One of the common funds found in retirement plans today is the target date retirement fund.  If you have a 401k plan through one of the major brokerages, you will likely find target date funds in it.

The idea is that you can invest in a fund that will allocate your money into assets that line up with your retirement date.  It is assumed that most people will retire around the age of 65.  As your target date approaches, the fund will get more conservative and less risky, or at least that is the idea.

If you were born in 1970, then you will turn 65 in the year 2035.  You would then pick the retirement fund with a target retirement date of 2035.  If you were born in 1980, then you would pick a retirement fund with a target date of 2045.

I believe these exist in increments of 5 years.  I haven’t seen any retirement funds with more precise dates.  So if you were born in late 1982 or early 1983, should you pick the 2045 retirement fund, or the 2050 retirement fund?

This may be a slight drawback to these funds, but I don’t think Vanguard and Fidelity want funds for every possible retirement year.  In the above example, someone could pick one or the other, and it wouldn’t have that much of a difference.  You could also split your money between the two funds.

Another thing to consider with these funds is that not everyone is going to retire around the age of 65.  There are some people who plan on working well into their 70s.

There are also people who are pursuing the FIRE life (financial independence, retire early).  There are people who want to retire at the age of 40.  Of course, for a person in this situation, they won’t be able to access their retirement money in a 401k plan until age 59 ½.  If they withdraw it any earlier, they will get hit with a penalty in most cases.  So an argument could be made that even these people should invest in the retirement date funds as normal.  Maybe they could target when they will hit age 60.

For most FIRE people, they are quite involved in their personal finances, so these people will figure out their needs.

There is an article on Investopedia describing the advantages and disadvantages of target date funds.

One of the disadvantages listed is that not all of the funds are the same when comparing different brokerages.  There are slight variations in the allocation to equities and bonds.  Within the equities portion, there are variations in the allocation toward international stocks.

The article also mentions expenses and how they can add up.  I would say this is a minor drawback, as the expense ratios for these funds are dropping and are very low as compared to what they have been in the past.

The Number One Drawback

It is curious that these conventional articles just don’t mention the number one drawback.  To me, the biggest problem with these funds is the lack of diversification.

First, there are really only two categories at play.  There are equities, which are stocks.  And there are fixed-income assets, which is mostly bonds and maybe a little bit of short-term assets that are like cash.

There is no focus on real estate or commodities.  You could pick up a little bit of exposure in the equities portion indirectly though.

It doesn’t provide a very good hedge against a situation of high inflation.  If we went through a period like the 1970s and early 1980s, these funds would get crushed.  Stocks do not always serve as a great hedge against inflation.  They certainly aren’t the best hedge.

But there is also a problem of deflation and recession and depression.  If you look at the examples from the Investopedia article, it gives three examples of 2045 target funds.  This was written in 2020, so it assumes a person born around 1980 who is 40 years old.  This person will turn 65 in 2045.

The current allocation (in 2020) shows all three funds with the equity portion above 90%.  To allocate 7 to 9 percent to bonds and the rest to stocks is absurdly risky.

I understand all of the arguments that someone at this age has time to recover.  This hypothetical person has 25 years and has plenty of time to ride out any bear markets, so the experts say.

We are told that 25 years is a long time horizon, and historically stocks always go up in the long run.

Tell that to the Japanese investor who put money into the stock market in 1989 and is still way down from that point over 3 decades later.

There is a legitimate retort that most people will not be dumping all of their money in at once, and it won’t be all at the top of the market.  But still, the Japan example (which is a first-world nation) shows that the stock market can basically go stagnant for a long period of time.

This is not a prediction of what will happen in the United States.  It is only to say it is possible.

And here in 2021, we are in a massive and unsustainable bubble.  The only way this thing doesn’t come crashing down is if we see massive price inflation.  And even then, we will likely eventually see a major market downturn from where we are.

And if a long period of high inflation does prevail, then stocks probably aren’t going to be your best investment anyway.

This is why I advocate using the permanent portfolio as a place to start.  You can tweak it to your own situation and even make it a little more aggressive if you are young.  But I believe that should be your starting point.

I don’t think it is a good starting point for a person who is 40 years old to have over 90% of his or her retirement account in stocks.

What happens if stocks drop by 50% and stay down for a while?  What happens if they drop by 80% and we have a prolonged depression?

Again, I am not predicting these things, but I am pointing out that they are possible.

Even if someone is continuing to contribute, that would be a massive hit.  If the 40-year old person has $200,000 saved up, a 75% drop in stocks would hit over 90% of this amount in the target fund.  How would this person like to open up the latest 401k statement and see that $200,000 went to $70,000?

It gets even worse for those close to retirement.  Take the Vanguard Target Retirement 2030 Fund.  This means someone will be retiring in approximately 9 years.  Vanguard still has this at over 66% in stocks.

While I love Vanguard’s low-fee index funds, this retirement target fund is absurd and completely irresponsible.

Let’s imagine someone who is 56 years old and planning to retire in 9 years.  Then stocks crash.  That two-thirds portion in stocks takes a hit of 80%.  Maybe the smaller portion in bonds goes up 10%, although there is no guarantee that bonds will go up in value (interest rates decline) with a stock market crash.

Let’s say this person had one million dollars sitting in this retirement fund with a target date.  About $660,000 in stocks drops to $132,000 (80% drop).  About $340,000 in bonds goes up to $374,000 (10% increase).  That leaves this person with $506,000.  That million-dollar retirement portfolio essentially just got cut in half with only 9 years until retirement.

