We are in the “everything bubble”.  This doesn’t technically mean that everything is going up or is in a bubble, but there is no question that most asset classes are going up in price right now.  It also seems unsustainable, unless the Fed is determined to bring us to some form of hyperinflation.

Stocks are booming.  Housing is booming.  Bitcoin and other cryptocurrencies are booming.  NFTs are booming.  Bonds, to a certain extent, have already boomed, but were limited to booming farther by zero interest rates.

Consumer prices are starting to rise faster.  We are going to get the Fed’s magical 2% inflation good and hard.  I have seen reports of raw materials such as lumber going up in price by 2 to 3 times what it was last year.  This partially explains the higher price for housing in most areas.

The Fed’s balance sheet keeps exploding higher.  It is nearing $8 trillion.  Yet the Fed keeps adding approximately $120 billion per month to get to our 2% average inflation.  We don’t know the time period that this “average” is supposed to take place.

Even going by the government’s own statistics, price inflation has picked up.  This isn’t the metric that the Fed cites, but it is the metric many others look at.  The CPI for March was up 0.6% from the previous month.  If you annualize that, it is an annual inflation rate of 7.2%.

The median CPI was up only 0.2% for March, which tends to be more stable.

While high inflation doesn’t necessarily show in the CPI statistics, there is no question that price inflation is picking up.  You can probably see this in your everyday life.

What should we expect when the government is handing out money to people to not work, while also handing out money to most Americans, just because?  Where does everyone think this money is coming from?  Taxes haven’t been raised on the rich recently.  It is all coming from debt monetization.  The Fed is funding all of this so-called stimulus by creating money out of thin air.

With direct payments, people have money to spend.  Young people can easily set up a Robinhood account and buy Tesla, GameStop, or whatever the newest gambling fad is.  They can also buy Coinbase, a company that briefly became worth $100 billion because it facilitates trading a bunch of computer code.

A friend of mine sent me an article the other day referencing tulip mania.  My comment: At least with tulip mania you might get some pretty flowers out of the deal.  With cryptocurrencies and NFTs, you’ll be left with a bunch of computer code.

Investing or Gambling?

We are in a gambler’s paradise right now.  If you are an “investor”, it has been pretty hard not to make money over the past year.  Don’t tell that to the hedge fund that was heavily shorting GameStop though.

I am a relatively conservative investor compared to what is out there now.  I know others who are similar.  We almost look like chumps right now for not cleaning up in the casino.

If you are in the same boat, or if you have been fortunate enough to get some big wins over the last year, then I will suggest that this cannot go on forever.  It can’t go on forever unless we have some form of hyperinflation.  If that’s the case, then you’ll have other issues.  If we have hyperinflation, then you’ll want to own gold.  Or more importantly, you’ll want to own food, along with guns to protect your food.

We are in a massive boom right now.  I was shopping over the weekend and it almost seemed like Christmas time at the mall.  Maybe a lot of people are tired of being locked up for the last year (whether it was forced or voluntary).

The problem is that it is an artificial boom built on easy money from the Fed.  Some people are paying down debt.  Some people are spending money on necessities.  Some people are buying consumer goods that they don’t need.  Some people are investing, or more accurately, speculating.

People intuitively know that they don’t want a large chunk of money sitting in their checking account.  They know it will lose value (purchasing power) over time.  They also know that it will barely pay anything to have it in a savings account or a U.S. Treasury bill.  This essentially forces people to become speculators so as not to lose money to inflation.

This is why it makes sense to a certain degree for people to be bidding up the price of houses.  This is why people are trying to make a quick buck in the stock market and in cryptocurrencies.  But it is all a giant bubble waiting to be popped.

People look brilliant right now.  There are people bragging about 40% returns over the past year, and this is just for people who are buying index funds.  People in even more speculative investments are largely cleaning up.

I was in my 20s when the tech bubble blew up and then popped.  It was euphoria in the late 1990s, and then it came down hard in the early 2000s.  By the way, the Nasdaq peaked in that bubble at just over 5,000 in March 2020.  It now stands above 14,000, which is almost three times the bubble price 21 years ago.

Most people who make a lot of money from a speculative boom are not disciplined enough to take their money and run.  They don’t know when it will end, so they keep playing the game.  If there are a couple of down days, they don’t know if it is a temporary blip or if it is the start of a bear market.

I can guarantee you that the majority of people who are cleaning up right now will be severely hurt when the bear market arrives.  It will arrive fast and hard.  The people who have done the best will be the people who get hurt the most.

I know it seems like it will keep going, at least for a while.  But consider how quickly it can change.  Let’s say that inflation numbers come out showing that price inflation has spiked to near double digits (10%).

Would the Fed be so insane as to blow it off and say that it will continue with its policy of near-zero interest rates and asset purchases of $120 billion per month?  It’s possible that would happen.  It’s also just as possible that it would announce it has to stop inflating so as to control the price inflation before it goes completely out of control.

If the Fed suddenly announced a stop to its monetary inflation, it could turn the sentiment of investors (gamblers) right away.  It could lead to a major crash.  It could quickly expose the house of sand that this bubble is built upon.

The brilliant investors will become the suckers.  They will be the last to hold the bag.  The ones who got in late will really become the worst of the suckers.

There will be a few who really were brilliant who made a lot of money but were smart enough to head for the exits before everyone else.  There will not be many of those people.

Meanwhile, for the more conservative among us, we will have to be satisfied in knowing that we didn’t get sucked in too much and didn’t get burned too much.  Even if you experience a 10% to 20% reduction in your investment portfolio, you will start to look like the genius compared to all of the people who lost 50% or more in the casino.

I am afraid that down the road, Bitcoin will make libertarians look bad.  There are varying opinions about Bitcoin and cryptocurrencies even within the libertarian movement, but if and when Bitcoin fails, the enemies of liberty will be quoting the large segment who are currently promoting Bitcoin.

I am not so much talking about the investment or speculation side of Bitcoin.  If a libertarian, or anyone else, says that you should get into Bitcoin because it is going to $100,000 and you can make some quick money, that is one thing.  It is quite another to promote Bitcoin as an alternative form of money that will transform the world.

For hardcore libertarians who understand that there should be a complete free market with regard to money, the position is consistent that people should be free to use or not use Bitcoin or any other cryptocurrency or alternative currency as they want.

