American Consequences - August 2020

Real Estate In COVID-19 Times

The Melt Up Boom Is Back

REGAN The Great American Meritocracy at Risk

TODD

SJUGGERUD

SUMMER that wasn't the I D E A S T H A T M A T T E R E D I T E D B Y P . J . O ’ R O U R K E AMERICAN CONSEQUENCES

NEARING THE END OF ANOTHER LOST SEASON... WILL AMERICA FALL FLAT ON ITS FACE AGAIN?

AUGUST 2 0 2 0

INSIDE THIS ISSUE

T he seasons steal by in 2020. First Millions of Americans remain unemployed. More than 165,000 are dead. Hotspots are increasingly moving from cities to small towns. Any return to school is haphazard at best. And the upcoming election has the potential to dramatically shift our nation. Americans are getting desperate. spring, then summer... Now, we enter autumn with few illusions. There is no simple way out of this crisis of our own making. And the slow-moving financial catastrophe brought about by the government’s response to the pandemic is only going to get worse. Editor in Chief P.J. O’Rourke kicks us off this month with a deep dive into Democratic presidential candidate Joe Biden’s many, many, many plans for America. Joining us for the first time... and with many more to follow... is award-winning journalist Trish Regan. She shares a tale of her travels in socialist Venezuela – and concludes with a stark warning for America. Our financial coverage for industries and sectors hit by COVID-19 continues... • Buy real estate in COVID-19 times, writes Kendra Todd – who both won The Apprentice and worked with now-President Donald Trump on his record-breaking $95 million sale of a Palm Beach oceanfront estate. • But dump airlines, Bill McGilton and Warren Buffett say... as we wonder which major airline will be the first to go bankrupt.

• Dr. Steve Sjuggerud shows that the Melt Up is back, with the market moving past the pandemic... and why you must be invested as stocks soar far higher than anyone imagines. • Wall Street truth-teller Joel Litman details the “At-Home Revolution” and how loss aversion can make your potential profits vanish. As always, we’re watching Twitter so you don’t have to... Dr. David Eifrig has 10 tips to save in COVID-19 times... And globetrotting financial writer Kim Iskyan shows how the debt jubilee is going global. And don’t miss... Libertarian journalist John Stossel details why private business succeeded where NASA failed in the space race. Stanford economics professor John B. Taylor shows that school choice is the only option for improving America’s education system. Pat Buchanan labels today a stress test of a straining superpower... and one we might fail. Finally, Executive Editor Buck Sexton takes us full circle with a look at Joe Biden and his habit of saying things that are barely coherent and often absurd... and why Joe may be a Trojan horse candidate for the far-left agenda. Please read and share our latest magazine, and tell us what you think at feedback@ americanconsequences.com. Regards, Steven Longenecker Publisher, American Consequences

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August 2020

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CONTENTS AUGST 2020 : ISSUE 36 LOST? CLICK HERE

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AMERICAN CONSEQUENCES

Inside This Issue BY STEVEN LONGENECKER

54 The Great American Meritocracy at Risk BY TRISH REGAN

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Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Publisher: Steven Longenecker Executive Editor: Buck Sexton Managing Editor: Laura Greaver Creative Director: Erica Wood Contributing Editors: Pat Buchanan, Dr. David Eifrig,

Letter From the Editor BY P.J. O'ROURKE

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64 The Debt Jubilee Is Going Global BY KIM ISKYAN

14 From Our Inbox

72 The Private Space Race BY JOHN STOSSEL

20 The Melt Up Is Back

BY DR. STEVE SJUGGERUD

76 School Choice Is the Only Option BY JOHN B. TAYLOR

28 Real Estate In COVID-19 Times BY KENDRA TODD

80 Stress Test of a Straining Superpower BY PAT BUCHANAN

Kim Iskyan, Joel Litman, Bill McGilton, Trish Regan, John B. Taylor, Kendra Todd, Dr. Steve Sjuggerud, John Stossel General Manager: Jamison Miller Advertising: Ricky D'Andrea, Jill Peterson Editorial feedback: feedback@americanconsequences.com Published by:

36 Death of Airlines

BY BILL MCGILTON

44 10 Ways to Save During COVID-19 BY DR. DAVID EIFRIG

84 The Final Word

BY BUCK SEXTON

88 Featured Contributors

48 A Bird in the Hand BY JOEL LITMAN

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From Editor in Chief P.J. O’Rourke

Now I’ll tell you what you’re thanking me for... I just read Joe Biden’s presidential campaign platform so you don’t have to. If you’re thinking, “Thanks anyway, but I’ll read it for myself,” think again... Joe has 43 exhaustively detailed platform planks. My print-out totaled 564 pages, and that’s not counting the pleas for campaign donations and campaign volunteers tacked onto the end of each document or the full text of “Joe’s Leadership During the COVID-19 Pandemic” that sends you down a rabbit hole of links to everything Joe has ever said about the coronavirus. I burned through an ink cartridge and wasted more than a reforestation’s worth of copy paper. (Joe has a plan for reforestation – Joe has a plan for everything .) I used up three pads of Post-it Notes, dried out four highlighter pens, and spent three days I’ll never get back reading and annotating Joe’s platform. In the middle of the second day, I had to lie down in a darkened room with a cold compress on my forehead.

