Today I’m going to explain why gun-control is not only entirely reasonable but also certain to be effective. Only the ignorant can deny this.
First, some orientation. Cement-headed NRA types need to recognize, and state manfully, that the illegalization of guns is in fact perfectly practical. History has shown this repeatedly. When the government outlaws something that huge numbers of people very much want, the outlawed items immediately disappear from society. This has been shown countless times.
When Washington outlawed alcohol, booze vanished overnight and everyone stopped drinking. Can anyone deny this? When Washington banned the use of cannabis, all of those of us made insane by Reefer Madness quit smoking dope, and today there is probably not a town in America in which one might buy a joint. Similarly, Washington made illegal the downloading of copyrighted music – which also stopped immediately. No one now has illegal music. Ask your adolescent daughter.
So with guns. They are small, easily smuggled, of high value to criminals and will be of higher value when only criminals have them, so it is virtually certain that they will vanish when the government says so.
Mexico, where I live, has stringent laws against guns, which have proved at least a partial success. Criminals have AKs, RPGs, and grenades, while nobody else has anything. That’s a partial success, isn’t it?
While I am in favor of illegalizing guns and thus ending crime, I think the principle should be democratically applied. Let us begin by disarming the Pentagon. If this seems unreasonable, ask yourself: who kills more children in a month, Ritalin-addled little boys in America, or the US Air Force in every Moslem country it has heard of? All I ask is an honest body count. I will accept your numbers.
…..So Ackman vs. Herbalife has no heroes. Both parties, in their own way, take advantage of the goodwill and trust that underlie capitalism. Herbalife recruits sales people with the knowledge–based on mathematical certainty but undisclosed to its recruits–that the vast majority will lose money. Mr. Ackman, for his part, has gotten rich betting against bad companies. One party is possibly immoral, the other party at best amoral. Who do you cheer for? –Mr. Karlgaard, publisher of Forbes (A Short Seller Takes on a Vitamin Vendor, WSJ Jan 4, 2013)
Yes this battle will be gruesome, bloody and long (perhaps) but our purpose is to understand whether Herbalife which–as of the last filing–sported franchise-like financials of high ROA, ROE and ROIC with growing sales. Copious cash flow. On the surface, the company seems to have a franchise. Why can’t other companies do the same thing. What barriers to entry are there? Product patents, customer captivity, economies of scale and scope, network effects, etc. This battle will allow us to understand what drove Herbalife’s success. Will it be fleeting or lasting. My bet is that Herbalife does NOT have a lasting competitive advantage.
The quote above by Mr. Karlgaard is disappointing because as a publisher of a business magazine, he should understand Mr. Ackman’s purpose. A good investor should invest in companies that will use owner’s capital wisely and should not invest or even warn against investing in companies that mis-allocate capital for the long-term. Short sellers are just as important as having a Warren Buffett in the market. An Ackman does more for future growth than any government program because–like him or not–Mr. Ackman is trying to take capital away from poorly managed, potential frauds, unsustainable businesses while allocating capital to companies that will use his investors’ capital beneficially. He may be proven wrong but that is for the market to decide.
UPDATE: MONEY SUPPLY EXPLOSION--We are now officially in double digit territory for non-seasonally adjusted 13 week annualized money supply (M2) growth. Here is the amazing ascent in growth over recent weeks: 5.1%, 5.6%, 6.6%, 7.1%, 7.5%, 7.8%, 8.2%, 8.4%, 8.7%, 9.0%, 9.3%, 9.6%, 9.9%, 10.7%. It is this growth that is going to fuel the U.S. economy, the U.S. stock market and commodities. www.economicpolicyjournal.com
Investing in Banks
I find investing in global banks like Bank of America or Citibank impossible because I have no way to value or understand their businesses. How much “shadow” banking do these entities engage in? I don’t want to find out the hard way. See the article below
Some four years after the 2008 financial crisis, public trust in banks is as low as ever. Sophisticated investors describe big banks as “black boxes” that may still be concealing enormous risks—the sort that could again take down the economy. A close investigation of a supposedly conservative bank’s financial records uncovers the reason for these fears—and points the way toward urgent reforms.
The financial crisis had many causes—too much borrowing, foolish investments, misguided regulation—but at its core, the panic resulted from a lack of transparency. The reason no one wanted to lend to or trade with the banks during the fall of 2008, when Lehman Brothers collapsed, was that no one could understand the banks’ risks. It was impossible to tell, from looking at a particular bank’s disclosures, whether it might suddenly implode. Red the whole article:
The authors of the above article don’t grasp the true cause of the banking panic. Yes, transparency is a problem, but that would ALWAYS be true under our current fractional reserve banking system–it’s inherently a Ponzi scheme that functions on public gullibility and government edict–banks get to violate private property rights.