Perhaps I should say that it was supposed to be 9 years until retirement.  If the market doesn’t recover quickly, then this person will not be retiring as planned, or will be doing a lot less in retirement than what was planned.

In summary, I understand that these target retirement date funds are there for simplicity.  They are for people who don’t really know what they are doing in terms of investing, which is most people.

The problem is that these funds are very heavy in equities.  They would have served most people well over the last 40 years.  But past performance does not guarantee future results.  That is the problem.

We are living in an unprecedented bubble.  Maybe it will keep going for a while.  Maybe it won’t.  But it is setting up many millions of people to take a drastic hit in their portfolio if and when stocks crash.  The people in these target retirement date funds may have to change their retirement date when things get bad.  I don’t know if they will change their fund.

It won’t look good for these major brokerages when someone is looking at their 2030 target retirement date fund in 2035 when they are still working.

The Federal Reserve (the Fed) has done the unthinkable.  It has increased its balance sheet to over $8 trillion.

The balance sheet stood around $900 billion in 2008.  When the financial crisis hit, it quickly doubled in the matter of a couple of months.  It proceeded higher for many years, reaching $4.5 trillion in late 2014.

This was all referred to as quantitative easing (QE).  From 2008 to 2014, we went through QE1, QE2, and QE3.

Ben Bernanke had talked about balance sheet normalization.  In 2018 and early 2019, there was mild monetary deflation coming from the Fed.  But it was very mild, and we, of course, never went back to anywhere close to what the balance sheet looked like in early 2008.  In August 2019, the balance sheet got down to about $3.76 trillion.

Here is something that people forget (if they ever knew).  The balance sheet started increasing again in September 2019 when interest rates in the repo market spiked higher.  These are rates on short-term loans that the Fed had to control by starting up monetary inflation again.

It is also easy to forget that the yield curve went negative in 2019.  There were many problems on the horizon.  But the Fed was able to cover it all up because of virus hysteria and lockdowns that came about in March 2020.

By the time March 2020 came, the balance sheet had already gone back up to about $4.2 trillion.  Balance sheet normalization (using pre September 2008 as a basis) was never going to happen with or without a virus.  It wasn’t ever going to be close.

Now here we are in June 2020, and the balance sheet is over $8 trillion.  It is up about nine times what it was prior to the fall of 2008.

It’s not that this is unprecedented in history.  We know about Weimar Germany, Zimbabwe, Venezuela, and many other countries that have experienced hyperinflation.  What is unprecedented is that this is happening in the richest country in the world with a currency that is still considered to be the world’s reserve currency.

I am not saying that we are in hyperinflation or that we will go into hyperinflation.  But when the central bank increases its balance sheet 9-fold over a period of 13 years, it should open your eyes.

From 2008 to 2014, the Fed mostly got away with its massive monetary inflation.  Much of the newly created money went into bank reserves.  The fractional reserve lending process of banks did not multiply this new money like it could have.  In addition, there was still some hesitancy on the part of consumers due to the shock of the financial crisis.  While assets went up in price – particularly stocks – consumer prices did not rise significantly according to the government’s CPI numbers.

It is a different story in 2021.  The Fed’s inflation has come fast and furious, and the government has helped inject some of this new money directly to people in the form of unemployment checks and stimulus checks.

We are in a major boom right now.  The problem is that it is mostly an artificial boom.  It is also unsustainable.

The Fed is continuing to add about $120 billion per month to its balance sheet.  This could end quickly if Fed officials see that they are losing control of the dollar.

They say they want higher inflation (meaning price inflation).  They say that the current pickup in price inflation is just transitory.  But you better believe that they are a bit concerned right now.  They really don’t want to return to the 1970s or something far worse.

These are dangerous economic times.  We could see much higher price inflation still to come.  We could see a major pop in the “everything bubble”.  We could see one and then the other.  We could see both at the same time.

This is why it is important to diversify.  I still recommend something resembling the permanent portfolio.  It is important to not get sucked into the mania.  The mania is unsustainable.

Jon Stewart recently made an appearance on The Late Show with Stephen Colbert.  Stewart went on a little rant about the infamous virus.

The best part about viewing that video isn’t necessarily the accuracy and simplicity of Stewart’s funny rant.  For me, it was watching just how uncomfortable Colbert was with the whole thing.

This was Stewart’s version of the boy yelling that the emperor has no clothes.  He was pointing out some obvious facts and helping to connect the dots.  He does it so well, but the simplicity of it all has to make others wonder why you don’t hear anything like this on the “mainstream” news.  It took a comic as a guest on a late night show to explain the obvious.

I have been a big fan of Harry Browne since shortly after his 2000 election run on the Libertarian Party ticket.  I listened to his radio/ internet shows in the 2000s up until his death in early 2006.

I recall Browne talking about Jon Stewart and The Daily Show at the time.  Browne highly praised Stewart, and it puzzled me a little bit at the time.  I knew Stewart was something of a political leftist.  I had watched his show a little bit.  I found parts of it funny, but then I could see his political leftism come out at times.

I also watched The Tonight Show with Jay Leno at times.  Overall, I liked Leno.  I believe he is a leftist as well, but he was fairly equal opportunity when telling political jokes.  He would certainly make fun of Democratic politicians almost as much as Republican ones.  He was also nice to Ron Paul when Leno had him on the show.

As a side note, the hatred for Trump completely destroyed late night comedy shows for me.  They tried too hard to make Trump look bad, so it did not come across as funny.  Watching Colbert, Jimmy Fallon to a lesser extent, and others was no longer funny.  It was more like watching CNN trying to slam Trump for his latest misstep.  I was already not a Colbert fan, but the last 5 years made it far worse.

