POITOU, FRANCE – “You can’t take that car into Paris.”

Our gardener is our source of local news and universal wisdom.

“You don’t have a green sticker,” he explained.

The French are always finding ways to make life expensive, difficult, inefficient, and unproductive. In the latest installment, they have instituted a system that is meant to keep old cars like ours off the streets of the capital.

Banned From the Streets

“It’s just too old and too polluting,” Damien told us.

“They give you a sticker for the windshield. If you have a low-emission, new car, you get a green sticker. If you have a normal car, you get a yellow sticker.

“But for this one, you’d get a black sticker… and you’re not allowed on the streets.”

This was a blow.

We’ve had these wheels – a Renault van, which was very handy when we had five children and a grandmother at home – for 20 years.

The diesel engine never failed us. We were planning to drive up to Paris for meetings on Friday.

Bill’s decades-old van

Now, we will have to take the train. Which is not bad… in theory.

But in practice, the trains are dominated by unionized workers. They still have pictures of Karl Marx or Leon Trotsky on their living room walls… and raise their right fists in salute each time they pass.

They believe it is their duty to inconvenience the bourgeoisie as much as possible. Typically, they go on strike when it will be most disruptive to others… and most agreeable for themselves.

“I don’t know,” Damien went on, “but they’re probably going on strike next week. It’s a big holiday [Bastille Day; America’s president, Donald J. Trump, will join the festivities].

“You won’t be able to get into Paris or out of it. And the railway workers will get an additional day of vacation.”

Another Kind of Setback

We were just getting over that news when Damien delivered another blow…

There are always setbacks in life. There are setbacks we make for ourselves – the fruit of our own bad deals, bad judgment, or bad habits. And there are the setbacks we suffer from nature.

We accept them both as we accept flies and fools… trying only to limit the damage.

Setbacks delivered by nature and chance we take in good grace. If we build our house on the beach, for example, we’re not going to complain when a hurricane floods the living room. We asked for it.

But if the governor closes our beach, citing a “budget issue,” we’re going to be suspicious… and annoyed. Especially if he then uses the beach himself.

In fact, there is an entire category of setbacks – caused by win-lose deals imposed upon us.

For instance, a robber puts a gun to our head. “Your money or your life,” says the well-read thief. And if you could engage him in conversation, you might find plenty of plausible “reasons” for the larceny.

He was abused as a child. He is a member of a disadvantaged minority. He went to public school. He needs the money more than we do. He is only stealing it to give it to the poor.

“Stealing from the rich,” he says, “will reduce wealth inequality. And since we know from reading Stiglitz, Krugman, Piketty, et al. that wealth inequality slows down growth, making everyone poorer, redistributing wealth will make us all better off. I’m just a facilitator. I’m helping to create a fairer society.”

You see immediately that the robber has a future in politics!

“The risks are lower… and the payoff is greater,” you tell him. “And the work is essentially the same – transferring wealth from the people who earn it to the people who are favored by the robber.”

Back-alley stickup men get caught… or shot… from time to time. The politician, almost never.

Instead, he is re-elected… moved from one committee post to a more powerful one… where he is able to redistribute more wealth.

And when he eventually retires, he has a job waiting for him among the plumy cronies – in the think tanks, lobbying firms, or big business.

Rising Damp

Those thoughts in mind, we walked with Damien to look at our gatehouse.

The gatehouse in the French countryside

This is a charming little place. Open fireplace. Gas heat. Original handmade tile floors. Exposed beams.

But it’s empty. And an empty house degrades faster than one that is lived in. Moisture wicks up the stone walls. Rising damp it is called. Soon, there is mold, saltpeter, and peeling paint.

“How come we haven’t rented it?” we asked.

“A couple of people have looked at it. But it’s not up to code.”

“What code? It’s 200 years old…”

“That doesn’t matter,” Damien continued. “There’s a new law. If you want to rent a place, you have to have it inspected to see if it is up to standard.

“You pay… I don’t know… €200, and they certify that it meets code requirements. And you have to do that before each time you rent it. It’s a scam.”

“What would we have to do to this place?”

“Ooh la la! Almost impossible. It has to be fully insulated. You’d have to redo all the walls. Stone walls won’t pass. We would put up sheetrock with insulation.

“And we’d have to rewire the whole place. And put in new double-glazed windows. And find a way to insulate the ceiling. I don’t know how you’d do that without covering up the beams.

“And that staircase – it is too narrow. And the steps aren’t exactly what they are supposed to be.”

Damien pointed to the corner where a little handmade staircase, with steps worn by long use, winds up to the loft bedroom.

“Wouldn’t be worth it. We rent this for €300 a month when we can get a renter. And it would probably cost about €15,000 to bring it up to code. Let’s see. How long would it take to pay that off? I don’t know… 20 years?”

Subsidized Housing

Math is not Damien’s strongest subject.

It would probably take about four years to repay the investment – if the place were rented the whole time. Still, not a terrible investment.

But think of the waste: The house is already comfortable. The way it is used, with an open wood fire, makes insulation less important. And who’s to say that wallboard is a real improvement over stone?

Only the renter can say if he likes it… or wants it… and whether it is worth the rent.

But wait… There’s more:

“It’s not that simple,” Damien explained.

“Almost all the renters get a subsidy from the government, which pays about half the rent. They only get it, though, if they rent an approved place. So they can’t rent here.”

Win-lose. The feds force their vision of proper housing on renters. They subsidize those who go along and punish those who don’t.

