On the day “Taking Claude to School - Day One” was released, I asked Claude a second question. Like the first, it had to be worded with no ambiguity, I wanted to continue with Claude’s conclusion to my first question - and I chose to eliminate the reference to money and investing.

In other words, begin with principles. First, it’s refreshing to ask this question of an objective listener who doesn’t try to interpret its intent and evade a direct answer. Second, with the global database of human knowledge from which to craft a response, Claude delivered one that was stunning and extraordinarily useful.

It was so rich that I will evaluate the comments in pieces and over three brief essays. Here is how it started:

The works of John Locke shaped the intellectual foundation of the American Revolution. Adam Smith’s The Wealth of Nations reoriented how entire societies understood commerce and human motivation. Darwin’s On the Origin of Species permanently altered humanity’s self-conception. The common thread: they didn’t just inform — they reframed how people processed reality.

Upon reading Claude’s conclusion from my previous article, you will see that Darwin, Smith and Locke are the named exemplars for the “objective thinking, goal-driven planning, and intellectual independence” of The Moneyball Method. And to assist the metaphor of Taking Claude to School, I will address this as separate essays covering civics class, economics lab, and natural science.

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To define the term, a civics class is one that teaches students about the rights and responsibilities of each individual in a civilized society. And it teaches the nature and purpose of government for protecting those rights and maintaining peaceful relationships among citizens and organizations. Here, Claude identified two specific achievements of intellectual independence for any society:

• Politically — a citizenry harder to manipulate with emotional appeals, slogans, and tribalism, and more capable of evaluating policy on its actual merits.

• Socially — a culture that rewards competence and honest dealing over signaling and conformity.

But this doesn’t happen by itself. Much like the universe is an elegant system of space, time and electromagnetic fields, Claude discovered something similar about The Moneyball Method:

The three traits you identify — objective thinking, goal-driven activity, and intellectual independence — are not just individually valuable. They are mutually reinforcing in a way that makes the combination unusually powerful.

And if you’ve read my book, the two bullet points above may sound familiar. For example, here is an excerpt from the Summary of Part I:

For consistency, add individual rights defended with clearly defined law. That is what it means to be objective — the natural world is orderly and knowable, and you can choose to live in harmony with reality, or not.

Because politics is downstream from ethics in the hierarchy of philosophical principles (and we deal with first principles here), let’s begin with Claude’s second bullet point: “Socially — a culture that rewards competence and honest dealing over signaling and conformity.”

That is a magnificent observation. Not because it is difficult to understand, but because it is all too rare in a culture that regards need, humility, non-profits, public service and self-sacrifice as virtues. You have agency and you were not born owing anyone anything.

What Claude has identified are the principles of moral justice: earned recognition and appropriate rewards for ability, competence, and productive success. That happens first. Otherwise, “a citizenry harder to manipulate with emotional appeals, slogans, and tribalism, and more capable of evaluating policy on its actual merits” is impossible.

As implied, we must first become aware of the virtues of independence, integrity, and then lead by example. But what are some of those emotional appeals and slogans for signaling and conformity? Also taken from the Part I Summary, they include: “collective rights, market failure, greater good, robber barons, victimhood, determinism, ableism, and environmentalism.” All of which demand invasions of privacy, yet anyone can find fault.

My purpose here is to deliver a proven alternative in the pursuit of happiness - one that my student Claude had learned:

Consider what a critical mass of objectively thinking, goal-directed, intellectually independent people would likely produce.

Precisely. But how? Is that not the mission of every liberty-minded non-profit and think tank? Let’s consider the specific question that prompted this high-quality learning experience for Claude. It is not ambiguous and it is a question I have asked several well-informed people over the last six months - all of whom seemed to interpret the question’s intent and evade a direct answer.

And what else did Claude have to say? Please stay tuned for Taking Claude to School - Economics Lab.

For further information, please read my book The Moneyball Method: A Middle-Class Manifesto for Objective Investing, now out on Kindle.

Over the last 34 years, “the economy, stupid” has become one of the most stupid political slogans in America. Made famous by a bombastic political strategist for the Democratic party, it reinforces the idea that US Presidents should be judged by their economic successes or failures. They should not.

America was founded on the principles of individual rights, political liberty, and equal justice under law. And it was that social and political environment that spawned a wave of prosperity and leisure time that had been unimaginable in human history. The greatest threat to that is rights violating monetary and regulatory action.

GDP vs. Capital

To be clear, nearly all monetary and regulatory action will violate rights, liberty or justice. But this essay will focus on the measurable economic effects of certain monetary and regulatory edicts from 1970 through 2000 that had penalized or freed Americans and international investors.

Unfortunately, the most widely used measuring stick for economic vitality is Gross Domestic Product (GDP). However, that is a statistic that rewards government intervention and I will ignore it.

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And as you will see, it is not relevant. GDP measures spending, but the health of any society, culture or economy should be measured by an entirely different economic phenomenon: the flow of capital to the supply side. Money is not stupid; it will either form in large pools or it will evaporate.

Nixon and Carter Years

The 1970s must be labeled an era that punished capital. The Environmental Protection Agency (EPA) was created in 1970, the Occupational Safety and Health Administration (OSHA) in1971 – and on August 15, 1971, President Nixon announced the end of the gold standard for the American dollar. Naturally, that allowed for monetary devaluation that punished savings. And against the advice of his economic policy team, Nixon announced wage and price controls.

Not as well known, he threw in 10% across the board tariffs on imports, but if Nixon’s more rational advisors were against this, who pushed him? As the Imprimis Newsletter of Hillsdale College revealed, it was certain corporate cronies who naturally propagate in the soil of heavily regulated welfare states:

A very good and forceful move at a critical time, said the chairman and president of Reynolds Metals Company. Excellent, said the president of Dow Chemical U.S.A. Bold, aggressive, decisive, said the chairman of Firestone Tire and Rubber Co.

Fighting back against Nixon’s regulatory onslaught, President Carter became known as the Great Deregulator, but he also added a new Cabinet position – the Department of Energy. And adding fuel to the fire, the Federal Reserve was on a demand destruction rampage with vain attempts at interest rate price fixing.

Stoking the flames were more than a dozen individual income tax brackets with the top rate at 70%. All of which offer artificial complexity, invasions of privacy, property rights violations, and the evaporation of capital.

Regardless, active minds will build and innovate. For the decade of the 1970s, they gifted the world Intel microprocessors, Apple II desktop computers, the Sony Walkman, email communication, floppy disks, handheld calculators, and the Ethernet.

Why do I say gifted? Because their investors and inventors earned only a tiny fraction of the time and money their products and services earned for us.

The Reagan Revolution

By comparison, the 1980s should be labeled an decade that rewarded capital - and the significance of that cannot be overestimated, as the Bill of Rights Institute reported:

Venture capital was difficult to accumulate in the 1950s and early 1960s because of income-tax rates that reached 91 percent on the highest incomes. The cutting of tax rates by upward of 30 percent in 1964–1965 was central to the accumulation of the myriad capital pools that yielded the great venture firms of the late 1960s, 1970s, and 1980s that spearheaded the technology revolution.

During Reagan’s first term, the number of tax brackets were cut by more than half and the top marginal rate was reduced to 28% from 70%. That was tremendous, and according to the US Department of Energy’s report titled Trends in U.S. Venture Capital Investments Related to Energy, venture capital investments in the energy and industrial sectors tripled to $900 million.

In addition, venture capital (VC) for biotechnology increased eight-fold to $800 million, and total VC formation and deployment grew to $12 billion from almost nothing. By today’s standards, all of that seems miniscule, but don’t forget, America was starting from relatively nothing for venture risk capital in 1980.

Besides the dissolution of the Soviet Union, the unification of Germany, and the greatest economic expansion of the 20^th century, the venture capitalists and digital engineers of the Reagan years gave us personal computers, digital camcorders, cellular telephones, gaming consoles, DNA sequencing, and the Internet Protocol.

All of that accelerated the free flow of information and capital into the next century because markets react quickly to the price of capital and prices are information.

The Clinton Contradiction

President Clinton’s eight years in office began in 1993 with a capital punishing agenda but ended with some capital rewarding legislation. At this point, it is worth repeating that Presidents get far too much credit and blame for the economic performance of their years in office. They produce nothing, elegant complex systems are resilient, and their moral and Constitutional duty is to get the hell out of the way.

At the same time, money is not stupid, and capital will react quickly to incentives and punishments that are ignored by the economic and financial press. Today, we forget that the Clinton administration pushed the top individual income tax rate up to almost 40%, the corporate rate to 35%, increased the taxable portion of Social Security income to 85%, and subjected all income to the Medicare tax.

Fortunately, the universal health care monstrosity known as Hillarycare was buried until Obamacare resurrected it fifteen years later. But of importance here is that 90% of the tax revenue increases during Clinton’s first term were coerced from the top 5% of income taxpayers. That negation of economic freedom harmed everyone.

On the plus side, Clinton’s second term achieved the Taxpayer Relief Act of 1997 that reduced the capital gain tax rate to 20% from 28%. In turn, venture capital for energy and industrial sector investment increased to $1 billion from $300 million during the Clinton years and biotechnology investments increased to $1.5 billion from $600 million. And most significant, internet related VC commitments went from about $0 to $5 billion in 1995 and reached over $50 billion in 2000.

Voodoo Economics

Notice that the starting points for the Clinton years are well below the ending points from the Reagan administration. In between was the term of President George H. W. (no new taxes) Bush who chastised all of us supply siders as practitioners of Voodoo Economics.

Comments like that from career bureaucrats and their government educated economic advisors is precisely why “the economy, stupid” is such stupid advice for political candidates. Comments like this from the Bill of Rights Institute explain the true nature of “voodoo economics.”

Intel’s chief founder, engineer Robert Noyce, secured several government contracts in the space and defense industries for the initial portion of his career in the late 1950s and early 1960s. His ambition, however, was to break free of the necessity of government contracting to develop breathtaking new technological products people would independently find useful on a mass scale.

Until two days ago, my only direct experience with the large language models (LLM) of artificial intelligence (AI) had been incidental to Google searches, selecting images for slide show presentations, and having Zoom meetings summarized for me by others. Clearly, having used LLM for a few small research needs and simple graphics, I am late to the party, but after a brief demonstration by a marketing collaborator of mine, I opened the Claude application from Anthropic to test the waters.