I haven’t gone back to late night shows.  I have maybe seen a couple of minutes of Jimmy Fallon.  I also don’t watch Saturday Night Live any longer.

You would think it would be a gift to have Joe Biden in the White House with his many gaffes.  The problem is that they don’t want to make him look too bad just coming off of the Trump presidency.  Also, it is hard to make fun of him for his dumb remarks and for tripping over words because some of that is due to old age.  Are they going to make fun of the guy for having mild dementia?

Anyway, going back to Stewart and Colbert, it is interesting that Colbert got his main start by appearing on Stewart’s The Daily Show.  Somehow Colbert ended up with the late night show on one of the major networks.

Stewart was on the Comedy Channel, but his show became quite a hit at the time.  I don’t know if he got tired of it, but there hasn’t really been another show like it since that time.  I have heard or seen people say that they love Jon Stewart, even to this day.  I don’t think I’ve ever heard the same said about Colbert.

After I heard Harry Browne’s comments praising Stewart, I gave him more of a chance.  I never became a regular watcher, but I did appreciate him a bit more.  I was really appreciative of him when he did a segment exposing the establishment media’s attempt to hide Ron Paul in the Republican primaries.

Most political leftists end up being stooges for the establishment.  But every now and then you get someone who is willing to go against the grain and challenge the establishment narrative.  Just as Glenn Greenwald challenges the establishment narrative with his columns, so does Jon Stewart with his comedy.

I have really come to appreciate people like this.  They may not know their economics very well.  Their words are often imprecise.  They often challenge the lies of the establishment yet hang onto every word of them when it comes to some other issue.  For example, I have seen people talking about being led into war based on lies, but then in the next breath believing everything that they’re told about global warming.

But we need people with courage who are willing to stand up and point out that the emperor has no clothes.  Jon Stewart did this on Colbert’s show, which is typically a mouthpiece for the establishment.

I don’t think it is any coincidence that Colbert made it to the top in terms of comedy/ talk shows on network television.  He got the job as host of a late night show on a major television network because he fit in to the culture.  Part of that culture is towing the establishment line.

I have no idea if Jon Stewart ever wanted such a job.  But I don’t think he would have lasted, or else he would have been corrupted.  He would have been told to tone it down.  You can’t question Fauci and “the science” until you are granted permission to do so.

When Stewart had his moment on Colbert’s show, not only was it making Colbert uncomfortable, but his audience was also laughing.  Stewart was probably getting more laughs that Colbert ever gets on a regular basis.

We need comedy as part of political persuasion.  For those who appreciate Stewart and heard his rant, they probably have a little less faith now in the so-called experts and the so-called science that everyone is supposed to follow.

The establishment, for all of the damage done over the last year and a half, is actually quite vulnerable right now.  It only takes a few voices to tell the truth to expose the big lies.

The Federal Open Market Committee (FOMC) released its latest statement on monetary policy on Wednesday, June 16, 2021.  As was widely expected, the Federal Reserve will keep its target federal funds rate near zero, in spite of higher price inflation.

Jerome Powell held a news conference at the conclusion of the meeting and statement release.  It was amazingly boring, even though he had to answer questions about price inflation coming in a bit higher than expected.

Powell is still saying that the higher inflation should be transitory, but admits that it is a difficult job trying to predict the future.  He, like many others, also blames shortages.

But shortages and inflation go hand-in-hand.  If there are shortages, then prices should eventually rise.  The shortages themselves may be due to higher demand for certain things, which in itself is a result of loose monetary policy.

The cure for shortages is higher prices.  The cure for higher prices is higher prices, as the higher profit motive gives an incentive to producers and suppliers to produce more and supply more.  Higher prices also give an incentive for consumers to cut back.

The problem is if the higher prices are a result of higher costs for producers and suppliers, and if there is an overall trend of higher prices in the economy.  This can only come about and be sustained by more monetary inflation, courtesy of the central bank.

In other words, the Fed is the problem.  There are shortages and higher price inflation because of the Fed.  It is possible to have a shortage of something due to other factors, but when you hear about it being widespread, all fingers should point to monetary policy.

The idea of shortages doesn’t make much sense in a somewhat free market system where prices are allowed to fluctuate.  But there can certainly be temporary shortages because the market needs time to adjust.

Some businesses are hesitant, and rightly so, to raise prices quickly.  Even if their costs have risen, they don’t know if it is a temporary situation.  Gas stations get away with it because we know to expect fluctuating prices.  But it is not as easy in other businesses.

Imagine you are a store selling electronics.  There is supposedly a chip shortage.  You are selling a certain type of computer for $500.  Your costs to make or purchase the computer wholesale are $400.  Your costs all of a sudden rise to $500, but you don’t know if it is temporary.  You may just hold off on raising the price until you find out if the higher costs are permanent.  When the cost of obtaining a product is the same as your sell price, you are really losing money, as you carry all of the other costs associated with holding the product and running your store.

If the higher costs are coming in for everything, then you will have to quickly raise your prices unless you are willing to run at a significant loss for a while.

At the same time, it is understandable to not want to raise prices too quickly.  There is no guarantee that your customers will pay the higher price.  A sale at $500 is better than no sale at $600.

Also, most companies are not like gas stations where the price changes every day.  It is complicated to keep changing the price of something.  It gets more complicated if you sell hundreds or thousands of products.

Imagine walking into Best Buy and seeing a computer for $499.  You go home and talk to your spouse.  The next day you go back to buy it and the price has gone up to $539.  Then you go back the next day and the price is at $524.  This just isn’t how most retailers want to operate, and rightly so.  Customers want some predictability.

