Most Americans Poorer Than Before Recession

Cannot tell if this is good news or not, but, in 2013 dollars, the wealth of middle class is below where it was before the recession:

The Typical Household, Now Worth a Third Less: The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation.

This could be good news because the top 1% are getting, deservedly, all of the gains in wealth for the economic value these individuals create. Before 2008, we had a wage and job glut of too any people being overpaid to perform redundant work in obsolete or dying industries. Too many homes were built, too many financial services jobs, etc. Even better news is credit standards for mortgage applicants have gotten considerably more stringent, which is great for landlords as rents have skyrocketed due to huge demand from people that, a decade ago, would have otherwise been homeowners. So as the middle class may be getting squeezed, this is helping the economy in many ways, by forcing them to spend.

Some are blaming Obama, but we would still have record inequality and the usual pain at the pump and lack of good jobs under two terms of McCain or one term of Obama and Mitt Romney. The stock market and real estate markets, however, would post even stronger gains under a republican because of lower taxes and less regulation. Your best shot at getting rich is to get that STEM degree, buy Bay Area real estate, buy stocks or create a viral app.

The ownership society that Bush spoke about is still thriving, we just need better president and less class warfare. Silicon Valley and Wall St. is still capable of creating immense wealth, as much as the libs want to take it all away.

Bay Area the Center of the Universe as Home Prices Keep Surging

Robert Shiller says we could be in another hosing bubble, but the Bay Area didn’t get the memo. After a huge 2013, prices are off to the races again for 2014:

In the most expensive regions of the Bay Area, such as Palo Alto and Atherton, the gains since 2011 have been so pronounced, by looking at the chart, you wouldn’t have known a real estate bubble had burst in 2006 unless someone told you.

With the web 2.0 boom showing no signs of slowing and the huge influx of wealthy foreigners, as well as private equity, home prices will keep going up. Facebook just reported another blowout quarter and the stock is at a new 52 week high, enriching everyone from the employees, to the VCs, and the founders. The obscene wealth being generated in tech is flowing into the Bay Area economy – from homes to landscapers, to interior design, and restaurants. Do you need any more evidence the Bay Area is the center of the universe? As we wrote earlier:

America, especially since 2008, has become a hyper-meritocracy in overdrive. If you like coding, have a prestigious degree and a high IQ, now couldn’t be a better time to be alive, although having the first two qualities pretty much guarantees the third. We’re in a high-IQ, STEM, wealth creation feeding frenzy on a biblical scale. The Rockefellers, Vanderbilt and Carnegies actually had to build something to get wealthy, which took decades and thousands of people. Now start-ups less than three years old are making instant billionaires out of their youthful founders and early investors. Even in the 90′s – what many consider to be the epitome of a bubble – a typical tech start-up was seldom valued at over $60-100 million. Now that is just the Series A round. The Bay Area housing market is going nuts in all-cash bidding wars above the asking price due to endless fed money, rich foreigners, web 2.0 founders and investors flush with cash, and private equity. There is so much wealth being created in relatively few hands. Outside of the Bay Area tech scene and Wall St., there’s an abundance of low tech opportunities catering to the new rich, such as nannys, butlers, trendy restaurants, landscaping, and home restoration. America, more specifically its elite institutions such as Harvard, Stanford, and MIT as well as its tech giants like Google and Facebook and the Bay Area have become epicenters of innovation and wealth creation. The left predicted in 2008, incorrectly, that the over-hyped financial problem would usher in a post-America era. The exact opposite happened. As evidenced by historically low treasury yields, a perpetually rising stock market that has vastly outperformed its peers, a strong dollar, surging Bay Area real estate, tech companies and Ivy League institutions being inundated with foreign applicants, America has, more than ever before, become the center of the universe and envy of the world all over.

