Saturday, December 31, 2016

Coming Undone

Ah, it'll take a little time
Might take a little crime
To come undone
--Duran Duran

Like its progressive electorate in general, the Obama administration appears to be coming undone on the way out the door. After publicly berating Israel over its settlement policy and unilaterally claiming 1.6 million acres of western United States land as 'national monuments, the administration sanctioned Russia for allegedly interfering with the US presidential election without producing a shred of specific evidence to support those allegations.

This opened the door for Russian President Vladimir Putin to, as he has done several times during President Obama's tenure, look like the adult in the room by publicly declining to retaliate against Obama's sanctions and even inviting US citizens to partake in holiday ceremonies at the Kremlin.

The juvenile behavior has some DNC operatives distancing themselves from an administration whose 'legacy' is dwindling by the day. Some of the administration's mainstream media lackeys also seem disturbed by the folly.

'Out with the old and in with the new' seems particularly appropriate on this day.

Friday, December 30, 2016

Persuasion vs Coercion

Darby Shaw: You can't, under any circumstances, use my name. Or reveal how you got the information. Or publish anything until I've left the country. Agreed?
Gray Grantham: Unless I can convince you otherwise.
--The Pelican Brief

How to get someone else to do something that you want? There are two general approaches. One is persuasion. Asking, discussing, suggesting, reasoning, arguing, leading, setting an example. Methods of persuasion are force-free. Because persuasion does not apply force, however, there is a chance that others will not respond in the desired manner.

The other approach is coercion. Harassing, intimidating, strong-arming, beating. Methods of coercion use violence or threat of violence to achieve compliance. Because it applies force, coercion is more likely to elicit the desired response--at least in the short term.

Persuasion is peaceful and voluntary. Coercion is violent and involuntary.

People who use government to get others to do what they want are not engaged in peaceful persuasion. Rather, they are principals of violence, contracting with strong armed agents to engage in coercion.

Thursday, December 29, 2016

Policy-Based Evidence Making

From my heart and from my hand
Why don't people understand
My intentions
--Oingo Bingo

Analysis of US temperature data debunking claims that 2016 was 'overwhelmingly hot' and that temperatures have risen 1.5F since the nineteenth century.

The thrust of the analysis is that the percentage of hot days is not trending higher and is currently below the LTA:

And that time series show trending only after 'adjustment' (a phenomenon that should raise suspicion in any truth-seeking mind):

In fact, the adjustments correlate almost perfectly to measured levels of atmospheric CO2:

The national weather service (NOAA) appears to be adjusting the data to match global warming theory. The author calls this 'policy-based evidence making.'

One would be foolish to ignore policy-based evidence making as a primary motivator of all government agency activities having to do with studies and data services.

Wednesday, December 28, 2016

Complaints About Strong Dollar

Now that ain't working
That's the way you do it
Lemme tell you
Them guys ain't dumb
--Dire Straits

As predicted, complaints are getting louder about the adverse effects of a strong dollar. WSJ posts a litany of negatives aimed at making you think that the big plus of a strong currency--greater purchasing power--isn't worth it.

How to weaken the dollar versus other currencies? Print more of it, of course.

Articles like the above serve to legitimize theft by inflation in minds of many.

Tuesday, December 27, 2016

Streetcar Pyramid

"I was an overachiever. I'm settling into my natural groove now."
--Natalie Scheffer (Joe Somebody)

In his masterful 1932 work The Bubble That Broke the World, Garet Garrett draws analogy between the great pyramids of Egypt, often regarded as world 'wonders,' and wasteful public spending projects. The real wonder of the pyramids is how massive amounts of economic resources that could have been put to productive use were diverted for years to build an expensive ornament.

The city of Cincinnati's latest pyramid is the downtown streetcar. After progressives jumped on board the first few weeks to celebrate another completed public works project, ridership has been dwindling. Usage currently rests at about half the projected rate. Moreover, riders report long waits at stops.

Predictably, the city council has commissioned a downtown traffic study on the matter.

There is no rest for pyramid builders.

Monday, December 26, 2016

Baked In

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

Jeff Tucker reflects on the reasons for Barack Obama's failed presidency. All of the feel good feelings of his supporters that ushered him into office in 2009 could not substitute for a fatal flaw in the Obama administration: economic ignorance. Much like the FDR years, Obama and his cronies believed that an economic team packed with technocrats could govern the country out of recessions and into prosperity.

Growth never came, however, leaving middle America high and dry. His signature Affordable Care Act, the high water mark of central planning folly for this administration, has predictably been sucking billion$ more out of those same Americans' wallets.

The president's political party has been paying dearly for his mistakes at the ballot box. Since Obama took office, over 1,000 Democrats have lost elections. Republicans control both the House and Senate at the federal level and the majority of state legislatures.

Results of the recent presidential election merely iced the cake that the Obama administration has been baking for years.

Sunday, December 25, 2016


For freedom Christ has set us free. Stand firm, therefore, and do not submit again to the yoke of slavery.
--Galatians 5:1

God is with us once again.

Gloria in excelsis Deo.

Saturday, December 24, 2016

Mission of Freedom

"In the year of our Lord, Judea--for nearly a century--had lain under the mastery of Rome. In the seventh year under the reign of Augustus Caesar, an imperial decree ordered every Judean each to return to his place of birth to be counted and taxed. The converging ways of many of them led them to the gates of their capitol city, Jerusalem, the troubled heart of their land. The old city was dominated by the fortress of Antonia, the seat of Roman power, and by the great golden temple, the outward sign of a great and imperishable faith. Even while they obeyed the will of Caesar, the people clung proudly to their ancient heritage, always remembering the promise of their prophets that one day there would be born among them a redeemer to bring them salvation and perfect freedom."
--Balthusar (Ben-Hur)

In his battery of Christmas questions, Judge Nap asks, "What if the true God made us in His own image and likeness? What if the most similar likeness between us mortals and the true God is freedom?"

He also wonders whether many people have accepted a seductive counter offer to reject God's gift of freedom in favor of government-as-god. Government-as-god establishes itself as provider of all secular needs in return for fidelity to the State. Compliance with the State chills the exercise of personal freedom because individuals fear loss of the government's munificence.