This is also a reason that you will never see anything truly priced in Bitcoin.  If a company ever says they accept Bitcoin in payment, it will always be a conversion from the true price in actual money.

Since most companies are hesitant to constantly change their prices, it is possible that prices could rise even more rapidly in the coming months.  It is impossible to say, but many companies may have held off raising prices significantly up to this point.  If they see the shortages continuing, which in most cases is really just higher prices, then they may decide it is going to be more permanent.

The Fed’s Balance Sheet

This all goes back to the Fed’s balance sheet.  As it approaches the $8 trillion mark, the Fed is not letting up.

Powell said that this is the meeting where they are talking about talking about tapering.  That is not an error.  In other words, they are still in the very preliminary stages of even thinking about slowing down its policy of mass monetary inflation.

As of now, the Fed will keep adding about $120 billion per month to its balance sheet.

When they talk about “tapering”, that doesn’t mean stopping the asset purchases (monetary inflation) all at once.  It means slowing it down.

So even when the Fed begins tapering, whenever that will be, it will still be adding money to the balance sheet.  Maybe it will slow down from $120 billion per month to $80 billion per month, but new money will be created until it has completely stopped.

After the Fed’s announcement on Wednesday, stocks fell.  They somewhat recovered during Powell’s press conference.

It is not exactly clear why.  Investors knew what was coming.  There wasn’t anything earth shattering in this statement or in the press conference.

Is it only because Powell is now saying that they are talking about talking about tapering that stocks sold off?  If that’s the case, imagine when the Fed actually starts tapering.

Stock investors love the loose monetary policy.  It keeps their game going.  Higher price inflation is a threat to that because it threatens that the Fed will stop creating so much money out of thin air.  The Fed may want higher price inflation, but Powell and company don’t want anything close to hyperinflation.

There may be something of a tug-of-war coming between higher price inflation and recession.  My fear is that they will both win.

This is one of those odd things where seemingly unrelated things may somehow be related.

The other day, one of my friends sent me a message showing Jim Rickards’ Twitter feed.  The tweet states:

“This chart shows Biden states (blue) compared to Trump states (red) measured by size and percentage vaccinated.  100% of the states > 65% are Biden’s.  The Democrats better hope there are no side effects ;-)”.

This chart shows Biden states (blue) compared to Trump states (red) measured by size and percentage vaccinated. 100% of the states > 65% are Biden's. The Democrats better hope there are no side effects 😉 pic.twitter.com/ZVWvSNE4SN

— Jim Rickards (@JamesGRickards) June 13, 2021

When you look at the chart, there is a clear trend.  The states on the right side (which are politically to the left) have a higher vaccination rate than the states on the left side (which are politically to the right).

If you take the dividing line at just under 65%, all of the states with greater than 65% are states that went for Biden.  The states below a 65% vaccination rate are mostly red states that went for Trump.

Many people wonder why this would be, and you will get different answers depending on which side you ask.  A Democrat who has been vaccinated will likely say something to the effect that the Trump people are a bunch of uneducated rednecks who are too stupid and brainwashed to get the vaccine.  A Republican may say that the Democrats are stupid and will believe whatever they are told.

If you look only at educational levels, then it is true that you will find more college-educated people in the population of the Democrats.  Of course, while education can be one sign of intelligence, it isn’t the only thing.  And to steal from Michael Malice, it is easier to train a smart dog.

The Trump people are less likely to get vaccinated because they are less likely to believe what they are being told by the establishment and the establishment media.

Saying that Trump is politically stupid wouldn’t seem to be something commonly said amongst anyone, even his enemies.  But in this situation, Trump is being politically stupid.  He is bragging about bringing about the vaccines so quickly, yet probably over half of this devoted followers have serious doubts about the COVID vaccines.

Trump is not reading the political tea leaves very well on this one.

I think it is clear by this chart that the whole COVID hysteria has largely been a political issue.  I find it interesting when I hear people tell me, or others on my side, not to make this a political issue.  Oh, but the people advocating lockdowns, stay-at-home orders, mask mandates, and everything else are just following the science.

The Chart and Election Fraud

When I saw this chart, something popped out at me.  Amongst the red states that went for Trump, there are 5 blue states that went for Biden in 2020.  Wisconsin is just barely grouped with the red states.  Then you have Michigan, Arizona, and Nevada.  And the farthest to the left (i.e., least vaccinated) of the Biden states is Georgia.

In almost perfect order, these are the states where there are the biggest allegations of election fraud from the 2020 presidential election.  It is actually quite remarkable.

I have not been really outspoken on allegations of election fraud.  I have said that I highly suspect there was widespread fraud, but I have no idea if it was enough to sway the entire election.

The one place I had my greatest suspicions was Georgia.  I simply don’t think Georgia is a blue state.  But the one big city there, Atlanta, is controlled by Democrats, and that is where the fraud came from.  If votes had been counted honestly in Georgia, I believe Trump would have won the state, but I have no hard proof of that.  It was one of those states where Trump had a clear lead on election night, and then things started to flip in the morning hours after the election.

Georgia is in the top 10 states of least vaccinated according to this chart.  It is clear that people who voted for Trump are far less likely to get vaccinated, and people who voted for Biden are far more likely to get vaccinated.

Statistics don’t lie if they are being presented fairly.  This chart was meant to show vaccination.  It showed me something so much more that wasn’t intended.  These “blue” states on the left side of the chart likely should have gone for Trump if the votes had been counted fairly.

Wisconsin is on the edge, so maybe that really did go for Biden.  Georgia, Nevada, Arizona, and probably Michigan should have gone for Trump if the vaccination rates are correlated.

