FREE MARKETS REQUIRE TRANSPARENCY, FROM EVERYONE

     The New York Stock Exchange, the NASDAQ, and the rest of the market exchanges employ Market Makers, humans or computers, which openly list all bids and asks, all offers to buy and sell a particular security.  The law demands "best execution" which requires a trader to accept the highest offer, in other words to ensure the end client gets the best and most fair result available in the market place.  This requires complete transparency.  Otherwise, Goldman Sachs or J.P. Morgan could sell their own positions to the highest bidder while executing their client's trade at a lower price which may also be available (and we all know they would never do that).
     Capitalism requires sunlight.  This is why our country doesn't like the Dark Pools in which Goldman and Morgan secretly swap stocks and bonds, nor are the citizens comfortable with the Dark Web which possibly protects criminal transactions.  But, did you know the U.S. Government demands secrecy when it reaches an economic or even criminal settlement with a U.S. citizen?  They say they don't, but let me explain how this works, and show you how this secrecy operating in the shadows impedes capitalism, free markets, and democracy.
      Two examples today:  (1) For over 50 years, the Securities and Exchange Commission (SEC) has required citizens to sign "gag orders" as part of the final case settlement.  Ninety-eight-percent of cases are concluded with settlements, because of the extreme financial and criminal threats which hang over the citizen's head like a sword of Damocles if they take the case to trial. (Note: The government maintains 98% conviction rates by implementing such extreme penalties for going to trial, up to 10-times, to dissuade citizens from forcing the government to bear the burden of proof, and to stop the defense's "side of the story" from being heard publicly.  If only 1-2% more of defendants actually defended themselves at trial, the justice system would come to a screeching halt due to the incredible volume of arrests and indictments served daily in the United States), and (2) When a U.S. Federal Judge has been found to have egregiously violated the rights of a U.S. citizen, as determined by the judge's own peers and with corrective action taken, the Final Order contains no names or identifying elements, only a long number-code for obfuscation.  A Confidentiality Provision, with the threat of criminal prosecution and imprisonment, hangs over the head of any U.S. citizen who reveals the judge's name, the very judge who is a public servant paid by U.S. tax dollars.
     (1) Recently the Cato Institute has sued the SEC claiming the gag orders violate the First Amendment.  This think tank, whose name is inspired by Cato's Letters in 18th century England, works for individual liberty, limited government, free markets and peace.  This organization is suing to be able to publish a book written by "Mr. X" who "tells the story of how he was the victim of egregious government overreach at the hands of overzealous officials: how he'd personally done nothing wrong, yet the government leveraged the threat of crippling fines and the prospect of years of costly litigation to extract a settlement from him where he ultimately admitted no wrongdoing."
     The Cato press release states, "The result is a system where the press and the public only hear one side of the story: The SEC issues press releases detailing its allegations at the BEGINNING of an enforcement action, and then it enters into settlements in which the accused is forced to promise never to dispute any of those allegations in public."  Cato's Vice President for Criminal Justice, Clark Neily, states, "The SEC's policy of demanding lifetime gag orders as a condition of settlement flouts the First Amendment and prevents publishers like the Cato Institute from educating the public about the true nature and behavior of government."
     (2) The recent misconduct claims against well-known Ninth Circuit Federal Judge Alex Kozinski, which led to his resignation, have re-ignited the calls for court transparency, disclosure and accountability for misconduct claims against federal judges.  U.S. Supreme Court Justice John G. Roberts, Jr. has proposed revamping the disciplinary system in order to promote "independent investigations and greater disclosure to enhance public confidence in the courts."
     "Transparency should be the default," said Gabe Roth, Executive Director of Fix the Court.  "Neither a judge's written response to a complaint nor any disciplinary action should remain private."  Charles Geyh, a legal-ethics professor at Indiana University told a panel of 10 judges that the process in which judges discipline each other is "particularly problematic and gives judges too much discretion to look the other way."  He concluded with, "The system should be about promoting public confidence" rather than "self-protection."
     JAM Views members must understand that pure markets demand transparency, provided by competition, not technocrats.  We must also demand transparency from our government, or what then separates us from Russia, from China?  Tom Hanks said it best in "Bridge of Spies" in response to the CIA agent demanding, "We need to know.  Don't go Boy Scout on me.  We don't have a rule book here."
     Hanks, protecting his client, responded, "I'm Irish, you're German, but what makes us both Americans?  Just one thing, one, the rule book.  We call it the Constitution, and we agree to those rules.  It's what makes us Americans.  It's all that makes us American, so don't tell me there's no rule book...and quit smiling at me you son of a bitch."
     This week may you operate in the sunlight and steer clear of the shadows.