What if, as the Judge asks, "Jesus came to set us free from the yoke of government oppression and the chains of personal sin?"

Celebrate His arrival this Christmas and His mission of freedom.

Friday, December 23, 2016

Election Interference

"Don't ever risk you life for an asset. If it comes down to you or them...send flowers."
--Nathan Muir (Spy Game)

LA Times article cites research of Carnegie Mellon poly sci prof Dov Levin who estimates that the US government has interfered with presidential elections in foreign countries at least 80 times since the end of WWII.

Levin defines electoral intervention as "a costly act which is designed to determine the election results in favor of one of two sides. He estimates that these actions have been carried out in secret about two thirds of the time and included campaign funding of particular political parties, disseminating misinformation and propaganda, training of one side in campaigning techniques, helping one side design campaign materials, making public pronouncements or threats against opposing candidates, and providing/withdrawing foreign aid.

Levin's database excludes coups or regime change efforts following the election of candidates that the US didn't like.

Separately, Ron Paul observes that that the US is interfering with elections around the world all time. Looking at our history of interference in the political affairs of other countries, he suggests that "we don't have much room for condemning anybody else."

Of course, condemning others for behavior similar to one's own is a favorite is why hypocrisy and politics go hand in hand.

Thursday, December 22, 2016

Walking Liberty Half Dollar, 1916-1947

So open up your morning light
And say a little prayer for right
You know that if we are to stay alive
Then see the peace in every eye
--Paula Cole

In 1915 new Mint Director Robert Woolley commissioned a competition for designs to replace the Barber half dollar. The winning design came from Adoph A. Weinman, a German immigrant and sculptor. (Weinman also won the dime competition with a design that affectionately become known as the 'Mercury dime').

1934-S Walking Liberty Half Dollar PCGS MS66+ CAC

The obverse of Weinman's half dollar design featured a full length Lady Liberty striding to the left across the landscape with an American flag behind her blowing in the breeze. She carries branches of laurel and oak in her left arm, symbolic of civic and military virtue. Her right arm is outstretched in the spirit of liberty. She walks toward the dawn of a new day, with the sun rising near her feet on the periphery at about 7 o'clock. The coin's lettering was art deco style. LIBERTY surrounds the top with the date at the bottom. IN GOD WE TRUST appears in the lower right field.

1937-D Walking Liberty Half Dollar PCGS MS67 ex Sounder

On the reverse, an eagle stretches its wings from a mountain crag in a display of spirit and power. A pine branch springs from the rock at the eagle's feet, symbolic of strength. UNITED STATES OF AMERICA circles the top and HALF DOLLAR circles the bottom. E PLURIBUS UNUM is inscribed to the left of the eagle at 9 o'clock. Weinman's initials appear below the eagle's tail feathers at about 4 o'clock near the rim.

1939 Walking Liberty Half Dollar PCGS PR67

When the design was made public, the patriotic theme resonated. The 'Walking Liberty' half dollar was hailed by many as America's most beautiful coin--a label that persists today in the minds of many.

Diameter: 30.6 mm
Weight: 12.5 g
Composition: silver .90; copper .10
Edge: Reeded

1942 Walking Liberty Half Dollar PCGS MS67+ CAC

Walkers were first struck for circulation in late 1916. The design proved difficult to produce in full detail with the obverse center, particularly Ms Lib's arm and fingers, often weakly struck and exhibiting a noticeably flat appearance. The series was struck from 1916 until 1947 with some breaks in the 1920s and early 1930s. The Philadelphia, Denver, and San Francisco mints all struck Walkers during the series run. Proof coins were struck for collectors from 1936 to 1942.

1944-S Walking Liberty Half Dollar PCGS MS66

Collectors seeking to amass sets of business strike Walkers have several options. Some pursue the entire 1916-1947 series although this can be quite challenging due the scarcity of several early issues, particularly in high grades. The forty coin 'late date' set interests many collectors as it spans 1933 thru 1947 with all issues available in mint-state grades. Finally, there is the twenty coin 'short' set spanning 1941 thru 1947 that is very popular--particularly as a way to affordably get started in the series.

1947-D Walking Liberty Half Dollar PCGS MS66+ CAC

The Walking Liberty half is also important from a historical standpoint. The series spanned several defining periods in twentieth century America. Walkers were introduced as the US moved from peace to World War I. It was carried in people's pockets during the Roaring Twenties and the Depressionary Thirties. It remained the bulwark of everyday commerce during World War II, and exited the other side to peace once again.

War and peace. Boom and bust. The Walking Liberty half constitutes an artifact of the best and worst of times.

Wednesday, December 21, 2016

Evidence-Free Assertions

"And you call ME reckless?"
--Pete 'Maverick' Mitchell (Top Gun)

The 'Russia hacked the election' narrative has been repeated enough by the Clinton campaign, Obama administration, and their mainstream media lackeys that many people believe the mantra despite not a shred of evidence being provided to date that supports the assertion. Unfortunately, that has not restrained President Obama from publicly fingering Russian president Vladimir Putin's involvement and from vowing to retaliate against Russia using appropriate means at the appropriate time.

Issuing threats without a factual justification is an unwise strategy, particularly in international affairs.

Two congressman have now formally requested that the president brief Congress on the matter. Sadly, concrete evidence that implicates Russia has yet to be provided to Congress.

As stated in the letter:

"It is incumbent upon the executive branch to keep Congress apprised of hostile foreign actions in a timely manner, and once an allegation has been made public, it is reckless to allow evidence-free assertions to serve as Congress's and the public's only source of information."

The president's evidence-free assertions are grounded in one of two realities. One is that the president has been withholding vital information about hostile actions by a foreign country that should have been shared with Congress and the American people before leveling threats.

The other possibility is that the president has no concrete evidence.

Either way, the incoming president-elect could hardly exhibit more reckless behavior than that of the sitting president.

Tuesday, December 20, 2016

Trustworthy News

"Let's never forget. We're the real story, not them."
--Aaron Altman (Broadcast News)

Study shows US near bottom of pack for trustworthy news. Would be interesting to see a study of this over time.

The article suggests that higher trustworthiness associated with 'the presence of well funded public service broadcasters.' Ponder that for moment. The greater the resource dependence on government sponsored entities, the more trustworthy the news?

