Monday, April 30, 2018

Hunting Preserves

Now put your flags in the air
And march them up and down
You can live it up, live it up
All over town
--Escape Club

In lieu of the recent Waffle House mass shooting in Tennessee, John Lott once again discusses overwhelming perpetrator preference for gun free zones. He provides several links to analysis and raw data as well.

These pages have noted it many times before. Gun free zones establish hunting preserves for criminals.

Sunday, April 29, 2018

MLK and the Racism Narrative

"It will happen again because people like you and me like to be lied to. We like bedtime stories."
--Jake Moore (Wall Street: Money Never Sleeps)

When a black person goes down as the result of crime, there is a large group that prefers the perpetrator of the crime to be white. Because this group believes that racism runs rampant in this country, acts of aggression by whites against blacks fall in line with the group narrative.

This is confirmation bias writ large. It offers convenient cover for actual criminals targeting black victims. Find fall guys who are white, label them as racists, and perhaps you can get away with...murder.

For years, a dedicated group of researchers have been mining evidence that refutes the 'official' story of Martin Luther King's murder. They present a compelling case that James Earl Ray was a patsy framed by a predatory state and compliant media.

In the case of JFK, invent a communist shooter to get the public behind the story. In the case of MLK, concoct a racist assassin for similar, or perhaps even more effective, purpose.

Feed the public what they want to hear and any crime is possible.

Saturday, April 28, 2018

93 to 1

Everybody's talking at me
I don't hear a word they're saying
Only the echoes of my mind

In the 2013 confirmation vote for James Comey as FBI Director, only one senator voted no. Who was that?

Rand Paul, of course.

Friday, April 27, 2018

Watching PG

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

The heavy action in Procter & Gamble (PG) has caught my eye. Consumer discretionary in general has been outperforming the consumer staples category of which PG is a member.

That softness now finds PG touching its multi-year uptrend line.

Does that make the shares a value play? Maybe on a relative basis. And its 3.7% yield seems somewhat attractive in a low rate world.

But on an absolute basis, my cash flow work suggests the stock needs to come down from its current $180ish billion market a lot. My interest increases with a price closer to $50.

no positions

Thursday, April 26, 2018

Shrinking Margins

I'm sick and tired of you setting me up
Setting me up just to 
Knock a knock a knock a me down
--Bruce Springsteen

Stephanie Pomboy observes the general trend toward slowing top line growth at the same time that costs are increasing.

Implication: shrinking profit margins dead ahead.

Wednesday, April 25, 2018

Bears are Back

I got nine lives
Cat's eyes
Abusin' every one of them and runnin' wild

It took nearly two weeks, but the bears are back for another assault on the 200 day moving average.

Classic technical theory says that support weakens on each successive visit. Perhaps the third time will be the charm for the bears.

position in SPX

Tuesday, April 24, 2018

Touch Three

Come on, come on, come on, come on now
Touch me, babe
Can't you see
That I am not afraid
--The Doors

Continuing our yield watch, 10 yr yields briefly touched 3.03% this morning and marked four year highs before pulling back below the three percent maginot.

On a multi-year chart, 10 yr yields can be seen as tracing out a large inverse head-and-shoulders pattern. This is bullish for yields but bearish for the bond prices. Also bearish for an over-leveraged economy dependent on perpetually low rates.

When higher rates begin to 'matter' is anyone's guess. Because the charts are suggesting that yields want to go higher yet, it seems likely that the issue will arise sooner rather than later.

no positions

Monday, April 23, 2018

Peace by Force

"By condemning an old friend without hesitation, I shall be feared."
--Messala (Ben-Hur)

Garet Garrett describes the ultimate barbarian fantasy--that world peace must be imposed by force.

The folly does not just have an external component, i.e., a country must make its military the Policeman of the World in order to keep the peace. It also applies internally, i.e., the State must police its citizens and limit freedom in the name of social harmony.

The notion that peace requires force constitutes one of the foremost oxymorons of mankind.

Sunday, April 22, 2018

Back to the Highs

"You back again?"
--Floor Specialist (Wall Street)

Ten yr yields closed their strong week at, or even kitten's whisker higher, the mid February highs.

