I just watched a 60 Minutes piece on the former Duke lacrosse head coach, Mike Pressler, who resigned 9 years ago during rape allegations against 3 of his players.

He was a scapegoat at the time and he is put in a very different light today in this 60 Minutes piece than what was being said 9 years ago.

The case itself is frustrating because 3 players were accused of rape and much of the media and many activists had already convicted the three young men before most of the facts were out, let alone their actual day in court.

This is why we don’t live in a democracy and should never want to live in a democracy.  If mob rule had had its way back then, then the three young men would have never stood a chance.

It is a relief in one sense that most of the truth eventually came out and the three accused people were acquitted by the truth.  But we can’t take for granted how horrible of an episode this must have been (and still is) for them and their friends and family.

It is also frustrating in that the criminal accuser and the prosecutor, Michael Nifong, were not held more accountable for their crimes.  If you are purposely lying in an attempt to imprison people, then doesn’t it seem just that the liars should themselves be imprisoned?

Nifong was disbarred, but should have been sent to prison, or at least paid major restitution to the three young men, who turned out to be the actual victims.

Crystal Mangum, the woman who accused them of raping her, did not serve prison time.  Instead, she got a book deal.  She ended up in prison in 2013 when she was found guilty of killing her boyfriend.

But the 60 Minutes story focused on Mike Pressler, who resigned as head coach after the allegations were made and during major protests.  He says that he was given an ultimatum of resigning or being fired.  If I had been in his position, I would have told them to fire me.

I thought it was foolish at the time.  Nearly everyone was rushing to judgment and I thought at the time that the allegations might not be true.  When you see an unruly mob of people in the streets, this is often a sign that they have their story backwards.  Mobs of people and intelligence don’t often go together, but there are exceptions.

But even if the allegations were true, I thought it was ridiculous that the head coach be fired or that he resign.  Why is he responsible?  What about the professors of the classes that the guys were in?  What about the athletic director and the Duke president?  What about campus security?  Why was it just the head coach that was originally made a scapegoat?

In the interview, Pressler said that he believed his accused players at the time and thought they were innocent.  The 60 Minutes story talked about how loyal of a guy Pressler is.  But if that is the case, then why didn’t he stick up for his players in public at the time?  Why did he go into hiding?  He didn’t have to worry about keeping quiet for an official trial.

He could have stood in front of cameras and said that we shouldn’t rush to judgment.  He also could have defended himself and said that he is not ultimately the one responsible for their actions.

Would it have been a hard thing to do?  It probably would have.  But for me, I would think it would be harder to stay silent and let your reputation go downhill.  I would think it would be hard to let your players be crucified without a fair trial up to that point.

Pressler was another victim in all of this, but he also lost his opportunity to stand up for principle and what was right at the time because he was afraid of standing up to the mobs in the street.  He was afraid of the media.  I don’t really know this for sure, but that is my guess.

Sometimes you face situations in life that are difficult and almost seem unfair because you didn’t bring them on and didn’t ask for them.  This is what happened to Joe Paterno at Penn State and he ended up with a tainted reputation at the end of his life, and rightly so.

I am not putting Pressler on the same level as Paterno, but they are both cases of where you just have to sometimes stand up and do the right thing, even if it goes against the grain and even if it is a hard thing to do in the short run.

There are a lot of lessons to be learned from this story.

Frank Shostak of the Mises Institute has written a piece on how easy money drives the stock market.  He points out that history shows an increase in the money supply generally precedes a rise in the stock market.

Conversely, a decline in the growth of money generally precedes a drop in the stock market.  He goes back as far as the 1920s and uses the big stock crashes in American history to make his point.

At the end of his article, he suggests that the stock market (he uses the S&P 500) is highly vulnerable because of the fall in liquidity from June 2009 to June 2010.

As noted in Shostak’s article, there is usually a time lag, typically longer than a year, as it takes time for the change to filter through the system.  However, if he is marking June 2010 as the end of a big fall in liquidity, then a 6-year time lag seems awfully long.

