“Freedom People see two different questions where Virtue People see only one. How should people behave? How must they behave? For Freedom People, the first is philosophical and personal. The second is legal and coercive. The answer to the first does not answer the second. Freedom People do not impose their moral judgments on others. They will not have others impose upon them.
Paradoxically, Freedom People have faith that Virtue People lack. They have faith in spontaneous order. If we leave people alone, they say, things will turn out fine. Individual decisions will coalesce into peace and prosperity. Virtue People do not believe in spontaneous order. They want their hands on the wheel, so that they can manage people to virtuous ends.”
Somehow, it seems that this lesson of capitalism vs socialism is never mentioned when we’re gathered around the Thanksgiving table. The thing that caused the change from starvation to plenty was a philosophical concept, an idea, an intuition. Aligning man and his nature with God and the natural laws of the universe led to amazing results. And I can only guess, but I think it’s a fairly safe guess, that this idea didn’t spring from the minds of the masses at Plymouth Rock or anywhere else. Rather, it was probably an idea that one or two people had in each of these places, that they then shared, promoted, and advocated for, until it was tried. The results speak for themselves.
As Leonard Read said, “it’s not a numbers problem, and it’s not a teaching problem…”
Thanksgiving isn’t just a break from work, a time to stuff ourselves with turkey, dressing, and pumpkin pie, it is a time to remember the true significance of the holiday, and pass on the lessons from our forefathers to our children who won’t learn these lessons in school, and thus must learn them elsewhere.
I have a bit of a love/hate relationship with Jordan Peterson. Some of his ideas I find really compelling. He is definitely a very deep thinker in certain areas. And then in other areas, specifically on economics and foreign policy, I find his views very superficial. Some of his ideas in his area of expertise are profound, and sometimes I feel like he’s just overthinking everything including some of his philosophical and religious ideas.
One thing is for certain, he’s touched a nerve in our society in the age we live in. I believe he is sincere in his pursuit of truth, and I give him, and anyone else making the same effort with sincerity and goodwill, some credit and the benefit of the doubt. It is a noble pursuit after all, and the unthinking masses are always critical of someone who is genuinely pursuing truth no matter where it leads. So I have some sympathy for him even if I disagree with some of his positions. These are hard topics, and no one has all the answers. At least he’s asking some good questions.
As someone once said, “I’d rather live in a society where I can’t answer all the questions, than in one where I can’t question any of the answers”.
I thought he made some good points in this interview.
This was an interesting discussion about the US dollar and it’s role going forward. The second half of the discussion was more interesting to me than the first half. I’ve believed for many years that the economic problems we’re creating for ourselves with our monetary policy will lead to political problems, and that is the real risk. I think they make a strong case for that.
Once again, listening to two people have a civil discussion even when they may not entirely agree is really valuable. It’s kind of amazing how they barely even discuss gold, mainly because they think it’s so obvious what happens in the end.
Just in case I haven’t already alienated my few readers, I plan to occasionally post something that I find interesting in the philosophical or religious areas. I’ve read books by Tom Holland and Stephen Meyer and found them fascinating. Having them on a panel with a neoconservative, gay, “Christian athiest” Douglas Murray makes for an interesting conversation to say the least.
I’ve always enjoyed Peter Robinson as an interviewer, and no matter what one may think of the opinions of his guests, the civilized manner in which they share their perspectives is refreshing. People with differing opinions being able to have friendly, meaningful conversations gives one hope for the future.
With all of the negative aspects of our technology and celebrity saturated culture, just as with everything else human beings have created, there are at least some benefits derived from it as well. Whether the progress being made is a net gain or loss has been debated on every technology since the discovery of fire. Youtube’s ability to bring interesting conversations like this into everyone’s living room for free is simply amazing. Imagine having Youtube conversations of Jesus and his Disciples, or Martin Luther, John Calvin, Isaac Newton, Charles Darwin, Thomas Jefferson and John Adams, etc., etc.
It is an amazing time to be alive and to have access to these types of conversations.
One of the questions I ask myself from time to time is how would I know if my perception of the financial problems headed our way is accurate, or if it’s just my imagination. What are some of the signs one would expect to see on the road to a collapse of the empire? Because, as with any other theory, if it has no predictive value, is it even a worthwhile theory?