PS: can anyone fill in the blanks? All panics arise from excess _______ over and above ___________. Correct answer wins this prize:
This was published on January 2, 2013, in Ron Paul’s Monetary Policy Anthology: Materials From the Chairmanship of the Subcommittee on Domestic Monetary Policy and Technology, US House of Representatives, 112th Congress. All the books mentioned in this article are free on the web, go to www.mises.org and do a book search by title.
The scholarly contributions of Murray N. Rothbard span numerous disciplines, and may be found in dozens of books and thousands of articles. But even if we confine ourselves to the topic of money, the subject of this volume, we still find his contributions copious and significant.
As an American monetary historian Rothbard traced the party politics, the pressure groups, and the academic apologists behind the various national banking schemes throughout American history. As a popularizer of monetary theory and history he showed the public what government was really up to as it took greater and greater control over money. As a business cycle expert he wrote scholarly books on the Panic of 1819 and the Great Depression, finding the roots of both in artificial credit expansion. And while the locus classicus of monetary theory in the tradition of the Austrian School is Ludwig von Mises’ 1912 work The Theory of Money and Credit, the most thorough shorter overview of Austrian monetary theory is surely chapter 10 of Rothbard’s treatise Man, Economy and State.
Rothbard placed great emphasis on the central monetary insight of classical economics, namely that the quantity of money is unimportant to economic progress. There is no need for the money supply to be artificially expanded in order to keep pace with population, economic growth, or any other factor. As long as prices are free to fluctuate, changes in the purchasing power of money can accommodate increases in production, increases in money demand, changes in population, or whatever. If production increases, for example, prices simply fall, and the same amount of money can now facilitate an increased number of transactions commensurate with the greater abundance of goods. Any attempt by “monetary policy” to keep prices from falling, to accommodate an increase in the demand for money, or to establish “price stability,” will yield only instability, entrepreneurial confusion, and the boom-bust cycle. There is no way for central bank policy or any form of artificial credit expansion to improve upon the micro-level adjustments that take place at every moment in the market.
With the exception of the Austrian School of economics, to which Rothbard made so many important contributions throughout his career, professional economists have treated money as a good that must be produced by a monopoly – either the government itself or its authorized central bank. Rothbard, on the other hand, teaches that money is a commodity (albeit one with unique attributes) that can be produced without government involvement. Rothbard’s history of money, in fact, is a history of small steps, the importance of which are often appreciated only in hindsight, by which government insinuated its way into the business of money production.
It was Carl Menger who demonstrated how money could emerge on the free market, and Ludwig von Mises who demonstrated that it had to emerge that way. In this as in so many other areas, Mises broke with the reigning orthodoxy, which in this case held that money was a creation of the state and held its value because of the state’s seal of approval. A corollary of the Austrian view was that fiat paper money could not simply be created ex nihilo by the state and imposed on the public. The fiat paper we use today would have to come about in some other way.
It was one of Rothbard’s great contributions to show, in his classic What Has Government Done to Our Money? and elsewhere, the precise steps by which the fiat money in use throughout the world came into existence. First, a commodity money (for convenience, let’s suppose gold) comes into existence on the market, without central direction, simply because people recognize that the use of a highly valued good as a medium of exchange, as opposed to persisting in barter, will make it easier for them to facilitate their transactions. Second, money substitutes began to be issued, and circulate instead of the gold itself. This satisfies the desires of many people for convenience. They would rather carry paper, redeemable into gold, than the gold itself. Finally, government calls in the gold that backs the paper, keeps the gold, and leaves the people with paper money redeemable into nothing. These steps, in turn, were preceded by the seemingly minor – but in retrospect portentous indeed – government interventions of monopolizing the mint, establishing national names for the money in a particular country (dollars, francs, etc.), and imposing legal tender laws.
Rothbard also brought the Austrian theory of the business cycle to a popular audience. Joseph Salerno, who has been called the best monetary economist working in the Austrian tradition today, was first drawn to the Austrian School by Rothbard’s essay “Economic Depressions: Their Cause and Cure.” There Rothbard laid out the problems that business cycle theory needed to solve. In particular, any theory of the cycle needed to account, first, for why entrepreneurs should make similar errors in a cluster, when these entrepreneurs have been chosen by the market for their skill at forecasting consumer demand. If these are the entrepreneurs who have done the best job of anticipating consumer demand in the past, why should they suddenly do such a poor job, and all at once? And why should these errors be especially clustered in the capital-goods sectors of the economy?
