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Wednesday, December 29, 2021

All the Fun's in Getting There

All the Fun's in Getting There

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One of my favorite hobbies is sailing—no racing, no destination, just being on the water and sailing. There are faster ways to move on the water—the technology has been out of date for centuries. Certainly there are easier ways to get from one place to another; the ratio of hard work to distance traveled is great. The point, though, is not to go anywhere in particular. I always end up just where I started. The point for me is to enjoy and make the most of the journey. All the fun, as the saying goes, has to be in getting there—because there is no "there* there.

To be a successful investor over the long term, you must also pretty much enjoy the journey. Warren Buffett and Peter Lynch long ago surpassed any reasonable level of savings required to ensure that those near and dear to them would be provided for. They clearly enjoy the challenge of investing. If you're the type that is going to lose sleep after the first market dip (or worse yet if you're going to panic out of your well-thought-out investment portions just because the market falls), then maybe a more passive approach than  the one advocated in these pages would be better suited for you. In fact, if you're not going to enjoy the "game," don't bother: there are far more productive uses for your time.

Of course, if you are able to successfully manage your own investments, there can be some side benefits. While everyone knows what money can't buy, there are obviously things that money can buy: a sense of security, a comfortable retirement, and an ability to provide for your family. Even from a religious standpoint, money doesn't have to be such a bad thing. In fact, if it's used to help others, money can be a very positive force.

Some people—include the renowned eighteenth-century economist Adam Smith in this group—believe that when you pursue your own self-interest, the whole of society benefits. In the stock market, the buying and selling of stocks creates a market for corporate equity and ultimately provides a vehicle for productive businesses to raise capital and expand. While true, this kind of thinking can only go so far. Betting keeps the cashiers employed at the racetrack, but somehow I doubt that Albert Schweitzer pursued this particular style of altruism; there may be a higher and better use for most of your time.

While to many "time is money," it's probably more universal to say that "money is time." After all, time is the currency of everyone's life. When it's spent, the game is over. One of the great benefits of having money is the ability to pursue those great accomplishments that require the gifts of being and time. In fact, you can't raise a family or make your contribution to society without these gifts. So, while money can't buy you happiness or even satisfaction, it might buy you something else. If viewed in the proper light, it can buy you time—the freedom to pursue the things that you enjoy and that give meaning to your life.

This book was meant to be viewed on many different levels. (You'll see what I mean if you take it on an elevator.) If you're an investor who already has substantial stock-market experience, hopefully it has opened up whole new areas of the investment world to you. In many ways, your work should be easier now that you know where to find those special places where the investment odds are so dramatically tilted in your favor. After reading this book, you should also have a better idea what to look for once you get there. For the novice, I hope that this book has served as a first step and as an inspiration. If the opportunities described in this book look enticing, rest assured that most of the areas covered are not beyond the grasp of the average investor. You don't have to be a genius, but you do need a basic understanding of financial statements, some common sense, and the patience necessary to gain experience.

As I've said all along, it will take some work and some effort, but this knowledge should be comforting to you. If everyone could take advantage of the investment methods described in this book just by showing up, then you probably couldn't expect to achieve extraordinary results. What will set you apart from the crowd will be the same thing that will cause most investors to fall by the wayside. The barrier to stock market success isn't exceptional brain power, unparalleled business savvy (hey, I still own sea-monkeys), or uncommon insight. The secret, now that you know where to look, is in simply doing a little extra work. When you think about it, this seems quite fair.

While it can't be said that life is always fair, in most cases and over the long term the stock market is. Despite being a card-carrying contrarian, I agree with the now widely accepted wisdom that for most people stocks are the investment vehicle of choice. As long as the economy and the individual businesses that make it up continue to grow, sooner or later the stock market will reflect this reality. That doesn't mean that in every period the stock market will provide superior investment returns. Most recently, in a stretch lasting from the late 1960s to the early 1980s, the major market averages hardly advanced at all. But in general and over the long run the stock market will accurately reflect the progress of the businesses that it represents.

Which brings us to the final benefit of the type of special-situation investing that has been the subject of this book,  While it's nice and often helpful to have a rising market, it's not required. Because your bargain opportunities are created by special corporate eventsevents that take place in all market environments—new bargains are constantly being created. In most cases, though, these bargains are only temporary. It might not be today or tomorrow, but if you do your homework well, the stock market will eventually recognize the inherent value that attracted you to the bargain opportunity in the first place. That's why, in the end, a disciplined approach to seeking out bargain stocks will pay off.

The idea behind this book was to let you know about a snowball sitting on top of a hill, to provide you with a map and enough rope and climbing gear so that you can reach that snowball. Your job—should you choose to accept it—is to nudge it down the hill and make it grow.

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You Can Be A Stock Market Genius,

Joel Greenblatt

Monday, December 13, 2021

Stephen Takacsy on BNN-Bloomberg’s Market Call, Dec 13, 2021

Stephen Takacsy on BNN-Bloomberg’s Market Call, Dec 13, 2021

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MARKET OUTLOOK:

Volatility has increased in equity markets due to fears of the new Omicron variant and central banks increasing rates earlier than anticipated to fight persistent inflation fueled by supply chain disruptions and labor shortages. 

Markets have been driven by easy money from low interest rates and momentum investing, with little regard for valuation, led by a narrow group of large cap stocks. This has created bubbles in stocks like Tesla and other EV plays, as well as in new asset classes like crypto currencies and non-fungible tokens. 

The TSX’s return has been almost entirely driven by energy, financials, and Shopify, and more recently the gold sector, driven by massive inflows into ETFs by foreign investors. Money has been sucked out of other sectors, creating great investment opportunities at compelling valuations such as in renewable energy, certain industrials, healthcare, and non-energy small cap stocks. We continue to be focused on valuation when deploying cash and are starting to see some good opportunities in the overvalued tech sector.

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TOP PICKS:

D2L (DTOL TSX)

D2L is a world leader in cloud-based e-learning platforms for schools, universities, and corporations with 1000 clients in 40 countries. The pandemic was a massive wake-up call for educational institutions and corporations to upgrade their legacy on-premises systems. 

