San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Friday, May 31, 2013

David Mitchell's "Big Boys" Theory

David Mitchell fascinates me.  On the one hand his folksy manner and Texas twang make him impossible to dislike.  On the other hand the outlandish claims he makes about his investment program, called the New Venture on Wall Street, makes me wonder why the Securities and Exchange Commission has not arrested him for securities fraud.  Furthermore, he is a Christian minister who is also pastor of a church in Texas.  I hear his show touting his investment program on Christian radio all the time.  I have posted comments about his investment program in two previous postings to this blog (April 4, 2012 and January 31, 2013).  If you are not familiar with his story you might want to read those posts.  Today I continue that tradition of critical analysis of the investment scam that Mitchell has created.
I was driving home from the mountains a couple of days ago when I decided to tune into a local Christian radio station.  I was immediately wrapped up in a 30 minute infomercial produced by David Mitchell and the New Venture on Wall Street company he has founded.  I have listened to various forms of these infomercials several times over the past couple of years and would not be posting this additional article to this blog today except for the fact that I learned something new from the show that I heard that day.  Many of you reading this post are probably aware that Mr. Mitchell claims that there are "three big lies" that are foisted upon the investing public by professional money managers.  The three lies are:  1) Buy and hold is a good investment strategy, 2) Market timing does not work, and 3) Diversification is important.  In contrast, David believes that buy and hold is an abusive and fraudulent investment strategy used by immoral investment managers to steal money from their clients, market timing is the key to realizing market beating total returns and diversification is unnecessary and will actually hinder your attempt to realize triple digit annual returns in the stock market.  I have addressed his view on diversification in an earlier post.  Today I am going to address his view on market timing and the alleged scam of buy and hold.
Mitchell loves to bash stock mutual funds.  He has some good reasons for doing so.  Or so he thinks.  His biggest reason to declare stock mutual funds to be inferior investment vehicles is the objective fact that about two thirds of the stock mutual funds sold in this country do not realize a rate of total return that even equals their commensurate stock market indexes.  I will not dispute his figures.  I believe they are correct.  I will dispute his interpretation of those figures.
The fact that a stock fund cannot outperform a stock index is not a brilliant revelation.  In fact, by definition, it is impossible for a stock fund to outperform an index when that stock fund holds the exact same stocks as the index.  An index is not an investment.  It does not exist in the real world.  When a fund is created to hold all of the stocks that exist within an index it is necessarily the case that the fund will have expenses which will also, quite necessarily, result in a lower rate of total return when compared to the imaginary index.  That economic truth, however, is not what I believe Mitchell is getting at when he declares stock funds to be inferior investments. 
Mitchell describes a hypothetical situation in which an ordinary investor takes a bag of his money down to his local mutual fund brokerage and deposits it with the local stock fund broker.  It is at this point Dave believes the lies and deception begin.  According to Mitchell the local broker informs the local investor that is is very important for him to utilize the strategy of "buy and hold" with the money he has just deposited with the brokerage.  Mitchell informs the radio listener that this operating procedure is important because it allows the brokerage to keep your money for a long time and pay you piddling total returns (8-12%/year at the most he says) while secretly earning enormous returns on Wall Street.  While telling the hapless investor that buy and hold is important, the broker is simultaneously taking the bag of money he has just received and shipping it to the "big boys" who live in "New York" and work on "Wall Street".  There, much to the dismay of Mitchell and unknown to the investor due to his ignorance, the investment professionals abandon the strategy of buy and hold they were preaching to the individual investor and begin to utilize market timing.  So, according to Mitchell, it is standard practice in the investment business for brokers to tell clients that they will be practicing buy and hold while, at the same time, utilizing market timing.  That, of course, is an accusation of fraud.
In what seems to me to be a wild contradiction, Mitchell suddenly presupposes that the investment professionals working in New York and on Wall Street are able to successfully time the market and outperform it on a huge scale.  After just having informed us that most professional money managers are generally inept and incapable of outperforming the market (70% of them by Dave's count) he then informs us that some money managers (the remaining 30% of them I would assume) are able to realize "triple digit" annual returns on the money they have been entrusted with.  How they are able to realize these amazing returns is, according to Dave, a "secret" that they are keeping from the investing public.  Enter David Mitchell and the New Venture on Wall Street.  He is about to let you in on their secret.