Many libertarians are sympathetic to Bitcoin just for the fact that it is a potential competing currency, and it calls attention to the harmful policies of the central bank.

In this sense, I don’t want to make enemies of the people who are hardcore Bitcoin supporters, as it is difficult enough in this world to find people who have some understanding of the Federal Reserve and actually oppose it.  However, I also don’t want to give a reason for all of the anti liberty people to be critical of the liberty movement when Bitcoin doesn’t fulfill its promises.

It’s Not Money

I recently listened to an episode of the Tom Woods Show.  He had on a guest talking about Bitcoin.  The guest kept insisting that Bitcoin is money.

This is completely untrue.  In the United States, U.S. dollars serve as a form of money and really nothing else.  Gold has a long history of being used as money and would probably be used if left to the free market, but gold really doesn’t serve as money now either.

To be money, it has to be widely accepted.  You can’t walk into Walmart and pay with Bitcoin.  You can’t buy airline tickets with Bitcoin.  You probably aren’t going to pay your car mechanic in Bitcoin.  Even if some of these places started to accept Bitcoin, they would be almost-instantly converting bitcoins received back into dollars.

There is also the continuing problem that you are supposed to pay capital gains taxes on any dollar gains made by trading Bitcoin.  This would make bookkeeping quite complicated for individuals and businesses trying to stay compliant with the law.

The guest on this episode of Tom Woods’ show wasn’t saying that Bitcoin had the potential to be money.  He wasn’t saying that Bitcoin was on its way to becoming money.  He was saying that it is money, which is wrong.

Tom Woods is a solid libertarian and very knowledgeable on many issues.  And while I don’t think my position differs in any way in terms of policy (let the free market decide), I didn’t agree with one of his points in this episode.

Tom said that most of the people out there criticizing Bitcoin are the same people who want to keep you under lockdown for the virus.  This is a faulty debating technique.  It also isn’t even true.

Sure, there are many pro lockdowners who criticize Bitcoin in the corporate media.  This is no surprise.  But there are also a lot of people who fully opposed the lockdowns who also are not proponents of Bitcoin.  Also, the people in the corporate media criticizing Bitcoin are often criticizing it for different reasons than some libertarians criticize it.  I have also seen several establishment-type figures promoting Bitcoin for investment purposes.

Peter Schiff is one such prominent person in the liberty movement who speaks against Bitcoin, but there are many others in the libertarian/ Austrian school camp who are not hyping up Bitcoin and are warning about it.

I think some libertarians are excited about Bitcoin now because it was a group of somewhat liberty-minded people who brought it about, and now it has become something.  It has made the ticker on CNBC, so it is in the big leagues of personal finance now.  And this all came about because of a bunch of techie nerds who were sympathetic to free market money.

The problem is that Bitcoin and the thousands of other cryptocurrencies are nothing.  They were invented on a computer screen.  They have taken off now as part of the everything bubble.  I have no doubt that there was a good chunk of people who took their free government money (stimulus checks) and bought Bitcoin or other cyrptocurrencies.  The Bitcoin bubble fits right in with the stock bubble.

The only thing that libertarians should be saying in terms of policy is that people should be free to choose whatever form of money they decide.  It should be left to the marketplace.

This doesn’t preclude anyone from predicting or speculating that Bitcoin will go higher in terms of dollars.  But that should be done outside of the realm of libertarianism.

It’s like a libertarian saying, “As a libertarian, I understand that price inflation will reach 10% by next year.”  This is incorrect.  You can say, “As a libertarian, I understand that the Fed’s monetary inflation will do harm to the economy by misallocating resources and potentially leading to higher prices.”

It would not be incorrect to say, “As a libertarian, I predict that price inflation will hit 10% next year.”  But in this case, identifying as a libertarian is unnecessary in order to predict price inflation, and if you get the prediction wrong, it doesn’t mean you are wrong about libertarianism.

If Bitcoin crashes in terms of U.S. dollars, I think libertarians are going to take a beating in terms of reputation.  I know that the powers-that-be will go after libertarians no matter what.  But in this case, they will have actual quotes and video footage of libertarians touting Bitcoin and how it will one day compete with (or replace) dollars.

If Bitcoin goes to zero, the libertarian position remains the same.  The marketplace should choose money.  Ultimately, there should be no central bank.

I am thankful that Peter Schiff has been a consistent critic of Bitcoin and cryptocurrencies in general.  Again, he’s not saying that anyone should be forbidden from trading it or holding it.  But he understands that Bitcoin lacks all of the good characteristics as a form of money.  That honor still belongs to gold.

On March 29, 2021, the Libertarian Part of Kentucky sent outthe following tweet.

“Are the vaccine passports going to be yellow, shaped like a star, and sewn on our clothes?”

The LP of Kentucky later sent out a clarification tweet saying, “If the Star of David tweet didn’t make it clear, The Libertarian Party of Kentucky is against #Vaccinespassports as they are a complete and total violation of human liberty.  This is the stuff of totalitarian dictatorships.”

In the original tweet, the LP of Kentucky is comparing the idea of vaccine passports to Hitler and Nazi Germany.  Instead of being tagged as Jewish, people would be tagged as unvaccinated.  And, of a course, unless you deny that the Holocaust happened, we know that millions of Jewish people were slaughtered in the early 1940s.

If there was one thing wrong with the tweet, it was that it got things a little backwards (which was later admitted).  The vaccine passports won’t be the equivalent of the Star of David. It will be people who are not vaccinated who will have the equivalent of the Star of David.  It will be the people not vaccinated and without “passports” who will be the mark.

This original tweet stirred up a big response.  There was a lot of backlash and support.

I think most of the people condemning the tweet are being hypocrites.  If someone says it is not an apt comparison, then that is one thing, and it can be debated.  The problem is that most of the critics are calling it insensitive or worse because it is comparing taking a vaccine to killing millions of Jews.

But that’s not what the tweet is doing, as I will discuss shortly.

Most of the people chiming in are hypocrites because they themselves use Hitler/ Nazi analogies for the things they hate.  At the very least, they don’t flip out and call it insensitive when others make an analogy for the people or things they hate.

Do you know how many times Trump was called a Nazi?  Did these same people speak out saying that it is insensitive or repulsive to compare Trump to Hitler or the Nazis because it compares Trump’s policies to killing millions of people?

