Friday, December 15, 2017

Becoming the Market

I've got your picture, I've got your picture
I'd like a million of them all around my cell
I asked the doctor to take your picture
So I can look at you from inside as well
--The Vapors

Nice picture of the relative position of all central banks (not just BOJ) in markets.

Not only are they increasingly involved, but CBs are quickly becoming THE market...

Thursday, December 14, 2017

Always On

"The Army is a broadsword, not a scalpel. Trust me, senator, you do not want the Army in an American city."
--General William Devereaux (The Siege)

During the Civil War, President Abraham Lincoln dealt with those in Union states voicing opposition to the war by arresting dissenters under auspices of martial law. Thousands were jailed without writs of habeas corpus and tried before military commissions rather than civil courts.

One such dissenter, an Indiana lawyer name Lambdin Milligan, petitioned the federal circuit court in Indianapolis. His case, which became known as Ex parte Milligan, was passed to the Supreme Court. The primary question was whether Lincoln's military tribunals against dissenters were legal.

The Court unanimously rebuffed Lincoln's efforts to cut constitutional corners. The Court wrote:

"The Constitution of the United States is a law for rulers and people, equally in war and peace, and covers with the shield of its protection all classes of men, at all times, and in all circumstances. No doctrine, involving more pernicious circumstances, was ever invented by the wit of a man than that any of its provisions can be suspended during any of the great exigencies of government. Such a doctrine leads directly to anarchy or despotism."

Via its ruling in Milligan, the Court tells us that the Constitution is always on. No exceptions.

Wednesday, December 13, 2017

Distortion, Misallocation, and One Way Up

"You know, there's fortunes to be made--hundreds of millions of dollars--betting against this bubble. Just wish I had a million."
--Gordon Gekko (Wall Street: Money Never Sleeps)

ZeroHedge discusses a recent CNBC interview with Stan Druckenmiller. The legendary hedge fund manager, now retired but managing a multi-billion dollar family fund, became legendary for consistently putting up 30%+ annual returns.

This year has been different. "I would have to say it's probably the worst year I've had relative to the set of opportunities out there," he confessed. Although he's done well in stocks, "I've really, really mistraded macro," which, presumably refers to positions involving currencies, bonds, and other instruments that capture large-scale (macro) economic changes. "I'm not up anywhere near 30%," he laments, "I'm not up double digits."

While he may have mistraded his macro thesis from a timing standpoint, Druck seems confident in the endgame associated with his big picture view. "If you took the Taylor Rule a normal interest rate given our economic circumstances would be 4%. Interestingly, we're at 1%. In Europe, it would be 2%; they're at -0.4%. In Sweden, it would be 3.75%; they're at -0.5%. That doesn't even count the bond buying."

When asked about the consequences of keeping rates at such suppressed levels, Druckenmiller responded, "Well, the consequences are huge because we've distorted market signals and we're causing all sorts of what I would call misallocation of resources." [emphasis mine]

This distortion and misallocation goes far beyond the crypto-bubble. "Bitcoin, art, wine, equities, credit--you name it--everything is one way up. And there are huge distortions taking place...and when you get a misallocation of resources, it really hinders growth in the long run." [emphasis mine]

Understand the logic: distort market signals (i.e., suppress interest rates) --> misallocate resources --> create one way up asset classes --> vaporize resources when those bubbles pop --> less economic resources available for investment in the long run.

Traders like to say that when you get the timing of a trade wrong, then you're wrong. That's obviously how Druckenmiller sees it w.r.t. his investment performance. In the long wrong, however, Druck's macro thesis is likely to play out with near certainty.

Tuesday, December 12, 2017

Bucking Tribal Bias

King Henry VIII: It's my bounded duty to put away the Queen. And all the popes back to Peter shall not come between me and my duty. How is it that you cannot see? Everyone else does.
Sir Thomas More: Then why does your Grace need my poor support?
King Henry VIII: Because your honest. And what's more to the purpose, you're KNOWN to be honest.
--A Man for All Seasons

On the surface, attorney, law professor, and political analyst Alan Dershowitz would seem no friend of freedom. He is an avowed Democrat who endorsed Barack Obama and Hillary Clinton in recent presidential elections.

Over the years, however, I have found some value in Dershowitz's viewpoints. Because he is a constitutional scholar, Dershowitz's take on related issues can be interesting. Some of his arguments, such as those involving gun control and Israel, miss the mark. Many of his civil liberty opinions, on the other hand, are grounded in a libertarian-minded reading of the Constitution.

Dershowitz is also interesting because he has demonstrated that he has not afraid to break from the pack on controversial issues. As suggested by signaling theory, a message is often seen as more credible when it conflicts with the ideologies of the sender's home 'tribe.' Because the sender is not toeing the party line as expected, receivers reason, then the information may contain more truth and less 'tribal bias.'
For some time now, Dershowitz has been arguing (as indicated in the Tweet above) against the legal investigations into Donald Trump's alleged Russian collusion and associated obstruction of justice charges. His basic argument is that no credible evidence of collusion has been brought forth, and that the Constitution grants presidents broad discretionary powers in staffing his agencies.

Pushback by his home tribe has been significant, as Dershowitz notes below.
Dershowitz likely knows from experience that when you buck tribal bias, you will incur the wrath of the tribe.

Monday, December 11, 2017

Litany of Retraction

"There isn't anything I can do to him that he hasn't already done to himself."
--Keith Nelson (Some Kind of Wonderful)

Last weekend Donald Trump called out a Washington Post reporter for photos that falsely reported an underwhelming crowd at a recent Trump rally down south. \The report was later retracted.
Subsequent apology by the reporter adds to the list of nearly daily retractions (another weekend whopper here) by mainstream media outlets for negative press on the president that has been proven wrong. Fake news, quite literally.

This Twitter exchange captures the situation well:

Through a litany of retraction caused by lowering journalistic standards in a quest to destroy someone they don't like, mainstream media outlets are destroying themselves.

Sunday, December 10, 2017

Full Employment Fantasy

Here come the jesters
One, two, three
It's all part of my fantasy
--Bad Company

Graphic-rich piece comparing claims of 'full employment' to reality. One informative graph is this simple time series comparison of headline unemployment to the labor force participation rate.

The difference in labor force participation rate at this peak in 'full employment' vs previous peaks amounts to about 16 million fewer people working this time around.

Meanwhile, wages are nowhere near levels associate with previous 'full employment' peaks.

The obvious question is why isn't less supply/more demand for labor find wages rising here?