It was at this point I learned something new about the content of the nationwide seminar the Mitchell group presents.  Although unwilling to divulge to his radio audience the secret that will allow us to attain 100%+ returns in the stock market year after year, Dave does tell us a little bit about the "skill set" we can learn at one of his seminars.  According to Dave it is possible to use market timing to attain these amazing returns.  On this particular radio show he asserted that your skill set can develop to the point where you can discover what stock these highly skilled investment managers have purchased and buy it for yourself just minutes (or hours) after they do.  Then, by following the tools you will learn at the seminar, you will be able to sell that stock just minutes (or maybe an hour or two) prior to when the money-grubbing money manager sells the stock.  By following this rule you are able to realize the same triple digit annual returns these immoral money managers do.
In summary, you can do what the Big Boys on Wall Street do.  You can jettison the principle of buy and hold being preached to you by your broker and you can utilize the secret principle of market timing being used by the Big Boys on Wall Street.  By doing this you will be able to purchase stocks that will guarantee you annual total returns in excess of 100% per year regardless of market conditions.  At one point during the program Dave told us listeners that some super-competent money managers realize "quadruple digit" investment returns.  When those fools who have entrusted their money to a stock mutual fund manager are getting slammed by a 35% loss you are realizing another 100% return for the year.  All of this can be accomplished by closely mimicking the behavior of the Big Boys who have figured out the "secret" of everlasting total returns. 
I have many problems with Mitchell's theory about the Big Boys on Wall Street.  First, if what he claims is true, there are a large number of professional money managers who are guilty of financial fraud on a massive scale.  Theoretically, and according to Mitchell, these money managers are realizing 100% on the money you have invested with them and they are only paying you "8-12%/year" from those profits.  That is what Mitchell actually claims on his radio infomercial.  If what he is saying is true, we have an example of fraud that would make Bernie Madoff look like small potatoes.  How these managers are able to hide the fact that they are obtaining 100% returns and only paying 8-12% returns to their investors is not described.  How they are able to manipulate the system of public accounting associated with professionally managed funds is not detailed.  We are simply told that this is taking place.
Second, if these managers really exist, why have we never heard of them?  We are always told that this group of secretive men and women operate in dark places nobody ever sees and have secrets that they will not pass on to us.  But certainly if this group of people actually exists somebody must know who they are.  Hedge fund managers, a subset of professional money managers, are highly competitive.  It strains credulity to believe that a hedge fund manager who has been able to realize 100% per year total returns would not publicize that fact.  It would be extraordinarily difficult to hide from public view if one is capable of realizing 100% returns year after year in the stock market.  So, who are they?  Give me some names.  Mr. Mitchell says he knows who these people are.  Give me some places where these returns take place, other than the nebulous "Wall Street" and "New York".  No hedge fund or mutual fund manager I am aware of has ever even come close to realizing the sorts of returns Mitchell says the Big Boys are getting.  Give me some actual investment results.   
I can give you some of the most impressive average annual returns ever realized and tell you who realized them.  From 1989 until 2000 Gary Lewis realized over 18%/year in the Van Kampen Emerging Growth Fund.  From 1977-1990 Peter Lynch realized 29%/year in the Fidelity Magellan fund.  Perhaps the greatest investment returns of all time have been realized in Berkshire Hathaway where Warren Buffet has been able to realize 19.7%/year for the past 48 years.  These three professional money managers are legendary for their performance.   The rates of return they were and have been able to realize are some of the best, if not the best, in history.  So once again I ask, where are the triple digit annual returns?  Who are the hidden figures allegedly realizing those triple digit returns?  They should not be hard to produce. 
Third, and as I wrote in a previous posting on this topic, it would be much smarter for these imaginary people to come out of the shadows and start their own mutual funds or hedge funds (essentially private mutual funds).  If these people are really capable of realizing 100%/year, regardless of market conditions, they could open a publicly traded mutual fund and corner the entire stock mutual fund business in a short time.  By charging a simple 1%/year fee for the management of the fund they could become the wealthiest people in the world in a short time.  Why has this not happened?
I conclude the same thing I have concluded in the past.  The scheme, or scam, created by New Venture on Wall Street will not work because it is contingent upon the belief that it is possible to time the stock market and realize astronomically high rates of total return despite market conditions.  If this claim were really true it would be easy enough to prove.  Publish the data that show the person who has been able to do this.  Show me which stocks he held.  Show me when he bought and sold them.  Show me how he realized a 100% return in both 2008 and 2009.  What we will all be forced to eventually admit is that this person does not exist.  Going to a seminar to learn a skill set that will allow you to mimic the stock trades of an imaginary person is not going to make you rich beyond your wildest dreams.  My advice remains the same....when something sounds too good to be true it is not true.  David Mitchell's theory about the Big Boys of Wall Street is not true.  You can take that to the bank.  Or Wall Street if you prefer.

