Lost and Found

"I know what it's like to lose precious things. And then, of course, to find them again."
--Laura Charles (The Last Dragon)

Today we are treated to Luke 15--the magnificent Lost and Found parables. The intellectuals of the day, the Pharisees and scribes, complained that Jesus was mingling with sinners who wanted to hear Him speak. Christ explained using a series of parables.

He first asked the crowd, including the intellectuals, who among them would not tirelessly search for the one sheep from a large flock that had been lost, and then happily let everyone know once it had been found. This is like the joy felt in heaven when one sinner repents.

Christ then asked who among them would not search their homes for the one silver coin that had been misplaced, and then rejoice when it was recovered. This too, is analogous to God's joy when a sinner repents.

Then Jesus launched the main story, the famous story of the Prodigal Son. A twist to this parable is the brother who has faithfully stood by his father's side thru thick and thin. He is bothered when his father celebrates the prodigal son's unexpected return. After all, the faithful son had done everything his father had asked while his brother had squandered a fortune. Now the father was willing to forgive and forget plus throw an extravagant party on the prodigal son's behalf--a party that the father had never before thrown for the faithful son.

There is much to reflect on in this parable. Recovery and its celebration. The holiness of penance. Heavenly views on equality and justice.

It also bids the question of who was truly lost and found in, and by, this parable.

Ignorance and Socialism

The parting on the left
Is now parting on the right
And the beards have all grown longer overnight
--The Who

In an exchange on the House floor this past week, several Democrats protested claims made by several Republicans that Nazis were socialists. A writer for the leftist outlet Politico rushed to defend the Democrats:

"Of course, this isn't true. The Nazi Party, officially National Socialist German Worker's Party, was fascist, not socialist - the opposite end of the political universe from socialists. But that hasn't stopped other Republicans from jumping in as well."

The Democrats and their media lackeys would benefit from a better understanding of economics and history.

As these pages have discussed, socialism is a form of economic organizing in which control of the means of production rests with the state. Socialism comes in different brands. One form is communism, credited to the ideas of Karl Marx, which seeks to distribute production equitably in the name of the 'common good.'

Enthusiasm for communism as a political means for socialistic organizing grew in the late 1800s. By the turn of the Twentieth Century, Germany had embraced social welfare programs patterned on the Marxist ideal. However, World War I and its after effects soured sentiment for communism among the German people--particularly the part about sharing the wealth with comrades worldwide.

Political activists including Adolph Hitler convinced the German people that a more inwardly focused brand of socialism--one that stopped at the country's borders--would benefit them. The idea was for government to concentrate resource control on important production verticals. Proceeds would be shared inside the German borders.

The national socialist (NAZI) movement was born and became the template for similar movements elsewhere. Roosevelt's New Deal even employed several features.

Hayek understood that 'Marxist socialism' and 'National socialism' were merely different expressions of the same idea. He warned policymakers that the increasingly interventionist policies of the US and UK up to and during World War II were paradoxically transforming the ‘allies’ into precisely those 'bad' countries that we were fighting a world war against.

Ignorance about socialism then, it seems, remains ignorance about socialism now.

No Yuri, Now What?

Balian: Take the horse, and be about your business.
Imad: This is your prize of battle! I am your prisoner--your slave--should you wish it!
Balian: I have been a slave, or very near to one. I will never keep one, nor suffer any to be kept. Go.
Imad: The man you killed was a very great cavalier among the Muslims. His name was Mummad al Fais. 
Balian: I will pray for him.
Imad: Your quality will be known among your enemies...before you ever meet them, my friend.
--Kingdom of Heaven

After the Mueller Report was released last weekend, which revealed no Yuri, many Republicans wish to turn the guns around (quite literally in the case of government) on political partisans, including both government officials and their media lackeys, who precipitated this bogus investigation. Such a turnabout seems fair and reasonable under the circumstances.

However, there is also an argument for letting it go. It is possible, for example, that many people who motivated the Mueller investigation suffer from a psychosis that they are having trouble shaking. Seeking retribution does not seem a constructive mechanism for helping those who may be struggling.

The Lenten season teaches mercy and forgiveness--even toward staunch enemies.

Imagine this. A group of political partisans who had the opposition party in their sights for an easy public take-down refuse to pull the trigger. Instead of re-engaging in another round of combat with its enemies, the group walked away and prayed for the opposition.

