28 Pages and the Establishment Media

For the last couple of weeks, the media has mostly focused on the national conventions, at least when it comes to political stories.  And while there were some interesting stories within the conventions, there has been little talk of the release of the 28 pages from the 9/11 report.

If you get your news from the internet, then you may have seen this story.  If you get your news from the establishment  (sometimes called mainstream) media, then you probably don’t know about it.  If you rely on television, radio, and newspapers, then you are probably out of the loop on this.

There has been a push to release these secret (not anymore) 28 pages from the 9/11 Commission’s report.

We can assume that if there had been a direct smoking gun, then the government wouldn’t have released the pages.  The powers-that-be had to weigh their options of withstanding pressure of revealing the documents versus how much the release of the pages would change public opinion.  So far, it seems that the establishment has bet correctly on an apathetic American public.

Of course, the establishment media really does help direct the narrative.  If these 28 pages had been headline news, then Americans might be more outraged.  So while the internet has been wonderful in spreading messages that were previously untouched, we still have to acknowledge that the establishment media somewhat directs the narratives.

While there isn’t one particular direct smoking gun, there are a series of events that look really bad for the Saudis when put together.  It would be too coincidental for at least some Saudi officials to have not played a role in the 9/11 attacks.

You can check out 28pages.org for a summary and for the details.  There seems to be little question that Prince Bandar of Saudi Arabia was helping to fund the hijackers.

(Also, you can check out this informative podcast on the Tom Woods show.)

Some people might say, “Who cares?”  They might say that the victims of 9/11 are already gone and nothing can bring them back.  But if you had a loved one murdered, wouldn’t you want to know who was responsible for it?

Of course, if goes much deeper than this.  It is not just about justice, as important as that is.  It is also about the U.S. government and the entire premise of its foreign policy.

If Prince Bandar funded the 9/11 hijackers – which looks to be the case – then this all of a sudden implicates the Bush administration.  The Bush family is close friends with Bandar.  If Bandar has blood on his hands, then Bush and Cheney likely do too.

The entire foreign policy of the U.S. since 9/11 is a farce.  The hundreds of thousands (or millions) of people who have died are real.  But the American people have tolerated all of these wars that have all been based on lies, which includes Afghanistan.

I do not favor a war with Saudi Arabia, but if any country should have been attacked based on the 9/11 attacks, it should have been Saudi Arabia.  Meanwhile, almost 15 years later, the war and occupation of Afghanistan goes on.  The war and occupation of Iraq goes on.  And let’s not forget all of the other wars and drone bombings in countries such as Libya, Pakistan, Yemen, and Syria.

To top it off, the Saudis are still supported by the U.S. government, both militarily and financially.  The Saudis are our supposed allies.  With friends like these, who needs enemies?

When you examine these 28 pages and see that certain Saudi officials were helping to carry out the 9/11 attacks, it becomes clear that the Bush administration likely also played a role.  All of a sudden, the 9/11 conspiracy theorists shouldn’t seem so crazy.  It almost becomes crazy to think that no U.S. officials played a role in the attacks.

Unfortunately, most Americans don’t seem to know or don’t seem to care.  Yet, it is these people who blindly support whatever war is the flavor of the day.  They have been completely lied to and deceived.

If it was clear that the Bush administration played a role in the attacks, or at least knew about them beforehand, I wonder how the American people would react.  Unfortunately, all too many would still be happy to turn vast amounts of power over to the government.

Bush and Cheney should be in prison forever, but this isn’t just a couple of bad apples.  This is representative of the deep state.  We can be reasonably sure that Obama knows most of the truth of what happened as well.  This may be why the establishment is so scared of Trump.  They don’t want him to find out any deep secrets because he is a wildcard and can’t be depended on to carry on the secrets.

At this point, all we can do is let people know about these 28 pages and the implications.  Let’s hope that with the decentralization of information via the internet, that more will be found out as time goes on.  It took just a small minority of people to get to the point where the government felt compelled to release the 28 pages.

Public opinion matters.  The more people who find out about the implication of the Saudis in the 9/11 attacks, the better it is.  It means less consent for the U.S. government.  It means that perhaps, one day in the future, there will be a big enough movement that government powers are actually curtailed and our foreign policy changes.

FOMC Statement – July 27, 2016

The Federal Open Market Committee (FOMC) has released its latest statement on monetary policy.  The Federal Reserve will not be raising its target federal funds rate.

Compared to the last statement, there were a few changes in the language used in the first paragraph, but it is mostly just gibberish as usual.

There was one dissenting vote by Esther George, who wanted to raise the target rate.

Stocks ended the day mostly flat, although the Nasdaq was higher.  Gold went up, but not a lot.  The 10-year yield went down to almost the 1.5% level.  Overall, there was not a lot of market reaction.

With the Fed having so much power over the economy, things are often backwards when dealing with the financial markets.  For example, there are many times where bad economic news actually drives stocks up.  Stock investors see the bad news as a sign that the Fed will loosen (or keep loose) its monetary policy.  Therefore, they reason that it is beneficial for stocks.