Perhaps the picture reflects US information consumers who are further along in the process of waking up to just how slanted the mainstream media complex is. Others are still asleep.

Monday, December 19, 2016

Cover Meltdown

Times are tough now
Just getting tougher
This old world is rough
Keeps getting rougher
--Bruce Springsteen

The magazine cover indicator was working overtime this election season, producing some truly epic specimens of 'common wisdom' being spectacularly wrong. Witness, for example, Time's doubling down on Trump:

And Newsweek granting Hillary Clinton her "Dewey Wins" moment:

Now, on the financial front, we have media jumping on the strong dollar bandwagon:

Cause for pause for those long the USD in size...

position in USD

Sunday, December 18, 2016


"The thing is I can't afford to pay the heat and I had to send my kids to live with relatives. They keep cutting shifts down at the just don't get picked everyday."
--Jim Braddock (Cinderella Man)

One of the negative scenarios on the Trump possibility spectrum involves restriction of trade in attempts to 'level the playing field' and 'save jobs.' Restricting trade always and everywhere results in lower standard of living because of productivity losses from less specialization and trade.

The benchmark tragedy in this regard involves the Tariff Act of 1930, also known as the Smoot-Hawley Act. As America slid into Depression in 1929, Reed Smoot, a Republican senator from Utah, believed that jobs were being lost because foreign countries were selling too many goods at low prices to US consumers, thereby undermining the livelihoods of millions of hardworking Americans. Working with Congressman William Hawley of Oregon, Smoot devised a series of tariffs and duties to be imposed on imports that would serve to protect American jobs. The act containing those tariffs was signed into law by Herbert Hoover in 1930.

The central feature of the Smoot-Hawley Act was a tariff hike on dutiable goods to an average of nearly 60%, with duties on many imported goods quadrupling.

Predictably, global trade dried up. As prices rose on many goods, US consumers, many of whom were unemployed, cut way back on purchases in attempts to make ends meet. Production and capital investment ground to a halt as demand plummeted.

America's trading partners also reacted in kind. Trade barriers went up worldwide, thereby reducing business to be done by many of those American's whose jobs had been 'protected.'

Between 1929 and 1933, US imports and exports fell by more than 60%. The unemployment rate tripled to 25%.

Exacerbating the problem was the design of Smoot-Hawley tariffs, which generally taxed imported goods at a fixed amount rather than as a percentage of product value. As demand fell, the taxable percentage of products grew as their value collapsed. A reinforcing cycle commenced--the less trade there was, the more difficult it became.

Although FDR was able to change the structure of tariff control in 1934, the spirit of 'managed trade' embedded in the Smoot-Hawley Act still influences US foreign policy.

By driving economic malaise to new depths and lengths, Smoot-Hawley helped put the 'great' in the Great Depression.

Here's hoping that we avoid the rhyme of history related to trade restriction.

Saturday, December 17, 2016

Owning It

"I've made some mistakes, but they're mistakes I take full responsibility for."
--Coach Norman Dale (Hoosiers)

A characteristic of maturity is self-responsibility. By this we mean taking responsibility for one's actions--particularly when the outcomes are negative or undesirable.

Immature individuals avoid self-responsibility. Instead, they prefer to blame their actions and outcomes on outside influences. Other people, the environment. 1970s comedian Flip Wilson famously joked "The devil made me do it."

Stated differently, mature people own their actions, immature people do not.

We've been seeing classic examples of people who do not want to own their actions and their outcomes in this presidential election cycle. It's the other guy...even the Russians.

Such a blame game ensures further failure.

Owning it turns the future toward success.

Friday, December 16, 2016

Trump and Regime Uncertainty

"Fitness report says it all. He's a wild card. Completely unpredictable."
--Rick 'Jester' Heatherly (Top Gun)

Many people seem convinced that they know precisely how Donald Trump will behave as president of the United States. #NeverTrumpers believe that he is the ultimate deplorable. For Trump backers, the future's so bright that they're already wearing shades.

It strikes me that Trump has demonstrated just the opposite--that he is one of the most unpredictable president elects in US history. As such, 'regime uncertainty' associated with his upcoming tenure is inordinately high at this time.

As Trump prepares to enter office, I find it more useful to think in terms of a spectrum of possibilities. Some good, some bad, and some in between. Because his unpredictability makes it difficult to handicap any particular scenario, applying a flat probability distribution at the outset seems prudent. In other words, all scenarios are viewed as having equal chances of occurrence. If five scenarios are envisioned, each is estimated to have a 20% (1 in 5) chance of occurring.

As Trump takes more action from the Big Chair, scenarios and their likelihoods will become more apparent.

Thursday, December 15, 2016

Bond Market Control

Pete 'Maverick' Mitchell: Goose, I'm losing control. I'm losing control. I can't control it. It won't recover. Shit!
Nick 'Goose' Bradshaw: It's coupling up, Mav. We're out of control. This is not good! This is not good!
--Top Gun

Treasury yields gapping higher after the Fed raised rates yesterday and signaled more increases in 2017. Ten year yields moving quickly toward the 3% maginot.

It has been clear for some time that the end game to this long period of market lunacy involves the loss of bond market control by central banks. This may be the beginning of that end game.

If it is, then I must admit that the scenario currently unfolding was not one that I had considered. Rampant economic optimism after unexpected election results causes people to buy stocks to all time highs while dumping bonds. The Fed follows with rate hikes and rhetoric that reinforces belief that bonds need to be sold in favor of stocks--even though bond yields are up over 50% in a month. All the while leveraged bond market longs are getting carried out on stretchers as they 'teach' others to close their long bond trades.

Meanwhile, trading robots programmed to short bonds above 3% TNX await nearby.

Nope. Not a scenario that was on my radar.

no positions

Wednesday, December 14, 2016

Left Losing Influence

Only shadows ahead
Barely clearing the roof
Get to know the feeling of
Liberation and release
--Crowded House

One trend that has become readily apparent this election season is the declining political influence of the Left. Donald Trump's presidential victory merely accentuates a tendency that has been building since at least the midterm 2010 elections. Save for Obama's re-election in 2012, Democrats have been losing seats in both the House and Senate for years.