Saturday, December 9, 2017

Household Stock Exposure

If you say that you are mine
I'll be here till end of time
--The Clash

Financial media frequently claim that households aren't into stocks any more and have therefore missed most of this bull market. In reality, most households never left stocks in a big way. While they may not be day trading brokerage and IRA accounts as in the heady .com days, households are likely to be significantly exposed to stocks via held 401(k) mutual funds, 'lifestyle' retirement funds, stock-laden pension and insurance pools, and other vehicles.

Currently, households hold more money in stocks than at any other time outside of the .com peak in 2000.

This is, of course, a key reason why policymakers can't afford for stocks to decline in meaningful way. Can their prop job endure?

If not, then people will still hold the shares, but they will be worth far less.

Friday, December 8, 2017

Reinforcing Moral Hazard

Jacob Moore: You know what moral hazard is, Ma? You know what that means?
Sylvia Moore: No.
Jacob Moore: It means that once you get bailed out, what's to stop you from taking another shot?
--Wall Street: Money Never Sleeps

The gist of this article, including the accompanying graph below, is that central banks no longer have to intervene in markets because investors have 'learned' from previous interventions that they will be bailed out by CBs should market actually decline.

Thus, we have investors buying all dips in competition to be early entrants into subsequent rises that would have been backstopped by the Fed et al. had those dips been deep enough. Follow that?

Due to CB-facilitated moral hazard, the reinforcing loop creates what appears to be a self-fulfilling prophecy of higher markets.

If one buys into this thesis, then the question becomes: what breaks this reinforcing cycle?

no positions

Thursday, December 7, 2017


"That stock's going to Pluto, man."
--Marv (Wall Street)

Make that 19,000...


"He's going vertical, so am I."
--Maverick (Top Gun)

Bitcoin has creased 16,000 this morning. As recounted by ZeroHedge, the crypto has gone from 12,000 to 16,000 in about 36 hrs.

Bitcoin's market cap now exceeds $250 billion, ranking it as the 12th largest 'company' in the S&P 500.

Every bubble has its poster child. And you're looking at it.

no positions

Wednesday, December 6, 2017

Consecutive Low Closes

Will you look above me?
Look my way? Never love me?
Rain keeps falling, rain keeps falling
Down, down, down, down
--Simple Minds

An almost unbelievable note from Jason Goepfert stating that, yesterday, the SPX closed in the bottom 10% of its daily range on two consecutive days for the first time in about two years.
Cursory review of a candlestick chart over the past seven months is consistent with his statement.

Demonstrates just how one sided the market action has been. And how comotose we've become to the extreme conditions.

no positions

Tuesday, December 5, 2017

Reversal of Fortune

An angel's smile is what you sell
You promise me heaven
Then put me through hell
--Bon Jovi

Market trends often culminate in a reversal day, where early strength is sold and another seemingly positive leg higher turns into a loss. Yesterday, the gap higher surrounding the weekend tax cut euphoria didn't stick and, by mid-day, major indexes began to leak.

After a rally attempt by the bulls, markets closed near session lows in classic 'sell the news' fashion.

Of course, this bull run has produced many false signals of its demise. This may be another one. Key will be whether we see downside follow-thru in the near term.

no positions

Monday, December 4, 2017

Sensitivity Analysis

"It's what the bean counters call a simple actuarial analysis."
--Dr Getchell (Class Action)

Dilbert discusses sensitivity analysis. How sensitive is your model to changes in your assumptions?

When small changes in assumptions cause big or unpredictable changes to projected outcomes, then a model is overly sensitive. When a model weathers such changes well, it is 'robust.'

Consumers of forecasts, particularly economic forecasts, would be wise to apply sensitivity analysis to the underlying models that generate the forecasts.

Those who do will likely find that, more often than not, noise greatly exceeds signal.

Sunday, December 3, 2017

Drawdown Drought

It's been such a long time
I think I should be going
And time doesn't wait for me
It keeps on going

Interesting graph showing amount of time before a 10% drawdown for a 'balanced' portfolio of 60% stocks and 40% bonds.

Only the 9.1 year run-up in portfolios in the late 1920s surpasses the current 8.7 year streak.

1920s run-up, of course, culminated in the great Crash of '29 and ushered in the Great Depression.

no positions

Saturday, December 2, 2017

Market Highs and Margin Debt

Spent the last year
Rocky Mountain way
Couldn't get much higher
--Joe Walsh

'Dow 24K' was the major market headline this week. Needless to say, margin debt marking all time highs was not deemed headline worthy.

All speculative blow offs occur in environments of cheap debt and high leverage.

Without exception.

no positions

Friday, December 1, 2017


Oh, you're a hard one
I know you got your reasons
These things that are pleasin' you
Can hurt you somehow

Democrats were so desperate to pass healthcare legislation during President Obama's first year that they jammed the steaming pile of excrement that became known as Obamacare thru during the holiday season of 2009. Dems were so driven to deliver on a promise to their constituency in that first year that they were willing to pass...anything. They would find out what they passed, as House leader Nancy Pelosi so aptly put it, later.

Now it is the GOP's turn. Desperate to deliver on campaign promises to 'cut taxes,' Republicans are scrambling to push tax cut legislation thru the system before year's end. Whether this bill actually takes a big bite out of taxes for all Americans does not matter at this point.

What matters is passing...anything. And subsequent bragging rights that you have fulfilled a campaign promise during President Trump's first year.

Never mind that in your haste you passed legislation with so many ill effects that you get voted out of office next time around (see: Democrats post Obamacare).

So goes the perverse logic of Washington.

Thursday, November 30, 2017

Coolidge's Error

Nick Carraway: You can't repeat the past
Jay Gatsby: Can't repeat the past? Why, of course you can.
--The Great Gatsby

These pages have argued that Calvin Coolidge may have been the best president of the Twentieth Century. He was not perfect, however. His gravest mistake involved presiding over a Federal Reserve that made credit too easy for too long while the Twenties roared.

At several points during the 1920s, the Fed eased credit conditions despite the booming economy. When they finally tried to tighten credit in 1928, stock and real estate markets did not respond. Instead they continued their upward spiral. In late 1929, of course, these markets finally came crashing down, ending one of the largest speculative benders in US history.

It is easy to draw parallels to today's situation. Despite information suggesting that the economy is on solid footing, the Fed maintains an ultra low interest rate policy. Stock markets are ringing all time highs almost daily. Speculators bid crypto constructs like Bitcoin to astronomical levels.

Stated differently, we are repeating Coolidge's error.

Wednesday, November 29, 2017

Animal Spirits

"Don't you see, dear. Some children wish for things they couldn't possibly use--like real locomotives or B-29s."
--Kris Kringle (Miracle on 34th Street)

Courtesy of the WSJ.

