Word Trappers

"Hornbeck, I'm getting tired of you. You never push a noun against a verb without trying to blow up something."
--Henry Drummond (Inherit the Wind)

The media establishment can be seen as an arm of modern-day Pharisees. They employ out of context quotes, fact checking, think tank studies, loaded interview questions, et al. in order to deceive and promote political agendas.

As in Jesus' time, they are consummate word trappers. They are intent on using rhetoric against others.

Digging Gold

Well I don't really know her
I only know her name
But she crawls under your skin
You're never quite the same
--Genesis

Continue to dig the action in gold and silver. Many metal proxies quietly approaching their 200 day moving averages.

Let's see how they address this level of technical resistance.

position in gold, silver

Vermont Model

Matt Farrell: What are we doing?
John McClane: It's a little thing they invented back in the Sixties call 'jogging.' You're gonna love it. Come on.
--Live Free or Die Hard

Mas Ayoob notes that New Hampshire, the 'Live Free or Die' state, recently enacted a law that allows law-abiding citizens to carry loaded, concealed handguns without a permit. This makes 12 states that permit individuals to carry with few restrictions. In addition to NH, those states include Maine, Vermont, West Virginia, Mississippi, Arkansas, Missouri, Kansas, Wyoming, Arizona, Idaho, and Alaska. Three more that allow carry with slightly more restriction are Oklahoma, New Mexico, and Montana.

Ayoob refers to permitless carry as the 'Vermont Model.' Vermont has the longest standing tradition among the states of not requiring a permit to carry a concealed gun. It has restricted carry only to certain people including convicted felons and those adjudicated as mentally incompetent.

Vermont consistently ranks among the lowest violent crime rate states in the union.

Caterers On the Run

Fred Flintstone: Now listen, you, I got two big parties to book and I can always take my business elsewhere.
Caterer: Well, you can try. But I'm the only caterer in town. That's why I'm such a wise guy.
--The Flintstones

Of the many life lessons conveyed by the Flintstones, a memorable one comes in Season 5 Episode 4 when Fred books two parties, an adult one with dancing girls for his Water Buffalo lodge and a clown and favors for his daughter Pebbles' birthday party.

The caterer who takes the business is arrogant and clumsily mixes up the orders, sending the birthday party clown to the lodge and the dancing girls to Pebbles' party. When confronted with his mistake, the caterer is unapologetic. After all, he says, he's the only caterer in town.

The lesson: no competition promotes low productivity and lack of responsiveness to customer needs. It also fosters holier-than-thou hubris in those who believe they hold monopolistic positions.

For many years mainstream media outlets enjoyed a similar monopolistic position. Outlets were relatively few, particularly with the advent of radio/television and decline of traditional newspapers.

At the same time, ideologies of journalists were becoming more homogenous, leaving interpretation of events increasingly susceptible to slanted reporting, whether intentional or not. The nature of 'news' being what it is, it is difficult for consumers of news to assess the accuracy of reporting because they are not there to witness the event themselves. Journalists in such a situation become less accountable and are likely to exploit their only-caterer-in-town' position.

In competitive markets, the problem of slant should vanish over time because entrepreneurs will recognize opportunity to provide more accurate reporting for information consumers (assuming, of course, that unbiased information is actually desired). Fox News and talk radio, while certainly not unbiased in the content they provide, exemplify entrepreneurial responses to provide consumers with alternative perspectives on events compared to the entrenched media establishment.

However, it has not been until the advent of social media, and, most recently, the recent election cycle, that the media caterers have really started to lose their grip on the news markets. Thousands of alternative venues (many of which mainstream media sought to recently label as 'fake news'--an smear op that has completely blown up in the establishment's face) convey alternative perspectives of events. Slant, such as that revealed during the recent presidential campaign coverage, becomes much more apparent to information consumers.

Couple that with an entrepreneurial president who comfortably takes his message directly to the people (thus reducing effect of journalistic distortion) and has no problem calling out journalists for what he believes to be inaccurate or unfair coverage, and you have caterers on the run everywhere.