According to Rothbard, competing theories could not answer either of these questions satisfactorily. Certainly any theory that tried to blame the bust on a sudden fall in consumer spending could not explain why consumer-goods industries, as an empirical fact, tended to perform relatively better than capital-goods industries.
Only the Austrian theory of the business cycle adequately accounted for the phenomena we observe during the boom and bust. The cause of the entrepreneurial confusion, according to the Austrians, is the white noise the Federal Reserve introduces into the system by its manipulation of interest rates, which it accomplishes by injecting newly created money into the banking system. The artificially low rates mislead entrepreneurs into a different pattern of production than would have occurred otherwise. This structure of production is not what the free market and its price system would have led entrepreneurs to erect, and it would be sustainable only if the public were willing to defer consumption and provide investment capital to a greater degree than they actually are. With the passage of time this mismatch between consumer wants and the existing structure of production becomes evident, massive losses are suffered, and the process of reallocating resources into a sustainable pattern in the service of consumer demand commences. This latter process is the bust, which is actually the beginning of the economy’s restoration to health.
The concentration of losses in the capital-goods sector can be explained by the same factor: the artificially low-interest rates brought about by the Fed’s intervention into the economy. What Austrians call the higher-order stages of production, the stages farthest removed from finished consumer goods, are more interest-rate sensitive, and will therefore be given disproportionate stimulus by the Fed’s policy of lowering interest rates.
Equipped with this theory, Rothbard wrote America’s Great Depression(1963). There Rothbard did two things. First, he showed that the Great Depression had not been the fault of “unregulated capitalism.” After explaining the Austrian theory of the business cycle and showing why it was superior to rival accounts, Rothbard went on to apply it to the most devastating event in U.S. economic history. In the first part of his exposition, Rothbard focused on showing the extent of the inflation during the 1920s, pointing out that the relatively flat consumer price level was misleading: given the explosion in productivity during the roaring ’20s, prices should have been falling. He also pointed out how bloated the capital-goods sector became vis-a-vis consumer goods production. In other words, the ingredients and characteristics of the Austrian business cycle theory were very much present in the years leading up to the Depression.
Second, Rothbard showed that the persistence of the Depression was attributable to government policy. Herbert Hoover, far from a supporter of laissez-faire, had sought to prop up wages during a business depression, spent huge sums on public works, bailed out banks and railroads, increased the government’s role in agriculture, impaired the international division of labor via the Smoot-Hawley Tariff, attacked short sellers, and raised taxes, to mention just a portion of the Hoover program.
Rothbard had been interested in business cycles since his days as a graduate student. He had intended to work on a history of American business cycles for his Ph.D. dissertation under Joseph Dorfman at Columbia University, but he found out that the first major cycle in American history, the Panic of 1819, provided ample material for study in itself. That dissertation eventually appeared as a book, via Columbia University Press, called The Panic of 1819: Reactions and Policies (1962). In that book, which the scholarly journals have declared to be the definitive study, Rothbard found that a great many contemporaries identified the Bank of the United States – which was supposed to be a source of stability – as the primary culprit in that period of boom and bust. American statesmen who had once favored such banks, and who thought paper money inflation could be a source of economic progress, converted to hard money on the spot, and proposals for 100-percent specie banking proliferated.
In A History of Money and Banking: The Colonial Era to World War II, a collection of Rothbard’s historical writings published after the author’s death, Rothbard traced the history of money in the United States and came up with some unconventional findings. The most stable period of the nineteenth century from a monetary standpoint turns out to be the period of the Independent Treasury, the time when the banking system was burdened with the least government involvement. What’s more, the various economic cycles of the nineteenth century were consistently tied to artificial credit expansion, either participated in or connived at by government and its privileged banks. Rothbard further showed that the traditional tale of the 1870s, when the United States was supposed to have been in the middle of the “Long Depression,” was all wrong. This was actually a period of great prosperity, Rothbard said. Years later, economic historians have since concluded that Rothbard’s position had been the correct one.
Rothbard’s treatment of the Federal Reserve System itself, which he dealt with in numerous other works, involved the same kind of analysis that historians like Gabriel Kolko and Robert Wiebe applied to other fruits of the Progressive Era. The conventional wisdom, as conveyed in the textbooks, is that the Progressives were enlightened intellectuals who sought to employ the federal regulatory apparatus in the service of the public good. The wicked, grasping private sector was to be brought to heel at last by these advocates of social justice.