Nothing seems to awaken animal spirits like flat screen TVs on sale during the holiday season.

Tuesday, November 28, 2017

Tax Cuts, Deficits, and Debt

I have a mansion, forget the price
Ain't never been there, they tell me it's nice
I live in hotels, tear out the walls
I have accountants pay for it all
--Joe Walsh

Tax cuts do not cause deficits and debt. Deficits are caused by spending beyond one's means. Resources must be borrowed to make up the difference.

To reduce deficits and debt, get rid of the cause.

Cut spending.

Monday, November 27, 2017

Shopping on Margin

"I'm tapped out, Marv. American Express has got a hit man looking for me."
--Bud Fox (Wall Street)

As the holiday shopping season begins, let's check in on consumer credit position. As a % of disposable income, credit-instilled leverage has never been higher.

Nothing like shopping on margin...

Sunday, November 26, 2017

Inconsistent Time Horizons

It may seem to you that I'm acting confused
When you're close to me
If I tend to look dazed I've read it someplace
I've got cause to be
--Tina Turner

Buy-and-hold investors often argue that one has to be in it for the long haul. That you can't time the markets.

Many of these 'long term' investors chide bears who predict market declines but, because no decline has occurred recently, those bears must obviously wrong.

See the inconsistency?

Saturday, November 25, 2017

Dilbert's Rules for Writing

Staring at the blank page before you
Open up the dirty window
Let the sun illuminate the words
That you could not find
--Natasha Bedingfield

Scott Adams, creator of the Dilbert comic strip series, claims that he became a better writer after taking a one day course in 'business writing.' To realize improvement, he suggests using the following tricks.

Simplicity rules (see?). Simple writing persuades. A good argument in a few sentences is better than a great argument delivered over many pages. Academics, even those from business disciplines, have yet to catch on here.

Writing can be simplified by pruning words. The example he uses, that of deleting 'very' from sentences, was a lesson from my first boss, He argued that words like 'very' and 'really' read like you are trying to sell the reader on an idea using emotional tags rather than on the merits of the idea itself. Take the 'sell words' out.

Grab the reader in the first sentence. Rewrite the beginning until you are satisfied that it will arouse curiosity.

Write short sentences. Multiple thoughts in one sentence confuse and fatigue readers.

Use active rather than passive voice. Focus on verbs. Action-oriented verbs convey more effectively. For example, "I wrote this sentence" engages human brains far more than "This sentence was written by me."

These practices apply to writing contexts beyond the business realm, of course.

Friday, November 24, 2017

On the Contrary

I have a picture
Pinned to my wall
An image of you and me
We're laughing and loving it all
--Thompson Twins

Last two time consumers expressed such a low level of concern about the US economy? 1999 and 2007.

This, my friends, is what is known as a contrarian indicator.

Thursday, November 23, 2017

Grateful for Markets

Neal Page: Honey, I'd like you to meet a friend of mine.
Susan Page: Hello, Mr Griffith.
Del Griffith: Hello, Mrs Page.
--Planes, Trains & Automobiles

Richard Ebeling shares the story surrounding the first Thanksgiving--a story that these pages have recounted before.

Am grateful for our Creator's gifts of markets and spontaneous order that have led to this bountiful harvest.

Wednesday, November 22, 2017

Big Business and Government

Say that you'll never, never, never need it
One headline, why believe it?
Everybody wants to rule the world
--Tears for Fears

Ron Paul and Chris Rossini discuss several myths surrounding big business and government. These myths include:

Big business loves free markets and is shackled by regulation.

Republicans love free markets.

The fact is that big business loves hampered markets where regulatory barriers protect its franchise by keeping entrepreneurial competition out. Moreover, going back to Lincoln, the Republican Party was founded on hampered markets. In particular, the Party of Lincoln favored corporate welfare in the form of tariffs, central bank control of money and credit, and government sponsored 'internal improvement' projects.

If you believe official narrative that regulation of big business is good for the people, then you are being played.

Tuesday, November 21, 2017

Red Century, Red Blood

Take my arm, take my leg
Oh, baby don't you take my head
--The Rolling Stones

The 100th anniversary of the Bolshevik Revolution finds several mainstream media outlets including NYT waxing poetically about the 'Red Century.' Its association with the color red is more than a little ironic. No ideology has exacted a bloodier toll on human existence than communism.

As noted here, the killing capacity of the Marxist-Leninist movement, which commonly promoted itself as a champion of 'the people,' tests the bounds of human comprehension. The number of deaths associated with various threads of this ideology might surpass 100 million.

Recount after recount of life behind the iron curtain reinforces the extent of human cruelty in everyday terms.

None of this should be surprising. Even cursory examination of Marx and Engels and other early works that laid the conceptual foundation for communism suggests that an extreme amount of force is necessary to reshape the lives of individuals--who are naturally endowed with freedom--into the unnaturally collectivist communist ideal.

Harvard undergrad, whose parents fled the chaos the communism wrought on Eastern Europe, captured the essence:

"Communism cannot be separated from oppression; in fact, it depends on it."

Here's hoping that the world's sentence to a century of communism is not extended.

Monday, November 20, 2017

Abundance and Scarcity

I'm not expecting to grow flowers in the desert
But I can live and breathe
And see the sun in winter time
--Big Country

Two quick lessons in economics from Prof Bylund. Abundance is a condition where a good is in plentiful enough supply where it has no price. Oxygen in the air is an abundant good.
Abundance does not mean that abundant goods can be taken from owners because it is deemed that they have more than they need.

Scarcity is a condition where a good is in short enough supply where it commands a price (i.e., something must be given up, or traded, to acquire it).
Scarcity does not mean that it is rare or nearly impossible to obtain.

Sunday, November 19, 2017

Where's the Leverage?

"And I hate to tell you this, but it's a bankrupt business model. It's systemic, it's malignant, and it's cancer."
--Gordon Gekko (Wall Street: Money Never Sleeps)

In past bubbles, leverage was concentrated and easy to spot. In the late 1990s leverage clustered in In the 2000s it accumulated in housing and mortgages.

This time around leverage is harder to recognize. Yet, derivative usage, corporate debt, duration, and sovereign debt are all at record levels.

It is tougher to see leverage when it is all around us.

Rather than being dormant and local, leverage and its associated risks have become malignant and systemic.

Saturday, November 18, 2017

Debt and GDP

In violent times
You shouldn't have to sell your soul
In black and white
They really, really ought to know
--Tears for Fears

Uncited but simple list that ranks debt as a percentage of central government GDP.
US is number four. Federal debt now exceeds $20 trillion.