Heaven's Opener

Ray Kinsella: Is there a heaven?
John Kinsella: Oh yeah. It's the place where dreams come true.
Ray Kinsella: Maybe this is heaven.
--Field of Dreams

Opening Day in Cincinnati. If you haven't grown up here, then the vibe can be difficult to grasp. Winter done. New beginnings. Tradition. Celebration. Joy.

Even more meaningful this year, as a special version of Take Me Out to the Ball Game streams from heaven.

Play ball!

Exploiting Fear

"People should not be afraid of their governments. Governments should be afraid of their people.
 --V (V for Vendetta)

Good point by Ron Paul. The recently proposed Green New Deal linked to the progressive rallying cry of 'climate change' is analogous to various neocon proposals that stir the rallying cry of 'terrorism.' Both are ready-made excuses for expanding government and curtailing liberty.

Politicians learned long ago that the key to assimilating power is to instill fear in the citizenry. When people are fearful, they become more willing to surrender their freedom in exchange for safety. Consequently, they contract with strong armed government agents to protect them from their fears.

By exploiting fear, the government's protection racket flourishes. State power increases and social power decreases.

Capital Gains vs Dividends

I was halfway home
I was half insane
And every shop window I looked into
Just looked the same
--Style Council

Stocks are often called 'shares' because, when you buy them, you essentially purchase fractional ownership of a business. This opens the door to sharing in a company's success in two ways. One way is through capital appreciation of your shares. Your 'capital appreciates' when the share price of a stock that you own increases above your purchase price.

If you previously bought Apple (AAPL) at $160/share, then at this morning's opening quote of about $192 you currently have a $32/share capital gain on your investment. That profit is on paper only, however, until you 'ring the register' by selling your shares. It is quite possible that today's $32/share gain in AAPL could turn into a future loss if the share price declines significantly from here. After all, AAPL shares were selling at about $140/share in early January.

Materially profiting from capital appreciation, then, requires selling your shares at a higher price. This raises several hard-to-answer questions. When should I sell? What are the tax consequences of doing so? What should I do with the proceeds after I sell? What if prices decline below my original purchase price before I can sell? How do I invest for the long term if I'm constantly selling my stock positions in pursuit of capital gains? Buy-to-sell investment strategies can be difficult to consistently execute well--as I can attest from personal experience.

The other way to participate in the success of a company is through dividend payouts. Dividends are cash payments made by companies to their shareholders. Think of dividends as a form of profit sharing. Companies that pay dividends decide to take a portion of their earnings and distribute them to investors. Dividends are often paid on regular (e.g., quarterly) basis.

Dividends often come from companies that have been around a while. These firms commonly have mature, profitable businesses that no longer benefit from plowing all earnings back into internal growth projects. Instead, some profits are returned to investors in the form of cash.

Take Coca-Cola (KO) for example. The company was founded in 1892 but did not begin paying a dividend until 1920. As the company has matured, it has become a consistent dividend payer. In fact, KO has increased its annual dividend payout to shareholders in each of the past 55 years. Current KO pays a quarterly dividend of $0.40/share, or $1.60 share annually. With KO currently trading at about $46/share, that's a 'dividend yield' of $1.60/$46 = 3.5%

Unlike capital gains from share price appreciation--which remain unrealized until/unless you sell your shares--dividends constitute actual cash in hand from your investment. As such, dividends provide a source of real income. Dividends can supplement the income that you earn from your job. When you retire, a portfolio of dividend-paying stocks can be an important source of regular income. This situation reflects the classic idea behind investing: lay out investment capital today and, if you have chosen wisely, that investment throws off a stream of future cash in your direction.

Dividend paying stocks do carry risks. A company's business can deteriorate, causing a it to reduce or even eliminate dividend payouts. Moreover, declines in a company's share price can offset gains from dividends. For instance, a 3.5% decline in KO's share price can be seen as wiping out a year's worth of dividend payouts from the company.

While investment strategies grounded in capital gains certainly have a place in investment portfolios, circumstances over the past few months have re-introduced me to the value--perhaps the superior value--of investment strategies grounded in dividend-paying stocks. We'll discuss why in a future post.

position in KO

Unequal Incomes by Force

And I get so tired when I have to explain
When you're so far away from me
See you've been in the sun and I've been in the rain
And you're so far away from me
--Dire Straits

As these pages have observed, income inequality is not a bad thing when it occurs naturally. In fact, it is an essential feature of a thriving market economy. The specter of higher incomes motivates producers to become more productive. When producers are compensated (by consumers) for being more productive (either thru innovation or efficiency gains), then standard of living improves for all.

