Governments are only efficient at one thing

  • No guns for you
  • They still don’t get it
  • Down days mean nothing for these ‘tiny stocks’
  • In the mailbag

According to reports, the gunman in Orlando, Florida, killed at least 50 people in a nightclub.

Not surprisingly, the Australian press has fallen over themselves calling for the US to finally ban guns. The claim is that guns are dangerous in the average person’s hands.

To counter that prevailing view, we thought it would be time for some perspective.

A book your editor bought about two months ago, lies unopened on our bedside table. Not because it’s of no interest to us, but because there is a whole stack of books waiting for us to read them.

The particular book in question is relevant to this discussion, based on the strapline on the front cover. The book is Antony Beevor’s The Second World War.

The strapline is, ‘6 Years, 60 Million Lives Lost. No Human Life Untouched’.

It’s an arresting statement. 60 million lives lost. It got us thinking: at whose hands were those lives lost? The answer is simple: at the hands of governments, which think nothing of plunging their civilian populations into war.

It may be true that guns are dangerous in the hands of some people. And it may be true that a lone gunman killed at least 50 people in a nightclub over the weekend.

But so far (and we’ll admit, it’s only so far), we’re yet to find evidence of a ‘lone gunman’ dropping atomic bombs on two Japanese cities, killing hundreds of thousands of people.

We’re yet to find evidence of a ‘lone gunman’ invading a south east Asian or Middle Eastern country, supposedly in the name of democracy, resulting in the deaths of hundreds of thousands or more people.

And back to Beevor’s book, we’re yet to find evidence of a lone gunman (or even a group of non-government organised gunmen) arranging the mass murder of millions of people — 60 million to be approximate.

The truth is clear: guns and weapons in the hands of any government are significantly more dangerous than guns in the hands of private citizens.

To give you more perspective. According to statistics in 2012 from the United Nations Office on Drugs and Crime, there were 127,607 firearm homicides that year.

That is one huge number. But as I said, perspective is in order. For civilian firearm homicides to match the number of government-caused deaths during the Second World War, it would take 470 years at the rate of 127,607 per year.

Got that? What would take civilians on their own 470 years to achieve, governments worldwide achieved in just six years of world war.

I’ll take back everything I’ve said about governments: they actually can be efficient — at killing.

Now on with the show…


Overnight, the Dow Jones Industrial Average fell 132.86 points, or 0.74%.

The S&P 500 index dropped 17.01 points, for a 0.81% fall.

In Europe, the Euro Stoxx 50 index lost 57.59 points, or 1.98%. Meanwhile, the FTSE 100 index fell 1.16%, while Germany’s DAX index lost 1.8%.

In Asian markets, Japan’s Nikkei 225 index is down 227.5 points, or 1.42%. China’s CSI 300 index is up 0.05%.

On the Australian markets, the S&P/ASX 200 index is down 98.7 points, or 1.86%.

In commodities, West Texas Intermediate crude oil is trading for US$48.40 per barrel. Brent crude is US$49.92 per barrel.

Gold is trading for US$1,282 per ounce, and silver is US$17.32 per ounce.

The Aussie dollar is worth 73.99 US cents.

No guns for you

One other thought. When politicians rail against guns, and tell you they’re too dangerous…and that there is no need for them in a civilised society, do me a favour. Keep the image below in the back of your mind.

chart image

Click to enlarge

What they’re really saying is that guns are too dangerous for you, but not for them.

What they’re saying is that their life is worth more than yours.

What they’re saying is that it’s OK for them to protect their family…but it’s not OK for you to protect your family.

Just remember that.

Now, really, on with the show.

They still don’t get it

You don’t have to be a financial newsletter writer to understand that today wasn’t a good day for the Aussie market.

As I write, the S&P/ASX 200 is down 101.8 points, or 1.92%.

You can see the drop on the extreme right of this year-to-date chart:

chart image

Source: Bloomberg
Click to enlarge

To our naked eye, it appears to be the biggest one-day drop since late February.

So, what’s the deal now? Weren’t the markets and the world’s economies supposed to be in recovery mode?

Wasn’t the Aussie economy growing stronger by the day…and transitioning from the resources sector to some other, as yet unidentified sector?

That was the story — but perhaps not the reality.

As Bloomberg reports, the jitters are returning to the markets:

U.S. stocks and oil slumped, benefiting haven assets such as gold and the yen, as investors grew increasingly cautious ahead of key central-bank meetings this week and Britain’s vote on its membership of the European Union, due later in the month.

The US Federal Reserve is due to meet this week.