But this ignores QE3, which was the Fed’s biggest and longest round of monetary inflation.  The Fed created about $1 trillion in 2013 alone and slowly wound it down in 2014.

We must remember that the Austrian Business Cycle Theory says that you do not necessarily have to have a declining money supply, or even a stable money supply to have a bust.  If the rate of growth is decreasing, this can be enough to expose the malinvestments and bring on a bust, or at least the popping of bubbles.

Even if the rate of inflation stays stable, say at 20%, you will eventually get a bust.  The only way to prevent the bust is by continually increasing the rate of the growth of money.  Eventually, this leads to hyperinflation, which is the biggest bust of all.

I believe that if the Fed had stabilized the monetary base a few years ago and kept it that way, thus having no QE3, then we would have already seen a major bust.  But QE3 was enough of an injection to stall the bust.  Of course, it will also make the bust worse when it eventually does come.

We must also remember that we have already seen oil fall to below $50 per barrel.  There has been a bust in the oil market, which just so happens to be good for most consumers.

Overall, I am in general agreement with Shostak that there is a stock bubble that has been fueled by the Fed.  With its current stable money policy, the bubble in stocks is quite vulnerable.

I advocate a permanent portfolio for a good portion of your investments, which will include 25% in stocks.  But outside of this, and perhaps a few speculative plays in mining stocks, I would avoid stocks right now.  If you are feeling particularly courageous, you might even consider a small short position at this point.

The Austrian Business Cycle Theory tells us that a bust is coming, unless the Fed decides to ramp up its digital printing press again, which seems unlikely right now.  I think a big downturn in stocks is more a question of when at this point.

As I write this, the 10-year yield for U.S. Treasuries is under 2%.  You can buy a 10-year bond and it will pay out less than 2% per year in interest, which probably doesn’t even keep up with inflation.  And who knows how high price inflation will be in 10 years when you get your last interest payment and your original principal back.

It is crazy though that the U.S. 10-year yield is higher than many other countries.  For example, Spain, Italy, and the U.K. all have 10-year rates that are lower.

In Japan, where the central bank is engaging in unprecedented monetary inflation, the 10-year yield for Japanese government debt is just 0.37%.  You can loan your money to the near-insolvent Japanese government, with all of its bloated debt, for the privilege of getting an interest payout of less than half a percent per year.

It is even worse in Germany, although slightly more understandable there.  The 10-year yield is just 0.16% as of this writing.  People in Europe are looking for safety and Germany is the least bad.  If I were in Greece with the threat of bank “bail-ins”, I would certainly consider putting some of my money into German debt, just for the possibility of getting a decent portion of it back.  It might be the best option available, especially if it is hard to buy and store gold.

This all represents fear.  People are looking for safety.  They don’t seem too concerned about inflation, even though central banks have been, or currently are, printing a lot of digital money.

I was surprised to see that David Stockman is predicting some kind of a deflationary situation to continue and get worse.  I agree with most of what he has to say, but I don’t think we are going to see any sustained deflation.  As Ben Bernanke once said, a determined central bank can always create positive price inflation.

Regardless of whether we ultimately see really high price inflation, it is important to realize that central bank inflation does great damage to the economy, even if it doesn’t show up in consumer prices.   It misallocates resources and hurts our living standards.  It misallocates savings and investments and causes less productivity in the future.

In terms of shorting the bond market, I still don’t think the time is right.  If we hit another recession, U.S. rates could easily go lower still. I don’t think we are going to see higher interest rates until we see a significant uptick in price inflation.  Right now, the CPI numbers are coming in too low.

Since there is little perceived threat of price inflation and there is almost no chance of default on U.S. government debt (in nominal terms), rates are staying low, even with the Fed’s current tight monetary policy.

There will probably be a day when shorting bonds will pay very well.  That day is not today or tomorrow.  It probably won’t be in 2015.

Every so often, I like to look at the adjusted monetary base.  It is really the one thing that the Fed most directly controls.  It is a reflection of monetary inflation, but not necessarily a reflection of money in circulation.