Problems arise, however, when income inequality is increased by force. "Huh?," you ask, "I thought income equality is what bureaucrats seek to achieve by force--using, for example, socialist tactics of re-distribution."

Yes, but while income equality can be forced, so can income inequality. The primary platform for increased income (and wealth) inequality is central bank policy. Whenever the Fed and other central banks ease monetary policy, which requires force to do so, then incomes become more unequal.

When rates are forced lower, financial assets like stocks and bonds are bid higher. Wealthy individuals, who tend to own more financial assets, benefit in an out-sized way compared to people of lesser means. Moreover, people of lesser means, who commonly climb the first few rungs of the economic prosperity ladder by saving more of their incomes in interest-bearing accounts, get paid less for doing so. With less incentive to save, many lower income people save far less than they otherwise would--and may even take on more debt since the cost of borrowing has been forced lower. Yet, more debt and less saving is precisely the opposite of what poorer people need to do to boost income and wealth over time.

Another group that benefits from easy monetary policy is the financial sector. Because banks, brokers, et al. get first dibs on newly created cash and credit money by central banks, they can buy things (financial securities in particular) while prices are still low and then profit handsomely as prices rise when those lower in the food chain subsequently get their hands on the money and bid things higher in an inflationary cycle.

With central bankers engaged in the most radical monetary policies that the world has ever seen, we can be confident that these policies have forced income distribution markedly wider in their wake.

Why the Fed Caves

"Well, we're now so levered up that once it gets outside these limits, it gets ugly in a hurry."
--Will Emerson (Margin Call)

Chart below shows the Fed Funds target since 1992. The low periods correspond to recessions (~1992, 2002, 2008). Note the lower lows and lower highs--the technical definition of a downtrend.

This helps portray the Fed's predicament. Each time we have a recession, the Fed lowers rates below market, prompting more borrowing than would otherwise occur. In natural market cycles not subject to central bank intervention, just the opposite should occur. Debt should fall during a recession as bad loans get extinguished, interest rates rise, and saving commences.

In unnatural market cycles, with Fed policies that force rates lower, we get more debt and leverage. And, by definition, less savings.

This leaves the system weaker coming out of downturns rather than stronger. Thanks to central bank policies, the system always exits a recession more levered up than before.

Thus, attempts by central banks to 'normalize' rates back to levels of previous expansions are destined to fail. Why? Because the greater the leverage in the system, the less tolerant the system is to rising interest rates and falling asset prices used as collateral against the debt.

Stated differently, the collective balance sheet, being more leveraged, is more susceptible to insolvency should rates rise and asset prices fall.

This is why the Fed always caves and turns dovish earlier in the present cycle compared to the previous cycle. With each passing cycle, the Fed paints itself (and the economy) farther into a corner that it cannot escape.

First Amendment Protection on Campus

A voice is waiting for me
To set it free
I got the key
I got the key
--Russ Ballard

This week President Trump signed an executive order aimed at protecting free speech on college campuses. The order threatens to pull federal funding from colleges that do not uphold those rights.

This order is directed at movements on college campuses to suppress speech deemed unpleasant by some students, administrators, or external resource providers. Those movements restrain communication of alternative viewpoints necessary for seeing various sides of an issue and for developing critical thought processes (perhaps the ultimate goal of higher ed).

Opponents of Trump's order claim that colleges are not free speech forums but learning institutions, and these institutions must set norms about how learning should take place. These norms may, at times, limit speech for the sake of learning.

Nice try, but few things challenge critical minds more so than views that run counter to orthodoxy and fall outside the comfort level of everyday norms. Free speech forums--not safe spaces--are vital for learning.

The First Amendment specifies that the federal government shall make no laws abridging the freedom of speech. When speech takes place in public places, such as on college campuses that have received public funding, then no laws, rules, regulations, et al. can rightfully prevent speech from freely occurring. In fact, government is obligated to ensure a speaker's right to speak and his/her audience's right to hear. President Trump is fulfilling that obligation.

However, the president has no standing to uphold free speech in private college contexts. Under principles of private property, owners of private schools can manage speech as they choose and have the right to physically remove those who violate the rules. 

The implication, of course, is that those schools not wishing to preserve the First Amendment can do so simply by removing their hands from public coffers.

