Optimal Strategy for Confronting the Coronavirus Pandemic in the United States

April 20th, 2020 14:14 Central Time by Tom Bergerson

When faced with a viral pandemic there are only two logical strategies that can be pursued.

1. You can try to prevent anyone from becoming infected. You can attempt to prevent herd immunity by getting the virus to die out.

The only way to prevent infection is to prevent people from coming into contact with each other. This would require shutting down the world and national economies indefinitely and everyone staying at home. If it were the case that the virus could then run its course in those currently infected and fade away, this would seem like a good course of action. But that would mean a GLOBAL order for everyone to stay at home until the infection died out. This seems unlikely to happen.

Alternatively I have seen arguments for testing every single person, using a miniaturized test similar in form factor to home pregnancy tests, and quarantining the sick rather than quarantining everyone. While nice in theory, would everyone really do their home test and quarantine? Because if you miss some people then the virus will spread. And then again you would have to implement this around the entire world.

Now that the virus has made its first foray into the entire world at large, there will be infections somewhere that will then restart the chain of infection unless global borders are durably closed. Therefore the economy would have to be stopped everywhere repeatedly. Any time you attempted to restart economies, the virus would start to spread anew. This would be of course catastrophic and lead to loss of wealth and well-being on a massive scale, until the only people who can afford to live are the very very wealthy, and even they would run out of things to buy as too few people would be working. The economy would self-destruct. Meanwhile the virus would spread over time to everyone in any event. Herd immunity would eventually be achieved but at incalculable economic cost in wealth, and lives.

2. You try for herd immunity so that the virus fades and can no longer gain a foothold.

There are several ways to go about achieving herd immunity. Different outcomes depend on how achieving herd immunity is managed.

A. No management. You simply let the virus run its course, doing nothing to prevent its spread. Everyone continues life as before. Herd immunity is achieved as rapidly as possible.

The problem with this approach is that unless health systems are able to handle all patients, with caregivers having all means of protecting themselves as well as providing care to all comers, you will wind up with these systems overwhelmed in many areas, potentially even a plurality or majority of population and health care centers. With a shortage of items for both patients or caregivers you will wind up having many deaths that would otherwise be preventable if the health systems were wholly able to supply the required care. Perhaps 5-10 million people would die in the US, perhaps half or more of them otherwise preventable. One can argue about the final death toll, but the denominator of the lethality rate would quickly become apparent and hence the lethality rate itself. Economic disruption would still occur to a degree as large numbers of people succumb to the virus and others self-shelter to avoid infection.

B. Maximum management. You shut down the economy until you can administer a vaccine to most people. Herd immunity is achieved with significant delay.

The problem with this approach is that it would likely take more than a year. And there are now some scientists saying a vaccine may not be possible on any time frame. Even waiting a year means that the economic devastation associated with the approach of trying to prevent anyone from becoming infected would still occur. Perhaps 250,000 to 1 million people in the USA would die from the virus, but tens if not hundreds of millions of people would have their lives devastated economically. In other words you would minimize the number of deaths from infection, but that would be offset dramatically by severe economic disruption and the loss of lives, liberty and economic security that result. If a vaccine were to arrive earlier so much the better, as long as it is a straight vaccine that does not incorporate any of the monstrous vision espoused by groups such as id2020.org. It would then shorten the normal herd immunity process.

C. Optimal management. You can shut down the economy for a brief period, flattening the curve as they say, while immediately and swiftly marshalling the resources for the health care system to be able to handle all infected patients as they come. Herd immunity is achieved as rapidly as possible while minimizing preventable loss of life and also minimizing the loss of life, liberty and economic well-being associated with severe economic disruption. Once sure that the supply chains for production of all necessary equipment for caregivers and treatments and equipment for patients are on track to be able to provide all of the necessary items to care for the large surge of infected, you open the economy fully and things proceed as in 2A above, but without suffering deaths that would be otherwise preventable but for want of items for caregivers and patients.

Crucially in order to minimize the time necessary to shut the economy and to minimize loss of lives to the virus, the Federal Government uses emergency wartime powers to marshall the resources of the economy to produce all of the items necessary for the health care system everywhere to provide the best care to all comers. It might take 8 weeks (?) to start the system in motion to providing all such items. Once things are underway, you end the lockdown and let the economy restart in full. The virus then runs its course, but preventable deaths are minimized. Perhaps 1-2 million people die of the virus (this is arguable), but the economic devastation associated with approaches 1 and 2B are minimized. The economy is reopened the moment it appears that filling the pipeline of supplies required to prevent deaths due to restriction in the supply of goods for patients and health care providers will occur.

Clearly this last approach (2C) is the one that best balances the inevitable loss of life from the virus spreading until we reach herd immunity with the loss of life, freedom and financial security associated with economic disruption and dislocation.


Though the Trump Administration has convened the Coronavirus Supply Chain Stabilization Task Force (“CSCSTF”) under the auspices of FEMA, a reading of their approach at https://www.fema.gov/fema-supply-chain-stabilization-task-force indicates that the CSCSTF will act mostly as a facilitator between the various State Governments and private firms. While The POTUS has activated the Defense Production Act and is pressuring firms to produce some of the Necessary Items in some cases and having the CSCSTF do it in others, it does NOT appear to be acting as the sole point of purchase (for example they are still insisting states take the lead in acquiring tests…wow), which will mean that the purchasing and production processes necessary to marshall resources as quickly as possible at the lowest cost will be suboptimal. It will take more time and cost more than if the Federal Government acted as the sole purchaser and maintainer of the List of Necessary Items. Time is the crucial element. Every day lost to inefficiency means a day longer that the economy is shut down and staggering economic losses accrue. The Trump Administration has strangely taken the stance that the Federal Government is there as a backstop to the States and that it is the States that are to manage the pandemic. In almost all cases this is the correct approach, and as for the local administration of care still is. But once you have decided that the pandemic is a true emergency on the scale of War then arguments about Federalism that should normally prevail lose their might and persuasiveness. Both state governments and the Federal Government have in fact declared this to be such an emergency, on par with the notion of a Wartime emergency, and clearly the notion of issuing stay at home orders and shutting the “non-essential” economy indicates that has been the decision.

If that is the decision, then in order to minimize the duration of the economic shutdown that needs to occur while marshalling the nations health resources to be able to treat all infected patients optimally, the Federal Government MUST take the lead in doing so. President Trump must marshall the economy to quickly manufacture the items on a List of some 30-50 things the health care system needs to avoid preventable deaths. That List includes Masks, Gloves, Disposable Gowns, Eye Protection, Ventilators and Respirators, Inhalers, Hydroxychloroquine and Zpacks + Zinc, Vitamin C, Other Antivirals (Remdesivir, Lopinavir and Ritonavir, Other treatments (plasma from those who have recovered, antibody therapy as touted by Jacob Glanville, of Distributed Bio etc), testing capability to identify possible plasma donors for plasma treatments, additional temporary treatment facilities and everything else that should be on the List both for patient treatment and caregiver protection. The President can marshall his stable of technocrats to flesh out the List of Necessary Items (you could call it the “LNI” if you are a lover of acronyms as the CSCSTF seems to be). The Federal Government can persuade or in some cases coerce private firms to produce the Necessary Items on the LNI. The Federal Government can then distribute items to the various States and localities as needed to ensure as few people die of the disease as possible, and none for the want of anything that is needed by caregivers or patients.

