Photo Credit: Ewen Roberts || What is the sound of one hand clapping? It is when you are sitting around in a quiet house at night, and you realize the motor of the refrigerator just turned on. This piece may be a little discursive, so please bear with me. When did US economic policy begin going badly wrong? There were two major errors, and both happened in the (drumroll) Reagan administration. Error 1 was ceasing to run balanced budgets. Error 2 was appointing Alan Greenspan as Fed Chairman. The second error was the bigger one. (Dishonorable mention goes to the Greenspan commission on Social Security, which made our future problems there worse.) Greenspan did not let recessions do their work, eliminating malinvestment. He cut recessions short, and as … [Read More...]

There is no “Wall of Money”
Photo Credit: Crypto360 aka Cryprocurrency360.com [sic] || When will this stupid concept die? Recently as I was reading Barron’s online, I ran across the following article: Small-Cap Stocks Could Keep on Rising. There’s a ‘Wall of Cash.’ I’ve subscribed to Barron’s for at least 20 years of my life. Really, I expect better of them. The meme that money flows in and out of the market is hard to kill. Stocks rise; money must have flowed in. Stocks fall; money must have flowed out. Some of this comes from the impulse that journalists must find a reason for the market action of each day, when really — there’s a lot of noise. I have a few simple ways to explain this. … [Read More...]
What Game Are You Playing?
Photo Credit: Alex Alexi ||As Captain Kirk once said (something like): “If you are stuck in a losing game, find a way to change the rules.” You might be a very good trader. More likely, you are not. The markets are not like Lake Wobegon where all the children are above average. Personally, I think that I am probably an average trader, which is why I don’t trade much. That said, there is a reason to avoid thinking of trading as a way to make money. It is a negative sum game for those who are not market makers, specialists, or high frequency traders, whose computer algorithms generally make intelligent trades against order flow from everyone else. Stocks derive their value from the stream … [Read More...]
Decentralized Ponzi
Photo Credits: Jared Enos, Stephan Mosel & Pine Tools || Ponzi would have appreciated the cleverness of wallstreetbets The operation of the “bull pool” at wallstreetbets resembles a Ponzi scheme. There are five things that make it different: It is decentralized.Because it is decentralized, there is no single party that controls it and rakes off some of the money for himself, at least not directly.The assets can be freely sold in a somewhat liquid, but chaotic market. Most Ponzi schemes have time barriers for redemption.They caught a situation where shorting was so rampant, that triggering a squeeze was easy. Situations where the shorts are so crowded are rare.Gamestop [GME] and other companies whose stock prices get manipulated above their intrinsic value can … [Read More...]
Relax
Photo Credit: Juliana Dacoregio || Please relax, it is not that bad What happened at the US Capitol today was unusual, but it was nothing severe. Don’t get me wrong; those that illegally entered the Capitol should be prosecuted. When I say it was not severe, I mean that it was unlikely to do any permanent damage. Those who threaten violence, even if non-lethal, have to understand that once they fail, society will do the opposite of what they wanted. There is a saying that if you want to kill the King, YOU MUST KILL THE KING! Don’t do something halfway. It will result in your own demise. What happened at the Capitol today was the actions of a bunch of disorganized malefactors who … [Read More...]
Should You Become an Actuary?
Image credit: Word Cloud by Epic Top 10 || It is a great profession, but for most people, the exams are tough. Note: at the end of this article, there is a note on GameStop. Here’s a letter from a reader: David,I am a longtime reader of your blog, which I enjoy greatly. I will retire from the military in about three years and am considering becoming an actuary via self-study and taking the requisite exams. Given your experience in the field, I would like to ask you some questions:1. If I do this, will anyone hire me, or is this field one that strictly recruits new graduates from certain established schools? My degrees are in Chemical and Aeronautical Engineering (BS & MS respectively) if … [Read More...]
On Fractional Shares
Photo Credit: Tim Green || Once my friend Jose Pedro Marcos de Fuentes said to me “A centavo for your thoughts.” I said, “Peter, I don’t deal in fractions of cents.” He said, “You certainly deal in fractions of sense.” Since I mentioned my old friend Peter Fuentes, who I haven’t heard from in 35 years, let me tell you a funny story that he once told me. He had immigrated to the US, and came from a trilingual family in Mexico where they spoke Spanish, French, and English fluently. One day he was walking in the streets of LA, and he realized that an INS agent was following him. He had forgotten to bring his immigration documents with him … [Read More...]
Your Children Can’t Live Here Anymore
Photo Credit: Jason Thibault also massivekontent.com/ ||Urban Wasteland Before I write my piece this evening, I want to express and opinion that is unpopular to many of my friends. I think Trump lost fair and square. Since Trump is a greater liar than even Bill Clinton, he continues to protest, but with no significant data, only allegations. Here’s my quick summary. In the four states that were the smallest wins for Biden (AZ, GA, PA & WI), the state Republican parties generally did not allege any major voting fraud. They may not have liked the concept of mail-in voting and/or increased absentee voting, and they might want to curtail those methods of voting, but given that those were the rules prior to the … [Read More...]
GameStop: The Voting Machine Versus The Weighing Machine
Photo Credits: Seattle Municipal Archives, Luis Anzo, piepjemiffy & Pine Tools || Truth is stranger than fiction, particularly with the behavior of crowds in markets Before I start writing this evening, I want to say that what I write here is correct in its major findings, but it is quite possible that I got some details wrong. This is complex, and there are a lot of issues involved. I’ve had four friends ask me about GameStop [GME] over the last few days. Thus I am writing an explanation as to why things are so nuts here. As a prelude, I want to tell everyone that I have no positions at present in GME, and have no intentions of taking a position in it ever. Mid-decade, … [Read More...]