Kevin Duffy on the prevailing buy-the-dip mentality

ETF flows show no sign of panic, in fact the opposite.  It’s as if investors have been conditioned by 9 years of false alarms to rush into a burning building.

~ Kevin Duffy, October 30, 2018

Kevin Duffy on Alan Greenspan, the enabler of all of the problems he sees today

To the editor,

This was quite a revealing interview; thank you for bringing it to us.  It is a good example of how politicians can become more honest the further removed they are from office and closer to meeting their maker.  Greenspan was quite frank about serious problems like entitlements, lack of savings, trade wars, budget deficits, price inflation and a bond bubble.  However, he was less honest (with himself) about his own role in enabling these: first, heading a commission to “fix” Social Security which expanded payroll taxes and second, presiding over a Federal Reserve that suppressed interest rates and created moral hazard (the “Greenspan put”), resulting in asset bubbles and a “Too Big to Fail” banking crisis.  Worse, his short-term success was endorsed by Milton Friedman in 2006 and central bankers all over the world copied his easy money policies, fomenting the “everything bubble” and enabling a global debt buildup unparalleled during peacetime.

While Reshma Kapadia admitted that the financial crisis “cast a more critical light on Greenspan’s tenure of low interest rates,” she unfortunately added the bromide, “and his faith in the market’s ability to self-regulate.”  Interest rates are the ultimate regulator of time preference, rewarding savers for their willingness to defer consumption and invest in greater production in the future.  By setting non-market rates below their natural level, Greenspan discouraged savings and sapped productivity, the very things he worries about.  Let’s be clear: central banking is at the root of our economic ills today, not free markets.

~ Kevin Duffy, letter-to-the-editor sent to Barron's, but never published, October 21, 2018

Kevin Duffy on why Henry Paulson failed to fix the financial system in 2008

To the Editor,

In his recent interview (“’I had to deal with raw fear’,” September 17, 2018), former Treasury Secretary Henry Paulson claimed, “The timing, cause, and severity of the next financial crisis are impossible to predict.  Of course someone will get it right and will be credited with doing so, but he or she won’t spot the next one.”  Having warned about the late ‘80s Japan bubble, late ’90s tech bubble and mid ‘00s credit bubble (“For Whom Do the Bells Toll?,” June 18, 2007), I’ll take that as a challenge.  The root cause is always artificially low rates set by central banks.  Since this period of low rates was longer (7 years vs. 2 ½ from 2002-04), deeper and more global, the next crisis will be more widespread and prolonged.  As for timing, it’s anyone’s guess but with rising rates, narrowing leadership (just 5 of 35 country stock markets up on the year), investor euphoria (record low cash levels at Schwab), and wild speculation (first cryptocurrencies, now cannabis stocks), the lights are flashing red.

There are plenty of areas of fragility.  Within the U.S., since the end of 2008 student loan debt is up 127%, auto loan debt 57%, corporate debt 76%, public debt 98%.  Margin debt has more than tripled.  Outside the U.S., Canada and Australia are experiencing housing bubbles while emerging market debt has gone from 110% of GDP to 194% according to the Bank for International Settlements.  Other potential landmines: Chinese corporate debt has increased by 64% of GDP, Italian government debt by 40% of GDP, and Japanese government debt by 61% of GDP.

Unlike the tech and credit bubbles, which were sector-specific, the bubble today is in “everything.”  This is the true legacy of Paulson, Geithner, Bernanke, Frank & Co.

~ Kevin Duffy, letter-to-the-editor sent to Barron's, but never published, September 21, 2018

Larry Kudlow on the economic boom (2018)

The economy is in terrific shape. We are in an economic boom. People thought it would be impossible. The reality is we are clicking on all cylinders. They are absolutely crushing it, profits are rising, confidence is up, blue-collars are up, wages are up.

~ Larry Kudlow, Fox News interview, October 14, 2018

Benjamin Franklin on democracy and liberty

Democracy is two wolves and a lamb voting on what to have for lunch.  Liberty is a well-armed lamb contesting the vote.

~ Benjamin Franklin

Grant Williams on crying wolf

Just like the wolves in Aesop's fable, the dangers facing financial markets, and indeed the entire world, are very real indeed.  But those who have been warning about them have been made to look foolish by the continued intervention by the central banks for a decade now.  That doesn't mean the dangers aren't there, it just means people are sick of hearing the word "wolf."

~ Grant Williams, keynote speech, October 1, 2018

Tom Woods on the importance of economics to studying history

If you're looking at history and you don't understand economics, then what are you going to do?  Are you just going to repeat what the textbook says about the Great Depression?  Well, how do you know if the textbook is right?  Just because it's the textbook?  What kind of thinking is that?  It's deeply irresponsible not to know economics, especially if you're going to be in history.

