Monday, December 28, 2020

Roaring 20s

 Roaring 20s

With free money and pent-up demand ready for release, the economy is poised to repeat the Roaring 20s all over again...this time with booze legal!

We are on the cusp of a Gatsbyesque epoch. The Fed has already declared they will not raise rates until 2023 at the minimum. Three (or is it four now?) major pharmaceutical companies have their Covid vaccines approved. There is an excess of over $2T sitting in savings accounts in the United States alone. The world is awash with capital...and all if it is looking for a home. Cue the big band music.

Traditional outlets of excess liquidity have been fulfillment of hedonistic impulses. The 2020s look like they will be no different as pent-up demand for physical relationships will undoubtedly result in a Baby Boom on par with the end of WWII. Plus, there are significantly reduced societal norms defining what a relationship should be...many couples live together for years, purchase homes/condos together, and begin their families without a thought of marriage. 

Loose money and loosened moral norms will accelerate natural trends to their apogee. It took approximately a decade for the "Lost Generation" to finally party themselves out of energy. The fireworks most likely will start in the United States. From there, it will spread in lockstep with vaccine rollout, monoclonal antibody therapies, and ICU/treatment capability.

What's going to be catalyst that pushes the country into the Roaring 20s again? Already signs of it are becoming apparent. High end liquor sales are creeping up. Second homes in vacation areas are becoming primary homes. Household wealth is up considerably. Real estate prices are soaring. Stocks are soaring. But the great litmus test is going to be an increase in the birth rate. That will be the lagging indicator that the Roaring 20s are upon us again and the good times are already rolling. Hopefully this time, however, a modicum of prudence learned from the Great Recession will let some air out of the balloon before it pops. But of course, nobody ever says "Enough!" So be sure to take some off the table on the way up.

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Saturday, December 26, 2020

Animal Spirits

 Animal Spirits

John Maynard Keynes coined the term "animal spirts" to describe the financial decision making process during times of turmoil. Their release is an apt catalyst in our current situation.

The original passage by Keynes reads: "Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over may days to come, can only be taken as the result of animal spirits--a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitive probabilities."

The pandemic has unleashed the animal spirits, with the strongest of all, survival, being most relevant in the time of chaos. It has accelerated the adoption of multiple technology platforms (internet retail sales, logistics, working from home, education from home, and telemedicine to name a few.) And oddly enough, the virus that has killed millions may have inadvertently increased productivity.

What does this all mean? I believe we are on the cusp of 2 major trends: 1) The Roaring 20s are about to occur all over again, or put better by one of my favorite philosophers Yogi Berra, "It's like deja vu all over again." Ditto for the second trend: 2) A Baby Boom of epic proportions is on the horizon as pent-up emotions are released across the world. An "end of WWII" scenario isn't out of the question.

Investors with ready capital can take advantage of these 2 major trends by identifying companies (or better yet, starting companies) that have the potential to unleash animal spirits. This is a key litmus test I use when looking to buy assets. Does the target company unleash animal spirits? Has this product or service created a paradigm shift in consumption, utility, economy, trust, etc.? Buying the future today has often proven to be extremely lucrative tomorrow.

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Monday, December 14, 2020

Asset Inflation

 Asset Inflation

Headlines abound with terms like "mania" and "exuberance" in regards to recent stock market IPOs, journalists should rather focus on the collapse of the dollar.

With Fed Funds rate at essentially 0% consumers aren't stupid. Money is flowing like lava from a Hawaiian volcano into real estate and stocks (especially platforms.) Why? Well the chart above helps to illustrate approximately 100 years of the dollar's decline. Granted, a lot of things have become cheaper, or weren't even available to purchase a century ago (iPhone anyone?), but some things never change: the flight of dollars into real estate, gold, and businesses has been real.

What does this mean for the average investor? Well the average investor, one who typically does not receive pre-IPO shares or hold significant private equity wealth, is troubling. Given the market's recent spike to all-time highs it can be argued that stocks are frothy. Same thing with real estate. Gold may still offers value, in my opinion, to say Bitcoin.

Bitcoin has eaten up the traditional safe-haven status of gold. Bitcoin is an asset that is easily traceable, easily seizable, extremely tax-inefficient, hard to do business with, and limited in supply to 21 million units. Obviously ILAF isn't a fan.

What is a prudent investor to do? Where else can money be allocated? It is hard to believe bonds or CDs offer anything greater than an arena of cash storage with most likely a real yield that is negative...that's right, you are paying a bank to hold your money. They in return offer you protection on the amount (not the value) of the declining asset. Your opportunity cost is the true victim.

A good farmer, and investor coincidently enough, weighs the opportunity cost in making a decision. The future is nebulous, but the past often provides a looking glass into what has worked in prior situations. Most notably, I would turn your attention to the 1918-1920 time period in global history. The Spanish Flu most coincides with our current predicament.

With 50 million dead in the span of several years, which also coincided with World War I, Spanish Flu could arguably be categorized as humanity's singular worse disaster. Technology has offered some relief today. The world is also significantly more unified in a response (Operation Warp Speed should clearly be the Nobel Peace Prize Winner.) So politically, medically, and financially the "world" has acted considerably more in concert than 100 years ago. If the current scenario plays out similarly to the 1920s (which I think it will) prepare yourself for even more asset price gains...think Roaring 20s all over again, and a baby boom to rival the end of WWII.

Bottom line? After covering your monthly nut for housing, medical, education, etc. turn those remaining dollars into ownership in something more sustainable than cash...real estate, gold, business ownership, etc. Oh yeah, and don't forget to save something for the Big Guy! Trump Tax Cuts are 1st on the chopping block under the new Joe Biden regime.

Wednesday, December 9, 2020

Bob Dylan, Capitalist?

 Bob Dylan, Capitalist?

As reported in the Wall Street Journal yesterday, Bob Dylan sold his entire music catalog to Universal Music Publishing Group. This comes on the heels of Stevie Nicks selling her publishing catalog last month for $100 million. Mr. Dylan's deal is likely closer to a billion dollars based on higher-end royalty metrics, historical significance, and artist premium.

While the actual deal value has not been revealed, the timing is impeccable. With the Biden administration poised to sack the Trump Tax Cuts on day one, there has been a flurry of deals and IPOs (428 to date, not including the largest of them all, the upcoming Airbnb offering expected to hit the tape tomorrow.) It's no coincidence Mr. Dylan pulled the trigger when he did.

The savings of monetizing in 2020 are vast. Consider in Mr. Dylan's case, he'll likely pay ~24% in a one-time capital gains tax for his catalog (plus state taxes) versus the recurring ~37% (plus state taxes) on the annual income his music catalog generates. It is a savvy move, especially since a decent portion of his music right are *probably* slipping through his fingers via social media apps using his music without paying the vig (TikTok, anyone?)

