Category Archives: Capitalism

Doug Casey on Why Millennials Favor Communism

Here is the short answer: because they are uneducated and what passes for the education they have received has corrupted them. From Casey at caseyresearch.com:

Justin’s note: Communism is better than capitalism.

At least, that’s what a growing number of young people in the U.S. think.

I wish I were joking. But a recent study from the Victims of Communism Memorial Foundation, a D.C.-based nonprofit, found that half of the millennials it surveyed would rather live in a socialist or communist country than a capitalist society.

And 22% of those surveyed had favorable views of Karl Marx… while 13% viewed Joseph Stalin and Kim Jong-un as “heroes.”

To figure out what’s behind this disturbing trend, I called Doug Casey…


Justin: So Doug, about half of U.S. millennials would rather live in a socialist or communist country… What’s gotten into the youth?

Doug: The youth are being corrupted, and it’s more serious than ever.

I say that a bit tongue-in-cheek, however.

That’s because one of the two charges against Socrates when he was executed in Ancient Greece was corrupting the youth. Older people always think the youth are foolish, ignorant, lazy, crazy, and generally taking the world to hell in a handbasket. And of course many of their charges are, and always have been, true.

But as kids get older, they generally get wiser, more knowledgeable, harder-working, and more prudent. Nothing new here. The world has survived roughly 250 new generations since civilization began in Sumer 5,000 years ago. And it will likely survive this one too.

That’s the bright side. And, as you know, I always look on the bright side. But, on the other hand, the American university system has been totally captured by Cultural Marxists, socialists, statists, collectivists, promoters of identity politics, and people of that ilk. These people hate Western Civilization and its values, and are actively trying to destroy them.

To continue reading: Doug Casey on Why Millennials Favor Communism

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Resolved: The Welfare State Should Be Abolished, by Jeffrey A. Tucker

The welfare state doesn’t eliminate poverty; it institutionalizes and perpetuates impoverishment. From Jeffrey A. Tucker at fee.org:

That the welfare state is for the purpose of helping the poor is one of the great fictions of our time.

I was honored to be the guest speaker of the Yale University Political Union last week, addressing the need to abolish the welfare state. The structure of the union breaks down students into “parties” based on political ideology. The guest speaks and then the students challenge. This is followed by minor speeches and challenges from students. The entire event lasts two hours, and the guest gets the final word.

A word on the students themselves: I was amazed at the erudition, decorum, and adult-like collegiality among them. It seems almost out of some movie I’ve seen, something set in the 1920s. I’m not entirely sure the students fully realize just how special they are. With a student body like this, I suspected that they learn more from engagement with each other than from their classes. Several students confirmed this. And, to be clear, this was true regardless of political outlook.

I, of course, was speaking on behalf of the pure free-market position on the welfare state, going further even than F.A. Hayek to say that the whole thing ought to be scrapped. There is nothing that the welfare state contributes to our lives that couldn’t be replaced by the normal operations of the market and civil society. In the end, I lost the debate, two to one, which is not a surprise, but I hope I planted plenty of seeds of doubt about the merit of the welfare state.

Command and Control

This whole topic is widely misunderstood. People think of the welfare state as a system of redistribution to help the poor improve their lot in life. Those who oppose it, we are told, are greedy advocates for the interests of the rich.

My contention is that this is just a story we tell ourselves that has nothing to do with the history and current reality of the welfare state. The welfare state is a system of command and control, imposed by the political elites, that targets politically marginalized groups in a way that, through both bad and good intentions, excludes them from participation in mainstream society.

To continue reading: Resolved: The Welfare State Should Be Abolished

The Bonfire Burns On, by John Mauldin

Two things that sound the financial alarms: US credit market debt is about 350 percent of GDP, and cash allocations in mutual funds are at multi-decade lows. From John Mauldin at mauldineconomics.com:

“Life invests itself with inevitable conditions, which the unwise seek to dodge, which one and another brags that he does not know, that they do not touch him; but the brag is on his lips, the conditions are in his soul. If he escapes them in one part they attack him in another more vital part. If he has escaped them in form and in the appearance, it is because he has resisted his life and fled from himself, and the retribution is so much death.”

– Ralph Waldo Emerson, “Compensation”

Bonfires are fun to watch, but they eventually burn out. Human folly apparently doesn’t, so we just keep adding to the absurdities. The volume of daily economic lunacy that lights up my various devices is truly stunning, and it seems to be increasing. I shared a little of it with you in last week’s “Bonfire of the Absurdities.” Since it’s a holiday weekend and I was traveling all week, today I’ll just give you a few more absurdities to ponder. And this shorter letter will lighten your weekend reading load.