Tire Tariffs and Jobs

You could have a big dipper
Going up and down around the bends
You could have a bumper car, bumping
This amusement never ends
--Peter Gabriel

President Trump's loud protectionist rhetoric may be crowding out memory about interventionary trade policies of his predecessors. The fact is that no president in the past 100+ years has operated in the White House as a totally free trader (Coolidge was probably closest to the ideal). All had protectionist policies, sometimes huge ones, en force.

Going back further to the Party of Lincoln and beyond, protectionism has been a central political plank nearly since the country's founding.

Prof Williams takes us back to the early days of the Obama Administration's initiative to protect jobs in the domestic tire industry. Beginning in 2009, the administration oversaw the imposition and enforcement of various tariffs and taxes on tire imports, particularly those from China. When it couldn't realize adequate relief via the WTO, China retaliated with trade sanctions of its own.

In his 2012 State of the Union speech, Obama boasted that his administration's policies were responsible for saving over 1,000 tire industry jobs. However, this situation is a classic case of that which is seen and that which is not seen.

A subsequent study sought to evaluate the total cost of the tire industry protection program. The researchers concluded that tire trade restrictions forced Americans to pay about $1.1 billion more for tires. Moreover, each of those tire industry jobs, with average salary of about $40k/yr, would up costing about $900,000 per job saved. That's an ROI that only a bureaucrat would love.

Protectionism is always and everywhere a failed strategy. What people often see in support of protectionism are highlights of the few jobs saved. What they don't see are higher resulting product costs and the many jobs in other industries eliminated as a result.

Hedge Funds Misrepresented

Amanda Jones: So, do you always bring an extra girl when you go out?
Keith Nelson: I like to cover my bets.
Amanda Jones: That's very cute. I'll have to remember that.
--Some Kind of Wonderful

WSJ article today touts a $1 million bet that Warren Buffett made 10 yrs ago that index funds would outperform hedge funds over a decade long period. The article suggests that, unless markets crash this year, then Buffett will win the bet.

But it is precisely during those periods of market turbulence that hedge funds outperform. The primary purpose of hedge funds, classically defined, is to 'hedge' bets with positions that move in opposite directions.

The article, which reads like an advertisement for Warren Buffett with graphics like the above, ignores the hedging purpose of hedge funds in what has transpired during the period of the bet.

Am pretty sure that the basket of hedge funds employed in the bet significantly outperformed Buffett's Vanguard S&P Index fund during the first two years of the bet. After all, this was the period during which the credit market collapse brought major stock indexes down by more than half.

Since then, however, markets have gone straight up with little correction, with many stock indexes more that quadrupling from their March 2009 lows. Major indexes currently rest at all time highs.

Basic market axiom: Long/short funds will generally under perform long-only funds in trending bull markets.

Yes, hedge fund fee structures are higher than passive index fund alternatives. But those fees have been declining due to competition. Moreover, the gains obtained from hedge funds during periods of market turbulence have far exceeded the fees.

We can be confident in this: If the last decade resulted in eight down stock market years and only two up (rather than the opposite), then Buffett would be the one getting ready to write the check.

Bubble Blindness

"And the beauty of the deal: no one is responsible. Because everyone is drinking the same Kool Aid."
--Gordon Gekko (Wall Street: Money Never Sleeps)

Q: When do people broadly recognize financial market bubbles? A: Afterwards.

As demonstrated here, warning signs continue to flash. Unfortunately, they make no nevermind to people as long as prices march higher.

When it all comes crashing down, it is then that people will 'see' the bubble.

Liberating Tolerance

"That's right. Brantley is Whitfield. Whitfield is Brantley."
--Brantley Foster (Secret of My Success)

In the 1960s, cultural Marxist Herbert Marcuse developed the concept of 'liberating tolerance.' Drawing from Freudian theories of psychological oppression, Marcuse posited that many 'correct' ideas are repressed by dominant coalitions that would not benefit if those ideas became widely known. In order to get the 'truth' out there, those dominant coalitions and their associated institutions must be overthrown.

Marcuse proposed that one way to do this is thru 'liberating tolerance.' Liberating tolerance means tolerating all ideas coming from the 'correct' sources while tolerating no ideas coming from sources deemed 'incorrect.'