Now things are starting to work the other way.  When the Fed doesn’t raise its key rate, investors start to wonder what they see that is wrong with the economy that is making them so fearful of raising it.

The official unemployment rate is now at 5.5%.  Stocks are hitting all-time highs.  There is supposed to be a recovery, albeit not as strong as previous recoveries.  If the Fed can’t raise its target rate above a half of a percent, when can it raise it?  What do Fed officials see?  What are they so worried about?

It wasn’t that long ago that the Fed was expected to raise its key rate 4 times in 2016.  Now it is questionable whether it will happen in September or December.  Will the Fed raise it at all in 2016?

The federal funds rate is not dictating monetary policy at this time.  Due to the huge pumping of money from 2008 to 2014, the huge pile of excess reserves is keeping the overnight lending rate low.  The Fed has kept a tight monetary policy since the end of QE3 in October 2014.

In order to raise the target federal funds rate, the Fed either has to sell trillions of dollars in reserves, or it has to increase the rate it pays on bank reserves.  Since the Fed isn’t going to be massively reducing its balance sheet any time soon, it is basically left with the second option.

Still, even if the Fed raises its key rate by paying banks not to lend, it is still a reflection of a tighter monetary policy on the margin.  It could mean even less bank lending than we currently have.  This has a deflationary effect.

I think the Fed officials know that the economy has been propped up by loose money.  This includes the stock market.  They are afraid of what will happen if they take on a slightly tighter stance.  The one time they raised rates (last December), stocks had a really rough ride for a little while after.

The stock market makes me really nervous right now.  It has for a while, but it is even more so now.  I don’t think the risk is worth the reward at this point, unless you are betting on specific individual stocks or specific industries.  Even there, there is danger.

Stocks are at or near an all-time nominal high right now.  Maybe the Dow will go to 20,000.  Is a possible 8% gain (less fees and taxes) really worth the risk?  That question answers itself when you consider that a recession could easily mean a 50% downturn.

Even if you just think a 15% correction is in the cards, why would you stay in for just a little bit more in potential gains?

I am an advocate of a permanent portfolio.  In this context, I think stock holdings are acceptable right now.  But beyond that, it really is speculation with a lot of risk right now.

The Fed is sitting tight right now.  Of course, doing nothing is a choice.

I keep saying that if the economy gets rough and a recession appears, the Fed is likely to start ramping up monetary inflation again.  QE4 anyone?

That will be a time to look into more speculations in precious metals and mining stocks.  I like gold and mining stocks now, but there is still a threat of a downturn that could hurt these.  For this reason, I am far from being “all in”.

In a recession, cash is still king, especially as long as inflation is not seen as a serious threat.  Right now, inflation is not seen as a threat.  That is what the bond market is telling us with these low yields.

Now we can look forward to the FOMC’s next meeting in September to see what the next excuse will be for delaying another rate hike.

China and Japan Still Holding Massive U.S. Treasuries

There is a report released by the Treasury that is updated once a month showing the U.S. Treasuries held by foreign countries.  As of this writing, it was last updated on July 18, 2016.

Despite previous reports of the Chinese dumping U.S. Treasuries, this isn’t really the case.  China is still the number one holder of Treasuries, with Japan coming in a close second.  Third place is nowhere close to Japan.

As of the end of May 2016, China held $1.244 trillion.  This is only a slight decrease from $1.271 trillion a year ago.  While $27 billion is a lot of money, it isn’t much of a drop from a year ago when put into context.

Japan has gone from owning about $1.197 trillion last year to $1.133 trillion.  This is a little more of a drop, but it is not as if the Japanese central bank is massively selling off Treasuries.  The Bank of Japan is busy buying up its own government’s debt (at negative yields), so perhaps it is not rolling over all of its maturing U.S. debt.

There is no reason to expect this situation to change in the short run.  The Chinese and Japanese officials in charge are a bunch of mercantilists.  They think they have to buy U.S. Treasuries in order to boost their export industries.  Meanwhile, they have no problem in depreciating the value of their currencies.

The massive U.S. debt held by foreigners (over $6 trillion) is somewhat of a subsidy to American consumers.  Unfortunately, it is also a subsidy to the U.S. Congress and the entire U.S. government.  It enables them to run up debt at lower interest rates than would otherwise be the case.

Right now, we see negative yields in Japan and many places in Europe.  This is mostly the result of central bank buying.

In the U.S., we have not seen negative yields.  The yields on short-term debt were at or near zero for a while, but these have gone up slightly.  Longer-term yields have fallen, as the 10-year yield has been around 1.5%.

The interesting thing is that long-term rates have fallen in the U.S. despite a tight monetary policy from the Fed.  The Fed has not been buying U.S. Treasuries since October 2014 (the end of QE3), except for rolling over its maturing debt.

This means that private investors have been buying U.S. Treasuries/ bonds, particularly longer-term debt.  Foreign holdings overall have remained relatively steady.