At the state level, the trend has been similar. Republicans have added to their share of state governors as well as state legislators.

While the Left's decline can be readily viewed as a referendum on a failed Obama administration, there seems to be more to it than that. The Brexit vote, political upheaval in France, Germany, Italy et al,, and other events suggest that the Left's collectivist agenda is becoming less popular among voters in other parts of the world as well.

It remains to be seen, of course, whether this is merely a cyclical correction or something more enduring.

Tuesday, December 13, 2016

Confidence Jump

And I know, baby
Just how you feel
You gotta roll with the punches
And get to what's real
--Van Halen

Gallup reports US economic confidence at nine years highs. The report notes that the jump detected in economic confidence since last month's election has rarely been matched since the survey's founding.

For those looking for flies in the ointment, Gallup reports that the last time its measures of economic confidence stood this high was January, 2008. We know what subsequently unfolded after that...

Monday, December 12, 2016

Bond Yields: The Big Picture

Hey now, hey now
Don't dream it's over
Hey now, hey now
When the world comes in
--Crowded House

As bond yields continue to back up, thought I'd elongate the time horizon and try to separate the forest from the trees. The chart below shows T-Note yields back to the early Eighties. This horizon captures the 30+ year (thirty year!) bull market in bonds in its glory.

What's it show? The downtrend line associated with the three decade run projects current resistance at about 3%.

Should 10 yr yields pierce the 3% level--which we must note is still more than 50 bips (about 20%) away--then the long term bull market in US sovereign bonds ends in the eyes of many technicians.

It would also end in the algorithms of many trading robots...

no positions

Sunday, December 11, 2016

New Red Scare

Art Ridzik: In this country, we try to protect the rights of individuals. It's called the Miranda Act, and it says that you can't even touch his ass.
Ivan Danko: I do not want to touch his ass. I want to make him talk.
--Red Heat

When the Clinton campaign began claiming that Russia was hacking email accounts and trying to influence the presidential election in late summer/early fall, I initially figured that this was an attempt to sway #NeverTrump Republican voters who might respond favorably to Red Scare, McCarthy-like tactics and pull the lever for Clinton.

But then it persisted--straight on thru the election and into the Left's post-election hysteria phase.

The New Red Scare reached new levels of absurdity this weekend, as the Washington Post and others published stories citing unnamed sources who claim that the CIA believes that Russia intervened in the election to help Donald Trump win the presidency.

Once again, the irony could hardly be greater. The same government agency that has actively engaged in espionage and misinformation campaigns aimed at swaying elections in other countries is cited, anonymously, as a credible source of information about this particular election.

Naturally, Democrats seeking to cope with their post election cognitive dissonance have embraced the reports as truth.

Both Glenn Greenwald and Craig Murray demolish this latest round of bogus reporting by a slanted media that continues to lose credibility by the day. The problems associated with basing stories on, as Greenwald puts it, "competing, unverifiable anonymous leaks from professional liars inside government agencies, cheered by drooling, lost partisans anxious to embrace whatever claims make them feel good, all conducted without the slightest regard for rational faculties or evidentiary requirements" are blatantly obvious.

We know that markets for media bias exist. The New Red Scare market remains a growth story.

Saturday, December 10, 2016

Popular Vote

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

One of the Left's many mechanisms for coping with the cognitive dissonance of Donald Trump's victory in the presidential election is to claim that Trump didn't actually win because he lost the popular vote. By 'popular vote,' the Left is referring to the results of the general election which, disregarding the possible impact of voter fraud, currently has Hillary Clinton ahead by approximately a 2.5% margin over Trump.

Winning the popular vote but losing the presidential election is not unusual. It has now happened five times in US history, which equates to nearly one occurrence in every ten presidential elections held in this country.

As specified by the Constitution, it is the Electoral College, not the popular vote, that determines the outcome of presidential election in the United States. As Prof Williams observes, the primary grounds for this was our founding ancestor's deep abhorrence for democracy and majority rule. A search by topic on this site will reveal many posts written about the topic.

Auberon Herbert's 130+ year old essay asks the question that anyone suffering from general election cognitive dissonance must come to terms with: what gives a candidate elected by a democratic majority valid power over the minds, bodies, and possessions of others?

Friday, December 9, 2016

Shiller PE Danger Zone

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

The 'Shiller PE,' named after Yale economist Robert Shiller of Irrational Exuberance fame, is a ten year moving average of stock price to earnings. It is also referred to as CAPE--cyclically adjusted price to earnings.

CAPE is currently north of 27, a level historically associated with excessive valuation and epic market tops.

Doesn't mean they can't run higher...see the era. Does mean that we're treading in the Danger Zone.

position in SPX

Thursday, December 8, 2016

Trannies Confirm

Arrows of neon and flashing marquees out on Main Street
Chicago, Detroit, New York and it's all on the same street
Your typical city involved in a typical daydream
Hang it up and see what tomorrow brings
--Grateful Dead

Yesterday's rally pushed the Dow Jones Transportation Index thru previous resistance at 9200ish to all time highs. The Trannies now join the Industrials in virgin territory. This constitutes a confirmation of the rally, a.k.a. a buy signal, from a 'Dow Theory' perspective.

While not fighting the trend, I am literally not buying it either. Perhaps things are all good with the world in a manner that justifies a big move higher from here. But I don't think so. Moreover, from where I sit, the faster they melt up and draw buyers in, the greater the likelihood of an epic collapse from the apex.

Would be more prone to look for ways to participate in that downward phase if/when.

position in SPX

Wednesday, December 7, 2016

Provoking Pearl

"I think world war two just started!"
--Danny Walker (Pearl Harbor)

Seventy five years ago today, the Japanese bombed Pearl Harbor. The standard story, the one that is taught in US schools, is that Japan's attack was unprovoked and took the country completely by surprise. While it certainly surprised the unfortunate US forces stationed at Pearl Harbor (and in the Philippine Islands), this mythology is far from true.

After being duped by President Woodrow Wilson into being involved in the bloody conflict of WWI, the American people had little taste for further conflict after 'The War to End War.' Never again, it was resolved, will the United States become entangled in foreign conflict. Artifacts that reflected this mindset included the Peace Dollar. Struck from 1921 thru 1935, it is the only circulation coin minted in the US to contain the inscription 'PEACE.'