Admission of Failure

Relax said the night man
We are programmed to receive
You can check out any time you like
But you can never leave
--Eagles

Following its bimonthly meeting on Wednesday, the FOMC announced that its overnight lending rate would remain unchanged in a range between 2.25-2.5%. At a news conference after the meeting and announcement, Fed Chairman Jerome Powell suggested that the central bank's previous campaign to tighten rates is over.

He also announced that the Fed's quantitative tightening (QT) program, originally anticipated to last years as the central bank unwound $trillions in securities purchased during the quantitative easing (QE) campaign, would end this fall with about $4 trillion of assets now to be kept on the Fed's balance sheet.

This all amounts to a gigantic admission of failure. Aggressive monetary policy did not create a self-sustaining recovery that could withstand a reversal of that policy.

Instead, all QE et al proved is that financial asset prices could be inflated significantly higher.

It also proved that these aggressive policies trap central banks. They can't leave these policies without willfully collapsing economies and markets.

Unfortunately, that suggests an 'unwillful' collapse when central banks can no longer suppress natural forces that seek to normalize market functioning.

Apples and Oranges

Jacob Moore: Can I have a copy of it? She doesn't keep pictures of her childhood.
Gordon Gekko: I don't even know you, and you already want something from me. So what do I get in return?
Jacob Moore: So you want to make a trade?
Gordon Gekko: Yeah. Okay. All right. I'll give you this and you give me another picture of Winnie--recent--without you in it.
Jacob Moore: I don't have one on me.
Gordon Gekko: I guess this one is on margin, huh?
--Wall Street: Money Never Sleeps

Jacob Hornberger offers a nice primer on free trade. Suppose Jess has 10 apples and Jen has 10 oranges. Because Jess would like some oranges and Jen would like some apples, they decide to trade. What would constitute a fair trade in this case? Many would likely say 5 apples for 5 oranges, or a 'price' of one apple per orange.

But this in incorrect. This is because individuals have their own subjective valuations based on their personal taste preferences. Jen, for instance, may like apples so much that she would be willing to part with 3 oranges in order to obtain an apple. Outsiders looking in might deem this trade 'unfair,' but to Jen it is completely fair given her affinity for apples.

The important point is that when two parties voluntarily engage in exchange, the price they decide upon IS the fair one because it motivated them to trade. And, because they did trade, both sides are better off than they would be others...lest they would not have traded.

When governments interfere with free, voluntary exchange, then that is when things become unfair. Through trade agreements, tariffs, sanctions, embargoes, et al., government intervention forces exchange prices away from the truly fair price that traders would voluntarily settle upon.

Because they prevent the fair market price, i.e., the prices voluntarily agreed upon between traders, from being freely determined, government-imposed restrictions on trade impair improvements in standard of living to be gained through trade.

Shred the treaties, lift the tariffs, and open the ports--even if other countries don't. By definition, free trade does not require government permission.

Change the Rules

Now did you read the news today
They say the danger's gone away
But I can see the fire's still alight
There burning into the night
--Genesis

Over the past week or so, various Democrats have proposed or voiced support for the following:

-->Abolishing the Electoral College in favor of a 'national popular vote' for electing the president.

-->Packing the Supreme Court with additional judges.

-->Lowering the legal voting age to 16.

Demonstrating, once again, that when a political party has trouble competing under the rules set forth by our Constitutional framework, then it prefers not to endeavor to become more competitive under those rules.

Rather, it endeavors to change the rules.

Sentiment and Investing

I'd hold onto you
Till the mountains crumble flat
I'd hold onto you
'Till you figure out just where you're at
--Ric Ocasek

Previously we discussed the primary asset classes available to investors and shared some sample asset allocations. We also examined the relationship between income, saving, and investing as well as the negative effects of debt on the process. Finally we offered a brief primer on technical analysis using uptrend and downtrend patterns.

Today, let's briefly consider sentiment and its influence on investing. In our context, sentiment is synonymous with emotion. Many assume that humans make economic and financial decisions rationally with little emotion. Research suggests that this can be a bad assumption. At best, people are 'boundedly rational,' meaning that limits in cognitive capabilities limit capacity to be completely rational. At worst, people rarely choose to engage the slower thinking, rational portions of their brain, opting instead to let fast thinking, emotionally charged thought processes govern most of their decisions.

