Sunday, March 23, 2014

The Dao of Capital by Mark Spitznagel

Not only do we highly recommend reading (and rereading) Mark Spitznagel's The Dao of Capital, Austrian Investing in a Distorted World, we also recommend that everyone heed his warning of an upcoming crash.  This book is more important than both of Taleb's Fooled by Randomness and The Black Swan, combined.

The first link below, around 3:00 into the video, Spitznagel reminds us that interest rates are the most important economic variable and interest rates are currently artificial (determined by a bureaucrat, as opposed to to market).   THE MOST IMPORTANT ECONOMIC VARIABLE WE HAVE IS BEING DISTORTED.

Spitznagel Crushes The Strong Balance Sheet Fallacy

Mark Spitznagel Warns "Fed's Frankenstein Markets Are Totally An Illusion"

Spitznagel on CNBC:  Market is Set Up for a Huge Crash

Our Malinvestment In President Obama Will Bring Painful Consequences

Mark Spitznagel:  How the Fed Favors The 1%

Mark Spitznagel:  Christmas Trees and the Logic of Growth

Mark Spitznagel:  The Man Who Predicted the Depression

Saturday, February 22, 2014

Andrew Cuomo is a Disgrace

Andrew Cuomo is an absolute disgrace.  No two ways about it.  Cuomo makes Joe Biden's arguments sound cogent and reasonable.

He continually peddles the "assault weapon" misnomer - either completely unaware of his own ignorance, or just whoring his pathetic attempt to undermine the Second Amendment with the Un-Safe Act.  For the record, the term "assault rifle" is often misused.  An "assault rifle" has the capability to shoot automatically, something that is effectively illegal in the U.S. (unless you have the time, patience, licenses, and thousands of dollars to acquire the equipment and pay the taxes for doing so... good luck if in New York State).

Also, for the record, the Second Amendment asserts one's RIGHT TO PROTECT THEMSELVES FROM CRIMINALS.  The Second Amendment protects one's RIGHT TO PROTECT THEIR FAMILY FROM CRIMINALS.  The Second Amendment reiterates one's RIGHT TO PROTECT THEIR LOVED ONES FROM VIOLENT AND DANGEROUS CRIMINALS WHO HAVE BEEN LET OUT OF PRISON AND CONTINUE TO TRAMPLE THE RIGHTS OF OTHERS.  The right to protect yourself, and your loved ones, is not (and never will be) outdated.

Inform yourselves:

Thomas Sowell - Guns Save Lives
Thomas Sowell - Do Gun Control Laws Control Guns?
Thomas Sowell - Gun Control Laws
Thomas Sowell - Gun Control Myths Part 1
Thomas Sowell - Gun Control Myths Part 2
Thomas Sowell - Gun Control Myths Part 3
Thomas Sowell - Gun Control Hypocrisy
Thomas Sowell - Gunning for Guns
Thomas Sowell - Facts Versus Dogma on Guns

Back to the pathetic disgrace that is Andrew Cuomo.

His assertion that he has the final say on marriage (not that anyone should be able to tell consenting adults what they can and cannot do with other consenting adults) is inconsistent, incoherent, and ignorant:

Just a few years ago, he [Cuomo] declared that anyone who opposed redefining marriage was “anti-New York and anti-American.” So it really should be no surprise when his rhetoric gets out of hand, and shows a lack of respect for those who take opposing ­positions in good faith.

Nevertheless, the remarks he made the other day are particularly disturbing. Commenting on some internal disputes among his Republican rivals, the governor of all New Yorkers (even those who disagree with him) said this: 

“Who are they? Are they these extreme conservatives who are right-to-life, pro-assault-weapon, anti-gay? Is that who they are? Because if that’s who they are and they’re the extreme conservatives, they have no place in the state of New York, because that’s not who New Yorkers are.” ­(Emphasis added.)

A governor, or any type of leader whose salary is paid by taxpayers, is supposed to serve everyone.  Andrew Cuomo cannot make a foolish assertion, change his mind, and then make another assertion totally opposite and claim that opposing views are "not welcome".   Andrew Cuomo lacks the intellect, integrity, honesty, selflessness, and tact to successfully lead anything other than a rally for his own re-election.  His fiscal policy is also a joke, and people are voting with their feet and leaving New York State in droves.  Andrew Cuomo is a pathetic disgrace, a belligerent fool, and the tyrant you deserve if you voted for him.

