San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Friday, April 25, 2014

Adulterers Should Be Executed

I have drawn the wrath of the militant heterophobic lobby with some of my recent posts to this blog.  Okay, that is not exactly true.  I will tell the truth.  I have not actually drawn the wrath of anyone because the handful of people who read this blog each day, maybe numbering five or six people, either aren't angry enough to write me or they already agree with me.  Still it is nice to pretend that I managed to make someone in the blogosphere angry.  In over two years of writing this blog I have only had two people get angry enough with me to post a comment to it calling me stupid.  So I have decided to try another tactic.  Today I am going to argue that practically every citizen in the Socialist Democracy of Amerika deserves to be executed.  Please allow me to make my case.
To make this argument I have to posit several presuppositions.  Almost everyone who will read this post will disagree with most or all of my presuppositions.  Presuppositions, being what they are, are not the result of a logically necessary syllogism.  That does not mean that the following presuppositions could not be the conclusion of a logically necessary argument.  In fact, all of them could be.  I just don't have the time or the energy to argue for every one of my presuppositions today.  So, in the spirit of full disclosure, I give you my presuppositions in advance.
My first presupposition is that God's law is morally perfect.  My second presupposition is that God's law, including both the moral and civil components, should be the law that is enforced in the Socialist Democracy of Amerika.  That makes me known as a theonomist.  In the old days, back when the Puritans and Pilgrims roamed this land, almost everyone was a theonomist.  Then, with the creation of federalism and the ratification of the US Constitution, theonomy was expressly banned from the land.  Since then we have come to be ruled by laws created by men rather than God.  I don't think that is working out very well but who am I to go against the combined wisdom of every member of Congress?  My third presupposition, which is really just an expansion of my second presupposition, is that the biblically mandated penalties for failure to observe the moral law of God should be enforced by the SDA government.  I think that is all you need to know about my presuppositions.  Now let's get to the heart of the matter.
Biblical law stipulates the death penalty for a number of offenses.  In particular, the death penalty comes into play whenever a person is found guilty of committing murder, striking or cursing a parent, kidnapping, adultery, incest, bestiality, homosexuality, the practice of witchcraft or satanism, habitual criminality, blasphemy, idolatry and refusing to abide by a court decision.  I recognize that limp-wristed, sissified modern men can barely bring themselves to consider the death penalty for even the most hardened mass murderer but God is not so squeamish.  He orders the execution of many different types of sinners and criminals.  He does so because He wants to have those people immediately ushered into His throne room where He can deal with them directly. 
That is one of the things about the death penalty almost nobody understands.  Human beings, being the God-hating sinners they naturally are (don't forget about original sin) look at the death penalty exclusively from the human level.  God does not.  Human beings, being the lovers of sin that they are, think that God needs to lighten up and take a more relaxed stance towards punishment for sin.  God does not lighten up nor does He overlook sin.  God declares that he who sins shall die.  No exceptions.  In the case of death penalty activities, anyone who commits one of them should be executed by the state and immediately ushered into the Kingdom of God where He will deal with the final disposition of each man's soul.
Most heterophobes, and others who support the position that homosexuality is a morally proper behavior, become quite upset when anyone like me has the audacity to declare that the practice of homosexual behavior should result in the execution of the practitioner by the government.  I do not consider that to be my responsibility.  I did not invent God's law.  I am just telling you what it says.  Today, however, is a good day to hold many other people's feet to the fire for, you see, almost every single citizen in the SDA would be executed by the government if the provisions of God's law were applied without discrimination. 
In particular, today I want to discuss the fact that all adulterers should be executed.  According to a recent poll by NBC news of adults age 20-59, "women have an average of four sex partners during their lifetime and men have an average of seven."  Why is this important, you ask?  Most people unfamiliar with the provisions of biblical law believe that they are free to have sex with as many people as they want as long as none of those sexual contacts is with someone who is married.  Most people define adultery as sex with a married person.  Most people are half right.
Although it is true that adultery is biblically defined as having sex with a married person, the definition of what it means to be married is highly distorted by today's sexual hedonists.  Unknown to most people and, sadly, generally unknown even to those who profess to be Christians is the fact that God has declared that the act of sex constitutes the creation of a marriage bond.  The biblical doctrine of marriage requires the swearing of a marriage oath and physical consummation, in that order, to create a marital bond.  Human beings, being the lustful and sinful creatures they are, typically reverse the order of those two elements.  In some cases they leave the swearing of the oath out entirely and decide to cohabit without one.  This does not change the fact that men and women are morally required to swear an oath of marriage after they engage in sex with each other.  Whether they do or do not swear the oath does not change the fact that, from God's perspective, they are married when they have sex.