I’m sure there may be a few consistent people out there, but not many who were attacking this tweet.

I can understand if a libertarian is criticizing it because he doesn’t want it coming from an organization with the “libertarian” name in it.  But even here, if they aren’t being hypocrites, I still think they are wrong.

When it comes down to it, most of the people criticizing this tweet aren’t criticizing it because it invoked the Holocaust.  They are criticizing it because they favor pushing the vaccines and are not opposed to the idea of vaccine passports.

It’s an Analogy

An analogy is an analogy.  Ayn Rand, call your office.  A is A.

An analogy doesn’t mean that we will literally have yellow-shaped stars sewn on our clothes if we don’t get vaccinated.  It also doesn’t mean that we will be marched off to concentration camps. It is an analogy, and it is a warning.

The comparison is also not referencing the same period of time as the actual Holocaust.  This is the point.  The Holocaust didn’t just happen.  The German officials didn’t just wake up one morning and decide they would march Jews off to concentration camps.  There was a groundwork laid down, and this tweet was a warning of groundwork being laid for something worse to come.  It doesn’t mean that all unvaccinated people will be taken to concentration camps and killed.  It was a warning against laying the groundwork for tyranny.

Hitler came to power in 1933.  The Nazi regime had to stir up a lot of propaganda and hate against the Jews.  There had to be a lot of groundwork laid down. Most of them were probably not even doing it with the ultimate intention of slaughtering millions of people.

So for all of the people who think that tweet is insensitive, repulsive, offensive, etc., I say you need to understand analogies.

Maybe it was over the top, but I am not even sure about that.  Again, it wasn’t comparing vaccine passports to the Holocaust. It was comparing vaccine passports to what was happening before the Holocaust.

And is it really so crazy that libertarians are making these comparisons after what has happened over the last year?  When people were talking about the possibility of vaccine passports less than a year ago, they were called crazy conspiracy theorists.  So what is supposed to be said now that vaccine passports are being publicly discussed and widely advocated by people with power?

In the last year, across America, people have been told to stay at home.  They have been told to wear masks and keep their distance from others.  Businesses deemed “non-essential” by government were forced to shut down.  People were told they couldn’t have weddings and funerals. People were told they shouldn’t see their loved ones on Thanksgiving and Christmas.  And now we’re being told that we might need a vaccine passport to just carry on with a normal life.

Tyranny has already arrived.  It doesn’t mean we have concentration camps and mass murder.  But if the above doesn’t qualify as some form of tyranny, I’m not sure what would.

What do the so-called libertarians who criticized this tweet think should be said at this point? Should we all be polite and say, “These vaccine passports may not be a good idea.  They could lead to an infringement on our civil liberties.”

There is a time and place for politeness, and I don’t think this is one of them.  It’s not to say that you shouldn’t be polite to others, but I don’t think we should be polite in the sense of holding back the truth because we are afraid to offend others.

I don’t know if using a Hitler/ Nazi analogy works in convincing others on the dangers of vaccine passports or anything else.  But I do know that libertarians who hold back the truth because they are afraid to offend others are mostly irrelevant and ineffective, at best.

Some people need to be figuratively hit over the head with a sledgehammer.  They need the bold truth thrown in their face.

I believe the LP of Kentucky did nothing wrong here (other than getting the original wording backwards), as they are fighting for liberty and trying to be bold about it. The tweet was not insensitive towards Jewish people or minimizing the Holocaust in any way.  It was a warning that we don’t even want to begin to go down any similar path in any way here.

This idea of vaccine passports is a dangerous idea and antithetical to liberty.  If only there were more people and organizations that would realize just how dangerous this whole idea is.

I think we are in a gigantic stock bubble.  I thought we were in a bubble in 2019 and 2020.  Now it is just ridiculous.

As Keynes supposedly said, “The market can remain irrational longer than you can remain solvent.” It was one of the wiser things that he said.

So I’m not telling anyone to short the market or short any particular stocks.  I am not telling anyone not to either. Shorting involves a high degree of speculation because of the issue of timing.  If you shorted the market in 2019 or 2020, it was too early. It may still be too early in April 2021.  We just don’t know.

But unless the Fed goes into some form of hyperinflation, then I believe a dramatic decline in stocks is nearly a sure thing.  It is just a question of when and how much.  It is also a question of how long it lasts, given the Fed’s penchant to try to bail everything out as soon as something happens.

The Fed’s balance sheet continues to go higher. It is near $7.7 trillion now. For context, it was just under $4 trillion in September 2019.  The big explosion happened in March, April and May of 2020.

At some point, something has to give.  I sound like a broken record repeating this, but I can’t emphasize it enough. We are either going to see massive price inflation or we are going to see a major recession, which will likely include a stock market crash.  Maybe we’ll see both.

I believe that price inflation is already a factor.  I believe it is probably beyond the 2% goal stated by the Fed, which the Fed now wants as an average.  It doesn’t say over what time period though.  I think for the basic necessities of life (housing, food, medical care), price inflation is already well exceeding 2% per annum.

Where it Counts

There is a major disconnect between the stock market and people’s actual living standards. This is one reason it should be apparent that stocks are in a bubble.

I know that people are enjoying their “free” government money, with unemployment checks and stimulus checks, but tens of millions of people are struggling right now, even with the government money.

Of course, this “free” money is not free.  The government is spending it by continuing to issue more debt. Most of the debt is being monetized.  In other words, the central bank is creating money out of thin air to pay for it.  This causes resources to be misallocated, and it causes prices to be higher than they otherwise would have been.

I think it is important to look at the stock market for a few reasons.  First, if there is a crash, it is going to mean that the whole economy goes down with it.  In a way, this could be seen as a positive, as it would liquidate malinvestment, increase savings, and clear the way for new prosperity.  There is a good reason it is called a correction.

The problem is that we have to worry about the reactions from the Fed and the government. Just as in 2008/ 2009, they do not allow the full correction to take place.  Instead, they pile onto the problems by trying to temporarily hide them through monetary inflation and massive spending.

The other major reason to look closely at the stock market is for your own personal protection. Most people who have any significant savings have money in the financial markets.  This is especially true of stocks.  Most people who have 401k plans and other retirement plans have some exposure to the stock market.

