Wednesday, December 31, 2014

Divining Debt

I saw the sign
And it opened up my eyes
I saw the sign
Life is demanding without understanding
--Ace of Base

Did God create persistent debt as a signal of excess and unsustainability? We borrow to live larger in the present than we otherwise could. Yes, some borrowing is done to invest in projects that improve productivity in the future. If that productivity improvement materializes, then the debt should be extinguished.

Debt that persists--or increases--tells us that the payoff is not materializing.

Perhaps this is God's way of telling us that we need to change. That we need to live more within our means.

He is warning that today's debt-funded excess, if left unchecked, portends tomorrow's squalor.

Tuesday, December 30, 2014

Bullish Gold

"Fort Knox? Ha, it's for tourists."
--Simon Gruber (Die Hard: With a Vengeance)

Bullish on gold and silver here. Professional and retail investors have been throwing in the towel. Closed end funds like GTU, CEF continue to trade at 8-10% discounts to NAV.

Meanwhile, technicals across the metals space tracing reverse head and shoulders patterns.

Suspect we'll look back on this period in amazement at what Mr Market was offering.

positions in GTU, CEF

Monday, December 29, 2014

Racial Profiling

"I'm calling it the Thrilla In Vanilla. You know, couple of suburban white guys..."
--Cade Raymond (Joe Somebody)

Prof Williams discusses racial profiling--something that he has done before. Profiling can be generally defined as use of readily observable characteristics to predict difficult, hard-to-observe characteristics.

All people are prone to engage in profiling to some degree. This is because information is costly and people will seek to economize on their information costs. Profiling helps people get more information for less cost.

Capacity for particular intrinsic behaviors is often a difficult to observe characteristic. If, however, groups of people who possess certain readily observable physical characteristics are thought to engage in certain types of intrinsic behavior, then people who belong to that group are likely to be profiled.

Because it is one of those readily observable physical characteristics, skin color is commonly employed in profiling.

Racial profiling has valid uses in peaceful societies engaging in voluntary exchange. For example, market researchers might gather information on skin color to tailor products for potential market segments.

However, it is in situations perceived as hostile that racial profiling has garnered considerable attention. Under conditions of threat, people might profile based on skin color to prepare themselves against possible attack. For example, an individual walking down a street in a high crime neighborhood might profile individuals for skin color common to crimes in the area. Upon seeing people walking toward her that fit the profile, the individual might cross the street to reduce the threat. Racial profiling, then, can be part of prudent self-defense.

While it can be useful, racial profiling never justifies aggression. Identifying someone who 'fits the profile' does not justify launching physical force against that person in preemptive attack. It also does not constitute definitive 'probable cause' and subsequently permit illegal search and seizures prohibited by the Constitution--not even in the name of 'security.'

Racial profiling is part of a natural process that helps people get more information for less cost. It is how people use that information that is either good or bad.

Sunday, December 28, 2014

Financial Harakiri

"You watch your back, cowboy."
--Nick Conklin (Black Rain)

David Stockman discusses the ritual financial suicide taking place in Japan. Declining savings:

Increased spending versus income:

Debt going parabolic vs output--to the extent that the BOJ is essentially buying all new government issues:

As he observes, this is not just a Japanese phenomenon. We could substitute similar charts of the US with similar effect.

Saturday, December 27, 2014

Weighted Money

"Crazy! I mean like so many positive waves maybe we can't lose. You're on!"
--Oddball (Kelly's Heroes)

The US Dollar's reserve currency status is under increased scrutiny. Perhaps it should be replaced by a different paper money as the euro or the yuan. Maybe a basket of currencies. Or perhaps there should be a single paper currency for the entire world.

But there is one alternative that solves all problems related to cross rates, contracts, and government mischief: ditch paper currencies and their titles altogether, and trade metal by weight--ounces of gold, silver, platinum, etc.

No need to determine how many yen per dollar. No need to hedge for currency fluctuations. Imagine the transaction costs that would vaporize--which would free economic resources for much better things.

Plus, imagine less worry about governments printing money at their discretion or trying to manipulate its value.

Just trade metal by weight--the universal monetary denomination.

position in gold, silver

Friday, December 26, 2014

Measurement and Management

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

An old management saw goes, "what gets measured gets managed." What gets left off the end of that statement is "and often managed poorly." Human wiring problems along with preference for pleasure over pain are likely to drive usage of measures, particularly those meant to directly reflect performance effectiveness, that are incomplete, manipulated, ignored, or otherwise gamed to paint those with the most on the line in a better light.

Measures, whether they be for corporations, governments, or any institution, are likely to be biased rather than true.

The greater the stakes, the more likely measures will be manipulated. And the more biased the information will be.

Thursday, December 25, 2014


Veni veni, Emmanuel
captivum solve Israel,
qui gemit in exsilio,
privatus Dei Filio.

God is with us once more.

Wednesday, December 24, 2014

Symptoms of Confirmation Bias

I certainly was in the right
--Pink Floyd

Confirmation bias, or selective reasoning, is accepting data that supports one's view of the world while rejecting data that oppose that worldview. Because individuals generally prefer pleasure over pain--including the pleasure of believing that they are 'correct'--confirmation bias is likely to inflict all people to some degree.

Confirmation bias can be seen as a product of fast thinking, where individuals refuse to subject cognitions through the rigor of slower, deliberate thought processes. It is the enemy of critical thinking.

Symptoms of confirmation bias include:

Rendering judgment on complex or distant situations quickly.

Consumption of institutional media sources.

Significant group affiliations.

Paying attention to likes/dislikes, friending, and pageview statistics on social media.

Reluctance to review data that appear in conflict with a hypothesis.

Failure to explain why opposing viewpoints or data are invalid or do not apply.

Arguments peppered with "I think" or "I feel" rather than "the data show."

Disounting reason in favor of sophistry or mysticism.

Basing one's argument on slant.

Discounting probling questions in favor of declarative statements.

Failure to define key terms in an argument.

Preferring to cite secondary analysis of others rather than personally engaging in primary analysis.

Thinking other people and their associations are biased but you and your associations are not.

Because human beings possess self awareness, we can endeavor to reduce the extent to which confirmation bias inflicts our decision processes.

Tuesday, December 23, 2014

Do No Harm

"They did not harm me."
--Leroy Green (The Last Dragon)

Saw this tweet from Rand Paul this am:
We've noted similar on these pages. Because government is legitimized force, any political action should not be preceded by asking "Who will be helped?"