For a number of years I’ve believed that, at some point, the US would face a situation where the amount of bonds being issued would outstrip demand, and this would force interest rates higher. Higher interest rates would expand the budget deficit, leading to more money printing, leading to higher interest rates, bigger deficits, and so on until the system implodes in a self-reinforcing debt spiral. This would bring to fruition that long awaited prediction by Ludwig Von Mises:
If the market rate of interest is reduced by credit expansion, many projects which were previously deemed unprofitable get the appearance of profitability [because of the reduced cost of capital. The entrepreneur who embarks upon their execution must, however, very soon discover that his calculation was based on erroneous assumptions. He has reckoned with those prices of the factors of production which corresponded to market conditions as they were on the eve of the credit expansion. But now, as a result of credit expansion, these prices have risen. The project no longer appears so promising as before. The businessman’s funds are not sufficient for the purchase of the required factors of production. He would be forced to discontinue the pursuit of his plans if the credit expansion were not to continue. However, as the banks do not stop expanding credit and providing business with “easy money,” the entrepreneurs see no cause to worry. They borrow more and more. Prices and wage rates boom. Everybody feels happy and is convinced that now finally mankind has overcome forever the gloomy state of scarcity and reached everlasting prosperity. …
There are only two alternatives.
One, the expanding banks may stubbornly cling to their expansionist policies and never stop providing the money business needs in order to go on in spite of the inflationary rise in production costs. They are intent upon satisfying the ever increasing demand for credit. The more credit business demands, the more it gets. Prices and wage rates sky-rocket. The quantity of banknotes and deposits increases beyond all measure. … The whole currency system breaks down. Its unit’s purchasing power dwindles to zero. People resort to barter or to the use of another type of foreign or domestic money. The crisis emerges. The other alternative is that the banks or the monetary authorities become aware of the dangers involved in endless credit expansion before the common man does. They stop, of their own accord, any further addition to the quantity of banknotes and deposits. They no longer satisfy the business applications for additional credits. Then the panic breaks out. Interest rates jump to an excessive level, because many firms badly need money in order to avoid bankruptcy. Prices drop suddenly, as distressed firms try to obtain cash by throwing inventories on the market dirt cheap. Production activities shrink, workers are discharged. Thus, credit expansion unavoidably results in the economic crisis. In either of the two alternatives, the artificial boom is doomed. In the long run, it must collapse. … The artificial prosperity cannot last because the lowering of the rate of interest, purely technical as it was and not corresponding to the real state of the market data [for real savings], has misled entrepreneurial calculations. It has created the illusion that certain projects offer the chances of profitability when, in fact, the available supply of factors of production was not sufficient for their execution.
If my theory is correct, that the US empire is built on top of a massive financial bubble, whose implosion will remove the US from being the unipolar global power, then it should be fairly simple to predict some of the things that will happen leading up to the end of this bubble. One question I think about is who will end up being the bag holder of all the US treasury bonds that will need to be held as the debt spiral accelerates.
So, what are one of the signs I would expect to see between now and then? I would expect the government to force people to hold government bonds against their will. If they can’t keep increasing the money supply because of it causing too much inflation, but, for political reasons, they also can’t cut government spending, and budget deficits; what is the other alternative? It seems obvious to me: force someone to buy the government bonds that are rapidly depreciating. How would they do that, and what would that look like. It seems to me that one obvious choice would be to force people holding tax deferred retirement accounts to buy up these government bonds. Holders of IRA’s, 401-k’s, government pensions, etc., would be forced to allocate a certain percentage of their assets into rapidly depreciating US bonds.
According to the Congressional Research Service, there were total assets of $37.8 trillion held in U.S. retirement plans and accounts at the end of 2022. That is a LOT of capital that is just sitting there with a big old bullseye on it, waiting to be used to kick the can down the road on governmental financial problems.
That’s all a rather long winded way of bringing me to this interview that I saw with Jeff Snider and Michael Green. In it, they mention that IBM is now funding their employee pension plan with IBM bonds. Hmmm…that seems really interesting, and could be one step down the road towards what, to me at least, could be a flashing warning sign that the debt spiral is accelerating. Make of it what you will. Maybe it’s nothing. But I suspect that this could be emulated by other companies, and ultimately by the U.S. government. If that happens, it might be a really good idea to liquidate retirement accounts and find a better place for your capital.
They begin their discussion on this topic at 4:07 of the video…
Frederic Bastiat was a brilliant 19th century French economist. The paragraphs below were the inspiration for Henry Hazlitt’s book Economics in One Lesson. Hazlitt basically derived his entire book from this one profound concept.