Let's be clear. Tolerance does not mean accepting something as right or truthful. It means being able to live with something that one doesn't like. For example, I may find someone who espouses cultural Maxist ideals as distasteful, but, if I am tolerant, then I do not seek to forcibly remove that person from my environment. I can try to explain or persuade why that person's ideas or approach may be wrong or misguided, but I cannot seek to forcibly suppress the person's views. If I did so, then I would be intolerant.

The notion of 'liberating tolerance' is clearly oxymoronish in nature.

Then again, attempts to turn the meaning of words upside down is another trademark of socialist movements.

Credit, No Credit

Welcome to your life
There's no turning back
Even while you sleep
We will find you
--Tears for Fears

Ironic statement coming from someone who advocated a monetary system steeped in credit money and backstopped by central banks.

btw, the Federal Reserve Act was signed into law one year later.

position in gold

America First

You mention the time we were together
So long ago 
Well, I don't remember
All I know is that it makes me feel good now
--The Motels

Some people have treated Donald Trump's statements about focusing political energies internally (e.g., his campaign slogan "Make America Great Again") as something new and dangerous.

They are nothing new, as demonstrated by the picture below borrowed from renowned Coolidge expert Amity Shlaes' Twitter feed. I suspect that such 'America First' platforms were common and in fact largely implied before the progressive era when the globalism mindset first gained widespread traction.

They are also not inherently dangerous. Putting America first does not necessarily imply some nationalistic, xenophobic fervor as progressives often suggest. Instead, it means prioritizing scarce political resources internally toward issues affecting everyday Americans.

Putting America first does not necessarily mean isolationism either. In order to advance standard of living, America (nor any other country for that matter) cannot be independent and self-sufficient. Instead, as Trade Theory 101 tells us, America should specialize its production and engage in robust trade with other nations.

Paradoxically, one of the best policies for putting America first is to let its citizens trade freely (no trade agreements necessary) with people from other countries.

Causes of Political Division

I though the pain and truth 
Were things that really mattered
But you can't stay here
With every single hope you had shattered
--Big Country

These pages have discussed many factors that lead to political division over time. One is socialism. The more property is taken out of the hands of individuals and put in the hands of the state, then the more divisiveness is likely to grow between those who have property and those who want to appropriate it by force.

Exacerbating the problem is another factor, democracy. When control of the strong arm of government is captured by majority vote, then various factions will band together, likely into two opposing groups over time per Duverger's Law, to become the first past the post. The larger the stakes, the more the two opposing groups will seek to win the election and destroy the each other.

Another factor that Lew Rockwell reminds us about is state size in terms of population. Axiomatic to the human condition is diversity and variation. People have different preferences, including preferences related to politics. It stands to reason that as the size of a country grows, then it will be less likely that there will be agreement in terms of how the country should be governed.

A straightforward solution to the size problem is secession. Break up the big country into smaller ones so that people can associate according to their political preferences.

One group that may be catching on here is the left. Although they have long claimed that secession was a racist or treasonous initiative, leftists, because of the current state of political affairs, now seem to be grasping the merits of a break up.

Here's hoping that debates on the merits of breaking big into small escalate.

Banks are Borrowers, Not Lenders

"But beware. Anger, fear, aggression. The dark side are they."
--Yoda (Return of the Jedi)

People do not seem to grasp this message.

Depositors are creditors to banks. Banks borrow from depositors.

How banks get away with being the 'lender' and entitled to take delivery on houses and other property when loans built on the capital of others fail is one of the greatest Jedi Mind Tricks in history.

Not to mention the bailouts that make banks whole at the expense of their creditors. Nice work if you can get it.

Institutional Isomorphism, the Intelligence Community, and Trump

"Cooperation only lasts as long as the status quo is unchanged."
--Patrick Gates (National Treasure)

A central objective of institutions is isomorphism, or sameness. Various processes that encourage institutional isomorphism may be mimetic, normative, and/or coercive in nature. These processes seek compliance and maintenance of the status quo.

An obvious problem with institutions is their maladaptive nature. Processes that promote sameness and compliance are of little use in turbulent environments that require innovation and change.

