Temporary Housing

Kumiko: My home is here.
Daniel LaRusso: Home is where you hang your hat. 
--Karate Kid II

Today, Paul (2 Corinthians 4:13-5:1) reminds us that although growing old or being gravely ill seems to signify the end, it is not. As long as we persevere in seeking God and pursuing truth, we should "not lose heart" when our health declines.

This is because "even though our outer self is wasting away, our inner self is being renewed day by day. For this slight momentary affliction is preparing us for an eternal weight of glory beyond all measure."

Rather than worrying about our physical deterioration too much, Paul suggests that "we look not at what can be seen but at what cannot be seen, for what can be seen is temporary, but what cannot be seen is eternal."

We should rest assured "that if the earthly tent we live in is destroyed, we have a building from God, a house not made with hands, eternal in heaven."

Human bodies are but temporary dwellings for people's spirits. God challenges each of us to strengthen our spirits in the face of declining physical capability. If we do so, then our spirits will ultimately vacate our temporary housing and travel to permanent digs.

And, unlike our earthly dwellings, God's house is built to last.

Discretionary Morality

Casey Ryback: I support women's lib. Don't you?
Jordan Tate: When it works in my favor.
--Under Seige

Interesting study by Uhlmann et al. (2009) demonstrating discretionary application of moral principles by politically motivated individuals. Their basic premise was that people will be more likely to employ moral principles when those principles are consistent with the preferred political narrative.

For example, the researchers hypothesized that progressives would be more prone to support the consequentialist outcome of the trolley problem when the victim to be sacrificed was white instead of black. Similarly, the researchers hypothesized that conservatives would be more prone to endorse the consequentialist outcome of collateral damage during wartime (e.g., accidental killing of innocent civilians) when the victims were Iraqis rather than Americans.

Five studies using 'what if' scenarios presented to college student and community respondents confirmed the hypotheses. The authors conclude that people appear to selectively draw from a 'moral toolbox' when those morals conveniently support a political argument.

These results are consistent with theoretical concepts of confirmation bias, selective reasoning, and cognitive dissonance.

Reference

Uhlmann, E.L., Pizarro, D.A., Tannenbaum, D. & Ditto, P.H. (2009). The motivated use of moral principles. Judgment and Decision Making, 4(6): 476-491.

FANGs on Summer Pay

I never will forget those nights
I wonder if it was a dream
Remember how you made me crazy
Remember how I made you scream
--Don Henley

During the dot.com run up the 'must have' stocks were known as the Four Horsemen. Owning Intel (INTC), Cisco (CSCO), Oracle (ORCL), and Microsoft (MSFT) were tickets to Easy Street.

This time around it's the FANGs. Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOG) are supposed to promise riches.

To demonstrate, USA Today suggests that teens and college workers take half their summer job pay and roll it into the FANGs. It estimates that investing half of the average summer pay into these stocks over the past four years (about $6500 total) would have grown to nearly $20K today.

"Think about what you could do," the article beguiles, "with $20,000 in four years. Maybe buy a car or book a trip to Tahiti."

Whether its cab drivers buying dot.coms, bartenders buying houses, or teens buying FANGs, when media outlets capture (and promote) this degree of speculation, you know that we're late in the game.

position in SPX

Discrimination in Markets

"You tell the trucking company that we have to service our customers. If they're not gonna help us, we're gonna find somebody who will."
--Brantley Foster (The Secret of My Success)

Some people argue that a producer should not be able to discriminate between customers. A baker, for example, should not be able to make a wedding cake for one couple while refusing to make a wedding cake for another couple. If a customer is refused service, then the strong arm of government should be applied to force the issue.

Proponents of this approach face several questions. Why isn't this situation akin to slavery? Slavery involves forcing individuals to produce output for others.

Furthermore, if it should be illegal for producers to discriminate between customers, then why shouldn't the opposite be true? Shouldn't customers be barred from discriminating between producers? If, for example, a buyer does not care for a seller's policy on making bathrooms available to the public, then why should that buyer be allowed to discriminate by boycotting that seller and/or taking business elsewhere?

The solution on both the buyer and seller sides is to remove government intervention from the equation and permit peaceful discrimination of all types. Indeed, markets operate on the basis of peaceful discrimination. Economic actors must prioritize, choose between alternatives, and cope with trade offs. This can only be done effectively through processes of discrimination.

If those processes of discrimination lead to bad decisions, then no government force is necessary to correct them. Poor discriminatory processes are sanctioned naturally by economic forces. A baker who refuses a customer loses business. A customer that boycotts a producer foregoes valuable products.

Because poor discrimination dents people's wallets, it causes people to think twice about perpetuating those unwise decisions. It also creates opportunity for entrepreneurs to better satisfy needs that have gone unmet in the past.

When not subject to violent intervention, discrimination in markets facilitates natural learning and improvement.

Let Them Decide

"Their prophet says 'submit.' Jesus says 'decide.'"
--Sybilla (Kingdom of Heaven)

Am constantly amazed at statist propensity to forcibly interfere in the decision-making of others. Rather than employing peaceful persuasion, statists prefer the strong arm of government to force the issue.

