Market Punditry As Astrology

Markets may remain irrational longer than one can remain solvent

By Monty Pelerin

Is recent market behavior the beginning of a market turndown? No one knows, although it is easy to find people providing “answers.” The value of these predictions approach those of astrologers and fortune-tellers. What follows are some thoughts regarding markets.

History and Markets

History is a summary of what historians consider relevant. Selectivity of a limited number of events is required. Behind these events are millions of other events and processes that must be ignored. Many of these are causal elements and not even known to the historian. What is reported is the outcome(s) of these complex interactions. Historians then focus on a few causes that rationalize the outcome(s). Often these are correlative; never do they fully explain the outcome they purport to. That is the nature of all history.

Discussing the performance of the stock market is an exercise in history. It is subject to similar simplification. At the end of each market day, analysts “explain” why the stock market went up or down. These explanations are more rationalizations than explanations. Stock market outcomes can never be explained in terms of one or two variables, regardless of how relevant they might appear to be or how enlightened the analyst sounds. Soundbites preclude more than a couple of variables. Yet complexity does not care about soundbites.

To retain the aura of “expert,” these self-professed gurus must provide short, pithy and incorrect answers. A truthful answer would go something like the following:

I have no idea why stocks went up or down today. Nor does anyone else. There are literally thousands (millions?) of variable affecting peoples’ decisions to buy or sell stocks. No one knows them all and no one knows how to measure or weight them on a particular day. The market went up (down) because more buyers (sellers) participated today.

On some days, one or two major news items may ostensibly move markets, but that doesn’t change the fact that numerous other variables also had impact.

Enduring Empire

The history of the idea of empire in the west is largely the history of successive imitations of Rome

by Thomas R. Martin

After 24 centuries, the remnants of Rome still dominate the landscape of the Western mind. Like the ruined temples, arenas, theaters, and aqueducts spread across the lands of the Mediterranean, the literature, political institutions, philosophers, heroes, and words of the Romans permeate our culture both high and low, from the columns and architraves of the Capitol in Washington to the lurid fantasies of the cable-television series Spartacus. As the Roman poet Horace bragged of his poetry, a great part of Rome has escaped death.

The improbable story of Rome's rise to preeminence is fascinating, as these three new histories ably demonstrate. Rome began as poor, small clusters of thatch-roofed huts surrounded by scores of ethnically related but differing tribal settlements jostling each other on the plains of central Italy. As Brian Campbell, a professor of Roman history at Queen's University in Belfast, notes, around 40 separate Italic languages and dialects such as Oscan, Volscian, Venetic, and Umbrian were spoken by Rome's neighbors until Latin became the dominant dialect of this region on the heels of Rome's military success. In addition to these Italian rivals, Celtic Gauls dominated the Po River valley to the north, and closer to Rome in Tuscany the mysterious Etruscans developed a sophisticated civilization that according to myth dominated early Rome. Greek colonies commanded Southern Italy as far north as modern Naples, and Phoenician colonists in North Africa, western Sicily, Sardinia, and Corsica sparred with the Greek cities for control of Mediterranean trade. As Greg Woolf, who teaches ancient history at the University of St. Andrews, writes, "Rome emerged from Italy into a hostile world." Given these formidable competitors, we can share in the wonder of the Greek historian Polybius when he wrote that only the "worthless or lazy" would not want to know "how and under what government the Romans have brought under their sole rule almost the whole of the inhabited world."

Why UK politicians now love single mums

Lone parents, once the easy target of the New Right, are now being championed by the family-fearing state

by Neil Davenport 

London Tube trains are carrying an advert for a sperm clinic based in the capital. One of its target audiences is ‘women contemplating single motherhood’. In other words, the clinic is offering women the chance to have a baby without even having to have sex with a man, let alone forge a long-term relationship. So far at least, there have been no shrill denouncements in the Mail or the Express, no junior Tory minister condemning such ‘immoral behaviour’. Clearly, the days when moral opprobrium would be heaped on unmarried women who raise children alone are long gone. Today, in fact, it is more likely that a Conservative minister criticising single mums would be booted out to the back benches.

