Power & Market

Household Employment Goes Nowhere for Fourth Month

08/05/2022Ryan McMaken

With the release of new employment data from the Bureau of Labor Statistics today, most commentators have focused on the big gains seen in the total number of jobs as reflected in the establishment survey. According to that survey, total nonfarm jobs reached 152 million which—30 months later—finally puts total jobs back at their pre-covid peak during January and February of 2020. This was hailed as an enormously strong jobs report by many observers. 

But the grand employment successes indicated by the establishment survey are not reflected in the household survey which, rather than measuring total nonfarm jobs, measures "total employment" or employed people. In that case, employed persons are about a half a million jobs below the February 2020 peak, but the more worrying trend is in the fact that total employment has been flat for the past four months. total employment was 158 million in March 2022 according to the survey. In July, it was also at 158 million. 


That's quite a difference between the two employment surveys. The establishment survey shows that since March total jobs have grown by 1.68 million while total employment has fallen by 168,000. That's a difference of 1.8 million. 

This suggests that the total number of jobs is growing, but the total number of employed people is not. In other words, people are taking more second jobs, but more people aren't employed. 

Employment weakness also shows up in the labor force participation rate (for the 25-54 age group, excluding most retirees) which remains below the 2020 peak, and also below where it was for the entirety of the period from the late 1980s to the 2008 financial crisis. 


The overall narrative for the most recent employment data, however, was that jobs are "smashing" expectations and that the labor market is red hot. Yet, it's apparently not hot enough to bring the working-age labor force back to where it was before the GFC. Nor is it hot enough to bring total employment back up to 2020 levels. 

Theoretically, this sort of thing could always be explained by the idea that household earnings are so strong that many workers simply don't need to work anymore. That is surely true in some cases, but we also know that the savings rate is falling while debt is mounting. 

For example, after surging to historically high levels in 2020—thanks largely to stimulus checks and people putting off recreation and vacations—the personal savings rate has collapsed since December of last year. As of June, the personal saving rate is at 5.1 percent, which is the lowest since 2009. 


Moreover, household debts are mounting as well. According to the Federal Reserve consumer debt and revolving credit have grown rapidly since March of 2021, and are now at a new high and in July was up more than 17 percent year-over-year. Other data suggests consumers are still doing plenty of spending, but many are apparently doing it using consumer credit and at the expense of savings. 

This is not shocking since wages are not keeping up with the CPI inflation rate

What does all this mean for the economy? It suggests neither collapse nor robustness. The fact that employment data tends to be a lagging indicator, however, means the employment data probably doesn't mean much in terms of telling us where the economy is headed. Many economists and policymakers are busy debating semantics and whether or not the call the current situation a recession. But falling real wages, high inflation, rising debt, and two quarters of negative GDP growth suggest falling standards of living, which is mostly what matters. 

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How To Be Like Socrates

07/19/2022Gary Galles

Voltaire once famously urged people to “Judge a man by his questions rather than by his answers.” Someone’s questions tell us what they already presume to be true and whether they are seeking wisdom or something very different. For example, a politician asking “who should I blame for something I am actually at fault for?” or “how can I best make a proposal that will violate people’s rights and liberties come across as reasonable?” is not seeking wisdom.

But asking appropriate questions is often a useful means toward wisdom. Unfortunately for most of us, knowing what wisdom is to be developed and how best to get others to see that wisdom for themselves is a high bar to clear.

That is why Leonard Read turned to Socrates for inspiration toward wisdom and how to more effectively transmit such wisdom as we have to others, which he pursued for a major part of his adult life, in his “How to be like Socrates,” Chapter 20 in his 1973 book, Who’s Listening

Each of us is unique. But the method employed by Socrates to advance understanding is one that all of us might well try to emulate.

The Socratic method of teaching or discussion is to ask a series of easily answered questions that inevitably lead the answerer to a logical conclusion foreseen by the questioner. This is to teach a student the way of philosophizing, as distinguished from urging him to memorize the conclusions of philosophers.

This is quite the opposite of the popular “compulsory mis-education” which tends to turn students into carbon copies of so-called teachers. Instead of putting masks on students--blanketing their minds with someone else’s “wisdom”--real teaching is an unmasking process, helping [individuals] to find their own hidden aptitudes, potentialities, uniqueness…Enlightenment is the mutual goal.

If enlightenment is sought, and the Socratic method can help us get there, one would think it would be used more than it is. Read asked why.

Why, we must ask, is this superior method so little used?...because we do not know the right questions to ask.

How can we reach the level of wisdom to utilize that method to lead others to “own” such wisdom for themselves?

If one would be like Socrates, where does he start?...training for enlightenment above and beyond where he now stands…To ascend, one [first] reaches for the bottom rung…practiced and mastered, to that extent may one rise step by step toward the top.

Consciously developed, it assures individual growth in awareness, perception, consciousness; and this leads in turn toward the good society…we seek for truth and share it with those who also seek…We enrich or enlighten each other.