 CLICK HERE TO READ THE WEB VERSION

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August 2020

LETTER FROM THE EDITOR

But although Joe has a plan for everything and can’t shut up when explaining his plans, he doesn’t make it easy to find out exactly what these plans are . (And perhaps that’s a wise move for someone trying to attract “Anybody-But-Trump” moderate voters.) If you care to repeat my reading experience, you’ll have to go to the “Joe Biden for President: Official Campaign Website” and get past all the pestering for donations and amateurish videos of Joe interacting with highly diverse and moderately enthusiastic supporters until you find the little “Menu” icon among the screen clutter. Click on that, and you’ll be presented with a list of (not very enticing) options. Ignoring “Home,” “Joe’s Story,” “Action Center,” “The Latest,” “Store,” “How to Vote,” and “En Español,” click on “Joe’s Vision.” This will take you to “Bold Ideas.” Beneath that heading, there’s an array of 43 boxes similar to Jeopardy! categories. (And unless you lack any political conservatism whatsoever and are bereft of every libertarian principle, the “jeopardy” comparison is apt.)

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What you find when you open the first box sets the tone: The Biden Plan to Secure Environmental Justice and Equitable Economic Opportunity in a Clean Energy Future... While Rubbing His Tummy and Patting His Head and Spinning a Plate on His Toe Ok, I invented the last part, but you get the general idea. And please excuse me for reprinting (without invention) the exquisitely dull paragraph that follows. It, in turn, sets the tone for how Biden’s general ideas are specifically presented. The Biden Plan to Secure Environmental Justice and Equitable Economic Opportunity in a Clean Energy Future... While Rubbing His Tummy and Patting His Head and Spinning a Plate on His Toe The current COVID-19 pandemic reminds us how profoundly the energy and environmental policy decisions of the past have failed communities of color – allowing systemic shocks, persistent stressors, and pandemics to disproportionately impact communities of color and low-income communities. That’s Joe telling us what he’s going to do about pollution. His “ It’s the End of the World – Poor and Minorities Hardest Hit ” attitude persists through all 564 pages. So does the pretentious

and silly verbiage – “disproportionately impact,” “persistent stressors,” “systemic shocks,” “environmental justice,” etc. Every one of the 43 platform planks seems to have been written by perfervid freshmen political- science majors in a dorm room bull session after taking methamphetamine. To give the briefest of examples, there’s this phrase from “The Biden Plan for Combating Coronavirus (COVID-19)”: “Stand up a Pandemic Testing Board to massively surge a nationwide campaign... “ The platform planks are numbingly repetitious, full of grammatical errors, and occasionally just stupid. The little Jeopardy! box that you open to read Joe’s policy prescriptions for increasing the physical safety of women is labeled “The Biden Plan for Violence Against Women.”

However, the real problem with Joe’s campaign platform is quantitative not

qualitative. All presidential candidates make a lot of promises, but there is a point where “a lot” turns into a multitude, a profusion, a passel, a slew, oodles, scads, heaps, piles, and – frankly – a shitload. And then the promises, by dint of sheer number, become lies... Joe is lying his head off. He promises a carbon-pollution-free power sector by 2035, a net-zero emissions national economy by 2050, and the creation of “millions of jobs producing clean electric power for American families and businesses,” presumably by rubbing our socks on the carpet and touching the doorknob. Plus Joe promises “decarbonizing the food

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LETTER FROM THE EDITOR

Those roadways, Joe promises, will have 500,000 electric-vehicle charging stations. But you won’t need them because Joe promises “new highways that can charge electric cars while in transit” (and add a spark to the lives of America’s school-crossing guards). Unfortunately, the highways won’t work for Uber drivers... because there won’t be any Uber drivers. Joe promises “tough enforcement to end the misclassification of workers as independent contractors” and to make sure that “workers in the ‘gig economy’” receive “full benefit packages.” Plus Joe promises “decarbonizing the food and agriculture sector.” This is strange because I was under the impression that almost all the food we eat comes from carbon-based life forms. But that’s OK... With Joe as president, you won’t need to work in the gig economy. You can flip “fair-price” hamburgers (perhaps available with a ration card at the “fair market”). Joe promises to raise the minimum wage to $15 an hour and index the minimum wage to the local “median hourly wage” and eliminate the “tipped minimum wage” loophole that allows restaurants to hire cheap help. (Yet, somehow, Joe “will also support small businesses like restaurants during this economic crisis.”) Or, with Joe as president, you won’t need to work at all... You can go to college.

and agriculture sector.” This is strange because I was under the impression that almost all the food we eat comes from carbon-based life forms. If we have any food to eat... Joe comes very close to promising the nationalization of agriculture with a declaration that new agricultural technologies and seed stocks “should be developed and owned by the American people, not private companies who can use patents to expand profits.” And he comes close again in his proposal for “making sure small and medium-sized farms and producers have access to fair markets... and get fair prices.” Here come price controls. Joe promises to create 250,000 jobs plugging abandoned gas and oil wells and reclaiming abandoned mines, part of his promise for “conserving 30% of America’s lands and waters by 2030.” Quit splashing in that mud puddle, Johnny, it’s a national park . Joe promises 1 million new jobs in the American auto industry, although he also promises to establish “ambitious fuel economy standards,” raise the gas tax, build the “cleanest, safest, fastest rail system in the world,” and provide public transit for every city with a population of more than 100,000. (Bend, Oregon gets light rail! To take you to – according to Wikipedia – the last remaining officially licensed Blockbuster video store in the world.) Also, I’m sure the 1 million new auto- industry workers will be interested to hear Joe’s lament that “families rely on cars, which can be a big financial burden [and] clog roadways.”

