Tag Archives: markets

Why I No Longer Invest In Stocks And Bonds, by Paul Rosenberg

Paul Rosenberg’s reasons for not investing do not include that stocks and bonds are at absurd valuation levels, particularly bonds. However, that’s not to say his reasons don’t make sense, they do. From Rosenberg at freemansperspective.com:

I’ve touched upon this subject in my subscription newsletter, but I had no plans to write anything more until I got a note from a friend, mentioning a particular investment analyst and his views on investing over the next few years. I had to agree that it was brilliant analysis, but at the same time I knew that I’d never do anything about it, because I simply can’t bring myself to put money into “the markets” anymore.

As a young man I spent time learning the nuts and bolts of investing: Price to earning ratios, book values, charting, puts, calls, covered positions, and so on. And when I had extra money, I tended to put it into the markets and use my tools. But I can no longer do that, and I think explaining why may be useful.

There are three reasons for this conviction of mine, and so I’ll list them below. But I’m listing them in reverse order, because reason number one stands above the others: By itself it would prevent me from investing in the usual way. I think all three reasons are strong, but reason number one is pivotal.

Reason #3

Reason number three is simply that the markets no longer make sense. In fact, I’ve now taken to calling them “exchanges,” not wishing to denigrate the concept of markets.

Continue reading→

The problem with climate change politics, by Alasdair Macleod

Allowing governments to “solve” the climate change problem is allowing people with only a tenuous connection to reality to propagate their solutions unchecked by feedback from the people who must live under those solutions and bear their cost. From Alasdair Macleod at goldmoney.com:

Climate change bears all the hallmarks of a state-sponsored crisis, useful to shift attention from other political failures. But the absence of financial accountability which characterises government actions also introduces behavioural errors.

The absence of a profit motive in any state action exposes the relationship between governments and their electors to psychological factors. We all know that governments use propaganda and other tools to manage crowd psychology and influence their electorates. What is less understood is that governments themselves are misled by a crowd psychology in its own ranks which contributes to policy failure.

This article does not question the climate change debate itself. Instead, it examines the debate in the context of the psychology driving it. The release of government-sponsored propaganda on climate change in the form of a unanimous IPCC report predicting the end of the world as we know it is the latest example of a political and bureaucratic phenomenon, making the timing of this article apposite.


Western economies have moved on from free markets to the point where they hardly exist in the true meaning of the phrase. Yet the state continually claims that it is free markets that fail, not government.

The reason governments fail in economic terms is that economic calculation is never part of their brief, and nor can it be. By economic calculation, we mean taking positive actions aimed at a profitable outcome. To survive and prosper, businesses and individuals must do this all the time — the only exception being when they can rely on the state to underwrite their failures, which is why established businesses encourage statist regulation to place hurdles in the way of upstart competitors. And why at an individual level there is a ready demand for state welfare.

Continue reading→

Smart Society, Stupid People, by Jeffrey Tucker

There is a logic to spontaneous and free interaction among peoples that is only stifled and eventually destroyed when someone tries to control it. From Jeffrey Tucker at aier.org:

We’ve lived through the most bizarre experience of human folly in my lifetime, and perhaps in generations. Among the strangest aspects of this has been the near universal failure on the part of regular people, and even the appointed “experts” (the ones the government employs, in any case), to have internalized anything about the basics of viruses that my mother understands, thanks to her mother before who had a solid education in the subject after World War II.

Thus, for example, are all governments ready to impose new lockdowns should the infection data turn in the other direction. Under what theory, precisely, is this supposed to help matters? How does reimposing stay-home orders or mandating gym closures mysteriously manage to intimidate a virus into going away? “Run away and hide” seems to have replaced anything like a sophisticated understanding of viruses and immunities.

Continue reading

Here’s What We’ve Lost in the Past Decade, by Charles Hugh Smith

There’s no arguing with Charles Hugh Smith on his list; life in the US has gotten much uglier the last ten years. From Smith at oftwominds.com:

The confidence and hubris of those directing the rest of us to race off the cliff while they watch from a safe distance is off the charts.
The past decade of “recovery” and “growth” has actually been a decade of catastrophic losses for our society and nation. Here’s a short list of what we’ve lost:
1. Functioning markets. Free markets discover price and assess risk. What passes for markets now are little more than signaling devices to convince us the economy is doing spectacularly well. It is doing spectacularly well, but only for the top .1% of 1% and the class of managerial/technocrat flunkies and apologists who serve the interests of the top .1%.
2. Genuine Virtue. Parading around a slogan or online accusation, “liking” others in whatever echo-chamber tribe the virtue-signaler is seeking validation in, and other cost-free gestures–now signals virtue. Genuine virtue–sacrificing the support of one’s tribe for principles that require skin in the game–has disappeared from the public sphere and the culture.
3. Civility. As Scientific American reported in its February issue (The Tribalism of Truth), the incentive structure of largely digital “tribes” rewards the most virulent, the most outrageous, the least reasonable and the most vindictive of the tribe with “likes” while offering little to no encouragement of restraint, caution, learning rather than shouting, etc.
The cost of gaining tribal encouragement is essentially zero, while the risk of ostracism from the tribe is high. In a society with so few positive social structures, the self-referentially toxic digital tribe may be the primary social structure for atomized “consumers” in a dysfunctional system dominated by a rigged “market” and a central state that no longer needs the consent of the governed.
Common ground, civility, the willingness to listen and learn–all lost.
4. Trust. Few find reason to trust corporations, the corporate media, the tech monopolies or the government. This distrust is reasonable, given these institutions have squandered the public trust to protect the swag being skimmed by insiders and elites.
Rather than earn our trust with true transparency and accurate reporting of data, these institutions spew a false form of transparency that’s doubly opaque, as it’s rigged to mask the skims of the insiders. Transparency: lost. Accountability: lost.
Do you really trust Facebook, Google, and the agencies that are supposed to provide oversight of these monopolies? If you said, “yes,” you’re joking, right?

Ignorance Versus Stupidity, by Walter E. Williams

If you’re smart, you’ll realize you’re ignorant, and that doesn’t make you stupid. From Walter E. Williams at theburningplatform.com:

One of the most challenging and important jobs for an economics professor is to teach students how little we know and can possibly know. My longtime friend and colleague Dr. Thomas Sowell says, “It takes considerable knowledge just to realize the extent of your own ignorance.” Nobel laureate Friedrich August von Hayek admonished, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” The fact that we have gross ignorance about how the world operates is ignored by the know-it-all elites who seek to control our lives. Let’s look at a few examples of the world’s complexity.

According to some estimates, there are roughly 100 million traffic signals in the U.S. How many of us would like the U.S. Congress, in the name of public health and safety, to be in charge of their actual operation? Congress or a committee it authorizes would determine the length of time traffic lights stay red, yellow and green and what hours of the day and at what intersections lights flash red or yellow. One can only imagine the mess Congress would create in the 40,000 cities, towns and other incorporated places in the U.S. But managing traffic lights and getting good results is a far less complex task than managing the nation’s health care system and getting good results, which Congress tries to do.

Here’s another task I’d ask whether you would like Congress to control. The average well-stocked supermarket carries 60,000 to 65,000 different items. Walmart carries about 120,000 different items. Let’s suppose Congress puts you in total control of getting just one item to a supermarket, say apples. Let’s not make it easy by having the help of apple wholesalers. Thus, you would have to figure out all of the inputs necessary to get apples to your local supermarket.

To continue reading: Ignorance Versus Stupidity

How Welfare States Make Us Less Civilized, by Per Bylund

Who would have thought that taking money from some people at the point of a gun and giving it to people who didn’t earn it might make all concerned less civilized? From Per Bylund at mises.org:

Throughout history, the state has justified itself on the grounds that it is necessary to protect us from others whose habits and beliefs — we are meant to believe — are dangerous. For millennia, this fiction was easy to maintain because most people interacted so little with people outside their nearly autarkic — and therefore impoverished — communities.

But, with the rise of industrialization and international trade in recent centuries, the state’s claim that it is necessary to keep us “safe” from outsiders has become increasingly undermined.

Much of this is thanks to the fact that in order to benefit from the market, one must engage in activities designed to serve others and anticipate their needs. As a result, trade increases our understanding for both members of our community and even the stranger; it also makes us realize that other people are much like us. Even if they speak strange languages or have odd customs and traditions.

The Market Order and Civilization

This is in essence Say’s Law, or the Law of Markets, which states that in the market we produce in order to trade with others so that we can thereby, indirectly, satisfy our own wants: our demand for goods in the market is constituted by our supply of goods to it. In order to effectively satisfy other people’s wants we need to not only communicate with them, but understand them. If we don’t, then we’re wasting our productive efforts for a random result. Obviously, we’d benefit personally from learning what other people want, both their present wants and anticipated future wants, and then produce it for them.

So far so good. Most people (except for Keynesians) grasp this very simple point about the market — and how it contributes to civilization and peaceful interaction. But all people aren’t saints, so good, hard-working people risk being taken advantage of as they have nothing to set against such actions. Without a central power such as the state, who will protect us from such people?

Answer: the web of voluntary transactions aligns people’s interests. In the market, “bad people” are not only defrauding, stealing from, or robbing a single person or family. They are, in effect, attacking the community of interdependent producers and network of traders.