The highs of human beings and trading robots will be trained on this coming week's action. Will T-note yields be repelled by resistance here? Or will they power thru to new highs for the move?

no positions

Saturday, April 21, 2018

Equitable Solution to Urban Decay

When you said goodbye
You were on the run
Tryin' to get away from the things you'd done
Now you're back again
And you're feeling strange
So much has happend, but nothing has changed
--Glenn Frey

How to prevent or reverse accumulative decay in cities? Walter Williams suggests the officials skew provision of city services toward neighborhoods that house the highly productive. Keeping the best and brightest increases the likelihood of 'net positive fiscal residual' necessary to fund city services.

As Prof Williams notes, some people might find this type of discrimination distasteful or unfair.

A far more equitable solution would be to cut back on city services altogether. No public education or libraries. Allow local residents to contract with private providers for services such as street and park upkeep.

Less 'positive fiscal residue' would be required to fund city services. Plus, the highly productive would have greater capacity to shape their urban environments. The positive spillover from productive activity would once again create opportunity in cities for lower income individuals.

Friday, April 20, 2018

Paul's Penny Plan

"How many are left?"
--Col Robert Gould Shaw (Glory)

Senate rules say that if leadership and the Budget Committee do propose a budget by April 1st, then any senator can do it. Because no budget has in fact been put forward by the hierarchy, Senator Rand Paul plans to do so.

Paul's proposal is based on a 'penny plan' design. The penny plan idea is that small cutbacks in spending--just a penny on each dollar spent--add up to big savings over time.  His version of the penny plan proposes annual spending reductions of one percent annually over the course of the next five years, at which point a balance should be achieved between revenues and spending. Where precisely those one percent cuts would come from would be up to Congress.

Paul's budget also includes reconciliation instructions to provide for expanded Health Savings Accounts (HSAs) to lower health care costs. Health care is by far the fastest growing category of federal spending.

Perhaps the most intriguing part of Rand Paul's proposal is that it promises to smoke out hypocrites--those who talk smaller government but act like statists. One he puts the proposal forth, Paul intends to force a vote on the Senate floor.

Will anyone stand with Rand?

Thursday, April 19, 2018

TIPping Off Higher Yields

Ah you're breathing faster
Silence the only sound
There's no need to be nice on the way up
'Cause you're not coming down

After a pullback lasting about two months, 10 Year yields are suddenly striding back toward previous highs. Perhaps the recent pullback has been a classic rest period in order to build energy prior to a new leg higher.

Here's an interesting chart below that suggests motivation for the persistent 'bid' in yields. The red line plots the ratio between the TIP and IEF bond ETFs. Because TIPs (Treasury Inflation Protected Securities) are adjusted for inflation, higher inflation expectations increase demand for them, thus elevating the price. Unprotected Treasuries, such as those in the IEF basket, should not benefit from higher inflation expectations and in fact may experience outflows under such circumstances. Thus, uptrends in the TIP:IEF ratio should signal higher inflation expectations among bond investors.

The white line in the graph is crude oil. Note the trend higher in the TIP:IEF ratio since early 2016. More importantly, note the strong correlation between this ratio and the price of crude. Although the price of crude can change for many reasons, one important factor is the extent to which investors think a depreciating dollar will require more greenbacks to be surrendered to purchase a barrel of oil.

If expectations of lower purchasing power of the dollar is increasing prices of commodities like crude, then perhaps bond investors are beginning to demand higher yields to fairly compensate them for holding Treasury paper.

no positions

Wednesday, April 18, 2018

Accumulative Decay

The city desert makes you feel so cold
It's got so many people but it's got no soul 
And it's taken you so long
To find out you were wrong
When you thought it held everything
--Gerry Rafferty

Many US cities that were major population centers in the early 20th century are less so today. Some, such as Detroit, Cleveland, and St Louis, sport less than 50% of their previous pops. People have left these cities in droves, primarily for the suburbs where schools were better and property was more secure.

During the 1960s, civil rights advocates claimed that urban decline was due to racism--'white flight' to the suburbs. However, as Prof Williams notes, blacks were fleeing many of these cities at higher rates than whites.