D2L has a subscription-based business model with long term contracts, so great revenue visibility of which 90 per cent is high margin recurring SaaS revenue. D2L just reported strong results with annual revenue run rate growing over 20 per cent to US$150M. 

It also announced several large contracts: with the State University of New York (SUNY), the largest post-secondary systems in the U.S. with 400,000 students across 64 colleges and universities and with British Columbia's Ministry of Education for up to 670,000 students in schools across the province. 

D2L trades for around 3.5X forward sales with is less than half of its U.S. peers like Instructure and Powerschool (8X sales) and less than one quarter of TSX listed Docebo (15X sales). The recent pull back is an excellent opportunity to buy into a high-quality technology success story. We think the shares can double or even triple over the next few years.  

TECSYS (TCS TSX)

We recommended Tecsys at $15 in 2019 and it’s been one of the top 30 best performing stocks on the TSX over the past 3 years. The company develops and sells end-to-end supply chain management software solutions. So, they’re right in the “sweet spot” with all the current supply chain problems. 

Their main clients are healthcare networks in the U.S. (so networks of hospitals and clinics like the Mayo clinic), a vertical which they dominate. They also service businesses with complex distribution needs like wholesaling (like auto parts) and transportation logistics, as well as retailers with omni-channel sales (so bricks & mortar and e-commerce).

The company just reported another quarter of record sales with growing high-margin recurring SaaS revenue and also has a record backlog. TECSYS shares have come down a lot during the recent tech stock correction and presents a great buying opportunity. We think this will be a $100 stock in a few years.

QUARTERHILL (QTRH TSX)

Quarterhill was formerly called Wilan, which was an IP patent licensing company. The patent portfolio continues to throw off lots of cash, which the company is using to acquire companies in the Intelligent Transportation Systems (ITS) sector. 

It just bought ETC, a cloud-based road tolling software provider with a 17 per cent market share of toll lanes in the U.S. It also owns International Road Dynamics, a world leader in weight-in-motion technology, traffic data collection, sensors and imaging. 

This is a global growth industry that will benefit from massive infrastructure spending as governments seek additional sources of revenue. Quarterhill is currently bidding on over $4 billion worth of contracts. If you do a sum of the parts analysis, the IP portfolio is worth around $2 per share, while the Intelligent Transportation segment is worth around $3.50 per share. In addition, there’s also a large amount due from Apple for patent infringement that was awarded to Wilan by a jury that could be worth up to another $1 per share, for a total of $6.50 per share versus its current trading price of $2.50. The company has been aggressively buying back shares and the CEO bought a large amount as well.

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PAST PICKS: January 25th, 2021

POLLARD BANKNOTE (PLB TSX)  

Then: $34.74

Now: $36.52

Return: 5%

Total Return: 5%

Think Research (THNK CVE)

Then: $4.44

Now: $1.14

Return:  -74%

Total Return: -74%

Baylin Technologies (BYL TSX)

Then: $1.78

Now: $0.83

Return: -53%

Total Return: -53%

Total Return Average: -41%

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Stephen Takacsy, president, CEO and chief investment officer, Lester Asset Management

WEBSITE: www.lesterasset.com

Sunday, December 12, 2021

Lessons From Warren Buffett: Don’t Pass Up a Good Investment Because of Negative External Factors

Lessons From Warren Buffett: Don’t Pass Up a Good Investment Because of Negative External Factors

December 5, 2020Lessons From Warren Buffett Value Investing, Warren Buffett

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The trade deficit is up, unemployment is sky high, and Coronovirus is taking thousands of lives a day. Negative news with sweeping impact is coming out daily.

Should you integrate macroeconomic news into your investing strategy? Warren Buffett says no.

“We don’t really pay attention to that sort of thing,” 

Buffett said at the 2004 Berkshire Hathaway Annual Meeting. He went on to point out that

 “You could’ve sat down in 1974, when stocks were screaming bargains, and you could’ve written down all kinds of things that would have caused you to say, you know, the future is going to be terrible.”

As Buffett noted, the stock market has survived wars, pandemics, and all kinds of negative news.

“You know, the Dow went from 66 to 10,000-plus in the hundred years of the 20th century, Buffett explained. “And we had two world wars . . . . There‘s always problems in the future, there’s always opportunities in the future. And in this country the opportunities have always won out over the problems over time.”

So, don’t let the size of the federal deficit scare you out of making a well-researched investment in an individual stock.

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© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future result.

Source

https://mazorsedge.com/2020/12/page/2/

Saturday, December 11, 2021

Lessons From Warren Buffett: It Is a Waste of Time Having an Opinion About the Stock Market’s Direction

Lessons From Warren Buffett: It Is a Waste of Time Having an Opinion About the Stock Market’s Direction

January 23, 2021Lessons From Warren Buffett, Value Investing, Warren BuffettValue Investing, Warren Buffett

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Turn on the financial news and you will see a steady stream of predictions as to the stock market’s overall direction. What is more routine at the beginning of the year than pundits predicting where the market will be at the end of the year? Will it hit a new high? Will it plummet? It clearly fascinates a lot of people, but not Warren Buffett, who sees those types of predictions as a waste of time.

“You may have trouble believing this, but Charlie and I never have an opinion about the market because it wouldn’t be any good and it might interfere with the opinions we have that are good,” 

Warren Buffett said at the 1994 Berkshire Hathaway Annual Meeting.

 “If we’re right about a business, if we think a business is attractive, it would be very foolish for us to not take action on that because we thought something about what the market was going to do, or anything of that sort. Because we just don’t know. And to give up something that you do know and that is profitable for something that you don’t know and won’t know because of that, it just doesn’t make any sense to us, and it doesn’t really make any difference to us.”

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© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future result.

