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Bill James
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Bill received a BS in 1972 from West Point with concentrations in math, physics, chemistry, and engineering. He was an NCAA All American Wrestler and captain of the wrestling team. He is an eight-year infantry veteran, Airborne, Ranger, Arctic Light and Mechanized Infantry in the United States... More
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  • Politics Dominates Long Term Investing, Study Constitutional Fundamentals 0 comments
    Jun 23, 2012 5:08 AM | about stocks: CNI, CP, CSX, DVN, FSLR, GLNG, GWR, HGT, JASO, JKS, KSU, LDK, NSC, SJT, SOL, SPWR, STP, TGP, TSL, UNP, XCO, YGE

    Politics dominate worries of the EU, the Fiscal Cliff, municipal bonds, national debt, unfunded liabilities, $trillion printed by the Fed, quantitative easing, resource depletion, Peak Oil, Climate Change, wars to defend foreign oil, and the list goes on.

    The coming 10 years will see great unhappiness as consequences of a century of Federal encroachment:

    • Controlling instead of regulating commerce unwinds.
    • Excessive debt and many capital structures associated with that debt are liquidated.

    As events unfold, I believe a deep study into America's founding principles will result, down-sizing all levels of government, and enforcing the enumerated Constitutional limits on the Federal government.

    Vast segments of wealth based on debt will be destroyed. But economic booms as power and transportation infrastructures are restored to free markets will repeat the success of restoring communications infrastructure to a free market in 1984.

    I believe the best long term investment strategy is based on:

    • Fundamental American principles. Following is a summary of Constitutional principles I believe will lead in the down-sizing of government and end Federal control of commerce.
    • The fact that life requires energy.
    • Free markets companies in transportation are limited to railroads at this time and will survive as 480 ton-mile per gallon efficient logistical arteries. Current "B and above rated" railroads are: Union Pacific (NYSE:UNP), Canadian National (NYSE:CNI), Norfolk Southern (NYSE:NSC), Kansas City Southern (NYSE:KSU), Genesee & Wyoming (NYSE:GWR), CSX (NYSE:CSX), Canadian Pacific (NYSE:CP).
    • Longer-term urban transportation will be re-tooled to build a physical version of the Internet. Personal Rapid Transit (PRT) networks will expand from Morgantown, Uppsala, Heathrow and Masdar, solar collection systems integrated into rail systems will likely cause solar stocks to appreciate dramatically by 2015 (Disclosure: The author is the founder of JPods, Inc. a PRT industry company).
    • Natural gas will boom as oil supply shocks hit. This article on natural gas and the comments are excellent (NYSE:XCO), (NYSE:DVN), (NYSE:HGT), (NYSE:SJT), (NYSE:TGP), (NASDAQ:GLNG).
    • Solar and wind companies will boom as transportation re-tooling becomes the catalyst for deploying solar. Large value increases should be expected in the depressed solar stocks such as SunPower (NASDAQ:SPWR), SunTech (NYSE:STP), Yingli Green Energy (NYSE:YGE), Trina Solar (TSL), LDK Solar (NYSE:LDK), ReneSola, Ltd. (NYSE:SOL), JA Solar Company, Ltd. (NASDAQ:JASO), Jinkosolar Holding Co., Ltd. (NYSE:JKS), First Solar (NASDAQ:FSLR).
    • All commodities will boom as re-tooling of power and transportation consume resources on a scale similar to the post 1973 Oil Embargo re-tooling.

    Founding Principles:

    America's founders spent 37 of intense effort tinkering with the nature, capabilities and limitations of government. Their intense effort provides insights on human nature applied to the capabilities and limitations of government. Following are clips from America's founders the mission of the Federal government as it applies to self-reliance and why our failure to enforce the Constitution resulted in civilization killers of Peak Oil, Climate Change and Debt.

    Quotes are from the Declaration of Independence, Constitution, Bill of Rights, letters and the Federalist Papers. The Federalist Papers were written by Hamilton, Madison and Jay to explain the wording in the Constitution. The Anti-Federalists opposed the ratification of the Constitution but faded after ratification of the Constitution. Yet Madison organized the key objections of the Anti-Federalists and carried to ratification the Bill of Rights.

    Mission of the Federal Government: "We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

    The Constitution enumerates the powers of the Federal government. Powers not specifically granted are retained by the States and the People. The Federal government has one duty in divided government, to defend liberty.

    "Provide" defense is mandated. "Promote" welfare is a restriction to only promote, not provide. Providing welfare is reserved to the People and States. Federal "providing" welfare is unconstitutional.

    Federalist #45 (Madison): "The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State."

