Stock Picks & Trades

There was an essay written by Leonard Read called “I, Pencil”. He makes a fantastic claim. No one in the whole world knows how to make a pencil. At first glance, this seems absurd. After all, millions are produced each year. How could this be. To understand how no one in the world knows how to make a pencil but yet there are millions produced each year read this.
There are some individuals who consider themselves experts. These people think they know something. At this site you will never see me proclaim I am an expert at investing nor anything else. Whenever some one claims they know something or makes the assertion that they are an expert, you know they have never read I, pencil.
From I,pencil:

Just as you cannot trace your family tree back very far, so is it impossible for me to name and explain all my antecedents. But I would like to suggest enough of them to impress upon you the richness and complexity of my background.
My family tree begins with what in fact is a tree, a cedar of straight grain that grows in Northern California and Oregon. Now contemplate all the saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding. Think of all the persons and the numberless skills that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes, motors; the growing of hemp and bringing it through all the stages to heavy and strong rope; the logging camps with their beds and mess halls, the cookery and the raising of all the foods. Why, untold thousands of persons had a hand in every cup of coffee the loggers drink!
The logs are shipped to a mill in San Leandro, California. Can you imagine the individuals who make flat cars and rails and railroad engines and who construct and install the communication systems incidental thereto? These legions are among my antecedents.
Consider the millwork in San Leandro. The cedar logs are cut into small, pencil-length slats less than one-fourth of an inch in thickness. These are kiln dried and then tinted for the same reason women put rouge on their faces. People prefer that I look pretty, not a pallid white. The slats are waxed and kiln dried again. How many skills went into the making of the tint and the kilns, into supplying the heat, the light and power, the belts, motors, and all the other things a mill requires? Sweepers in the mill among my ancestors? Yes, and included are the men who poured the concrete for the dam of a Pacific Gas & Electric Company hydroplant which supplies the mill’s power!
Don’t overlook the ancestors present and distant who have ahand in transporting sixty carloads of slats across the nation.
Once in the pencil factory—$4,000,000 in machinery and building, all capital accumulated by thrifty and saving parents of mine—each slat is given eight grooves by a complex machine, after which another machine lays leads in every other slat, applies glue, and places another slat atop—a lead sandwich, so to speak. Seven brothers and I are mechanically carved from this “wood-clinched” sandwich.
My “lead” itself—it contains no lead at all—is complex. The graphite is mined in Ceylon [Sri Lanka]. Consider these miners and those who make their many tools and the makers of the paper sacks in which the graphite is shipped and those who make the string that ties the sacks and those who put them aboard ships and those who make the ships. Even the lighthouse keepers along the way assisted in my birth—and the harbor pilots.
The graphite is mixed with clay from Mississippi in which ammonium hydroxide is used in the refining process. Then wetting agents are added such as sulfonated tallow—animal fats chemically reacted with sulfuric acid. After passing through numerous machines, the mixture finally appears as endless extrusions—as from a sausage grinder—cut to size, dried, and baked for several hours at 1,850 degrees Fahrenheit. To increase their strength and smoothness the leads are then treated with a hot mixture which includes candelilla wax from Mexico, paraffin wax, and hydrogenated natural fats.
My cedar receives six coats of lacquer. Do you know all the ingredients of lacquer? Who would think that the growers of castor beans and the refiners of castor oil are a part of it? They are.
Observe the labeling. That’s a film formed by applying heat to carbon black mixed with resins. How do you make resins and what, pray, is carbon black? Why, even the processes by which the lacquer is made a beautiful yellow involve the skills of more persons than one can enumerate!
My bit of metal—the ferrule—is brass. Think of all the persons who mine zinc and copper and those who have the skills to make shiny sheet brass from these products of nature. Those black rings on my ferrule are black nickel. What is black nickel and how is it applied? The complete story of why the center of my ferrule has no black nickel on it would take pages to explain.
Then there’s my crowning glory, inelegantly referred to in the trade as “the plug,” the part man uses to erase the errors he makes with me. An ingredient called “factice” is what does the erasing. It is a rubber-like product made by reacting rapeseed oil from the Dutch East Indies [Indonesia] with sulfur chloride. Rubber, contrary to the common notion, is only for binding purposes. Then, too, there are numerous vulcanizing and accelerating agents. The pumice comes from Italy; and the pigment which gives “the plug” its color is cadmium sulfide.

