Saturday, March 31, 2018

Always Zero

Maybe someday
Saved by zero
I'll be more together
--The Fixx

Great insight by Thomas Sowell.

And when the government imposes its own 'minimum wage' by law, more zero wage situations occur.

Friday, March 30, 2018

Baseball's Back

"You know what we get to do today, Brooks? We get to play BASEBALL!"
--Jimmy Morris (The Rookie)

Opening Day in Cincinnati used to happen on the first Monday in April. The tradition also had the Reds opening before any other team seeing as it was the first professional baseball team--founded in 1869. 

Modern MLB scheduling has has done away with much of that, although the Reds are still afforded the privilege of opening at home. 

This year has been extra strange, with Opening Day slated for the last Thursday in March just shy of an early Easter weekend. The Findlay Market Parade was even moved to the following Monday due to downtown merchant concerns that the parade festivities might spook Easter shoppers. On Wednesday, forecasts of rain on Thursday prompted the Reds to postpone the game until Friday (follow that?), thereby marking the first Opening Day rain out since 1966 (which is a year or two prior to where my Baseball Memory kicks in).

But here we are. It's Friday noon and skies appear to be clearing to the west right on cue. Although playing the opener on Good Friday will likely cut into hot dog sales at the ballpark, and folding chairs may not be set up in the outfield as they were for Robby's first in 1956 at Crosley Field, we prepare to shed the shackles of winter once again.

Baseball's back.

Thursday, March 29, 2018

Democracy, Incrementalism, and State Power

Louden Swain: Can 800 million Chinese be wrong?
Tanneran: Frequently
--Vision Quest

Jeff Deist discusses the danger that democracy poses to freedom over time. Using past examples of income taxes, Social Security, and Medicare, as well as the present situation related to gun control, he argues that these programs evolved over long periods of time as a result of incremental gains gradually obtained thru democratic process.

This is not a new argument, of course. Growth of state power thru incrementalism (a.k.a. gradualism or fabianism) has been discussed on these pages before. A necessary ingredient of incrementalism is ability to foster compromise, the favored strategy of statists for getting people to cede liberty over time.

He makes a particularly insightful remark near the end of the piece:

"Democracy is nothing more than the process of politically vanquishing minority viewpoints."

Indeed--as these pages have long observed. Democracy, defined as decision-making processes based on majority vote, strips rights from some for the benefit of others. Although the dangers of democracy were well known to our founding ancestors, they are little understood today.

Seemingly, democracy's incremental compromises that erode liberty grow chains of bondage so gradually that most people fail to notice.

Wednesday, March 28, 2018

Capitalism, Socialism, and Wealth

"Look, what does a capitalist do? Let me ask you that, Mike. Huh? Tell me. I mean, what does he make, besides money? I don't know what he makes. The workers do all the work, don't they?"
--John Reed (Reds)

Not a bad sketch of socialists tend to view, or at least how they like to discuss, the two systems of economic organizing. The important feature of capitalism is that the rising tide of productivity improvement lifts all boats.

The only change I might make involves the upper right quadrant. With socialism, there is likely to be a large disparity of wealth between rich and poor. There may be less rich people, but those who are live high above the squalor of the masses.

Tuesday, March 27, 2018

Successful Test...For Now

It's not in the way that you hold me
It's not in the way you say you care

Yesterday's test of the 200 day moving avg proved successful. Exceedingly so in fact with the Dow ripping nearly 700 pts higher.

That's twice now in about six weeks that the SPX has bounced off this line of technical support. A central tenet of technical analysis is that support gets weaker with each successive test as layers of demand that support the level are used up during the test.

As such, bulls need to hold the gains. Not sure they can withstand another test should it occur in the next few days.

position in SPX

Monday, March 26, 2018

Textbook Bounce

On the rebound, you came to me
On the rebound, to set me free
On the rebound, too bad for me
--Russ Ballard

Textbook bounce off last week's technical set up with a nearly 2% gap higher this am.

Not sure the bulls really wanted a big gap open. Slipping a little here already. If they can't hold 'em higher, then it could get ugly.

position in SPX

Sunday, March 25, 2018

Gun Grabbers are Pro Gun

"Go to the sporting goods store. From the files obtain forms 4473. These will contain descriptions of weapons and lists of private ownership
--Colonel Ernesto Bella (Red Dawn)

The hypocrisy of statists never ceases to captivate me. The gun grabber segment is particularly active at the present time. Many like to say that they are 'anti gun.'