This is the greatest wealth boom in the history of the world, and it will only continue. Snapchat will soon be valued at $15-20 billion, Uber at $30-50 billion, Pinterest at $15 billion, Tinder at $10 billion, AirBNB at $40 billion, and so on… Just two or three of these companies will be equal to one Disney or a McDonald’s, but still not a bubble. The left said Facebook was a bubble at $15 billion back in 2007. Now it’s worth $190 billion. These companies each fill a niche, have no viable competition, and have huge growth. Just like there is only one Palo Alto or one Stanford, there is only one company that does what Snapchat or Facebook does. Other have tried, but they cannot gain traction. The moat is too wide, and unlike the demise of Myspace, teens aren’t getting ‘burned out’, as so many pundits predicted, incorrectly, would happen to Facebook and Instagram. Speaking of Instagram, now it’s obvious, in retrospect, that Facebook’s acquisition of Instagram for $1 billion was a steal instead of being a sign of bubble. Instagram would be another $10 billion company had they not sold out too soon. This is is the state of bay Area capitalism – a hyper meritocracy, where anyone, regardless of age, race or socioeconomic background can become obscenely wealthy in a very short period of time – by virtue of intelligence, hard work, and a little luck. You can code an app and be a billionaire in a couple years or invest in a web 2.0 start-up and increase you money ten-fold in just a year, as investors in Uber and Spanchat have done. Or buy some already expensive Bay Area real estate and watch it become even more expensive, as the left calls it a bubble and the usual blah blah blah.

Constructing a ‘Madoff’ Portfolio

As a diversion from the usual politics, using a linear combination of ETFs I was able to construct a ‘Madoff-like’ portfolio, without the whole fraud aspect to it. Here’s what it looks like versus the S&P 500:

As a rule, I only used liquid, long-only ETFs and no re-balancing.

Here’s Madoff’s actual portfolio just before the implosion:

It returns on average 5% a year with a max draw-down of 2.77% versus 19% for the S&P 500. The advantage of this is it can be leveraged very easily with as little as $15000-20,000 to control up to $300,000 in stock. A max draw-down of 3% means a maximum loss of $9,000 with the hypothetical portfolio.

Here’s an even better one with a higher Sharpe ratio, but it’s slightly harder to implement, because it requires more ETFs to construct:

The Good News: Washington Is Giving Up on Everything

Washington Is Giving Up on Everything

A can’t-do spirit is settling over Congress and President Obama, writes a leading political handicapper.

I, for one, applaud the do-nothing congress for not doing too much. Let Wall St. self-regulate. The private sector, with the help of the fed, has created more wealth in the past five years than anything Obama has done. The proliferation of defense spending that began at the turn of the last decade also creates value, but that was under Bush. Healthcare an hospital stocks going nuts due to the aging baby boomer population. Don’t expect Obamacare to make costs go down or, in the long run, to put a dent in the number of uninsured. We’re in an era of inflation that technically isn’t called inflation such as healthcare, education, beef, gasoline, rent, travel, and so on. Yet, in agreement with my earlier predictions, those 30-year yields just refuse to budge even as the services millions of people rely on keep going up with no end in sight.

Facebook reports blowout earnings and the stock closes at $75 – another historic high and 150% higher than when I recommended it back in 2012. Zillow and Trulia surge 20% each on a proposed merger. Zillow is 300% higher than it’s IPO. So much for that ‘obvious’ web 2.0 bubble that the libs insisted would burst, going back as far as 2007 or so. They the left can keep calling stocks, treasuries, real estate or tech valuations a bubble until they are blue in the face, like the sore losers that they are. Oh, and let’s not forget that the valuations of Snapchat, Pinterest, AirBNB, Uber and other fast growing web 2.0 apps also gained paper value today, thanks to the huge Facebook earnings. Bay Area home prices keep going to the moon. Lots of potholes on the roads and ppl in low paying jobs or unemployed juxtaposed with Silicon Valley prosperity that would make kings jealous.

Not much going on in this slow news cycle. The left, starved for crisis, is looking for any indicators, however small, for the next economic and stock market meltdown. It was supposed to be Putin, but that came up empty-handed. Or the negative GDP reading a few weeks ago, which to the disappointment of the left, was a dud. The anti-establishment left wants the college bubble to burst, but that refuses to happen, too. Just like biology is immutable, so are these trends and this is why they refuse to terminate, even when every liberal pundit says they should.

The good news is as a nation, we’re becoming smarter and more informed than ever, unlike as recently as a decade ago when laypeople didn’t care about economics. We’re still in a STEM economic recovery, with individuals as to quote Aaron Clarey with ‘bullshit degrees’ finding themselves unemployed and deep in debt. The bad news, but not really a surprise, is that we’re becoming a nation of whiners and crybabies looking for handouts, seeking crisis, and for someone to blame – be it the fed, Washington, the rich, tech companies, and so on. Sometimes, we need to learn to come to terms with job loss and the inability to find work as being an inconvenient, but necessary part of the evolution of the economy. Many college educated millennial, being more educated in economics and than any previous generation, agree with the Supreme Court decision to make Hobby Lobby exempt from Obamacare. Most men, especially of the neckbeard generation agree that women should pay for their own birth control, instead of corporations.