If you have significant exposure to stocks, then you should be taking steps to reduce that exposure if you haven’t already.  It is bad enough when a recession hits.  Many people are facing unemployment or reduced wages or increased hours.  It makes it that much harder if you watch your net worth get cut in half because you were heavy in stocks.

The other day, I heard a segment with J.L. Collins.  He is a big figure in the financial independence/ retire early (FIRE) community.  He has a lot of good advice.  The one major area where I disagree with him is that he preaches buying and holding index funds. In other words, he generally suggests someone with a somewhat-long time horizon invest heavily in stocks. He might even suggest a good portion in stocks for those who don’t necessarily have a long time horizon.

I heard much praise being heaped on J.L. Collins for his work and his advice.  Of course, he looks like a genius right now because we have had an unprecedented bull market in stocks.  I have to wonder how much praise would be going his way if U.S. stocks looked more like Japan, which has essentially had a bear market for over 3 decades.

If you had invested in the Japanese stock market in 1989, you would still be way down now, over 30 years later.  Would you consider 30 years to be a long enough time horizon for investing?  Are you supposed to wait 50 years for positive returns?

https://en.wikipedia.org/wiki/Nikkei_225#/media/File:Nikkei_225(1970-).svg

What if we are Japan in 1989?  What if U.S. stocks take a massive haircut of 50% or more?  Worse, what if they stay down for a decade or more?  How would that impact your plans for the future?

In the FIRE community, there are tens of thousands of people who take the advice of J.L. Collins and others like him to heart.  What if they are buying index funds now while it is like buying Japanese stock funds in 1989?

Many of these people have been experiencing 25 or 30 percent annual gains over the last few years. They will admit that they are extraordinary, but most of them still expect something around 8% in the long run from here on out.  They say that stocks always go up in the long run.  What if they’re wrong?

What if stocks go down by just 30% and stay there for a decade?  In other words, they perform better than Japan from 1989 to now.  That would still be quite devastating for a lot of people.  It would certainly disrupt a lot of plans for people who plan to retire early (or retire at all) and live financial independence by traveling and sitting on the beach somewhere without having to work.

The stock bubble is not your number one priority.  Your health is more important.  Your income is more important, which is hopefully not too reliant on stocks.

But if stocks make up a significant portion of your portfolio, you may want to ask yourself if you would be able to live with a scenario of a dramatic drop without having a return to these levels for decades.  If that scares you in any way, then you should remedy the situation by getting out of stocks.

I am not predicting a Japan-like scenario for U.S. stocks.  I actually think higher price inflation is more likely in the longer run.  But I can’t discount the possibility either.

Buying stock index funds is not diversification.  It is just diversification between different stocks.  But if the whole stock market is in a gigantic bubble, most of the stocks are going to fall in tandem.  You should prepare accordingly.

I believe that some of the people in the FIRE movement are going to lose credibility if and when stocks implode.  I believe most of these people have many great things to offer in terms of advice.  I just don’t think going mostly all-in on stocks is one of them.

“Find out just what any people will quietly submit to and you have the exact measure of the injustice and wrong which will be imposed on them…”  ~Frederick Douglass

“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”  ~H. L. Mencken

Libertarians always seem to be warning about the coming tyranny.  Much like people in the prepper movement, libertarians are often called alarmists.  The opposition likes to make fun of them and say that they are still waiting for these dire predictions to come true.  Of course, libertarians can just as easily point out that the dire predictions of the climate change alarmists haven’t exactly materialized yet either.

In 2021, there are still libertarians who are warning of the globalists, the Great Reset, the New World Order, and many other similar things.  When it comes down to it, they are warning about coming tyranny.

Maybe it will get worse from here, but to warn of the coming tyranny seems a little late at this point.  The tyranny already arrived in 2020.

Let’s see.  We were told to stay in our homes, don’t travel, obey a curfew, wear face masks, distance from others, businesses deemed “non-essential” were shut down, and people were told not to see their friends and families, even at Thanksgiving and Christmas.  If that’s not tyranny, I hate to see what is. The tyranny is alive and well. Libertarians who previously warned of coming tyranny have been vindicated.  I don’t care if you think there is a terribly deadly virus out there.

Land of the Free

While political correctness, “wokeism”, class warfare, socialism, climate change hysteria, virus hysteria, and a host of other things have become really bad and are an ominous sign of things to come, all hope is not lost.

There is still a sense of rugged individualism in the United States of America that just doesn’t exist in most other places on the planet.  There is a spirit of entrepreneurialism, and it is generally seen as positive when someone has a rags-to-riches story, or a story of building up a company from scratch.

There are also a lot of Americans who do question the narrative sold by politicians and the media.  Say what you will about Trump and his loyal supporters, but Trump didn’t win the presidency in 2016 (and nearly 2020) with a bunch of sheep in the country.  Sure, the hardcore anti Trumpists will say his followers are a bunch of sheep for following him, but that means they are ignoring the corporate media and the conventional opinion.

The media told Americans in 2015 and 2016 that they were stupid if they dared to vote for Trump. They essentially laughed at anyone who considered voting for anyone other than Hillary Clinton.  Yet, over 62 million Americans in 2016 voted for Trump anyway (and far more in 2020).  Some may have voted for him just because the establishment and its media were telling them that they shouldn’t vote for him.

It is similar to what happened with Brexit in Great Britain.  But when you look at the extent of the lockdowns and other authoritarian measures in Britain, it is hard to say they value liberty anywhere near as much as Americans.  The British people seemed to free themselves from the European Union while being enslaved at home anyway.

There have been mass protests in several parts of Western Europe.  I have heard some people in the U.S. who generally oppose the lockdowns comment that you aren’t seeing that in America.  But that is because the lockdowns and other restrictions in the U.S. are far milder.  And the people in places like New York and California who don’t agree with the lockdowns (and even some hypocrites who do) are vacationing in places like Florida that is open.

If there were brutal lockdowns in the U.S. like there are in places like Germany and the U.K., then you better believe there would be mass protests in the United States. There would also be a lot of people ignoring the “laws” (which are mostly just dictates from mayors and governors), just as some are doing now anyway.

While the establishment and most leftists are trying to curtail free speech (“we have to stop hate speech” – they say), you can still get away with saying most things in America as long as you aren’t threatening violence.  I also look at other issues such as gun control and homeschooling, and the U.S. typically comes out near the top in terms of liberty.