Source

https://mazorsedge.com/page/17/

Friday, December 10, 2021

Lessons From Warren Buffett: You Don’t Want to Get Into a Stupid Game Just Because It’s Available

Lessons From Warren Buffett: You Don’t Want to Get Into a Stupid Game Just Because It’s Available

January 31, 2021Lessons From Warren Buffett, Value Investing, Warren Buffett Value Investing, Warren Buffett

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If there is one thing Warren Buffett is clear about, it is that gambling type of behavior, whether it is in the stock market or just buying a lottery ticket, will lead an investor astray. And, as opportunities to speculate look ever more enticing, it’s most important to remember that just because you can gamble doesn’t mean that you should.

“People win lotteries every day, but there’s no reason to have that effect you at all. You shouldn’t be jealous about it,” 

Buffett said at the 2016 Berkshire Hathaway Annual Meeting. 

“If they want to do mathematically unsound things, and one of them occasionally gets lucky, and they put the one person on television, and the million that contributed to the winnings, with the big slice taken out for the state, you know, don’t get on, it’s nothing to worry about. Just, all you have to do is figure out what makes sense. . . . When you buy a stock, you get yourself in the mental frame of mind that you’re buying a business, and if you don’t look at a quote on it for five years, that’s fine. You don’t get a quote on your farm every day or every week or every month. You don’t get it on your apartment house, if you own one. If you own a McDonald’s franchise, you don’t get a quote every day. You know, you want to look at your stocks as businesses, and think about their performance as businesses. Think about what you pay for them, as you would think about buying a business, and let the rest of the world go its own way. You don’t want to get into a stupid game just because it’s available.”

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© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future result.

Source

https://mazorsedge.com/page/16/

Thursday, December 9, 2021

Lessons From Warren Buffett: How to Evaluate the Quality of a Company’s Management

Lessons From Warren Buffett: How to Evaluate the Quality of a Company’s Management

February 6, 2021Lessons From Warren Buffett, Value Investing, Warren Buffett Value Investing, Warren Buffett

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Companies need to provide quality goods or services, and they also good management that can chart a course to long term profitability. How can an investor evaluate the quality of the management? According to Warren Buffett, it all comes down to two things.

 Warren Buffett explained at the 1994 Berkshire Hathaway Annual Meeting. 

"Well, I think you judge management by two yardsticks, One is how well they run the business, and I think you can learn a lot about that by reading about both what they’ve accomplished and what their competitors have accomplished, and seeing how they have allocated capital over time. You have to have some understanding of the hand they were dealt when they themselves got a chance to play the hand. But, if you understand something about the business they’re in, and you can’t understand it in every business, but you can find industries or companies where you can understand it, then you simply want to look at how well they have been doing in playing the hand, essentially, that’s been dealt with them. And then the second thing you want to figure out is how well that they treat their owners.”

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© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future result.

Source

https://mazorsedge.com/page/16/

Wednesday, December 8, 2021

Lessons From Warren Buffett: Stocks Sell at Silly Prices From Time to Time

Lessons From Warren Buffett: Stocks Sell at Silly Prices From Time to Time

March 20, 2021, Lessons From Warren Buffett, Value Investing, Warren Buffett Value Investing, Warren Buffett

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One of the most popular theories about stock market prices is that at any given time prices reflect all that is known about a company. Known as the Efficient Market Hypothesis (EMH), it became especially popular during the 1970s, as the rise of the Information Age brought about exponential increases in the storage and exchange of data.

It would thus stand to reason, that five decades later, when even the most casual investors have access to valuation tools that the most sophisticated traders of the 1950s would never even have dreamt about, that prices have reached an efficiency where stocks are always fairly and accurately priced.

However, Warren Buffett doesn’t believe when it comes to the market that there is anything efficient about it, and that in fact, far from the market always reflecting an accurate valuation of a company’s worth, that it is 

“built into the system that stocks get mispriced.”

 Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. 

“The beauty of stocks is they do sell at silly prices from time to time, Ben Graham writes about it in Chapter 8 of The Intelligent Investor. . . Chapter 8 says that in the market you’re going to have a partner named ‘Mr. Market,’ and the beauty of him as your partner is that he’s kind of a psychotic drunk, and he will do very weird things over time and your job is to remember that he’s there to serve you and not to advise you. And if you can keep that mental state, then all those thousands of prices that Mr. Market is offering you every day on every major business in the world, practically, that he is making lots of mistakes, and he makes them for all kinds of weird reasons. And all you have to do is occasionally oblige him when he offers to either buy or sell from you at the same price on any given day, any given security.”

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© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Source

https://mazorsedge.com/page/14/

Tuesday, December 7, 2021

Is the Mainstream Media a Threat to Freedom and Sanity?

 Is the Mainstream Media a Threat to Freedom and Sanity?

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This may seem to be an unusual topic in an investment blog, but think for a moment on the powerful influence the financial media have on the individual investor's mindset...

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“I rejoice that horses and steers have to be broken before they can be made the slaves of men, and that men themselves have some wild oats still left to sow before they become submissive members of society.”

Henry David Thoreau, Walking

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If this claim of Henry David Thoreau’s is true – that we must be broken before we become enslaved and submissive – then we are a broken population. For most of us are submissive to a fault. We do what we are told no matter how absurd, idiotic, or immoral, so long as the command comes from a politician, bureaucrat, or scientist. In exchange for protection from relatively trivial threats we have given away our freedom and are permitting the rise of a truly deadly threat – totalitarianism. But can the tides be turned? In this article we are going to make the case that the internet, smartphones, and social media are technologies that may prove very unfavourable to those who wish to place us in the chains of a technocratic totalitarianism.

It is said that politics is downstream from culture – that culture, in other words, determines the type of rule that emerges in a society. But one could also say that culture is downstream from technology. Technological innovations, by creating new possibilities for how we interact with the world, change culture. Of all the technological revolutions that engender cultural change, changes in communication technologies are among the most impactful. For these technologies sculpt the flow of information and information is power. Information directs our focus and so helps shape our perception of reality. Information demonstrates what is possible and so influences how we act. And in the political realm information legitimizes or delegitimizes a ruling class structure. Change the communication technology and you change the flow of information. Change the flow of information and you change a culture. Change a culture and you change the political status quo.