Universal brings corporate muscle to the catalog, and the ability to further monetize new technology as well as expanding the innate Americana Dylan brings to the table with perhaps more mainstream television adverting in big market events (think Super Bowl.) Mr. Dylan's iconic status and vast potential of licensing deals arguably justifies whatever premium Universal paid to acquire the entire music catalog that spans decades.

All of this talk about monetization, however, leaves many music aficionados wondering if they have been left blowin' in the wind. It smells like capitalism, something Mr. Dylan has railed against his entire career. It begs the question, can a champion of progressive liberalism morally be...gasp...a fiscal conservative with this own money?
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Tuesday, December 8, 2020



Wright Thompson's "Pappyland" is a swishing, swirling epic of family, fine bourbon, and the things that last. It is also my 2020 Top Pick holiday book recommendation. Thompson details the commitment it takes to become a master of a craft. Family legacy, horse-racing, and of course bourbon all play a central role in this tale. Branding and marketing is done over decades via the creation and sustainment of a family's legacy. One part Horatio Alger, one part Southern hospitality, but 100% Americana. Complex, nuanced, and long on the finish. A delightful tumbler. You sip these words and you want more of them.


Friday, December 4, 2020

Double Dip Anyone?

 Double Dip Anyone?

Double-dipping is a really bad idea in the time of Covid and equally painful in economic terms as well. In the culturally-definitive series Seinfeld, George is caught at a funeral double-dipping (dipping a chip that has already been dipped and eaten) in the sour cream. My elite friends at Harvard have taken the trouble of analyzing the danger of this possibility in detail. You can read their analysis here: "Double Dipping" Dangerous or just...icky?

Although a fervent Seinfeld fan, my interest is more along the economic terms. In particular, I'm wondering if we're setting up for a double-dip recession that will put a nail in the coffin of American small business owners (and the middle class.) Historically, a double-dipper has been defined as a recession that begins prior to the previous one ending. If we were to see a fall in GDP over two consecutive quarters that would qualify as the first (check that box), but it seems like GDP is recovering, right? Well...if you believe the "science" (and shut-up if you don't, a la Andrew Ross Sorken debating Rick Santelli) the 3Q GDP accelerated and we're out of the woods.

But look around the woods. Do you see a lot of small businesses open? Or people starting up new businesses? Any new coffee shops open up in your neighborhood? Or just the long, long lines at the Starbucks drive-thru? Is your local handyman killing it or is he hanging out at the full Home Depot parking lot? How about those local mom-and-pop retail stores? You remember them, right? If you can get past the traffic jam of UPS, FedEx, and Amazon delivery vehicles their shops are all boarded up on Main Street. 

We're in the midst of a Dickensian recovery; in particular a Tale of Two economy is bust. They were previously small business owners who owned restaurants and hardware stores and retail shops in your town's shopping areas. They've either been Covid-slammed or looted or both. The other economy, however, is a booming. Large capitalization companies are killing it; their infrastructure, logistics, capital, and political contacts have not only allowed them to survive, it has almost single-handedly allowed them to thrive. 

So when we talk about a double-dip recession, it is important to realize that there are two distinct economies at work right now; the small-business, family-owned company that has suffered greatly during Covid and the recent political chaos, the other is the monopolistic business with strong balance sheets that has cannibalized the consumer's buying power.

So in answer to the original question of whether we will experience a double-dip recession, my answer is that it is almost impossible that we don't; the dry powder typically used to bail out the middle class has largely been spent, ie the Fed Funds rate is already at 0%. The only thing keeping the economy afloat right now are sky-high real estate prices and a stock market at all-time highs. But these factors bedevil the fact that the U.S. Dollar has pretty much collapsed in terms of buying power. Anything of value, whether it be education, health care, or housing are at highs. Money is flowing into physical goods.

I suspect the end-game will be further erosion of the middle class and more dependance on government programs. The billionaire class will be the net winners. Raising taxes, punishing work, and increasing bureaucracy is not going to be helpful, unless the goal in an anemic recovery similar to 2009-2016 numbers. But that's what I think will be served for dinner; cold burgers and flat soda with a paper straw. The appetizer bowl of salsa with a bunch of chips floating on the surface will be the least of our problems.

Monday, November 30, 2020

The Legend of Poopy Britches

The Legend of Poopy Britches

Occasionally a story is so bizarre, so outrageous, so unreal that it obviously MUST be true...hence is the case with Poopy Britches. Dubbed "the most significant fraud on taxpayer funds in California history," (which is actually really, really saying something), California has paid in excess of $1,000,000,000 in fraudulent unemployment claims to prison and jail inmates.

For some unknown reason, there doesn't exist a system to cross-check whether a citizen is in jail prior to paying out unemployment benefits. There are cameras at every street corner in LA to fine motorists. There are elaborate sting operations to catch people with more than 3 households for Thanksgiving. A surfer was arrested for...surfing. But things are so bad at the EDD (Employment Development Department) that not only are funds being dispersed to criminals currently in jail, but debit cards were issued to such outrageous names as Poopy Britches without any sanity checks.

Politicians are poor stewards of taxpayer funds because there is no incentive for them to be good stewards. Has there been any bigger victim to the largesse of government than the taxpayer? If ever there was a concrete reason to dismantle a complicated taxation system, this is it. Any time money is laundered through the government for benefit programs, inevitably there is "leakage." Why not change the policy to reward work? Eliminating the payroll tax benefits everyone, yet billions in PPP loans were issued with massive amounts of fraud, waste, and abuse.

Poppy Britches should teach us all that rather than launching payment programs funded by taxpayer funds, we should rather eliminate or reduce existing taxes and laws. Streamlining efficiency should be the goal, work should be rewarded, and ultimately bureaucracy that is not a good steward of taxpayer funds needs to be eliminated tout de suite.


Saturday, November 21, 2020

House of Cards

 House of Cards

As Covid rages across the world, a house of cards has been revealed; commercial office space concentrated in costly urban areas. Changes in behaviors have resulted in massive shifts in commercial office space. Literally hundreds of billions of dollars in "value" in this sector has been destroyed. Commercial office space has experienced its own Chicxulub Impact Event.

It has taken a global pandemic of epic proportions to reveal something many office workers (especially the younger generations) have know for years; save for some special situations, workers can achieve more productivity and teamwork outside the office than in it. The office has almost always been a "round-up" corral for mid-level management to practice management techniques on their employees or bring in management consultants to do the same. Work in many office environments was a kabuki dance of office politics and fleeting attempts of productivity in-between endless meetings, training, and continuing education. But alas, Covid has demonstrated that productivity does not collapse and the right hires who have had the opportunity to embrace the corporate ethos do just fine.

