Groucho Marx on politics

Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.

~ Groucho Marx

(As quoted by Steve Berger in Mises University speech, "An Austrian Analysis of Covid Vaccines," 4:25 mark, July 27, 2023.)

Seth Klarman on investing

Investing is the intersection of economics and psychology.

~ Seth Klarman, interview with Charlie Rose, The Great Investors, 4:30 mark, July 9, 2023

Walter Block on prostitution

Some of these things should be stigmatized.  We shouldn't use heroin.  Heroin is not good.  I'm against using heroin and I'm against prostitution.  Look, I have a wife.  I have a mother; well, she's passed away.  I have a sister, a daughter.  I wouldn't want any of them to be a prostitute.  I think prostitution is very bad.  So I want it to remain stigmatized.  I want young people to be told, "Don't engage in prostitution.  There are better ways of relating with each other."  I'm sort of conservative in that way.  So I don't really want to destigmatize it, but I don't want prostitutes to be arrested, because that would violate the non-aggression principle.  I want to promote liberty.

~ Walter Block, "Defending the Undefendable - Walter Block Returns!," interview with The Politicrat, 12:30 mark

Murray Rothbard on freedom and virtue

To be virtuous in any meaningful sense, a man’s action must be free. It is not simply that freedom and virtue are both important, and that one hopes that freedom of choice will lead to virtuous actions.  The point is more forceful: no action can be virtuous unless it is freely chosen. 

Suppose, for a moment, that we define a virtuous act as bowing in the direction of Mecca every day at sunset.  We attempt to persuade everyone to perform this act.  But suppose that instead of relying on voluntary conviction we employ a vast number of police to break into everyone’s home and see to it that every day they are pushed down to the floor in the direction of Mecca.  No doubt by taking such measures we will increase the number of people bowing toward Mecca.  But by forcing them to do so, we are taking them out of the realm of action and into mere motion, and we are depriving all these coerced persons of the very possibility of acting morally.  By attempting to compel virtue, we eliminate its possibility.  For by compelling everyone to bow to Mecca, we are preventing people from doing so out of freely adopted conviction.  To be moral, an act must be free.

~ Murray Rothbard, "Frank S. Meyer: The Fusionist as Libertarian," originally published in Modern Age, Fall 1981, pp. 4-5

Murray Rothbard on the scapegoats of American society defended by Walter Block

All right, some readers might concede, we grant that these people [the pimp, prostitute, scab, slumlord, etc.] are performing valuable economic services.  Why is the pimp or the medical quack any more "heroic," and therefore in a sense more moral, than other, more respectable producers: the grocers, clothiers, steel manufacturers, etc."?  The explanation is precisely wrapped up in the extreme lack of respectability of Professor Black's scapegoats.  For the grocer, the steel producer, and the others are generally allowed to go about their business unmolested, and indeed earn respect and prestige from the fellow members of the community.  Not so these scapegoats; for not only are their economic services unrecognized, but they face the universal bile, scorn and wrath of virtually every member of society, plus the additional restrictions and prohibitions that governments have almost universally placed upon their activities.  Scorned and condemned unmercifully by society and state alike, social outcasts and state-proclaimed outlaws, Professor Block's collection of scapegoats go about their business nevertheless; heroically proceeding to confer their economic services in the teeth of universal scorn and outlawry.  They are heroes indeed; made so by their unjust treatment at the hands of society and of the state apparatus.

Heroes yes, but not necessarily saints.  When the author confers the moral stature of hero on the scab, the usurer, the pimp, and so on, he does not mean to imply that these activities are intrinsically more moral than any other.  In a free market, and in a society that treats the usurer, slumlord, and sweat shop employer precisely the same just way as it treats other occupations, they would no longer be heroes, and they would certainly be no more moral than anyone else.  Their heroic status, for Professor Block, is solely a function of the unjust restrictions that other men have been placing upon them.  It is the happy paradox of this book that if its implicit advice is followed, and the men and women described in these pages are no longer treated to scorn and legal coercion, then and only then will they no longer be heroes.  If you don't like the idea of a usurer or a slumlord being a hero, then the only way to deprive him of this stature is to remove the shackles that misguided people have placed upon him.

~ Murray N. Rothbard, forward to Defending the Undefendable (1976)

Walter Block on morality vs. the marketplace

This book does not claim that the marketplace is a moral economic institution.  True, the profit and loss business system has brought mankind a plethora of consumer goods and services unkown in the entire history of the world.  These benefits are the envy of all peoples not fortunate enough to live under its banner.  Given the tastes, desires, preferences of the ultimate consumer, the market is the best means known to man for providing for his satisfaction.

