The Idea of America

"Elizabeth," I asked this morning, as my wife climbed out of the pool. "How would you describe that sea turtle we saw on the beach?"

Pausing for a moment, she replied:

"Rotating its slow and majestic flippers, it ground its way slowly and inexorably towards China…"

The sea turtle was headed east. Whether China was its destination or not, I don’t know. I only know that it was about to leave the Latin America isthmus, from the west coast of Nicaragua, and put out to sea when a muscular, brown young man picked it up and carried it back up on the beach. He and his friends had dug a big hole in the sand where the turtle was placed.

At night we often see the dim light of flashlights along the beach. "It’s the locals looking for turtle eggs," Manuel explained. "It’s illegal to take them, but…" Manuel shrugged his shoulders.

Sea turtles are protected by international convention. But here in the wilds of Nicaragua they still end up in the soup from time to time.

This is America too…but it is not the same America. It is the New World…but not as new as the world north of the Rio Grande. Here, the Old World has not yet been snuffed out. It survives in a semi-tropical paradise.

But the object of our attention in today’s Daily Reckoning is neither the Old World nor the New one – but the ever-changing, never-fully-explored idea of America.

"Proud to be an American" says one bumper sticker. "One nation – indivisible," says another. America was, of course, founded on the opposite principle…the idea that people were free to separate themselves from a parent government whenever they felt they had come of age. But no fraud, no matter how stupendous, is so obvious as to be detected by the average American. That is America’s great strength…or its most serious weakness.

After September 11, so many people bought flags that the shops ran short. Old Glory festooned nearly every porch and bridge. Patriotism swelled every heart.

Europeans, coming back to the Old Country, reported that they had never seen anything like it. A Frenchman takes his country for granted. He is born into it, just as he is born into his religion. He may be proud of La Belle France the way he is proud of his cheese. But he is not fool enough to claim credit for either one. He just feels lucky to have them for his own.

America, by contrast, is a nation of people who chose to become Americans. Even the oldest family tree in the New World has immigrants at its root. And where did its government, its courts, its businesses and saloons come from? They were all invented by us. Having chosen the country…and made it what it is…Americans feel more responsibility for what it has become than the citizens of most other nations. And they take more pride in it too.

But what is it? What has it become? What makes America different from any other nation? Why should we care more about it than about, say, Lithuania or Chad?

Pressed for an answer, most Americans would reply, "Because America is a free country." What else can be said of the place? Its land mass is as varied as the earth itself. Inhabiting the sands of Tucson as well as the steppes of Alaska, Americans could as well be called a desert race as an arctic one. Its religions are equally diverse – from moss-backed Episcopalians of the Virginia tidewater to the holy rollers of East Texas to the Muslims of East Harlem. Nor does blood itself give the country any mark of distinction. The individual American has more in common genetically with the people his people come from than with his fellow Americans. In a DNA test, your correspondent is more likely to be mistaken for an IRA hitman than a Baltimore drug dealer.

America never was a nation in the usual sense of the word. Though there are plenty of exceptions – especially among the made-up nations of former European colonies – nations are usually composed of groups of people who share common blood, culture, and language.

Americans mostly speak English. But they might just as well speak Spanish. And at the debut of the republic, the founding fathers narrowly avoided declaring German the official language…at least, that is the legend. A Frenchman has to speak French. A German has to speak the language of the Vaterland. But an American could speak anything. And often does.

Nor is there even a common history. The average immigrant didn’t arrive until the early 20th century. By then, America’s history was already 3 centuries old. The average citizen missed the whole thing.

Neither blood, history, religion, language – what else is left? Only an idea: that you could come to America and be whatever you wanted to be. You might have been a bog-trotter in Ireland or a baron in Silesia; in America you were free to become whatever you could make of yourself.

"Give me liberty or give me death," said Patrick Henry, raising the rhetorical stakes and praying no one would call him on it. Yet, the average man at the time lived in near perfect freedom. There were few books and few laws on them. And fewer people to enforce them. Henry, if he wanted to do so, could have merely crossed the Blue Ridge west of Charlottesville and never seen another government agent again.

Thomas Jefferson complained, in the Declaration of Independence, that Britain had "erected a multitude of New Offices, and set hither swarms of Officers to harass our people, and eat out their substance." Yet the swarms of officers sent by George III would have barely filled a mid-sized regional office of the IRS or city zoning department today.

Likewise, the Founding Fathers kvetched about taxation without representation. But history has shown that representation only makes taxation worse. Kings, emperors and tyrants must keep tax rates low…otherwise, the people rise in rebellion. It is democrats that really eat out the substance of the people: the illusion of self-government lets them get away with it. Tax rates were only an average of 3% under the tyranny of King George III. One of the blessings of democracy is average tax rates that are ten times as high.

"Americans today," wrote Rose Wilder Lane in 1936, after the Lincoln administration had annihilated the principle of self-government…but before the Roosevelt team had finished its work, "are the most reckless and lawless of peoples…we are also the most imaginative, the most temperamental, the most infinitely varied."