The Neoconservative Resurgence

Another great day for stocks as the S&P 500 and Nasdaq make new yearly highs:

The biological determinism bull market and economic expansion rages on, with those unfit to participate being swept under the rug. There’s certainly no secular stagnation in tech as Google, Microsoft, Apple, Intuitive Surgical, and Facebook crush earnings yet again. Where’s the double dip recession the left promised? Where’s the Russian contagion? Why isn’t the consumer maxed out like it’s supposed to be due to wealth inequality being too high? lol Now more than ever, it’s a great time to be smart and rich in America. A great time to be an economist, physicist or a STEM major. So much wealth being created this year it’s mind-boggling. Everything is wonderful and nobody is happy.

I was right about Herbalife bulls stepping all over the cockroach that is Bill Ackman. The stock surged 25% after Ackman’s highly anticipated presentation fell short. Just another day of the free market winning and the libs losing.

Ross Douthat and Peter Brooks have become champions of the revived neo conservative movement, following a seven-year slump that began during Bush’s final term up until around 2013. Since 2013 with the huge rally in stocks, real estate and treasuries – in addition to the unstoppable web 2.0 boom, Obama’s falling polls and the inevitability of more high tech immigration, neo conservatism is making a comeback. Laissez-faire conservatism tends to thrive in times of wealth expansion such as today, versus traditional conservatism in bad times. These optimistic conservatives, unlike the occasionally acerbic tea party traditionalists, support globalization, deficit spending for pro-growth policy, higher education, and self-actualization. They see web 2.0 not as a useless waste of time, but a great catalyst of wealth creation that is improving our lives. They support high tech immigration, which helps drive up Bay Area home prices and, in the context of a meritocracy, allows the best and the brightest to succeed, regardless of national origin. They are open to the concept of biological determinism and how it applies to socioeconomics, as opposed to outright rejecting it – as many on the left and some on the Old Right do. The want more STEM majors, lower taxes, and support the fed in its efforts to create economic conditions optimal for the creation of wealth with QE and other programs. They want creative destruction, instead of clinging to the old obsolete ways of life and keeping dying industries on life support.

As I wrote in Roadmap for 2016, Neo conservatism or pragmatic conservatism as practiced under Reagan and George W. Bush not only represents the future of the GOP, but the best ideological path for winning national elections. George W. Bush got into office against an opponent that was arguably more competent than Obama, and on the heels of an economic and stock market boom that many attributed to Clinton and Gore. In the voting booth, Americans tend to choose tax cuts and defense over deficit reduction. Americans complain about inequality and deficit spending, but they want tax cuts and to feel safe, too. Hence, there is a disconnect between expressed voter preferences and how people actually vote, and this is how neoconservatives win. Only during the final year when the media exaggerated the supposed problems in Iraq and the overblown financial problem to get Obama elected, did Bush’s approval rating begin to nosedive. Others attribute the decline to what some perceived to be a weak response to the Hurricane Katrina disaster, but according to a bi-partisan panel experts, he did the best he could with the information and resources at his disposal. He’s not psychic.

Decades ago, liberals were the self-actualizers, now self-actualization has become appropriated by conservatives, in particular by neo conservatives. Like the agrarians of the Old Right, welfare liberals and civil libertarians (as opposed to neo liberals) want to cling to the old ways of life in the face of unrelenting prosperity and innovation. When you have some cool technology like Tesla or Facebook, without fail, its the left that has the most vocal criticism over the potential displacement of overpaid jobs, alleged crony capitalism, pollution, loss of privacy, etc. For everyone who creates, there’s a lib wanting to tear it down. The tradeoff between improved living standards and more productivity versus disruptions of the old ways of doing things is worthwhile one.