This general tendency to weave sentiment into our thought processes can impair ability to make consistently good investment-related decisions. Impulse purchases at the mall reduce capacity for saving--the necessary precedent for investing. Get-rich-quick desires motivate speculation on popular high flying growth stocks with unknown underlying fundamentals. Overconfidence drives belief that we are smarter than other investors in the market. Fear of missing out on big market moves encourages asset allocations tilted toward risky extremes. On the other hand, fear of losing money can prompt overly conservative asset allocations, or keep us from cutting losses by selling poorly performing investments that we should no longer own.

How can people keep their emotions in check when making investment decisions? A few ideas come to mind. Slow the process down. Think, read, study the possibilities before making a choice. The more rushed the investment decision, the lower the likelihood that it will be a good one. Also, consider tracking your investments on a routine basis. Make some spreadsheets that lay out your investment positions and show their performance over time. Calculate your asset allocation so that you know where you stand. It is more difficult to let your emotions drive you too far into the weeds when you routinely review the numbers. Finally, talk to others about markets and investing. Bouncing ideas and experiences off of others helps you learn how well you are thinking things through.

It also helps you realize that wrestling with sentiment when making investment decisions is not just a 'you' problem. It is part of the general human condition.

Self-Imposed Victim Hood

"You are what you have it in yourself to be."
--Godfrey of Ibelin (Kingdom of Heaven)

Sadly, some people are convinced that they are wholly products of their circumstances. They believe that they are not free to make their own decisions. Instead, they think that they are forced by others into acting the way they do.

They lay off responsibility for their actions on others. They believe that they are victims. Life works on them rather than them working on life.

They believe that they only way to assuage their victim hood if they force others to comply with their worldview.

These people, who have become slaves to their self-imposed victim hood, wish to enslave others as well.

Can't Reach the Ladder

She says I'm fine, I'm ok
Cover up your trembling hands
There's indecision when you know
You ain't got nothing left
--Toad the Wet Sprocket

Nice depiction of what minimum wage laws do. They knock the rungs off the bottom of the ladder that low productivity workers must initially climb toward higher standards of living.

Those whose skills do not yet generate productivity that equates to the legal minimum will not get hired.

Minimum wage laws prohibit marginal workers can't reach the first rung. They are prohibited--by law--from climbing the ladder.

Truth Never Dies

"You can break a man's skull. You can arrest him. You can throw him into a dungeon. But how do you control what's up here? How do you fight an idea? 
--Sextus (Ben-Hur)

Did our founding ancestors draft a perfect Constitution? Plainly, no. They should have taken the anti-federalists' advice and decentralized more. There are also clear divergences from natural law, such as the Three Fifths clause.

But, despite their errors, the founders were on the right track. Their design addressed the perpetual struggle that has framed society since the beginning of civilization--that of force versus freedom.  Our founding ancestors conceived a governing structure grounded in liberty.

Their vision remains radical and true. So radical and true that statists go to no end to suppress it.

Fortunately, the Lenten season reminds us that truth never dies.

Wall of Resistance

"We defend this city, not to protect these stones, but the people living within these walls."
--Balian of Ibelin (Kingdom of Heaven)

Many traders eyeing SPX 2820. Over the past few months, several rally attempts have failed at this level. As such, it has come to represent a significant wall of resistance that, if breached, could spark another leg higher and a run at last year's all time highs.

Of course, the opposite is possible is well. Another failure at this level could cause traders to shed hope in favor of fear, and send the bulls into full fledged retreat.

Safety and Government Agencies

Pete 'Maverick' Mitchell: What's your problem, Kazansky?
Tom 'Iceman' Kazansky: You're everyone's problem. That's because every time you go up in the air, you're unsafe. I don't like you because you're dangerous.
Pete 'Maverick' Mitchell: That right, Ice...Man. I AM dangerous.
--Top Gun

The recent controversy surrounding the Federal Aviation Administration's (FAA) grounding of Boeing (BA) 737 Max 8 jets demonstrates the foolishness of depending on government agencies for 'safety'--whether that safety relates to plane flights, food, drugs, cars, banking, etc.

Who is in a better position to determine the safety of a market transaction? Bureaucrats in a room, or the millions of buyers and sellers on the ground in market places engaged in voluntary exchange? If people are self interested, and they surely are, then isn't it in the best interest of individual market participants to determine safety-related aspects of the transactions that they are engaged in?

Of course it is. So if they are not doing so, then why not?

A common claim is that most people lack expertise and time to ferret out safety issues. But this is not a reasonable excuse. If there was demand for this information in the marketplace, then entrepreneurs would move to make it happen--particularly given today's state of information technology. A small example of this has been efforts by travel firms over the past few days to post plane makes and models scheduled by carriers for upcoming flights. This was done in response to "What type of plane am I flying?" questions suddenly being raised by customers.

