Monday, December 13, 2021
Wednesday, August 18, 2021
The Fall of Kabul
The Fall of Kabul is emblematic of twenty years of failed leadership from the military industrial complex, which has squandered trillions of dollars in U. S. taxpayer treasure and countless gallons of American blood in a wholly unsatisfying result; the complete capitulation of a democratically elected government to an angry horde of barbarians armed with American weapons, driving American vehicles, and cutting a direct path unopposed to the capital two weeks BEFORE America was projected to withdraw.
Who is culpable? The list is long, yet there is an eerie silence emanating from our most "distinguished" politicians and statesman/women...where is John Kerry? Hillary Clinton? Condoleezza Rice? Colin Powell? Do we even have a Secretary of State today? Four Presidents, including the sitting one, haven't released more than a Tweet. American Taxpayers, Veterans, and our Afghan allies deserve better than this...in the coming days, weeks, and months as heads literally roll in Kabul, we should take the opportunity to fathom the impact of this seminal event in our history.
Afghanistan demonstrates the near impossibility of establishing a democracy half way around the world where even waging war is a tenuous task at best. Standing up essentially a new country almost always fails if the wellspring of democracy doesn't flow from within and a coalition of the willing really isn't willing to stay for the long haul...and by the long haul I mean multi-generational transfer of power. It is completely implausible to believe a new democracy can be rooted in a couple decades when the ghosts of previous belligerents still walk the Earth. We still have bases in Germany, Italy, Korea 75+ years after WWII!
Some time in the last administration we decided the mission wasn't actually nation-building, and the goal then shifted to withdrawing. The chaos that ensued is Joe Biden's "Saigon moment," it will live in infamy, as pictures of Afghans clasping to departing aircraft linger in the mind like a helicopter on the U.S. embassy in Saigon. Joe Biden owns this disaster. The weakness and incompetence of this administration is simply staggering. It begs the question, "What else have they completely lost control over?" The border comes to mind.
Now we are left with Operation Afghan Clean-Up...is this administration up to the task? Probably not. Private billionaires, enriched mightily from the military industrial complex, need to act. Bill Gates needs to redirect "empowerment funding" to leasing a fleet of 747s. Jeff Bezos needs to provide logistics support and housing to all our inbound Afghan allies. George Soros and Warren Buffet need to provide incomes to all these brave allies who put everything on the line to help built the billionaire fortunes. The days of Ross Perot funding private operations to free hostages should not be simply a legend.
If Afghanistan has taught us anything, it is that leadership matters. In the face of calamity our leadership completely failed. They need to be held to account. Freedom truly is not free. It must be constantly maintained by vigilance and action by those who pay the salaries of these buffoons.
Tuesday, June 15, 2021
Increasing taxes and rising inflation are a deadly combination. "Taxflation" is what we find ourselves in now globally as freewheeling politicians ratchet up the pain and are beholden to nothing but their own egos. Be afraid on this solemn day dear readers of the unencumbered politicrat whose loyalty lies only with increasing power. Beware what constitutes your "fair share," as soon it will be your full share!
Every year Americans dutifully write out a myriad of checks to local, state, and federal governments to help fund our collective defense, social programs, and politicians' salaries under the banner of "civic duty" which is enforced by the threat of imprisonment. What other "civic duty" is compelled by the potential loss of liberty? What would be the collection rate if taxes were voluntary? Imagine if freewill dictated the scope of the government we received.
While the Biden Administration is planning to increase the budget of the IRS to something akin to a nation-state, increase tax rates, and (obviously) increase spending, the barn door is wide open out back. Billions in fraud, pork, and ill-executed government spending leaves the taxpayer without a doubt as the most maligned and least-loved animals in the barn. If America was "Animal Farm" the taxpayer would be the horse. And I think I have a pretty good idea who the pig(s) are feeding at the trough.
What to do dear financial farmers? "Fight, fight, fight against that dying light" of freedom! Readers of this blog well know I support voting, and especially voting with your feet out of states entrenched in burgeoning socialism. For those with strong backbones, however, there is yet another option: Run. And by "run," I mean run for office at the most promising level where victory may be assured. Change the potential outcomes of a country increasingly on the course of taxflation. It's your money, and the politicians work for YOU...isn't it about time we see some real return on our investment?