The question should be "Who will be hurt?"

Monday, December 22, 2014

Growing Out of Debt

There's a room where the lights won't find you
Holding hands while
The walls come tumbling down
When they do, I'll be right behind you
--Tears for Fears

An entrepreneur has a great idea for a business. She borrows money to build the business. The business is successful. At some point, she pays off her debt. She has 'grown her way out of debt.'

So why is it unwise that policymakers justify borrowing in order to grow a country's (e.g., US) way out of debt? Why isn't it like the entrepreneur's situation?

One obvious reason is that successful entrepreneurs are rare. The vast majority of new ventures fail. Successful entrepreneurs who move to debt free positions constitute a small minority. People who like to use the entreprenurial analogy for justifying US borrowing habits forget or ignore the 'survivor bias' present in their flawed logic.

Stated differently, entrepreneurs do not typically grow their way out of debt.

Instead of stopping right there, let's, for the sake of argument, assume that the US has the stuff that successful entrepreneurs are often made of. Of course, such 'stuff' is not easily recognizeable--at least ex ante--otherwise only successful entrepreneurs would ever be funded. Overconfidence in our ability to detect successful ventures aside, assume that we have found a situation where entrepreneurial credit risk might be attractive.

The problem here is that the US is not a nascent borrower. It has been been racking up debt for years. Entrepreneurs begin borrowing from unleveraged positions and from positions where returns on investment appear favorable to creditors. If those positions apears less favorable, then borrowing costs increase or credit gets cut off.

The data indicate that the US is no longer an attractive entrepreneurial credit risk. US credit growth has chronically outpaced economic growth. The gap between growth in debt and growth in output has been widening. In unhampered markets, this situation reflected in the above graph should have driven US borrowing costs higher years ago.

So why hasn't it? Because the credit markets are severely hampered. Central banks have been suppressing interest rates below market for years. Thru their 'quantitative easing' programs, CB's have even been buying sovereign own debt (also known as 'debt monetization').

This is the most important reason of all as to why the entrepreneurial 'growing out of debt' situation does not apply to countries such as the US. Entrepreneurs cannot manipulate prices like governments can. And government capacity for market manipulation has driven capital misallocation on scales impossible to fathom in free market situations.

One group who will come to fathom the magnitude of the 'grow your way out of debt' folly: our kids.

Sunday, December 21, 2014

Academia's Liberal Bias

"I'd rather be with someone for the wrong reasons than alone for the right ones."
--Amanda Jones (Some Kind of Wonderful)

Wanted to bookmark this piece for future use. It reviews an in-press paper that addresses liberal bias in academia. The paper (Duarte et al. 2014) focuses on social sciences and humanities--specifically in the area of social psychology.

Browsing the paper, I found a number of interesting citations that might prove useful in the future.

The authors' thesis is that growing liberal bias in the social sciences has been reducing the quality of research. Lack of political diversity undermines the validity of research through various mechanisms including groupthink and confirmation bias. These mechanisms steer researchers away from important yet politically unpalatable research topics, and and produce conclusions that mischaracterize reality.

The authors, of which the law of averages suggest that at least four of the six are liberals, appear to have checked their own biases at the door and proceded to write a well thought assessment of the state of academic inquiry in a biased context.

Their arguments and findings likely apply to all academic disciplines.


Duarte, J.L., Crawford, J.T., Stern, C., Haidt, J., Jussim, L. & Tetlock, P.E. 2014. Political diversity will improve social psychological science. Behavioral and Brain Sciences. (in press)

Saturday, December 20, 2014

Policymakers NEED Inflation

"The mother of all evils is speculation--leveraged debt."
--Gordon Gekko (Wall Street: Money Never Sleeps)

This missive is exactly right. The Fed and other central banks NEED inflation. Properly defined, inflation is expansion of money and credit supply. A system gets leveraged as credit inflates.

With current leverage in the system, it takes only a small decline in asset prices to turn balance sheets upside down. Because our incomes cannot support current level of debt service, we must resort to ever more borrowing to make ends meet.

This is why the Fed keeps pushing out the date for raising rates. Still grasping some principles from ECON 101, the Fed knows that raising rates (raising the price of debt) reduces quantity of debt demanded.

No credit expansion->not enough debt service->not enough stimulated demand->falling prices->upside down balance sheets->insolvency.

So the ponzi continues until credit can no longer be created at ZIRP or NIRP. Then comes pure money printing a la Weimar.

A most laughable claim is that the Fed is an inflation fighter. In reality, the Fed is an inflation factory.

Friday, December 19, 2014

Opening the Curtain

Someday soon we'll stop and ponder
What on earth's this spell we're under

As ZeroHedge observes, even mainstream media outlets are beginning to catch on. Where would equity markets be without the Fed? The press is learning the answer.

This is not to say that journalists or everyday citizens believe that Fed involvement in stock markets is bad. In fact, they might welcome manipulation as long as prices move in their favor.

Regardless, more are realizing just how rigged these markets are.

position SPX

Thursday, December 18, 2014


Don't ask me what I want it for
If you don't want to pay some more
--The Beatles

First we had zero interest rate policy (ZIRP). Now we have negative interest rate policy (NIRP). In NIRP, depositors don't get paid interest rates on their funds. They pay banks for the privilege of keeping their funds on deposit.

In June the ECB announced the first major central bank NIRP. Last night the Swiss National Bank (SNB) followed suit.

What's the purpose of NIRP? Bureaucrats want people to spend and invest in risky assets instead of save. Thus, they place a penalty on keeping wealth in 'risk free' cash.

The stupidity behind NIRP cannot be overstated. Reasons as to why NIRP consitutes supremely misguided policy include:

Class discrimination. Old people and others with low risk appetite are hit with what is essentially a tax. People who rely on steady income streams not only get no income, but they must surrender principle to depository institutions.

Inviting structural instability. NIRP is a policy of financial repression. To the extent that policymakers are successful in chasing investors out of cash and into risk, then the finanical system becomes more vulnerable to exogenous shocks that could vaporize massive amounts of wealth.

Bank runs. Modern day banks are bankrupt from the get go. They typically keep less than one dollar in their vaults for every ten they take in. This means that demand for withdrawal exceeding 10% of deposits cannot be met. When they must pay rather than get paid for their deposits, depositors are more likely to withdraw funds. This will put pressure on already thinly capitalized banks to maintain enough equity to remain solvent. Banks may face a Cyprus Syndrome.

