by Bill Bonner Bill Bonner’s Diary
Recently by Bill Bonner: The Curse of Leadership
Ben Bernanke spoke out on Tuesday, leaving no doubt where he stands on the QE issue. To print or not to print? He hardly seemed to think about it. Instead, he announced himself four-square in favor. If there is to be any prudence or propriety at America’s central bank, it won’t be on his watch!
This seemed to put some starch into investors’ nerves. After a big sell-off on Monday… and a bounce on Tuesday… they went back into the markets yesterday with a single-minded command: "Buy!"
The Dow rose 175 points. Today, it could hit a new record high.
Does that mean you should buy too? Nah… too risky. You don’t make money by buying expensive things with hidden risks. You make money by buying cheap things with the risks right out in the open.
Wait until U.S. stocks are down below eight times earnings… with dividend yields over 5%. Then, we’ll talk…
In the meantime… a real-life close encounter with zombiedom.
Zombies Hiding Everywhere
You remember our definition of a zombie: someone who takes but doesn’t give? A zombie is a parasite who lives on someone else’s hard work.
By this definition – albeit grosso modo – many people are zombies… even some who don’t realize it.
If a man makes a lot of money and gives it to his children, he risks turning them into zombies. They take. They don’t give.
In a private business, or – more likely – in a private charity, you’ll probably find zombies hiding everywhere, even in the boardroom. Some spend their careers in the corporate bureaucracy… not really helping the enterprise or the purpose for which it was intended. A few even gum up the works with pettifogging aggravations.
Whole industries, too, can be zombiefied. Many law firms, for example, are zombie-enablers; they make their money by encouraging people to become zombies. The lawyers may work hard at their jobs. But they contribute to the spread of parasitism, taking wealth from those who earned it, not creating new wealth.
In Baltimore, recently, the Cochran Firm, founded by legendary lawyer Johnnie Cochran, who defended O.J. Simpson on murder charges, called a meeting. It was designed to bring together potential plaintiffs.
Background: A doctor recently committed suicide after it was revealed that he had videotaped women undergoing gynecological examines. Nothing has been reported suggesting he did anything improper with the videotapes. As far as we know, no one’s privacy or dignity was compromised.
But the Cochran lawyers are readying a class-action suit… sure that they can get the very well-endowed Johns Hopkins Hospital to come up with money.
An Elegant Idea
But when it comes to zombies, nothing beats government. The feds have the power to force people to do things they would rather not do… notably, support bloodsucking zombies.
So, when the elite landowners of Anne Arundel County, Md., got together with the environmental protectors and enlisted the power of government… you could be sure that money was going to change hands. In the event, some of it came to your humble zombie-fighting editor.
You see, the idea was elegant. Subtle. And very profitable for those who understood what was going on. The landowners – often from old farm families – wanted to hold on to their land. But the cost of holding it was rising. As more and more people built houses in the area, land prices rose.
In 1950, the price of an acre of farmland might have been $100. By 1980, it was $10,000… and far more, depending on zoning, public utilities and so forth.
A landowner in 1950 paid a modest amount in property taxes and foregone income to hold land. By 1980, the cost was huge. A 100-acre farm might be worth $1,000,000. He’d pay property taxes. And he’d give up the income and capital gains on $1 million of capital.
Meanwhile, many preservationists and environmentalists wanted the farmland to stay farmland. So, they got together – the (rich) landowners with more than 100 acres… and the preservationists.
They got the county to buy the development rights from the large landowners. They took tax money from people with small lots, condos and modest suburban houses… and transferred it to people with large tracts of lands.
This reduced the value of the large tracts (they were no longer available for housing developments). It put money in the landowners’ pockets. It also reduced their property taxes. And it otherwise left them with almost exactly what they had before.
The preservationists got to hold back the future. The politicians got to hand out more favors. And landowners got to eat their cake and have it too. Everyone came out ahead – except for the poor taxpayers, but who cares about them?
Your editor was a beneficiary. He sold his development rights (he never had any ambition to build houses on his farm).
If we recall correctly, we got a check for about $250,000 – which was big money 30 years ago. We used it to build our house. Plus, we retained the right to build one house on our land for each of our 6 children. So, if we really wanted to develop the land… we still could, albeit in a low-density way, making nonsense of the whole program.
Bill Bonner is a New York Times bestselling author and founder of Agora, one of the largest independent financial publishers in the world. If you would like to read more of Bill's essays, sign-up for his free daily e-letter at Bill Bonner's Diary of a Rogue Economist.