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Catching a Falling Financial Knife

NO - A Profound Exercise of Freedom

Politics / Financial Markets 2012 Jul 01, 2012 - 02:15 AM GMT

By: Barry_M_Ferguson

Politics

Best Financial Markets Analysis ArticleFrom Dictionary.com, the word ‘no’ means ‘a negative used to express dissent, denial, or refusal, as in response to a question’. It seems to be such a simple word. But, the power of ‘no’ is lost on modern society. The ability to exercise the word ‘no’ is a profound exercise of freedom. If we can’t say ‘no’, then we have no freedom. Slaves cannot exercise the word ‘no’.


The month of June has ended and with it, a little more freedom has been conceded. We should all be ashamed because future generations will look back at ours as one of cowardice. We surrendered when we should have stood strong. We buckled when we should have bucked. We conceded when we should have been courageous. Let history record the truth.

The freedom to say ‘no’ is what gives balance to economies and free people alike. It is fairness and truth. When prices for a good or service rise to a point where that good or service is no longer affordable, consumers say ‘no’ to the higher prices by closing their wallets. They stop buying that product. The makers of the product then have to find a way to lower the price or go out of business. They must become more efficient. If they lower the prices and demand is still solid, eventually the lower prices make the product once again affordable. This is the way a free market works. This is capitalism. The scales of freedom are calibrated to the effective degree of expression of the word ‘no’.

In June, 2012, the US Supreme Court validated the supposed constitutionality of a government regime’s ability to require its subjects to buy health care insurance coverage. ‘No’ is no longer an acceptable response. In reality, the US will now institute a nationalized health care system that will be funded with a new tax that working subjects will pay. They cannot say ‘no’ regardless of price. Proponents of the idea insist that somehow someway this new health tax will lower costs of medical care and premiums for everyone will decline. I don’t know what these people are smoking but I would like to get some of it, you know, on a prescription basis, and let the rest of you pay for it. As many people back in the ’70’s used to say, ‘That must be some good s#%&’!

Beyond the argument over medical care, we should all be concerned with freedom. As I wrote when the so-called ‘Obama-care’ universal health care legislation was proposed, let’s be honest and call this a ‘tax’. A service will be provided, it will be administered by the government, and it will be regulated by the IRS. This is a tax. Period. And yes, the Supreme Court ruled it to be a tax as well. One would have to be a stupid cousin of Pelosi to even confuse this issue with real health care. T-A-X. It is a TAX!! And, we all know that when the government institutes a new tax, that tax rate only goes up. It never goes down.

It seems to me that as we move into the month of July, we should reflect upon Independence Day very solemnly. Our founding fathers gave birth to our country in large part because they wanted to exercise the freedom to say ‘no’ to taxes extracted by the British government from the new colonies. It didn’t seem fair to our forefathers that the sweat and toll of those who produced something in this new part of the world should be forced to give up part of their earnings to a government that no longer offered any representation. And now we turn our backs on our forefathers as we roll back the hands of time. We are surrendering freedom to a government that grows more powerful and more intrusive by the day. This Independence Day should be a day of shame as we again, refuse to exercise the freedom of the word ‘no’.

When we lose the power of the word ‘no’, we lose the ability to control prices. Health care costs have been rising at a rate much higher than the gooberment’s concocted inflation numbers and will likely continue their rise. Why? Because the root of inflation is the same root that poisons freedom. The central bank has always been a destructive force on the value of a nation’s currency. The central bank gains power by taking ours. The central bank gains assets by taking ours. Andrew Jackson knew this and he told us so. He protected his, and future generations, in one of the greatest acts of patriotism ever witnessed by annulling the central bank’s charter in 1832. But we are weak and growing stupider by the generation.

As the central bankers have pilfered the treasures of a nation, they have learned a few tricks over the years. In present day, as long as the Dow Jones Industrial Average rises, the subjects of the regime will not protest a bridle in their mouth nor a yoke around their neck nor a whip across their back. The Federal Reserve’s PPT virtually insures that any slip in the Dow will be met with a furious rally. And so it was on Thursday, June 28, 2012. Europe was desperately trying to avoid the inevitable bankruptcy of her sovereigns, JP Morgan admitted that the $2 billion in losses announced last month were really more like $9 billion and counting, Barclay’s was just fined $454 billion for LIBOR rigging, Q1 economic growth was not a strong as originally lied about, consumer spending was slowing, the Supreme Court had just given the US regime the okay to implement a massive new health care tax, and understandably, the Dow was down 170 points by 2:30 PM. No matter. A rally burst forth in the final 90-minutes of the day to leave the Dow down only 30 points.

