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Archive for March, 2012

There is no solution now

March 28, 2012 Leave a comment

Categories: Miscellaneous Musings

Iceland out of trouble

March 28, 2012 Leave a comment

As predicted years ago on this blog, Iceland is the only winner from the Euro crisis.  They followed a different path – the national taxing authority did not assume the private debts of stupid banks despite the enormous presssure on them to do so – and they are now through the tunnel and out the other side, whilst Greece and Italy and Ireland and Spain are still in the deepest darkest part of the debt tunnel with absolutely no prospect of escape.

You must repudiate unrepayable debt in order to grow.  How difficult is it to understand this basic fact?

Apple at $5

March 26, 2012 Leave a comment

I saw Apple as an opportunity when I was in the States in 1994.  If I’d put in $10,000, it would be worth $2,400,000 today.

Sigh…

At least I know my investment instincts are right.   I just have to act.

What do those instincts say now?

Gold and Silver.

The Aussie dollar.

Farmland and food.

Guns and ammo.

Entertaining the rich before they die.

All good businesses right now.

Nothing changes

March 26, 2012 Leave a comment

Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.  –Mark Twain

It’s always been the same.

So real reform is never going to happen.

So moderately leverage up into real estate, act as if the world’s resources will last forever and service those who can only see parties all the way into the future.  Because those people survive turmoil and those people are your customers.

Prada, Gucci, Hermès, Chanel.  These brands are all doing fine.

Oakley, New Balance, the middle tier, are all dying.

Discount is OK if it’s on the internet.

Choose the luxury market and stick at it.  Or sell heroin.  Some things never change.

The most important article you will read in your lifetime

March 22, 2012 Leave a comment

We’re run by sociopaths (or psychopaths) and have been for most of the second half of the 20th century.  It’s gotten worse in the 21st.  We are like Nazi Germany.  Or Cambodia.  Or Mao’s China.  Or the last days of the Roman Empire.  Or like literally hundreds of crazy regimes we’ve been forced to live under over the millenia.

In this article, I’m going to argue that the US government, in particular, is being overrun by the wrong kind of person. It’s a trend that’s been in motion for many years but has now reached a point of no return. In other words, a type of moral rot has become so prevalent that it’s institutional in nature. There is not going to be, therefore, any serious change in the direction in which the US is headed until a genuine crisis topples the existing order. Until then, the trend will accelerate.

The reason is that a certain class of people – sociopaths – are now fully in control of major American institutions. Their beliefs and attitudes are insinuated throughout the economic, political, intellectual and psychological/spiritual fabric of the US.

What does this mean to the individual? It depends on your character. Are you the kind of person who supports “my country right or wrong,” as did most Germans in the 1930s and 1940s, or the kind who dodges the duty to be a helpmate to murderers? The type of passenger who goes down with the ship or the type who puts on his vest and looks for a life boat? The type of individual who supports the merchants who offer the fairest deal or the type who is gulled by splashy TV commercials?

What the ascendancy of sociopaths means isn’t an academic question. Throughout history, the question has been a matter of life and death. That’s one reason America grew; every American (or any ex-colonial) has forebears who confronted the issue and decided to uproot themselves to go somewhere with better prospects. The losers were those who delayed thinking about the question until the last minute.

I have often described myself, and those I prefer to associate with, as gamma rats. You may recall the ethologist’s characterization of the social interaction of rats as being between a few alpha rats and many beta rats, the alpha rats being dominant and the beta rats submissive. In addition, a small percentage are gamma rats that stake out prime territory and mates, like the alphas, but are not interested in dominating the betas. The people most inclined to leave for the wide world outside and seek fortune elsewhere are typically gamma personalities.

You may be thinking that what happened in places like Nazi Germany, the Soviet Union, Mao’s China, Pol Pot’s Cambodia and scores of other countries in recent history could not, for some reason, happen in the US. Actually, there’s no reason it won’t at this point. All the institutions that made America exceptional – including a belief in capitalism, individualism, self-reliance and the restraints of the Constitution – are now only historical artifacts.

On the other hand, the distribution of sociopaths is completely uniform across both space and time. Per capita, there were no more evil people in Stalin’s Russia, Hitler’s Germany, Mao’s China, Amin’s Uganda, Ceausescu’s Romania or Pol Pot’s Cambodia than there are today in the US. All you need is favorable conditions for them to bloom, much as mushrooms do after a rainstorm.

Conditions for them in the US are becoming quite favorable. Have you ever wondered where the 50,000 people employed by the TSA to inspect and degrade you came from? Most of them are middle-aged. Did they have jobs before they started doing something that any normal person would consider demeaning? Most did, but they were attracted to – not repelled by – a job where they wear a costume and abuse their fellow citizens all day.