This indicates that there is some fear in the U.S., at least from bond investors.  Why would investors be locking in 10-year rates for around 1.5%?

The yield curve has been flattening, but it still has a way to go for inversion.  An inverted yield curve is a classic indicator of recession.

China and Japan have their own problems, but they continue to maintain most of their holdings of U.S. government debt.

But investors are signaling a weakening economy, at least from the bond market.  I trust the bond market over the stock market, at least in signaling an upcoming recession.

Keep an eye on long-term yields.  If they continue to fall without central bank buying, then a recession should be expected.

Republican National Convention: A Libertarian Take

The Republican National Convention is wrapping up as I write this.  While most of it has been politics as usual, it hasn’t been completely boring.

It started out with Melania Trump giving a speech, part of which was a copy of Michelle Obama’s speech from 8 years ago.  It would be hard to believe that this wasn’t done deliberately.

My first thought was wondering whether it was done to sabotage the Trump campaign.  But then it was reported that the speech writer admitted to it, but that Trump wouldn’t fire the person.  I have also heard theories that the Trump campaign purposely did it in order to draw comparisons between Melania Trump and Michelle Obama to get people to subconsciously think of Melania as the first lady.

One thing we can be sure of is that Melania Trump didn’t write this part of the speech.  It seems she doesn’t want the spotlight as her husband does.  She gave her obligatory speech, but she would probably rather be home taking care of her child.

The other interesting part of the convention was Ted Cruz’s speech.  He essentially got booed off the stage.  He would not endorse Donald Trump.  He said people should vote their conscience.

It is funny how the whole Republican nomination shaped up.  If you remember back at the first debate, the candidates were asked if they pledged to support the eventual nominee.  Trump was the only one who didn’t raise his hand.  That was the beginning of the end for Rand Paul and his campaign when he focused on the fact that Trump wouldn’t make that pledge.

Trump received a lot of criticism for this, and he eventually pledged to support the eventual nominee.  But then he became the nominee and not all of the candidates endorsed him, including Ted Cruz and Jeb Bush.  It is total hypocrisy.  Rand Paul did endorse Trump, but without much enthusiasm.  He was absent at the convention.

There isn’t much to say about Mike Pence.  I have already analyzed his conservative views, which includes being pro war.

On the final night, Ivanka Trump spoke before introducing her father.  It was probably a wise political choice.  She is obviously attractive and well spoken.  From a libertarian standpoint, some of the things she said were horrendous.  It was particularly bad when she was talking about the gender pay gap and how her father would have stricter labor laws.  She could have been speaking at the Democratic convention.

As for Trump himself, it was a rather typical Trump speech.  He is all over the place.  There are some good things.  There are a lot of slogans.  His economics is mostly bad.  If he becomes president, it is not likely that anything significant will change.  There is still a glimmer of hope that he will implement a less interventionist foreign policy.

This is what I will be watching for the next several months.  Will Trump continue to talk about a more non-interventionist foreign policy?

It will also be entertaining when he attacks Hillary Clinton.  I think she is scared of him because of what he might say.  None of the other candidates would have attacked her on such a personal level.  Gary Johnson, the Libertarian Party nominee, is even saying nice things about Hillary Clinton, but he is a subject for another day.

Trump has made this whole election cycle far more interesting than it would have been otherwise.  He is still somewhat of a wildcard, but I am not delusional in thinking that he will change things significantly.  He could change things in the wrong direction too.

Again, the one hope is that he implements a better foreign policy.  His pick of Mike Pence makes that less likely.

Now we will move on to the Democratic National Convention.  I don’t know if I will be able to stomach watching more than 5 minutes of it.

Are Americans Sticking Their Money Under the Mattress?

CNBC recently ran an article titled “To the mattresses: Cash level highest in nearly 15 years”.

The article’s title does not actually explain its point.  It only does so in a metaphorical way.  It is not claiming that Americans are literally sticking wads of cash under their mattresses.

The article is talking about professional investors.  Professional investors now have cash levels at 5.8% in their collective portfolios, which is the highest since 2001.  This is according to a survey, so consider that there could be somewhat of a margin of error.

The article is interesting in the fact that it also states that 39 percent of fund managers now anticipate some kind of helicopter money.  Too bad that “Helicopter Ben” Bernanke isn’t still around at the Fed to implement it.

But while the article briefly discusses professional investors, it doesn’t address whether the general public is putting cash underneath their mattresses.

Most Americans are not investors, unless you count retirement accounts such as 401k plans.  But aside from investing, people still have a choice of what to do with their money.

At any given point of time, there is a set amount of money in circulation.  The only thing that changes the money supply is the central bank and its balance sheet.  Bank lending also has the equivalent impact, as fractional reserve lending increases the supply of money in the sense that more people are drawing upon some of the same money.

But it isn’t just the money supply that impacts overall price inflation. What also matters is how quickly money is changing hands.  The Fed could print up a lot of money, but it wouldn’t result in massive price inflation unless people actually spent the money.  If everyone just stuffs it under their mattress or in their bank account, then prices will stay down.