But by the end of the 20th century, Americans were required to wear seat belts and ate low-fat yogurt without a gun to their heads. The recklessness seems to have been bred out of them. And the variety too. North, south, east and west, people all wear the same clothes and cherish the same decrepit ideas as if they were religious relics.

And why not? It’s a free country.

Bill Bonner
February 21, 2002 — Nicaragua

*** Venezuela, reports The Mogambo Guru, has allowed its currency, the bolivar, to float. "Just another sign of the crisis that is unfolding all over the world. It didn’t go well."

*** Uruguay is feeling the pinch too, as the Argentina flu starts infecting more and more neighbors and creditors.

*** "All these problems may be causing our stock and bond markets to advance," Mogambo sez, "as these foreigners look at the tea leaves and figure, "Hey! get my soon-too-be-depreciated currency into something that isn’t going to whack me hard." Namely, the USA."

*** Perhaps that is why the Dow jumped 196 points yesterday, to close just shy of 10,000 at 9941. The Nasdaq rebounded from a 19 point intraday loss – and a near 16-week low too – to close up 25 at 1775.

*** Of course, "If [foreign investors] were really thinking," our intrepid analyst continues, "they would get into gold and pronto. The fundamentals of the USA aren’t inspiring… We’re the biggest bunch of consumption-crazed gimcrack junkies on the planet, already wallowing in unplumbed depths of crushing debt, and I’m supposed to think that our fiat currency is somehow permanently immune from simple economic gravity? Who says so?"

(Bill, as you may be aware, is in Nicaragua. Eric, too, is traveling. Today, the DR is brought to you, live and in the flesh… er, text… by Addison Wiggin.)

*** "Once the sources of easy money dry up," writes Dan Denning of Strategic Investment, "drawing down bank lines of credit is bad for the balance sheet. Apart from possibly damaging credit ratings…it makes borrowing new debt, or servicing existing debt, more expensive. It’s like an added business tax."

*** "Businesses didn’t have this problem in the go-go ’90s," Denning continues, referring to what SI calls an "Epic Reversal" in the marketplace. "Now you’re seeing the other side of that coin. You can’t keep borrowing forever, if the money you borrowed before didn’t build an income-producing asset."

*** Are we entering the "credit withdrawal" phase of the Bubble… where the addict runs out of supply? "It doesn’t matter as much to companies with healthy balance sheets," Denning says, "or real assets." But for those who simply borrowed and spent… watch out.

*** So are there any companies with healthy balance sheets left worth investing in? Perhaps. "I just finished reading Ben Graham’s Intelligent Investor and the book that’s a collection of Buffett’s remarks," writes a friend of The Daily Reckoning. "So…I’ve been fooling around looking for great value stocks. Found a few. But, this is perhaps the best example of a great value stock I’ve ever found.

Here are the basic numbers:

Price/Book (mrq) 1.00

Price/Earnings (ttm) 3.28

Price/Sales (ttm) 1.28

Operating margin is 42.9%

Profit margin is 39%

"The company has been in operation for at least ten years. It’s in a simple business that’s easy to understand. It is asset rich. And… in 2000… this company threw off nearly $300 million in free cash flow (cash generated from ops – cap ex). That’s incredible, considering this is only a $1 billion company.

"Dividend yield is 2.5% and the stock’s beta is .68 – about half as volatile as the market. What is it…? Teekay Shipping – a provider of international crude oil and petroleum product transportation services through a fleet of medium size oil tankers. For the nine months ended 9/30/01, revenues increased 33% to $825.9 million. Net income totaled $305.3 million, up from $147.5 million.

"Revenues reflect an increase in average fleet size due to the acquisition of the Ugland Nordic Shipping ASA. Net income also reflects a $10.2 million gain on the sale of three vessels."

*** "I’ll second you on Teekay," value investor Lynn Carpenter says, "I’ve come close to recommending it a couple of times. Once (1999) I went with Tidewater instead, and a couple of months ago I decided to hold off since all my oil-related stocks were already doing badly… probably should have gone for it, considering how much it’s up since November."

*** "It’s a good company," Lynn continues, "I’m surprised at the beta of 0.68 – It’s not unusual for Teekay to go up or down 40-60% in a year, sometimes both. It looks like it should continue rising as oil exploration picks back up and could be good for as much as a 50% gain this next year."

*** Lynn Carpenter, by the way, is on the faculty of the Oxford Club’s Investment University – a unique program that has been earning high marks for its "total immersion approach to the art of wealth building." Lynn joins Oxford Club wealth advisory panels members CA Green, Dr. Steve Sjuggerud, Mark Skousen and Porter Stansberry for a three-day wealth building bootcamp… March 20-24, 2002 in Delray Beach, Florida.

*** Lynn, I’m told, will be revealing the secret behind "a very special trading service" that has returned a string of 300%, 200%, and 100% winners this year alone.

*** Bill tells me he has to drive an hour and a half to get from where he’s staying to a suitable location for sending us his missives… you’ll find the fruits of his labor below.


Addison Wiggin

The Daily Reckoning