“Hard times create strong men, strong men create good times, good times create weak men, and weak men create hard times.”
– G. Michael Hopff
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July 3, 2024— History and politics are cyclical. That we live in good times makes some of the stories of weakness in our own time… well, they strain your faith in humanity.
The documents we’ve been writing about this week were written by good men writing with our best interest in mind during hard times.
“Five men who signed the Declaration of Independence were captured by the British as traitors,” writes historian Matthew Smith, “and tortured before they died Twelve had their homes ransacked and burned. Two lost their sons in the revolutionary army and had two sons captured. Nine of the 56 fought and died from wounds or hardships of the revolutionary war.”
Meh.
Historical artifacts, you could say.
At least they went on to create a more perfect Union that would appeal to the better angels of our nature. If you’re into that kind of thing.
In our time we elect members of Congress so they can get rich!
Some less flippant specifics from our own honorable Andrew Packer, managing editor… Enjoy ~~ Addison
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Weak Men and Women Create Hard Times
Andrew Packer, Grey Swan Investment Fraternity
In 2001, Martha Stewart sold shares of Imclone before prices collapsed.
In so doing, she avoided $45,673 in losses.
That was chump change to Stewart, who was nearly a billionaire following the IPO of her media business. In fact, her magazine, Martha Stewart Living, was bringing in more than $60,000 per day.
However, the Imclone sale caught the eye of regulators eager to crack down on white collar crime. The SEC explicitly stated at the time they were using their budget money wisely and going after Stewart explicitly because she is high profile.
Bear in mind … this was in the aftermath of Enron’s collapse and a slew of other accounting scandals…
Amid the dotcom bust, where billions of dollars were raised to fund businesses that had no plan to ever turn a profit, they went after the lady who showed us how to beautify our homes on a budget.
It was also two years after regulators got the first warning that Bernie Madoff was operating a ponzi scheme, but six years before that unraveled. But, again, smaller fish to fry.
Stewart pled not guilty at trial. She showed that she had a standing order with her broker to sell shares if they dropped below $60.
But her broker had insider information, and called Stewart to encourage the sale before that information became public.
That was enough for a jury to convict. Stewart received five months in prison, and five months of probation, plus a hefty fine.
Fast forward to 2022. First Republic Bank collapsed shortly after the bank run that hit Silicon Valley Bank.
On March 16, 2022, my member of Congress here in South Florida (who shall remain nameless), sold shares of that bank before it slid 98%.
That same congresswoman then bought shares of JPMorgan Chase, the exact bank that took over First Republic’s assets for pennies on the dollar – and with some government-backed guarantees to boot.
In so doing, this member of Congress not only saved up to $15,000 in potential losses. She also benefited from JPMorgan’s monster rally over the past year.
Surely she’s facing the same consequences as Martha Stewart, right? After all, she was also trading on privileged, non-public information.
Surely there’s not a double standard for members of Congress, who are, after all, the same flawed human beings as you and I?
This may come as a shock. But this particular congresswoman’s corruption isn’t even meriting a primary challenge.
And that’s on top of having all of the perks of being a member of Congress. The salary, the staff, the travel expenses, and a phenomenal health care plan (the best your tax dollars can buy).
Meanwhile, as a constituent, I can’t even get the courtesy of a reply to mail sent in 2021. In the private sector, someone who couldn’t handle such a simple job task would have been let go a long time ago.
That’s not all.
Of the 535 members of Congress, she was in the top 10 for total returns during 2022, making out like a bandit while the rest of us had to sit through a bear market.
How were these returns made?
Nobody knows. While members of Congress are supposedly required to disclose trades in a timely manner, Congress has yet to create a law to properly enforce the requirement.
Of course, these returns pale in comparison to the tens of millions made by Nancy Pelosi, both during and after her Speakership. Even 60 Minutes has noted as far back as 2012 just how profitable some of her trades have been.
She’s managed to parlay a salary of about $250,000 per year into phenomenal wealth, just shy of $115 million.