Tuesday, June 8, 2021
Pipes & Rails
Sunday, June 6, 2021
Thursday, May 20, 2021
Long March to Socialism
Wednesday, May 19, 2021
Monday, May 17, 2021
Thursday, May 13, 2021
Buying dips is one of the great advantages long-term retail investors (aka Financial Farmers) have over their sporting counterparts who are focused on short-term (read high tax) trading gains. Here's how to do it.
When you buy a dip your goal should be to add acreage to your financial farm...at a price YOU are willing to pay rather than chasing a stock up. Even before the market sells off 700 points like it did yesterday for example, an investor looking to capitalize should be ready. The first step prior to even making a shopping list of potential targets, though, is making sure you have investible cash not only ready to go, but preferably deposited with your brokerage. Sometimes in the heat of the moment cash can be transferred but remains "unavailable" because it hasn't been cleared. Always have cleared cash ready.
Now with your cleared cash ready, the other thing that should be handy is your shopping list. This is a living document which has been assembled after careful thought, research, and diligence. It is often updated with new information or thoughts. Regardless, this shopping list has as its basis a group of stocks you want to own and the price you're willing to pay for them. Price discipline is essential. During a dip you are a price maker instead of a price taker. That is an important distinction. Bid low.
Buying dips is a confluence of action and inaction; the financial farmer has cleared cash prepositioned and a shopping list ready, now comes the order flow. Selloffs are tricky in that they often come on the heels of unpredictable data, by that very metric investors don't necessarily know the full impact of that data on the moment of release. Sometimes there are global macro events that trigger massive flights to liquidity that unravel over days, weeks, and months. Sometimes it happens in hours. The future is nebulous. But the investor should be prepared for the worst. This means that a selloff can markedly accelerate quickly. Very quickly. That is why having a comfortable margin of error is vital on the purchase price. Use limit orders.
The other leg of the trade is the timing. Sometimes even if you get the stock you want at the price you want you still overpaid! Selloffs have a nasty habit of lasting longer and diving deeper than we think is possible, or even reasonable. That's why you should buy in tranches.
If your goal is to have a total 1000 shares of XYZ, consider buying the entire position in segments; make a an initial buy of perhaps 100 shares at the first price point (with a margin of err0r build in) that you think is reasonable. Then stagger those limit orders lower and lower and lower. The risk here of course is the opportunity cost of NOT getting your full desired position, but by using staggered limit orders you can ideally pick up some portion of your goal at pricing more favorable in to you. Stagger your order flow.
So to recap: Buying Dips is a great strategy for long-term investors who want to pick up stocks during a period of market weakness. The strategy involves having cleared cash ready to invest at your brokerage, having a shopping list on hand, and placing staggered limit orders. Although not foolproof, history has shown being prepared to buy quality stocks on a dip can result in meaningful gain over time. An old adage in the real estate world is, "You make your money when you buy, not when you sell."
Wednesday, May 12, 2021
Coming soon to a purchase near you...inflated prices! Often called "the silent killer," in economic terms that's exactly what inflation does; it strips away the buying power of the consumer. This morning's Consumer Price Index (CPI) release by the Bureau of Labor Statistics was truly shocking, well at least to people who haven't eaten food, driven a car, or purchased any physical goods for the past several months. For average Americans, there has been no doubt the damage being done to their purchasing power. Everything of value is markedly higher. A lot higher.
Over the past 12 months the all items index rose 4.2%, the largest increase in 13 years. That doesn't sound like much, right? Consider some of the outlying data: the index for used cars and trucks rose 10% in APRIL alone, this was the largest 1-month increase since 1953. The energy index has risen 25.1% over the past 12 months. Food they claim "only" rose 2.4%...assuming you're buying in bulk, and I don't mean Costco, I mean TONS of soybeans. Who are they interviewing for these price points, animals on a farm?
As previously mentioned, inflation is the silent killer. Why does inflation kill? Inflation kills because it marginalizes the backbone of our society: the American Middle Class. The Middle Class is the most sensitive to out-of-pocket purchases; typically they are small business owners or employees subject to the inelastic demand for vital goods-and-services; like gasoline, food, housing, education, medical for example. Inflation ravishes the American Dream because the cost for life necessities consume an ever-increasing share of the Middle Class wallet.