When facing such turbulence and threat of extinction, institutions have trouble responding with anything other than 'more of the same,' meaning that they intensify isomorphic processes in hopes of beating back the threat.

It should therefore be of no surprise that elements inside the federal government, such as the intelligence community, are rising up in defiance of Donald Trump. Being an outsider who has proposed radical change, Trump poses a significant threat to those in government institutions--particularly those under Trump's direct control, e.g., intelligence agencies. Even prior to his inauguration, Trump promised to restructure the national intelligence apparatus.

Because he has threatened the status quo, Trump should expect push back as the institution does the only thing that it knows how to do when facing an environmental threat.
,
Meanwhile, Judge Nap warns the president that there are intelligence elements inside of the executive branch that he will need to get rid of.

It seems likely that these agencies have not perceived such a threat to their existence since JFK. We know how that threat was terminated.

Hands On, Hands Down

Saw my picture in the paper
Read the news round my face
And now some people
Don't want to treat me the same
--Tears for Fears

Ron Paul wonders whether President Trump will react to the next depression like 'hands-off' Harding or like 'hands-on' Hoover/FDR and, really every subsequent president who has had to deal with a major economic downturn.

I'll side with the latter. When the $%^t hits the fan, Trump will want to play economic central planner just as his predecessors.

While Trump has demonstrated during his campaign and during his early time in office that he is about as unpredictable as they come for the Oval Office, that he'll reach for the control panel when things come apart seems a safe bet.

Failure to Corroborate

"The heirs and their lawyers are up in the dome right now waiting to explain the nature of the crime with facts, figures, and falsehoods. One more F and they won't be drafted."
--Ed Hucheson (Deadline U.S.A.)

Post election hysteria has produced no shortage of examples of slanted media coverage and gaffes. A recent one involves the travel ban order and a Muslim-American Olympic athlete. In an interview last week, when asked whether she knew anyone directly impacted by 'Trump's travel ban,' the athlete, Ibtihaj Muhammad, responded that she "personally was held at Customs for two hours just a few weeks ago" and that she "didn't know why."

The "a few weeks ago" portion of her response should have raised some flags in both the interviewer's and audience's minds at the time. Trump was inaugurated on January 20th and he signed the travel ban order about a week later. The time line discrepancy was not questioned, however.

Before long, media outlets including Time, Sports Illustrated, and ESPN published versions of the interview with either explicit or implicit ties to Trump's executive order.

It was not until a Customs official familiar with the incident stated that the incident happened in December, while Barack Obama was still president, that the circulating narrative was upset. Because she happens to be a frequent traveler abroad, then Muhammad is also frequently subject to random checks that all travelers are subject to. The official also said that the incident took significantly less time to wrap up than was claimed by Muhammad.

Setting aside questions related to Muhammad's motives--motives that are certainly fair to question in this case--the central story once again is the widespread abdication of journalistic duty to get the facts straight. Few in the media attempted to do what they are supposed to do: corroborate a story.

Vesteds vs Threats

"The status quo has changed, son."
--Patrick Gates (National Treasure)

As the state grows bigger, those people seeking to shrink the state run into greater opposition. More people have a vested interest in the state's current size and continue growth.

The Vesteds will push back hard against the Threats--i.e., anyone who threatens state size and influence. Early on, Vesteds will push back by ostracizing the Threats. Slander, ridicule, exclusion, et al.

If social sanction strategies do not work, then the Vesteds will resort to out and out physical violence to eliminate the Threats. The Vesteds must preserve the status quo by eliminating the Threats who have become 'radical extremists.'

Chaos Cometh

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

Mises masterfully analyzed the situation years ago. Movement toward socialism does not ultimately deliver socialism in its purest sense. It brings about chaos.

We are now much farther down the road and symptoms of economic and social chaos continue to escalate.

Partisans of the two major political parties always blame the other side, unable to recognize the roles they themselves play in the cast of chaos.

Their actions to increase the size and influence of the state at the expense of voluntary cooperation moves us ever closer to the chaos endpoint.