It is strange that I should even have to be writing this stuff.  Not that long ago everyone knew what a "shotgun wedding" was.  Everyone also knew why a shotgun wedding was the proper response to profligate couples who were seeking to gratify their sinful flesh while ignoring the provisions of God's law.  If a young couple were discovered to be cohabiting they would be forced to swear the oath.   Those were to good old days.  Today, with men and women having from four to seven sex partners during their lifetimes it is necessarily the case that almost everyone is guilty of adultery, in one form or another.
But things, as they usually do, get much worse.  According to another national poll, almost half of all couples now live with someone prior to getting married, if they get married at all.  The average length of the cohabitation is 22 months.  After that they move on to someone else.  Many people go through their entire lives in these "living together" situations.  It never occurs to them that they are actually engaging in multiple corrupt marriages and multiple cases of adultery.  They continue to live with the moral delusion that they are committing no sin because they swore no marriage vow.  Then, to top things off, according to a survey by MSNBC.com, nearly half of all married couples have committed what is generally recognized as adultery. 
So there you have it.  If you have had sex with two or  more people during your lifetime you are guilty of adultery and, according to biblical law, should be executed by the government.  The only exception to this rule would be if you had sex only with your spouse who then died and you remarried and had sex with a second spouse.  Other than under the terms of that exception you are found guilty as an adulterer.  I believe it is fair to say that the overwhelming majority of all people who are presently alive in this land are therefore guilty of adultery.  It therefore necessarily follows that practically everyone should be executed.  And I have only been dealing with one of the sins that carries a death penalty sanction.  If I examine the remaining immoral behaviors that should result in the application of the death penalty I suspect that I would be forced to conclude that everyone in the SDA should be executed.  So take heart you heterophes, you will not be alone at the gallows. 

Thursday, April 24, 2014

Bonds Are For The Foolish And The Ignorant

Never buy bonds!  Never buy bond funds!  Bonds are a sucker's bet on the future that will break your heart.  Bonds are a waste of your time and money.  Bonds will destroy your wealth in the name of protecting your portfolio.  Bonds will bring you financial losses while promising you price stability.  Everything bond salesmen tell you is a lie.  Now, have I got your attention?  Good.  Let's talk about bonds.
I was reading a financial website yesterday when I came across a survey of "experienced investors"  designed to show how much they knew about various types of investments. What interested me was the response of these allegedly thoughtful and wise investors to a series of questions about bonds and bond mutual funds.  One of the questions was this, "What happens to bond prices when interest rates rise?"  Sixty percent of the respondents stated that bond prices either remain flat or rise when interest rates rise.  The correct answer to the question is that bond prices fall when interest rates rise.  I conclude that well over half of the folks who have made the crazed decision to put some of their hard earned money into bonds and bond funds do not even know that they are going to lose money when interest rates rise.
Think about it for a moment.  Imagine you have just purchased a 10 Year Treasury bond paying 3%.  You spent $10,000 on your purchase and you will receive a whopping $25/month in interest throughout the life of the bond.  Ten years later you cash in your bond and you get your $10,000 back.  The fact that you eventually get your money back is probably what makes most people believe that bonds either remain stable or increase in value when interest rates rise.  But you should never confuse the maturity value of your bond with the actual value prior to maturity.  The value of the bond prior to maturity changes every single day.
What would happen to the value of your bond one year later if the interest rate on a 10 Year Treasury bonds increased to 4%?  You are holding a bond paying 3%.  Why would any investor want to purchase your bond when she could put her $10,000 into a newly issued bond paying 4%?   The answer to that question, of course, is that no investor would be so foolish as to buy a 3% bond when a 4% bond is available for the same price.  So something has to happen to the price of your lower interest paying bond.  What happens?  It is discounted in value so that its yield to maturity equals the currently available 4% bond.  That means your bond just went down in value.  If you sell it you will get something less than the $10,000 you paid a year earlier.
The opposite happens when interest rates fall.  Imagine now that you are holding a 10 Year Treasury bond paying 3% and currently available Treasury bonds are paying 2%.  What happens to the value of your bond?  Quite clearly it goes up.  Investors are willing to pay you a premium in order to equalize the value of your 3% bond when compared to the presently available 2% bond.
