King Bear versus Bullzilla

I subscribe to two newsletters with opposite predictions about the markets:  David Stockman's Stockman Letter and Steve Sjuggerud's True Wealth, published by Stansberry Research. Stockman is predicting declines in a wide range of markets, including tech and energy, while Sjuggerud is predicting bull markets across the board, but especially in tech and China. There will be a "melt up" (Sjuggerud's term) until a correction, which will occur perhaps 18 months from now.

The great investor Howard Marks, in his book The Most Important Thing, says that being right at the wrong time is the same as being wrong, and from a purely financial perspective he is right.   While I'm quoting aphorisms, one that is worth considering is "the trend is your friend." 

Sjuggerud doesn't appear to dispute Stockman's underlying theory:  The Fed and the current monetary regime are a long-term drain on productivity and economic well being, and the bubble economy it has created is little different from other failed bubble economies of the past, such as John Law's Mississippi Bubble in France in the early 18th century.  The ending of a long-term bubble of this kind will not be positive. It may mean long-term stagnation and declining job opportunities, as occurred in Japan, and it may mean a massive crash.

If the trend is our friend, I'm thinking that Sjuggerud's hypothesis is right in the short-run while Stockman's is right in the long-run.  Tech and similar investments will do well until they don't.  The trick is to gain at least something from the short-term bubbles and to get out while the going is good.

The last tech bubble saw the Nasdaq rise to unprecedented heights. According to Wikipedia: "It reached a price-earnings ratio of 200, dwarfing the peak price-earnings ratio of 80 for the Japanese Nikkei 225 during the Japanese asset price bubble of 1991." It's impossible to know just when a bubble will burst, but it seems to me that the current Nasdaq price-earnings ratio  of 18.6 allows leeway for a bubble to proceed.  It is true that the prices of today's glamour stocks are at nosebleed levels, but the general market has a ways to go.  

The Woodstock Mystery in Atlas Shrugged

Frank O'Connor Painting

On page 510 of Atlas Shrugged  (of the paperback Signet edition), Dagney Taggart decides to withdraw to a family lodge in Woodstock, which Rand describes as being in the Berkshires.  I checked Google Maps and could not find a Woodstock, Massachusetts, although there is a Woodstock, Connecticut and a Woodstock, Vermont.  

Rand's husband, Frank O'Connor, was an artist and a member of the Art Students League from 1955 to 1966.  The Art Students League opened the Woodstock, New York School of Art in 1906 and discontinued its Woodstock summer program in 1979. According to the Woodstock School of Art's website, a local not-for-profit corporation, the Woodstock School of Art, had taken over the building complex in 1968.  I recall when the Art Students League was housed in the Woodstock School of Art building back around 1970.   Ironically, the building was built by one of the New Deal's make-work programs, the National Youth Administration.  It is currently listed in the national and New York registers of historic places.

My guess is that Rand knew about Woodstock, New York from her husband's involvement with the Art Students League.  I'm unclear as to why she decided to say that Woodstock was in the Berkshires. Often, New Yorkers bunch together provincial locales. Alternatively, she may not have wanted to give credit to one of the birthplaces of American communism.* 


*From Wikipedia:  

The Communist International, to which the UCPA and the CPA both pledged their allegiance, sought to end duplication, competition and hostility between the two communist parties and insisted on a merger into a single organization. That was eventually effected in May 1921 at a secret gathering held at the Overlook Mountain House hotel, near Woodstock, New York. The resulting unified group was also known as the Communist Party of America, which morphed into the Workers Party of America (December 1921) and changed its name in 1925 to Workers (Communist) Party and to Communist Party USA in 1929.

Atlas Shrugged and the Decline of New York

This past Tuesday I had to take my wife to her dentist in Manhattan, so I spent a little time walking around our old neighborhood, the Upper West Side, while she got her crown.  I learned that apartment buildings now have policies that can ban smoking outside the building; supermarket plastic bags are now illegal; if you want to use paper bags, you must pay a 5-cent penalty.

With so many meddlesome laws, New York is not a place in which I care to live. I first realized that the city had gone past the point of no return in 2000, when I sat on a Manhattan narcotics grand jury.  The grand jury was in the New York Supreme Court Building, 60 Centre Street, where the 1957 movie 12 Angry Men takes place.  In interacting with my fellow Manhattanites, I realized that the people of New York had gone far down the left-wing path, that they no longer believed in the rule of law, and that the ultimate result would be increasing socialism and moral chaos.

I was just rereading Atlas Shrugged, which I assigned to my class as an extra credit assignment. When I was in Manhattan on Tuesday, several things reminded me of it.  It is about the exodus of industrialists, managers, and the competent from a United States increasingly dominated by socialist looters, with an end result of the country's reverting to 18th century standards—a goal advocated today by  environmentalists.   

This passage is an example of Ayn Rand's perception of how backward-trending socialist law works.  A bureaucrat named Dr. Ferris explains the process to capitalist Hank Rearden, inventor of Rearden Metal:

“Did you really think that we want those laws to be observed?” said Dr. Ferris.  We want them to be broken. You’d better get it straight that it’s not a bunch of boy scouts you’re up against—then you’ll know that this is not the age for beautiful gestures.  We’re after power, and we mean it. You fellows were pikers, but we know the real trick, and you’d be better get wise to it. There’s no way to rule innocent men. The only power any government has is the power to crack down on criminals.  Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens?  What’s there in that for anyone?  But just pass the kind of laws that can neither be observed nor enforced nor objectively interpreted—and you create a nation of lawbreakers—and then you cash in on guilt.  Now that’s the system, Mr. Rearden, that’s the game, and once you understand it, you’ll be much easier to deal with.

 I can picture a Democratic Party policy adopted by di Blasio, Warren, Sanders, Ocasio-Cortez, et al. whereby neighbors are encouraged to inform on each other:  "Hello, police? I just saw my neighbor,  Mrs. Taggart, entering her apartment with a plastic bag of groceries.  Yes, we're at 140 Riverside Drive, Apt. 16-k. Please send a squad car."

Democratic Cities Lead in On-Street Pooping

A friend just emailed this SFGate article about the human-poop-on-the-street rate in the city of Nancy Pelosi, San Francisco. According to SFGate, Buzzfeed editor John Paczkowski posted the following chart on Twitter:

 

In addition to a longitudinal tracking of incidents, which seems to mirror the Fed-induced economic recovery, a cross sectional study of cities will likely reveal a consistent Democratic Party advantage: Burgs with more Democrats will be more brown.

Perhaps instead of red and blue, the party colors should be red and brown. This idea seems to have already gone to the Democrats' heads.