Friday, November 17, 2017

High Anxiety in High Yield

This city's mad in the head
And sick in the soul
All the stars flew away 
A long time ago
--Flesh For Lulu

Bears are eyeing the recent weakness in high yield (read: junk) bonds as a harbinger of what's to come in stocks. From a technical standpoint, it is true that junk has broken from a near term uptrend:

But pull back the time horizon a bit and the current weakness barely registers:

Because credit weakness often precedes equity weakness, the situation is worth watching. As of now, however, the action in high yield seems to be stirring little more than high anxiety among the bears.

no positions

Thursday, November 16, 2017

Rates Never Lower

Maybe some day, saved by zero
I'll be more together
Stretched by fewer thoughts that leave me
Chasing after my dreams disown me
Loaded with danger
--The Fixx

Short rates have never been this low for this long in human history.

Rates are not where they are because of natural, peaceful factors. Instead, they have been forced lower.

Force builds distortion and instability into the system. At some point that potential energy will turn kinetic.

Wednesday, November 15, 2017

TINA Will Turn

Out from the ruins
Out from the wreckage
We can't make the same mistakes this time
--Tina Turner

I know several intelligent people with significant exposure to equities here under the primary thesis that, because they need income, they are willing to take the risk of using dividend paying stocks as their primary income avenue. Their rationale? Because fixed income yields are so suppressed, stocks are the only game in town.

In some circles, this rationale is known as TINA (There Is No Alternative).

There is an alternative, of course. It is called capital preservation. This alternative feels terrible when equity prices are flying high.

But its purpose is to protect against the inevitable crash.

Tuesday, November 14, 2017

Gross vs Net Standard of Living

I'm sick and tired of you setting me up yeah
Setting me up just to knock-a, knock-a, knock-a me down
--Bruce Springsteen

Assessing standard of living in a debt-laden society can be misleading. A portion of what is viewed as 'prosperity' has been borrowed from the future and must be paid back. This payback taxes, quite literally, future standard of living.

Where would US standard of living be today, for example, if the resources borrowed by current $20+ trillion in federal government debt could be factored out of the picture?

Suppose that you borrowed to the hilt. Jumbo mortgage, car loans, maxed out credit cards, student loans, et al. Of course, for many, this state is not merely supposition. On the surface, living standards would seem quite posh. But when debt is netted out, equity may be below zero.

When evaluating degree of prosperity among highly leveraged entities, gross standard of living provides one image while net standard of living paints an entirely different portrait.

Monday, November 13, 2017

Demand for Slant

You don't really need to find out
What's going on
You don't really want to know
Just how far it's gone
--Don Henley

Many fault the media for its slanted product. However, in a market where choices are available, then it must be concluded that biased media coverage is merely catering to demand for slant. Media outlets may have an agenda, but without customers willing to trade money for slant then their agenda would go unfunded and their operations would wither.

The only exception is for media outlets sponsored by the State. State funded media can operate whether consumers are willing to pay for slant or not.

Sunday, November 12, 2017

Uncompetitive Advantage

Life is a mystery
Everyone must stand alone
I hear you call my name
And it feels like home

Competitive advantage is often the stated goal of strategic management. Innovation, productivity improvement, brand building, etc are among the activities that can give an organization an edge in a competitive industry.

The challenge, as Schumpeter observed many years ago, is that competitive advantage is always fleeting. Rivals are also busy trying to gain an edge.

In free markets, gaining, and maintaining competitive advantage is hard.

Because managers, like all humans, prefer to economize effort, they will be prone to look for ways to make their quest for strategic advantage easier. In particular they will be tempted to find ways to bend the rules in their favor so that they do not have to work so hard innovating et al. Patents, regulations, and other forms of political favor can give an organization an edge without having to endure competitive assault from rivals.

Advantage without competition.

Saturday, November 11, 2017

Economic Charlatans

You better get back to your used-to-be
'Cause your kind of love ain't good for me
--Dave Edmunds

Hard to imagine an academic field populated by more charlatans than economics. So much drivel has been spoon fed to people by so-called experts in economics that it has clouded the public mind.

Don't succumb to the temptation of outsourcing your economic thought to these people. The fundamental truths of economics are accessible to all willing to engage their brains.

When the charlatans come knocking on the door to your mind, don't let them in.

Friday, November 10, 2017

Markets Compensate for Ignorance

All for freedom and for pleasure
Nothing ever lasts forever
Everybody wants to rule the world
--Tears for Fears

Prof Williams reminds us that markets compensate for the ignorance built into the human condition. Despite the hubris of bureaucrats who believe that they could plan production and distribution for the masses, the fact is that the task of centrally planning an economy that works is impossible. The complexity is impossible for the human mind to grasp.

Markets are far more capable of doing the job. Why? Because no one single person needs to know all that's necessary to bring the products that consumers want to those consumers. Individuals focused on their local buying/selling situation chain together to get the job done far better than a brain trust ever could.

This, of course, does not stop the brain trusts from trying. And failing miserably.

Thursday, November 9, 2017

Tulip Deja Vu

"It's just money. It's made up. Pieces of paper with pictures on it so we don't have to kill each other just to get something to eat. It's not wrong. And it's certainly no different today than it's ever been. 1637, 1797, 1819, '37, '57, '84, 1901, '07, '29, 1937, 1974, 1989--Jesus, didn't that one fuck me up good. 1992, '97, 2000, and whatever we want to call this. It's all just the same thing over and over. We can't help ourselves. And you and I can't control it, or stop it, or even slow it. Or even ever-so-slightly alter it. We just react. And we make a lot of money if we get it right. And we get left by the side of the road if we get it wrong."
--John Tuld (Margin Call)

In the 1600s, Dutch speculators bid tulip bulb futures to spectacular heights. As prices rose, the value of one tulip bulb equated to annual salaries and even scenic homes. Not surprisingly, demand for bulbs and prices subsequently collapsed, causing ruin among leveraged speculators. The event, often referred to as 'Tulipmania,' is held up as an early example of a speculative financial market bubble.

Obviously, a captivating aspect of Tulipmania is how people could have been stupid enough to sink life fortunes into something as mundane as garden flowers.

I suspect that we will be wondering about the Bitcoin phenomenon in a similar fashion. When crypto prices ultimately collapse, the question will be how people could have been idiotic enough to sink fortunes into a construct that only existed on a computer?

That question will occupy the post-bubble autopsy crew for some time.