First, let me thank everyone who took my advice to register early for my next Strategic Investment Conference, March 6–9, 2018, in San Diego. Hundreds of you are now confirmed to attend. I know many more intend to do so. Sadly, we can’t accommodate an unlimited number of you. I can’t say when we will reach capacity, but I hope it is soon. I am in negotiations right now with a very familiar name whose economic views are, shall we say, different from mine. Our idea is to debate those differences in front of an audience. Fireworks will likely ensue. But, to get this to happen, I need some numbers to line up. You can help by registering for the conference now. Click here for more information.

Now, on with the absurdities.

Leverage, American Style

When I asked my “kitchen cabinet” of friends for instances of the absurd, Grant Williams sent a monumental slide deck. I guess I should have expected that, as the absurd is one of his specialties. My computer almost melted trying to download the deck, but it finally finished and was worth the wait. Here is just one example of craziness.

This chart is straightforward: It’s outstanding credit as a percentage of GDP. Broadly speaking, this is a measure of how leveraged the US economy is. It was in a sedate 130%–170% range as the economy industrialized in the late 19th and early 20th centuries. It popped higher in the 1920s and 1930s before settling down again. Then came the 1980s. Credit jumped above 200% of GDP and has never looked back. It climbed steadily until 2009 and now hovers over 350%.

To continue reading: The Bonfire Burns On

The Delirious Dozen of 2017, by David Stockman

There’s a 1999 tang in the stock market air. From David Stockman at davidstockmanscontracorner.com:

Yesterday we noted the massive market cap inflation and then stupendous collapse of the Delirious Dozen of 2000. The latter included Microsoft, Cisco, Dell, Intel, GE, Yahoo, AIG and Juniper Networks—plus four others which didn’t survive (Lucent, WorldCom, Global Crossing and Nortel).

Together they represented a classic blow-off top in the context of a central bank corrupted stock market. When the bubble neared its asymptote in early 2000, the $3.8 trillion of market cap represented by these 12 names was capturing most of the oxygen left in the casino. That is, the buying frenzy had narrowed to a smaller and smaller group of momo names.

That severe concentration pattern was starkly evident during the 40 months between Greenspan’s December 1996 “irrational exuberance” speech and April 2000 (when he told the Senate no bubble was detectable). In that interval, the group’s combined market cap soared from $600 billion to $3.8 trillion.

That represented, in turn, a virtually impossible 75% per annum growth rate for what were already mega-cap stocks. As it happened, in fact, $2.7 trillion or 71% of the group’s bubble peak market cap vanished during the next two years.

What we didn’t mention yesterday, however, is that this bubble top intumescence never really came back. In fact, the market cap of the eight surviving companies—all of which have continued to grow—-today stands at just $1.3 trillion or 34% of the 17-years ago peak.

Needless to say, that’s because the market no longer affords the Delirious Dozen of 2000 valuation multiples that are even remotely in the same bubblicious zip code.

Thus, the eight survivors posted combined net income of $52.3 billion during the LTM period ending in September 2017. On the far side of the 1999-2000 tech bubble, therefore, current earnings turn out to be worth 25X—not the 75X recorded back then.

We revisit the rise and fall of these turn of the century high flyers because we believe the same process of market narrowing into a diminishing number of momo names is exactly what is happening again as we reach the asymptote of this latest and greatest central bank fueled bubble.

To continue reading: The Delirious Dozen of 2017

 

The Mother Of All Irrational Exuberance, by David Stockman

Right now, we are living through the most irrational of irrational exuberances. From David Stockman at davidstockmanscontracorner.com:

You could almost understand the irrational exuberance of 1999-2000. That’s because everything was seemingly coming up roses, meaning that cap rates arguably had rational room to rise.

But eventually the mania lost all touch with reality; it succumbed to an upwelling of madness that at length made even Alan Greenspan look like a complete fool, as we document below.

So doing, the great tech bubble and crash of 2000 marked a crucial turning point in modern financial history: It reflected the fact that the normal mechanisms of honest price discovery in the stock market had been disabled by heavy-handed central bankers and that the natural balancing and disciplining mechanisms of two-way markets had been destroyed.

Accordingly, the stock market had become a ward of the central bank and a casino-like gambling house, which could no longer self-correct. Now it would relentlessly rise on pure speculative momentum—- until it reached an asymptotic top, and would then collapse in a fiery crash on its own weight.