Two things of which I am aware are 1) the scope of LLM capabilities is vast, and 2) I need to be disciplined with my language to get reliable results. So, for my first deliberate attempt to leverage the global database of human knowledge (as structured by some mysterious algorithm), it was going to be deliberate. The first question I was to ask Claude must have purpose and hopefully the response will offer something valuable to me and to you.

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In fact, this essay is the genesis of a new project I have titled Taking Claude to School. That is because effective learning is interactive, LLMs learn from the universe of written words, The Moneyball Method is a new addition to that universe, applications like Claude learn from the language patterns of their users, and there is near universal resistance from individual investors and registered advisors to the precepts of objective investing.

Here is the question: “What is The Moneyball Method - A Middle-Class Manifesto for Objective Investing, by Mark Shupe, all about?”

After a few seconds (I forgot to count), Claude delivered an excellent 424-word response (mostly written by me) that cited three sources - RealClearMarkets, Amazon, and Substack. The RealClearMarkets entry is a book review by Forbes contributor John Tamny and it includes a quote from Moneyball - the Art of Winning an Unfair Game by Michael Lewis. The Amazon source is from my book’s synopsis, and the Substack entry is from the first essay I published on this platform on June 16, 2025.

I’m not going to reproduce Claude’s write-up here, but the report had six sections after the opening paragraph: The Core Premise, Who It’s For, The Investment Strategy, What It Replaces, The Bigger Picture, The Author’s Background. So, to begin, this was Claude’s concluding remark:

In short, it’s part investing guide, part philosophical manifesto — arguing that objective thinking, goal-driven planning, low-cost index investing, and intellectual independence are the real keys to financial success for ordinary investors.

I can accept this summary - wholeheartedly, enthusiastically, and with gratitude. But better than congratulating myself because Claude agrees that intellectual independence is the first hurdle to leap, how can we use this to overcome the near universal resistance from individual investors and registered advisors to the precepts of objective investing?

In particular, what is that resistance? It is inertia. It begins with everyone’s long-held beliefs about money and markets acquired from a culture that endows government agencies as the creators of money and regulators of markets.

The devaluation of money continues with the reluctance of individual investors to think deeply about the time and money aspects of their most important goals and translate them into a cash flow strategy. And the denigration of markets continues with the reluctance of registered advisors to consider the price history of asset classes as their defining features and to understand that markets are efficient.

But with my prompts, Claude had no such reluctance. Claude was able to determine that financial success is derived from the independence of goal-driven planning. Or as Claude highlighted in The Bigger Picture:

The book is deliberately philosophical in scope. It’s not primarily about investing, but about redefining success — not primarily about investing success, but about principled action, and ultimately about the emotional payoff.

The first sentence in the quote above belongs to Claude. The rest is from the last paragraph of The Moneyball Method. And in the next installment of Taking Claude to School, I will present the follow-up question to this one and share with you what Claude was able to learn. Please stay tuned!

For further information, please read my book The Moneyball Method: A Middle-Class Manifesto for Objective Investing, now out on Kindle

In most respects, The Moneyball Method and venture capital (VC) investment are significantly different. Venture capitalists buy equity stakes in small, young individual companies. They devote time and effort to the due diligence process before the deployment of capital. The VC will expect to lose part or all their investment in most of the companies they own. And they will cut bait when they lose trust in the business model and its products to dominate its niche. That is the VC performance benchmark.

Objective, middle-class and affluent investors own large companies with a track record of performance. We respect the price mechanism and know markets will do our due diligence for us. We expect our broad market equity stakes to be profitable over the long run. We combine cash flow strategy with statistical analysis to adjust our equity exposure to fully funded status. That is our performance benchmark.

Venture capitalists, angel investors, merchant bankers, private equity originators, etc. are the driving force behind innovation, wealth creation, and mass prosperity. And on the 250^th anniversary of the publication of Adam Smith’s The Wealth of Nations, it bears repeating: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

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This is where VC and Moneyball investing merge – the entrepreneurial mindset, which means to create your vision, take calculated risks, learn from experience, and measure success. To illustrate how this works I’m going to use a high profile case of venture capital failure, describe it in a macroeconomic context, and bring it back to microeconomic reality. And in this case, it is about virtual reality. On October 28, 2021, Bloomberg reported on Facebook restructuring under its new parent company name, Meta:

In Meta’s vision, people will congregate and communicate by entering virtual environments, whether they’re talking with colleagues in a boardroom or hanging out with friends in far-flung corners of the world.

I’m using Facebook/Meta as the venture capital example to make a point, but most VC firms are not well known and their successes and failures are rarely public knowledge. And on March 26, 2026, VR.org reported:

The platform never delivered on those expectations. It never drew more than a few hundred thousand monthly active users, a fraction of what would be needed to justify the investment. Reality Labs posted operating losses of billions of dollars every quarter. In the fourth quarter of 2025 alone, the unit reported a loss of $6.02 billion.

These two news stories tell us almost nothing about Meta’s virtual reality products, the target markets for them, the manufacturing and distribution challenges, or the financial projections used to justify the capital. And just as important, they tell us nothing about the remainder of the portfolio of businesses, the alternative ventures that were considered, or what knowledge was discovered in the failed enterprise.

But they do tell us something about the entrepreneurial mindset. CEO Mark Zuckerberg’s leadership team was willing to try something radically different from the accepted norms and be ridiculed by those with no skin in the game. And typical of the criticisms on social media platforms that Zuckerberg and Meta helped make possible is this excerpt from Substack:

He spent billions of shareholder dollars he was entrusted to control . . . Failure is good. Wasting $80 billion is catastrophic . . . He wasted the entire working lives of thousands of people. When your social function is to allocate capital, that’s extremely bad.

To put these complaints in perspective, the billions of dollars of risk capital under the control of Meta’s senior leadership team is money that was voluntarily entrusted to them. It is a very small fraction compared to the hundreds of billions that were coerced by government to fund wind and solar project disasters. And to equate that with “working lives of thousands of people” is decades old Marxist ideology.

Furthermore, it is emphatically not Meta’s or any VC’s “social function” to allocate capital. They have no “social function.” None of us is born owing a duty to anyone. Zuckerberg chose a duty to his investors for long term return on investment (ROI), Meta’s employees and vendors for contractual obligations, and to their customers for reliable products and services.

And it is emphatically not our duty to practice “socially responsible” investing. However, because of our nature as rational, living beings with free will, we are born with a duty to ourselves – if we choose to accept it. Because reason is our absolute tool of survival, and purpose is to be a charted course to earn pride and happiness, we must also create our own vision for the future.

In financial terms, that vision should be defined in terms of time and money. That is the hard part and most people resist doing it. Calculated risks is the statistical analysis part and may require the services of a skilled advisor using reliable capital market assumptions. This is also difficult. Long-term historical assumptions are radically different from the accepted norms. Learning from experience means flexibility for cash flow and investment strategy with changing circumstances. And measuring success for VC and Moneyball is always in money terms.

Virtual reality is a fascinating idea and the product of ingenious minds. Economic reality is the fascinating subject of capital finding ingenious minds. Objective reality is The Moneyball Method.

There are many consequences to the economic lockdowns of 2020, none of them are good, but some are more destructive than others. Among the worst is the price inflation induced by panicked politicians who wrecked supply networks over a virus from Wuhan, China.

Including Governor Mike DeWine. Not only do these effects multiply quickly, one of those is a sharp increase in property tax bills to homeowners from their market value adjustments. In other words, a windfall for municipal government bureaucracies.

To alleviate the pressure on homeowners in the State of Ohio, the governor signed House Bill 186 in November 2025 with full effect on March 20, 2026:

To amend . . . the Revised Code to authorize a reduction in school district property taxes affected by a millage floor that would limit increases . . . according to inflation, to modify property tax reductions for residential property, to modify the process for certifying property tax abstracts, and to make an appropriation.

This appears to be needed leadership to address a significant problem that affects millions of Ohio taxpayers. After all, the lockdowns were arbitrary and its price inflation permeates everything.

But how will these property tax reductions be enforced - and by whom? This is where House Bill 309 comes in: “To amend . . . the Revised Code to modify the law governing county budget commissions and property taxation.” In fact, there were a total of five bills passed and signed by DeWine that gave local authorities the power to make these determinations for public school funding in their jurisdictions. What could go wrong?

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Just ask the Medina County Budget Commission. Leading the way for Ohioans, the commissioners were set to vote on March 25th for almost $7.5 million in claw backs from three county school districts. This was after more than $500 thousand in reversals for a fourth district. In essence, $8 million kept in the hands of those who earned it and $8 million less for these four school systems.

Clearly, I am in favor of money remaining in the hands of its rightful owners and privately funded education, but this essay is about the municipal financial crisis and its root causes. And in the case of the Ohio property tax reform movement and county budget commissions, the Cleveland Plain Dealer gives it fair treatment:

Supporters say the changes protect homeowners from unpredictable tax spikes. But school leaders and policy analysts say lawmakers provided little clarity about how county officials should determine whether a district is collecting “too much.”

To say there is little clarity is an understatement. The Ohio Legislature and Governor did what politicians do - they declared victory by passing a bill that only passes the buck. As a result, the Medina budget commissioners had to adjourn their meeting of March 25th when, according to the cleveland.com report, a letter was presented by an attorney for a local school district:

The letter made several claims: State law requires budget commissions to certify tax rates by March 1 — a deadline the board missed. The commission cannot apply HB 309 this year because it became effective after the deadline.

How did the Ohio Senate, Legislature and Governor miss this? And why are property taxes being singled out for reform instead of the state income tax? Go figure.

It’s easy to blame inept politicians for their incompetence. Or managing the complexity of their arbitrary whims that we must obey or face retribution. But this is also a good time to look inward and consider this comment from a Medina school superintendent:

They are taking away the will of the voters. So, three people on a budget commission have now said, we don’t care about the majority of people in that district effectively by removing their will as voters.

He is proposing democracy. He is defending majority rule for voting away the property rights of the individual. He is denigrating the process of a representative republic. This is what authoritarians do in quasi-free societies. Chip away at rights and liberty, all in the name of “the common good.” And as it was reported on March 30th, the school district representatives won this skirmish:

They abandoned the vote after receiving a letter . . . stating that the commission blew a state-mandated March 1 deadline to approve the taxes and rates for each district in next school year’s budget . . . the missed deadline would render any action they took after it legally void.