Wednesday, November 8, 2017

Voter Acquisition Costs

Grace Marshall: Remember our first campaign?
James Marshall: In the House? Yeah. Driving downstate with...who was that kid, our volunteer?
Grace Marshall: Henry.
James Marshall: Henry, with the convertible.
Grace Marshall: With the broken top.
James Marshall: And the snow coming in.
Grace Marshall: We were the only three people who thought you could win.
--Air Force One

Just as companies face costs (e.g., channel development, marketing) to acquire customers, politicians involved in elections determined by democratic process face costs to acquire voters. Politicians must campaign to get their name and message out. They might also try to acquire votes by doing things for prospects such as giving them free cell phones or giving them rides to the polls on election day.

Voter acquisition costs grow with geographic scope of an election. Politicians in local races face relatively low voter acquisition costs because voters are close by. It costs less to reach voters because there are less of them to reach and messages do not have to be conveyed as far. Campaigns are likely to be conducted on a more intimate level, with politicians themselves personally contacting voters, perhaps even door-to-door.

As elections cover more territory, voter acquisition costs quickly escalate. If one imagines the ground politicians have to cover as radiating outwards from election headquarters in a circular fashion, then cost to influence voters increases with the square of distance. Campaigns take on a 'mass production' feel and become less personal in order to economize scarce acquisition resources.

Once geographic scope expands beyond a certain point, then it becomes cost prohibitive for politicians to reach all prospective voters. When this situation arises, campaigns must decide which prospects to pursue and which ones to ignore.

Purely from a voter acquisition cost perspective, then, it follows that the greater the geographic scope of an election, the more likely that politicians will ignore some fraction of the electorate out of economic necessity.

Tuesday, November 7, 2017

Old School

"People don't talk that way anymore."
--Benjamin Franklin Gates (National Treasure)

Reading lists and exam questions from a 1936-37 economics class taught by Joseph Schumpeter at Harvard provide a sense of the classic college teaching method. Require students to read original texts, not textbooks, on important topics. Discuss those topics and the readings in class lectures with students taking notes. Examine knowledge acquired with open ended questions--many of them with no single correct answer. Instead, knowledge gained is measured by the quality of thought in the exam question responses.

Some representative exam questions:

Define arc elasticity of demand and explain the usefulness or otherwise of the concept.

"The key to problems of imperfect competition lies in the conditions of demand. But it is precisely when we come to problems of imperfect competition that the ordinary demand curve apparatus ceases to have any clear meaning." Comment.

Saving, by increasing the quantity of capital, will tend to increase its absolute and relative share. At the same time saving will tend to reduce the rate of interest and thereby to increase capital's absolute and relative share. State the conditions on which the net effect of saving on the absolute and relative share will depend. What do you think the actual effect is in practice?

Which of the theories of interest which you have studied seems to you most acceptable and why?

Discuss the problem of inequality of incomes from the following points of view: (a) measurement, (b) economic effects, (c) relation to welfare.

This is what college used to be about. The acquisition of dense, deep thought capacity and demonstrable ability to express it.

Monday, November 6, 2017

Racial Justice Indoctrination

"His brain has not only been washed, as they say. It has been dry cleaned."
--Dr Yen Lo (The Manchurian Candidate)

Prof Tom DiLorenzo recounts his experiences while sitting thru 'racial justice' training mandated by his institution. As he notes, the approaches and language employed are reminiscent of communist mind control camps. In fact, efforts to cram drivel such as 'white privilege' and 'social justice' down the throats of feeble-minded individuals are central to cultural Marxism.

The problem facing the cultural Marxists is that all minds aren't feeble. As DiLorenzo notes, reasoning minds readily shoot holes thru the institutional racism narrative that can't be patched.

Fortunately, my institution has not established these indoctrination camps for faculty...yet.

Sunday, November 5, 2017

Bitcoin and Real Money

Matt Farrell: Aww, great. There goes the cellphone.
John McClane: They knock the satellites out of the skies, now?
Matt Farrell: No, your battery ran out.
--Live Free or Die Hard

Real money determined by freedom rather than force would possess several characteristics necessary for a good money, including intrinsic value, scarcity, divisibility, recognizibility, portability, fungibility, and durability.

Cryptocurrencies are weak on several fronts. They have no intrinsic value because they are intangible constructs. More importantly, they are not scarce. Although developers claim that they can regulate their creation, the fact remains that their creation can be controlled by computer keystrokes executed fallible humans. When push comes to shove, humans are prone to print money in vain attempts to paper their way out of problems.

A good money should also be difficult to counterfeit. Hackers worldwide are no doubt laser-focused on cracking the cryptos.

Finally, a good money must always be available and not subject to being switched on and off by electrical power. Stated differently, what happens in a Bitcoin world if the grid goes down?

Saturday, November 4, 2017

Election Rallies

"Kid, you're on a roll. Enjoy it while it lasts, 'cause it never does."
--Lou Mannheim (Wall Street)

As we close in on the one year anniversary of arguably the most incredible presidential election in US history, Donald Trump reminds us almost daily about how high the stock market has lifted since election night. The S&P 500 is up about 21% in the last year.

However, that twelve month performance places the Trump election rally only fourth on the list since 1936. Clinton 1996 (32%), JFK 1960 (29%), and George H.W. Bush 1988 (23%) all rank higher.

One thing we can be sure of. All of these administrations, and their supporters, were prone to tout what they saw as the executive office's positive influence on markets. And you can bet that many of Trump's detractors who see higher stock market prices as completely unrelated to Trump were chatting up Bill Clinton's market magic during the era.

Taking credit for stock market gains is extremely bad mojo. From the above graph, the JFK and Bush rallies both fizzled in subsequent months. Clinton was fortunate enough to jump ship before the bust really got going.

Rest assured that the wrath of the trading gods will rain down upon Donald Trump's swagger as well. When the storm hits, this president, like his predecessors, will quickly move from owning market increases to disowning market declines.

no positions

Friday, November 3, 2017

Cancer of Compromise

"And so, one by one, these compromises, these small corruptions, destroy character. To want power is corruption already."
--President Art Hockstader (The Best Man)

Former DNC chair Donna Brazile authored a piece yesterday claiming that the party's presidential primary was rigged in favor of Hillary Clinton. To informed observers, this is of little surprise. In fact, it was Brazile herself caught red-handed for passing cheat sheets to the Clinton campaign during the presidential debates.

And the timing of Brazile's release is no accident as it amounts to an excerpt from her upcoming book on the subject to be released in a few days. For a political hack turned author, an article like this is cheap advertising.