What next? Changes in work behavior has significant secondary and tertiary effects. From an urban perspective, many people living in a city also work in that city. There has been a significant urban exodus into the suburbs and interestingly the exurbs. People with traditional office jobs are fleeing (or have fled) and many aren't coming back; if they can execute their job functions or run their small businesses remotely they will.

The impact of an urban exodus to local restaurants, that were already teetering on the edge, will be fatal. Same for entertainment venues. Retail shopping. The list is long. Malls in urban areas might survive, but it's hard to see how (or why.) The one lynchpin keeping the urban communities together for the most part was education, either in public or private schools. As that has become severely disrupted and other avenues of learning emerged, that may have been the last straw for many families who have the ability to leave cities and put their roots down in communities with lower student to teacher ratios, quality clinics rather than emergency rooms and leverage the ability to perform job functions via technology.

Technology has helped the United States and many developed counties weather the Covid storm; by one measure, between February and October this year savings account balances have increased by $2 trillion. So toilet paper isn't the only paper we're hoarding. There are literally tons of cash sitting on the sidelines! Yes our Federal deficit has soared by tens of trillions of dollars, but there is no doubt that as a country we have significant dry powder right now.

If the stay-at-home economy is here to stay then as a society we should embrace a strong hub-and-spoke philosophy in terms, education, medicine, farming, manufacturing, all of it. Think Amazon, but in terms of society and that's where I think we're going. The emphasis going forward should be on strengthening the spokes, while ensuring the hubs survive. We have too much office space, but not enough residential space. That solution seems pretty obvious. The answer to the excess in high-rent urban office space is pretty simple: convert stunning corporate offices in the heart of major urban areas into housing. What to do with all these mid-level managers and consultants? Hub-and-spoke farms seem like a great solution. Farming is an honorable profession and keeps this country alive. Viva the farm!

Wednesday, November 18, 2020

Buy Then Build

 Buy Then Build

Occasionally a book is so profoundly simple in its premise a reader is taken aback as to why he hasn't thought of this idea before; such is the case with Walker Deibel's "Buy Then Build"

Many of my friends and clients are always on the prowl for a side hustle or a retirement job and usually the path has been the well-trodden and well-marketed push toward converting either a hobby into a business or...gulp...starting a business from scratch. Theoretically either of this two methods can and do work, but for every Uber, Airbnb, or Slack there are literally tens of thousands of expensive failures. Put another way, there is only one Ferrari in California with the license plate "EPICWIN" 

Not to beleaguer the point, but for those readers who haven't had the pleasure of a very public start-up failure, it is unpleasant from many aspects; typically you lose (lots of) money, (lots of) time, and even friends or colleagues. So with that in mind, Walker Deibel's approach makes perfect sense.

They say a picture is worth a thousand words, and the major takeaway is clear as day on page 32:

Feel free to zoom in on that image. Deibel illustrates the "Odds of Success" comparing a startup, VC-backed startup, and the acquisition of a going concern. This is the proverbial money shot of why those interested in either starting a new career or adding a business to their existing schedule should strongly consider buying an existing business and building on it from there. Your odds of success increase exponentially when you buy an existing business and build it out.

Using Buy Then Build as a roadmap and having a handle on your time commitments as well as a potential budget, two resources I have found to be extremely helpful include: BizBuySell and Flippa. Perusing all the listings on both sites is really intriguing as to what is out there and also the different methods and techniques business owners have built their companies over the years. 

Hopefully this post acts as an entrepreneurial lightning rod and helps those readers interested in running a business or side hustle or both the value of approaching the startup cycle from the position of an acquisition then building on the existing customer base, infrastructure, and cash flow. 

Saturday, October 24, 2020

Opportunity Magnets

 Opportunity Magnets

     Why do people move? Generally people move for one of two reasons; they are either fleeing from something or moving toward something better. But what this really means is that people ultimately move because of an opportunity...the opportunity may simply be safety/security in its base form of Maslow's Hierarchy of Needs or it may be an innate matrix including safety/security, economic options, religious freedom, constitutional rights and natural beauty, to name a few.

     The United States is unique in the disparity of rights, freedoms, and economic opportunity amongst its various states. The sociopolitical factors and demographics of each state are vastly different; consider only 5 states have direct access to the Pacific Ocean, 18 states have direct access to either the Atlantic Ocean or Gulf of Mexico, which means the majority states are landlocked. A handful of states produce the vast majority of grains, fruit, and nuts. Minerals abundant in some states are virtually absent from others. 

     In addition to their vast physical differences, states are increasingly different in the opportunities they offer their respective citizens. Some states have become proverbial magnets for new citizens. Others are losing citizens in droves. Why? It boils down to opportunity. People generally act in their own best self-interest, which isn't to say they act against someone else, but rather voting with their feet means they are pursuing what they think is the best opportunity for them and their family.

     I recently started an amazing book called Nomad Capitalist by Andrew Henderson. It has a simple premise: Go where you're treated best. As humans, we're wired from birth in a Darwinian way for fight or flight in the face of danger in our environment. Henderson argues that rather than trying to influence politicians or "make change" people are far better off moving, either physically or their assets, to where they are treated best. So whether it is better housing, safety for your family, better economic opportunities, asset protection, or a combination of these factors Henderson makes an excellent point about voting with your feet.

     The problem arises when citizens settle into a new area, or maintain their existing homestead, in their chosen state and that state experiences drastic political changes. Voting with your feet can be expensive in terms of moving cost, professional relationships, and access to medical, education, and housing for example. Usually these political changes do not happen overnight, but rather are a process of political creep.

     Ultimately over time many citizens who loved where they lived become political hostages to a state government they do not support, and more importantly, does not represent them; rather their tax dollars are funding projects, services, and politicians that do not represent their values or interests. But pay they must. True danger is when a supermajority is reached, in terms of total single-party control, and at that point citizens contribute to a state that operates for its own self-interest. In America today, we are already there in many states. The question arises, will citizens move to where they're treated best?

Tuesday, September 29, 2020

Betting on Human Behavior

 Betting on Human Behavior

My ears perk up whenever I see or hear about changes in human behavior because experience has taught me whenever human behavior changes, and that change is sustained, a lot of dollars are behind it. There are many ways to make money in this world, and one of my favorites is to bet on human behavior.

Almost always, changes in human behavior are subtle at first, then big and obvious. The German philosopher Arthur Schopenhauer described truth, an accurate corollary to human behavior, as passing through three stages: "All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident. To that end, I want to spot behavioral change early and act on it.