More leverage. With NIRP, borrowers essentially get paid to take out loans with a negative cost of carry. Leverage in the system climbs.

Reduced savings. Worst of all, negative interest rates discourage saving. Any interventionary policy that suppresses interest rates below market is bad in this regard. However, at a time when world savings are already low or negative, NIRP is a disaster for future prosperity--one that will enslave our children and coming generations for years.

Surely, history will look back on NIRP with disdain.

Wednesday, December 17, 2014

Kudos Elizabeth Warren

Been away
Haven't seen you in a while
How've you been?
Have you changed your style
--Dave Mason

Usually, what comes out of Elizabeth Warren's mouth is pure drivel. But, as they say, even a broken clock gets it right now and then.

Warren was one of the thumbs down Senate voters on the federal budget bill. She railed against the banker friendly elements of the bill and the moral hazard that it promotes.

Directing her remarks toward the self-proclaimed 'small government' types who supported the bill, "If you believe in smaller government, how can you support a provision that would expand a government insurance program and put taxpayers on the hook for the riskiest private activities?"

She's correct.

Of course, Warren herself is not a small government type, and she supports expanded government programs and putting taxpayers on the hook in other areas. She's doing what politicians do so well: assuming the role of the pot calling the kettle black.

Still, Liz, it's a start. You're on the right track this time. Keep coming back!

Morning Optimism

"I love the smell of napalm in the morning."
--Lt Col Bill Kilgore (Apocalypse Now)

Once again, the tenor of the tape seems to be changing. To be sure, we have had false signals before and this may be another--particularly with the FOMC announcement out this pm which has been good for a few stick saves during this bull run.

Recently, however, green morning futes have been sold when the bell rings. This takes bites out of bullish optimism, and leaves traders lugging inventory bought higher. If this happens enough times then optimists become pessimists and buying turns to selling.

Once again we had a gap higher out of the gate. Keep half an eye on it.

position in SPX

Tuesday, December 16, 2014

Liberty Xmas List

Frank Cross: Grace, put yourself down for a towel, too.
Grace Cooley: What about my bonus?
Frank Cross: Towel and a facecloth.

After lamenting the passage of the federal budget, Ron Paul offers a Christmas list supportive of liberty.

1) Shut down the Federal Reserve, an institution that not only degrades citizen's lives thru inflation, but also enables the federal government's massive borrowing habit.

2) Dismantle the IRS, as the federal government is capable of fulfilling its constitutional requirements without an oppressive income tax.

3) Cease US militaristic foreign policy by bringing home all troops and ceasing all foreign aid. Replace it with a policy of peace and free trade with all.

4) Shut down agencies that promote domestic militarization such as the CIA, NSA, TSA. End domestic spying and the unconstitutional war on drugs.

5) End all welfare, including corporate welfare and programs that benefit the politically connected. Phase out low income welfare over time.

6) Padlock the Department of Education and government-influenced education of our children.

7) Scrap Obamacare in favor of a true free market in healthcare.

Hit your knees and pray for these this Christimas.

Monday, December 15, 2014

Energy Credit Spreads

There's no need for argument
There's no argument at all
And if you never hear from him
That just means he didn't call
--Van Morrison

Energy credit spreads continue to blow wider--particularly at the high yield (read: junk) end of the spectrum.

Huge declines like we've seen in oil, while good for consumers at the pump, tend to wreak havoc in structured (read: leveraged), finance. Producers, debtors, creditors feel balance sheet stress when underlying collateralized assets drop in value.

As we observed six years ago, when leverage gets high enough and asset prices get low enough, things start blowing up and the dominos start falling.

position in SPX, oil

Sunday, December 14, 2014

Banker's Budget Passes Senate

"You can take that to the bank!"
--Senator Vernon Trent (Hard to Kill)

The banker friendly federal budget bill jammed thru the House a couple nights back also passed the Senate on, yep, a Saturday night. Vote was 56-40. Interesting mix of no votes from both sides of the aisle, including a straight down vote by Tea Party types.

Now it is on to the president, who has been a BBBF (big banker's best friend) during his time in office.

Saturday, December 13, 2014

Liberty and Property

Benjamin Martin: May I sit with you?
Charlotte Selton: It's a free country. Or at least it will be.
--The Patriot

Wonderful Mises essay originally given as a speech at Princeton University in 1958. Essentially, Mises reviews economic system progression toward capitalism and associated political progress toward liberty.

So many compact insights. Just a few here that stuck out to me:

"[The Industrial Revolution's] main achievement was the transfer of economic supremecy from the owners of land to the totality of the population." (19)

"There is under capitalism one way to wealth: to serve the consumers better and cheaper than other people do." (20)

"Representative government by the people is an attempt to arrange constitutional affairs according to the model of the market." (21)

"Socialism substitutes the sovereignty of a dictator, or committee of dictators, for the sovereignty of the consumers." (25)

"Society is essentially the mutual exchange of services." (34)

"Government is essentially the negation of liberty." (34)

"Capitalistic business is not the perserverance in the once attained state of production. It is rather ceaseless innovation, daily repeated attempts to improve the provision of the consumers by new, better and cheaper products." (42)

"[Private property] is the means to stimulate a nation's most enterprising men to exert themselves to the best of their abilities in the service of all people." (44)

"The distinctive principle of Western social philosophy is individualism. It aims at the creation of a sphere in which the individual is free to think, to choose, and to act without being restrained by the interference of the social apparatus of coercion and oppression, the State." (48)

Friday, December 12, 2014

Crude Scrooge

"I never liked a girl well enough to give her twelve sharp knives."
--Frank Cross (Scrooged)

Been a while since we've experienced serious downside volatility in December. Action over the past week had that 'different' feel (I know, I know...).

Carnage in the oil space continues. Crude has fallen by half over the past six months, and this week the pace of selling picked up.

Perhaps some of this is rubbing off on stocks, which closed on the low tick after a reversal day yesterday. SPX is now below support defined by the previous September peak and currently is back on its 50 day moving average. Break that and its the 200 day moving avg followed by the October lows.

Perhaps the Santa Claus rally came early this year. One thing is for sure: few are positioned for coal in their end of year stockings.

position in SPX, oil

Locking In Bailouts

And when one litte bump leads to shock, miss a beat
You run for cover and there's heat
--The Fixx

ZeroHedge reports that the 2015 federal budget plan jammed thru last nite includes provisions for permitting FDIC insurance to apply to banks failing due to derivative losses.