Public Opinion Matters

Politicians will do what they can get away with.  But they are eventually limited by public opinion.  This is even true to a certain extent in the most authoritarian regimes.  There has to be a certain degree of consent by those being ruled.

In Canada, Trudeau is enacting authoritarian edicts, including forcing people into quarantine in government-designated facilities (one could call them internment camps) when returning to the country, even with a negative result on a virus test.

It is happening in Canada because the people are allowing it to happen.  They may not explicitly approve of these tyrannical policies, but they generally accept them.  There are some people who don’t accept them, but they are too much of a minority right now.  The majority of people accept them, so they happen.  What politician do you know will relinquish power, knowing they can get away with using the power?

When you think of politicians, don’t think they are all entirely evil.  They will generally abuse power when available, but their reputation matters to them.

Think about the people who make up the state (i.e., the government) and the people who work for the state.  Most of these people are not evil.  Think of the police, military, judges, people who work in alphabet agencies, and even politicians. They have families.  They have to go home and talk to their families.

“Welcome home, honey. Dinner will be ready soon. How was your day today?”

“Oh, it was fine. I had to march a few more people off to the concentration camps today to be executed because they were saying some things contrary to the regime.  Other than that, there wasn’t much happening at work.”

These conversations just don’t happen.  I mean, I don’t know what conversations took place with the Clintons, if they were ever eating a family dinner together.  But the reality is that most people are not pure evil.  And for the few who are, most people around them are not pure evil.  Again, I am not talking about the Clintons.

This is why, when the state is doing something evil, they have to hide it and make it sound good. They have to take your guns for public safety.  They have to lock down businesses to keep everyone safe from the virus.  They have to steal money (taxation) in order to build infrastructure and take care of the needy.  They have to start a war in order to spread democracy or stop terrorism or confiscate weapons of mass destruction.

This is why the state so heavily relies on propaganda.  If the state lies are exposed, the whole game falls apart.  Most people are good, so the statists have to rely on lies and propaganda to convince people to consent to their own enslavement.

This is why liberty is always a matter of education.  The more people you can convince that they are being lied to and that liberty is better (morally and pragmatically) than statism, the more liberty will flourish.

Most people don’t calculate their net worth.  For those who do, it is somewhat of a guessing game.

Your net worth, technically speaking in a financial sense, is your assets minus your liabilities. If you own a car worth $20,000 with a $12,000 loan on it, then you get to count $8,000 for that one asset.

If you want to get a picture of how you’re doing financially, and where you are in terms of being able to retire, then it is probably better not to calculate your net worth in terms of everything you own.

Should you count your living room couch as part of your net worth?  What about your new smartphone?  What about your clothes?

They are all technically part of your financial net worth, but they don’t really contribute to your financial well-being in terms of being able to retire, unless you are planning to sell them.  These things contribute to your standard of living and enjoyment of life, but you shouldn’t be counting them as assets for the purpose of retirement planning.

Your couch and your clothes pay no interest to you.  You probably aren’t going to sell them, and if you do, they aren’t going to be worth very much.  You probably aren’t going to sell your smartphone unless you trade it in for another new one down the line, which will just reduce the expense of getting a new one.

I’m not telling you whether or not to buy a new smartphone or nice clothes or a new couch. I’m just saying that these things shouldn’t be considered as assets when planning for retirement or financial independence.  In fact, if you are planning to get a new phone every year when the latest model comes out, then this should be counted as a liability, as it means a higher cost of living.

It gets a little trickier with a car.  Most people need a car for transportation.  Most people also own a car that provides much more than just transportation.  If you buy a new $25,000 car, then it should be realized that you could have bought a new car for under $20,000, assuming you don’t need something large for transporting cargo or something where the type of automobile you drive actually matters for your occupation.

So I am hesitant to count a car towards net worth.  At the same time, if you own a $20,000 car with a $12,000 car loan, what happens if you take $12,000 from your checking account to pay off the loan in full?  Your checking account has been reduced by $12,000, but if you aren’t counting your car as an asset in your net worth line, then your net worth just went down by $12,000. This obviously isn’t right.

I don’t have an easy answer to this.  I think the easiest way is to calculate your net worth without counting anything that you aren’t going to sell.  This would include your car.  But you have to count the liability for your car (or anything else) in the negative column.  So if you owe $12,000 on your car, subtract $12,000 from your net worth without counting the value of the car.  It doesn’t matter if your car is worth $15,000 or $50,000.  If you aren’t going to sell, it makes no difference anyway. It may make a difference in the enjoyment you feel when driving, but it doesn’t make a difference to your financial net worth.  If anything, the more expensive car is more of a liability in terms of insurance and maintenance.

When you think about all of the junk that people accumulate in their house (you are probably one of them), it doesn’t make sense to value these things, especially when you aren’t going to sell most of it.  And for most of the things that will be sold, it will be a few bucks at a garage sale.

If you have something that is really valuable (a classic baseball card, a gold coin, a diamond ring) and you may potentially sell it in the future, then it is reasonable to count it towards your net worth.  Otherwise, forget about all of the junk in your house, and forget about things that aren’t junk if you don’t intend to sell them.

Your House

This brings us to the question of whether to count your home equity towards your net worth.  If you own a $300,000 house with a $160,000 mortgage, shouldn’t $140,000 go towards your net worth?

Even here, I would tend to lean the same way as above and say that you should only count it if you intend to sell it.

As with the car example, if you pay off your mortgage early, shouldn’t the added equity offset the amount that your checking account went down?

If you take $160,000 out of your checking account to pay off your $160,000 mortgage, your net worth is still the same.  It may start to go up more by not having to pay the interest on your loan, but that is your future net worth.

There are people who bought a house a long time ago in an expensive part of, say, California, who now live in a house worth a million dollars.  If they didn’t have the equity in their house, they wouldn’t be able to afford the house they live in.  Should they be considered millionaires by virtue of the fact that they have a million dollars in home equity?

If someone is planning to sell their million-dollar house and move to another area or rent, then certainly that million dollars of net worth will come into play, assuming the house value stays up.

However, if someone lives in a million dollar house and never intends to move, I don’t think it should really be counted towards net worth, at least when determining the state of the person’s finances and whether retirement is possible.