"There's no way to rule innocent men.  The only power any government has is the power to crack down on criminals.  Well, when there aren't enough criminals, one 'makes' them.  One declares so many things to be a crime that it becomes impossible for men to live without breaking laws."  -  Ayn Rand, Atlas Shrugged


* Many thanks to the WSJ, Forbes, & Fortune for the above statistics and quotations.

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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 SCHADENFREUDE

     Schadenfreude: n\ 'sha-d'h-Froi-da.  Enjoyment obtained from the trouble of others.  Interesting.  H.L. Mencken defined Puritanism as the haunting fear that someone, somewhere, may be happy.  Andy Kessler, investor, spins this Puritanism definition to now be "the haunting fear that someone, somewhere, may be successful.  Finally, do you remember the old joke about the Russian who isn't happy that he and his neighbor each have a cow?  He isn't truly happy until his neighbor's cow dies.
     Why can't the socialists let others be successful?  Don't they understand that someone has to be the adult, that someone needs to make the money for them to redistribute?  Apparently they do not read JAM Views, or they would understand that governments have no money; they only take from the producers and give to the looters.
     So, now the socialists want to break up the successful companies, but at the same time they want the government to provide a Universal Income to every citizen.  They are too uneducated to understand that these two objectives are mutually exclusive.
     Columbia law professor Tim Wu recently stated, "We've let Facebook have their ride, they've made their money and they've been very successful" but it's time to "break things up a little bit."  First of all, "he" and his academics haven't "let" Facebook do anything.  Doesn't this ring of the previous Administration's proclamations that a rugged individualist never built anything, only the government can do this?
     The collectivists now want Facebook to divest of Instagram and WhatsApp, Amazon to sell whole Foods, Google to get rid of DoubleClick, and Apple to spin off the App Store.  This is no different than calls years ago to stop IBM and GE.  Collectivists don't understand that innovation and free markets take care of rebalancing the equation, moving towards equilibrium naturally.  Soon, great innovations in a multitude of smaller companies will make most of the above names irrelevant, just as IBM and GE are today.
     But, in the interim stage, Facebook, Google, Amazon, Apple, Microsoft and Samsung are spending $85 billion per year on research and development, which will multiply exponentially into products, services, and thousands of other startups which we cannot even envision today.  Why break that up through foolish government mandates?
     Next, Universal Income, a minimum paycheck to every citizen regardless of their personal production, is also gaining momentum as "a reasonable idea."  Beyond the expected lunatics in the news today, this extra government paycheck has recently been supported by Barack Obama, Bill Gates, Richard Branson, Mark Zuckerberg, and Elon Musk.  I'm sure you've noticed that once your net worth exceeds $1 billion, you must replace your capitalistic drive to succeed with a huge bucket of guilt for how you got there, at least when you are publicly addressing the media.
     They all must have burned their copy of Adam Smith's "Wealth of Nations," and already had dropped out of Stanford before taking the Behavioral Economics 101 course.  In a shocking paradox, the startup incubator, Y-Combinator, is pushing the Basic Income Project which would provide an extra $1,000 per month for everyone, or instead a fixed percentage of the nation's GDP every year.  They don't understand that there would not be any more GDP!
     If you think this will never happen, just look to Italy whose left wing 5-Star Movement's legislators have just instituted reddito di cittadinanza, or citizen's income.  Italian citizens will be required to do eight hours of community service per week and must accept one of their first three job offers (from whom?) to keep getting their checks.  Analysts estimate that nearly 20% of Italy's economy is "off the books," so there should be a huge crowd qualifying for the additional check, about $11,000 extra per year.  And, consistent with these brain-dead economics, any unspent monthly balances are clawed back so savings are impossible, and, of course, if you work more you lose the same amount from your government check.  I swear I don't make this stuff up!  It reminds me of how the Air Force Academy's roads were beautifully re-paved every year, whether they needed it or not, to ensure we did not lose our government allocation next year.
     I urge all JAM Views readers not to scoff at these ideas which destroy innovation, motivation, and dreams realization.  Social media, jealousy and lack of education can combine quickly into a terrible cocktail intoxicating 51% of the vote. These terrible human traits bubble over where you least expect them.  Everyone "wants your stuff!"  Send in a Freedom of Information Act (FOIA) request for your FBI file (trust me, there is one) and review their collection of financial documentation on your mortgages and car leases back further than you can remember, yourself.  Ask yourself why they have all that information on you.  Pay attention.  Seek knowledge.