Failure of the Federal Government to aggressively take the lead in directing the economy to produce the LNI to allow the nations health care system to be able to handle the entire influx of patients while minimizing otherwise preventable deaths will mean that the period of economic disruption will increase in duration and will thus lead to failure to minimize the spiraling and recursive cost in life, liberty and economic wellbeing being wrought by the pandemic. It is therefore imperative that the President takes immediate and complete charge of the marshalling process in order to get the economy back into full motion in the shortest period of time. It is also necessary that the President formulates and communicates this strategy during the Press Briefings and provides updates on progress in marshalling the LNI. Right now there is a great deal of uncertainty and most of the prattle on news networks is superfluous and misdirected. If President Trump were to enunciate the chosen strategy clearly, many of the questions and uncertainties plaguing people now about what happens going forward would fade away and people would have a renewed sense of purpose which would be a healthy step in recovery of the economy. The issue of testing, while still important in the intermediate to long term, would fade in immediate importance, except to the extent it helps identify those who have recovered and may offer plasma for use in treatment. Identification and contact tracing are nice if prevention is your goal, but if optimally managing herd immunity is the goal, it is secondary. Pronouncements by advisors like Dr. Fauci would also fade in importance as the virus will not dictate timing, rather the progress of the marshalling process would do so. Fear of repeated shutdowns would also be mitigated, as once the marshalling process has achieved critical mass, normal life would return. It is this marshalling process that would dictate the timing of economic reflowering.

Cuomo posed the question on 4/15/2020 “When will this end?” And he answered “When there is a vaccine”. But he could not be more wrong. Does he really contemplate using governmental authority to decree that millions of people can not work for over a year? That he will use the power of government to destroy the lives and livelihoods of millions of people until they are destitute? He said he might open up his state slowly, but if there were signs of increased infection he would have to back off. Well, once you open the economy of course the infection rate will pick back up. That is how you get to herd immunity. The second wave will be much larger than the first. That must be the PLAN. Once again, the ONLY question is whether we have taken the necessary steps to ensure the health care system can handle the second larger wave of infections once we reopen the economy. The only thing that determines when we open it up is when we have set in motion the processes that will ensure we can serve all of the infected and prevent deaths from a shortage of caregiving items and treatments. We can not keep the economy closed indefinitely to prevent people from getting the disease. We are all (well most of us) going to get it or we will all get the vaccine. Will the government really close the economy until the vaccine is ready? What causes the greater harm in the long run?

If you agree with this analysis of the Strategies for Confronting the Coronavirus Pandemic in the United States, please forward this message to friends and family in the hopes that someone can get the message to President Trump and his advisors.

Thomas Bergerson

Mystery of Low Inflation? Nonsense

May 22nd, 2019 11:35 Central Time by Tom Bergerson

In the aftermath of the Great Financial Crisis in 2008 which brought money markets to a standstill, central banks embarked on a voyage of discovery with a series of formerly unorthodox actions.  Zero Interest Rate Policy (ZIRP), in which central banks pegged the short term interest rates under their control at zero or below.  Quantitative Easing (QE) in which they purchased scads of sovereign debt in secondary markets (cough, cough) – or in the case of the European Central Bank (ECB) also corporate debt (!!!), and in the case of the Bank of Japan (BoJ) also equities or equity indices (!!!!!) – in a bid to create loads of excess reserves, which here in the US. the Fed kept from entering the real economy in conjunction with the execrable Interest on Excess Reserves (IOER).  So there was all this technical talk about managing rates using a floor approach or corridor approach which is not germane to the present issue.  Finally they set an explicit inflation target of 2% or more in order to get up or anchor inflation expectations which they have stated they believe is a key aspect of their inflation management toolkit.

Recently, several paragons of monetary officialdom have come out and said that continued low inflation is a mystery.  The head of the International Monetary Fund called it a mystery at a Milken Global Conference very recently.  How a person who is supposed to know such things could call it a mystery is a mystery to me.  The Fed Chief, Jerome Powell, recently said that there is “no easy answer” to explain why price rises have been so subdued.  Well gee guys, let me explain it to you then.  Surprisingly, there is a Bloomberg piece that gets many of the elements in place titled “Low Inflation Is Federal Reserve’s Maddening Unsolved Mystery”, though it doesn’t really lay things out fully.

The first thing to note in any discussion of inflation is what kind of inflation are we talking about here.  The inflation that is a “mystery” apparently to the Fed and the IMF is regular old goods and services inflation – the kind that Volker tried to tame in the late 1970s and early 1980s when he took the Fed Funds rate over 20% and that the Fed in the Greenspan era tried to combat with their approach of “opportunistic disinflation”.  Note that inflation means that a given unit of currency buys less than it did before, the value of the currency declines over time (h/t to Shedlock).  There is of course notable inflation in asset prices and art markets, which these officials mostly ignore.  There is also heart-stopping inflation in the prices of education, health care and health care insurance which is decimating the middle class even as the richest get even more rich through the asset inflation caused by central bank policy (they own the bulk of the assets which are inflating due to time value of money as well as money supply effects).

To get to the meat of the matter baffling the world’s most powerful and highly paid and feted monetary policymakers, the main causes of persistently low goods and services inflation are three, with a few others rounding out the case.  The first cause is the conscious creation of Chimerica by American fiscal policy makers during the Clinton era.  The accession of China to the GATT/WTO in 2001 and the runup to it has caused a truly massive deflationary impulse around the world as the globalization of the labor market impinged labor market pricing power.  The impact of this is difficult to stress highly enough.  Adding a billion or more people in Asia to the labor market for goods consumed by the West at wages much lower than those enjoyed by laborers in the West was one prong of the creation of Chimerica.

The other prong was to be the slaying of inflation.  Producing the world’s goods using labor in Asia means that the goods produced can be had for much lower prices by everyone in the West, including the laborers whose jobs were replaced.  That was the bargain.  We will give you (China and Asia generally) the jobs, and you give us (America, Europe) cheap goods.  Well mission accomplished.  Inflation has been low both because goods prices are lower than they otherwise would be and because the price of labor has been kept on a tight leash.  This dynamic has, however, largely run its course.  The labor market in China is now shrinking and most of the labor that was going to be transplanted to Asia has already been transplanted.  Labor prices have hit their low point and will either slowly rise or stay roughly the same until something (the conscious dismantling of Chimerica) causes power to swing from corporations to labor and then labor prices to rise.

The second primary cause of low inflation is demographics.  The low birth rates in Europe are well known.  Germany and Italy have declining native population (one of the reasons Merkel was eager to import northern African and middle eastern migrants, despite the cultural cost).  Japan’s population is declining.  Without the constant influx of immigrants, even the population of America would be flat to down.  Adding to the general lack of new babies, the creation and presence of which uniquely promote growth, the aging of the baby boomers (a pig in the python demographically) has meant a shift of spending patterns downward as people consume less as they age and their fewer children are grown and strike out on their own.

The third major cause as I see it is the vanquishing of collectivist legal frameworks by the Anglo Saxon model, which has resulted in the collapse of organized labor and the tilting of economic power toward corporations.  As a result, shareholders now reap more of the economic pie relative to labor than they have in generations.

There are a few other contributing causes, though less important than the secular forces described above. Technology and technological artifacts like computers and phones play a more important role in modern life and the cost per unit of power of these items tend to decrease over time (among other things giving rise to the dangerous notion of hedonic adjustments in gauges of inflation and output or GDP).  The price of oil has been fairly low since the great spike in 2008.  Hydraulic fracturing and other technical improvements allowing previously untenable fields to produce oil at reasonable cost has kept a lid on prices.  Oil is one of the most closely correlated price series with inflation over time.  Finally as Mike Shedlock has posited, competitive devaluation of currencies means no nation gets a leg up in the inflation race (a devalued currency vis a vis others is ceteris paribus inflationary as it means prices of foreign produced goods rise in local currency terms and hence prices of locally produced goods can also rise).