Ninth Circuit Ruling

It's been too long since we took the time
No one's to blame
I know time flies so quickly
--John Lennon

I view high profile court decisions as an opportunity for improving my understanding of the law, particularly as it relates to the Constitution and principles of liberty. These pages include reflections on several cases, including Obamacare, the Arizona immigration case, and the Zimmerman murder trial. The Ninth Circuit's recent decision to uphold a temporary restraining order on President Trump's travel ban provides another such opportunity.

The Trump's travel ban order is interesting to me because, at a high level, it pits freedom against security, a topic that has occupied this blog since its founding.

It also involves the Ninth Circuit. The Ninth Circuit is affectionately known to some as 'the Ninth Circus' because of its reputation to deliver some of the most unconstitutional rulings of any appellate court in the country (measured in part by the high percentage of its rulings that have subsequently been overturned by the Supreme Court). As such, its opinions often provide a useful contrast against which to evaluate legal correctness.

Much of the interest surrounding this case is Trump's campaign characterization of his executive order as a 'Muslim ban.' Trump's detractors, and the legal plaintiffs in the case, claim that this proves intent of discrimination on religious grounds. While this may of concern from a human standpoint, what matters from a legal standpoint is what is stated in the executive order. Plainly, there is no bias written into the order in this regard. Religious belief is not a basis for travel restriction; country of origin is. And although the Muslim faith pervades the several countries included in the ban, Muslims traveling from other countries are unaffected. Fortunately, although Ninth Circuit judges questioned federal lawyers about Trump's rhetoric and commented about it in their ruling, they did not base their opinion on this issue.

Did the plaintiffs, e.g., the state of Washington, even have standing in this case? The principle of standing holds that only persons legally injured by government conduct can sue to challenge legality. The Ninth Circuit ruling held that states can challenge federal immigration law on grounds that state institutions, such an universities, would be affected by the absence of students or faculty affected by the travel ban. This argument seems weak, and is analogous to Wal-Mart suing the government for taxes imposed on its customers because they would have less money to spend in the store. Moreover, state institutions are not the regulated party in this case. Instead, the plaintiffs are suing to block the enforcement of an executive order against other people, a situation for which there is little precedent.

A primary argument made by the plaintiffs is that the executive order violates due process rights of affected aliens. This is problematic for several reasons. One is that the president has been granted plenary authority by both the Constitution and by Congress under the Immigration and Naturalization Act (INA) to decide that aliens from particular nations present national security risks. Because they are unadmitted nonresidents, aliens have no constitutional right of entry into the United States.

The Ninth Circuit sidestepped this issue, arguing that aliens are being denied procedural due process in that they now have no 'notice or hearing' for making their case for entry. But aliens have no fewer procedural rights than they had under prior law. They can still apply for visas and protest cancellation of visas just as before. The executive order deals with substance, stating that aliens from several foreign countries will not be permitted to travel to the United States for a temporary period of time until security procedures are reviewed.

The Ninth Circuit spent several paragraphs explaining why the executive order might not be constitutional with respect to some groups, including green card holders, previously admitted aliens presently abroad, and even unlawful aliens now residing in the US. However, these groups represent a subset, perhaps even a small minority, of the scope of the executive order. Nonetheless, the law as written can be construed as incorrectly applying to some groups that are protected under the law.

The legal question is whether a law should be upheld when the scope, in terms of who is affected, has not been correctly specified. The court ruled, "Even though the TRO [the federal judge's block on the travel ban] may be overbroad in some respects, it is not our role to try, in effect, to rewrite the Executive Order."

I think the Ninth Circuit got this part right. Strike down a law (or uphold a restraining order) when it has been incorrectly specified. Don not try to recraft it from the bench. Parenthetically, recrafting it from the bench is precisely what the Roberts court did with Obamacare--not just once, but twice.

Since the appellate court decision, the Trump administration has signaled that they will not appeal the decision to the Supreme Court. This seems smart. Although it erred in much of its judgment, and it is questionable whether state plaintiffs in fact had legal standing to bring suit, the Ninth Circuit got its assessment of scope right.

In effect, the court has sent the executive order back to the president for a rewrite.

Good Looking Setup

I thought it was clear
The plan was we would share
This feeling just between ourselves
--Shannon

Attractive setup in Central Fund of Canada (CEF). Call it what you want. Reverse head-and-shoulders pattern. Cup-and-handle pattern.