Indeed, a Centre for Social Justice report published last week on the rise of single-parent families in the UK struggled to make the headlines. Aside from a technical complaint that family break-ups cost the taxpayer ‘£46 billion a year’, no public figure felt sufficiently confident to make a judgement about single-parent households. Many commentators, preferring a culturally relativistic stance, argued that single-parent households are as good as the nuclear family.

This eager toleration of single mothers might seem like a welcome and progressive development. Yet there is something odd about the fact that the official acceptance, even encouragement, of single mothers goes hand in hand with suspicion of intimacy and autonomy in the nuclear family. It’s because the journey of single mothers from being social pariahs to being socially accepted is often guided by the same impulse as that which drives state attitudes to the family: namely, the impulse to regulate personal relationships.

External and Internal wars are the health of the state

Slipping the constitutional leash

By George F. Will

In May 1918, with America embroiled in the First World War, Iowa Gov. William Lloyd Harding dealt a blow against Germany. His Babel Proclamation — that was its title; you cannot make this stuff up — decreed: “Conversation in public places, on trains and over the telephone should be in the English language.” The proscription included church services, funerals and pretty much everything else.

Iowa’s immigrant communities that spoke Danish, Dutch, Norwegian and French objected to this censorship of languages of America’s wartime allies. Harding, however, said speaking any foreign language was an “opportunity [for] the enemy to scatter propaganda.” Conversations on street corners and over telephone party lines — Iowa telephone operators did the metadata-gathering that today’s National Security Agency does — resulted in arrests. Harding was ridiculed but Germany lost the war, so there.

The war validated Randolph Bourne’s axiom that “war is the health of the state,” but it killed Bourne, who died in December 1918 from the influenza epidemic it unleashed. Today, as another war is enlarging government’s intrusiveness and energizing debate about intrusiveness, it is timely to remember that war is not the only, or even primary, cause of this.

Or, more precisely, actual war is not the only cause. Ersatz “wars” — domestic wars on various real or imagined vices — also wound the defense of limited government. So argue David B. Kopel and Trevor Burrusin their essay “Sex, Drugs, Alcohol, Gambling and Guns: The Synergistic Constitutional Effects.”

Kopel and Burrus, both associated with Washington’s libertarian Cato Institute, cite the 1914 Harrison Narcotics Act, which taxed dealings involving opium or coca leaves, as an early example of morals legislation passed using Congress’s enumerated taxing power as a pretext. In 1919, the Supreme Court held that the law “may not be declared unconstitutional because its effect may be to accomplish another purpose as well as the raising of revenue.”

Its “effect”? The effect of suppressing the drug business obviously was its purpose. Nevertheless, the court held that even if “motives” other than raising revenue really explained Congress’s exercise of its enumerated power, the law still could not be invalidated “because of the supposed motives which induced it.”

Obama's Monica moment

A questionable Gambit

By M K Bhadrakumar 

The United States may have administered one of the biggest-ever snubs to the Kremlin in the post-Cold War era with the White House announcement on Thursday that it will provide military support to the Syrian rebels. The announcement in Washington said:

Following a deliberative review, our [US] intelligence community assesses that the [Bashar al-] Assad regime has used chemical weapons ... Following on the credible evidence that the regime has used chemical weapons against the Syrian people, the President has augmented the provision of non-lethal assistance to the civilian opposition, and also authorized the expansion of our assistance to the Supreme Military Council (SMC) ... 

The United States and the international community have a number of other legal, financial, diplomatic, and military responses available. We are prepared for all contingencies, and we will make decisions on our own timeline. Any future action we take will be consistent with our national interest, and must advance our objectives.

Russia House in disrepair
The US President Barack Obama is scheduled to meet Russian President Vladimir Putin on the sidelines of the Group of Eight summit scheduled to begin in Northern Ireland this coming Monday. This was to have been the first meeting for the two presidents after their respective re-election to the high office. 

Fighting Terrorism by Arming Terrorists

The Syrian intervention John McCain and the Clintons want would be a war for Islamism, not democracy

By W. JAMES ANTLE

The Obama administration appears to be moving toward arming rebels in Syria, though the White House has only publicly confirmed an increase in the “scope and scale” of its military support.

By one estimate, seven of nine key rebel combatant groups are Islamist. “As the civil war has dragged on, the rebels have become more Islamist and extreme,” the Economist reports. Thus the administration’s decision to arm only the non-Islamist rebels may soon resemble O.J. Simpson’s search for the “real killers.”

