You and Who Else?

Hey,
Seems the time is right for palace revolution
--The Rolling Stones

Interesting article by Gary North. He claims that attempts by liberal politicians to enact laws against ownership of assault weapons is spawning the most remarkable resistance movement that he can recall.

He also suggests that if there is any credence to the claim of American exceptionalism, then perhaps it rests with the country's strong views on the right to own guns. While large groups of Americans have slept while their freedoms have been taken away in other areas, when their right to bear arms is threatened, they wake up and resist. Even if restrictive bans became law, it is likely that many, many Americans would not comply.

North proposes an interesting thesis that the Left is taking a big risk in pushing sweeping gun controls here. If Americans stand strong and defy gun control laws, then they may realize that the power of the federal government is just a myth. Broad disobedience of laws that restrict freedom might follow.

The Left's power would vaporize. And Americans would once again understand that they are in control of their lives, not the government.

Let's hope that the Left continues waking people up.

Tyranny

"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)

Tyrants are people in positions of authority who forcefully take freedom from others. The force is offensive rather than defensive in nature.

While it can take place in various contexts, tyrannical rule is usually associated with government. Governments that invade the freedoms of individuals engage in tyrannical behavior.

There are degrees of tyrannical behavior. The more freedom taken from individuals, the more despotic the government. For example, a government that forces people into internment camps is more tyrannical than a government that restricts production of certain kinds of light bulbs.

Because some people are more sensitive to loss of freedom than others, those who value freedom the most will be the first to recognize tyrannical government behavior. These people are canaries in the coal mine of sorts, since they warn at relatively low levels of despotism. Unfortunately, however, claims of tyranny voiced by this group are likely to sound shrill, radical, and misguided to a majority that has yet to sense loss of freedom.

As despotic government grows, however, so does recognition of tyranny. As Jefferson observed, when the "train of abuses and usurpations" escalates to an unbearable level, then those who value freedom will "throw off" the tyrannical government.

This repetitive process: escalating tyranny, growing recognition of tyranny, and the overthrow of tyranny has been the story of mankind.

We are cycling through it once again.

Is Immigration a Natural Right?

On we sweep, with threshing oar
Our only goal will be the western shore
--Led Zeppelin

This morning Judge Nap wrote on his Facebook page that "immigration is a natural right." I'm not sure I quite agree with him.

First, let's define immigration as changing country of residence. Leaving one country to settle in another.

Certainly, the 'leaving' side is a natural right. If people dislike where they live, then they should be free to leave.

It is entering someone else's country that is problematic. The existing borders of a country can be seen as a property right. If people inside that country impose restrictions on who can enter, then those restrictions must be respected. If those restrictions are not respected, then those entering the country are unwanted intruders, and it is the right of those inside the country to defend against unwanted intrusion.

Of course, a country that truly values freedom would put no restrictions on entry. Immigrants would be welcome as long as they respected the life, liberty, and property of others.

For countries who believe otherwise, however, it is not right for unwelcome outsiders to intrude.

T-Note Yields Flirting with 2%

"You really should flirt with someone unitl you're ready."
--Meg Harper (Joe Somebody)

Ten year yields are flirting with 2% this am following a strong durable goods report. Last week long bond yields popped thru near term resistance at about 1.8%.

Next stop appears to be about 2.5%.

The higher interest rates go in a levered system like ours--with the Fed trying to buy rates down at the rate of almost $100B per month--the greater the strain on the system.

And on inflation expectations.

Tempted to start a bond short right around here.

no positions

Printing Money to Repay Debt

But don't be fooled by the radio
The TV or the magazines
They show you photographs of how your life should be
But they're just someone else's fantasy
--Styx

To combat deflation over the past 5 years, the Fed has been printing money like there's no tomorrow. Several reports now indicate less leverage in the system than previously. For example, some media outlets report that leverage as a fraction of household income has fallen. Some people view this as a bullish sign that we're turning the corner.

It would be bullish if the deleveraging occurred by paying off debt with real economic resources earned thru productive effort.

But when debt is payed down simply by printing money, leverage in the economic system does not go down. Paper money is not an economic resource. It is a claim on economic resources.

When newly minted cash is used to pay creditors, the economic system is still short the resources which were previously borrowed. Standard of living for either the lender or borrower remains constrained until those resources are produced and repaid to cover the short position.

Money printing creates the illusion that economic liabilities have been cancelled and that increased prosperity is just around the corner.

Offensive and Defensive Force

Guinevere: How many Britons have you killed?
Arthur: As many who have tried to kill me. It's the natural state of any man to want to live.
Guinevere: Animals live! It's the natural state of men to want to live free in their own country.
--King Arthur

Force is the infliction of violence. Violence can be inflicted offensively or defensively.

Offensively, force is initiated by one entity on another. The entity who initiates force is the aggressor and is engaging in attack. The motivation for initiating violence on another entity is that the offender perceives some benefit from invading the other's person or property.