But the marketplace also produces goods and services – such as gambling, prostitution, pornography, drugs (heroin, cocaine, etc.) alcohol, cigarettes, swinger’s clubs, suicide abetment – whose moral status is, to say the least, highly questionable and in many cases highly immoral. The free enterprise system, thus, cannot be considered a moral one. Rather, as a means of consumer satisfaction, it can only be as moral as are the goals of the market participants themselves. Since these vary widely, all the way from the completely depraved and immoral to the entirely legitimate, the market must be seen as amoral – neither moral nor immoral.

The market in other words is like fire, or a gun, or a knife or a typewriter: a splendidly efficient means towards both good and bad ends.  Through free enterprise we are capable of achieving virtuous actions, but also their very opposite as well.

How, then, can we defend the immoral activitys of some market actors?  This stems from the philosophy of libertarianism, which is limited to analyzing one single problem.  It asks, under what conditions is violence justified?  And it answers, violence is justified only for purposes of defense, or in response to prior aggression, or in retaliation against it.  This means, among other things, that government is not justified in fining, punishing, incarcerating, imposing death penalties on people who act in an immoral manner - as long as they refrain from threatening or initiating physical violence on the persons or property of others.  Libertarianism, then, is not a philosophy of life.  It does not presume to indicate how mankind may best live.  It does not set out the boundaries between the good and the bad, between the moral and the immoral, between propriety and impropriety.

The defense of such as the prostitute, pornographer, etc., is thus a very limited one.  It consists solely of the claim that they do not initiate physical violence against non-aggressors.  Hence, according to libertarian principles, none should be visited upon them.  This means only that theses activities should not be punished by jail sentences or other forms of violence.  It decidedly does not mean that these activities are moral, proper or good.

~ Walter Block, Defending the Undefendable, introduction

Walter Block on protectionism

Protectionism is a misnomer.  The only people protected by tariffs, quotas and trade restrictions are those engaged in uneconomic and wasteful activity.  Free trade is the only philosophy compatible with international peace and prosperity.

~ Walter Block

Barron's on Jeff Bezos: "he's just another middleman"

The idea that Jeff Bezos has pioneered a new industry is silly.  He's just another middleman, and the stock market is beginning to catch on to that fact.  The real winners on the 'net will be firms that sell their own products directly to consumers.

~ Barron's, "Amazon.bomb," May 31, 1999

Fortune: "Can Amazon be saved? The answer is probably, No." (2001)

Bezos no longer calls Amazon.com an [e-commerce] incubator.  He's done with that now - he's busy writing a new script.  The big news now is that during the past eight months he and his team in Seattle hav signed a flurry of deals with brick-and-mortar retailers like Target, Circuit City, and Borders.  Amazon will run all or part of their e-commerce operations.  It will sell the retailer's products on Amazon.com, and in some cases it will warehouse products, distribute orders, and run the partner's Website.  Unlike the dot-coms, these new partners won't go out of business in a year, and they will pay Amazon in cash instead of rapidly falling stock.  Bezos would like us to believe that this time it's different, that Amazon's new "commerce platform" will put the company firmly on the road to profitability - and restore to it a market cap worthy of an Internet superstar.  The question anyone who owns or cares about Amazon's stock needs to ask is simple: Should we believe him?

The answer is probably, No.  Whichever of Bezos' stories you read, the numbers don't look good.

[...]

Bezos' Amazon is a land of eternal hope.  The CEO still avers that Amazon can eventually generate operating margins of 10%, despite the fact that it is still miles from that goal...  So yes, there is a chance that someday Amazon will grow up to be a company with real profits.  But it will never be the high-growth, wildly profitable, super-efficient company of Internet lore.  The only place that company lives is in the history books, and in the powerful imagination of Jeff Bezos.

~ Melanie Warner, "Can Amazon by saved? Jeff Bezos writes a new script. Too bad for investors it is more fiction than fact.," Fortune, November 26, 2001

Dan Ferris on central bankers

They're like people in a job interview who don't quite think they're qualified.  They're always trying to impress you and they're always trying to pull out something that impresses you.  And so they're trying very hard to suggest that they're in control and that they know what they're doing.  They represent themselves as a group of very smart people with excellent tools.  "We are like surgeons with precision instruments."  In truth, they are like a drunk sailor at a carnival playing whack-a-mole, and he can't even hit the board.  He's hitting the ground and he's hitting himself in the leg.  They really don't know.

[...]

It's propaganda.  It's a sales pitch.  "What am I being sold and why?" is the question.  You're being sold a level of control they simply do not possess.