So there it is.  Mystery solved.  So does that mean I am a better choice to run the IMF or the Fed than the current occupants?  I guess so.  At the least when you hear someone talk about the mystery of persistent low inflation you realize they are either a fool or charlatan or both.  Consider for a moment what it would take to truly reverse the main secular forces at work that really are causing low inflation.  First break up Chimerica.  That would mean kicking China out of the Free Trade Club.  Trump has already sort of done this with the institution of tariffs, whether legally justified or not.  But to really break it up would mean higher prices for goods and services.  The Fed would see its 2% inflation target breached in short order and jobs would come back home to some extent.  We would all pay a good deal more for stuff at the store however.  So monetary leaders cannot be expected to really embrace this solution, which means they have an incentive not even to recognize it (so charlatan I guess more or less).

Another means to solving the low inflation conundrum would mean having more babies.  Not a palatable prospect for the eco left and not really something in the wheel house of the esoterically trained university economists one finds at central banks.  So not much hope there.  Finally it might mean tilting the legal field back toward labor and away from laws that benefit the corporate world.  It would take a disaster on the scale of the Great Depression to do that (as it did last time).  Not a healthy prospect at all.  Of course if central banks really wanted to see inflation they could produce as much as they wanted, though not probably in a controllable way, simply by printing money and letting it get out into the real economy instead of bottling it up in money center banks.  I remember the Treasury sent out checks to everyone after the dotcom crash.  Helicopter money.  It is probably coming in some form (see all the mention of MMT lately).  But we will have to wait for TSTHTF first.


April 15th, 2019 14:07 Central Time by Tom Bergerson

One can’t watch very much TV today without seeing an ad for IBM, or someone else touting how Artificial Intelligence (AI) is changing everything.  I watched an interview with Satya Nadella of Microsoft along with the SAP and Adobe CEOs  where they went on and on about AI this and AI that.  I even had a financial software sales guy call me about how they were using AI to scan price data and had been doing so for 15 years already.  I always chuckle when I see these types of things.  Ok yeah sure. But is it really AI?  I think most of it is just really smart programming.

One of the concepts in AI is general purpose versus special purpose.  Think of your Android or even Apple smartphone.  It is pretty cool that you can just talk into it and the “AI” will come back with some usually relevant information in response.  That is some special purpose AI, usually coming out of the Search universe.  Really smart programming.  Automated cars are another example.  Using sensors and applying reams of logic to the input, some really smart special purpose AI programming is doing a passable job of moving a large object through the 3D universe, at least in optimal weather conditions.  Of course an Audi Q5 I was just driving had its sensors sqwauking at me constantly when we had a huge snow storm here recently.  I would not have wanted to trust the AI to drive me around in those conditions.  Still, nVidia stock has shot higher in the last few years as their video silicon is well suited to running fast enough to do these AI sorts of things, though much may be because their chips are also used for crunching the numbers in bitcoin mining.

I do not think though that the AI out there today passes the Turing Test, which is generally accepted as the hurdle for general purpose AI.  If the program makes you think it is human, then it is AI.  I recently read an article about how Deep Mind is exhibiting characteristics of intuition.    That is pretty cool, but still only a step on the way to true AI.  Another article discussing the machine learning approach to AI is here.  But see another article here  about the perils of overpredicting the sentience of AI.  Or this from MIT about some of the problems and ethical issues arising as AI gets closer to true AI .

I am having trouble finding a link to an interview with another MIT professor, one of the pioneers of AI, who thinks that the true or general purpose AI we imagine is still a long way off.  Of course one of the issues is that we are facing a technological dead end in computing.  Moore’s Law has stopped working.  Intel and other chip  manufacturers have reached the limit of how many transistors they can squeeze into a given area of silicon.  With manufacturing processes now etching channels at 14 nanometers and below, you start to get quantum effects that interfere with chip function.  Sure you get multiple cores on a CPU now, but parallelizing things, while allowing for more improvement in speed, is not the same as doubling chip capacity every couple of years.  It has limits.  So unless we get photonic chips or a breakthrough in quantum computing, the sheer power needed to create generalized AI might be impeded.

Finally a thought on the Turing Test itself.  The Turing Test suffers from the same inexactitude as the Taxonomical system developed by Linnaeus.  Scientists have long classified species by observing visual characteristics of the subjects of study.  This is essentially how the Turing Test works as well.  You observe what the AI says or does and if that looks human then it is AI.  If a bird has certain physical characteristics then it is of X species.  Of course we now have a much better way to classify animals, by extracting and cataloguing their DNA.  The new taxonomy allowed by the knowledge of DNA is much better than the one based on observable physical characteristics.  But is there an analogous way to get at the idea of self-awareness, which is essentially what general purpose AI will have if it is truly AI?  We cannot yet do such a thing with humans.  Self-awareness is an entirely subjective thing, not observable.  This gets at the whole concept of duality and DesCartes Cogito Ergo Sum and the effect of the observer on the observed, too much to go into here.  In any event, really smart people will continue to get better at developing pockets of AI here and there, but the prospect of true AI still lies well down the road, where it has been just out of reach over the horizon since people have been talking about it.

The Recipe for the Global Synchronized Recovery

March 22nd, 2018 10:22 Central Time by Tom Bergerson

Is more like the recipe for cotton candy than for say a pot roast.  Delicate and prone to collapse at the first sign of stress, the first whisp of breath on it.  Put it in your mouth and it just melts away.  As opposed to a pot roast with vegetables, hearty and hale, and leaves leftovers that last for awhile.

The Global Synchronized Recovery was composed primarily of two thrusts which showed up in the monthly data as a strong global economy.  The first was the pumping and primping done by China in preparation for the Chinese Communist Party confab in November.  In order to assure the appearance that everything is just plain awesome, China created credit here, doctored up some numbers there to provide the strongest background vista possible to achieve its goals at the CCP Congress.  Mission accomplished.  Xi has now wiped away the last impediments to his assumption of the mantle of power for the rest of his life.

The second major element which appeared as a thrust of growth in the numbers was the aftermath of the multiple hurricanes that hit the US last fall.  All those insurance payouts, rebuilding and the need for new cars appears through the lens of the monthly economic data like a big slug of growth.  That is why guys like Paul Krugman espouse the idea of digging holes and filling them in again as sound economic policy.  Bastiat of course famously exposed the idea that breaking windows so they need to be fixed was good for the economy, as a fallacy.  Such reasoning is a sleight of hand.  The problem of course is time shifting and limited accounting of the consequences.  If you limit your gaze to only what happens for a short period of time or only along one or a few vectors of economic activity it appears to be a net plus.  But in the fullness of time and taking account all of the costs, the notion of breaking stuff to fix it as a good idea falls apart.

Now there are other elements contributing to growth domestically, like a reduction in regulation, some reduction in taxes for corporations and some rekindling of animal spirits.  But those will seem small in comparison at the end of the day.

We will soon find that the global economic recovery melts like cotton candy with nothing left over.  In days past that would mean one thing.  Buy long term treasuries or futures.  Today we have the added complication that Mr Market is becoming dimly aware that the pace of marketing of treasury debt has kicked into a new gear, never before seen, scarcely to be believed.  So will long rates fall as they normally would as the monthly data cools off and the Citi Economic surprise index inflects down?  Or will the addition of risk premium to the risk free rate overcome the inflation component?  I am going to buy some just to see.  But it is not as easy a bet as it once was

The Hue and Cry Over Facebook

March 19th, 2018 15:42 Central Time by Tom Bergerson

Facebook stock got whacked today over revelations that 50 million people had their data appropriated by an outside group.  This just adds to the wailing and gnashing of teeth over Facebook’s role over the results of the 2016 election in which the dastardly Russians supposedly used Facebook to spread lies and misinformation that may have swung the election in Donald Trump’s favor by hurting the public image of Hillary Clinton.  Now I am not a huge Facebook fan, although we once created a prototype Smartphone app using the nascent Facebook API before Facebook or Smartphones became ubiquitous, and honestly one can only tip one’s hat to the achievements of such a juggernaut.

