Commentary for the Week of March 8

[The thoughts of Colorado financial adviser Doug Behnfield have been featured here many times in the past. Doug is not only the hands-down smartest investor I know, he is one of the smartest guys I know. In the penetrating essay below, prepared for clients, he reflects on the timeless wisdom of two towering figures in the investment world: Nathan Rothschild (1777-1836), a second-generation scion of the European banking family; and friend and mentor Bob Farrell, Merrill Lynch’s chief stock market analysts for 25 years and a pioneer in sentiment studies and market psychology. RA] Nathan (Baron) Rothschild was one of the most respected and successful investors in the 19th Century and when asked how he became the richest man in the world he responded: “I never buy at the bottom and I always sell too soon.” Bob Farrell, Chief Market Analyst for Merrill Lynch for most of the back half of the 20th Century, is one of the most respected market analysts alive today (and a personal friend). He gave us “Market Rules to Remember” in 1997 and I have always considered them to be sacrosanct. Rothschild's comment is somewhat counterintuitive in that one might expect the richest investor in the world would buy at the bottom and sell at the top. But what Rothschild was advocating was avoiding the market at extremes in order to minimize the destructive forces of fear and greed by trying to invest in the middle of the trend. The chart below is a graphic depiction of Rothschild's methodology. In this example, buying occurs only after it seems apparent that the bottom is behind us, whereas selling is done with the assumption that money has intentionally been “left on the table”. Based on this approach, this next chart of a closed end municipal bond fund

What can a state government do if it owes its retired workers vastly more in pension benefits than it will ever be able to pay? The answer, as far as the Illinois Supreme Court is concerned, is that the state will simply have to squeeze blood from a stone when the inevitable fiscal crisis hits. And it surely will, since the gap between tax revenues and pension obligations is conservatively estimated at $111 billion. Illinois doesn’t have that kind of money lying around, and probably never will. So what then? My expectation is that the court’s decision last week invalidating cost savings implemented in 2013 will eventually lead to rioting in the streets and a civil war that pits taxpayers against public-employee unions. Unions Won't Budge From a political standpoint, the irresistible force and the immovable object have been set to collide. The public-employee unions won’t budge, especially now that the state’s highest court is on their side, rejecting even such modest budgetary measures as might have averted bankruptcy. The justices wouldn't even countenance scaling back a COLA that has been compounding at 3% since 1989. For its part, Illinois will be able to claim, with blunt honesty, that the money simply isn’t there. The predictable “compromise” will be a court order effectively requiring Illinois to raise taxes until there is enough money to support the retirees more or less forever. Well before then, however, taxpayers will begin to exit Illinois with the urgency of North African refugees fleeing ISIS. Even now, one out of every four dollars that Illinois workers pay in taxes goes toward pension benefits for the state's retired workers. Can you see where this is leading? Trouble is, there are probably at least two dozen other states whose pension assumptions are nearly as shaky as those

This week, rather than speculate on the magnitude and direction of the stock market’s next inscrutable lurch, let’s ponder a troubling opinion piece on marriage that appeared in the Asbury Park Press. The author, one Anthony D’Ambrosio, is a 29-year-old millennial whose despairing ruminations bore the headline Five Reasons We Can’t Handle Marriage Anymore. He would know. D’Ambrosio, who writes a regular column on relationships for the newspaper, was a married man himself until recently -- to a woman he met in 2004 and whom he wed in 2012. So much for the supposed benefits of a long courtship. Here's D’Ambrosio's short list of reasons why millennials are unable forge lasting unions: • Sex becomes almost non-existent. • Finances cripple us. • We’re more connected than ever – but also disconnected. • Our desire for attention outweighs our desire to be loved. • Social media just invited a few thousand people into bed with you. Clearly, this is a guy who still has a lot of soul-searching to do -- and maturing. One could also argue that he has missed an important clue by failing to consider why marriages used to work so much better. Men and woman shared a common sense of purpose and an unlimited vista of opportunities when the U.S. emerged from the Second World War. Today, it is just the opposite: Career options for young people are limited, if not to say bleak; and, men and women were not at war back then, nor were they burdened by a sexual revolution that has cast gender roles perhaps irretrievably into doubt. And there are a hundred other good reasons. What say you, readers?