The good news is with stocks surging and the economy of Silicon Valley booming, the left is losing their war on success. With the ever-growing wage premium on high-IQ and test scores, they are losing their war on individual exceptionalism. And with America still the most important economy in the world with the lowest borrowing rates, the best consumers, the best stock market, the best fed and the best free market, they are losing their war on American exceptionalism, as well. On Wall St., in the tech companies, or on the research campuses, biology ultimately plays role in selecting who is admitted and who is rejected. How biology effects our life is inescapable, and from the moment conception, who we are cannot be changed, as much as the libs – in their war against biology and the troublesome inheritance – wish it weren’t so.

Some Thoughts About Future Technologies

The play was a great success, but the audience was a disaster. (Oscar Wilde)

As the S&P 500 closes at another record high, the celebration of wealth and intelligence become the new religion of America. Apple and Chipotle report yet another quarter of blowout earnings. Facebook earnings due tomorrow, which will also be blowout. The left is still waiting in vain for record wealth inequality to hurt the economy, yet it simply refuses to happen as everything keeps being better than expected. Liberals are like dinosaurs; they don’t yet know they are going to be extinct. Consumer spending not slowing down.

Facebook and Google will be the first trillion dollar companies, and eventually, within the next 60-100 years, complete construction of a ‘Matrix’ that will coincide with the transition to a type 1 civilization. It won’t just be these two companies; Tesla and Amazon, having both become immensely powerful, will lend a hand in the construction – with a handful of people being appointed the overseers or information overlords.

A hypothetical technology is the implantation of false memories and the ability to erase bad ones, although care must be taken to make sure the recipient of memory modification doesn’t become aware of the inconsistencies between his new memories and real life. For example, if someone’s house burns down you can run a memory implant to make the person forget that his house burned down, but then you have to implant a new memory to account for the house being missing. Super computers can run simulations to try to come up with the best ‘chain of events’ to create a memory that optimizes the happiness of the recipient, with the fewest possible logical inconsistencies.

Eugenics also hold promise to slowly phase out less economically useful people and promote the reproduction of individuals with desirable traits, but not surprisingly, political and ethical hurdles make even considering, let alone applying eugenics, a long shot. When you mention Eugenics to republicans they tend to invoke the tired argument that the liberals like Sanger pioneered eugenics which inspired the Nazis, but even if this is true, the argument is irrelevant. The libs of today have completely renounced their earlier ties to eugenics and want nothing to do with it, or anything to do with heritability as it applies to things like crime, intelligence, education, or income. Eugenics could be marketed to republicans as a way to curtail crime and entitlement spending. Second, eugenics doesn’t have to be inhumane. It could as harmless as offering monetary incentives for low quality individuals to not procreate, or making welfare benefits contingent upon birth control. The first step would be an educational campaign to make the concept of eugenics palatable to the public, and then offering various proposals.

It’s inevitable America will adopt a eugenics program within the next fifty years to address the growing entitlement problem. Don’t believe me? People didn’t believe me when I said stocks would keep going up, that there would be no hyperinflation, or that Facebook would recover from its overblown IPO blunder to eventually double in value.

Bill Ackman and Herbalife

Cockroaches Bill Ackman and James Cramer are attacking Herbalife again.

Hedge fund manager Bill Ackman said on CNBC today that he would give the “most important” presentation of his career on Tuesday when he unveils an investigation into Herbalife’s nutrition clubs.

In December 2012, Ackman, who runs Pershing Square Capital, gave a 342-slide presentation publicly declaring that he’s shorting Herbalife — a multilevel marketing company that sells weight-loss shakes and nutritional supplements.

But didn’t he have two years to make his case, and he’s still underwater on his position. Odds are, he’s played his hand and he has nothing but smoke and mirrors.

Affiliate and MLM marketing is not illegal – many companies use recruiting to increase sales. Liberals like Ackman and Cramer are just attacking another great American success story. Their political party cannot create wealth, it can only spread or destroy it.

The worst that will happen is Herbalife will get a slap on the wrist, possibly by having to make some subtle changes to their marketing techniques and paying a small fine. Most likely, the SEC and FTC will give the ‘all clear’ and the stock could possibly surge 40% or more. Even with a fine, the stock will still respond favorably, because the worst is over. The major tobacco companies, for example, survived and thrived after years of litigation and fines. Again, MLM is not illegal, with the FTC only going so far as recommending that people avoid such schemes. Furthermore, there is no law that prohibits a company from profiting from the infinite resource that is human stupidity.

As Herbalife fights these charges, Ackman and his accomplices will continue to twist and squirm like the injured cockroaches that they are, until they are finally put out of their misery.

