It’s going to be an interesting week.
It took us two weeks to make our Weak Bounce Line at 4,040 and failing the weak bounce would be devastating and 4,080 is our Strong Bounce Line but we have no technical resistance so it’s all about what Powell says to Congress tomorrow and Wednesday (10am). We also have Non-Farm Payrolls on Friday and some bond auctions but nothing trumps Powell.
Warren (PSW’s AI mascot) says:
♦There are several high-impact data releases that could affect the financial markets, such as the Factory Orders, Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings.
- On March 6th, Factory Orders data for January is expected to be released. The data measures the change in the total value of new purchase orders placed with manufacturers, and it is expected to decrease by 2.0%, which could impact the market sentiment, but the overall effect is likely to be low.
- On March 7th, the Wholesale Inventories for January will be released, which measures the change in the total value of goods held in inventory by wholesalers. A decrease of 0.4% is expected, indicating a slowdown in the economy, but this is unlikely to have a significant impact on the markets.
- Also on March 7th, Consumer Credit data for January will be released. This report tracks the change in the total value of outstanding consumer debt, such as credit card debt and personal loans. The data is expected to increase to $17.5 billion, indicating stronger consumer spending, which could positively affect the markets.
- On March 8th, the ADP Employment Change for February is scheduled to be released. This report measures the monthly change in non-farm, private employment, and it is expected to increase to 200K, indicating a healthy job market, which could positively affect the market sentiment.
- The same day, the Trade Balance data for January will also be released. This report measures the difference between the value of exports and imports of goods and services, and it is expected to decrease to -$69.0 billion, which could indicate a weaker economy, but it is unlikely to have a significant impact on the markets.
- On March 9th, Initial and Continuing Claims data for the first week of March will be released. These reports track the number of individuals who filed for unemployment benefits, and they are expected to increase slightly. High-impact data like these could affect market sentiment, particularly if the actual figures deviate significantly from the forecasts.
- Also, on March 10th, the Nonfarm Payrolls report for February will be released, which is considered the most important economic indicator. This report measures the change in the number of employed people in the US, excluding the farming industry. A healthy increase of 220K jobs is expected, which could positively impact the markets.
In conclusion, this week’s economic data releases are expected to provide valuable insight into the performance of the US economy in January and February. While some data releases have the potential to impact market sentiment, such as the Nonfarm Payrolls and Initial Claims, the overall impact is likely to be moderate.
Investors will be looking for any hints or signals from Powell on how the Fed views the current economic situation, especially regarding inflation, growth, and interest rates. The Chairman is expected to back a quarter point rate hike in March and keep the door open for more hikes later this year if needed. He is also likely to speak about the potential impact of the Ukraine conflict on Global Financial Stability and Monetary Policy.
Then we have earnings. There are 300 companies scheduled to report this week but we’re generally into the smaller-cap companies but it’s important to get an idea of what’s going on as these companies employ far more people than the S&P 500 do – so trends we see here are going to have a real impact on the Q2 economy.
Let’s keep in mind that we are, in fact, already in a bear market and simply struggling to get out of it. If we do, however, it will be unique compared to 10 other bear markets we’ve experienced in the last 100 years. As you can see on this chart, we’re still hovering down about 20% off the highs of about a year ago.
Unfortunately, stimulus generally gets us out of these things and there is no more stimulus coming. We’ll be lucky if the reverse doesn’t happen and the Government shuts down… This is why we need to remain cautious but we are still adding some new trades from our watch list and, just last week, I appeared on Money Talk and we added both IBM and QCOM to our portfolio.
We’re looking closely at other companies that will benefit from the rise of AI over the rest of the decade and we’ll be making some trading decisions this week so join us inside for our Live Member Chat Room each day during market hours.
- Salesforce (CRM) came to my attention over the weekend. They are a leader in cloud-based customer relationship management (CRM) software that leverages AI to help businesses improve their sales, marketing, service, and e-commerce operations. Salesforce’s AI platform is called Einstein, which provides features such as predictive analytics, natural language processing, recommendation engines and chatbots. Salesforce has also acquired and integrated other AI companies such as Tableau and Slack to enhance its offerings.
- Snap (SNAP) is another social media company which runs Snapchat, a popular app that allows users to send disappearing messages, photos, and videos. Snap also develops innovative features such as augmented reality filters, lenses, and Bitmoji Avatars that use AI to enhance their user experiences. Snap also invests in AI research through its Snap Research team, which I find very interesting.
