Amoral Majority

This has been bothering me and just about everyone I know for some time now, but with the conclusion of Bowl season, I feel the need to comment on the matter.  As many of you have witnessed in the past few years, there has been a increased use, by NCAA football players, of incorporating bible passages  onto their eye-black patches (e.g. John 3:16).  These passages are easily viewed on their faces, through their masks, and the images are broadcast around the nation on television and the internet.  So what’s the big deal, you may ask.

My problem is three-fold.  First, in the case of a public university, there is arguably a very real First Amendment violation taking place; namely a violation of the Amendment’s Establishment Clause’s long-recognized principle of separation of church and state.  Second, it is arguably a violation of the NCAA Guidelines. And my third point is simply this: Those who don’t currently have a problem with the displays may very well have real issues with them in the future.  The bible-fearing Christian that may enjoy Tim Tebow’s bible quote of the day may not like his successor’s quote from the Koran.

As to the issue of the displays under the First Amendment, the issue is quite clear.  If you’re an official representative or agent of a state financed institution,  you are prohibited from proselytizing your religious views in an official capacity.  Keep in mind, there’s nothing stopping an individual student from dressing up as Moses and running around their public university campus with cardboard cutouts of the ten commandments.  Just so long as they’re doing it as an individual and not on behalf of their school.  This isn’t a pickup game between private individuals on the quad.  This is a well-financed school program that puts you in a uniform and expects you to represent that school on the local, regional or national stage.  So why then are these students allowed to advance their particular religious views as that official representative, all the while being financed to do so with your tax dollars?

Interestingly, the U.S. Supreme Court recently declined to review a case from the 5th U.S. Circuit Court of Appeals which addressed a somewhat similar matter.  American universities should take notice of The 5th Circuit Court’s opinion, which addressed a Texas school district’s dress code, which prohibited student clothing that displayed political commentary. In rejecting the student’s argument that the policy censored political speech and upholding the school’s dress code, the Court opined that the policy’s intent was to “eliminate distractions.”  Consequently, a public university’s policy based upon the same rationale would arguably be upheld by the Supreme Court, especially since the 5th Circuit case concerned students simply attending class as opposed to students acting as an official representative of the state school.

With regard to the second prong of my argument, the NCAA Guidelines state in pertinent part:

The NCAA has rules in place to prevent student-athletes from displaying inappropriate personal or commercial messages on their uniforms (or person) during games. Responsibility rests with individual institutions and conferences to monitor appropriate uniform wear. The NCAA Football Rules Committee will continue to work with conferences to ensure application of the rules.

In the case of a private Christian university, for example, The University of Notre Dame, there is arguably nothing “inappropriate” about displaying such a message.  In the case of public university, for example, The University of Florida, there arguably is.  The issue with the public university relates back to my first point about the First Amendment.  However, “inappropriate” could also be interpreted, not as a legal reference, but a pragmatic one.  Institutions such as these have an interest in not alienating their audience, opponents, and current and prospective students.  While I’m not aware of any Islamic, Jewish, agnostic or atheist universities in the United States – at least any that have a serious athletic program – there certainly will be at some point and just try to imagine a match between them, all the while one side displaying messages that the other side is “going to hell” or that “God doesn’t exist” or so on.  It’s unnecessary, inflammatory and, dare I say, inappropriate in the realm of sport.

Finally, for those who tolerate or even admire such displays on NCAA football players faces, please bear in mind that one day, in the not-too-distant future, you will see blowback or retaliatory displays from people with contrary ideologies.  For example, if you were a Christian and a University of Ohio State alumn and the Buckeye’s new, young quarterback starts wearing eye-black with “Pro Choice,” “Thug Life,” or “Allah Akbar,” I could foresee you having a very real problem with this.  While “Thug Life” doesn’t violate the First Amendment, it may very well offend you since you don’t approve of that life style and disapprove of the University implicitly or indirectly promoting it via their official representatives on the football field.  “Pro Choice” may also not necessarily be a religious statement but it could alienate about 50% of the viewing audience.  And how many red blooded Americans really want to see “Allah Akbar” on their favorite players faces? (Note, I’m just being realistic here). While I’m guessing most wouldn’t mind that various players on their favorite team are of different religions, they most likely don’t want to be proselytized upon by them.

So what’s the solution?

I believe that a private solution is generally always preferred over a solution imposed by the state.  Further, a solution by the NCAA would be applicable over public and private institutions alike, whereas a ruling handed down by federal courts would only be applicable to public institutions.   Yet it’s clear the NCAA and its Guidelines, which allow the universities to regulate themselves in this respect, aren’t working.  Accordingly, I believe that the NCAA should follow FIFA’s example and simply make a blanket statement, clarification of the Guidelines, or institute a new policy that simply says “keep personal, political, religious, or ANY messages, albeit words, symbols or otherwise, off of your person and your uniform while engaging in official NCAA activity.”

FIFA Law 4, Decision 1 states:

Players must not reveal undergarments showing slogans or advertising. The basic compulsory equipment must not have any political, religious or personal statements.

A player removing his jersey or shirt to reveal slogans or advertising will be sanctioned by the competition organiser. The team of a player whose basic compulsory equipment has political, religious or personal slogans or statements will be sanctioned by the competition organiser or by FIFA.

I believe this should be the NCAA model.  FIFA has historically been in a much more diverse environment, both politically and religiously, than the United States and, thus, it has much more experience and sensitivity with potential issues of this nature. The NCAA, like FIFA, is a private and voluntary association that has the ability and authority to dictate mandatory rules over the athletic activities of public and private actors alike.  Membership in the NCAA is not mandatory and, thus, if a university felt so strongly against an NCAA rule as to completely opt out of it, they’re free to do so (with the likely consequence of not being able to compete against other NCAA members).