~ Dan Ferris, "2023 Midyear Market Outlook," Stansberry Investor Hour, 36:00 mark, June 26, 2023

Michael Lewitt on handling of SVB failure: "the government avoided a fire sale and created the time for these and other assets to recover"

While there is a great deal of handwringing about moral hazard with regard to the extension of unlimited deposit insurance at SIVB and Signature Bank (SBNY), that ship sailed a long time ago.  I think there are other lessons to be gleaned from how failing financial institutions were handled in 2008 that were applied (either knowingly or not) in this case that produced a better result.  And I think the FDIC did a reasonably good job managing a relatively orderly resolution of SIVB while minimizing any immediate systemic damage. 

The extension of unlimited deposit insurance will be debated for years but based on how the government handled the 2008 crisis, I believe it did the prudent thing here.  Had it extended a blanket guarantee on AIG’s obligations back then instead of selectively backstopping certain obligations, and also had it done the same with Lehman Brothers’ obligations rather than let the firm collapse, the losses in both cases would have been much lower and short-term and long-term damage to the financial system would have been much less.  Such a guarantee would have created the time required for these firms’ temporarily distressed assets to recover in value.  When financial institutions become distressed, the primary enemy is time.  Panic creates illiquidity which forces down prices to artificially low levels that almost invariably recover (sometimes rather quickly) once the situation stabilizes.  Today, even more than 15 years ago, time moves dangerously fast as a result of social media which accelerated the panic surrounding SIVB.  By guaranteeing the deposits at SIVB and SBNY, the government avoided a fire sale and created the time for these and other assets to recover (or begin to recover) their value, thereby avoiding unnecessary losses... 

In choosing between moral hazard and a bank run that could have caused unrepairable systemic damage, the government made the correct choice. It can address moral hazard later with measures designed to improve how banks manage their assets (including improved bank regulation), but the goal should be to live to fight another day. I would also add that the fact that depositors with more than $250,000 are almost exclusively “wealthy” as defined by the terms of our current political debates is a red herring.

~ Michael Lewitt, "Chasing Our Tails," The Credit Strategist, March 27, 2023

Michael Lewitt on commercial real estate loans coming due

Even more concerning is what will happen as commercial real estate loans mature and have to be refinanced at much higher rates.  Chris White at Loop Capital noted this morning that there are $147 billion of real estate loans coming due over the next 12-24 months with an average coupon of 4.3% while the current prime rate is 8%.  Rates may decline by the time these loans come due but will certainly remain at least 200-300 basis points higher than the original loans.  Many projects that penciled out in ZIRP are not economic anymore.  Many experts are forecasting loss rates of as high as 40% on commercial real estate based not merely on higher interest rates but lower utilization rates of urban (and even suburban) office buildings.  Commercial real estate was a major participant in the ZIRP/QE bubble and is now experiencing a painful and expensive adjustment as that bubble deflates.  A city like San Francisco, for example, is directly in the bullseye of higher rates, a tech bust, and the physical destruction of the urban environment.

~ Michael Lewitt, "Chasing Our Tails," The Credit Strategist, March 27, 2023

Michael Lewitt on the FDIC sale of Silicon Valley Bank's assets

First Citizens Bank stepped up and bought Silicon Valley Bank’s deposits and loans over the weekend, taking advantage of another bank’s mismanagement and the government’s need to support the banking system.  The deal involves the purchase of ~$72 million of assets at a $16.5 billion discount while another $90 billion of securities remain in receivership for sale by the FDIC.  What this means is that First Citizens is buying SVIB’s loans and leaving long-dated Treasuries and other investments behind for the FDIC to work out over time.  The FDIC also received equity appreciation rights in First Citizens’ holding company First Citizens Bancshares (FCNCA) with a potential value of $500 million to defray some of the potential losses on the transaction.  The 17 former branches of SIVB reopened this morning as First Citizens branches. FCNCA is rallying 40% on the news.  This should turn out to be a good move by FCNCA for which its management deserves credit.

~ Michael Lewitt, "Chasing Our Tails," The Credit Strategist, March 27, 2023

James Cash Penney on integrity

Golden Rule principles are just as necessary for operating a business profitably as are trucks, typewriters or twine.

~ James Cash Penney

Joan Baez on attitude

You don't get to choose how you're going to die.  Or when.  You can only decide how you're going to live.  Now.

~ Joan Baez, singer

John McEnroe on defeat

The important thing is to learn a lesson every time you lose.

