Science of Conceit

All my tubes and wires
And careful notes
And antiquated notions
But, it's poetry in motion
--Thomas Dolby

The hubris of this guy is consistent with what Hayek termed the 'fatal conceit' of central planners. Because bureaucrats generally believe that they know better than the masses weighing options and acting in ways best suited for their individual situations, they are destined to make poor decisions that lead to their downfall. 

Fauci says that he represents science. What he means is that what is says and does shouldn't be questioned.

His conceit has quite literally proven fatal to many already. The question is when will it take Fauci down as well.

Dividend Geese

Billy Chapel: Are you saying I should retire?
Gary Wheeler: Why not? It wouldn't hurt the negotiations. And it would serve those sons of bitches right.
Billy Chapel: I, uh. I don't know. I don't know what to say.
Gary Wheeler: Well, you can't tell me that you haven't thought about it. And you've been smart with money, right?
--For Love of the Game

Until recently, dividends didn't matter much to me. Like most investors, I focused on price appreciation potential. 

A few years back my brother reacquainted me with the value of cash dividend payouts. Managing my mom's portfolio, he invested primarily in stalwart dividend paying stocks. Over time, he built an income-producing machine capable of covering a large share of monthly living expenses. Yes, the portfolio gradually increased in value as well. But so did the dividend payouts.

The capacity of a well-designed stock portfolio to generate income--particularly 'replacement' income for retirees--impressed me, perhaps in part because I'm approaching retirement myself.

In the olden days, common wisdom was that aging people in need of income replacements should invest in bonds and other fixed income instruments. Being traditionally less volatile, fixed income was seen as less prone to big capital loss. Moreover, many fixed income instruments tended to offer yields superior to stocks.

In the late 1970s/early 1980s, for example, 10 yr Treasury yields traded north of 10%. Those cash payouts were far higher than dividend yields on stocks. Of course, inflation was also flying which negated much of those cash gains.

Since then, of course, T-note yields have been in secular decline--due largely to interventionary policies of the Federal Reserve. Dividend yields on stocks have also declined as shown by the yield in the S&P 500 since 1900.

Overlaying the two trends reveals a couple of things. One is that stock dividend yields have not always been lower than bond yields. In early decades of the 1900s, stocks generally yielded more than bonds by a couple of percent. The other note is that, more recently, the offset between stock and bond yields has narrowed to the point where cash returns on stocks once again looks attractive.

Index-to-index comparisons tend to understate the superior cash-yielding capacity of stocks. For example, the yield on the S&P 500 Index currently stands at about 1.3%. However, many stocks in the SPX pay tiny or no dividends. Investors can readily assemble a portfolio of reliable dividend payers from the SPX with an overall yield north of 3%. This handily beats the current 10 yr Treasury yield of about 1.5% (and nearly all other fixed income alternatives for that matter).

If Treasury yields should rise relative to stocks then the calculus changes, of course. That said, because central banks worldwide are determined to suppress sovereign yields, large increases in bond yields seem unlikely unless policy makers lose control of the interest rate markets. While this could certainly happen, it is likely to occur in the context of Big Inflation. Big inflation jeopardizes the attractiveness of bonds. Moreover, companies may be able to navigate inflationary environments in a manner that preserves value. Dividend payouts might even increase.

Preparing for retirement, then, I view the cash-generating capacity of dividend paying stocks as central to creating 'replacement income' when the paychecks no longer roll in. Essentially, the dividend payers write the checks instead of an employer. The more I can draw on steady-to-rising dividend payments, the less I will have to cut in on the principal that generates the cash.

Stated differently, I don't want to kill the dividend-paying geese that lay the golden eggs.

Scourging Vaccines

Ok
Just a little pin prick
There'll be no more 'aaaaahhh'
But you may feel a little sick
--Pink Floyd

Scientific discourse that has transpired since the administration of CV19 vaccines suggest two long term scenarios with 'chronically bad' components.