A break above $12.50 validates the bullish action.

This closed end fund currently trades at a 9% discount to net asset value. Conceptually, this is similar to buying gold and silver at close to 10% below the spot price. An attractive proposition in this environ.

position in CEF

Travel Ban

On we sweep with threshing oar
Our only goal will be the Western shore
--Led Zeppelin

Last week President Trump signed an executive order that temporarily suspends entry into the United States of aliens from several countries referred to in the Immigration and Nationalization Act (INA). Those countries have been deemed by the federal government (the most recent list was developed under the Obama administration) to harbor threats to public safety or security. The executive order also suspended the US refugee program, indefinitely barred Syrians from entering the US, and cut the number of refugees that the US would accept this year.

Subsequently, a US district judge in Washington state issued a temporary restraining order on the president's order, claiming that the order would do 'irreparable harm' to the affairs of people in several states serving as plaintiffs in the case. The case was quickly appealed to the Ninth Circuit in San Francisco where arguments have already been made and a decision is pending.

Judge Nap argues that Trump is well within his authority to issue his order. The president can legally discriminate on the basis of geographic area if there is a likelihood that the region harbors people who are deemed to pose public health or national security threats.

In particular, the INA grants executive authority for temporarily banning entry until more proper vetting procedures can be determined, which is an intent that is clearly stated in Trump's order.

Which ever way the ruling goes, the Ninth Circuit's decision will likely be quickly appealed to the Supreme Court. Judge Nap suspects that the high court will refuse to hear the case if the appellate court sides with Trump and the feds. However, if the circuit court upholds the TRO, then he thinks that the Supremes will take it on since the court is interested in "the orderly administration of government function."

Abolishing the Dept of Education

"Shut it down. Shut it down now."
--Telco operator (Die Hard)

Yesterday, House rep Thomas Massie (KY) introduced a one page, actually one sentence, bill that would abolish the federal Dept of Education. The bill reads:

"The Department of Education will terminate on December 31, 2018."

Demonstrating the clouded state of the bureaucratic mind, some members of the House subsequently asked Massie what the bill meant.

Whether government at any level should be involved in the education of children is a fine issue to ponder. That any such government involvement is better injected at the federal or local level seems an even more straightforward case to resolve.

Hopefully, similar proposals to dismantle other federal agencies will follow.

Emerging Inflationary Scenario

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

These pages have frequently considered the 'great debate' as to whether the next time down will be initiated by an extreme inflationary or deflationary event. Although I originally found the deflationary argument intuitive, I have been warming to the inflation side. Currently, I am entertaining a previously unconsidered scenario that lends further weight to the inflation case.

The scenario is predicated on a new wave of economic optimism brought on by the election of Donald Trump. Trump is promising a business friendly environment by rolling back regs, investing in infrastructure, and favoring US job creation and production from a policy perspective. Whether some of those initiatives actually are ultimately business friendly is beside the point. The issue is whether people think they are. If they collectively do, then their herd-like reflexes may lead to investing more and biding up prices at a time when leverage is extreme and financial securities are priced at all time highs.

It is easy to envision another leg higher in stocks, perhaps even a moonshot, and another hefty layer of debt added to an already over-leveraged system. Prices of goods and services are also likely to shoot higher.

For this scenario to play out, however, interest rates need to stay low. If rates move higher as they have already started to do, then the chances of this scenario decline as it depends on debt creation.

The wild card may be the wild man Trump himself. Trump has publicly criticized the Fed and its role in blowing financial bubbles in the past. But that was before Trump took over the Big Chair. Now that he's seated, Trump may find it preferable to keep interest rates suppressed lest his Make America Great Again agenda shrivels.

Past behavior suggests that Trump will hammer away against a non-compliant central bank institution until he gets his way. If Janet Yellen and/or other Fed governors do not accommodate, then Trump will seek to swap them for people who will.

Subsequently, if a Trump-picked Fed re-initiates bond buying (a.k.a. Quantitative Easing) in a big way, then Big Inflation via this scenario is almost a lock.