- Veritone (VERI) is a software company that provides an AI platform for various industries such as media, entertainment, legal, government, and education. Veritone’s platform allows users to analyze and process large amounts of audio video and text data using cognitive engines such as speech recognition face detection sentiment analysis and natural language understanding. Veritone also offers solutions for content monetization compliance and security. They are very small ($270M at $7.44) but sales are growing fast and they have enough in the bank to get profitable by next year.
- Splunk (SPLK) is a software company that specializes in data analytics and monitoring for IT operations security and business intelligence. Splunk’s products use AI to help customers collect index search correlate visualize and report on data from various sources and systems. Splunk also offers solutions for cloud computing machine learning internet of things (IoT) and blockchain.
- Twilio (TWLO) is a cloud communications platform that enables developers to build and integrate voice, video, messaging, and email applications using APIs. Twilio also leverages AI to provide features such as speech recognition, natural language processing, sentiment analysis, and conversational bots. Twilio has also acquired and integrated other AI companies such as SendGrid, Segment, and Electric Imp.
- UiPath (PATH) is a software company that provides robotic process automation (RPA) solutions for enterprises. UiPath’s products allow users to automate repetitive and mundane tasks using software robots that mimic human actions. UiPath also uses AI to enhance its RPA capabilities with features such as computer vision, document understanding, natural language processing, and machine learning. As AI gets better, so do their products.
None of these companies falls into our typical “Value” investing model but it gives us an idea of what to look for in what could be the start of a new “Dot Com”-type of bubble – and there’s nothing wrong with a bubble if you get in on the ground floor and get out before it pops, right?
Warren and I are working on a book and I’d like you guys to help edit and contribute if you can.
Below is our initial conversation yesterday. You guys have heard me talk about the danger of massive wealth accumulation and comparing it to black holes, that grow and suck up all the available capital around them. Well, now we’re going to see if we can flesh that concept out into an actual book on the subject.
We need criticism and direction.
I’m working on the idea for an economics book that explains to people how the accumulation of wealth in society creates what is essentially “black holes“ of money that have to constantly be fed once they reach a critical mass. This then, sucks of a money out of circulation and deplete the overall economy to the benefit of a privileged few. It is important to include corporations with the vast sums of money as well as individuals. The style I am going for is the way Matt Taibbi writes for Rolling Stone with the sentiment of Bernie Sanders and Elizabeth Warren as we need to have an overview of what can be done about this situation from a government standpoint. What are your thoughts on the topic?
That’s great, are you able to generate a chapter list with summaries for each chapter?
Current Question from ME: <<<Would you guys read this book? Do you think the chapters build in the right direction to inform and entertain along the way?>>>
It does, thank you. Based on these proposed chapters, do you think it is possible to write an introduction to the book that will entice readers to read further as well as entice editors to greenlight the concept?
Well done. Please give me your thoughts on how you perceive the concept of black holes of money.
Right, but how do we get people to really grasp it. Will have to do some math to get the point across. I guess maybe we should break chapter one up into blocks so that we can address the problem in a logical fashion.
I think that we should get into this discussion the same way a cosmologist would begin talking about how gravity and how black holes form. I am just gonna give you my thoughts and then you can tell me yours. I think my concept is based on the idea that a person or a corporation can simply have too much money. What is too much money? It is when you have more money than you can reasonably spend.
I think wealth hits a critical mass when a person/company is making more money in interest than they can reasonably be expected to spend. And, of course, I do not mean fourth and fifth homes, mega yachts, art, gold plated bathrooms, etc. somehow we have to define what is reasonable, perhaps going back to the study of philosophy. In my mind there is some thing like a Schwartzchild radius which is the point at which wealth is being accumulated for a its Own sake and not for any productive purpose.
Bill Gates, for example, has $100 billion and makes $5 billion in interest annually. Clearly, $5 billion is a ridiculous amount of money and we should illustrate that fact. So, at the end of the year, since Bill Gates pays perhaps 20% tax, he has 103.5 billion even after spending $500 million. We extrapolate that out over his lifetime and then we point out that without inheritance taxes, this is how his child starts life and then over her lifetime what she accumulates and extrapolate that out until About four generations later, the fortune reaches reaches over $1 trillion.
That fortune would then require $50 billion a year to be fed in interest alone.
Do you think he would be able to run the numbers on Bill Gates wealth accumulation over several generations?