Big tech likes to capture large data across multiple clouds to run predictive analytics. Visualizing data in this context is important because it allows companies to find sustaining trends. Although their resources are virtually limitless, big tech still depends upon someone, doing something, to change some human behavior. It may be just a nudge to an existing behavior, or it could be something truly disruptive, but the litmus test is spotting a trend based on evidence of human behavior change.

Trendspotting changes in human behavior early is valuable because changing human behavior at scale is capital intensive. People don't just line up to pay $5 for a cup of coffee; that behavior was nudged to where it is today. A lot of marketing, brand creation, construction, and products coupled with decades of advertising needed to occur to make that human behavior change happen. Many attempts at behavior modification fail. Hence, usually by the time a change in human behavior is noticeable, the seed has taken root and is growing. These are the seeds big tech is looking for and the ones investors should be cognizant of as well. Lao Tzu said it well, "To see things in the seed, that is genius."

Human behavior is often a leading indicator of where the profits will flow, especially if a company succeeds in turning a commodity into a brand. What do consumers ask for? Carmel-colored cola? Athletic sports shoes? Electric-powered cars? A video conference call? No. Consumers ask for the brands. Branding typically results from repeated nudges from marketing or praise from fellow consumers who have tried the brand. From there, if successful, human behavior grows tap roots and the brand becomes sustainable. Investors can reap significant gains in owning companies with high margin/high volume products and services typified by strong brands. There is, however, a sly danger to this success.

Danger arises when the human behavior changed becomes so successful that the brand reverts back to a commodity. Success breeds copycats. A niche without moats, such as superior technology or intense consumer loyalty, is usually exploited by competitors. Rarely have I seen a consumer ask for a branded gasoline or a branded wireless carrier for example, at some point a highly successful product or service reverts back to commodity status unless it innovates by changing human behavior and renewing the innovation cycle.

We're at that very crossroads today. With multiple crises engulfing our society, a whole new wave of companies are being formed as you read this blog and many will be coming to the market soon, if not hitting the tape already. Human ingenuity is a powerful force, the desire to survive is strong, and unleashing animal spirits creates opportunity. One change in human behavior that has caught my attention is in sports.

The reopening of sports leagues across the country has temporarily satiated the hunger for the proverbial "Bread & Circus" that runs deep in our collective psyche. Competitive physical human sports have been with us from the dawn of time. But along with the reopening of sports something else has occurred, or I should say reemerged, and it is a powerful, instinctive, human behavior.

The way many viewers increasingly enjoy sporting events now is directly tied to wagering on them, legally. Sports betting now has the umbrella support of the 2018 PASPA ruling, which changed everything. PASPA legalized sports betting at the federal level, and states like New Jersey jumped on the bandwagon early. Residents in these early-adopter states didn't waste time either; they've unleashed a proverbial tsunami of bets.

Sports betting has arisen as probably one of the most exciting new economic sectors in recent memory. The initial revenue numbers are staggering. Hungry for tax revenue, states are trying to pass legislation as fast as the quill can write. Twenty-two states and the District of Columbia have legalized sports wagering since the 2018 ruling.

As expected with a behavioral change at scale, there are all types of derivative jobs arising from this new (legal) sector. From payment processors to software developers to accountants, the potential spectrum of new jobs created is vast. New sectors typically have long runways and spawn secondary and often tertiary industries. All of this is a result of human behavior change. 

Prior to the PASPA ruling, sports betting was obviously still happening. But legal sports betting was primarily restricted to Nevada, and wagers had to be placed in person at a casino's respective sportsbook. Bettor's were issued a physical ticket. A confluence of events coupled with technology has radically changed the dynamics of betting in the pandemic stricken post-PASPA world; now every living room is a potential sportsbook. 

Sunday, April 12, 2020

How to Invest

How to Invest

It is important to understand the fundamentals of investing if one is going to commit hard-earned money to the investment process. Like any worthwhile endeavor, it is helpful to first ask questions. One of the most important questions to ask is "Why?" Why are you investing? What are your goals? Are you willing to learn the investment process?

Before reading any further, get out a piece of paper and write down answers to these questions. Consider this a contract with yourself listing your reasons for investing, your goals, and your commitment to the investment process. This "Investment Contract" is a living, breathing document that can be amended and improved over time. Carry it with you in your wallet or purse. With your Investment Contract in hand, let's begin.

Typically an investor buys something (real estate, stocks, gold) with the anticipation of it going up in value over time. Some of the most successful investors in the world, however, consider investments in terms of cash flow. This means they classify investments as assets; an asset being in the strictest definition of the word something that pays YOU to own IT. I will focus this post on the asset class of stocks because they are my speciality. Although there are multiple other asset classes in this world, stocks are what I live and breath, so I feel comfortable discussing them in depth and at length as an asset class.

What is a stock? I consider a stock to be a small, almost infinitesimal or atomic-level, ownership of a company. A stock is a piece of corporate DNA. What this means is that those shares you own represent not only fractional corporate cash flow, but also its management, brand, locations, industry, and employees. And they ALL matter.

As we're experiencing right now with the coronavirus pandemic, owning a single stock in a portfolio can be very dangerous (airlines, hotels, casinos, etc.) or lucrative (video conferencing, supply chain, logistics, etc.) Most investors, and mathematicians, support the belief that owning a basket of stocks helps to reduce the risk associated with owning a single stock. Traditionally this has been pitched as owning an index or mutual fund or fund of funds with hundreds, if not thousands, of positions. This approach championed by the index fund companies seeks to "own the haystack and you'll also own the needle." Basically, own everything and something will work.

Historically, passive investing has proven to work. Passive investing works primarily because over time the stock market has risen in lockstep with inflation. Also, if you buy everything something usually does work. That would qualify as the growth component of passive investing. Indexes drop the losers and keep the winners in a Darwinian rebalancing. It has several advantages: you can buy stocks in bulk and on the cheap. For many people this is an easy solution. For other people they prefer to actively choose what companies they own. I am of the latter persuasion.

Active management builds custom portfolios. I prefer this approach because I want to know the companies I own, I don't want to own the entire haystack. I prefer to concentrate my firepower (cash) into a handful of viable ideas. Building your own portfolio offers several advantages. Transparency: You know exactly what holdings are in your portfolio. Liquidity: You can typically sell without a minimum holding period. Cost: Most firms have eliminated trading costs or they're negligible. With that said, what do I look for when building a portfolio?

My investment philosophy is biased towards profitable companies, ie I typically only buy companies (stock) that are profitable. It is difficult for a company to pay a dividend or buy back their own stock if they aren't profitable; both of those factors are key tenants for me. There are very few exceptions to this rule. In the quest to find explosive growth, however, this rule is often violated.