    Thomas Jefferson, Letter to Joseph C. Cabell, February 2, 1816
    "The way to have good and safe government, is not to trust it all to one, but to divide it among the many, distributing to every one exactly the functions he is competent to. Let the national government be entrusted with the defense of the nation, and its foreign and federal relations; the State governments with the civil rights, law, police, and administration of what concerns the State generally; the counties with the local concerns of the counties, and each ward direct the interests within itself. It is by dividing and subdividing these republics from the great national one down through all its subordinations, until it ends in the administration of every man"s farm by himself; by placing under every one what his own eye may superintend, that all will be done for the best. What has destroyed liberty and the rights of man in every government which has ever existed under the sun? The generalizing and concentrating all cares and powers into one body."

    Federalist #79: "In the general course of human nature, A POWER OVER A MAN's SUBSISTENCE AMOUNTS TO A POWER OVER HIS WILL."

    Federal providing subsistence income gives the Federal government power over the will of the people and setup the tyranny of the majority as adults vote themselves benefits to be paid by debts on their children. Human nature is wonderful but easily corrupted if government builds a buffer between action and consequences. That is why the Constitution limits the Federal government to only "promote" welfare and forbids democracy and tyranny of the majority.

    Declaration of Independence:
    Children "are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." Binding the liberty and future labor of children so politicians can buy votes today is immoral.

    Article IV, Section 4 "The United States shall guarantee to every State in this Union a Republican Form of Government"

    Salient characteristics of "republican" government:

    • No taxation without representation.
    • No tyranny of the majority.
    • Respect for minorities.
    • Free markets, no socialism, no "levelers."
    • Respect for personal property rights.
    • Government dedicated to the liberty of the citizen.
    • Divided and balanced government with "ambition set against ambition."
    • For citizens to perceive the justness of a government function, they must be fully taxed for that function at the time of its operation.

    James Madison, Federalist #57: "...the House of Representatives, restraining them from oppressive measures, that they can make no law which will not have its full operation on themselves and their friends, as well as on the great mass of the society. This has always been deemed one of the strongest bonds by which human policy can connect the rulers and the people together. It creates between them that communion of interests and sympathy of sentiments, of which few governments have furnished examples; but without which every government degenerates into tyranny."

    Socialism, Federal control of the means of production, empowers the Federal government to create consequences that will not have their "full operation" for decades. The Federal government declaring communications, power and transportation "natural monopolies" resulted in a century of rotary telephones and civilization killers of Peak Oil, Debt and Climate Change. (click to enlarge)

    Oil Famine

    Life requires energy. Oil is finite. Yet to gain political advantage, politicians bound America and the survival our people to oil. US Peak Oil was in 1970. Since 1970 oil imports and national debt have climbed in tandem as politicians sacrificed self-reliance for short term political benefits. Costs that should have been capitalized into gasoline prices have been socialized into national debt.

    The Federal highway monopoly made oil the lifeblood of the US economy. Since World War I, to be economically competitive it has become ever more essential to own an automobile. Since The Federal-Aid Highway Act of 1956 funded the Interstates and resulting urban sprawl, oil addiction has been mandated. Thousands of miles of railroads were abandoned because as the highway monopoly removed efficiency as a market force. Pollution from use of oil and coal are socialized into uncertain risks to be faced by our Posterity. Costs of DOE/DOT employees and wars to defend foreign oil are socialized into national debt instead of capitalized into gasoline prices. Socializing costs is indicated by the high correlation between rising oil imports and national debt.

    Oil is finite. Life based on oil is terminal.

    Federal control of communications was found unconstitutional by the courts in 1984; ending a century of rotary telephones.

    Restoring power and transport infrastructures to free markets, ending socializing costs into national debt, shifting Federal action from control to "regulate" will allow markets to adapt to depleting oil.

    The Earth Belongs to the Living, Letter from Thomas Jefferson to James Madison, September 6, 1789
    "Then no generation can contract debts greater than may be paid during the course of it's own existence."

    "But with respect to future debts; would it not be wise and just for that nation to declare in the constitution they are forming that neither the legislature, nor the nation itself can validly contract more debt, than they may pay within their own age, or within the term of 19. years? And that all future contracts shall be deemed void as to what shall remain unpaid at the end of 19. years from their date? This would put the lenders, and the borrowers also, on their guard. By reducing too the faculty of borrowing within its natural limits, it would bridle the spirit of war, to which too free a course has been procured by the inattention of money lenders to this law of nature, that succeeding generations are not responsible for the preceding."

    "Every constitution, then, and every law, naturally expires at the end of 19. years. If it be enforced longer, it is an act of force and not of right."

    Debt is the tax on future labor. Federal debt beyond a 10-20% of GDP or 19 years is a tax on children that cannot yet vote. Excessive debt, unfunded liabilities and devaluation of currency empowers the House of Representatives to make laws that will not have their full force on themselves and their friends. Politicians seeking political power by putting children into debt is tyranny,

    • Debt is tyranny of the majority, democracy where adults steal from and enslave their children by voting themselves unconstitutional benefits.
    • Peak Oil is tyranny of the majority, democracy where adults deplete essential resources without capitalizing restoration to like use by our Posterity into prices.
    • Climate Change is tyranny of the majority, where adults pollute without capitalizing restoration to like use by our Posterity into prices.