Arms shipments approved by the Obama administration have already ended up in the hands of jihadists in Libya. “The weapons and money from Qatar strengthened militant groups in Libya,” reported the New York Times, “allowing them to become a destabilizing force since the fall of the Qaddafi government.”

Operation Fast and Furious meets American foreign policy.

Youth unemployment is less important than those who are in their prime earning years

Europe’s Youth Unemployment Non-Problem

By Daniel Gros

European policymakers have decided that they must be seen to be “doing something” about youth unemployment. A special summit of Europe’s heads of state has been called, and a “Youth Employment Initiative,” proposed at the EU Council of Ministers’ meeting in February, aims to “reinforce and accelerate” measures that were recommended in a “Youth Employment Package” in December 2012.

This activism comes mainly in response to the latest alarming figures on youth unemployment in southern Europe, with sky-high rates of joblessness widely regarded as politically unacceptable. But there are several reasons to doubt that youth unemployment is a discrete problem meriting special treatment. Indeed, official youth unemployment statistics are misleading on two counts.

First, the data refer to those from 15 to 24 years old. But this age group consists of two sub-groups with very different characteristics. The “teenagers” (15-19 years old) should mostly still be in school; if not, they are likely to be very low skilled – and thus to have difficulty finding a full-time job even in good times. Fortunately, this group is rather small (and has been declining in size over time).

Unemployment among those aged 20-24 should be more troubling. Members of this cohort who are seeking full-time employment have typically completed upper secondary education, but have decided not to pursue university education (or have completed their university studies early).

Second, the data on youth unemployment are based on active labor-market participants. But labor-market participation averages just 10% among teenagers in Europe. (Teenage activity rates come close to 50% only in countries like the Netherlands and the United Kingdom, where having a part-time job while in school is very common.)

Labor-market experts thus consider the unemployment rate a potentially misleading indicator, because a youth unemployment rate of 50% does not mean that half of the young population is unemployed. That is why one should look at the unemployment ratio – the percentage of the unemployed in the reference population – rather than at the unemployment rate.

Missing Mahmoud

Don’t snicker. Once President Ahmadinejad is gone, there’ll be no one left to stand up to Iran's mullahs

BY REZA ASLAN

What's that saying? You don't know what you've got 'til it's gone? Well, after eight long years of Mahmoud Ahmadinejad as president of Iran, I'm willing to bet that even those of us who loathe the man are going to end up missing him -- not just because of the comedy he provided with his bellicose rhetoric and his inane populism, but because he may have been the last, best hope of stripping the clerical regime of its "God-given" right to rule Iran.

Back in 2011, I argued that those who oppose the clerical regime in Iran and who yearn for a more secular nation that looks for inspiration in the glories of its Persian past instead of its Islamist present may have an unexpected champion in their corner: Mahmoud Ahmadinejad.

I was not suggesting that Ahmadinejad is some sort of democracy icon or that he is even a good guy, let alone a competent president -- though he is far more politically sophisticated than his critics generally assume. It is a Western fallacy that "more secular" necessarily means "more free." But the fact remains that no president in the history of the Islamic Republic has so openly challenged the ruling religious hierarchy, and so brazenly tried to channel the government's decision-making powers away from the unelected clerical bodies that hold sway in Iran.

Dumb and Dumber Tax Hikes in Italy

Grand Coalition Splintering

By Mike "Mish" Shedlock

One of the dumbest things a country can do in a recession is raise taxes. Yet, after pronouncing the end of austerity, Italy's "grand coalition" government, led by Enrico Letta, is going to hike the VAT.

Why? It seems they need to hike the VAT to pay for a decrease in property taxes.

Recall that Silvio Berlusconi was only willing to take part in Letta's grand coalition on condition property tax hikes were rolled back. Letta agreed to do that, but now Letta says Italy needs revenue hikes to make up for it.

Grand Coalition Splintering 

Curiously, the International Business Times reports Enrico Letta's Grand Coalition Could End Italy's 'Lingering Civil War'.

What nonsense. Letta's "grand coalition" is burnt toast already.

Eurointelligence gets it right. 