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Joe promises that all public colleges and universities will be tuition-free for families with incomes under $125,000. Historically Black colleges, tribal colleges, and “minority serving institutions” will be tuition-free too, and all federal student debt incurred at them will be forgiven. Two years of community college “or other high-quality training” will be free for everyone. Student loan payments under the Public Service Loan Forgiveness and “income- based repayment” programs will be cut in half. Student debt will be dischargeable by bankruptcy. And “students will be able to use their Pell grants, state aid, and other aid to help them cover expenses beyond tuition and fees.” Cue Prince’s Little Red Corvette. .. For second, third, and fourth responders and other such, Joe promises to “spur the construction of 1.5 million sustainable homes and housing units.” Of course, you can’t go to college until you’ve gone to primary school – as soon as you can walk. Joe promises universal pre-K for three- and four-year-olds. And he promises “double the number of psychologists, guidance counselors, nurses, social workers, and other health professionals in our schools.” Although whether this is a promise or a threat, I’m not sure. Johnny, if you don’t sit down and behave, I’ll send you to the “other” health professional .

Participation and Equality for People with Disabilities,” Joe cites “emotional disturbance” as a disability, which will pretty much require one full-time government-funded shrink for every teenager in the nation. None of these people, however, will have to worry about where they live. Joe promises to “expand housing benefits for first-responders, public school educators, and other public and national service workers.” Although, Joe also promises “the mobilization of health care workers nationwide.” (Your draft notice is in the mail. And I hope you like your new barracks.) For second, third, and fourth responders and other such, Joe promises to “spur the construction of 1.5 million sustainable homes and housing units.” Although you may not get to live in them because Joe promises to “increase the number of refugees we welcome into the country” and “welcome immigrants in our communities”... while also making sure “that employers are not taking advantage of immigrant workers” (by, you know, hiring them for jobs that can be done by unskilled people who can’t speak English, or something). But don’t worry about having a roof over your head. Joe promises to make “housing a right for all” with “a new Homeowner and Renter Bill of Rights” which will “protect tenants from eviction” and “eliminate exclusionary zoning” (in case you want to start a trailer park in your driveway). Where you’ll be housed is another matter. Joe promises to “ensure growth is shared by

The school psychologists, anyway, will be busy. In “The Biden Plan for Full

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LETTER FROM THE EDITOR

delusive – “Protect and Empower Women Globally” – to the disturbingly picayune – “Create a ‘Safer for Shoppers’ program that gives compliant businesses a sign for their window.” Some proposals exude a whiff of totalitarianism, such as the promise to “Ensure questions about sexual orientation and gender identity are included in national surveys and data collection efforts... including the decennial Census.” While other items on the Biden agenda smell of a total divorce from reality: “smarter cities that can withstand storms, floods, heat, wildfires, sea level rise, and more.” Alexa, drain the basement . You probably didn’t even know you were a wealthy American – but you’ll find out that you are... if Joe keeps his promises. Joe makes all the standard-issue liberal promises, of course. He’ll lead us, without map or compass (or caveat), into the Green New Deal’s impenetrable jungle of policies and endless wilderness of expense. Joe will provide “a public option health plan” that will cover contraception and abortion, restore federal funding to Planned Parenthood, and “codify Roe v. Wade” into federal law. (But he won’t, presumably, go so far as to make having babies illegal.) Joe will lower the cost of health care insurance for middle-class families, “cutting their premiums almost in half,” slash prescription- drug prices, limit price increases of generic

communities across the country.” Paducah is lovely in the spring. Or you might just wind up on the wrong side of the tracks. Joe promises to alter “local regulations to eliminate sprawl and allow for denser, more affordable housing near public transit.” Wherever you wind up, you’ll have “universal, reliable, affordable, and high-speed Internet,” Joe promises. So you’ll be fine... Unless, of course, you try to make money. Joe promises to “keep well-off business owners from using any program to unjustly enrich themselves.” And if you’ve already unjustly enriched yourself, don’t go trying to save and invest that money. Joe promises to close “loopholes in our tax system that reward wealth, not work.” He promises he’ll be “getting rid of capital gains tax loopholes” and will “restore the 39.6% top tax rate” and raise the cap on Social Security taxes while he’s at it. Joe promises “common- sense tax reforms that finally make sure the wealthiest Americans pay their fair share.” You probably didn’t even know you were a wealthy American – but you’ll find out that you are... if Joe keeps his promises. Which, with the unfortunate exception of the tax increases, he cannot conceivably do. I have, so far, barely skimmed the flotsam and jetsam from the surface of the ocean of promises Joe makes. While navigating, with increasing mal de mer , the bounding main of his campaign platform (soon to fill the recycling bin to its brim), I did my best to keep a list of Joe’s promises. That list is 25 pages long. The promises range from the grandiose and

