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"No Warning Can Save People Determined To Grow Suddenly Rich"
Submitted by Tim Price of PFG Wealth Management (via The Price of Everything blog),
“No bubbles. Because it’s normal for large liquid asset classes to nearly double in value over less than a year and then drop 10% in a day.”
-Tweet from financial journalist Alen Mattich, 23 May 2013.
“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”
- Benjamin Graham and David Dodd, ‘Security Analysis’.
“No warning can save people determined to grow suddenly rich.”
- Lord Overstone.
At the height of the financial crisis (i.e. 2008) it was easy to despise just the bankers for their serial and colossal ineptitude and rank hypocrisy. Now, five years into one of history’s most alarming bubbles, it’s easy to despise just about everyone in a position of financial or political authority, and for the same reasons. Take the FT front page from last Wednesday: “America’s corporate titans fight back”. With just a cursory look at the layout of the page, one could be forgiven for thinking that “America’s corporate titans” were somehow fighting against a common foe. But on closer reading it transpired that JP Morgan’s Jamie Dimon had merely succeeded in defending his own interests – as chairman and CEO of America’s most iconic bank – versus those of the people who notionally own his company, i.e. JP Morgan’s shareholders. Apple’s CEO, Tim Cook, on the other hand, was defending his company against the predations of some of America’s biggest crooks, a.k.a. the US government. “We pay all the taxes we owe,” said Mr Cook; “every single dollar. We not only comply with the laws but we comply with the spirit of the laws.” In sympathy with Mr Cook, the Republican senator Rand Paul added, “I’m offended by the spectacle of dragging in executives from an American company for doing nothing illegal. If anyone should be on trial here it should be Congress.”
There was a similar atmosphere of populist corporate tax avoidance witch-hunt mania here in the UK, as Google’s executive chairman Eric Schmidt suggested that it was not for companies to decide what tax policies should be, but rather for duly elected governments. This prompted the FT’s political columnist Janan Ganesh to tweet, somewhat archly: “Eric Schmidt is sparing the time to teach C-list MPs who have never created or run anything the difference between law and morality. Impressed.” The ‘debate’ over corporate tax is really no such thing. Rather, it is a classic piece of misdirection by cynical governmen ts whose own fiscal affairs are out of control. “As times change,” writes Erwin Grandinger in his devastating critique of Germany’s own stability as a sound sovereign entity, ‘Beyond Repair’, “so do the methods of sanction. In today’s Germany nobody has to fear for his life or fear ending up in a.. concentration camp. As is evident, a media-led or tax-based execution is quite sufficient.
That is the subtle art of execution. The need to be seen to be acting and the creativity of the state when it comes to tax revenue issues lead to attempts to channel mass perception and to make the scandal personal. [This may be why the UK authorities started their tax avoidance pogrom against high profile entertainers before attacking equally high profile corporations.] The strategy of the system is always to employ a secondary theatre of war as a replacement for the central action in order to avoid the firing line.”
Lord Clyde gave the last word on tax avoidance, and it applies equally to corporations as it does to individuals. Indeed, for-profit corporations and the entrepreneurs who build them are the true wealth creators; all government can do is shuffle other people’s wealth around. Said Clyde:
“No man [he could have added: or company] in the country is under the smalles t obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, as far as he honestly can, the depletion of his means by the Inland Revenue.”
And it’s not even an equal fight. Which makes the hysterical posturing by politicians that much more absurd. If politicians don’t like the tax regime that they themselves have conjured into being through regulatory fiat, they have it in their power to change the laws they make. That they are too stupid or lazy to understand this basic principle suggests that the quality of our political class, and their respect for the electorate, stands at an all-time low.
But tax itself is just a sideshow. The real black comedy lies in the manipulation of market prices that is now endemic throughout the global financial system. As Japan is now showing, even with the unrestrained commitment of a central bank and its magical powers to create money out of nothing, there are practical limits to market rigging activity. Last week’s price action within the Japanese government bond market and stock market suggests that both of these markets are in the early stages of shaking themselves to pieces. The fallout of unintended (counter-intended ?) consequences from massive market manipulation will be awesome. And this is invariably what happens when government – which in the opinion of this observer shouldn’t be entrusted to play with a ball of string – is allowed to control money.
