Capitalism, Socialism, Bailouts and Talking Heads

“Depression is the aftermath of credit expansion.” – Ludwig von Mises

I’d love to find someone that can venture through a single day without reading, hearing or talking about the current state of the economy, the stimulus plan, the bailouts or ponzi schemes. It’s sickening but what’s worse is the fact how NO ONE talks about fixing the problem correctly. Does anyone learn from the past?

I didn’t read the stimulus package in its entirety (it appears that our representatives didn’t either) so take what I say with a grain of salt.

We can blame Bush, blame Clinton, blame Obama, blame Regan, blame Nixon, etc. – it’s all the same; they work for the same crooks, I mean corporation, the US Government!

Time magazine recently published a list of the top 25 people most responsible for this crisis but I would argue that their thinking is flawed and dated by at least 100 years. As Victor Sperandeo noted in his book, Trader Vic – Methods of a Wall Street Master, Thomas Jefferson understood better than any political leader in world history that government “profusion” can only be paid by the “labors of the people.” He knew that a growing government budget and an extension of the services government offers “under the pretense of caring for [the people]” can only come at the expense of private property and individual liberty.

“I place economy among the first and most important virtues, and public debt as the greatest of dangers … We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.” – Thomas Jefferson

“The issue is always the same: the government or the market. There is no third solution.” – Ludwig von Mises

This blog entry is not about playing the blame game, pointing fingers or determining who is responsible but rather a move towards first discussing and then implementing responsibility and accountability based on how economics 101 truly works (without government interference). I am certainly not ruling out oversight and regulation but I am asking the government to just butt out of the free-market system we call capitalism. They will not make things better. For example, Ludwig von Mises once said:

“Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other.”

He made this statement more than half a century ago but the current administration is doing exactly that, spending an unprecedented amount of money (trillions when they look in the mirror and state the truth) on a stimulus plan that will most likely fail to achieve what its authors claim. I am not arguing that is won’t create jobs but how many jobs will be lost due to the new package. What will the net gain or loss total be once we look back in five or ten years?


The talking heads of the media offer no help as they skew the unemployment numbers every chance they get so they can “GET” their headlines. Even the president is talking about the economy and unemployment numbers reaching levels not seen since the Great Depression. Really? What stats are they looking at? This is a sensitive topic as several of my family’s closest friends have lost jobs in recent months but the truth is the truth.

Business Week noted:

In the last year, the U.S. economy shed 3.4 million jobs. That’s a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost — fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.

Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82. This was reflected in unemployment rates.

The latest survey pegs U.S. unemployment at 7.6%. That’s more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can’t equate 7.6% unemployment with the Great Depression.

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Top Articles for the New Year

Happy New Year!

Wall Street Cycles

Times are tough, banks are failing, the government is bailing out everyone but the common guy and Madoff is the new Ponzi. With all of this in mind, nothing is new on Wall Street. We’ve been through this before and will come out the other end, one way or another. The question is: Are you a sheep?

I will refer to a couple of quotes I have posted numerous times on this blog:

“All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope – that is why the numerical formations and patterns recur on a constant basis” – Jesse Livermore

“Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes” – Jesse Livermore

The books listed below were found through a fabulous list provided by the Hess Collection from An Exhibit at The University of Toledo ‘s William S. Carlson Library. February 22–April 30, 1999

As you can see, things will never change, as much as we wish they would because it’s in our DNA (we’re human).

Don’t these titles sound familiar:
How to Cope with the Developing Financial Crisis
By Ashby Bladen, New York: McGraw-Hill, 1980.

Financial Crises
By Theodore E. Burton, New York: Appleton, 1931.

Our Mysterious Panics 1830-1930
By Charles Albert Collman, New York: Morrow, 1931.

Booms and Depressions: Some First Principles
By Irving Fisher, London: George Allen and Unwin, 1933.

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Solving the Financial Crisis

“Problems cannot be solved by the same level of thinking that created them.”
~Albert Einstein

So, why are the same goons that created our mess trying to solve it?
The politics in our country is a joke!

By the way, we are not in a depression (the talking heads just won’t shut up). The restaurants and movie theatres are packed, the malls and box stores are packed, the parking lots are filled with SUV’s, etc…

Recession, yes, but we are NO WHERE NEAR a depression. Just some thoughts as I celebrate my grandmother’s 85th birthday; she lived through a “real” depression.

Yes, my post title is slightly misleading…

Pivot Reversal – Day 1

I think…, I predict…, I expect…, They said…, etc…

Everyone is an expert when it comes to the market, or at least a certified psychic. Everyone seems to think they know what’s supposed to happen, especially if you read the articles around the web and the newspapers on the stand.

You know what I think: Talking heads are useless!

Why don’t we just sit back and allow the market to tell us where it wants to go. I can’t say that expected the market to rally more than 10% or almost 900 points the exact morning I post the parameters to a pivot reversal (the article was written Monday night while watching the Titans smack around the Colts).

In any event, the market clearly marked day one of the attempted rally. No argument here.

Is it too early? Should we wait on the sidelines? Should we wait for the election? Are you scared to trade? Are you scared to lose? Are you embarrassed to be wrong?

Rule #1: Wait for a follow-through on overwhelming volume, 4-10 days from today’s 10% surge. The signal will be “buy” if we get a follow-through, so add a few shares at that time. Maybe it will reverse but we can’t think to hard about rules etched in stone, so we can only act based on the historical odds presented by this scenario. Trade small; enter a position that is 1/3 or 1/2 of your regular position size or trade fewer units but don’t sit on the sideline because you “think” this is a false move.

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