Sunday, February 22, 2015

Industrious lunatics

It is almost impossible to parody the daily breaches of common sense that constitute our political life. I used to have fun in these pages lampooning the imbecility of governments and their enablers. Now they take the piss out of themselves with no need for outside assistance. Who needs a blogger to enjoy a laugh at the voluntary inmates at the asylum when the asylum is the corridors of power?

For months now, we have been told about the sickening atrocities committed by the Islamic State and various other excitable subgroups of the religion of the Prophet. Unless a new chapter has been opened today, the latest farce is Imam Obama's calling together a group of professional meeting-goers for something called The White House Summit to Counter Violent Extremism.

Since 2012, we've actually had an undersummit on the same theme (supported by the U.S. State Department and your tax money, headquartered in Abu Dhabi) -- the International Center for Excellence on Countering Violent Extremism. "Excellence" is a nice touch; remember the 1990s management fad of Excellence? Remember Total Quality Management (TQM)? ISO 9000?

We can perhaps expect the White House Summit to establish a new certification, CVE 45,000. CVE is combating violent extremism. What does the 45,000 mean? Who knows, but it sounds impressive.

The first award will go to a Green company, subsidized by the U.S. government, that turns Libyan sand into biofuel. Or says it will. That will aptly fulfill the suggestion of State Department Marie Harf that ultimately extremism must be counteracted by a jobs program, which would (for instance) recruit jihadis as heads of departments rather than head hunters.

As everybody has heard by now, the Sheikh of Washington has seen to it that the White House Conference on Violent Extremism tiptoes around any mention of the Islamic State and similar. Maybe they're not considered violent enough to win a Best Killing Oscar.

G.K. Chesterton wrote that "going mad is the slowest and dullest business in the world." He explained that it happens without anyone noticing that it's going on, especially the person going mad. Countries, too, can lose their minds with smooth-flowing efficiency.

"Madness is a passive as well as an active state: it is a paralysis, a refusal of the nerves to respond to the normal stimuli," Chesterton adds.
There are commonwealths, plainly to be distinguished here and there in history, which pass from prosperity to squalor, or from glory to insignificance, or from freedom to slavery, not only in silence, but with serenity. The face still smiles while the limbs, literally and loathsomely, are dropping from the body. These are peoples that have lost the power of astonishment at their own actions.
Take a look at that White House Summit logo again. In no particular order, as they form a circle, the "Solution" includes Engage, Mentor, Support, Communicate, Partner, and Educate. Just the stuff for community organization of bloodthirsty tribes. The symbolism is hard to make out, though. I get the little red schoolhouse for Educate, and the monitor for Communicate, but what is the house with a heart over the door meant to say about support? An Adopt-a-Soldier-of-Allah program? The weirdest of all is the symbol for Partner, which resembles if anything a filing cabinet.

Well, Imam Obama probably had a brainstorm for the White House Summit and wanted to announce it the next day. Some poor sod in the federal bureaucracy, normally occupied with devising wavy lines to indicate water and fish outlines to indicate fish in brochures for the Department of Wildlife, got the call to come up with a design for the Violent Extremism summit in the next eight hours. That didn't leave much time for refinement, or for imagination to set in.

When nations that have "lost the power of astonishment at their own actions," Chesterton says,
... give birth to a fantastic fashion or a foolish law, they do not start or stare at the monster they have brought forth. They have grown used to their own unreason; chaos is their cosmos; and the whirlwind is the breath of their nostrils. These nations are really in danger of going off their heads en masse; of becoming one vast vision of imbecility, with toppling cities and crazy country-sides, all dotted with industrious lunatics.
Come, let us unreason together.

Wednesday, February 18, 2015

We're all Warren Buffett now

Every day brings more disasters and threats, actual and potential. I have no cure to suggest. (I know you were counting on me; sorry about that.) So let me take up a subject many of us are familiar with: money.

That's the neat thing about this topic: it's easy to relate to. And, it seems, easy to advise about. Amid winter's gloom (if you're anywhere north of Florida or Scottsdale), it's natural to dream of turning a dolor into into a dollar. And there is no shortage of blogs and web sites, not to mention financial publications -- all right, so I just did mention them -- to plant a word to the wise in your brain. We're all Warren Buffett now, just waiting our turn to say the magic word that will make the duck with the cigar drop in. (For those of you under 50 or outside the U.S., that was a running gag on Groucho Marx's TV quiz show many a year ago.)

