August 2011

From the portfolio, VGR is looking to break out of a triple-top pattern, moving to new 52wk highs. Low P/E high dividend stock, makes rational sense in the current environment.


Diarmid Weir Says:

August 29, 2011 at 10:06 am e

…then I am a consumer, until I produce my product.

You are just misusing terms to suit you. In economic usage, consumption implies that a good has been used up to provide ‘utility’ and once used up is no longer available for use in whole or in part. The inputs of firms are not ‘consumed’ in this sense. If you want to be pedantic the terms ‘final consumption’ or ‘exhaustive consumption’ can be used to make this clear.

So a shipbuilder who consumes [uses up] raw steel to provide the utility of a ship, to whom he will exchange against money, with a shipper of commodities, is not a consumer? The producer of raw steel did not supply the demand for raw steel to a consumer of raw steel? What then if, our hypothetical shipbuilder has misjudged the demand for ships, and he cannot exchange his newly completed ship for money, and the ship lies unused? What then of the raw steel, has it been consumed? After all the raw steel is no longer available in its original raw form and the utility falls to zero.

You can argue semantic detail to the n’th position, it will not however save the error of your analysis, which simply remains incorrect.

And herein lies the error and the fallacy. Let me suppose…

All you suggest is that barring long-term barriers to entry, predatory pricing cannot continue indefinitely.


Were this all there was to it, you still don’t ‘prove’ that monopoly cannot exist, only that it cannot be a permanent feature in all industries.

Which is categorically not my position is it? My position is that monopoly cannot exist outside of government grant of privilege and the coercive force required to maintain that privilege.

My argument here is that profits arising from non-monopoly behaviour can be used to permit monopoly-creating behaviour (of which predatory pricing is only one form), which in turn creates more profits.

Your argument signally fails to provide the truth to your assertion.

The persistence of these monopolies depend on barriers to entry and the scale of monopoly profits. With high barriers to entry and high monopoly profits this could be quite a long time.

The existence, never mind persistence, of any monopoly depends on a barrier to entry. This cannot happen on a free market. It can only happen with government granted privilege. I repeat Lord Coke’s admonition;

A monopoly is an institution or allowance by the King, by his grant, commission, or otherwise…to any person or persons, bodies politic or corporate, for the sole buying, selling, making, working, or using of anything, whereby any person or persons, bodies politic or corporate, are sought to be restrained of any freedom or liberty that they had before, or hindered in their lawful trade.

Original article here.

This article is full of errors, which I will address in due course.

NEW YORK – We live in a time of high anxiety. Despite the world’s unprecedented total wealth, there is vast insecurity, unrest, and dissatisfaction. In the United States, a large majority of Americans believe that the country is “on the wrong track.” Pessimism has soared. The same is true in many other places.

Well I can’t really comment on that. No evidence is presented. Pessimism is being measured how? How about the results of this poll?

In this poll, government seems to be the source of the angst.

Against this backdrop, the time has come to reconsider the basic sources of happiness in our economic life. The relentless pursuit of higher income is leading to unprecedented inequality and anxiety, rather than to greater happiness and life satisfaction. Economic progress is important and can greatly improve the quality of life, but only if it is pursued in line with other goals.

Certainly there is growing inequality.

Well that was not suggested by the above poll. Rather than earning/wealth inequality, government was the source. In fact the American dream is predicated on the notion that anyone can succeed in America, the land of opportunity.

In this respect, the Himalayan Kingdom of Bhutan has been leading the way. Forty years ago, Bhutan’s fourth king, young and newly installed, made a remarkable choice: Bhutan should pursue “gross national happiness” rather than gross national product. Since then, the country has been experimenting with an alternative, holistic approach to development that emphasizes not only economic growth, but also culture, mental health, compassion, and community.

GNP and GDP are simply total products sold against total money spent [prices]. Increase the prices through expanding the money supply – instant growth in GDP. But what does it actually say about the question being asked, viz. happiness?

Dozens of experts recently gathered in Bhutan’s capital, Thimphu, to take stock of the country’s record. I was co-host with Bhutan’s prime minister, Jigme Thinley, a leader in sustainable development and a great champion of the concept of “GNH.” We assembled in the wake of a declaration in July by the United Nations General Assembly calling on countries to examine how national policies can promote happiness in their societies.

So increased government intervention. Another technocrat.

All who gathered in Thimphu agreed on the importance of pursuing happiness rather than pursuing national income. The question we examined is how to achieve happiness in a world that is characterized by rapid urbanization, mass media, global capitalism, and environmental degradation. How can our economic life be re-ordered to recreate a sense of community, trust, and environmental sustainability?

What was the argument for happiness? How was it defined? How will it be measured?

Here are some of the initial conclusions. First, we should not denigrate the value of economic progress. When people are hungry, deprived of basic needs such as clean water, health care, and education, and without meaningful employment, they suffer. Economic development that alleviates poverty is a vital step in boosting happiness.

How then is the most efficient way of producing these goods and services?

