Tuesday, October 1, 2013

Do my eyes deceive me? - And - "The Law"

Do my eyes deceive me? As I type (embarrassingly early on Tuesday October 1, 2013), day one of the 2013 U.S. Government shutdown, Dow futures are pointing to a 34 point gain at the opening. At one point last night, as I reported, Dow futures were off over 100 points (that's not that much, by the way). You gotta love it, at least in concept. I've been preaching for the better part of 30 years that market-timing is the most foolish of games, and moments like this serve to, further yet, seal that conviction. Who, other than perhaps a rabid free-market fanatic, like yours truly, would expect a, albeit small (and likely brief), rally during the initial stage of a government shutdown---although, truthfully, I didn't.

So what gives? Why would buyers venture anywhere near the market at a time like this? I mean, even if the government reopens all those departments tomorrow, we still have the debt ceiling standoff coming in 16 days. Perhaps, as I suggested the other day, the market indeed finds present policymakers an unthreatening lot. Okay, but I absolutely expected the market to give them a real drubbing---should a shutdown occur---and, in very short order, force their hand. If, therefore, you happen to be hoping for a quick resolution, green arrows for stocks is not what you're after. Although I'll be very surprised if, barring that quick resolution, and/or a surprise deal on the debt ceiling, those green arrows don't soon turn red, and on their heads. Which, again, is the sort of thing that would get you what you're hoping for.

What am I hoping for? Oh, you shouldn't have asked, but since you did: As an advisor to long-term investors, I'm not the least bit rattled by today's goings on; the government will reopen and, alas, borrow to its heart's content---Tea Party pressure notwithstanding---before you know it (uh, maybe I should be rattled). My hope (pardon my digression) is that one day Frederic Bastiat's 1850 Essay, The Law, will be required reading in every school in the nation. I know, alas, it'll never happen.

Here's a snippet:
See whether the law takes from some persons that which belongs to them, to give to others what does not belong to them. See whether the law performs, for the profit of one citizen, and, to the injury of others, an act that this citizen cannot perform without committing a crime. Abolish this law without delay; it is not merely an iniquity---it is a fertile source of iniquities, for it invites reprisals; and if you do not take care, the exceptional case will extend, multiply, and become systematic. No doubt the party benefited will exclaim loudly; he will assert his acquired rights. He will say that the State is bound to protect and encourage his industry; he will plead that it is a good thing that the State to be enriched, that it may spend the more, and thus shower down salaries upon the poor workmen. Take care not to listen to this sophistry, for it is just by the systematizing of these arguments that legal plunder becomes systematized.

And this is what has taken place. The delusion of the day is to enrich all classes at the expense of each other; it is to generalize plunder under pretense of organizing it. Now, legal plunder may be exercised in a multitude of ways. Hence come an infinite multitude of plans for organization; tariffs, protection, perquisites, gratuities, encouragements, progressive taxation, free public education, right to work, right to profit, right to wages, right to assistance, right to instruments of labor, gratuity of credit, etc., etc. And it is all these plans, taken as a whole, with what they have in common, legal plunder, that takes the name of socialism.

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