The same thing happens in bond mutual funds.  Since bond funds hold hundreds of different bonds it is not possible to hold a share of a bond fund to maturity.  As a result the day to day value of your bond fund is going to vary depending upon the day to day changes in interest rates.  When rates rise the bond fund net asset value will decline.   Conversely, when rates fall the bond fund net asset value will rise.  The erosion in value of a share of a bond mutual fund can be significant.  Imagine the discount that must be taken to adjust for an increase in interest rates from 7.0% to 15.8% over just five short years.  That is what happened between 1976 and 1981.  People have forgotten about the bloodbath taken by bond investors during that time of rapidly rising interest rates.  I picked one bond fund at random to see what happened to its price during that period of time.  In November 1976 it was trading at 15.62/share.  In September of 1981 it had dropped to 10.25/share.  For those of you doing the calculation, that is a 35% drop in value.  When was the last time a bond fund salesman warned you about that kind of bond market volatility?
Since 1981 bonds have experienced a secular bull market.  The 10 Year Treasury has dropped from 15.8% to its present 2.7% yield.  As a result bond prices have skyrocketed.  Another way of putting this truth is to say that bonds are in a huge speculative bubble.  Buying bonds today essentially guarantees that you are purchasing an investment that is doomed to burst sometime in the near future and bring about large capital losses on your part.  Still, investors continue to pour money into bond funds.  The week ending March 19, 2014 saw almost a billion dollars flowing out of stock mutual funds while 2.5 billion dollars poured into bond funds.  During the two weeks ending April 16th, when many investors were funding their tax qualified retirement accounts, domestic stock mutual funds received $2.7 billion in inflows while bond funds took in $2.2 billion.  These retirement accounts are, by definition, long term.  Still investors put almost as much into bond funds as they put into domestic stock funds.  I have a prediction to make.  The day is coming, in the not too distant future, when millions of bond fund investors are going to be a combination of very angry and very sad.  A word to the wise....don't be one of them.
Bonds continue to be sold and investors continue to flock to them for one primary reason....the allegation that they are "safe" when compared to stocks.  By now you should be able to see that that allegation is simply not true.  Bonds could easily experience a 35% bear market, or worse, in the near future.  A bear market of that magnitude rivals that of some of the greatest bear markets in the stock market that people are so afraid of.  The problem is that investors have notoriously short memories.  Everyone remembers the stock market bears of 2000-2001 and 2008-2009.  Almost nobody remembers the bond bear market of 1976-1981.  That ignorance will extract a penalty for those who buy bonds.
The title of this post is that bond investors are both foolish and ignorant.  They are foolish because they believe it is possible to purchase investments, especially those "guaranteed by the full faith and credit of the United States government" that have little to no risk.  But there is no such thing as a risk free investment.  Most people calculate risk as a function of daily price swings.  That is what wrongly keeps so many investors out of the stock market.  Being foolishly afraid of price fluctuations in the stock market, they flock to the bond market where those same price fluctuations also exist but are rarely discussed or long since forgotten.  Although price volatility is a factor in risk calculation, it is by no means the only one.  Equally important in evaluating risk is the risk associated with obtaining a rate of total return that is so low, after adjusting for inflation and taxation, that the investor actually loses money over the long term.  That is what happens with bonds.  There is a reason why knowledgeable investors call long term government bonds "certificates of guaranteed confiscation." 
Besides being horrible long term investments bonds have another powerful negative associated with their purchase.  When you buy a government bond you are buying a promise to pay interest for a specific period of time.  Have you ever asked yourself where that interest payment is going to come from?  You should.  Government has only two ways of raising revenue and thereby paying your interest.  Those two means of revenue generation are taxation and inflation.  Government will both tax you and create money out of thin air.  From the revenues generated by these two legalized forms of theft the government will then pay you the interest due on your bond.  In other words, the interest payments you are receiving are coming from the money you already paid in taxes or had stolen from you via inflation.  Who in his right mind would ever purchase an investment if he knew in advance that the interest he is about to receive is first going to be stolen from him and then given back at a later date?  Nobody that I can think of would consciously do that yet millions of investors do it every day.  Why do they do it?  Because they are ignorant as to how bonds work.  I conclude that bonds and bond mutual funds are great investments for the foolish and the ignorant.