However something just does not sit right about the idea of having the government regulate Facebook, or forcing it to curate the posts of the hundreds of millions of users in order to increase the truthiness of information promulgated therefrom.  What these efforts essentially signify is that governors think that people can not be trusted to think for themselves.  People can not be trusted to think critically to distinguish truth from fiction.  The government must step in to enforce truth on the platform is the dangerous refrain.  Red flags should be flying and loud alarms going off when one hears this.  To the extent that outside actors use established information platforms to change hearts and minds, that is the essence of what is protected by the First Amendment.  Changing hearts and minds is the essence of a Democratic system.  Does anyone think that anything that was posted by third parties was any more or less truth oriented than the insane drivel that comes out of the mouths of politicians themselves, or their supporters?

Prudent regulators should tread carefully with a light touch.  If actions were taken to actually change the votes of people after they have been cast that would change the vote of people that had cast them (or as in the case of recent Russian election, simply casting votes that were not cast by actual people), then yes by all means something must be done to prevent such nefarious activity.  But in the battle for hearts and minds, the government should stand idly by and do nothing –  to Facebook or any other outlet for information.

Amazon: The Mercantilist In Our Midst

February 1st, 2018 13:37 Central Time by Tom Bergerson

OK.  Mercantilist is probably not the right analog, but it does share some elements of what is occurring in the world as shaped by Amazon.  Mercantilism is a State policy and Amazon is not a State…yet.  Mercantilist states seek to accumulate specie through positive policies enabling foreign trade, or at the very least substantial market leadership and market share regardless of profit.  Japan in the 1970s and 1980s and China today are examples of modern mercantilist states at work.  Amazon too uses pricing to gain market share regardless of the profit it generates.  They have notoriously low margins.  Profits as a percentage of sales have historically been below zero.

The more precise term for what Amazon does is Predatory Pricing.  In the aftermath of the Great Depression, predatory pricing actions were far more frequent than today.  As a part of Antitrust law this area largely withered on the vine because the low prices are generally favorable to consumers and in the world of retailing or even wholesaling, barriers to entry are generally low.  The pricing they can accomplish are composed of three parts; the price of the product, taxes and shipping.  By having the ability to sell without sales tax until recently, and by subsidizing shipping costs and also by charging little to no markup on the price, or even negative markups, Amazon has threatened the existence of both small and larger established sales outfits nationwide.  This follows the shakeout of the retail space already started by the rise of Walmart.  The result is that strip malls and even large malls have been losing tenants and the number of retailers has fallen, as has the number of people employed in the retail sector.

And therein lies the risk for Amazon.  While the consumer has gained greatly by the ability to find literally anything and have it shipped in two days at what is almost always the lowest price available, the sheer carnage wreaked upon the economy as a whole has become so large that it will start to garner the attention of policy makers in Washington and of the Justice Department.

Now this is a near run thing because much of what Amazon has done is sheer genius.  In pioneering the new best distribution model, where items are sent to logistical hubs which produce least time and least cost routes to consumer end destinations, they needed massive computing resources.  And massive computing resources are expensive to acquire and maintain.  What better way to fray the cost than to share out the computing infrastructure to the world at large and in so doing paying for your own computing needs?  And so the entire Cloud Computing industry was born.  It is their most profitable business and the profits from that pay for losses from their actual retailing business.  And so their stock price has rocketed higher.

The other major element of their genius was building a go to first relationship with people via the Prime program.  This gets people two day free shipping.  This means when you go to Amazon you know exactly how your life is going to go.  No uncertainty.  I ordered this now.  I will have it in a couple of days.  Oh I also get some free videos and some other stuff.  Great.  The whole point is that when people want to buy something, people go to Amazon first, and only if there is some overriding concern do they consider buying from somewhere else.

As the saying goes, in the long run the stock market is a weighing machine, in the short to medium term it is a voting machine.  And as a voting machine it depends entirely on narrative, of which actual fundamentals like the state of the balance sheet and income statement play only a small part.  A stock’s price in the short to medium term is all about the Story.  The more the Story engenders a stars-in-the-eyes response in investors the higher the stock price and the higher the multiple.  Amazon has created a very sexy story.  And so they have nearly limitless access to capital with very long term tolerances that their competitors large and small lack.  They can afford to sell at a loss.  Investors love their story so they don’t care.  In fact it makes the stars glow in their eyes all that much more because once they have vanquished everyone else they can raise margins and print money.  Of course that is the end result of Predatory Pricing schemes.  Kill off the competition, then raise prices.  You can probably consider the costs of computing and creating the logistical network necessary for the new retail distribution model pretty high barriers to entry, which is the other element necessary to allege Predatory Pricing.

So if I were Target or Walmart or Best Buy or whoever is threatened by Amazon, I would be undertaking at least a three pronged attack against the Seattle SuperGiant’s pricing strategies.  First you have to do what Amazon does best, optimize your distribution model to lower costs (Walmart pioneered this) and enable seamless sales experiences for people with little to no uncertainty, by which I mean if someone orders from you they can be nearly certain when they are going to get what they ordered and confident in what their experience is going to be whether they are interacting in person or via the web.   Leverage your physical stores to make consumer experiences even better than what Amazon can do.  Second, have lobbyists making the antitrust case to Congress as well as the DoJ and even the best antitrust experts at leading law schools to create and reinforce a meme that what Amazon is doing is ultimately bad for the country as a whole and which overwhelms the benefit of lower costs to the consumer.  Finally, attack their tax advantage.   I do not think you argue they should pay the full state sales tax in every jurisdiction.  Where they do not have a physical presence, the state does not incur the physical costs to justify charging the full tax.  But everything is delivered over roads in the states where the deliveries take place so the states do incur some costs.  Maybe half the sales tax rate should be charged for online sales for retailers over a certain size.

This just barely touches on what is one of the most interesting developments of modern times but Amazon is not invulnerable.  At some point competitors with their eye on the ball and the ability to take the long view will be able to blunt the juggernaut that is reshaping the retail landscape.

One Number To Rule Them All

January 25th, 2018 16:47 Central Time by Tom Bergerson

There is one number that will determine the fate of the world and its financial markets.  In the United States, that number is the Core PCE inflation number, or at least expectations of what that number might be in the future.  This number or its expectations will determine the posture of the Fed.  Analogous numbers in Europe and Asia will determine the posture of the other central banks who have flooded the world with simply unfathomable amounts of money and money-like liquidity.  That amount of liquidity and its effect on asset markets (Note to Avi Gilburt – <sarc>no, clearly central bank liquidity has no effect on asset prices</sarc>) can be summarized in the following chart:

Note that the QE line does not include asset purchases of the PBoC, the BoE, or the SNB.  If it did, the number would be more like $20 Trillion, not $14.x.  Central Banks undertook to inflate their balance sheets in fear of a debilitating debt deflation they thought might return the world to Great Depression like circumstances.