One is that the vaccines push the virus to mutate in harmful manners far beyond what would occur if the virus faced more measured resistance posed by naturally acquired immunity. Increased evolutionary pressure to become vaccine resistant might produce adaptive forms of the virus that are more dangerous and long lasting.

Another is that the side effect profiles of the vaccines, already observed to contain acute elements, create long-term issues for vaccinated people. One possibility associated with heart and neurological problems is discussed here.

It goes without saying that either of these scenarios, should they materialize, could scourge the world for a long time. Let us pray that our Creator does not permit them to unfold.

Give Thanks

Therefore, our God, we give you thanks
And we praise the majesty of your name
(1 Chr 29:13)

Bureaucratic Incompetence

Oil, that is
Black gold
Texas tea
--Flatt and Scruggs

In the midst of skyrocketing gasoline prices and the administration's release of oil from the Strategic Petroleum Reserve, the Secretary of Energy is unable to answer what should be simple question for a person in her position: How many barrels of crude does the US consume daily?

Representative example of the bureaucratic incompetence engulfing this administration. 

btw, a useful repository of energy supply/demand info can be found in BP's annual Statistical Review of World Energy. Turn to p.23 of the 2021 edition to view US daily oil consumption for the past 10 yrs.

Credentialism Corollary

Well, the years start coming and they don't stop coming
Fed to the rules and I never stopped running
Didn't make sense not to live for fun
Your brain gets smart but your head gets dumb
--Smash Mouth

Previously we proposed that in societies that value credentials, people will be prone to outsource their brains to so-called 'experts'--i.e., those with important credentials. The greater the credentialism, the more likely people are to be misled.

An interesting corollary is that the more educated, and thus the more credentialed, a society becomes, the less able that society is likely to be at reasoned, independent, and integrative thought. 

Because that kind of thought is critical for coping with novel, disruptive change, the implications are paradoxical if not ominous. As a society becomes 'smarter' via credentialed education, its capacity for adapting to major change declines.

Urban North as Old South

"Fate, it seems, is not without a sense of irony."
--Morpheus (The Matrix)

Victor Davis Hanson claims that major progressive regions of the US, particularly large northern and coastal urban cities, are increasingly taking on characteristics traditionally attributed to the Old South. One party political fiefdoms. A feudal class system lacking a vibrant, mobile middle class. Intolerance of dissent on issues held dear.

Just as people fled the Old South in droves to escape similar conditions, they are packing their U-Hauls once again to escape escalating oppression in the Urban North. 

Their destination? Why, the South. 

Texas, Tennessee, and Florida are among the states viewed as lands of opportunity.

Proving once again that the magnet of liberty, wherever it may be placed, never looses its capacity to attract.

Christ the King

"I think that when statesmen forsake their own private conscience for the sake of their public duties, they lead their country by a short route to chaos."
--Sir Thomas More (A Man for All Seasons)

Today Catholics celebrate the Solemnity of Christ the King. Celebrated on the last Sunday of the liturgical year, the solemnity was instituted by Pope Pius XI in 1925 in response to growing secularism which, in the holy father's view, was attempting to "thrust Jesus Christ and his holy law" out of public life, thus fueling discord among people and nations.

He was right, of course. Nearly one hundred years after his encyclical, it is difficult to argue that Pius was right, and that godless rule among men continues to divide.

The solemnity reminds the faithful that Christ reigns supreme as king of the world--regardless of the perceptions of earthly rulers and their minions who seem to believe otherwise.

Inflation and Stocks

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

Some believe that if Big Inflation cometh, stocks will get creamed. Surging prices will drive folks to spend less. Simple ECON 101.

Lower demand for goods and services should be bad for stocks.

A counterargument is that Big Inflation occurs when people get nervous about the value of their dollars sitting idle, so they put them to work today assuming that they can buy more today (i.e., goods, services, AND stocks) than tomorrow. The psychology feeds on itself, creating, in its ugliest form a reinforcing cycle of higher prices and money printing that feeds it.