New Left revisionists demonstrated that this version of the Progressive Era was nothing but a caricature. The dominant theme in Progressive thought was expert control over various aspects of society and the economy. The Progressives were not populists. They placed their confidence in a technocratic elite administering federal agencies removed from regular public oversight. What’s more, the resulting regulatory apparatus tended to favor the dominant firms in the market, which is why the forces of big business were in sympathy with, rather than irreconcilably opposed to, the Progressive program. “With such powerful interests as the Morgans, the Rockefellers, and Kuhn, Loeb in basic agreement on a new central bank,” Rothbard wrote, “who could prevail against it?”
It is with these insights in mind that Rothbard scrutinized the Federal Reserve. He would have none of the idea that the Fed was the creation of far-seeing public officials who sought to subject the banking system to wise regulation for the sake of the people’s well-being. The Fed was created not to punish the banking system, but to make its fractional-reserve lending operate more smoothly. In The Case Against the Fed, What Has Government Done to Our Money?, and The Mystery of Banking, Rothbard took the reader through the step-by-step process by which the banks engaged in credit expansion, earning a return by lending money created out of thin air. Without a central bank to coordinate this process, Rothbard showed, the banks’ position was precarious. If one bank inflated more than others, those others would seek to redeem those notes for specie and the issuing bank would be unable to honor all the redemption claims coming in.
The primary purpose of the central bank, therefore, in addition to propping up the banks through its various liquidity injections and its position as the lender of last resort, is to coordinate the inflationary process. When faced with the creation of new money by the Fed, the banks will inflate on top of this new money at the same rate (as determined by the Fed’s reserve requirement for banks). Therefore, the various redemptions will tend, on net, to cancel each other out. This is what Rothbard meant when he said the central bank made it possible to “inflate the currency in a smooth, controlled, and uniform manner throughout the nation.”
Although Rothbard distinguished himself as a monetary theorist and as a monetary historian, he did not confine himself to theory or history. He devoted plenty of attention to the here and now – to critiques of Federal Reserve policy, for example, or to criticisms of government responses to the various fiascoes, the Savings and Loan bailout among them, to which our financial system is especially prone. He likewise looked beyond the present system to a regime of sound money, and in The Case for a 100 Percent Gold Dollar and The Mystery of Banking laid out a practical, step-by-step plan to get there from here.
In his work on monetary theory and history, as in his work in so many other areas, Rothbard showed from both an economic and a moral point of view why a system of liberty was preferable to a system of government control. At a time when the political class and the banking establishment are being subjected to more scrutiny than ever, the message of Rothbard takes on a special urgency.
For that reason we should all be grateful that his monetary work, and that of the other great Austrian economists, is being carried on by Murray Rothbard’s friend and colleague Ron Paul. By my reckoning, no one in history has brought true monetary theory and history to a larger audience.
OK, I don’t like right or left wing extremists either, but many people in foreign lands like Afghanistan and Pakistan view us in this way. Listen to what you don’t like to hear. The media’s portrayal of the tragedy in Sandy Hook
should be contrasted with the silence on U.S. sanctioned drone killings of women and children (“collateral damage”). The actual video starts at 4:26.
Corporate treasurers have been driving the bull market in stocks, not retail and institutional investors. The Fed’s Flow of Funds data show that net issuance of corporate equities over the past year through Q3 was minus $274 billion. In other words, buybacks well exceeded gross issues. Nonfinancial corporations registered net buybacks of $419 billion, while the financial sector had net issuance of $119 billion and foreign corporations issued $25 billion, according to the Fed’s data.
The financial sector data include stock issuance by all ETFs, which rose to $174 billion over the latest four-quarter period. Excluding these ETFs, net issuance by financial corporations was minus $55 billion.
The Fed also compiles monthly data for total gross equity issuance. Over the past 12 months through October, corporations raised $152 billion. However, that was overshadowed by buybacks. Data available for the S&P 500 show that they totaled $406 billion over the past four quarters through Q2.
You can never hear this lesson enough–beware of experts. In the end, no one knows the future. In fact, market gurus or experts have a greater than even chance of being wrong than a coin toss. Skip those odds and save yourself a lot of time.
Jon Stewart Puts CNBC on Trial. Cramer is roasted.