1922-s $1 Peace PCGS MS65+ CAC

Franklin Delano Roosevelt was elected president in 1932 in part because his platform included a promise to keep America  away from war. He extended his promise as a condition of his re-election in 1936--despite war drums beating in both Europe and Asia.

Unfortunately, FDR's New Deal policies aimed at reviving the US economy were not generating their intended effects (the New Deal's effectiveness is a mythology to be addressed on another day). By 1937, the economy was hitting stall speed and tumbling back into Depression once again with unemployment recapturing the 20%+ level.

Desperate to jump-start the economy once again, FDR and his braintrust turned their attention to the prospects of military spending and, gradually, military involvement as a means for breaking the back of the Depression. It began by supplying 'allies' with arms but by 1940 activity had escalated toward active, but 'unofficial' involvement in areas such as the North Sea vs Germany and on mainland China vs Japan.

FDR and his braintrust wanted war. Unfortunately for them, and unlike today, the president was unable to act unilaterally and send large numbers of troops into battle (as would happen later in Korea, Vietnam, Iraq, etc.). Instead, a declaration of war by Congress was constitutionally required. FDR knew he couldn't get this declaration from Congress as the American people were still collectively opposed to involvement in foreign conflict. Thus, as observed by Jacob Hornberger, FDR campaigned once again for an unprecedented third term on a promise that "Your boys are not going to be sent into any foreign wars."

'Foreign,' of course, being the key word because FDR's administration had already been active for years trying to get Germany or Japan to fire the first shot (much as Lincoln did with the South at Fort Sumter). FDR preferred Germany to be the perceived aggressor so he approved of 'lend-lease' armament agreements with the United Kingdom and of US warships escorting British vessels in u-boat infested waters to provoke Hitler. Unfortunately, he would not bite.

As documented by FDR's secretary of war Henry Stimson, focus turned to Japan. Robert Higgs writes that, beginning in 1939, the US terminated commercial treaties with Japan and slapped embargoes on resources critical to Japanese standard of living such as fuel oil and steel. In 1941, all Japanese assets in the US were frozen, effectively bringing foreign relationships between the two countries to a halt.

On the back of terms put forth by the US to end the intervention, the Japanese faced two choices. One would be to end its occupation of China. The other would be to move into areas of the South Pacific to secure vital economic resources such as oil.

Japan chose the latter. Correspondence between the Japanese foreign diplomats included the following:

"Commercial and economic relations between Japan and third countries, led by England and the United States, are gradually becoming so horribly strained that we can not endure it much longer. Consequently, our Empire, to save its very life, must take measures to secure the raw material of the South Seas.

The Japanese knew, however, that American forces in the Pacific would be sent to challenge any movement that would weaken US government-sponsored economic sanctions.

FDR and his braintrust knew that Japan knew. Cryptographers and broken Japanese diplomatic and military codes and understood that Japanese 'measures' might well include an attack of Pearl Harbor to keep US forces at bay.

Yet, despite this understanding, the federal government did little to place military forces at Pearl and in the Phillipines on high state of alert. Instead, they were dangled as bait.

Unfortunately for them and for the world, Japan took the bait.

Tuesday, December 6, 2016

Government Contracts

"Get off my plane."
--President James Marshall (Air Force One)

Donald Trump tweets that the federal government should cancel its order with Boeing (BA) for a new Air Force One because of the project's high price tag--currently about $4 billion. The list price of a 'standard' 747-8 model upon which AF1 is based is about $378 million.

Should there be more room for cancelling government contracts than there is for contracts between private buyers and sellers?

Yes. Public officials who sign contracts for products or even labor are representatives of 'the people.' But in reality not all people will be in support of the government contract. Signing a contract that forces some people to abide by stipulations that they did not agree to is grounds for voiding the contract.

Suppliers who ink contracts with government agents, which includes creditors who buy sovereign debt, should be aware of the possibility that they can be legitimately reversed. In the case of bonds, that means legitimate grounds for default.

no positions

Monday, December 5, 2016

Modern Day Slaves

Colonel Robert Gould Shaw: It stinks, I suppose.
Trip: Yeah, it stinks bad. And we all covered up in it, too. Ain't nobody clean. Be nice to get clean, though.

Using an analogy from the popular TV series The Walking Dead, Jacob Hornberger suggests that many people narrowly view slavery as the chattel version practiced by southern states prior to the Civil War.

But many other forms of slavery exist. Any time a person must routinely surrender production under penalty of force constitutes slavery.

As JH correctly concludes, modern day taxpayers are today's fractional slaves.

Sunday, December 4, 2016

US Population Density

In a big country
Dreams stay with you
Like a lover's voice
Fires the mountainside
--Big Country

Cool animated map of population density of the continental United States from 1790 - 2015. Many of the blank spots in the first 100 yrs are due to lack of data, as people were living in many of those areas--albeit thinly w.r.t. density. The visual of the second century is one of increasing splotches as population becomes more concentrated, particularly in urban areas.

Saturday, December 3, 2016

Tax Cuts vs Bailouts

If you drive a care, I'll tax the street
If you try to sit, I'll tax the seat
If you get too cold, I'll tax the heat
If you take a walk, I'll tax the street
--The Beatles

Of many headlines Donald Trump made this week, one related to a deal that he helped engineer with Carrier Corp. The essence of the deal was that the company would keep 800 jobs at a factory in Indiana rather than moving them outside the US in exchange for about $7 million in tax breaks.

Of course, the president-elect has no authority to grant tax breaks. But his running mate, vice president-elect Mike Pence, is still governor of Indiana and does possess the influence to get state-level tax exemptions done.

One of the many complaints about the deal comes from, naturally, progressives. Their complaint goes something like this: Barack Obama got all kinds of grief for bailing out the US auto industry following the credit market meltdown eight years ago. What's the difference between Obama's bailouts and Trump's tax cut?