A cursory glance at two communication technology revolutions that preceded the rise of the internet – the invention of Gutenberg’s moveable-type printing press in the mid-15th century and the rise of the mass media of radio and television in the 20th century – reveals the dramatic social change that comes in their wake.

“Socially, the typographic extension of man brought in nationalism, industrialism, mass markets, and universal literacy and education.”

Marshall McLuhan, Understanding Media

The printing press led to an explosion in the publishing of books. It is estimated that only 12,000 books were copied by all the scribes in Europe in the 50 years prior to this invention while in the 50 years following it approximately 12 million books were produced. By reducing the cost of publishing a book, information flowed into more houses and ideas expanded the minds of a greater number of people and with profound political implications. The increase in the number of bibles was an important factor in the Reformation and the pamphlet movement was a driving force of the French and American Revolutions.

“As a result of Gutenberg’s invention monarchs were beheaded, world maps were redrawn. . .Modern society and modern economics were born.”

Andrey Miroshnichenko, Human as Media

The next major communication revolution was the invention of the electric telegraph and the radiotelephone and television which followed soon after. These technologies diminished the need for a transportation network of rail, road, and sea to spread information and so shrunk the globe. The ability to beam information into every home in a nation simultaneously, gave rise to the paradigm of the mass media that defined the 20th century. In 1947, The Commission of Freedom of the Press gave a prescient description of the power unleashed by the informational flows of this new media paradigm:

“The modern press itself is a new phenomenon. Its typical unit is the great agency of mass communication. Those agencies facilitate thought and discussion. They can stifle it. They can advance the progress of civilization or they can thwart it. They can debase and vulgarize mankind. They can endanger the peace of the world . . . They can play up or down the news and its significance, foster and feed emotions, create complacent fictions and blind spots, misuse the great words, and uphold empty slogans.

A Free and Responsible Press by The Commission on Freedom of the Press, 1947

The mass media of radio and television structures a top-down informational flow. The relative few who own and operate the broadcasting infrastructure in cooperation with the wealthy and powerful individuals, corporations, and institutions who influence the institutions of mass media, filter, manipulate and package the content in ways that serve their interests.

“The [mass] media proclaim themselves a supplier, but it really serves as a valve, which opens for money or when given permission to by the authorities.”

Andrey Miroshnichenko, Human as Media

Mass media made possible a never-before-seen conformity in worldviews and proved an excellent paradigm for the furtherance of ideologies that favoured top-down, centralized control. For those who determine what information flows through the mass media have the power to direct the attention of the masses toward certain issues and events, and away from others or as Michael Parenti explains:

“If the press cannot mold our every opinion, it can frame the perceptual reality around which our opinions take shape. Here may lie the most important effect of the news media: they set the issue agenda for the rest of us, choosing what to emphasize and what to ignore or suppress, in effect, organizing much of our political world for us. The media may not always be able to tell us what to think, but they are strikingly successful in telling us what to think about.”

Michael Parent, Inventing Reality: The Politics of Mass Media

In a more cynical manner, one could say that mass media grants the few who control it the sort of power depicted in George Orwell’s novel 1984:

“Power is in tearing human minds to pieces and putting them together again in new shapes of your own choosing.”

George Orwell, 1984

The Nazis made use of the mass media to induce their population into accepting totalitarian rule, for as the Nazi propaganda minister Joseph Goebbels stated: “Our way of taking power and using it would have been inconceivable without the radio…” Gordon Allport and Hadley Cantril, in their 1935 book The Psychology of Radio, echoed the sentiment behind Goebbels claim writing:

“Radio is an altogether novel medium of communication, preeminent as a means of social control and epochal in its influence upon the mental horizons of men.”

Gordon Allport and Hadley Cantril, The Psychology of Radio

A unidirectional, limited, and filtered flow of informationall in the control of a select few and served up to the gullible masses creates a situation analogous to Plato’s allegory of the cave. In this allegory prisoners are chained in a cave and forced to watch the dancing of shadows on walls. Not knowing any better, the prisoners mistake the shadows for reality and as Richard Weaver writes in Ideas Have Consequences:

“. . .the [mass media] is a translation into actuality of Plato’s celebrated figure of the cave. The defect of the prisoners. . .is that they cannot perceive the truth. The wall before them, on which the shadows play, is the screen on which press, motion picture, and radio project their account of life.”

Richard Weaver, Ideas Have Consequences

And herein lies the power of the internet revolution – it is a means for the masses to escape from the cave of manipulated shadows. For each time one of us identifies corruption by institutional authorities, sees through a lie, or identifies an act of propaganda – once we notice in other words, that what is thought to be a truth is but the manipulation of a shadow – we can reveal our discovery to an audience of potentially millions. The internet revolution is ending the monopoly the mass media has on the flow of information and so if the printing press led to an emancipation of readership, then as Miroshnichenko writes:

“What we are experiencing now is . . .the emancipation of authorship. Personal computers as well as mobile devices. . .have given all individuals the unlimited right to share their thoughts with others, whatever their reason. . .”

Andrey Miroshnichenko, Human as Media

Will the emancipation of authorship be as transformative as the communication revolutions that preceded it? Time will tell but, to quote Miroshnichenko once again:

“. . .if historical analogies are accurate, then we should . . . expect comparable cataclysms [following the rise of the internet]. The powers of the old authorities. . .have always collapsed along with their loss of sacral control over information. As a result, the social, political and economic status quo falls apart. With every release of content, society sheds its old form, like a snake sheds its skin.” (Human as Media)

Andrey Miroshnichenko, Human as Media

The informational flows made possible by the internet should not be viewed as solely destructive and delegitimizing in their effects. Rather, in a more constructive manner they are revealing alternative possibilities for how society can operate and how individuals can live their lives. Be it alternatives to the inflationary monetary system of fiat currency, to the government control of education and healthcare or to the political structure of society at large, ideas that would never have been permitted in the controlled paradigm of the mass media are being spread by the emancipation of authorship. This new media paradigm is unleashing the creative destruction needed to keep society from descending into the rot of stagnation.