Update:  August 12, 2015

For a defense of the NVOWS program on this blog go here.  The author of the defense has completed the highest levels of the program and presents a reasonable defense of his position in favor of it.  I also critique his defense on the post. 

Thursday, May 30, 2013

10 Reasons To Go To A Colorado Rockies Game

Regular readers of this blog might think I go to a lot of Colorado Rockies games.  You may wonder, how can I go to so many games on a janitor's salary?  Answer:  I can't.  I go to the games because of the kindness and generosity of others.  Were it not for their generosity, I would watch all games from my rocking chair at home.  I was generously provided with a block of tickets for last night's game against the Houston Astros.  I invited the few friends that I have and we went as a group to the game. 
It was a strange night at the stadium.  Or maybe it was a normal night and I just noticed what "normal" is for the first time.  The seats that my wife and I usually occupy are very close to home plate.  These seats were far down the left field line and about a dozen rows from the field.  That put us into a different class of fan.  It also gave me the opportunity to observe things about the stadium and the game that I had missed on previous visits.  So, without any further introduction, I give you my top ten reasons to go to a Colorado Rockies game:
  1. To pay $20 for parking.  I do not know how much the ticket costs for the seats that we sit in.  How could I?  I don't purchase them.  I do know how much it costs to park near the stadium.  We were playing the worst team in baseball, the Houston Astros.  The 40,000+ seat stadium was maybe 25% full.  In other words, nobody was there.  Still, parking lots around the stadium were charging an outrageous $20 for the privilege of parking in a dirt lot and walking for fifteen minutes to a stadium entrance.
  2. To see numerous barf piles.  I do not know how many people showed up for the game drunk.  I do not know how many people became drunk during the game.  I do know that my wife and I saw a record number of barf piles along the sidewalks and concourses of the stadium.  If you want to see more barf piles than anyplace except DisneyWorld (the funnest and barfiest place on earth), go to Coors Field for a Rockies game.
  3. To pay $15 for a beer and a dog.  You got that right.  A beer and a dog will cost you $15.  I once stood in line at Todd Helton's burger joint in the left field concourse.  When I got to the front of the line I discovered it was going to cost me $20 for a cheeseburger and fries.  I quickly realized how it is the Rockies can afford to pay Helton so much money to flirt with the Mendoza line.  Needless to say, I did not have a burger and fries that night.
  4. To pay $8 for a plate of stale nachos.  You got that right.  After eating my "Rockie Dog" (which, by the way, was very tasty) I was still hungry.  So I went to the nacho line and ordered a plate.  It set me back eight bucks.  The chips were stale and the jalapeno peppers tasted like they had been basted in fish juice.  It was not a pleasant experience.  I ate some of them and gave the rest to a kid who was sitting behind me.  He seemed to enjoy them.
  5. To have the pleasure of sitting with clueless fans.  The two seats that we normally sit in are owned by season ticket holders.  Although we may have our disagreements with our fellow fans about when to employ the double switch and how long to allow a starting pitcher to continue in the game, we at least are there to watch the game.  Last night I realized that knowledge and concern for the game decreases in inverse proportion to the proximity to the home plate.  The further away a fan is from home plate, the less he knows and cares about the game.  I had three hipsters sitting in front of me who spent most of the night talking with each other and texting who knows who?  To my right was a yuppie family.  I was sitting next to the 10 year old daughter and her mother was next to her.  They spent the night talking and texting.  My wife was sitting to my left so she was OK.  I had a kid sitting behind me and besides taking my plate of nachos I have no idea what he was up to.  I did hear his mom say that he had consumed too much lemonade and, at one point, I thought I heard her say that he was starting to grow gills, but I am not sure about that.    I do not believe that any of those people saw more than a handful of the plays that took place during the entire game.
