Broker Check


August 09, 2021


July, Sort of…




I receive regular “thoughts” from several people that I consider rational thinkers and that includes a man named Bill Bonner.  I have mentioned him before.  But his most recent “thought” collection caught my attention because I was specifically asked to compose a blog to address issues that are relevant to young people.  That opens up a lot of audience since being 71 provides a fairly large “younger” audience.  (That is assuming anyone reads this!)


Bill introduced his current thought by saying:  “…there are only two ways to get what you want.

Either you bargain, trade, and persuade for it – that is, providing goods and services to others in exchange for goods and services from them…Or you take it by force… otherwise known as theft, burglary, corruption, payoffs, giveaways, income redistribution, socialism, communism, fascism, etc.  You either make it… or you take it. There is no other way.    “


His summary statement is:  “And there is no example in all of history where a politically controlled, centrally planned economy (taking it) was more fruitful than a free economy (making it).”


I am old enough to remember from my early school days that the US population was forecast to grow so fast and large that by the turn of the century each American would only have 9 square feet to live in, which led to a very popular “Zero Growth” lobby. (Look up a book titled the Population Bomb by Paul Ehrlich and David Brower ).  Every time I fly over much of the western United States returning from a mid-west vacation, I wonder how did we ever believe that?  And you will soon hear much more about the coming global food shortage and mass starvation coming.  When the “mass starvation crowd” meets the “ban engineered food crowd” will that be the ultimate “food fight”? (Sorry, couldn’t let that go.)


Bill Bonner goes on:    “The first problem with central planning is that it relies on the aforementioned force… and is therefore doomed from the get-go.  As we will see, the planning is as fake as the dollar. The world improvers pretend that they are preparing for the future. What they are really up to is trying to change the future… which inevitably leads to taking things that don’t belong to them.

The second problem is that the plans all depend on the part of the time spectrum that is unknowable – the future.

The planners are always trying to make better tomorrows, without knowing what tomorrow would have been like if they had left it alone.

In one tomorrow, long ago, the automobile was invented. Suddenly, plans for more horse-watering troughs were obsolete. In another, along came the internet.

World War I surprised all the future-facing thinkers of the early 20th century. COVID-19 seems to have gotten the drop on those of the 21st.

There are zillions of possible tomorrows. But the planners cannot plan for an infinite number of futures. They can only plan for one. So the odds are, approximately, a zillion to one that they will get it right.

The future… as they have imagined it… will never exist. And their plans will not only be unwelcome… but unwise, untimely, and unprepared for the future that actually comes.


We can get a hint of how the plans might go awry by wondering what kind of strategic plans the Nixon Administration might have come up with 50 years ago.

For example, it might have tried to steal a march in the battle against climate change. But it probably would have been marching in the wrong direction.

That is, it might have spent billions trying to make the planet warmer; global cooling was the bugaboo back then.

“Another Ice Age?” asked TIME magazine in 1974, worrying about the spread of arctic temperatures.

Or perhaps Nixon would have begun making plans for strategic competition with China.

But wait… China was not considered a rival back then; Mao’s central planning had just starved 20-30 million of his own citizens in the Great Leap Forward.

Back then, the “state-run giant” with a swell economy that seemed to threaten the U.S. was the Soviet Union. “We need more central planning in the U.S.,” said the Paul Krugmans of the 1960s. “We need it to keep up with the Soviets. They’re pulling ahead.” 

In the 1960s, the Soviets were definitely ahead in the “Space Race.” They had put their man, Yuri Gagarin, into orbit in 1961. It wasn’t until eight years later that the U.S. was able to definitively win the race by putting men on the moon. And by then, Gagarin was already dead at 34… in a plane crash.

Even as late as the 1980s, the U.S. elite still thought it was in a dogfight with the Soviet Union. The Reagan Administration added $1.7 trillion to U.S. debt, largely to counter the threat. 


       But by the early 1990s, the Soviet economy – weighted down by five decades of central planning – was no longer airworthy. The Russians dragged it off the runway themselves in 1993, and went back to a basically capitalistic system. By then, the planners manques in the U.S. had turned their attention farther east. Japan Inc. was the bubble of the 1980s. And it had an “industrial policy.”  “We need strategic planning to keep up with Japan Inc.” said America’s elite.