Saturday, November 9, 2013

The Education of a President

Despite having a degree from Harvard Law School, our President's most expensive educational experience has taken place over the past five years.  Since taking office, the national debt has increased over 57%, and is on track to double under his Presidency.  Trillions of dollars later, our economy is still anemic.  People are leaving the workforce in droves, and seemingly 'giving up'.  Real unemployment is approaching a double digit rate if one were to factor in the amount of people that have left the workforce.  Obama's real legacy thus far is an underemployment rate equivalent to 10% - something unheard of since Jimmy Carter's Presidency of 'malaise'.

One would hope that Obama has learned from his multi-trillion dollar mistakes and will reverse course - however this is not the case.  Perhaps after he has doubled the national debt and the total cost to the American taxpayer is at or near 10 trillion dollars, will Obama realize that his ideas - as well as his ideology in general - are bankrupt.  Government cannot create economic growth.  Government cannot create jobs without destroying the opportunities for other jobs to be created.  Government cannot allocate capital until it has already confiscated that capital from others.  Government cannot allocate funds better than the market, the entrepreneurs, the consumers, and the American people as a whole.

His most recent, and pathetic, attempt to 'apologize' for what will invariably be millions of people losing their health insurance - if not tens of millions of people - has still done nothing to deter his toxic plans to naively dismantle a market that is already heavily regulated and dominated by government players (MediCARE, MedicAID, etc.).  Just as Fannie Mae and Freddie Mac create economic dislocations in the housing market, MediCARE and MedicAID create economic dislocations in the health insurance market.  This does not mean that we are against such safety net programs existing.  On the contrary.  However the consumers (patients) ultimately pay for these programs, hence the expensive price tag.  Adding another poorly conceived plan (ObamaCare) to an already complex system is proving to be catastrophic.

Ben Carson's recents statements on ObamaCare will make most of us uncomfortable.  However others have stated that ObamaCare, and the fact that it was upheld by the U.S. Supreme Court, will forever change the relationship between the individual and government.  ObamaCare stipulates that as a citizen, you must purchase something you may not want nor need.  Some believe that this essentially makes us subjects, and no longer citizens, to an all powerful federal government, and henceforth we are being financially controlled (but certainly not enslaved).  The plan is obviously not economically viable, but it is also a major violation of individual liberty.

Anyone surprised at the outcome of Obama's "health care" plan should have their head examined (that is, if they haven't lost their insurance coverage already).  Hopefully Obama will have learned something from his 10 trillion dollar education.

Sunday, October 13, 2013

Spitznagel: Interventionist Policies Cause Of, Not Cure For, Busts

Mark Spitznagel once again takes central planners and central bankers to school:

Time is nearly up for Ben Bernanke, the chairman of the Federal Reserve who supposedly applied his scholarly knowledge of the Great Depression to steer the U.S. to safety after the financial crisis.

In truth, Bernanke navigated a monetarist course that favored intensive intervention, following in the footsteps of many mainstream economists who grossly misunderstood the lessons of the Crash of 1929 and the ensuing malaise.

That lesson is that when corrective crashes occur, intervention is far from the cure — it is the cause.

Until we learn from the past, we will continue to expose ourselves to devastating booms and busts. The Bernanke-led Fed has only exacerbated the problem, leading us to the brink of an even worse correction.

To capture the lessons learned, we turn to a scholar of the Great Depression: Murray Rothbard of the Austrian School of Economics, who refutes the common misconception that "laissez-faire capitalism was to blame."

His contrarian and far less popular — yet more accurate — view is that the booms and busts of the business cycle result from shocks to the system caused by monetary intervention.

Specifically, Rothbard blames the 1929 Crash on loose monetary policy during the 1920s. For Rothbard, the boom was the problem; once the Fed pushed asset prices up to unsustainable levels, a crash was inevitable. Without the meddling of central-bank intervention, the market — like any natural homeostatic system — can reestablish equilibrium on its own by allowing its natural entrepreneurial "governors" to work. Greater savings prompts longer-term production for future greater consumption (and the inverse). The natural order trumps intervention every time.

Laissez-faire, however, gets a bad rap because it has been erroneously attributed to President Hoover, who supposedly did little or nothing to "save" the U.S. after the Crash of 1929.

In this popular and convenient narrative, Hoover sat back and did nothing as the U.S. sunk into the depths of the Depression, while the activist Franklin Delano Roosevelt finally "got us out of the Depression" with the New Deal.