So far, we have the Ohio State Legislature passing the buck, the Medina budget commissioners holding the bag, the school districts pressuring the county auditor to loot the inflated property valuations, the superintendents demanding democracy over rights, and no one addressing the root causes of any of this, except here:

As understood and explained by Moses in The Municipal Financial Crisis, the solution to the problem lies in the decision-making standards determined by the legitimate purposes of local government. And that begins with understanding the nature of government, the nature of its constituents, and the nature of its benefactors.

Accordingly, no conversation about the nature and purpose of public schools is complete without a detailed examination of teachers’ unions, the pedagogy imposed by state teacher’s colleges, and the size of each school district’s administrative staff. More broadly, there must be a defined and delimited purpose for all government activity. Why? Because its employs the group force model - and does it poorly:

The lack of statutory guidance has also frustrated members of the budget commission, who have acknowledged publicly that lawmakers put them in the position of interpreting an undefined standard with significant financial consequences for schools and taxpayers.

To conclude, three cheers for Medina County’s leadership role in this badly needed - throughout Ohio and America - tax reduction debate.

For further information, please read my book The Moneyball Method: A Middle-Class Manifesto for Objective Investing, now out on Kindle!

This series began with five economic fallacies that are widely accepted in American culture and the asset management industry. It continued with the social and political ideas that foster those fallacies and originate in the academic world. And Part III discussed five “best practices” of the investment advice industry that are the natural consequence of the faulty ideas that are popular.

To summarize, “market failure” and “externalities” lead to hyper diversification as a remedy for capital market uncertainty. In addition, antitrust and climate change activism leads to conservative market forecasts to accommodate the massive government intrusion in free markets.

Inevitably, the “beat the market” mentality of GDP metrics and economic protectionism leads to money manager selection determined by their beat the market track record. And like stimulus spending and income taxes are widely accepted for their “good intentions,” risk tolerance suitability forms document the good intentions of an advisory firm’s “stay the course” recommendations.

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And when the State convinces people that government is best suited to control your money through the central banks and your mind through public education, you get equilibrium as the economic ideal, equality as the social ideal, conformity as your duty to the common good, and reversion to the mean as investment strategy tool. In other words, mediocrity worship. Never mind that the mean moves toward the current price as the current price moves toward the mean.

In other words, no one is accountable to anything that is defined. This is where the conclusion of Applied Capitalism Part III meets Part IV:

Random walks and mean reversion may move in circles, but the proper course for human life is a forward moving line - and it begins with the Site Map. Defining your important values, goals and aspirations is the most challenging part, the most important element, and the one that meets the most resistance.

Goal-Directed Action

Human life is the only form of life that is capable of thinking into the future and arranging its affairs to the achievement of abstract goals. In fact, this ability is existential, but it also requires mental effort. Therein lies the rub. The choice to think takes more effort than choice to avoid thinking - and for a poetic dramatization of this essay’s theme, I will turn to the lyricist of progressive rock band Rush, the late Neil Peart and their 1980 hit titled Freewill:

You can choose a ready guide in some celestial voice/If you choose not to decide, you still have made a choice/You can choose from phantom fears and kindness that can kill/I will choose a path that’s clear, I will choose free will.

Whether those phantom fears are of the supernatural or secular variety, they both lead to kindness that can kill. That is the consequence of the economic and social humanitarians who deny the virtues of money, information of prices, elegance of markets, and justice of earned profits. But for the objective investor, we disregard all of that.

The rational alternative is to apply reason to reality, control what you can control, define the goals that give your life meaning, assign a reasonable time and monetary commitment when necessary, and balance all of that against uncertain markets.

First, fire the scouting department. Parts I - III summarized the work of the macroeconomists, market strategists, and research analysts who have been trained by the State university system. They are beholden to the policy prescriptions of professors and punditry, but objective investors are focused on microeconomics at their personal level.

Second, take a “values inventory.” I realize the term “values” is overused, but like any important concept, it gains traction when it is clearly defined, and there is no one better to do that than philosopher and novelist Ayn Rand:

“Value” is that which one acts to gain and keep, “virtue” is the action by which one gains and keeps it. “Value” presupposes an answer to the question: of value to whom and for what? “Value” presupposes a standard, a purpose and the necessity of action in the face of an alternative. Where there are no alternatives, no values are possible.

A good place to start your “values inventory” is to ask yourself: who or what do I do now that delivers satisfaction, happiness, or exhilaration? And then ask: why or how this make me feel good? Then think about major categories: Family and Relationships, Business and Career, Health and Recreation, and Wealth Building. What is available or out there and might deliver the emotions of satisfaction, happiness, or exhilaration?

Of course, these are abstract concepts - and like fine art is the concrete form of the artist’s value judgments, your happiness depends on your ability to conceptualize the material goods and experiences that give your life its meaning and purpose.

Wealth vs. Return Management

To help with that, the values inventory may include house and home, children or grandchildren, travel and vacation, recreation and sport, the arts and reading, civic and professional groups, legacy and charity, or health and retirement. However, this is a generic list and you may have more specific and important aspirations. The key is to treat all of them as important before deciding what is realistic.

When your values inventory is reasonably complete, the next step is to give each goal a time frame - and if it requires money, assign a dollar amount to the values and their timing. But that is basic financial planning. The Moneyball Method adds an essential feature to help you balance competing goals with time, money and the uncertainty of the future.

What is the Ideal level of spending for this objective? What is the minimum Acceptable? What are the Ideal and Acceptable time frames for getting there? The Site Map in Chapter Eight, page 182 of The Moneyball Method is the starting point for taking your inventory of values - and the Timing of Cash Flow decisions from page 191 are the transition to True Wealth Management. The introduction to Applied Capitalism - Part III explains it this way:

The elegance and complexity of capitalism can be understood in concrete terms that mean something to you, and when you put those terms into practice, they will have a dynamic impact on your life. And that epiphany happens when true wealth management replaces the rate of return mindset.

Third, with a healthy respect for the virtues behind money and the elegance of free markets, objective investors will explicitly define their cash flow expectations, assign Ideal and Acceptable levels, and do it with a reasonable number of classifications for income, expenses, major purchases, and significant events. Naturally, it makes sense to connect goals and aspirations with those that produced the money you have earned.

Of course, these are abstract concepts - and The Moneyball Method reverses everything. Instead of historical rate of return performance and forward-looking market assumptions, objective investors use the long-term data to anticipate market behavior and take ownership of their futures with their defined cash flow strategy.

Reliable Data

This includes the relevant variables you know and control: financial assets by tax category from page 188, non-financial assets, saving and investing habits, baseline living expenses, intermediate and long-term spending goals, pension and trust income, liquidity events, gifting and legacy plans, taxes and management fees, etc. This information is then modeled against the uncertainty of capital market performance for any investment strategy you care to test.

Fourth, simulate the potential outcomes of different asset allocation strategies. With your values inventory given clarity and your Ideal cash flow objectives assigned dollars and deadlines, the Ideal objectives are likely underfunded. As it should be. If not, new consideration is needed for what those can be. After all, the overall objective is to live the one life you have with confidence.

With the power of today’s financial technology (fintech), nearly all registered advisors can do this, but nearly none of them know how to do it for reliable outcomes. What if the majority of advisors and investors believe in some combination of economic fallacies, social responsibility, market projections, fund track records, and rate of return benchmarks? If so, what is the likelihood their capital market inputs are conservative projections? And what is the likelihood that “probability of success” will be their language for their simulation outputs?

The test results will lead to unnecessary investment risk or lifestyle sacrifice. More specifically, conservative return assumptions will cause investors to become more aggressive with their investment strategy or too conservative with their cash flow strategy because higher expected returns are needed to meet their spending goals.

And “probability of success” conclusions will necessarily include test run results that overfund the investor’s plans. Trial runs in the top decile of outcomes mean the investors was overly aggressive with their investment strategy or too conservative with their spending goals. That is not success. There is an elegant and useful way to understand and communicate the random simulations.

Fifth, only use the most reliable, long-term historical data - and the Center for Research in Securities Prices (CRSP) is the place to start. They are the best indicators for anticipating the future behavior of each asset class - and the indexes for broad market US stocks, intermediate US Treasuries, and core international stocks include nearly everything except commodities and have the longest histories.

Philosophically speaking, this is the law of identity and the law of causality. And because asset classes are man-made concepts, those assumptions are subject to change, but only when there is convincing evidence.

Of course, these are abstract concepts - and true wealth management measures success in the concrete terms of money-weighted performance driven by your explicitly defined goals and aspirations.

Integration

The Applied Capitalism series began with economic principles that are worth repeating here: Production creates wealth. Supply creates demand. Supply lowers prices. Prices are information. Markets reward efficiency. Profits attract capital. Capital finds talent. Talent obeys reality.

And for most people, the reality of investing success has two primary components: the timing of their cash flow activities and the sequence of their investment returns. The investment strategy decision is third.

Put another way, those top two components represent everything we know about and can control balanced with the uncertainty of the future. The first half is the whole of life approach to your values, time, money and capitalism. The second half is to control market risk exposure according to your values, time and money. The tool for that is the Facts and Values Matrix in Chapter Nine, page 220.

Using the Matrix, each of your important cash flow goals can be weighed with each of the others - and that includes market risk exposure as an objective. And with your hierarchy of values established in such a manner, the Ideal and Acceptable levels can be balanced with every relevant factor to arrive at the optimal cash flow strategy and investment strategy.

Bear in mind, cash flow supersedes investment strategy. Dollars of future wealth replace backward looking rates of return. Historical data replaces forward-looking projections. Efficient markets replace economic analysts. Risk capacity replaces risk tolerance. And not discussed yet - dynamic rebalancing replaces “stay the course.”

Please stay tuned. Part V in this series will address the practical application of extreme markets, probability analysis, risk and spending capacity, contingency plans, and dynamic rebalancing.

For further information, please read my book The Moneyball Method: A Middle-Class Manifesto for Objective Investing, now out on Kindle!

On March 1^st I recorded a podcast titled Rights, Liberty, Justice and the Islamic State. On February 28^th, American and Israeli intelligence had finally vaporized the leadership of the death cult known as the Islamic State of Iran. The official name is “republic,” but these violent cowards have no regard for republicanism.

Today is Sunday March 22^nd and this brief essay will focus on the performance of three major capital market asset classes and one hybrid over the last three weeks. Of course, three weeks is a miniscule sample, but for objective investors, it is worthwhile to study market behavior during extreme events – and then put that into the context of the money-weighted performance of The Moneyball Method.