The term “defining moment” is overused, but it seems appropriate to describe the news media’s quandary over what to do about Hillary Clinton. Will the Fourth Estate further its traditional role as watchdog and guardian of democracy by calling on her to abandon her quest for the White House? Or will they instead give Hillary a free pass, bending to the grandiose political ambitions of a woman whose dishonesty, hypocrisy and ethical lapses would be egregious even in comparison to the corruption of Tammany Hall? We can quibble about whether Hillary’s accomplishments qualify her for the presidency, but how much scandal should it take to disqualify her? The New York Times, more than any other newspaper, will have to decide, since the Times is a crucial lever of liberal political power in America. The Grey Lady would surely prefer a liberal in the White House over virtually any Republican. But will Clinton sleaze prove too repugnant, even, for the left-tilting editors and owners of the Times? Whatever evolves, it will not be possible for the Times to straddle the fence, since they have been out front in reporting on the many scandals that have engulfed Hillary in recent weeks. Indeed, Times reporters have crossed a wide ideological divide lately, appearing on Fox News to help get the story out. NYT Op-Ed Ignores Story In stark contrast, the Times' editorial page has barely taken notice of Hillary’s troubles. On Sunday, while Fox News was devoting an entire day to the stench emanating from the Clinton Foundation, the Times op-ed page trotted out liberal mouthpiece Albert Hunt to lecture candidates from both parties about the role of money and politics in 2016. How long will the Times continue to embarrass itself by withholding its editorial voice on the matter of Hillary? We

Greece’s financial problems evidently were weighing on investors’ fevered brains on Friday. Grexit hysteria, which resurfaces every couple of months like a stubborn rash, was thought by some to have triggered a global selloff in stocks that saw the Dow Industrials fall by 1.54% and Germany’s DAX plunge even harder, suffering a 2.58% decline. Don’t they ever learn? First of all, no matter what you read, Greece will not be leaving the EU any time soon. That’s because the consequences are not only unpredictable, but potentially catastrophic. Despite attempts by the spinmeisters and their news media lackeys to convince us that the impact of cutting Greece loose from the eurozone would have but a minor impact on Europe’s economy, we know better. We’ve already seen how the bookkeeping problems of an obscure bank in Cyprus nearly toppled the global financial system. It’s a house of cards, as the banksters well understand, and that’s why the EU is unlikely to kiss off Greece, its puny economy and rinky-dink banks. Shortening Athens' Leash Also, no matter how deeply Greek’s socialist government and the rabble that voted it into power dig in their heels to resist “austerity,” Greeks would starve if they had to pay in drachmas for what they consume. That is why they will do whatever it takes to keep on borrowing. And while we’re on the subject of austerity, let’s be clear about one thing: It was not imposed on Greece by creditor nations, but by the fact that Greece is broke and no one wants to lend them more money. They will, though, and soon, since letting Greece fend for itself would be too dangerous an experiment for an enterprise as shaky and irresolute as the European Union. More likely, we shall soon be reading about how EU banks,

In a month, my son will graduate college with an English degree and a teaching certificate. He plans to travel to South Korea in the fall, where entry-level jobs for kids with his qualifications are plentiful. I graduated with a degree in English myself, but that was in 1971, when students with arts and humanities degrees didn’t have to go all the way to Asia in search of employment. I found work as a reporter with my hometown newspaper, The Atlantic City Press, a week after graduating. Although I’d planned to stay just for the summer, I wound up working in journalism for seven years, until the lure of the options floor in San Francisco proved too tempting to resist. Interesting, well-paying jobs were plentiful back then, and even students with degrees in English, art history, psychology or philosophy were not anxious about finding work. A Glut of Humanities Majors These days, however, good jobs for college graduates are scarce, and unless you have a degree in math or the hard sciences, you’re likely to find yourself doing work that is unrelated to your educational background and training. Even so, students continue to flock to humanities departments, mainly because the curriculum is far less challenging than math, engineering, accounting, organic chemistry and computer science, where the best opportunities are. The point was driven home when I hired a high school classmate of my son’s to do some development work on my web site. I’ve been paying him $100 an hour – a relative bargain, I’m told, because he can complete a project quickly and without glitches. In times past, career advice usually boiled down to the old adage, do what you love. Unfortunately, the current crop of graduates can’t afford to be so choosy, especially if they have student loans

