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.

I occasionally like to visit websites that encourage saving money.  In particular, I enjoy visiting ones that encourage ultra saving, perhaps on the verge of being compulsive.  Two such websites are as follows:

http://www.mrmoneymustache.com/

http://www.thepennyhoarder.com/

I find them fascinating, perhaps because I know it is not realistic for me.  It is not realistic for most people, especially those with a spouse and children.  You pretty much have to get the whole family on board or it isn’t going to work.  You will just end up getting frustrated.

Personally, I don’t really like compulsive saving, but I do occasionally get some good tips from these websites.  I strongly encourage people to save money and live below their means, but I also don’t think you should make yourself miserable in the process.

I know the $5 cup of coffee is often used as an example of cutting expenses, whether or not it is symbolic.  You can probably get a cup of coffee for cheaper, but that is beside the point.  If you really enjoy your $5 cup of coffee and it makes your day, then I don’t think you should cut it out of your life and deprive yourself, unless you are really in a tough situation financially.

Saving five dollars a day isn’t going to make you rich.  Even if you find four or five little things to cut out of your life, it probably isn’t going to make much of a difference.  You will probably get frustrated because you are depriving yourself of little life pleasures while not seeing much progress on the savings front.

In terms of saving money, you should really look at the big things.  This would include car payments, rent/ mortgage, and perhaps your biggest or most expensive pleasures.

If you really like boating, maybe you can find an alternative to owning a $30,000 boat.  Maybe you can join a boat club or share one with others.

There are people who will pay $600 per month for a car payment, yet they feel forced to pack a lunch every day.  It is fine if you like to pack a lunch and you really love your car.  But I find that this isn’t usually the case.

The other important point is that sometimes you just have to find a way to make more money.  If you are stressing over a $5 cup of coffee, you really need to either check your spending or your income or both.

If you are making six figures and you don’t live in a really expensive city, then you should be saving money.  It is more of a spending problem than an income problem.  But I find that many people feel locked in to their income and never explore other options.

If you are making $40,000 per year, you will probably never be rich.  You can try to save, but you aren’t going to get very far.  You may just have to look at finding ways of making more money.  This could include finding a better job, finding a second job, starting a side business, or doing some extra consulting work.

While I often write about investments and wealth protection, this advice isn’t going to do you much good if you don’t have much of anything to protect.  At some point, you have to make more money than you spend.  You may have to be creative and find ways to make more and spend less.  The key is to figure out which area you can get the biggest bang for your buck.

As I write this, the price of gold is back down to almost $1,200 per ounce.  The price showed promising signs recently for gold investors, but it can’t seem to hold on to the gains (in terms of dollar profits).

Gold stocks have been a terrible investment over the last several years, but they also started showing signs of life in the last few weeks.

Gold has actually traded in a fairly narrow range over the last year or so.  There are day-to-day ups and downs, but the swings haven’t been too wild.  Just when you think gold is about to break out, either to the upside or downside, it reverses course.

One important thing to consider is that the U.S. dollar has been strong in comparison to other fiat currencies.  In particular, the two other major currencies – the yen and the euro – have been really weak.  Both the ECB and the Bank of Japan are in monetary inflation mode (more so the Bank of Japan up until now) and the economies in Japan and Western Europe are extremely weak.

I believe that gold can still go higher even with a strong dollar.  It isn’t so much that the dollar is strong, but that it is just less bad than the other fiat currencies.

People ask if it is a good time to buy gold.  I say, “that depends.”  If you don’t own any, then you should certainly buy.  If you own 40% of your portfolio in gold and gold-related investments, then you should probably sell a bit.

My target is generally around 25% of your financial portfolio as part of a permanent portfolio.  This would include any investments directly tied to the price of gold.  Gold stocks should be separate as a speculation.

In the next year or two, the dollar price of gold is going to depend on what the Federal Reserve does.  This in turn depends on the state of the U.S. economy.  If the economy sinks and the Fed starts another round of so-called QE, then I expect gold to go higher.  If the Fed keeps its current tight money stance, then I expect gold to stay in its current narrow range.