Novice investors trying to get rich quick on bitcoin are going to learn one of many hard lessons. A very important lesson is this:
It is easy to get into a market. It can be difficult to get out.
Consider as bitcoin was crashing from its 17K+ high. Coin base displayed the following message to users:

When the bids go away a vacuum will form under the bitcoin price.  There will be no more buyers any where close to the current prices.
Consider this. Do you know anything in the history of mankind that has went from 6K to 20K in a few weeks? Do you truly believe these price appreciations are sustainable?
The price of bitcoin can not get any more vertical than this…

This is a top.

New Recommendations can be found in the performance tab.

I read my share of worthless articles per day. Here is an example of one. The title is:
“Got $1 million to retire? Here’s how long it will last, by U.S. state”
Now consider how many Americans actually have a million plus.

 

Debt is very easy to understand. As a individual, if you spend more money than you have in a given month you must borrow if you have no saving. Everyone understands it is never a good idea to go into to much debt. At some point no one will lend you money. You must than default. This line of reasoning does not escape governments. Everyone understands this. Unless of course you are an economist. Than you do not understand this.
Takes this poll from a few years back.
You can find more up to date polls that show approximately the same numbers. The article above has other important information I could not find in one concise article.
Whats the point?
Majority are very concerned about the national debt. However less than 5% of those surveyed want to cut entitlements. This is despite the fact that entitlements are going to sink the US government. No one wants to increase taxes (4%). This is very good. We can now draw a conclusion from the data.
Everyone loves their handouts. No one wants to pay for it.
There is a lie going around. “This country is very divided”.
On issues such as gay marriage. Yes. I can divided this country right down the middle. However, if any politician mentions reduction of entitlements, he/she will become unemployed. Perhaps even tarred and feathered.
The public demands their entitlements. How to pay for it? Not their problem. Just keep the money flowing. This is why both political parties perform lip service on reducing the debt but it never happens. The public is not serious about it. The government is nothing but a reflection of the masses.

The great bond bull market that started in 1981 will come to an end. The US government will default. They will not meet their obligations. This is obvious to any one with a calculator. The public will be confused. Than the greatest opportunity will be available. Explaining to the masses what happened:
You thought you could vote yourself prosperity? At the expense of who?

From The Gulag Archipelago

At the conclusion of the conference, a tribute to Comrade Stalin was called for. Of course, everyone stood up (just as everyone had leaped to his feet during the conference at every mention of his name). … For three minutes, four minutes, five minutes, the stormy applause, rising to an ovation, continued. But palms were getting sore and raised arms were already aching. And the older people were panting from exhaustion. It was becoming insufferably silly even to those who really adored Stalin. However, who would dare to be the first to stop? … After all, NKVD men were standing in the hall applauding and watching to see who would quit first! And in the obscure, small hall, unknown to the leader, the applause went on – six, seven, eight minutes! They were done for! Their goose was cooked! They couldn’t stop now till they collapsed with heart attacks! At the rear of the hall, which was crowded, they could of course cheat a bit, clap less frequently, less vigorously, not so eagerly – but up there with the presidium where everyone could see them? The director of the local paper factory, an independent and strong-minded man, stood with the presidium. Aware of all the falsity and all the impossibility of the situation, he still kept on applauding! Nine minutes! Ten! In anguish he watched the secretary of the District Party Committee, but the latter dared not stop. Insanity! To the last man! With make-believe enthusiasm on their faces, looking at each other with faint hope, the district leaders were just going to go on and on applauding till they fell where they stood, till they were carried out of the hall on stretchers! And even then those who were left would not falter…Then, after eleven minutes, the director of the paper factory assumed a businesslike expression and sat down in his seat. And, oh, a miracle took place! Where had the universal, uninhibited, indescribable enthusiasm gone? To a man, everyone else stopped dead and sat down. They had been saved! The squirrel had been smart enough to jump off his revolving wheel. That, however, was how they discovered who the independent people were. And that was how they went about eliminating them. That same night the factory director was arrested. They easily pasted ten years on him on the pretext of something quite different. But after he had signed Form 206, the final document of the interrogation, his interrogator reminded him: “Don’t ever be the first to stop applauding.”

Tax reform has always been a scam. Little has changed since November 1985.
Tax reform is about moving pieces around on the chess board. All in all it will probably be neutral. Tax increases for some and tax decreases for others. This is why they don’t call it a “Tax Cut”. A true tax cut bill would be one sentence:
“All taxes shall be decreased by X%.”
Pick a number.
A bill like this would be bad for business. No special privileges hidden in a 1000 page document. No lobbyist fighting their hardest to sneak lawyer language to benefit their cronies. Everyone would understand it.
Interestingly, all sides go into a frenzy over the passage of this bill. I have lost no sleep over it.
The stakes are very low. The rhetoric is very high. The entertainment level is mediocre.