But as this free flow of information is threatening to the parasitic lifestyle of many who occupy positions of powerwe should expect increased calls for censorship in the attempt to force us back into the cave of deceptions. This censorship will be justified as needed to limit hate speech and to correct misinformation – but these excuses are merely the attractive packaging being used to hide what is a socially destructive act – the stifling of free speech in the attempt to protect powerful interests. The emancipation of authorship threatens the legitimacy of the oligarchical class of politicians, bureaucrats and crony capitalists and their ability to pull off their machinations behind the protective veil of the manipulated mass media.

“The gods and men who have kept their prestige for long have never tolerated discussion. For the crowd to admire, it must be kept at a distance.”

Gustave Le Bon, The Crowd: A Study of the Popular Mind

This is not the first time attempts have been made to limit the informational flows that emerge from new communication technologies. Following the invention of the printing press the ruling class of Europe implemented harsh censorship laws. One example was the English Licensing Order of 1643 which mandated the arrest of anyone who printed books critical of the government. But the power of the printing press proved too strong, its effects could not be contained by mandates of a ruling class grasping for power and as Marshall Mcluhan wrote:

“Once a new technology comes into a [society] it cannot cease to permeate that [society] until every institution is saturated.”

Marshall McLuhan, Understanding Media

But history merely rhymes, it does not repeat. And it is possible that if we are too passive and do not take a hard stance against attempts to stifle free speech, then this technological revolution will be one that differs from those of the past. Those in power will learn to use this new technological paradigm to their advantage and instead of liberating us, these technologies will be the tool that descends us into the hell of a technocratic global totalitarianism.

“Public opinion! I don’t know how sociologists define it, but it seems obvious to me that it can only consist of interacting individual opinions, freely expressed and independent of government or party opinion. So long as there is no independent public opinion in our country, there is no guarantee that the extermination of millions and millions for no good reason will not happen again, that it will not begin any night – perhaps this very night.” (The Gulag Archipelago)

Aleksandr Solzhenitsyn, The Gulag Archipelago

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Academy of Ideas

Source

https://academyofideas.com/2021/11/mainstream-media-a-threat-to-freedom-and-sanity/

Monday, December 6, 2021

Lessons From Warren Buffett: Why Depreciation Is the Worst Kind of Expense

Lessons From Warren Buffett: Why Depreciation Is the Worst Kind of Expense

April 3, 2021Lessons From Warren Buffett, Value Investing, Warren Buffett Value Investing, Warren Buffett

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When it comes to discussing a company’s financial performance, EBITDA (earnings before interest, taxes, depreciation, and amortization), has become such a common reference point that you would think that everyone embraces its utility. However, neither Warren Buffett, nor Charlie Munger, who famously said 

“I think that, every time you see the word EBITDA, you should substitute the words ‘bullshit earnings,’”

 have much good to say about the acronym. Buffett has even gone so far as to call its widespread use a “mass delusion.”

“In respect to EBITDA, depreciation is an expense, and it’s the worst kind of an expense,” 

Warren Buffett said at the 2017 Berkshire Hathaway Annual Meeting. 

“You know, we love to talk about float. And float is where we get the money first and we have the expense later. Depreciation is where you spend the money first, you know, and, then, record the expense later. And it’s reverse float. And it’s not a good thing. And to have that enter into a multiple, it’s much better to buy a business that has, everything else being equal, has no depreciation because it has, essentially, no investment and fixed assets that makes X, than it is to buy a company where there’s a lot of depreciation in getting to X. . . . And, of course, it’s in the interests of Wall Street, enormously, to focus on something called EBITDA because it results in higher borrowing power, higher valuations, and all of that sort of thing. So it’s become very popular in the last 20 years. . . . It’s a very misleading statistic that can be used in very pernicious ways.”

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© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Source

https://mazorsedge.com/page/13/


Sunday, December 5, 2021

Lessons From Warren Buffett: Diversification Makes Very Little Sense, If You

Lessons From Warren Buffett: Diversification Makes Very Little Sense, If You

June 26, 2021Lessons From Warren Buffett, Value Investing, Warren Buffett Value Investing, Warren Buffett

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Diversify your portfolio. It is a bedrock tenet that gets preached over and over. However, to Buffett, if you know what you are doing, that doesn’t make sense. Why? Because there are only a limited number of great companies that are worth owning. So, why do people do it? 

“Diversification is a protection against ignorance,” 

Warren Buffett says. However, he notes that its not the secret to great wealth. As he points out, 

“If you look at how the fortunes were built in this country, they weren’t built out of a portfolio of fifty companies.”

“We think diversification is, as practiced generally, makes very little sense for anyone that knows what they’re doing,” 

Warren Buffett said at the 1996 Berkshire Hathaway Annual Meeting. 

“I mean, if you want to make sure that nothing bad happens to you relative to the market, you own everything. There’s nothing wrong with that. I mean, that is a perfectly sound approach for somebody who does not feel they know how to analyze businesses. If you know how to analyze businesses and value businesses, it’s crazy to own fifty stocks or forty stocks or thirty stocks, probably, because there aren’t that many wonderful businesses that are understandable to a single human being, in all likelihood. And to have some super-wonderful business and then put money in number thirty or thirty-five on your list of attractiveness and forego putting more money into number one, just strikes Charlie and me as madness.”

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© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Source

https://mazorsedge.com/page/8/

Saturday, December 4, 2021

The Crowd: A Study of the Popular Mind – Gustave Le Bon

The Crowd: A Study of the Popular Mind – Gustave Le Bon

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In one of the best known books on mass psychology, LeBron (1982) wrote that when people gather in a crowd, 

“Whoever be the individuals that compose it, however like or unlike be their mode of life, their occupations, their character, or their intelligence, the fact that they have been transformed into a crowd puts them in possession of a sort of collective mind which makes them feel, think, and act in a manner quite different from that in which each individual of them would feel, think, and act were he in a state of isolation.” 