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drugs to the inflation rate, and allow consumers to buy prescription drugs from other countries. (Ukraine, maybe?) Joe will not only expand Medicaid eligibility, but (another whiff of totalitarianism) he’ll do so by “automatically enrolling... individuals when they interact with certain institutions (such as public schools) or other programs for low income populations.” Buying your groceries with a SNAP EBT card? Turn your head and cough. When my son was 10, he got a .22 for Christmas. Can Santa pass a background check? That North Pole address looks fishy – especially what with global warming filling the Arctic with swimming elves and reindeer. Joe will decriminalize cannabis, end “all incarceration for drug use alone” (no sharing!), eliminate mandatory minimum prison sentences, end the death penalty, and appoint the first African-American woman to Supreme Court (whether she wants to go there or not). Joe will pass the Equal Rights Amendment, “reverse the transgender military ban,” roll back “broad religious exemptions to existing nondiscrimination laws and policies,” and “restore transgender students’ access to sports, bathroom, and locker rooms in accordance with their gender identity.” (Where did the girl’s field hockey team get that 6’4” goalkeeper with a beard?)

Joe will institute public financing of elections, pass a “Constitutional amendment to entirely eliminate private dollars from our federal elections,” ban all contributions from lobbyists “to those who [sic] they lobby,” and provide matching funds for “federal candidates receiving small dollar donations.” Loved all of those $5 contributions you got, Bernie, here’s another fiver from the Treasury. Joe “will immediately do away with the Trump Administration’s draconian immigration policies” and “ensure asylum laws protect people fleeing persecution.” Though, I doubt this asylum will include people fleeing persecution from Joe’s threat to “hold corporate executives personally accountable – including jail time when merited” if they violate environmental regulations or labor laws. Joe will reinstate the assault-weapon ban (never mind that this is a law about how guns look , not what guns do). He’ll hold gun manufacturers liable for damages if one of the guns they made hurts someone. (Next, I guess, is holding cement mixers liable if I drop a concrete block on my foot.) He’ll make background checks mandatory not just for gun sales but for every kind of gun transfer. When my son was 10, he got a .22 for Christmas. Can Santa pass a background check? That North Pole address looks fishy – especially what with global warming filling the Arctic with swimming elves and reindeer. Also, Santa, “Whatcha gonna do when they come for you?” Joe promises to “notify law enforcement when a potential firearms purchaser fails a background check” –

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LETTER FROM THE EDITOR

officials the tools and resources they need to combat gentrification.” And the liberal elite worldview does not seem to be a view of the world that the rest of us live in. Here, from “The Biden Plan for Ending Gun Violence,” is Joe’s proposal to “tackle urban gun violence” with something called “Group Violence Intervention” which “organizes community leaders to work with individuals most likely to commit acts of gun violence, express the community’s demand that the gun violence stop, and connect individuals who may be likely perpetrators with social and economic support services that may deter violent behavior.” (Take that , Crips and Bloods!) There’s nothing senile about Joe... There’s nothing wrong with his brain... His thinking is terrifyingly clear... Joe is an all too actively minded idiot. And yet – whether he seems to be awake or not – at least Joe isn’t woke. Biden is a member of the old-fashioned liberal elite, not the modern loony Left. (P.S. Lest my editor’s letter this month be taken as an endorsement of Joe Biden’s opponent, I hereby promise that next month’s Letter From the Editor will rip into Donald Trump’s 2020 presidential campaign and take no prisoners.)

whether the guy gets a gun or not. There’s all this... and much, much more... And yet – whether he seems to be awake or not – at least Joe isn’t woke . Biden is a member of the old-fashioned liberal elite, not the modern loony Left. He uses every imaginable pretext to pledge “good-paying union jobs.” He wimps out on the question of slavery reparations: “a Biden Administration will support a study of reparations.” (Italics added, but – given what happens when politicians “study” an issue – not needed.) He even makes two brief favorable mentions of “advanced nuclear reactors” to produce electricity. Joe is not a modern loony Leftist. But he’s a reminder of just how loony the old- fashioned liberal elite can be. The concept of “governmental overreach” is beyond the elite’s comprehension. “President Biden will ensure that no child’s future is determined by their zip code, parent’s income, race, or disability” claims “Joe’s Plan for Educators, Students, and our Future.” Also beyond liberal comprehension is the notion that liberal elites don’t control the universe. “The Biden Plan for Combating Coronavirus (COVID-19)” contains the statement “Biden would also get ahead of this year’s seasonal flu... “ which will break out before Joe is in any governmental position at all. With governmental elitism comes a contempt for the people who are to be governed. They are pissed upon from a great height as in “Lift Every Voice: The Biden Plan for Black America” where Joe declares, without embarrassment, that he’ll “give local elected