But the Japanese economy blew up in 1989. Its stock market has never recovered.   


Strategic planning back then might have also included a big handout to the oil industry. Oil was essential to the U.S. economy. And the U.S. was running out. At least, that was the theory of American geologist M. King Hubbert, who believed the peak in U.S. oil production had been reached in the early 1970s. The U.S. created a Strategic Petroleum Reserve (SPR) in anticipation of running out.  By the 1980s, the U.S. was awash in oil. Then, the fracking revolution of the 2000s made the U.S. energy-independent again.  And in the COVID-19 crisis and lockdowns of 2020, the price of oil went negative. Producers had to pay to get rid of it. Instead of filling their SPR, the planners should have left it empty!


What else? The planners of the Nixon era might have wanted more freeways right through the inner cities to make it easier for commuters to get to work… and more gas stations, where they could fill their tanks… and more cigarette machines to make it easier for them to enjoy a smoke.” 


 Of course, when you’re trying to prepare a whole nation for the future, you’re going to make mistakes.  But what does it matter? The elites will do the planning. They will reward their favored clients, allies, and cronies. They will subsidize industries they like and punish those they don’t – with other people’s money, of course. They will give funding to universities to study the future they imagine… and cancel alternative opinions. Professors who describe the future as the elites would like to see it will get tenure. Companies that enable their plans will get contracts. Planners will get sinecures. Busybodies will find lifelong employment implementing their plans. And day by day, little by little, the future will take shape. Not the future as it should be – full of surprises, growth, and innovation… nor even the future that the elites tried to create (you can’t really force the future to do what you want)…but a grotesque future – like the Soviet Union in 1989 – full of failed plans… bankrupt programs… and sour people.”


That discussion of the hazards of global centralized planning for hundreds of millions of people with each having their own set of goals for the next 50 years (young people), I think generally conveys the friction between the “elites” as Bill refers to those who think that only they can create and execute on lofty ideals they consider beyond criticism, and the “little people” just can’t understand and need re-education.


Bill was responding to a quote from a writer in the Financial Times: “ simply bringing a smidgen of strategic and long-term foresight to the way America’s economy is run. In a world in which we have to compete with state-run giants like in China, that think on 50-year time horizons, quarterly capitalism simply doesn’t cut it any more (not that it really ever did).”   

To quote Bill finally:  “Capitalism created almost all the wealth we enjoy. The only alternative is some form of political control over capital, business, markets, and people.”


So how do “we” individually plan for OUR future?


Fundamentally, we individually or as a family plan based on “goals”.  I would not be surprised if you have NOT seen the diagram of measuring the “balance” in your life planning. For many years I have found the visual self-assessment tool shown below quite useful.


The “life in balance” tool is depicted below but needs to have “financial” and maybe other categories entered to fit your situation (family, exercise, etc.)  It dramatically points out which “sectors” of our life need to be worked on to achieve better “balance”.  My “hobby/Model Train” radius line, in some people’s opinion is too highly rated!

Being a systems engineer from 1972 through about 1990 in the Air Force and aerospace industry, I learned that to effectively work toward an objective, you first had to define that objective.  For example, I now have a messy, dirty vehicle and I want a clean and well-kept vehicle.  So you schedule weekly trips to the car-wash.  Your vehicle is 10 years old and requires costly maintenance too often.  What would you do…set a goal to replace that vehicle.  What does getting a new vehicle require?  What does it cost, how much can I save, can I afford to finance the purchase, what are my sources of funds to make the purchase, when do I absolutely need to have the new vehicle, etc. are all factors that get evaluated along the way to arriving at the goal, getting a new vehicle.



Individuals can and should have “50 year” plans but we need to accept that no two people or family plans necessarily look alike.  So, if you are 25 now and want to be comfortably retired at age 75, you need to consider several factors:

  1. What do you mean in terms of “monthly spending” needs to be “comfortable” in retirement?
  2. What amount of retirement assets have you accumulated so far?
  3. How much are you adding to retirement assets annually?
  4. What investment strategy do you use for your retirement assets?
  5. What investment return (performance) fits with the risk you are willing to absorb?
  6. Are retirement plans rated too low on your “balance” chart?