Il Corriere della Sera and other Italian papers are leading with the news that finance minister Fabrizio Saccomanni and another cabinet ministers said yesterday that Italy cannot simultaneously afford to cut the IMU housing tax and not implement an envisaged rise in VAT, and would thus opt to raise VAT.

In its coverage, La Repubblica writes that Saccomanni is now becoming a controversial within the coalition, as Silvio Berlusconi appears to appear chosen him as a target for his verbal attacks. The VAT increase is threatening to drive a gulf between the two largest parties, the PD and Berlusconi’s PdL.

Lessons of a Greek Tragedy

Past mistakes, committed not just by Greece, but also by its partners, make a difficult short-term future unavoidable

By Barry Eichengreen

A visit to Greece leaves many vivid impressions. There are, of course, the country’s rich history, abundance of archeological sites, azure skies, and crystalline seas. But there is also the intense pressure under which Greek society is now functioning – and the extraordinary courage with which ordinary citizens are coping with economic disaster.

Inevitably, a visit also leaves questions. In particular, what should policymakers have done differently in confronting the country’s financial crisis?

The critical policy mistakes were those committed at the outset of the crisis. It was already clear in the first half of 2010, when Greece lost access to financial markets, that the public debt was unsustainable. The country’s sovereign debt should have been restructured without delay.

Had Greece quickly written down its debt burden by two-thirds, it would have been able to shed its crushing debt overhang. It could have used a portion of the interest savings to recapitalize the banks. It could have cut taxes, rather than raising them. It could have jump-started investment and gotten its economy moving again, if not in a matter of months, then, with luck, in no more than a year.

In its official post-mortem on the crisis, the International Monetary Fund now agrees that debt restructuring should have been undertaken earlier. But this was not its view at the time. Under the leadership of Dominique Strauss-Kahn, the Fund was in thrall to the French and German governments, which adamantly opposed debt relief.

The Unknown Unknowns and Survivor Bias

Survivorship bias helps us understand why success stories are not what actually help us succeed

by charles smith

Former Secretary of Defense Donald Rumsfeld is famous for uttering a koan-like description of the epistomological ambiguity of human experience:

There are known knowns; there are things we know that we know.

There are known unknowns; that is to say, there are things that we now know we don't know.

But there are also unknown unknowns – there are things we do not know we don’t know.

(Interestingly, it appears Rumsfeld did not pen the koan himself; correspondent J.S.S. noted that the original source may be Landmark Education of Seattle, Washington.)

I recently read two fascinating accounts of why we have such a difficult time knowing what we don't know: it's called survivor bias, and what that means is we only get information from the survivors, not those who perished and vanished from the records.

A mid-list author recently explained how listening to the handful of authors who make it big financially is completely misleading: Survivorship bias: why 90% of the advice about writing is BS right now.

Here's how this works: big-bucks Author Z says, here are the 10 steps you need to take to become as successful as me. The list always mentions perseverance, being nice to your readers, writing 1,000 words a day and so on.

Adiós Alemania

Many Immigrants Leave Germany within a Year

By Sarah Sommer

Is Germany a dreamland for immigrants? Not entirely. According to a new OECD study, more than half the Greeks and Spaniards who come to Germany leave within a year.

"Bienvenidos! Welcome to Baden-Württemberg!" Several initiatives are currently underway in the southwestern German state, home of the Black Forest, to attract young workers from Spain.

Plagued with a lack of skilled workers, rural southern Germany has focused on attracting Spanish workers looking for jobs as apprentices in the restaurant business, as skilled workers at hospitals or daycare facilities, or as engineers for the kind of small to mid-sized industries that form the backbone of the German economy.

The idea behind the campaign is simple: Southern Europe is faced with dramatically high youth unemployment, and small and mid-sized businesses in southern Germany are in desperate need of personnel. Why not let young and experienced skilled workers from Southern Europe come to Germany, creating a win-win situation?

Honor From Our Fathers

Happy Father’s Day! 

"My father gave me the greatest gift anyone could give another person: he believed in me."         - Jim Valvano

Honor is essential to the maintenance of a free society. We learn about honor from our fathers.

When the duties of fatherhood are widely dismissed or rendered poorly, our understanding of honor is diluted… and freedom soon begins to wither.