~ John McEnroe

Henri Bergson on change

To exist is to change, to change is to mature, to mature is to go on creating oneself endlessly.

~ Henri Bergson, philosopher

Nolan Bushnell on taking action

Everyone who's ever taken a shower has an idea.  It's the person who gets out of the shower, dries off and does something about it who makes a difference.

~ Nolan Bushnell

Thomas Edison on success

The first requisite of success is the ability to apply your physical and mental energies to one problem without growing weary.

~ Thomas Edison, inventor

St. Francis on achievement

Start by doing what is necessary, then do what is possible, and suddenly you are doing the impossible.

~ St. Francis of Assisi, founder, Franciscan order

Ray Bradbury on taking action

If we listened to our intellect, we'd never have a love affair.  We'd never have a friendship.  We'd never go into business, because we'd be cynical.  Well, that's nonsense.  You've got to jump off cliffs all the time and build your wings on the way down.

~ Ray Bradbury, author

Ann Landers on staying positive

When life's problems seem overwhelming, look around and see what other people are coping with.  You may consider yourself fortunate.

~ Ann Landers, columnist

Enzo Ferrari on leadership

I gave (my drivers) three things: a sense of optimism, a creative environment and the ultimate motivator - competition.  By competing with each other in-house, we wound up beating our rivals.

~ Enzo Ferrari, auto racer, designer

Peter Bauer on foreign aid

Aid is the process by which the poor in rich countries subsidize the rich in poor countries.

~ Peter Bauer

Peter Bauer on foreign aid

If mainsprings of development are present, material progress will occur even without foreign aid.  If they are absent, it will not occur with aid.

~ Peter Bauer, development economist

Murray Rothbard on order vs. chaos

Another critical dispute between traditionalists and libertarians is over the role and the nature of order.  To the traditionalist, order is the overriding consideration, and order can only be achieved by a massive imposition of state coercion.  To the traditionalist, liberty is arrant chaos and disorder, and the libertarian is someone who wishes to sacrifice order on the altar of liberty.  The libertarian, on the contrary, has a diametrically opposed view.  To him, the only genuine order among men proceeds out of free and voluntary interaction: a lasting order that emerges out of liberty rather than by suppressing it.  With Proudhon [considered by many to be the "father of anarchism"], the libertarian hails Liberty as the "Mother, not the Daughter of Order."  In this way, the libertarian sees the harmonious interaction of free people as akin to the harmonious interaction of natural entities that is summed up as "natural law."

State coercion, on the other hand, is viewed by the libertarian as a pseudo-order which actually results in disorder and chaos.  State-imposed order is "artificial" and destructive of the harmony provided by following the natural order.  Economic science has long shown that individuals, pursuing their own interests in the marketplace, will benefit everyone.  The free market has been shown to be the only genuine economic order, while state coercion hampering that market only subverts genuine order and causes dislocation, general impoverishment and, eventually, economic chaos.  Moreover, one of our most distinguished free-market economists, F.A. Hayek, has extended the concept of what he has trenchantly termed "spontaneous order" to include many other activities than the economic sphere.  Hayek has pointed out that the evolution of human language itself was not imposed by coercion from above but emerged from the free and voluntary interaction of individual persons.  To use a phrase of Hayek's language, the origin of money, and the market itself were products or byproducts of human action, not human design.

~ Murray Rothbard, "Frank S. Meyer: The Fusionist as Libertarian," originally published in Modern Age, Fall 1981, pp. 16-17

Pierre-Joseph Proudhon

Lawrence Reed on how FDR campaigned against the big spending policies of Hoover in 1932

Did Hoover really subscribe to a "hands-off-the-economy" free-market philosophy?  His opponent in the 1932 election, Franklin Roosevelt, didn't think so.  During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions on the dole.  He accused the president of "reckless and extravagant" spending, of thinking "that we ought to center control of everything in Washington as rapidly as possible," and of presiding over "the greatest spending administration in peacetime in all of history."  Roosevelt's running mate, John Nance Garner, charged that Hoover was "leading the country down the path of socialism."  Contrary to the conventional view about Hoover, Roosevelt and Garner were absolutely right.

~ Lawrence W. Reed, "Great Myths of the Great Depression," Mackinac Center for Public Policy, 1981

Paul Johnson on H.L. Mencken's attacks against the New Deal

Mencken excelled himself in attacking the triumphant FDR, whose whiff of fraudulant collectivism filled him with genuine disgust.  He was the 'Fuhrer,' the 'Quack,' surrounded by 'an astonishing rabble of impudent nobodies,' 'a gang of half-educated pedagogues, nonconstitutional lawyers, starry-eyed uplifters and other such sorry wizards.'  His New Deal was a 'political racket,' a series of stupendous bogus  miracles,' with its 'constant appeals to class envy and hatred,' treating government as 'a milch-cow with 125 million teats' and market by 'frequent repudiations of categorical pledges.'