While you are accumulating assets and planning how to spend your income, being aware of the impact of “taxes” on your annual decision making is very important.  Again, everyone is different.  Contributing to your 401k plan is GENERALLY better from a tax standpoint but if you already have a substantial 401k, 403b or IRA balance it may be more cost effective over the length of the retirement plan to avoid further tax deferral plans.  One thing is for sure:  taxes are a moving target as we are about to see.



Often this is associated with creating wills/trusts which assist in creating an efficient legacy for our heirs, or not.  Currently this is mostly the work of attorneys who specialize in these areas, or should be.  But with technology and the huge data base of will and trust planning, self-creation programs are available.  BUT if you don’t know what “goals” in this area can encompass then it would be impractical to assume you would cover all the bases on your own.  Areas that also come into play include: “special needs child/adult” benefit provisions, how to hold title on assets, how to smartly receive inheritances, how to select beneficiaries for retirement accounts and pension payouts, and even Social Security claiming strategies.  (Yes, I believe it will be there even for the “young”)



From the 1950’s on in many parts of the country, World War II returnees (my Dad) were focused on putting kids through college, especially with the dramatic rise in the manufacturing economy initiated by meeting wartime demands and post-war innovation.  If you don’t believe me, ask your grand-mother as she transitioned from washing clothes by hand to the use of an electric washing machine (in Avocado Green)  in the 1950s.  Currently, interestingly enough, there appears to be a rising trend to take a self-assessment of a need/advantage to go to college.  Younger tech savvy high-schoolers who are currently mining for Bitcoin, and skilled trade careers can be very lucrative and as the “baby-boomers” currently working with those skills are now disappearing those jobs are harder to fill.  Apprenticeship programs are on the rise and public awareness as to the shortage of such careers as truck drivers, household related trades, and other services can meet the goals of many young people today as colleges appear to be losing applicability to direct career training. I think you will be much more involved in guiding your children to make prudent educational/career decisions and not be leaving that up to guidance counselors.



I do not see a return to the high interest rates of the l980s as some fear.  Mortgage rates of 16.625% on my house in 1989 are not likely to be repeated.  Last fall I refinanced into a fixed 30 year mortgage rate of 2.5%.  Interest rates have fallen since their peak back in the late 70’s and early 80’s and remain very low historically.  We had not seen rates as high as those in the 1980s anytime prior to then.  Yes, rates will cycle but in all likelihood within a much narrower band than the highs of 20+% of 1982 and the lows of nearly 0% today. 


The risk is “around the corner” for the end of the current business cycle.  If this country were to enter a true economic slow down or at least very low growth rates in an environment of a bloated Fed balance sheet, a falling dollar means imported items cost more dollars to buy, and rising income taxes, further potential impacts on global product pipelines, we would likely enter a period of “stagflation” (stagnant growth and higher inflation).  The housing impact may well be still low mortgage rates, but falling home prices.




Simple:  Still impossible to explain.  Defy logic.  Looks like gambling to “me.”


The “traditional” markets flash many fundamental warning signs.  Only as compared to very low interest rates being manipulated via Federal Reserve massive ongoing bond purchases can we argue that while stocks are perceived by many to be “expensive”, a case can be made that with some continued ups and down over the rest of the third quarter, the fourth quarter could bring some stock market “correction”.  Correction is defined as a 10% or more drop. 


We will be using the next month or so to re-tune our current model “mixes” that we design as core holdings for most client accounts.  We are likely to simplify the models for now and prepare for an additional model change in the September-October time frame if market “technical” indicators begin to show signs of weakening. 


Some issues are already popping up.  For the last few weeks the ratio of rising stocks vs falling stocks in the major indexes has been falling, the number of new high prices vs new low prices has been declining and since mid-April the number of stocks in the S&P100 index that are trading above their 50 day moving average has dropped from about 90% down to about 55%.  You could argue that the big Tech names are holding up the large stock index.  At least for now.  We have been seeing a sort of rotation among groups of stocks that jump out and drive the index up.  That would appear to be the pattern we are now seeing and may continue to see until fall.


Achieving your overall financial goals can be done using various types of assets (asset classes) including stocks, bonds, real estate, commodities, metals, energy, and the related derivative products available today that far outnumber the assets themselves.  Sometimes we just stand aside, we don’t need to own them all and no one asset class works forever!