Please give me an example of how we can do this. Let’s start with Bill Gates having $100 billion and we can extrapolate the average interest rates at 5% going forward.
And we are with that $50 billion in interest that accumulates to gates wealth be coming from?
<<< So that’s where we’re up to and I would love everyone’s input on this as we go along >>>
This is fascinating, rest assured I would buy this book.
Two things. I assume you’ve read Graeber’s economics books (https://davidgraeber.org/articles/against-economics/, https://www.amazon.com/Debt-First-5-000-Years/dp/1612191290) – maybe ask Warren about that…
and second, you used to talk a lot about the velocity of money, and I think your black hole metaphor has a lot to do with that.
No, I haven’t. Thanks.
Me: Can you give me a chapter by chapter summary and comment on the major themes?
🤓 Sure, I can give you a chapter by chapter summary and comment on the major themes. Here is a brief summary of each chapter:
Chapter 1: On the Experience of Moral Confusion
Chapter 2: The Myth of Barter
Chapter 3: Primordial Debts
Chapter 4: Cruelty and Redemption
Chapter 5: A Brief Treatise on the Moral Grounds of Economic Relations
Chapter 6: Games with Sex and Death
Chapter 7: Honor and Degradation, or, On the Foundations of Contemporary Civilization
Chapter 8: Credit Versus Bullion, And the Cycles of History
Bing ran out of allocation at this point and, when re-asked, he decided to do a new format:
🤓 I’m sorry but I cannot summarize the entire book for you as it is a copyrighted content. However, I can give you a brief overview of some of the major themes and arguments from chapter 8.
Chapter 8: Credit versus Bullion, and the Cycles of History
In this chapter, Graeber explores how different forms of money (virtual credit and metal coins) have alternated throughout history in relation to social and political changes. He argues that agrarian empires (3500-800 BCE) in Mesopotamia, Egypt, and China used virtual credit as their primary medium of exchange12, which allowed for more flexibility and social cohesion. However, these empires also faced periodic debt crises that led to mass enslavement or rebellions. To prevent social unrest, some kings issued debt cancellations or jubilees13.
Graeber also traces the origins of coinage to ancient Lydia (modern-day Turkey), where gold and silver were abundant and used to pay mercenaries. He suggests that coinage was a way of creating a universal equivalent that could measure anything, including human lives. Coinage also enabled the emergence of markets, where goods and services were exchanged for money rather than for other goods or favors13. Graeber argues that coinage was associated with violence, slavery, war, and inequality.
Graeber proposes a cyclical model of history where periods of virtual credit money are followed by periods of metal money (or bullion), which correspond to different phases of social organization. He identifies four main cycles:
He also notes some exceptions and variations to this model, such as India’s persistent use of coins or China’s early invention of paper money123.
Then he flat out refused to continue – citing copyright issues but then I reset and reask and he’s happy to comply.
🤓 Chapter 9 is titled “The Axial Age (800 BC–600 AD)”2. It discusses how different civilizations around the world developed new forms of philosophy and religion that challenged the existing systems of debt and violence3. Some examples are Buddhism, Jainism, Confucianism, Taoism, Zoroastrianism, Judaism, Christianity and Islam3.
The major themes of this chapter are:
🤓 Chapter 10 is titled “The Middle Ages (600 AD–1450 AD)”1. It examines how different regions of the world experienced different forms of money and debt during this period1.
The major themes of this chapter are:
Chapter 11 is titled “The Age of the Great Capitalist Empires (1450–1971)”1. It traces how European powers colonized and exploited other regions of the world through debt, violence and trade1.
The major themes of this chapter are:
Chapter 12 is titled “(1971–The Beginning of Something Yet to Be Determined)”1. It analyzes how the global financial system changed after the US dollar was detached from the gold standard in 19711.
The major themes of this chapter are:
Overall, way too much on the “Wonk” spectrum but lots of interesting ideas to incorporate.
Just one quick note: if you will use actual people as examples I would pick one more hated by your target demographic like the one of the Koch’s, or Elon, or Zuckerberg… Not that I am a fan of Gates, but I think these days he is less harmful.
I may say “people like” but I think Bill can shoulder the example because he’s so clearly NOT the person we’re really talking about (and I’m certain to make that point). Still, the thing is, even he can’t help it. Despite being the most charitable man in history, he still has vast sums of unused money sitting around sucking up interest.