Hoover, however, was nothing if not an interventionist — and his actions prevented what could have been the "downturn of 1929-30" from resolving itself, just as the recession of 1920-21 had.

Instead, it was the government to the rescue, and the downturn became a depression.

The events leading up to the Crash and Depression form an incriminating trail. The Federal Reserve expanded bank reserves and its holdings of government securities, creating excess liquidity that flowed into a land boom in Florida followed by a stock bubble — the signature traits of mal-investment.

In 1930, Hoover enacted the Smoot-Hawley Tariff Act, which had the disastrous unintended consequence of impeding the importation of goods into the U.S. and obliterating the export market for agricultural products. Farm prices fell and rural banks that held agricultural assets failed.

Herein the great lies of the Keynesians are exposed — that capitalism cannot control itself. If Americans would simply Google the relevant figures, they would see that what they have been taught about government intervention is a myth.

Nominal federal spending rose from $3 billion in fiscal 1929 to more than $4.7 billion in 1932. Hoover had inherited a government surplus of about 0.5% of GDP, which had become a deficit of 4% of GDP by 1932. This increase in federal spending and the deficit went hand in hand with skyrocketing unemployment, which by 1932 stood at 23.6%.

At best, Keynesians can argue that Hoover did "the right thing," only not enough of it. (Sound familiar?)

Hoover didn't view himself as a disciple of laissez-faire either. In his acceptance speech at the 1932 Republican Convention, he boasted that "we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic."

History would show he was half right — gigantic, yes, but defensive counterattack, no. The dismal results of Hoover's policies and Roosevelt's New Deal for creating employment are arguments against intervention, which does nothing but flood the system with liquidity, like fertilizer for unhealthy growth.

Our fear of corrective crashes is misplaced. They are necessary purges to clear the financial system of unhealthy mal-investment and to allow the redistribution of resources to stronger industries. I would argue that had the government followed this path in 1929, there would have been a garden-variety recession — not a Depression.

Unfortunately, we have labored under faulty assumptions and failed logic, particularly since 2008-2009. This is the legacy that Bernanke leaves not only to his successor, but to all of us.

What we must learn from history is that the government should stop suppressing the natural, homeostatic functions of the market. Otherwise, the "cure" will prove deadlier than the disease.

• Spitznagel is the founder of Universa Investments and the author of "The Dao of Capital: Austrian Investing in a Distorted World" (Wiley, 2013).

Monday, September 9, 2013

Economic Facts and Fallacies

F.A. Hayek's The Road to Serfdom and The Fatal Conceit, respectively, are arguably the first and second most important books in explaining the importance of economic liberty.  However two possible contenders, both of which are more straight forward, albeit highly influenced by Hayek's works, are Basic Economics and Economic Facts and Fallacies, both by Thomas Sowell.

An excellent summary of Economic Facts and Fallacies can be found here.

Sowell provides in depth analyses and examples of each fallacy and how each is used to prevent progress in our society today.

You don’t have to read far to find the focus of Thomas Sowell’s latest book, Economic Facts and Fallacies. It begins by quoting John Adams—“Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence”—then immediately argues for the importance of debunking economic errors because so many policies are based on false beliefs and fallacious thinking.

Economic Facts and Fallacies exposes an array of widely held beliefs to careful logical scrutiny and evidence—evidence that is usually ignored by those who favor interventionist government policies. Time and again, readers are shown that support for expanding government control arises from mistaken reasoning and interpretation of data.

First is Sowell’s discussion of four core fallacies we frequently encounter in public-policy discussions: the zero-sum fallacy (ignoring that voluntary economic arrangements are positive-sum); the fallacy of composition (particularly that robbing Peter to pay Paul benefits society simply because it benefits Paul); the chess-piece fallacy (assuming that some authority can achieve desired results as though he were moving chessmen on a board, ignoring people’s desires and incentives); and the open-ended fallacy (that commitments to ever-more health care, safety, open space, and so on, are sensible in a world of scarcity).

Even if people read only that section, they would greatly benefit from Sowell’s logic. The bulk of the book consists of six chapters dealing with subjects where economic misunderstanding abounds: the urban economy, male-female comparisons, academia, income, race, and the Third World. In each of those sections Sowell rebuts a group of beliefs that are widely accepted despite their fallaciousness and incompatibility with the evidence. While the whole of the book is enlightening, Sowell’s discussions of affordable housing and income comparisons are particularly powerful. I’ll concentrate on them.