If anything, as Robert Kiyosaki would say, the house is a liability.  Someone who lives in a million-dollar house is paying much higher prices for insurance, upkeep, and property taxes than someone living in a house worth $300,000.  The insurance, maintenance, and property taxes on a million-dollar house will often be more than many people pay for their monthly mortgage payment.

Again, as noted above, it is better to just count the debt part against your net worth, but not count the value of the asset if you are never planning to sell.  Or in the case of a house, even if you are going to sell, you should only count the difference of what you will later buy.

For example, if you are going to sell your million-dollar house and buy another million-dollar house, then this will actually cost you money because of closing costs and commissions.  If you are going to sell and then buy a house for $700,000, then you can reasonably include $300,000 towards your net worth, minus the transaction costs.

Calculating FI

If you are trying to calculate a number for financial independence (FI), you also have to be strategic in how you count your home equity.

Many in the FI community like to say that you need approximately 25 times your annual expenses.  So if you spend $40,000 per year, you would need a million dollars to reach FI.  If you spend $100,000 per year, you would need $2.5 million dollars to reach FI.

I think the 25 times expenses formula is too low.  I find that many times the estimated returns that are counted on in the future are too high.  But that is beyond the scope of this post.

If you have paid off your mortgage, which is probably a good idea if you are planning to retire early or retire at all, your home equity should not be counted towards your net worth, unless you are planning to sell your house and move to a cheaper one. If you have a $600,000 house paid for versus a $300,000 house paid for, the person with the cheaper house is better off financially if neither one is going to sell.  The more expensive house is a bigger liability for maintaining.

The benefit of paying off your mortgage is that you won’t have the mortgage payment (principal and interest) as an expense.  So you don’t have to count that as part of your annual expenses, which can be a significant piece.

If you are going to pay off your mortgage sometime in the future and want to calculate your FI number, you can just deduct the amount you owe on the mortgage from your financial net worth.  But then you don’t have to count the principal and interest from your mortgage payment as part of your expenses when calculating your FI number.

So if you owe just $40,000 left on your mortgage and are trying to calculate your FI number, take $40,000 off of your net worth.  But you also get to take the principal and interest portion of your mortgage off of your expenses.

This is the way I would handle it.  It is ok to calculate your net worth to include your home equity, but you should also calculate it the way suggested above for planning purposes.  If you have any thoughts of your own to share, please comment below.

Let’s say that SARS-COV-2 is exactly what the medical establishment tells us what it is, even though the virus was never properly isolated.

Let’s say that the PCR tests used to test people are accurate, even though they are often run at 35 cycles or higher, which even Dr. Fauci admitted will spit out false positives, and even though the creator of the test – Kary Mullis – said it should not be used for diagnostic purposes by itself.

Let’s say that this is a really deadly virus and the death count is accurate, even though the CDC changed its guidelines in March and April 2020 to essentially count anyone who dies with COVID-19 as a COVID-19 death, and hospitals received increased reimbursement for coding patients as COVID-19 positive.

Let’s say that society at large is willing to accept sacrifices to mostly save people who were on the verge of death anyway, even though those sacrifices mean higher unemployment, economic depression, increased anxiety, loneliness, and higher rates of suicide.

Let’s say that locking down society by shutting down “non-essential” businesses makes a significant difference, even though there seems to be no difference in cases and deaths in places that locked down heavily as compared to those that didn’t.

Let’s say that we could achieve keeping people at home and closing down businesses on a voluntary basis, even though it was only through state force that this could be widely achieved.

Even granting all of those things, what is to say that masking, social distancing, getting rid of large gatherings, and having people stay at home was the answer to this virus?

If the virus is deadly to those who are elderly and those who are in bad health, wouldn’t it have made more sense for the other 90% of the population to carry on with life as normal and achieve herd immunity?

I believe very little, if anything, of significance coming from the establishment media.  But even if everything that we have been told has been true, and even if we ignore the immorality of controlling others, the lockdowns still don’t make any sense.

People make judgments every single day, including how much risk to take.  If there were a really deadly and contagious virus with people dropping dead all around you, then human behavior would react rather quickly.  For most people, if they personally knew just a couple of people, who were relatively young and healthy, who dropped dead because of a virus, then they would act accordingly. It wouldn’t require a governor or mayor to tell them to stay home.

It is a bit of a joke when you see people in the store walking around with a mask on, as if that will protect them from the plague.  If it was really a high-risk situation, then I’m pretty sure most people wouldn’t be shopping for shoes.  Even with groceries, if you thought there was a one percent chance of contracting a virus with a one percent chance of dying if contracting it, that would probably be enough for a lot of people to order their groceries online.

Most people aren’t terrified of COVID-19.  If they are, their actions don’t really represent that.  But there is a small segment of the population that really is terrified and have mostly stayed home for the last year.  For their sake, wouldn’t it be better for those willing to “risk it” to live something of a normal (prior to March 2020) life?

If every healthy person under the age of 65 went about their life as before, then any virus would quickly spread and dissipate.  It’s not that the risk would be lowered to zero, but most elderly people and those in poor health would probably feel a lot more comfortable by now going about their lives.

I can’t think of a more tortured way to deal with a supposedly deadly and contagious virus. If anything, not only is it just prolonging the whole thing, it actually makes the more vulnerable people even more vulnerable.  It would have been better if the people willing to take on the risk had been allowed to live their lives.  They would have “achieved” herd immunity and provided some protection for others.

And now that the establishment is promoting their vaccines, they have to admit that herd immunity is a factor.  It was something taboo to mention a year ago, or even 6 months ago.  But if vaccines are going to “work”, there has to be herd immunity.  Otherwise, it just means that people can be reinfected, or it means that people who get vaccinated can easily spread the virus.

If the vaccines actually work, then we should reach herd immunity at some point.  Otherwise, they are mostly pointless at best.

If we are to believe what the establishment tells us about the virus (which is often contradictory in itself), then we could have easily achieved herd immunity a while ago. Life would have gone on as normal for most people, and life would be mostly back to normal for those who were fearful and stayed home until things fizzled out.

Not only were these lockdowns wrong, which destroyed millions of people’s lives; they also made no sense in terms of protecting vulnerable people.