Wednesday, April 23, 2014

Whatever Happened To Mental Toughness?

Mountaineers in the early days of European mountaineering used to speak of "hard men."  Hard men were men accustomed to deprivation.  They thought nothing about minor inconveniences like spending a sleepless night out under the stars shivering through freezing conditions or slogging through a non-stop rain.  They were so unaffected by those conditions they would write of them as if they were nothing more than a mosquito bite.  Spending days on end with little sleep in harsh conditions was simply the price to be paid to attain the greater goal of an unvisited summit.  Avalanches and gaping crevasses were simply par for the course.  Painfully slow progress up the mountain was the norm.  Yet none of them complained and none of them turned back.  No matter how they might have felt physically, they remained mentally tough.
I remember reading about John Muir years ago.  John was a hard man.  He would head off to explore the Sierra Nevada with nothing more than a tarp, the clothes on his back and a cup with which to drink water.  His motto was that nobody needed to carry food for any trip that lasted less than seven days.  All he needed was plenty of fresh water.  He could catch up on his eating when he returned from his adventure.  Can you imagine anyone thinking that way today?  My goodness, people can't even skip a midday meal these days without throwing an apoplectic fit and telling everyone who will listen that they are hypoglycemic and "dying of hunger!"  What a bunch of sissies we have become.
I was reading another story, in this case an actual diary, about a woman who was part of a wagon train moving west.  She told of hardships unknown to people today in a totally matter of fact manner.  Her traveling party could go for long periods without food or water.  They would suffer heat, dust, bugs and wild Indians.  In the particular case of this lady she gave birth to a stillborn child during the journey.  I vividly remember her account primarily because she made such a small deal out of it.  She noted that God is sovereign and had taken her child.  She also noted that God is just and that the child's spiritual status was in God's hands.  Other than that, she had little to say.  She pressed on.  She did not complain. She was mentally tough.
People used to eat what was set in front of them and be glad to have it.  Nobody complained if, after the meal, they felt a little gastrointestinal discomfort.  Nobody complained if they experienced a little bloat.  Nobody stopped eating particular foods because it gave them heartburn.  Today every person in the known universe has a food allergy of one sort or another.  It is impossible to throw a party in which food will be served without first finding out the specific dietary requirements of every person who might attend.  We are surrounded by glu-tards (people who cannot eat gluten).  We are surrounded by people who are allergic to sugar or flour or who knows what else.  If, after each meal, the feeling these people experience is not total physical contentment they set an appointment with their doctors to find out the reason why.   Everything must be perfect all of the time or something is wrong and somebody is going to pay.
Are these people from the past just cruel and heartless automatons from another era or are they sterling examples of mental toughness?  I don't believe that human nature has changed one iota since Adam so I am prone to believe that the people I have described above, plus many more from the past, had all of the same powerful emotions that we experience today.  The difference is not in what they felt but in how they dealt with how they felt. When times got tough, they got tougher.
I was reading "Ask Amy" today.  I was struck by the first letter.  It was written by a twenty-something male who is married to his "high-school" sweetheart. He wrote that he is growing tired of her and that their relationship no longer excites him.  His wife is about to give birth and he is excited about that but he wants to divorce her and have a fling with an old college acquaintance.  He asked Amy how he should deal with his conflicted emotions.  He was so sad.  I almost puked up my Cheerios.
Are you kidding me?  How can anyone be so selfish as to not understand that his marital vows bring a certain responsibility to fulfill them?  How can anyone be so emotionally immature as to believe that simply because he is no longer hot to trot with his wife he is free to abandon her for someone he is hot to trot with?  How could any self-respecting man ever write something like that fellow wrote?  What a sissy he is.  I can't even imagine the thought process that would turn a man into such a sissy.  I wish I had a stronger word than 'sissy' to use for these guys.  They are pathetic.
I think a big part of our modern problem has to do with expectations.  Children are raised as the center of the universe. They are trained to expect that everything will always work out in a way that suits them.  I watch the way Yuppies raise their children and it is quite obvious that whatever Junior wants, Junior gets.  No sacrifice is too much for Junior.  In my day (does that sound curmudgeonly enough?) kids were raised to take an interest in the lives of the adults around them.  The universe revolved around the adults and the kids would be in-grafted into the adult world over time.  Today adults are ordered by touch-feely counselors and other priests of psychiatry to center their universe around kids.  We have it exactly backwards.  When kids become the center of the universe their expectations about the future are so incorrect it is impossible they will not experience serious disappointment and depression when things do not turn out like they desire or as they expect.