Most Americans believe that government intervention is necessary to ensure that there will be enough “affordable” housing. Sowell challenges that notion with a barrage of contrary evidence, including that 1) people paid smaller percentages of their income for housing before the era of government intervention; 2) housing prices rose sharply when more pervasive government regulation began; 3) housing prices in areas with more government intervention rose more rapidly than in areas with less; and 4) growing population and income did not result in far higher housing prices where builders were allowed to construct more housing.

In short, government intervention in the housing market is the problem, not the solution. Sowell writes, “It is precisely government intervention in housing markets which has made previously affordable housing unaffordable.” The next time you hear someone claiming that there is a shortage of affordable housing due to a failure of the free market, you can haul out the book and show that the failure does not lie with the free market.

Sowell similarly devastates income comparisons that twist the data to get whatever conclusion is desired to justify political redistribution. He points out many ways that those who want to create the impression that the United States faces an income distribution “crisis” rely on misleading statistics. For example, there are substantial differences between real income growth per household and per capita (from 1969 to 1996, the former rose only 6 percent in America, while the latter rose 51 percent). By emphasizing only the first statistic, it is possible to create the impression that income growth has been fairly stagnant.

Another way of misleading people is to focus only on income data and ignore consumption—consumption by people in the poorest quintile is actually twice their income, but that fact is usually ignored. Moreover, the idea that there is an income crisis is greatly undermined if, instead of looking at “snapshot” data, you consider the high degree of income mobility. The latter data tend to be ignored. With this section, Sowell shows that it’s unwise to jump to conclusions based on highly selective facts.

Economic Facts and Fallacies highlights many instances where questionable if not downright foolish policy choices were made. So why don’t we change them? Sowell writes, “Many beliefs which collapse under scrutiny may nevertheless persist indefinitely when they are not scrutinized, and especially when skilled advocates are able to perpetuate those beliefs by forestalling scrutiny through appeals to emotions or interests.” This book makes it harder for such advocates to keep pulling the wool over our eyes.

The Face of the Democrat Party

This post contains nauseating images.  Apologies in advance.  The (new?) face of the Democrat Party:

Tuesday, July 30, 2013

Investors Are Lab Rabbits in Central Bank Experiments

Original article here.

The European Central Bank and Bank of England are emulating Ben S. Bernanke’s experiment in offering monetary-policy guidance to financial markets. Investors could well end up being the guinea pigs. 

Bond prices have fluctuated during the last three months, with the yield on the 10-year Treasury note swinging from 1.63 percent to 2.74 percent, the fastest jump since 2010, as the Federal Reserve chairman struggled to provide a clearer picture of when and why the central bank will reduce and then end its asset purchases.

“If this is science, then we’re the little white lab rabbits,” said Vincent Reinhart, chief U.S. economist for Morgan Stanley in New York, who served as the Fed’s chief monetary-policy strategist from 2001 to 2007. 

More communication mishaps are likely as the ECB and BOE strive to get their messages across to the market, said Gilles Moec, co-chief European economist at Deutsche Bank AG in London and a former Bank of France official. “The potential for the dialog between the central banks and the market to sometimes fail is significant,” he said.

All three monetary authorities meet separately this week, with the Fed gathering on July 30 and 31 and the ECB and BOE announcing policy decisions Aug. 1.

ECB President Mario Draghi said July 4 that the central bank expected its key interest rates “to remain at present or lower levels for an extended period of time.” The central bank’s main refinancing rate is 0.5 percent while its deposit facility rate is zero.

F.A. Hayek, amongst others, warned of the dangers of central planning.  Until currency competition becomes a reality, investors will remain part of an experiment.

Wednesday, July 17, 2013

New York State Government Corruption

Where to begin.  Vito Lopez is finally out of the Assembly, however his 'non-profit' received over $420k from the New York City Council.  Who better to administer 'non-profit' funding than Vito Lopez?

Ethics Panel Fines Lopez $330,000 in Harassment Case

Lopez is not alone...