The big winners are the big banks (who helped craft the legislation, natch), as they own the lion's share of derivatives exposure. The big losers, of course, are taxpayers who foot the bill for the bailouts.

'Taxpayers,' in this case, should be broadly construed. The FDIC is thinly capitalized and could never cover the losses of big bank failures. The only alternative will be to make depositors whole thru money printing.

When this occurs, we all pay the Invisible Tax.

Thursday, December 11, 2014

Deflationary Fed?

Standing in line
Marking time
Waiting for the welfare dime
'Cause they can't buy a job
--Bruce Hornsby & The Range

The question of whether inflation or deflation rules the day as a result of central bank actions has long been considered on these pages. The argument presented here is that, despite 'common wisdom' that Fed actions are highly inflationary, central bank actions are actually deflationary. The crux of the argument is this:

"Central bankers and economists think that to get inflation they only need to print more money, not recognizing that the inflation that does result from money printing, asset inflation, leads eventually to consumer goods deflation. ZIRP and QE cause malinvestment and overinvestment that leads to excess productive capacity.

"That leads to overproduction and oversupply. Oversupply puts downward pressure on prices. That spurs a vicious cycle where the central banks print more money to try to create inflation. That puts more cash into the accounts of the leveraged speculating community and its off we go again.

"While ZIRP and QE encourage waves of excess speculation and malinvestment, they do so at the expense of investment in labor. Businesses become speculators in their own stocks and products rather than in costly and uncertain investments in labor. The value of labor falls in the marketplace. Mass wage and salary incomes fall. Consumption falls. Demand trends weaken, putting downward pressure on the prices of consumer goods."

This is one of the more cogent explanations of what is currently happening that I have read.

It is also consistent with long term capacity utilization trends. We are creating more supply relative to demand.

ECON 101 suggests what about direction of prices in such a situation?

Wednesday, December 10, 2014

Narrative Journalism

"A journalist makes himself the hero of the story. A reporter is only a witness."
--Jim Cleary (Deadline U.S.A.)

Proposition that the mainstream media generally practices "narrative journalism" rather than "factual journalism." Narrative journalism is defined as devotion to preconceived storylines that fit a particular agenda or ideological view. Narrative journalism is a form of confirmation bias.

Therefore, a story where a white police officer who shoots a black person is preconceived as racism and reporting is slanted in that direction regardless of opposing views or evidence.

The author claims that narrative journalism is "almost always" a progressive phenomenon. While both theory and evidence suggest a left leaning bias, "almost always" understates bias present in conservative outlets.

For example, after this week's torture story broke, right-leaning outlets were predictably beginning their 'analysis' with the preconceived notion that, in unsafe times, torture keeps us safe, and then proceeded down a path that favored this view.

The point of the author seems to be that narrative journalism is "bad" while factual journalism is "good." The problem with this thesis is that, because all of us are prone to practice confirmation bias to some degree, then we will prefer to consume media that allows us to reinforce our own biases (i.e., pleasure of thinking that we are right over pain of suspecting that we might be wrong).

Stated differently, there is a market for narrative journalism. It is demand driven. Otherwise it would be starved of resources. It would not be as large and as persistent as it has become.

Tuesday, December 9, 2014

Economics of Trust

"Trust is the basis of any relationship."
--Hardy Jenns (Some Kind of Wonderful)

In social situations, trust is the extent to which a person believes in the honesty, integrity, or reliability of someone else. Trusting relationships require little oversight to guard against agency or other problems. Trusting relationships are also durable, meaning less cost of search for alternative relationships.

From an economic standpoint, then, trust can be seen as quite valuable. It helps individuals get more for less, since fewer resources need to be spent on frictional costs associated with relationships.

On the other hand, trusting relationships tend to build commitment and specialization. Interdependence increases. This may not be problematic in stable contexts, but in turbulent contexts relationships built on trust may need to be revised or perhaps broken. Because of the lock-in associated with commitment, specialization, and interdependence, rearranging trusting relationships can be difficult. Switching costs are likely to be high.

It is also possible that relationships built on trust will persist longer than they otherwise should in uncertain environments. In fact, such relationships might escalate rather than diminish, as loss averse parties seek allocate more resources to maintain bonds that should be reversed.

Monday, December 8, 2014

Same Difference

"Well, you can be wrong a million times. You only gotta be right once."
--Doug Carlin (Deja Vu)

Barron's posts yet another in a string of cover stories that should give contrarians cause for pause. This one includes those four words that define many momentous prognostications: this time it's different.

History is doubtful.

Not all covers like this correspond to significant turns. But nearly all significant turns occur when media outlets post covers like this.

Sunday, December 7, 2014

Police Misconduct and the Legal System

"Someone has taken justice and hidden it in the law."
--Judge Benjamin Caulfield (The Star Chamber)

Recent events suggest that race demagogues are fond of associating racism with grand jury refusals to indict white police officers for capital crimes involving black victims.

The demagogues' claims are either a) polically motivated, or b) the product of selective reasoning, as there are have been cases where grand juries have not indicted police officers for criminal misconduct regardless of victim skin color. For example, a local grand jury recently failed to indict a white police officer for shooting and killing a white teenage girl in Hebron under questionable circumstances (dash cam here).

Indeed, various studies (including this one) suggest that police officers facing criminal charges are indicted at significantly lower rates than the general public and, if indicted, face significantly lower conviction rates and sentencing lengths.

Bias toward police officers might come from a) prosecutors, judges that enjoy or need to work with law enforcement to advance prosecutorial interests and b) juries that are sympathetic to law enforcement officers.

Efforts to better understand the causes of this bias and eliminating them from the system would better reflect equality under the law.

Saturday, December 6, 2014

Community Self Defense

Col James M. Montgomery: Prepare your men to light torches and fire the town.
Col Robert Gould Shaw: I will not!

A while back we noted a group called the Oath Keepers, a group of former and current law enforcement, military, and associated personnel that has sworn to uphold the Constitution even if told to do differently by authorities.

The Oath Keepers are currently in the news for voluntarily guarding businesses in Ferguson.

As government-run institutions prove ineffective in securing person and property against aggression, voluntary organization aimed to providing such security should naturally increase.

Push back by government institutions and their supporters, such as that being exerted against the Oath Keepers in Ferguson, should also be expected. As a form of competition, community self-defense threatens those who benefit from government-run "security" institutions. By protecting innocent people from harm, groups such as the Oath Keepers guard against chaos that drives many people to trade liberty for some modicum of safety.