In the old days most folks expected hardship.  Life, as they say, was miserable, brutish and short.  When things did not turn out that way people were thankful.  When things did turn out that way it was simply what they expected.  It was no big deal.  Back then folks assumed responsibility for their own actions.  Today nobody does.  Back then folks did not desperately seek to be placed into some government created class of "victims" in order to receive special privileges and transfers of taxpayer dollars to them.   Today seeking victim status is the full time job of most people.  Everyone wants to be a victim of something.  It allows them to be the center of attention plus it comes with all sorts of government granted advantages that non-members of the class never receive.
Let's face it.  Most people are wimps.  They wilt at just the slightest life obstacle.  They collapse into a pile of quivering, whimpering, self-analyzing sissyness at the slightest provocation.  They complain about everything.  It is too hot.  It is too cold.  It is too wet.  It is too dry.  They have to wait "forever" in line when the actual wait time is a couple of minutes.  Listen to the conversations of most folks. They are little more than constant litanies of complaint about how hard their lives are.  As a result of those hardships they believe they are entitled to be exempt from personal responsibility.  Because life is hard for them and nobody else everyone in the world is expected to adjust their lives to accommodate them.  Put all of these folks together in the same room and it is no wonder nobody gets along.  
I heard a story on the television news yesterday.  I didn't see the story because I was out on the back deck grilling some burgers at the time.  That horrific incidence of burger grilling resulted in my losing some of my beard when the grill flamed up as I ignited it.  That was followed by a shout of pain emanating from my mouth as some grease from the burgers hit my hand while turning them.  The incident concluded with a fit of coughing as smoke from the burned burgers filled my lungs.  It was a difficult experience I was entirely unprepared for.  But, enough about my overwhelming hardships, let's get back to the news report I heard.
It was about the poor fellows who own the cantaloupe farm in southeastern Colorado where listeria broke out a couple of years ago.  Thirty three people died as a result of that outbreak.  I assumed that the lives of the brothers who owned the farm were over as they knew them.  They would be sued into oblivion and end up in some SDA debtor's prison.  The trials were all conducted, the judgements were all rendered and the brothers were ordered to pay hundreds of thousands of dollars to the families of those who died in the accidental outbreak of listeria.  They were  not found guilty of negligence of any sort.  It was just an terrible accident.  And then, much to my surprise, something unheard of happened.  It warmed my heart.  Only three of the thirty three families affected by the listeria deaths decided to pursue their claims against the brothers who own the farm.  Imagine that.  Thirty families pass up an opportunity to extract cash from innocent farmers even after they have won the litigation lottery!  I had to sit down.  Here are thirty families who are showing character.  Here are thirty families who are not out for blood.  Here are thirty families who do not have a victim complex.  Here are thirty families with mental toughness.  Good for them.  Mental toughness might be on the endangered species list but it still exists in some people.  Are you one of them?

Tuesday, April 22, 2014

Surprise! I'm Back In Style

I had a strange experience a couple of days ago.  It was a totally unexpected, out of the blue type experience.  It shocked and surprised me beyond belief.  You probably will not believe this but for one brief moment I found myself dressed according to the popular style!  Yes, I was hip.  I was cool.  I was fashionable.  I was back in style.
The Welsh are not mavens of style.  We are a far too practical people to be stylish.  Most attire that is considered to be in style is extraordinarily impractical.  This is especially true of women's clothing.  Women's shoes are clearly designed by some ex-prison camp torturer who takes sadistic pleasure out of watching women walk about with horrible contraptions on their feet designed to induce pain and long term structural damage to their feet.  Women's clothing fashions mostly appear to be designed by aged prostitutes who create them with an emphasis upon showing as much cleavage as possible.  Although this design style might accomplish the goal of getting just about every man in visual contact to leer at a woman's bosom, it can hardly be considered properly modest attire for a woman not interested in a constant barrage of wolf whistles and lustful stares.
The Welsh are practical.  When it rains we put on something that will keep us dry.  When it is cold we put on heavy clothing.  When it is warm we wear light clothing.  Being fair skinned we avoid prolonged contact with sunlight in order to avoid sunburn.  Being tender of foot we wear footwear at all times.  Being bald of head we wear some style of hat at all times.  These things just make sense.  It matters little to us if the pattern sewn into the cloth of our pants matches the color, texture or pattern of the material in our shirts.  All that matters is that the clothing serves its purpose of protecting the amazingly beautiful and hairy Welsh body underneath it. 
