For some reason, Rand Paul has a lot of supporters who also support his father – Ron Paul.  Many Ron Paul supporters found the liberty movement in 2007/ 2008  or 2011/ 2012 during his presidential campaigns.  They are hungry for some decent politicians (oxymoron?) and for some real change.

Some Ron supporters have defaulted to Rand.  But Rand is no Ron, as some are still finding out.

Rand Paul is a politician.  It was always hard to consider Ron Paul a politician.  He has always been principled and he just happened to get elected to Congress.

Rand Paul is going to run for president, unless he figures that he has little chance.  He plays politics.  He will say different things to different crowds.

I understand you don’t go to a Christian group and lead off with ending the drug war.  I understand you don’t go to a minority group and lead off with ending all laws against discrimination because they violate property rights.  However, with that said, Ron Paul did speak to a group of Cuban-Americans and told them he favors ending the embargo on Cuba.

My point is that you deliver your message in a way that is likely to be well received, at least by some people.  You are selling your message.  The problem arises when you change your message and you don’t stick to principles.

Rand Paul posted the following on Facebook: “Hillary Clinton simply does not recognize the threat that the world faces from a nuclear Iran.  Play our ‘Who Said It?’ game and see if you can tell the different between statements from Hillary Clinton and and Ayatollah spokesman.”

First, Hillary Clinton is a warmonger, so he is doing a complete disservice to make it sound as if she is some kind of non-interventionist.

Second, if Rand Paul is being hard on Hillary Clinton for being too soft on Iran, I wonder what he is saying about his dad.

Third, Rand Paul is showing that he simply cannot be trusted, particularly in regards to foreign policy.  I have seen through him from the beginning and have never trusted him.  I have spoken to libertarians who have criticized me for this, or at least disagreed.

This Facebook post comes right after Rand Paul joined most of the Republican senators (47 in all) in signing a warning letter to Iranian officials that they would not go along with Obama’s attempts at making peace with Iran.

Again, Obama also has a bad record on foreign policy, but the Republican Congress actually makes him look good, despite his drone bombings, sanctions, and war making.

The best part of that Facebook post were the comments by his “friends”.  They are calling him a neocon.  They are telling him to stop beating the war drums.  They are telling him that he needs to listen to his father.

I once thought Rand Paul had a decent chance of getting the Republican nomination.  I no longer think this is likely, unless he just completely abandons his base, whatever that is.

I don’t think Rand can succeed just from establishment support.  Why wouldn’t the establishment just support Jeb Bush or Scott Walker?

Rand Paul has been trying to play both sides of the fence since the time he started running for the Senate.  It hasn’t changed.  It is probably getting worse now that he is in the Senate and he is probably running for president.  He isn’t going to succeed by losing most of the supporters of his father.

If he really wants to play politics, he would make sure to at least appease his base, which is mainly a portion of Ron Paul supporters.  I don’t think supporting a Fed audit is going to cut it, especially when he is beating the war drums on Iran.

I will not vote for Rand Paul in 2016.  I will at least consider Jesse Ventura in 2016 if he runs.  I probably agree with Rand Paul’s economics more than Ventura’s.  But I trust Jesse Ventura more to do the right thing.  I particularly trust him more when it comes to foreign policy, which is the most important issue for a president.

It amazes me how many Americans are really house rich and cash poor.  If you do a measure of net worth (assets minus liabilities), I’m guessing that a good portion of Americans have a majority of their net worth as equity in their house.  This is even after the housing bust from the late 2000s.

Home ownership is obviously encouraged in the U.S.  Most middle class families will own, as opposed to renting.  Perhaps part of this is due to incentives by the government and Federal Reserve (artificially low interest rates and inflation).  But part of it may also be societal pressure.  Part of it is also just wanting to own something and make it your own.  This last piece is particularly true for women.  Women don’t want a house.  They want a home.

I see buying a house as something of a forced savings plan.  As long as you don’t continue to move or refinance or tap an equity line of credit, then you are going to slowly pay down the principal balance on your mortgage.  If someone stays in the same house for 30 years and doesn’t refinance for an extended term, then they will find themselves owning a house outright after 30 years.