Absent an NCAA solution, I fear that this issue could soon be a point of contention between the public, media, and/or competing athletes.  Why not nip it in the bud before it becomes a distracting problem of epic proportion?  So please NCAA, use some common sense.

The Occupational Safety & Health Administration of the Department of Labor issued a fact sheet on safety tips regarding Crowd Control for retailers this week. Among the important reminders were these gems:

Have trained security or crowd management
personnel or police officers on site;

And to prevent flying objects:

Locate shopping carts and other potential obstacles or projectiles inside the store and away from the entrance;

And just in case shit gets out of hand:

Designate an employee to contact local emergency responders.

Obviously, this is in response to a trampling death at a Wal-Mart in Long Island last year, and the fact sheet even says so up front. But the question begs, is this really necessary? At the very least, Wal-Mart is already taking steps to prevent another such tragedy. It would seem as if it were in the best interest of other retailers to do the same as to avoid a similar PR fiasco.

On the other hand, you would expect there to be heavy consequences for alleged negligence on the part of Wal-Mart. Well, the Department of Labor vowed to make an example of this case and eventually doled out a whopping $7,000 fine. (Disclaimer: I work for DOL.) A more substantial cost was a settlement for $1.9 million in which the criminal case was dropped; still a drop in the bucket compared to their $406 billion in revenues in 2008.

So if the legal ramifications only total up to $17,000 – the maximum fines including $10,000 from the DA and $7,000 from OSHA – what is the point of even filing a suit which will inevitably cost much more than that to prosecute? Keep in mind the downside of bad press is obviously much more damaging, even to a smaller retailer.

Additionally, are these ’safety tips’ serving their purpose or are they just common sense that doesn’t require the DOL agency to tell retailers? I’d argue for the latter, but I feel as though the only way to put the fear of science into the retail industry would be to increase the maximum fines. Such incidents could put a dent in the profits of smaller retailers even though the only (realistic) deterrent for the Wal-Marts of the world is bad publicity.

Finally, don’t for a second think that the upstanding citizens that shop at these fine establishments get off the hook. It’s really sad (and a reflection on our consumer society?) that people can’t control their urge to shop like an idiot on our unofficial max-out-all-our-credit-cards holiday.

Now I know a bangin’ deal at Wal-Mart is hard to resist for many, but does this mean we have to trample people in reckless abandon to be FIRST into the store? There is no escaping the personal responsibility for such careless actions, yet it’s hard to track down the trampler(s) when there are hundreds (thousands?) of pushing and shoving idiots trying to get through a sliding glass door or two. Americans be shoppin’.

So, in summary, we can probably avoid such a tragedy in the future if we: (a) are prepared for the inevitable mass chaos, (b) do a better job of imposing penalties if/when this happens again, and (c) try to not act like we’re at a 1979 Who concert in Cincinnati if you do choose to head out on this science-forsaken ‘holiday’.

Maybe then, OSHA won’t have to give us friendly 3-page reminders to have a SWAT team on hand to control the crowds and an emergency dispatcher to phone in the carnage.

If anyone’s been watching cable “news” television lately, listening to talk radio, or visiting blogs and news portals on the internet, they’ve probably noticed a lot of shouting at, over and past one another. Partisan politics is arguably at an all time high. The reasons for this are complex, debatable and suited wholly for a different article. I shall not address such issues here. Rather, I’m going to offer a simple, somewhat obvious but apparently ignored method of debating another individual who may harbor a different point of view on a particular matter.

No one likes to be wrong.

At least, we don’t like to be wrong about something when it wasn’t ourselves that discovered such wrong and we especially dislike being proven wrong by another, particularly when that other person receives a smug sense of satisfaction when proving him or herself right at the expense of your supposed intellectual prowess. It sucks. It can garner resentment towards your opponent…who, frankly, shouldn’t even be categorized as such but who will now remain firmly in your eyes with disdain.

Unlike competitive sports, where winning is the end goal, debating in politics, economics, religion, philosophy and other intellectual pursuits should not be focused on victory or the defeat of your rival. Rather, the debate should simply be understood as the method or procedure by which the debating parties can elicit the truth. It’s not a game but it can be fun if you approach it as an illuminating path to discovery.

The First Amendment’s protection of free speech is based upon the idea that the free exchange of ideas, harbored by rational men and unhindered by government, will eventually result in the discovery and acceptance of the truth. It is an optimistic philosophical underpinning that credits men in a free society of being both rational and willing to being proven wrong in the pursuit of truth.

Thus, before we can possibly understand how to argue with an opponent we must first commit ourselves to the possibility that we may be the one that is wrong and be prepared to accept that result if it should occur. The best way to do this is to change one’s perspective on this: one should become comfortable with the notion of realizing their own ignorance or faulty logic and celebrate in the discovery of truth rather than resenting those that presented it to them. For example, when we embraced the truth that the earth orbits the sun or that all life evolved from a common ancestor, we are much more interested and preoccupied with celebrating the discovery than we are in loathing in the sudden realization that we had been ignorant for so long. So why not apply the same reactionary behavior towards political debates?

Now that we’ve accepted our fallibility we can move on to effectively debating an opponent. As I said above, no one likes to be proven wrong. So it’s important that you not focus on humiliating your opponent’s use of logic. Rather than destroying their ideas and pushing the truth upon them, try to make them come to what you believe to be the truth on their own. Empathize. The lack of empathy is the biggest obstacle to any debate. If we cannot see the issue from our opponent’s perspective, it’s near impossible to bring them to understand ours.

For example, if an American liberal is to debate an American conservative on the issue of health care (the debate du jour), would that liberal base their argument on the supposed human right of every citizen or human to have adequate health care? I certainly wouldn’t start with this although it’s worth mentioning at some point. A better idea would be to first analyze the basis of your opponent’s disagreement. In this case, the conservative opposes large government and favors private markets. Why? Well, because markets have generally proven to be more efficient in most matters than government in providing better goods and services to people at lower costs. Does that always prove true? Not necessarily as we’ve seen with private security (i.e. police), private militaries and military logistics, private firefighters, and so on. But, generally, the conservative has a sound, rational base to their stance on health care. So then, what will you be arguing? If possible, you should focus on efficiency and lower costs.