Why, then, are not more people being entrepreneurial in everyday transactions w.r.t. safety? Perhaps it is because they think government agencies have their backs. People are economizers, meaning that they seek to conserve scarce resources including time and effort. They will spend less time doing their diligence in ferreting out problems and opportunities if they think someone else will do it for them--or recoup their losses in case of they have chosen poorly.

If the FAA, FDA, FDIC, et al backs it, then it must be safe, right?

This is moral hazard writ large. People are taking more risk than they otherwise would (including self-imposed ignorance of safety issues) because they think that their risky behavior is insured by government agencies.

Incomes and Fairness

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

Prof Williams considers whether inequality of incomes is 'fair.' If it was obtained by force, as in the case of a person robbing another, then such income would not be fairly obtained. That property needs to be taken from the thief and returned to its rightful owner.

If the income was obtained thru production and trade, then that income is is fairly obtained. That income serves as proof that the individual who obtained it has served his fellow man. As Williams notes, "A system that requires that one serve his fellow man to have a claim on what he produces is far more moral than the system without it." The more a person serve others, the greater that person's income.

Compare that to the system promoted by many politicians that works like this: "You don't need to work to have a claim on the production of others. Instead, just vote for me. Via the tax code, I will take some of what your fellow man produces and give it to you in the name of 'fairness.'

How could such a morally corrupt system ever get traction? Because the distribution of wealth is naturally skewed. A few have a lot compared to many who have less. Merge that with a democratic political process where majorities get their way and control the strong arm of government, and it is easy to see how the many rationalize their theft of the few in the name of 'fairness.'

Straight On Socialists

Now I know I got to play my hand
What the winner don't know
The gambler understands
--Heart

For many years socialists have adhered to a gradualist approach for implementing their agenda in the United States. Recognizing that they would be rejected outright if they tried to force too much down the throats of the American public at one time, socialists have slowed it down, piecing out their policies incrementally. That's how the frog gets boiled--by turning up the heat a little at a time.

Recently, however, socialists seem to be shedding their measured approach in favor of straight on assault. Gradualism is being replaced with resistance, disruption, and overt affiliation with socialist ideals and organizations.

Many people are fearful of this overt socialist 'threat.' What if it catches on?

On the other hand, what if it wakes people up? People who have been sleeping while socialists were quietly robbing them of liberty might come to and decide to push back.

It is easy to wonder if socialists have fully thought through their new straight on strategy.

Uptrends and Downtrends

Be running up that road
Be running up that hill
Be running up that building
--Kate Bush

A useful skill for investors is technical analysis. In the investing context, technical analysis is the study of security prices over time. Usually the price:time relationship is pictured in a graph, and the objective is to look for patterns that either help describe current situations or that might help predict future price behavior.

For instance, a common pattern in technical analysis is a price trend. An uptrend occurs when a diagonal line can be drawn underneath a series of prices so that a pattern of 'higher lows' is evident in the series. The current chart of Cisco Systems (CSCO) indicates a strong uptrend over the past couple of months:

A downtrend occurs when a diagonal line can be drawn above a series of prices so that a pattern of 'lower highs' is evident in the series. Note the downtrend evident in Apple (AAPL) prices last fall:

Note also what is sometimes called a 'trend reversal' on the AAPL chart. In early January, the downtrend in AAPL stock prices was 'broken' when prices decisively moved through the uptrend line. Since then, the stock has been heading higher in a discernible uptrend pattern.

Knowing whether individual securities, or markets overall, are trending up or down leads to more informed investment decisions.

position in CSCO

Who's the Dependent?

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

Nice tax season tweet by Thomas Massie. Parents generally list their kids as dependents on their 1040s.

🤔 3 of my 4 kids now pay federal income taxes... Should they list me as a dependent? 🤷‍♂️ #sassywithmassie

— Thomas Massie (@RepThomasMassie) March 10, 2019

However, given our burgeoning debt created by the old that must be paid by young, perhaps the situation should be reversed. Who is the real dependent?

Priced Out of Work

I wander in early to work
Spending days licking boots for my perks
--The Who

Ron Paul relates productivity and wages to his childhood experiences at his grandfather's farm. Kids in the family would pick berries at the farm and get paid based on how many they picked. The more productive a kid was, the more the kid earned.

