Monday, September 25, 2017

Wounded Knee

Because a vision softly creeping
Left its seeds while I was sleeping
And the vision that was planted in my brain
Still remains
--Simon & Garfunkel

Some sports fans are pushing back against NFL players who chose to take a knee or sit during the playing of the national anthem before yesterday's games. Players shouldn't be making a political statement during a sporting event, goes the complaint.

I sympathize with that argument. When I sit down to watch football, I'm not interested in observing political protests by players on the sidelines.

The problem is that I already have to endure political statements during NFL games--and those statements are sanctioned by the NFL itself. It begins with the national anthem, which can be viewed as a pledge or oath to a political collective.

It continues with regular events that honor military personnel, particularly those who have fought in government-sanctioned wars.

Even the Super Bowl is not immune, as the president is routinely granted a 5-10 minute television slot during pregame festivities to make a political speech. This is always my cue to hit the snack tray.

The NFL is not the sole purveyor of political statements in professional sports, of course, as most other sports leagues engage in similar activities.

For those wishing to remove politics from sports, perhaps their first stop should be the owners' box.

Sunday, September 24, 2017

National Anthem

Duke of Norfolk: Thomas, look at these names! Why can't you did as I did and come with us, for fellowship?
Sir Thomas More: And when we die, and you are sent to heaven for doing your conscience, and I am sent to hell for not doing mine, will you come with me...for fellowship?
--A Man for All Seasons

A country's national anthem can be seen as a remembrance and celebration of heritage. This is surely a reason why many people, particularly conservatives, are attracted to it.

But a national anthem can also be seen as a tool of indoctrination--a pledge of allegiance to a collective entity that demands surrendering one's self for the good of the state.

Those who refuse to take that pledge are called unpatriotic. Of course, patriotism itself can be seen as an instrument for driving isomorphism in collective regimes.

In a true land of liberty there can be no such mechanism of compliance. People are not required to swear allegiance to the collective because, by definition, liberty puts the interests of each individual first.

When anthems, pledges, oaths, et al are required of citizens to demonstrate that they are subservient to the whole, then that country is no longer the land of the free.

Saturday, September 23, 2017

Flawed Again

When the truth is found
To be lies
And all the joy
Within you dies
--Jefferson Airplane

Judge Nap outlines why Rand Paul is once again correct to stand in opposition of the latest GOP-sponsored Obamacare 'repeal and replace' bill circulating around the Senate. He notes that Obamacare has been built on four flawed requirements:

1) The federal government has the obligation to provide healthcare coverage for every American.

2) The federal government can mandate that all citizens purchase healthcare coverage.

3) The federal government can micromanage healthcare production and distribution.

4) The federal government has access to all provider and patient medical records.

The latest Graham-Cassidy bill changes none of those flaws.

The correct response, as Judge Nap observes, is straight repeal of Obamacare, and then reliance on the free market, or at the very least regulation by the states, for healthcare provision.

As he has noted previously, the Judge suggests that the insidious victory of the Obamacare legislation is that it has persuaded Republicans, and a large group of Americans for that matter, that it is the duty of the federal government to assure healthcare coverage for all.

The federal government has nothing rightfully to do with healthcare. That's not according to the Judge, as he adds, it's according to the Constitution.

Friday, September 22, 2017

Bearing Down

Go on
Take the money and run
--Steve Miller Band

Yale's Robert Shiller discusses three current market conditions similar to those preceding most historical bear markets. One condition is valuation. Using his CAPE metric, the value of the S&P 500 has only been higher before the 1929 crash and the dot.com pop.


Another condition is high earnings growth. Huh? Shouldn't high earnings growth be good for stocks? Unfortunately, earnings growth is often highest just prior to big market declines. Shiller notes that in 13 prior bear market cases, annual earnings growth averaged over 13%. Over the past 12 months S&P earnings growth has averaged...13.2%.

Finally, average stock market volatility is low. In terms of the standard deviation of monthly percentage stock price changes, volatility is about 1.2%. From 1872 until 2017, the average is about three times as high at 3.5%. Lower vols lead to compression, which leads to...higher vols.