Although producers are hurt on the input side with higher costs, they can offset them at least partially by raising prices, thereby preserving profit margins to some degree. To the extent that producers own tangible assets, these are also likely to appreciate in value as inflationary pressures rise--giving a boost to book value at least in nominal terms.

In this scenario, stocks are likely to rise. Perhaps not to a degree that completely compensates for purchasing power decline, but at least to serve as a partial hedge that preserves wealth (note Kyle Bass estimates perhaps 85% coverage).

Historical analysis supports this thesis. Weimar Germany, Venezuela, Zimbabwe. Equities tended to rocket in the local currency--even if they didn't keep pace with exchange against more stable currencies (and gold).

One thing seems increasingly clear. In Big Inflation environments, stocks are likely to be a better place to be than cash.

It also seems that, in the current market environment where the CPI is starting to print some big numbers, stocks seem unfazed--like they want to go higher.

position in gold

Turn It Off

"I'm going to hang up this phone, and then I'm going to show these people what you don't want them to see. I'm going to show them a world without you. A world without rules and controls, without borders and boundaries. A world where anything is possible."
--Neo (The Matrix)

Following up on our recent post.

Turn it off and free your mind.

Bass Fishing

The trees are drawing me near
I need to find out why
Those gentle voices I hear
Explain it all with a sigh
--Moody Blues

Always interesting to hear what Kyle Bass has to say. Some points from this recent interview.

Fed monetization of debt will result in inflation. 

The 'official' numbers grossly understate the extent to which purchasing power is declining. He provides an example of the average car 30 yrs ago which cost $13,000 then marked at less than $15,000 in the inflation basket today--even though the average price of a new car is about $40,000. How can this be? The trick of hedonic adjustments. Even though a new car buyer's bank account goes down by $40K, the CPI number account for only a fraction of the actual price.

The Fed will be unable to taper much. Short rates higher than 1% would break the system. This means more monetization (inflation) pending in attempts to keep the wheels on the wagon.

The field position of government and central banks makes it unlikely that they will be able to intervene as Paul Volcker did in the late 70s/early 80s to 'break the back' of big inflation. Radically raising interest rates (and therefore borrowing costs) to curb inflation today would bankrupt the federal government (debt payments skyrocket) in addition to rendering leveraged entities across the globe insolvent.

He's not a Bitcoin/crypto fan.

Instead, he especially likes the prospects of rural real estate, particularly as populations migrate to states such as Texas, Tennessee, and Florida that are positioning themselves as business and consumer friendly with less regulatory burden. He likes land as a 'hard asset' play better than gold due to real estate's functionality.

Lots of discussion about China. Bass has been outspoken on what he feels is China's irresponsible, aggressive agenda. He believes that the country's move toward a national digital currency bodes poorly for global trading partners. He thinks the US should outlaw trading in it. He also believes that Taiwan faces imminent threat, and that markets have not seriously discounted the possible of Taiwan asset appropriation by the Chinese (e.g., TSM). Suggests strategic supply chain risk as well.

He thinks that the Chinese real estate problem will remain largely contained to the mainland, and that the PBOC will print yuan to keep the local economy afloat. He did NOT discuss what that money printing might mean to the global system.

Bass believes that fiduciaries should be fired if they buy Chinese stocks for their clients--due to their unaudited, manipulated nature.

Although he admits that he is a 'tree hugger' and believes in global warming, Bass thinks that under-investment in hydrocarbons over the past few years (due to widespread virtue signaling behavior) may take oil and gas prices to levels that we've never seen--particularly if we have a cold winter. The transition to cleaner energy will take decades and requires a far more measured approach than climate change zealots have been pushing. 