~ Paul Johnson, A History of the American People (1997), p. 762

Rex Tugwell on the origins of the New Deal

We didn't admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.

~ Rexford Guy Tugwell, economist who served in FDR's administration until 1936

June 25, 1934

Tom Lee: 9 month rally "is the start of a new bull market"

In our view, the stock market bottomed October 12, 2022, and the rise over the past nine months is the start of a new bull market.  We have had a huge decline in inflation, and the inflation war is the war the Fed is waging and seemingly winning.

[...]

If inflation is cooling, and therefore people become more confident that two rate hikes are the most, or maybe there’s not even two hikes, then I think it’s going to ease financial conditions, so interest rates and bond-market volatility should be diminishing

~ Tom Lee, "He called the 2023 stock-market rally. Here’s what Wall Street’s biggest bull sees for the second half.," MarketWatch, July 6, 2023

Wall Street Journal on the intense competition for deposits

Montana-based Glacier Bancorp (GBCI) benefited from the glut of money that flooded the economy during the pandemic, as well as the acquisition of a small Utah bank.  Its deposits nearly doubled over the course of 2020 and 2021. 

When more customers started to pull deposits at the end of last year, Glacier had to pivot quickly to try to hold on to them.  In the first quarter, Glacier paid $46 million in interest, up from $5 million a year earlier. Total deposits still fell 7%. 

“We went through a decade of zero to low rates, and so there was a little muscle memory that had to be developed in terms of competing for deposits,” CEO Randy Chesler said on a call with analysts in April. 

Businesses and wealthy customers were the first ones to start looking for higher rates last year.  Now, every type of customer with extra cash is looking for more interest, said Chip Reeves, CEO of MidWestOne Financial Group (MOFG), which is based in Iowa City, Iowa. 

“It’s probably the greatest deposit competition that I’ve seen in my banking career,” said Reeves, who has worked in the industry for three decades. 

Houston-based Prosperity Bancshares (PB) found that even public-sector clients such as counties, cities and school districts were pulling deposits and moving them to higher-yielding investment vehicles.  “I don’t really see those coming back,” CEO David Zalman said on an earnings call in April.

~ Rachel Ensign and Gina Heeb, "Everyone Wants Interest on Their Deposits. That's Bad for Main Street Banks.," The Wall Street Journal, July 6, 2023

Lawrence White on banks runs, the FDIC and latest round of bank failures

If the uninsured depositors in Bank A can't access their funds, that's going to make the depositors in Bank B nervous, we have contagion and then we're back to 1933.

I think on the one hand, FDR [Franklin Delano Roosevelt] would be wincing and saying, "ah, man, I thought we wouldn't have screwups like this."  On the other hand, I think he would smile and say, "ah, it didn't spread, we haven't had contagion.  We haven't had widespread runs.  That was my goal in creating the FDIC."

~ Lawrence White, NYU Stern economics professor, "Everyone Wants Interest on Their Deposits. That's Bad for Main Street Banks.," The Wall Street Journal, July 6, 2023

Friedrich Hayek on Walter Block's libertarian classic

Looking through Defending the Undefendable made me feel that I was once more exposed to the shock therapy by which, more than 50 years ago, the late Ludwig von Mises converted me to a consistent free market position.  Even now I am occasionally at first incredulous and feel that this is going too far, but usually find in the end that you are right.  Some may find it too strong a medicine, but it will still do them good, even if they hate it.  A real understanding of economics demands that one disabuses onself of many dear prejudices and illusions.  Popular fallacies in economics frequently express themselves in unfounded prejudices against other occupations and, in showing the falsity of these stereotypes, you are doing a real service, although you will not make yourself more popular with the majority.

~ Friedrich Hayek, commentary about Defending the Undefendable, 1991 edition

Miguel del Gallego on Robinhood's pay for order flow business model

The argument can be made that its real end clients are these high frequency traders who are actually taking this information and trading against what's referred to as uninformed investors.

~ Miguel del Gallego, ClearBridge Investments analyst, "In the Wake of GameStop, A New Test for Robinhood," Barron's, February 6, 2021

Sam Walton on focus

I have concentrated all along on building the finest retailing company that we possibly could.  Period.  Creating a huge personal fortune was never particularly a goal of mine.

~ Sam Walton, founder of Wal-Mart