Because statists depend on such chaos, they will challenge community self defense organizations who seek to prevent it.

Friday, December 5, 2014

Yield Spreads

Now I'm towing my car
There's a hole in the roof
My possessions are causing me suspicion
But there's no proof
--Crowded House

Once upon a time flattening yield curves were harbingers of economic slowdown.

Of course, it must be different this time...

no positions

Trust and Political Volatility

Looks like we're in for nasty weather
One eye is taken for an eye
--Creedence Clearwater Revival

Nice little piece proposing, with some supporting data, that declining trust in government increases volatility in political control. These pages have suggested similar ideas. Oppressive government reduces trust. As trust declines, voters take it out on the majority party.

Since the two dominant political parties are more alike than different, then volatility in political control is likely to continue as both parties pursue similar policies that impair liberty and prosperity.

Thursday, December 4, 2014

Grand Juries

And the men who spurred us on
Sit in judgment of all wrong
They decide and the shotgun sings the song
--The Who

Well footnoted review of grand juries penned in 2003. The argument is that grand juries have evolved from an institution designed to screen legal cases and protect the right of the individual to an instrument of power for prosecutorial government.

Modern grand juries can be seen as a facade behind which agendas of government can be pursued at the expense of constitutional rights of citizens. In particular, operations of modern grand juries violate Fourth Amendment rights to protection of person and property against unreasonable search and seizure, and Fifth Amendment rights that respect due process and prohibit compulsory self-incrimination.

Political power clearly grows at the expense of social power under this arrangement.

Wednesday, December 3, 2014

Social Media and Tight Coupling

We tried to speak between lines of oration
You could only repeat what we told you
Your axe belongs to a dying nation
They don't know that we own you
--The Who

Many people frequently use social media. People like to say that they are 'wired'--connected to a seemingly endless network of news, relationships, and entertainment.

For some, social media may have a pathological component. Some people exhibit signs to addiction--spending much of their day on Facebook, on Twitter, in online chat rooms, etc. They have trouble putting their cell phones down and turning their laptops off.

Moreover, social networking media advances conditions of tight coupling. Those plugged into social media are more likely to respond to stimuli such as questions, debates, etc. that frequently appear before them. Overreaction and attention paid to trivial issues increases. Meanwhile production elsewhere declines, which could reduce long term capacity for survival.

Recently, I have been reducing participation in social media. My personal effectiveness has consequently improved.

Although it may seem counterintuitive at first, cutting back on social media connections could be an effective adaptation strategy in an ever changing world.

Tuesday, December 2, 2014

Money vs Wealth

Oh that ain't workin'
That's the way you do it
Get your money for nothing
And your chicks for free
--Dire Straits

Classic missive from Mr P reminds us that money does not create wealth. Only production creates wealth.

Money is, instead, claims on production. When central banks print money, they create claims on production. Typically, those claims fall into the hands of the unproductive. Recipients of printed money use those claims to lift production from others.

Money printing, then, is the process of wealth transfer.

$18 Trillion and Counting

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

US public debt has crossed $18 trillion. Something NOT to be thankful for this Season.

Monday, December 1, 2014

Burning Oil

Out where the river broke
The bloodwood and the desert oak
Holden wrecks and boiling diesels
Steam in forty five degrees
--Midnight Oil

Last week the price of crude oil cratered nearly 20% and has given back its gains since mid 2009.

Some link sharply lower oil prices to improving production technologies, particularly those developing in the US, with goosing supply comfortably above demand.

Others attribute collapsing oil prices to a pending global economic slowdown. Less demand for crude means less demand for production-hungry energy, so the story goes.

Some also view commodity volatility as a predecessor to equity volatility. However, one has to look hard to find much evidence of crude being a leading indicator of trend reversals in equities over the past decade or so. What is readily apparent is that stock prices have generally lost any semblance of historical correlation with oil (or with most else for that matter) over the past year or two.

position in crude, SPX

Sunday, November 30, 2014

Making News

"A free press, like a free life, sir, is always in danger."
--Ed Hutcheson (Deadline U.S.A.)

When my dad wrote for the Cincinnati Enquirer, the paper would host annual employee family days. As I recall, they took place about this time of year. Families could tour the Enquirer Building and learn how newspapers were made.

My greatest recollection is the basement--where the printing presses ran. Press operators folded hats out of newpaper pages and gave them to the kids. I also recall those linotype machines used for arranging letters on letterpress printing plates. An entirely new set of  metal plates in high relief type had to be made daily to fit the content. I remember thinking how much work went into producing newspapers each day.

The above figure sketches production flow for the Washington Evening Star (1852-1981). Not terribly different than the Enquirer layout. Even the sports department's position, which as I recall from visiting my dad now and then on the sixth or seventh floor, was in about the same place.

The integrated approach to news and newspaper production has generally given way to a virtual model. Formerly in-house steps in the process--ad sales, reporting, printing, etc--are often outsourced. And, of course, newsprint has yielded to digital media.

A primary risk of outsourcing is loss of control. Loss of control--in cost, quality, key resource access, etc--can be the kiss of death strategically as commitments that define competitive position are relieved.

It seems of little surprise, therefore, that as the self-contained production process of newpapers has dwindled, so has the independent, objective nature of the product.

And with it, the relevance of the institution.

Saturday, November 29, 2014

Environmental Coupling

I wanna know what you're thinking
There are some things you can't hide
I wanna know what you're feeling
Tell me what's on your mind
--Information Society

Environmental coupling reflects the extent which a living entity is linked and responds to stimuli in its external environment. Tight coupling reflects high degrees of linkage and response. Loose coupling reflects low degrees of linkage and response.

It has been posited that tight coupling is maladaptive (e.g., Glassman 1973, Weick 1979). Tight coupling creates instability. An entity that is tightly coupled to its environment responds to every little stimuli--even those that do not demand response. Stated differently, tightly coupled entities are prone to overreact to their environments, which weakens their position to thrive and prosper. In the language of Orton & Weick (1990), tightly coupled systems are responsive but not distinctive.

Loose coupling is thought to be a more stable configuration because fewer connections makes living entities more productive. Although they might miss signals occasionally, loosely coupled entities are less susceptible to environmental noise that does not demand response. From an information processing theory perspective, loosely coupled entities tend to process information with a higher signal-to-noise ratio, thereby allowing them to more effectively cope with uncertainties in their environments.