Owning a house doesn’t always make sense.  There are many reasons to rent, especially for people with less money and people who want the flexibility to move quickly.  But since so many Americans lack the discipline to save, owning a house can be beneficial because it is like a forced savings plan.  That is why the majority of wealth for middle class Americans is in their house and 401k or other retirement plan.

Of course, it is best if you can be a disciplined saver and put money aside that isn’t just going to pay down your mortgage.  The decision to rent or own should be done on its own merits and not be decided just because you are a terrible saver.

I find this similar to a whole life insurance plan.  I generally recommend against whole life insurance.  I am definitely one who would say that you should buy term and invest the difference.  But whole life plans have probably benefitted a few people over the years because it has forced them to save money.  It may not have been the optimal way to save, but if they hadn’t bought the whole life insurance, they probably wouldn’t have saved at all.

One thing I find crazy is when I hear people who own expensive houses/ properties and yet have almost nothing in retirement or savings.  I have heard stories of people with million dollar houses in California, that are often paid off or closed to paid off, yet they don’t have any liquid savings.

If I were in this situation, I would sell the house and either rent or move.  If you have a high income, such as a successful Hollywood actor, then moving may not make sense.  In this case, you can rent.

It is crazier when I hear someone in California who makes $80,000 per year.  They could move to Texas or Florida (no state income taxes) and make $60,000 per year instead.  But the key is that they could buy a similar house for 20% of the cost of a house in some areas of California.

I understand that some people like the lifestyle or they have family ties in a particular area.  But some of these people are so house rich and cash poor that they could become instant millionaires just by moving.  They could practically retire or go down to part-time work just from the sale of their house.

Houses are things.  You need some form of shelter to live in, but there is a lot of flexibility as to where that is.  Money can buy you lifestyle.  It doesn’t do you much good to live by the beach in California if you have to work most of the time to pay for it.

The central bank of Ukraine raised interest rates in the first week of March to 30%.  According to this article, inflation is expected to hit at least 26% this year.  The currency used in Ukraine (the hryvnia) has lost about 80% of its value in less than a year.

I won’t get too much into foreign policy and war in this article, although the violence and conflict in Ukraine is obviously partially a cause of the major economic troubles there.

Ukraine is an extremely poor country.  In comparison, Russia is well-off economically.  It should not be too surprising that most people in Crimea wanted to join Russia, just looking at it from an economic standpoint alone.  If geo-politics weren’t a factor, I’m not sure why Russia would want to absorb Crimea.  Why would you want to take on a lot of poor people?

It is interesting though that the central bank had to take these drastic measures just to prevent its currency from being completely abandoned.  This is what happens when hyperinflation threatens.

The point here is that there comes a day of reckoning and there are limits to even what a central bank can do.  Being in the United States, I know it seems that the Fed can do practically anything without limits.  But there really are limits.  That limit is massive price inflation, or worse, hyperinflation.

When there was double-digit price inflation in the 1970s, it took Paul Volcker to come into the Fed and allow interest rates to skyrocket.  He stopped the monetary printing presses.

There are going to be consequences to the Fed’s previous monetary inflation of the last 6 and a half years.  We may fall into another deep recession.  If the Fed tries to pump in more money, we are eventually going to hit a point where a lot people start questioning the dollar.  The Fed cannot keep injecting massive amounts of money forever.  It is on hold right now, but I don’t think it will stay like this if we hit another recession.

I’m not predicting 30% interest rates in the United States.  What I am saying is that there are limits to what the Fed can do.  At some point, it will have to let all of the misallocations reveal themselves and let the market correct.  I don’t think the Fed is going to allow hyperinflation to happen.

Hillary Clinton has been in the news, especially if you get your news on the web.  The latest scandal involves her use of private emails and it is coming at a time when presidential contenders are making their aspirations known.

Anyone who has followed Hillary Clinton knows that she has wanted to be president for a long time.  Saturday Night Live has made fun of her for this and continues to do so.

She is addicted to power and control, and any advocate of liberty should be very concerned when someone seeks power this intensively.

I don’t really care about this whole email scandal.  She may or may not be guilty of something.  But don’t think this is a vast right-wing conspiracy.  I think this may be the establishment taking down Hillary.  It may be the Democrats more than the Republicans.