  6. To have the pleasure of sitting next to rude fans.  The 10 year old girl sitting to my right refused to sit still.  The section of seats we were sitting in were angled towards the field in such a way that any person who would sit forward in his/her seat would impede the view of the person sitting to his/her left.  When the 10 year old was not texting she was bouncing up and down on the edge of her seat.  I was forced to move forward, move back, move sideways and, finally, allow my seat to rise up and sit on top of it just to see the batter.  Every once in a while the mother would shove her kid back in her seat.  That would last for about two seconds.  At one point the 10 year old girl starting throwing popcorn at her 8 year old brother who was sitting two seats away.  This resulted in my total inability to watch the game and the need to dodge the occasional popcorn kernel.  The mother became aware of what was going on but thought her kids were so cute she stopped texting long enough to record the event for posterity sake on her cell phone.  
  7. To have the pleasure of watching drunk fans charge the field.  There were two of them last night.  Two brainless idiots, no doubt full of fire-water, charged the field and ran around like crazy men until the local security tackled them and ushered them off the field.  I can only imagine what they were thinking.  "I looked pretty cool running around on the field, didn't I dude?"  "I got to show everybody how fast I am, didn't I dude?"  "Did it take them longer to catch me than how long it took me to get thrown from the bull?"  As they were being escorted off the field I secretly, and rather darkly I must confess, wished that they would have been taken to a holding cell and given the opportunity to meet some local Denver police officers.  Several bruises and cracked ribs later they could reconsider the wisdom of their decision to charge the field.
  8. To have the pleasure of going up to uniformed military personnel and thanking them for "their service", whatever that means.  Back in my day military personnel who were not on duty would wear civilian clothes.  It was considered a bit of a social and fashion faux pas for military folks to wear their work clothes outside of the job.  Imagine how strange it would be to see a doctor walking around in scrubs or a janitor walking around with his slop bucket.  But that is not the way things are done today. While going up for my stale nachos I noticed a small line had formed in front of two guys wearing fatigues.  The people in line were breathlessly waiting for their opportunity to shake the hand of these heroic figures.  I do not know about you but I think soldiers wear their uniforms in order to garner attention and, if possible, free drinks.  It is selfish and exploitative.  I found the entire situation tasteless.  
  9. To have the pleasure of having someone screaming in your ear.  I don't know when it happened but some time during the game some 12 year old girl slipped into the seat behind me.  At various points during the game the Rockies electronic billboard operator will flash up a sign exhorting the fans to "make some noise".  This girl took that exhortation seriously.  The scream she unleashed was loud enough to create its own sonic boom (if that is physically possible, and I think it probably is not).  My ear drums suffered more damage than they usually do when I force Q-tips into them.  Fans sitting several rows away turned around to see what had been the source of that unholy utterance.  The little girl thought she was being cute and that the whole situation was cool.  She laughed and giggled as people looked at her in disbelief.  I made a vain attempt to exercise her of the demon of loudness and went back to watching the game.
  10. To have the pleasure of participating in "the wave".  Everybody knows what the wave is.  At some point during a sporting event that involves a stadium filled with disinterested and ignorant fans, the lower IQ models will initiate a process whereby people spontaneously jump from their seats and throw their hands into the air.  Then, the person sitting next to them is expected to do the same thing.  In time the entire stadium is rising in one continuous wave of human stupidity.  It was the bottom of the eighth inning.  The score was tied 2-2.  The Rockies were at bat in desperate need of a run or two.  The heart of the Rockies lineup was coming up to bat.  All attention should have been focused on the game.  What happened?  The wave happened.  The ten thousand or so people who participated in it were deliriously happy at what they were able to create.  It went on for the better part of the half inning.  When the half inning was over the Rockies had not even been able to scratch out a hit but the "fans" were in ecstasy at what they had created.
This list is just from my experience last night.  I could have added other items to the list.  Things like having the pleasure of watching baseball that is played at the level of AA would be one.  Another would be having the pleasure of watching the Rockies continually strand runners in scoring position.  But that is material for another posting and another day.  Those items actually have to do with the game that was being played on the field and, if there is one thing I learned last night, going to a Rockies game has nothing to do with the game that is being played on the field. 