The heck of it is, while some of the advice is mainly self-promotion, a lot of it is valid, at least if you accept its premises.

If these pundits are so smart, why aren't we rich? (No offense meant if you are rich.)

Part of the trouble is that so much of what they say is reasonable, but impracticable. Let's take as an example a post from Clear Eyes Investing, headed "5 Ways to Avoid Permanent Losses." The writer, Todd Wenning, CFA, is an equity analyst currently with Morningstar.

He first makes clear what is meant by a permanent loss.
... A permanent loss of capital differs from a temporary loss of capital that's due to market volatility and it occurs when an investment's value has declined so much that getting back to break-even within a few years is unlikely. Effectively, an unrecoverable loss.
As most people who've been in the investment game for a while know, a loss of x percent means you will have to make more than x percent just to return to where the dip began. For instance, as Wenning shows in a table, if you own a stock that sinks 30 percent, you can tell yourself it's only a "paper loss," but for you to be made whole the stock must climb 43 percent. Possible, but the odds are against it. Even if it does recover 43 percent or more, chances are it won't happen quickly.

I won't paraphrase his five ways of avoiding permanent losses; please just click the link and read them for yourself. In principle, they all sound sensible. So what's the problem?

Mostly they are procedures that only a professional financial analyst could love. They are enough to make us amateurs run screaming from the room. Let's take one as an example:
4. Focus on trends in competitive advantages. The market has become incredibly focused on the short-term. For example, the average stock mutual fund turnover rate have [he means has] jumped from an average of 17% between 1945 and 1965 (implying an average holding period of about five years) closer to 100% today (implying an average holding period of about one year). Naturally, then, market participants seek short-term information advantages -- e.g. "Will this company beat next quarter's consensus estimates?" -- at the expense of gathering helpful long-term information. ...

Spend more time in your research process thinking about where this company might be three- to five-years from now. A simple way to get started is with a "SWOT" analysis -- listing the company's strengths, weaknesses, opportunities, and threats. Then ask how the company might enhance its current strengths, reduce its weaknesses, capitalize on opportunities, and respond to competitive threats. 
Who can say aught against long-term thinking? With all respect to Wenning, who is undoubtedly far more sophisticated than I am about security analysis, I don't believe anyone (especially outside the company being analyzed) can acquire more than a general idea of its "strengths, weaknesses, opportunities, and threats."

Still less relevant is how the company "might" enhance its current strengths, reduce its weaknesses, capitalize on opportunities, and respond to competitive threats. Even if anyone could divine how the company might do all those things, it's anyone's guess whether it will. 

And say the company looks from here to be on the right track. Think of all the things that could cause it to pack up in the next three to five years: technological changes, a smart new competitor arriving like a lightning bolt from a blue sky, a change of management, a law suit, a huge increase in the cost of raw materials, international crisis ... and on and on. All possible, none predictable.

Short-term trading gets a bad name in the financial media commentariat. We're all supposed to assure ourselves with deep research before we splash out on a stock, and then stay the course. Warren Buffett groupies like to quote him: "My favorite holding period is forever." Well, Mr. Buffett can lose a few million dollars and not bother to look for it under the sofa cushions. Others aren't so blasé about parting with money on a mistaken buy, especially if it's a permanent loss.

Maybe at least some of those short-term thinkers aren't so dumb after all.

Me, I do trades now and again, but mainly I've come to (a) avoid individual stocks and (b) hedge by allocating my modest stash among exchange-traded funds. That doesn't guarantee I won't lose on any of them, but asset classes as a whole are more likely to recover than single companies that go haywire. And it takes a lot less time than trying to figure out the strengths, weaknesses, opportunities, and threats of particular names. Time is an asset class, too.

Friday, February 13, 2015

Turn, turn, turn ... turn again?

I am dubious about cyclical theories of history, such as those ginned up by Hegel, Marx, Toynbee, and Spengler. The latest here-it-comes-again carousel is known as the Fourth Turning, and Jim Quinn of The Burning Platform has a go at using it to extrapolate our future. Actually, long-winded as it is, his piece is the only the third of four parts. It's a little easier to read on Zero Hedge, which republished it without all those click-bait teasers in the margin.