In a few short paragraphs, Bastiat alludes to several important insights. The obvious one is the concept of opportunity costs. This is the idea that for every action taken, there is another action that was sacrificed. In order to make a good decision, these alternative actions need to be weighed vs. the action chosen. Another insight that is implicit in this idea is the idea of causation vs. correlation. This is one of the most common logical fallacies that I experience on a regular basis. Confusing causation and correlation leads to disastrous outcomes.
I believe that Bastiat’s insight, along with the Austrian’s further development of the idea of time preference, had a large impact on Hazlitt’s thought process in other areas as well. Specifically, when Hazlitt later wrote what he considered to be his most important lifetime contribution to humanity in his book, The Foundations of Morality. In this fascinating book, Hazlitt introduces the idea of time preference into the discussion of ethics. The idea that immorality derives from high time preference is such a simple, brilliant insight that one has to wonder why this concept isn’t in the middle of every discussion on ethics and morality.
It is very easy to overlook the fact that human history is a story of new concepts that evolve and grow from generation to generation. The concept of time preference wasn’t widely understood until relatively recently. It is a really big idea with applications far beyond economics. This is a good example of how different concepts from completely different fields such as economics and ethics influence one another, and how, a breakthrough in one discipline can lead to cascading breakthroughs in other disciplines.
Bastiat’s insight seems especially relevant today when one surveys the political landscape. Political discourse in this country, and around the world, is incredibly shallow. One of the main reasons for this is that people are not capable of grasping Bastiat’s point here. Political rhetoric is so shallow and disingenuous largely because people are not intellectually honest enough, and curious enough, to think through the promises being made to them in a logical manner. The focus has shifted from what the principled, moral choice should be, to what the most expedient, self interested choice is.
Societies get the politicians they deserve. A people who are incapable of thinking beyond the first order effect of a political promise, and completely ignore the second, third, and fourth order effects of an action, will suffer increasing calamities until this lesson is learned.
In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, — at the risk of a small present evil.
In fact, it is the same in the science of health, arts, and in that of morals. It often happens, that the sweeter the first fruit of a habit is, the more bitter are the consequences. Take, for example, debauchery, idleness, prodigality. When, therefore, a man absorbed in the effect which is seen has not yet learned to discern those which are not seen, he gives way to fatal habits, not only by inclination, but by calculation.
This explains the fatally grievous condition of mankind. Ignorance surrounds its cradle: then its actions are determined by their first consequences, the only ones which, in its first stage, it can see. It is only in the long run that it learns to take account of the others. It has to learn this lesson from two very different masters — experience and foresight. Experience teaches effectually, but brutally. It makes us acquainted with all the effects of an action, by causing us to feel them; and we cannot fail to finish by knowing that fire burns, if we have burned ourselves. For this rough teacher, I should like, if possible, to substitute a more gentle one. I mean Foresight. For this purpose I shall examine the consequences of certain economical phenomena, by placing in opposition to each other those which are seen, and those which are not seen.
Today I’m going to share my stock portfolio with my readers. Why am I doing this? Several reasons:
Sharing information is powerful. Many people have shared their ideas with me, and sharing information is the whole point of this blog.
Lots of people talk about their investments, but you rarely hear the whole story. It’s easy to always talk about your winners and ignore your losers. Sharing this information will put me on the record and hold me accountable for my investment decisions. Everyone can judge for themselves in six months, or a year, or five years, how my investments have performed.
They say that teaching is the best way to learn, and by sharing these ideas it will help me to learn more about them.
This is not a conventional stock portfolio and is definitely not appropriate for most people. This portfolio was designed for my specific circumstances and is very unconventional. My stock portfolio is only a reasonably small portion of my overall assets and I’m in a position where I can afford to take large drawdowns on the portfolio without it greatly affecting my overall standard of living. This portfolio was designed to achieve numerous objectives specific to my personal circumstances:
Protect against what I think is inevitable inflation.
Provide me with the opportunity to take significant risks in return for potentially significant rewards. I’m not looking to grow these funds by 8-10% per year. Anyone can do that by buying index funds and holding them for extended periods. I’m looking to hit doubles, triples, and home runs. In doing so, I’ll also strike out quite a bit. That’s okay. I know that’s the game I’m playing.
I don’t invest in stocks that I don’t believe have the potential to at least double in five years. Ideally, the stocks I invest in are small to mid-cap stocks that have the potential to turn into 5-baggers or even 10-baggers within 5-7 years. A person only needs a few 10-baggers in a lifetime to really move the needle.
