow so they can eat, in the U.S. I see people that are stressed because they can only buy their kids a WII this year instead of a WII and an X-box. What a bunch of babies.

I hope the citizens of the U.S. decided to take the pain, get their house in order and become the leaders they should be. Maybe their new leader President Elect Obama will help.

One other example of no one willing to take the pain or think long term, during the three weeks I have been in the U.S. I have seen gas drop about one dollar a gallon, all the sudden everybody is driving again and not conserving. If they put a $2.00 a gallon tax in place, no one would notice since the price has dropped about $2.00 from the high, and people would keep conserving on fuel.

Now for Poker statistics.

I had a good week of Poker played almost 8 hours and won $307.45 which is an hourly rate of $38.51 an hour, below shows my worst hand and best hand of the week.

This hand I was just plain brain dead.

POKERSTARS GAME #22122343620: HOLD'EM NO LIMIT ($1/$2) - 2008/11/17 - 13:35:14 (ET)
Table 'Gaspra III' 9-max Seat #5 is the button
Seat 1: takao11 ($37 in chips)
Seat 2: DUG ($217.30 in chips)
Seat 3: akaginsf ($175.75 in chips)
Seat 4: Min9 ($85.25 in chips)
Seat 5: Spagiari ($210.70 in chips)
Seat 6: bet2live ($40 in chips)
Seat 7: usagolf ($40.65 in chips)
Seat 8: TehBluffman ($200 in chips)
Seat 9: CFA777 ($293.65 in chips)
bet2live: posts small blind $1
usagolf: posts big blind $2
*** HOLE CARDS ***
Dealt to DUG [Jd 9h]
TehBluffman: folds
CFA777: folds
takao11: folds
DUG: raises $4 to $6 I had not played many hands and was just trying to steal the blinds.
akaginsf: folds
Min9: calls $6
Spagiari: folds
bet2live: folds
usagolf: calls $4
*** FLOP *** [9c 4s 8d] ok I hit top pair, but so what not a great hand.usagolf: checks DUG: checks I will go for a check raise.
Min9: bets $8
coolusagolf: folds
DUG: raises $14 to $22 here we go he should fold
Min9: raises $54 to $76 Oh, NO!!!
DUG: calls $54 This was real dumb, I should of folded real fast.
*** TURN *** [9c 4s 8d] [Qd]
DUG: bets $74 This was even dumber.
Min9: calls $3.25 and is all-in
Uncalled bet ($70.75) returned to DUG
*** RIVER *** [9c 4s 8d Qd] [5s]
*** SHOW DOWN ***
DUG: shows [Jd 9h] (a pair of Nines)
Min9: shows [8c 8s] (three of a kind, Eights)
Min9 collected $174.50 from pot
*** SUMMARY ***
Total pot $177.50 Rake $3 Board [9c 4s 8d Qd 5s]
Seat 1: takao11 folded before Flop (didn't bet)
Seat 2: DUG showed [Jd 9h] and lost with a pair of Nines
Seat 3: akaginsf folded before Flop (didn't bet)
Seat 4: Min9 showed [8c 8s] and won ($174.50) with three of a kind, Eights
Seat 5: Spagiari (button) folded before Flop (didn't bet)
Seat 6: bet2live (small blind) folded before Flop
Seat 7: usagolf (big blind) folded on the Flop
Seat 8: TehBluffman folded before Flop (didn't bet)
Seat 9: CFA777 folded before Flop (didn't bet)

At least the guy only had $85.00 so my loss was limited, by his stack.

POKERSTARS GAME #22152690292: HOLD'EM NO LIMIT ($1/$2) - 2008/11/18 - 14:32:47 (ET)
Table 'Papagena' 9-max Seat #7 is the button
Seat 1: krischnumani ($214.15 in chips)
Seat 3: Belok ($211 in chips)
Seat 4: micula213 ($207 in chips)
Seat 6: DUG ($212.45 in chips)
Seat 7: AR_GTAm ($222.30 in chips)
Seat 8: cyberpeogh ($134.30 in chips)
Seat 9: Lawyerbyday ($153.25 in chips)
cyberpeogh: posts small blind $1
Lawyerbyday: posts big blind $2
PimpMySpeed: sits out
*** HOLE CARDS ***
Dealt to DUG [8d 8c] This is fine have to play.
krischnumani: folds
Belok: folds micula213: folds
DUG: raises $2 to $4 Make a mini raise, this way I can represent a lot of hands.
AR_GTAm: calls $4
cyberpeogh: folds
Lawyerbyday: calls $2
*** FLOP *** [Qh Jd 8h] Great flop, now I need to hope someone has JQ or AQ, maybe even AJ would stay in.
Lawyerbyday: checks
DUG: bets $9 Need to build the pot, plus there is a flush draw possibility. 3/4 of the pot bet kills the odds for a flush draw, but if the flush hits I can act like I was on the draw.
AR_GTAm: raises $21 to $30 He has JQ, if he had QQ or JJ he would have reraised preflop.
Lawyerbyday: folds
DUG: calls $21 I only call because I want him to keep betting.
*** TURN *** [Qh Jd 8h] [3h] I am not worried about him having a flush since he tried to push me off the flush.
DUG: bets $32 I bet less then half the pot so it looks like a weak bet saying I have a flush.
AR_GTAm: raises $88 to $120 Perfect he is now committed, he has so much in the pot already any bet I make he has to call since he is getting great odds. He would win if a J or Q hits, that is 4 outs, 8% if he has a heart he has 7 outs or a total of 22%.
DUG: raises $58.45 to $17 8.45 and is all-in
bet2live leaves the table
AR_GTAm: calls $58.45
*** RIVER *** [Qh Jd 8h 3h] [As]
*** SHOW DOWN ***DUG: shows [8d 8c] (three of a kind, Eights)
AR_GTAm: mucks hand
FATDAN44 joins the table at seat #5
DUG collected $426.90 from pot
*** SUMMARY ***
Total pot $429.90 Rake $3 Board [Qh Jd 8h 3h As]
Seat 1: krischnumani folded before Flop (didn't bet)
Seat 3: Belok folded before Flop (didn't bet)
Seat 4: micula213 folded before Flop (didn't bet)
Seat 6: DUG showed [8d 8c] and won ($426.90) with three of a kind, Eights
Seat 7: AR_GTAm (button) mucked [Jh Qc]
Seat 8: cyberpeogh (small blind) folded before Flop
Seat 9: Lawyerbyday (big blind) folded on the Flop

Very nice pot several years worth of living in Botswana, would last me about 2 days in the U.S.



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