Whose idea was this? What politician thought he should dictate to landlords and renters where they could live and where they couldn’t?

We don’t know, but we expect to find him on the board of a real estate inspection firm when he retires from government.





Market Insight: Is the Stock Market Overvalued?


bill bonner

Is the stock market overvalued?

It certainly looks that way if you compare today’s valuations with average valuations going back over 150 years.

One of Bill’s favorite valuation metrics is the CAPE ratio. It looks at the price of stocks relative to their average earnings, adjusted for inflation, over the past 10 years.

Today, the S&P 500 is trading at a CAPE ratio of 29.7. Going all the way back to the 1870s, its average CAPE ratio is 16.8.

In other words, today’s CAPE ratio is 76% higher than the historical average.

But a lot has changed over the past 150 years.

For example, there are more investors today than there were back then. There are 401(k)s and IRAs. There are ETFs and mutual funds. And there’s a whole industry devoted to analyzing stocks around the clock.

A more illuminating comparison may be with the average valuations of the past 25 years… when the stock market was much more similar to the one we know today.

And as you can see from today’s chart, this tells a different tale.

Today’s CAPE ratio (29.7) for the S&P 500 is still higher than its 25-year average (26.2).

But it’s only 13% higher, versus 76% higher, if you take the 150-year average.

Chris Lowe

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In response to yesterday’s Diary, Trump remains a popular topic of discussion…

You describe how Trump knew how to win the presidency by appealing to most voters at their level. It may have been the right formula for Trump, but doesn’t it also show once again that voters hardly have any say in what happens to them?

The only folks that seem to be affected are the businessmen. The masses, who delivered us a guy like Trump, have the same struggles they had before Trump. The only consequence that matters is how our enemies play us, perhaps. Or not even that.

– Michael C.

Everything you indicate about President Trump may be accurate. But once again who IS the perfect statesman capable of taking down the Deep State, the bureaucracy if you will. The answer is no one… Nada.

It is so corrupt and entrenched. The rot is too deep. If you have the answer please let me know. I humbly await your cure for your diagnosis and the name of the individual who you think is the messiah.

– Earl P.

You must be very frustrated, as am I, to discover your readers cannot separate the policies being promoted by Trump from his abnormal and dishonest personal behavior. They cannot separate the irrational and self-defeating policies from those required to make their lives better.

They appear to be ignorant of even basic facts, instead claiming the professional press is filled with fake news. Personally, I’m terrified such people apparently can elect leaders who have no ability to solve the problems with healthcare, as the Republican-led Congress has demonstrated. The Deep State is not our only problem.

– Edmund S.

I saw in your mailbag that someone says that you need to have more money than Trump before you can call him a moron. Is money the only criteria in life? Now THAT is moronic.

– Richard T.

Meanwhile, Bill’s recent history lesson on America’s War of Independence has gotten some readers thinking…

Thanks for the interesting history lesson on French contributions to our nation. U.S history tends to deify George Washington at the expense of those who also gave critical support to the revolution. While he and others no doubt were instrumental in holding the colonists together, risking their lives and fortune to create this great nation, the French support too often gets relegated to a footnote.

Interesting to follow the subsequent course of events regarding the financial and political cost to the French monarchy! Too bad King Louie didn’t have his own federal reserve to print up some extra cash, eh?

– D. L.

Thank you for telling the truth about our “Revolutionary War” with Britain. In exchange for helping us drive out the British, France created Canada, in a roundabout way.

– William C.

Love your work, and am happy to see someone else actually concerned with more than a single paragraph of history. You would enjoy reading more about the influence the Spanish had on American independence. And don’t forget the wealthy Dutch.

The admirable Comte de Grasse, who is a favorite figure of mine, didn’t fare so well after Yorktown, and was captured. Complex dance, as usual in the world! Things don’t change much and you did a great job getting this out to people.

– Elizabeth P.

I just finished reading your essay on the Revolutionary War. Obviously, you love the French. Yes, the French made a significant contribution to the American victory in the Revolution, but there would have been no revolution without a group of men and women who wanted to be free from the control of a non-resident ruler.

Those who signed the Declaration of Independence are the true heroes. Many of them did not survive the war.

Without the determination and leadership of General Washington and many others, the French would not have had the opportunity to help. Let’s not forget who shed the most blood in this war. And by the way, who saved the French in WWI and WWII?

– Noel G.

Thanks for your very interesting account of the Involvement of the French Army in the American Revolution. Just would like to remind you that a significant number of the French soldiers were blacks and mulattoes from the Caribbean, mainly Martinique and Saint-Domingue, now Haiti. Moreover, one of them was Henri Christophe, who became one of the founding fathers of the Haitian state.

– Jean J.

Most Americans are not cognizant of the contributions of other nations to the victories we have experienced in the major conflicts we believe we “won.”

The Russians broke the German Army at Moscow and Leningrad. Without the sacrifices of Russian Troops in those battles, the Allies would have faced a much bigger challenge on D-Day, and may not have been able to establish a beachhead in France.

If there had been more resistance in Africa and Europe to the Allied invasions there, it could have affected manpower and supplies available for the war effort in the Pacific Theatre leading to an outcome of us speaking German.

– William C.

In Case You Missed It…

Before joining our team, Chris Mayer was a 10-year corporate banking insider and former VP of Maryland’s largest independent bank. That experience allowed him to see “behind the scenes” and discover how legendary investors like Peter Lynch and David Einhorn made their fortunes.

Now, Chris is showing readers how they can use the same little-known technique to invest like an insider.
Read more here.