"Property is the fruit of labor - property is desirable - is a positive good in the world.  That some should be rich, shows that others may become rich, and hence is just encouragement in industry and enterprise.  Let not him who is houseless pull down the house of another, but let him work diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built."  -  Abraham Lincoln

* Many thanks to the WSJ, Forbes, & Fortune, & especially Andy Kessler for the above statistics and quotations.

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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LET US LEAD LIVES OF SIGNIFICANCE

     At JAM Views we periodically review the WSJ Obituaries to learn about people who believed in opportunity, took risks, and decided to take the path less traveled.  These tributes are excellent lessons, case studies, which hopefully shake us from our weekly routines and help us remember why we started these journeys in the first place.
     Barbara Gardner Proctor, an African-American woman born to an unwed mother in North Carolina, once stated, "I have never had the luxury, or the hindrance, of having anyone take care of me."  When applying to the Small Business Administration for a loan to start an advertising firm in 1970, she was asked what her collateral was.  She replied, "Me!," and that turned out be solid backing as she grew her Chicago firm to great success representing Kraft Foods and Sears.  Barbara moved onto the next adventure recently at age 86 after an amazing life.
    After a promising start to a Wall Street career, Jason Spindler was at his Tower 7 office during 9/11.  Instead of fleeing the devastation, he joined the first responders to help the injured.  This experience promoted him to join the U.S. Peace Corps, bringing finance and investment opportunities to the developing world.  He became Founder and CEO of i-Dev International with offices in San Francisco, Lima and Nairobi.  His firm funded Twiga Foods connecting fruit and vegetable growers across Kenya to markets, as well as coffee ventures in Madagascar, and an East African fast-food chain.  Tragically, just shy of his 41st birthday he was killed by Islamist extremists who stormed a hotel complex in Nairobi where he was on a late lunch.  What an amazing journey he experienced here, and I am sure the universe simply needed him for another great expedition.
     Caroline Rose Hunt was the daughter of H.L. Hunt who used his poker winnings to acquire oil fields in Texas.  Fortunately, she did not invest her slice of the inheritance with her two brothers, Nelson and William Hunt, who famously went bankrupt attempting to corner the silver market.  "Moozie," as she like her grandchildren to call her, instead built a chain of luxury hotels to include the Bel-Air in Los Angeles and the Carlyle in New York, and spurred development in blighted areas around Dallas.  She wrote a novel and two cookbooks, created Lady Primrose bath oils, soaps and lotions, and led weekly Bible study sessions at her Presbyterian church.  She recently passed at age 95, leaving 19 grandchildren and 23 great-grandchildren with an incredible example and role model for their own journeys.
     Robert Smith was a bored Boston attorney when a client asked him to collect a debt in Turkey.  He flew there and had to create a convoluted transaction, but he was then hooked on buying foreign abandoned debt and then selling it at much higher prices.  Decked out in his toupee and $99 seersucker suit, Mr. Smith traveled the world in search of adventure and profits.  He stayed in hotels with "dead cats floating in the pool," and wanted "to prove to his wife that he wasn't a loser."  In this murky world, he bought Guatemalan bonds from one arm of a British bank and sold them, at a hefty markup, to another unit of the same bank.  He profited on Nigerian Government promissory notes, and he recounted his adventures in his 2009 memoir, "Riches Among the Ruins."  He recently passed at age 78, and his wife said a few days after his funeral, "He wanted something different, and he certainly got it."
     Susan Ellis, with degrees in English and folklore, landed a job at the Philadelphia Family Court managing volunteers helping youths in trouble.  She had "absolutely no qualifications," but discovered neither did most everyone else.  So, she started Energize Inc. in 1977 to teach nonprofits and other organizations how to use volunteers more effectively.  She changed their mindsets from "little old ladies in flowery hats" to computer coders and legal aides.  She preached, "The best volunteering is when the giver and the recipient see each other as equivalent and equal - when they both benefit, and it's a form of exchange."  She wrote and co-wrote 14 books and gave speeches in 26 countries.  Diagnosed with cancer, Susan kept friends updated by email on her "Medical Magical Mystery Tour," with her last update stating, "One day at a time.  Smile as often as possible.  Love to you all!!! XOXO Susan."  She moved on at age 70, likely now organizing all of her new angel volunteers, and left her estate to the new Susan J. Ellis Foundation to continue her amazing work.
     WOW!  This week let's not complain about our boss, whine that our back hurts, or lose patience with our children's stumbles.  Life is an adventure, and the clock is ticking.  We live in the greatest country, and during the most prosperous time ever, in the history of this strange blue rock.  No excuses!  Let's make it happen this week.  Good luck!