The difference is considerable. When Obama, who in reality extended a plan initiated by his predecessor George Bush, bailed out the auto industry, he forced tax payers to subsidize imprudent behavior of automakers. In an unhampered market, that imprudent behavior would have been penalized by turning economic resources formerly in the hands of people who took excessive risk over to others who would have had the chance to manage those assets more prudently. Bailouts backstop excessive risk taking, and invite more imprudent decision-making in the future.

On the other hand, tax cuts of any kind are not subsidies. They constitute government permission to keep property--property that was rightfully owned in the first place. Tax cuts are peacefully grounded as they remove force from the system.

Bailouts are grants of privilege. They must be funded by imposing financial obligations on others. Tax avoidance of any kind (exemptions, loopholes, etc) confers no privilege. Those who avoid taxes are merely keeping more of what is rightfully theirs.

Friday, December 2, 2016

Flag Burning

"Who's to blame? Well certainly there are those more responsible than others and they will be held accountable. But again, truth be told, if you're looking for the guilty, you need only look into a mirror."
--V (V for Vendetta)

Recent statements by Donald Trump help us illustrate a recent point. Commenting on recent protests that included burning the American flag, the president-elect tweeted that flag burners should be jailed or perhaps even have their US citizenship revoked.

Under the constitutional government developed by our founding ancestors, what can a president legally do to people who burn flags?

Assuming that the flag is the burner's property and the act of burning does not endanger others, then the answer is nothing. Not a damn thing. The President of the United States cannot act like a king.

Burning an American flag under protest is a form of speech--speech which is protected from government interference under the First Amendment.

Under the original central government design, the best Trump could do is to drum up support for a constitutional amendment to ban flag burning--a tall order indeed.

Of course, what gets people nervous about Trump's rhetoric is that presidential power has expanded far beyond original intent. Thus, when a modern president states that he wants to ban speech, take away guns, suspend due process, et al., there is cause for alarm as he may be able to get away with discretionary action.

And guess what? We the people have ourselves to blame. We have sat idly by as presidents since the time of Lincoln have been unconstitutionally assimilating discretionary power aimed at trampling our natural rights.

Thursday, December 1, 2016

Yields March Higher

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

After a brief rest, long bond yields have resumed their march higher. Ten year note yields have increased nearly 50% in a month.

The wind in the face of leveraged economies and markets is stiffening.

position in SPX

Wednesday, November 30, 2016

Elections and Expansion of Power

"And, when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, all the laws being flat?"
--Sir Thomas More (A Man for All Seasons)

Increasingly, presidential elections in America throw groups who supported the losing candidate into panic. The panic includes pointing fingers. The president elect is a marxist or fascist. People who voted for him are uninformed or just plain idiots. The election system is rigged or unfair.

An interesting thing about this phenomenon is that it is bipartisan. For example, eight (and four) years ago, Republicans went into hysteria when Barack Obama was elected. Today, it is Democrats' turn as Donald Trump prepares to take the reigns. Complaints only arise when their side loses.

One way to explain this behavior is that it aligns with social identity theory and the psychology of losing. People tend to identify with groups--sometimes very strongly. They can develop such an psychologically vested interest in their group being superior that, when their group loses or is put down, they cope with cognitive dissonance by blaming others.

Another way to explain it is that there is true reason to be terrified. Today's US president holds far more discretionary power than our founding ancestors intended. That may be ok with you if the person in charge shares your values. But if a sitting president does not like you or the group you belong to, then the nation's chief executive is in a position to trample your rights with, borrowing from the current administration's stated approach to lawlessness, with the stroke of a pen or a phone call.

The anti-federalists foresaw this situation long ago. Marry discretionary rule with democratic election processes, and you were likely to see at some point just what we're living through today.

But the proper source of blame isn't the other guy. It is with us when we support discretionary expansion of presidential powers when it suits our interests. Because, at some point, that discretionary power quite likely will be wielded by someone we don't like and who doesn't like us.

Tuesday, November 29, 2016

Making America Great Again

We, so tired of all the darkness in our lives
With no more angry words to say can come alive
Get into a car and drive
To the other side
--Joe Jackson

President elect Donald Trump's campaign slogan was 'Make America Great Again.' Of course, countries such as the US are merely collections of people. It is people living inside of countries who can act in great ways.

It is true, however, that capacity for greatness is influenced by a country's environment. For example, how a country's various legal and economic institutions are structured can place a wind at peoples' backs or in their faces on the path toward greatness.

Perhaps a more appropriate campaign slogan would have been 'Make America's Environment More Capable of Facilitating Greatness.' Unfortunately, it's not very catchy.

The most significant factor that influences a country's environment for facilitating greatness involves the extent to which its people are free. Free people can exercise their God-given right to peacefully pursue their interests. When people can freely act, great things happen.

Unfortunately, policies enacted during past administrations have made us less free. Moreover, many of Trump's campaign planks, such as protectionist trade policy and government funded infrastructure projects, serve as powerful headwinds that stall great endeavors.

It is reversing such policies, i.e., removing government force from the system, that is critical to an environment that promotes greatness.

Ron Paul suggests that ending the 100+ year dominance of the Federal Reserve over monetary policy is vital in this regard. The Fed's fiat monetary policies have destroyed the purchasing power of our currency and unnaturally tilted the scales toward more economic inequality.

During his campaign, Trump indicated that he is aware of these problems to some degree. It remains to be seen, of course, if he is serious about acting on them.

By removing government force from the monetary system, people can freely decide on things such as what constitutes effective money and how much borrowing should cost.

Ron Paul is correct. Monetary freedom lines the path toward greatness.

Monday, November 28, 2016

Of Clothes and Cake

"Sorry, the bar is closed."
--Bartender at fashion show (Bright Lights, Big City)

Thought similar after hearing news this past weekend that prominent fashion designers are refusing to outfit Melania Trump for the presidential inauguration. If bakers can be forced to serve particular customers, then why can't fashion designers?

When freedom of association, which includes the right to discriminate, is taken away, then intolerance of any sort is illegal.

Pretty sure Ms Trump will be able to make do without the presidential clothiers, though.

Sunday, November 27, 2016

Real Fakes

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

In a timely follow up on yesterday's post, Glenn Greenwald dissects the Washington Post's shoddy work in their reporting on venues deemed to be 'fake news' outlets. As noted yesterday, it could hardly be more ironic that an outlet whose product is consistently slanted is accusing others of reporting 'fake news.'