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FROM OUR INBOX

the Spotify and Liberace part. Our family is Heinz 57 flavors as far as genealogy, French, Irish, Colombian, Caribbean Black, Spanish and god knows what else but because I’m a contractor and we have a tendency to keep things simple (as everything looks like a nail seeking a hammer mentality) and we’re not as sophisticated as reporters. They’re getting rice with a few carrots and onions. – Richard S. P.J. O’Rourke comment: Richard, you have a gastronomically lucky family tree with branches of wonderful cuisines that you can “appropriate” – from yourself! I’ll bet even the rice with carrots and onions is delicious. At our house, we’re just Irish (“Boil everything!”) and part German (“Then serve it with sauerkraut.”) Very funny AND insightful comment about your kids and the woke state of mind. Back in the '60s I was a working-class kid going to college working on Interstate 10 from El Paso to Lordsburg, NM, in the summer to pay my own way. Most of my friends were in the same situation, and we loved the term “Mustang Maoist” mocking the rich (middle and upper middle class kids and others) who drove up to the street barricades in their Mustangs that momma and daddy bought for them. I think the first time I heard that term was reading about Mark Rudd – a street rad leader then. The anti-war crowd was a little different but shares some of the fundamental characteristics of the current crowd; some

Re: Our Newest Readers Weigh In

Almost fell out of my chair laughing! – Dave M.

P.J. O’Rourke comment: And some of the serious stuff we print can also knock you over, Dave. We suggest that American Consequences readers peruse the magazine while sitting on the floor. I like what you have written and agree with you. Keep up the excellent work. – T.G. P.J. O’Rourke comment: And we agree with you , T.G. Keep up the excellent support of the work we’re doing! Your inputs and ideas are the best! – Gonzalo C. P.J. O’Rourke comment: And we’re not going to disagree with you either, Gonzalo. PJ as usual has taken the temperature of the time and come up with an admirable response and a potential remedy. – Dave C. P.J. O’Rourke comment: Thanks, Dave. And I’ll resist making any jokes about where I put the thermometer to take the temperature of the times. Re: Things I Say to Drive My ‘Woke’ Kids Nuts I’m still laughing and I’m going to read this to my two “woke” granddaughters, one of which is vegan, and I can’t wait till I get to

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1977, served less than a year in jail, and then taught mathematics at Central New Mexico Community College – in Albuquerque, up I-25 from where you were pouring concrete, Kent. From what I can tell from Googling around, none of the working-class kids Rudd taught (and I hope his arithmetic added up better than his politics) were impressed or could have cared less that their instructor was a former ‘60s Marxist icon. Marx had a lot to say about the working class, but he never bothered to talk to a worker. I took the time to investigate what Europeans ate before the potato was introduced. It’s the turnip. Threaten the kids with a steady diet of turnips and milk (fresh from the cow, the natural way). – RJS P.J. O’Rourke comment: Thank you for your research, RJS. From now on, my children will be getting nothing but baked turnips, mashed turnips, turnip chips, French fried turnips, turnip salad, and turnip tots, accompanied by milk right out of the udder, and all served in the smelly barn. Your article today was awesome. I so enjoyed it this Monday morning. I could just picture all of that going on with your 20-somethings in these days and times. You must have the patience of a Saint... yeah, that’s it; Saint O’Rourke! – Lyle N. P.J. O’Rourke comment: Hmm... Father Gilhooey at my local parish might beg to differ with that last point. The only candles anyone’s ever lit to me were on birthday cakes (and over the past few years those are getting

of them actually knew a little about Marx and Hegel instead of the few slogans that some fool professor has shared with the newbies. They still wouldn’t admit that Marxism in its various forms was universally lethal, oppressive, economically devastating and the “dictatorship of the proletariat” never got a chance because all that happened was that the old tyrants got replaced by a small class of new and much more deadly tyrants. – Kent C. P.J. O’Rourke comment: Kent, you are – as we Mustang Maoists used to say – “Right on!” And I’m glad that you had the sense to turn us loudmouths off. I should have known better myself. My family was hanging on to the bottom rung of the middle class by their fingernails. So, as a ‘60s protester, I wasn’t really a rich idiot – I was just an idiot. Meanwhile, for those too young to remember Mark Rudd or who have given him a well- deserved forgetting... Mark was a left-wing SDS (Students for a Democratic Society) organizer and the leader of the 1968 take-over and occupation of Columbia University by anti-Vietnam War protestors. He was one of the founders of the SDS off-shoot terrorist group called the Weather Underground. In 1970, he had to go into hiding after three of his fellow terrorists blew themselves to bits while making bombs in the basement of a Greenwich Village townhouse owned by the wealthy parents of Weather Underground member Cathy Wilkerson (who was more like a Rolls Royce Radical than a Mustang Maoist). Rudd surrendered to authorities in