Few of them can imagine that they’re shepherding in a police state as they play their roles in security theater. (A reinforced door on the pilots’ cabin is probably all that’s actually needed, although the most effective solution would be to hold each airline responsible for its own security and for the harm done if it fails to protect passengers and third parties.) But the 50,000 newly employed are exactly the same type of people who joined the Gestapo – eager to help in the project of controlling everyone. Nobody was drafted into the Gestapo.

What’s going on here is an instance of Pareto’s Law. That’s the 80-20 rule that tells us, for example, that 80% of your sales come from 20% of your salesmen or that 20% of the population are responsible for 80% of the crime.

As I see it, 80% of people are basically decent; their basic instincts are to live by the Boy Scout virtues. 20% of people, however, are what you might call potential trouble sources, inclined toward doing the wrong thing when the opportunity presents itself. They might now be shoe clerks, mailmen or waitresses – they seem perfectly benign in normal times. They play baseball on weekends and pet the family dog. However, given the chance, they will sign up for the Gestapo, the Stasi, the KGB, the TSA, Homeland Security or whatever. Many are well intentioned but likely to favor force as the solution to any problem.

But it doesn’t end there, because 20% of that 20% are really bad actors. They are drawn to government and other positions where they can work their will on other people and, because they’re enthusiastic about government, they rise to leadership positions. They remake the culture of the organizations they run in their own image. Gradually, non-sociopaths can no longer stand being there. They leave. Soon the whole barrel is full of bad apples. That’s what’s happening today in the US.

It’s a pity that Bush, when he was in office, made such a big deal of evil. He discredited the concept. He made Boobus americanus think it only existed in a distant axis, in places like North Korea, Iraq and Iran – which were and still are irrelevant backwaters and arbitrarily chosen enemies. Bush trivialized the concept of evil and made it seem banal because he was such a fool. All the while real evil, very immediate and powerful, was growing right around him, and he lacked the awareness to see he was fertilizing it by turning the US into a national security state after 9/11.

Now, I believe, it’s out of control. The US is already in a truly major depression and on the edge of financial chaos and a currency meltdown. The sociopaths in government will react by redoubling the pace toward a police state domestically and starting a major war abroad. To me, this is completely predictable. It’s what sociopaths do.

There are seven characteristics I can think of that define a sociopath, although I’m sure the list could be extended.

  1. Sociopaths completely lack a conscience or any capacity for real regret about hurting people. Although they pretend the opposite.
  2. Sociopaths put their own desires and wants on a totally different level from those of other people. Their wants are incommensurate. They truly believe their ends justify their means. Although they pretend the opposite.
  3. Sociopaths consider themselves superior to everyone else, because they aren’t burdened by the emotions and ethics others have – they’re above all that. They’re arrogant. Although they pretend the opposite.
  4. Sociopaths never accept the slightest responsibility for anything that goes wrong, even though they’re responsible for almost everything that goes wrong. You’ll never hear a sincere apology from them.
  5. Sociopaths have a lopsided notion of property rights. What’s theirs is theirs, and what’s yours is theirs too. They therefore defend currency inflation and taxation as good things.
  6. Sociopaths usually pick the wrong target to attack. If they lose their wallet, they kick the dog. If 16 Saudis fly planes into buildings, they attack Afghanistan.
  7. Sociopaths traffic in disturbing news, they love to pass on destructive rumors and they’ll falsify information to damage others.

The fact that they’re chronic, extremely convincing and even enthusiastic liars, who often believe their own lies, means they aren’t easy to spot, because normal people naturally assume another person is telling the truth. They rarely have handlebar mustaches or chortle like Snidely Whiplash. Instead, they cultivate a social veneer or a mask of sanity that diverts suspicion. You can rely on them to be “politically correct” in public. How could a congressman or senator who avidly supports charities possibly be a bad guy? They’re expert at using facades to disguise reality, and they feel no guilt about it.

Political elites are primarily, and sometimes exclusively, composed of sociopaths. It’s not just that they aren’t normal human beings. They’re barely even human, a separate subspecies, differentiated by their psychological qualities. A normal human can mate with them spiritually and psychologically about as fruitfully as a modern human could mate physically with a Neanderthal; it can be done, but the results won’t be good.