Central to this phenomenon is a process Williams terms 'accumulative decay.' When schools, neighborhoods, and city services become run down, the first people to leave are those who care the most about their quality of life and have the resources to move. Because this inaugural group tends to be the most productive, they tend to put more to city coffers than they take out.

Once this group leaves, it is replaced with people who care less about things like schools and city amenities. Moreover, since the city has lost tax resources from the productive group that has left the area, officials must either raise taxes or allow city services to deteriorate further. This the next round of people who can do better to leave.

And the downward spiral of accumulative decay gains momentum...

To reverse the cycle, Williams suggests that city officials must recognize that their first order of business is to retain what economists call 'net positive fiscal residue.' This means creating conditions that makes the most productive people want to stay in city environments. This might mean discriminating when it comes to the provision of city services. For example, provide better lighting, libraries, schools, and other amenities in more affluent neighborhoods.

Although some might argue that city service discrimination is unfair, Williams counters that it is even more unfair for cities, once magnets of opportunity for low income individuals, to devolve into economic wastelands.

Tuesday, April 17, 2018

Taxpayer Mind Trick

Storm Trooper: Let me see your identification.
Ben Kenobi: You don't need to see his identification.
Storm Trooper: We don't need to see his identification.
Ben Kenobi: These are not the droids you're looking for.
Storm Trooper: These are not the droids we're looking for.
Ben Kenobi: He can go about his business.
Storm Trooper: You can go about your business.
--Star Wars

As another Tax Day looms over us, many people maintain the charade that we live in a free country. When government can forcibly take the fruits of one's labor, then people are not free.

It is often said that taxation is theft. But theft is generally a one-off event, and is usually unanticipated by the victim.

Taxation involves routine expropriation of production. It is more akin to slavery. Taxpayers are today's slaves.

That many of these taxpayers believe that they live in a free land is a mind trick worthy of Jedi status.

Monday, April 16, 2018


"So, here's to the men who did what was considered wrong, in order to do what they knew was right...what they KNEW was right."
--Benjamin Franklin Gates (National Treasure)

Murray Rothbard elaborates the concept of radicalism in the libertarian sense. Radicalism can be seen as:
  • "being in total, root-and-branch opposition to the existing political system and to the State itself."
  • "having integrated intellectual opposition to the State with a gut hatred of its pervasive and organized system of crime and injustice."
  • "deep commitment to the spirit of liberty and antistatism that integrates reason and emotion, heart and soul."
Statism has been the default condition of social life. It is the status quo, and demands conformity and compliance.

The radical idea continues to be liberty. Its institution, by definition, will require the work of radicals.

Sunday, April 15, 2018

Letters of Hypocrisy

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

Right on cue, Justin Amash shares letters warning two different presidents about commencing offensive strikes against Syria. The first letter was written in 2013 to President Obama:

The second letter was written last week to President Trump:

The first letter was signed by 119 Republicans and 21 Democrats. The second letter was signed by 15 Republicans and 73 Democrats.

There are few repeat signatures.

Saturday, April 14, 2018

Constitutional Convenience

And the parting on the Left
Is now parting on the Right
And the beards have all grown longer overnight
--The Who

How Democrats and Republicans evoke the Constitution only when it is convenient is well demonstrated when war is in the air. The constitutional requirement is that approval for war must come from Congress.

Both Democrats and Republicans know this. Unfortunately, each party prefers to evoke the requirement only when the other party occupies the Oval Office. Thus, Democrats generally call for congressional approval when a Republican administration is in place, and Republicans call for congressional approval when a Democrat sits in the big chair.

We observed the hypocrisy once again this week during the Senate confirmation hearing of Secretary of State nominee Mike Pompeo. Responded to questions from Senator Rand Paul, Pompeo said that the power of the president to authorize military strikes "has not been disputed" for some time.

In addition to observing that this power was well disputed by our founding ancestors, Paul observed that Pompeo himself, when a member of Congress, claimed that then President Obama needed congressional approval to strike Libya in 2011.

Demonstrating once again that, when your guy is in charge, you tend to put that nagging set of restrictions called the Constitution away.