I really enjoy following markets and economics, so this is something that I enjoy doing, rather than a task to be done. If I didn’t enjoy the process, I’d simply invest in index funds and spend my time doing something else. Investing in different companies, in different industries, allows me to learn a lot during the process of doing due diligence, and I enjoy that.
A few additional points. I don’t really have specific trading/investing rules that I strictly follow. I find that, in general, they don’t allow the creativity and flexibility needed to really be successful. One rule that I do generally follow is that I’ll only hold ten stocks at one time. This instills some discipline in my investing outlook and avoids what Peter Lynch referred to as “di-worseification”.
If you’re managing a baseball team, you want your best hitters in the lineup. Why would you let your 11th, 12th and 13th best hitters take at bats away from your top ten hitters. Another way to think about it is by thinking about the Austrian concept of diminishing marginal utility. Each additional marginal unit added provides less value than the previous units.
You’ll notice that all of my current holdings are resource companies. This would be considered insane by any financial advisor. But I really don’t care. It’s the sector that I think will outperform by a wide margin over the next decade and I’m comfortable with that concentration risk. I’m not opposed to stocks outside the resource sector and when I see value outside this sector I’ll invest there. I’ve invested in many different sectors over my lifetime, and I plan in investing in lots of other sectors going forward. But right now, I see the resource sector as the most hated, undervalued sector of the market and some of the best company values are here. So that’s what I own.
So…here are my current ten holdings along with their current price per share and market capitalization.
Alphamin Resources Ticker -AFMJF Current Price-$.63 Market Cap- $814 Million
Baytex Energy Ticker – BTE Current Price-$4.43 Market Cap- $3.82 Billion
Filo Mining Ticker – FLMMF Current Price-$14.09 Market Cap- $1.84 Billion
Journey Energy Ticker – JRNGF Current Price-$3.67 Market Cap- $224 Million
Meg Energy Ticker – MEGEF Current Price-$19.64 Market Cap- $5.80 Billion
Minera Alamos Ticker – MAIFF Current Price-$.21 Market Cap – $97 Million
Wesdome Gold Mines Ticker – WDOFF Current Price-$5.71 Market Cap-$850 Million
I plan to write one post per week for the next ten weeks to explain why I own each of these companies. And I do think about it as owning a piece of each of these companies rather than owning shares in their stocks. If you think about owning the stock shares, you tend to focus on the stock price. If you think in terms of being a partial owner of the company, you tend to focus on how well the company is doing rather than the stock price. In the long run these two things are the same. But in the short term they will frequently diverge. It’s important to know what you own and why you own it.
I’ll explain more about my investing philosophy as I write about each of these companies in the coming weeks.
“It was granted me to carry away from my prison years on my bent back, which nearly broke beneath its load, this essential experience: how a human being becomes evil and how good. In the intoxication of youthful successes I had felt myself to be infallible, and I was therefore cruel. In the surfeit of power I was a murderer, and an oppressor. In my most evil moments I was convinced that I was doing good, and I was well supplied with systematic arguments.
And it was only when I lay there on rotting prison straw that I sensed within myself the first stirrings of good. Gradually it was disclosed to me that the line separating good and evil passes not through states, nor between classes, nor between political parties either—but right through every human heart—and through all human hearts. This line shifts. Inside us, it oscillates with the years. And even within hearts overwhelmed by evil, one small bridgehead of good is retained. And even in the best of all hearts, there remains . . . an un-uprooted small corner of evil.”
The shift from forty years of declining interest rates to an era of rising interest rates is just starting to play out. The effects will be dramatic. I can’t overemphasize the impact this will have on investing, the economy, and politics. Americans have taken for granted that we can borrow and spend without long term repercussions. The math is really simple. Austrian Business Cycle Theory is very clear as well. The distortions that were created by these artificially low rates need to be corrected. The market will correct them.
Jim Grant has been observing interest rates for a very long time, and is somewhat of an authority on this subject.
“If you want to go back and look at the long cycles, it might just be that the fifty odd years since the end of Bretton Woods and the end of the dollar’s convertibility to gold, that that cycle is ending. It might be that paper money in the historians’ retro perspective views will seem to have been a failure and that the world is going to charge back on unconstrained central bank credit creation and unconstrained sovereign borrowing. Maybe, that’s one way to look at it. It’s the way I tend to look at these things: longer-term, historical trends – and fifty years in the history of money is about the blink of an eye.”
It's A Learning Problem 