This is the demand for money.  When the demand for money is high, it means people are saving it.  It is the equivalent of stuffing it under a mattress.  In our world of digital banking, most people don’t actually stuff it under a mattress, although we can be sure it still happens.  But most money that is not outside of the country is not in physical cash.  It is digits in bank accounts.

If the demand for money is high, it means people are buying fewer things.  Stated another way, velocity is low.  Money is changing hands less frequently.  This has a deflationary effect on prices.

It is quite difficult to measure the demand for money though.  It is almost an intuitive sense.  During the artificial boom times of the mid-2000s, velocity was running higher.  People were spending money.  During the financial crisis, and perhaps even leading up to it, velocity dropped.  People became fearful and some actually tried to save a few bucks for a rainy day.

It is very hard to sense where the demand for money is now in the United States.  A lot of people have bought new cars.  Housing has somewhat recovered, depending on the area.  it is not 2009 any more.  But it also isn’t 2004.  There is still a sense of uneasiness, and probably rightly so.

Times are tight right now for middle class America.  It is not necessarily widely admitted, but I have heard and seen enough on the streets (not literally).  Even two-income households that should be doing well are struggling.

Price inflation has remained relatively low according to the CPI statistics.  They are probably understated, but it is nothing like the 1970s.  Still, wages are stagnant as compared to the cost of living.  Technology gets cheaper, but health insurance and other basics get more expensive.

I think the velocity of money will likely drop in the near future.  It will be part of the correction process if it is allowed to happen.  Unfortunately, those fund managers anticipating helicopter money may be correct.  If the Fed starts with another round of money creation, then velocity will likely increase.  Velocity can pick up quickly if people think their money will depreciate rapidly.

A lot of libertarians/ Austrian school economists wrongly predicted high price inflation when the Fed was creating money like crazy from 2008 to 2014.  They did not account for the lack of bank lending.  They also didn’t account for the demand for money remaining relatively high.

This does not in any way make libertarianism or Austrian economics wrong.  Maybe it made some of those people wrong on this subject.  But monetary inflation is damaging because it enables increased government spending and misallocates resources.  Higher prices is just one potential consequence.

I expect more Americans to stuff more money under their mattresses, literally and metaphorically, if they can find enough to actually save.  If and when the Fed starts another round of quantitative easing or whatever you want to call it, then all bets are off.

Total Government Spending and Why We are Poorer

In the U.S. (and elsewhere I’m sure), there are constant arguments about little things dealing with the economy.  There are arguments over what the marginal tax rate should be for high-income earners.  It is typically an argument over 35% vs. 40% (maybe higher for Bernie supporters).

There are arguments over certain budget items.  There are arguments over “sequestration” and non-existent cuts to the military.  There are arguments over funding Planned Parenthood, which the Republicans aren’t even capable of ending.

It mostly adds up to insignificant amounts, and usually there aren’t any actual cuts anyway.  Sometimes it is good to take a step back and look at the big picture.  If you wonder why middle class America is feeling poorer these days, this might help answer your question.

Instead of looking at taxation, let’s look at government spending.  While taxation itself isn’t unimportant, government spending gives us a better idea of how much capital is being spent by government.  When the government spends money, it misallocates resources.

This has to be the case.  Unless the government is spending your money exactly the same way you would have spent it if you had been allowed to keep it, then it is a misallocation.  It is being spent according to politics and bureaucracy and not according to consumer demand.

When looking at government spending, we can’t just look at the federal government.  We have to look at everything.  For the United States, the total government spending is approximately $6.7 trillion.

The federal government spends about $4 trillion, but some of it is funneled to state and local spending.  If you account for intergovernmental spending, it drops to $3.3 trillion, but then you have to count it at the state and local level.  The total state spending is $1.6 trillion and the total local spending is $1.8 trillion.  That is a grand total of $6.7 trillion, give or take a hundred billion.  That is about 36% of GDP.

By using total government spending, we are accounting for the resources being sucked away from us via debt and inflation.  This is the main reason it is more appropriate to use total government spending as opposed to total tax receipts.

In the U.S., there are approximately 125 million households.  If you divide $6.7 trillion by 125 million, that comes out to $53,600 per household.

You may not think you pay that much, but that is the average for each household.  It is being paid for in some form, whether it is through lower wages, higher product prices, depreciating money, various taxes, etc.

Imagine if all of government stuck to basic functions of infrastructure, defense, a court system, and the police.  As a side note, I am not saying that these things can’t be done outside of government, but that is not the point of this piece.  It is a big picture piece on the economy.

Imagine if that basic government spent $13,600 per household instead of $53,600.  I understand that it would mean no more Social Security, Medicare, Medicaid, state school system, and a lot of other things.  (As another side note, we would actually gain even more wealth by not having so many of the alphabet agencies that regulate us.)

