The World is a Hard Place
Research for Online Investors

by John Dalt

12/22/10

When the market is good, it is so-o-o much fun.  Everything just seems to be rolling along great.  Every one of our subscriber services are doing well, it just doesn’t get any better than this…  If you are feeling this way, you better look over your shoulder; something might be gaining on you!

The “something” that might be gaining on you, and us, is a market that has priced in all of the good news, and is ignoring bad news.  What about the eurozone credit problems….forget about it.  You say, “Those guys at the European Central Bank (ECB) will take care of everything.”

But, what happens when the countries that are defaulting are too big?  What about N. Korea, or Iran?  The S. Koreans are conducting more military drills, who knows if the North will exercise restraint?  Iran…these guys are a threat to everyone.  They don’t like Saudi Arabia, Israel, Yemen, the U.S., Iraq, and Afghanistan just to name a few.  What kind of trouble are they capable of when they have nukes and missiles?  It is a dangerous world.

Free trade policies only last as long as everyone feels they truly are ‘fair’ and more importantly that their country is gaining an advantage from ‘free trade.’  The moment a country realizes their ‘free trade’ partner is gaming the system for an advantage, the wheels come off the bus.

We are watching all the nooks and crannies of the world for the next problem, but will probably be surprised just like everyone else when the next ‘game changer’ news item hits.  The best preparation is to know it is out there, ready to take center stage and create a crisis mentality in the market.  Our best advice, be vigilant and prepared to be agile.

We are making plans for Christmas, the girls are home from college and their oldest sister will arrive on Thursday afternoon.  We are going to have a quiet day and will drive to the in-laws for another dinner on Sunday.  We have invited our church’s pastor and his wife to join us.  They are new in town, as they hale from the east coast.

I came across an interesting advertisement for a book by Thomas Sowell this morning.  The excerpted quotations reminded me what a mind Thomas Sowell has.  His ability to cut through the haze of economics and social policy is amazing.

He reinforces much of the prejudices I have for smaller government and resistance to regulation.  From his book, “ Is Reality Optional?”

Much of the social history of the Western world, over the past three decades has been a history of replacing what worked, with what sounded good. In area after area - crime, education, housing, race relations - the situation has gotten worse after the bright new theories were put into operation. The amazing thing is that this history of failure and disaster has neither discouraged the social engineers nor discredited them.

Some things must be done on faith, but the most dangerous kind of faith is that which masquerades as 'science.' As the pretense of science has replaced commonsense experience, we have abandoned many old-fashioned practices that worked in favor of high-sounding innovations that have led to disaster.  The assumption that spending more of the taxpayers' money will make things better has survived all kinds of evidence that it has made things worse. The black family - which survived slavery, discrimination, poverty, wars, and depressions - began to come apart as the federal government moved in with its well-financed programs to 'help.'

Worst of all, guilt has so furtively stolen into many hearts and minds that people feel apologetic about being civilized, educated, and productive when others are barbaric, uneducated, and parasitic. When civilization apologizes to barbarism, something has gone very wrong at a very fundamental level.

One commentary I read about Is Reality Optional?, mentioned how laws try to change our behavior from what the free market would dictate.  What business would have refused service to blacks if there were not a “Jim Crow Law?”  A wonderful point I had never contemplated.  In all the years I was in business, I never refused service to anyone that was willing to pay.  The competition would have been happy to have my customers.

The world is a hard place; you have to work to succeed.  That is what capitalism and free enterprise is all about.  Everyone acts in their self interest, and society benefits from the success of individual initiative.  F.A. Hayek warned us about ‘world improvers’ seventy years ago.

Wouldn’t it be nice if today’s generation would listen to Thomas Sowell?  You can order his book here.  What a great Christmas present.

To the mailbag:
Very good report on Local Debt problems.  I don’t understand why so many financial advisors are bullish.  Our states are heading into bankruptcy, our federal government is bankrupt, our government doesn't know the meaning of a budget, and yet all three indices are heading higher. What do you think?-subscriber G.C.

John’s reply:  Financial advisors gather money…we are paid to bring you our best information.  We may take some profits off the table soon.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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