""Life should not be a journey to the grave with the intention of arriving safely in the pretty and well preserved body, but rather to skid in broadside in a cloud of smoke, thoroughly used up, totally worn out, and loudly proclaiming, 'Wow!  What a ride!'"  --  Hunter S. Thompson

* Thank you to the WSJ for sharing these amazing stories.

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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DOLLAR STRATEGY:  NOT WEAK, NOT STRONG, BUT STABLE

     Periodically we pick up the newspaper, or a Fortune Magazine, and we read confusing articles proclaiming the need for a weak U.S. dollar, or a strong U.S. dollar, many times interchanging the exact same arguments for either case.  Now, as JAM Views members we know to first pause and remember (1) the pontificator is more than likely incorrect, and (2) their views are driven by their own self-interests (not to mention confirmation bias and recency bias).
     I have to admit that even while running an investment firm for two decades, when it came to exchange rates I would have to regularly pull the finance books off the back shelf and refresh my memory on what helps what and why.  So, I thought this week we could endeavor to present a simple lesson on the strength of the dollar, so that we can more easily debunk Uncle Harry's rant about Trump's trade policies over Schlesinger's Easter Brunch.
     First, know that we are not dealing with absolutes.  The dollar is strong or weak only in relevance to the rest of the world currencies (similar to how stocks are overvalued or undervalued mostly in comparison to current interest rates).  Currently, the U.S. dollar is about 5% "stronger" against the world than its average since 1971 (when we abandoned the gold standard), so pretty "normal."
     The main arguments for a strong dollar promote selling our U.S. Government bonds to the world at higher prices, adding more capital without the Federal Reserve having to buy our bonds, and giving the U.S. strong purchasing power and influence around the world.  "He who owns the gold makes the rules."
     The primary arguments for a weak dollar are for promoting U.S. exports.  If the dollar is weaker compared to the Japanese Yen, the Japanese will find the Harley Davidson's to be much less expensive, and U.S. manufacturing jobs will thrive, at least in the short-term.
     It seems simple enough, but the real world never works the way the elites claim it does (seems to be a recurring JAM Views theme).  For example, the Swiss and the Dutch are at the top of the list for best-performing currencies (strongest) since 1900, but the major parts of their economies are exports.  Also, history is replete with countries devaluing their currency (making it weaker) to boost their export economies, and hurt imports, only to see them quickly ravaged by inflation, devaluing more, and destroying everything.
     The answer for the U.S. dollar now, and always has been, is stability.  The Federal Reserve and U.S. politicians can only do damage to the free markets, and they try their damnedest every day to make it worse.  As we have taught in JAM Views, "money goes where it is treated best."  Artificial inputs only screw up systems which are constantly searching for equilibrium, balance, homeostasis.  The British economist, John Maynard Keynes, has been screwing up economies with artificial steering since 1913 when Britain replaced gold with foreign-exchange reserves.