A key question investors should ask themselves is: "Am I buying an asset (cash flow positive) or am I paying to help raise money?" Many IPOs fall into the second category. With few exceptions, a company without a plan to profitability doesn't survive. That's not to say founders or insiders in these companies can't become fabulously rich, they can. It's just that they sold their shares to the public to extract their wealth. Know what type of company you're buying.

There are five primary traits I look for when purchasing a company: Do I trust the brand? Does it pay a dividend? What type of sales profile does it have? What does the chart look like? Finally, what type of management is in place? In an ideal situation all five of these factors align; a well-trusted brand that pays a dividend with a high margin/high volume sales cycle having an increasingly higher left to right chart with strong management in place is a dream scenario. A successful combination of these variables lead to the formation of a shopping list. Although many companies may make the cut, the timing might not be right....and as they say, timing is everything. 

There are many adages as when to buy a stock. We're often told "it's a matter of time in the market, rather than timing the market," or "the stock market is perfectly efficient," or "long-term investors don't time the market." To some extent all of these sayings are true, but as an investor that has seen multiple Bull Markets and multiple Bear Markets, I can say with absolute certainty that long-term gains (ie time in the market) can be wiped out in weeks, if not days. The stock market is definitely not perfectly efficient; otherwise there would be no volatility, there would simply be a perfectly smooth line. And finally, anyone who has bought before a crash will tell you, holding through a Bear Market is psychologically almost impossible. Couple all these factors with the truth that as you live you will need money for cash flow, very few, if any, people can start investing in their teens and hold until their 60s or 70s. I say again, very few people can simply buy and hold indefinitely. The vast majority of investors, therefore, need some element of timing in their portfolios.

Realistically you have several decades to actively build a base of investments; once again the spectrum is wide in terms of choices. Real estate, stocks, commodities, etc. should ALL be part of your master portfolio. From the stock market perspective in which I operate, however, I can tell you that concentrated portfolios can be wiped out in weeks, sometimes days, and we encounter catastrophic events like these "one-in-a-million" scenarios every 8-12 years. This is why it is essential to build gradually, have multiple irons in the fire, and be prepared. One catastrophic loss should NOT derail your entire future. The Rothschild's proverb was "buy when there is blood in the streets." That is a good one to keep in mind. Warren Buffet famously remarked it is prudent to be fearful when others are greedy, and greedy when others are fearful. 

Buying at a dip's nadir is almost impossible because it is a finite moment in time, but buying in a lull is quite possible. I refer to these buyers as "mountain men." Mountain men come down from the mountains during times of crisis, pick up assets on the cheap, and then disappear for a decade until the next crisis. Cheap assets offer a buffer of safety, ie the premium has evaporated due to fear. Many businesses can be had for significant discounts at the right time, usually chaos. This happens often enough as to make the strategy viable. Historically the only assets worth having are gold and cash in the height of a correction. Everything else sells off hard. This is why having a "shopping list" on hand is always a good idea; know what you'd like to buy and at what price.

This leads to one of the more controversial theories I have regarding purchasing stocks; simply put, you shouldn't buy out of habit, but rather by feeling the price is right. Only you know what that is, but "correct" pricing is typically associated with a feeling, and that feeling is nausea/fear...if you feel nauseous buying because there is so much fear in the market most premiums have evaporated. If that isn't possible, consider the default approach of dollar cost averaging a basket of stocks. Although not ideal, it has worked over the long-term for many investors. The danger to long-term investors, however, is always the market cycle.

For those who haven't experienced a Bear Market, where every day is worse than the previous, the concept of a market cycle might be meaningless. Retiring into a Bear Market, however, is brutal. Forced selling into a Bear Market is brutal. Looking for work in a Bear Market is brutal. Bear Markets are good primarily for Mountain Men, for most other investors it is a horrible experience. Many sell and and never return...once mauled, twice shy. What is an investor to do? A lot depends on your risk tolerance, time horizon, and investment goals.

If you have a high risk tolerance, where suffering a loss to your net worth of 50%+ within a month doesn't faze you, I don't believe you. For most investors, the percentage loss to a portfolio to cause panic is actually relatively small; somewhere around 5-10% elicits immediate concern. For those who haven't experienced an economic collapse, a 20% loss seems apocalyptic. Keep in mind though, fewer than 50% of all small businesses survive 5 years. So from a stock market investor standpoint, a 5%, 10%, even 20% drop isn't irrecoverable. The problem with selling is that typically once sold, the cash flow ends.  This leads me to my final point. Time.

Time is the most valuable commodity. If something looks like a bear, walks like a bear, then it probably is a Bear Market. In answering the market cycle/timing postulation, an investor needs to be able to sleep at night. Being dead is bad for business. Time fixes most long-term problems in the stock market and your portfolio, but there are interludes, however, that are so volatile that many investors are shaken out permanently. Permanence is a long time. A way to avoid this is to buy a basket of quality, diverse, cash-flowing businesses over time. Have ample cash on hand (preferably with a healthy slug of gold too), and avoid leverage. These strategies can increase your resilience to selling, and increase your propensity to BUY in times of distress. When to sell? Holding periods should be thought of in decades, if not generations. Take a dynastic view of your gold dragon egg.

Friday, April 10, 2020

The Nation State of California

The Nation State of California

Governor Gavin Newsom accurately referred to California as a Nation State this week in a news conference. What is a Nation State? A bordered geography whose economic and political powers are so great as to make it equivalent to its own sovereign nation. Cue the statistics.

California is the most populous state with over 40,000,000 residents. It is vast; California's 160,000+ square miles make it the 3rd largest state. The California economy? Well with a Gross State Product of over $3 Trillion it is considered the largest NON-national economy in the world. To put that figure in perspective, The Nation State of California's economy is larger than the United Kingdom, France, or even India. But perhaps its greatest (or worst, depending on who you ask) asset is its culture.

That culture has spawned multiple, diverse industries concentrated in several major hubs, while also leveraging abundant natural resources. As a trendsetter, California amplifies both the best and worst extremes. What is rarely mentioned, however, in the formation of this Nation State utopia is the wealth and income inequality. 

How California got to be California is in large part due to the discovery of gold in 1849 which literally acted as a magnet drawing people from all over the world; in fact at the time it was easier to travel from China, Australia, or South America than it was from the then-distant East Coast. The hard scrabble life of a 49er helped create the first economic boom which resulted in California's statehood just a year later. It could be argued California never stopped drawing people from all over the world to throw their lot in and make a better life.

By definition a gamble is taking a chance, and with that very few will reach the higher echelons of wealth (power), while many will fail or succeed only enough to subsist. Over time, a generous social net has emerged as well as increasingly numerous regulations; the former provides a minimum level of survival, the later prevents small successes from becoming large successes as regulation is the friend of monopolies. How can a Nation State survive this dichotomy?