If Your Productivity Is Less Than The Minimum Wage...

Thank Government For Pricing You Out Of A Job pic.twitter.com/cfWv6yrtVB

— Ron Paul (@RonPaul) March 8, 2019

If the grandfather was forced to pay a minimum wage, then the dynamic may have differed. A mandated wage would have pressured the grandfather to pay some kids less than what they were worth in terms of productivity which, in turn, would have hurt the business. Or, the grandfather would likely consider hiring fewer pickers--i.e., those whose productivity was in line with the mandated wage.

Stated differently, a mandatory minimum wage would have priced some kids out of work.

Ten Years

Sam Rogers: You gonna keep the kid?
John Tuld: Keep him? He's getting promoted. It's all hands on deck now, Sam. There's going to be a lot of money to be made coming out of this mess, and we're going to need all the brains we can get around here.
--Margin Call

Ten years ago tomorrow US stock markets finally bottomed from the credit collapse carnage, and commenced what was (and technically still is) one of the greatest bull markets in history. From an intraday low of 666 (!) on March 9, 2009, the SPX marked an intraday of 2941 last September. That a 342% move, or about 16% compounded annually.

The bullish trend is still in place technically. Both the uptrend line starting from the 2009 lows and the 200 period moving average have been in synch for some time. Support currently rests at about 2370--not quite 400 pts below yesterday's close.

Stated differently, markets would have to drop almost 20% from here to decisively negate the long term trend from a technical standpoint. That's a pretty sizeable drop.

It also provides a sense of just how far above trend the last couple of years worth of action has been.

Euro U-Turn

Relax, said the nightman
We are programmed to receive
You can check out any time you like
But you can never leave
--Eagles

ECB joins the Fed this am by deciding not to raise rates as previously planned. Further, it signaled that future rate hikes are on hold and that new lending programs will be rolled out for banks and other institutional borrowers.

Seems only a matter of time before the ECB will also announce that its QE program will not be reversed, leaving trillions of assets on its balance sheet similar to the Fed.

This morning's actions once again reinforce the notion that central banks can never leave the extreme monetary policies that they have created.

Fragile Earth?

"You know how I'm always trying to save the planet? Here's my chance."
--David Levinson (Independence Day)

Popular leftist claims: Earth is a fragile planet. Immediate intervention is required in order to save it. Prof Williams presents evidence suggesting the absurdity of these claims.

Dozens of progressives with prestigious pedigrees have prognosticated of the Earth's demise--a demise that, of course, never came. For example, in 1970 Nobel laureate George Wald predicted, "Civilization will end within 15 or 30 years unless immediate action is taken against the problems facing mankind."

The trumpet of doom strikes again...

Williams also presents previous cases of natural disaster, such as volcanoes and floods, that have spewed more smoke and displaced more water than man-made causes ever could. Not only do these examples demonstrate the so-called fragile planet's capacity to survive seemingly catastrophic events, but they also suggest man's puny potential to make significant parametric changes on the earth.

The evidence suggests the opposite of watermelon socialist claims. The earth is robust, not fragile.

On Target

"Gentlemen, this is bulls-eye!"
--Comander Tom 'Stinger' Jordan (Top Gun)

Building on yesterday's pretty chart pattern, Target (TGT) traced out a nice multi-month reverse head-and-shoulders formation before today's bullish earning's report popped the stock 5% today.

The stock has also filled the gap from last November caused by the negative tone of the previous earnings report. Once again demonstrating the old technical analysis saw that price gaps are ultimately meant to be filled.

position in TGT

Pretty Pattern

"You could use a cup of my fanous java."
--Rigby Reardon (Dead Men Don't Wear Plaid)

Pretty looking near-term chart below. Cup and handle pattern with the handle showing a miniature reverse head-and-shoulders formation. Stock starting to edge thru resistance.

Several stocks I'm following show variations of this pattern.

position in WFC

Debt Reduces Freedom

Hundred dollar car note
Two hundred rent
I get a check on Friday
But it's already spent
--Huey Lewis & the News

Previously we discussed the relationship between income, saving, and investing. We argued that saving and investing a portion of your income helps to elevate your prosperity and the prosperity of others. The sooner you get into the habit, the better.

But what about debt? How does it enter the equation?

Debt is the opposite of saving. Individuals take on debt when they want to live larger in the here and now than can be afforded by income alone. Suppose, for example, that you work a job that pays you $1,000 per month after taxes. If you put aside nothing for saving and investing, then you could live a $1,000 monthly lifestyle.