But they are not anti gun at all. They need guns in order to enforce their agenda. Gun grabbers must point guns at people and threaten them with bodily harm in attempts to keep them from owning guns. Whether that strategy can be effective is of course another discussion entirely.

Gun grabbers are pro gun. They support using guns to initiate violence on others. As principals of violence, they prefer guns in the hands of their strong-armed government agents in order to enact policies that require force to implement.

Saturday, March 24, 2018

Retest Coming

And there's some chance we could fail
But the last time someone was always there for bail
--Toad the Wet Sprocket

One of the rougher weeks for stock markets in recent memory quickly finds the SPX retesting the February lows. On a closing basis, we're already there in the 2580-90 zone.

Friday's close also finds the SPX sitting right on top of its 200 day moving avg. The 200 day is where the index bounced on an intraday basis last month. A decisive drop thru the 200 day early next week, particularly if the decline breaches the 2530ish Feb intraday low, might ignite some fireworks.

Meanwhile, the gold complex is perking up. The metal itself is rallying toward the top of the recent channel. The chart below has a cup-and-handlish look (bullish). Miners are also showing signs of life.

Should the it scamper thru 1360ish, the yellow dog might be off to the races.

positions in SPX, gold

Friday, March 23, 2018

Going Bust With Omnibus

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

With a multi-trillion 'omnibus' spending bill breezing thru both sides of a GOP majority Congress, we're once again reminded that there is little difference between your typical Hill Republican and the progressives that the party purports to oppose.
The exceptions continue to be a handful of senators including Rand Paul, who yesterday actually printed out the entire 2200+ page bill (a 2+ hr endeavor in itself ) and spent the remainder of the day reading and tweeting bill provisions. He signed off last nite after about 500 pages.

Quiz Question #1: Calculate the time to read a 2232 page bill assuming each page takes 2 minutes to read.

Quiz Question #2: Estimate how many members of Congress have read the entire omnibus bill.

The other exceptions are House members collectively known as the Freedom Caucus. The Caucus has not been shy in its opposition to the spending bill. It also wrote the below letter to the president asking him to join the Caucus in vetoing the bill.

Were it not for these few Tea Party remainders, it would be difficult to maintain hope that sailing over the fast approaching cliff can be averted.

Thursday, March 22, 2018

FISA 'Courts'

I'll move myself and my family aside
If we happen to be left half alive
I'll get all my papers and smile at the sky
For I know that the hypnotized never lie
--The Who

The Foreign Intelligence Surveillance Act (FISA) requires an assembly to authorize surveillance on individuals. These assemblies are called 'courts,' which serves as a euphemism that lends an air of legitimacy to the unjust FISA process.

Judge Nap once again recounts just how far away from legitimate courts these FISA assemblies are. They are held in secret with rulings and records unavailable to the public. Only government lawyers appear before a FISA judge, meaning that there is no one on the other side to challenge the government's submissions. No probable cause of a crime needs to be presented.

As the Judge observes, it takes no constitutional scholar to realize just how profoundly unconstitutional FISA courts are. As our founding ancestors well understood, secret courts that do not respect the principle of due process are ripe for abuse. They are tools of tyrants and lead to the corruption of judicial process and to the erosion of freedom.

FISA-facilitated corruption has been coming to light in the case of former FBI Deputy Director Andrew McCabe. McCabe allegedly approved the use of an unsubstantiated political dossier as the basis for obtaining a FISA court approval for spying on presidential candidate Donald Trump. The dossier itself and subsequent FISA court-approved surveillance formed the basis for an investigation into the Trump campaign's alleged ties to Russia by the Obama Dept of Justice, and now being run by special counsel Robert Mueller.

Where this particular investigation leads is anyone's guess, but it is clear that it was initiated in an unconstitutional manner. And this, the Judge notes, creates lessons to be learned. Courts that hear no challenge to the government are not courts as we understand them. They are merely vehicles to advance political agendas.