I see two possible reasons for this.  The first is that there is simply Clinton fatigue in the U.S.  The same thing could happen to Jeb Bush.  I actually don’t think the establishment wants a Bush vs. Clinton matchup because it would be too obvious.  The American people might begin to realize that these elections are a sham and that we are ruled by oligarchs.

To go along with this, Democrats may not want her to get the nomination for the simple reason that she will lose.  Most people love her or hate her, but the hate side is at almost 50%, which makes it tough to win an election.  She could win if she had a similar scenario as her husband where a third-party candidate runs.  She might win with 40% of the popular vote.

The other possible reason for the establishment all of a sudden turning on her is because they are afraid of what might be revealed if she does run for president and she gets the nomination.  They may just be hoping that she goes away quietly.

The Clintons have a lot of skeletons in their past.  There are Clinton body counts on the internet.  I know there are conspiracy theories for almost anything out there, but it really is crazy how many people associated with the Clintons have died at a young age or went to jail.

Vince Foster is the most famous one associated with the Clintons.  He committed suicide, if you believe the official reports.  He was a close associate of the Clintons and was a partner at the Rose Law Firm in Arkansas.

For conspiracy theorists, the most interesting one is John F. Kennedy Jr., who died in a plane crash in July 1999.  There are some reports that he was about to announce his candidacy for the U.S. Senate out of New York.  He is probably the one person who could have beaten Hillary Clinton, who was elected to the Senate a year later.  Hillary saw the senate as a stepping stone to the presidency, in case it wasn’t obvious.

Regardless of whether you believe this stuff, I believe that the establishment is nervous about having a Hillary Clinton candidacy.  The internet has reached new proportions and things get exposed and uncovered as never before.  If Hillary runs for president, there will be a spotlight on her and you never know what story from her past may come back to haunt her.  It isn’t going to be something relatively minor like private emails, unless those emails are fully exposed.

The establishment wants to keep the status quo.  They don’t want bad publicity.  They would rather have presidential candidates who have a cleaner past.  That is my guess anyway.

I just recently wrote an article about the NASDAQ hitting the 5,000 level, which is just short of its all-time high reached briefly back in 2000.  Right after I wrote that, Mark Cuban wrote an article stating that we are in a tech bubble that is worse than the tech bubble of 2000.

I generally like Mark Cuban.  He has his obnoxious moments on Shark Tank, but he also has his many moments of helping people out.  He is very intelligent and obviously very successful.  And from what I can tell, he actually made his money honestly, through hard work and good decision making.  He really is a great entrepreneur with a great story.

Now he is saying there is a tech bubble.  He doesn’t specifically address the NASDAQ, but that is really where the tech bubble was of 2000.

I think Cuban makes some valid points in his recent piece, but I also don’t necessarily agree with it all.  First, I just want to point out that just because somebody is very successful, it doesn’t make him all-knowing or intelligent in every area.  Warren Buffett is one of the greatest investors of all time and I consider him to be terrible on economics.  His father, Howard Buffett, understood economics.

I think Cuban understands economics much better than Warren Buffett, so I do take his opinion more seriously on this subject.

Cuban is right about people just picking stocks back in the bull market of the late 1990s.  You could pick almost anything, especially tech related, and you would look like a genius.  Cuban was smart enough to cash in on some of his endeavors at that time.  Most investors got caught in early 2000 when the bubble finally started to burst.

In his piece, Cuban talks about angel investors and crowd funding.  He thinks this is part of the bubble.  This may or may not be the case.  But I would hope that people understand the risks of these ventures.  Many of them will fail and some will be successful, just like any business startup.  I actually think these are creative ways of funding startups and it is mostly being done by the free market, although I’m sure some of the money is being directed there because of a previously loose monetary policy.  It is also a way to go around the tradition of getting a loan from a bank.

I actually do think the stock market is in a bubble.  I’m just not sure when it is going to deflate.  Much of it is going to depend on Federal Reserve policy.  I don’t think this is just technology related.  I think the S&P 500 is just as vulnerable as the NASDAQ.

If we hit a deep recession, then maybe a good percentage of these startups will go bust.  And yes, many investors will lose their money.