The human mind cannot really comprehend numbers in the Billions, never mind Trillions, or 3 orders of magnitude more.  Perhaps this is one reason we now inhabit a La-La-Land of asset prices and the lowest volatility in recorded history for most asset classes.  Another reason of course is that low levels of inflation diminish the discounting of forward cash flows such that the current numbers are closer to the forward numbers.  This then suffices to demonstrate the validity of the title of this post.  Central Banks have been able to get away with the gargantuan purchases of sovereign bonds, corporate and agency bonds, and in some cases equities themselves because the one constraint that would prohibit them from doing so has been low and tame for many years now.  And that one constraint on the actions of Central Banks is inflation.  In the US the Fed’s preferred measure is PCE Core Inflation.  Lets take a graphical look at that:

As you can see, since the GFC Core PCE has been running between 1 and 2 percent annual change.  And really that has been the range with the exception of a couple years just before the Great Carnage, since the mid to late 1990s or 20 years now.  Reasons include the great outsourcing of labor to the East which produced a one time massive downward adjustment in global labor prices, as well as demographic changes throughout the world stunting population growth, and technological change which caps goods prices.

The question going forward is whether inflation will rise to a level that will force Central Banks to rein in their profligate spree of asset purchasing, or even force them to divest the assets they have accumulated.  In the US, the Fed has started a program of letting up to $50 Billion a month of bonds roll off their balance sheet as they mature.  Prior to the start of this “normalization” campaign the Fed replaced any assets that matured in their portfolio with fresh purchases to keep the level of the balance sheet even.  Starting last quarter they allowed $10 Billion to roll off (~$6 Billion Treasuries and $4 Billion Agency MBS).  This quarter it will be $20 Billion.  It rises over the next 3 quarters until it reaches $50 Billion in Q4 2018.  They are divesting domestically already in teensy tiny amounts growing to merely small amounts.

So IF PCE stays where it is or lower, the Fed will be free to stop divesting or even turn back to LSAP if the stock market ever goes down a couple of percent (at this point even a couple percent will feel like an earthquake) in order to validate the central bank put on asset prices and ensure moral hazard continues to permeate every corner of the world.  However if it goes higher, or the expectation evolves that it will go higher, they will continue to divest or may even have to pick up the pace while simultaneously raising Fed Funds and IOER higher than the 5 quarter point clicks they have done already in the last 2 years.  Similar logic applies to the other major central banks.  Japan and Europe have had inflation rates, measured generally as consumer inflation, in the 0-1% range for Japan and the 1-1.5% range for Europe.  Northern European countries run a little higher and Southern ones a little lower.  What might cause inflation to rise durably is a matter of debate.  Tight labor markets, rising commodity prices.  Who knows.  The recent drop in the dollar may cause inflation to rise in the US as the prices of imported goods rise allowing domestic prices to rise as well.  That of course would have the opposite effect in the world ex the US.  Given the amount of debt creation in China, it is a wonder prices have not risen there.  Food inflation is the one thing the CCP will not abet because it tends to a decrease in social harmony and ultimately threatens the CCP.  What IS certain is that at the end of the day, the direction of the little blue line in the first graph above will be determined by what happens to the blue line in the second graph above, or emerging expectations of what will happen to it. One number to rule them all.

Price Protection Group

May 23rd, 2017 21:51 Central Time by Tom Bergerson

Asher Edelman had an astonishing interview on CNBC Fast Money this afternoon.  In it he claimed that Reagan’s Executive Order 12631 which established the Working Group on Financial Markets resulted in the fabled Plunge Protection Team which he called the Plunge Protection Group, reporting only to the President.  Comprised of the heads of the SEC, Treasury, the Fed and the CFTC, it works with major banks like Goldman Sachs and Morgan Stanley to smooth stock market function by buying during times of stress by buying stocks in the open market.  But he further postulated that under Trump and hence Mnuchin, he suspects it is now being used nearly every day to prevent drops in the market, and ascribes the noted lack of recent volatility to this.  Further he states that it is done using taxpayer money.  You can see the short video here (click if the video below does not embed properly):

Now I do not know whether he has some special knowledge of this group gleaned during cocktail banter in fabulous parties in NYC, but if what he is saying is true here is what needs to happen to anyone who has ever been involved in such a wrong-headed and unAmerican activity:

This Is America!!!  There would be a special place in a deep dark hole in Hell reserved for any official or banking personnel who participated in or even had knowledge of stock buying activity directed by the Secretary of the Treasury.  If Ronald Reagan sanctioned such a thing my estimation of him would drop several notches.  In all seriousness though, it would be totally inappropriate for the government to be involved in any way in the purchase of stocks or even corporate bonds (here’s looking at you Kuroda and Draghi).  Any person involved in such a scheme should resign immediately, or be fired or removed from office with the loss of all pension or other benefits, including all past officials still living.  Bank officials participating in or knowing of it, now or in the past, should resign or be fired immediately and be stripped of nearly all their personal wealth.

There is no place in American capitalism for the government to be getting involved in the stock market for any reason.  The Fed doing QE with an EYE toward lifting stock prices is bad enough.  They can get away with it because they can pretend they are prosecuting monetary policy through their accepted methods of buying and selling Treasury securities in order to add liquidity or drain liquidity from the banking system, though QE is stretching that to its limits.  Directly purchasing and selling stocks, impacting financial markets for political purposes is not OK.  Let us hope Edelman’s speculations are wrong.

On the Nature of Price Movement

March 18th, 2017 14:10 Central Time by Tom Bergerson

There are, I think it is safe to tentatively assert, only two reasons why the prices of things – whether goods, services, financial instruments, derivatives or other commodities – fluctuate.  These can be categorized as flow and state.  Consider first the notion of flow.  At the margin where price determinations are made, there are usually a bid and an offer price.  Now in everyday life these may not exist, as at a store like Target where you simply take whatever price is marked.  You are a price taker and the store is the price maker.   But even in many store based commercial transactions you may haggle with the store owner and make an offer of payment (bid) while the proprietor may alternatively suggest a usually higher asking price (offer or ask, I know the terminology becomes confusing as the word offer is used on both sides with slightly different denotations or connotations).  One side or the other will become the aggressor.  Prices tick down when the offeror hits the bid, and conversely tick up when the bidder takes the offer (argh the terminology, damn and praise the indeterminacy of language).

When there is a preponderance of bidders hitting the offer price then the price of whatever is being priced tends to trend higher.  When there is a preponderance of sellers hitting the bid, then the price will trend down.  Flows can therefore exert powerful price effects and by watching the price move, as in financial markets, one can tell whether there are more buyers or sellers on balance, or more precisely, whether the buyers or sellers are more aggressive, whether buyers or sellers are in control of price setting at the margin.

Now consider the idea of state, or more importantly state change.  It may come to pass, for instance, that a meteorological service comes out with a report that predicts imminent drought in the flyover country that is a true sine qua non of our nations vast wealth.  Whether markets are open or not, there will be a discontinuity in price.  Offers at the prior prevailing level of prices will be pulled or filled as participants reevaluate what makes sense for prices.  This also occurs in either direction on the first Friday of each month when the employment figures are released in the US.  Flows will surge to one side or the other in response to the new information.  Flows can be thought of as intrinsic to the idea of the marketplace while state can be thought of as extrinsic.  Of course perceptions about change in state will cause changes in flows.  And reflexively in the Soros sense, flows can lead to general perceptions about state as well.

One can argue that perhaps it is flows after all that move everything, they just move quickly in response to new information.  I kind of think of that like arguing about whether the number zero exists.  Since it denotes the idea of nothing then ontologically it could be said not to exist.  But I think there is enough of a difference to separate into two concepts.  And anyway it does not really matter as much as being observant about what flows are doing and being on the lookout for changes of state that could change perceptions in a flash.

Yellen Gleefully Endorses Wildly Elevated Stock Prices and Wildly Accommodative Monetary Policy

March 15th, 2017 14:09 Central Time by Tom Bergerson

In discussing the neutral level of the Federal Funds Rate after today’s Federal Open Market Committee meeting, Janet Yellen returned to her oft stated idea that there is research indicating that the neutral level of Fed Funds is 0% in real terms.  So if the Fed’s preferred level of inflation, PCE is at, lets say, roughly 1.75% right now, that means the neutral Fed Funds rate should also be 1.75% right now for the Fed to be at a neutral Fed Funds rate.  Of course if the neutral rate is not quite that low, then the Fed Funds rate should be even HIGHER.