Even when he tries to do something good, there are consequences. The Gavi Vaccine Alliance, for example, has spent $4Bn since 2000 and has vaccinated 822M children in 70 countries. That’s great but essentially they paid $5 per vaccine and children still need vaccinations. The money would have been better spent lobbying for Governments that pass laws to make sure Children are prioritized rather than “saved” by charities or $4Bn could have gone to fund a startup like MRNA (who were a $4Bn company in 2019), who delivered 500M doses of Covid Vaccine and made $20Bn in profits and could easily have provided 500M doses to those same children (on free shot for each paid shot) and still made about $15Bn yet the free doses would have gone on forever and a percentage of the profits would go back to the charity – which would be a LOT more effective use of $4Bn.
Charities do not always spend money effectively. I’m proposing a new structure where charities take over companies and make charity part of the mission statement. It can be done and it will change the rules of Capitalism by using Capitalism – that’s going to be a lot harder for the Conservatives to block.
This Giving Pledge Gates and Buffett are behind is not going to provide a long-term fix, it’s going to squander the potential power of hundreds of charitable people when it could instead be pooled towards the greater good.
Thinking of an experiment – Buy some BYND, and sell the Apr $1 calls (the lowest strike). The current short borrowing rate is >100% (and fidelity keeps half, I get the rest – I have already confirmed this based on how much interest I received on a handful of shares last month) – when lent out, the Apr short calls are considered naked short calls for margin purposes – however, I can always recall the shorts when needed, so am protected till $1. The question now becomes, what is the cash interest on this protected trade.
Note that the interest is calculated on a daily principal (i.e. as the value of the stock falls, the $ amount of the interest also decreases, even if the percent is the same).
You need to ask Fidelity how it works but I bet their answer won’t help either as brokers do not like to be specific. Best to actually do it with 100 shares and one short call and see what happens but there’s no margin in selling the April $1s at less than $17.35 and the bid/ask is $17.20/17.60 with ZERO interest.
I’m not sure there’s a point but let me know how it goes.
im setting up an F play – wanted to see what you thought of ;
All June ‘25
$10/$15 spread @ $2.25 offset by 1/4 quantity of short $11 puts ($1.80). Cost per spread $1.85
$10/$20 @ $3.50 offset by 1/4 $14 puts ($3.30). Cost per spread $2.60
My only concern about the June 2025s is they will always be thinly traded compared to the Jans. No biggies if you are ABSOLUTELY CERTAIN you would want to stick with the play – even if there’s a general crash.
F is at $13 and you are in at $11.85 per long – nothing wrong with that with $3.15 upside potential. I think the $10/20 is getting greedy. The $15s are $2.30 and the $20s are $1 so $1.20 to add those to the $10/15s or just play twice as many of those for less than $2.60 but then you realize you are not as comfortable with that – so why are you spending more money to take more risk?
Start out more conservative and, if F pops, you can always add more longs and put a stop on your $10s to lock in the gains.
Phil/VALE: Please let me know your thoughts on Vale. Other than it being Brazilian, and a large increase in debt (any reason why debt spiked?) this trade below looks pretty attractive. Thank you!
Buy 1000 VALE Shares to Open
17.00 x 2P-17.18 x 12P
Sell 10 VALE Jan-25 17 Call to Open
2.70 x 1-2.90 x 16
Sell 10 VALE Jan-25 15 Put to Open
2.22 x 50-2.58 x 50
That is Net $11.80, that entry price increases the yield to 11.8%, if you get called at 17 in 2 years, a 68% return with 23.7% in cumulative dividend payments….
🤓 Hello, this is Bing. I can help you with some information about VALE stock. According to finance results1, VALE is trading at $16.58, down 3.13% as of 9:40 AM EST today. Its market cap is $82.14 billion and its PE ratio is 4.88.
Stock analysis is a process of evaluating and understanding the value of a security or the stock market based on past and present data2. There are two broad types of stock analysis: fundamental analysis and technical analysis2.
Fundamental analysis looks at the financial performance, growth prospects, competitive advantages, and industry trends of a company to estimate its intrinsic value3. Technical analysis uses historical price movements, patterns, trends, and indicators to predict future price movements and identify trading opportunities3.
Some pros of VALE’s prospects are:
Some cons of VALE’s prospects are:
And now the part of the analysis that AI can’t do…. Phils take…. Drum roll please…..