Defensively, force is used to counter violent aggression. Rather than initiating violence, the defender uses force for self-defense purposes. The motivation is to stave off the aggressor's attack of person or property.

In a free society, there is no legitimate cause for the use of offensive force. All people have the inalienable right to liberty. No one can legitimately invade the interests of another.

Should someone be attacked, then that person can legitimately use force to counter the violence initiated by someone else. All people are free to develop self-defense capacity within their means as they see fit.

Anyone seeking to limit someone else's self-defense capacity through the use of force becomes an attacker--an initiator of violent force on someone else.

In a free society, the proper role of government is to help individuals defend their person and property. When the scope of government extends beyond this into the realm of taking from some for the benefit of others, then government becomes the aggressor.

Of course, government is just a strong armed agent for those seeking to employ offensive force. The principals who back the agency of offensive government force are the true aggressors.

Majority Opinion. So What?

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

Nice missive on why the 'majority opinion' decision rule (a.k.a. democracy) is problematic. Humans are social beings, and we have a strong need to belong. However, this need to belong often finds ourselves abandoning the search for truth in favor of conforming to what other people think.

Those who refuse to comply with majority opinion are seen as being behind the times, social deviants, or just plain crazy.

Yet, as the author notes, the majority opinion is usually wrong, particularly at society's pivotal moments. Great discoveries and innovations are always the product of individual thought that breaks from the majority view.

Motivation to think creatively in groups is low. Instead, collectives are prone to groupthink that aims to preserve their institutions at all costs. This groupthink takes the form of propaganda, lies, and deceit.

As noted many times on these pages, America was born as a republic, not as a democracy. In a republic, the rights of individuals are protected so as to not be subject to the mood swings of the masses.

As the author correctly observes, even if 99%+ of all people believe that, say, certain forms of weaponry should be abolished, such a strong majority opinion does not make it true or legitimate. Minorities that believe otherwise are not required to conform to majority opinion.

This country was founded on the principle of individual liberty. A free person is not held hostage to 51% of the population, or any other claimed percentage.

When a politician claims that the majority of people favor gun control or other government sponsored initiatives, a free person responds, "So what?"

Rotten Apple

Now our bell was ringing
Our souls were singing
Do you remember every cloudy day, yow
--Jackson 5

As Apple (AAPL) stock zoomed over the past year, its mega cap status gives it outsized influence on the performance of market indexes. We've been keeping an eye on AAPL, positing that weakness in this name should take the tape with it.

That's been wrong as rain so far.

AAPL has been for sale for the past few months, punctuated by a -12% move today after disappointing earnings that drove it below important support at 500. The stock seems destined to fill the gap created a year ago at 425. The stock is down almost 40% from its late September kiss of $700.

Meanwhile the overall tape has been stronger than a mule's breath. Today, the SPX touched 1500--a mark last occupied in late 2007.

Is AAPL irrelevant or is the tape destined to play ketchup? It shouldn't take long to find out. The Dow has been up 10 out of the last 11 days, measures of sentiment are stretching to the bullish side, and the recent euphoric moves into SPX 1500 seemingly qualifies Tom DeMark's preferred scenario for upside trend exhaustion.

Stated differently, many classic ingredients are in place for a tape reversal.

position in SPX

Time Preference and Survival Mode

Hundred dollar car note, two hundred rent
I get a check on Friday but it's already spent
--Huey Lewis and the News

Time preference is the value that you place on the here and now. High time preference means that you are very focused on the present. You will shift resources and consumption into the current period. You may even borrow from others to elevate your present well being.

Life threatening conditions are likely to elevate time preference. People facing serious illness, catastrophic financial loss, or a pointed gun will dedicate their energies toward now in order to elevate their chances of survival.

As people shift into survival mode, they will seek to marshal the resources necessary to get them through the present period--at the expense of preparing for a better future.

Phase Change

A place for a moment
An end to a dream
Forever I loved you
Forever it seemed
--The Motels

At 32 degrees, water turns to ice with little transition. Temperature drops a fraction of a degree and liquid turns to solid.

Crowd behavior is similar. The herd moves in particular direction until a small, perhaps indiscernable stimulus prompts the masses to change course.

Throughout history, all major inflations, defined here as large declines in purchasing power of money, have occurred relatively suddenly. Although plenty of warning signs go up that the value of money is being destroyed, the public continues to believe that the institution called the dollar will remain stable.

Then, something causes confidence in the currency to rapidly disintegrate. People being unloading dollars in their wallet in favor of things perceived to hold more value. The dollar falls more. Then more dollars are sold.

Etc.

We are headed toward a repeat of history. Central banks are printing $trillions. We see it but don't act. Suddenly, one day, we will act en masse.

And the dollar quickly joins the list of currencies that are no more.