In this case, the liberal should point out how every other industrialized nation has a single, uniform health care system, albeit different from nation to nation, which has proven to reduce administrative costs far below our nation’s mish mash of various systems (veterans/military system, medicare/medicaid, employment/worker based care, and out of pocket). Switzerland has something like 5% administrative costs while the US sits around 25%. The liberal should lament that it takes government to do this but that this has proven time and again to be the most efficient use of resources.  Further, the government bureaucracy of these other nation’s systems is, in actuality, smaller than the private bureaucracy of our system.  See what I did there?  Go on to argue that since Switzerland switched to a government-backed Bismark system from a US out-of-pocket system several years ago that their private insurance companies have become more competitive and have actually increased profits.  Point out that their pharmaceutical industry hasn’t suffered.  Bring up how individual premiums have dropped dramatically while coverage has increased universally, all with a lower rate of rising costs that our US system.  Address…no, celebrate the fact that doctors, hospitals, insurers and health care-related industries all remain private! (All of this is true, of course.) And be sure to cite a nation like Switzerland – a vigorously capitalist nation, financial center, and leading producer of pharmaceuticals; not Sweden or France or another nation with socialist tendencies and a history of dislike among your conservative counterpart.  But, of course, be prepared to address those nation’s systems and to delineate the differences between their systems and the one you’re praising.  In fact, go ahead and join in on ridiculing the Canadian and British systems to engender some temporary comradery with your conservative counterpart (but don’t say “comrade!”).

This is but one example of how to effectively approach an argument and from just one perspective (the liberal one) and you certainly don’t have to agree with the above assertions.  The point is that you want your opponent to reach your conclusion using their own principles wherever possible. In the case above, we used conservative principles to sell a liberal idea. Your goal should never be to humiliate them or prove them wrong for your own sense of self satisfaction and intellectual superiority. After all, whatever it is that you’re arguing at the moment, you too at one time did not harbor that view and had to learn it from someone else.

I dread people asking me what my degree or job title is.  When I tell people that I am a “Mathematics Specialist”, they usually crinkle their nose and comment on how much they hate my chosen field.  Not everyone, of course, but a vast majority.  Ask a bunch of adults to raise their hand if they can’t read, and you’ll get nobody’s hand up.  People feel embarrassed to admit they can’t read.  Ask the same group of adults if they can’t do math, and you will get many hands.  People are not embarrassed at all to admit they can’t do math.  I’ve always thought it was weird that a room full of adults has no problem admitting their incompetence in the field of mathematics, a field that permeates every aspect of human life.  The situation isn’t much different for the field I got my first degree in;  Physics is still viewed by many as an intractable and incomprehensible field for the nerds and geeks of the world.  I’ll give you an example:  I was getting my teeth cleaned, maybe a year ago or so, and the lady asked me what I went to school for.  I told her I had gotten a BS in physics and an MS in mathematics.  She responded with a loud, “Ewwwww!  I hated math and physics!”

I told her, “I hate dentistry!” (not really, but I was thinking it!  What are you supposed to say to someone who just told you they hate your passion and chosen profession?)

But I am not writing about the fact that nobody has a problem telling me how much they hate my occupation.  I can live with that.  What would really bother me is if one of those people started arguing with me about Quantum Mechanics or the Calculus of Variations.  In fact, this has happenned before.  A while ago someone who had read some popular book, like Hawking’s “A brief History of Time”, wanted to actually argue with me about how quantum mechanics really works!  He had so many misconceptions of the subject that I just gave up and said, “whatever dude”, and left it at that.  I mean, can you imagine me trying to tell my dentist how to do her job that day?

But recently I have realized that this is exactly what almost every person does with both politics and economics.  Everybody, no matter how well read they are, has an opinion on these fields.  That must be exhausting for actual economists!  Economics is a science, like math.  You set out basic assumptions (axioms) and you draw conclusions through logic that you can test against reality for usefullness.  I’m glad they have kept math out of politics, because it would drive me crazy, I think, to hear the Hill debate weather or not Pi is actually a rational number.  Most people know nothing about economics, having never read a single book, but they nonetheless have many ideas and misconceptions of the subject (and will have no problem imposing those views on others through the force of government).  Similarly, everyone has an opinion on politics without ever having read the basic texts.

Marx, Bastiat, Adam Smith, Mises, Friedman, Locke, Hobbes, Hayek.  Everyone who ever talks about politics or economics should be familiar with all these names, and more, or they are like the guy arguing with me about quantum mechanics, full of misconceptions.  The one big difference is that the guy arguing quantum mechanics can’t really affect how the world works, or the direction of research in that field.  His understanding does not affect my world in a real way.  However, the peope who constantly argue politics and economics without at least a solid understanding of the fundamentals do affect the economy though their votes and elected representatives.  The TARP, (or TALF, or whatever it is now called), stimulus, bailouts, these all have serious implications for my future.  When the Mayor of Detroit gets on TV arguing economics with an economist, it drives me crazy.  Almost as crazy as Stephen Baldwin arguing the politics of Marijuana legalization with Ron Paul.  It reminds me of the classic skit in Monty Python’s Flying Cicus where the bulky boxer is put in the ring with a little girl and he just keeps knocking her down over and over.  Except this is real life, and instead of being funny, it’s actually quite depressing.