Stocks are in a bubble.  Bonds are in a bubble. Real estate is in a bubble. Cryptocurrencies are in a bubble.

The latest thing in the near-everything bubble is NFTs.  An NFT is a non-fungible token.  You can search for some of the stories out there showing the ridiculousness of it all, including the absurd prices of some of these things.

As described on Wikipedia: “A non-fungible token (NFT) is a unit of data on a digital ledger called a blockchain, where each NFT can represent a unique digital item, and thus they are not interchangeable.  NFTs can represent digital files such as art, audio, video, and other forms of creative work.  While the digital files themselves are infinitely reproducible, the NFTs representing them are tracked on their underlying blockchains and provide buyers with proof ownership.”

So you can “own” a digital file that is easily accessible by anyone.  So what?

For years in following the arguments for cryptocurrencies, I have heard about how the blockchain technology will have many wonderful uses in the future.  I don’t disagree that the blockchain technology will be beneficial in the future, but NFTs is not one of those useful things right now, except for those making money off it.

This is especially a joke in the year 2021 as patent laws become harder and harder to enforce. What happens when someone in China uses a piece of digital art that is “owned” by an American?  Will the American shout out on the rooftop to “stop”?  Will the Chinese government enforce the ownership of NFTs?  I think the question answers itself.

This is just the latest gimmick.  Since anyone with some computer programming skills can create a new cryptocurrency out of thin air (and there are thousands of them), I guess we are on to the latest thing of creating ownership of digital artwork and other video and audio files.

All you have to do is create something and then sell it for a lot of money, and you too can be rich.

Maybe I can find a friend who will go in on this with me.  I’ll create an NFT (of something), and he can create an NFT of something.  I’ll sell my NFT to him for a million dollars, and he’ll sell me his NFT for a million dollars. Then the value of each of our NFTs will be a million dollars.  We can be millionaires just like these fellows who created their own crypto currencies.

This mania is what happens when the central bank creates trillions of dollars out of thin air while trying to suppress interest rates to near zero.  People lose their minds.

This is Tulip mania in the 21^stcentury. At least back then, you got a tulip bulb and hopefully a nice flower later on.  At least it was an actual physical asset.

With NFTs, it is nothing.  I could sell you ownership of a square mile on Pluto, but it doesn’t mean much if you can’t do much with it.  It doesn’t mean much if you can’t enforce your property right.

Of course, I have long thought cryptocurrencies to be similar, as they are just made up out of thin air.  I have always been sympathetic to the crypto crowd because they tend to be anti Federal Reserve (or anti central bank), but I have never thought cryptocurrencies to be an answer to replacing the dollar as money.

Believe me, I wish I had bought lots of Bitcoin back in the early days.  I would be a multi-millionaire from it today from a small speculative investment.  So I can’t discount the possibility that these NFTs are going to explode in popularity and price.

There is a lot of easy money floating around out there.  People don’t want it eaten up by more inflation, and many are looking to make a quick buck.  I believe the newest craze of NFTs will last as long as the everything bubble lasts.

We are in an era of major speculation right now.  When it finally stops, it is going to stop hard.  The last suckers holding the bag will get hurt the most. This goes for NFTs and cryptos. It may also go for stocks and bonds.

The Federal Open Market Committee (FOMC) released its latest monetary policy statement on March 17, 2021.  As expected, the Fed will keep its target rate near zero, while continuing to add at least $120 billion per month to its balance sheet.

The FOMC statement says, “Inflation continues to run below 2 percent.”  Apparently the Committee members do not buy gasoline for their cars, and they don’t shop at the same grocery store as I do.

The Fed continues to maintain that, “With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent.”

They never exactly say how they will calculate the average.  Does this mean averaging inflation over the last 20 years?  Does it mean the last 2 years?  It sort of makes a big difference.

In Jerome Powell’s press conference, he continued to preach the 2% inflation mark.  He also said, “Beyond these base effects, we could also see upward pressure on prices if spending rebounds quickly as the economy continues to reopen…”  He added, “However, these one-time increases in prices are likely to have only transient effects on inflation.  The median inflation projection of FOMC participants is 2.4 percent this year and declines to 2 percent next year before moving back up by the end of 2023.”

Ever since the Fed announced it would target 2% inflation as an average, I suspected that it is just an excuse to run price inflation above 2%, even according to the government’s own statistics.

Powell is saying that we should expect price inflation above 2% this year before falling back. But why would price inflation push higher and then drop back to 2% or below?  Does this mean he expects a recession?  Does it mean that the Fed will tighten as compared to what it’s doing now?

According to Fed officials, we should expect the target federal funds rate to remain near zero for at least a couple of more years.  Maybe the Fed will slow down its purchases of assets, but there are no signs of that yet.

Looking back at 2008 to 2014

From 2008 to 2014, there were three rounds of quantitative easing (QE).  There was QE1, QE2, and QE3.  The Fed would inflate its balance sheet like crazy, then stop, and then start again.  It basically got away with it.  Sure, we all pay the price with misallocated resources and prices higher than they otherwise would have been.  But from the Fed’s perspective, they got away with it because we didn’t have a recession for 11 years, and price inflation remained relatively tame.

And when there was a sharp economic drop in March 2020, it could all be blamed on the virus. Of course, it was really state and local governments to blame for shutting down businesses.

We can’t overlook though that we may have been in for rough times anyway.  In 2019, the yield curve inverted, which is a classic sign of a coming recession.  In September 2019, the Fed had to step in when the repo rate spiked up.

So the virus and all of the hysteria was a convenient excuse for the Fed to massively inflate starting in March 2020.  It was also a good excuse for Congress to run even higher deficits than they were already running.  And it is largely the Fed funding these deficits.

I don’t see how we get out of this pleasantly.  There has been a massive buildup of debt, which was already a major problem. The interest rates are low now, but what happens when they go higher?  What happens when price inflation goes higher?  Does the Fed really believe that it can keep creating trillions of dollars out of thin air while keeping rates low, price inflation low, and the economy humming along?

I don’t think the Fed will get away with what it did from 2008 to 2020.  I think the chickens will come home to roost.

We are in a nearly everything bubble.  I think precious metals is one of the few things that isn’t in a giant bubble.