Wednesday, May 29, 2013

Obama's Transparency And The 4th Amendment

Yesterday I wrote about another gross violation of our 4th Amendment right to be secure in our papers and possessions.  In the course of writing that post I mentioned the Bank Secrecy Act of 1970.  As I went through the day yesterday the name of that act continued to haunt my mind.  Why was that particular piece of legislation entitled the "Bank Secrecy Act"?  Who is keeping secrets?  Why is keeping secrets bad or good?  What does secrecy have to do with banking?  As I pondered those questions I remembered that King Obama had recently made a big deal about government agents not keeping secrets.  He believes in government transparency.  In particular, King Obama recently issued this statement in a memorandum about government transparency:  "Government should be transparent.  Transparency promotes accountability and provides information for citizens about what their Government is doing.  Information maintained by the Federal Government is a national asset.  My Administration will take appropriate action, consistent with law and policy, to disclose information rapidly in forms that the public can readily find and use."  There is so much hypocrisy in the statement released by our King I hardly know where to begin my stinging criticism of it.
It finally dawned on me that the Bank Secrecy Act was written in reference to secrets allegedly being kept by banks from the government.  In other words, the federal government believes that it has a right to all of the private information held by banks about their customers.  When banks refuse or fail to deliver that information to the federal government the bank is accused of immorally and illegally keeping secrets from the government.  The obvious question in this scenario is where does the government derive the constitutional or moral authority to be informed about all of the private details of voluntary transactions between banks and their customers?  The 4th Amendment to the Constitution of the United States (the document to which all politicians still swear an oath to uphold) states that, "The right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath of affirmation, and particularly describing the place to be searched, and the persons or things to be seized."  In other words, politicians, bureaucrats, police forces and all other government agents have sworn an oath to not invade our privacy unless first authorized to do so by a search warrant.  That search warrant must be granted by a judge and only after it has been determined that there is probable cause to believe that a crime has been committed.  Every time a government agent, or bureaucratic bank examiner, probes into the private personal information on file at a bank without a warrant the 4th Amendment right of that customer has been violated.  Every time a bank offers up private information about a customer to any government agent the 4th Amendment right of that customer has been violated.  Needless to say, 4th Amendment rights violations occur millions of times every day.
Who has the right to privacy, the government or the citizens who live under that government?  That is a fundamental question in all relationships between rulers and their subjects.  It is a fundamental question for residents within any kingdom.   It was widely understood by prior citizens in what is now the Socialist Democracy of America that the right to privacy applied to the citizens of the land.  Those people who governed the land were expected to be completely transparent in their governing activities.  Just writing that last sentence shows how far we have departed from the original intent of the founding fathers.  In our land today the government invokes the right to secrecy/privacy all the time.  On the other hand, whenever a citizen invokes the right to secrecy/privacy he is arrested for doing so.  My how things have changed.
Allow me to ask a couple of questions of our rulers:
  • Do you know anything about how and why JFK was assassinated that we have not been informed about?  Do you know anything about the 9/11 attacks that we have not been told?  Do you know anything about UFOs, Zombies, or pandemic viruses that we are not aware of?
  • Do you know anything about the Sibel Edmonds case that you have not told us about?  Do you really believe that she is a schizophrenic?  Are all of her charges truly baseless?  (http://www.boilingfrogspost.com/)
  • Have you ever tested any products or weapons on the citizens of this land without their knowledge or consent?  Have prisoners or soldiers ever been unwilling dummies in any of these tests?
  • Have you ever targeted specific individuals or companies with IRS harassment?  Have you audited these people or groups for political purposes?  
  • Since transparency involves telling the truth, have you, Mr. Politician, ever told a lie that you did not later confess to?  Have you ever molded the truth in such a way as to distort reality?  Have you ever withheld the truth knowing that doing so would constitute an act of deception?  
Despite King Obama's affirmation of transparency I believe we all understand that politicians, police forces and other government agents exist for the purpose of providing us a continuous supply of disinformation.  All they do is lie.  All they are capable of doing is lying.  When a politician lies he gets elected.  When he lies even more he gets reelected.  When he lies for his entire career he gets a lifetime pension and the accolades of the citizenry when he retires.  When a citizen lies to a politician he gets arrested.  When a citizen refuses to testify before Congress he is imprisoned.  But that is not all.  When a cop lies to a citizen in order to gets a conviction it is considered good police work.  When a citizen lies to a cop he gets arrested.   In fact, all a citizen has to do to find himself in big trouble during a confrontation with a cop is refuse to answer any questions other than to identify himself.  That guarantees a citation will be issued or the handcuffs will be slapped on.  Try it next time you are pulled over.  Refuse to speak to the officer.  Provide your identification and refuse to do anything else.  How do you think the confrontation will turn out?  How do you think the application of your right to remain silent and your right to be secure in your papers and possessions will aid your cause when facing down the gun-toting, costumed freak that has illegally and immorally detained you?  I think we all know the answer to that question.
Let's go back to the last King.  What did King George know about the alleged weapons of mass destruction being manufactured by Saddam Hussein?  When did he know it?  Why did we go to war with Iraq?  When were the citizens of the SDA clearly informed on the reasons for the war against Iraq?  Why did those reasons change?  If government transparency is so important, why was there so little of it in the Iraqi war?  If government transparency is so important, why is there so little of it in general?  If King Obama really believes what he says, why does he not do what he says?  The list goes on:
  • Did Nixon keep an enemies list?  If so, why?  What did he do with it?
  • Did Hoover keep secret files on SDA citizens?  If so, why?  How did he use them?
  • Did the FBI follow John Lennon?  Martin Luther King?  Malcom X?
  • Did the CIA attempt to assassinate Castro?  If so, when did it stop trying?  
  • What really happened in Roswell, NM?
  • What really happens in Area 51?
  • Did the FBI know in advance that there would be a bombing at the Boston Marathon?
The list of government secrets is practically endless.  Meanwhile, the government insists that they have a right to know everything about you.  The Census Bureau will interrogate you about the most private details of your personal life.  You are required to answer their questions.  Your failure to do so can result in your being punished.
Government, in all of its various forms, has the right to know only two things about me.  First it can know who I am and how I am legally related to the other members of my family.  Second it can know how much money I make each year prior to extracting a maximum of  10%  of that income from me in taxes.  Beyond that the government has no right to any information about me, my life, my choices, my ideas, my investments, my banking options, my associates, my religious beliefs or anything else it might want to know.  When the government looks my way it should see a vague shadow.  Conversely, when I look the government's way I should see everything that it does in great detail.  HA HA HA HA HA HA HA.  The water temperature continues to rise and only wackos like me notice it.