Loosely coupled systems are both responsive and distinctive (Orton & Weick 1990).


Glassman, R.B. 1973. Persistence and loose coupling in living systems. Behavioral Science, 18: 83-98.

Orton, J.D. & Weick, K. 1990. Loosely coupled systems: A reconceptualization. Academy of Management Review, 15: 203-223.

Weick, K.E. 1979. The social psychology of organizing (2nd ed). Reading, MA: Addison-Wesley.

Friday, November 28, 2014

Disparity of Force

"Cameron Poe, you have pleaded guilty to manslaughter in the first degree. With your military skills, you are a deadly weapon, and are not subject to the same laws as other people that are provoked--because you can respond with deadly force. It is the order of this court that you be remanded to a federal penetentiary, where you will remain incarcerated for a term not less than seven to ten years."
--Sentencing Judge (Con Air)

Some people seem to believe that there is no justification for an individual to shoot someone who is 'unarmed.' These people ignore the legal principle of disparity of force.

In the eyes of the law, a gun is not a magical source of power. It is one of myriad ways of exerting deadly force. Disparity of force recognizes that even without a gun, knife, or other ostensible weapon, a violent attacker may possess a physical advantage over the intended victim that, if the assault is permitted to continue, the totality of circumstances suggest that the victim is likely to badly hurt or killed. This situation authorizes the victim to use lethal force (a.k.a. proportionality of force), including use of a gun, against the attacker.

Factors that establish disparity of force conditions include:

Age. Young attacking old (man in 20s attacking man in 70s), or old attacking young (man in 20s attacking young teen).

Size. Big attacking small.

Fitness. Highly fit attacking weak or unfit.

Numbers. Many attacking few.

Fighting skill. Highly skilled hand-to-hand fighter attacking someone with low unarmed fighting skill.

Position of advantage. Attacker has freedom of movement and leverage while the victim does not.

Furtive movement. As part of attack or credible threat of attack, attacker reaches into concealed area for what appears to be a gun or other lethal weapon.

Attempt to gain control of victim's weapon. Attacker seeks to gain control of victim's gun or other lethal weapon.

Impaired victim. Attacker assaults previously injured or handicapped victim, or during the fight an attacker impairs victim's ability to fight back, escape, or evade continuing blows.

Being armed does not require a weapon. Being without a weapon does not make one unarmed.

Principled self-defense requires thorough understandinging of disparity of force.

Thursday, November 27, 2014

Thanksgiving Lessons

Neal Page: He says we're going the wrong way.
Del Griffith: Oh, he's drunk. How would he know where we're going?
--Planes, Trains & Automobiles

Once again on this day, remembering that early American settlements were failed experiments in socialism. The first Thanksgiving meals celebrated newfound abundance and the throwing off of policies that created squalor.

Our early ancestors learned it the hard way. Praying this Thanksgiving that we're not destined to endure a similar process before we figure it out.

Wednesday, November 26, 2014

Looter's Message

John McClane (after he grabs kid stealing candy bars): Hey, hey! Where are you going? Come here. What are you doing?
Kid: Let me go, dickhead.
John McClane: Watch your mouth. You want to go to juvenile hall for a Butterfinger? Is that it?
Kid: Look around. All the cops are at something. It's Christmas. You could steal city hall.
--Die Hard With A Vengeance

Salient point made by Gary North. Looters and rioters send a message: the state is largely impotent when it comes to protecting life and property.

Government is legitimized force. Proper use of that force is for defensive purposes--for helping people defend their person and property from offensive intrusion by others.

Looters and rioters demonstrate that, when push literally comes to shove, government force is often ineffective in defensive situations.

North also observes that in the Watts riots of 1992, Korean store owners stood their ground, fully armed in defense of their property. They understood that government was unable to provide the necessary defense to turn back looters. Instead, the store owners collaborated in self-defense.

Tuesday, November 25, 2014

Greater Cincy Map, 1907

Left a good job in the city
Workin' for the man every night and day
And I never lost one minute of sleepin'
Worryin' 'bout the way things might have been
--Creedence Clearwater Revival

Interesting 'Map Showing Cincinnati's Principal Industries and Suburbs' circa 1907.

As of yet, no significant urban sprawl. Communities like Hyde Park and Spring Grove marked outer suburbs--peaceful getaways from city bustle.

Also enjoyed tracing road names and paths, particularly away from town.

In addition to the downtown area, industries clustered along the Mill Creek and in Norwood. Not so much today.

CBs Buyin' 'Em

It's time we stop
Hey, what's that sound
Everybody look what's going down
--Buffalo Springfield

A veteran trader thinks the Fed and other central banks are buying stocks. These pages have been considering this possibility via discussion of non-economic buyers and stock pools.

Of course, in some countries, stock buying by CBs is legal. Bank of Japan, for example, recently announced that it would be increasing its position in equities.

In the US, however, it is against the law for the Federal Reserve to buy stocks.

What I wonder is, if it was revealed that the Fed was indeed buyin' 'em, would there be public outcry?

Or might there instead be public support for Fed activities designed to goose stocks higher?

position in SPX

Monday, November 24, 2014

Central Banks and Social Instability

There's a room where the light won't find you
Holding hands while the walls come tumbling down
When they do, I'll be right behind you
--Tears for Fears

Minsky-esque hypothesis that efforts by central banks to stabilize economies and financial markets will create social instability as the wealth chasm grows between people at the top and bottom of the social pyramids. That social instability, in turn, could exert significant political pressure on the system to remove interventionary monetary policy.

Of course, such social instability could also spawn riots in the streets.

Sunday, November 23, 2014

Uncertainty Avoidance

I can see clearly now the rain is gone
I can see all obstacles in my way
--Jimmy Cliff

Uncertainty avoidance is the degree to which a culture prefers structured over unstructured situations. In high uncertainty avoidance cultures, people have high anxiety about uncertainty and ambiguity. Laws, rules, regulations, and controls are designed to reduce uncertainty. Things that are new and different are considered dangerous and risky.

Low uncertainty avoidance cultures are less dismayed by ambiguity and have greater tolerance for various options. There are less rules and more risk taking. Change is more readily accepted.

Hofstede (1978, 1980, 1997) developed the uncertainty avoidance construct in the context of country cultures, although it obviously applies elsewhere.


Hofstede, G. 1978. The poverty of management control philosophy. Academy of Management Review, 3: 450-461.