The Fed just got around at their leisurely dovish pace today to getting the range for Fed Funds all the way up to 75-100 basis points.  So by her logic, the Fed is at least 100 basis points BELOW the NEUTRAL rate.  Accommodative indeed.  When asked whether they weren’t concerned about the insanely elevated valuation in the third and latest stock market bubble the Fed has blown in the last 20 years, she showed no angst.  Indeed she stated the new Fed policy stance that elevated stock prices lead to elevated consumer spending.  This is true for the richest 10% of Americans only and is a primary reason for the growing disparity between the rich and the poor.  Amazing lunacy by the most powerful person on earth.  Expect stocks to fly even further moonward in the coming months as the Fed is dead set to stay at less than half of what the neutral policy rate would be.  Then when she has left office and things are getting out of control, expect the stock market to lose half its value sometime in 2019 or 2020, just in time to kill Donald Trump’s chances at reelection.

A Note On NBC Meet The Press, The “Press” and Trumps Russia Non-Problem

February 26th, 2017 11:35 Central Time by Tom Bergerson

Chuck Todd continues his aggressive pursuit of the Russia Scandal which in essence is a Democratic hope that Trump worked with Russia and Putin to subvert the democratic process in the US in 2016.  But that is really just to say that he enlisted the aid of foreigners in politics.  For what is politics?  It is the attempt to persuade people to support one position or another, usually represented as support of one candidate or another.  So lets assume for a minute that Trump actually had daily conversations with Putin about using RT and other Russian propaganda outlets to hurt Hillary and help Trump.  Lets even say he urged them to use formidable Russian hacking skills to get and release the embarrassing emails of prominent Democrats.  So what?  That is not subverting the democratic process in any way.   That’s what politics is!  It is outing truth and persuading people to do something.  So unless they think there is some evidence somewhere that Russia actually tried to change the votes that people had already cast, switching them from what people actually cast of their own free will to something else, there IS no scandal.  Which means every minute spent on this stupid crusade is a minute wasted in doing other important things like tax reform, regulatory reform and undoing the disaster of Obamacare while maintaining its few good aspects.

And while we are at it Chuck.  Know that Trump is right and as usual you have miscast and misunderstood what it is he actually said.  The mainstream press – by which I mean the archaic networks ABC, CBS and NBC, along with CNN, Washington Post and some others – in my estimation, is lowlier than almost any organization or person out there.  They might, and I mean MIGHT, just be barely above say, child molesters;  but probably below murderers and traitors.  And Chuck, Trump did not say the press as defined above were enemies of the state, which you denied you – NBC news – were this morning.  No the press are huge supporters of the state, a force without which the State could not attempt to propagandize its own citizenry, whose interests they are supposed to represent.  Trump said, and you are, enemies of the PEOPLE, not the state.  Precisely because you are such enablers of the oppressive state, that makes you enemies of the people.  Get the words straight.  Because they matter and there is a world of difference, as usual, between what the object of your derision said, and what you said was said.  Quod erat demonstratum.

Two Complaints About the Stupid Party – Embracing Stock Highs and Obamacare

February 24th, 2017 09:45 Central Time by Tom Bergerson

First, yesterday the new Treasury Secretary, Steve Mnuchin, whose name looks suspiciously like munchkin, when asked by CNBCs Becky Quick whether the Trump Administration sees the stock market as a scorecard he replied “Absolutely” – “this is mark to market”.  Oops.  Now aside from the fact that he used the should-be-banned word absolutely, this was the Wrong Answer.  Who’s prepping these guys anyway?  The correct answer is that while it is nice to have Wall Street seemingly validate their intentions by rocketing higher, it is main street at whom their ministrations are aimed.  Idiot.  Now, in his defense, his boss has said much the same thing.  “Trump has essentially said “Yeah isn’t that great?  It means they realize we know what we are doing”.  Oops.  For a guy who said only a few months ago we are in a huge fat bubble, this is an about face.  And it is very stupid.  If we are in a bubble, that means it will crash.  And pretty soon, meaning on his watch.  So embracing the bubble as validation of ones self is stupid.  Especially when the whole point is that he is trying to help main street, not wall street.  So why do they not say something like “We are here to help main street.  If Wall Street likes the results then great.”  This foolishness will come back to bite them.

Speaking of foolishness coming back to bite them, what is going on with the ACA, AKA Obamacare?  These guys passed 6 repeal bills in the last 6 years, each of them vetoed by Obama.  Democrats said they didn’t have any alternative and these were empty gestures.  Now the same guys have been in the lead for much of that time, Ryan and McConnell.  So what I want to know is, why do they not have an Obamacare repeal ready to roll now that they actually have the ability to make it stick?  I mean what the hell have they been doing for 6 years?  They didn’t think the would ever really get the chance?  That is not a very good excuse.   If the Congress goes through March without repealing that absurd legislation one can only conclude that the Democrats were right – there is no there there.  Instead we have the disaster-in-the-making Attorney General Jeff Sessions affirming the use of private prisons, one of the greatest lunacies of all time…  But that would be a third complaint so I will have to save that for another time.

What Was Once Taboo Is Now Policy De Rigueur

February 15th, 2017 12:07 Central Time by Tom Bergerson

There was a time back in Donald Trumps cherished clean American past when representatives of our government would go out of their way to distance themselves from any notion that anything they do is intended to affect markets directly.  It was considered bad form to interfere with markets as we considered our nation the worlds freest economy.  A shining beacon of laissez faire for all the world to follow.  Interference in markets was considered to be an inappropriate undertaking for the government.  It was something about which you would reasonably say “It just isn’t done.”    Ah the nostalgic embrace of what might have been.

Shortly after Alan Greenspan, a former acolyte of everyone’s favorite champion of free markets and individual enterprise – Ayn Rand, became the Chairman of the Federal Reserve in 1987 however the stock market had a massive tumble in October, losing more than 20% in a single day.  Greenspan sought to reassure markets that liquidity would be forthcoming and additional panic was averted.  The Greenspan Put was born.

The bogeyman of the Great Depression has always figured prominently in the minds of economists.  Any crash in stocks was always guaranteed to cause panic first in the minds of those who spent their careers studying it.  Following that fairly aggressive actual intervention in markets in 1987, rumors started to circulate about a Plunge Protection Team (PPT) under Reagan.  This would have been a group ensconced physically either somewhere in Washington or more likely in the bowels of the New York Fed, where debt market operations – purchases and sales in the secondary market – were already undertaken in the execution of monetary policy.  Of course every sane person when asked would eschew any belief that such  thing as the PPT could exist.  After all it would be beyond the pale.

But alas, the Great Financial Crisis has changed everything.  I once wrote that real men don’t do QE.  This didn’t seem to faze Bernanke and his peers at the Fed who anyway I am sure never read what I wrote.  Bernanke, one of those Great Depression scholars Greenspan got onto the Fed after the 2000 crash in order to bring some crazy thinking to the task, went ahead and started buying up truly gargantuan quantities of Mortgage Backed Securities (MBS) and Treasuries, starting on the short end and then moving more and more to the long end of the curve.  They did this from early in 2009 until they finally quit buying new quantities in late 2014.  They still buy new MBS and Treasuries to replace those that are reaching maturity, so QE is actually still going on in reduced form.  The brash thinking Bernanke even went so far as to make explicit what had been whispered about for years, namely that the Fed sought to create a wealth effect by increasing the level of stock prices.  He wrote in a Washington Post editorial in November 2010 titled “What the Fed did and why: supporting the recovery and sustaining price stability”:

[H]igher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

The Greenspan Put had become the Bernanke Put and stock prices have risen ever since they started, now reaching their second longest bull streak in history.  But the progenitor of this outre policy was Greenspan.  In an early 2013 (February 18th on CNBC) interview with Maria Bartiromo, Greenspan said, speaking on the impact of the Sequester on the economy:

[T]he issue is how does it affect the stock market.  …  [T]he stock market is the key player in the game of economic growth. … [D]ata shows that not only are stock markets a leading indicator of economic activity, they are a major cause of it – 6% of the change in the growth in GDP results from changes in the value of stocks and homes.