It’s a serious problem when a society becomes highly politicized, as is now the case in the US and Europe. In normal times, a sociopath stays under the radar. Perhaps he’ll commit a common crime when he thinks he can get away with it, but social mores keep him reined in. However, once the government changes its emphasis from protecting citizens from force to initiating force with laws and taxes, those social mores break down. Peer pressure, social approbation and moral opprobrium, the forces that keep a healthy society orderly, are replaced by regulations enforced by cops and funded by taxes. Sociopaths sense this, start coming out of the woodwork and are drawn to the State and its bureaucracies and regulatory agencies, where they can get licensed and paid to do what they’ve always wanted to do.

It’s very simple, really. There are two ways people can relate to each other: voluntarily or coercively. The government is pure coercion, and sociopaths are drawn to its power and force.

The majority of Americans will accept the situation for two reasons: One, they have no philosophical anchor to keep them from being washed up onto the rocks. They no longer have any real core beliefs, and most of their opinions – e.g., “We need national health care,” “Our brave troops should fight evil over there so we don’t have to fight it over here,” “The rich should pay their fair share” – are reactive and comforting. The whole point of spin doctors is to produce comforting sound bites that elude testing against reality. And, two, they’ve become too pampered and comfortable, a nation of overfed losers, mooches and coasters who like the status quo without wondering how long it can possibly last.

It’s nonsensical to blather about the Land of the Free and Home of the Brave when reality TV and Walmart riots are much closer to the truth. The majority of Americans are, of course, where the rot originates – the presidential candidates are spending millions taking their pulse in surveys and polls and then regurgitating to them what they seem to want to hear. Once a country buys into the idea that an above-average, privileged lifestyle is everyone’s minimum due, when the fortunate few can lobby for special deals to rake something off the table as they squeeze wealth out of others by force, that country is on the decline. Lobbying and taxation rather than production and innovation have never been able to sustain prosperity. The wealth being squeezed took centuries to produce, but it is not inexhaustible.

In that light, it was interesting to hear Mitt Romney, the presumptive Republican nominee, speak about the lower, middle and upper classes recently. Romney is an empty suit, only marginally better than the last Republican nominee, the hostile and mildly demented John McCain. In any event, Romney is right about the poor, in a way – there is a “safety net,” now holding 50 million people on Medicaid and 46 million on food stamps, among many other supposed benefits. And he’s right about the rich; there’s no need to worry about them at the moment – at least until the revolution starts. He claims to worry about the middle class, not that his worries will do anything to help them. But he’s right that the middle class is where the problem lies. It’s just a different kind of problem than he thinks.

People generally fall into an economic class because of their psychology and their values. Each of the three classes has a characteristic psychological profile. For the lower class, it’s apathy. They have nothing, they’re ground down and they don’t really care. They’re not in the game, and they aren’t going to do anything; they’re resigned to their fate. For the upper class, it’s greed and arrogance. They have everything, and they think they deserve it – whether they do or not. The middle class – at least in today’s world – is run by fear. Fear that they’re only a paycheck away from falling into the lower class. Fear that they can’t pay their debts or borrow more. Fear that they don’t have a realistic prospect of improving themselves.

The problem is that fear is a negative, dangerous and potentially explosive emotion. It can easily morph into anger and violence. Exactly where it will lead is unpredictable, but it’s not a good place. One thing that exacerbates the situation is that all three classes now rely on the government, albeit in different ways. Bankruptcy of the government will affect them all drastically.

With sociopaths in charge, we could very well see the Milgram experiment reenacted on a national scale. In the experiment, you may recall, researchers asked members of the public to torture subjects (who, unbeknownst to the people being recruited, were paid actors) with electric shocks, all the way up to what they believed were lethal doses. Most of them did as asked, after being assured that it was “alright” and “necessary” by men in authority. The men in authority today are mostly sociopaths.

One picture. A thousand words.

March 21, 2012 Leave a comment

‘Nuff said:

Fingers in the dyke

March 19, 2012 Leave a comment

Stopping real market prices is like putting your fingers in the dyke.  It looks OK initially, but then all of sudden… it doesn’t, and the dyke collapses and you end up all wet.

Pumping trillions of paper toilet paper money into the economy and (at the same time) trying to suffocate commodity prices (especially gold, silver and oil) is always going to be a mammoth task.  And it looks like things are starting to crack.  Check out oil hitting $4:00 a barrel:

Check out Treasury yields spiking last week.

For 4 years I have been expecting (1) gold/silver/oil prices to spike (2) Treasuries to collapse and yields to skyrocket (or the US dollar to tank).  I admit I’ve been waiting a long time.

The central planners have held back the tide so far.  In fact, Moses-like, they have parted the seas and reversed the tide.  Treasuries have been a fanstastic investment over the last 4 years.  Incredibly low yields still appear on the 10 year at around 2%, despite the jump in yields last week.

But for how long?