It has been said that all wealth derives from the land. Sometimes it is hard to see this when software companies make billions, while farmers are lucky to harvest peanuts. But the Nation State of California as well as the rest of the United States is built, both figuratively and literally, on the land.

A land of rights and opportunities should offer citizens equal access to the possibility of success without favoritism. It will be increasingly difficult to succeed in this Nation State for future generations when opportunity is locked up by either government via regulations or aristocratic wealth; the success of our Nation State depends on incentivizing small businesses, repatriating manufacturing, and investing heavily into intellectual capital. These investments will provide the infrastructure for future success. Invest like a farmer.

Monday, March 30, 2020

Where is Bill Gates?

Where is Bill Gates?

Although I enjoy a TED Talk just as much as the next guy, it really makes you wonder if it is the best use of your time if you're the head of a multi-billion dollar charitable health foundation in the midst of a global pandemic. Rather than fielding questions as to what you'd do if you were President of the United States, perhaps it would be better to go through an action plan of what the Gates Foundation is proactively doing to help fight the coronavirus. Where is Bill Gates?

As the beneficiary of hundreds of millions of dollars in both Federal and State tax exemptions, the Gates Foundation holds a special place in global philanthropy. For the liberal elite, it is an invitation-only pass into the highest echelons of philanthropy. But the hairs on the back of your neck should tingle when you hear the words "philanthropy," especially when it coincides with massive tax breaks that would otherwise be funneling much needed funds into a government that is actually fighting the coronavirus with surges in public/private manufacturing of N95 masks and ventilators, an unrelenting pursuit of vaccines amongst big pharma, and most importantly, the frontline heroes (nurses, caregivers, EMTs, firefighter, doctors, etc.) who are completely overwhelmed. Where is Bill Gates?

Philanthropy, and foundations in particular, are touchy subjects. At face value, they are supposed to be the engines of direct, unbureaucratic good. And many, many are just that...they have minuscule operating budgets, shoestring infrastructure, and provide a world of good for many. To those, God bless you! My concerns, however, arise when an institution by its very mandate, say helping to alleviate global pandemics, does nothing when its very reason for relevance appears on the global stage. Then it is only morally right to ask questions. Where is Bill Gates?

A higher power lens needs to focus on the billions of dollars pledged and committed to private foundations when operating expenses run into the hundreds of millions, corporate infrastructure is grandiose, and financial control of donated assets remains intact to the donor(s). As taxpayers on the hook for capital gains and income taxes, we all should wonder why the U.S. Treasury isn't the first choice for billionaire philanthropists...especially when foundation mandates are ignored in the face of calamity. Something is seriously wrong when citizens of this great country are deprived of the economic and social benefits of hundreds of billions in sheltered assets. Where is Bill Gates?

When the last vestiges of the coronavirus are ultimately mopped up throughout the world, including the inevitable secondary and tertiary waves, we're going to need a "Marshall Plan" of restoration. Similar to post-9/11, there will be societal changes. The economy itself will shift, and survive. A reckoning needs to occur right quick, however, answering the question of why those with so much did so little. COVID-19 is going to leave generational scars on this country, especially in terms of income and wealth inequality. The salve, echoed by Truman and Reagan alike, was the philosophy Gen George C. Marshall coined with the comment: "There is no limit to the good you can do when you don't care who gets the credit." It's time to strip mega foundations of their tax-exempt status and restore accountability to the taxpayer. Where is Bill Gates? Who cares.

Friday, March 27, 2020

Climbing a Wall of Worry

Climbing a Wall of Worry

It has often been said that stocks climb a wall of worry. Coronavirus is going to put this maxim to the ultimate test in the weeks, months, and years ahead as investors digest news cycles that seem to circulate in discrete 15-minute increments of despair, hope, jubilation, and despair again.

Coronavirus appears to be the most challenging wall of worry for bullish investors to climb in at least a generation. What to do? Like any good coach will tell you, having a playbook is essential. In terms of relevant coronavirus playbooks, I am a big fan of Laura Spinney's "Pale Rider" which describes the course of the Spanish Flu.

As previously mentioned on this very blog several weeks ago, COVID-19 closely resembles the spread of Spanish Flu from 100 years ago. Although not identical, both diseases share eerily similar traits. More importantly, in my humble opinion, is what we can glean from a societal impact and recovery timeline as useful takeaways.

Given the exponential growth rate of infections throughout the globe, and the denial still present in many countries (Mexico/Sweden) that the "Pale Rider" is coming, I think there is the distinct possibility it could be much worse. Ignorance may be bliss, but denial is not a good strategy. I also believe there are vast societal changes coming our way along the scale of 9/11. You know a crisis is real if it affects behavior. This one will.

Prior to 9/11 airport security was present, but for all intents it was simply a quick screening...i.e. gun/no gun. After the Twin Towers fell, the world as we knew it fundamentally changed in terms of security protocols. I suspect something similar will happen in regards to coronavirus. This brings us to the proverbial "wall of worry" that stocks need to climb in order to regain their highs. What will lead to an economic recovery?

I think a two-pronged solution is in order to beat the coronavirus. First, we need to flatten the curve nationwide immediately. Although roundly criticized, Bill Ackman's interview on CNBC last week (18 March 20) was spot on; much of what he said came to fruition rapidly, several of his ideas still need to be implemented. His thesis: The coronavirus cannot live (long) without a host. If you want to flatten the curve, shut down the USA for a month.

The second prong, which needs to be worked concurrently, is to laser-focus on restoring positive cash flow on a national level; from large companies to small business, cash flow is essential to survival. There are undoubtedly certain industries which are going to take longer than others to recover, especially customer-facing ones which have significant exposure to geographic movement and human sanitation. Via paradigm shifts in behavior and societal norms, however,  many industries can be up and running within weeks. Success in flattening the curve and an economic "jumpstart," however, both rely on a key factor: Trust.

One of the first questions many portfolio managers are asking is: "What will survive?" From there a lot of speculation ensues as to: "Who has the best balance sheet" or "Who stands to gain market share?" But ultimately all that matters is: "What brands do I trust?" That's the lynchpin to the entire economy. Trust. Trust is going to result in sales which will result in cash flow which underpins survival. Trust is essential.

The founder of Salesforce, Marc Benioff famously remarked last year that "trust" has become the coin of the realm, commenting that "Trust has to be the highest value in your company." I echo this philosophy, and also believe that is exactly what will help investors climb the wall of worry ahead. Logistics, supply chains, manufacturing, safety, sanitation, all of them and more, are completely dependent upon trust.

Saturday, March 21, 2020

Every Day Is Prime Day Now

Every Day Is Prime Day Now

As Coronavirus shuts down most of the United States, Amazon's vertical integration with retail sales, Whole Foods, streaming video, AWS, and logistics has effectively made EVERY day Prime Day now.