For a more detailed video of CNBC’s expert predictions (11 minutes) with more of Jon Stewarts’ savage commentary: http://youtu.be/N3LCZ3wTDoQ
Stewart is really going after CNBC’s promotional stock hyping while masquerading as a knowledgeable news source. Jim Cramer is part of the market ecology just like his famous predecessor, Gerald M. Loeb, the author of The Battle for Stock Market Survival (1935). Loeb, whom Forbes once tagged “the most quoted man on Wall Street,” became synonymous with the Hutton brokerage firm in the 1950s–and, not coincidentally, a flamboyant method of trading that generated brokerage commissions. Meanwhile, his visibility in the press was, as it often is, mistaken for respectability.
Despite all the ink that was spilled about him (and Cramer, today), there is no real contribution there of enduring value. Separate what is fundamental and new, or for that matter fundamental and old, from the kind of superficial sales-driven froth that Loeb and his PR machine have delivered. Loeb was the personification of the saying that” you can’t believe everything you read.” (Source: 100 Minds That Made The Market by Ken Fisher).
More proof that Chimps could pick stocks better (at least 50% randomly choosing stocks that will do better or worse) than “experts.”
Louis Rukeyser Shelves Elves Missed Market Trends Tinkering didn’t improve index’s track record for calling market’s direction.(MUTUAL FUNDS)
Investor’s Business Daily
November 01, 2001 Byline: KEN HOOVER
Louis Rukeyser, host of the popular “Wall Street Week” TV show, has quietly shelved his Elves Index, which was made up of his panel of experts’ stock market forecasts.
On Sept. 14, in the aftermath of the World Trade Center attack, he told his audience he was going to “give our elves a rest for a while.” He hasn’t mentioned them in weeks. And he declined to be interviewed on the subject.
He’s doing viewers a big favor. The index had a terrible track record. The elves said buy when they should have said sell, and vice-versa.
They were giddy with optimism as stocks crumbled the past two years. Maybe their darkest hour came in 1999 when an elf was indicted by a federal grand jury.
There’s a lesson here for investors. Pay no attention to experts, even if they are handpicked by the venerated Rukeyser. Sure, his show has helped PBS viewers gain an understanding of the arcane world of the stock market for three decades. But all investors need to learn to separate fact from opinion. And be especially leery if there’s a consensus about the market’s direction from Wall Street’s best minds. Chances are the market will go in the opposite direction.
“As far as I’m concerned, the experts are nothing more than the herd,” said Don Hayes, a money manager who closely follows market psychology. “Most people get their current market opinion from current market news. And news looks backward. The market is always looking forward six to 12 months.”
Rukeyser’s index worked like this: Each of 10 panelists voted on the Dow’s direction. A bullish vote counted +1. A bearish vote was -1. Zero was neutral. A +5 reading was supposed to be a buy signal. A -5 was a sell signal.
This system went against decades of research about market psychology. Several widely watched and reliable market indicators are built around the principle that markets are likely to do the opposite of consensus opinion.
After The Fact
The elves index started in 1989. It was reading +3 on July 27, 1990. That was a market top. It read -4 on Oct. 12, 1990. That was a market bottom. It gave its lowest reading ever, -6, on April 1, 1994.
That was after a nasty correction. The problem was the correction was almost over. The elves stood at -5 on Nov. 25, 1994, just as a powerful advance was about to begin.
The index was working just like any other contrarian sentiment indicator. Some market strategists started watching it that way.
The elves never gave another negative reading after May 1995. Rukeyser tinkered with the elves’ makeup, adding bullish votes. In May 1996, he purged five elves, replacing them with new blood.
That moved the index from +1 to +6, just in time for a correction that made some elves nervous. It fell back to +3.
On July 31, 1998, just as the market was starting to sink into a quick but painful bear market, the elves were a chipper +6. A 21% Dow plunge moved them down only to +3.
Rukeyser gave the elves another bullish boost just as the bubble was about to burst. In November 1999, he expelled long-time bear Gail Dudack. She was replaced with pension-fund manager Alan Bond.
Bond voted with the bulls, pushing the index to an all-time high of +7. A few weeks later it reached +8. If Dudack had stayed, she would have finally been right a four months later.
Bond was on the panel only five weeks. He was indicted on charges of taking $6 million in kickbacks. Last August while awaiting trial, he was arrested on new fraud charges. Trials are pending.
Nurock’s Record
As the market peaked in March 2000, the elves were bullish at +7. For 11 weeks during the worst bear market in a generation, the elves gave readings of +9. Late last year, Rukeyser started a parallel index for the Nasdaq. Its readings differed little from that of the Dow.