Still, what would your family do with an extra $40,000 per year?  If there were still any poor people left, don’t you think they could be easily helped by people with so much more disposable income?

The total government spending is approximately equal to the median household income.  If you can’t figure out how this is possible, give it some thought.  You never see some of the money in the form of income that the government spends (employer taxes, corporate taxes, debt).

You already get by with your income as it is.  If the major government programs went away, maybe your expenses would increase for certain things, such as school if you have children.  If you have a government pension, then you could initially lose out if all pensions went away.  (I understand this is not politically realistic right now.)

Even if your expenses increased by $20,000, you would still have an extra $20,000 remaining, and we aren’t even accounting for the possible windfall from fewer government regulations.  If you had this much extra, you could donate generously to charity, save for retirement, and live a better lifestyle.  Now imagine 100 million other households doing the same.  Imagine this wealth compounding over time.

The reason we are feeling so poor right now (relatively speaking) is because the government is sucking capital away from us.  It is hurting savings and capital investment.  This makes us poorer than we otherwise would have been.

If the economy can keep chugging along with so much government spending and regulation, imagine how rich we would be if the total size were reduced to a fraction of what it is now.  Our living standards would be beyond our current comprehension.

Mike Pence: A Libertarian Perspective

It is being reported that Donald Trump has chosen Mike Pence to be his running mate on the Republican ticket.  This is just a short perspective on Mike Pence from a libertarian viewpoint and the possible ramifications.  If the reports are completely wrong and he announces a different pick for vice president, then I will just have to do another analysis.

Mike Pence is the current governor of Indiana.  He is up for re-election this year, but this latest announcement will likely end that run.  Pence was previously in the House of Representatives from January 2003 to January 2013.

He is considered to be a conservative Republican, both fiscally and socially.  He is considered to be an original Tea Party guy.

As governor, he signed what was known as a religious freedom bill in 2015, which was highly controversial.  Despite the fact that Libertarian Party presidential nominee Gary Johnson thinks that bakers should be forced to bake cakes for gay couple weddings, that is not the libertarian position.  The libertarian philosophy is one of voluntarism and freedom of association, even if it may not be tasteful.

In this sense, Pence’s signing of the bill was mostly correct from a libertarian perspective.  But like many things in politics, he probably did it for the wrong reasons.  This isn’t even really a religious issue so much as it is a property rights issue.  Also, after all of the pressure from the establishment media and the rest of the left, Pence signed an amendment that essentially said it is not acceptable to discriminate.

In terms of economics, libertarians will obviously find more in common with Mike Pence than they will with Hillary Clinton or whoever her running mate is.  Still, we know how things go in Washington DC.  Talk is cheap.  George W. Bush also campaigned as a fiscal conservative.  Talk is mostly meaningless unless the person is offering highly specific cuts to government programs and agencies that are significant.

There are other red flags for libertarians.  Paul Ryan and Lindsey Graham both like Pence.  That is a major problem because they are so awful.  Graham is especially problematic, since he is always anxious to start another war somewhere.

And that brings us to the biggest issue, which is foreign policy.  Pence was a supporter of the Iraq War.  I am not sure how this reconciles with Trump’s opposition to the war.  Pence is a typical establishment Republican when it comes to foreign policy.  That is why he can hang around the likes of John McCain and Lindsey Graham.

Pence pays homage to Israel and everything the government does there, as any good Republican is required to do.  He has also opposed the closing of the Guantanamo Bay detention centers.

In other words, Pence is mostly a disaster on foreign policy.  This is rather disappointing because that is the biggest issue for the presidency.  It is also an issue where libertarians hold out for some hope of actual change if Trump gets elected.

The fear is that Trump will end up doing what Reagan did.  Reagan picked Bush as his running mate and then ended up with many of Bush’s closest buddies as his advisors and cabinet.

Even if Trump holds firm on his less belligerent foreign policy stance, it will be hard to maintain it if he has a bunch of people around him who are committed to the status quo of interventionism.

And by the way, Pence was very recently a supporter of Ted Cruz, saying he would vote for Cruz in the Indiana primary.  We have to wonder why Trump would even consider someone who supported “Lyin’ Ted”.

It is too bad that this is Trump’s likely pick.  He could have done so much better.  Obviously someone with a libertarian streak would have been nice.  Realistically, Trump could have picked Pat Buchanan, whom he is very similar on the issues.  Buchanan and Trump are both terrible on trade, but they are pretty good on foreign policy.  Someone like Buchanan also would have been a better life insurance policy for Trump, as the establishment would like Buchanan even less than Trump.

Politically speaking, this probably isn’t a huge deal for Trump either way.  The election is going to mostly hinge on the economy for the next 4 months and the debates.  We already know that most of the media will continue to go after Trump.

In conclusion, Pence is not the worst pick in the world, as there are almost always people who could be worse.  But it could have been a lot better too.  It is worrisome for libertarians that this means Trump will compromise on his foreign policy views.