    These are all consequences of socialism, government control of the means of production in power and transportation. Socialism removes the consequence gluttony/sloth from the current consumption. Socialism allows a mere majority of people to condemn our Republic.

    James Madison, Federalist #10 "Hence it is that democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and in general have been as short in their lives as they have been violent in their deaths... A republic, by which I mean a government in which a scheme of representation takes place, opens a different prospect and promises the cure for which we are seeking."

    Benjamin Franklin: "Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote!"

    Thomas Jefferson: "A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine."

    Alexander Hamilton: "Our real disease - which is democracy."

    John Adams: "Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide."

    James Madison, Federalist #51: "It is of great importance in a republic not only to guard the society against the oppression of its rulers but to guard one part of the society against the injustice of the other part. If a majority be united by a common interest, the rights of the minority will be insecure."

    Article I, Section 9:

    "No title of nobility shall be granted by the United States: and no person holding any office of profit or trust under them, shall, without the consent of the Congress, accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state."

    Government workers operate the machinery of government. When they use their station to gains pay or benefits not fully taxes at the time of service, they create a class of nobility. Titles of nobility refers more to property advantage, "present, emolument, office," than to a label; they are state granted benefits and privileges to government insiders, to be paid for by future taxes for which those taxpayers have no vote. Today's government employee union used their power to established their pensions and cost of living allowances as titles of nobility.

    The size and scope of all levels of government will be significantly reduced and simplified.

    Federalist #62

    "The internal effects of a mutable policy are still more calamitous. It poisons the blessing of liberty itself. It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?

    Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the moneyed few over the industrious and uniformed mass of the people. Every new regulation concerning commerce or revenue, or in any way affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow-citizens. This is a state of things in which it may be said with some truth that laws are made for the few, not for the many."

    Bill of Rights
    Bill of Rights reinforces the Constitution's enumerated powers with Amendments IX and X. Federal encroachments on the retained rights of the individual and States are so numerous and outrageous that they will be outlined in a series of Self-Reliance Papers:

    Amendment IX

    The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

    A citizen should not have to claim a right. All rights not specifically enumerated as encroached upon in the Constitution are retained by the People. The Constitution does not grant power for one generation to provide welfare to itself, to borrow money against the liberty and labor of future generations, to deplete essential resources or to socialize pollution into future risk.

    Amendment X

    The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

    Amendment X provides the same protection to States and the people. We have the right to pursuit happiness without Federal undermining our self-reliance by providing welfare. We have the right to be self-reliant. We have a right to free markets where all costs are capitalized into prices so we can sense value and adapt to shifting circumstances.

    Restoring communications to free markets in 1984 provides a model. Restoring power and transportation to free markets, will also result in millions of jobs and vast innovation. It is unfortunate for us that we failed to restore free market after US Peak Oil in 1970 or the harm of the 1973 Oil Embargo. Federal commercial monopolies have now created civilization killers of Debt, Peak Oil and Climate Change.

    The Greedy will complain that they are owed, that promised made by themselves to themselves exceed the Constitution.

    Federalist #42 (Madison): "But the mild voice of reason, pleading the cause of an enlarged and permanent interest, is but too often drowned, before public bodies as well as individuals, by the clamors of an impatient avidity for immediate and immoderate gain."

    Federalist #63: "so there are particular moments in public affairs when the people, stimulated by some irregular passion, or some illicit advantage, or misled by the artful misrepresentations of interested men, may call for measures which they themselves will afterwards be the most ready to lament and condemn."

    We face civilization killers. We are going to lament and condemn that we did not enforce the Constitution and remain self-reliant. If we aggressively embrace self-reliance, by 2015 most local economies in the US can survive the Oil Famine. By 2020 America can be self-reliant.

    The current generations will have to accept that the Federal benefits we paid into for most of our lives have been squandered. It is our duty to our children and grandchildren to absorb the loss, drive the size and scope of the Federal government to its proper roll, transfer some welfare functions to the States, but accept that self-reliance is local and personal. The sacrifices will be significant, the work is worthy and the liberty of our Posterity hangs in the balance.

    The price of liberty is self-reliance.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Disclosure: The author is the founder of JPods, Inc. a PRT transportation industry company

    Themes: long-ideas Stocks: CNI, CP, CSX, DVN, FSLR, GLNG, GWR, HGT, JASO, JKS, KSU, LDK, NSC, SJT, SOL, SPWR, STP, TGP, TSL, UNP, XCO, YGE
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