SÃO PAULO – We arrived on Sunday morning.
São Paulo can have terrible traffic. It is a sprawling place of 12 million people.
But it was early when we pulled into town; the traffic moved swiftly.
We decided to go to mass at the old São Paulo (Saint Paul’s) Cathedral downtown.
The area is a bit rundown. Derelict. Bums and half-wits congregated in the park in front of the church… and inside the church, too.
More on that story in a minute. First, we check in on the world of mammon.
U.S. stocks have seen their sixth straight day of losses as the economic picture darkens.
Houses are selling again. But there’s a big problem: The average house buyer is less able than ever before to buy the average house.
His income, compared to the cost of buying a house, is the lowest on record. Thus housing takes up a disproportionate share of his wages, leaving less for other spending.
It’s part of the reason why retail sales are so weak… and why middle America’s mall stalwarts J.C. Penney, Sears, Macy’s, and Kmart are all closing outlets.
Not only is spending shifting online, but also their customers don’t have any money. As many as 3,500 major retail stores are due to lock up.
Defaults on auto loans are also rising – worse than 2009.
The middle classes don’t earn enough money to support housing, retail, autos, and their debt – at current levels.
The Main Street economy is a win-win-deal economy.
But over the last 30 years or so, the balance has shifted from win-win to win-lose.
It’s left working people worse off. And now the feds control too much of our time and resources – by way of legislation, regulation, or the fake-money system.
All of them are win-lose deals.
The Fed has announced plans to back off. It says it will pursue “normalization” – gradually raising interest rates.
You’ve heard our prediction: It won’t happen. The Fed will never voluntarily return to normal market-set interest rates.
It will only raise rates so long as it doesn’t matter… that is, as long as the “natural” rate is higher.
The Establishment – Wall Street, Big Business, the feds, the Deep State — depends on money borrowed at preferential interest rates.
They aren’t going to give it up.
And now we offer a companion forecast for Congress: It will never voluntarily cut spending.
The swamp critters need funding. Part of it they get from the Fed. They get another big part from Congress. They won’t give that up, either.
There will be no intentional turnaround. Not under Donald J. Trump. Nor anyone else. The Deep State is in charge. And the Deep State wants more of your money.
Meanwhile, back at São Paulo Cathedral…
The church edifice is a bit like Notre-Dame in Paris – with side walls supported by flying buttresses and a roof held up by large columns.
São Paulo Cathedral in Brazil
It is impressive stonework, but not particularly attractive. The grey-brown granite is a little dull. And the ceiling, painted white, lacks the decorative excitement of many European cathedrals.
The music had an antique quality; the whole ceremony seemed a bit out of date, recalling the ancient Hebrew laments from which it is derived.
We settled into a pew at the rear of the church and followed the service as best we could. We don’t speak Portuguese. But the liturgy and the Bible readings were familiar.
Most important, we know how the story turns out.
We couldn’t follow the sermon very well, but we heard several telltale words: “social justice,” “community,” “solidarity.”
We couldn’t be certain. But it appeared the bishop had fallen for the “liberation theology” that was so popular in Latin America in the 1960s and 1970s.
The idea was that the church should encourage people to become engaged politically and push for more activism on the part of government to cure whatever ailments they saw afflicting society.
Religious people – Christian and Muslim – are always tempted to back their faith with the brute force of the state.
The first amendment to the U.S. Constitution specifically forbids it.
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.”
But churches in America are often adorned with U.S. flags and state flags as well as the flags of the church.
Jesus warned against trying to “serve two masters.” But many churchgoers seem to want to give it a try.
Even in our little church in Maryland, we say prayers for “our men and women serving in the armed forces” as if they were doing God’s work.
Over and over, Jesus emphasized the responsibility of the individual – the Good Samaritan, for example – to do the right thing.
As for government, he seemed to despise it… or at least keep his distance. (“Render under Caesar that which is Caesar’s,” he said, tossing a small coin.)
And at one point, Jesus was invited to join the Deep State insiders. Political power… the power to force win-lose deals on others… was offered to him:
And the Devil taking him up into a high mountain showed unto him all the kingdoms of the world in a moment of time….
And the Devil said unto him, “All this power will I give thee, and the glory of them; for that is delivered unto me: and to whomsoever I will give it. If thou wilt worship me, all shall be thine.”
And Jesus answered and said unto him, “Get thee behind me, Satan…”
Jesus had no truck with the feds.
While thus engaged in our thoughts… a woman shuffled into church and lay down on one of the pews in front of us.
Dirty. Dressed in odds and ends.
She scratched herself for a few minutes as though she had fleas… and then fell asleep.
A few minutes later, a young man came in and sat down. The atmosphere was one of movement. People came and went. Some listened to the sermon intently. Others talked. Some got up and left.