The purpose of the Constitution is to restrain government, thereby protecting liberty. FISA courts do the opposite. They infuse government with corruption and undermine privacy of us all.

Wednesday, March 21, 2018

The Surplus Side of Deficits

You can go the distance
We'll find out
In the long run

Which would you rather have: a trade deficit or a foreign investment surplus? Turns out this isn't an either/or question.

As we have noted, when you buy goods from someone else with cash, that someone else has to invest that cash.

While timing may be off a bit (holders of cash may wait a while before investing), trade deficits and investment surpluses must balance.

Tuesday, March 20, 2018

Facebook and Personal Productivity

"Come. Waste time here."
--Miyagi (Karate Kid 3)

I joined Facebook in the early days when a .edu email address was still required. To join the network, enrollees must agree to Facebook's policies regarding property rights and information sharing. The content on your page is not your own. Facebook can share your information with whom it wants. It can even mine your site for data that it can use.

Despite the restrictions on privacy, I enrolled. The privacy issues did not bother me initially because my primary motivation for joining Facebook was job-related. I was working with an entrepreneurial financial media firm that sought extend its reach toward the academic community and I wanted to learn about Facebook's potential to connect with college students and perhaps even market to them.

After creating an account, I immediately commenced with the 'friending process,' sending requests to pretty much anyone I could think of in my higher ed circle. Upon confirming my request, a grad student acquaintance at the University of Wisconsin became the first to write on my wall. His message was, "Wow, welcome to the number one time waster for college students!"

It did not take long before I realized that my friend was right about Facebook as a magnet for people's time. Here was an novel, easy-to-use, and free platform for virtually networking with others. You could connect with friends anywhere. You could see what they were up to. You could build a 'profile' that conveyed your identity. You could 'like' what others were doing and saying, and others could do the same for you. You could measure how popular you were by the size of your network. The more people that you connected with, the more alluring the platform became.

Over time, I overstepped my original work-related scope. I had a profile. I was posting on my wall and on the walls of my friends. I was also, for lack of a better word, snooping. I was spending hours reading what others were saying in various threads. Occasionally, I'd jump into those threads and reply myself. I would engage in those mindless debates commonly seen in 'comments' sections of on-line posts. I began anticipating push-back, and looked forward to posts that I could counter.

After this process intensified over the course of years, I finally caught myself. An audit of my time revealed that I was spending at least an hour per day on Facebook--most of it unproductively. It had become, as my friend observed on my first day, my 'number one time waster.'

So I quit.

That was 5 or so years ago and I'm a better person for it. I am now considering the merits of my remaining social network connections, namely Twitter, the networks implied by by gmail and hotmail accounts, and, of course, this blog. My concern this time is not the snooping and debate problems I had with Facebook. Twitter, for example, has become almost exclusively an news and information feed for me. Almost all inbound with an occasional outbound.

Instead, my concern is privacy, and what I concede through my on-line choices and activity. Facebook is currently being questioned about how far the company has taken its access to user information, but it should not be surprising given what users agree to upfront.

It really is amazing what we seem to be willing to give away when we go on-line. In fact, this is a phenomenon that I would like to address in future posts.

Provided that I decide to remain here, that is.

Monday, March 19, 2018

Knowledge and Calculation Problems of Socialism

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

Robert Murphy reviews two primary impediments to socialism. Hayek (1945) stressed the 'knowledge problem' facing central planners. The size and complexity of modern economies make it impossible for bureaucrats in a room to comprehend all of the relevant information necessary to direct production and distribution.

Mises (1949), on the other hand, emphasized the calculation problem facing socialists. Suppose that thru super computing technology central planners could process economic minutiae as if they were on the ground in millions of places at once. They would still be missing a calculation that the supercomputers could not undertake.

That missing information is the relative taste preferences of all individuals on the planet, as well as entrepreneurial perceptions about how to transform matter into different forms to satisfy those preferences. These cannot be calculated via a model.

In fact, the only way they can be determined is by setting up a market economy and letting people 'self-calculate.' The primary outcome of these calculations, prices, drives economizing.

Market prices, derived from dynamic economic calculations done inside people's heads, are phenomena that socialists cannot replicate.


Hayek, F.A. (1945). The use of knowledge in society. American Economic Review, 35: 519-530.