If we really want to live freely, we should be allowed to set prices for everything including stocks. When we all felt prices were too high, we should be able to exercise the power of ‘no’ by selling stocks. But we aren’t allowed to do that and prices are never allowed to be fairly adjusted. The central bank always stands ready to launch a rally. After all, they don’t have to use their own money. Certainly part of this rally was based on the news out of Europe that the European Union had solved all of their member debt problems with the waving of the central bank magic wand. They announced that all the banks that lost all of their money trading derivatives would now be recapitalized. The EU announced an ESF or an ESN or CON or a RUSE or an ESPN or something with an ‘E’ in it to produce trillions of euros for cash starved banks. Did it bother anyone that Europe has been grappling with debt problems for several years and has yet to do anything meaningfully helpful? Yet now, coincidentally as second quarter was ending and the Dow was fading, they put forth a magic solution of sorts. Just in time to save the euro, the EU, and the Dow! Well, in truth they only acted to save the big banks in Europe and also to spur on a rally in stocks.

The month of June was positive for the Dow basically thanks to two trading days. The third day of the month gave the Dow a 2% gain due to rumors about Fed stimulus. As the Dow turned weak in the second half of the month, the PPT instigated a 150-point rise in the last 90 minutes of the next to last day of trading. Then the wondrous announcement from the EU supplied the Dow with a 270 point, 2.2% rise in the final trading day of the month/ quarter. This action was almost enough to erase all of the losses for the quarter. All stock gains are now tied to rumors of, or actual announcements of, central banker stimulus. Hurray for freedom to set prices ourselves!!

So I ask again. Why aren’t investors allowed to set prices for stocks? Why do central banks intervene so often? Are we so devoted to the Dow that we are willing to surrender all freedom so the central bankers can rig the indices higher only to make our new-fitted bridles and yokes more comfortable? Will it be worth it if we surrender all our freedoms in exchange for a new high on the Dow? Are we willing to put the word ‘no’ on the profane list?

Yes. Uh, I mean, ‘yes master’. Of course, we are willing slaves. Just as long as the Dow goes higher we will accept anything from the regime. We won’t argue with higher prices for anything. For example, on the last day of June 2012, the euro-banks got their bailout promise, stocks enjoyed a serious rally, and consumers were rewarded with a 7.9% increase in the price of West Texas Crude. Hip-hip-hur..., what?

For all the people as dumb as a Pelosi, here is the way it works. Elite banksters, suddenly insolvent from speculative derivative trading, get rewarded with bailout money siphoned from the treasures of taxpayers by central bankers which in turn inflates prices for stocks and everything else including oil so that the woefully ignorant subjects of the land lose the power of ‘no’ in setting prices and wind up paying 10% more for oil. Don’t cry - the Dow Jones Industrials went up too!

What are we going to do about it anyway? We don’t control prices anymore since we relinquished control of the word ‘no’. Besides, the current regime has promised that health care costs will fall anyway. What are we worried about?

My friends, we have taken the first few steps down the slippery slope of Mount Enslavement.

So let’s fire up the barbecue, wave our flags, and celebrate Independence Day. The Federal Reserve and the European Central Bank have the Dow moving higher now. They certainly set the prices for bonds. Now they set the prices for stocks. Investors and citizens have surrendered the power of ‘no’. That little word is the ultimate expression of freedom. What are citizens in the US supposed to celebrate again on July 4? Independence? Independence from what?

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
Primary Tel: 704.563.2960
Other Tel: 866.264.4980
Industry: Investment Advisory
barry@bmfinvest.com
www.bmfinvest.com
www.bmfinvest.blogspot.com

Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

© 2012 Copyright BMF Investments, Inc. - All Rights Reserved
Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented.


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