Friday, April 13, 2018

Government Spending and GDP

We decided that we would have a soda
My favorite flavor, cherry red
I sung my song to Mr Jimmy
And he said one word to me, that was "dead"
--Rolling Stones

Dan Mitchell shares some graphs from a recent empirical study of the relationship between government spending and economic output. Various countries, regions, etc all show same thing. The higher the government spending, the lower the GDP.

R-squares, ranging from .24 to .67, are quite high considering other factors that could be at work.

Just one more brick for the Keynesian crypt.

Thursday, April 12, 2018

Don't Dream It's Over

There is freedom within
There is freedom without
Try to catch the deluge in a paper cup
--Crowded House

Bulls breathing another sigh of relief as their defense of the 200 day moving has held once more. Several pundits seem to think that the battle is over.

I wouldn't let my guard down so quickly. Perhaps this lift is merely relieving some oversold pressure on the stochastics before the bears muster another assualt.

position in SPX

Wednesday, April 11, 2018

Will We Ever Learn?

This is what we've waited for
This is it, boys, this is war
The president is on the line
As ninety nine red balloons go by

Presidential threats of missile strikes against Syria and indirectly against Russia once again remind us of the dangers (frequently discussed on these pages) of permitting the executive branch to assimilate powers not expressly granted in the Constitution. Constitutional power to declare war rests with Congress.

Yet, since the beginning of WWII, Congress has abdicated its responsibility and effectively delegated the initiation of war to the president. And every administration since then has used that power to entangle the United States in countless conflicts that have cost millions of lives.

Trample the Constitution and get burned. Will we ever learn?

Tuesday, April 10, 2018

Institutionalizing Aggression Among the Peaceful

"There will come a day when you will wish that you had done a little evil to do a greater good."
--Sybilla (Kingdom of Heaven)

Statists prefer to employ the strong arm of government to advance their interests, whether those interests involve material gain or psychic income obtained from furthering a social agenda. Most statists do not consider themselves violent sorts. Yet they are serve as principals of violence who contract with government agents to exert force on others for personal gain.

Statists face a cognitive dissonance problem. Although they view themselves as peaceful, they sanction acts of aggression against others.

To cope with the mental stress generated by this inconsistency, statists must interpret reality in a manner that provides psychological relief. Some statists might view some offensive force as necessary for the advancement of society. However, that explanation would keep their psyches on the hook for fostering violence. As such, it should be a minority justification among statists.

Statists are more likely to rationalize government as an instrument of peace rather than of aggression. Government is seen as an institution of benevolence. Or, alternatively, government is a defensive mechanism that engages in actions that protect people from harshness in the world. In either case, the strong arm of government is seen as furthering good.

To cope with the obvious counter that doing good for some might mean, for instance, taking property from others under threat of force, statists must once again construct explanations that keep mental stress to a minimum. One such argument is that actions such as paying taxes are 'voluntary' acts, not a shakedowns. Rather, people have implicitly agreed to paying taxes as part of a latent 'social contract' in force as a condition of living in 'civil' society.

Such rationalizations create one of the great paradoxes of social life. They serve to institutionalize aggression among people who view themselves as peaceful.

Monday, April 9, 2018

Wait a While

"I'll wait a year or two."
--Liesl von Trapp (The Sound of Music)

This tweet gets right to the point.
They'll be waiting a while on that one.

Sunday, April 8, 2018

Liberty Pole

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

Early American coinage sometimes captures Ms Liberty clutching, or in the vicinity of, a long stick with a brimless cap on the end. This is a symbol of freedom called a liberty pole.

1856-O 50c PCGS AU55 CAC

In republican Rome, slaves who were granted freedom were often given a soft felt cap. When Julius Caesar was assassinated, the cap was placed on top of a pole to symbolize that the Roman people had been freed from tyranny. The liberty pole was born.

Before and during the American Revolution, colonists erected liberty poles in town squares and on public land. Violent struggles sometimes ensued as British soldiers sought to strike down the symbol. This proved difficult, as it was hard to eradicate such a simple-to-make symbol.

Perhaps we will see a renaissance of liberty poles as the modern struggle for freedom continues.