What I found most interesting in her expose was near the end where she says that after telling Bernie Sanders about the rigged arrangement, both he and she decided to keep their mouths shut and campaign for Clinton. She writes:

"I urged Bernie to work as hard as he could to bring his supporters into the fold with Hillary, and to campaign with all the heart and hope he could muster. He might find some of her positions too centrist, and her coziness with the financial elites distasteful, but he knew and I knew that the alternative was a person who would put the very future of the country in peril." [emphasis mine]

What she describes is not just a Democratic Party issue. Rather, it is a problem that all politically motivated people regularly face in elections determined by democratic (i.e., majority) vote. Set aside what is right and take one for the team. Don't break ranks, because if we can't band together to support our candidate, the option being put forth by the other side will win and it is far worse.

This is the cancer of compromise in democracies.

Thursday, November 2, 2017

Cryptos as Gold Substitutes

Jacob Moore: So what's your number, Bretton?
Bretton James: More
--Wall Street: Money Never Sleeps

We recently noted that gold bullion sales have been soft this year despite a sociopolitical environment often favorable for precious metals. One explanation is that cryptocurrencies such as Bitcoin are increasingly seen as a viable alternative currency to dollars, yen, euros, et al. And because they are perceived as having sound money properties, they are being purchased as a substitute for gold, thereby siphoning money away from bullion.

Yesterday, I heard a radio personality who has historically been bullish on gold recommending that his listeners should diversify their portfolios with some Bitcoin.

I have no doubt that this phenomenon has contributed to soft gold demand. I also have no doubt that the proposition that the cryptos are a sound money alternative to gold is wrong--something that we will discuss later.

Meanwhile, I personally welcome the current softness in gold prices as I am a net buyer. My constant fear is that gold prices will take off before I get done accumulating the metal in its various forms.

Of course, in this environment, I'm not sure my appetite for bullion can be sated. The rise of the cryptos has only intensified that feeling.

position in gold

Wednesday, November 1, 2017

Deep State Retaliation

"People should not be afraid of their governments. Governments should be afraid of their people."
--V (V for Vendetta)

David Stockman suggests that the recent indictment of a young Trump campaign foreign policy official by special prosecutor Robert Mueller is part of a retaliatory effort by the Deep State. Deep State bureaucrats resent Trump's efforts to pursue foreign policy without them.

It is becoming obvious to all how the Deep State seeks to use legal machinery to get Trump. Dig up any dirt that you can find on low-level personnel and then, using the plea bargaining mechanism, which is akin to blackmail, make your way as far up the chain of command as possible toward the ultimate target.

One of the many grand follies of this entire charade, as Stockman notes, is that it pretends that interference in elections is frowned upon in Washington. This is the height of hypocrisy because "meddling in the political life, elections and governance of virtually every nation on planet earth--enemy, foe, rival, neutral, and friend, alike--is what Imperial Washington does."

Here's hoping that the Deep State's blatant attempt to sanction those who seek to defy its institution continues to open eyes.

Tuesday, October 31, 2017

Vertical Inflation

"He's going vertical; so am I."
--Maverick (Top Gun)

Suppose there are only two categories of goods. Consumer goods are products what you and I consume in our everyday lives. Food, clothing, cars, appliances, computers, etc. Financial goods are vehicles for investment. Stock, bonds, and other securities, for example.

Suppose also that there are two ways to create and distribute money. One way is to print dollars and send them directly to people in boxes. The other way is to reduce the price of credit (a.k.a. interest rates) and offer cheap loans to primary lenders, such as banks.

Now, match up the category of good most likely to be the initial recipient of the newly created money. Correct, if people received newly printed cash in boxes, most of it would likely be spent on consumer goods, thereby rising prices in that category. If banks were the initial recipients of newly created credit money, then most of that money would be spend buying financial goods, thereby bidding up the prices of stocks, bonds, etc.

This is a consequence of the Cantillon Effect. Prices rise first in the vertical that is the initial recipient of newly created money.

Practically all of the trillion$ in money created by central banks over the past 30 years has been of the credit money variety. This is why the price of goods has remained relatively tame, while prices of financial assets have been going vertical.

Monday, October 30, 2017

Zen and Keynes

"Don't think. Feel. It's like a finger pointing the way to the moon. Do not concentrate on the finger or you will miss all the heavenly glory."
--Lee (Enter the Dragon)

Thought project for the day. Ponder how this picture describes the Keynesian idea of government intervention and economic stimulus.

Very good, Grasshopper.

Sunday, October 29, 2017

Home Prices and Affordability

"Someone reminded me the other evening that I once said, 'Greed is good.' Now it seems it's legal. But, folks, it's greed that makes my bartender buy three houses he can't afford with no money down. And it's greed that makes your parents refinance their two hundred thousand dollar house for two fifty. And then they take that extra fifty and they go down to the mall. And they buy a plasma TV, cell phones, computers, an SUV, and, hey, why not a second home while we're at it because, gee whiz, we all know that prices of houses in America always go up, right?"
--Gordon Gekko (Wall Street: Money Never Sleeps)

Nearly a year ago, US home price passed thru their previous highs set before the mortgage-backed credit collapse. In fact, over the past few years, home prices have been increasing at a breathtaking pace. The below graph indicates that since summer of 2012, the median price of a new home has increased about 38%.

This is a good example of the Cantillon Effect. First users of cheap mortgage credit have bid up the housing category in a classic compartmentalized inflation.

So what's a little housing inflation matter? Well, for one, home prices are rising faster than incomes, making housing less affordable.

For another, people are more leveraged as they borrow more against less equity. Another economic downturn will once again stress cash flows and mortgage payments, leading to the familiar sound of jingle mail.

Stated differently, rising housing prices are a mirage. Like a decade ago, they are an artifact of cheap credit money bidding up assets ahead of an inevitable tumble.

Saturday, October 28, 2017

Name Calling

David Sloan: The most dangerous weapon in the universe is a focused mind. Your mind should be like a still, calm pool. Tranquil. Relaxed. One violent emotion is like taking a rock and dropping it into that smooth pond. Everything is chaos. Concentration is lost. Now, Brian here is going to show us how to lose with dignity and grace. You ready?
Brian Wagner: Any time, old man.
David Sloan: See? He's trying to throw a rock into my pond.
--Kickboxer 2

Verbal altercations on the playground often find kids running to their teachers or parents with the complaint that "s(he) called me a name!"

There are two ways to approach this situation. One is to sanction the name caller and perhaps even the name caller's parents.

Another is to strengthen the minds of children so that they are immune to name calling. Because not taking it personally is associated with maturity, name calling episodes are an opportunity to help children advance their emotional stability.