Some Ideas to Reform Education

The left sorrowfully clings to their cheese in the wake of tectonic economic changes. Incapable of adapting, they complain that they cannot keep their old, economically inefficient way of life, that there is too much debt, that stocks are a bubble, interest rates are not high enough, or not enough good paying jobs are being created.

People are getting richer and smarter than ever. America is becoming Richistan. Smart, high-IQ people have and will continue to reap most of the economic gains. Get a STEM degree, learn to code apps, buy stocks, buy real estate in good areas like the Bay Area, Washington DC, Aspen, Orange County, Long Island, Seattle, and Manhattan. Become a technology or a defense lobbyist.

We, the American people, need to come to terms with the reality that in our super-competitive economy where productivity is paramount, not everyone who wants a job will be able to obtain one, even among the educated. The problem is our education system is setting unrealistically high expectations for the millions of dull students that are churned through the high school diploma mill. Upon graduating, they forget most of what they have learned, and because they aren’t that smart, they don’t complete college, nor do they have the capability of self-learning programming or some other high-paying skill. So unless these millions of dull young adults find low paying service sector work, they will probably be unemployed most of their life and a drag on society.

George W. Bush infamously asked, “Is our children learning?” Now the question is, is our children learning the right stuff? To answer this, we propose overhauling the k-12 curriculum by splitting it into two groups: the dullards and everyone else, with special classes for the former and regular classes for the later. Of course, schools already have various special ed and gifted programs, but the difference is that after a certain grade level, we stop teaching the dullards a normal education and instead focus on teaching them how to create economic value. Second, to raise revenue and teach these value-centric skills, the public schools partner with various private companies.

For example, schools should partner with Fox News to broadcast all day, every day, year round patriotic, pro-growth messages. For the dullards, Facebook and Snapchat could offer classes on how to take selfies and upload them (although everyone is encouraged to join).

Maybe Hasbro and Mattel can offer a ‘class’ to teach kids persuasion techniques to get their parents to buy the latest toys.

For low-scoring girls, make Keeping up with the Kardashians required viewing. Same for the popular Kim Kardashian app. While lacking in educational value, these activities create more economic value than a typical overpaid job, and for low-IQ students, it’s the best they can aspire to.

Challenging economic times call for unorthodox solutions. Another idea is that the unemployed could partner with Google to click Google ads. At the end of every month, an audit is done to see if the ads are being clicked, and if so, the unemployed are given a small amount of money.

Thee are just some rough ideas, but it’s better to teach good consumer spending habits and pro-growth values than waste time and money teaching subjects that will be of no use and will go in one ear and out the other.

Some Thoughts on Investing, Investor Exceptionalism, Emerging Markets, Bubbles, and Debt

Theodore Dalrymple of Taki Magazine wrote an interesting article about investing. A passage that stood out:

In this life I entrust my savings, such as they are, to advisers, in the hope that they are not of the Bernie Madoff school of finance and investment; but for all I know, or can be bothered to find out, they may be.

I suppose the only way to eliminate that risk is to manage it yourself. It’s pretty easy to do. Also, after taking into account the fees, it’s unlikely the manager can beat the S&P 500, but I also don’t know what your financial objective is, either. However, pretty much any investment strategy- from conservative to aggressive – can be replicated with a retail brokerage account using stocks, options, futures, and ETFs. The advantage is no one will run off with your money and much less fees. For example, the founder of the Grey Enlightenment makes roughly 50% a year selling volatility hedged with Russell 2000 puts and does it all from a retail brokerage account.

For the foreseeable future, the market will keep going relentlessly higher, with only brief pauses along the way. With the exception of moral decay, we’re living the greatest of times, at least as measured by wealth creation and prosperity, even if relatively few can participate in the gains.

If you haven’t already seen it, this tedx talk on the validity of standardized tests should restore your faith in the markets and America. The market keeps going up because of the economic value created by smart people and to reward the smart people for the value they create. Economic policy is designed to make the successful more so, to advance technology, as well as America’s global economic hegemony. Do you really want to bet against the high-test-scoring geniuses and the policy makers that are subservient to them? Or bet against the U.S. consumer? I sure as hell don’t. Those who did in 2009 lost their shirt, as I recall.