His expose gives deep insight into the understanding of behavioural patterns of the market crowd and the individual trader. People change when they join crowds. They become more credulous and impulsive, anxiously search for a leader, and react to emotions instead of using their intellect. An individual who becomes involved in a group becomes less capable of thinking for himself

A Review of the Psychology of the Capital Market in an Emerging Economy,

E. Chuke Nwude 

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The nature of crowds has long been a topic of interest in philosophy. However, the 18th and 19th centuries were a time when an increased emphasis was placed on understanding the psychology of crowds. For example,  the 18th century philosopher Jean Jacques Rousseau proclaimed that  “…we have a very imperfect knowledge of the human heart if we do not also examine it in crowds.”

Gustave Le Bon (1841-1931), a French social psychologist, is often seen as the father of the study of crowd psychology. Le Bon believed an understanding of crowd psychology was essential for a proper understating of the both history and the nature of man. As he wrote in his classic and highly influential work The Crowd: A Study of the Popular Mind: 

“It is crowds rather than isolated individuals that may be induced to run the risk of death to secure the triumph of a creed or an idea, that may be fired with enthusiasm for glory and honour… Such heroism is without doubt somewhat unconscious, but it is of such heroism that history is made.”(The Crowd: A Study of the Popular Mind – Gustave Le Bon)

In this article we will provide a summary of Le Bon’s classic work. In particular, we will investigate his insights into the nature of crowds, look at the role ideas play in influencing crowds, examine the  religious sentiment of crowds, and discuss  the psychological and emotional benefits one derives from joining a crowd.

What is a crowd? Le Bon defined a crowd as a  group of individuals united by a common idea, belief, or ideology.

The idea which unites a crowd is not chosen by a process of clear reasoning and examination of evidence. Instead, as we will discuss in more detail later, crowds accept beliefs and ideas superficially and utilize them as fuel for revolutionary action.

When an individual becomes part of a crowd, according to Le Bon, he undergoes a profound psychological transformation. That is, he  ceases to operate as an individual: 

“He is no longer himself, but has become an automaton who has ceased to be guided by his will.” (The Crowd: A Study of the Popular Mind – Gustave Le Bon)

With such a psychological transformation, an individual no longer lives for himself, but instead becomes a pawn who sacrifices his own personal ends and goals in favour of those of the crowd:

“In a crowd every sentiment and act is contagious, and contagious to such a degree that an individual readily sacrifices his personal interest to the collective interest.” (The Crowd: A Study of the Popular Mind – Gustave Le Bon)

As was mentioned earlier, Le Bon maintained that a crowd forms when an  influential idea unites a number of individuals and propels them to act towards a common goal. These influential ideas, however, are never created by members of the crowd. Instead,  they are brought into the world by the minds of great individuals.

Since those who compose a crowd are by their very nature mediocre, they are incapable of understanding these ideas in their  original form. Therefore, in order for an idea to unite and influence a crowd,  it must first be thoroughly simplified:

“Ideas being only accessible to crowds after having assumed a very simple shape must often undergo the most thoroughgoing transformations to become popular. It is especially when we are dealing with somewhat lofty philosophical or scientific ideas that we see how far-reaching are the modifications they require in order to lower them to the level of the intelligence of crowds…. However great or true an idea may have been to begin with, it is deprived of almost all that which constituted its elevation and its greatness by the mere fact that it has come within the intellectual range of crowds and exerts an influence upon them.” (The Crowd: A Study of the Popular Mind – Gustave Le Bon)

For example, a great philosopher could extol  the nature of liberty in an 800 page masterpiece. However, the crowd, incapable of comprehending such thoughts, would require the  concept of liberty to be thoroughly simplified in order for it to stimulate revolutionary action. Le Bon proposed that  this is where leaders come in. For it is the leader of a crowd who communicates simplified ideas to the crowd and in doing so unites it together and stimulates it to act. 

“The majority of men, especially among the masses, do not possess clear and reasoned ideas on any subject whatever outside their own specialty. The leader serves them as guide.” (The Crowd: A Study of the Popular Mind – Gustave Le Bon)

In the modern day one can see how invigorated and rejuvenated crowds become when they hear a leader pronounce that a cause is being  fought in the name of freedom, peace, or prosperity. Once these words are proclaimed the members of the crowd nod their heads in blind obedience to whatever else follows from the leader’s mouth completely ignorant as to the corrupt purposes that may be the true guide for the leader’s  actions.

“How numerous are the crowds that have heroically faced death for beliefs, ideas, and phrases that they scarcely understood!”(The Crowd: A Study of the Popular Mind – Gustave Le Bon)

Referring to the ideas which leaders manipulate in order to govern and control crowds, Le Bon wrote:

“By many they are considered as natural forces, as supernatural powers. They evoke grandiose and vague images in men’s minds, but this very vagueness that wraps them in obscurity augments their mysterious power. They are the mysterious divinities hidden behind the tabernacle, which the devout only approach in fear and trembling.”(The Crowd: A Study of the Popular Mind – Gustave Le Bon)

Approaching these simplified, and therefore gravely misunderstood, ideas as mysterious divinities, a crowd always forms a  religious relationship to the ideas which motivate them to action. This being the case even when the ideas have no explicitly religious component:  “A person is not religious solely when he worships a divinity, but when he puts all the resources of his mind, the complete submission of his will, and the whole-souled ardour of fanaticism at the service of a cause or an individual who becomes the goal and guide of his thoughts and actions.

Along this line of reasoning Le Bon continued:

“Were it possible to induce the masses to adopt atheism, disbelief would exhibit all the intolerant ardour of a religious sentiment, and in its exterior forms would soon become a cult.”(The Crowd: A Study of the Popular Mind – Gustave Le Bon)

While crowds are capable of acts which achieve both good and evil, Le Bon believed that more often than not  crowds commit barbarous and immoral actions.  Why do crowds so often act in an immoral manner?