Tuesday, May 28, 2013

SDA Extorts $1.9 Billion From UK Bank HSBC

In a story that has generally gone unnoticed, a group of government agencies from the Socialist Democracy of America has successfully extorted $1.9 billion dollars from HSBC, a major player in the United Kingdom's banking industry.  In an article found at wsj.com and written on December 11, 2012, it was reported that "HSBC Holdings acknowledged that for years it ignored possible money laundering as part of a record $1.9 billion settlement with U.S. authorities that caps the bank's disastrous foray into the U.S. market."  Exactly what did HSBC admit to?  The article goes on to say that "as part of the agreement, the bank will admit to violating the Bank Secrecy Act, the Trading with the Enemy Act and other U.S. laws intended to prohibit money laundering."  There is so much wrong with this scenario I scarcely know where to begin.  Still, I will try.
The Bank Secrecy Act was passed by Congress in 1970.  It was a gross violation of personal privacy and dramatically accelerated our progress towards the total elimination of the 4th Amendment to the Constitution of the United States.  Richard Nixon was President of the SDA when the Act was passed.  Ostensibly designed to allow government agents to uncover and prosecute drug trafficking and tax evasion, the act was expanded even further by the passage of the Patriot Act in 2001 when the rules that applied to banks were expanded to include all companies that deal with the financial assets of SDA citizens.  Under the original terms of the Bank Secrecy Act, all financial institutions in the country were required to clandestinely track and report a wide variety of financial transactions to the federal government.  No person who was being tracked was permitted to be informed of the surveillance that was being conducted against him.  To do so would have resulted in fines and imprisonment for members of the financial institution.  All of these rules and violations of your right to privacy are still in force today.
Probably the most well known of the provisions of the Act is the requirement that banks report all cash transactions in excess of $10,000 to the federal government.  As the public discovered this rule those good folks who would engage in large cash transactions began to break their transactions into smaller amounts.  The plan was to avoid the $10,000 reporting threshold.  There are countless stories of bank regulators fining profit seeking banks for their failure to report a handful of $9,000 cash transactions that were aggregated.  As a result, many banks simply started reporting all cash transactions above a certain internally determined amount to the government.  If you have ever engaged in a large cash transaction the odds are pretty good the FBI knows about it.
Transactions that involve the crossing of international borders are subject to intense scrutiny.  Any transaction in excess of $10,000 must be reported to the government.  Any annual aggregate of transactions that attains the magical $10,000 level must be reported to the government.  In addition, bankers are expected to monitor every single banking transaction you engage in and report any "suspicious activity" to the FBI.  That particular rule requires the filing of a SAR (suspicious activity report) with the FBI.  Like all other reports about your activity that are filed with the government, you are never permitted to become aware that you are being watched.  To inform you of what is taking place will result in fines and imprisonment for the offending banker.  The Bank Secrecy Act is illegal and immoral.  It is in direct violation of every citizen's constitutional right to be secure in his papers and possessions.  No search warrant is ever issued prior to the creation and filing of a report to the government about your financial activities.  Everyone reading this blog has been violated many times over the years.
The Trading With The Enemy Act was passed in 1917 and is still in force today.  Basically it says that any SDA citizen who engages in free market transactions with someone the government has declared to be an enemy is behaving illegally and subject to punishment.  Although it is possible to be highly critical of the historical application of the provisions of this bill (another blog posting for the future), there is some reasonableness in this law.  In the days when we knew who our enemies were it made sense to forbid free trade with them.  When our enemies wore uniforms that identified them as our enemies it was easy to avoid trading with them.  When our enemies lived behind a particular geo-political boundary it was easy to avoid trading with them.  The situation today, however, is very different.  Even the best intelligence agencies (and I use that term very loosely) within the secret recesses of the SDA are incapable of precisely defining who our enemies are.