The video at CNBC has been taken down, presumably at the behest of Greenspan himself or maybe even the Fed,  both of whom are or should be embarrassed by the sheer insanity and inappropriateness of what the words said represent, but you can get the gist of it here, here or here.  So there you have it.  The scion of the greatest proponent of individualism and anti-government feeling in American History in Ayn Rand, turns tail and becomes one of the greatest statists of all time.  What was once viewed as wildly inappropriate as an object of government handling has now become just another policy tool.  It is tempting to ascribe the fall from grace to the machinations of the Obama administration, for whom, following Alinsky, nothing is inappropriate or beyond the pale as long as it furthers the leftist agenda.  But sadly, like so many other things, the fall from grace occurred thanks to someone who should have known better.

And so here we are 8 years after the end of the GFC, more than 6 after Bernanke’s famous editorial and 4 years after Greenspan’s interview with fed funds only a couple of 25 bp hikes above 0 and with stocks making new record highs every day, with record low intraday volatility or range, paying 25 times last years actual GAAP earnings or so in the biggest bubble yet.  <sarc>I am sure we have reached a new fed sponsored permanently higher plateau</sarc>.  But Yellen better seriously pray that the economy does not actually create any inflation over her stated target of 2% (a stated inflation target other than 0 being another anathema to formerly staid central bankers) requiring her to raise rates, or the Feds real main policy tool, engineering high stock prices, may become impossible to wield any longer.

The worst effect of the obsession of Greenspan with manipulating stocks markets higher is found in his own statement – “stock markets a leading indicator of economic activity, they are a major cause of it”.  By using the levers of power at his disposal Greenspan reduces the power and validity of the price signal that stock markets generate.  He introduces noise into the system.  Like a Potemkin Village that may fool people for an indeterminate and potentially long period of time.  But by degrading the price signal, the most important signal there is in capitalism, he unwittingly introduces inefficiency and hence lowers the total future wealth of the polity, reducing the optimality of the outcome.  Statists do what statists do.  They cannot help but tinker – with the best intentions of course.  Sadly that has a cost, and one that will go unknown and unheralded by most, and actually applauded by many.


Apple Stock Being Manipulated?

January 24th, 2017 16:20 Central Time by Tom Bergerson

Look at the hourly chart of AAPL below.  For the last week plus it has barely moved around $120 per share.  The week before, it barely moved around $119 per share for the whole week.  There is no way a stock like this can have such low volatility right at an even dollar number for such extended periods of time absent some kind of manipulation.

Never mind the absurdities in our stock markets the last few years thanks to the Fed, like companies with no real world business or assets trading with market caps in excess of a billion dollars, but should not someone at the SEC be looking into something as obvious as this?

The Kerfuffle Over Trump’s Business and Emoluments

January 11th, 2017 17:34 Central Time by Tom Bergerson

With inauguration day approaching, much is being made of the potential conflicts of interest surrounding Donald Trump’s business interests.  Trump haters are on the lookout to make sure that Trump does not enrich himself by virtue of achieving the highest political office in the land.  Trump lovers should also be wary.  I just watched an interview with a Boston University Law Porfessor named Jay Wexler and in it he made the most amazing and frankly stupid assertion – that he may have to liquidate all his business assets:

“Hes not taking over the position of small town mayor, he’s the president of the united states, he’s the most powerful person in the world, and if that means he might have to lose his business, that’s what the constitution very well may require.”

What?  He cites the emoluments clause in Article 1 of the Constitution as the legal barrier that may be transgressed:

No title of nobility shall be granted by the United States: and no person holding any office of profit or trust under them, shall, without the consent of the Congress, accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.

Hmm.  Aside from the fact that that clause only covers foreign emoluments, when domestic ones should also be of equal concern when it comes to the perversion of the fealty of our President (Solyndra, cough, cough), one wonders whether the Founders really essentially meant that a private business person had to choose between their business and serving as Commander in Chief for the remainder of their life.  Now there are legal means to try to avoid this, and as a non-practicing lawyer who never had any specialty in this area, I will not pretend to essay an opinion on whether the methods elucidated by Trump’s attorney in the Press Conference today is better or worse than a Blind Trust or some other legal method or framework of shielding a persons business interests for the purposes of serving in High Office.

But I would point out that a finding in favor of Professor Wexler’s position as stated above would seem inconsistent with the desire of the American People to obtain the best service they can, for it would effectively preclude most successful business people from serving as President.  And as a citizen who just suffered through 8 years of an incompetent twit who never held a job in the private sector in his life, I am refreshed by the idea of having a President who actually knows something about how hard it is to succeed in creating a world class business in the country whose business is business.  And yeah, one you built yourself – of course a reference to the odious and outrageous statement by that same above-referenced twit that “if you have a business, you didn’t build that”, a sentiment he shares with Pocahontas, the esteemed academic-turned-idiot, i mean -Senator, from Taxachusetts.

So I would reject categorically Wexler’s notion that serving as President of the country formerly known as the United States of America means you would have to permanently remove oneself from ones lifetime work.  In fact, that would fly in the face of the idea that we ought to have a Republic served by citizens rather than professional politicians, something clearly intended by the Founders, despite the fact that they tragically overlooked addressing the issue of limiting the terms of those who served, and left it up to a SCOTUS that was not intellectually up to the task of handling it correctly in their remarkably bad decision in U.S. Term Limits, Inc. v. Thornton.


Clinton Is Pulling Out All Stops Behind The Scenes

November 9th, 2016 02:10 Central Time by Tom Bergerson

Podesta just came out and said “lets get those votes counted and bring this home”.  What that means is that the Bill and Hill Kill Squad is out where votes have yet to be counted banging some heads making sure that the last states come out her way.  Do you think they are politely asking them to be “With Her”?  No they are threatening death and mayhem.  So the election will not be called until tomorrow.  Want to bet what the outcome will be?  The Billionaires and all the Powers That Be are doing what they can to swing this to Hillary now that it is clear she was going to lose.

And don’t you know the markets are now coming off the lows significantly with the Spoo only down 72 after being down more than 100.  The last time I saw that was the Flash Crash in 2010.

Is Politico Owned By Facebook?

October 25th, 2016 11:50 Central Time by Tom Bergerson

Occasionally I see a story at Politico on which  I would like to comment.  Like the recent one in which the Clinton aide Sheryl Mills, who of course was granted immunity by the compromised and corrupt or clueless FBI, in which she realizes they need to cover up contacts between Obama and Clinton through her privately maintained email server over which she was routing US state secrets now in the hands of the Russians, Chinese and everyone else, which demonstrate that he knew or should have known she was not going through a government server because Killary’s email address does not end in .gov.  Yawn, just another Obama lie, another Democratic cover up.  Whatever.  Par for the course.  The useless and biased mainstream press cannot be bothered to lift a finger in outrage or coverage of any kind.