The current CPI numbers show a decrease in price inflation for December.  A lot of this is due to falling energy prices.  The median CPI is usually a better measure and it is showing 2.2% year-over-year.

I don’t think Yellen and the Fed are worried about price inflation, unless they just aren’t showing their hand.  Since price inflation doesn’t seem to be much of a factor right now, at least by their standards, I don’t think it is going to take that much to start another round of digital money printing.

Adam Kokesh, an ex-Marine and libertarian activist, interviewed people seeing the movie American Sniper.  There is a 27-minute video where he really gets to the heart of the matter.  It is amazing how many people are either ignorant or just downright confused.

The movie has been huge at the box office and many people (not just Republicans) are calling Chris Kyle an American hero.

First, I have to point out that Chris Kyle was a liar.  For him to say that he shot several looters from the top of the Superdome in New Orleans after Hurricane Katrina is ridiculous.  If it were true, he should have been charged for murder just for that act alone.  How can anyone accurately judge a situation from that far away?

But the fact that Chris Kyle was a liar does not change the rest of the story.  Even if he had been completely truthful, it would not change my opinion of him.

While many Americans see Chris Kyle as a hero, I see him as a murderer.  We know that he killed a lot of people.  He admitted it.  He had 160 confirmed kills in Iraq.

Most Americans view these 160 kills as justified.  In many cases, he was protecting his fellow Americans.  This view needs to change.

This took place in Iraq.  It wasn’t in the United States.  The American military went into Iraq and blew up buildings, blew up utilities, and killed a lot of people.  Then they occupied the country and effectively put it under martial law.

If the Chinese government, or any other government, came into the United States and devastated cities and killed a bunch of your friends and relatives, what would your reaction be?  Would you be justified in taking up arms against the Chinese military men?  If a Chinese sniper killed you because he saw you walking around with a gun, should he be called a hero for protecting his fellow Chinese soldiers?

So many Americans are so hypocritical when it comes to foreign policy.  They view their own country and their own government as righteous.  They believe everything is right because “we are Americans”.

Many people still believe that the invasion of Iraq was linked to 9/11. It wasn’t.  The only link was the implication by the Bush administration and all of the apologists.  They lied.

But even if Iraqi officials had been involved in 9/11, it still would not have excused killing innocent people and devastating the country.

None of those 160 people killed by Chris Kyle had been convicted by a jury.  None had been formally accused of a crime.  They were people living in their own country trying to fight off people they saw (and justly so) as occupiers.

It doesn’t matter about Saddam Hussein.  Maybe he was a bad man.  There have been a lot of bad men who have sat in the White House too, but it doesn’t mean I want another government to come in and bomb my country.  Still, even with that said, most Iraqis would probably much prefer to have Saddam in power than to have a devastated country occupied by foreign troops.  It has been chaos there ever since the war started, particularly the second time.

I think some Americans see the reality of the situation, but unfortunately are too cowardly to speak up.  They don’t want to be accused of being anti-patriotic or anti-American or pro-Saddam or any number of other names they will be called.

But it is time to tell the truth.  It is especially time to stop defending someone who was a cold-blooded murderer.

I don’t know what the motivations were of the guy who killed Chris Kyle.  Maybe he was just crazy.  But I can’t help but think that he actually had a conscience.  This is not a defense of what he did.  It is just to point out that he probably felt a lot of guilt for having been violent and felt resentment towards Kyle that he didn’t feel the same.

The military worship has to stop.  Murder is murder.  Chris Kyle should be looked at as a thug.  If he had been a true hero, he would have refused to go to Iraq.  He would have refused to kill innocent people who were trying to defend their homeland.

For some reason, some libertarians like Thomas Sowell.  Many fiscal conservatives like him.  To me, he is a statist.

Sowell has some decent views on certain aspects of the free market.  He is a good writer when he knows what he is talking about.  Some of his writings on economics are decent, although even here he falls very short sometimes.  He seems to have little to say about central banking.

I have written about Sowell before.  I called him a moron.  I don’t really like name calling because it is usually unproductive and unpersuasive.  With that said, it is really irritating that someone can seem to be so articulate about certain aspects of the free market, yet fail to see some of the simplest things and be a complete statist.