Judging by some of the comments in the Taki article, it seems many don’t have much faith in the financial services sector. Not much different than NYT or Huffingtonpost ‘they are all crooks’ or ‘the market is rigged’ type comments. When people say the markets cannot be predicted, that long-term superior returns are not possible, or that prognosticators are useless, I say ‘bullshit’. To be dismiss all forecasting as voodoo is just the lazy, anti-intellectual approach that appeals to the likes of Taleb or Gladwell, who assume investors are irrational and cannot beat the market. In the same way ‘blank slate’ liberals deny individual biological exceptionalism or America’s exceptionalism, they deny that exceptional investors can exist, or that some people can consistently beat the market on skill, not luck. The left attributes exceptional returns to insider trading, crony capitalism, some unfair environmental advantage, or just plain luck – never innate skill. There are many instances of funds that have beaten the market over the long run – two notable examples being the Soros Quantum Fund and the Renaissance Technologies Medallion Fund. There are many people who trade options and post consistent gains. On stocktwits there two people I follow that have made a killing trading options in the various high-growth stocks like Tesla and Priceline, and they keep doing it over and over. Just like some people have an innate, biological knack for math and science, some people are better able to read and time the markets.

Some things are easier to predict than others. For example, predicting the direction of the market is not that hard. Plot the past 50 years of the S&P 500. It mostly goes up, with some hiccups along the way.

It’s generally accepted stocks tend to rise on fundamentals, and since the U.S. has better fundamentals than emerging markets, then we can infer that buying U.S. equities would be a better bet than buying foreign equities. It’s like putting your money on the horse that always wins. The ROI, obviously, will not be as great as the underdog, but the risk-adjusted odds of simply making money are better.

Furthermore, a lot of investors make the process needlessly complicated by taking on too much idiosyncratic risk. They want to beat the market, so they speculate in small cap stuff that has high beta. The problem is, these small companies carry idiosyncratic risk (company risk) that can result in major under-performance, even in a bull market. If you’re gonna buy individual stocks, buy companies that have impassable moats, scant competition, huge growth, and very large market caps – my favorite stocks that meet this criteria are Google and Facebook. If you want greater returns, use some leverage in the S&P 500, because you are still following the market and there is no idiosyncratic risk.

Another common theme in the comments as well on other sites such as Captain Capitalism is that the U.S. economy is in a monetary bubble that is on the verge of collapse. The system won’t explode because it’s blessed by the smartest minds in the world. Also, America is a safe haven, so if things start to get rocky, money will inflow into treasuries, which eliminates the fear of hyperinflation so many fear. Ironically, the fear of hyperinflation will be deflationary, although this only works for large economies with reserve currency status such as Japan and the U.S. There really is no crisis since the treasury can roll over its maturing debt indefinitely. As shown below, the good news is interest payments as a percentage of GDP is very low:

More GDP growth would make it worse because it would increase borrowing costs, due to rising rates. It’s better to have cheap money to fuel M&A and buybacks than too much employment and economic growth.

Also, the U.S. dollar has outperformed most currencies since 2009 and, over the past 100 years, is one of the few currencies to not be completely destroyed by hyperinflation. The dollar technically may have ‘lost’ 90% of its value since the 1900′s, but a dollar has much more utility as well. Realfactbias.blogspot.com does a good job debunking this myth:

Let us take at the period from 1913-2006, where we have complete data. So what do they mean, when they say the dollar lost 95.1% of its value in those 93 years? Essentially, an average good/service that cost $1 in 2006, used to be priced at 4.9 cents in 1913. In other words, the average price level of goods/services increased by 1930% since 1913. True, but guess what, average earned income increased by 6560% during the same time period. Average earned income rose from $740/yr in 1913 to $49,300/yr in 2006. Adjusting for inflation, $740/yr in 1913 is $15,000/yr in 2006 dollars. Average incomes, not only kept pace, but beat price inflation by 230%.