But the thing about politico, which demonstrates not how cool they are but how utterly lame, is that the ONLY way to sign in to comment or do anything else is through a Facebook account.  Now I was a very early Facebook user, as we were prototyping mobile apps using their brand new shiny API in 2007, when Facebook was but 3 years old.  But I no longer have an account nor will I participate in supporting a biased and frankly dangerous company.  So I guess I cannot comment at Politico.  Which means I will simply not click on links going to Politico.


To Tim Seymour: Yeah I Bought Gold At The Bottom

October 22nd, 2016 12:56 Central Time by Tom Bergerson

On September 2016, there was a fantastic exchange between CNBC commentator Tim “All Is Well” Seymour and Bill Fleckenstein.  In it Seymour mocks Fleckenstein for his bearish views and then says, “yeah and I bet you bought gold at the lows right?”.  My views run more towards Fleckensteins and less toward Seymours.  Aside from the fact that it has been annoying to watch a guy like Seymour – with that shit-eating grin and beady little eyes – be right merely because the Fed has targeted stocks to stay high, I just have to reply, “Yeah Tim, I did buy gold at the low.  And Silver too.  And Miners.”

I started acquiring gold mining stocks in May and June of 2015 actually prior to the low, mostly by writing puts against them.  I bought some silver futures contracts with a 13 handle and have been rolling them over ever since.  They now are mid 17s after running to over 21.  By writing puts and doing a little bit of outright buying I have about 2.5% of the portfolio I manage in mining stocks and etfs.  Here is a list of positions with their basis:

  1.   ABX:  9.34
  2.   AUY:  2.93
  3.   GDX:  13.20
  4.   GGN: 4.57
  5.   GLD:  103.56
  6.   NEM:  18.63
  7.   SLV:  13.92
  8.   Silver Futures:  Mid 13 Handle

Oh, and the basis quoted above is actually much too high because it does not take into account all of the premiums I collected selling the put options, quite a substantial amount.  So Tim,  stick those in your pipe and smoke it, jerk.  I think like Fleckenstein and I bought gold and silver right around the low.   I am buying more on this consolidation.  I can not wait to see that grin wiped off your face when TSHTF.

US Government Interferes Directly In US Election

October 20th, 2016 08:58 Central Time by Tom Bergerson

It is one thing for privately owned companies to do things that influence the election, like Google altering its search results to favor one candidate or the the other, or Facebook, altering its news feed for the same purpose, but it is entirely another thing for the sitting administration of Barack Hussein Obama to exercise governmental power to shut off avenues of information to affect the outcome in favor of Hillary Clinton.  Yet this is precisely what is happening.  In the NBC News article we find:

Quiet pressure from the U.S. government played a role in Ecuador’s decision to block WikiLeaks founder Julian Assange from using the internet at Ecuador’s London embassy, U.S. officials told NBC News.

“It was a bit of an eviction notice,” said a senior intelligence official.

The action came after U.S. officials conveyed their conclusion that Assange is a willing participant in a Russian intelligence operation to undermine the U.S. presidential election, NBC News has learned. U.S. intelligence officials believe Assange knows he is getting the information from Russian intelligence, though they do not believe he is involved in helping plan the hacking, officials told NBC.

“The general view is he is a willing participant in the Russian scheme but not an active plotter in it. They just realized they could use him,” said a senior intelligence official.

So here we have the Obama administration pressuring the government of Ecuador to stop Julian Assange from continuing to direct the leaking of the hacked emails of Democrats like John Podesta because it is embarrassing and damaging to Hillary Clinton.  In other words it is using government power to try to cover up information unfriendly to its preferred candidate to keep it out of the news and to keep the public unaware and uninformed of information that might cause them NOT to vote for Killary.

In other words, the US Government is using government power to try to swing the outcome of the election to Hillary Clinton. 

One more in a litany of impeachable offenses by the worst “president” in the history of the country formerly known as the United States of America.  And the main stream media will  not say a thing.  Nary a peep from the press.

Instead they are up in arms that Trump will wait and see to assess the results of the election.  I have news for the uninformed.  All the powers of the actual and shadow governments are in motion to make sure their preferred candidate – meaning pliable and well-bought – “wins” the election.

Why Hillary Clinton’s Email Fiasco Makes Her Unfit For Office

October 17th, 2016 16:44 Central Time by Tom Bergerson

Never mind that Killary has already her 3AM wakeup call and failed it miserably when she was begged for security by her Ambassador in Benghazi and failed to provide it.  What makes Hillary unfit is her demonstrated lack of judgment regarding the communication setup while she was Secretary of State.  Consider for moment what the position she occupied was.  She was essentially the most important cabinet officer under Obama, fifth in line to the Presidency after the Vice-President, the Speaker of the House of Representatives and the President pro tempore of the Senate.  The Secretary of State is a high officer representing and acting as agent of the Government of the United States and hence of the People.  Necessarily, ALL of the formal communications incident to carrying out the powers of that agency MUST therefore be available in posterity for the People to review, with due regard that sensitive matters not be subject to review too early, lest that affect the proper execution of the Office.

It therefore follows that any technological system used for carrying such formal communications MUST be under the control of the government.  Any person undertaking such office must certainly be aware of this.  If they are not so aware they are not fit for such high office.  Yet Hillary Clinton, purportedly for ease of convenience but obviously so she could prevent disclosure of immoral or illegal activity occurring in her web of selling power, decided that she would use not a government controlled email server for her communication as Secretary of State of the United States, but her OWN server located on premises controlled not by the US Government but by herself.

  1.  This mistake in judgment alone disqualifies Hillary Clinton from the office of President

But we are not done yet.  With full knowledge (presumed or real) that all of her official communications must be reviewed by those for whom she was serving as agent,

2.  she arrogated to herself the power to decide what emails were official and which were entirely personal and hence not necessary for the record of her agency in posterity for review by the People.

Finally we get to the nub of the criminal investigation which was botched by the FBI, and in which the Director of the FBI was clearly suborned by the Clintons.  I have maintained my own email server at home.  And I have had it hacked despite my best efforts to provide security.  Unless you have a really good dedicated system administrator, your server is going to be hacked.    And even if she had such an administrator on hire, and it does not look like she did, knowingly sending classified information over an unsecure system is illegal.  Many have been imprisoned for what seem like minor breeches of this principle. Given that it is impossible to prevent hacking of a privately maintained email server you can rest assured that foreign governments have ALL of the email she ever sent through that server. despite the FBI lying that they had no such evidence.

3.  Hillary sent classified information over an unsecure system.  She either did so knowingly, which should land her in prison or she did it neglectfully, which means she is not fit to have a security clearance due to her ignorance and incompetence.  Either way she is unfit for office.

The FBI Director was persuaded by either the Obama Administration or the Clintons to declare that no prosecutor could find she did so knowingly.  Aside from the fact that that is wrong and that the FBI Director was clearly bought off, most FBI agents, according to sources, wanted her either prosecuted or at the least to have her security clearance revoked.  Either way, she would not be fit for the Presidency.

There is in addition to all the above the little fact that when pressed on the matter, Hillary lied to the FBI (another crime) and lied to Congress (another crime) and lied to the American People (apparently not a crime as Democratic politicans do this constantly and Republican ones occasionally).  She is on record stating that she never sent any classified information over her unsecured server.  The FBI stated unequivocally that she did.

4.  Hillary lied to the FBI, Congress and the American People about whether she sent classified information

5.  Finally, there is the small matter that Hillary had her minions destroy the information on her home brewed, eminently hackable email server AFTER she had received a Congressional subpoena not to do so.

So take your pick of the 5 reasons above or any of the dozens of reasons having to do with selling her office in connection with the Clinon Foundation or having people killed or the dozens of other issues with this utterly corrupt person.  She is not fit to be President of the United States.  It takes real hubris for her to throw that same thing into the face of her opponent when in fact she is far more unsuitable than he.