     Our friend, Steve Forbes, explains it best.  Last year he wrote, "Economists and policymakers regard as holy writ the fantasy that the economy can be steered, as if it were a car...The Federal Reserve, or any central bank, can no more control an economy than long-ago Soviet central planners could...with 7 billion people around the world and countless millions of entities of all kinds engaging in more than 100 billion transactions each day...the only sensible question to ponder is how much damage will our central bank do?"
     The answer is stability.  Remember how CEO's complained during the previous Administration that they couldn't make long-term investments because they didn't know if tax rates and regulatory costs were going to keep going higher?  Note how the stock market always falls when there is "uncertainty."  Listen to Coach "K" say, "I don't care if the refs are calling it loose or tight.  I just need them to be consistent!"
     If the U.S. dollar was allowed to find its own proper value, without misinformed politicians and technocrats attempting to justify their own existence (and government paychecks with your tax dollars), then the system would find the correct interest rates, correct inflation rates (maybe it's 2% as the Fed claims or more likely it's closer to zero), and correct exchange rates.  U.S. companies and workers would maximize efficiency and productivity with the requirement to be as competitive as possible, and the U.S. would efficiently import the correct goods from the correct countries which maximize our own self-interests, just as with Adam Smith's butcher and baker.
     Since the Egyptians and the Romans, monetary stability has been maintained over long periods by a gold standard.  Forbes, again, said it best in one of his never-ending campaigns to return to the gold standard.  "Markets work best with fixed weights and measures.  Everyone knows how chaotic life would be if the number of minutes in an hour or ounces in a pound fluctuated.  The same is true for money, which is supposed to measure value.  Until we blew it all up in the early 1970's, the U.S. had a fixed value for the dollar since Alexander Hamilton established it with a gold standard in 1791.  It's no coincidence that the U.S.' average pace of economic growth since then has fallen sharply."
     During brunch slip Uncle Harry one more mimosa, light on the OJ, and let him know that all the fake news is gobbledygook (economics term), and as he goes for another trip to the buffet, stress "less is more."  Let's continue to do whatever we can to keep governments out of free markets and to allow the citizens of all currencies to thrive.  Now that we understand the basics, pay attention to the mistakes countries make every day in attempting to manipulate their currency.  "First do no harm."

"The rating agencies guys wore blue suits from JC Penny, with ties that matched too well, and shirts that were starched just a bit too stiffly.  They appeared to know enough to justify their jobs, and nothing more."  Michael Lewis, The Big Short

* Thank you to the WSJ, Forbes, and Fortune for the above statistics and quotations.

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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CAPITALISTS SHOULD VOTE FOR NUCLEAR