But what if you sought a higher standard of living--one that exceeded $1,000 per month of consumption? If you do not have past savings to draw from, and you don't want to work more hours, then you might consider borrowing the money that would allow you to acquire those additional economic resources that enable living larger. The lender of the money is sometimes called a creditor, and the borrower is called a debtor.

The basic loan contract works like this. The creditor loans you money today. In the future, you agree to pay back the loan. Loan repayment includes both the original amount borrowed, called principal, plus a charge for using the amount borrowed, called interest. Although loan contracts sometimes stipulate repayment in one lump sum, it is more common to repay loans gradually in regular intervals. Monthly intervals are common. Almost always, the longer the term of the loan, the more interest owed to the creditor.

With loan in hand, life seems good. You use the borrowed funds to consume more resources than your income afforded you. Just as you hoped, you're living large.

But then those monthly loan repayments commence. Now part of your $1,000 monthly income must be spent on servicing your debt. Pretty soon you not only can't afford the premium lifestyle anymore, but it becomes harder to live on your $1,000 monthly income. If your loan payments amount to $100/month, then that leaves you with only $900 to divide between consumption, saving, and investing. The more you borrow, the less you have left after paying your debt.

A few years back, a smart cookie summed it up for me in three words: Debt reduces freedom. Although the lifestyle 'sugar high' obtained from the original loan may seem liberating, that feeling is likely to be temporary. The reality is this: borrowing to fund a greater lifestyle today increases the probability of a lower standard of living in the future as those debts are repaid. Moreover, your future freedom is likely to be compromised. A loan can be seen as a contract of voluntary servitude. In exchange for the right to use the property of someone else today, you agree to work for that person in the future to repay what you owe.

The implications on saving and investing should be obvious. The more you borrow, the less you can save and invest for the future.

National Emergencies

"Tonight I will speak directly to these people and make the situation perfectly clear to them. The security of this nation depends on complete and total compliance."
--High Chancellor Adam Sutler (V for Vendetta)

President Trump's declaration of a national emergency to fund a $5+ billion wall across the southern border has partisans once again choosing sides. Those for it argue that it is necessary for national security. Those against it argue that it is beyond the president's legitimate authority to unilaterally fund government activities.

The latter argument is correct. Declaring a national emergency to fund a project for the executive branch is not just an end around Congress, but an end around the Constitution. Article 1 gives Congress sole power of the purse.

As Ron Paul observes, Trump's situation is hardly unprecedented, however. Many presidents, at least as far back as Lincoln, have used so-called national emergencies to expand their power. In fact, Congress itself has passed several statutes that provide for the president to bypass congressional authority by declaring emergency situations.

For example, the 1976 National Emergencies Act gives the president broad powers to declare emergencies for almost any reason. After informing Congress that an emergency has been declared, the president merely needs to renew the declaration once/yr. Since the act passed, 59 emergencies have been declared by nearly all presidents since the law's enactment (except for Reagan, I believe), with 31 of those still in effect.

Other laws that grant the president emergency powers include the Defense Production Act, the Communication Act, and the 2001 authorization for use of military force (AUMF).

Judge Nap argues that any presidential declaration of emergency cannot be contrary to the Constitution, and cannot authorize the president to spend money that Congress has declined to spend. Doing so now would be a dangerous precedent.

To be sure, but the counter to his argument is that the horse is already out of the barn. And many of those who oppose (support) Trump's move would surely support (oppose) a similar move from 'their' (the ‘other side’s) president.

Unless opponents of Trump's declaration are ready to rescind all past statutes that grant presidential powers associated with emergency declarations, then their objections can hardly be seen as sincere.

Gapping Higher

"The break-up value's higher. It's worth eighty."
--Bud Fox (Wall Street)

Gap (GPS) up nearly 20% after management announced that it will split up the company. Old Navy will be spun off, leaving the flagship Gap brand, Banana Republic, and some miscellaneous stores in the other security--which may be renamed.

Nice to see the pop, for sure, in what seems to be one of the more undervalued names in this market. But not sure I agree with the strategy. A big advantage Gap held was it held brands across various segments of fashion retail. There was likely some synergy there that will be lost.

On the other hand, it will be nice to see the Old Navy franchise spread its wings given its growth story. That, I believe, is what the market is voting on this am.

Will be interesting to see how that affinity holds once the euphoria wears off.

position in GPS