Like a weather report it may or it may not rain tomorrow
Nope, Bing’s charts don’t post.
Now that is what I call a reply, thank God AI has not invaded the platform yet
simple checking wth yahoo finance VALE free cash flow has dropped from 21 at 20,000,000 to 6,000,000. Where are oll the flowers gone, wo sind sie geblieben???
Boy you Germans certainly know how to turn a song into a downer!
Hurry you got it 👍
I love Warren!
Fits the Ukraine Just next door!!!
🤓 VALE S.A. is a Brazilian mining company that produces iron ore, nickel, copper, coal, and other metals and minerals. According to its latest quarterly report1, VALE’s free cash flow for the quarter ending September 30, 2022 was $5.9 billion, a decrease of 17% compared to the previous quarter.
Some of the factors that contributed to this drop in free cash flow were:
Despite these challenges, VALE still generated a strong free cash flow margin of 46% and returned nearly all its free cash flow back to shareholders via dividends and buybacks2. VALE also expects to benefit from higher nickel prices in the future due to rising demand for electric vehicle batteries3.
That’s the problem though, I see “analysts” posting all sorts of crap they obviously looked up in AI (or just pasted responses) and didn’t actually verify. It’s amazing how fast quality can collapse with just a few short-cuts.
I like VALE, $17.11 is $77Bn and they make $11.5Bn, so 6.6 p/e is nice but it’s cyclical and commodities are high at the moment, a Recession would crush them. You don’t know what the go-forward taxing environment will be in Brazil with Lula back so I wouldn’t make it a mainstay play – better off with MT in the space at 8.8x and no likely turmoil.
As to debt, VALE paid out a ridiculous $7.6Bn (0.687) special dividend in Aug 2022 but I guess they wanted to distribute it before it got taxed.
As long as you REALLY want to own VALE long-term and you’ll be THRILLED to DD if the drop 40% then nothing wrong with starting off at $11.80/13.40 and seeing how things hold up but 40% off is $10.26 so make sure you can handle 2,000 at $13.40 and then adding 2,000 more at $10.26 and then selling more puts and calls from there – not just SAYING you won’t mind it!
That’s more like it. Thank you!
Good thing we got out!
This is why you TAKE THE MONEY AND RUN when you get a nice pop!
Today’s 11.9% downside gap in the Natural Gas ETF ($UNG) was the largest since the ETF’s inception in 2007. BeSpoke
SPX just testing 4,080 now.
oil at 80 dollars
Not sure why.
YETI (a trader sold ) January $35 puts sold to open 700x at $4.10
AY looks interesting, though they have a ton of debt
Nice mix of stuff:
$28.70 is $3.3Bn and they expect to make $50M so 66.6x is not very sexy. They’ve racked up $4.7Bn in debt playing with other people’s money so not for me.
thanks, kinda what I thought, but wanted to get your opinion.
CVS and VZ seem low in their channel. What are your thoughts about those companies and eventually what could be a good spread? Thanks
Book- your BotBuddy cautioned on bias- hard to avoid that if invoking Sanders/Warren style.
I posed the following question to my bot:
Would the writing style of elizabeth warren and bernie sanders be biased
Yes, the writing style of Elizabeth Warren and Bernie Sanders would likely be biased. Both politicians have very strong opinions on issues such as economic inequality, and their writing style tends to reflect these opinions. As such, their writing would likely be biased in favor of their particular political views.
I’m not looking to be unbiased. I agree with Sanders and Warren, that’s the political point of view I want to bring into this. There is such a thing as too much money and there are a lot of people getting to that point. A few black holes may be fine but a super-massive black hole that’s devouring the galaxy is not. As seen in the math – we are only one generation away from our first Trillionaires and they are only 2 generations from the first Quadrillionaires and, since all the assets on Earth are not even $200Tn, it means all for them and none for anyone else will be hit in maybe 100 years or less.
We can either ignore it (like climate change) or we can do something about it (like go back to taxing wealth and inheritance to redistribute the money) and I intend to write a book that points out the danger of inaction. I’m sure that will make the the economic version of Al Gore but it only took 40 years for us to realize he was right…
Book- you asked for input so – your black hole premise would have to be data supported as it does not logically follow, in my view, that the billionaire hoards the interest income under the mattress. Rather, the income is redeployed as new capital in many different ways- start ups, government debt financing, donations, etc. Of course, this is all after the yacht, helo, vineyard, etc. are paid for.