You can view the latest chart here.

The monetary base has been up and down a bit, but basically hanging around the 4 trillion dollar level.  There are always going to be little ups and downs because of maturing debt that needs to be rolled over.

The monetary base is consistent with Fed policy right now.  The Fed ended QE3, or whatever you want to call it, back at the end of October 2014.  It now has a policy of stable money, at least for now.

Meanwhile, excess reserves held by depository institutions have also seemed to level off.  The chart for excess reserves over the last 7 years has basically mimicked that of the monetary base.  They have gone up and leveled off in tandem.

This is why the monetary base is not an accurate reflection of the money in circulation.  Much of the new money created by the Fed over the last 7 years has not been lent out by banks.  It is sitting there “earning” 0.25% interest with the Fed.

This has helped keep a lid on price inflation.  If all of this new money had been lent by banks to the legal limit, then we likely would have seen an explosion in price inflation.

This is also a big reason on why the federal funds rate has meant little over the last several years.  Banks do not need to borrow overnight money if they are already above the mandated reserve requirements.

The federal funds rate also doesn’t matter much because it is not dictating Fed policy.  The Fed is now telling us directly in the FOMC statements if is expanding the monetary base.  Over the last 5 months, it has been the Fed’s policy to keep a level monetary base by just rolling over maturing debt.

I am a believer in the Austrian Business Cycle Theory.  When there is an artificial boom and the central bank does not continue to provide loose money, then it will eventually expose the malinvestments and lead to something of a bust.  So if the Fed keeps its current policy, then I do expect a recession to hit at some point.  I think a lower stock market will probably lead the way.

The most interesting aspect will be when we actually do hit the next bump in the road.  Will the Fed keep a tight money policy or will it go back to another round of QE?  My bet is on the latter.

If you are a libertarian, you should never cede the moral high ground.  That is one of the beauties about libertarianism, which hopefully most libertarians realize.  You have the moral high ground and pragmatism on your side.

If you are ever asked about libertarianism, you don’t necessarily have to try to convince the other person of your point of view.  Instead, just help them understand where you are coming from.  Imagine the following conversation.

Libertarian Guy (LG): Let’s say that your neighbor is really sick and needs money for an expensive surgery to help save him.  You go to another neighbor and ask if he can help out in providing any funds.  Do you agree that it is ok for you to ask your neighbor for some help?

Non-Libertarian Guy (NLG): Of course it is ok to ask.

LG: Good.  We agree on that point.  What happens if your neighbor refuses to help out with donating money?  Do you think it is ok if you take out a gun and demand that he help his other sick neighbor?

NLG:  Of course I don’t think it is ok.  It doesn’t matter if the other guy is sick.  You can’t just take out a gun and demand money.  That is violence and it would be a crime.

LG:  Good.  We completely agree on that point too.  Now let’s say that you get together the rest of your block and you hold a vote.  The majority of people on the block vote for you to take your gun and go back to that one neighbor’s house and demand some of his money to help the other sick neighbor.  Is it ok to use your gun since the majority of your block thinks it is ok?

NLG:  Well, I would hope that there wouldn’t be that many people who think that robbery is ok.  But, of course, it doesn’t matter what they say.  It doesn’t make it right.  You still can’t just go up and take the guy’s money at the point of a gun just because he doesn’t want to donate money.

LG:  Well, yet again, we agree.  We are in agreement in all of these points.  So you were wondering what makes me a libertarian.  I believe if the people on your block call you or themselves a state or a government, that it is still wrong to take the guy’s money at gunpoint.  That is the main difference between a libertarian and a non-libertarian.  Most non-libertarians live peacefully with others and wouldn’t dream of initiating force against others.  They just don’t apply this principle to the state.

End of Conversation

You can get into detailed issues about what constitutes the initiation of force and what constitutes self-defense.  You can get into details about how certain property rights are acquired and where property rights should and shouldn’t apply.  You can get into details about whether a state is legitimate if it only acts to protect people’s lives, liberty, and property.