Le Bon put forth the following explanation:  “our savage, destructive instincts are the inheritance left dormant in all of us from the primitive ages. In the life of the isolated individual it would be dangerous for him to gratify these instincts, while his absorption in an irresponsible crowd, in which in consequence he is assured of impunity, gives him entire liberty to follow them.

The 20th century  psychologist Carl Jung reiterated this idea:

“…if people crowd together and form a mob, then the dynamisms of the collective man are let loose – beasts or demons that lie dormant in every person until he is part of a mob. Man in the mass sinks unconsciously to an inferior moral and intellectual level, to that level which is always there, below the threshold of consciousness, ready to break forth as soon as it is activated by the formation of a mass.” (Carl Jung)

Nonetheless, Le Bon believed he understood what motivated individuals to join a crowd.

When an individual lives his life as an individual – that is, when he forced to take responsibility for his life – he is apt to feel a crushing burden and sense of impotence he can’t seem to shake.

In joining a crowd or a mass movement, the individual is temporarily relieved of this responsibility and sense of impotence, and comes to feel that he is capable of shaking the foundations of the earth:

“In crowds the foolish, ignorant, and envious persons are freed from the sense of their insignificance and powerlessness, and are possessed instead by the notion of brutal and temporary but immense strength.”(The Crowd: A Study of the Popular Mind – Gustave Le Bon)

Le Bon thought that we are all in a sense a part of a crowd, as we are all  motivated by ideas and ideologies which are socialized into us and via communal action unite us with others in our culture. Many of our actions, in other words,  are motivated by ideas, beliefs, and ideologies which we do not understand. Le Bon thought it was impossible to fully extricate one’s self from all of these implicit ideas.  Yet he did maintain that partial freedom and independence can be attained by bringing to the light of reason the ideas, values, and beliefs which guide our actions. For as Le Bon  wisely claimed:

“The tyranny exercised unconsciously on men’s minds is the only real tyranny, because it cannot be fought against.”(The Crowd: A Study of the Popular Mind – Gustave Le Bon)

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Academy of Ideas

Source

https://academyofideas.com/2013/07/the-nature-of-crowds/

Friday, December 3, 2021

Lessons From Warren Buffett: Volatility is a Huge Plus for the Real Investor

Lessons From Warren Buffett: Volatility is a Huge Plus for the Real Investor

July 10, 2021Lessons From Warren Buffett, Value Investing, Warren Buffett Value Investing, Warren Buffett

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When stocks make sharp moves downward, the news is often full of commentaries decrying volatility. However, for Warren Buffett, volatility is just what he is hoping for.

“Volatility is a huge plus to the real investor,” 

Warren Buffett said at the 1997 Berkshire Hathaway Annual Meeting. 

“Ben Graham used the example of ‘Mr. Market’. . . . And Ben said, ‘You know, just imagine that when you buy a stock, that you in effect, you’ve bought into a business where you have this obliging partner who comes around every day and offers you a price at which you’ll either buy or sell. And the price is identical.’ And no one ever gets that in a private business, where daily you get a buy-sell offer by a party. But in the stock market you get it. That’s a huge advantage. And it’s a bigger advantage if this partner of yours is a heavy-drinking manic depressive. The crazier he is, the more money you’re going to make. So you, as an investor, you love volatility. Not if you’re on margin, but if you’re an investor you aren’t on margin. And if you’re an investor, you love the idea of wild swings because it means more things are going to get mispriced.”

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© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Source

https://mazorsedge.com/page/8/

Thursday, December 2, 2021

Lessons From Warren Buffett: Future Cash Flow Determines Intrinsic Value

Lessons From Warren Buffett: Future Cash Flow Determines Intrinsic Value

July 25, 2021Lessons From Warren Buffett, Value Investing, Warren Buffett Value Investing, Warren Buffett

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Key to Warren Buffett’s efforts to find a company worth buying, whether it is the whole company, or just a minority stake, is his determination of the company’s intrinsic value. For Buffett, that intrinsic value is all about the future cash flow of the business. In his mind, those cash flows are like the interest paid on a bond, but unlike with bonds, the interest rate is not printed on a share of stock as it is with a bond.

“If we could see in looking at any business what its future cash inflows or outflows from the business to the owners, or from the owners, would be over the next, we’ll call it a hundred years, or until the business is extinct, and then could discount that back at the appropriate interest rate, which I’ll get to in a second, that would give us a number for intrinsic value,” 

Warren Buffett said at the 1997 Berkshire Hathaway Annual Meeting.

 “In other words, it would be like looking at a bond that had a whole bunch of coupons on it that was due in a hundred years. And if you could see what those coupons are, you can figure the value of that bond compared to government bonds, if you want to stick an appropriate risk rate in. Or, you can compare one government bond with 5 percent coupons to another government bond with 7 percent coupons. Each one of those bonds has a different value because they have different coupons printed on them. Businesses have coupons that are going to develop in the future too. The only problem is they aren’t printed on the instrument, and it’s up to the investor to try to estimate what those coupons are going to be over time.”

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© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Source

https://mazorsedge.com/page/7/


Wednesday, December 1, 2021

The Bank of Canada's Failed Mission to "Preserve the Value of Money"

The Bank of Canada's Failed Mission to "Preserve the Value of Money"

TAGS Money and Banks

11/30/2021

In Canada, inflation hit 4.7 percent in October, and is expected to go even higher. According to a recent survey, 46 percent of Canadians are struggling to feed their families because of the rising cost of living. Perhaps they are also struggling to understand the logic of the Bank of Canada’s (BOC) mission statement: “We work to preserve the value of money by keeping inflation low and stable.” 

That’s the BOC’s objective, but it’s impossible to achieve. Preserve means to maintain something in its original state, and the only way to preserve the value of money is to keep inflation at 0 percent, not low and stable, as the BOC illogically claims. According to the BOC’s own inflation calculator, the Canadian dollar has lost 22 percent of its value since 2010, and 81 percent of its value since 1990. Given its perpetual failure to achieve its stated goal, why does the BOC continue to exist?