Real estate is likely in a bubble, but there is some justification for this, and it may not be as bad as 2008.  Stocks are in a massive bubble.  Bonds are in a massive bubble.  Crypto currencies are a bubble.  And now we have NFTs, which may be even a bigger joke than cyrpto currencies.  I’m just waiting for tulip bulbs to be in high demand.

All of these asset bubbles (although it’s hard to call cryptos and NFTs “assets”) could blow at any time.  The Fed will try to prop them up, since it was the Fed that inflated them all.

But what happens if price inflation, by the government’s own measures, hits 5 percent?  What if it hits 10 percent?

At some point, the Fed is going to have to choose between the dollar and funding the bubbles and massive deficits.  If history is any guide, the Fed will choose the dollar, just as it did in the late 1970s and early 1980s.

While I put the chances of something resembling hyperinflation higher than I would have a year ago, I would still give it less than a 5% chance.  The more likely scenario is that the Fed pulls back and we experience a depression for the ages.

We really don’t know what is going to happen.  This is why I recommend something resembling the permanent portfolio.  However, I do think chances are good that the Fed will scale back eventually.

I don’t know what that breaking point will be.  I don’t think the Fed will purposely go to 10% annual price inflation.  It could still happen if it loses control quickly.  But if we go beyond 5% price inflation, I would expect to see the Fed pull back in some way.

The Fed has been able to pull off this trick for a while, so it seems that it can go on forever. But the debt and bubbles are unsustainable.  Something has to give at some point.

All real estate is local, or so the saying goes.  But when you have nationwide lockdowns and a central bank that is creating money out of thin air like crazy, then there tends to be some uniformity with real estate prices.

Stocks aren’t the only thing booming these days.  The real estate market is hot in many areas across the country.  This is particularly true if you don’t count big cities in blue states.

For example, real estate is not booming in New York City.  Prices are likely to decline for a while in Manhattan, which was previously attractive for the cultural scene and for high-paying jobs.

Now the cultural scene has largely been shut down.  There are no Broadway plays to see, and it is difficult to find entertainment at a comedy club or even eating at a restaurant.  Meanwhile, millions of people now work at home who didn’t just over a year ago.  They are realizing that they don’t really need to go into an office. Why not make the same amount of money in a lower cost-of-living area with lower taxes?

I live in Florida, where real estate is booming.  This is good if you are a seller.  It is not so good if you are a buyer.  Anecdotally, I know of people moving here from the Northeast.

Florida has been open for business completely since September 2020.  There are still many people running around with masks on, but at least business is seemingly thriving.  I was in Orlando (in a very touristy area) just over a week ago and there were long waits at some restaurants.  I don’t know what it was like in this area before then.

It is no surprise that people want to move to Florida.  The state is open, and the governor said he has no plans of enacting any more restrictions related to the virus.  The weather is warm (or hot).  There is no income tax.  I just hope that the people moving here don’t bring bad politics with them.

While Florida may be booming more than other places, there is still a general rise in residential real estate prices happening across the country.  I believe this is largely due to Federal Reserve policy.  The Fed’s balance sheet has exploded since March 2020, and short-term interest rates have been pushed to near zero. While the 10-year yield has risen back up a bit in the last couple of months, mortgage rates are still near all-time lows.  This makes it cheaper to borrow money, which means that people can afford (or think they can afford) a higher price for a house.

It makes some sense why people are rushing into housing.  If the Fed continues to depreciate the currency, then it is better to have hard assets.  And what is more of a hard asset than real estate?  It’s better than having money sitting in a savings account earning .01% while losing 2% or more per year in purchasing power.

I was initially uncertain what would happen to housing prices when the virus hysteria began. The government has made it convenient for people renting to not pay their rent.  It has also been convenient for homeowners to not pay their mortgage.

(Unfortunately, you still have to pay your property taxes.  That includes business owners who were forced to shut down.)

I have several friends who own rental real estate.  As far as I know, every one of them has been receiving rent in full and on time. Their properties are in relatively nice, middle-class neighborhoods, which obviously helps.  It also helps that they are all in Florida, where the economy has not suffered to the same degree.

While I believe that the housing market is probably overheated and has largely been pushed higher by Fed policy, I don’t think it is a bubble in the same way that it was back in the mid 2000s.

In my own neighborhood, the housing prices are probably now just above where they peaked around 2006 or 2007.  But over the last 14 years, there has been massive Fed inflation.  So if we are in a bubble, it has to be less of a bubble than what happened previously.

I also don’t know that the Fed is going to take its foot off the monetary gas any time soon. The Fed says it wants price inflation to average 2%, which means it will go beyond 2% before thinking of slowing it down.  Somehow, I don’t think its price inflation metric is taking housing prices into much account, even though it is typically the biggest expense for most people outside of taxation.

If the Fed keeps pouring in $120 billion per month for a long time, then I see no reason why housing prices in most areas should go down in any significant way any time soon.

With that said, I don’t think it’s the best time to buy, whether for a primary residence or for rental real estate.  The best time to buy was in 2011.  And it was certainly better to buy in 2019 in most areas than it is today.

We also face the prospect of a severe recession or depression.  If there is a major spike in unemployment and reduced wages, then it may not matter if the Fed keeps digitally printing money.  People have to have money to pay for their mortgage.

Still, because of the extent of the Fed’s interventions and its likelihood to continue, I think any fall in housing prices will not be anywhere near as dramatic as what was seen after the bubble in the mid 2000s.

If you are considering buying or selling a house, then I think you should just use common sense right now and not try to time the market.  If you are buying, then you should only buy what you can afford and with the intent of not selling for a long time.

If you are thinking about selling, it is probably a good time to do so, assuming you don’t live in Manhattan.  Or maybe now is a good time to sell if you own in Manhattan if you expect prices to decline farther in the future.

It seems like many things are in a bubble right now, which includes real estate.  But if you are living in a house that you own and plan to stay there for a while, then it probably makes sense to stay and do nothing.  You can refinance your mortgage if you haven’t already taken advantage of it.

I believe we will ultimately see a major crash in stocks and crypto currencies.  I am not as confident that we will see a crash in housing.  Everyone needs a place to live, whether it is to own or rent.

Even if we hit a severe recession, the Fed will react with even more funny money.  If you have a low fixed-rate mortgage for 30 years, then your last payment may be the price of a nice lunch when the time comes.