That’s what subsequently happened in April 2000 when the hottest precincts of the stock market—the NASDAQ 100 stocks—-began a perilous 80% dive; and it’s also what happened in the broader markets—–including the S&P 500—in 2008-2009, when a thundering 60% plunge unfolded in a hardly a year’s time.

So with the market raging in self-fueling momentum at the 2600 mark on the S&P 500, we reflect back to the great dotcom crash for vivid reminders of what happens next. That earlier meltdown is especially pertinent because in many ways today’s stock market mania is far less justified than the one back then.

Moreover, the dotcom version was also the first great central bank fueled bubble of modern times—a creature that market participants understandably did not fully grasp. Yet to its everlasting blame, the Fed’s subsequent experiments in reflationary bailouts of the casino gamblers has only caused Wall Street’s muscle memory to atrophy further.

Indeed, after 30 years of Greenspan-style Bubble Finance and two devastating crashes, Wall Street is even more credulous today than it was on the eve of the tech crash. Back then, in fact, there was a considerable phalanx of Wall Street old-timers who warned about the dotcom insanity. Now almost no one sees this one coming.

To continue reading: The Mother Of All Irrational Exuberance

 

The Silence of the Bears, by the Northman Trader

The bears haven’t entirely vanished, but we’re certainly taking a low profile these days. From the Northman Trader at northmantrader.com:

The silence of the bears is deafening. And who can blame them? The last 2 years have been absolutely brutal for any fans of price discovery, volatility and anything analytical mattering. Nothing matters. Be it divergences, valuations, earnings misses, slowing data, yield curve, equal weight, internals, catastrophes in nature, slowing loan growth, slowing auto sales, slowing real estate, retail apocalypse, debt levels, etc…I can drone on. Nothing matters. Markets keep drifting higher despite it all.

Price discovery as we used to know it, the back and forth of buyers and sellers engaging in the argument of forward valuations based on expected earnings growth, has ended with the disappearance of sellers as part of the normal market functioning:

Corrections as a means of price discovery don’t exist any more. Every day we don’t have a 3% correction is a new record in length of time without any such correction. And the chart above illustrates this adequately. It is a global phenomenon, it’s not only US based.

5% corrections, what also used to be regular part of markets and a bare minimum at that, have also disappeared:

Not quite at a record, yet the message is nevertheless clear: There’s not much happening in these markets on a day to day basis.

The abomination of what passes for intra-day trading ranges these days illustrates the point quite nicely:

Whatever downside does occur can’t sustain itself for more than minutes, a couple of hours at best. Case in point: The $DAX was only negative for 1 hour 16 minutes after the surprise collapse of German coalition talks on Monday. Nothing matters.

Hence it is no surprise sentiment is as bullish as it is. Recall allocations are all bullish, people, funds, even central banks all own the same shrinking universe of stocks.

To continue reading: The Silence of the Bears

The Friendly Faces of Fascism, by Robert Gore

Like flies drawn to steaming manure, tycoons are drawn to politics and government, all in the interests of a better world, of course.

There are two modes of human interaction: voluntary and involuntary. The symbol of the former is the market; the symbol of the latter is government. Historically, the pendulum has swung back and forth. Since the early 1900s the pendulum has swung towards government and the involuntary. Humanity’s future hinges on whether or not it will swing back. Ominously, many of the biggest beneficiaries of voluntary free choice are ideologically opposed to it.

It may seem paradoxical that Mark Zuckerberg, Eric Schmidt, Jeff Bezos, Bill Gates, and Tim Cook, among others, build fortunes on the voluntary choices of billions of customers, then join forces with those aligned against voluntary choice. Silicon Valley used to be almost a libertarian outpost, now it’s a bastion of statism. However, there are skewed rationales for it, lodged in the nature of government and business in the 21st century, psychology, and historical precedent.

Government has become so big and all-pervasive that once a business reaches a certain size, it’s going to run into the behemoth blob. Facebook, Google, Amazon, Apple, and Microsoft are huge, and aside from Apple, they dominate their markets. (Apple had a little under 15 percent of the smart phone market in the first quarter of 2017). Computers and the internet are at the heart of the national security state, and Facebook, Google, Apple, and Microsoft are the heart of social media, search, smartphones, communications, and business computing. Along with Amazon, they all have significant roles in cloud data storage. In its voracious quest for information with which to track, blackmail, and subjugate the citizenry, it was inevitable the government would turn to these treasure troves.