Sowell is a war hawk.  He is mostly a Republican apologist.  He might have had a few minor criticisms of George W. Bush.  He supported Newt Gingrich for president (that should be enough said about him).  He couldn’t seem to find anything nice to say about Ron Paul when he was running for president.

Now Sowell has written an article about measles, vaccines, and autism.  I will quote the final paragraph in his piece:

“Some say the decision to vaccinate or not should be the parents’ choice.  That would be fine if their child would live isolated from other children.  But that is impossible.”

In other words, Sowell wants to force you to stick needles into your child.  If you don’t obey Sowell, then he wants the police to come and kidnap your children away from you.  If you resist, then you yourself will be kidnapped or shot and killed.

I hope if Sowell ever gets a cold that he never leaves his house.  Maybe the police should force him to stay there.  After all, we wouldn’t want him infecting anyone.  There is always that possibility.

Of course, I am not the first to point out that if the vaccines are so great, then why are people worried about unvaccinated people.  Wouldn’t it just be the unvaccinated people that would have to worry?

And what about people who receive the vaccine?  There is shedding, where the virus can actually spread.

If young babies and people with cancer (weakened immune system) aren’t supposed to be vaccinated, then why is a particular age for an older baby or young toddler all of a sudden risk free?

Sowell says that there is hysteria over a faulty study that linked autism to vaccines.  Sowell says there are better studies out there, presumably by government officials and government-paid scientists.

Sowell says that the doctor who wrote the study linking autism and vaccines (he is probably referring to Andrew Wakefield), had his license revoked.  In Sowell’s eyes, this strengthens his case because the government-run bureaucracy revoked the doctor’s license.  Sowell, as we know, trusts the state and all of its licenses and those who issue them.

Sowell says that the main reason for the increase in autism is because they have changed the definition.  I know the guy is over 80 years old, but does he have to spout off like an ignorant fool?  Can he just open his eyes to reality?  I have seen people argue that the increase in autism is related to other factors, which is fine, but for him to argue that there is no significant increase in autism in today’s world is just plain ridiculous.

Almost everything in Sowell’s article is completely wrong or based on wrong assumptions.  All of his “evidence” is based on trusting the state.  And he, of course, demands using the violence of the state to stick dozens of needles into each young child in America.

But the topper for me that shows his absolute ignorance is when he says that lawyers were suing pharmaceutical companies because they had a vested interest.  Yes, the lawyers have a vested interest in winning their cases.  They have probably made many millions in total.

This somehow doesn’t compare to the many billions (in case you are reading this Sowell, billions is more than millions) that pharmaceutical companies have made pushing these vaccines.  The pharmaceutical companies are in bed with the FDA and various politicians.  But if they make a profit, I guess it is just free market capitalism at work.

Thomas Sowell is a complete statist.  I can’t understand why any libertarian would like the guy.  He is pro war, pro government spying, pro central banking, and he wants to force every parent to vaccinate according to his opinions.  It is understandable why he supported Newt Gingrich so much.

• Brian Williams is in hot water over embellishing (some would say lying) about an incident that happened while he was in Iraq.  Now people are questioning his stories about his time in New Orleans during Hurricane Katrina.  He talked about bodies floating by in the flood waters.  I just figured it was the bodies of people that Chris Kyle took out from the top of the Superdome.
• I recently saw The Tonight Show where Jimmy Fallon said: “Speaking of Obama, he presented a $4 trillion budget that he says would help the middle class.  And then the middle class said, ‘You know what, how about just giving us $4 trillion?  That will help us.  We will figure it out.  We’ll figure out what to do with it.'”  Fallon has no idea how true that should be.
• Jeb Bush said his brother had been a “great president”.  I understand loving your family.  But if he thinks his brother was a great president, that is enough for me to strongly oppose Jeb Bush.  Anyone who thinks George W. Bush was a great president, or even a good one, deserves huge criticism from libertarians.
• How does ISIS sell all of this oil?  We are not talking about Bin Laden hiding in a cave somewhere.  This isn’t a bunch of roaming terrorists.  These people somehow know how to package and deliver oil and receive payment.  Do you ever get the feeling that you are not getting the full story from the U.S. government?