American Consequences

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FROM OUR INBOX

Steven Longenecker comment: We’ll set aside gold for a moment, Henry, and note that “arbitrary construct” isn’t too far off from describing a dollar. What do you think is backing those many pieces of cotton-rag paper, printed with special inks and engraved on a press, that we carry in our wallets and exchange for goods and services? The simple answer is nothing . Nothing at all... other than the belief of billions of people in its worth. That’s why you can easily trade a single dollar for anything from a soda to an iTunes song to a lottery ticket. Today, one bitcoin is backed by the belief of millions of people regarding its worth. That is exactly both its risk and its opportunity... There are, of course, billions of people in the world who aren’t ready to trade $11,000 in paper bills for one bitcoin. And yet, what do you think will happen if tens of millions or even hundreds of millions more start to believe that bitcoin is worth something? We are not die-hard believers here. Instead, we have been both interested and somewhat skeptical of the burgeoning promise of both cryptocurrency and blockchain technology since we launched American Consequences . In fact, we made it the focus of our second-ever issue, three years ago. A single bitcoin was about $2,500 when we published that issue... versus more than $11,000 as we write today. Re: Another Type of Pandemic Is Just Beginning

to be a somewhat hellish fire hazard). But thank you for your kind words, Lyle. Re: How Crypto Will Quietly Go Mainstream I have a son-in-law studying for his accountancy exams. He has been staying with us and said cryptocurrencies are part of his homework on the syllabus. In order to give him background info, I forwarded your e-mail to give him a wide sense of the possible future of cryptos... I think Porter’s own conversion has convinced me to wake up and smell the crypto coffee. – Michael Y. Steven Longenecker comment: Michael, we frankly hadn’t considered the idea that cryptocurrency was in accounting coursework, but it makes perfect sense. We’ve heard that about 10% of Americans currently hold some type of cryptocurrency – so it makes sense that those gains are going to be increasingly relevant on their taxes. Thank you for writing in and sharing... and we wish your son-in-law the best on his exams. Bitcoin is not a coin, not gold, like the one- ounce coin we normally see an image of when bitcoin is depicted. Those images, along with the two vertical lines through the "B" are meant to give the illusion that bitcoin is real, like a dollar bill or a gold coin, that it has real value when it is just an arbitrary construct, a digit created from nothing, is, well, it's nothing but an abstraction. – Henry P.

This opinion piece closely mirrors my own

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August 2020

did not work in the sense that it was levied to pay for the Vietnam War, and that was a war we lost. The surtax may also have damaged the U.S. economy although there were other economic problems current at the time, and it’s hard to sort out all the individual causes for the general economic stagnation of the 1970s. However, when the surtax went into effect in 1968, annual GDP growth was 4.8%, and by 1970, when the surtax ended, GDP growth had declined to .02%. Re: The Chasm Grows Deeper and Wider It amazes me that so many people and publications act surprised that the wealth gap gets bigger. Isn’t it logical? The wealthy have money left over at the end of the month, which they can invest. These investments then make more money. And this continues year after year. The poor do not have money left over, and they even max out credit cards and pay ridiculous interest rates, which reverses the compounding effect that the wealthy are enjoying. – Stephen C. Steven Longenecker comment: We are sympathetic to this argument, Stephen, but only to a point. It is always possible for an individual in America to get ahead, to save money, and to better themselves – no matter their starting point. Excuses for it being impossible are just that – excuses. And of course the secret behind the journey from less to more is not a secret at all... It requires hard work, an ability to delay gratification, and a strong character. These are old-fashioned virtues, of course... but they have stood the test of time for a reason.

sentiments that the class gap is widening rapidly. And wrongly. And dangerously. During the VietnamWar, the U.S. added a 10% income surtax to everyone earning above the poverty level. I’d be good with instating a similar surtax until unemployment drops below a meaningful level. 5%? 7.5%? I don’t know, but the assertion that Covid-19 has decimated the working class and yet is largely an inconvenience to white collar workers is painfully obvious. The original justification for paycheck support was to cushion workers from a disaster that was in every sense outside their making or control. Is that not still true? – James J. P.J. O’Rourke comment: James, I agree with you that workers are suffering from a disaster “outside their making or control.” And I agree that workers should – indeed must – be protected from penury. Unfortunately, I’m not a good enough economist or a wise enough author of political policy to tell you how this should be done. A surtax is one possibility. When LBJ tried it, the surtax both did and didn’t work. The Revenue and Expenditure Control Act of 1968 (passed by large bipartisan majorities in the House and Senate) added a 10% surtax to corporate income taxes and to the income taxes of individuals making more than $5,000 a year (about $35,000 in modern money). The surtax lasted from 1968 until 1969 and was renewed at a 5% rate through the middle of 1970. It did work in the sense that it raised about $101 billion (in 2020 dollars) in federal revenues and led to a federal budget surplus in 1969 – the last budget surplus we would have until 1998. It

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FROM OUR INBOX

P.J. O’Rourke comment: Robert, if your meaning of “we” is political, the answer is no. “We” the partisan enthusiasts, “we” the campaign activists, and – alas – “we” the voters are always looking for someone to solve our economic problems for us. But if your meaning of “we” is “we who work our butts off” (whether at a job or in a family or by making some other material contribution to society), we’ve already answered you with a resounding “yes” just by doing what we do all day. If you ever feel like doing another term paper let me suggest, as a subject, another free market hero very much like Professor Ludwig Erhard. Sir John Cowperthwaite was a British economist and civil servant who was posted to Hong Kong in 1945 and assigned to help revive Hong Kong’s economy, which had been devastated by Japanese occupation. Cowperthwaite realized that the people of Hong Kong – though ill-fed, ill-housed, and broke – were already engaged in a vigorous economic revival. Sir John put all his effort into making sure that the post-war Labour government back in the U.K. didn’t destroy Hong Kong’s free market the way they were destroying Britain’s... And it worked. Sir John rose through the colonial administration’s ranks to become Hong Kong’s financial secretary (i.e. minister of economics) in 1961 and held that office for a decade. When Cowperthwaite arrived in the colony, it was starving. But when he retired, it was one of the richest places in the world.