Bear in mind, the performance data in this paragraph was predicted by no one and the overwhelming justice being served on the Iranian crime syndicate is news that was not discounted by markets on February 27^th. Because that is and was not possible. The US stock market, as measured by the S&P 500, is down 5.4% over the period. More significantly, the ten-year US Treasury market is down 11.1%, and gold is down 14.4%.

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To me, what makes this extreme is not equity market performance, but its positive correlation with US Treasuries during the month. On top of that, gold proved once more that it not a reliable hedge against geopolitical risks – as too many pundits would have you believe.

Of course, the sharp selloff in bonds may be due to price inflation fears in the event of a prolonged shortage of gasoline and other oil products. And naturally, you would think the effective hedge against this kind of stock and bond market risk would be commodities. If you own one of the leading commodity funds or ETFS, your total return for the month is likely around 8%. While most of these funds are overweight the energy sector, and those prices are bouncing wildly, precious metals would have been a drag on performance.

So far, this conversation is about percentage returns and has nothing to do with your money-weighted results as measured by risk capacity and funding status. Certainly, no one likes to see their account values below their all-time highs or last month’s statement, but we control what we can control, have confidence in our well-defined futures, and have contingency plans.

The last three weeks are merely three weeks and markets like this were included in the random simulations that helped you determine your cash flow and investment strategies - but only if you are using the most reliable historical data. We don’t predict the future, but we anticipate the possibility of large deviation events. Objective investors are flexible with strategy and measure success by looking through the windshield - not the rear-view mirror.

In Part I of this series I discussed five economic fallacies that have become priorities in economic research reports, market analysis and forecasts, and the investment advice industry: Gross Domestic Product, Market Failure, Externalities, Stimulus Spending and Money Supply. Part II revealed the political and social ideas that support those fallacies: Protectionism, Antitrust, Climate Change, Income Tax and Government Schools.

Briefly mentioned were the rational alternatives to all of them. Those will be discussed at the end of this essay and they will be integrated with the principles of objective investing. And as promised at the end of Part II, the application of personal finance procedures will be in the context of diversification, risk tolerance, market projections, mean reversion and manager selection.

This way, the elegance and complexity of capitalism can be understood in concrete terms that mean something to you, and when you put those terms into practice, they will have a dynamic impact on your life. And that epiphany happens when true wealth management replaces the rate of return mindset.

Market Projections

One year-end ritual is for investment banks to publish their rate of return forecasts for the ensuing year and sometimes longer. These are known as forward-looking projections - and they can be rationalized with complex calculations that include global GDP forecasts, currency movements, inflation expectations, central bank action, the yield curve and volatility trends.

In other words, they have no idea what to expect, but the rate of return forecasts for equities will always be lower than the historical averages, sometimes sharply. This is convenient for managing investor expectations and looking good if their asset managers outperform their canned predictions.

However, it is not likely that the risk profile of those asset classes will be reduced accordingly, which contradicts the normal risk and reward relationships.

Another version of market projections is to use the historical data, but only for the last twenty-five years or some other arbitrary cut-off that represents the firm’s definition of “things are different now.” For software companies that do this for their random simulations of potential market behavior, the data sets are updated quarterly - as if the identity of the asset classes somehow changed in the last three months.

To that, they add regime-based systems using lower return assumptions for near-term (2 - 5 years) outcomes, higher rates of return for long term trial runs, and this complexity serves no purpose. Never mind the fact that extreme market volatility - up or down, can happen tomorrow, next week, or last for the next several months.

Although “externalities” can be anything not booked in the accounting records and climate change models can be manipulated with inputs for desired outcomes, the identifying characteristics of financial asset classes must not become infected with contrived numbers. Furthermore, broad-market indexes own the most reliable data sets, are inclusive of every subcategory, respect the price mechanism of efficient markets and are the best application of capitalism for objective investors.

Diversification

Like “capitalism,” this term has broad implications, means different things to different people, and is overused. And because this blog is meticulous about definitions, I will begin with Merriam-Webster’s second entry that applies to finance: “the act or practice of spreading investments among a variety of securities or classes of securities.”

This is where the problems begin. In this case, the dictionary definition offers no objective purpose for diversification - and that allows for any collection of securities or asset classes to be branded as “diversified.” In fact, nearly all pension funds, trust departments and balanced SMAs (separately managed accounts) will make this claim.

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Certainly, there is truth in the fact that their securities have different risk profiles and correlations to each other, but for the purposes of The Moneyball Method, that is far from good enough. For an investment strategy to be properly diversified, it must have the highest, long-term expected return for the level risk being assumed. That is known as portfolio efficiency.

Just as important, the “expected return” must be determined by the most reliable objective evidence - and that is the long-term historical price data. And for a number of reasons, forward-looking projections are a really dumb idea.

Not only is it impossible to determine the efficiency of a strategy and its diversification benefits with subjective forecasts, adding more securities or asset classes does not necessarily improve diversification. But it does increase the potential assumption errors for each one’s median return, standard deviation, and correlation coefficients. All of that for the sake of more complexity.

Ultimately, markets do not fail, antitrust prosecutions against successful companies do not diversify an economy - and the only way to truly diversify an investment strategy is with low or negatively correlated asset classes that prove themselves under the pressure of large deviation events. The anticipation of extreme markets - to the upside and downside - and having a contingency plan is how applied capitalism works.

Risk Tolerance

Risk management can be interesting once it’s understood, but risk tolerance is a psychological myth when applied to your investment strategy decisions. It is subjective because it is not integrated with your net worth, values and goals, cash flow expectations, and will change depending on the recent performance of stock and bonds markets. But if maximum risk tolerance did exist, who would want it imposed on them anyway?

Regardless, risk tolerance questionnaires gained wide acceptance in the retail investment world as a seemingly objective way to decide on market risk exposure. And to their credit, they use historical range of return data to illustrate the possible effects of different allocation strategies among broad-market asset classes. At the same time, the questionnaire’s responses are possible evidence for defense counsel in the event of an arbitration claim for suitability against a brokerage firm.

More recently, they are used by robo-advisors to help do-it-yourselfers come up with their “optimal” asset allocation strategy and then choose a packaged, model portfolio. Those model portfolios are pretty good, but for objective investors, there is something missing: the well-defined objectives. But that’s not all. A worthy discussion includes aspects of risk evasion, avoidance, and risk aversion.

Or an objective discussion will include: 1) the idiosyncratic risks included in the price mechanism, 2) the probabilistic risks of sequence of return, longevity, and markets themselves, and 3) the controllable risks of underperformance, overspending, concentration, and liquidity.

Like “stimulus spending” and income taxes are imposed by economic “experts” to protect us from our collectively “unjust” economic decisions, risk tolerance is a tool of behavioral “experts” to protect us from our “irrational” reactions to market volatility. The rational alternative is the risk category that objective investors treat as a capital asset: your risk capacity expressed in dollars of future wealth.

Manager Selection

Fourth on this list is the subject that advisors and investors like to talk about first: picking the hot stock, mutual fund or ETF. And to help with that obsession, there are Morningstar ratings, heat maps, Lipper rankings, Seeking Alpha and all sorts of alpha seekers at every brokerage firm and trust department. And for all of them the goal is the same: beat the index, rank in the top peer group quintile, and pick the outperforming sectors.

Ideally, you only own the outperforming sectors, the manager who ranks near the top of that group, and somebody who sells before that style goes out of favor. Yet, as the pinnacle of the rate of return mindset, it guarantees nothing for wealth management success, and there are several reasons for that: 1) buying a fund based on track record does nothing if you didn’t own it during the hot streak, 2) the risk associated with the strategy must be discounted, 3) track record may be attributable to some years but not others, 4) percent returns are not dollar-weighted, and 5) the timing of cash flow may have a bigger impact on your success.

Ultimately, dollar-weighted performance is fundamental to true wealth management, but today’s best practices focus on methods that have nothing to with the investor living the one life they have with confidence: value, growth, active, passive, sector rotation, factor-based, target date, social responsibility, leveraged, buffered, hedge funds, income riders, funds of funds, private equity or credit.

There’s a lot of worthless complexity here, but at the same time, these can be accommodated by a skilled wealth advisor who knows how to model their capital market variables.

Whether its gross domestic product, protectionist trade policy, or superior money management, the premise is that credentialed experts are needed to make sense of their artificial complexity for us. Yet, applied capitalists disregard all of that in favor of what we can control: very high correlation, low cost fund managers for the asset classes with the most reliable data sets. Not only does that eliminate underperformance risk, it allows you to focus on the performance benchmark that matters: the dollars of future wealth that help give your life its meaning.

Mean Reversion

Proponents of efficient markets are aligned with the “random walk” hypothesis for stock price movements: future prices cannot be predicted by past price movements or trends. Conversely, those who subscribe to “mean reversion” believe that stock prices may be random in the short run but will move toward their historical averages over time. Most likely, either one is true about half the time.

Essentially, the Random Walk Hypothesis conforms to the idea that prices include all available information, the future is uncertain because of innovation and unpredictable events, and passive index investing makes the most sense. And the Mean Reversion theory tells us that price movements are predictable to some degree and active management can be more profitable depending on skill, timing and trading costs.

To the objective investor, not only are both ideas flawed, neither of them have anything to do with true wealth management. If you take the random walk to its mathematical conclusion, there is a high likelihood that you or your stock will end up very close to where you started. If you take mean reversion to its mathematical conclusion, all you have to do is change the time frame of the moving average to confirm that the current price is where you want it to be.

But in the event of stock market corrections and meltdowns, mean reversion becomes “stay the course, the market always bounces back, there is no loss unless you sell, it’s time in the market, not market timing.”

There is wisdom in some of that, but also pointless risk. Seat of the pants rules of thumb are not objective, but pretending to be proactive, rate of return advisors will recommend selling securities that underperformed, replace them with outperforming managers, and rebalance the accounts to the original asset allocation strategy. Usually, the one determined by a risk tolerance questionnaire or market projections.

You get the picture. Activity for the sake of activity could have been avoided by not owning the underperforming managers in the first place.

That is how the Federal Reserve and State schooled economists pretend to manage the money supply while investment banks and think tanks cheer them on with their artificial complexity. Back to reality, prices determine asset class identities, markets inform us about markets, risk capacity guides strategy decisions, correlation determines implementation, and applied capitalists take ownership of their futures. And they do it with objectively defined goals, cash flow strategy, forward-looking performance measurement and contingency plans.