As one succeeds in probing for truth, he becomes more and more conscious of an ever-expanding unknown…If one can reach the level of humility, of wanting to know, then the next higher rung of the ladder is within reach: an intelligent interpretation of self-interest. In reality, this amounts to an understanding of the Golden Rule: one’s interest is never served by doing injury to another.

Leonard Read then turned to exemplars of the kind of wisdom he sought.

Immanuel Kant was at this level: no one has a moral right to do anything that cannot be rationally conceded as a right to everyone else-the principle of universality. The interest of self and of society are in harmony, not at odds.

William Graham Sumner…stated the principle in brilliant terms: “Every man and woman in society has one big duty. That is to take care of his or her own self… the duty of making the best of one’s self individually is not a separate thing from the duty of filling one’s place in society, but the two are one, and the latter is accomplished when the former is done.”

With such exemplars in mind, Read also acts as an exemplar of someone seeking wisdom, by first turning serious questions inward.

I…am aware of knowing nothing, and understand the Golden Rule. However, I do not know enough answers to ask many of the right questions. Why am I not more like Socrates? Simply because I am not wise enough. Nonetheless, each of us can strive for more wisdom.

Finally, Read provided an example of a step along the Socratic path toward liberty:

Q-Joe Doakes was lynched. Who did it?

A-A mob.

Q- Mob is but a label. Of what is it composed?

A - Individuals.

Q- Then did not each individual in the mob lynch Joe Doakes?

A- That would seem to be the case.

Q-Very well. Can any individual gain absolution by committing murder in the name of a label, the mob, a collective?

A- I guess not.

Q- Now that we have established that point, let me pose another question. Do you believe in thievery?

A- Of course not.

Q- Logically, then, you do not believe that you should use force to take my income to feather your own nest. True or false?


Q-Is the principle changed if two of you gang up on me?

A-Not at all.

Q- One million? Even a majority?

A-Well, perhaps O.K. if a majority does it.

Q-Do you mean that might makes right?

A-Oh, no.

Q- That is what you have just said. Would you care to retract that?

A- To be logical, I must.

Q-You have now agreed that not even 200 million people or any agency thereof-government, labor unions, educational institutions, business firms, or whatever—have a moral right to feather their nests at the expense of others, that is, to advance their own special interests at taxpayers' expense. You have also admitted that no one gains absolution by acting in the name of a collective. Therefore, is not every member who supports or even condones a wrong collective action just as guilty as if he personally committed the act?

A- I have never thought of it that way before but I now believe you are right.

Thus, by asking the right questions, one may thread his way through the maze of moral, economic, and political philosophy toward truth. This is the method of helping others to find right answers for themselves, the way to truth through their own minds. Your problem and mine is to become wiser that we may increase the number of the right questions to ask. This, in my view, is the way to become more and more like Socrates.

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Hoping for the Best, Expecting the Worst

07/18/2022Robert Aro

Is it possible to be too optimistic? In the case of Federal Reserve Governor Christopher J. Waller, he maintains the fabled soft landing is still possible. Quotes from speeches, testimony, or interviews from members of the Fed hardly age well, as is the case here, when he gave a talk at an economic summit in Idaho a few days ago:

We must be focused on reducing inflation because, despite a lot of talk about recession lately, the evidence from the labor market indicates the economy is on track, while inflation continues to be far too high.

While transitory inflation and average inflation targeting have since fallen by the wayside, we should always remember that after all these years of hearing about “stubbornly low inflation,” the Fed finally got its wish.

He called the June CPI inflation data a “major league disappointment.” Explaining:

On a twelve-month basis, total inflation stood at 9.1 percent, the highest in 40 years… No matter how you look at the data, inflation is far too high and my job is to move it down toward our 2 percent target.

Consider: They wanted higher prices. They got higher prices. Now they want prices to go down again. If this is the economic track they wanted, it’s concerning to envision how it will unfold.

He acknowledges Atlanta Fed’s data indicating a recession just around the corner, or that we may already be in one, stating:

Some argue that a recession has already started.

But clearly not all economic data is created equal, as he looks past GDP, saying:

…I don't see how that squares with the job creation data, the low unemployment rate, and overall strong labor market…

Maybe it will matter one day… Yet other metrics aren’t as favorable. The 10-year minus 2-year yield curve turned negative for the second time this year (currently at -0.20), and the 10-year minus 3-month yield curve faced a sharp decline in the last few weeks (currently at 0.56). Price inflation is still at a multi-decade high, while the stock market shows bursts of strength here and there. But without the Fed expanding the balance sheet, a long position continues to sound like a bad idea.

And yet, the soft landing still shines as a glimmer in our central planner’s eyes:

At our June meeting, the latest SEP shows that there is some expectation among participants for what is often referred to as a soft landing.

He claims:

 …a soft landing is very plausible.

With an optimism that can’t be beat, he winds down his talk:

So, while some data measures suggest the chances of recession have increased, I believe it can be avoided.