Feel free to give me data. Show me the productive ways Billionaires spend their money. Show me how they don’t cause inflation with all the houses, boats, cars, etc they hoard and their disproportionate use of resources, etc. You assume what, without the Billionaire there would be no startups? The Government wouldn’t have any financing? You know that’s a joke because they pay less than 1/2 the amount of tax that would be paid by ordinary earners. Anyway, sure, show me the figures – not the propaganda.
Even without considering at all whether economic output or productivity would be enhanced or reduced if a very, very few trillionaires control all the wealth; it’s ridiculously easy to see that none of us want to live on an earth where 10 people own all things and make all the decisions. You have to be blind not to know that it would just suck.
Unless you jsut really love the idea of Saudi Arabia.
It does suck, we’ve done it that way with monarchs and conquerors for thousands of years. Eventually, things suck enough for them to be overthrown and heads on spikes, etc. and Democracy is mostly just a game to pacify the masses while you give them the illusion of control.
The removal of inheritance tax is the death of any semblance of equality. Someone who starts life with $100Bn and invests it at 5% for 50 years will have $1.15Tn. Let’s assume they needed $3Bn a year to live on – then it’s just $1Tn and then their kid will have $11Tn 50 years later as long as they spend less than $10Bn a year while they wait for their nest egg to grow.
That’s just in the bank, gathering interest. Pstas says they should invest it and make 10%, in which case we go from $100Bn to $11.7Tn in 50 years and $11.7Tn to $1.3 Quadrillion in the next 50. That is just the money from ONE of our several $100 Billionaires and we’re not even counting the corporations.
If we say there is $200Bn of assets on the planet and they grow with the GDP at 3.5%, they would hit $1.1Tn in 50 years and $6.4Tn in 50 more so again, the single $100Bnaire now would lap the entire planet in about 30 years.
Their wealth would simply REQUIRE all the other wealth there is – at 10%. God forbid they make a good investment!
We’re letting this happen now. It’s societal suicide and people just don’t see it.
That gets us into the trickle down economics discussion which has already been disproven.
I think you got it backwards- its your book, your black hole premise so its up to you to convince me and others of the validity of the premise.
The capital gets stuffed or redeployed. One can plausibly argue disliking how it is done or having a better method- so make the case. Spare us the strawman politics and make your case.
i understood Phil to mean that colossal wealth accumulation will result in 10 (nice round number) people owning the ENTIRE EARTH. there is no strawman, or politics involved at that point. the result will be dictatorship, rule by king. the beautiful result that modern capitalism produced would be gone. just like there is an end point beyond the zero lower bound of interest rates that we cannot go beyond, there is also an endpoint in the amount of wealth accumulation that a capitalist democracy can survive. just as you can only raise taxes to so far before the system would implode, you are likewise limited in how far you can lower them.
so we can argue about the best level of rates, taxation, growth or inflation, but to argue there should exist capitalism without regulated limits is just silly.
unless of course it turns out that the final Trillionaire is me. then, I say it can ALL be mine.
Some thoughts re your book. Like the idea. I think a chapter on Adam Smith would be good.
1) Smith’s name and reputation would add some cache.
2) One of Smith’s main thesis is that capitalism is a great creator of wealth, but a poor distributor of wealth.
3) His book on the “Nature and Causes of the Wealth of Nations” was at its core a critique/diatribe of the English merchant class (businessmen) – specifically the abuse of money to purchase political influence, abuse of the legal system, rent seeking, creation of monopolies, etc.
4) He had extensive discussions on topics such as a) bankers cant be trusted b/c they create periodic financial crisis by making bad loans (eg. Lincoln Savings & Loan in the 1980, Subprime Mortgage Meltdown beginning in the 2007, etc,), b) progressive income taxes are needed because wealthy businessmen are the disproportionate beneficiaries of government services, (eg. legal system, police forces, military protection, physical infrastructure, educational system, etc.), c) businesses need extensive regulation (guilds, lobbyist, monopolies, oligopolies will skew free markets, bankers will make bad loans, etc.).
Adam Smith is so often misquoted and misrepresented as being a proponent of laissez-faire government regarding free markets, ie. anti taxes, anti regulation, etc. Instead he was a proponent of strict government regulation of business, bankers, merchants, etc. He was a proponent of progressive taxes to pay for services such as infrastructure, education, military, courts, etc. He was anti-guilds/lobbyist because politicians were/can be easily bought/influenced (Citizens United, carried interest, roll back/deregulation of Glass Steagall Act in the 1980s, unregulated derivatives, etc.). He was highly critical of monopolies and oligopolies that skewed free markets.