Call it the anti-Midas effect. Everything that government touches, whatever its initial value or worth, ultimately turns to ashes. Investors are now reduced to all sorts of linguistic contortions and analysis in order to try and parse the meaning from Fed chairman Bernanke’s latest pronouncements about quantitative easing, and whether the magic money tree will continue to shower its seemingly effortless largesse over the financial markets of the US. From our perspective, if we cannot understand the dynamics of a market (or if we have scant respect for the pronouncements of the central banker pulling the strings of that market), then we would prefer not to participate in that same market. This is by no means sour grapes. On a cyclically adjusted price / earnings basis, the US equity market trading at around 23 times is expensive even without the imponderable (and impossible to price in) inflationary aspect of QE. There are compelling valuations elsewhere, in markets like Russia (with large cap, single stock p/e’s down at 4 or 5) or more broadly across Asia, where domestic consumer - focused businesses are still available in single digit p/e’s and at price / book levels of one or less.
Brent Johnson of Santiago Capital wrote a while back that the greatest trick central bankers ever pulled was convincing the world they work for the public and not for the banks. Now that asset bubbles are alive and well across stock markets, bond markets and credit markets, it takes a brave – and probably foolish – investor to accept market risk at face value, rather than adopting a perspective of extreme selectivity and aloofness – unless you’re indifferent to the prospect of permanent loss of capital, and we aren’t. We are content to allow the trend - following managers with whom we invest to ride the momentum of markets, and in both directions, up and down. But for the much larger percentage of client portfolios that are under our own discretionary control, we feel more concerned than we ever have as we watch markets like Japan’s writhing and roiling with extraordinary volatility, as investors, traders and speculators alike tie themselves up in knots trying to assess what the end - game of a money printing bubble means for their own bottom line.
Playing a game of chicken with one central bank – or siding with it, for that matter – is bad, and difficult, enough. Playing a game of chicken with all of them seems tantamount, to this asset manager at least, to career suicide. So this is a game we elect not to play. We disregard the conventional indices and benchmarks (someone else’s rules altogether), and we make more nuanced investments across only those assets and asset classes that we think, in a hopelessly distorted world of disparately inflated prices, have genuine value.
In other words we play our own game, by our own rules.
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One of my favorite quotes from Ernest Hemingway will always be in regard to how people go bankrupt: “Slowly, then all at once.”
Also applies to how economies crash? How currencies fail? How your GF's ass gets bigger?
You know something is wrong when the people with no logic and no IQ are making money hands over fist (though unrealized) while people who sees whats going on in the world right now, are not.
love the moniker... very appropriate depiction of the USS of A...
So I guess the title of this thread is the reason that 'Mr. Potato Head' [Tobin Smith's], melon is the default click ad...
>> How your GF's ass gets bigger?
Interesting. I never had a GF that went through the slowly stage. The process was always fairly simple, dish out a piece of ass, start laying on the lard.
Life is about making the right choices, and living with those choices. If you can't look at a women's upbringing, mental attitude, or genetic background (her mother) and figure out whether or not she is going to be a fatty later in life, that's your own fault. It's one thing to be poor, it's another altogether to have to deal with such a women. Personally, I'd rather be poor...
by Adam Fergusson
When Money Dies is the classic history of what happens when a nation’s currency depreciates beyond recovery. In 1923, with its currency effectively worthless (the exchange rate in December of that year was one dollar to 4,200,000,000,000 marks), the German republic was all but reduced to a barter economy. Expensive cigars, artworks, and jewels were routinely exchanged for staples such as bread; a cinema ticket could be bought for a lump of coal; and a bottle of paraffin for a silk shirt. People watched helplessly as their life savings disappeared and their loved ones starved. Germany’s finances descended into chaos, with severe social unrest in its wake.
http://www.amazon.com/When-Money-Dies-Devaluation-Hyperinflation/dp/1586...
yes, yes, so please explain Japan then. The earth is now flooded with exponentially increasing paper promises and liabilities while the real value of the underlying collateral and assets remains constant or decreases. The mis-allocation of capital and resources continues until the supply lines break in earnest and the world goes to war, again.
"objects in the mirror appear to be............................................"
Brilliant! Yes, her ass has been getting bigger lately.
My grandma used to have a saying pretty similiar that that one...
"People having sex come slowly.... THEN ALL AT ONCE!"
Then there are those guys who skip the slowly part. But there's help for that.
Here it's...
In Ernest Hemingway’s "The Sun Also Rises," one of the main characters is asked how he went bankrupt.
"Two ways," he responds. "Gradually and then suddenly."
"money printing has unintended consequences" Really ???
yes, like: you can run out of trees to make paper off... the price of green ink might rise because of high demand... and so on and so on....
Re: Liberty Reserve, Bitcoin
As Stalin's longtime head of the NKVD, a predecessor of the KGB, Lavrentiy Beria was reported to have said, "You name the person, I will find the crime."
http://homment.com/bitcoin-crackdown
The current Central Bank methodology to return markets, and thus American capitalism to normalcy has ended up distorting markets, and tshifting American capititalism to bubble capitalism.