And it’s why Twitter/X channels like Unusual Whales have launched to try and systematically track all this wheeling and dealing.
This corruption has likely always been a part of Congress.
But in the digital age, when financial records can be tracked and compiled in real time, we’re just now realizing how institutionalized and pedestrian it is for members to enrich themselves while performing their public “service.”
Meanwhile, when asked about these suspicious trades in banking stocks, all my member of Congress had to say was that the trades were made at the discretion of an independent advisor.
In other words, the Martha Stewart defense.
A Nation of Men and Women, Not Laws
In 1780, my rather distant relation, John Adams, wrote the constitution for the state of Massachusetts. It’s the oldest governing document still in use today.
Over the past few decades, Adams has regained respect as one of the Founding Fathers. His work on drafting the Declaration of Independence, serving as a diplomat in Europe, and serving as the first Vice President just scratches the surface.
Like most of his era, he was a farmer first, growing flax and other crops from sturdy New England soil.
Most of my ancestors followed a similar path. As have most of yours. It’s only been a few generations since industrialization changed the path of millions away from physical toil.
Those were hard times. They were made easy by generations of men and women aspiring to help those around them, not enrich themselves at the public expense.
Low government expenses and regulations made technological innovations easy. We still had booms and busts, as we likely always will. But the goose of laissez-faire economics was still allowed to lay the golden eggs.
So when I say hard times are upon us, I get it. It’s hard to believe, much less take seriously.
We have lived easy in America.
But, much like Venezuela or even California, when you stifle the goose that lays the golden eggs, you eventually stop getting golden eggs.
Our weakness is apparent today. It can’t be hidden much longer. Congressional trading abuse is just one crack that’s become apparent in recent years. Eventually, one of these cracks will bring our republic down.
A big part of our problem lies in politicians who have made a career out of politics … on both sides of the aisle.
Our founding fathers had minimum ages for entering public office, but didn’t expect anyone to make a career out of it.
George Washington, who could have been a king, stepped down from the presidency after two terms, going back to his farm.
John Adams passed away on July 4, 1826, at the age of 90 (50 years to the day after the signing of the Declaration of Independence, and the same day Thomas Jefferson passed away). His presidential term had ended 25 years before, in 1801, at the age of 65.
Part of today’s weakness is that we’re devolving from a nation of equally-applied laws to one where some men and women are, to paraphrase George Orwell, “more equal than others.”
Holding a political office was once a noble service. But now it’s been transformed into a scheme to hold onto power for the sake of wealth, not serving the public.
When members of Congress openly and notoriously engage in the same kind of illegal behavior that got Martha Stewart sent to prison, you may just be in the endstage of American society.
When I moved to Florida from my home state of California in 2009, I used to joke that I was a “refugee.” Today, seeing California leading the nation in cost of living and economic inequality, people get the joke. That joke has become all too real.
The rest of the country is following in California’s footsteps. And there are fewer and fewer places to still strive for the American dream of being left the hell alone to achieve in peace.
Florida is one of those places, South Florida’s Congressional representatives notwithstanding. Amazon founder Jeff Bezos just moved here, conveniently around the same time the state of Washington was looking to charge a surtax on capital gains. (His estimated savings? $600 million.)
There’s no telling how much harder times will get before we find the political will to stand up to corruption and runaway government power, if at all.
Pointing out the corruption and standing up against it? As Martha Stewart would say: It’s a good thing. ~~ Andrew Packer, Grey Swan Investment Fraternity
So it goes,
Addison Wiggin
Founder, The Wiggin Sessions
P.S. For additional holiday entertainment fun, click here.
P.P.S.: How did we get here? An alternative view of the financial, economic, and political history of the United States from Demise of the Dollar through Financial Reckoning Day and on to Empire of Debt— all three books are available in their third post-pandemic editions.
(Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites:Bookshop.org; Books-A-Million; or Target.)
Please send your comments, reactions, opprobrium, vitriol and praise to: addison@greyswanfraternity.com
