Geniuses in Charge
BALTIMORE, Maryland – Is there any smarter group of homo sapiens on the planet? Or in all of history? We’re talking about Fed economists, of course.
Not only did they avoid another Great Depression by bold absurdity…giving the economy more of the one thing of which it clearly had too much – debt. They also carefully monitored the economy’s progress so as to avoid any backsliding into normalcy.
Who Cares What Voters Want?
BALTIMORE, Maryland – There were two newsworthy developments last week, neither of them really important – the first because it won’t happen, the second because it won’t matter. First, the Fed let it be known that it has “normalcy” once again in its sights.
It’s all in your head…and that’s where it shall remain!
Illustration via thesurvivalchannel.com
Gassy Hacks and Big Quacks
Today, we recall the “commencement” at the end of four years at the University of Vermont. The university itself is imposing and a little intimidating. The rest of the world works in warehouses or common office spaces. Academia labors in hallowed “halls” and prestigious “centers.”
The path to the hallowed halls of the University of Vermont
Photo via hercampus.com
Black-and-Blue Crash Alert Flag
Let us begin the week “on message.” The Diary is about money. Today, we’ll stick to the subject. Old friend Mark Hulbert has done some research on the likelihood of a crash in the stock market.
Ye olde tattered Crash Alert flag… should it be unfurled again?
Image by fmh
Expanding in Ireland
DUNMORE EAST, Ireland – We came down the coast from Dublin to check on our new office building. For this visit, we wanted to stay somewhere different than we normally do. So we chose a small hotel on the coast, called the Strand Inn.
Irish landscape with alien landing pads. Even the guys from Rigel II have heard about Ireland’s corporate tax rate.
Photo credit: Tourism Ireland
Smart Money Fleeing Stocks
DUBLIN – The Dow dropped 180 points on Tuesday – or about 1%. And another clever billionaire says he is looking elsewhere for profits. Reuters:
“Activist investor Carl Icahn on Monday said there was a chance the stock market could suffer a big decline, saying valuations are rich and earnings at many companies are fueled more by low borrowing costs than management’s efforts to boost results.
“I am very cautious on equities today. This market could easily have a big drop,” Icahn said.”
Famous activist investor Carl Icahn – in fact, we like to think of him as the “original activist”; we still remember when he had his way with the likes of TWA and Texaco back in the 1980s. Evidently, tempus fugit. Does he know something we don’t? It certainly seems possible. After all, contrary to us, he has made billions. According to his latest filings, he currently holds a huge net short position of 150%.
Photo credit: Platon for Time
DUBLIN – The smart money is getting out while the gettin’ is still good. That’s the message we get from reading the recent headlines.
Here’s the Financial Times:
Redemptions from stock funds have hit nearly $90 billion this year as portfolio managers and hedge funds struggle to navigate a market that no longer seems driven by radical central bank policy.
The Importance of Cabbages
LONDON – A dear reader challenged us:
“To create a perfect world what type of government would you propose?”
Another put it a different way:
“Again, I’m convinced more than ever, Trump is the only candidate that might have a chance to get us out of the financial and economic mess the United States is in. If Bonner & Partners is unable to recognize this, it tells me their agenda is not to fix America’s problems… but continue the agony…”
Emperor Diocletian in retirement, talking to his security detail. Famous quotes made on occasion of his decision to become a cabbage farmer: Diocletian: “Cabbages don’t talk back”. Maximianus (a.k.a. “M”, his co-regent as “Augustus of the West” from AD 286 to AD 305): “You’ve lost your marbles, old chap”. It later turned out that M’s assessment was erroneous. He got bored and came out of retirement after just one year to help his son Maxentius in his fight over the succession, as the “tetrarchy” put in place by Diocletian threatened to splinter. Maximianus succeeded in sorting things out in favor of his son, but not even two years later he recognized he had made a fateful mistake: Maxentius was actually unfit to rule. Maximianus not only told him so, but actually told everybody. Then he ripped the imperial toga from Maxentius before an assembly of soldiers, expecting the soldiers to side with him (he was an old war horse and battlefield hero after all). That turned out to be a miscalculation – instead was chased out of Italy in disgrace. Should have gone for cabbage farming too!
Engraving by Charlotte Mary Yonge
Don’t Plan on Living in St. Petersburg…
GENEVA, Switzerland – When we left you last week, we were describing why neither democracy nor planning works on a large scale. Austrian School economist Friedrich Hayek described the problem with great thoroughness in his book The Fatal Conceit.
The Fatal Conceit: central economic planning is literally impossible – there can be no centrally planned rational economy. Individual planning is distinct from central planning, in that the many individual plans pursued by self-interested individuals mesh and create a spontaneous order. This order is far superior to anything that a central planning agency can ever hope to achieve – in fact, as Mises has shown, central planning is even doomed to failure if the planners hypothetically had perfect knowledge of all facets of the economy at a given time. However, this hypothetical situation can can never be realized anyway, as knowledge is widely distributed and as Hayek argues, is often tacit and therefore not directly communicable. It only expresses itself in human action.
Trump Is Right
PARIS – On Wednesday, brick-and-mortar retailers – such as Macy’s – led U.S. stocks lower. The Dow lost about as much as it had gained the day before. Nothing much to talk about there…
NORMANDY, France – The Dow rose 222 points on Tuesday – or just over 1%. But we agree with hedge-fund manager Stanley Druckenmiller: This is not a good time to be a U.S. stock market bull.
Legendary former hedge fund manager Stanley Druckenmiller at the Ira Sohn conference – not an optimist at present, to put it mildly.
Photo credit: David A. Grogan / CNBC
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