Hofstede, G. 1980. Culture's consequences: International differences in work-related values. Beverly Hills, CA: Sage Publications.

Hofstede, G. 1997. Cultures and organizations: Software of the mind. New York: McGraw-Hill.

Saturday, November 22, 2014

Hungry Alligator

Out along the edges
Always where I burn to be
The further on the edge
The hotter the intensity
--Kenny Loggins

Plot 20+ years of the SPX and the VIX and what do you get? The 'hungry alligator' pattern. Currently the gator's jaws are opened to record wides.

Poised to snap shut, perhaps, on nearby risk.

position in SPX

Friday, November 21, 2014

Senior Savings Famine

Sun streaking cold
An old man wandering lonely
Taking time
The only way he knows
--Jethro Tull

Charles Schwab estimates that people aged 65+ lost more than $2000/yr on average due to the Fed's financial repression programs. Because seniors tend to spend about $2 for every $1 of interest income, Schwab estimates that financial repression has cost the economy upwards of three quarters of a trillion dollars in lost spending by seniors over the past six years.

Moreover, many seniors have also taken on more risk in search of yield bearing instruments. Instead of CDs with puny yields, for example, many seniors have substituted dividend-paying stocks and high yield (read: junk) bond funds.

Seniors and other savers have been experiencing a famine that Charles Schwab suggests is coming to an end with the recent closing of the Fed's QE3 project. Not so fast, Chuck. Central banks around the world, recently those of Japan and China, appear to revving up their interest rate suppression machines.

And just because the Fed is no longer buying bonds in large size does not mean that it intends to raise short rates (which have large influence on yields linked to savings vehicles) any time soon. Or that the Fed wouldn't re-engage their QE habit at the drop of a stock price, er, hat.

Seniors and others hungry for yield are likely to continue down the path toward starvation.

Thursday, November 20, 2014

Presidential Nullification

And the men who spurred us on
Sit in judgment of all wrong
They decide and the shotgun sings the song
--The Who

Nullification is usually defined in the context of states refusing to enforce what are perceived to be bad laws passed by the federal government. In this context, nullification can be seen as an expression of distrust in government and as a mechanism for coping with oppressive rule. 

More broadly, nullifaction can be seen as overt refusal to enforce law by an institutional entity. States can refuse to enforce a law. So could branches of the federal government.

Currenly, President Obama is preparing an executive order that would effectively nullify federal immigation law. Similar to Judge Nap, I can sympathize with this action to some degree. Under natural law, people should be free to travel where they wish--provided that they do not infringe on someone else's property rights.

However, under current our current system, open immigration policy in the US would infringe on the property rights of others. This is because immigrants could tap various social welfare programs funded by property taken from some people by force. Immigrants who partake in those services are party to robbery.

A president who selectively enforces federal law also portrays himself as a discretionary ruler who dictates legality by fiat--someone who believes in the rule by authority instead of rule of law and who thinks that he is above the law.

Finally, a president who nullifies federal law violates his oath of office. He essentially condones lawlessness. When someone else, be it another government official or Everyday Citizen, breaks a law, the president cannot complain or seek to prosecute.

Because he has done the same thing himself.

Wednesday, November 19, 2014

Information Processing Theory

I want to know
What you're thinking
There are some things you can't hide
--Information Society

Information processing theory (Galbraith 1973; Tushman & Nadler 1978) views effective production as the organization's central objective. In order to effectively produce, the organzation must obtain and process information relevant to its 'task environment' (market demand, customer requirements, new technologies, regulations, etc).

The difference between information required to perform a task and the information already processed is known as 'task uncertainty' (Galbraith 1973: 5). Uncertainty creates lack of clarity about what must be accomplished to satisfy market needs, and generates exceptions to the status quo (Ford et al. 2014). At low levels of uncertainty, exceptions to what is already known are passed up the decision-making hierarchy for resolution.

However, as uncertainty increases, exceptions mount, and the hierarchy must process ever greater quantities of information in order to achieve acceptable performance (March & Simon 1958). At some point, information processing capacity of the hierarchy is exceeded, and exceptions can no longer be handled in conventional channels without lowering performance.

To take pressure off the hierarchy and improve performance, organizations must develop information processing mechanisms that enable effective task execution. As uncertainty increases, performance should benefit from coordination and control mechanisms that reduce information processing requirements. Joint planning, establishing standard operating procedures, and creating self-contained work groups decrease the need for frequent interaction and take pressure off the hierarchy as long as task performance remains within specificiation.

If uncertainty continues to increase, then benefits gained from mechanisms that reduce information processing requirements no longer compensate for the large number of exceptions that must be addressed. To cope with this situation, the organization must install mechanisms that increase information processing capacity.

Mechanisms for increasing information processing capacity are of two general types depending on the formality of the information. When the information to be processed is formal, then management information systems that span work unit boundaries create common languages and higher levels of information processing. For processing informal information, lateral relationships that cut across lines of authority create joint decision processes that effectively handle more data. Cross functional teams, task forces, and integrating roles such as project or program managers exemplify lateral mechanisms that add information processing capacity.


Ford, M.W., Evans, J.R. & Masterson, S.S. 2014. An information processing perspective of process management: Evidence from Baldrige Award recipients. Quality Management Journal, 21(1): 25-41.

Galbraith, J. 1973. Designing complex organizations. Reading, MA: Addison-Wesley.

March, J. & Simon, H. 1958. Organizations. New York: John Wiley & Sons.

Tushman, M.L. & Nadler, D.A. 1978. Information processing as an integrating concept in organizational design. Academy of Management Review: 3: 613-624.

Tuesday, November 18, 2014

Fed Fog Index

This one, he got some princely racket
That's what I said now
Got some big seal upon his jacket
--Spin Doctors

Interesting analysis by The Economist on the increasingly opaque wording of FOMC statements. The fog index began increasing around the year 2000 under Greenspan's tenure. It then jumped higher with the commencement of Quantitative Easing under Bernanke.

It's been ratcheting higher since.

The Fed's communication strategy: Make it sound complicated, and perhaps the people will let us get away with murder. Murder of the dollar, that is.

Monday, November 17, 2014

Stability and Adaptation

"I belong to the warrior in whom the old ways have joined the new."
--Katsumoto (The Last Samurai)

Stability is often defined in terms of resistance to change or ability to withstand force without distortion. When viewed in this manner, stability relates to maintaining the status quo.