This is not to belittle the importance of mothers. Many single mothers do a spectacular job of providing their children with an understanding of personal honor. We can respect and celebrate the achievements of extraordinary individuals, without blinding ourselves to the effect of broad trends upon vast populations. Both fathers and mothers are uniquely important. Our society is suffering from a pronounced deficit of fatherhood.

There are many ways to define honor. I suggest viewing it as an expression of faith, in both yourself and others. An honorable man or woman displays honesty and integrity because they believe others deserve such treatment. It is a sign of faith in other people that we deal honorably with them, and presume they will do the same, unless they prove otherwise. Honor is also a gesture of respect we offer to ourselves, because we have faith that we can succeed without deceit and savagery. If you truly respect yourself, you believe you can win without cheating.

The Carefree Life of a Teen in Wartime Berlin

Hairdos and Movies

By Jane Paulick

The diary of Brigitte Eicke, a Berlin teenager in World War II, is an account of cinema visits, first kisses, hairdos and dressmaking, along with a brief, untroubled reference to disappearing Jews. Recently published, it highlights the public indifference that paved the road to Auschwitz.

1 February 1944

"The school had been bombed when we arrived this morning. Waltraud, Melitta and I went back to Gisela's and danced to gramophone records."

Young girls are made of stern stuff. In December 1942, while Allied bombs rained on Berlin and Nazi troops fought for control of Stalingrad, 15-year-old Brigitte Eicke began keeping a diary. For the next three years, the young office apprentice wrote in it every single day.

Now published in German as "Backfisch im Bombenkrieg" -- backfisch being an old-fashioned term for a girl on the cusp of womanhood -- it adds a new perspective to Germany's World War II experience and shows not only how mundane war can become but also how the majority of Germans were able to turn a blind eye to Nazi brutality.

Neocons and Progressives

One Big Family of Aggressors and Central Planners, with Delusions of Grandeur 

by Scott Lazarowitz.

Regarding the traditional left-right scheme and modern uses of the terms “conservative” and “liberal,” the neoconservatives are hardly conservative and the liberals and progressives are hardly liberal or progressive. Rather than viewing “left” as liberal or progressive, and “right” as conservative or neoconservative, I view left as being collectivist and right as individualist.

Because both sides, progressives and neoconservatives (a.k.a. “neocons”) are of collectivism, I view both sides as on the left. Advocates of private property and voluntary exchange are on the right, in my view.

Collectivism includes the sacrificing of the individual to serve the collective, and the conscription of the individual’s labor to serve the interests of the collective via coercive taxation under threats of violence, i.e. involuntary servitude.

Individualism, on the other hand, includes the protection of the rights of the individual to self-ownership, the right to be free from the aggression and intrusion of others, the sanctity of justly acquired private property, and voluntary exchange, voluntary association and voluntary contracts.

Good luck with that ‘exit strategy’!

Roubini attacks the gold bugs

by DETLEV SCHLICHTER

Earlier this month, in an article for “Project Syndicate” famous American economist Nouriel Roubini joined the chorus of those who declare that the multi-year run up in the gold price was just an almighty bubble, that that bubble has now popped and that it will continue to deflate. Gold is now in a bear market, a multi-year bear market, and Roubini gives six reasons (he himself helpfully counts them down for us) for why gold is a bad investment. Roubini does not quite go so far as to tell his readers that there is no role whatsoever for the yellow metal. Investors should have a “very modest” share of gold in their portfolios, as a hedge against extreme risks, which, the good professor assures us, are almost so negligibly small that they are “irrational fears”, really, but beyond that there is little reason to bother with gold.

Interestingly, “very modest” is indeed a good description of gold’s share in the global asset mix. According to some studies gold accounts for only around 1 percent of global asset holdings. In terms of asset breakdown we already are where Roubini thinks we should be. So why bother? Those of us – such as yours truly – who hold a more pessimistic outlook as to the efficiency of current policies and the sustainability of the current monetary infrastructure, and who accordingly hold a bigger share of their wealth in gold, are evidently “paranoid”, and as they now reap the deserved reward for their dreadful negativity courtesy of a declining gold price, why not ignore them? It is, after all, a tiny minority. But it is evident from Roubini’s essay that he not only considers the gold bugs to be wrong and foolish, they also annoy him profoundly. They anger him. Why? – Because he thinks they also have a “political agenda”. Gold bugs are destructive. They are misguided and even dangerous people.