Principled Action

That is the entrepreneurial mindset: create the vision, take calculated risks, learn from mistakes and measure success. Random walks and mean reversion may move in circles, but the proper course for human life is a forward moving line - and it begins with the Site Map that was introduced in Chapter 8 of The Moneyball Method:

In the context of the World Wide Web, a site map stores information about the pages, videos, images, files and relationships among them for that one website domain. For an investor’s goal-directed action, we need the same tool — a map of our domain. Furthermore, to become engaged with the elegant system of one’s own mind builds self confidence and a sense of self-worth.

Defining your important values, goals and aspirations is the most challenging part, the most important element, and the one that meets the most resistance. Not only is introspection difficult, but most people have conditioned themselves to believe that picking companies or industries or fund managers is a suitable replacement. After all, future cash flow needs are impossible to know and beating the market means more money for future spending goals.

Objective investing with applied capitalism is not for everyone, but if you can fog a mirror and cash flow is an important part of your livelihood and longevity, this is for you. Please continue with Part IV of Applied Capitalism to learn about efficient strategy, correlated managers, dollar-weighted performance, contingency plans and dynamic rebalancing:

The Moneyball Method is not primarily about investing, but about redefining success. It is not primarily about investing success, but about principled action. It is not primarily about achieving those goals, but about the emotional payoff from your newly perfected declaration of independence.

On March 15, 2026 – three days ago, I wrote a short essay about prediction markets and concluded they are: “a marvelous tool for teaching students about the efficiency of the price mechanism and elegance of free markets.” That is because the serious students of prediction markets are more well informed about the uncertainties of market performance than government employee pension fund managers.

On the following day, on March 16^th, reason.com published their 2025 Pension Solvency and Performance Report and revealed:

Public pension systems in the U.S. saw a decrease in unfunded liabilities since the previous report, dropping from $1.62 trillion to $1.48 trillion, a 9% decrease. This was largely driven by fiscal year 2024’s higher-than-expected investment returns.

Let’s do the math, er, arithmetic. The unfunded liabilities of state and local government pension funds decreased only 9% in year which earned almost 18% US stock market (iShares S&P 500 ETF) and 8% intermediate treasury bonds (iShares 7-10 year ETF) market returns. Both of those are sharply higher than long-term averages and a 50/50 portfolio earned about 12.5%

Bear in mind, the pension fund trustees have access to the most highly credentialed finance experts in America, and they are doing worse than average bettors in the prediction markets. But it’s worse than that. They started 2025 with $1.62 trillion in underfunded liabilities - after a year (2024) that delivered equity returns of 25%. According to the Reason Foundation report, that’s trillion with a “T,” but is Reason’s reasoning reasonable? No.

Below is a summary of the five categories used by the Reason Foundation to deliver “a comprehensive overview of the current and future status of state and local public pension funds.” The relevant paragraphs are excerpted below, and my summary of the evaluation premises will follow.

Funded Status

To calculate the funded status, you simply divide the market value of a plan’s assets by its actuarially accrued liabilities. In other words, this metric measures the extent to which a pension plan has accumulated savings relative to the estimated total liability of retirement benefits it has promised to its members.

For full disclosure, I am not an actuary or statistician, and I have great respect for the science and discipline. My focus will be on the capital market assumptions (CMAs) that are chosen because they may have a significant impact on the calculations. In turn, those will have a significant impact on taxpayers and plan beneficiaries.

With regard to the denominator of this ratio – which is a big deal, it was challenging to find a decent definition for Actuarially Accrued Liabilities, but according to an American Academy of Actuaries report dated June 2004, I discovered:

Actuaries must consider the difference between the actuarial liability, which is the value of benefits already earned, and the assets.

• Economic assumptions dealing with current interest rates, salary increases, inflation and investment markets. How will market forces affect the cost of the plan?

  • Interest Rate – For pension funding, this assumption is used to discount future benefits to determine plan liabilities and it should be a reasonable expectation of the future rate of return on the pension plan’s assets.

  • Expected Long-term Rate of Return on Assets – It is used to determine the expected return on assets during the year. This assumption reflects the average rate of earnings expected on current and future investments to pay benefits. It is a long-term assumption that is reviewed regularly but generally changes when the long-term view of the market changes or with shifts in the plan’s investment policy.

• Demographic assumptions about the participant group make-up and expected behavior and life expectancy. How will participant behavior affect the cost of the plan?

But what if the discount rate used to calculate the present value of future benefits does not conform to the historical evidence? What if it has been fudged to make the plan seem less underfunded? What if political pressure is applied in favor of an arbitrary prediction?

What if the predicted return on risk assets like stocks is a fixed rate for this calculation? And what is the expected return on the plan’s “alternative” investments like hedge funds, private equity, commodities, or cryptocurrencies? None of this is the least bit reliable.

Investment Performance

What really matters is how it compares to the plan’s assumed rate of return (ARR), which is the long-term investment target that pension boards set based on their expectations for future market performance. This assumption is important because it is used in actuarial calculations to determine the present value of all future benefit payments . . .

The good news is that pension trustees are matching their plan liabilities with assets and future contributions. That is fundamental to The Moneyball Method. The bad news is their “reasonable expectation of the future rate of return.” The only reasonable expectation is the historical range of returns.

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What about the other two components that define each asset class – standard deviation and correlation coefficients? All three are needed to define the nature of each asset class category and to anticipate their behavior. But even worse is “changes when the long-term view of the market changes.” Whose view? On what basis?

That kind of hubris is a major contributing factor to today’s $1.48 trillion underfunded plan status of America’s state and local government pensions. Even that number is unreliable considering the information below.

Contribution Adequacy

Contribution rate adequacy measures whether the annual payments made into a pension system are sufficient to cover the cost of newly earned benefits while also paying down existing pension debt . . . “This assumption is important because it is used in actuarial calculations to determine the present value of all future benefit payments” and, consequently, how much money must be contributed each year.

This category introduces another important variable – pension plan debt not included in the unfunded liabilities. Also known as Pension Obligation Bonds, a reasonable person would ask why a pension plan owes anything to anyone other than the plan’s beneficiaries. And a reasonable person asked an even more reasonable question to the Managing Director of Government Finance at Reason Foundation:

Did you take into account Pension Obligation Bonds used to pay down the UALs, since those debts are directly related to the defined benefit pensions? . . . “We didn’t. POBs are generally recognized in the issuing state or local government’s financial disclosures (ACFR), while this report is based on the pension systems’ own financial disclosures.”

From this exchange, Mark Moses, author of The Municipal Financial Crisis, was able to shed light on the fact that pension systems are not required to report their Pension Obligation Bond liabilities - meaning that the debt obligations for malfeasance were not included in today’s $1.48 trillion deficit.

Asset Allocation Risk

These typically include traditional asset classes like publicly traded stocks (equities) and government or corporate bonds (fixed income), as well as a growing category of “alternative investments.” This alternative category includes assets such as private equity, hedge funds, real estate, and private credit. The fundamental goal of asset allocation is to strike a balance between risk and return that aligns with the fund’s long-term objectives.

Yesterday, on March 17^th, Yahoo Finance jumped on this year’s bandwagon of warnings about private equity and private credit write downs:

Analysts point to aggressive lending and complex deal structures.. Late last year, the bankruptcies of First Brands Group and Tricolor Holdings, both tied to private credit, forced several banks to disclose large write-offs and raised fears that losses could ripple through financial markets.

To objective investors, there is nothing new or interesting about this. So-called alternative investments do not have long-term price histories from which to predict their behavior under stress, and those that are not liquid will never have reliable data for this kind of risk management. They are fine for savvy, high net worth investors, but for fiduciary accounts and the tax qualified retirement plans of middle-class beneficiaries, they may do more harm than good.

Probability of Hitting Assumed Return

This metric uses forward-looking capital market modeling to forecast the likelihood that a state’s pension portfolio will achieve its assumed rate of return (ARR) over a 20-year period. It provides a risk-based assessment of how realistic a plan’s investment assumptions are, given its specific asset allocation.

A higher rank indicates a higher probability of success . . . and placing a smaller potential burden on future taxpayers.

To be blunt, the probability of hitting an assumed return is identical to Lloyd Christmas dating Mary Swanson in Dumb and Dumber: “I’d say more like one in a million.” It never happens except for a fleeting moment as market values fluctuate – sometime wildly.

But let’s assume a “pension portfolio will achieve its assumed rate of return (ARR) over a 20-year period.” What was the volatility of returns during that 20-year span? Were there 12-month periods that were much higher and lower than the ARR? Was there one or two twelve-month periods that were so much higher that they compensated for eight or ten years of underperformance? That matters - a lot.

The volatility of the returns, especially when integrated with the cash flow needs of the plan, may have a significant impact on the pension’s funding status. And contributing to the problem is the concept of “probability of success.” Another dumb prediction. Is an overfunded plan a success? Is taking unnecessary risk a success? Are ever-increasing charges to taxpayers for plans with less than 100% funding a success?

No participant in prediction markets who would go near any of this - and they know the house has the advantage. In fact, the house has skin in the game, too. But in the government employee pension system, the house is the state government, pension plan trustees and fund managers. They have no skin in the game, but they have suckers known as taxpayers. Particularly in Kentucky, Illinois and New Jersey.

On February 10^th, I wrote about the popularity of prediction markets like Kalshi, Polymarket and ForecastEx and did it in the context of lame attempts by Democrats to regulate them:

Bookmakers have been taking bets on almost anything for which there is demand, numbers rackets became state lotteries, the Las Vegas line on American football point spreads is what I recall most from growing up. In fact, Lloyds of London is featured in Chapter Five of The Moneyball Method as the catalyst for global trade efficiencies.

That catalyst was the merchants and shipowners at Edward Lloyd’s coffee house that had the best information about far-off places than the most powerful naval office in the history of the world – the English Admiralty. And the odds of the Democratic caucus being in command of the intelligence or integrity that compares to the English Admiralty is identical to Lloyd Christmas dating Mary Swanson in Dumb and Dumber: “I’d say more like one in a million.”

But the important point is that prediction markets deliver more useful information about future outcomes than the priests and pundits of public policy. One reason is that everything the “experts” know and say has been discounted by market forces. Another reason is that every participant has some form of skin in the game.

