The Debt Ceiling Hurt Locker

and the triumph of founding fatherism




The debt ceiling was raised, the crisis averted.

So why did the stock market go down again? Wasn’t there supposed to be a rally?

You may recall the award-winning movie from 2008, The Hurt Locker, in which a US soldier disarms bombs in Iraq. For the enemy combatants, blowing up innocent civilians was acceptable so long as it furthered their goals. I mention all this because it seems eerily similar to what we all witnessed in Congress last week.

Tea party members actually said – publicly - that they were willing to let the US default on its debt if it led to reforms later. That is, they were perfectly willing to detonate an economic bomb in order to reach their long-term objective (which, ironically, was to save the economy). Sane members of congress, despite universally despising the bill, passed it only because self-destruction was worse.

Both Republicans and Democrats swallowed bitter amounts of compromise to get the job done over the weekend, which was admirable. Despite this, rightist media is still calling the President a “Marxist thug” and “Nation Destroyer,” along with the usual racial slurs (ex. “leader with swollen lips.”)

Some of the tea party's ideas are actually good, though most members probably don't realize why. For example, Keynesian spending (to improve the economy) doesn’t work if everyone is worried about the country spending too much and defaulting on its debt; in this case, fiscal conservatism is better. It’s not the tea party’s economic ideas as much as their methods which are concerning.

The stock market continues to drop because people around the world increasingly regard the US as fanatical. The nation’s cult religion, “founding fatherism,” is growing faster than Falun Gong.

Many believe that because of fringe groups, the United States simply can’t be trusted.

Can it?

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(about the civil war in Cuba)

Michael Corleone: "I saw a strange thing today. Some rebels were being arrested. One of them pulled the pin on a grenade. He took himself and the captain of the command with him. Now, soldiers are paid to fight; the rebels aren't."
Hyman Roth: "What does that tell you?"
Michael Corleone: "It means they could win."

From the movie, The Godfather, Part II

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Freaking Out for Congress

Thanks, idiots, for the carnage.

By “idiots,” I mean those members of the US Government who are unwilling to compromise because of some quasi-religious convictions about taxation and the role of government. I mean those members of the US Government who are using the debt ceiling to create a crisis, thereby scaring the bejeezes out of little old ladies.

Officially, the US debt ceiling “crisis” (which is completely artificial and unnecessary in the first place) is supposed to occur sometime next week. But, it’s already happening.

Little old ladies, sophisticated investors – everyone – are now getting out of US investments. They are selling their US mutual funds, closing their US bank accounts, and selling their US stocks. Today, I had millions of dollars’ worth of accounts cross my desk saying, “Sell all my US holdings and buy Canadian.” This selloff - which has already cost the country billions of dollars - will continue until the matter is resolved.

Of course, not everyone is upset about the situation. Citizen’s militia groups are apparently ecstatic about what they feel is the increased likelihood of finding practical use for their assault rifles and body armor.

Interestingly, tea party members are now calling for the resignation of John Boehner, saying that he is part of the “old guard” and not revolutionary enough.

It is likely that Congress will reach an agreement at the last minute, after scoring enough political points to satisfy their most maniacal constituents. Even so, many investors are not confident enough of this positive outcome to leave their life savings to the whims of fanatics.

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See also:




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“Some men just want to watch the world burn.”

Alfred the Butler, in the movie, The Dark Knight
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George Soros "Retires" from Hedge Fund Business

In a surprising announcement this week, billionaire George Soros – equity manager of one of the largest hedge funds in the world – said he will be returning his investor’s money and changing his hedge fund to a private fund for himself and his family.

Soros’ decision is primarily due to new regulations which will make hedge funds more transparent and trade-restricted than they used to be.

Like most great investors and traders, Soros spends a lot of time contemplating human psychology and logical thinking (or lack thereof), and making big bets based on his analysis. Recently, Soros noticed that although the price of gold had been rising for weeks, silver had not experienced the same boom. Recognizing that at some point silver would have to jump as well, Soros bought large quantities; and, he was right. After a parabolic rise in the price of silver Soros sold out, partially causing the subsequent drop.

Soros is for some a shadowy and mysterious figure. He has one of the most extreme cases of clinical narcissism I’ve ever seen, and in fact he recognizes this. Though he doesn’t actually say “I have a narcissistic disorder,” he does describe himself as having “messianic tendencies” (i.e. the tendency to think he’s god). To his credit, he realizes that this is a belief he should try to suppress, even if he is an internationally famous billionaire.

Soros’ main contribution to the world of investing is a semi-philosophical concept called “reflexivity.” In a nutshell, reflexivity is the idea that while facts and circumstances generally create results, expectations and interpretations of facts can create results of their own. For example, even if a company is in good financial condition, if everyone believes the company is on the verge of bankruptcy they will sell off the stock and cause the price to plummet, thereby causing the financial instability they were worried about in the first place. According to Soros, understanding reflexivity is key to making superior investment decisions: I don't disagree.

These days, Soros gives a great deal of money to philanthropic organizations, mainly those that promote human rights, logical thinking and open-mindedness.

Soros’ logical demeanour and flexible way of thinking tends to drive doctrine-following and/or illogical people absolutely insane. Dorky talk-show host Glenn Beck, for instance, considers Soros a mortal enemy (Beck calls Soros “Spooky Dude,” mocking his Eastern-European accent in a Dracula-like fashion). The fact that Beck regards himself as Soros’ intellectual equal only adds to the hilarity.

Hopefully, retiring from public investing will give Soros more time to write and lecture. If so, I am looking forward to it.

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Lecture on Reflexivity (starts at 16:45 - prior is introduction).

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See also:

Glenn Beck "exposes" George Soros


Jon Stewart mocks Glenn Beck