But I want you to think back to the tech bubble of the late 1990s and the ramifications.  Was it really a tech bubble, or was it just a stock bubble?  The NASDAQ came crashing down, but it wasn’t really the end of the technology boom.

Some of the little startup dot com companies went bust and many investors lost a lot of money.  But look at the companies that survived and have since thrived.

Amazon is an amazing company.  I don’t necessarily think it is a great company to invest in, but it is a great company for consumers.

Apple is enormous now and has been a huge innovator in new technology.

Then there is Google, which has thrived since the NASDAQ crashed 15 years ago.

The internet is 100 times better or more than it was 15 years ago.  Technology is so much greater.  Computers are far faster and far cheaper, even in nominal terms.

In other words, there wasn’t really a technology bust.  It was a stock market bust that brought back realistic expectations.  So even if Cuban is completely right in all of his predictions, it isn’t anything close to the end of the world.  Some companies will go bankrupt and the good ones will survive.  Capital will get reallocated and new projects can begin.

I think the big threats are Federal Reserve policy and big government.  The Fed is responsible for any stock bubbles that currently exist.  Resources have been misallocated on a grand scale and it is going to be painful when the misallocations are revealed and they start to adjust.

I’m not so sure we are in a technology bubble so much as we are in a big government bubble.  The government bubble is going to burst and a lot of people aren’t going to like it.

The NASDAQ hit 5,000 today.  It briefly went above 5,000 back in early 2000, right before the tech bubble came crashing down.  It started going back up and then fell back again in late 2008.

It’s hard to believe that the index went from below 1,500 in 2009 to over 5,000 today.

We do have to consider that the index is still way off its all-time highs in real terms.  Since 2000, consumer prices have risen approximately 35% according to the government’s CPI inflation calculator.

We also don’t know if this is a bubble that is about to pop.  I am pretty certain it is a bubble, but we haven’t seen the parabolic stage yet.  It’s possible we could still see some huge gains before the big fall.

If you invested in nothing but stocks since the spring of 2009, you have done very well.  Of course, this is assuming that you could time the market and buy at the very low point when everything looked really bad.  This is also assuming that anyone who bought at that time is smart enough to know when to get out.

That is the problem with bubbles.  You don’t want to miss the ride up, but you also don’t want to get out too late.  You would rather get out early than too late.

Warren Buffett’s Advice

As I saw the NASDAQ hit 5,000 for the first time in almost 15 years, I saw this article about Warren Buffett giving bad advice.

Buffett doesn’t practice what he preaches (in more ways than one).  In this instance, he says that investors should buy an index fund and hold it.  He says you will beat most hedge fund managers, which may be true to a certain extent.  As Buffett points out, you pay big fees to fund managers, as opposed to small fees when buying an index fund.

The article points out that you would have been better off buying Buffett’s top 5 stock picks over the last 6 or so years than buying an index fund.

I don’t like Buffett’s advice for a couple of reasons.  First, that is not how he got rich.  He bought specific companies that were winners.  This is the main point of the article.

But what about for capital preservation or those who simply don’t have the skills to pick winning companies?  Should you buy index funds?

Personally, I think you should preserve and grow your capital using a permanent portfolio setup, as originally described by Harry Browne.  That means that only 25% would go towards stock index funds.

You aren’t going to get rich investing in the permanent portfolio, but you won’t do that investing in index funds either.  It is to protect wealth that you have already accumulated.

In terms of investing, people like to look at stocks, but they fail to invest in themselves in learning new skills or starting a side business, etc.  This is really the best way to make a lot of money in the long run.

As for Buffett’s advice in buying stock index funds, I wonder if he would give the same advice to someone in Japan.  If you had bought the stock market index in Japan at its high over 25 years ago, you would still be down about 50%.  Buffett would respond that it can’t happen in the United States.  It may be true, but we don’t really know for sure.

The documentary film Citizenfour recently won an Academy Award for Best Documentary Feature.  The film was directed by Laura Poitras and follows Edward Snowden and his exposing of NSA documents to the journalist Glenn Greenwald.

I find that asking someone about Edward Snowden is one good litmus test on someone’s stance regarding liberty.  On this subject, I will tend to find more in common with liberals (in the modern sense) than with conservatives.