Now, since I am not an economist, though I have read many many books on the subject, I still tend to listen to actual economists before forming my opinion of any policy.  And just like the layman trying to decide on what to wear for the day and deciding what channel’s weatherman to watch, i want to listen to those that repeatedly get it right.  Some “economists” have proved to be so only in name, missing just about every single warning sign on the way to the current situation.  I dont listen to them.  I cant imagine a physicist or mathematician lasting too long when every time he sits to do an experiment or solve some problem, he misses wildly.  However there are many economists who have gotten it right over and over.  I tend to listen to them.

But one of the most respected and listened to economists has been disastorously wrong on multiple occasions.  Paul Krugman, Nobel prize winner and Keynesian economist extrodinaire, has been wrong over and over.  He suggested, in the wake of the dotcom bubble that greenspan should blow up a housing bubble to replace lost business investment.  Here we see a perfect example that replacing bubbles with other, larger bubbles can only lead to a worse situation in the future.  Would you rather go back to 2000 and let that recession take place and never have experienced the housing bubble to begin with?  Of course you would.  Unless, that is, you like the fact that we will be running a 2 trillion dollar deficit this year (which means we nearly have to borrow every two months what we did for the entire year last year at a time when the dollar really cant take anymore beatings), multi-trillion dollar deficits over the next four years, and moral hazard created when government steals from its citizens (who are broke) to bailout their rich friends on wall street.

Instead of continuing to listen to those economists that have repeatedly gotten it wrong, why not listen to someone who has been right?  Examples are abound, just not in the mainstream media.  Here is one.  Tom Woods is my hero.  Here is another, Peter Schiff, Ron Paul’s economic advisor during his long shot presidential bid (and someone I wholehartedly support to this day as maybe the only honest, principled representative left who is truely conservative).  Check out the recently popular Schiff was right video on youtube.  Finally, Gary North and Lew Rockwell.  Gary can be found on Lew’s blog, which I read everyday.  Obviously, when Obama says the economists on all sides agree, he is admitting the personal flaw of selective hearing (as egomaniacal authoritarian warmongers tend: to select facts to support their agenda;  self-absorbed and obtuse to the extreme).

Having now spent three months living eating and sleeping the National CHANGE from tightie whitey red briefs to loose, slick silky blue boxers, methinks they still clothe the same sweaty crotch-rotten package, the same inflamed, diseased nutsack and the same bent, semi-hard caulk with the same tendencies toward incontinence and premature ejaculation.

Meet the New Boss.

He spends like the old boss, Drunken Sailor Sam. We don’t have to worry about that fiscal responsibility bullshit; living within ones’ means is for individuals and businesses – not governments.

He embraces the unitary executive like the old boss- seeking to quash all legal action designed to prosecute unconstitutional warrantless domestic spying, as well as all attempts to reveal the nature and depth of said spying. Here I was afraid he’d hold ATT to the same standards as you or I when it comes to illegal data-mining and pesky privacy, but he fooled me and supported the position of the previous administration. And in the Name of National Security.

Way to go, New Boss!!

He embraces and maintains this sweeping dictatorial authority for the same reason as his predecessor:

The New Boss fully supports a Perpetual War on Terror at home and abroad, and thereby needs and claims the authority to suspend any and all constitutional, individual rights in the name of National Security.

What a relief. I was afraid change meant we’d have a pussy in the WH.

It’s not just the evildoers that we have to fight over there so we don’t have to fight ‘em over here. It’s also the Enemy Within – real and potential – that we must keep an eye on over here so they don’t become terrorists or get recruited by others who might become terrorists or otherwise act on/in/for extremist beliefs. Sure, the E.W. has changed his spots since the old boss moved out and the New Boss has moved in; he’s no longer the black-masked leftist anarchist, the anti-capitalist hippie, the quaker peacenick or the violent environmental activist; he’s now the gun-rights advocate, the returning vet, the states rights activist, the teabagging, easily led, right-wing extremist, the religious fundamentalist, the anti-interventionist and the anti-internationalist.

When you’re the guvmint, old boss or New Boss, there’s always an Enemy Within, just as there’s always a Moral, Just and Necessary Mission to be Accomplished Over There.

The New Boss has smartly and rightly preserved his supra-constitutional authority to keep a special eye on the Enemy Within, and the extra-judicial means to indefinitely detain them without charges and without the due process of law.

The New Boss, like the old boss, has smartly and rightly embraced the ultimate Moral Authority of American Exceptionalism. No domestic or international criminal prosecution for our former leaders/accused war criminals. It is our right and duty to hold the Saddams and Milosevics and their complicit minions accountable for their actions, but when it comes to our own miscreants, we have chosen a superior moral position that usurps principle, consistency, accountability, due process and the rule of law: it’s called, “moving forward.”

For those who have yet to hop on the ObamaWagon, the time is Now.

Embrace change.

It’s not all that different as you mighta thunk it to be.

With Texans talking secession, Alaskans challenging federal gun control, and angry redneck teabagging threatening to disturb the peace, DHS can’t sit on their hands and wait for an actual crime to occur. We can’t allow the smoking gun to be a mushroom cloud ignited by domestic lunatics, rising like Lucifer’s shadow over an Amerkin city.

We are the United States of America. We are facing unprecedented economic catastrophe, ever-growing future indebtedness, increasing threats from rogue states and global terrorism. We must pull together for the good of the nation. If Obama can’t persuade us to unite for the Greater Good, he must use more assertive means. You can’t argue rationally with those whose overgrown limbic systems preclude them from understanding and grasping the superiority of central planning. You can, however, use the threat of prosecution to intimidate the majority of the dissenters, and the power and authority of the unitary executive in a time of war to gather up and silence the remaining terrorist sympathizers.

Thank Science we didn’t hold the last administration accountable for their dirty deeds. We’d never have the power today to fight the real Enemy Within.

“Party like its 1933!”