Presidential elections and politics in general are overrated.  But if there is one area where a president could possibly have some impact, it is foreign policy.  It would be nice to see less interventionism, but I fear this won’t be the case if Trump is surrounding himself by people like Mike Pence.

Why Isn’t the Permanent Portfolio Higher?

I am a strong advocate for having a permanent portfolio as described by Harry Browne in his book Fail-Safe Investing.

I can’t say that it is necessarily a timeless strategy, but it seems to be a pretty good formula for the long run.  If the U.S. government ever threatens to seriously default (aside from inflation) on its debt, then we may have to reconsider.

I recommend that you have at least 50% of your financial assets in a permanent portfolio setup, or something similar.  This would not include real estate investments, ownership in a business (not including stock ownership), or home equity.

It is a portfolio designed to help you sleep at night.  You don’t have to fear what the stock market, or any other market, is going to do the next day.  If there is a stock market crash that drops stocks 20%, your portfolio will probably go down.  But the cash and bonds portion will likely help offset a large portion of the losses.

If you are a more conservative investor, you will probably want to have even more than 50% of your financial assets in a permanent portfolio setup.

Although I recommend this portfolio, it hasn’t been doing all that well over the last 5 or so years.  It served its purpose in the 2008/ 2009 financial crisis, but it has been rather weak since then.

It is hard to get a good accurate figure because you are supposed to rebalance the portfolio.  People will rebalance at different times.  In addition, the 25% allocated to each asset (stocks, bonds, gold, and cash) are approximations.

I like to track the permanent portfolio mutual fund.  The symbol is PRPFX.  It does not precisely mimic the portfolio as described by Harry Browne.  Still, it is close enough to use as a measuring stick.

The 5-year average return for PRPFX is just 1.12%.  The share price of the mutual fund is actually lower than it was 5 years ago, but it does pay out dividends.

The only reason it is positive at all over the last 5 years is because of 2016.  As of right now, the year-to-date return is 14.21%.

I have read in various articles that all (or most) asset prices are inflated right now.  Stock markets are at or near all-time highs in the U.S.  The U.S. dollar has still been relatively strong.  Gold has started to surge lately.  And bonds continue to do well, as long-term yields continue to fall.

With all of this, you would think that the permanent portfolio would be doing really well.  For 2016, it has done really well.  But prior to 2016, this wasn’t really the case.

This is easily explainable though.  The permanent portfolio, which is well designed for all economic environments (inflation, deflation, recession, and prosperity), has a bias towards inflation.  The portfolio will tend to generate higher returns during times of higher price inflation.

This is how it should be.  You want higher nominal returns in an environment of higher price inflation.  Since your purchasing power is declining, you need higher nominal returns to compensate for this.

While there has been significant monetary inflation from 2008 to 2014 as measured by the adjusted monetary base, this has not translated into high consumer price inflation.  Perhaps the CPI is understated, but it is still relatively low as compared to the rest of the era of the Fed.

It makes sense that the permanent portfolio returns have been low in an era of low price inflation and low interest rates.  Gold makes up 25% of the portfolio.  PRPFX has a little silver mixed in, which is worse in terms of volatility.  Gold has done poorly over the last 5 years, except for its recent surge in 2016.

In addition, the low interest rates mean smaller dividends.  Falling rates are good for bond prices, but the low interest rates hurt the payouts from bonds and the cash portion.  We all know that savings accounts pay close to nothing these days.  Therefore, the cash portion is basically ineffective in terms of providing any return at this point.

The main purpose of having cash is to lessen the blow of a recession, and to also buy assets if they fall in price and you need to rebalance.

I personally do not have all of my eggs in one permanent portfolio basket.  I like the investment though and I highly recommend it, but it is tough during this period of low interest rates.

I don’t like fooling with the portfolio, but I have previously suggested tweaking it a little if you can make it fit your needs better.  Instead of having the full 25% in cash and 25% in bonds, it could make better sense to take a small portion and pay down mortgage debt (or other debt), especially if the interest rate is high enough.

You have to be very careful with this strategy though, as things can change quickly.  If you pay down your mortgage, you are tying up this money.  You cannot use this money to buy cheap assets in an economic downturn.  You also can’t use it as emergency money, unless you are planning to sell your house or refinance.

In conclusion, I know that the permanent portfolio has been disappointing for some over the last several years.  But it has still served its purpose of preserving wealth.

You have to be patient and realize that the economy won’t stay like this forever.  We will see a stock market crash, or a spike in interest rates, or a spike in price inflation, or maybe a combination of some of these things at some point in the future.  When we hit more turbulent times, you will be thankful that you have your money in a permanent portfolio designed to weather almost any storm.

What Can Stop Hillary Clinton?

The FBI recently announced that it would not recommend charges against Hillary Clinton for using a private email server while working as Secretary of State.  While some of her opponents are disappointed, it comes as little surprise.

The Clintons have gone through life by using lies and threats and violence in order to gain power and to prevent others from dethroning them.

They are both highly intelligent.  I believe Bill Clinton is a sociopath.  He has the ability to turn on his emotions at a whim, as seen at Ron Brown’s funeral.

