Of Mice and Idiots

I highly advocate that you don’t practice cynicism in your interpersonal relationships. With family, friends, coworkers and acquaintances, you’ll be best served by thinking the best of people and always extending an olive branch.

There’s no practical limit to how many times you should be nice before you resort to other methods in your personal life. I say this not because I’m a Pollyanna or because it’s good for your soul, but strictly from a utilitarian viewpoint. Being nice helps you get things done.

But in the markets, and especially with regard to the governments of the world, the opposite tends to be true. You should always be cynical. You should always think and expect the worst from the government.

And since – for now – we live in a world where the government heavily influences the markets, you have to extend that cynicism to your investments. I wish this weren’t the case – and I know that you’re probably tired of reading my diatribes against the government.

It’s hard enough to invest successfully when the government doesn’t meddle. But when we have to adjust our outlook to account for the opinions and beliefs of a whole class of powerful idiots in Washington, D.C. – it’s much more difficult.

These idiots – let’s call them “Lenny” – don’t comprehend the harm they can do to the markets. They simply don’t have the capacity to understand that every action they take has an unintended consequence that in all likelihood will be worse than the problem they sought to fix in the first place.

So we’re best served if we assume the worst. We have to assume that when (not if) the markets take another downturn, Lenny will try to fix things. For one, we know Lenny won’t let any major banks fail. Lenny remembers when Lehman Bros. folded – and how scared everyone got. So from now on, Lenny will use his immense inarticulate strength to stop any major bank from failing – ever. That’s a very real pain point for Lenny, and he’ll do all kinds of ridiculous things to keep banks solvent – including wringing the necks of every single American taxpayer in the process.

Don’t believe me? Our necks are already being wrung. That’s what a zero-percent interest rate policy does to scrimpers and savers. It wrings their necks.

What I’m saying is – arm yourself with cynicism. Be highly aware of your stop losses. Be nimble with your cash savings – and keep your physical gold and silver safe but handy.

Good investing,

Kevin McElroy


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