5 years into this experiment job growth remains anemic, and the mere mention of tapering risk sending markets plummeting only exposes how the original working hypothesis by the Fed has been wrong.
The original premise was that the Fed could extend its capabilities, and act as a surrogate fiscal authority, and job creator, due to the dyfunction in Congress. It's not doing well at either, and has overreached.
"and we make more nuanced investments across only those assets and asset classes that we think, in a hopelessly distorted world of disparately inflated prices, have genuine value."
Go on......
Yes, which asset classes would those be fine sir?
Yet i know many of my southern/mid southern european acquaintances who still believe it's all the "capitalist's free market's" fault.
i'm not even kidding.
That's the beauty of the whole facist system for the elites. There is just enough capitalism so that the socialists can point their fingers and say " we told you free markets don't work" and their is just enough socialism in the system for the capitalists to point their fingers and say " socialism is destrying the country". A bunch of clever fascists we have running things.
Excellent way of putting it Doc...
these are words of wisdom.
They are. Suggest one more step:
http://www.corbettreport.com/interview-582-tom-secker-on-operation-gladio/
yes, we should adopt the socialist model for equal misery for all (sarc)/
i dont mind rich people who actually do ethical things and become succesful like that.
however, i cant stand rich people who are making there money through crooked things such as hedge fund managers, or anyone who works on wall st. i wish these people lost all there money, all they do is steal from the middle class.
fuck them all.
not all hedge fund managers are crooks. You know , slave merchant used to be a perfectly legitimate way to earn a living too.
It’s the same model as lotteries really, which presume to create magic revenues to help society. On the whole, the poorest members of society end up paying for those benefits, as well as the sustenance of the people who administer and run these government gambling operations.
Given that they now produce jackpots in the 100's of millions, ever wonder how much tax revenue is generated for Club Fed? Just another tax, in a long line of taxes, and generally, as you state, paid by the poorest...
Paid by the stupidest. You don't have to spend money on lottery tickets. At least not yet. I'm sure it's coming, though.
Nothing wrong with the lotteries. People shouldn't spend what they can't afford to lose. The person who bought the $590 million winning ticket in Zephyrhills, FL surely agrees with me.
That's about 15 miles from here and one of the Publix store managers comes into the local convenience store. They still don't know who the winner is...
"...the greatest trick central bankers ever pulled was convincing the world they work for the public and not for the banks..."
No. The greatest trick is that we have been fooled into thinking we work for anyone else besides ourselves.
I enjoy helping my neighbor. It makes me feel good. But I also realize that helping him helps me. I don't usually help people who aren't able to return the favor. This is a very diffuse definition. I may help a homeless man (poor traveller) because I don't know amnything about him. Maybe he's rich. Maybe he's a divine being in disguise. Withoun more information, I choose to err on the side of liberality. But there are those in my community whom I knonw are shiftless and irresponsible. Maybe they have substance abuse problems. Maybe they are simply lazy. I don't help them. Helping htem hurts me. "Help" to such people hurts them, because it conforms them in their self-destructive behavior. "Help" hurts the community because it contributes to the maintenance of a non-contributing leech on society. We can all make these calculations intuitively.
The gov't, in simultaneously "helping" the irresponsible poor, and the parasitic rich, shows itself to be a force for the destruction of good society.
Well said nonster!
"...the greatest trick central bankers ever pulled was convincing the world they work for the public and not for the banks..."
Funny that because I had always assumed the Bank of England was created in 1694 because the King's creditworthiness was suspect and he could not raise £1,200,000 @8% to fund the Royal Navy. A Bank representing The City Subscribers was deemed the best way to represent the Bankers to The Crown and let the Bank hold Treasury receipts in return for bullion. The Bank then had currency issue backed by the Government Bond and could piggy back on the Government Bond backed by bullion.
So until 1946 it was a private Bank representing The City to the Treasury and drew its Governor from banks like Barings or Brown Shipley. It was Montagu Norman that caused the rift with his forcing Churchill back onto Gold in 1925 at $4.8675 and producing the General strike and the 1931 Crisis together with his overly cooperative approach to Czech and other gold reserves at the BIS in Basle on behalf of the Reichsbank during WW2 that led Labour to nationalise the Bank in 1946.
I think Leslie O'Brien in 1966 was the first non-banker to become Governor. It seems since that the Bank of England is really a branch of the Treasury and Gordon Brown's fake independence still had Treasury staff inside the Bank like John Gieve and Treasury control of appointments of the Governor, the Court and policy.
Even the Bundesbank has become more politically connected since Tietmeyer to the point where they - Weber, Weidmann, have had to become more assertive simply to avoid Merkel and Schauble squeezing them