The longer WaPo and other mainstream media sources cling to such absurd threads, the more likely it is that their brands will lose any equity that they have left.

Saturday, November 26, 2016

Fake News

"Just what do you want from me? Permission to be a fake? Stop whining."
--Jane Craig (Broadcast News)

One of the amusing outcomes of progressive hysteria over the election of Donald Trump is the left's rally around the narrative of 'fake news' and how it contributed to Trump's win and/or Hillary Clinton's loss. In this context, fake news is misinformation that is presented in a format that resembles mainstream news sources--particularly web-based sources. Because it looks like news, it is taken by gullible consumers of information to be true even though it is false.

The situation could hardly be more ironic. Mainstream media sources such as the New York Times and the Washington Post--venues whose content was so slanted during the presidential campaign that it could well have pushed voters away from Clinton and toward Trump in the name of procedural fairness--are now accusing alternative outlets of being illegitimate.

It gets even weirder. Mainstream outlets are now crossing the fake news concept with the narrative that Russia was the primary driver of election-related fake news as was able to bamboozle hundreds of websites to serve as propaganda machines for Mother Russia. A couple of the names appearing on such lists, btw, are,, and, of course,

Such absurdity suggests that the noise associated with post election cognitive dissonance may be reaching a crescendo.

Friday, November 25, 2016

Using The Cyber

Ellsworth Toohey: Mr Roark, we're alone here. Why don't you tell me what you think of me in any words you wish.
Howard Roark: But I don't think of you.
--The Fountainhead

Jeff Tucker notes one encouraging practice of president-elect Trump thus far: his preference for speaking directly thru new technology media channels rather than indirectly thru traditional media outlets and 'journalists.' Trump has been doing more communicating thru YouTube and Twitter than thru newspapers, television networks, et al.

Yes, Trump is prone to bluntness and gaffs. But it should be obvious by now that the only people who mind this approach are intelligentsia and #NeverTrump types.

Trumps use of 'the cyber' bypasses the establishment to deliver messages to people in a manner that reduces possibility for media filtering and slant. This is refreshing and liberating.

Thursday, November 24, 2016

I, Turkey Day

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

In a holiday-inspired homage to Leonard Read's classic "I, Pencil," this article sketches the complexity behind the supply chain that brings us Thanksgiving dinner. No planner could put such a progression together--much less describe it accurately.

Another demonstration of the miracle of spontaneous order that occurs when people voluntarily cooperate through production and exchange.

Indeed, our founding ancestors learned this the hard way.

Wednesday, November 23, 2016

New Technical Pattern

Where are you going to
What are you gonna do
Do you think that it will be easy
Do you think that it will be pleasin'
--Steve Miller Band

With the Dow crossing 19K post-election, a new bullish technical pattern has been proposed:

Seems fitting, given the times. Unfortunately, long bond yields exhibit a similar 'USA' pattern.

At least one of them is unlikely to last.

position in SPX

Tuesday, November 22, 2016

Monkey in the Wrench

Hans Gruber: Who are you then?
John McClane: Just the fly in the ointment, Hans. The monkey in the wrench. The pain in the ass.
--Die Hard

All three major equity indexes closed yesterday at all time highs. The wind is at the backs of the bulls for a year end surge.

One fly in the ointment is the Trannies which have yet to confirm the new highs in the Industrials.

While new highs for the group are a day or two's worth of rally away, the nonconfirmation constitutes one cause for pause--however small.

position in SPX

Monday, November 21, 2016

Not Free Trade

I'm sailing away
Set an open course for the virgin sea
I've got to be free
Free to face the life that's ahead of me

Article provides evidence of just how far away the US is from the 'free trade' country that many presume. When all regulatory constraints are considered, the US is one of the most trade restrictive counties in the world.

As noted in previous posts, free trade requires no treaties or 'deals.' No signed documents among bureaucrats are necessary to motivate people to trade with each other in order to better their circumstances.

Sunday, November 20, 2016

Unity After the Vote

He say, I know you, you know me
One thing I can tell you is you got to be free
Come together, right now
Over me
--The Beatles

The motto of the United States is e pluribus unum, Latin for 'from many, one.' Established in 1776, the same year as the signing of the Declaration of Independence, the motto's context tells us that the meaning does not imply surrendering oneself under penalty of force for some kind of greater good. Rather, it means voluntary cooperation in order to advance one's life, liberty, and pursuit of happiness.

When people act with discretion with respect to how much cooperation they will engage in, individuals are free to disagree and not go along with the crowd as long as they do not trample the rights of others--many of which were enumerated in the Constitution.

The same idea applies to post election unity. It is sometimes said that, once the process of an election is completed, it is time for people to accept the results and come together in unity in order to move forward. Not only does this fly in the face of human nature, particularly for those on the losing side of the vote, but it also challenges the unalienable right to pursue one's interests limited only by the restrain of not forcibly invading the interests of others in the process.

In fact, one can argue that our founding ancestors made it as difficult as possible for the central government to be unified. Their designs specifying differences in how officials were chosen for various branches of the federal government (House, Senate, President, Supreme Court) exemplify the framers' intent to discourage political unity.

Unity is not a condition under which representative should expect to govern. If government seeks unity by force, then expect more rather than less divisiveness.

Saturday, November 19, 2016

Social Networks and Election Hysteria

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

Some have theorized that the hysteria on display following the presidential election, particularly among anti Trump types, demonstrates that extensive social networking can prompt many people to create virtual realities that are difficult to shed if facts that challenge their personal worlds intervene. Such individuals cope with election-related cognitive dissonance by retreating further into the comfort of the world defined by their social network connections.

A competing but not altogether unrelated theory is that people with extensive social network connections are too tightly coupled to their environments. In the social networking context, tight coupling can make it more difficult to think for oneself because of constant exposure to the thoughts of others. Time and attention that can be allocated to personal matters offline is reduced. Highly networked individuals are more subject to influence and control by others.

Tightly coupled individuals respond to every little stimuli--even those that do not demand response--thereby making highly networked types prone to overreact to their environments.

Because of its capacity to 'overconnect' individuals to their environments, social networking can be viewed as potential source of instability--one that is potentially maladaptive in nature.