Even though ‘optimistic’ is not a word I would have attributed to my outlook of the last several months (“We’re Just Sitting Around Blowing Bubbles 2/11/09″ & “We’re All In, America 3/1/09″), it was obvious even to me that a global rally was quite likely as I mentioned in my most recent post (“Dirty Jobs” 3/8/09“).  Massive losses for almost 18 straight months were topped off by the straight line decline of 8300 to 6500 in the Dow Jones Industrial Average in two weeks at the end of February/beginning of March.  Pessimism had reached a breaking point.  Sure enough, it didn’t take much of a glimmer of hope to spark what by all means was the greatest rally ever seen.  U.S. equity markets closed Friday afternoon (4/3/09) with four week gains of 25% starting later in the week of 3/9/09 – you’d probably have to be almost 100 years old to have been investing in 1933, the last time similar (better) gains were seen.

Despite an array of – literally, in many cases – the worst economic data ever, global stock markets are acting differently.  Emerging markets are up over 25% as well during this period, commodity prices like copper and oil have rallied to, in some cases, 6 month highs; it seems like the world is starting to get the wheels turning again.  The Volatility Index (VIX) that measures fear through options volatility dropped to its lowest levels since January and February during the last rally attempt.  More telling, though, is that the short term peaks have been trending down since peak levels in November (click the Symbol to see).  This seems to indicate that there is progressively less and less panic.  At the current level of just under 40, it makes these coming weeks very interesting to watch.

We’ve had many ‘bear market rallies,’ as they are commonly referred to, but I would argue that each of them was sparked by something artificial (fake). Treasury/Congressional/Fed/Regulatory actions caused people to get overly optimistic in the short term despite the looming disasters and uncertainty surrounding banks.  Now lies the dilemma.  What sparked this rally?  Really, nothing – except the market tendency to seek equilibrium (as in, when prices get low enough, there is an excess supply and prices fall).  Banks came out and said they were making operating profits four weeks ago.  This is meaningless – if a bank weren’t making operating profits, it wouldn’t be running at all for very long, recession or not.  When we consider that almost all bank losses have been concentrated in other areas of the balance sheets, this wouldn’t by itself do much.

The market would’ve taken anything at that point, though.  Any glimmer of hope, or something less than the end of the world, and people would start buying bank stocks at the prices they were at.  With the Federal Reserve’s decision to monetize its debt (3/18/09) and the Treasury’s release of its long awaited Public-Private Investment Program – PPIP – details (3/23/09) that were very beneficial to Wall Street (perhaps at the expense of the Taxpayers?), financials, energy, and commodity stocks had every reason to continue the rally that began the week of 3/9 on essentially no news.  This is different from prior rallies that had started after plans were announced.

Four weeks later, it is tough to say with confidence where we go from here.  Stocks have every reason to pull back as people lock in their profits of recent weeks – this is the common wisdom.  Stocks don’t go up in straight lines just as they don’t go down in straight lines like those weeks of late February and Early March.  Yet I continue to hold strong into next week, however.  As I mentioned, the VIX is at a key technical level.  If it breaks through to the downside (signaling a lessening of the panic), that will be a great ‘buy signal’ for a market dominated by computer algorithm trading.  Not to mention, it probably means stocks are going up.  And stocks, too, are at key technical levels.  The NASDAQ is now positive on the year and above 1600.  The Dow is above 8000 again, and the S&P is right above its key 50 day Moving Average (840) at 841.  A breakout above that level will also signal a buy.  Banks are at these same technical levels, etc etc etc.

This Tuesday 4/7/09 kicks off a couple weeks of earnings announcements, when *anything* can happen.  Depending on expectations, it can vary as to how the market reacts to losses and gains.  In some cases, gains will be less than expected, while in other cases losses can be better than expected, etc.  I’m interested to see if the banks have improved earnings on write-ups that they are allowed to take in Q1 as of the FASB mark-to-market accounting standard adjustment.  Earnings are already expected to be BAD.  Very bad.  If they aren’t quite as bad as expected, or if many firms’ outlook is for better earnings in the future (than are currently expected), we may be pleasantly surprised this quarter.  Technology leader Research in Motion (RIMM) blew away the estimates Thursday afternoon, for example.  Another key signal to me is in the currency markets, which I watch somewhat religiously since I view it as a great indicator of global sentiment.  The Japanese Yen has reached its weakest level against the Euro and Dollar since January, which signals a lessening of global fear.  The Dollar has weakened dramatically (especially since the Fed announcement), which also signals investors are willing to take on more risk.  The USD/JPY is just over 100, and the EUR/JPY is just over 135, levels that are key.  Weekly closes over those levels were great signs from a sentiment perspective.

Basically, it seems like everyone is expecting a pullback and waiting to get in again near the lows so that they can take advantage of the gains we saw these past 4 weeks whenever ‘the bottom’ is reached.  From what I know of history, however, few people catch bottoms by default because they usually occur when things seem the worst.  In addition, they usually leave most investors in the dust looking back saying ‘what happened?’  It could be that kind of scenario.  When everyone is waiting for and expecting a pullback, it signals that there are still plenty of short-sellers, and plenty of people who may panic on upmoves either by covering their shorts (equivalent to buying shares) or regular buying to participate.

We have gone down so far still, that even 25% is nothing compared to the drops.  The Dow is still a long way from 14,000 – even if we get nowhere near it, which we probably won’t for many years, we still have substantial room to move to the upside.  Each dip seems to be bought in relatively short order, as opposed to the massive drops we’ve been seeing for so long now.  It just feels like investors (globally) are back to looking for opportunities rather than non-stop selling for days or weeks at a time.  Bond prices have continued to stay very high as well (further inflating the bubble), and I would bet that if stocks continue to rally, many investors will shift out bonds and into the more attractive asset in equities.