What was once a yearly event to find any, and all, the products that you needed at special prices with fast shipping and backed by a brand you can trust, has become the de facto method of survival for thousands of households in America. Every day is now Prime Day.

Jeff Bezos left the hedge fund D. E. Shaw & Co. in 1994 to start Amazon as an online bookstore, three years later it went public. Over the next 25 years Amazon aggressively moved into retail sales, grocery sales, streaming video, internet infrastructure, and logistics. These "five pillars" have now formed the backbone of one of the most valuable, and essential, companies in history.

The coronavirus spread has laid bare the value of vertical integration in terms of a stable supply chain that can be accessed at any time, anywhere. Through thousands of incremental improvements over the past 25 years Amazon has harnessed the "new" technology of the internet to leverage the customer experience. 

As its namesake implies, virtually anything can be purchased on Amazon now including vital food and beverage supplies online while Whole Foods adds a large physical footprint across the country. Not only can consumers purchase needed physical goods and supplies, Amazon also offers arguably the best video streaming platform. Prime Video allows viewers to select from thousands of educational to entertainment videos which are included in its membership, but also the ability to purchase or rent virtually any digital product ever produced. Finally, for those working from home AWS offers a compelling platform to build a business and work. Tying all of this together is one of the best logistics systems in the world. 

Amazon's laser focus on being customer-centric has allowed it to leapfrog the competition in multiple industries, grabbing market share from staid businesses and transforming the retail landscape. Along the way it has built tremendous trust with the consumer allowing it to dovetail into seemingly disparate business lines like streaming video, food, and logistics which in hindsight all helped to cement the consumer experience into one where every day is now Prime Day.

Friday, March 20, 2020



The Wuhan coronavirus (COVID-19) will go down as one of the most effective acts of bioterrorism in history. If you want to destroy global capitalism and democracy, viruses are the ultimate Trojan Horse. Viruses destroy the very fabric of an open society by concentrating power in the hands of a few to make vast economic, societal, and political decisions without a single vote. Basic freedoms, like movement, are restricted.

Viruses are especially dangerous in countries that value human life highly because those countries are willing devote almost limitless resources to testing, treating, and caring for all segments of their society, especially the most vulnerable. If you want to take down a democratic society, a viral pandemic is an extremely effective agent to accomplish that goal.

Whether accidental or strategic, the results of the WuFlu have been dramatic; from an economic and social impact its devastation is global in scale on par with a World War. The story of "the Wuhan," however, starts not in November or December of 2019, but rather several decades before, when the seeds of destruction were first sown with something so seemingly benign as counterfeit goods.

The New York Times has an excellent article entitled "The Chinese Roots of Italy's Far-Right Rage" that helps frame the current disaster in terms of product theft, industry destruction, and ultimately killing of the former residents. In summary, the article details the initial theft of hundreds of Italian textile brands (linen, shoes, clothing, etc.) by visiting "tourists" who took pictures of all the products and factories while in Milan, then subsequently began making identical copies in the 1980s. The result was a flooding in the market of counterfeit goods. These goods led to the destruction of the industry because the Italian factories had a higher cost of goods for raw materials and labor; the authentic Italian goods, however, couldn't survive against their inferior clones despite the value difference in quality. 

In the decades that followed, Italian factories were systematically purchased by Chinese Nationals who brought over their own family and friends thus displacing generations of Italian families. While the New York Times story was written specifically about the Italian fashion industry, it applies generally to nearly every industry in every country with particular emphasis on manufacturing and pharmaceuticals. If there was a branded successful product, the strategy over the past 40 years has been to clone it, sell it, and capture the industry. In recent years this has been prevalent noticeably in software platforms.

Over the past 40 years global manufacturing has largely moved offshore. Coronavirus is simply the icing on the cake; not only have the products, jobs, and industry been destroyed, but the very residents of those areas are now being killed. The coronavirus pandemic is the final indication of what has happened to democratic Western Society since globalism has pushed industry to embrace "free trade" agreements like goods and executive comp were the costs of losing a nation's self-reliance.

In times of crisis, allies evaporate, borders close, and citizens are left wondering why a country isn't self-sufficient. Fear, panic, and hate are not going to be the answers in the weeks and months ahead that will make this country stronger. Rather, it will be the collective awakening of our society, especially amongst GenX, of the need to seek greater political power and rapidly ween the United States off of dependence on foreign manufacturing; we have an abundance of God-given resources in this country capable of making the USA self-sustainable. A "New New Deal" should be a sustainability movement laser-focused on repatriation of industry. "Made in the USA" means a lot.

Saturday, March 14, 2020

Demand Shock

Demand Shock

The United States of America has entered a period of severe negative demand shock. Negative demand shock occurs when demand collapses across multiple economic sectors simultaneously. As the Wuhan coronavirus has spread in this country it has triggered a panic not seen in the stock market since 1987...and it presumably will last significantly longer. Much longer. Think 1929ish.

Entire industries have been laid low, namely: airlines, cruise lines, hotels, casinos, restaurants, sporting events, and education to name a few. There undoubtedly will be secondary and tertiary impacts such as the hundreds of thousands of small business that cater to these industries as well as the millions of employees whose livelihoods are intricately woven into supply/demand chain of our economy.

From an economic standpoint, Wuhan coronavirus has most likely triggered a recession. It is hard to conceive of our economy, which is 70% consumer-dependent, bouncing back from the Wuhan coronavirus quickly, especially since there will be many lingering concerns in regards to travel, safety, and trust.

The path forward is an arduous one. First, large segments of the American population will be exposed to the Wuhan coronavirus. Second, many Americans will undoubtedly be infected with this disease, with victims typically being the elderly and/or those with underlying medical conditions. Our most vulnerable. Third, it's not going away quickly.

Self-quarantine time alone is running at a minimum of 2 weeks, but there are staggered results popping up all over the country. What I mean by this is that another cluster might easily pop up in a month, or 2 months, or even next year. Wuhan coronavirus is the proverbial "whack-a-mole" scenario.

What does this all mean? Based on the existing infection rate it is probable that many millions of Americans will be infected with the Wuhan coronavirus and thousands will die. As America is a country that values life highly, this will have severe economic and social ripple effects; demand shock is the most obvious initial wave. Another rational wave is going to be societal push-back against viral originators responsible for deaths and economic destruction. Human nature is what it is. As previously stated, it is highly likely we entered a recession last week. We definitely entered a bear market. 

What's an investor to do? Price discovery has significantly altered the trading prices of many stocks, especially in the most affected sectors such as airlines, cruise lines, oil, etc. to name a few. Given that nobody really knows when the Wuhan coronavirus will be contained, it is important to focus on sustainability and that usually translates to quality of balance sheet and earnings.