Early on in his screed, Quinn supplies a sensible look at the background and overview of the current state of play.

The seeds of the next crisis are always planted during the climax of the previous crisis, when the new social order is established. The American Revolution Crisis created a new nation, but left unresolved the issue of slavery. This seed grew to become the catalyst for the Civil War Crisis. The resolution of the Civil War Crisis greatly enhanced the power of the central government, while reducing the influence of the States.
The rise of central authority led to the creation of the Federal Reserve, the implementation of income taxes to fund a vastly larger Federal government and the belief among the political class that America should intervene militarily in the affairs of other countries. The Great Depression was created by the monetary policies of the Federal Reserve; the New Deal programs were a further expansion of Federal government; FDR outlawed the ownership of gold; and America’s subsequent involvement in World War II created a military and economic superpower. 
After sixty-two years of ever increasing debt; ever increasing taxes to support an ever growing governmental bureaucracy; ever expanding laws, regulations, and rules; currency debasement by the Federal Reserve; complete abandonment of the gold standard; and never ending wars of choice around the world, the next Crisis grew and blossomed from the seeds planted during the previous Crisis. The New Deal social programs, along with the extension of the welfare state by LBJ and subsequent administrations, have swelled to unprecedented unsustainable levels with unfunded liabilities exceeding $200 trillion.
The promises cannot be fulfilled. The $18 trillion national debt increases by $2.3 billion per day; $96 million per hour; $1.6 million per minute; $27,000 per second. Does that sound sustainable? The legacy media sycophants cheer when consumer debt outstanding surges past $3.3 trillion, as their warped worldview applauds spending versus saving, consuming versus investing, and living for today rather than striving for a sustainable future.
Whether all this followed a "turning" template written in the stars, or it just worked out that way, makes little practical difference. 

Quinn scores another palpable hit in describing the loss of individual freedom and growth of government control.
The overbearing, militarized, captured Federal government has treated citizens like suspects since 2001. ... What kind of government clandestinely spies on its citizens; militarizes local police forces; conducts military training operations in major cities; wires its streets and highways with surveillance cameras; disperses peaceful protestors with water cannons, tear gas, pepper spray, and rubber bullets; and treats the U.S. Constitution like toilet paper? An authoritarian regime treats its people like this. Authoritarian regimes treat everyone like a potential enemy. They trust no one.
 Besides that, he says:
The American people have lost their ability to think, reason, question, do math, control their urges, defer gratification, or realize when they are being lied to by the people they elected to public office. A culture of ignorance, celebration of the absurd, salutation of stupidity, honoring of the inane, being mesmerized by electronic gadgets, and satiating their egocentric shallow impulses on social media, is a sure recipe for societal collapse.
The paragraph makes admirable reading until the iron cell door slams -- "a sure recipe for societal collapse." There are no sure recipes, even for cooking dinner, much less for societal collapse.

Societal, financial, political, any or all kinds of big-time collapse take more than a single causal factor. Quinn favors the "corporations are buying the government" explanation. "I now believe the focus of this Fourth Turning will be the conflict between the government and its supporters, and those who oppose the welfare/warfare surveillance state controlled by Wall Street vested interests," he says. And so on. It's all down to a "ruling elite ... desperate to keep their despotic bacchanal empire of debt from disintegrating in a catastrophic apocalypse of derivative time bombs, bank failures, corporate bankruptcies, and denial of their guilt."

That is, unfortunately, part of the story, but only part. Another force is the hegemony of the cultural Marxist Left over practically every American institution, which Quinn doesn't so much as mention. 

An empowered Left has already made sure what is taught in schools, from kindergarten through graduate school; what facts and ideas must and must not be transmitted through the mainstream media; expanded centralized power in Washington, aiming to reduce states and municipalities to functionaries of the Super State; and dissolved national borders, turning the U.S. into a prize for immigrants -- particularly the unskilled and uneducated from failed countries -- to vote themselves (whether citizens or not) a big portion of the debt-fueled largesse Quinn rails against.

The system is unprecedented in history. Capitalist potentates work hand-in-hand with the Marxist Left for regulatory capture and a division of the spoils. The racial grievance industry kicks in with its own demands. Fourth Turning? More like an all-star team against a group recruited from the league basement.