Mises, L. (1949). Human action. New Haven: Yale University Press.

Sunday, March 18, 2018

Stupid Smart

Professor Jerry Hathaway: When you first started at Pacific Tech you were well on your way to becoming another Einstein, and then you know what happened?
Chris Knight: I got a haircut?
--Real Genius

Professor Bylund notes that recently deceased physicist Stephen Hawking was one of the latest in a line of 'geniuses' to whiff when discussing economics. One of his many mistakes concerned inability to distinguish between factors of production and economic resources.

In recent commentary devoted to 'the robots (and the capitalists that own them) will take over the world' meme, Hawking stated:

"If machines produce everything we need, the outcome will depend on how things are distributed. Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine owners successfully lobby against wealth redistribution."

Hawking erroneously assumes that ownership of factors of production grants economic power. However, owning factors of production is only valuable to the extent that they are employed to produce goods that consumers value. If a single individual buys up all the machinery in the world and does not use it to produce and sell goods to consumers, then that machinery has no economic value.

If we do reach a future state where robots were able to 'produce everything we need,' then the cost of production plummets--as do prices as supply explodes higher. That's good. In fact, this is the proper role of capital--i.e., to improve the productivity of labor.

There are other problems with Hawking's argument that Prof Bylund does not address. For example, why would investors allocate capital to projects that are likely to have no payoff? Stated differently, if machines and their output are horded by producers, then how do they collect the the resources to pay back investors? And knowing this, why would investors fund such projects?

The upshot to ever increasing productivity facilitated by machinery is that people do not have to work as much while enjoying a much higher standard of living. This has been going on since the first machine was employed in production. In the future, wouldn't it be nice to only work a few hours to support a month's or year's worth of consumption?

Apparently not to some geniuses drenched in socialism.

Saturday, March 17, 2018

Home Price Trends

Rory Devaney: These houses are fantastic.
Tom O'Meara: They're pretty old, around 1900.
Rory Devaney: Our new ones are older than that.
--The Devil's Own

Interesting analysis on home price appreciation. From 1891 thru 1996, US home prices only exceeded inflation by 15% on a cumulative, not annual, basis.

In fact, for the 50 year period stretching from 1890 thru 1940, home prices had trouble keeping up with inflation.

That thinking changed, of course, during early 2000s run-up in home prices when it seemed that home values only went higher. Housing became an 'investment' and then a 'speculation.'

Then the bubble popped.

While some home markets once again have that frothy feel, long term data suggest that, from an investment standpoint, home purchases are, at best, an inflation hedge. And likely worse once borrowing and maintenance costs are factored in.

Friday, March 16, 2018

Old Crosley

"I've heard that old men wake up and scratch itchy legs that have been dust for over fifty years. That was me. I'd wake up at night with the smell of the ball park in my nose, the cool of the grass on my feet...The thrill of the grass."
--Shoeless Joe Jackson (Field of Dreams)

Always captivated by old photos of Crosley Field.

Notice the building density.

Almost as if they had to shoe horn the field into the surrounding neighborhood.

By the time I went to my first ball game as a seven year old, much of the neighborhood had been bulldozed over to make room for the freeway beyond the outfield wall:

The wrath of eminent domain strikes again.

Meanwhile, less than 2 weeks till Opening Day!

Thursday, March 15, 2018

Kids as Political Pawns

Another night in any town
You can hear the thunder of their cry
Ahead of their time
They wonder why

Herbert long ago observed that as stakes rise associated with controlling the massive power of a democratic state, factions in competition for that power will become increasingly polarized. Moreover, those factions will become increasingly motivated to use all possible means to capture and retain state power.

This includes employing kids as political pawns.

In many ways, kids are ideal political instruments. Generally speaking, their reasoning powers are not fully developed, leaving them gullible to half baked arguments. They have not yet learned to fully control their feelings, making them susceptible to emotional capture. They are dependent on grown-ups for both tangible and psychic resources, making them open to adult influence in order to obtain what they need.

Perhaps the most desirable feature that kids possess for political operatives is the strong influence that kids, particularly perceived as innocent and victimized, can have on others. A crying child attracts more attention than a crying adult. While kids are prone to being emotionally captured themselves, they also possess tremendous capacity for emotionally capturing others.