No one seriously believes the Fed will do anything other than keep interest rates exactly where they are.

As usual, it’s not so much the rate decision itself, as the language that goes with the rate decision. What will that tell the markets about future interest rate prospects?

Will the Fed maintain its stance that further rate rises are on the way this year…or will it introduce a softer approach? Perhaps with a ‘get-out clause’ that could allow it to not raise rates for the rest of this year…or next year…or the year after.

We’ll see.

But in reality, it continues to amuse us that the market behaves the way it does.

Can anyone really be surprised about the state of the world’s economy? Maybe it’s because we write about this stuff every day that it’s so obvious to us.

There must be a whole bunch of investors, commentators, and analysts who don’t look at the broader problems. Perhaps they only look at individual companies, and ignore the wider macroeconomic issues.

If they choose to invest that way, that’s fine. Heck, I’ve often told investors to ignore what’s going on — the market ‘noise’ I call it.

But there’s a time and a place for that attitude. The time and the place is when the issues identified by the mainstream really aren’t major issues. When the Russians invaded Crimea, the mainstream said it could cause a market crash.

We said that was bunkum, it would do no such thing. Sure, the market wobbled, but it didn’t fall.

But the issues affecting the world’s economy today aren’t just ‘noise’. These are mostly issues that stem from the government and central bank decisions made over the past eight years.

A Russian invasion of Crimea won’t crash the market. But a gradual loss of confidence in the world’s paper money system, and the institutions that support it…well, that’s something different.

That’s why gold is back in favour again.

chart image

Source: Bloomberg
Click to enlarge

After a recent slump, gold is back near the US$1,300 mark.

If you’re doubtful about the sustainability of paper money, and you are convinced central banks are about to crank up the printing presses again, the idea of owning gold looks pretty good.

Down days mean nothing for these ‘tiny stocks’

Market down over 100 points — check.

A bunch of ‘tiny stocks’ are up more than 20%…in one day — check.

chart image

Source: Bloomberg
Click to enlarge

There’s something enticing about the idea of backing a stock that goes up even when most other stocks fall.

As you can see from the tables I’ve shown you over the past week, every day, there are stocks going up…whatever the broader market does.

In the mailbag

Here’s an idea, from subscriber, Ian P:

Thanks for publishing the comments provided readers on the milk price war, and its effects on dairy farmers.  It is good to have those views aired.

I think I understand the basic economic principles around the issue. And yes, Coles & WOW can be seen for what they are — large commercial enterprises with sufficient market share to dictate prices. And apparently with consumer support. However that consumer support is gained in a completely non-transparent manner. I fully sympathise with the plight of dairy farmers and, like Malcolm and Mike W, have concern for the emotional damage the actions of the large corporates have over the livelihoods of smallholders. As margins are squeezed and lead to financial distress, mental illness and family breakdowns. I’m sure you would take this factor into account when making your comments.

I’m sorry, but there is nothing to be amused about in my view. Unlike an e-publishing business there are significant cost inputs, which are financial commitments the farmers cannot simply walk away from. And the time commitment means it’s difficult to diversify an income base.  As you mention the principle of no harm (John Stuart Mill) applies. And there is little doubt (in my mind) that the corporate action will have resulted in significant emotional and financial harm to families in the dairy sector.

A family business that requires a significant financial and constantly physically demanding commitment. I understand Mill established that individual efforts to excel have worth. Yet under the corporate efforts of WOW & Coles, small operators are simply forced to go to the wall, sell up etc, and have to start again — once the bank loans are paid back — regardless of how excellent their individual efforts may be.

Certainly the less efficient producers will be forced out of the industry. But even highly efficient producers cannot keep going when the ROI is insufficient to maintain loans and basic family expenditure. So as a libertarian and a free market capitalist, would you not have a foot in each camp?

My main suggestion in writing to you is re the editor’s use of the word ‘amusing’ about contributions made by readers. To be amused by readers views/concerns seems quite patronising, when their concerns are about the social cost in rural communities of uncaring corporate attitudes. Perhaps you meant grateful to receive their comments & contributions, which provide social fabric for the PPI finance advisory newsletter?

Perhaps with your distribution list of 50000 readers you can get into online marketing of milk to take a stand against the fascist duopoly?

Enjoy your newsletter.

I can see it now, proudly among our list of other investment services:

  • Quant Trader
  • Time Trader
  • Microcap Trader, and…
  • Milk Trader

If that isn’t a multi-million-dollar business idea, I don’t know what is.

I’ll put my marketing people onto it right away.