We know, of course, that society has leaned toward the first approach, given the hypersensitive nature of many who are offended by and seek to sanction all who say things deemed by the recipient as unpleasant.

Many adults have not yet graduated from the playground.

Friday, October 27, 2017

Dot Com Deja Vu

She's so high
High above me
She's so lovely
--Tau Bachman

The name of the day is Amazon (AMZN), up more than $100/share on what is perceived as positive Q3 earnings report. AMZN's share price now clocks in at about $1100.

Dot com deja vu.

no positions

Thursday, October 26, 2017

Reluctance to Prosecute

"Listen, I'm a politician, which means I'm a cheat and a liar. And when I'm not kissing babies, I'm stealing their lollipops. But it also means I keep my options open."
--Jeffrey Pelt (The Hunt for Red October)

We see this scenario repeat itself in Washington. Evidence mounts that a political figure has broken the law. Officials from the opposing political party bang the drums for an investigation. Then, after a period of hand wringing...nothing. Despite evidence suggesting formal scrutiny, no serious investigation is ever undertaken.

People scratch their heads. Shouldn't politicians be all over opportunities to vanquish their opponents who have appears to have engaged in illegal behavior?

In a word, no.

The straightforward explanation is that most politicians are dirty. They fear that if they undertake legal proceedings against someone on the other side, then the other side is likely to retaliate against them in tit for tat fashion.

A strategy that appears to be deemed 'safer' is to leak leak information about the opponent to the people via the press and hope that voters subsequently damn the behavior as criminal at the ballot box.

This helps explain why politicians are generally quick to grandstand against the opposition but reluctant to legally prosecute them.

Wednesday, October 25, 2017

Looking Away

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

If the mainstream media were anywhere close to 'fair and balanced,' then the story that should be making front page headlines is the report that the Clinton campaign in conjunction with the DNC funded the research that produced the infamous dossier that dubiously linked Trump to Russian-sponsored collusion in the presidential election.

Dot connectors now have more data to work with. Clinton and the DNC paid 'deep' sources in UK spy apparatus and in Russia, to dig up dirt on Trump. After the election, the FBI, via James Comey and possibly others, was instrumental in subsequently leaking the dossier to the media.

Reporters at Politico and the NYT are now claiming that Clinton/DNC officials lied about the sources of this funding for over a year.

This story continues to merge with the thread involving Clinton's possible involvement with Russia over US nuclear assets. The central story line here is that in 2010 Russia was able to obtain purchase U.S. uranium operations, with the approval of Hillary Clinton's State Department, in exchange for donations to the Clinton Foundation and possibly a $500,000 speaking engagement in Moscow by Bill Clinton.

This deliciousness of the irony not only places the Clinton front and center in 'Russian collusion,' but it also implicates the FBI's role in facilitating it.

As discussed in the WSJ, the FBI had uncovered bribery and kickback schemes associated with Russia/US nuclear business, but did not disclose this criminal activity to agencies vetting the 2010 uranium transfer until years later. The head of the FBI during that time? Robert Mueller, now the special investigator of the Trump collusion case.

One doesn't need a PhD to conclude that Mueller has the motivation and means to deflect investigation away from himself and his agency while pleasing a large portion of the political spectrum.

Yet, headlines continue to look away from the role of the Clintons and the FBI apparatus in sponsoring 'Russian collusion.'

Tuesday, October 24, 2017

Outside Day

Out in the distance
I could hear some people laughing
I felt my heart beat back
A weekend's worth of sadness
--Til Tuesday

In the old days, when technical patterns seemed to matter, an outside day to the downside in the major indexes like we had yesterday would be viewed with some significance An outside down day occurs when the range of a day that closes on the lows exceeds the previous day's range that closed on its highs.

Outside days are often deemed particularly significant when they occur in breakouts after extended rallies similar to what we've recently experienced. In such cases, they are sometimes referred to as 'island reversals.'

The interpretation is that optimism is out of gas, as a desperate push higher has failed, leaving traders who went long in the last couple of days upside down and prone to question their motives.

Whether any of this 'comes true' this time is anyone's guess.

no positions

Monday, October 23, 2017

Capture the Flag

I used to think maybe you loved me
Now baby I'm sure
And I just can't wait for the day
That you knock on my door
--Katrina & The Waves

Pulling back the time horizon on PAAS indicates that the stock is completing a 'flag' or 'pennant' pattern. The technical, almost obvious, implication of this pattern is that it is likely to resolve one way or the other.

The rule of thumb is that direction of resolution favors the current trend, which for the past year and a half, has been up.

position in PAAS

Sunday, October 22, 2017

In Control

Trust in the Lord with all your heart
And lean not on your understanding
Acknowledge Him in all your ways
And He will direct your paths
--Proverbs 3:5-6

In times of strife and chaos, it is easy to conclude that God has left us, that he is no longer in control of the situation.

This is mistaken.

God is always and everywhere with us. He is always in control.

Because He is always in control, it follows that, even in the worst of times, we are precisely where God wants us to be at that moment.

That is both comforting and mind-numbing at the same time.

Saturday, October 21, 2017

For the Children?

Richard Vernon: Now this is the thought that wakes me up in the middle of the night. That, when I get older, these kids are going to take care of me.
Carl the Janitor: I wouldn't count on it.
--The Breakfast Club

Government spending is often justified 'for the sake of the children.' If you buy this, then you have been emotionally captured. Spending today is largely debt-financed. Government debt burdens future generations.

Stated differently, we are increasingly consuming what amounts to our children's future production. And, as the chart below suggests, the burden that we are saddling onto our children is increasingly back-breaking.

Imagine showing children this graph and explaining it in terms of "we are doing this for you."

This is generational theft at its worst.

Friday, October 20, 2017

Monetizing Debt

All my instincts
They return
The grand facade
So soon will burn
--Peter Gabriel

Comparison of the extent to which various central banks are buying their country's sovereign bonds (a.k.a. 'monetizing debt' thru their quantitative easing (QE) programs. At its peak, Fed bond buying never exceeded net issuance.

Other central banks have been much more profligate. BOJ has been buying bonds at the rate of 3x net issuance.

ECB has been going at it at the rate of 7x net issuance.

The Fed looks like a tightwad in this era of CB profligacy.

Thursday, October 19, 2017

Presidential Healthcare Subsidies

We thought just for an instant
We could see the future
We thought for once we knew
What really was important
--Til Tuesday

Another important part of President Trump's healthcare-related executive orders signed last week is that they direct the treasury and health and human services secretaries to cease making payments to heath insurance companies that subsidize policies for people that qualify for subsidies under Obamacare.