You can ask someone two questions and get a pretty good idea of their overall political philosophy.

1) Do you think Edward Snowden committed treason?

2) Do you think we need more government control over healthcare?

If someone answers no to both questions, he is probably a libertarian, or at least somewhat libertarian leaning.  If someone answers no to the first question and yes to the second, then he is a leftist.  If someone answers yes to the first and no to the second, he is probably a conservative.

Then there is the person who answers yes to both questions, who is an authoritarian and almost completely against the idea of liberty.

I really like Glenn Greenwald, even though he is a leftist.  He is principled.  But the most important thing is that he speaks about the issues that he is really well-versed on.  He speaks mostly about war and civil liberty issues, both of which he is really great on.  He doesn’t talk a lot of economics, which I am thankful for.

Greenwald looked kind of nervous when he was up on stage at the Oscars.  I don’t blame him.  He is probably paranoid and he should be. I’m sure the government is following his every move.

https://www.youtube.com/watch?v=WesxK21N3E4

Neil Patrick Harris told a joke about Edward Snowden not being there “for some treason”.  I understand he needed to be funny as host, but I think there is a time for a serious message.  I don’t know if Harris was trying to undermine Snowden or not.

Either way, I am happy that Citizenfour won the Oscar.  The reason is because it draws more attention to the film.  Hopefully more people will see it and recognize the crimes of the NSA and heroism of Edward Snowden and Glenn Greenwald.

The CPI numbers came out for January showing a 0.7% decrease for the month.  That is the third straight month in a row where the CPI decreased.

The craziest thing is that, year-over-year, the CPI is down 0.1% from January 2014.  While I wouldn’t call a 0.1% reduction price deflation (it is more of a rounding error), it is significant that the inflation numbers have slowed so much.

To be fair, the median CPI is holding steady at 2.2% year-over-year.  It is typically less volatile.  In addition, energy prices are the main driving factor in the decrease over the last three months.  We can see that just by filling up our cars at the gas pump.

I don’t like to rely too much on CPI numbers.  I understand they are government-issued numbers.  But we can use them to look at trends.  We must also consider that analysts look at these numbers, including Fed officials.

The massive monetary inflation of the last 6 years has not translated into significant price inflation.  Much of the new money has gone into excess reserves at the banks.  Also, asset prices have been bid up, as we see new nominal highs in the stock market indices.

We shouldn’t be fooled by the low CPI numbers.  The previous loose monetary policy of the Fed has misallocated resources on a grand scale, even if it isn’t translating into big price inflation.

The interesting thing about these numbers is that the Fed may consider holding off on raising the federal funds rate later this year.  More importantly, it may be more open in considering another round of so-called quantitative easing.  That is the part that we should really be paying attention to.

If the CPI numbers keep coming in negative, we are going to have to assume at some point that the Fed will get more aggressive.  If the Fed goes back to a loose monetary policy, that is going to change my outlook for things.  I will be recommending more aggressive investing in hard assets, particularly precious metals and commodities.

For now, we will wait and see.  Energy prices seem to be leveling off.  We’ll see if the CPI turns back up for February.  If not, this may change Fed policy going forward.

I happened to catch part of the Oscars on Sunday night, which included a speech by Patricia Arquette, whom I wasn’t really familiar with before then.  At the end of her speech, Arquette said the following:

“It’s our time to have wage equality once and for all and equal rights for women in the United States of America.”

The camera then showed Meryl Streep and Jennifer Lopez cheering on her message.

I really have nothing against Jennifer Lopez (J-Lo) outside of her ignorant political/ economic views.  She has obviously been very successful in her career as a singer, performer, actress, and judge on American Idol.

J-Lo’s body and her other talents make her over $30 million per year.  Forget equal pay for women.  I would like equal pay with J-Lo.

This whole equality thing is ignorance at its best.  It is ignorance of economics.  In a free market society, wages will tend to reflect worker productivity.  Calling for equal pay for women is about the equivalent to calling for equal pay for short people or fat people or ugly people or nerdy people or unathletic people.  It is collectivism.  In the case of women, it is trying to group together over half the population of the country into one.