That is still a big IF.  I am being very cautious here, because I don’t know how likely it is that my scenario plays out.  If the market does turn back and start heading down big, I admit that I will be jumping ship.  I know there are problems on the horizon and that it’s only a matter of how much has already been ‘priced in’ to stock prices (since equities are always forward looking).  It’s hard to know what is priced in and what is not, so it’s wise to be careful.  Yet with the truly terrible economic data being shrugged off, I have begun to wonder if there is anything that can really scare this market so much so that the opportunistic investors waiting for the pullbacks won’t buy each time from here on out.  Everyone has seen the upward pressure that can ensue, so its unlikely that there will be nearly as many panic sellers as there were in the prior year.

So I’m partying like its 1933 and not ready to give up on this rally quite yet.  So many historic things have happened that I am not shocked at anything anymore.  As we have only seen historic things to the downside, I tend to think it is possible (probable even?) that one of these days we will see something truly historic on the positive front.  There are more people short-selling stocks than ever before, and with this week’s looming reinstatement of a modified Uptick Rule, we may see a further – and potentially much larger – short covering rally as we break through technical levels.

It’s definitely possible that things are not (and never were) quite as bad as we have thought…. I being as guilty of it as anyone.  There are still (arguably major) problems on the horizon, but stock markets cause global recoveries, they are not an effect.  As I said in my previous post (“Dirty Jobs” 3/8/09), “optimism can feed on optimism this spring.”  And we haven’t really seen any GOOD news yet!  Some glimmers here and there, but what do you think this market will do when it gets some POSITIVE economic data rather than better than expected bad data?  We could be weeks and months away from that, but it seems like a recovery is becoming all the more real.

I’ll admit it;  I’m more optimistic than I’ve been in at least 6 months, even from a short-term perspective – as indicated by the length of this post.  If this global (this is the key, since the US has built its debt to unprecedented levels) recovery in equities is sustainable, it will cause the recovery to begin since stocks are leading indicators.  As Yogi Berra said: 90% mental, and the other half physical.  Global sentiment had probably never been lower; while it is still possible for things to worsen, it seemed pretty hopeless there for awhile.  Just 4 weeks later, we have made substantial progress.  And I don’t mean our worldwide Governments (The G20 is laughable), I mean our mindset.  Pyschologically, I think we may be ready to take on whatever problems still lie ahead.

“Dirty Jobs”

The Bank Index is down 60% in 2009.  To be able to say that with a straight face is kind of remarkable, seeing as it is early March and 2008 wasn’t too kind to the industry either.  When you also consider that it’s down more than 80% since mid-2007, the magnitude of the crisis is put into perspective.  At the core of the problem is the mortgage market, which is completely clogged.  Since some mortgage securities had become worth less (in some cases much less) and there was no regulated open exchange of these securities, all the mortgages simply became worth zero as the downward spiral was exacerbated by uncertainty. Add to that the incredible problems this has led to in derivatives (AIG’s hemmoraging of money), and we get to where we are now.  Some would argue, though, that the housing bubble would not have collapsed nearly as quickly or as hard (maybe not at all?) if there was an open market for these securities with full information.

Of course, investors did not seem to care much about the information anyways.  They were more concerned with the huge returns and decided it wasn’t worth asking questions… but for now, let’s assume that this happens in all types of markets to some extent, which is probably true. It was kind of like musical chairs: When the music’s over (my favorite Doors song), who is the one stuck without a chair – in our case, who was stuck with large amounts of leverage in assets that were now worthless?

But, to continue the analogy – who decided to stop the music?  If there was more information provided through better regulation and/or open exchanges, not all the securities would have become worthless such as they are now.  Not to mention, everyone holding these certainly shouldn’t have been forced to assume that they will always be worth zero, as is the logic of mark-to-market accounting (M2M).  While the rule does make sense in normal market conditions, the current situation has become one where financial institutions have to mark the securities quarterly at much lower than they would ever sell them for in the future, which then causes them to have to raise more capital, which makes their stock price go down and credit default swaps blow out, so that they have no way of raising capital, etc etc etc.

What sense does any of this make?  If I’m not planning on selling my house, I don’t give a rat’s a** what the price of it is at any one specific time.  M2M is good for comparing companies within industries – it is supposed to help investors gauge what the value of a company is.  But we have strayed far from that goal. I have no doubt we should return to M2M in the future – again, for comparative purposes – but we need to stop this irrationality that has developed as fear has fed on itself.  “…nothing to fear but fear itself.”

This week, Congress will have a meeting to decide whether or not to call the plumber and have him look at unclogging our pipes. They (and the Fed) have been trying everything they can think of to fix the problem themselves with various unorthodox methods, but they should just stick to the norm.  When they decide at the meeting to call the plumber, we may get the water moving again.

By assuming for a minute that the banks would not sell their securities at zero (or 20, 30 cents on the dollar) just because the market doesn’t know what they are worth, why make them hold capital as if they were doing just that?  Why not instead try to get to the bottom of what the prices are of these assets and while we’re sorting that mess out, maybe for just awhile say that institutions do not have to have capital to back up a price they wouldn’t take for an asset?

Congress is having a meeting to discuss M2M this Thursday.  Despite the fact that this plumber has his work cut out for him since the clog in the pipes caused damage of unequaled proportions to our house (financial system), he can unclog this pipe so we can get our water moving again; then we can begin to repair the damage.

I have heard it argued that lifting M2M will cause more uncertainty as investors would know less about the assets on the books, but these have usually been people who are known as short-sellers.  While short-sellers have been right if you want to look at it that way (many do, including myself), it does not give any more merit to their opinion than anyone else trying to sell you on something.  If this huge burden was lifted off institutions’ balance sheets, you can bet that some of the massive amounts of money sitting in conservative investments will come pouring in.  Just as fear can feed on fear, optimism can feed on optimism this spring.  I bought stocks last week for the first time in months, and if nothing else, I think we’re due for a huge global rally.  Global markets have pretty much gone down in a straight line in 2009.  Just since the 2nd week of February, the DJIA went from 8300 to 6500.  Even at my young age I know that kind of thing doesn’t happen often.