But when you get down to it, the above example sums up what a libertarian is and isn’t.  Get agreements from non-libertarians on the above points and then point out the one simple, yet important, difference that makes you a libertarian.

There was legislation signed into law recently by the governor of Indiana, Mike Pence.  The law is named the Religious Freedom and Restoration Act.

Unsurprisingly, many people oppose the legislation, including some notable businessmen.  The most notable is Tim Cook, the CEO of Apple, who said he was deeply disappointed.

The CEO of Salesforce.com tweeted about his company drastically reducing investments in the state.  This is really kind of crazy because I would be boycotting every state and every country on earth if I did so on the basis of one bad law.

So what is so upsetting about this legislation?  Basically, it says that you can’t use the government’s guns in the state of Indiana to force people to associate with others where it interferes with their religious beliefs.  Of course, the critics aren’t putting it quite like this.

The critics are now saying that people are vulnerable to discrimination.  But I have some news for these people.  We are subject to discrimination almost every day of our lives.  As Walter Williams would say, he discriminated against all other women of the world the day he decided to marry his wife.

In this case, most of the focus is around gay people.  I don’t know the motivation of the Indiana governor or those in the legislature who supported this bill.  I don’t know if it is an anti-gay agenda or a pro-freedom agenda.  I suspect motivations differ widely and it might be a combination of reasons for different people who support this legislation.

This stems from ridiculous lawsuits where gay people have sued florists and bakers for refusing to do business with them for their weddings.  If someone doesn’t want to bake a cake for a gay couple’s wedding, then instead of just moving on to the next baker, the gay couple thinks it is appropriate to use guns in order to force people to bake a cake, or else use the guns to take money from the baker or kidnap the baker if he refuses to pay the fine.

The gay couples in question do not use their own guns.  They use the guns of the government, so they think that makes it ok.

This scenario applies to anybody and any group.  This is a violation of property rights and a violation of freedom of association.

The problem with the Indiana law is that it is using religion as the excuse.  But religion isn’t the issue.  A baker should be able to refuse to do business with anyone, regardless of the reason, unless he is obligated under a voluntary contract.  The baker should be able to discriminate for any reason because it is his time and his property.

What if a baker only wants to bake cakes for kids?  Should he then be obligated to bake cakes for anyone?

Unfortunately, many people do not understand the difference between supporting an action and supporting the use of government guns to obligate that action.

It doesn’t matter if you support certain forms of discrimination or you completely oppose them.  The question is whether you believe in the use of violence to solve the problem.  This is a liberty issue and nothing else.

I am going to continue to watch the CPI numbers closely.  I know they are government numbers and there are issues with the calculations, but they do serve a purpose.

First, the numbers can at least give us a trend for consumer prices.  This obviously doesn’t factor in many asset prices, but it is still useful.

A second reason to pay attention to the CPI numbers is for the simple fact that the financial media, and the Fed itself, pay attention to these numbers.  If the Fed is going to make a decision based on higher or lower than expected CPI numbers, then it will affect all of us.

The latest numbers are out for February 2015.  There is typically close to a month delay.  The percent change over the last 12 months is zero.  We are officially flat.  If you use the CPI excluding food and energy, then it shows a 1.7 percent increase year over year.  So a big part of the deceleration in consumer price inflation is due to the drop in oil.

The median CPI is 2.2% year over year.  It has shown this same number for the last 5 months.  The median CPI tends to be a good measure.  As you can see, it is far less volatile.

While consumers always benefit from price deflation, assuming it isn’t a crash from a previous artificial boom, the numbers are still relatively tame right now, even with slight increases.  The Fed supposedly targets a 2% rate, which is ridiculous by itself, but the CPI is below that target right now, unless you use the median CPI.

For this reason and others, I really don’t expect the Fed to reduce its balance sheet by any significant amount in the future.  There is little reason in the eyes of the Fed to have monetary deflation when price inflation is mild.

