Category: politicians

Mixing politics and capital preservation

We’d like to say a few words about two topics: economics and politics. (Unfortunately, the two are intertwined.) As our clients are well aware, we believe strongly in having a sound intellectual foundation to help us filter information and base our investment decisions, thus the choice of “bearing” as our company name. Our compass is Austrian economics which essentially sees government intervention as the greatest threat to your wealth. In contrast, nearly every politician who ever walked the earth is an interventionist and a promoter of Santa Claus economics. Not surprisingly, in this country the size and intrusiveness of government has inexorably grown under both Democrats and Republicans.

During this presidential election, we find ourselves on unfamiliar ground: willing to endorse a candidate wholeheartedly. Ron Paul is a long-time student of Austrian economics. How do we know? He has written several books on the subject. He speaks at conferences (we’ve listened to him several times). He mentioned Austrian economics as his inspiration behind getting into politics while Jay Leno’s guest on The Tonight Show.

Ron Paul understands the two greatest threats to your wealth (and liberty): the Fed and war. He is the only candidate who has consistently opposed both on principled grounds. His message is resonating on college campuses, of all places. “Here’s a man who served his country in the Air Force, delivered thousands of babies, has been married to the same woman for 50 years, has never taken a congressional junket, has never voted to raise taxes, has never voted for an unbalanced budget, refused to take a congressional pension, voted against the Iraq War, and returns some of the money given to him to run his office in Washington back to the Treasury every year,” to quote a good friend and local history professor. Yet the mainstream media takes every opportunity to smear him or ignore him – the ultimate endorsement.

Ron Paul is 72 years old. This is a rare opportunity that may not come along for quite some time. Heaven help us if we squander it.

Lone voice of reason

There was one exception yesterday to the cacophony of easy credit addicts and economic illiterates, Congressman Ron Paul:

America ‘s economic difficulties, especially the problems in the housing market, are the direct result of the Federal Reserve’s inflationary policies. While prices for gold, oil, and staple commodities continue to rise, the purchasing power of the dollar for all Americans continues to fall.

Inflationary monetary policies created the problems in the economy we are seeing, and these problems will be made worse, not better, by more inflation. And today’s action by the Fed is very bad news for American workers and retirees who are about to get hit with yet another jump in prices.

Make no mistake, the problems faced by the American people are not caused by unscrupulous mortgage brokers or the rising price of oil. These are symptoms of an economic disease caused by a spendthrift Congress enabled by loose monetary policy. Too many pundits praise the weak dollar as benefiting exporters, but they fail to see the harm done to thrifty, hard-working Americans.

Rather than continuing to pursue a policy of easy credit and increasing debt, we need to return to a sound monetary system.

The entire country loses its bearings and a politician, no less, is one of the few tethered to reality. Go figure.

Mozilo goes from housing hero to SEC probe

As MSNBC reported, Countrywide Financial’s not exactly press-shy CEO Angelo Mozilo is under investigation by the SEC for allegedly abusing a trading rule that allows executives to buy and sell their own stock without violating insider trading laws:

Mozilo sold some $130 million in Countrywide stock in the first half of the year through a prearranged 10b5-1 trading plan. The plans, popular among corporate executives, allow a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of significant nonpublic information.

“We are making sure that a rule designed to help executives with a legitimate purpose is not being used for illegitimate purposes,” Linda Thomsen, the SEC’s enforcement director, said.

The action was encouraged by North Carolina state Treasurer Richard Moore, a slick politician with presidential hair who loves to be in front of a camera:

North Carolina state Treasurer Richard Moore last week asked the agency to investigate Mozilo’s stock sales. Moore raised questions about changes made to Mozilo’s plan in the months before the company’s stock plunged, allowing Mozilo to significantly increase his sales of Countrywide shares.

Moore, the trustee of a pension fund that holds about 500,000 shares of Countrywide stock worth some $8.6 million, said in a letter to SEC Chairman Christopher Cox that he was “shocked” to learn Mozilo “apparently manipulated his trading plans to cash in” as the crisis involving high-risk mortgages was heating up.

“As one of many investors who have felt the painful losses in Countrywide stock, I am outraged at his manipulation of the system and this abuse of shareholders,” wrote Moore, a Democrat who is running for governor. “The timing of these sales and the changes to the trading plans raise serious questions about whether this is mere coincidence.”

Not only does Moore try to deflect blame for owning Mozilo’s brown smelly bag, he fashions himself and the SEC as the white knights riding to the rescue of the investor class:

Word of the SEC’s inquiry “is good news for investors and sends a clear message that the questions raised are serious,” Moore said in an e-mailed statement Wednesday.