How does a company say no to the FBI, the CIA, the Department of Defense, the NSA, and other intrusive government agencies? With difficulty. The “war on terrorism and drugs” rhetoric probably doesn’t cut any mustard, but as Senator Chuck Schumer said, the agencies, “have six ways from Sunday at getting back at you.” You get along by going along. Large shareholders—hedge, pension, and mutual funds—and the corporate collections of cowards known as boards of directors would take a dim view of a CEO who for ideological reasons fought a quixotic and ultimately unprofitable battle with the federal government over something as trivial as a principle.

Let’s not forget that the government has $4 trillion a year to throw around. Amazon received a $600 million dollar contract from the CIA in 2013. Tucked into the latest National Defense Authorization Act is an amendment authorizing $54 billion in online purchases by the government. Amazon will undoubtedly get the lion’s share. The government buys billions of dollars worth of computer and smart phone hardware and software every year. It also buys a lot of advertising, and Facebook and Google are the dominant online advertising platforms. You have to keep a customer that large satisfied.

Beyond payola, there’s publicity, prestige, pride, politics, and power. The first thing you do once you’ve acquired your tens of billions is set up a tax-exempt foundation. Founder and foundation then dive head first into the pool of altruistic goop into which anyone who acquires any measure of fame and fortune in contemporary America dives. It simply won’t do to say you’ve accomplished all you’ve accomplished for yourself. You must find a cause greater than yourself and proclaim your devotion to it.

That incantation serves several purposes. Bill Gates transformed from evil monopolist to philanthropic saint after he established his foundation and retired from Microsoft to devote his efforts full-time to it. Once you’ve acquired the halo, you’re ready to grab the power to which you’re wealth and superior intellect entitle you. Like flies drawn to steaming manure, tycoons are drawn to politics and government, all in the interests of a better world, of course.

There’s nothing new about this. In America, the prototype is John D. Rockefeller. He used state of the art refining technology, ruthless negotiating tactics, industrial consolidation, bribery, and governmental suppression of competitors to become the nation’s first billionaire. Rockefeller was a charter member of the oligarchy that guided the US into central banking, the income tax, foreign interventionism, and its nascent empire in the first few decades of the 1900s. His foundation sheltered his fortune from taxes, gave a bunch of money to worthy causes, burnished his image, augmented his power, and promoted world government organs like the Council on Foreign Relations and, after his death, the Trilateral Commission.

Anyone who gets involved with the behemoth blob wants power, the ability to use force to direct the actions of others. Any shred of a morality that recoils at coercively exacting involuntary compliance is abandoned. Involvement with the corrupt obscenity that is our government means either a conscious or unconscious surrender to the Dark Side paradigm: might makes the only wrong and right.

At the heart of it lies a simple truth: governments can anything they want to you if they claim they’re doing it for you. The altruistic veneer conceals every horror, from history’s bloodthirstiest regimes down to nanny state bureaucrats dictating toilets’ flush capacity. A warm place in hell is reserved for those who covet power under cover of professed good intentions. The hottest fires are reserved for those give it to them, surrendering without protest control of their own lives.

Once the government has assumed control, the entrepreneurs and executives of ostensibly private businesses toe the government’s line. It’s the only way to survive and indeed thrive under fascism, the correct label for the current system. All under cover of noble aims and approved good causes, of course. In Atlas Shrugged, Ayn Rand drew a sharp distinction between her competent champions of freedom and the incompetent toadies of soul-crushing altruism, collectivism, and statism. In real life freedom’s biggest beneficiaries have become some of its biggest—because of their competence and gargantuan fortunes— enemies.

The gravest threats to the most basic civil liberties—freedom of thought, expression, and transaction—come from the technology giants. Not simply because they’re the dominant commercial, communications and computing platforms, but because they’ve aligned themselves with the government. They’re engaging in creeping censorship, gathering massive amounts of data, cooperating with the surveillance state, and propagating propaganda. Call it the Orwellian or Panopticon state: Facebook, Google, Amazon, Apple, and Microsoft will be invaluable in establishing it. We’re at least halfway there. No surprise that these companies have been stock market leaders. It’s the first rule of fascist investing: buy the companies the government favors.

Italian economist and philosopher Vilfredo Pareto (1848-1923) argued that regardless of the label given to a system of government, a ruling class always emerges and enriches itself. There are no historical counterexamples, certainly not 2017 America. What’s historically unprecedented, however, is the power and control America’s technological oligarchy can potentially exercise, and the relative weakness of those who champion freedom and warn of impending involuntary servitude. The louder the oligarchs proclaim their good intentions and hail tomorrow’s better world, the graver the threat becomes.

The Story of a Man Who

Did It For Himself

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