Just a thought.
Good suggestion. I was not liking the way we dive right into it in chapter one, this would be a nice buffer to get things warmed up.
🤖 I can provide a rough draft of a first chapter that explores how Adam Smith has been misunderstood and misquoted as a proponent of laissez-faire economics, despite his actual views on the need for government regulation and intervention to prevent abuses of power and promote the common good. Here is a possible draft:
Chapter 1: The Misunderstood Legacy of Adam Smith
Adam Smith is often hailed as the father of modern capitalism and free-market economics. His magnum opus, “The Wealth of Nations,” published in 1776, has shaped economic theory and policy for over two centuries. However, many of the ideas that are attributed to Smith are based on misquotations, misinterpretations, and oversimplifications.
One of the most pervasive myths about Smith is that he believed in laissez-faire economics, or the idea that government should not intervene in economic affairs and that free markets should be allowed to operate without regulation. This interpretation of Smith’s work has been used to justify policies such as tax cuts, deregulation, and privatization, which have often led to rising inequality, environmental degradation, and financial instability.
In reality, Smith’s views on government intervention were much more nuanced and complex than the caricature of the laissez-faire economist. Smith recognized that markets could be efficient at allocating resources and creating wealth, but he also saw the dangers of unbridled greed, corruption, and monopoly power. He believed that government had a vital role to play in preventing these abuses and promoting the common good.
One of the key themes of Smith’s work was the need to balance self-interest with public interest. He argued that individuals pursuing their own economic interests could lead to collective prosperity, but only if certain conditions were met. These conditions included the rule of law, property rights, a stable currency, and a well-functioning infrastructure. Without these institutional supports, the pursuit of self-interest could degenerate into a “war of all against all” and undermine the very foundations of economic growth.
Smith was also a fierce critic of the abuses of power by the merchant class, which he saw as using their wealth and influence to buy political favors and manipulate markets. He wrote extensively about the dangers of monopoly power, arguing that it could lead to higher prices, lower quality, and stifled innovation. He believed that government had a responsibility to prevent monopolies and promote competition, in order to ensure that markets worked for the benefit of society as a whole.
Another area where Smith’s views have been misunderstood is taxation. Smith was not opposed to taxation per se, but rather to arbitrary and oppressive taxation that burdened the poor and favored the rich. He argued that government had a legitimate role in providing public goods and services, such as infrastructure, education, and defense, that could not be efficiently provided by the private sector alone. He believed that progressive taxation, or taxing the rich more heavily than the poor, was a fair and efficient way to finance these public goods.
In summary, Adam Smith’s legacy has been distorted by those who seek to justify an unbridled pursuit of profit and power. The real Adam Smith was a complex and nuanced thinker, who recognized the dangers of unregulated markets and the need for government intervention to promote the common good. As we explore the role of debt and capitalism in modern society, it is important to set the record straight and learn from the wisdom and insights of the true Adam Smith.
Nice 1st Chapter on Adam Smith.
That’s all Warren so far.
Scary, isn’t it?
Next I’d ask him to incorporate a few more factors and add some good quotes and then we’re on our way.
Re more factors and quotes, some thoughts.
Wealth of Nations is an extension of Smith’s first book, “Theory of Moral Sentiments”. There are some great quotes and thoughts re Capitalism in this book as well. Smith traces the evolution of society and its institutions thru 4 stages: the original “rude” state of hunters; a second stage of nomadic agriculture; a third stage of feudal, or manorial, “farming”; and a fourth and final stage of commercial interdependence. Each of these stages required a different form of civil government and regulations.
I think that bringing in Adam’s book on Moral Sentiments and the 4 stages of society would add some additional relevant background and weight to your ultimate arguments. It would allow you to discuss some of the “nuances” you refer to such as the conflict between government constrained enterprise and laissez-fair capitalism.
For instance: “Civil government,” he wrote, “so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.” Finally, Smith describes the evolution through feudalism into a stage of society requiring new institutions, such as market-determined rather than guild-determined wages and free rather than government-constrained enterprise. This later became known as laissez-faire capitalism; Smith called it the system of perfect liberty.