To continue reading: How Welfare States Make Us Less Civilized

How to Provide Universal Health Care Using This One Weird Trick, by Ann Coulter

Ann Coulter proposes the only universal health care plan that makes any sense. From Coulter at anncoulter.com:

The first sentence of Congress’ Obamacare repeal should read: “There shall be a free market in health insurance.”

Right there, I’ve solved the health insurance crisis for 90 percent of Americans. Unfortunately, no one can imagine what a free market in health care looks like because we haven’t had one for nearly a century.

On NBC’s “Meet the Press” this weekend, for example, Chuck Todd told Sen. Tom Cotton that his proposal to create affordable health care that would be widely available, “sounds good,” but “do you understand why some people think that’s an impossible promise to keep?”

(The “do you understand …?” formulation is a condescension reserved only for conservatives, whose disagreement with liberals is taken as a sign of stupidity.)

Todd continued: “To make it affordable, making it wider, I mean, that just seems like — you know, it seems like you’re selling something that can’t be done realistically.”

Dream Sequence: Chuck Todd on Russia’s “Meet the Press” after the fall of the Soviet Union: “Do you understand why some people think that’s an impossible promise to keep? To make bread affordable, making it wider, I mean, that just seems like — you know, it seems like you’re selling something that can’t be done realistically.”

It turns out that, outside of a communist dictatorship, all sorts of products are affordable AND widely available! We don’t need Congress to “provide” us with health care any more than we need them to “provide” us with bread. What we need is for health insurance to be available on the free market.

With lots of companies competing for your business, basic health insurance would cost about $50 a month. We know the cost because Christian groups got a waiver from Obamacare, and that’s how much their insurance costs right now. (Under the law, it can’t be called “insurance,” but that’s what it is.)

To continue reading: How to Provide Universal Health Care Using This One Weird Trick

The Truth About Politics, by Lew Rockwell

A comparison between capitalism and government. Capitalism wins. From Lew Rockwell on a guest post on theburningplatform.com:

The very first votes of the 2016 presidential election season will be cast tonight in the Iowa caucuses. This is supposed to fill us with happy thoughts about self-government, civic virtue, rational deliberation, and about politics as the way the people’s will is put into effect.

But to the contrary, we should spurn what the establishment would have us celebrate. Politics operates according to principles that would horrify us if we observed them in our private lives, and that would get us arrested if we tried to live by them. The state can steal and call it taxation, kidnap and call it conscription, kill and call it war.

And yet we are taught to fear capitalism, of all things.

But what, after all, are capitalism and the free market? They are nothing more than the sum total of voluntary exchanges in society.

When we engage in a voluntary exchange – when I buy apples for five dollars, or when you hire someone for $25 per hour – both sides are better off than they would have been in the absence of the exchange.

We can’t say the same for our interactions with the state, since we pay the state under threat of violence. The state sure winds up better off, though. That’s for sure.

Business firms that increase their profits thanks to some new innovation cannot rest on their laurels. Other firms will adopt the innovation themselves, and those abnormally high profits will dissipate. The original firm must continue to press forward, striving to devise still newer ways to please their fellow men.

The state operates under no such conditions. It can remain as backward as it likes. Other firms are typically prohibited from competing with it.

The state’s priorities arbitrarily override your own. Ethanol “is important for the farmers,” one candidate says. So because the state has decided some interest group’s foolish and economically nonsensical pet project is “important,” what you yourself would have preferred to do with your money is simply set aside and ignored, and you are forced to subsidize what the state seeks to privilege.

Our schools and media portray corporations as sinister, and government as benign. But who wouldn’t rather take a sales call from Norwegian Cruise Line than an audit demand from the Internal Revenue Service?

To continue reading: The Truth About Politics

Overload, by Robert Gore

When one too many applications are plugged into an overloaded power source, it’s not just that application that doesn’t work, the entire system crashes. Engineers design redundancies and back-up power sources to address such contingencies. The world’s governments find it impossible to control the expanding multitude of variables they assign themselves. There are no redundancies or back-ups, so overload and system crash loom. That outcome does not stem from a glitch in an otherwise serviceable system, but rather from an inherently unstable conceptual foundation and fatal design flaws.

Start with the notion that some individuals should exercise control over other individuals. It’s the basis of the command and control philosophy, accepted by most people for centuries. To illustrate the human engineering problems that make such arrangements problematic, consider the extreme case where one individual voluntarily surrenders to another person’s control. The controller must now process two sets of external informational inputs, ascertain two sets of internal thought processes and desires, guide two sets of actions, and assess two sets of feedback and consequences. The human being has not been designed who can do so. Most of us find dealing with our own variables challenging enough. The one case where many of us exercise a measure of control (not generally voluntarily surrendered to) over other individuals, as parents, is exhausting and error prone, notwithstanding its rewards.

