Dear Reader,

Many of you have already read Warren Buffett’s New York Times op-ed calling for higher taxes on the ultra-rich. Why, even Obama has mentioned it in his speech. I don’t want to counter everything that Buffett said point by point; other authors have already done so. Rather, I’d like to discuss the general theme of this type of op-ed.

The formula is always the same: take some incredibly rich guy and have him talk about the need for higher taxes or more spending for some government cause or another. The audience is supposed to be awed by the person’s generosity – or “sacrifice,” as Buffett refers to it in the article. However, my question is, “What constitutes a sacrifice for these people?” The sacrifice really depends upon what one values.

Among those who value material wealth (the rich as well as just plain, regular Joes), I’ve noticed two broad groups. Those in the first group tend to desire material possessions. They want to own a Ferrari and a mansion simply for the fact that they would like to drive a Ferrari and would enjoy the comforts of a mansion. Those in the second group, however, buy the Ferrari and mansion to garner the respect or admiration of those around them. They don’t enjoy wealth for the materialistic ends in themselves. Rather, they enjoy feeling important. These types also value fancy corporate titles and being seen at high-end charity events. I would put practically all politicians into this latter category, but many folks in the private sector belong there too. Some get that feeling of importance through political power, and some can get it through piles of money.

So, which category does Warren Buffett fall into? In my opinion, the second one. After all, he’s famous for living in the same plain home for the past 50 years. To me, that’s a dead giveaway. Also, don’t forget that this 80-year-old is still busy commenting on world events, donating to charities, and offering investment advice.

I consider myself more in the materialistic category. And let me tell you… If I make it to 80 with plenty of wealth, I won’t be wasting any time commenting on world events and investments. I’ll be too busy unhooking my latest catch in the Virgin Islands and spending my last years with family.

The same millionaire theme is often used in articles about the presidential salary. The piece will note, “It’s amazing how little the president of the United States gets paid.” The authors ignore one thing: The type of people who want to become president often desire something more than money. They want the feeling of power and the limelight. In that view, U.S. presidents are probably the most overpaid people on the planet.

So, just because some millionaire or billionaire wants more taxes doesn’t impress me. Are they really sacrificing what drives them? Perhaps if Warren Buffett said, “I’m going on a year-long fishing trip, and I won’t comment on any world events or Berkshire Hathaway until the tax revenue situation is fixed,” I would start listening to him… because then the man would be giving up something that he actually values.

For the rest of the issue, Doug Hornig will discuss the European Council for Nuclear Research’s search for the “God particle.” Then, I’ll have some links on the Bank of England, John Paulson, and the home ownership to rent ratio.

Helping to Find the God Particle

By Doug Hornig

How’d you like to be present when researchers finally find God?

Okay, you won’t be. In fact, if God could be observed by the likes of mere mortal man, then He’d be rather ungodlike. So that one’s going to have to remain a matter of faith.

However, physicists have long believed that the next best thing would be to identify the ultimate building block of the universe. This would be the Higgs boson, sometimes referred to in popular parlance as the “God particle.”

The Higgs boson is a massive elementary bit of something that is as yet hypothetical, although it is predicted by the Standard Model of particle physics and was postulated in order to resolve inconsistencies in subatomic theory. It’s an intermediary necessary to reconcile the difference between photons, which have no mass, and other bosons, which do. Or to put it another way, it’s the explanation for how matter comes into being. Hence the “God particle” nickname.

Scientists at CERN (the European Council for Nuclear Research), the folks who brought us the Large Hadron Collider (which was supposed to end the world when it was turned on but didn’t, as far as we know), have been on the trail of the elusive Higgs boson for years. They’ve come up empty so far. And now – if you’re interested – they’d like your help.

Yep, anyone with a home computer – which by definition includes all of our readers – can now participate directly in the search for the God particle.

CERN wants to build a planetary network of PCs, bringing them together to form a “volunteer cloud” that can then work as a “virtual supercomputer.” On August 8, the organization’s Citizen Cyberscience Centre released its second-generation LHC@home software, the code that will be used to create the cloud.