People who meet Bill Clinton say he is incredibly charming and can win people over almost instantly.  But this is the classic sign of a sociopath.  He can easily trick others into thinking that he is empathizing with them.

Hillary Clinton is not as skilled.  She is a liar and criminal, but she does not have the same ability as Bill to instantly charm people.  Still, she is pretty good at faking it for some people.  If she weren’t any good, then she wouldn’t be the presumptive Democratic nominee for president.

The lying and criminality goes way back to at least Arkansas.  I firmly believe that both of these individuals will do anything to gain and retain power.  That includes threatening others with violence, and following through with violence if necessary.

The number of people associated with the Clintons who either ended up in jail or ended up dead is astonishing.  It is hard to get an accurate count because some of the associations are more direct than others.  Even for a governor and president, it seems statistically impossible.

I understand that people in positions of power have greater connections and more people within their circles.  But if you don’t think that the Clintons are behind murdering people (not counting foreign policy), then you must believe it is a statistical aberration that so many of their friends and associates end up dead or in jail.

If you think this is too conspiratorial, you don’t have to dig much to still conclude that the Clintons are a highly corrupt and criminal duo.

The email scandal itself is obvious evidence.  There are many people who have gone to jail for much lesser offenses.  Military people have gone to jail for sharing pictures or text messages, where they didn’t even intend to disclose anything.  So even if Hillary Clinton did not have intent, if she were not above the law, she would be going to prison.

Of course, to think that there wasn’t intent would be incredibly naive at best.  She is obviously very intelligent and she knew exactly what she was doing when she used private email for state business.

Even aside from all of this, let’s go back to the final days of the Clintons in the White House.  Bill Clinton issued 140 pardons on his final day in office.

As a side note, issuing pardons is actually a constitutional function.  If any libertarian ever became president, he or she could instantly pardon all people convicted of federal crimes in which there was no victim.  This would include all people convicted of federal drug laws.

So it was certainly within Clinton’s constitutional power to issue pardons.  But when you look at the list, it is a lot of friends and associates.  It includes his brother.  It includes Susan McDougal, who went to jail so that she could spare jail time for Bill Clinton.

Clinton also pardoned Marc Rich, who was one of the most wanted men in America.  He was on the run from tax evasion and other charges.  From a libertarian standpoint, maybe he should have been pardoned, but it is the inconsistency and hypocrisy.  Bill Clinton did not pardon other tax evaders, most of whom would owe far less.

This was a complete abuse of power.  It actually received a little bit of attention from the mainstream press at the time.  But Americans have short memories.  Most vaguely remember anything about these pardons, which was a complete abuse of power.

Hillary Clinton is part of her husband’s (if in name only) team.  They married as a business partnership in order to gain wealth and power.

With the FBI passing on recommending charges against Hillary Clinton, it almost seems she is unstoppable.

Still, I remain optimistic.  Donald Trump is the best candidate to go up against her because he will attack her personally.

Don’t get me wrong here.  The actual political issues are incredibly important, but almost everyone is on the wrong side.  If anyone gets a little bit right in terms of foreign policy, it is Donald Trump.  That is why he is such a threat to the establishment.

I hope Trump continues to go after Hillary on her husband’s rape of Juanita Broaddrick.  I hope he keeps suggesting that Vince Foster died under mysterious circumstances.

In today’s world of the Internet, it is easy for anyone to look up these things and get a different side of the story (or any side of the story) that they wouldn’t hear on television.

I want to see the Clintons go down.  I want to see them in prison.  I want them to live long enough for most of the world to know just how bad these people are.  Their policies are terrible, but they are completely evil individuals.  Maybe they are matched by the Bush family, but that is a subject for another day.

I think Hillary Clinton could still lose the general election.  Donald Trump is very effective at debating.  I hope he doesn’t become conservative (not in a political way).

If there is any kind of a major economic downturn over the next 3 or 4 months, that could quickly derail Clinton’s campaign as well.

I think Hillary Clinton would be an absolutely horrible president in almost every way.  But there could be a few benefits.

First, the Republican Congress would oppose almost everything.  Sure, spending would still be out of control, but there would be no major legislation like Obamacare.  If there is one big fear I have, it is that Hillary Clinton would start yet another war.  I can’t count on the Republicans to oppose that.

One other possible benefit of a Clinton presidency is that it would keep the spotlight on her and her criminal career.  Maybe more investigations will be done on Vince Foster and others.  Maybe more investigations will be done on Bill and his possible child molestations.

Again, I want to see the Clintons humiliated and sent to jail for the rest of their sorry lives.  They are pure evil.

Unfortunately, even if there was a YouTube video of Hillary Clinton issuing orders to murder one of her political opponents, there would still be Hillary supporters.  They either would refuse to believe it or would somehow justify it.  But there will always be deranged or clueless people on this planet as long as the human race is in existence.

To answer the original question – What can stop Hillary Clinton? – the answer is the same as what can stop big government.