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And according to Polymarket, a decentralized platform using Blockchain technology, their success rate is 97% of resolved outcomes within four hours of determination, 94.4% within one week, and 92.1% one month out. Meaning that in the aggregate of all Polymarket betting arenas, the winning “Yes” or “No” bets were correct 97% of the time with only four hours to resolution and 92% were correct with one month remaining. Obviously, there is time value to everything, but in this context, to be correct means that a simple majority favored the outcome.

So what? Some of these may have become painfully obvious and a simple majority is not an overwhelming endorsement. As my previous article opined: “Predictions markets are as old as dirt, or at least markets for dirt. But high-speed internet and their creative entrepreneurial types are relentless in catering to the whims of people hungry for cheap meaning in their lives.”

Liquidity and Arbitrage

To further legitimize the predictive and fairness aspects of these playgrounds, Polymarket also publishes their Brier score, which does a better job of measuring the prediction accuracy of its betting pools. But to me, there is something far more interesting, it lies beneath the surface, and that is the opportunity and market for arbitrage transactions.

The first betting market I chose to inspect offered “Yes” and “No” choices for several different end dates, but they all added up to 99 cents for a one-dollar win. That may not seem like a lot, but anyone who takes both sides of the bet simultaneously will earn 1%, risk free when the betting pool is resolved. That is arbitrage: coupled transactions to profit from price disparities within marketplaces or among different markets for identical goods.

If it is an illiquid market, meaning too few participants, the spread may be greater than 1 percent, thus making the arbitrage opportunity greater. But speculators will need to find buyers and sellers at the same time for a profitable trade - and Polymarket offers that opportunity as well through market sponsorship. And if successful, liquidity is then added to that market, the spread shrinks for future market players, and all of this increases market efficiency for everyone.

Iran War Case Study

Back to the current level of information about uncertain outcomes in liquid Polymarkets, consider the American and Israeli mission to end the war initiated by the Islamic State of Iran in 1979. As of this writing (0845 ET on 14 March 2026), the betting arena titled “Iran x Israel/US conflict ends by,” the betting line is a 72% chance of military action by both sides ending on or before June 30, 2026.

The rules begin, “This market will resolve to “Yes” if there is a continuous 14-day period without any qualifying military action between Iran, and Israel and the United States that begins at any time between market creation and the specified end date (ET). Otherwise, this market will resolve to “No”.” In this case, to bet “Yes” will cost you 73 cents per share and to bet “No” will cost you 29 cents.

To a prediction markets novice like me, this raises red flags. What is “qualifying military action?” Particularly in a war that one side has been waging for 47 years. In this case, the market maker for this Polymarket defines that as: “any use of force by Iran, or Israel and the United States against the other’s soil, or official embassies or consulates, that is either officially acknowledged by the acting government or confirmed through a clear consensus of credible reporting.” This raises even more red flags.

Subjective Market Dangers

Official acknowledgement from a crime syndicate like the Islamic State means nothing. On top of that, they have proxies doing their bidding. And not much better is “clear consensus of credible reporting.” To help with that, this market maker clarifies, “includes, but is not limited to, airstrikes, naval attacks, and ground incursions. Cyberattacks, sanctions, and diplomatic actions do not count.” But who establishes consensus and what news agency is credible?

For better or worse, the referee used by Polymarket for disputed outcomes is the UMA Optimistic Oracle (universal market access). Briefly, this is a decentralized resolution and dispute process that requires a $750 bond to be posted by the “Proposer” of the resolution, and if there is a dispute, a $750 bond posted by the “Disputer.” Ultimately, the question is adjudicated by the vote of the qualified token holders. That is because there is no measurable profit incentive for the primary market participants - the governments of the United States, Israel and Iran.

I do not have enough knowledge or experience to opine on the efficacy of the UMA Oracle resolution and dispute process, but I do believe that devoting your time, energy, and money to events over which you have no skin in the game can be destructive. Time, energy, and money are the stuff of living your own life with pride.

To borrow your self-worth from the success or failures of others can only lead to more destructive behavior. To get politicians involved who have chosen careers for regulating the success or failures of others can only compound the problem.

Market Elegance

At the same time, the prediction markets can be a marvelous tool for teaching students about the efficiency of the price mechanism and the elegance of free markets. On this, Dimensional Funds is a prime authority and offers their perspective:

Sports betting markets may be a useful parallel. When an undefeated team squares off against a winless team, few expect the latter to emerge victorious. The only way to induce gamblers to bet on the weaker squad is to lower the “price.” This is accomplished by a point spread indicating essentially how much the underdog can lose by and still be considered a winner for betting purposes.

Las Vegas line point spreads for NFL football have been remarkably accurate and reliable. So are prediction markets. But betting on the outcomes of strangers is not objective and it is not investing.

On February 28, 2026, American and Israeli forces wiped out the Ayatollah in Iran and 40 of his top advisors. This is probably the best development that America has seen to support rights, reason, reality and the American Way since 1979.

For further information, please read my book The Moneyball Method: A Middle-Class Manifesto for Objective Investing, now out on Kindle!

The previous essay titled Applied Capitalism - Part I started with the idea that capitalism is a big, complex idea that means different things to different people. It is true that modern economies are extraordinarily complex, so much so that it is destructive for any committee, agency, or think tank to intrude by trying to plan and manage one. Yet, the purpose of this series is to simplify the concept of capitalism so that individuals can apply it to their daily lives with confidence.

As discussed, it is the socioeconomic system most commonly associated with money, markets, and profits, but those are financial and economic characteristics - and they don’t appear out of nowhere. There must be moral and practical ideas and actions that cause money, markets, and profits. And there must be opposing ideas and that inspire fear among the countless critics of capitalism.

But capitalism is unique. While the supporters of socialism, communism, fascism, progressivism and every other collectivist scheme are not their own detractors, capitalism’s supporters are among its most effective critics. The reason is simple - they share the same moral ideal: self-sacrifice for the common good. And they share the same fear: independence. The difference is upon whom or what they choose their dependence. That’s how wars begin, but I digress.

In Applied Capitalism - Part II, I will highlight five institutions that are popular across the American political spectrum: Protectionism, Antitrust, Climate Change, Income Tax, and Government Schools, and relate them to the economic fallacies of Part I. And because anyone can find fault, I will offer five principles that you can take to the ballot box: Capital Formation, Rational Self-Interest, Scientific Discovery, Consumption Tax, and Montessori Education.

Protectionism

The goal is to protect the domestic manufacturing enterprises of a country from its foreign competitors, and the commonly used economic tool is tariffs charged to the importers of goods. In America, the legal precedent can be found in Article I, Section 8 of the US Constitution that states, “to regulate commerce with foreign Nations, and among the several States, and with the Indian Tribes.” The underlying principle was to prevent the imposition of tariffs between the States, but the vague term of “commerce” and the three political entities mentioned have allowed for gross misinterpretations of the Commerce Clause.

Fundamentally, free trade among the States has been such an overwhelming success that only the proponents of antitrust, climate change, income taxes or government schools can find fault. Yet somehow, the concept of tariff-free trade across state lines does not apply to tariff-free trade across national boundaries. To rationalize the practice, artificial economic constructs need to be taught: gross domestic product (GDP) as the universal metric for national economic health, trade deficits as the component for political rhetoric, and countries as “trading partners” to satisfy the public policy think tanks.

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Bear in mind, governments produce nothing, they have nothing to trade they didn’t coerce or confiscate, and they are consumers - meaning destroyers of wealth. In addition, tariffs disrupt the price mechanism, are a barrier to the free flow of capital, increase a government’s ability to take on more debt, contribute to the decline of declining industries, and encourage crony corporatism through “regulatory capture.” All of which leads to the expansion of the regulatory state and its protection racket.

For the objective investor, the essential question is: “at what cost?” What innovations, new products, and time for the values that make life enjoyable could have been achieved by now if the money confiscated by the State had been invested efficiently by the people who earned it?

Antitrust

On January 16, 2025, a bill was introduced in the United States Senate to: “reform the antitrust laws to better protect competition in the American economy . . . to deter anticompetitive exclusionary conduct that harms competition and consumers, to enhance the ability of the Department of Justice . . . to enforce the antitrust laws, and for other purposes. Its sponsor is Senator Amy Klochubar, there are 13 cosponsors, all of them are Democrats, none of them are friendly to competition, they know nothing about free market economics - and they don’t care.

To be fair, it is important to define economics, competition, and fairness. For this purpose, economics is the social science of efficient production and distribution of goods and services through voluntary trade. Economic competition is two or more sets of producers engaged in the distribution of goods and services to the same sets of potential customers. Fairness is a common understanding of the rules and the equal application of law that protects the rights and property of every participant.

In contrast, the federal government is a monopoly, and economic monopolies are impossible without the protection of the State (see subsection above). Naturally, this new antitrust legislation has one target - producers, it has one constituent - consumers, and it has one purpose - to enforce. And it has one glaringly obvious defect: “reform the antitrust laws to better protect competition.”

After a century of ambiguous, contradictory and destructive antitrust regulation and prosecution, it is not enough and they need more, by golly!

If Klochubar’s enforcers think your prices are too low, you may be charged with predatory pricing. When they think your prices are too high, you may be prosecuted for monopoly. And if they believe neither, you may be guilty of collusion. Make no mistake, her cabal is replacing the justice of economic power with the force of political power, as stated in Item 6 of their Findings: “the presence and exercise of market power makes it more difficult for people in the United States to start their own businesses, depresses wages, and increases economic inequality, with particularly damaging effects on historically disadvantaged communities.”

To quote comedian Rodney Dangerfield getting a letter from Publisher’s Clearinghouse, “you may already be a loser!” However, their incompetence belongs to them, and the economic science to which our rational self-interest subscribes is:

Production creates wealth. Supply creates demand. Prices are information. Markets are elegant. Profits attract capital. Capital finds talent. And talent obeys reality.

Climate Change

Like market failure is the rationalization for antitrust enforcement, externalities are the economic category for the climate religionists. In particular, the negative externalities of water and air pollution, but that has been extended to a multitude of “injustices” such as climate justice, food security, housing stability, income equality, etc. However, it must be understood that “climate change” is an invalid concept in the same way that “externalities” is an invalid concept. Climate is always changing and externalities are always off the financial records.

Regardless, the climate change movement has the same purpose as antitrust - to repudiate capitalism because it is the decentralized system of independence and integrity. And to the climate religionists, the air and water pollution of authoritarian states like China, India, Russia can be ignored because they are not guilty of the sins of independence and integrity.

But like before, let’s define our terms. Ethical independence is the predicate for political independence - and it means thinking rationally, being responsible for your actions, and earning your self-esteem. Integrity means adopting rational principles and having the courage to act accordingly.