In turbulent environments that demand change, however, clinging to the status quo is maladaptive. Resistance to change brings instability (Farjoun, 2010).

Dynamically, stable systems are those capable of responding to change when necessary.


Farjoun, M. 2010. Beyond dualism: Stability and change as a duality. Academy of Management Review, 35: 202-235.

Sunday, November 16, 2014


Can we last forever
Will we fall apart
At times it's so confusing
Questions of the heart

A month back we gazed at Fountain Square circa 1962. The below pic shows Fountain Square in 1875. The view is looking east on Fifth Street.

When I view old pics like this, I often wonder what in the picture might still be around today. None of the people, of course. Very little of the infrastructure either.

Maybe some of the items in people's pockets?

1875-CC $20 Liberty PCGS XF45 CAC

Here's a twenty dollar gold piece struck in 1875 at the Carson City Mint. The CC Mint itself was shut down in 1893 although the building still stands as the Nevada State Museum.

How many hands have touched this coin over its nearly 140 yrs of existence? Perhaps it could have been found, shiny and new, in someone's pocket that day on Fountain Square.

Saturday, November 15, 2014

Mutual Fund Epicenter

This wouldn't be the first time
That things have gone astray
Now you've thrown it all away
--Bryan Adams

Interesting theory floated on Ask Fleck yesterday that the Next Time Down will be triggered by redemptions in fixed income mutual funds. Leveraged loans and junk bonds are beginning to show impairment.

If income sensitive investors begin liquidating fixed income mutual fund positions out of necessary (because they have reached for yield in overly risky bond funds), then the redemption ripple will work from periphery to core--taking out stocks as well as bonds.

position in SPX

Friday, November 14, 2014

Socialism and Black Markets

Andy Dufresne: I understand you're a man who knows how to get things.
Ellis Boyd 'Red' Redding: I'm known to locate certain things from time to time.
--The Shawshank Redemption

Like all brands of socialism, Venezuelan-style socialism does little to alleviate scarcity. Instead, it fosters squalor.

Predictably, Venezuelans have taken to producing and trading on their own. These black markets operate outside of laws designed to keep the socialistic system intact.

Now the Venezuelan government is seeking to shut down the black markets.

The people must choose: keep living a life of forced restraint and squalor. Or continue to find ways to voluntarily trade with each other to improve their condition.

Which choice is more likely?

Black markets are institutions of socialism.

Thursday, November 13, 2014

Battery Acid

"You're walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place."
--Gordon Gekko (Wall Street)

This morning it was announced that Procter & Gamble will sell its Duracell subsidiary to Warren Buffett's Berkshire Hathaway. The terms of the deal have PG injecting $1.8 billion in cash into Duracell, and then BRK trading its PG stock position currently valued at $4.7 billion for Duracell.

Suppose that PG shares are overvalued and that their intrinsic value is half the current price. If true, then Buffet is paying with currency that is actually worth $2.35 billion. Moreover, PG kicks in $1.8 billion in cash--cash that is on margin via corporate borrowing.

As such, Buffet surrenders about $500 million ($4.7 - 2.35 - 1.8 billion) in real value for Duracell. PG shareholders get a pile of overvalued shares, and they have fewer productive assets with which to create future value (part of which would go to servicing the debt used to fund the cash surrendered in the Duracell transaction).

The better deal appears to belong to which side?

no positions

Wednesday, November 12, 2014

Stability Motive

Who knows how long this will last
Now we've come so far, so fast
But somewhere back there in the dust
That same small town in each of us
--Don Henley

Environmental uncertainty can be defined as the degree to which future states of the world cannot be anticipated or accurately predicted (Pfeffer & Salancik, 1978: 67). Decision-makers generally do not like high levels of uncertainty because it upsets their strong preference for certainty, stability, and predictability.

As such, when environments are perceived as uncertain and unpredictable, decision-makers will exert greater effort to re-establish the illusion or reality of control and stability over future outcomes (Oliver, 1991).

Actions taken to reduce uncertainty and gain predictability can be seen as driven by the 'stability motive.'


Oliver, C. 1991. Strategic responses to institutional processes. Academy of Management Review, 16: 145-179.

Pfeffer, J. & Salancik, G.R. 1978. The external control of organizations: A resource dependence perspective. New York: Harper & Row.

Tuesday, November 11, 2014

Aggression and Political Ideologies

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

The below graphic does a good job of distinguishing ideologies that mark the political landscape. The traditional left-right spectrum is defined by the use of government aggression--albiet for different purposes.

Libertarian ideology, on the other hand, is grounded in the non-aggression principle. The only valid use of government force is for defensive purposes--i.e., to help individuals defend person and property from invasion by others.

Want to get to the heart of any political philosophy? First and foremost, endeavor to understand the extent to which that ideology condones government aggression.

Monday, November 10, 2014

More of the Same

Meet the new boss
Same as the old boss
--The Who

Jacob Hornberger discusses the biggest failures of Barack Obama's presidency. Few liberty-minded people expected Obama to steer policy toward more economic freedom. In fact, it was easy to fear the worst--more intervention in economic affairs. And that has occured.

But Obama could have worked within his ideological constraints to alter the country's course on civil liberties and foreign affairs. He could have used his office to move America away from policies of militarism, surveillance, and foreign interventionism and back toward original principles of peace, security against warrantless search and seizure, and no foreign entanglements.

Instead, Obama allowed himself to be just another president. JH proposes that "Obama's two terms in office are nothing more than Bush's third and fourth terms in office."

How could it have been different? Obama could have worked toward several ends that would have made big progress on the civil liberties and foreign affairs fronts, including:

Repealing the Patriot Act.

Ending all US invasions, occupations, and coups of foreign soil.

Bringing home and discharing all US troops.

Closing all US military bases on foreign soil.

Ending all sanctions and embargoes. Cuba's embargoes could have been first.

Shutting all Cold War era military and intelligence departments agencies, including CIA and NSA.

Welcoming dissent about infringements on civil liberty and foreign policy, rather than seeking to prosecute it.

Ending all foreign aid.

Ending all surveillance--both foreign and domestic.

Ending the war on drugs.

About halfway through Bush's second term, I hoped that W would break away from his general party's direction and champion radical efforts toward removing force from the system. "Because Bush was a lame duck, what did he have to lose?" I reasoned (probably naively). It didn't happen, of course.

Of course, the book is not yet closed on Obama. Perhaps he will step out of the mainstream and champion liberty rather than force.

I pray that he does.