The concept is well tested. For instance, Seti@home has used Internet-connected PCs to assist in the search for extra-terrestrial life since 1999. With LHC@home, members of the public can similarly install a client on their computers, thereby adding their spare processing power in support of various CERN efforts. These include: predicting natural disasters and tracking them when they occur; locating sources of clean drinking water in resource-poor parts of the world; and gathering data on deforestation, to assess the extent of environmental damage and loss of biodiversity.

And, of course, finding the Higgs boson.

The theory behind enlisting the public in this effort is this: While scientists have advanced physics theory that tells them how they expect systems to behave, they can’t actually give a prediction of how a particular system will behave until they put that theory into a system. With LHC@home 2.0, clients can apply their spare power to simulations of high-energy collisions between protons. The results will then be compared with experimental data from real-world LHC runs to narrow the search for items of interest. You become an integral part of the experiment.

But there’s a hitch. The popularity of this program has really taken off since news of it first hit the world press. According the LHC@home’s website, there are now nearly 8,000 registered volunteers, which saturated their server. They have had to put further eager participants on hold while they sort out how to handle the overwhelming response. They expect, however, to gradually open to more participants in the coming days.

So you will have to stand in line if you want in. If you don’t mind that, you can go to the site and take a shot.

Good luck.

[Participation in the LHC@home project involves no monetary compensation. To actually profit from technological advancements, an investor must be ahead of trends and able to separate hype from reality. The tech experts at Casey Research are both; and you can put them to work for you with a risk-free trial subscription to Casey Extraordinary Technology.]

Additional Links and Reads

King Says “Severe” Market Stress Threatens U.K. Recovery (Bloomberg)

Mervyn King, the governor of the Bank of England, is stuck between a rock and a hard place. If there’s a double dip, the British economy will suffer. If there’s no double dip, inflation will become rampant. Inflation has already risen to 4.4%, and King sees it moving to 5% in coming months.

The BoE hopes lower commodity and energy prices will drive inflation downward, but with oil already regaining ground, this may be wishful thinking. Furthermore, the drop in oil prices would need to go far deeper to reverse the effects of ill-advised monetary policy.

So, how can the BoE get out of this corner? Unfortunately, there’s not much it can do – the brakes have failed on this train. If the BoE wants to lower inflation, it should raise rates now. However, I can’t think of a worse time for a rate hike with the market recently crashing and further European troubles brewing.

King is right on one thing: He’s completely at the mercy of commodity prices. If they fall through the floor, he might be able to save some face. If commodity prices don’t fall significantly, prepare to see over 5% inflation in England in the next year.

Paulson’s Hedge Fund Sells Citi, BofA Shares (Bloomberg)

Paulson’s reputation shot into the stratosphere with his wise bets ahead of the 2008 crisis, but with his fund losing 31% this year, perhaps he didn’t really have it all figured out. In a way, he only had half the story correct. Paulson predicted the crash, but didn’t predict the severity of the damage. (That’s still better than most, however.)

In my opinion, Paulson’s fund fell victim to a textbook definition of the business cycle. First, there’s a drop in the market, and then there’s a rather rapid recovery. The article points out:

Paulson told investors at the start of the year that U.S. economic growth would probably continue in 2011, and that over the past 20 years, the average length of expansion after each of the previous two recessions had been 32 quarters.

That sounds like too much reliance on what happened before rather than analyzing the current mess as a unique recession without a direct comparison. With Paulson exiting bullish picks such as Citi and Bofa, the question becomes, “What’s next?”

Buying Is Cheaper than Renting in Most U.S. Cities (CNN)

Here’s an interesting article on the ratio of rent to home ownership. According to the piece, buying is cheaper than renting in 74% of America’s top 50 cities. The data may be a little questionable, but it’s still hard to completely ignore. The article itself points out part of the problem:

“It’s a personal decision, of course. But if you have a steady job and you are planning to stay for seven years or more and have enough cash to put 20% down and enough left over for seven or eight months of expenses, you’re better off buying in most places,” said Daisy Kong, a spokeswoman for Trulia.

With high unemployment and many people worried about their jobs, few fall in the steady-job category. Furthermore, too many of us have heard horror stories of the American dream of home ownership turning into a nightmare, whether it’s moving to another city and being unable to sell the previous home or facing foreclosure.

That’s it for today. Thank you for reading and subscribing to Casey Daily Dispatch.

Vedran Vuk
Casey Daily Dispatch Editor