Rape and Abortion

Maybe we'll be all right
It's a sacrifice
--Madonna

The central issue in the Judge's article here is whether rape is a valid justification for abortion. The Judge argues that it is not.

I certainly agree that the ruling of Roe v Wade was wrong. Similar to the Dred Scott case which ruled that the rights of blacks were not protected by the Constitutional, Roe v Wade declared that the rights of fetuses in the womb are not worthy of Constitutional protection either.

As such, millions of people have been slaughtered via abortion.

The Judge argues that even when conception results from the heinous crime of rape, the rights of the fetus merit equal protection under the law. I understand his point. The baby committed no crime. Why should it be killed because of someone else's crime?

However, pregnancy is not a risk-free endeavor. Among those risks is the possibility of death from childbirth. When a man and woman voluntarily engage in sexual intercourse, the woman chooses to assume those risks should she become pregnant. Except for extreme cases, such as when an unforeseen complication threatens the life of the mother (requiring the terrible choice of saving one life at the expense of the other), the fetus's rights should be protected.

But in the case of rape, the woman does not freely make that choice. Instead, the risks associated with pregnancy have been forced on her. A woman placed in this situation has the right to choose whether to assume those risks or to abort them. The fetus's rights cannot supercede the mother's when the fetus is conceived involuntarily.

As such, I believe that the Judge is wrong in this case.

Silver Separation

Passengers in time
Lost in motion, locked together
Day and night by trick of light
I mus take another journey
We must meet with other names
--The Fixx

With the metals gapping higher again today, decided to take sell a trading position in SLV taken months back.

Metals seem to be sniffing new rounds of money printing, and this may be only the start of the move.

However, prudence suggests that gappy moves like this coupled with toppy oscillators and a move to the 200 day MA 9 (see graph) are where trades should leave the ride. Besides, still holding some GDX for a trade (trigger finger getting itchy here too) along with some CEF as a core (read: not tradeable) position.

position in GDX, CEF

Newsflow Indicators

You don't have to shout or leap about
You can even play them easy
--Ringo Starr

Hadn't seen these 'newsflow' indicators before. Suggestion is that they tend to be leading indicators (~ 3 months), ahead of such measures as production and other economic strength metrics.

Somewhat counter intuitive in that we often speak of media headlines as being contrarian indicators of general sentiment (e.g., cover story indicators). We don't know the method used for these newsflow indicators, however. If it employs some sort of content analysis over many daily articles, then there may be some merit.

The data suggest that an 'economic rough patch' (thx Elmer) lurks ahead.

Another data point...

Gold's Big Picture

"Nothing wrong with that one right there."
--Dave Patterson (The Rookie)

Usually markets that are up 400-500% catch the public eye. Not so with gold. Although the yellow metal is up over 4x since 2000, there continues to be no shortage of detractors. Classic example from liberal media here.

The current argument is that gold is down this year despite all of the fear and money printing. So gold must not be such a safe haven after all...

Elongating the time horizon tells a different story. That's one pretty chart. Prices over the last year can be seen as consolidating in declining pennant fashion. Healthy behavior.

Textbook technical analysis suggests that pennant will likely resolve in direction of prevailing trend.

Up.

position in gold

Convertibility Risk Rationale

The deception 
With tact
Just what are you trying to say?
--The Fixx

It appears that the growing argument for ECB buying of sovereign debt is to stave off 'convertibility risk' of the euro. This, of course, is nothing more than a rationalization for monetizing debt.

Gold jumped to 3 month highs today on the news.

position in gold

Compassionate Evil

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

It is difficult not to wonder whether proponents of government programs truly understand that they vote to employ strong armed agents that force some to give up property (broadly construed to include life, wherewithal to produce, and property) for the benefit of others.

Yes, I understand the power behind the something-for-nothing temptation and the rationalization it drives. But do people seriously believe they are showing 'compassion' when they force others to comply with their wishes at the point of a gun?

Bagging SWAG

Keith Frazier: Let's just try to keep everybody calm, okay?
Dalton Russell: Don't I sound calm to you?
Keith Frazier: Yeah, you do.
--Inside Man

This article makes the case for SWAG (silver, wine, art, gold) as a hedge against building inflation pressure. Wine's not my bag, but the others certainly make sense. Suggestion here is for 20% of assets in SWAG.