When King George declared war on "terror", he created so much ambiguity in regards to who our enemy is that it is practically impossible to enforce the terms of the Trading With The Enemy Act in our country today.  How is a businessman, or a banker, expected to know if the company he is trading with has ties to some alphabet soup terrorist organization nobody has ever heard of?  How is a banker expected to know and anticipate that the company he is trading with today could become tomorrow's terrorist organization?  How does he know when a terrorist organization might suddenly become a legitimate company?  It is not a matter of spending enough money or paying enough private investigators to find this information out.  I would suggest it is impossible for a banker to know when he is and when he is not engaged in trade with an organization that could possibly be considered to be an enemy of the SDA.  The responsibility for determining the status of a bank's trading partner should be with the government of the SDA, not the bank itself.  But that is not the way it works in the SDA.  Government regulators are in the business of extracting fines and expanding the size of their bureaus.  Actually providing service to banks is something they would never consider doing.
HSBC expanded operations into the SDA with the hope of becoming a significant player in the SDA banking industry.  However, unlike their compatriots in the SDA, the UK bank had little regard for the immoral and illegal rules that SDA banks are expected to operate under.  Bank regulators got wind of their violations of the rules and the wolves began to circle.  Sensing that millions, perhaps billions, of dollars could be extorted in fines, all sorts of government agencies piled on in their various attempts to punish HSBC for sins against the immoral and illegal SDA rules.  In exchange for not continuing to pursue HSBC, the bank agreed to admit to sins against the SDA and cough up almost $2 billion dollars.  That $2 billion dollars will fill the coffers of the various bureaus that attacked HSBC and be used to pay bonuses to the heroic government agents who have protected us from the depredations of HSBC as well as to expand the size of their kingdoms......I mean, bureaus. 
HSBC should be applauded for standing up to the bank regulators and refusing to play the game by their rules.  I applaud the bank for ignoring the onerous regulations.  I wish the bank would have fought the charges and brought this dark and secret world of bank regulation in to the open air of public scrutiny.  Such was not to be.  In an extremely disappointing turn of events, even that bastion of free market economics found at Forbes Magazine has jumped on the "I hate HSBC" bandwagon.  This article (http://www.forbes.com/sites/halahtouryalai/2012/12/12/final-thought-on-hsbc-settlement-how-much-bad-behavior-will-we-tolerate/) at forbes.com amazingly takes the socialist and statist position that it is the job of government to protect us from evil, profit-seeking bankers.  The lady who wrote the article calls for more severe sanctions against HSBC.  I guess it is time to admit that socialist statists have been successful in their propaganda campaign against profit-seeking banks.  It seems as if everyone now agrees that all banks are evil and all bank regulators are diligent protectors of the American way when,  in fact, the exact opposite is the truth. 
Perhaps the most sad thing in this entire affair is the reaction that you, the reader of this blog, are having to what I have written.  You are no doubt saying things like "this guy is making a mountain out of a molehill", or "the invasions of your privacy should not be a source of concern if you are not behaving illegally."  These types of reactions show that it is too late for you to be rehabilitated.  You are so far down the pathway of state worship it is impossible for you to conceive of what it means to be truly free.  You are so accustomed to seeing politicians and bureaucrats as your moral superiors that you have no hesitation when you give up your right to privacy whenever they come calling.   I suspect the cause has been lost.  The water is just starting to boil and the frog is still totally unaware the temperature has been rising.