The New York Times has apparently taken great encouragement from last week’s news from Lausanne. “The preliminary agreement between Iran and the major powers is a significant achievement that makes it more likely Iran will never be a nuclear threat,” wrote the newspaper’s editorial board last week after the protracted negotiations ended. “President Obama said it would ‘cut off every pathway that Iran could take to develop a nuclear weapon.’ " Whether true or not, the world will have to live with the consequences. That the Times should take such an unskeptical view of a deal that by most accounts will leave Iran free to develop nuclear weapons is hardly surprising. In the early 1930s, the newspaper was famously duped by the outwardly avuncular Stalin, who was about to murder more than 30 million Russians. The Times’ man on the scene back then, Walter Duranty, won a Pulitzer for his glowing dispatches from Mother Russia just as Papa Joe was beginning to systematically starve a million kulaks to death. Of course, Iran’s mullah’s are plotting genocide on a vastly larger scale. As we know, it is an explicit goal of radical Islam to kill or convert every infidel on Earth -- about six billion of us. Unlike Stalin, however, the jihadists could conceivably have the means to accomplish this if they should come to possess a nuclear bomb. Are you concerned about this? Or do you instead side with the the Times?

Depending on whom you believe, Coke is either mildly poisonous or a miracle elixir that enhances the quality of our lives. The beverage giant spends billions of dollars every year trying to convince us of the latter, but consumers literally aren’t buying it – have been buying steadily less Coke over the years, much to the consternation of the company’s top brass in Atlanta. For in the end, no amount of advertising can undo the salient point made so obvious by the picture below – i.e., that every can of Coke is loaded with sugar, an ingredient for which no health benefits have ever been claimed. Indeed, no less an authority on the subject than Fidel Castro once averred that America’s concerns about Communism were misplaced – that sugar, once exported by Cuba to the U.S. in immense quantities, was rotting our nation from within. The idea of sugar-as-toxin has gained traction as Americans have inched their way over the last decade toward healthier foods. At the same time, the blog world, with all the latest information on why too much Coke will kill you, has provided an informational counterweight to soda-pop ads that would have us believe that a no life well-lived should be without carbonated sugar-water. All too predictably, Coke has responded to our increasing reluctance to believe such claptrap by boosting its advertising budget, which was $3.1 billion in 2013, by $1 billion over the next three years. Similarly, McDonald’s, which has been killing us with fat, sodium and beef raised on hormones and antibiotics, thinks the correct marketing approach is to hit us with more, and “better,” advertising. Do you think it will work? That’s the question of the week, all comments welcome.

Rick’s Picks treats all securities markets like a carnival midway because both were designed to fleece rubes. Entertaining proof of this came in the form of the steep dive Apple shares took in the final minutes of Friday’s session. Money was lost, and we’re not talking about chump change, either, since AAPL, with a capitalization of more than $700 billion, is the most valuable stock in the world. ZeroHedge estimated that the sudden, $2 drop caused $10 billion in market cap to vanish in minutes. And to what end? We may never know for sure, but you can bet that those who were short expiring call options at the $127 and $126 strikes were pleased when the stock dove from $128 to $126 just ahead of the bell. Open interest totaled a reported 105,000 options, but it’s impossible to tell the extent to which they were hedged. There were almost certainly some very big winner and losers, but my guess is that no heads will roll. Call it business-as-usual in a world where humans can nearly always find a machine to blame. Which brings us to the Question of the Week: Have you ever been ripped off by Wall Street?