I am trying to think of reasons that these states could have actually gone for Biden legitimately and have low vaccination rates.  I can’t think of a good reason other than fraud.  I’m sure someone will let me know if I’m missing something.

Florida has a relatively high vaccination rate for being a red state.  But Florida has gotten a reputation as a solid red state because DeSantis had some courage (or political wisdom) that others lacked in late summer 2020 by completely opening up Florida from COVID restrictions.  But Florida only went for Trump by a few percentage points, and there is a large population of older people, so that likely explains why the vaccination rates are a bit higher there (but still less than most blue states).

While this chart was supposed to be about vaccination, that’s not what stuck out to me.  After seeing it, it makes me question the whole outcome of the election more than I did before.

I recently wrote about our 2021 version of Atlas Shrugged.  Now we are faced with a case of Investors Shrugged.

The bull market continues, and it doesn’t seem like anything is going to faze it at this point.

The latest CPI numbers were released showing that price inflation for May came in at 0.6%.  This is after coming in at 0.8% for April.  So based on the last two months, annual price inflation, according to the government’s statistics, is running above 8%.

It came in slightly higher than what was expected, but investors shrugged.  Stocks went up at the opening bell.

This is what stock investors (or maybe speculators is a better term) are telling us.  They are saying: “It doesn’t matter that prices are rising.  This is good for stocks.  And the Federal Reserve isn’t even thinking about discussing the possibility of tapering, so let the party continue.”

The Fed says that this price inflation is “transitory”.  Tell that to a struggling American family when they pay 10 dollars more per week for groceries.  Sure, it’s only 10 dollars, but that is 10 dollars for every week.  That is over 500 dollars extra per year for groceries.  And it’s not as if prices just went up once.  They are continuing to rise.

“Sorry kids, we’ll have to scrap together some leftovers and supplement it with rice and beans for the next few dinners.  But it’s ok.  Jerome Powell has assured us that this is just transitory.”

The Federal Reserve’s balance sheet is approaching $8 trillion as I write this, and we are constantly hearing about shortages.  But production isn’t what matters to investors (speculators).  What matters is the easy money coming from the Fed, which keeps the speculative frenzy going.

You may have trouble buying a car or a new appliance for your kitchen, but your portfolio of stocks and crypto is out of this world.

The CPI Numbers

The less volatile median CPI ticked up to 0.3% for May.  The CPI less food and energy was up 0.7% for May.

The year-over-year CPI now stands at 5%.  You can look at this a couple of ways.  First, many things were under lockdown or heavy restrictions one year ago, so people were likely not spending as much money.  So in this sense, the 5% maybe doesn’t seem so bad.

On the other hand, price inflation was coming in rather mild last year and earlier this year as compared to now.  So if the numbers keep coming in hot, that year-over-year change is going to go higher.

We have seen three months in a row of 0.6% or higher.  For March, April, and May, it was 0.6%, 0.8%, and 0.6%, respectively.

Again, based on this, price inflation, according to the CPI numbers, is running somewhere around 7 or 8 percent annually.

At 8 percent annual price inflation, prices would double approximately every 9 years.  Use the Rule of 72.  Take 72 and divide by 8, and you get a doubling every 9 years.

Don’t wait to buy that Tesla, or it may cost $180,000 in less than a decade. (The first half of that sentence is a joke.)

Inflation and Stocks

Stocks can provide something of an inflation hedge over long periods of time.  But it is not as if stocks can’t go down right now, and we also must consider the impacts of inflation.

Most publicly-traded companies have significant input costs.  If the price of raw materials goes up, and a company needs those raw materials to build its products, then its costs are going to go up.

One input cost that almost every company has is labor.  Businesses are having a hard time finding dependable workers, especially when they are competing with the government’s generous unemployment benefits.  In order to hire people and get them stay, businesses will have to start raising wages, if they haven’t already.  This is a major cost for most companies.

One response to this is that companies can just charge more money for their products because their input costs are higher.  This is true to some extent, but there is no guarantee that customers can afford the higher prices or are willing to pay them.

Some businesses will be hurt more by inflation than others.  But inflation does not help profitability except perhaps on a nominal basis.  In real terms, most companies are ultimately hurt by inflation.

Maybe it makes sense that stocks are going up in nominal terms, but the gains we have seen are far and beyond the reported price inflation numbers.

It is a good reminder that, even during the high-inflation times of the 1970s, there were periods when stocks went down significantly.

At some point, if price inflation gets into double digits and stays there, the Fed is going to have to slow down its monetary inflation (taper), or just outright stop it.  I think they will ultimately choose this path over hyperinflation.

I can’t repeat enough that this is unsustainable.  Something is going to happen.  You can call it a correction.  You can call it a reversion to the mean.  The bear market in stocks (and many other asset classes) will eventually arrive.

Investors (speculators) have shrugged off the inflation news, but they won’t be shrugging when the selling frenzy begins.

We have been lied to from the very beginning.  The first major lie that I identified was in February or March 2020 when we were being told that the newly discovered COVID-19 had a fatality rate of 3 to 4 percent.  This was obviously a lie (but not too obvious, I guess) because they were only counting those people who had tested positive for COVID-19, which at that time were the sickest people.

The lies likely started before that time, and Dr. Anthony Fauci (who doesn’t actually treat patients) seems to be complicit in all of it.

Isn’t it strange just how hard the narrative has been pushed?  Since March 2020, the narrative of lockdowns, isolation, and mask wearing has been pushed relentlessly.  Since the end of 2020, vaccines have been pushed relentlessly, while critics or skeptics have been shamed.