Stated differently, kids can serve as excellent marketers for political agendas.

Thus, appeals for passing laws or government programs 'for the children' become increasingly common--as dubious as the underlying logic may be. More recently, those desperate to gain control of state power are trotting out kids as central participants in organized political protests--first on college campuses and now in high schools.

This should not be surprising. In fact, we should expect demand for children as political pawns to escalate as do the stakes associated with control of the state.

That does not mean, however, that individuals should sit idly while kids are being manipulated by political operatives.

Wednesday, March 14, 2018

Gold Price and Daily Closes

Oh, and there we were all in one place
A generation lost in space
With no time left to start again
--Don McClean

Posted yesterday by Fleck, interesting chart comparing recent gold prices to running total of number of upside closes in gold price over the past 30 days.

Like Fleck, I've never seen a chart like this before, but does suggest stability of gold price in midst of a period of down days. Obvious implication is that a few up days have overpowered many down days in order for price to remain this stable.

Seems bullish.

position in gold

Tuesday, March 13, 2018

Protecting God-Given Rights

"Would you like a lesson, sir, in the rules of war? Or perhaps your children would."
--Colonel William Tavington (The Patriot)

Jacob Hornberger reminds us that the Second Amendment does not 'give' us a right. Instead, the Second Amendment, and the rest of the amendments that comprise the Bill of Rights, expressly prohibit the federal government from infringing on those rights.

The origin of those rights is explained in the Declaration of Independence. They are natural and God-given. As such, they are unalienable, meaning that no earthly being can justly take away what God has given.

The proper role of government is to protect the existence and exercise of people's God-given rights. When government steps over its just boundaries and infringes on the very rights that it is supposed to protect, then, as the Declaration observes, people can rightly 'throw off' that government in favor of a more capable design.

Because government is empowered with state-of-the art weaponry to enforce those rights, citizens must be permitted to carry similar arms in the event that the government must be thrown off. As Hornberger observes, our founding ancestors understood this principle well. Hence the Second Amendment.

That so few people, particularly children, seem to understand this thought train reflects an abject failure of our education system in explaining the founding logic of this country.

Monday, March 12, 2018

Buyback Bandwagon

"And with the surplus cash, we implement a major stock repurchase. So Trask is protected and their stock goes up, and everybody's happy...or not."
--Tess McGill (Working Girl)

Once again shaking my head as investors cheer another epic round of share buybacks while stock prices mark all time highs.

At current nosebleed prices, many shareholders would not personally buy more shares. But they're ok with corporate managers spending shareholder funds to buy back shares.

Perhaps they should take a closer look at Friedman's matrix.

What's going on is the furthest thing from 'buying low'...

Sunday, March 11, 2018

Fair Trade

It was thirty days around the Horn
The captain says it's thirty five more
The moon looks and the crew ain't stayin'
'There's gonna be some blood' is what they're sayin'
--Jay Ferguson

As we have noted in the past, Leftists often invoke the concept of 'fairness' when attempting to justify use of government force. Redistribution of income, for example, is often framed as a fairness issue.

But Leftists don't have a lock on fairness as a positive substitute symbol. When it suits their needs, people on the Right like appeal to people's sense of fairness as well.

For instance, President Trump has justified his tariff plan as necessary to foster 'fair trade.' Tariffs help 'even the playing field,' so the argument goes, against countries judged to be giving their firms an unfair leg up via subsidies and other mercantile programs.

Whenever political partisans from either end to the statist spectrum utter the term 'fairness,' take it as a euphemism or justification for use of government force to advance an agenda. When the Right promotes trade that is governed by discretionary rule, and it has a long history of doing so, it is a far thing from true fairness.

Saturday, March 10, 2018

Slow But Sure

"You can't expect an enormous volcano with three tiny bags of explosives. You have to let nature take her course. Give it time. It'll work."
--Miller (Force 10 From Navarone)

Short rates closed the week at their highest levels in nine years.

Higher short term rates serve to curb near term credit markets. They also boost attractiveness of CDs and other low risk, cash-like instruments vis-a-vis riskier yield-bearing securities such as dividend-paying stocks.