Let us return to the metaphor of  “Santa Claus: Benevolent Conspiracy” as it relates to money and banks and fear and faith.

In the case of Sanity Claus, the conspirators must maintain a sufficient degree of consistency and credibility in their deception in order to perpetuate the conspiracy, to alleviate the doubt and boost the faith of the true believer.  Don’t ever give them REASON to doubt, for they will surely grasp upon it if the least bit curious, and eventually unravel the whole freakin’ fairy tale.  Inconsistency was the hobgoblin that swallowed my parents’ version of the myth, and its role in my belief system.  You can’t, on one hand, reward and encourage a child to examine the universe from a scientific, rational, logical western perspective and then try to feed the same child fairy tales about a fat fucker with a flying sleigh.

Cognitive dissonance breeds the questioning of authority and reality.

Unlike myself, when my own children came to the realization that Santa was a crock of shit, they kept their mouths shut. For years. Their faith had been replaced with the fear that if they dared utter the truth, the presents would cease to appear.

They tolerated the deception as long as the gifts came in.  We played along as long as the requests were reasonable.

They knew, and we knew that they knew and we all played make-believe and nobody got hurt because everyone played nice.  If the players become either greedy or irresponsible, the game collapses.

For the kids, that meant reasonable requests.

For the adults: don’t promise what you can’t deliver.

The benevolent conspiracy, the Fractured Fairy Tale of Fractional Reserve Lending and debt-based currency is beginning to unravel.

The reason?

In a word, greed.

Unreasonable expectations.

Unrealistic promises.

Prosperity, abundance and the delusion that Santa can deliver whatever our heart desires has turned us into a society that engages in willful co-conspiring year round.

“Where’s dinner?”

“Under the tree!”

You can only keep the fairy tale alive as long as you don’t try to squeeze too much magic out of it.  Everyone’s gotta play nice, or else.

We have – both literally and figuratively – bought a little to deeply and selfishly into the myth that we can create something from nothing at all.

We’re afraid to call out the allegedly adult co-conspirators for their deception and irresponsible actions, because we’ve become reliant on their largesse for our very survival.

Our faith has been replaced with the fear that if we dare utter the truth, the gifts under the tree will vanish.

The fairy tale:

Too Big To Fail.

Realty is gravity:

i.e.,

What goes up

Must come down.

Lest ye be spooked by my lunatic howlings, look at the Light Side of the Moon.

Defy gravity with levity.

Spin to the yin that completes the yang.

Decouple your perception of value from the dollar standard.

The Power to Love is an unlimited commodity; adopt it as your currency.

Measured in gigaHugz and delivered in person.

Door to door, face to face, cheek to cheek;

On demand or on the dance floor.

If we all play nice, any myth will suffice.

peas bewitchu

We’re All In, America

The striking thing in Warren Buffett’s letter to shareholders (2/28/09) was not that his Berkshire Hathaway had its worst year in his career.  To me, it was striking that his words sounded like those of a 78-year-old man who wishes to warn the world about what scares him before his time has run out.  Never before has Warren Buffett sounded so emotional and forthcoming; nor has he ever sounded his age.  This year he seemed to be ‘spilling the beans’ as the popular phrase goes. In the letter, he warns that derivatives were very dangerous and that many firms had knowingly created this system stating,

“From this irritating reality comes The First Law of Corporate Survival for ambitious CEOs who pile on leverage and run large and unfathomable derivatives books: Modest incompetence simply won’t do; it’s mindboggling screw-ups that are required.”

The superstar investor continued, writing:

“In poker terms, the Treasury and the Fed have gone all in.  (emphasis added).  Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel.  These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects.  Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.”

He also mentioned a Treasury bubble – as described in my previous post – that may be as extraordinary as the internet and housing bubbles.

The Treasury and Fed are all in with our money. So, we’re all in.  The few who responsibly managed their budgets are now bailing out the majority who didn’t, albeit on an individual or a business level.  Moral hazard is now an extinct ideology.  There is no incentive to be responsible even if it were possible to overcome being soaked dry by ‘the “good” of the people.’  I know this:  I’m no good at poker, but if I had the hand America is being dealt, I sure wouldn’t want to go all in, especially if Buffett’s assertions are even partially true.  Our debt is in a bubble set to pop, we owe the world $10.9 trillion, and we plan to allocate an addition $3.7 trillion to the federal budget this year, which includes $1.75 worth of more deficit borrowing.  The only thing still holding this all together is that the rest of the world depended on our stupidity.  Their exports have fallen dramatically as we stop consuming so much.  It’s only a matter of what will happen first – will the rest of the world find other people to sell their goods to, or will our economy recover fast enough to where they still remain dependent on us in the future?

Warren Buffett said that he agreed with the government’s actions, because without them, we would have faced cataclysmic consequences.  So I guess maybe we look at it this way:  if you only have one chip left, maybe you do have to go all in.  So there you have it.  We’re all in, America.

The market watch for March doesn’t look too promising.  The Dow and S&P indices closed on 12 year lows on Friday.  That said, the government” hope bubble,” as described in the previous post, was alive and well this week.  Before a pull-back on Friday, when the government took up to a 40% stake in Citigroup, the index tracking the banking sector was on pace for the best week in history on hopes that government actions would be beneficial for banks.  With Warren Buffett’s disclosures on derivatives showing how much they were hurting even someone like him, it is clear that the government cannot and will not save the banks from mounting losses they don’t even understand.  At this point, it seems equally dangerous to be invested in Treasuries or equities.  If the financial sector sees a further break-down, the effects on all areas of the economy will suffer.  Precious metals like gold and silver seem to be the safest asset class as it is inevitable that inflation takes off at some point as countries all over the globe destroy their currencies.  Stocks seem cheap right now, but it is likely what’s known as a “value trap. “  There is a reason that stocks are at 12 year lows.  Future earnings for companies are very uncertain, repercussions of government actions remain unclear, and perhaps most importantly, people don’t have money to invest.  All asset classes are seeing heavy withdrawals and redemptions, which means that the deleveraging is far from over.  Commercial real estate is seen as a looming disaster, which means the economic woes are far from over.  It is not a bad idea to start buying some small positions in quality stocks and adding to them as the market declines in the next few weeks or months, but I would not be putting serious money into stocks right now just because they are ‘on sale.’  If you can get them for cheaper later, why buy now?  Don’t go all in like our leaders have done. It’d be one thing if those were my naive words but when they are the words of the greatest investor of our time, it makes you stop and think.