When governments are offering free beer and lottery tickets to take a jab, it really makes you wonder why they are so desperate for people to take their form of medicine.  The ones who are pushing the hardest are not the candidates on my list of those trying to bring greatness to mankind.

When the CDC relaxed its guidelines on mask wearing, I thought it was a bit strange at first.  Were they realizing that too many people were rebelling, and they therefore had to jump ahead of the parade and make it look like they were leading it, instead of having the appearance of widespread non-compliance?

But then I realized that it was all a push to get more people vaccinated.  They said you should only take your mask off if you have been fully vaccinated.

Next, I learned that there are now different standards for the vaccinated and unvaccinated when it comes to recording cases.  If you have been vaccinated, it is almost impossible to be counted as a COVID case.

Now, reality has changed again.  It is now somehow widely accepted that the virus may have originated from a lab in Wuhan, China.

A Conversation in Time

Me in 2020:  The virus may have been manmade in a lab in China.

Reaction to me in 2020:  You are a crackpot conspiracy theorist who should be banned from all media platforms.

Me in June 2021:  The virus may have been manmade in a lab in China.

Reaction to me in June 2021:  Of course, everyone knows that the Chinese may have manufactured the virus.

It really is amazing how fast the narrative can change, and it is amazing how people just forget what they were told in the past.

Why the Lab Theory Now?

Now that the theory that SARS-COV-2 may have been developed in a lab, it leads to a lot more questions.

First, why is this just now gaining acceptance amongst the powers-that-be?

This obviously wouldn’t have played well in March 2020.  If the establishment had admitted then that this was a lab leak, then all of the tyrannical measures that came would likely have not been possible.

It is worse when you consider that the U.S. government, with the directives likely coming straight from Fauci, were helping to fund “gain-of-function” research.  In other words, the government, which included Fauci, helped to fund the development of this bio weapon.  So why would anyone listen to what Fauci has to say about this virus?  If the man is this much of a liar and this evil, then why would anyone listen to what he has to say about lockdowns and mask wearing and vaccines?

After Rand Paul questioned Fauci about his funding of gain-of-function research, it became widely accepted that this virus might have escaped from a lab in Wuhan.  But now most Americans are trying to blame China.  You have to wonder if the establishment decided to play along with the lab theory to, once again, get in front of the parade.  Maybe they figured it was being exposed, so it is better to admit it now and set the narrative that it is the fault of the Chinese.

It would be rather ironic if Rand Paul’s questioning of Fauci ends up leading to a war with China.

But how is it that the U.S. government once again has its hands in the cookie jar?  Whenever anything bad happens in the world, it almost seems inevitable that the U.S. government will have ties to the event.

There was a coup in some third-world country?  Oh, it just so happens the CIA had operatives stationed there just before it happened.

This is where we are at now.  The virus likely escaped from a lab in China, and the U.S. government was funding some of the research in this lab.  And the funding was likely coming from different sources, but they all originate from the U.S. Treasury.

This leads to more questions.  If the research was at least partially funded by the U.S. government, and the manmade virus escaped from the lab, how do we know if it was intentional?

Some are pointing a finger at China, but why would the Chinese release a virus on their own population?  As deranged as the communist party is there, they don’t really have the incentive to do this.  If you watch China closely, they are certainly tyrannical in some aspects, but almost everything seems to revolve around economic superiority.

When it comes down to it, the Chinese ruling party is made up of mostly Keynesians.  They want more economic growth, and they want more ownership and trade of economic goods and services.  They do this through a mostly centralized system, but the last 30 years has shown that some form of Keynesian economics is far superior to any form of communism.

If the virus was purposely released on the population, it was more likely done by Fauci and company.  These are sick people.  These are the sick people who want your life to be miserable.  These are the sick people who want you desperately to be vaccinated.  Fauci is probably some kind of sick eugenicist like his buddy Bill Gates.

If you wanted to depopulate the earth in a controlled way, could you possibly think of a better strategy?  The virus that was released isn’t all that deadly, but can be manipulated enough to appear to be far deadlier than the flu.

With the desperation of pushing vaccines, it seems that the virus and the “pandemic” were not the end game.  The vaccines seem to be the end game.  It makes you wonder how many people will suffer long-term consequences, including death, from these experimental vaccines.  Or perhaps they will just make a generation of people mostly infertile so that they can’t reproduce.

As I write this, I almost do feel like a crackpot conspiracy theorist.  I have to entertain every possibility at this point.  I have also entertained the idea that COVID-19 is a complete hoax, as the virus was never properly isolated, and it is just assumed that it is there.

It is a bit odd when the number of symptoms of COVID-19 is seemingly endless.  There are many illnesses that are never diagnosed.  People have health issues all the time.  And if you have a PCR test run at a high cycle threshold, it isn’t difficult to pick up viral debris in order to claim a positive test.

The only common symptom I have heard from some who have tested positive is that they lose their smell and taste.  Of course, you can easily lose your smell when you have a cold.  So maybe some people in the U.S. are getting the same virus that came out of China in late 2019 and early 2020.  Even then, it is probably a different variant at this point, and possibly much weaker.

It is hard to know what to believe any more.  We have been continually lied to non-stop since March 2020.  These lies have been used to justify locking us down, isolating us, and then injecting an experimental cocktail of chemicals into our bodies.

I don’t think it is a coincidence that the U.S. was funding research on manipulating viruses in a lab in Wuhan, China, which just happens to be the same place that SARS-COV-2 originated from.

If I follow Occam’s razor, then this virus, assuming it exists, came from a lab.  It is less clear whether it was intentionally leaked, or if it accidentally escaped.  If it was intentionally leaked, then all fingers should point to the U.S. government, and particularly the evil Dr. Fauci.