Re: After the COVIDWar, the Debt Bomb Your article with answers to what can be done about the “Debt Bomb”? The lesson # 1 [Breaking down a cage of regulations can free up resources and encourage the economy to grow faster] caused me to dig out a term paper I wrote back in the 1960’s as a student attending Miami Dade County College. My answer to the question “What should be done” about German recovery after WW2. First was currency reform and then a bunch of left-wing regulations. Except one man, Professor Ludwig Erhard as minister of economics was a declared enemy of economic controls who believed in the free market, shouldered the responsibility to dispose of the compulsory economy with all its restrictions and regulations. He implemented the rules of a free economy – the rules of “LAISSEZ- FAIRE”. By 1953, the index of industrial production had risen from 40 in 1948 to 170. Sixteen million persons were gainfully employed. Three million new jobs were created, etc., etc. The German currency became one of the hardest in the world. Will we ever learn the lesson of a truly “Free Market”? – Robert G.

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August 2020

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American Consequences

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August 2020

By Dr. Steve Sjuggerud

THE MELT UP IS BACK

WHY NOW IS THE SAFE TIME TO GET BACK IN

We were young, but not dumb... Because I started college at 16, I’d already finished my Ph.D. I’d already been the vice president of a global mutual fund in charge of research and trading. I’d also been a broker specializing in international stocks. And my childhood friend Porter was smarter than me for sure. We were willing and capable. What we learned in that manic period of figuring out what works still guides us today. So what lessons from back then can we apply to today? Two things are crystal clear to me right now : 1. It’s time to get back into stocks . And... 2. The Melt Up is back .

When do you get back into stocks? In 1996, Porter Stansberry and I set out to answer this question. Back then, we were just hungry kids in our mid-twenties. The company we started, Stansberry Research, didn’t exist yet. (Who would have listened to two kids anyway?) We were living together in an efficiency apartment. (The whole place was one room.) He slept on one couch. I slept on another. We had nothing – literally – except a mission to find out what works in investing, and a desire to share that with our handful of readers. More than once, Porter stayed at work all day, all night, and all day the next day. Why not? There was nothing at “home” for us.

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That’s all you need to know. I urge you to take advantage of it. Things are happening quickly. After a lumbering decade- plus-long bull market, the landscape has changed. Everything has sped up. Don’t waffle in your decision and miss out. WHEN TO GET BACK IN When do you get back in after getting out? This is the most important question to answer today – after we just experienced the fastest bear market in our investing lifetimes. In 1996, Porter and I tried to figure it out. We read everything we could on the topic... In particular, we focused on what the most successful traders and investors did with their money over the past 100 years. Long story short, we realized that getting back in had two components: 1. A mathematical one, and 2. An emotional one. We learned a lot about what the best investors have done throughout history. And we

wanted to devise incredibly “dumb” rules for getting back into an investment – rules so simple that it would be obvious if one of us was trying to break them. Porter is the more emotional of the two of us – which is good. He gets extremely passionate about his ideas. And he’s usually right. But sometimes, the markets go against us. So when do we get out? And when do we allow ourselves to get back in? We already had our “sell” rules in place for the first question. We were already using trailing stops to limit our downside risk – even back in 1996. But once we stopped out of something Porter believed in, he wanted to get back in as soon as we could... because he had the conviction that it would succeed. We had to set “buy” guidelines to prevent us from emotionally jumping back into what ultimately might be a bad idea. So we settled on two foolproof rules back then: 1.If the stock or investment hits a new high , then you are allowed to get back in.

PUBLISHER’S NOTE: The “Melt Up” is Dr. Steve Sjuggerud’s term for the final push just before the big “Melt Down.” It’s where stocks often have their biggest, most explosive gains. We started featuring the Melt Up thesis in our inaugural American Consequences magazine in July 2017 in an article titled, “Your Last Bull Market.” Since then the market has soared more than 30%. And many big-name stocks are up far more – for example, market darling Amazon has soared nearly 200%. Time and time again in the pages of our magazine, Steve has written us articles showing how the long bull market would not reach its ultimate peak until individual investors were “all in” on stocks once again. And today, given the COVID-19 crash and the huge levels of fear in the market, he has an important update on his prediction.