Friday, November 18, 2016

Internal Improvements

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

A great hypocrisy of American politics involves mainline Republicans who decry socialist policies of Democrats while applauding large infrastructure spending projects funded by the federal government. Currently GOP applause is directed toward Donald Trump's proposal to spend $1 trillion to build/rebuild roads, bridges, etc.

Republican love of infrastructure projects has a long history. A central plank of the Whig Party's American System in the early 1800s was federally funded 'internal improvements'--roads, bridges, canals, dams, et al.--primarily for benefit of northern industry. When the Whigs morphed into the Republican Party in the 1850s, it was Abraham Lincoln who helped institutionalize the internal improvement notion into the GOP playbook.

Funding infrastructure projects by forcibly taking property from some for the benefit of others, even if those others are euphemized as 'the greater good,' is consummate socialism.

Thursday, November 17, 2016

Leaks and Elections

Sybilla: What will become of us?
Balian of Ibelin: The world will decide. The world always decides.
--Kingdom of Heaven

Ron Paul echos something I've been thinking--that the most significant thing to come out of this election cycle from a process standpoint is the contribution of Wikileaks. Wikileaks, of course, is just a clearing house for information. The suppliers of that information, the real leakers, are the ones that deserve the credit for getting information being suppressed by governments to its rightful place: into the hands of the people.

Wikileaks' slogan is "we open governments." Very appropriate. Government secrecy compromises freedom. It compromises safety as well. Government secrets create foundations for aggression and war.

As implied by the Wikileaks slogan, the fewer the secrets, the more open the government. The more open the government, the greater the liberty.

Because government can only create information if it commandeers resources from people to do so, then it is the people who are the rightful owners of that information. It is their property. They have just claim to see it.

Once they have it hand, then people are capable of making more informed decisions in, for example, elections.

Wednesday, November 16, 2016

Dollar Rally

We're talkin' 'bout the dollar bill
Now what are we all to do
When the money's got a hold on you
--Simply Red

The US dollar has been rallying on the back of last week's election results. Some high profile investors, such as Stan Druckenmiller, have voiced their bullishness about the dollar's prospects post-election.

A long term chart shows the Dollar Index doing work at the nice round resistance level of 100 with a nice multi-year cup-and-handle pattern in the backdrop. Should it break out, the USD has considerable room to run.

Conventional wisdom suggests that a strong dollar is bearish for gold, although there have been extended periods where such a negative correlation is not apparent. Moreover, central bank money printing worldwide is likely to make all historical relationships involving fiat currency less reliable predictors in the present environment.

Would think that we are likely to start hearing complaints from domestically headquartered companies that the strong dollar is hurting their ability to trade with other countries.

position in gold 

Tuesday, November 15, 2016

Will of the People

Kreese: What's the matter? The boy can't take care of his own problems?
Myagi: One to one problem, yes. FIVE to one problem, too much ask anyone.
--The Karate Kid

It is often said that results from democratic election processes constitute 'the will of the people.' No. More accurately, democratically derived election results can be said to reflect the will of some group--usually a majority faction--of people.

In societies governed by discretionary rule rather than the rule of law, election results confer a license to the majority faction to impose their collective will on the minority faction. Because of the stakes involved, factions become desperate to achieve majority status and maintain it.

Only systems grounded in the rule of law impairs the will of any group of people to be imposed on others via democratic election process.

Monday, November 14, 2016

Global Bond Route

It ain't no use
We're headed for disaster
Our minds say no
But our hearts were talkin' faster
--Donnie Iris

Bonds still getting pounded with Ten Year yields up almost 20% in less than a week. Sovereign debt worldwide has joined the route.

Heard some talking heads this morning trying to drink the bond bloodbath pretty--e.g., rising yields signal optimism about global growth. Look at the Dow, they argue. It's hitting all time highs...

Don't drink that kool-aid. Although near term stochastics suggest the sell-off may be due for a breather, a secular trend higher in rates will eventually crush leveraged economies and markets.

position in SPX

Sunday, November 13, 2016

Post Election Cognitive Dissonance

"This is a pleasant fiction."
--Lucilla (Gladiator)

Cognitive dissonance is mental stress driven by the holding of contradictory beliefs or thoughts, or by the appearance of new information that conflicts with existing beliefs or values. While cognitive dissonance can be resolved in the direction of moving toward truth, it often drives people in the opposite direction--toward rationalizing false beliefs and/or continuing (perhaps even escalatinge) failing courses of action.

Stated differently, cognitive dissonance helps shape the psychology of false beliefs and denial.

Scott Adams suggests that last week's election results have unleashed a enormous wave of cognitive dissonance among anti-Trumpers. He suggests that those protesting Trump's victory are struggling with a state of mental stress that is characteristic of cognitive dissonance. The pathology was as follows:

1) They believe they are smart and well-informed.

2) Their smart, well-informed judgment told them that Trump was obviously a terrible candidate for president.

3) Half the voters, which includes smart and well-informed people, voted for Trump anyway.

Because these 'facts' can't be reconciled in the minds of anti-Trumpers, something has to give in order to cope with the mental stress. Two possibilities for interpreting reality follow. One is to accept that, if a large portion of the voting public does not see Trump as a terrible candidate for president, then perhaps he isn't. Of course, doing so would conflict with 1) and 2) above--i.e., that the individual is smart and well-informed and correctly identified Trump as a terrible candidate. The negative psychic income involved with this resolution is too great for many to bear.

Seeking an alternative that takes less psychic toll, anti-Trumpers are likely to head down path number two. Post-election anti-Trumpers stay committed to 1) and 2) and modify 3). They rationalize that those who voted for Trump know he was a terrible candidate and prefer terrible. Moreover, Trump supporters can't be smart and well-informed.

In the anti-Trump hallucination, the KKK, neo-nazis, xenophobes, bigots, et al are not nutty fringe groups but appear center stage as general symbols of all Trump supporters.

That Trump supporters include many smart and well-informed people who are capable of rendering good collective judgment is unfathomable to people who can't imagine a world in which their personal powers of perception could be so wrong.

To reconcile their world, anti-Trumpers have to imagine Trump supporters as defective in some moral or cognitive way.