Things are starting to look a little too much like Ayn Rand’s novel from 1957.  To be sure, there are major differences, and I think the book did not reflect reality in many ways.  But at the same time, we seem to be witnessing a slow collapse of civilization.

We haven’t seen the lights go out permanently in New York City, but it is interesting that New York City has seen one of the biggest declines over the last couple of years in the United States.  Between lockdowns and rising crime (which aren’t unrelated), New York City is no longer a highly desirable place to be, even for many who previously loved the place.

Even across the country, there are signs of decline.  It is strange to say because in some ways, our lives are better than ever.  It is a tale of two cities.  It is the best of times and the worst of times.  This is evident when you see a poor person in line at a food bank while talking on a cell phone.

I wrote recently about shortages and inflation.  This story continues.  People are quick to blame it on COVID and supply disruptions.  But it was the reaction to COVID, particularly lockdowns, that may be responsible for supply disruptions. However, it also goes way beyond this.

There is the reaction of the government to spend trillions of more dollars when it was already running massive deficits.  There is the reaction of the Federal Reserve to monetize the debt and create trillions of dollars out of thin air.  And when you include the fact that the government is bailing out cities and states for locking down, and also bailing out the people who were pushed into unemployment, it is a recipe for disaster.

We have heard about people making more from unemployment benefits than from what they were previously making at their job.  Even if someone is getting paid slightly less in unemployment, they may not return to work.  If you are getting, say, $2,500 per month in unemployment, and you can get a job for $2,800 per month, what is the motivation to work 40 hours per week for an extra $300?

In Atlas Shrugged, it was mostly the creators and entrepreneurs who went on strike.  In today’s world, it is the lower skilled people who are on strike, except that they are really just being paid to be on strike.  And while they are lower skilled, employers do need employees for simple tasks that cannot necessarily be done by robots.

I think one area of Atlas Shrugged that wasn’t realistic was that many businessmen were seen as good and noble.  That certainly doesn’t represent the world we live in today, especially when it comes to big business.  Unfortunately, there are probably more people in today’s world like James Taggart than Dagny Taggart or Francisco d’Anconia.

While entrepreneurs are still going strong in America, there is a major decline when it comes to big corporations.  The CEOs and corporate boards are more worried about being “woke” and diverse than they are about serving their customers.  They are also rightly worried about pleasing government officials and making sure that they get the right benefits, whether it is through direct subsidies or favorable regulations.

I feel like some businesses are more worried about whether I’m wearing a mask and if I’m vaccinated than actually making sure I get the products that I am looking for.

Due to a massive expansion of the Fed’s balance sheet, coupled with free money handed out to people, prices are going up at a fast pace.  There are shortages being reported of many materials and products, but widespread shortages do not typically occur unless there is government intervention.  In this case, the resolution to the shortages may just come in the form of even higher prices.

For companies looking to hire people, they will likely have to raise the wages being offered.  But this will only be done if it is feasible and profitable.  McDonald’s could get workers by paying $30 per hour, but then they would have to raise the price of their food in order to be profitable.  And that will only work if people are willing to pay the higher prices.

My Experiences

My wife has been trying to get through to Delta Airlines because one of her flights booked for this summer was changed.  It went from one layover to two layovers, and one of the layovers is only 30 minutes long, which makes it likely that she would miss her next flight.

The other day, she called Delta customer service, which is anything but.  The wait time was several hours.  She left her phone number for a call back.  This was at about 9:00 in the morning.  They said the call-back wait time was about 7 hours.  She ended up getting a call back at 3:00 in the morning.  I’m not sure which is worse – the fact that they called her at 3:00 in the morning, or that it took about 18 hours for someone to call her back.

Delta obviously has a major staffing problem right now.  I can’t imagine what someone would do who has a more urgent situation.  They are canceling flights, and their customer service is almost impossible to reach.  If it weren’t for the internet, the airline would basically have to shut down at this point.

I am hearing stories frequently about people not being able to find regular products.  I ordered a new oven for my kitchen back in April.  The wait time for delivery was over two weeks.  I have heard of other people ordering appliances and it taking even longer.  What happened to the old days when you could walk into a store and order an appliance for next-day delivery?

It is all of these little things happening around me.  There are signs of a major decline in civilization.  I am just thankful now when I go to the grocery store and they have everything I am looking for.

I am afraid that massive price inflation is coming.  Economically, the only thing worse than that is if the government tries to prevent massive price inflation by instituting price controls beyond the so-called price gouging laws already in existence.  If that happens, the current shortages will seem like nothing compared to what will happen.

I don’t think many creators and entrepreneurs are purposely going on strike.  But some of them were shut down in 2020, and they don’t want to go down that road again.  And the government, with its unreliable fiat currency, is making it difficult for the good and honest entrepreneurs to prosper.

We are starting to experience a decline like what was initially seen in Atlas Shrugged.  The problem is that Atlas hasn’t even shrugged yet.  The weight of the world isn’t just on the shoulders of entrepreneurs and businessmen.  It is on middle class America.  It may be middle class America that is about to shrug in order to deprive the power elite.

The most important issue coming out of 2020 is not healthcare.  It is property rights.  Government at all levels violated property rights to a degree that hasn’t been seen in our lifetimes.

The only possible exception to this is the issue of war, which in itself heavily violates property rights.  It obviously violates the rights of those subjected to the bombings and occupations.  Americans who were drafted in the 1970s and before also saw this violation.  The property right violation was against their lives.