Monday, May 27, 2013

Los Alamos: A 4th Amendment Free City

Last Friday I posted an article to this blog about a sign I saw on a restaurant wall in a small New Mexico town.  The town was White Rock and it is essentially a suburb of Los Alamos.  Los Alamos, if you are not aware, is known as the birthplace of the atomic bomb.  Originally founded as a summer camp for boys, the town was taken over by the federal government during WWII and turned into a location for the top secret "Manhattan Project".  Los Alamos was the research and design laboratory for the atomic bomb.   "Fat Man" and "Little Boy", two atomic bombs, were built in Los Alamos and detonated over Japan near the end of the war.
Los Alamos continued to exist after the war as a town dedicated to weapons research.  Over time the laboratory branched out into all sorts of nuclear research, as well as other types of scientific research and development.  The city was opened to the public at the conclusion of the Manhattan Project and has remained an "open" city to this day.  Los Alamos National Laboratory, or LANL, is the primary employer in town although all of the usual supporting businesses have come to exist in this city of about 18,000 souls. There is a fascinating museum that tells the tale of the town that is well worth your time if you ever visit there. 
While staying in White Rock, my wife and I thought it might be fun to take a drive into the Jemez mountains surrounding Los Alamos.  In particular we were interested in the "Valle Grande", a large caldera in the heart of the extinct volcano that created the Jemez mountains.  Getting to the caldera proved to be more of a problem than we expected.  The main highway to Los Alamos from White Rock, called Pajarito Road, had been closed after 9/11.  Apparently the powers that be thought that the various scientific installations found along the road were potential locations for terrorist attack.  In response to their own fears they closed the entire highway.  We were instructed to take the "truck route" to Los Alamos instead.  Dutifully following orders we made our way to the truck route.  After about 8 miles we came to the series of large plateaus upon which Los Alamos sits.  We were following a NM state highway (I forget which number) which, according to the map, would take us into the heart of the Valle Grande.  It was then I saw the sign.
In front of us, as we were driving along minding our own business, was a highway sign that said, "All Vehicles In This Area Are Subject To Search Without Notice."  We were directed into a large roundabout that had about a dozen gates at the far end.  Each gate had a barricade and a guard standing beside it.  It was obvious what was about to happen.  We were going to be searched.  I felt like I was in a scene from some old spy or war movie as the good guys approach the evil guard station and try to bluff their way across the border.  Mind you, we were driving on a state highway.  We were driving on a public road.  We were minding our own business.  We were not breaking any laws.  We were not even going into the town of Los Alamos.  Our plan was to drive past the town and on to the Valle Grande.  None of that mattered.  As we found out later, we were in close proximity to the Administration Building for LANL and apparently that land is holy ground that must be protected at all costs.
The 4th Amendment to the Constitution of the United States says, "The right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath of affirmation, and particularly describing the place to be searched, and the persons or things to be seized."  As we approached the guard station we both realized that our 4th Amendment rights were about to be violated. Short of cancelling our plans and turning around, there was nothing we could do about it.  If we wanted to drive on a state highway that is open to the public to visit a part of a public National Forest we thought might be interesting we were going to be required to give up a Constitutional right and submit to an illegal search at the hands of government agents. 
I pulled up to the guard and rolled down my window.  I looked at the guard and he looked at me.  I said nothing.  He said nothing.  An awkward period of silence followed.  Finally, after what seemed like several minutes to me, he told me to produce some identification.  I had no idea what he wanted from me so I was glad that he had at least finally spoken to me.  I suspect most people who go through the 4th amendment free zone know what is expected of them and do it automatically.  I did not.  I hoped that did not get me classified as a malcontent and subject me to additional harassment.  I handed the armed guard my drivers license and he examined it and the car.  Then he handed it back and told me I was free to proceed.  I did so without further discussion.
I discovered later that the state highway I was driving on had to be kept open to the public.  However, due to a paranoid fear that terrorists might attack the main administration building for LANL, the federal government had installed the unconstitutional guard stations in the vicinity of the building.  Why any terrorist in his right mind would want to attack an office building that houses hundreds of federal government bureaucrats is a mystery to me.  In fact, if I was a terrorist, I would leave all office buildings housing federal bureaucrats alone.  Those federal bureaucrats do more to terrorize the citizens of the SDA than any Islamic jihadist ever could.  No matter, those bureaucrats were in fear for their lives so they took taxpayer dollars and constructed a Nazi style guard station near their building.  Every citizen who passes by is subjected to an unlawful search of his property and person.  Every citizen who passes by is informed that the Constitution does not apply to him in this place.  Something is very wrong about this situation.
As we drove away from the guard station I continued to fume about what had just happened.  My wife, who has a more stable personality than I do, exhorted me to enjoy the scenery and forget what had just happened.  That was hard to do since most of the scenery that we saw from that point onward consisted of burned down forest.  It turns out that a huge forest fire, started by an agency of the federal government no less, had burned through Los Alamos several years earlier (http://en.wikipedia.org/wiki/Cerro_Grande_Fire). The resulting devastation was profound.  We drove through dead trees all the way to the Valle Grande.  While driving through the Valle Grande I could not help but think about the slogan the federal government has shoved down our throats for years.  You know the one.  It says, "Only YOU Can Prevent Forest Fires".  How ironic.  Practically all of the largest forest fires started in the western states, including New Mexico, were started by government agents, not private citizens.  Maybe agents of the federal government should tend to their own affairs before they tell us how to behave. 
By the time we started back I was in no mood to go back through the guard station so we found a longer route back to our room for the night.  It too was lined with burned forest for almost the entire route (14 miles).  Later I learned that there was another road that takes people to Los Alamos.  It is called the "hill road" and it avoids the guard station we passed through.  If I ever return to Los Alamos I will take the hill road.  I have no desire to subject myself to the federal gestapo again.  I conclude that for all of you who want security at any cost and for all of you who believe the federal government can provide it, visit Los Alamos.  It is a 4th Amendment free city. You'll love it and the guard stations.