Although the argument 'for' gold et al has been getting more airplay, the number of people who have actually acted on the idea of swapping cash for tangible assets remains very small. Somewhat surprising given golds 4x increase in a decade.

High end SWAG markets, like truly rare paintings and old coins, have been on fire as 'smart money' converts cash into classic rarities.

position in gold, silver

Cash Conundrum

You're devastating in the dark
You could be tearing me apart
But you still feel the same
Lost like tears in the rain
--Ric Ocasek

"How much cash should I hold?" This is among the difficult decisions facing investors (broadly defined to mean any individual with residual income after consumption) at our present juncture.

The 'easy' part of the answer is to set aside at least enough cash to handle 6-12 months of living expenses. Once this 'emergency fund' is taken care of, use further cash residuals to pay down debt--first credit cards, then car loans, and perhaps even extra on monthly mortgage payments if applicable.

If you are fortunate enough to have checked off these items and still have spare cash to work with, then you might consider adding more to retirement accounts although, personally, beyond making sure one contributes enough pretax income to meet an employer's match, I'm chilly to channeling lots of present day capital into tax deferred retirement instruments (rationale here).

Beyond the IRA route, investors with left over income face two general choices: a) invest in 'taxable' asset classes like equities, bonds, real estate, commodities, collectables, etc, or b) build additional cash (or cash near-equivalents such as CDs or T-bills).

Few financial professionals advise the cash route. They argue for asset classes like stocks and bonds because of belief that these asset classes will outperform cash over time--due to either compelling valuation or because inflation gnaws at the value of cash. The first argument, that stocks and bonds possess compelling valuations here, finds little sympathy with me. From where I sit, stock and bond values are closer to (or at) historic highs.

I am sympathetic to the inflation argument, however. It is easy to build the case that, on top of the $trillions already created out of thin air, governments worldwide have little choice but to try to print their way out of massive debt. Huge increases in the supply of paper currencies will destroy the value of paper money relative to the value of things. Think Weimar, or Argentina, or Brazil. Hard assets in particular, such as gold, seem advisable under these circumstances.

The counter argument is that there is not that much 'free' cash, i.e., true savings, on hand. The world is highly leveraged, meaning that most money that has been 'printed' is linked to a liability somewhere. If people become risk averse and no longer want to live with their debts, then the 'cash' on hand will evaporate as people use it to close out debt projects or address margin calls.

Indeed, a good argument can be made that we have been inflating for decades, and that people have been intelligently shedding cash in favor of debt that gets paid back with currency less valuable than when the debt was taken on. Stated differently, a debt super-cycle IS an inflation super-cycle.

If that super-cycle is coming to an end, then, by definition, it should be replaced by a deflationary phase.

The problem is this. If one accepts the thesis that we've been inflating for years and debt has reached extremes that make it difficult to add more debt, then one still has to explain how deflation occurs when governments around the world still control the monetary printing press. Won't governments just keep printing to keep the system from collapsing into the deflationary abyss?

The answer to that question is the ultimate answer to the question of how much cash to keep on hand. There is a compelling case for a veritable paper blizzard ahead. But the contrarian in me suggests that cash in its true 'saved' form is already scarce and thus should be valuable in the future.

position in SPX, gold

Lending Others' Property

Everybody plays the fool sometimes
There's no exception to the rule
--Aaron Neville

When individuals do not consume all of their income, they can lend out some of their savings to others. The borrower then repays those resources, usually with interest, in the future.

In a fractional reserve, fiat money system where credit is created out of nowhere, banks do not primarily lend savings--since they lend out far more than they collect in deposits. Yet, borrowers take control of economic resources.

Is this magic? Where do those economic resources come from if they don't come from depositor savings?

They come from you and I.

Banks lend our resources without our consent. Borrowers pay banks for do doing so. If borrowers don't pay back the loans, then it is you and I, not the banks, that are the primary loss takers.

Hot Potato

Like sitting on pins and needles
Things fall apart
It's scientific
--Talking Heads

While it is well known that today's investor has a shorter time horizon, the below graph (source here) provides perspective on just how much average time horizon has changed.

Fifty years ago, average holding period of stocks was 5+ years. Average holding period has been declining since the late 1970s. Now, stocks are held less than a year on average.

Note that during the 1920s, average stock holding period was also low.

What might the 1920s and the last 20+ yrs have in common?

position in SPX