Outside of war, Americans have never seen such massive violations of property rights as what has been seen since March 2020.  Most state and local governments issued stay-at-home orders and shut down businesses deemed non-essential.  Meanwhile, the guidance was coming from the federal government (maybe national government is a better term here).  And then you also have the CDC telling tenants that they won’t be kicked out if they don’t pay their rent.

The issue of property rights goes along with freedom of association.  When the government tells a restaurant to not allow any diners, it violates the rights of both the company and the customers.  The two parties should be free to associate, but the government is telling you that they will ultimately use violence if you violate the imposed rules (not laws).

Libertarians are the strictest defenders of property rights.  It is really the basis of libertarianism.  You don’t infringe on other people or their property.  Maybe there are some nuances and gray areas, but this really sums up libertarianism.

We live in a society with some respect for property rights.  If there were no respect for property rights, we wouldn’t really have a civilization at all.  If the human race still existed at all, it would be a world of violence and poverty like we can’t imagine.  Even in current-day Venezuela, there is still some form of property rights.

There are obviously many violations of property rights, even in the United States.  All you have to do is look at all of the taxes and most regulations to see where the violations come in.  There is certainly crime, but most property rights violations come from the government at some level.

Given this, it has made it that much more difficult over the last year for libertarians to navigate the statist waters.  Whenever property rights are violated, it seems libertarians are talking to an empty crowd when the issue is brought up (if it is ever brought up).  But if a private business does something that is worth criticizing, then libertarians are immediately met with, “It’s a private business, so they can do what they want.”

Don’t Back Down, But Explain

It’s important for libertarians to not back down from these discussions.  But it’s also important to get the nuances correct.

In 2016, Libertarian Party presidential candidate Gary Johnson was asked about whether a baker should be forced to bake a cake for a gay couple’s wedding.  Johnson said that the baker should be forced to bake the cake, but he doesn’t have to decorate it.  He rightly received a lot of criticism for this response, especially from hardcore libertarians.

Now it is being used against hardcore libertarians when a private business does something that most libertarians object to.  For example, many businesses require that you wear a mask.  Many people object to this.  So we’re met with, “They are a private business, so they can do what they want.”

It’s not that this response is wrong.  But it doesn’t end there.  First, these mask mandates are there because of pressure coming from the government.  They will often just follow CDC guidelines, and some of it is to protect against lawsuits.  It isn’t all virtue signaling.

Second, just because a libertarian objects to a mask mandate, it doesn’t mean this person is advocating government action.  You can make your thoughts known and then choose whether or not to shop there.

I, personally, have always been hesitant to say that I have a medical condition.  I don’t really like to lie.  I will enter a store without a mask even if there is a sign saying it is required.  But as soon as someone from the store questions me about it (which rarely happens) and tells me it is a requirement, then I will choose to either wear one or leave the store.  It ultimately is their property.

There was a video of a woman in a bank who was arrested because she refused to wear a mask.  But really, she refused to leave the premises.  It is hard to blame the police in this situation because the bank employees (who represent the owner or owners) were telling her to leave.  At that point, she was trespassing.

I understand where many conservatives and some libertarians are coming from when they want to use the law to their advantage.  When you say you have a medical exemption, nobody is supposed to ask you about your medical condition, as it could be a violation of federal law.

In Florida, new legislation is preventing private businesses from using vaccine passports.  Many conservatives and some libertarians cheer this, and understandably so.  At the same time, it is a violation of property rights, as a movie theater or any other venue should be able to write its own rules.

But then it is frustrating for libertarians because most companies would not even be considering such a thing as a vaccine passport if we lived in a free society and if you didn’t have the CDC shoving guidelines down your throat.

Another thing to consider, which is a point often skipped even by libertarians, is that these vaccines did not come about in the free market.  The federal government spent billions of dollars funding the research and development.  And now your vaccine is “free”, as the federal government (with help from the Federal Reserve) has paid for the production and distribution.  The government also shields the vaccine manufacturers from liability, and then uses your tax money again to offer incentives (bribes) and do mass marketing campaigns.

So when Ron DeSantis stands up and says that vaccines shouldn’t be required, it is hard to give a first reaction of, “Well, that’s a violation of property rights.”  I do think it needs to be said that it is a violation of property rights, but it is rather minor when compared to everything that just came before it.

(It gets even messier when looking at the cruise industry, as there are contradicting laws coming from the federal government and the state of Florida.)

The same goes for employers that mandate vaccines in order to stay employed.  I think libertarians and every other sane person should fight hard so that this does not become the norm in our society.  I’m sure there will be many court battles in the future that deal with this issue.

You know that eventually, some employer is going to require the vaccine and then someone will get really sick or die right after getting the shot.  Then the employer will be sued for liability (while the drug companies are protected as planned).

If you are a libertarian, it is not a contradiction to fight these mandates while maintaining a respect for property rights.  You can be against mask mandates and vaccine mandates by private businesses without requesting government interference.  Of course, it should always be pointed out that these likely wouldn’t be issues if it weren’t for the government in the first place.

It is also an opportunity to call out those who do not defend property rights, especially on the political left.  If you ever hear a non-libertarian say, “It is a private business, so they can do what they want.”, then this is a perfect opportunity to say that they should have been treated this way in 2020 when businesses were forcibly shut down.

If you want to take it one step farther, you can also ask them whether they favor getting rid of all anti-discrimination laws.  Why is it only libertarians who have to be consistent all of the time?  Anyone who is opposing DeSantis for telling businesses that they can’t require vaccine passports better support complete property rights and freedom of association.  Otherwise, they are just authoritarians who want all of the rules and restrictions in place that they favor, and no more.