Second, relentless pursuit of GNP to the exclusion of other goals is also no path to happiness. In the US, GNP has risen sharply in the past 40 years, but happiness has not. Instead, single-minded pursuit of GNP has led to great inequalities of wealth and power, fueled the growth of a vast underclass, trapped millions of children in poverty, and caused serious environmental degradation.

So let’s look at how that was accomplished.

Third, happiness is achieved through a balanced approach to life by both individuals and societies. As individuals, we are unhappy if we are denied our basic material needs, but we are also unhappy if the pursuit of higher incomes replaces our focus on family, friends, community, compassion, and maintaining internal balance. As a society, it is one thing to organize economic policies to keep living standards on the rise, but quite another to subordinate all of society’s values to the pursuit of profit.

Really? Says who? Do you speak for everyone? Who died and left you in charge? Your assertions have the evidence where?

Yet politics in the US has increasingly allowed corporate profits to dominate all other aspirations: fairness, justice, trust, physical and mental health, and environmental sustainability. Corporate campaign contributions increasingly undermine the democratic process, with the blessing of the US Supreme Court.

I agree. The Supreme Court Justices, appointed by who? Oh yes, government. The Supreme Court, and in point of fact the entire judicial system, which draws their salary from where exactly, oh yes, government, would of course stand-up and be counted through continuously fighting government incursions into freedom. That Corporations purchase political corruption is absolutely wrong, but predictable under the current system.

Fourth, global capitalism presents many direct threats to happiness. It is destroying the natural environment through climate change and other kinds of pollution,

Incorrect. Unenforced property rights create the pollution problem. This is directly attributable to government preventing private ownership and preventing individuals suing corporations that violate property rights via pollution.

while a relentless stream of oil-industry propaganda keeps many people ignorant of this. It is weakening social trust and mental stability, with the prevalence of clinical depression apparently on the rise. The mass media have become outlets for corporate “messaging,” much of it overtly anti-scientific, and Americans suffer from an increasing range of consumer addictions.

Propaganda certainly exists. Government does what exactly, apart from preventing private prosecutions. If government prevents private prosecutions, then they need to enforce the property rights, but, then they would lose their contributions.

Consider how the fast-food industry uses oils, fats, sugar, and other addictive ingredients to create unhealthy dependency on foods that contribute to obesity.

So the fat bastards that stuff their faces are totally at the mercy of the food they choose to eat? They could make no other choices? On the contrary, they have demonstrated their preference to be obese. If they hadn’t, McDonald’s et al would soon provide a new menu, as has been the trend as food choices change.

One-third of all Americans are now obese. The rest of the world will eventually follow unless countries restrict dangerous corporate practices, including advertising unhealthy and addictive foods to young children.

And these children, they get access to the food how? From their daytime jobs?

The problem is not just foods. Mass advertising is contributing to many other consumer addictions that imply large public-health costs, including excessive TV watching, gambling, drug use, cigarette smoking, and alcoholism.

Of course, the individual is totally incompetent to make any choices for themselves. Let’s bring in more government regulation shall we to regulate these bad choices, from which government takes tax revenue. Then we’ll tax the healthy, working people to pay for the medical treatment of the fatties. Caveat emptor, you reap what you sow. If you want to booze, fag and exist on takeaways, go for it, but accept that when the bill comes due, you pay.

Fifth, to promote happiness, we must identify the many factors other than GNP that can raise or lower society’s well-being. Most countries invest to measure GNP, but spend little to identify the sources of poor health (like fast foods and excessive TV watching), declining social trust, and environmental degradation. Once we understand these factors, we can act.

Who can act? Government? And what will government propose? Take away all the booze, fags and takeaways? You’ll be left with a segment of the population, the ex-fatties, who are now far from happy, in fact they are totally pissed-off, and since they are leaner & meaner, probably become a pain in the arse to the rest of us, who also become unhappy.

The mad pursuit of corporate profits is threatening us all. To be sure, we should support economic growth and development, but only in a broader context: one that promotes environmental sustainability and the values of compassion and honesty that are required for social trust. The search for happiness should not be confined to the beautiful mountain kingdom of Bhutan.


Jeffrey D. Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also Special Adviser to United Nations Secretary-General on the Millennium Development Goals.

Good grief.

Full article posted here

I’m only going to address the common fallacy that appears below, as it continues our previous discussion with respect to monopoly and the monopoly price.

But this is nonsense – businesses are not really ‘consumers’ at all.

Nonsense indeed. Businesses are indeed consumers. If I sell coffee, unless I am 100% vertically integrated, viz. I own the land, grow the coffee beans, own the transport from land to port, own shipping, etc, etc, then I am a consumer, until I produce my product. If I employ a workforce, I am the consumer of labour. If I pay rent for the land, I am a consumer of land.

When prices are more than costs, the extra cash is available to further the prime business activity – maximising money revenue while minimising money costs.


For example, if we own a business, a cash surplus means we can manipulate the market by temporarily setting our prices lower than our cost of producing goods.