My comments:

  1. Mozilo didn’t just slip off the Titanic this year. He’s sold over $400 million of his own stock over the past several years – all disclosed. Shame on Moore and the people running the NC pension fund for falling asleep at the switch.
  2. When Mozilo was a poster-child for “expanding homeownership, ” the political class and the financial media loved him. Now that his stock has been more than cut in half and the country’s largest mortgage lender is looking more like another Enron, the finger pointing is beginning.
  3. The entire political class is obviously guilty here: the Greenspan Fed for fomenting a housing bubble for the ages, the ill-conceived public policy of expanding “homeownership,” politicians running public pension money, and SEC bureaucrats claiming they can protect investors.

Austrian economics celebrates 25 year anniversary of its rebirth

We just returned from a weekend in NYC, taking the pulse of the Ron Paul campaign and the intellectual movement that spawned it – Austrian economics. The seeds of this movement were planted by Lew Rockwell 25 years ago when he founded the Ludwig von Mises Institute. Joining Rockwell at the beginning were Ron Paul, Mises’ greatest student – Brooklyn-born Murray Rothbard, and Mises’ widow Margit. Margit gave her blessing to the Institute as long as Rockwell promised to dedicate the rest of his life to the cause.

Through serendipity, I discovered the ideas of the Austrian school 18 years ago after watching Lew Rockwell defend Exxon in the Valdez oil spill on CNN’s “Crossfire.” Not too long after, Forbes ran articles about Rothbard and Friedrich Hayek, another of Mises’s students who received the Nobel Prize in 1974. The Austrian movement has grown exponentially since, reaching the mainstream financial press and either heavily influencing or providing the intellectual anchor for such independent financial thinkers as Jim Grant, Bill Fleckenstein, Paul Kasriel, Fred Hickey, Marc Faber and Fortune’s Peter Eavis.

The Mises Institute has always believed ideas matter and that an intellectual shift must take place before a political shift. In his lunch talk, Ron Paul believed the success of the campaign was a sign the seeds planted over the past 25 years were bearing fruit.

Probably the most obvious takeaway from this weekend was the number of bright young people involved, whether the large number of volunteers in the Paul campaign or those attending the conference.

The Paul campaign is across-the-board anti-state, which explains the cold shoulder he’s gotten from the mainstream media. Online, he is by far the most effective of the Republican candidates. In fact, the online response to the CNBC debate shows him winning in a landslide.

His message has been consistent on three fronts: individual liberty, free markets, and anti-imperialism. The failure in Iraq and encroachments on civil liberties with the passage of the Patriot Act have helped. So has the growth of the internet which opened decentralized information channels. If the credit bubble continues to unwind and the economy worsens, his economic message (anti-Fed, anti-Wall Street, anti-tax, anti-spending) will gain further credibility. Ron Paul is an unusual mix of populism with a sound economic foundation which has the MSM baffled. He is Scrooge while the other candidates play Santa Claus. Incredibly, when he speaks to college students he gets the most applause when criticizing the Fed! Students will even burn dollar bills. Bizarre – a politician who actually knows something about money and banking, and isn’t afraid to talk about it. When critics tell him these issues are too complex for the average person, he responds, “how difficult is it to understand counterfeiting?”

The big story here is the Austrian movement and the dedication of one man – Lew Rockwell – to its revival. As state intervention in the economy fails over the next decade, stock in the Austrian school will only go higher… much higher.

CNBC Republican debate: One beacon of truth in a sea of Machiavellian mediocrity

What a pathetic group of candidates. In the one-on-one interviews afterword, Larry Kudlow asked Rudy Giuliani if he’d take a no new tax pledge. Giuliani talked in circles and wouldn’t commit. Only one candidate named specifics – Ron Paul. In fact, if Kudlow hadn’t cut him short I’m sure he would have named even more government programs suitable for the ax. What really floored me was how Stephen Moore – formerly with supposedly fiscally conservative and quasi-libertarian Cato – said he wasn’t a fan of Congressman Paul. Huh? Let me get this right – every candidate is your typical tax and spend Republicrat and Moore is criticizing the only one with a) a long track record of voting against spending and b) the courage to announce real spending and subsidy cuts. Moore is either a phony or I’m missing something.

It was clear during the debate every Republican and Democrat candidate wants politics as usual – i.e. to play Santa Claus. The only one willing to be Scrooge is Ron Paul.

Of course, the Mainstream Media minimalized Ron Paul and focused instead on the front runners. The headline from the WSJ read “Republicans Spar on Economy. Giuliani, Romney Argue Over Spending Records;Thompson Joins Fray.”

Seeing Mitt Romney and Rudy Giuliani spar over their tax cutting and spending restraint credentials is like watching two sumo wrestlers debate over who makes fewer trips to the desert table. There is only one candidate truly on a diet, Ron Paul. As these MSNBC polls indicate, the online audience is apparently smart enough to tell the difference:

Sadly, there is little such hope for the MSM.

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