New York corruption probe: Names released of 7 elected officials recorded by disgraced state Sen. Shirley Huntley

John Sampson:
U.S. Attorney Slams John Sampson’s ‘Extreme Examples of Political Hubris’

Indictment of John L. Sampson

Malcolm Smith:
Jumping From Party to Party to Bribery Charge

Troubles Continue For Sen. Malcolm Smith — Hit With Alarming New Charge

Malcolm in the Muddle

Velmanette Montgomery:
State Sen. Velmanette Montgomery Named in Federal Investigation

Ruth Hassell-Thompson:
Sen. Ruth Hassell-Thompson among officials recorded for feds 

Jose Peralta:
Jose Peralta's Role in FBI Probe Brings Attention to Seat's History

Eric Adams:
Brooklyn Borough prez hopeful Eric Adams among  the 7 names of officials recorded by feds

Some older incidents...

Kevin Parker:
Senator Convicted of Misdemeanor Charges in Clash With Photographer (he was cleared of more serious felony assault charges)

Pedro Espada:
Crooked ex-state Sen. Pedro Espada Jr. sentenced to 5 years in prison for embezzlement

Carl Krueger:
Former State Senator Is Sentenced to 7 Years in Vast Bribery Case

Hiram Monserrate:
Hiram Monserrate sentenced to 2 years in prison for corruption

And of course, Sheldon Silver (the KING of corruption):

Assembly Speaker Sheldon Silver sued over $103K sexual harassment settlement

NYers Pay $500/Hour To Defend Sheldon Silver From Gropez Lawsuit

Assembly Speaker Sheldon Silver sued for using taxpayer money in Albany sex scandal pay-off

Voters Think Silver Should Resign, Poll Finds

Gov. Cuomo considering ousting Assembly Speaker Sheldon Silver over Albany scandals

Private citizen sues Speaker Sheldon Silver, demands he repay taxpayers for secret Lopez settlement

Silver, others ‘targeted’ Lopez accusers

Two Vito Lopez sexual harassment victims file lawsuits in state and federal courts against Lopez and Assembly Speaker Sheldon Silver

And now for some humor.  Our brilliant Governor has a genius plan to help solve the corruption plaguing New York State - he is calling on the state legislature to pass 'anti-corruption' laws on themselves - of which he, the righteous Governor will surely enforce.  Not surprising, since he has also failed to respect our Second Amendment rights and believes that firearms are only used for hunting deer.  The man is a genius.

Is it now time to get serious about fixing New York?

Thursday, July 4, 2013

The Rarest of Gifts

From Lieutenant Commander Rorke Denver:

The Holy Trinity of holidays in an American warriors mind, in my opinion, would be comprised of Memorial, Veterans and Independence Day. Of the three, Independence Day, or the 4th of July, holds a supreme station. Warriors are fighters. That is core to who they are. If you asked 100 of them to describe what they fight for, you would get many answers. Commonalities of service to country, for my brother warriors, for my family would ring out consistently. But if I had to pick one motivation or purpose, I could do no better than freedom. Freedom, and I will accept liberty as an equal concept, is the rarest of gifts we enjoy in this incomparable nation. This singular concept serves as a compass by which our nation, and each and every one of us chart our American experience. If you have never left our shores, it is hard to understand, on a visceral level, the value and experience of free peoples. Fear, bondage, oppression, servitude, confinement and subjugation are the reality of those who know no freedom. Trust, opportunity, faith, expression, voice and happiness are our reality. One of my favorite dictionary definitions highlights the difference. “The right and power to act, believe, or express oneself in a manner of ones own choosing”. That is what freedom offers, power and choosing. Our nation is young, but how far we have come. None of our exceptionalism would have been possible without freedom. On this Independence Day, you have a choice of what, with whom and how you celebrate. Remember that the very ability to choose is unique in the world. It has been defended from the day of “declaration”, often with blood, for just shy of 240 years. Choose wisely.

We highly recommend reading Damn Few: Making the Modern SEAL Warrior and watching Act of Valor if you have not done so already.  Happy Independence Day.

Wednesday, June 12, 2013

CFTC Chairman Wants to Replace LIBOR

In an interview with Bloomberg news, CFTC Chairman Gary Gensler states he would like to replace LIBOR.  The only problem is that, when asked what he would like to replace LIBOR with, he has no answer.  Perhaps we should replace the market based LIBOR (of which the lowest and highest bids are actually dropped before calculating in order to filter out potential manipulation) with the Federal Funds Target Rate.  Yes, replace a rate that has been sometimes manipulated by market participants with a rate that is constantly manipulated by central bankers.  Not surprising that Gensler then complains that the CTFC is underfunded and, of course, needs more resources from the brain trust known as the 113th United States Congress.