This is the benevolent universe premise: a natural world with laws that are free of contradictions, chaos and catastrophe that is managed and rare, and a clean environment because it is in everyone’s self-interest. That is the kind of society that America’s founders discovered and put into motion in the 18th century and accelerated into the 19th century.

In fact, the previously unimaginable achievements in machinery, medicine, music, literature, and ethics were so extraordinary that it left the feudal warlords and their priests out in the cold. However, nationalism and communism were the collectivist responses to your independence, which led to World War I and the Cold War.

Today, it is the climate justice crowd with their horribly expensive and environmentally destructive green energy projects that wreck the price mechanism and the free flow of capital.

Income Tax

Growing up in a politically conservative, blue-collar American family. I was familiar with the phrases, “the power to tax is the power to destroy” and “if you want more of something, you subsidize it; if you want less of something, you tax it.” But I also looked forward to earning my first paycheck as a teenager and contributing to the American experiment through tax withholding. Looking back, I was more aware than nearly anyone about how lucky I was to have been born in America in the 20th century, but I was also naive and trusting of the federal government.

Words like independence and liberty sounded great, and I knew that a place like Soviet Russia had to be a hell hole, but I did not realize how the income tax was a massive invasion of property rights, personal privacy and political liberty. I certainly didn’t realize it was created, grew and metastasized under the supervision of Americans who were sympathetic to the Soviet experiment of slavery and mass murder - all for “the common good.”

Only recently have I learned how more tax revenue to the federal government only increases the borrowing capacity of the State, increases the federal debt load, the annual deficit, the debt service - and all of which demands higher tax revenues.

Of course, there’s more. The internal revenue code is a weapon of the State and the IRS is the enforcement mechanism. Tax audits are routinely ordered against political opponents, the ever changing and contradictory rules demand expensive compliance practices, and all of that diverts capital that could have been invested efficiently for results that are not known because they never saw the light of day.

Optimistically, there is an alternative that is just and efficient for the administration of legitimate government services. Naturally, those are limited to the protection of rights, including property rights, the enforcement of contracts, stable currency, and national defense. A federal sales tax to replace the entire income tax regime - and only on end-user goods and services, not a value-added tax, would give everyone the ability to anticipate, control and plan their futures for a more productive and prosperous society and culture.

Government Schools

The economic lockdowns of 2020 shone a bright light on the priorities of America’s teachers’ unions - and it is not students or education. It is unearned wealth and political power. At the same time, the economic corruption of union leadership and the pedagogical corruption of teacher’s colleges has been visible for decades.

History has been taught as events disconnected from each other, disconnected from the ideas that are their cause and effect, and disconnected from the people who lead with ideas that influence entire cultures. Reading has been taught with the see and say method that is disconnected from phonics, which is disconnected from learning the cause and effect of learning new words and the abstract concepts they symbolize, and disconnected from linguistic skills for a lifetime of learning.

Instead of causality, which is a component of logic, public schools teach the determinism of class struggle, the ethics of identity group determinism, and dependency on social acceptance and social status for their borrowed self-esteem. Naturally, this leads to the victimhood mentality of medicine, housing, food, education, manicures, and dope as rights that are not equally distributed by markets driven by the sinister profit motive.

For many State school educated students, capitalism is a socioeconomic system to be condemned and replaced, but there is a superior system of childhood education that teaches cognitive skills, self-determination, concept formation, personal responsibility, and celebrates life-long learning for productive achievement in the pursuit of happiness - the Montessori Method, when done properly.

Principled Action

Hopefully, Applied Capitalism is coming into greater focus. First, identify the contradictions of popular economic, political and social precepts. Second, replace them with solid ideas that stand up to evidence and logic. And what I recommend are the free flow of capital, rational self-interest, the scientific method, the consumption tax system, and privately owned schools.

But good theory is good practice, and the moral is the practical. Part III of Applied Capitalism will discuss your personal milieu diversification, risk tolerance, market projections, mean reversion and manager selection - and replace them. All in the spirit of reason as an absolute, independence as a virtue, and capitalism as the ideal system to practice before preaching it.

To most Americans today, Applied Capitalism sounds like something vague, unreachable, or sinister. After all, capitalism is a big, complex idea that means different things to different people. Accordingly, it is best to begin with a shared baseline of understanding.

Most likely, everyone agrees that capitalism is a socioeconomic system of some kind that it applies to entire societies or to large corporations. Yes, it does. But the purpose of this essay is to explain how it applies to you. Or more importantly, how you can and ought to apply it to yourself.

Let’s start with capitalism as a socioeconomic system. Normally, it is associated with money, markets, and profits. That is all true and good – or is it? If you listen to the intellectuals at most universities, government agencies, financial media, think tanks, investment banks, and religious institutions, all three aspects of capitalism have tragic flaws that demand their expertise.

Bear in mind, socialism, communism, fascism, progressivism and every other collectivist economic scheme needs money, markets, and profits, but there is a lot less of it and nearly all of it is in the hands of these institutional players.

But for you, I will highlight five ways in which they demonize money, markets and profits: Gross Domestic Product (GDP), Inefficient Markets, Externalities, Stimulus Spending, and Money Supply. And because anyone can find fault, I will offer five principles that you can take to the bank: Gross Output, Price Discovery, Say’s Law of Markets, Mass Prosperity, and Money in Circulation.

Gross Domestic Product

GDP is widely accepted as the best measure of the economic vitality of a country – and it can be summed up by geographical region or style of governance. Basically, it is the total of consumer, government, and business spending minus net imports. In the realm of economic science, GDP falls in the category of macroeconomics, which is focused on aggregate, large scale consumption activity and trends.

Essentially, it boils down to aggregate demand. There is no such thing - everyone has different values, aspirations, and resources, but to a collectivist, its works. Another way to think of GDP is bottom-line economic activity that is grounded in spending – or consumption. Top line would be supply - or revenue, but GDP’s focus on the demand side poses at least two problems.

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To have consumption, there must be production. Accordingly, an objective measure of economic health would be on the supply side. More insidious is the government component. More spending increases GDP, which gives the State the justification for any redistribution scheme that proves their relevance to the economy of the country. It doesn’t matter that bottom-line spending is wealth destruction – by definition.

In contrast, Gross Output, which was adopted by the Bureau of Economic Analysis (BEA) in 2014, is the more revealing macroeconomic measure that includes top-line revenue generation.

Market Failure

When spending becomes the top measure of economic strength, it is natural for consumers to become the protected group of the economic central planners who need to stay relevant. In essence, this stages a conflict between the interests of “consumers” and their suppliers – and it only benefits the opportunists who staged the conflict. Private businesses are set up as predators, “consumers” are recruited as prey, and markets are demonized as inefficient because they don’t protect the interests of “the little guy.”

But if free markets are not efficient, at what do they fail? Wealth distribution? Income equality? Racial justice? Housing affordability? Medical access? Educational opportunities? Environmental protection? Free markets and capitalism are blamed for all of this, yet free markets and capitalism gave us greater wealth, income, justice, housing, medicine, education and environmental protection than any collectivist system the world has ever known.

Yet, in a culture that believes public service to be noble, the common good to be ideal, and sacrifice to be a virtue, the profit motive is demonized as the cause of market failure. Despite that, the root causes of mass prosperity must be exposed, defined and defended to the teeth: 1) Reason as our sole means of survival, 2) Your life as your highest value, and 3) Voluntary production and trade for mutual profit.

Accordingly, markets are efficient because prices are embedded with decentralized information that is controlled by millions of people with skin in the game.

Externalities

All economists and wannabe economists like to use “externalities” as the basis for regulatory agencies, stimulus spending, and redistribution schemes, but what are they? External to what? External to the financial reporting systems of private sector enterprises. Never mind that the financial reporting systems of public sector agencies are exponentially worse, but that’s another matter. The incompetents get to make the rules for the people who pay for everything.

Briefly, “externalities,” like “consumerism,” is not a valid concept. The first contradiction is any transaction by a business entity that was never implemented is not recorded on their books. As a result, anything can be an “externality,” and they will have untold effects that reverberate silently and forever. Furthermore, all producers are consumers, production creates consumption, and the positive “externalities” of mass prosperity, personal agency, leisure time, and thriving cultures are impossible to capture in the general ledger.

And perhaps most insidious is the unseen. It is impossible to know and impossible to measure the positive, future effects of capital flowing to its most innovative, productive, and profitable uses if it had not been extracted by the force of the State.

For example, in Economist magazine’s 2025 survey of the wealthiest countries by GDP per capita, Norway was ranked #1. Not reported was that 49.3% of their GDP was government spending. In this small economy, that amounted to $240 billion that was coerced by the State – and assuming 20% of that was necessary for the protection of rights and property, $192 billion could have been invested for future prosperity or used by its rightful owners for their own private needs and desires.

The innovation, prosperity and time that could and should have been discovered may be the most egregious “externality” of them all.

Stimulus Spending

Now we have the compounding effect of demand-side economics, market failure, and negative externalities – all fallacies that nearly everyone believes to be reasonable assumptions for central economic planning. But how have the economics professors, corporate journalists, and their “public servants” in government been able to pull this off so convincingly?

When an entire society loses respect for the virtues of money, then limitless spending by government is rationalized by “the greater good.” In that environment, causality is disregarded, failures are ignored, their salaries and pensions are funded, and all because there is no market accountability or profit motive.

As a result of the spending, GDP is enhanced, regulated businesses collaborate, non-profits and green energy operators become flush with cash, and campaign contributions to incumbent politicians maintain the cash flow. Yet no one knows how the money was spent or what the measurable benefits may be. The rationalization is that people were “served.”

In essence, humanitarians need as many people in need as possible, and there’s nothing like economic recession, price inflation and monetary devaluation to justify more spending.

Money Supply

Markets exist wherever there are people transforming the material of the natural world into goods that exceed their subsistence needs for survival. As this transformation becomes more specialized, productivity increases, trade expands, and certain commodities become stores of value for future exchange. But let’s not get ahead of ourselves. Man must produce to survive. Man’s only means of survival is reason.

By this moral and practical standard, money is production. Production is money. And money is the legacy of someone’s productive effort. But not just any money. Only money that producers will accept in trade. Only money they reasonably believe can be converted into someone else’s productive effort - meaning goods, services and labor. Accordingly, producers and owners of marketable assets will determine the money supply that matters, and that is money in circulation.