Before Rukeyser had the elves, he had Robert Nurock, who cobbled together 10 technical indicators into a composite that actually had a decent record, according to a study by technical analyst Arthur Merrill.
From 1974 to the end of 1986, the index correctly forecast the Dow’s direction 26 months in advance 79.5% of the time. That’s according to Merrill’s study, which was reported in the book “The Encyclopedia of Technical Market Indicators,” by Robert Colby and Thomas Meyers.
Nurock and Rukeyser parted company after the 1987 crash.
A review of the new Richard Gere vehicle, Arbitrage, in which a wealthy hedge-fund manager is—surprise—the villain. Suggestion to the filmmakers: Check the dictionary before you title your next movie.
“Arbitrage—buying low and selling high—depends on a person’s ability to determine the true value of any given market,” reads the program note for the Sundance Film Festival, where writer-director Nicholas Jarecki’s movie Arbitrage was screened to rousing acclaim in January.
From the start, then, someone got the definition wrong. Whoever wrote that program note apparently believes arbitrage—simultaneously buying and selling the same asset at difference prices—is just another form of value investing (“buying low and selling high”).
Call me a purist, but if you pay good money to watch a movie called Arbitrage, you should get to see a little of it. Arbitrage depicts nobody in the act of arbitrage. Not that this would be the first time title and content diverge. At least the hedge-fund manager in Arbitrage does engage in hedging (laying off risk), unlike some real-life firms that call themselves hedge funds without actually hedging.
If Arbitrage were a bond, it would make investment grade, but just barely.
Richard Gere stars as Robert Miller, a successful hedge-fund manager who illegally covers up a $400 million loss, then attempts to escape the consequences by selling his company. The sale becomes more difficult when he commits another crime in the course of a bit of wife-cheating with a sexy art dealer. That leads to a second coverup and to a breach with his adoring and idealistic daughter, who is also the firm’s chief investment officer.
Compared with other films on finance worth seeing—admittedly, a short list—Arbitrage fails to give the stock market a pivotal role. Director Oliver Stone’s Wall Street, which features Michael Douglas as takeover artist Gordon Gekko, creates tension with a takeover battle. That film also shows protagonist Charlie Sheen breaking the insider-trading laws instead of just telling the audience about it.
In Boiler Room, the most engrossing action consists of penny-stock salesmen conning their victims. By contrast, Gere’s Robert Miller has already committed his financial crime by the time the action begins.
It might be objected that Arbitrage would lose the average moviegoer by dwelling on the details of securities transactions. But the excellent finance film Margin Call, which does depict margin calls, manages to convey the essential facts about complex derivatives to a general audience. By declining the challenge of portraying finance on-screen, Arbitrage becomes a film as much about its peripheral subjects—police work, the art world, and philanthropy—as the stock market.
BEYOND BEING MISNAMED, the film lacks one key ingredient of the most enduring investment-oriented movies: an instantly quotable line. Wall Street had “Greed is good.” The cult favorite Boiler Room had “You got a cannoli you can stick in your mouth?”—followed by a rejoinder that is not printable in a family magazine. The best Arbitrage can offer is this response to the observation that it’s a cold world: “You’d better get a warm coat.”
The Bottom Line
In addition to being a thriller with few thrills, Arbitrage even bungles the meaning of its title. Wait for this one to come to cable.
But hey, this is a movie: Whether or not Arbitrage holds up as a finance film, is it a decent popcorn picture that spins a suspenseful yarn? It benefits from some good acting. Richard Gere is more than adequate in the lead. Susan Sarandon, already experienced at playing Gere’s long-suffering wife (in Shall We Dance?), again fulfills that duty with finesse. Tim Roth and Nate Parker shine in supporting roles. CNBC’s Maria Bartiromo plays Maria Bartiromo in a cameo that adds luster to the proceedings.
Key plot twists are at times cleverly foreshadowed. Characters reveal unexpected depth as they confront not-so-easy moral choices. A tearful embrace that occurs at a funeral is a powerful use of dramatic irony, and the story’s resolution denies viewers any smug satisfaction that all’s well that ends well.
But these individual touches are too infrequent. If Arbitrage were a bond, it would make investment grade, but just barely.
This shortfall raises the question of why Arbitrage garnered such raves at Sundance, even spurring talk of an Oscar for Richard Gere. The critics’ huzzahs are hard to explain on purely cinematic grounds. As an exploration of family betrayal, Arbitrage is no more than workmanlike. Unlike the best thrillers, it will leave most stomachs unknotted.
