Blue Blooded Family

"Everything you need is right here."
--Frank Reagan (Blue Bloods)

Previously these pages suggested that Blue Bloods offered the best in network television. Last night's season opener reinforced that proposition.

The ending scene in the new house around the dinner table was a powerful moment. A family picking up one of its own, and Danny finishing it off by offering grace.

Lotta lessons worthy of reflection.

Institutions of Capitalism

You see dimensions in two
State your case in black or white
But when one little cross leads to shots, grit your teeth
You run for cover so discreet
--The Fixx

In the sociological context, institutions are structures that promote social order. They define rules, customs, and traditions that govern behavior. In capitalistic societies, these institutions include:

division of labor
limited government
private ownership of property
money
trade
saving
investment
competition
profit motive

As Prof Reisman observes, most of these institutions have been under attack for years. Without these institutions, standard of living suffers.

Paul Plan

Has he taken
Any time
To show you
What you need to live?
--Zombies

After the failure of another flawed 'Obamacare Lite' healthcare bill, it appears that President Trump is preparing an executive order to allow people to purchase health insurance across state lines. Essentially, this is Senator Rand Paul's 'association health plans' proposal.

This would be very positive and possesses far more potential impact than any health care reform discussed to date. Why? Because it fundamentally improves the system. As Paul observes, this plan frees the market by giving individuals the ability to club together in groups that would increase their bargaining power with a larger stable of insurance providers.

The plan is thought to not require congressional approval because authority for it already exists. The Employment Retirement Income Security Act (ERISA) already permits multi-state corporations to buy insurance across state lines. Paul thinks that the president can act on his own with an executive interpretation of existing law that expands the definition of who can form an association.

"The good thing about my plan is that it costs zero dollars," Paul adds.

That may be true, Rand, but it will take money out of the pockets of myriad special interests. It also subtracts from state power as it adds to social power. As such, expect those who a) benefit from the current arrangement, b) aspire toward a single payer healthcare system in the US...to object.

Golden Pullback

She's got a heart of gold, she'd never let me down
But you're the one that always turns me on
You keep me comin' 'round
--Bryan Adams

After an early September breakout, gold has pulled back and is currently hovering above the $1300 breakout point.

As it stands, appears a healthy pullback. Of course, a decisive break below support would darken the technical picture.

position in gold

Scripts of Paradox

Evey Hammond: Who are you?
V: Who? Who is but the form following the function of the what, and what I am is a man in a mask.
Evey Hammond: Well I can see that.
V: Of course you can. I am not questioning your powers of observation. I'm merely remarking upon the paradox of asking a masked man who he is.
Evey Hammond: Oh, right.
--V for Vendetta

Several students at Virginia Commonwealth University were arrested last week while protesting at a neo-confederate rally. Their alleged crime: wearing masks. In Virginia, wearing masks to conceal your identity is considered a felony.

This is ironic for a couple of reasons. One, the trial for the students has been set for...Halloween.

Two, the law that they were accused of breaking was passed in 1952 in an effort to stymie activities of...the KKK.

Stupid laws are scripts of paradox.

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.

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.

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.

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.

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.