There are reasons why no fashion conventions are held in Cardiff.  There are reasons why no famous clothing designer hails from Wales.  When you think about it, and most people don't, fashion is little more than random change and the application of peer pressure.  One day people are walking about sporting aviator sunglasses.  A year later those aviator sunglasses are now terribly out of style and everyone is walking around wearing ridiculous looking huge, flat white plastic framed sunglasses.  It looks as if a huge group of color blind people are all attending a 3-D movie.  Those wearing the new, fashionable, pair of sunglasses mock and belittle those wearing last year's style.  A year from now the style will have changed and those same people will be mocking those who are wearing what they are wearing now.  Does this strike anyone besides the Welsh as an extreme waste of time and energy?
I always have a bemused smirk on my face whenever I am in the presence of people looking at an old college or high school yearbook.  Their comments are so predictable.  As they flip through the pages looking for the photograph of themselves I wait with great anticipation for the inevitable "look at my hair style" or "look at that shirt" or "look at those pants" comments.  It never fails.  When each person sees the picture of himself he can't help but shout out some comment about how ridiculous he looked then.  I keep smiling but none of them ever get the joke. As they sit there flipping through the yearbook, decked out in all of the current popular styles, they look equally ridiculous.  If I had a cell phone I would take a picture of them and show it to them ten years in the future.  At that point I would have another bemused smirk on my face as they would most certainly gaze in horror at what they were wearing as they were sitting there ten years earlier looking at the picture of what they were wearing in college.
I don't care about what is fashionable.  I hate shopping in general and shopping for clothing in particular.  I tried to count up the number of times I have gone shopping for clothing in the last 25 years and I can only remember two or three of those distasteful events.  Just going into a shopping mall gives me the heebie geebies.  I only go into a mall once per year, around Christmas, in order to do my annual shopping duties for others.  Once inside the mall I become confused and disoriented.  My wife, who knows that I have an uncanny sense of direction when in the wilderness, loves to make fun of my disorientation while in the mall.  She will ask me which way is North and then laugh uproariously when I have no clue.  She knows where every store is, and there seem to be thousands of them!  Within an hour I am sweating profusely, I feel dizzy and disoriented and my breathing becomes labored.  It feels as if I am being crushed by a mass of humanity and shopping bags.  I can't wait to get out to the fresh air and freedom found outside the prison-like confines of the shopping mall.  
For the most part my clothing shopping experiences have consisted of an occasional trip to Wal-Mart for some new Fruit of the Looms and some gigantic packages of mid-calf white cotton socks.  I am forced to make those purchases every couple of years because the underwear and socks I am wearing become so hole infested they begin to literally fall from my body.  Why anyone would voluntarily spend time shopping for clothing mystifies me.  People do not voluntarily check themselves into prison or mental hospitals so why would they go shopping for clothes? 
I am too stupid to know if I am fashionable.  If I had to guess I would guess that I am not.  But just like an inoperative clock is correct two times a day, it is possible that the winds of fashion could one day blow in my direction and I could suddenly find myself nattily attired.  That happened to me the other day.  That is what I started this post with and I just have to tell you about it.
My wife was doing something else for the evening so she informed me that I was on my own for dinner.  Not seeing anything in the refrigerator that could be immediately consumed I immediately went out to find something from the local menagerie of fast foot outlets.  A restaurant called Noodles struck my fancy.  I entered the store, walked up to the counter and ordered a big bowl of mac and cheese, to go.  I then sat down to await my order.  When sitting around waiting in Yuppie restaurants for my food to be prepared I have tried to develop the habit of staring into the floor.  I do this to avoid having to see the profuse displays of ample cleavage being flashed by all of the Yuppie women and their teenage daughters as they enter the store.  As I was sitting there, staring at the floor, I noticed something that shocked me.
Two teenage males had entered the store.  They were talking boisterously, as teenage boys tend to do, while shoving each other and generally behaving in an emotionally insecure fashion.  Then I noticed it.  They were both wearing socks that, except for the Nike logo, looked exactly like mine!  They were mid calf.  They were white.  They were cotton.  These two kids, who were wearing only what the current fashion style demanded of them, were now wearing the same style of sock that I have been wearing every single day for the past forty years.  I could not help but smile.  For the first time in my life, I was in style.