This doesn’t mean the Fed won’t raise the federal funds rate by increasing the rate it pays to banks on reserves.  But even here, I think the relatively low CPI numbers will make the Fed hesitate more and increase rates more gradually.  This may be temporarily bullish for stocks, but we can’t be certain.

Assuming oil prices have leveled off, I expect the CPI numbers to turn positive again.  If they don’t, this will be further reason to expect the Fed to act slowly, if at all, in raising its benchmark rate.

With low price inflation numbers and a strong dollar, along with massive monetary inflation by the ECB and BOJ, I won’t be surprised if we are talking about QE4 this time next year.

I want to briefly discuss the wonders of free market competition.  While the U.S. tax code and free market economics do not really go too well together, this is an exception.

Tens of millions of Americans have to suffer through tax time during this time of the year.  Billions of man hours are wasted filling out tax forms.  This doesn’t account for the huge expenses in time and money that companies have to go through just to abide by the law in providing the proper tax forms.

You can take your tax information to a professional for help, which will set you back a few hundred dollars or more if you have anything complicated such as investments, rental property, or a business.  If you want to attempt to do it yourself, there is software that can help.

The biggest name in tax software is TurboTax.  The biggest name in tax preparation help is H&R Block.

In 2015, TurboTax decided to shake things up a bit.  The company changed its software from what it previously offered.  For example, if you have investment capital gains and dividends, or if you have a rental property, you could previously have used TurboTax Basic and it worked for these things.  You could upgrade to Deluxe or Premier for more help or more in-depth items.

This year, for the 2014 tax year, TurboTax Basic does not do much, unless you are just filling out a basic tax return with a W-2.  If you have investments or rental properties, then you will have to get the Premier edition, which will probably run you around $75 or more.  In the past, you could use the Basic for $20.

Needless to say, TurboTax has received a lot of complaints.  If you look at the reviews on Amazon, it is mostly one and two star reviews.  When you raise prices on loyal customers from about $20 to about $75, there is probably going to be a backlash.  And to make it worse, some people bought the Basic edition or the Deluxe edition thinking it would do the same as last year.

I wonder what bureaucrats at Intuit (the owner of TurboTax) sat down and came up with this brilliant idea to raise more revenue.  I can just imagine a bunch of senior executives dressed in suits sitting in a conference room scheming about this brilliant plan.

Who knows; maybe it will be a good move.  Some people are paying the higher price, which is a lot higher.  But I also know of people refusing to use TurboTax, not only because of the high price, but just out of principle because they see this as a sleazy tactic by the company.

Meanwhile, H&R Block, a competitor, is offering free software for this year only to certain TurboTax customers if they can show their receipt.  This is a great marketing ploy by H&R Block to obtain new customers.

Even if Intuit increases revenue this year from TurboTax, what is to say that more customers won’t leave next year?  Here is a company with a solid customer base and it just turned its back on its customers.  Sure, they have apologized for “the confusion”, but there really is no confusion now.  Customers are going elsewhere because they don’t want to be treated this way.

This is really the free market at work.  It just shows that companies cannot just take their customers for granted.  They can’t just raise prices like crazy and expect that the customers will take it.

If Intuit is wise, it will revert back to the old TurboTax editions from the 2013 tax year.  It is too late this year, but we’ll see what happens next year.  If not, I expect customers to continue to slip away and find other alternatives.  In a relatively free market, the customer is king.  The customers vote with their money and where to spend it.  If a company doesn’t respect its customers, it won’t be around for too long, assuming it doesn’t get help from the government.

There is little question that there is some kind of asset bubble that has been created by the Federal Reserve.  The Fed has quintupled the adjusted monetary base since the fall of 2008.

While much of this new money went into excess reserves at the commercial banks, it is still monetary inflation.  It has served to bail out the banks, fund deficits by Congress, and misallocate resources.

Consumer price inflation, as measured by the CPI, has been tame.  But this was also true in 1929 before the stock market tanked and the Great Depression came.  The monetary inflation resulted more in asset price inflation, rather than consumer price inflation.