The answer is public opinion.  If a significant majority come to view Hillary Clinton as the liar and criminal that she is, then that will take away any legitimacy that she has.  It is possible she could still win the election with a plurality of votes (as her husband did), but she would quickly lose a lot of power if she loses legitimacy with a significant majority of Americans.

All the public has to do is open their eyes.  Look up the past of the Clintons.  It is out there for you to see.  You can learn all about their shady dealings, their “foundation”, their associates who have gone to prison, their associates who have mysteriously died, their various scandals including Whitewater, the pardons, the rapes, and so on.

It is a long list.  It is amazing that these two evil individuals have been able to go so far and do so much damage.  It shows how corrupt our system is.  Public opinion can stop it though.

The American public should not give them any more power.  But ultimately, I want to see them behind bars.  I want the public to know the truth about these two criminals.

Happy Independence (Secession) Day!

Happy Secession Day! Or otherwise known as Independence Day.

The entire independence movement and the war that ensued from the American colonists is a fascinating subject. There are a lot of elements that come in to play, so I find myself critical of virtually all sides in some manner.

When you look at King George III, he was a rather peaceful and lenient guy when you compare him to many dictators throughout history. Even when you compare him to most politicians in countries with democratic elections, King George III seems rather benign.

Taxes were incredibly low by today’s standards. It is difficult to get an exact rate because it was mostly a combination of excise taxes and tariffs. But most colonists were probably paying around 1 or 2 percent in terms of their total income. Even if it was higher than this, it is a far cry from the 20% or more that the federal government extracts from us today in one form or another.

In terms of taxation, I would love to go back to the days of the American colonists under George III. Today we are stuck with income taxes, payroll taxes, business taxes, various excise taxes and tariffs, plus all of the inflation and debt.

In that sense, maybe the colonists were better off living under one tyrant three thousand miles away as opposed to three thousand tyrants one mile away (as stated in the movie The Patriot).

This isn’t to excuse the actions of George III. His policies were rather benign as compared to what we have today, but he was still a thug for starting a war. And yes, he is the one who started it. He should have allowed the colonists to secede peacefully. He should have let them go without a fight.

And secession is exactly what it was. You can call it whatever you want, but it doesn’t negate the fact that the colonists seceded from Great Britain. Yet many who never question the independence of the colonists will call you a traitor, a racist, an extremist, and many other things if you suggest that a state be able to secede from the United States.

By the way, the United States is now thought of as one entity. But back in the day, you would say that the United States were a confederation of states. In today’s world, the U.S. is thought of as one entity (singular). Back then, the United States were multiple entities (plural).

If the states had remained under the Articles of Confederation, things would likely be much better today with a lot more liberty. Instead, we have the Constitution, which greatly centralized power. It is ironic that those who tend to love liberty the most are the ones who most revere the Constitution.

If the politicians in Washington DC actually followed the document, then we would certainly be much better off. But this doesn’t change the fact that the Constitution handed over a lot more power to the politicians, which has exploded over time. The national government was weak under the Articles, which is much better for liberty. And the Constitution has been little help, especially in the last century, in terms of limiting government power.

With the voters of the United Kingdom recently voting to leave the European Union, this was a vote for secession. It was their own declaration of independence. Hopefully nobody will start a war with them. I think there will be heavy-handed tactics, but I don’t expect an outright war.

Now that the Brexit has happened, some American libertarians (and even a few non-libertarians) are wondering if some states could do the same in seceding from Washington DC. Will there be a Texit (Texas exit) or something of that sort?

While I like the talk of the idea, I am realistic in the fact that things would have to get a lot worse before that would happen. The two main reasons that we will not see a state secede any time soon is Medicare and Social Security. Right there, there would be too many voters opposed to the idea because they want to collect their “benefits”.

If there ever is a major default with these two programs, then maybe the idea will be entertained more. The less people have to lose, the more likely they are to support a secessionist movement.

The other thing we have to consider is that the culture in the U.S. is far more similar than in Europe. I know there are certainly differences between Texas and New Jersey, but they are fewer than amongst the European countries. And in the U.S., we have a common language. There may be a few cities where Spanish dominates, but for the most part, English is the accepted language.

If people want to talk about state secession though, I welcome the conversation. Maybe it will get more people accustomed to the idea without thinking it is completely crazy.

There will be major problems ahead for the U.S. government, especially when it comes to the debt and unfunded liabilities. When things get worse, more people will be open to new ideas, or at least new to them.

In the meantime, celebrate your Independence Day, even though you live in a mass surveillance state and you have to fork over about half of your money. At least we have freedom of speech, at least for the most part, so you should take advantage of it where you can. This doesn’t mean being rude to people or shouting them down. It just means gently exposing people to the ideas of liberty, especially those who may be open to them.

And be sure to take advantage of the freedom that you do have and occasionally enjoy the pleasures in life. What is the point of fighting for freedom if you never get to experience any of it? And nobody wants to be around someone else who is constantly complaining.