Slowly but surely, higher short rates are altering the competition for capital.

position in SPX

Friday, March 9, 2018

Kidding Around

Sometimes I feel I gotta get away
Bells chime I know I gotta get away
And I know if I don't, I'll go out of my mind
Better leave her behind with the kids, they're alright
The kids are alright
--The Who

Federal spending as a percentage of GDP, both historical and projected.

Major entitlements include Social Security and the healthcare triad (Medicare, Medicaid, Obamacare).

Were I to cover the labels and ask my students to identify which of the three categories corresponded to which line, I'm confident that most would associate the red line with military spending.

When our kids and grand kids wake up to what's going on here--that they're paying our way--they're gonna to love us.

Thursday, March 8, 2018

Disarming Mass Shooters

John Cale: I got three rounds. Tell me you got some weapons in the residence.
President James Sawyer. No. We usually have two agents right there with machine guns.
John Cale: What?
President James Sawyer: They're big knives.
John Cale: Great, then you can make me a sandwich.
--White House Down

A frequent argument made by gun grabbers for banning 'high capacity' magazines (e.g., reducing the legal limit for AR-15 style mags from 30 rounds down to 10) is that mass shooters would need to reload more often, giving victims more opportunity to, um, grab the perp's gun.

There is some element of truth in this argument. When shooters are reloading, they are not firing, leaving them vulnerable to counterattack. Moreover, the more times perps have to slam fresh mags into their weapon and rack the slide, the greater the likelihood that a gun will jam, which creates additional downtime for vics to disarm or flee.

However, as Mas Ayoob recounts, little historical evidence supports the claim that reloads have resulting in clean gun takeaways. In fact, there appears to be more evidence that trying to disarm shooters by hand are usually unsuccessful and often lethal.

One reason why this is so is that it is difficult to get close to a mass shooter. Nearby targets are usually the first victims. Plus, the natural reaction of untrained people is to move farther away from a shooter, leaving them in poor position to exploit a temporary cease fire while gunmen are reloading.
Mass shooters are also prone to carry multiple guns which serve to offset lower capacity magazines.
There is also, of course, the reality that people motivated to commit heinous crimes are unlikely to be deterred by laws of any kind--including those limiting how many bullets they can put in their guns.

History suggests that waiting for a shooter to run empty and then grabbing the gun is not a very viable strategy.

Another strategy works far better. In nearly every mass shooting incident on record, as soon as the gunman is met with return fire, he ceases to attack. He is either killed, kills himself, or surrenders.

The most viable strategy to disarm mass shooters is for the would-be targets to be armed.

Wednesday, March 7, 2018

Murder and Morality

Forty seven deadbeats living in the back street
North, east, west, south all in the same house
Sitting in a back room waiting for the big boom
I'm in a bedroom waiting for my baby
--Escape Club

Prof Williams lends some reasoned thoughts to offset recent gun-related emotional capture. Some mortality statistics:

Vehicle deaths where alcohol is involved: about 30/day
Deaths due to stabbing or hacking: more than 1500/yr
Deaths due to shotgun or rifle: about 550

If the thinking is that comprehensive background checks would reduce rifle related deaths, then why aren't federal background checks and waiting periods required for purchasing a car, for getting a driver's license, or for buying a knife?

Williams also observes that gun availability is far more limited now than in the past. A 1902 Sears catalog included 35 pages of firearms that could be purchased by mail. In the 1940-1960 period, magazines were full of gun ads directed at both adults and youngsters. Few states had advertisements on buying guns, and firearm transfers to juveniles was largely unrestricted.

His point is that current levels of murder, mayhem, and other forms of anti-social behavior are no more gun-related than they are car- or knife-related. Uncivilized behavior increases when moral standards decrease. And moral standards have been under siege in the US for more than half a century.

Because morality is the first line of defense against anti-social behavior, Williams argues that problems of murder et al. will continue until we regain our moral footing.

Tuesday, March 6, 2018

Trade Deficits

We've got no future, we've got no past
Here today, built to last
In every city and every nation
From Lake Geneva to the Finland station
--Pet Shop Boys

I run a trade deficit with Target (TGT). I buy more goods from TGT than it buys from me. Are trade deficits a bad thing?

When I trade with TGT, I receive goods from the retailer in exchange for dollars. In accounting, I am running a 'current account deficit.' Somewhere that must be offset with a surplus--a 'capital account surplus.'