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August 2020

the global pandemic hit. You can’t know how bad something like that will be, or how far your stocks will fall. So we followed our rules in my financial newsletter True Wealth and sold positions when we hit our stops. This is how we protect our wealth. Now, based on our 1996 rules, it’s time to get back in. Last month, the Nasdaq hit 10,000 for the first time in history – an all-time high. Don’t get me wrong. I don’t mean that COVID-19 is behind us. I don’t mean that we can’t have a second wave or that there won’t be more struggles ahead. What I mean is that the stock market has already assessed these factors, and it’s not worried. To me, this means that the market has moved beyond COVID-19. It means that the Melt Up can pick up where it left off. And it means that stocks can soar far higher than anyone can imagine. Most people won’t believe it. Most people don’t understand that the market looks ahead . It has already priced in yesterday and today. The market has assessed the economic threat from COVID-19, and it has moved on. Don’t get me wrong. I don’t mean that COVID-19 is behind us. I don’t mean that we can’t have a second wave or that there won’t be more struggles ahead. What I mean

(That doesn’t mean you have to get back in – a new high might be too expensive for your taste.) 2.If No. 1 doesn’t look like it’s going to happen, then you need a “ cooling-off period ” before you are allowed to buy again. The first rule takes care of the math. The second rule takes care of the emotions. For the first one, the principle is straightforward. A new high means that the investment has unequivocally erased its loss. And therefore, whatever caused that loss is likely behind us. That keeps it simple and sensible. For the second one, think about it like buying a gun. There’s often a three-day “cooling-off period” involved. This way, a person can’t just get emotional, buy a gun, and immediately take the law into his own hands. The three- day period gives him time to come to his senses. It’s probably not scientific – it’s just a measure in place to control emotions. We set our cooling-off period for investing at six months. So if a beaten-down investment doesn’t hit a new high to erase the past, you then have to wait past the cooling-off period. These rules are incredibly relevant right at this moment. COVID-19 came out of nowhere and clobbered the stock market. Nobody saw it coming. And stocks fell into an official bear market faster than we have ever experienced in our investing lifetimes. The Melt Up was just getting going... Then

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is that the stock market has already assessed these factors, and it’s not worried. That means we still have a lot of upside in the stock market. You see, the market peaks when everyone believes in stocks. But right now, people still have a lot of fears about COVID-19 (which I understand). They don’t believe that stocks can do extremely well despite what’s happening. You can choose to believe it or not. But the new highs in the Nasdaq tell me that fears about the virus wrecking the economy are now in the rearview mirror. A healthy market is one with lots of stocks moving higher. We want to see all sectors and company sizes booming... not just the biggest and most important companies in the major indexes. The market is looking ahead. The market sees record-low interest rates. It sees trillions of dollars in stimulus. And it believes those things are more important to future returns than a potential second wave. It’s the ideal setup for a Melt Up... the last push before a blow-off top where stocks make their biggest gains. We have a perfect financial environment, with still enough fear out there to leave plenty of upside at the moment. More than that, one signal is showing us the broad-based strength of the current rally...

A GREEN LIGHT FROM OUR BEAR MARKET INDICATOR

Today, history is giving us a clear sign. It comes from one of the most powerful bear market indicators we have. And this indicator is giving the stock market a green light . Longtime readers will know what I’m talking about. It’s the advance/decline line. This is a simple measure that tells us how many stocks are moving higher versus the number of stocks moving lower. The technical term for this kind of indicator is “market breadth.” It tells us if, overall, most stocks are moving in the same direction or not. A healthy market is one with lots of stocks moving higher. We want to see all sectors and company sizes booming... not just the biggest and most important companies in the major indexes. That’s exactly what the advance/decline line does. While it might sound fancy, it’s an extremely simple indicator. Each day, you take the number of stocks that went up, then subtract the number of stocks that went down that day. Simple. You then add that number to the previous day’s value for a running total. That makes the advance/decline line a cumulative history of stocks going up or down. And it means that in a healthy market, this line will hit new highs alongside – or even before – the major indexes. Again, by that measure, this bear market indicator is giving us the green light today. The S&P 500 hasn’t quite hit new all-time

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August 2020

410,000

Advance/Decline Line The advance/decline line recently hit new highs

400,000

390,000

380,000

370,000

360,000

350,000

Source: Bloomberg

Jun Jul Aug Sep Oct Nov Dec 2020 Feb Mar Apr May Jun Jul

highs. But the advance/decline line – which covers more stocks than the S&P 500 – hit a new high in June... and has continued to rally since. This is exactly what we want to see. When the advance/decline line is hitting new highs ahead of the market, it means the rally is broad and healthy. It tells us that a bust isn’t likely. While this indicator didn’t flash a warning ahead of the COVID-19 crash, that was a true black swan event. It wasn’t caused by

a crack in the underlying economy or the health of the market. When those underlying issues are present, the advance/decline line is a perfect and simple way to see the problems with the bull market’s health. It gave plenty of warning ahead of the dot-com bust and the Great Recession crash, for example. The chart below shows the advance/decline line during the late 1990s. In that case, it peaked years ahead of the overall market.

60,000

Advance/Decline Line

50,000

40,000

30,000

20,000

10,000

This indicator started falling years before the dot-com peak

0

Source: Bloomberg

1996

1997

1998

1999

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