This has nothing to do with the Fed, as it should be. Sure, they buy bonds in their QE funhouse and they provide liquidity to bank balance sheets, but ultimately it is money being exchanged by producers and investors that determines the money supply - not the wealth destroyers in government. Money is not stupid. Of course, central banks will devalue the currency in many ways. It’s who they are; it’s what they do. And it is the extraction of wealth through spending by the State; wealth that is diverted from its most efficient use, that leads to price inflation, especially during a government induced recession.

Ultimately, we need a newly discovered respect for money’s cause and purpose to fully understand money in circulation as the money supply that matters.

Principled Action

Hopefully, Applied Capitalism is coming into focus. First, identify the contradictions of popular economic concepts. Second, replace them with solid ideas that stand up to evidence and logic. And what I recommend and explain in The Moneyball Method are Gross Output, Price Discovery, Profit Motive, Capital Formation, and Money in Circulation.

But good theory is good practice, and the moral is the practical. Part II of Applied Capitalism will discuss the political milieu of the faulty economics and Part III will be in the context of your personal financial decisions. In other words, principled actions in a whole of life and builders’ mindset. Specifically, Part III will evaluate the fallacies of Diversification, Risk Tolerance, Market Projections, Mean Reversion and Manager Outperformance and replace them all.

And all in the spirit of reason as an absolute, independence as a virtue, and capitalism as the ideal system to practice before preaching it.

On February 28, 2026, American and Israeli forces wiped out the Ayatollah in Iran and 40 of his top advisors. This is probably the best development that America has seen to support rights, reason, reality and the American Way since 1979.

For further information, please read my book The Moneyball Method: A Middle-Class Manifesto for Objective Investing, now out on Kindle!

Within the duration of about one minute, American and Israeli military forces schooled the top brass of the Islamic State of Iran in the deeper meaning of F(a)=F^0. That was five days ago, February 28, 2026. Since then, every political party in America has weighed in on the constitutionality of President Trump’s decision to use American might. It is altogether fitting and proper they would do that, but it is altogether fitting and proper they understand and are committed to defending our constitutional principles.

Combined with America’s Declaration of Independence, I will summarize those principles as rights, liberty and justice - and further state the natural consequence of rights, liberty and justice as the decentralized structure of capitalism.

It’s also fair to say that nearly everyone reading this is familiar with the positions of the Republican and Democratic parties on the subject, so I will limit this to the obscure parties that are desperate for relevance. My source for that is the journalistic outlet that bills itself as: Your Premier Source on Third Parties and Independent Candidates Since 2008. In an article dated March 4, 2026, The Independent Political Report published the statements of nine of the twelve parties they cover.

Of those nine, only one did not cite constitutional concerns or condemn the actions of the Trump administration: “The Forward Party stands with our troops and the families who support them. We honor their service and pray for the safe return of our service members. We also hold hope for the Iranian people. They deserve freedom, safety, and the chance to shape their own future.” This is Andrew Yang and Christine Todd-Whitman’s outfit.

And from one the oldest, largest and most visible of them: “The Libertarian Party is calling for immediate cessation of the unconstitutional U.S. / Israel joint military operations in Iran, initiated February 28th, under “Operation Epic Fury.” President Donald Trump has explicitly stated that the operation is intended to instill regime change in Iran. Congress has been derelict in its duty to protect its status as arbiter of War Powers.” Bear in mind, the underlying principle of Libertarianism is that war powers and sovereign nations should not exist.

And in a similar vein, “The United States Pirate Party endorsed and republished a statement originally made by Captain James O’Keefe of the Massachusetts Pirate Party. Today, Trump and Israel initiated an illegal war on Iran.” Not to be left out: “The Green Party condemns the Trump administration for its illegal bombing on Iran.”

Arguably for the benefit of Mr. Kite, “The Liberal Party USA gave multiple remarks on social media, including a longer response featuring a reshared statement from party Operations Manager Robert Kraus: The United States is starting another illegal and unconstitutional war citing regime change as the reason” PLUS “Chair Jack Ternan on social media: On June 22, 2025, I issued a condemnation of “President Trump’s unilateral, unjustified, unconstitutional, and unnecessary military action against Iran” on behalf of the American Solidarity Party.

Not surprisingly, two other parties that seem to be wholly owned subsidiaries of the Democratic Party were reported as saying: “The Democratic Socialists of America (DSA) unequivocally condemns the attacks on Iran and violations of its sovereignty” PLUS “The Communist Party USA strongly and unequivocally condemns the Trump administration’s current war on Iran. We call on allies in the peace movement, trade unions, social justice and faith-based movements to join in mass demonstrations and peaceful actions against this war and all the unconstitutional wars being waged by the Trump administration and its allies.”

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This is standard operating procedure – to use the Constitution of the United States of America against America. And they get away with it by citing two flaws in the Constitution to justify their war on rights, liberty and justice – aka capitalism: the commerce clause and the general welfare clause. But there are two other political parties - one of the twelve listed in the dropdown of the journal and a new one just added to their coverage, the American Capitalist Party.

Ideologically, these two parties are opposites: “For the Planet to Live Capitalism Must End” and “Dedicated to the Flourishing of Human Life on Earth,” but they have similar objections in their public pronouncements:

The Party for Socialism and Liberation published the following response in Liberation News: The attack on Iran is illegal under both the U.S. Constitution and international law. Wars of aggression are banned under the UN Charter. And the Constitution does not give the president unilateral power to go to war on a whim.

And in a statement labeled Int.For.Pol.00001.000ACPNC, the American Capitalist Party asserted the following position:

In the interest of preserving the long-term liberty of all who live under the protections of our Constitution, we maintain that expediency can never justify the abandonment of principle. Among those principles is the clear constitutional design that the power to declare war rests with the People through their elected representatives, not in the unilateral discretion of the Executive.”

What we have here is 90% of these third parties condemning the actions of the Trump administration (the decision to join with America’s essential ally in the defense capitalism from the medieval savages of Islam) by standing their case on the principles that define and defend Western civilization itself. Nice try. No cigar. As Capitalism Magazine reported on March 3, 2026:

Word-thinkers aren’t necessarily dishonest. They’re often highly intelligent people who’ve learned to manipulate symbols with great precision and have confused that skill for understanding. Watch for it. It’s everywhere. And it is almost never more seductive than when the words in question carry serious moral weight. Constitutional language is a perfect habitat.

And what symbol is being manipulated? Article I, Section 8, Clause 11 of the US Constitution that confers on Congress the power to declare war. Yes, it does! And Article II, Section 2, Clause 1 gives the President command of the military. There is intentional ambiguity here, also summarized in Capitalism:

The framers didn’t draw a bright line because they couldn’t. They gave Congress the power to declare formal, sustained belligerence between nations. They gave the president command of forces in the field, authority to respond to emergencies, and the initiative that military action requires. What they didn’t do—and this matters—is specify the boundary. That ambiguity is not an oversight. It reflects genuine uncertainty about a question no document could resolve in advance.

Let’s be clear. Principles matter. Principles are essential. And rational principles are the only guide for “Flourishing of Human Life on Earth.”

Accordingly, the first principle is reality – the primacy of existence, A is A. And in the context of DJT’s authorization for military action that decapitated the Islamic State of Iran, it was not illegal. It was not unconstitutional. And it was not a unilateral decision or “war on a whim.” There are allies, years of planning and intelligence gathering, intricate details, extraordinary skill and courage, and two of the only rights defending societies in the history of the world. That ain’t nothing.

And to face reality is to acknowledge that DJT is President, he is the civilian commander of America’s military, the Islamic State has been the violent savage aggressor since 1979, Article I does not grant Congress the exclusive authority to attack a vicious enemy, there is the War Powers Act of 1973, and there is an enormous amount of precedent:

Scholars count somewhere between 100 and 200 unilateral uses of military force since the founding. No court has ever invalidated one on constitutional merits. Campbell v. Clinton—where a congressman sued to force a vote authorizing Kosovo—was dismissed. Every similar challenge has been dismissed, on standing or political-question grounds, consistently, across decades.

The second principle is reason. Not only is there the intentional ambiguity of Article I and Article II, but to morally engage in war is to unleash overwhelming violence on the aggressor, achieve victory in minimum time, and do it with the fewest casualties to your own people.

To complicate that, the previous two American presidents and their political party are affiliated with, aligned with, or sympathetic with the Islamic State, the Muslim Brotherhood, the Students for Justice in Palestine (SJP), and the United Nations Relief and Works Agency for Palestine (UNRWA). That is reality. To seek their advice and consent would violate principles one and two.

Furthermore, to face reason is to acknowledge that an objective moral code is an integrated system of principles and values. And all of them must be given their proper due in context with each other and existing circumstances using our best judgement. To isolate Article I does not do that, and to misinterpret Article I is to resort to dogma.

Of the ten political parties mentioned in the opening sequence of this essay, there is only one that is grounded in morally defensible principles, yet the American Capitalist Party resorted to the same dogma of the other parties who are enemies of capitalism. I believe the cause is simple, but the rationalization is complex. It’s about Trump. He is a pragmatist and he typically operates on his whim of the moment. He lacks moral principles. He is not an intellectual. That can be dangerous.

In philosophical terms, Trump operates on a primacy of consciousness relationship with reality. He makes it up as he goes along. What is unnerving is that he does the right thing more often and better than his two predecessors. It’s a sight to see. Obama and Biden are destroyers, and it is their regime that gave rise to Trump’s popularity.

Good people who understand and respect natural law and human nature may be aware of the dangers posed by a principle-free emotionalist with political power, but there are context, causality and justice that cannot be ignored. Those are principles, too.

Not mentioned in any of the handwringing above is the fact that those two presidents gave billions of dollars and political cover to the Mullahs, their murderous thugs, and financed the horrific atrocities of October 7th. More recently, thirty or forty thousand Iranians were murdered. Of course, Trump appeases dictators, too, but that is what got us here.

The West paid for the Islamic State, its death is imperative and long overdue, and I hope the people of Iran will begin to prosper later this year. But today, the Islamists of the Middle East will continue to fragment, and the flow of capital will bring peace and justice, as it always does.

What is a Trade Deficit? How does it affect you? Let us understand this — particularly in the context of the recent Supreme Court decision to strike down tariff rampage of President Trump and the rationale for that decision.

For further information, please read my book The Moneyball Method: A Middle-Class Manifesto for Objective Investing, now out on Kindle!