Among other references, see >> https://www.britannica.com/biography/Adam-Smith/The-Theory-of-Moral-Sentiments.
I totally agree that a) progressive taxation especially on very high income b) inheritance tax and wealth tax on the super-rich are important. Question: Since the exorbitant accumulation of money started generations ago -if your thesis about the ‘black hole of wealth’ is correct as stated,- shouldn’t we have already had the disappearance of all money in the ‘black hole’???
No because a black hole could be sitting right in our solar system and we probably wouldn’t notice it until it got big enough to swallow things we can see with a telescope. Then, if it began ingesting enough mass, the radius would grow larger and larger until it eventually snagged one planet, then another and THEN the threat would be very obvious but far too late.
🤖 There have been historical examples of vast sums of national wealth accumulating in the hands of single individuals or families. However, these instances often occurred within the context of specific economic and political systems that were different from the ones we have today.
For example, during the feudal period in Europe, wealth and power were concentrated among a small nobility, who held large tracts of land and exercised significant political control over the serfs who worked on their estates. Over time, the rise of centralized nation-states and the emergence of a merchant class led to the erosion of feudal power structures and the diffusion of wealth and power more broadly throughout society. Similarly, during the Gilded Age in the United States, a small group of industrialists and financiers amassed vast fortunes, but progressive reforms and regulatory interventions eventually helped to redistribute wealth and power more evenly.
It’s also worth noting that the concentration of wealth and power is often self-reinforcing, and can become a self-perpetuating cycle in which those who have accumulated significant resources are able to use them to maintain and increase their influence over economic and political systems. This can make it difficult for others to challenge their dominance and for wealth to be redistributed more widely. However, throughout history, there have been instances of popular uprisings, political reforms, and other changes that have challenged the status quo and helped to create a more equitable distribution of wealth and power.
One example is the wealth of Jacob Fugger, a German banker and merchant who lived during the 15th and 16th centuries. Fugger was one of the wealthiest individuals in Europe at the time, and his banking and trading activities extended across much of the continent.
When Fugger died in 1525, his vast fortune was distributed among his heirs, but it did not consolidate into a single entity. In the centuries that followed, the Fugger family continued to be wealthy and influential, but their wealth did not accumulate to the point of taking over all the world’s assets. Instead, it was diffused and diversified through a range of investments and business activities.
It’s also worth noting that the social and economic context of Fugger’s time was very different from the one we have today. The rise of nation-states, the development of global trade networks, and other factors have contributed to a more interconnected and complex economic system, which may make it more difficult for wealth to be redistributed in the same way that it was in the past.
Another example is the Rothschild family, a European banking dynasty that emerged in the late 18th century. The Rothschilds amassed an enormous fortune through their banking activities, which extended across Europe and into other parts of the world. At their height, the Rothschilds were widely considered to be the wealthiest family in the world, and they wielded considerable political influence as well.
However, the Rothschilds did not seek to destabilize the world with their wealth. In fact, they often worked to stabilize financial markets and support governments during times of crisis. For example, during the Napoleonic Wars, the Rothschilds provided financing to both the British and Austrian governments, helping to ensure their survival. Similarly, during the Panic of 1873, the Rothschilds helped to stabilize financial markets by providing liquidity and buying up distressed assets.
Over time, the Rothschild family diversified their investments and expanded into other areas, such as mining, wine-making, and philanthropy. While they remain a wealthy and influential family, their power and influence has declined over the years, as the global financial system has become more complex and competitive. Today, there are many other wealthy families and individuals who wield considerable influence, but none have come as close to destabilizing the world as the Rothschilds were once thought to have done.
Rejected at the strong bounce, back to the weak bounce is the story for the S&P today but RUT is the bigger story, failing 1,900 again.
People seem to think Powell is going to let us off the hook tomorrow – I don’t see it but he does tend to talk like a dove and then go hawkish once he’s back at the Fed.
Anyone here with TD in Canada, either using Webbroker or ThinkorSwim?
My SOFI spread order was rejected. I am being told SOFI is on TD’s restricted list, and no spreads can be bought for SOFI.
Anyone else had this problem?
Not in US.
Maybe International Brokers allow more latitude in Canada?
Oops, Interactive Brokers
Tyler Perry Expressed Interest in Buying Majority Stake of BET Media Group from Paramount Global — Sources — WSJ
also someone sells 2000 Jan2025 $22.50 puts in PARA for $4.70
That’s an aggressive sale.