All of south America, most of the Middle East, Africa, Russia – all have political instability and or lots of inflation. Turkey had to cancel its old currency in 2005 because its Lira become toilet paper. Another example, Russia, like many developing economies, has a long history of hyperinflation and political upheaval, which creates a lot of risk, that in my opinion, even a very low PE ratio is insufficient to overcome. In 2008, Argentina nationalized savings accounts. Now they are defaulting again. Last year, Cyprus gave bank depositors a 10% haircut. The Venezuelan Bolívar is in the toilet, having lost some 97% of its value relative to the U.S. dollar:

Predicting bubbles has become the new pastime of the commentariat. Liberals said the Facebook IPO was for suckers at $38, now, just 2 years later, the stock is at $68. So much for that ‘obvious’ bubble. How about twitter, which they said was a bubble in 2008 and now is worth over $25 billion. Same for Snapchat, Uber, Instragram, and many more. Even if the valuations are overextended, they have risen so much since being labeled a bubble, the term has no predictive value and, for all intent and purpose, is meaningless. It’s become the reflexive explanation for any asset that is rapidly rising.

It’s the reactions to the perceived bubble that has political connotations. To free market capitalists such as myself and others, a rapid rise in asset prices is a function some sort of supply and demand and should be let alone. The left, on the other hand, sees it as unsustainable and wants to take preemptive action to stop it, so that people don’t get ‘burned’. From years of observation, I’ve noticed a tendency among leftist types to call everything either a bubble or a crisis, and to dismiss the people who invest in these appreciating assets as ‘irrational’. The perfect investment for liberals is collecting pennies in water jugs because, after 100 years, you still have the name amount of money, precluding the possibility of any bubbles or irrationality. It’s rumored the liberals have so many pennies stockpiled – dating as far back as the 1800′s – that if they were all spent today, the fed would have to raise rates tomorrow. Liberal babyboomers will bequeath trillions of pennies to their children, possibly spurning the greatest economic boom, the likes of which have never been seen before.

Grey Enlightenment vs. Dark Enlightenment

The ‘Grey Enlightenment’ is similar to the ‘Dark Enlightenment’ in terms of its belief in biological determinism and the social hierarchy or caste system that arises from it, which goes against the welfare liberal ideal of egalitarianism. We differ in that our approach is more descriptive (positive) than prescriptive (normative), as well as taking a more pragmatic approach that maximizes utility and economic flouring for the top 1%, or what we call the smarties or cognitive elite. The society we envisage though these posts is inevitable or already occurring; we’re merely bearing witness to the unfolding of events, or the world as it is – with some suggestions on how to make it better such as adoption of eugenics. However, we believe America will adopt a eugenics program within the next fifty years to address the growing entitlement problem, without the need for a revolution – although implementing such a program now would be better than waiting.

The Dark Enlightenment generally opposes the mixed economy and democracy and wants to upend the entire thing, to be replaced with a ‘neo autocracy/monarchy’. To some extent, that’s where society is headed; no revolution or ‘end times’ is necessary, and only the naive believe America is or was ever a democracy, so there is no need to expunge something that only exists as a figment of the imagination. The ‘cathedral’ of liberalism and moral decay, while possibly irksome, doesn’t hinder the ambitions of the cognitive elite. The Dark Enlightenment would lump social media such as Facebook, Instagram, and Twitter and most TV programs in with the ‘cathedral’ and should be purged. We argue there are benefits to placating large portions of the low-IQ population with easily digestible entertainment – most notably, a lessened likelihood of revolt.

Essentially, the major difference between the two ideologies is that the Dark Enlightenment seeks revolution to change the fundamental institutions of society, whereas we want to keep the status quo, albeit with gradual changes along the way. Being a ‘member’ of the Grey Enlightenment doesn’t require much commitment or undertaking a large ideological leap of faith because it’s very similar to the society we have today, and most of our ‘beliefs’ are self-evident.

As an example of the differences, the fed and most forms of centralized government are anathema to the ‘reactionary right’; however, from a pragmatic/utilitarian perspective, we (Grey Enlightenment) argue that the 2008 bank bailouts and the various QE programs that followed were a success and a necessity, by creating an environment conducive to the creation of wealth and the flourishing of the cognitive elite. In a technocratic form of manifest destiny, in behooves policy makers to create policy that enables the best and the brightest to fulfill their full biological potential or destiny; the bank bailouts accomplish this – in addition to deregulation, low taxes, low interest rates, and QE. Six years later and stocks keep going up; no doubt the bailouts helped. Silicon Valley is the center of the universe. Home prices in the Bay Area keep going up. TARP was fully repaid as early as 2011, and the treasury turned a profit. As measured by subsequent gains in the stock market, real state, and overall economic activity – both and the US and abroad, one could argue that the bailouts had the best ROI of any government program.