THE SUNDANCE CRITICS WERE probably won over by writer-director Jarecki’s choice of a fashionable political theme, the 1% versus the 99%. And you can never go wrong in Hollywood by making the businessman the villain.
Gere’s Robert Miller stands a good chance of prevailing over the law-enforcement system, thanks to his immense wealth, unlike the working-class youth he draws into his crime, played by Nate Parker. The detective, played by Tim Roth, who pursues Miller openly complains that he is in an unfair fight if he must pursue such a privileged perpetrator without having license to fake the evidence. To compound the corruption at the top, we learn that Miller cut corners even in the supposedly lawful phase of building his fortune.
Arbitrage will be released in theatres Friday, Sept. 14. Will media critics also be seduced by the film’s populist theme, or will they judge it according to more rigorous standards of movie-making? That question is as suspenseful as anything you’re likely to see in Arbitrage.
MARTIN FRIDSON is the global credit strategist and CEO of FridsonVision. He reviewed the film version of Atlas Shrugged last year.
JC Penny’s (JCP) Announces Terrible Earnings but The stock rallies
Is the market a discounting mechanism? Jim Cramer of CNBC would say, “JCP is a CROWDED short.” The beginnings of a case study here: JCP_Barrons
Scams
My inbox is being flooded (as a subscriber–to find shorts–to Penny Stock Newsletters my email is raw meat for scammers) with more sophisticated scams: IMF_–_International_Monetary_Fund_SCAM
My email automatically responds to the scammer to call about 50 different (phony) phone numbers in the US to reach me so I can wire funds to help them.
Note: Charlie Munger once said that no one ever got rich being an asset allocator.
Updated: Aug. 13, 2012: from www.economicpolicyjournal.com
The economist and financial author Harry Browne once designed what he
called a “Permanent Portfolio”. The idea behind PP was to create a
portfolio in away that investments were made so that the portfolio
would maintain its value and grow conservatively over time, with
certain parts of the portfolio outperforming other parts of the
portfolio at different times, depending upon the economic
environment—without having to time the economy.
Browne’s idea was to equally divide up a certain amount of money
between various sectors. Because he felt the economy was cyclical, he
felt that when a sector was cheap (and might be poised for a climb)
you would end up buying more unit wise in that sector, if you
allocated your money equally among the sectors, and less, unit wise,
when prices were higher, BUT that this still resulted in your
participating in all sectors, without having to attempt to time the
exact ups and downs of the business cycle.
There’s a lot to be said for Browne’s PP.
His four sectors were:
The US stock market via warrants
The 30-year T-bond.
Gold coins.
Cash, i.e.,Treasury bills
This is a good base to work with. However, given that the yield on the
30-year Treasury bonds is so low (2.65%), in my view it makes no sense
to put money in them. Thus, I would put money into only three sectors:
gold coins, Treasury bills and the US stock market.
As far as gold coins are concerned, I would divide up purchases
between both gold coins and silver coins. And also, if your back is
strong enough, nickels.
Put 33% in nickels of your “gold sector” purchases. They can be
acquired at any bank. Put 33% in gold coins and 33% in silver coins.
Buy only what is known as “junk silver” (These silver coins come in
bags of $1,000 face value). as for gold buy only “bullion coins” such
as the American Eagle and Canadian Mapleleaf.
If you do not live near a major gold coin dear that has been in
business for at least a decade, consider buying from Kitco.I have
successfully purchased coins via mail with Kitco for many years. If
you chose to use a different dealer, you can use the Kitco prices
online as a guide. One note when buying online, split up your order,
so you don’t risk having an order lost. It’s very unlikely an order
will get lost but take the precaution and split you order up.,Kitco
sends by registered mail and they video tape every step of your coin
order as it is put in a box.
As for Treasury bills, depending upon the size of your purchase, you
can buy them directly from the Fed or through a bank or broker.When
possible, I recommend dealing directly with the Fed.
For those dealing in smaller numbers, I recommend simply using a bank
account at a “Too Big To Fail” bank.
Browne recommended using warrants for the stock market portion of the
portfolio, there is nothing wrong with this. However, carefully chosen
stocks picks will provide just as much upside potential as warrants,
with less of the downside risk.
Thus to re-cap:
A PP, under current market conditions should look like this:
33% in Treasury bills (or funds at a Too Big To Fail bank)
33% In gold coins (actually split up between 1/3 gold coins, 1/3,
silver coins and 1/3 nickels)
33% in the stock market (with stocks that will benefit from inflation
and also from individual growth trends)
How much should be put into your PP?