The problem (which really isn’t a problem) is that nobody is equal.  Everyone has different talents.  Everyone has different wants and needs.  Everyone has different goals.  Most chess players are men and most chess tournament winners that aren’t exclusive to women are men.  Do we need different rules of chess for women?

Of course, it should be obvious that many women have different goals in life.  There are a lot of working mothers who want more flexibility.  They don’t want to work late hours in an office because they want to pick their kids up from school.

So even if you compare people in similar occupations, the comparisons still aren’t fair.  You can compare all lawyers in the U.S., but maybe there are more women lawyers who accept lower pay for the benefit of having more flexible hours.

It is also not surprising that in some occupations, men will simply perform better than women.  The reverse is true in other occupations.

And what about sports?  Professional men basketball players earn far more than professional women basketball players.  This is because there are more people interested in watching men play basketball.  You can’t blame this on the employers.  You can blame it on the customers who determine the advertising revenue and ticket sales.

In a free market economy, wages will tend to reflect productivity.  This doesn’t mean that everything will be perfect and exact.  Some workers may be giving their employers a break by not looking at other jobs and seeing what the market will pay.  But overall, there will be little or no wage gap between workers with similar talents and productivity.

If women are equal in productivity in everything (which we know isn’t true), and they were truly being underpaid, then employers would be rushing in to hire them.  If you can pay a woman $15 per hour to do the same job just as well as paying a man $20 per hour, even the most sexist of employers are probably going to prefer to save money and pay the woman less for the same productivity.

But this is why there cannot be a big differential.  Because another employer is going to pay the woman $18 per hour and another one will pay $19 per hour.  As long as the woman let’s her skills be known in the marketplace, the wages are going to reflect her productivity to employers.

Ironically, there may be one situation where there really is unequal pay for women, even with similar productivity and talents.  This can only come about in a controlled economy that is not free.  This can happen when there are government favors, government bailouts, and central bank inflation.

These government interferences prevent the market from working.  This leads to situations that we see with bank CEOs making millions of dollars, despite overseeing near bankruptcies if it weren’t for government bailouts.

But – and I’m just guessing here – I don’t think Patricia Arquette was advocating less government regulation and an end to central banking when she was promoting equal pay for women.

Maybe Americans should demand equal pay with all of the people attending the Oscars, especially those cheering for equal wages.

The latest reports out of Greece are showing that the Europeans are going to kick the can down the road, yet again.  The new leftist Greek government is already falling in line with the establishment and are going to come up with new reforms in order to keep the euro zone bailouts coming.

The bailouts are really just buying time.  In this case, the negotiations are extending the bailout terms for four months.  But the debt doesn’t go away.  It just keeps piling up.

The longer this goes on, the worse the situation gets.  It just means more capital consumption.  There is very little saving and capital investment in Greece.  Where there is savings, most people are hopefully smart enough to keep it outside of the Greek banking system.

As I’ve said before, we can talk about statistics and interest rates all day long.  The unemployment rate in Greece is over 25 percent.  It basically boils down to a severely reduced standard of living in Greece.  Poverty is high there.  These are real people and they are struggling.  Here is one video on the subject from last year.

Consider that poverty for someone in Greece is probably a lot worse than poverty for someone in the U.S.  The lower middle class in America lives better than most people in Europe who are considered middle class.

Greece should default on all of its debt.  It should repeal its welfare state.  If it can’t take a radical step of going to some kind of gold standard or free market form of money, then it should at least drop out of the European Union and tie its currency to the dollar.  This would provide some stability.

The Greek government should be severely downsized.  This would include massive layoffs for government employees.  But this is what needs to be done.

If Greece turned its economy into something resembling Japan or Hong Kong of the 1950s and 1960s, then the Greek people would see improvement within a couple of years.  It is going to be painful no matter what, so they might as well get on the road to recovery.

They need savings and capital investment.  They don’t need more jobs for the sake of having jobs.  They need productive jobs that create wealth.  This can only be done through the free market in a system of low taxes, low regulations, low government spending, and strong property rights.

In other words, the Greek people have to do a complete 180.  They have to do the opposite of what has been done over the last several decades.  They need to repudiate their debt and they need to repudiate the welfare state.  Anything less than this and the people are going to continue to suffer in the long term.