While I can't be generally long stocks in any significant way at current prices, there is no way I want to be short them in lieu of this scenario. Gold and silver, on the other hand, beckon.

positions in gold and silver

Patriot Games

Jack Ryan: Where are you taking me, Marty?
Marty Cantor: It's you who have taken us, Jack.
--Patriot Games

Have never been a huge New England Patriots fan but it is difficult not to respect the game that this team has played for more than a decade and a half. Yes, they employ perhaps the best quarterback of all-time, Tom Brady. However, Brady's supporting cast over the course of his 17 year career has varied from year-to-year. It has included mercenary stars for hire like Randy Moss as well as no-names-turned-temporary-star like Julian Edelman.

Given their nomadic roster, the team's superior results over such a long period of time suggest that it's not merely the result of the superior talent of Tom Brady on the field. It is about Tom Brady and his supporting cast plugging into the Patriots' operating system. Head coach Bill Belichik is the chief software engineer, and he has mastered the ability to rapidly reprogram the system for a given situation.

The Patriots' spectacular comeback overtime victory over the Atlanta Falcons in last night's Super Bowl was a sight to behold, and marked perhaps the pinnacle of the cooperative. By themselves, both Brady and Belichik are headed to the Hall of Fame. However, it would be nice if there was a way to capture the synergy of the Patriot system for display in Canton as well.

Dodd Frank

Bill Clark: Do you realize what you've done? You are asking for the largest bailout in the history of this country. We are talking about nationalization. Socialism. I've fought against this my entire life!
Bretton James: And if we don't get it, Bill, then there is no history anymore. The music stops. The ballgame is over. Julie?
Julie Steinhardt: 1929...It's worse now because it goes faster. Money markets worldwide dry up before the end of the week. ATMs stop spitting out cash. Banks close. It'll be the end of the world, Bill.
--Wall Street: Money Never Sleeps

Last week President Trump ordered a review of rules and regs governing financial markets to ensure alignment with several 'core principles,' including empowering Americans to make independent financial decisions and informed choices, and preventing tax-payer funded bailouts.

Many are viewing this executive order as a referendum on the validity of the Dodd Frank Act signed into law during President Obama's first term. It is easy to understand why.

One only needs to start paging thru the legislation to get a sense of its bureaucratic heft. At over 2300 pages, DF is a marvel of central planning unmatched by any piece of legislature in recent memory save for Obamacare (which lawmakers have still yet to read in order to find out what's in it).

A popular defense of DF is that it has served to reduce risk by exerting more control over the banks to keep those institutions from blowing up the financial as they almost did in 2008. However, DF does little to address the root causes of the credit crisis. In fact, it can be argued that the legislation has elevated the risk of future meltdowns by adding to the moral hazard that runs rife in the system.

Any actions from this order that hand control back to the markets will be welcome.

Legal Immigration

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

The left loves employing positive substitute symbols because of rhetoric's capacity to deceive. A current favorite is 'immigration.' People tend to have a natural affinity for the term because, by and large, their ancestors were immigrants. This is true for most people in most countries, as the history of man can be told as a story of migration.

We Americans are particularly fond of the immigrant term as it conjures recollection of our E pluribus unum founding and millions subsequently pouring out of ships at Ellis Island in search of better lives.

1882-S $1 Morgan PCGS MS67 CAC

The adjective that the left prefers to leave out of the American immigration narrative is 'legal.' Since the country's founding, laws have governed the admission of immigrants into the country. The American melting pot recipe has been one of legal immigration.

Leftists omit 'legal' from the immigration discussion out of political expedience. The millions of illegal immigrants currently residing in the US have been a source of votes. They also support a statist agenda grounded in globalism. Former President Obama's lawlessness with respect to enforcing immigration law exemplifies the left's position.

Because leftists know that they would have difficulty making their case to most Americans that illegal immigration is a fine thing for the country, they must restrict the narrative to immigration only. Then, the accusations fly. Those who support Trump's Wall or other methods of immigration law enforcement are painted as anti-immigrant. Or xenophobes. Or nativists.

If the name-calling grates on enough people, however, then the positive substitute symbol strategy could very well backfire. Americans are likely to become more conscious of the difference between legal and illegal immigration.