Set an example, persuade, teach. Yes.

Force. No.

Let them decide.

Vicious Cycles of Statism

This is the world we live in
And these are the hands we're given
Use them and let's start trying
To make it a place worth living in
--Genesis

Ron Paul sketches various vicious cycles of statism. They include:

Invade country-->destroy-->occupy
Redistribute wealth-->increase poverty
Failed govt program-->increase program funding
GOP wins-->grow govt-->Dems win-->grow govt
Print money-->wreck economy

And, of course:

How to break these vicious cycles? With liberty, of course.

Liberty spawn voluntary cooperation and exchange. Sound money. Peace.

Paul asserts that these vicious cycles "will continue to squeeze the life" from citizens until "the desire for liberty dominates. And not a moment sooner."

Consumer Discretionary vs Staples

We got to move those microwave ovens
Custom kitchen deliveries
We got to move these refrigerators
We got to move these color TVs
--Dire Straits

Sector-specific SPDRs for the consumer discretionary (XLY) and consumer staples (XLP) began trading in the late 1990s. XLY can be seen as a more aggressive market bet on economic strength while XLP is more conservative.

Currently the XLY:XLP ratio has never been higher. Since the beginning of the year, it has spiked into uncharted territory.

I continue to sense that, on a relative basis, many consumer staple stocks (e.g., PG) constitute the best value in the market. On a relative basis...

no positions

Who Has Benefited?

Papers in the roadside 
Tell of suffering and greed
Fear today
Forgot tomorrow
--Duran Duran

Charlie Bilello observes that since the Affordable Care Act was enacted in 2010, average family health care premiums are up over 200%. Meanwhile, big health insurance stocks, such as United Health Care, are up over 700%.

Since the "Affordable" Care Act was signed into law in March '10...
United Health Group (Largest US Insurer): +732%
Avg Family Health Insurance Premium: +233% pic.twitter.com/kOL6P4FtoN

— Charlie Bilello (@charliebilello) May 31, 2018

Who precisely has benefited from this 'affordable' law?

no positions?

Easy Money and Jobs

Why in the world would anybody put chains on me?
I've paid my dues to make it
Everybody wants me to be what they want me to be
I'm not happy when I try to fake it
--Commodores

Like his predecessors, President Trump is not shy about taking credit for positive economic news reported on his administration's watch. Yesterday's job report was no exception.

Record JOBS DAY!! 223K jobs added. Unemployment is 3.8%, lowest in 50 yrs. Black and Asian unemployment hit historic new lows. Adult men and women, and teenagers, are at lowest since 2000. Hourly earnings are up! Tax CUTS are working. America is WINNING BIG under President Trump!

— President Trump (@POTUS) June 1, 2018

Yet any reasoned mind merely looking at the data must question what is truly different under the Trump administration when it comes to jobs. After all, the record low unemployment number reported yesterday marks the continuation of a downtrend that commenced early in the Obama administration:

When viewed in this manner, even the widely touted Trump tax cuts haven't changed the trend in unemployment. The trend has clearly been down for nine years with little change in the rate of decline (as reflected by the slope).

What policy has been consistent across these two administrations? Ultra easy monetary policy. Easy money in the form of cheap credit, quantitative easing (QE), and like-minded programs were initiated during the credit crisis under Fed chair Ben Bernanke and perpetuated by his predecessor Janet Yellen. It remains to be seen precisely how new Fed head Jerome Powell will uphold this approach but early indications are that he is no different from previous chairs.

How does easy money policy influence jobs? Cheap credit drives businesses to invest more today than they would otherwise, and consumers to spend more today than they would otherwise. Stated differently, artificially low credit pushes spending from the future into the present. The increased economic activity serves to improve employment in the near term.

Unfortunately, the artificially driven boom inevitably leads to a bust. Projects that never should have seen the light of day do not pay off. Shutting them down pushes people who found jobs during the upswing to head to the unemployment line once again. Moreover, less economic resources (read: savings) are available in the future that can be applied toward capital projects since they have been consumed in the present. This prolongs economic malaise during the depression.

Although the timing of the bust is difficult to predict, the outcome is as predictable as night following day. And, given the degree of money, credit, and debt created during this most recent interventionary cycle, a large, deep period of darkness almost certainly awaits.

The other thing that is completely predictable is that, if the darkness happens to commence during his watch, then Donald Trump, once again following his predecessors, will assume no responsibility for the bust.

Strong Jobs, Recessionary Monetary Policy

They think they're so cute 
When they got you in that condition
Well I think
It's a total disgrace
--John Mellancamp

Another strong jobs report puts the headline unemployment number at 3.8%--lowest since 1969.

This puts the number of consecutive months with job growth at 92--by far the longest streak in history.

Yet, despite these historically positive job numbers, the Fed Funds Rate remains at recessionary levels. The negative real interest rate situation is something that is usually associated with only the worst economic conditions.

When will people start questioning what is going on here? With such historic job numbers, why are policymakers maintaining recessionary monetary policy?