There are many industries that do not seem sustainable if all of their demand collapses. I would avoid them. Survivors? There will be many survivors, namely in the food and beverage industries, many of which are actually experiencing tremendous demand. I like those sectors. Finally, there are some sectors (like tech) that have extremely large installed userbases which don't disappear overnight and given quarantine conditions might add to their installed userbases. I like those as well.

In times of uncertainty, having cash is a good thing; you might miss out on a quick turn of events and maybe not capture all of the upside, but when survival is on the line it is better to survive. Ultimately the Wuhan coronavirus will be contained at some level. The jury is still out on what level. Until that time it makes a lot of sense to focus on quality cash flow and survivability.

Tuesday, February 25, 2020



Global pandemics, real or perceived, have a nasty habit of rattling investors out of solid, long-term investment strategies; historically, however, within a six-month period, the stock market usually recovers ALL of its initial losses PLUS tacks on additional GAINS.

The trillion-dollar question though, is whether "this time" things will be different. Do we have the global health infrastructure and political will as well as decisiveness of fiscal leaders (I'm talking to you Federal Reserve) to mitigate the Coronavirus? I believe we do.

Although China has been criticized for acting too slowly, when they finally did act to contain the coronavirus, the Chinese didn't fool around; they went into full lockdown with a population zone size in the hundreds of millions. Of course several thousand or perhaps even hundreds of thousands of infected individuals had already left the country, which leads us to the current situation of initially small pockets of infection popping up all over the world. As we have become an increasingly interconnected world, literally within weeks travelers from almost anywhere in the world can go anywhere in the world. What used to take years now happens in weeks.

Now we're playing a global game of "whack-a-mole" while simultaneously trying to develop a vaccine. There are several advantages we currently enjoy over the virus, mainly due to panic and luck; reporting of new cases is broadcast over social media almost instantaneously, we "kinda" have a plan in place in nearly every pocket of the world to isolate and contain, and thankfully the fatality rate seems lower than comparable respiratory infections. That's the good news.

The bad news? The three weeks of lag time in shutting down the Chinese flight from Wuhan probably increased by one or perhaps even two orders of magnitude the GLOBAL impact of the spread. Also, keep in mind, China itself has largely slowed economically...many, many manufacturing operations have ceased. Consumption inside China, save for food, beverages, and the internet have largely collapsed. In terms of a baseball analogy, China is probably in the 5th or 6th inning in terms of containment/eradication while the rest of the world might be in the 3rd inning. A lot is going to depend on how many other clusters of coronavirus pop up, how those are contained, and also whether a vaccine can be developed in a safe and timely manner. A big wild card is whether the virus mutates.

For an interesting, and quite scary, historical perspective the Spanish Flu ranks probably second only to the Plague in terms of total human deaths. It ravished almost all of the known world over a period of several years (1918-1920). It literally went to almost every single patch of Earth where humans lived, particularly devastating remote island communities once it arrived there. It changed the fabric of human civilization in the 20th Century. Yet there were a handful of places it never arrived simply from the absolute remoteness of the places. Check out the hyperlink above to learn is a fascinating story of viral infection, spread, and ultimate containment.

What's the average investor to do? Don't get rattled out of your long-term plan. If history is any indicator, there might even be some excellent buying opportunities in the weeks ahead!

Monday, January 27, 2020

The United States of Taxation

The United States of Taxation

The United States of Taxation has become a reality. One of the last engines of growth that launched massive, nearly incomprehensible global trade prosperity and solidified America's internet commerce strength was struck down in South Dakota v. Wayfair, Inc. on 21 June 2018. It was a horrible decision from our U.S. Supreme Court that once again stole liberties from American Citizens. Its lasting effects and reverberations will be felt for decades if not generations to come. When we discuss "days of infamy" in history, 21 June 2018 is one of them.

Closing the last meaningful sales tax loophole cemented the United States into a solid slab of taxation, increasingly WITHOUT representation. President Reagan nailed it when he said "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!"

Taxation is the ultimate government program. President Trump has reset many of the corporate and personal income tax rates, but the future is clearly on the horizon of what political candidates WANT to impose. Take a look at the following chart of proposed rates. These rates would essentially cut the legs off of wage-earning Americans (basically 99% of the population.) The Top 1% can easily move assets around to draw income at will or delay income or take no income and instead borrow thereby writing off the cost of income itself.

Taxation is ultimately a filter which transfers income and wealth from hard work into Government coffers. From these overflowing coffers the Government then finds a way to spend the funds. Please notice that I wrote "finds a way to spend." Not NEEDS TO SPEND. Budgets increase like clockwork because Government agencies know that if they don't spend all the money they were allocated, nigh MORE than allocated, then their next fiscal budget will be less. It is a fundamental breakdown in integrity and the Republic when this happens. And it is happening 24/7/365.

What can you do as part of the R.I.S.E. Movement? As a USA Citizen? Well theoretically you can vote. That's the "long game" if you can build a consensus that is also fiscally responsible with taxpayers' money. About 50% of the population already doesn't agree with this approach. Even though almost 100% of people are fiscally responsible in terms of their own money. (There are hundreds of "Progressive" Liberal billionaires; Bezos, Gates, Buffett, Soros, etc.) With significant social and political ramifications playing the "long game" it is a tough, tough way to win in the short term. And sadly the short term ultimately becomes the "long game."

There are only a handful of pro-growth, libertarian-leaning, fiscally responsible States remaining. In fact, the country is becoming increasingly economically polarized as mass migration from some States to others is occurring. Many people CAN'T move from State to State for various reasons (they're anchored because of a job, family, health, etc.) Others simply WILL NEVER move because they too are anchored; the benefits are just too good...the American Dream is alive and well for many, many millions of people.

But for the "coalition of the willing," there are opportunities to be had in several remaining States. Below is a map of the various opportunities to be found in these remaining States, assuming a citizen has the means, ability, and desire to take advantage of "voting with your feet." It is a biter pill for many whose relatives or friends or business helped build one State to then move to another based solely on economic reasons...a lot of absolutely beautiful coastline has been locked up by political sabotage.

My final commentary is on regulation creep. This is the mortar that binds and seals the fate of many millions of Americans. Via no vote, or in many cases even zero feedback from voters, additional departments, regulations, codes, and enforcers are hired to build the hive of government. Be wary of this fellow citizens, these agencies come at the cost of YOUR freedom. Another famous Reagan euphemism comes to mind: The nine scariest words in the English language..."We're from the government and we're here to help."

Vote, hold your elected officials personally responsible, speak truth to power, champion liberty, and be willing to "vote with your feet" if necessary! America was built as government for the people, by the people. Not the other way around!