~ Tom Woods, "Tom Woods: The Libertarian Face of New Media," The Austrian, September/October 2018

(interview with Jeff Deist)

Kevin Duffy on the current boom-bust cycle

If booms hide a multitude of sins, hell is about to get crowded.

~ Kevin Duffy, October 5, 2018

Lew Rockwell on tax reform

Is there a need to reform taxes?  Most certainly.  Always and everywhere.  You can always make a strong case against all forms of taxation and all tax codes and all mechanisms by which a privileged elite attempts to extract wealth from the population.  And this is always the first step in any tax reform: get the public seething about the tax code, and do it by way of preparation for step two, which is the proposed replacement system.  Of course, this is the stage at which you need to hold onto your wallet.

~ Lew Rockwell

Lew Rockwell on the greatest enemies of freedom

Let me state this as plainly as possible. The enemy is the state. There are other enemies too, but none so fearsome, destructive, dangerous, or culturally and economically debilitating. No matter what other proximate enemy you can name – big …business, unions, victim lobbies, foreign lobbies, medical cartels, religious groups, classes, city dwellers, farmers, left-wing professors, right-wing blue-collar workers, or even bankers and arms merchants – none are as horrible as the hydra known as the leviathan state. If you understand this point – and only this point – you can understand the core of libertarian strategy.

~ Lew Rockwell

Lew Rockwell on conservatism

What does conservatism today stand for?  It stands for war.  It stands for power.  It stands for spying, jailing without trial, torture, counterfeiting without limit, and lying from morning to night. …  There comes a time in the life of every believer in freedom when he must declare, without any hesitation, to have no attachment to the idea of conservatism.

~ Lew Rockwell

Kevin Duffy on Social Security

The boomers didn't have enough kids to keep the Ponzi going.

~ Kevin Duffy, September 30, 2018

America's Light Leads Her
Generations Onward

Kevin Duffy on the legacy of the 2008 financial bailouts

In his recent interview in Barron's (“Hank Paulson Says the Financial Crisis Could Have Been 'Much Worse’,” September 17, 2018), former Treasury Secretary Henry Paulson claimed, “The timing, cause, and severity of the next financial crisis are impossible to predict.  Of course someone will get it right and will be credited with doing so, but he or she won’t spot the next one.”  Having warned about the late ‘80s Japan bubble, late ’90s tech bubble and mid ‘00s credit bubble (“For Whom Do the Bells Toll?,” June 18, 2007), I’ll take that as a challenge.  The root cause is always artificially low rates set by central banks.  Since this period of low rates was longer (7 years vs. 2 ½ from 2002-04), deeper and more global, the next crisis will be more widespread and prolonged.  As for timing, it’s anyone’s guess but with rising rates, narrowing leadership (just 5 of 35 country stock markets up on the year), investor euphoria (record low cash levels at Schwab), and wild speculation (first cryptocurrencies, now cannabis stocks), the lights are flashing red.

There are plenty of areas of fragility.  Within the U.S., since the end of 2008 student loan debt is up 127%, auto loan debt 57%, corporate debt 76%, public debt 98%.  Margin debt has more than tripled.  Outside the U.S., Canada and Australia are experiencing housing bubbles while emerging market debt has gone from 110% of GDP to 194% according to the Bank for International Settlements.  Other potential landmines: Chinese corporate debt has increased by 64% of GDP, Italian government debt by 40% of GDP, and Japanese government debt by 61% of GDP.

Unlike the tech and credit bubbles, which were sector-specific, the bubble today is in “everything.”  This is the true legacy of Paulson, Geithner, Bernanke, Frank & Co.

~ Kevin Duffy, September 21, 2018

Tony Robbins on stock market corrections (2018)

When we hear about the possibility of a correction or a crash or a crisis, it’s easy to become anxious because it sounds like the sky is about to fall. And we’re in our ninth year so there’s going to be a correction. But corrections are just a routine part of owning stocks. Instead of living in fear of them, accept them as regular occurrences.

Historically, the average correction has lasted only 54 days—less than two months! Most corrections are over before you know it, and they’re relatively painless. In fact, less than 20% of all corrections turn into a bear market. When the market starts tumbling, people let their fear take over and begin to sell. But the biggest danger isn’t a correction or a bear market, it’s being out of the market. When the next crash comes, it truly is an opportunity for investors to leapfrog from where they are to wherever they want to be financially.

~ Tony Robbins, "Tony Robbins talks about facts, fear and the bull market," MarketWatch.com, October 2, 2018