Yet, in the nocturnal emissions that constitute command and control fantasies, a tiny percentage, an elite, will direct the lives of people who will outnumber them 100, 1000, or a million-to-one. Of course, the controllers will not be interested in their slaves’ “internal thought processes and desires,” all they will want is submission, but does that make their job any easier? That submission will be exacted by force and fraud, and force and fraud require resources and energy. It takes something like $50,000 per prisoner per year to house, feed, offer medical care, and subjugate convicts in the United States, offset only by whatever minimal economic value can be extracted from their labor (slave labor is never very productive). Keep in mind, convicts have already been subjugated; the costs go way up when resistance must first be overcome.

Sparks and smoke that portend system crash fill the air. If war is the health of states, many are suffering from long, wasting illnesses. Armed conflict since the Korean War has been expensive, lengthy, and inconclusive. (Officially, even the Korean War has not ended; there is no peace treaty between South and North Korea.) There is a dramatic cost and incentive disparity between offensive and defensive war, in favor of the defensive, and the longer a conflict drags on, the greater that disparity becomes.

So invasions and subsequent guerrilla conflicts go on and on, never seeing the clean resolutions of World Wars I and II: the Soviet Union in Afghanistan, the US and allies in Vietnam, Afghanistan, Iraq, Syria, Libya, Somalia, and Yemen. Although Vladimir Putin has been applauded in some quarters for a “decisive and game-changing masterstroke” in Syria, it’s a good bet that Russia and its allies will still be there, fighting, five or ten years from now, and the masterstroke will be long forgotten.

War, and the inevitable domestic repression it brings, are the force aspects of command and control. The fraud aspect is the skyscraper of cards global financial system. Every government on the planet currently involved in wars (and their concomitant domestic repression) is spending money it does not have, going deeper in debt. Bankruptcy, rather than decisive victories or peace treaties, will end many of today’s conflicts and governments.

Under current monetary and political arrangements, governments issue fiat currencies and fiat debt, and buy off their people with promises of benefits. The value of pieces of paper, computer entries, and political promises goes to the marginal cost of production, zero. Debt has become a net negative for the global economy; its marginal burden outweighs its marginal benefit. Reducing debt is inherently contractive and deflationary. How can contracting economies and falling asset prices support the promises made implicitly against production and assets? They can’t, as numerous canaries in the coal mine are now chirping (see the Debtonomics Archive).

If there were a financial index for chaos, one would want to be long that index. It is not difficult to trace some manifestations of chaos to a source. For example, Europe’s refugee crisis stems from foreign intervention in the Middle East. It requires more perspicacity to trace the enveloping chaos to its ultimate source: the systemic overload and breakdown of command and control, or force and fraud. It requires an uncommon appreciation of paradox to realize that the only durable order is not that which is centralized and imposed, but that which is decentralized, dynamic, organic, and chosen.

Which is the order of markets. Consider trading in financial instruments and commodities. It is global and decentralized, spanning continents, languages, and millions of participants making billions of trades worth trillions of dollars a day. Prices change in milliseconds, and a huge industry reports and records prices and trades, analyzes market trends, delivers relevant news, and facilitates transactions. The interrelated factors and relationships are constantly changing, but nobody would argue that there is not an underlying order to it. If there were not, who would commit billions of dollars to a trade with just a phone call or a keystroke? This is an organic, ever evolving order, driven by the needs of its participants and adopted only to the extent it fills those needs.

If there is a “nature’s law,” markets are more consonant with it than governments. Who dictates evolution or ecosystems? Nobody, they just happen. The dynamic, organic adaptation that characterizes natural systems arise from their constituent elements and their interrelationships. Human intervention, even when seemingly benign or well-intended, often produces unintended and negative consequences. One of the great failures of the environmental movement, among many, is the refusal to embrace the organic adaptation for humans that they rightly regard as essential for microorganisms, plants, and animals other than humans. Environmental policy journals are bereft of market-based solutions to the problems they decry; command and control reign supreme.

The hallmark of chaos is unpredictability, and there is no predicting where the current overload and impending collapse of command and control will lead. There is a nontrivial possibility that one or more command and controllers panic, press buttons, and extinguish the human race. That outcome may satisfy both the generals: “In order to save humanity we had to destroy it,” and the environmentalists: “Nature unsullied by man!” but will leave the rest of us somewhat dissatisfied.

One thing is clear: if we survive the collapse, we cannot give command and control a mulligan. Repeating that which has repeatedly failed is not an option. If order is to be the alternative to chaos, it must be a chosen, not an imposed, order of individual autonomy, protected rights, liberty, innovation, evolution, adaptation, production, property, voluntary exchange, contracts, and markets. Nothing says that humanity even knows how to arrive at such an order. But we have to get it right next time, because the stakes will be so high: the survival of our species.