Monday, April 21, 2014

Al Lewis Does It Again

In his never ending war on anything and everything associated with economic freedom, Al Lewis has written another column dedicated to attacking the free market and praising the federal government.  It is enough to make me wonder if he is on the federal payroll as a paid economic propagandist for statism.   In the "Al's Emporium" section of the Sunday Wall Street Journal Al once again shows his complete and total ignorance of economics.  Sunday's target for his misdirected rant are hedge funds and hedge fund managers.  Here is some of what he has to say:
"It's ridiculous to expect the Federal Reserve to understand what caused a financial collapse that it didn't see coming, but nearly six years later our central bank is finally getting a clue.  'More important than commercial banks or investment banks, hedge funds may be the most important transmitters of shocks during crises,' according to the latest Economic Letter from the Federal Reserve Bank of San Francisco...It's hard to believe anyone writing for the Fed is just now coming to this conclusion.  In 1998, the Fed's then chairman Alan Greenspan organized a bailout of a hedge fund called Long Term Capital Management because its highly leveraged portfolio threatened to take down the world economy.  That hedge funds were drivers of the financial collapse is an obvious conclusion.  They created insatiable demand for the mortgage backed securities that blew the housing bubble, and little has been done to regulate them.....Hedge fund managers can often attract billions with just a year or two of outsized returns.  To get these bigger returns, they take on bigger risks. When  they get lucky, more money flows to them.  And when their funds finally blow, they may already be billionaires from collecting 2% of the assets and 20% of the profits.  It's an entire industry built on taking other people's money, borrowing billions more, and betting it all on some throws of the dice....When a hedge fund must suddenly sell billions in assets to cover a loan or a margin call, it can set off a damaging chain reaction.  'The sale of those assets increases the supply on the market, which drives prices lower,' the Fed letter explains.  'This in turn leads to more margin calls on other financial institutions, creating a downward spiral.'"
Let's take Al's comments one at a time and try to bring some light to a situation that is, in reality, not all that dark to start with.  Although Al had long ago figured out that the financial crisis of 2008-2009 was mostly caused by the activities of hedge funds and their managers, he is glad that after six years the Federal Reserve has become as economically astute as he has always been.   Al agrees with the latest pronouncement from on high emanating from the San Francisco branch of the Federal Reserve that hedge funds may have been most responsible for the financial woes of the last recession.  At this point you would expect Al to present some logically necessary economic argument in support of his position.  You will be disappointed if you expect Al to present anything that is even remotely close to being a logically necessary argument.  No, he decides that the best way to support his belief that hedge funds caused the 2008-2009 recession is to remind us all of the case of Long Term Capital Management, as if that had anything to do with what happened ten years later.
Al used the notorious example of Long Term Capital Management a couple of weeks ago.  I critiqued his position here.  Needless to say, the bailout of LTCM had nothing to do with what happened in 2008-2009.  So what does Al do to further fortify his position?  He makes wild assertions with no evidence in support of them whatsoever.  After reminding us of an event that had taken place ten years prior to the last recession, he goes on to restate his original assertion as if it is the end of a logically necessary argument.  That is called "begging the question" and it is a technique that is often used by those who have no argument in support of their position.  They believe that constantly restating their position somehow ends up constituting an argument in favor of it.  Al tells us his personal belief that "hedge funds were drivers of the financial collapse is an obvious conclusion."  He does not tell us why that conclusion is so obvious.  In fact, he does not even give us an argument from which he draws his conclusion.  It just appears out of thin air.  Al's conclusion sure isn't obvious to me. 
By now the original argument has been set aside and Al is off on one of his famous diatribes against the free market.  Today he is going to take down hedge funds.  Al displays gross economic ignorance when he alleges that hedge funds "created insatiable demand for mortgage backed securities" in the last recession.  If it is truly the case that producers of goods can "create insatiable demand" for their goods then it necessarily follows that no business would ever fail.  And yet businesses fail all the time.  How can that be?  The answer, which is obvious to any rational individual, is that the assertion that businesses can "create insatiable demand" for their products is ludicrous.  The reality is just the opposite.  Businesses spend huge sums of money trying to discover what consumers want.  Businessmen realize that if they produce goods and services that relatively few people want to purchase they will soon be out of business and quite possibly bankrupt.  But Al's belief that evil businessmen artificially and immorally create demand in the minds of consumers in order to sell them nefarious economic goods that will result in the eventual financial ruin of the investment holders is common among socialists and other economically misinformed people. 