What can be done? As financial farmers you can vote with you money by buying stocks in companies that have the power to pass on increased costs to consumers. Darwinian? Yes. Effective? Yes. Buying inflation pegged consumer staples puts you in lockstep with bad government policy, at least you don't get crushed twice. Second, you can vote members of Congress out of office who do not have a sense of fiscal responsibility. Unfortunately, this takes years. So an alternative approach is to vote with your feet to lower cost areas of the country. If this isn't a viable option, then stick with ideas 1 & 2, and in particular make a God-awful stink to your local, regional, State, and Federal government. Remember they work for you!
Failed fiscal and monetary policy results in rampant inflation. The first flight is usually into dirt (real estate) and gold...fiat paper money continues to lose purchasing power until costs become absurd. In Weimar Germany wheelbarrows full of money were needed to purchase simple goods. Are we there yet? Not by a long shot, but rampant spikes in real estate, food, and vehicles indicate that people aren't dumb to what is occurring...money for nothing never ends well. You can't expect to burn a candle at both ends and not have the lights go out.
Friday, May 7, 2021
Big Tech Five
Wednesday, March 31, 2021
Follow the Money
Friday, March 26, 2021
Monday, March 22, 2021
Sunday, February 21, 2021
A Bitcoin for Your Thoughts?
I am not a crypto fan for a variety of reasons; for one it feels like a pure Ponzi scheme, for another it has no ties to a physical commodity (think gold standard), and it can be seized electronically at will by almost any major government...but there is one trait that is very, very interesting about Bitcoin: The IRS wants to know on your 2020 1040 "At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?" Unfurl the red flags.
Why does the Deep State want to know whether you have virtual currency? Well dear readers, taxation is a by product of any benefit. This first example of this phenomenon in the United States sparked the Whiskey Rebellion in 1791. Whiskey had become a store of value; tilled fields planted with rye ultimately harvested and distilled into whiskey became in many respects this country's first portable, stable, and universal currency. Naturally the government wanted to tax this store of value. Hence the brewing discontentment which resulted in the Whiskey Rebellion.
Ultimately a paper currency was introduced which was backed by silver and gold; this metallic standard lasted well into the 20th century until under the Nixon administration the gold standard was revoked in order to pay for the escalating costs of the Vietnam War. The result was disastrous for working Americans as their purchasing power collapsed and inflation raged. The amount of paper currency, fiat money, in circulation exploded.
Friday, February 12, 2021
A Special Purpose Acquisition Company (SPAC) model is turning the traditional Wall Street monopoly on Initial Public Offering (IPO) deals on its head...and heads are rolling in angst. Consider the recent hit piece by Bloomberg "Investors in SPACs Need to Know the Real Deal." Or any of the various rants by Jim Cramer on CNBC about why he doesn't like SPACs. But wait, a host of recent traditional IPOs (those birthed by traditional Wall Street investment bankers) like DoorDash, Airbnb, and most recently Bumble all soared on their first day of trading. Great for retail investors, right? Not so much.
(Intentional?) Mispricing by investment bankers has led to massive single day pops on issue, leaving the IPO company in a lurch (yeah, those are dollars they left on the table, rather than going into corporate coffers) while the investment bankers make a killing (all the money is made between the lines) for a service that could have been accomplished via a direct listing like Palantir accomplished or...gasp...via a SPAC. Oh yeah, one more thing...how about all those retail buyers (read as the general public) who had to pony up to pay the premium price for a new issue? Hosed. Their only hope now is to bet on a high price going higher.
In a raging bull market, proximity to the deal flow is vital. Everyone knows this, that's why there is so much demand for IPO deals. That's why the margins are so fat. That's why traditional investment bankers crush it. It's an easy algorithm, get as close (early) to a deal of a good issue as possible. Retail investors know this well. And about a year and a half ago a SPAC launch occurred that first kinda appeared under the radar...Diamond Eagle Acquisition Corporation was to acquire SBTech and DraftKings. This seminal event ushered in a new wave of investing for the retail investor and the small company. It was a renaissance moment. Since the DraftKings deal went public, literally another hundred SPACs were launched. More are on the way.