TGT must take the dollars it received from me and do something with them. That 'something' includes investment. That investment could be 'direct' in the form of new plant, property, and equipment for the retailer. Or it could be 'indirect' in the form of buying portfolios of financial securities such as stocks and bonds.

Ignoring timing issues, deficits and surpluses must balance.

The US has been running large trade deficits with many countries, including China, for some time. This has some people concerned. However, at the same time, we have been running large capital account surpluses with China as the Chinese invest billion$ in the US.

Restricting trade thru tariffs will surely reduce our trade deficit with other countries. By definition this will result in fewer goods imported that US consumers currently desire. It will also mean that foreigners will have less money to invest in the US.

Less goods and investment are not factors associated with prosperity.

When was the last time the US ran a trade surplus for most of a decade? The 1930s...a.k.a. the Great Depression.

Monday, March 5, 2018

Relief Valve

Better get yourself together
And hold on to what you've got
--Miami Sound Machine

Recent shallow pullback in 10 yr yields doesn't look like much, but it has been enough to relieve some of the near term 'overbought' technical pressure. Stochastics et al no longer twisting high.

Conceptually, I like to think about this as adding 'potential energy' to another possible thrust higher.

no positions

Anti Tariff or Anti Trump?

Some break the rules and live to count the cost
The insecurity is the thing that won't get lost
--Howard Jones

People coming out of the woodwork against President's Trump's proposed steel tariffs. That's good.

Of course, many of those same people are for interventionist actions of other kinds. That's bad.

A tariff is a tax on imports. Taxing imports reduces reduces trade and the benefits that come from specialization of labor. Prosperity is therefore compromised.

Other forms of intervention, many of them the equivalent of 'local tariffs,' essentially do the same.

Not supporting Trump's tariff proposal while supporting, say, taxes on income or minimum wage laws, demonstrates either ignorance or political partisanship.

Sunday, March 4, 2018

Replying to Fools

Do not answer fools according to their folly, or you will be a fool yourself.
--Proverbs 26:4

Social networking seems to increase propensity to reply to fools. Solomon reminds us to resist the temptation. Don't take it personally, and walk away.

Pray for them as well.

Saturday, March 3, 2018

Age Discrimination and Guns

They're seeing through the promises
And all the lies they dare to tell
Is it heaven or hell?
They know very well

In the wave of emotional capture following the Valentines Day school shooting in Florida, some retailers, most notably Dick's Sporting Goods, have proclaimed that they will no longer sell 'assault-style' rifles. It is, of course, completely within a seller's rights to do so. No one can put a gun to retailers' heads and order them to sell...guns.

Other retailers who do sell guns have announced that they will raise the minimum age for gun and ammo purchase to 21. Under federal law the minimum age for firearm purchase is 18.

No problem here either, you say. Just like no one can force a retailer what to sell, no one should be able to force a retailer who to sell to.

In a free market environment, this would be true. People should be free to associate with whomever they wish--including associations for business transactions.

The counterargument has been that freedom of association breeds discrimination, and discrimination should not be allowed. Even if, say, a baker does not care to bake a cake for a gay couple, legally the baker should be forced to do so.

Consequently, freedom of association has not been permitted. Laws have been put on the books that prohibit discrimination when selling goods and services.

It is not difficult to apply the discrimination argument to the case of young people and guns. If it is legal to sell guns to 18 year olds, and a retailer chooses to sell guns, then why isn't that retailer legally obligated to sell guns to 18, 19, and 20 year olds?

This is different, you might argue. It is an issue of maturity, and those younger than 21 are not really adults yet. They are generally not mature enough to own and operate guns.

That is a difficult argument to make given what people of that age group are legally allowed to do. For instance, they are permitted to drive cars, to vote, and, ironically, to join the military.

Does, a 20 yr old single mom who wants to protect her home have a legal case against a retailer that refuses to sell her an AR-15 from the gun rack in the store because of her age? Under extant laws that prohibit discrimination in retail sales, I believe that she might.