According to Al, some folks who managed hedge funds decided that they wanted to be able to buy and sell a new investment called a mortgage backed security.  In order to do this they somehow "created an insatiable demand" in the minds of individual investors all around the country who were now suddenly inexorably drawn to take their life savings and put it into mortgage backed securities.  As this mystical power somehow worked its way up the investment supply chain we next discover investment bankers taking huge pools of mortgages and packaging them into bonds of various quality.  How the desire for mortgage backed bonds on the part of the hedge fund managers created the ability for the investment bankers to craft them into existence is not explained.  Where the huge pools of mortgages came from is not described.  But it gets crazier.
In order to have enough mortgages in the market to put them into pools, then converting them into a form of investment security known today as a mortgage backed security, somebody even higher up the investment supply chain had to convince millions of people to purchase mortgages.  My oh my, it sure sounds like these hedge fund managers have powers that have been heretofore unknown to man.  All because they can earn 2% commissions on the value of the assets under their management these evil hedge fund managers created a vertically integrated investment supply company from the bottom up!  That has to be an economic first in the history of the world. 
Al ignores two fundamental economic truths about the last recession.  The first truth is that the fuel for the boom that ultimately resulted in the financial collapse was straight out of the tanks of the Federal Reserve and the federal government.  By grossly distorting the money supply and by grossly depressing interest rates those two pillars of federalism were able to fashion a housing boom of gigantic proportions.  By distorting market signals in the real estate markets around the country the Fed was able to convince individual investors that real estate investments, particular individual homes, were guaranteed to rapidly appreciate.  Anyone could become a real estate investor and "flip" homes for huge profits with little or no money down.  It was the best of all possible worlds and the fiction was entirely the creation of the federal government.  Hedge fund managers had nothing to do with the housing boom.
Then, in a classic example of unintended consequences, the rule makers in the federal government enacted a new accounting rule that single-handedly brought down the entire house of cards.  It was not the intention of the ruler makers to bring about a recession.   In fact, their intention was to punish profit seeking businesses for the accounting procedures they legally utilized during the earlier government created recession in 2000-2001.  The new accounting rule was called "mark to market" and it had the unintended consequence of  causing holders of low quality mortgage backed securities to be forced to mark the value of their securities to the present market value rather than allowing them to be valued on an "at maturity" basis.  The net result was immediate insolvencies in many banks and financial institutions that held lots of low quality mortgage backed securities.
What does all of this have to do with the hedge funds?  Nothing, of course.  Hedge funds that held mortgage backed securities got burned just like everyone else.  The panic that ensued after folks began to realize that the real estate bubble was bursting affected everyone.  Hedge funds were not immune.  Nor were they the cause of that panic.  Al seems to believe that the selling of mortgage backed securities on the part of hedge funds during the financial panic of 2008 somehow contributed to the rapid decline in prices for many of those securities.
Both Al and the Fed seem to forget that there was no market at all for mortgage backed securities in late 2008.  Because of the insane "mark to market" rule nobody had any clue how to value the securities.  As a result all trading in them came to a grinding halt.  It was around this time that Nancy Pelosi issued her famous warning that if the Congress did not pass a financial rescue package "we won't have an economy tomorrow!"  A huge part of the bailout package that was passed involved creating a sub-account at the Fed (called "maiden lane") that purchased hundreds of billions of dollars in mortgage backed securities.  This effectively unfroze the market in those securities.  It also had the horribly detrimental impact of transferring hundreds of billions of dollars of private securities into government ownership.
(Little recognized historical fact:  When the Fed later sold those mortgage backed securities back into the free market they did so at a profit.  Those profits contributed to making the Fed the world's most profitable company that year.  This should raise serious questions about what we were being told about their value at the time the Fed purchased them.  If they were such horrible investments how did they end up turning a profit?)
Once again Al gets it all wrong.  Clearly Al hates hedge fund managers.  I suspect he suffers from a serious case of envy.  Hedge fund managers make a lot of money and Al probably does not.  According to the generally established rules for socialism and other types of sinful envy, hedge fund managers are fair game.  I think I understand Al.  He is a very ordinary envy filled man.  He is a very ordinary socialist who hates economic freedom.  What I don't understand is why he keeps showing up in the Wall Street Journal.  Just who does he have pictures of?