I see the same scenario now with stocks.  I really do believe we are in a stock bubble.  I am not saying this is just like 1929 because there are major differences, such as the existence of the FDIC.

Even if this were comparable to the 1920s, we may not be in 1929 yet.  We may be in 1927 or 1928.  That is the thing with bubbles.  The mania can last for a long time.

I thought the Chinese real estate bubble would have popped by now. And while there has been a slowdown there, it has not yet come crashing down yet.

There is a quote attributed to Keynes where he said that markets can remain irrational longer than you can remain solvent.  I think this is good investment advice, particularly in times like today.

I am not recommending a big position in stocks.  I am quite fearful of stocks right now and trying to warn people.  At the same time, the bubble may go for another major run before things turn down.  Maybe we will see Dow 20,000 first.  Maybe it will be even higher.

This is not at all a prediction.  If I had to bet, I think the market will go down this year.  But again, timing is difficult, especially when you are dealing with bubbles.  That is the problem with bubbles.  It is a mania and you can’t really use rational thought to bet against it.  A mania defies rational thought.

In terms of real estate, I am not too fearful of a bubble.  It is certainly quite possible that real estate could go down 10 to 20 percent if we hit another recession.

There are a few areas where I would be worried.  New York and San Francisco come to mind, where real estate prices are sky high.  There are also portions of Canada, such as the Toronto area.  Of course, I already mentioned China and its real estate bubble.

There are certainly good reasons why prices are higher in some big cities, but it just makes it more risky to own real estate there.

In most places in the U.S., you are probably going to be ok if you own real estate, as long as you aren’t trying to flip something.  The best test is to compare rents to mortgages.  If you can buy a place for less than 20% down, and the rent will cover your expenses (mortgage, taxes, insurance, association fees, repairs), then you shouldn’t worry about a bubble.

When the housing bubble popped from around 2007 to 2010, rents did not go down that much.  They went down a little, but nothing compared to prices.  So if you are buying an investment property and you can get positive cash flow, you shouldn’t worry about a housing bubble as long as you plan to keep the place for a while.

I think real estate is a better investment than stocks right now.  In a couple of years, they may both be attractive investments if the asset bubble pops.  At that point, some people may give up on stocks.  That will be a better time to buy them.

The FOMC has released its latest monetary policy statement.  You can read it here, but it probably isn’t necessary this time around.

The big news is that the word “patient” has been dropped.  Janet Yellen has assured us that this doesn’t mean the Fed will be impatient either.  Analysts are taking this to mean that the first rate hike will not occur until June or later.

Analysts are also now expecting the rate increases to be less dramatic once they start coming.  For this reason, markets soared on Wednesday.  Stocks were up.  Gold was up.  Bonds were up.

Yellen held a press conference at the end.  One interesting thing I noted was her saying that the Fed will consider stopping its policy of rolling over maturing debt at some point in the unspecified future.

Right now, it is the Fed’s policy to roll over maturing debt.  This keeps the monetary base stable.  If the Fed allows debt to mature, it essentially removes assets from its balance sheet.  This would be monetary deflation.

I find it almost impossible to believe that the Fed is going to reduce its balance sheet in any significant way in the future, especially if the CPI remains relatively low.

As far as the rate hikes go, I don’t think they matter much except in terms of perception.  Since the Fed won’t be significantly reducing its balance sheet any time soon, the only way to raise the federal funds rate is to increase the rate paid to banks for their excess reserves.

I see this whole big deal about raising rates as nothing more than giving another bailout to the banks.  Raising rates is not going to affect the monetary base in the near term.  Raising rates may not even affect market interest rates.  The 10-year yield continues to hang around the 2% mark, despite expectations of a Fed hike later this year.

I think the big things to pay attention to are the CPI numbers (because the Fed watches this) and the overall economy.  If we see signs of a deep recession coming or if the stock market tanks, then I think all of the talk will change quickly.  The question at that point will be when the Fed starts another round of so-called QE and how big it will be.