Stock may be the best tool for average investors trying to weather inflationary periods. Bass's work suggest stocks keep up with about 85% of general price increases. Investors will still lose, but stocks mitigate the losses.

position in gold

Shrugging Atlas

The whole world is out there
Just trying to score
I've seen enough
Don't want to see anymore
--Bruce Springsteen

In an upcoming book, Stanford professor and former White House advisor Scott Atlas recounts the dismissal of scientific evidence by CDC officials during his tenure. For example, Atlas presented data indicating the inadvisability of closing schools and that children are not significant spreaders of CV19.

After the presentation, there was silence. No one citing work with contrary results. No discussion of the serious harms likely to result from school closures.

According to Atlas, Dr Deborah Birx instead told him that his opinion was 'out of the mainstream' and that he was part of a 'fringe' group wanting to re-open schools. She insisted that all experts agreed with her, despite the reality that many well known epidemiologists vehemently disagreed with the position of CDC officials.

Birx subsequently testified before Congress that Trump-appointed advisors such as Atlas did not take mitigation steps such as mask wearing that could have prevented CV19-related deaths. Of course, many of those mitigation steps still lack conclusive scientific support.

Atlas' book will serve to document and confirm what public health officials predictably do in the face of a pandemic.

Media Mindlessness

Shiver and say the words
Of every lie you've heard
--Echo & the Bunneymen

Independent thought decreases with increasing connection to mainstream media, particularly of the networked, social variety. It becomes an echo chamber of propaganda. 

Paraphrasing Matthew 5, if your connection to social media causes you to lose your independence, cut it off.

And be free.

Long Covid

But it was just my imagination, once again
Running away with me
--The Temptations

'Long Covid' sounds like a position in some arcane financial security. In reality, it is meant to signify a condition where unpleasant symptoms deemed to be associated with CV19 are thought to persist even after acute infections are past. 

Fatigue, muscle pain, insomnia, and other pedestrian symptoms are said to be representative of long Covid. Because such symptoms are common to a variety of illnesses and ailments, the legitimacy of long Covid seems questionable.

Alex Berenson reviews a recent AMA paper that further fuels long Covid skepticism. Researchers asked French adults whether they had previously been infected with CV19 and whether they had subsequently experienced any of 18 symptoms commonly associated with long Covid. They found that self-reported CV19 was strongly associated with reports of lingering symptoms.

Of course, self-reported infections and symptoms invites methodological problems of 'common methods variance'--where psychometric data on both proposed cause and effect are taken from the same subject.

Fortunately, the researchers also had CV19 antibody tests for the people they surveyed, meaning that, regardless of the self-reports, they knew who actually had been infected with the virus. 

When the researchers compared the symptoms reported by people who had actually been infected per the antibody tests to symptom reports from the general population, they found no significant difference in most symptoms. One exception was loss of smell, a known lasting side effect of CV19 which becomes a nice validity test of sorts for the study's method.

The researchers also found that nearly 60% of those people with CV19 antibodies did not know that they had been infected.

Results suggest a psychosomatic basis for long Covid. People are using previous CV19 diagnoses, real or imagined, to explain away pedestrian physical symptoms. The findings also suggest that actually being infected with the virus is less risky than thinking you've been infected--at least for many people.

Berenson suspects that patient, physician, and public health investment in the long Covid concept that they won't let it go regardless of evidence to the contrary. 

Seems a safe bet, since it would be consistent with overall response patterns to the virus for going on two years now.

Out of the Tube

Step right up, and don't be shy
'Cause you will not believe your eyes
--The Tubes

The October CPI increased at a 6.2% annual rate. That's the largest monthly print in over 30 yrs. Gold and silver both ripped higher on the news.

Brace up, 'cause the toothpaste is coming out of the tube.

positions in gold and silver

Voter ID

"Define irony."

--Garland Greene (Con Air)

Liberty-minded people are naturally wary of government-mandated ID requirements. Mandatory identification cards, tags, numbers, implants, retinal scans, fingerprints, etc. invite government tracking which threatens individuals' constitutional right to privacy. When it cannot identify and monitor behavior, the state loses much of its power for meddling in the affairs of the citizenry. 