Here’s the answer: the BOC recently announced that “they would stop creating money to buy Government of Canada debt.” That’s the BOC’s real purpose: creating money! It is impossible to preserve the value of a dollar while simultaneously increasing the quantity of dollars (and if the BOC stops creating money, it will only be temporary). Moreover, the Bank of Canada, like all central banks, facilitates money creation through commercial banks.

When the quantity of money increases at a faster pace than the quantity of goods, the result will be tend to be higher prices for goods, services, or assets. Or perhaps all three. Price inflation is caused by monetary inflation, not by supply chain problems, as the BOC claims.

Economic growth does not rely on a predetermined quantity of money. If the quantity of Canadian dollars were eternally fixed, price deflation would probably be the norm. But the BOC warns us that deflation is bad because “a general, persistent fall in prices is usually a symptom of deep problems in an economy.” However, American history says otherwise.

Deflation in American History

As happens today, commercial banks in nineteenth-century America made loans that were not backed by savings in the vault—known as fractional reserve banking. That is, banks would issue paper money (i.e., paper receipts for deposits in the bank) with no money in the vault to back these receipts up. This resulted in monetary inflation. Governments understood how this type of inflation could be used to the state’s advantage.

During the War of 1812 and the Civil War, for example, the government encouraged and legalized banks’ immoral practice of fractional reserve banking, then borrowed unbacked funds from banks to pay war expenses. This inflated supply of unbacked money eventually resulted in higher prices for goods and services. Sensing the fraud, people rushed to the banks to redeem their bank-issued paper money. The government’s response—as you may have guessed—was to grant banks the legal right to refuse redemption while continuing to do business.

Outside of these two war periods, fraudulent increases to the money supply were much less pronounced during most of the nineteenth century compared to the money creation activities of central banks during the twentieth and twenty-first centuries. This relatively stable money supply was accompanied by falling prices during a time of significant economic growth. By the end of the century, the US was on the verge of overtaking Great Britain as the world’s foremost economic power. This puts the lie to the BOC’s claim that falling prices are “a symptom of deep problems in an economy.”

friday

If not for the government’s support for banks’ counterfeiting activities, prices likely would have dropped further. In his book Money, Bank Credit, and Economic Cycles, Jesús Huerta de Soto explains the government’s support for fraudulent money creation:

[The] gradual discovery authorities made of banks’ immense power to create money explains why, in most instances, governments ended up becoming accomplices to banking fraud, granting privileges to bankers and legalizing their improper activity, in exchange for the opportunity to participate, directly or indirectly, in their enormous profits. In this way they established an important alternative source of state funding. Furthermore, this corruption of the state’s traditional duty to define and defend property rights was encouraged by governments’ enormous, recurrent need for resources, due to their historical irresponsibility and lack of financial control. Thus, a more and more perfect symbiosis or community of interests was formed between governments and bankers, a relationship which to a great extent still exists today. (p 39, emphasis added)

That relationship is nurtured through central banks, including the BOC.

Central Banks and Fiat Money

In Canada, the government grants a legal right to the BOC to (a) create money and (b) facilitate additional money creation through the commercial banks—in both cases with minimal human effort. This is called fiat money, and it requires no more time to create $50 billion than it does to create $50.

The BOC is owned by the federal government, which means it does the bidding of the federal government, which primarily involves the BOC’s purchase of financial assets, including federal and provincial bonds, to finance budget deficits. With every purchase, the BOC creates new fiat money out of thin air.

Thus, consistent with Huerta de Soto’s observation, the BOC’s real purpose is to create money for favored groups and purposes (e.g., government salaries, government contractors, government expenses, commercial banks, corporate subsidies and bailouts, etc.). Welfare for the 1 percent. As Ludwig von Mises wrote:

[A] government’s plans concerning the determination of the quantity of money can never be impartial and fair to all members of society. [It] always furthers the interests of some groups of people at the expense of other groups. It never serves what is called the commonweal or the public welfare.

Benefits for the 1%. Costs for the 99%.

Private sector employment is the system through which most Canadians earn their income, which they receive only after their labor has contributed to the production of goods and services. Then they exchange their production (Canadian fiat dollars) for the production (food, clothing, etc.) of other people.

In contrast, when the BOC creates new money, the recipients of this money can purchase goods that others have produced without having to produce anything themselves—while counterfeiters are thrown in jail for doing exactly the same thing.

As the newly created money works its way through the economy, consumer prices—and often asset prices, such as home prices—tend to rise before wages rise. As a recent Angus Reid poll revealed: “[The] majority of the survey's respondents don’t see their wages increasing fast enough to offset increases to consumer prices.” The same thing is happening in the US and in other countries. Inflation is a hidden tax.

Technically speaking, it is legal to use other forms of money in Canada, but the government actively discourages this with its tax and legal tender laws. Thus, the government’s regulatory environment makes it almost impossible for hardworking Canadians to avoid a rising cost of living by using a different form of money. Canadians are trapped in an inflationary fiat money system. Within this system, the BOC’s mission statement is to preserve the value of money with low inflation, which is mathematically impossible, a massive fraud perpetrated against Canadians.

When legal systems do not hinder people’s freedom to use whatever form of money they wish, people tend to use money whose quantity changes very little over time, because this inspires confidence in the future value of the money. And, as American history reveals, this money freedom tends to not only preserve the value of money, but to increase its value.

The fraud must end. Abolishing fiat money, and restoring money freedom, would allow Canadians to more fully enjoy the fruits of their own labor. Moreover, financing government deficits with newly created money would no longer be possible. Deprived of the hidden inflation tax, if federal and provincial governments are unable to borrow existing money at market interest rates, they must either reduce their spending, or increase the level of visible taxes. And the latter option might disappear, because public resistance to higher visible taxes could force governments to reduce their profligate spending. Isn’t that how democracy is supposed to work?

Author:

Lee Friday

Following a 23-year career in the Canadian financial industry, Lee Friday has spent many years studying economics, politics, and social issues. He operates a news site at www.LondonNews1.com

 

Source


The Bank of Canada's Failed Mission to "Preserve the Value of Money" | Mises Wire