While our firm makes a loss in the short term, the surplus acts as a cushion as other firms go bankrupt.

Assuming that you can stay in business longer than they can. This assumes that you were the lowest cost producer in the first place. So for the sake of argument, let me grant that assumption.

Once they’ve been driven out of the market, our firm has a monopoly and can then put up prices again and increase profits further. And, as economists frequently forget, markets don’t float free but are part of the social fabric.

And herein lies the error and the fallacy. Let me suppose that the other firm went out of business due to losses. The fixed capital could be purchased by myself, at a discount, and I could re-enter the market, now that attractive pricing again exists, only this time, you are no longer the low price producer I am. Cutting selling costs again, would only put you out of business.

Simply stated: monopoly cannot exist on the free market. Monopoly can only exist when there is government intervention into the market granting privilege [monopoly] to a favored producer.

Diarmid Weir Says:

August 28, 2011 at 4:50 am e

If A gets control of B’s actions by threats or persuasion, then it would seem that the effect is precisely the same as if A controlled them directly. To say otherwise is a semantic distinction with no practical effect.


There is a material difference between B gaining control of A through coercion and fear, and B gaining control of A through a method that limits A’s ability to think for himself and make choices. That is an enormous practical difference.

It is also possible with modern surgery that A could control a part of B’s body (eg: arm or face) without any interposition of B’s mind whatsoever. Interestingly, I think we would generally say that any actions carried out using that transplanted part were the actions of A rather than of B!

If that is true, then through the ability of A to remove choice from B we have a situation of true control. I agree that any actions taken by B under the control of A must redound to A.

Property rights do currently exist as law. They are the foundation of the common law. It is only that government violate them to achieve their ends.

Indeed. Both property rights and government have the property of currently existing. As such neither of them seem to be favoured by this line of argument. One could turn the argument round and say (as an argument against property rights) that it is only property rights that act as a limit to the actions of government!

Agreed. That is after all the purpose of Constitutional Law. The law that government ignores and runs roughshod over. The law that the Judiciary is supposed to enforce, but turns a blind eye to government violations of.

In fact, the more reasonable position would be that both exist in balance according to the consensus arrived at through social bargaining across various spheres (market, judicial, democratic and threat of force).

This is where we disagree. The balance has long been smashed through government usurpations under the rubric of threats of war, terrorism, crime, etc. What we are left with is a shadow of what we once had.

Then he’s bang out of luck son!

Precisely. Which leaves valuable assets with poorly defined a priori property rights. The decision that nobody, somebody or everybody should take these over can only be an empirical one.

The owner is the owner, unless it can be proven that in point of fact that he is not the owner. If this can be done, the legal title reverts to the correct owner of the legal title. Clear and simple.

We’re talking currently accepted usage. So living economists please.

Tsk, tsk Dr.D. You keep trying to change boats in mid-stream.

…a deductive argument is productive of necessary conclusions,..

Only if the starting premise is necessarily true – which is the point at issue.

Correct. And you have already accepted is as such. Or do you want to change boats again?

Diarmid Weir Says:

August 28, 2011 at 4:22 am e

That inflation is a monetary phenomenon, that reveals itself eventually in the symptom of higher prices, although not uniformly, the equation of exchange is invalid for performing an analysis.

I assume this is the conclusion. No idea what it means.

Simply that the causative agent for inflation is an expansion of the money and credit supply. That the equation of exchange is illegitimate and worthless.

You are right to draw attention to the problems of marginal analysis in determining and interpreting an average price level,

So far so good.

but you should be aware that inflation is a rate of change.

A rate of change in the money/credit supply.

Thus it is possible that conceptual and measurement errors in the price level may cancel out.

There is, as demonstrated, no such thing as the price level

In effect this is precisely the role of velocity (V) in the quantity equation.

Velocity. More nonsense.

Thus my take on the Quantity Equation is simply that given some stability of measurement and institutional factors, the average price level (= the average purchasing power of money) is likely to be the result of a relationship between the amount of money and the amount of goods and services available to purchase in any defined time period.

It has just been shown that the price level is an illegitimate construction. That it in no way = total money spent. Before you can use that nonsense, you need to prove it.

In general it would be anticipated that a rise in money greater than a rise in goods would cause a rise in the average price level (inflation),

And that is exactly what doesn’t happen. Newly created money flows to the goods and services demanded by the creators of the new money, not to some fictional average price level. Why do you think financial markets were rising on the back of QE1/2?

and a rise in money less than a rise in goods would cause a fall in the average price level (deflation). The exact nature of the relationship and its usefulness are entirely empirical matters.

Until you can prove the equation of exchange, any reference to it is simply incorrect and nonsense.

Market is trading higher. All my positions are up save one. The average is about 5%, so a good start to the week. I would imagine that if we close higher that SC’s TT will confirm the move. Saying that, we are still needing to trade above the resistance point of the initial bounce to generate some momo to get higher.

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