It depends upon your age and your wealth. The older you are and the
more wealth you have, the more that should be put into PP. perhaps
100%.
If you are very young and are willing to take on more risk, then
perhaps only 50% of your funds should be in a PP. The rest can be for
more aggressive trading.
The EPJ Daily Alert is about identifying opportunities for the stock
part of the PP and also identifying opportunities for more aggressive
traders.
Below are stocks and other investments that I have previously
identified in the EPJ Daily Alert and are still “active’ investments.
They are designated as PP (permanent portfolio) or AP (aggressive
portfolio) investments.
First, here is my view on nickels a gold coin sector PP investment:
NICKELS
At some point,nickles, which are mostly made of copper, will start to
disappear from
circulation, as the copper price climbs
There is right now approximately 5.0 cents worth of metal in a nickel.
It was much higher before the financial crisis: Close to 7 cents worth
of metal. When I run into someone that does not have a strong
background in investing, I now tell them to buy nickels. You need storage space and a strong back to move them around, but a $100 box of nickels (roughly the size of a very large brick) can be lifted without problem. You can stack
plenty of “bricks” on a hand truck.
What’s great about this investment is that there is no downside. In
the unlikely event that there is no inflation, you can just spend your
nickles. But you will have to “order” your nickles from your bank. I
tend to try and keep any one order (per bank) to around $2,000 for
both handling (lifting) purposes and so that Ben Bernanke doesn’t
personally visit to see what is going on.
You can also buy brand shiny new nickels from numismatic dealers for a
small charge, and obviously they don’t ask any questions. But, again, nickels are a great conservative investment [If you have the space and the back] with zero downside.
One hedge fund manager has reportedly ordered from his bank a million
dollars worth of nickels. I fully expect the coins will eventually
climb in value to at least double their 5 cent face value price. The
government has made it illegal to melt them down, but you will never have to do anything close to that. When you need to liquidate, just sell them to a
numismatic dealer. Via the magic of black markets, the value (with a
good spread) will track the metal value. You can monitor the value of
the metal in the nickels at the website Coinflation.com.
As part of the PP stock portfolio, I include:
COMMERICA WARRANTS
Comerica (CMA-WT) warrants have much less exposure to foreclosuregate
than other major banks (They are heavy into commercial loans which
will benefit from Fed printing, and the warrants offer an opportunity
to play CMA on a leveraged basis, while limiting risk. These warrants
were issued by Comerica to the Treasury as part of the TARP program.
Warrants give you great upside leverage with limited downside risk. A
hedge fund manager I know, who has studied these warrants, tells me
they are mis-priced. He tells me traders use the Black_Scholes option
model to determine value of the warrants, but the manger argues, the
option model undervalues warrants.
For example Comerica warrants expire in late 2018 and the change in
intrinsic value of the warrants will depend on the value of Comerica
in 2017. Which means long-term trends are much more important in these
warrants, and this is not properly taken into consideration in the
short-term thinking of the Black-Scholes model.
Or in the case of 13-year old entrepreneur Nathan Duszynski in Holland, Michigan, who tried to start a business, and somebody else (government bureaucrats) made that not happen. Here’s what happened, or more accurately, what didn’t happen, according to the Holland Sentinel:
“Nathan Duszynski (pictured above), 13, decided he wanted a hotdog cart, so he could earn some money. But as he was setting up shop Tuesday in the parking lot of Reliable Sports at River Avenue and 11th Street — across the street from Holland City Hall — a city of Holland zoning official shut him down. Now, after spending more than $2,500 to start-up his business, Duszynski is throwing in the towel, his mom said.”
Think of All the Businesses That Did NOT Happen, Thanks to Government Bureaucrats and Regulations
“There are a lot of wealthy, successful Americans who agree with me — because they want to give something back. They know they didn’t — look, if you’ve been successful, you didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something — there are a whole bunch of hardworking people out there. (Applause.)
If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen.”
After decades of rising prices, hostile foreign suppliers and warnings that Americans will have to bicycle to work, the world faces the possibility of vast amounts of cheap, plentiful fuel. And the source for much of this new supply? The U.S.
“If this is true, this could be another dominant American century,” said Brian Wesbury, chief economist at First Trust Advisors, money managers in Wheaton, Ill.
U.S. natural-gas production is growing 4% to 5% a year, driven by sharply higher shale gas output. Shale gas production is forecast at 7.609 trillion cubic feet this year, up 11.6% from 2011 and 12 times the 2004 level.