Friday, March 2, 2018

Steel Blues

Well we're living here in Allentown
And they're closing all the factories down
Out in Bethlehem they're killing time
Filling out forms
Standing in line
--Billy Joel

Yesterday, after President Trump indicated that a big tariff on steel imports was coming, stock markets drained a couple percent. This morning Trump followed up with comments that trade wars are 'good' and 'easy to win.'
Even the ghosts of Smoot and Hawley might be raising eyebrows at that one.

Of course, we have come to learn that it can be a bad idea to take the president's blurts at face value. He floats revocable thoughts in the spirit that all issues are fluid and negotiable.

The spectre of escalating trade wars is disturbing nonetheless. ZeroHedge observes that the last time significant tariffs were slapped on steel (under President Bush), stock markets sank about 30% over the course of the next year.

The graph appearing in this analysis shows that the Bush steel tariff did little to protect domestic steel jobs. In fact, US steelworker jobs are down nearly 60% since 1990. However, over that same time period, steel production is up about 8%. That's an increase in productivity of over 150%.

Societies benefit from such productivity increases. Not from policies that slow such productivity increases down.

Thursday, March 1, 2018

Beware the People Weeping

Ed Harrison: And, yeah, we'll put the old boy on himself. You know, the forgotten man angle. Tear their hearts out.
Bob Wallace: Sorry, Ed, but that's out. We're not capitalizing on the old man's hard luck. No chance.
--White Christmas

Judge Nap adds to our recent discussion of emotional capture and institutional failure in the context of gun control. Of course, he does it in a much more eloquent manner than these pages ever could. In my view, this is one of the Judge's more insightful pieces (and that's saying something). Reading and re-reading is recommended.

I would like to discuss several of his thoughts here.

Putting traumatized kids before television cameras soon after a tragedy virtually guarantees emotional capture, or what the Judge calls 'madness' among the children and onlookers. Madness in this sense is "the passionate and stubborn refusal to accept reason." Madness is common after a tragedy. The Judge cites poet Herman Melville, who after witnessing the railroading of individuals accused of being involved with President Lincoln's assassination, wrote, "Beware the People weeping. When they bare the iron hand."

The lesson: it is nearly impossible to argue rationally with tears and pain. Take a step back from a tragedy before addressing it with 'legalized' force.

The concept of natural rights can be viewed religiously or aesthetically. Those who believe in an all loving God see natural rights as the claims and privileges attached to humanity by Him. For those who do not accept the existence of a Supreme Being, the argument for natural rights still holds. Because it is obvious that humans are the superior rational beings on earth, our exercise of reason leads us to the exercise of freedoms that are integral to our humanity and independent of government. The first among these is our right to life--the right to be and to remain alive.

The right to life implies the right to defend one's life. Our founding ancestors recognized this right when they ratified the Second Amendment. They wrote it to ensure that all governments (in place then and in the future) would respect the right to keep and bear arms as a natural extension of the right to self-defense.

The Supreme Court has characterized this right as 'pre-political'--meaning that the right pre-existed government. If it pre-existed government, then it must be a natural right, i.e., it must come from our human nature. When Judge Nap asked the late Justice Antonin Scalia why he used the term 'pre-political' instead of 'natural' when authoring the majority opinion in the landmark District of Columbia v. Heller case, Scalia replied, "You and I know they mean the same thing, but 'natural' sounds too Catholic, and I am interpreting the Constitution, not Aquinas."

The Heller opinion also recognized that the Second Amendment was written soon after a war had been fought against a king and an army that was regarded as the most powerful army on earth. That war would surely have been lost had not the colonists borne arms equal to or better than those of the British troops.

The Second Amendment was not written to protect the right to shoot deer. It was written to protect the right to defend against acts of aggression, whether those acts are perpetrated by bad guys, crazy people, or tyrannical governmentHeller articulated that the right to self defense means that individuals have the right to use guns that are of the same level of sophistication as their adversaries.

Gun grabbers are unwilling to accept this. A colleague recently asked the Judge on air: Suppose we confiscated all guns? Wouldn't that keep us safe? The Judge replied that we'd need to start with the government's guns. No, his colleague said. What if we confiscated guns from the civilian population only?

An extension of this question would be: What if we confiscated 'assault style' weapons from civilians but left them in the hands of government?

To the reasoning mind that grasps the concept of institutional failure, the answer is obvious.