Forgive my rambling, but every once in a while it makes sense to try to think about the problem of government in a free society.  What does it take for a society to be truly free?  For me, it is the freedom to do whatever you may want, as long as it doesn’t stop others from doing so.  I’ll use that as my definition of freedom for now.  So what kind of government is consistent with freedom?

First, because enforcing policy necessarily requires voluntary agreement in a free society, there should be a reasonable level of agreement on any policy adapted by our central planners.  To what extent people agree will depend on the issue.  As these issues are defined more narrowly, we would expect agreement to be less and less likely.  Likewise, as the issues under consideration for control are made more broad and general, the level of agreement becomes greater (e.g. We all agree government should provide defense. We just don’t all agree on the specifics).

You might have heard, for example, that we have just been approved to build a new base in Italy, apparently, to try to prevent “social unrest.” You know, people not agreeing with what their government is doing to them (note to self:  Ask Obama what the hell this has to do with the security of the American people).  We have hundreds of military bases in over 100 countries.  Do Americans really want a new base in Italy right now?  Can we really afford to give any more money to the military-industrial complex? (Shhh…I don’t think it really matters anymore what we want, but don’t call it a conspiracy!)

Because we all have very different views, needs, wants, and morals, Americans embody a very wide spectrum of opinion.  We disagree on all sorts of things.  But the key here is that we do have practical unanimity on some issues, like basic human rights of life, liberty, and the pursuit of happiness.

Even on some issues where people can all agree , like raising the average wage in the US, the methods for accomplishing this goal can vary wildly.  Any given plan is likely to favor one group over another.  And for every plan that favors group A over B, there will be a plan that favors B over A.  The actual number of plans theoretically could be greater than the number of people under the direction of the central planners.  So that even when we have unanimous agreement on one issue, in reality no plan can be said to be objectively better than any other.

And this is where we get to the punchline.  Ultimately, if we are to pass the hypothetical plan to raise the average wage of Americans, some person or committee will have to decide, quite arbitrarily, on a specific plan.  The government will have to decide who wins and who loses, and as we’ve seen for quite awhile now, those in power to make such decisions usually have money and power on their mind; not the “general welfare”.

The problem stems, in this example, from the fact that the policy in consideration was ends-based.  It is not a general rule which must be followed by all, as is the case with laws concerning murder.  Rather, it is focused on a specific end.  This creates the need for specific groups to be mentioned in the policy.  The planners creating this legislation can see its effects in advance.  They use this foresight to please special interests (at the expense of some other group, of course).  However, murder laws, for example, are not the same at all.  None of the planners could possibly foresee what group will be affected by murder laws in advance.  It is true, though it possibly sounds like a contradiction, to say that planners should not have any kind of foreknowledge of the effects of their plan on any specific groups.  This does sound odd, but it is at the heart of why our planners have repeatedly failed over and over.

Furthermore, the arbitrary nature of such decisions will ultimately subvert the rule of law, which has always been the hallmark of a free society.  We have seen in the last eight years, the effects that such a subversion can have.  The rule of law, as opposed to the rule of men, is the natural consequence of the progression of societies from autocratic to democratic rule.  It is the dividing line that separates the totalitarian states of the past from the more liberal states of the present.  If we are to truly preserve the rule of law, policymakers must stop proposing ends-based policy.  As we have seen, ends-based policies subvert the rule of law, have almost no chance for any kind of broad agreement from the people, and are used to please special interests at the expense of the general public.

Furthermore, the world is extremely complex, and understanding all of the interconnected and often conflicting goals of each of its inhabitants can never be achieved by any one man, let alone a committee of men.  Eventually, policy decisions will always favor one group over another (due to the limited scope of the planners’ experience and knowledge), and the laws of economics are such that the favored group is bound to be smaller (so that each member of the losing group ends up “paying” a small amount, lest they revolt).  Thus, ends-based policies have little chance of actually helping a majority of the people.

I sometimes wonder if people truly believe that its okay to have such a powerful executive as long as the guy in control is benevolent.  As I mentioned earlier, the complexity of even the most basic structures of society, like the vast financial system, are such that no one man, woman, or committee could possibly effectively handle tweaking the system to what they perceive to be in the general interest.  But even if we got someone that can manage such control, whose to say Americans will always vote for that person?  In fact, the likelihood seems very small considering our past presidents.  If we continue to give such power to our federal government, we will ultimately find ourselves one day serving under an autocracy and living in servitude to the ruling party and their elite friends (although I’m not totally convinced that isn’t more or less the case right now).

One would like to think that Obama does not fit this group.  However, it is clear that Obama does not share this vision of how we may truly have a government by the people and a free citizenry protected by the rule of law.  He has shown he has no interest in bipartisanship or truly listening to the ideas of both sides, neither of which seems to know anything about economics (Where have all the Austrians gone?).  He had no problem voting against the overwhelming majority of Americans on the TARP.  He favors ends-based policy, which is the enemy of the free society.

I’ve been rambling for long enough, I think.  Time to get back to figuring out how I can use the new laws being passed to my advantage; at the expense of others, of course.