Saturday, August 27, 2016

How Bad Laws Get Passed

So, a group, say, a union or an industry that is comprised of, say, 100,000 Americans decides that they'll prosper if they can convince Uncle Sam to tax the foreign imports of the good(s) they produce here at home. In essence, stealing the benefits of international trade from the remaining 324,375,211 American consumers. So how is it that we allow such things to happen?

This excellent video tells the story:

Alaska trout trends say this could be a big year for stocks :)

You may recall a couple weeks back when I mentioned that I’d be away for a few days doing some market research --- I’ll share my findings at the end. 


A few years ago I shared my experience with my (and now Judy’s) dear friend Matt Morrill, an enlightened Montana fly fishing guide whom I met by happenstance as the one-year window to re-book a cancelled airline ticket was about to close. I found myself in Yellowstone National Park, unexpectedly inspired by a true master, not only of his craft, but of how to live. If you’re new to the blog, you might enjoy God’s Greatest Work.

Over the years I’ve had the pleasure of having fished with many a guide --- most of them adept at what they’re paid to do --- but up until this past week, other than that first experience with Matt, I have not found myself plunked at my desk immediately upon returning home writing about anything deeper than maybe analogizing a jeep trail to investing in the stock market. Well, here I am.

There’s this guy in Kenai, Alaska, named Ben Hulbert. Ben, like Matt, is a fishing guide, and Ben, like Matt, never asked what I did for a living (I.e., his interest lied solely in the moment), and Ben, like Matt, has the utmost respect for the surroundings that allow him, at the tender age of 30, to earn his living amid nature’s breathtaking beauty.

We --- Ben, my wife Judy, and I --- recently spent two amazing days adrift glacial green waters as they flowed their way to the ocean via the great Kenai River. 

Immediately after first shaking hands with our young tutor I whispered to Judy "I'm really going to like Ben" as she and I entered the service station mini mart where we initially rendezvoused --- Ben insisted that we grab our coffee, etc. while he transferred the gear from pickup truck to drift boat. With slightly bent brows and through a puzzled half-smile Judy said "really, we just met him." "Yeah, but I got a really good feeling. The kid’s really comfortable in his own skin.” Shortly thereafter, Judy shared that sentiment completely.

Ben’s boat will never smell of organic bate; he calls his business "Kenai on the Fly", as in "fly fishing". At one point during the second day’s drift he noticed a small concentration of fishing boats motoring through a stretch of river. He promptly equipped a fly line with a dark-red colored bead that would emulate the salmon eggs he knew these gents were spilling onto the river floor --- and into the mouths of the gorging rainbows that follow their seafaring cousins to their spawning beds. He explained his tactic with some chagrin; the fishermen douse the eggs in all manner of chemicals (to give them color and, I presume, stickiness) that are ultimately toxic to the wild trout that Ben hopes to help his clients outwit, net, and gently release. He briefly mentioned the regulatory regime he operates under and compared the bate fishermen’s freedom to slowly poison the trout to some entirety senseless regulation. Honestly, I was so eager to put his ingenious plan to work --- to get that artificial fish egg that imitates a modified fish egg into the water --- that I didn’t quite catch the details of that particular senseless regulation.

I could, at this point, as I often do, dive into the ills of government intervention. Like when the Federal government instituted a program to subsidize Alaska fishing guides during a recession, while Ben’s business grew by 20%. Which, in essence, impedes the market process that uses economic slowdowns to separate good businesses from bad, leaving industries to emerge better, more efficient, and delivering higher than ever before quality to their customers, but I won’t.

To cut to the chase, yes, this is a commercial for Ben. He’s an absolute joy of a young man who happens to be far wiser than his years. If you ever find your way to Kenai Alaska, and would like to try your hand at fly fishing (he’ll get you quickly to the basics if you’ve no experience) for wild trout (and/or silver salmon if you insist), I promise you, Ben is your man! Go to

As for my research into the correlation between the feeding habits of Alaskan trout and volatility in the stock market, well, this could be a big year! :)

Friday, August 26, 2016

This Week's Message: Amateurs, unwittingly, love forecasts...

Janet Yellen’s Jackson Hole speech on Friday essentially echoed the sentiment I’ve been sharing with regard to the economy of late. That is, things are indeed improving, but not at some breakneck inflationary pace. The initial reaction to her commentary was about a 70 point decline in the Dow, as I type (it’s Friday morning) the Dow’s up 90. Won’t guess where it’ll end the day, don’t really care actually.

What I do care about are the prospects for earnings going forward for the many companies whose stocks occupy the mutual and exchange traded funds that we hold in client accounts. Their share prices will meander all over the chart while these companies search the world (yes, the world!) for opportunities to sell their wares. At this juncture, the next recession appears to be somewhere beyond the foreseeable horizon, at least to my eyes. And being that emotionally-impacting bear markets tend to need recessions, while volatility has to pick up going forward, the economy doesn’t suggest that we should be losing any sleep these days. That said, if you’re our client and you ever lose sleep over your portfolio --- regardless of market conditions --- I demand that you call Gladys the next morning and schedule us a meeting.

As this bull market grows older, out of the woodwork will come more and more soothsayers and snake-oilers offering up their guaranteed forecasts on stocks, gold, oil, currencies, etc.

Here’s Alexander Elder in his timeless 1993 book Trading for a Living telling it precisely how it is:
Nature's Law is the rallying cry of a clutch of mystics who claim there is a perfect order in the markets (which they'll reveal to you for a price). They say that markets move like clockwork in response to immutable natural laws. R. N. Elliott even titled his last book Nature's Law.
The “perfect order” crowd gravitates to astrology, numerology, conspiracy theory, and other superstitions. Next time someone talks to you about natural order in the markets, ask him about astrology. He'll probably jump at the chance to come out of the closet and talk about the stars.

The believers in perfect order in the markets claim that tops and bottoms can be predicted far into the future. Amateurs love forecasts, and mysticism is a great marketing gimmick. It helps sell courses, trading systems, and newsletters.

Mystics, Random Walk academics, and Efficient Market theorists have one trait in common. They are equally divorced from the reality of the markets.

Have a great weekend!


Wednesday, August 24, 2016

Quote of the day

Whether it's protectionism (erecting barriers to international trade, immigration, etc.), the pros and cons of a minimum wage, of government spending, of regulation, etc., our busy lives and varied interests I'm afraid compel us unwittingly to adopt a crowd think that risks us taking ill-conceived sentiments to fruition. Politicians, and the special interests that support them, alas, know this all too well. As Gustov Le Bon warned back in 1895:
Crowds are only cognisant of simple and extreme sentiments; the opinions, ideas and beliefs suggested to them are accepted or rejected as a whole, and considered as absolute truths or as not less absolute errors. This is always the case with beliefs induced by a process of suggestion instead of engendered by reasoning.
The characteristics of the reasoning of crowds are the association of dissimilar things possessing a merely apparent connection between each other, and the immediate generalisation of particular cases. It is arguments of this kind that are always presented to crowds by those who know how to manage them.

Today's TV Segment (video)