There was little formality; many people were dressed in shorts or sports outfits.
So it was not unusual for this man to come in in the middle of the service and sit down casually in front of us. But then he made no effort to synchronize his movements with the rhythms of the service.
We kneeled for Confession; he stayed seated. We rose for the Evangile (the Gospel lesson); he remained in his seat, his arm thrown over the back of the pew.
Then his head went back… and he, too, fell fast asleep.
Further Reading: In Investing Insight below, my friend Chris Mayer explains why sometimes in investing, it’s best to just do nothing.
BY CHRIS Mayer, EDITOR, Chris Mayer’s Focus
I recently finished reading Ed Thorp’s memoir A Man for All Markets.
Thorp is most famous as the brainy mathematician who figured out how to win at blackjack.
His 1962 book Beat the Dealer became a bestseller. It proved mathematically how a player could tilt the odds in his favor against the house.
Most of us know this technique today as “counting cards.” Thorp’s memoir includes some valuable lessons for 100-bagger hunters. (100-baggers are stocks that return 100-to-1.)
One is simply that you have to hold on to take advantage of the power of compounding.
It seems like the easiest lesson of all to learn. But it’s perhaps one of the hardest to do. Thorp shares some great anecdotes about how costly selling early can be.
In the late 1960s, Thorp met Warren Buffett.
Buffett’s Berkshire Hathaway was trading for $42 a share. But Thorp didn’t buy any then. After all, Buffett was just a folksy smart guy from Omaha. He didn’t have the reputation he has now.
After it had gone up 23-fold, Thorp finally bought his first shares in 1983. He paid $982.50 a share. And he held them.
A lot of people can’t get that second part right – sit tight and hold.
There’s another story he tells of a San Francisco bank president he met in 2004 whose mother owned Berkshire stock in 1969.
Thorp was impressed and said his mother must be rich today. The stock was $80,000 a share by then. Sadly, she had sold it all long ago at $79.
Or there’s the story of Thorp’s divorced housecleaner who in 1985 got a windfall of $6,000. Thorp told her to buy Berkshire and never to sell it without checking with him first.
She bought two shares for $2,500 each. The stock rose to $5,000. Then the 1987 crash hit. She got scared and never asked Thorp what to do.
She sold shortly after the crash at $2,600.
“Sixteen years later,” Thorp writes, “at the time her children might have been finishing college, the stock ranged between about $60,000 and $74,000 a share.”
It’s the same old story.
People can’t just sit and own a stock. They feel the urge to trade. They read the news or watch TV. Something important seems to be happening all the time.
They feel they have to act. They see all those blinking stock prices on their screens as if they were the flashing lights of a Vegas slot machine. It’s a siren’s call.
As Thorp writes:
Offering explanations for insignificant price changes is a recurrent event in financial reporting. The reporters often don’t know whether a fluctuation is statistically common or rare.
The vast majority would be better off if they didn’t check their stock prices every day, or week, or month. If you invest scared, you’ll never really amount to anything as an investor.
You may make some money. You may lose some money. But you’ll never reap the big, life-changing gains that turn a $10,000 investment into $1 million – if you can’t hold on.
— Chris Mayer
P.S. Last week, I told an exclusive group of your fellow Diary readers about the little-known investing strategy that has made a small fortune for me and my family. And the best part is… there’s about to be a new opportunity to put this strategy to work.
It only happens a few times each year. That’s why my online presentation about this strategy will disappear at midnight. But you still have a few hours left to watch right here.
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Yesterday’s Diary, “The Swamp Claims Its First Victim,” got some readers thinking about the state of health care in the U.S…
I agree with nearly everything you write. And this article is no exception. It’s what you did not write. Or more accurately, what you implied is that which I take exception to.
You implied that the first victim of the swamp was Obamacare reform. But in truth, the bill put forth by the GOP was anything but. Had it passed, then and only then would the swamp have claimed a victim.
We should be rejoicing the failure of the “repeal-replace” bill. Instead, the talking heads are pretending it failed because it went too-far, when the opposite is true.
– J. Johnson
I would like to take this opportunity to thank you for my continued education.
I am a retired claims adjuster in property casualty for over 40 years. I also studied health insurance and obtained a license to sell health insurance. As you well know, to have a true free market in healthcare, every legal working American should own their own health care policy.
The employer should play a passive role, not an active role. Employer provided healthcare coverage started after World War II when we were in a recession. Employers successfully lobbied Congress to support employer provided healthcare in lieu of giving workers a raise.
With the employee owning their own policy, each family with the help of their agent or broker, would be able to cross state lines and buy a policy to suit their needs.
– R. Calabro
You continue to be my favorite writer on the planet. And today’s missive in Diary (for me anyway) proves the point. As always your comments were prescient, forthright and loaded with common sense. Bravo!
– B. Morrow