Asia's Rise of the Rest

Asia's New Power Brokers

By Robert Kaplan

Significant movements in world affairs often go unnoticed by the media. For what fits inside the strictures of hard news are usually dramatic statements by politicians, dramatic actions by military units or dramatic economic shifts. But what also really changes history are the gradual developments that accrue over time. That's one of the reasons you are liable to learn more by reading serious books or scholarly reports than by reading newspapers. Asia is a case in point.

The news about Asia is relentlessly repetitive and often insignificant, however tragic in human terms sometimes. Indeed, the recent building collapse in Bangladesh was heartrending, but geopolitically it was of marginal importance. The jousting between China and Japan over disputed islands in the East China Sea is important -- but after reading about it for months on end, unrevealing. The same with the islands in the South China Sea. We already know that Japan has a more activist prime minister and for years his country has been shedding its quasi-pacifism, if only the media would finally tell us more.

Syria's Collapse

Can Washington Stop It ?

by Andrew J. Tabler

Syria is melting down. The ruling regime’s attempt to shoot its way out of the largest uprising it has ever faced has killed over 80,000 people and displaced roughly half of Syria’s population of 22 million. If the current monthly death tolls of around 6,000 keep up, Syria will by August hit a grim milestone: 100,000 killed, a number that it took almost twice as long to reach in Bosnia in the early 1990s. This a full two years after U.S. President Barack Obama pronounced that President Bashar al-Assad needed to “step aside.”

Comparisons to the Balkans do not suffice to describe the crisis in Syria, however. The real danger is that the country could soon end up looking more like Somalia, where a bloody two-decade-long civil war has torn apart the state and created a sanctuary for criminals and terrorists. Syria has already effectively fractured into three barely contiguous areas. In each, U.S.-designated terrorist organizations are now ascendant. The regime still holds sway in western Syria, the part of the country dominated by the Alawite minority, to which the Assad family belongs; and fighters from Hezbollah, a Shiite Islamist group backed by Iran, regularly cross the increasingly meaningless Lebanese border to join Assad’s forces there. Meanwhile, a heavily Sunni Arab north-central region has come under the control of a diverse assortment of armed opposition groups.

Is Obama Starting A War With Syria Just A Distraction From All The Scandals?

For now, Obama is saving his own skin, and that is the most important thing. To him.

by Michael Snyder

Well, isn't that convenient?  At the moment when the Obama administration is feeling more heat then ever before, it starts another war.  Suddenly everyone in the mainstream media is talking all about Syria and not about the IRS scandal, Benghazi, NSA snooping or any of the other political scandals that have popped up in recent weeks.

As if on cue, Obama made headlines all over the globe on Thursday by claiming that the Syrian government has used chemical weapons against the rebels "multiple times", and that the U.S. was now ready to do more to assist the rebels.  That assistance is reportedly going to include "military support" for the rebels and a no-fly zone over at least part of Syria is being discussed.  Without a doubt, these are acts of war, and this conflict is not going to end until Assad has been ousted.  But Assad will not go quietly. 

And all it would take is for Assad to fire a couple of missiles at Tel Aviv for a huge regional war to erupt in the Middle East.  And what happens if Russia or China decides to get involved in the conflict in Syria?  Obama is playing with fire, but he has shown again and again that he is willing to do virtually anything if it will benefit him politically.

Freedom: The Unfolding Revolution

By  Jonah Goldberg

‘Why are there no libertarian countries?”

In a much-discussed essay for Salon, Michael Lind asks: “If libertarians are correct in claiming that they understand how best to organize a modern society, how is it that not a single country in the world in the early twenty-first century is organized along libertarian lines?”

Such is the philosophical poverty of liberalism today that this stands as a profound question.

Definitions vary, but broadly speaking, libertarianism is the idea that people should be as free as possible from state coercion so long as they don’t harm anyone. The job of the state is limited to fighting crime, providing for the common defense, and protecting the rights and contracts of citizens. The individual is sovereign; he is the captain of himself.

It’s true, no ideal libertarian state has ever existed outside a table for one. And no such state will ever exist. But here’s an important caveat: No ideal state of any other kind will be created either. America’s great, but it ain’t perfect. Sweden’s social democracy is all right, but if it were perfect, I suspect fewer cars would be on fire over there.