The message: For investors, things may not be as good as they appear.

Thursday, September 21, 2017

Pooling Assets

"Just when I thought it was safe to go back in the water."
--Brantley Foster (The Secret of My Success)

Yesterday the Fed announced that it will begin unwinding the $4+ trillion of assets that it accumulated during its various 'quantitative easing' programs since the credit collapse. It will begin by selling $10 billion worth of paper in October and gradually increasing sales in subsequent months.

It is difficult to fully appreciate the enormity of the Fed's balance sheet. For instance, even at a $50 billion/month sell rate, it would take the Fed nearly seven years to unwind a $4 trillion book.


My sense is that the Fed is selling only because other central banks continue to buy. As shown in the graph above, BOJ and ECB balance sheet assets have blown past the Fed with no end in sight.

Central banks buying and selling assets to each other constitutes a modern day stock pool.

Wednesday, September 20, 2017

Rebuttal vs Retraction

A time to build up
A time to break down
--The Byrds

Interesting piece discussing growing tendency for academics to demand journals to retract published articles that they do not agree with. The traditional academic way has been to rebut research that contains what are considered falsehoods. This is what scholars are supposed to do--use their thinking skills to argue their way thru competing hypotheses and propositions on the way to the truth.

Emotion or ad hominem do not apply in this process.

Unfortunately, cries for retraction rather than rebuttal are wholly consistent with trends toward intolerance of ideological diversity in higher ed.

Tuesday, September 19, 2017

Home Formation and Student Debt

"Christ. Seven years of college down the drain. Might as well join the Peace Corps."
--John 'Bluto' Blutarsky (Animal House)

Mike Shedlock reviews a recent study on college student debt. Student loan debt now totals $1.4 trillion, which amounts to about 35% of non-housing debt. More than half of all student borrowers have debt greater than $50,000.


One consequence of student debt is that it postpones family and home formation while students pay down their loans. The delay in buying a first house is estimated at about seven years. This is a headwind to economic growth.

While cheap student loans certainly benefit the colleges and universities who receive the borrowed funds as payment for services rendered, college grads who struggle to dig out from underneath student loans serve as a long term drag on the economy.

Monday, September 18, 2017

Miner Revision

When it gets too much
I need to feel your touch
--Bryan Adams

Have been itching to add to my Pan American Silver (PAAS) and finally did so this am as the stock pulls back a bit from near term highs.


May be a bit early as the moving averages are still a coupla dimes below. Like the technical setup nonetheless with stochastics reaching low.

And fundamentally, continues to operate with one of the best balance sheets in the sector. Net cash of over $100 million and an enterprise value of about $2.5 billion continues to make this my favorite name in the mining sector.

position in PAAS

Sunday, September 17, 2017

Prices in Nascent Markets

On another day, c'mon, c'mon
With these ropes tied tight we can do no wrong
Now we grieve 'cause now it's gone
Things were good when we were young
--Von Bondies

Saw an insightful comment the other day. Prices are set by supply and demand in mature markets. In nascent markets, supply and demand has yet to be established. Instead, entrepreneurs post initial prices based on where they think buyers will perceive value.

Apple might price a new iPhone model at $1000 but customers may not show up to buy them. Or customers might show up in such quantities that prices go up with demand.

When markets are young, prices can be volatile.

Saturday, September 16, 2017

Squawk Box

America, have your heard?
I got a brand new dance and it's called 'The Bird'
--Morris Day and the Time

Classic example of excessive regulation. An Obama era 2014 regulation limits the number of chickens that can be processed in a plant to 140/minute. A trade group representing poultry companies is petitioning the USDA for an increase to 175.

Rationale for the limit includes worker and food safety. Poultry companies cite pilot plant results that no adverse safety impact of higher production rates.

Regardless, government has no rightful role in dictating these production rates. If producers lose control of their processes at higher production rates, then they will be penalized in the market (for both labor and product).

Government's rightful role is settling legal disputes that may result. For example, if consumers sickened by bad birds, then then it is their right to seek recompense in the courts.

Stated differently, let markets (buyers and sellers) set proper production rates, not government.