Saturday, April 7, 2018

Not Working and Dependent

"From East Egg, then, came the Chester Beckers and the Leeches, and a man named Bunsen, whom I knew from Yale, and Docter Webster Civet, who was drowned last summer up in Maine."
--Nick Carraway (The Great Gatsby)

With headline unemployment numbers at decade lows, one would think we would be enjoying a period of prosperity that we haven't experienced in some time. However, when you look under the hood of the jobs numbers, there are several eyebrow raisers.

An important one is the labor force participation rate, which as been been marking multi-decade lows for years. This means that less able bodied people are actually working as a fraction of the total.

How do people who are not working get by? Some may be living off past savings (either their own or perhaps inherited). Given our low saving rate, the number of people in this group is likely low.

Others may have retired early due to rich pension plans. Instead of drawing from past saving, early retirees draw income from the production of others to fund their lifestyles. Stated differently, early retirement involves people with productive capacity are sitting it out in favor of living off the backs of others.

Still others, as noted by Dan Mitchell, are on simply on the government dole. They are not working because can live off the welfare state.

Early retirement and the welfare state create conditions of dependence, They leech productivity, and perhaps even morality, from economic systems, thereby hindering prosperity.

Friday, April 6, 2018

Battle Cry

"It's trench warfare out there, pal."
--Gordon Gekko (Wall Street)

Trench warfare continues in the Battle for the 200 Day Moving Average. Bulls made 'em bounce the last two days but early indications today suggest the bears might press them back toward the maginot.

My growing sense it that the more drawn out the battle here, the greater the chance that the winner will let loose with a powerful victory lap.

position in SPX

Thursday, April 5, 2018

Lawless Special Counsels

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

Judge Nap notes two of the most glaring problems with the Mueller investigation--and with nearly all 'special counsel' investigations for that matter. One is the FISA warrant charade. By seeking a search warrant via the FISA court, investigators circumvent the Fourth Amendment requirement to produce evidence of probable cause. This is clearly unconstitutional.

The other involves the practice of indicting 'low level' individuals in the investigative food chain--often of trivial crimes unrelated to the investigation--and then offering them leniency in exchange for information that the prosecution can use against 'high level' individuals in the investigative food chain.

This is a form of bribery. You tell us what we want to hear on the witness stand and we'll go easy on you. The courts have granted only prosecutors with the ability to commit such bribery. If a defense counsel offered a gift to a witness in exchange for favorable testimony, that attorney would be indicted.

People tend to look the other way when this lawlessness occurs in pursuit of an enemy. You can bet that those same people will view the process differently when the counsel turns on them and their interests.

Wednesday, April 4, 2018

Hampered Money, Hampered Economy

After three days of the desert fun
I was looking at the river bed
And the story it told of a river that flowed
Made me sad to think it was dead

Stated differently, when the monetary system is hampered, then capitalism cannot exist in full form. Yes, some people may act in capitalistic manners. Some people might save and invest, for instance.

But when money is messed with, distortions build, moving the economic system further from the capitalism pole and toward the socialism pole.

A destination that can never be reached.

Tuesday, April 3, 2018

Trench Warfare

 "We went up and down that dirt pile for six days and nights. Fixed bayonets. Hand-to-hand. Fought them something fierce."
--Sgt Major J. Choozhoo (Heartbreak Ridge)

Battle for the 200 day moving avg continues. Bears breached the line yesterday but couldn't hold onto big inroads yesterday afternoon. Bulls reclaimed the line this am.

Robots sit in the wings awaiting guidance from the trenches on which way to jam 'em.

position in SPX

Monday, April 2, 2018

Breaking to the South Side

We chased our pleasures here
Dug our treasures there
--The Doors

Heavy action out of the gate this morning finds the SPX thru the 200 day moving avg. Key will be where it closes.

Should we remain on the south side, then the trading robots may find cause to turn their hats around and look to sell 'em.

position in SPX

Sunday, April 1, 2018

Life and Freedom

Miriam: I am afraid.
Esther: No cause. The world is more than we know.

Christ's death and subsequent resurrection reminds us of the sanctity of life. Not just life on earth, which is fleeting. But of eternal life. Death is not to be feared, as it is the gateway to eternal life.

Easter is also a celebration of freedom. Just as Jesus was free to walk the path to the cross, or not, so too are we free.God created each of us in His image.

As He is perfectly free, so are we.