Are SPACs risky? No doubt. Like any new issue without a track record, investors need to be cautious. When owners, founders, venture capitalists, private equity managers, hedge funds, AND retail investors, however, all are on the same page, it definitely seems like the investing world is thinking different (like Steve Jobs advised.) The one player traditionally clear and present, however, is noticeably absent...the investment banker.
SPACs are a great democratizer. And the Bloomberg article is quite right on one point; if investors still want to buy, so be it. One of the great legacies of the previous administration was the creation of an investing environment that put an emphasis on less regulation, less red tape, and more freedom. The result of this philosophy has begun to take root and bloom. The big potential losers are the static, entrenched monopolies which have maintained their status via ever-increasing market size fueled by bolt-on deals...who just said Microsoft...and bales of cash to lobby DC preventing competition. The big winner? You.
Sunday, February 7, 2021
Reminiscences of a Stock Operator
Wednesday, January 13, 2021
When the Fringe Goes Mainstream
When fringe ideas go mainstream lots of money can be made. Buckets full of money. The resulting services and products from what were once considered fringe ideas have fundamentally changed society when they were embraced by the mainstream.
Consider the societal impacts of Bitcoin, electric vehicles, sports gambling, pot (rebranded cannabis), and even gourmet coffee. All of these products or services originated in previously fringe sectors of society. They were what the mathematical, specifically the statistical community, have labeled outliers.
Outliers traditionally have been considered data (or even people) that are significantly outside the average or median set of data. Consider the image directly above. The data clustered in the bottom left would equate with a point or even slope if it was two-dimensional on the graph. Notice the point on the upper right of the chart. In the study of statistics, this is know as the outlier.
An outlier is an extreme value that is either much higher or lower than other data points. Not to get too complicated, but the outlier typically skews the mean and median. Traditionally outliers are discarded from a data set because of this effect. My experience has been to embrace the outlier. As a matter of fact, I suggest investors keep an eye out for outliers.
The case for keeping outliers on your investing radar screen is strong, because as alluded to in the first paragraph mucho dinero can be made getting in on trends early. That is typically when prices are low, because demand is virtually non-existent. In fact, the trend may be so early there may not even be a way to monetize the idea into a product or service yet. That makes investing in a nascent idea tricky. Often investors will pony up benjis for corollary product or service that aren't necessary the real thing.
In any industry created from a fringe idea, the birthing process is difficult and fraught with failure. The commercialization process of converting a fringe idea into a business can be best summed up as loony. It's like the primordial proteins, enzymes, heat, pressure, and time aligning to create a new life form, which of course is what a fringe idea converted into a new product or service most resembles. It is at this point when its product or service is launched and ownership can be had, whether in private equity or via purchasing the asset directly (Bitcoin), or licensing it (McDonald's franchise) that an investor can now gain exposure.
Ideas aren't two dimensional like most data on a chart. They aren't even three dimensional. The bridge between mathematics and ideas is tenuous at best. Ideas embrace at least length, area, volume, and time. The world as we know it has three dimension; length, width, and depth plus one dimension of time. String theory postulates that the universe operates with many more dimensions. Ideas are definitely at least three dimensional, consequently traditional statistics has been a poor utility to identify fringe ideas that will become mainstream. A better litmus test is needed that incorporates both mathematics and humanistics. Arthur Schopenhauer famously said "All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."
Since I am not as smart as Schopenhauer, I use something called the "Laugh Test." The "Laugh Test" is if I laugh out loud when presented with a fringe idea. I almost immediately put that new idea on my investing radar. The "Laugh Test" for me has proven to be an accurate predictor of potentially ground-breaking products or services, plus it also has produced countless failures. This litmus test, however, is also why I think certain environments are fertile ground to create new products and services, and also why AI will have trouble cloning this distinctly human gut reaction to what is funny, what is love, what is scary, etc. Emotions are a key factor in converting a fringe idea into a mainstream product or service. And once the mainstream embraces a fringe idea, its products and services typically change the course of history.
Tuesday, January 5, 2021
Georgia On My Mind
Monday, January 4, 2021
Where is Jack Ma?