Not sure the left wants that to happen.

Getting Real

The cracks between the paving stones
Look like rivers of flowing veins
Strange people who know me
Peeping from behind every window pane
--The Who

One snapshot of the value of real assets relative to financial assets.

Real assets are those things that you can touch (e.g., commodities, real estate, collectibles) while financial securities are those things paper (e.g., stocks, bonds).

This particular graph shows real assets at historic lows relative to financial assets. The results find me a bit skeptical because the value of real estate is closer to all time highs rather than all time lows.

Nonetheless, the general implication rings true. When allocating investment capital currently, real assets seem a better value than the paper stuff.

Jim

Keith Davenport: You've got to help them out, Frank, or they will walk out on you. That'll be a worse failure than mine ever was. 
Frank Savage: Give them something to lean on?
Keith Davenport: Call it anything you like.
Frank Savage: Keith...I don't believe it. Here's where we part company. They're not boys. They're men. Too bad they have to find out about it so young. How old is Bishop? Twenty one, maybe. It's tough to have to grow all the way up at 21. But that's the only way we're going to get it done. And I think they can do it. Lean on somebody? I think they're better than that. And it that's not true, then we're a dead duck.
--Twelve O'Clock High

Fresh out of school, I went to work in a factory as a process engineer. My role was technical support, particularly project work aimed at improving products and processes.

We had a production manager named Jim. Big guy, smoker, balding. As production manager, Jim was ultimately responsible and held accountable for all that occurred in daily operations. Quantity, quality, equipment maintenance, personnel safety. That Jim was prematurely graying was probably no surprise as his was the ultimate high pressure job in the mill.

Jim's management style was authoritarian. This did not mean that he did not listen to, or frequently seek out, the viewpoints of others. But at the end of the day he preferred to make the decisions--in a forthright and often blunt manner.

His gruff approach irritated many managers. More than one viewed him as a dictator who managed by edict. "Here comes your buddy," one of my process engineer colleagues once said to production superintendent when he noticed Jim strolling down the noisy production floor toward them. "He's not my #$%^ing buddy," the superintendent replied.

At least on the surface, Jim didn't appear bothered that he was not well liked. Sitting in Jim's office shooting the breeze one afternoon, a friend and I suggested to Jim that his decision-making style wasn't winning him many friends. "I'm not here to make friends," he quickly shot back.

Although Jim's style rubbed many the wrong way, his results were superb. His tenure as production manager coincided with record performance for the division. However, his fine results did not preclude many from holding grudges.

Did Jim truly not care that his approach to management did not win many of his associates over? I don't know. I am pretty certain that Jim would say that he was being completely transparent with his forthright manner, that he would not compromise his behavior in order to gain popularity.

There was much to learn in those early years. Although I didn't realize it at the time, Jim was one of the lead instructors.

Supreme Court Appointment

"Smile, Natalie, there is justice in the world."
--Bud Fox (Wall Street)

Last night President Trump nominated Neil Gorsuch, currently an appellate judge on the 10th Circuit, for the Supreme Court. Gorsuch would replace Justice Antonin Scalia who died suddenly last February.

During his campaign, Trump promised to appoint an individual with strong constitutional grounding. Many thought that Trump was just blowing smoke--essentially trying to entice skeptics in the Republican party to come over to his side.

However, like many other actions that he has taken in the short time since he was sworn in, Trump appears to have fulfilled another promise. A review of Neil Gorsuch's record suggests that he is every bit the originalist and textualist that Scalia was--perhaps even more so. Assuming that he makes it through the blockade that leftists are certain to mount during the confirmation process, Gorsuch appears to have the stuff to be a justice dedicated to upholding constitutional rule of law.

An interesting implication of this appointment is that, because the president himself has not demonstrated that he is ideologically grounded in the Constitution, Trump could find himself at odds with Gorsuch's legal opinions, particularly if the new justice is able to persuade others on the bench to join him. It also makes one wonder about the approach the president would take should he be required to nominate others to the high court during his time in office.

Nonetheless, evidence at this time suggests that liberty has taken a step forward.