     The nuclear power industry probably has the worst marketing department in the history of the world, and also can't even figure out how to have their own lobbyists effectively pay off the Washington politicians, as does the rest of the energy industry.
     JAM Views' mission is to not only help us all understand true economic and business principles, but to continuously uncover how the great majority of what "they" tell us simply is not true.  Nuclear power falls into this category.  If we all understood commercial nuclear power generation, and its incredible potential to completely change the technology landscape of our country, every capitalist and every New Green Deal believer would have to support its primary, and possibly only, position powering the United States.
     Quick basics.  Nuclear power today is generated by splitting or joining the nuclei of atoms.  The nucleus is the heart of the atom which is the building block of molecules which form to create everything on the planet.  So, let's first agree that there is pretty much an infinite supply of atoms for our projects.  Fission is the splitting of the nucleus which releases a tremendous amount of energy, and which shows us that the universe has already been designed to hold incredible energy beyond our current understanding.  Fission performed on one pound of uranium releases as much energy as burning six million pounds of coal.  The atomic bomb (WWII) was created by an "uncontrolled" fission chain reaction.  Commercial nuclear power plants are basically "controlled" fission chain reactions.
     Fusion is the uniting of nuclei and is the basis for a thermonuclear explosion, like which fuels the sun, and which is thousands of times greater than the atomic fission.  Unfortunately, currently, fusion needs about 122 million degrees Fahrenheit to ignite, like from a fission bomb, so commercial applications are still in the works.
     In nuclear power plants today, fission creates a tremendous amount of energy which is converted to steam (which directly powers nuclear submarines), and is then converted to electricity to power our cities.
     John Rie, prior owner of CBRS which specialized in bioremediation, and Alan Emery, former president of the Canadian Museum of Nature, are members of Est Actio, an international group of multi-disciplinary scientists "looking for ways to stabilize the climate."  They released a report in the Wall street Journal promoting both the economic and green benefits of nuclear power.  I've included a few highlights:

1. From 1970-1990 Sweden doubled its energy output by deploying nuclear plants. They also reduced carbon emissions by 50%, reduced fossil-fuel use by 40%, and expanded the economy by 50%.

2.  The world will need 38.6 terawatts of power in addition to existing hydropower over the next 50 years (38,600 one-gigawatt power plants).  Only nuclear or fossil fuels can meet this demand.

3.  Wind and solar are three to five time more costly than nuclear.

4.  Nuclear actually creates large profits.  It costs $2.3 billion to build a one-gigawatt plant (Not a thousand jigawatts by Doc and Marty!), which at current electricity rates generates about $419 million net revenue annually, which is $33.5 billion net revenue over the 80-year life of the plant.

5.  Reality on safety.  The 1979 Three-Mile Island incident caused zero deaths or increases in cancer.  The 2011 Fukushima "disaster" caused zero deaths or disease.  The 1986 Chernobyl Plant's bad design and lack of Soviet Union response caused 150 deaths.  The 2012 World Health Organization report estimates the burning of fossil fuels and biomass causes three million deaths world-wide every year.

6.  Reality on waste.  A nuclear power plant generates 20 metric tons of waste annually.  A typical coal plant produces this much toxic waste (mercury, arsenic, etc.) in one hour (I probably shouldn't be writing this in West Virginia!).  Most nuclear waste is hazardous for only a few decades, and newer technology plants are recycling nuclear fuel, actually using up waste.  France is way ahead of us here.  How did we let that happen?

     The fact that nuclear power is not at least the dominant energy source for the United States today is purely a result of lack of education and entrenched corporate interests controlling Congress and the White House;  Bush and oil on one side versus Obama and uneconomical Greens on the other.
     Nuclear power is our limitless future if we can overcome politics, fear, and misinformation.  Nuclear is the universe already given to us.  We have not even touched the tip of the tip of the iceberg, and it is already the best economic-green option.  Nuclear is about abundance instead of scarcity, and it simply needs a better marketing department.  JAM Views members, and capitalists across the planet, should support nuclear, but most importantly, must support the commercial re-launch and not look to ineffective governments to control the future.  Commercial implementations will achieve 100x the progress in 1/100th the timeframe it would take governments to move in the right direction.  Remember the Laws of Thermodynamics; energy is neither created nor destroyed, yet merely transferred.  We already have way more than we will ever need, and the net cost will eventually be zero.  We just have to be smart enough to use it.

"Whenever you find yourself on the side of the majority it's time to pause and reflect."  -  Mark Twain

* Thank you to the WSJ, Forbes and Fortune for the above statistics and quotations.

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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