It would seem that the lower the requirement for state-sponsored ID in a society, the greater the individual liberty in that society.

However, this proposition poses a dilemma when it comes to voting. Free societies are usually grounded in republican forms of government. In republican forms of government, representatives are commonly elected by the citizenry through some form of popular vote. 

A few rules are typically imposed on the voters. They must be of a minimum age. They can cast only one ballot. They cannot vote in proxy for someone else. Finally, they must be recognized citizens of the geographic domain for which votes are to be cast. 

It follows, then, that there needs to be a process for verifying that voters have adhered to the rules. It is also difficult to see how such a process does not include a reliable form of voter identification. Information on the ID enables verification of a prospective voter's eligibility and that voters have been true to the 'one person, one vote' requirement.

Wouldn't mandatory voter ID increase risk of government mischief? Oh yeah. The classic precedent is the Social Security number. When the Social Security program was enacted in the late 1930s, the number was said to be simple mechanism for tracking accounts in the Social Security system. Since then, of course, the SSN has become a principal identifier for individuals within the US.

But perhaps the risk can be intelligently managed. After all, absent voter ID, election integrity seems impossible to verify. Corruption is encouraged. Individual voting franchises are degraded. Electors are illegitimate. (Sound familiar?)

Consequently, governments may be installed that threaten the very liberty that free people seek to protect by remaining anonymous and untrackable. 

Quite the irony.

Masks and Exposure Science

Plastic tubes and pots and pans
Bits and pieces and
Magic from the hand
--Oingo Bingo

Insightful video divided into six segments that discusses scientific issues related to universal masking. The narrator is an industrial hygienist who understands theory and associated research that apply to practical masking situations.

He puts many useful concepts to work, including the hierarchy of controls employed to mitigate health and safety risk (of which personal protective equipment such as masks constitutes the final and least effective of all levels), and the hierarchy of evidence (of which anecdotal evidence and expert opinion--those sources that public health officials have emphasized most to justify their policies, constitute the lowest quality evidential source).

After watching this series, only the ignorant or partisan would fail to question the pseudo-science that has been manipulated to support prevailing public health policy.

National Police

When I'm in the shower
I'm afraid to wash my hair
'Cause I might open my eyes
And find someone standing there
--Rockwell

Under the reign of J Edgar Hoover, the FBI developed a reputation for blacklisting and gathering 'intelligence' on so-called enemies of the state. Today, the Feds are no longer merely dirt gatherers, they are perpetrators of crime in the name of the state.

This became all too apparent during the Trump administration. Efforts to keep Trump out of office and then take down his administration involved more than a few 'rogue agents.' It snaked through the hierarchy to the director level.

Federal police actions are escalating under Biden. Door knock down raids, false flag ops, frameups. 

After all, you can't have a police state without national police.

Route One

I won't be coming home tonight
My generation will put it right
We're not just making promises
That we know we'll never keep
--Genesis

In 2010 a 'red wave' poured over midterm elections across the country that replaced Democratic with Republican majorities in both houses of Congress. The Tea Party wave was said to be a reaction to the far left policies led by the Obama administration.

With midterms in this election cycle still one year away, voters tossed leftist politicians at the state level, highlighted by a stunning route in Virginia. The governor's race in New Jersey that featured a hugely favored Democratic incumbent remains too close to call.

What might this portend in next year's midterm elections? Not sure. But Democrats from the president on down are in damage control mode. 

And surely reflecting on looming political consequences of the socialist policies they have been trying to shove down the throats of Main Street Americans.

Gullibility

Linus: You don't believe the story of the Great Pumpkin? I thought little girls always believed everything that was told to them. I thought little girls were innocent and trusting.
Sally: Welcome to the 20th century.
--It the Great Pumpkin Charlie Brown

Kids are gullible because they have not yet developed their capacities for reason and critical thought that they were endowed with. Adults are gullible because they do not use their capacities for reason and critical thought that they were endowed with.

Those who seek power know this and seek to exploit it.