Judge Nap explains why those payments were unconstitutional.

Under the Constitution, it is Congress's responsibility to direct federal funds for expenditure. The congressional process requires two steps. First, Congress must create the program using its legislative process. Then, it must pass a second bill that appropriates money from the federal treasury and makes it available to the president for the purpose stated in the first law.

Although the Affordable Care Act become law in 2010, its provisions required several years to roll out. By the time the subsidy provisions of Obamacare took effect, Republicans had regained control of Congress. When President Obama asked Congress to appropriate the funds necessary to subsidize the system, Congress declined to do so.

This is completely within Congress's legal scope. The framers anticipated the very situation confronting Obama and Congress: an increasingly unpopular law no longer supported by Congress that costs money to enforce, with a president eager to enforce it. In such a situation, the framers clearly put the power of the purse in the hands of Congress. "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law."

When Obama was denied the means to enforce the subsidy portion of his signature legislation, he spent the money anyway. He directed his treasury and HHS secretaries to take fund appropriated for other programs and make subsidy payments to the seven largest health insurance carriers in the United States.

This was illegal.

Trump, after making the same unlawful payments for the first nine months of his presidency, decided to cease the practice last week. Although he should have done so his first day in office, Trump did the constitutionally correct thing.

Wednesday, October 18, 2017

Revenue Neutral

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

If a requirement of a tax cut plan is that it must be 'revenue neutral' to the federal government, then it is not a tax cut plan at all. Rather, it is a tax shifting plan. Some people may realize lower taxes, but only at the expense of others who must pay more to the federal government to make up for lost tax revenue.

Revenue neutral tax plans always find special interest groups maneuvering to be among those who don't get the shaft, er, shift.

Tuesday, October 17, 2017

Cash on Hand

I went to my brother
To see what he could do
He said, brother like to help you
But I'm unable to
--Simply Red

One personal finance decision is how much physical cash to keep on hand--i.e., under the pillow, in a coffee can in the backyard, between pages on the bookshelf--for 'just in case' situations. If one focuses on the central bank money printing situation, then the answer is not much. As we move closer to Big Inflation, then the value of paper dollars kept at the house goes to dust quickly.

However, the recent hurricanes offer a reason why it still makes sense to keep some cash around. Power could go off, thereby reducing electronic access to money. Those with cash in hand can make vital purchases that others cannot.

Bank runs, like those in Greece and Cyprus, are another reason. Cash withdrawals could be limited, once again granting only those with physical cash on hand with financial flexibility.

Bottom line: Despite the inflationary environment that destroys the purchasing power of currency, keeping some cash on the premises seems prudent to manage risk associated with extreme events.

Monday, October 16, 2017

Obamacare's Ugly Truth

You're begging me to go
Then making me stay
Why do you hurt me so bad?
--Pat Benatar

Jeff Tucker observes that last week's executive order that allows choice in seeking healthcare coverage defeats the core feature of Obamacare: coercion. The ACA forces risk pools to exist that free people would otherwise never had chosen.

Tucker cites a litany of mainstream media critics who believe that that Trump's executive order is some sort of despotic act. But clearly the opposite is true. The order removes one source of coercion from the system.

Per Tucker, "Once you break this all down, the ugly truth about Obamacare is laid bare: Obamacare didn't create a market. It destroyed a market. Even the slightest bit of freedom wrecks the whole point."

Obamacare is about force, not freedom. It forcibly redistributes wealth from the healthy to the sick. Through its forcible creation of non-market risk pools, Obamacare counters the entire logic of insurance, which is "supposed to calibrate premiums, risks, and payouts toward mutual profitability."

By introducing a modicum of freedom into the system, last week's executive order exposes Obamacare as the true despotic act.

Sunday, October 15, 2017


It's not in the way that you hold me
It's not in the way you say you care

Gold recaptured the flag last week as it moved back above 1300. In addition to being a psychologically important round number, 1300 is an important technical level currently as depicted below.

Let's see if the comeback holds.

position in gold

Saturday, October 14, 2017

Marginal Credit

Will Emerson: These here are the historical volatility limits which, of course, our trading model relies on pretty fucking heavily. Well, we're now so levered up that once it gets outside of these limits, it gets ugly in a hurry.
Sam Rogers: And how close to these limits have we gotten?
Will Emerson: Sam, we're beyond close. We broke through these limits five or six days in the last two weeks.
--Margin Call

Not sure what the corporate universe was for the analysis, but picture reflects the decline in corporate credit quality over the past decade.

Very few AAA companies left--probably even fewer than indicated as credit rating agency scales have relaxed.

Couple that with a burgeoning stable of junk and, once again, the stage is set for credit events.

Friday, October 13, 2017

Bait and Nominate

We can do the innuendo
We can dance and sing
When it's all said and done
We haven't told you a thing
We all know that crap is king
Give us dirty laundry
--Don Henley

Donald Trump's outrageous claims on Twitter and elsewhere constantly keep his adversaries in motion. Many absorb themselves in the president's rhetoric and spend much of their days crafting clever replies and put downs. They rationalize that Trump is unstable and maybe even downright crazy.

Crazy like a fox, maybe? What if Trump's social media remarks are meant, in many cases, to distract? Perhaps many of his off-the-wall comments are designed to bait enemies into looking one way while he acts elsewhere.

Case in point offered here in the WSJ editorial. The author argues that, while the media remains caught up in Trump's tweets, his administration is restocking the federal courts with dozens of constitutional textualists that bear little resemblance to their predecessors. Trump has nominated more that 60 judges and has already filled more vacancies than Barack Obama did in his first year.

The author suggests that, while Trump keeps "baiting the media with shiny objects," he is remaking the judiciary with an extraordinary class of nominees that appear to be, as the editorial title reads, "Scalias All the Way Down."

Thursday, October 12, 2017

Associated Health Plans

The mist across the windows hides the lines
But nothing hides the colors of the lights that shine
Electricity so fine
Look and dry your eyes
--Joe Jackson

Earlier today, President Trump signed an executive order that permits people to purchase health insurance across state lines. The blueprint for this order came from Rand Paul, who posits that this will allow small buyers to band together and form 'association health plans.' The prospective bargaining power of these AHPs promises to push down premiums for many Americans.

Paul discusses the executive order here.

The increased competition and buyer bargaining power facilitated by the order makes it potentially one of the best health care market 'reforms' in many years.

And the beauty of it, as RP has noted, is that this plan "costs zero dollars" and sidesteps the dysfunction on Capitol Hill. Instead, it frees the market to do what it does best via its 'invisible hand.'