Either the Captain of the Titanic saw the iceberg and thought the ship would weather the crash, or he just didn’t see it coming. Can anything more be said about the Fed’s Board of Governors? 

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How Boris Johnson Failed Britain

07/14/2022William Yarwood

Well they finally got Boris Johnson. But he sure scared the bejesus out of them…or did he? Johnson’s time as Prime Minister has been one plagued by political turmoil, Coronavirus, and scandal, all three of which many thought he could overcome with relative ease and buoyancy. But alas, due to his own party imploding after the latest scandal - involving sexual allegations surrounding his Deputy Chief Whip Chris Pincher - and various cabinet ministers and others important to the running of a functioning government resigning, his position became untenable. And despite some of his loyalists inside and outside the state backing him no matter what, the game was up and Johnson knew he had to resign. The questions now are firstly who will replace him and secondly where does the British right go from here? Unfortunately, both of these questions do not have clear answers.

Johnson has been at the forefront of British conservative politics for the better part of a decade and was beloved by the right-wing and predominately libertarian side of the spectrum for most of it. He was known as a brash, no-nonsense, and straight-talking politician who, unlike many of his friends in Westminster, did not play the game of social respectability and towing careerist party lines. As his own sister, Rachael Johnson, once said in an interview, Boris knew that breaking all the usual rules of politics would get him further and would make people like him more. In retrospect, this appears to have been the case.

On becoming Prime Minister, Johnson sought to re-inject optimism and dynamism into British politics which had become stale thanks to the lingering state of Brexit. Unlike Theresa May before him, Johnson was a true believer in the Brexit project and set his sights on passing his deal through parliament no matter what. If this meant proroguing parliament, so be it. If it meant de-selecting pro-EU backbench Tory MPs from the party, so be it. If it meant calling a General Election, so be it. In the end, this was the path Johnson took and it paid off beyond his wildest dreams, earning an 80-seat majority - the best result the Conservative Party has had since the Thatcher era. This landslide majority enabled Johnson and his cabinet to do essentially whatever they wished but true to character the Conservatives did absolutely nothing with this victory. Johnson becoming Prime Minister simply revealed that his ideological convictions and penchant for getting everyone to like him were both not as strong as many may have hoped.

After two years of Johnson rule what have the British people had? Lockdowns, Coronavirus fearmongering propaganda, debt at 100% of GDP, inflation rising, high fuel prices, scandals and an overall continuation of the managed decline Britain has been subject to for decades. Anti-ID card Boris Johnson became pro-vaccine passport Boris Johnson. Free market Boris Johnson became money printer and high tax Boris Johnson. Anti-nanny state Boris Johnson became puritan Boris Johnson. The libertarian credo that Johnson rode on for so many years proved to be empty bluster and lies. The populist ‘man of the people’ image he fostered turned out to be a mask which hid behind it simply another careerist Globalist hack; easily captured and made a puppet of the Westminster deep state.

After the recent scandals which broke Johnson’s chances at leading a credible government he resigned, albeit without much remorse or sadness. The question now is who will replace him and the many answers to it all are rather depressing.

Risihi Sunak, Johnson’s ex-Chancellor and poster boy for Tory moderns and wets, seems to be the front runner with Penny Mourdant, a war-hawk who has played into the cultural left’s talking point on more than one occasion, following closely behind him. Other leadership hopefuls are the ex-Liberal Democrat and Thatcherite LARPer Liz Truss and one of the last remaining Neocons in the party, Tom Tugenhardt (derided as ‘Total War Tom’ by his detractors). While there may be some lesser supported candidates, such as the seemingly libertarian-esque Kemi Badenoc and Suella Braverman, these types of MPs- while holding some good ideas and being popular amongst young Tories - will not get anywhere near Downing Street.

The current Conservative Party wants stability and sterility rather than any semblance of radicalism or ideological conviction. Their view is that the poll ratings show they can’t afford to elect a renegade like Braverman, who came out the other day declaring that Britain spends too much money on welfare. But maybe a radical renegade who is able to muster the populist energy of Johnson in 2019 and Farage before that is exactly what the current Conservative Party needs and what the country needs if it is to throw off the shackles of pessimism and decline. But alas, that is unlikely to come in the near future.

Nevertheless, the current turmoil might pose some benefits.

As Murray Rothbard pointed out during Watergate, the scandal “destroyed the public's 'faith in government'” with him further remarking that “it was high time, too.” The public’s faith in the state has been radically diminished over the last few years with Brexit, Coronavirus, and now incessant scandals and internal party bickering over who gets to sit in the big chair at cabinet meetings. Institutions like the Church of England, the courts, and even the police are facing greater scrutiny and dismay from right-wingers and the general public than they ever have before. And to top it all off, the young British right is beyond fed up with the current Conservative Party and is tired of the stale soundbites, ideological vapidity and the ever-ongoing shifts to the left both economically and culturally.

While there is still a plethora of ideological factions and groupings inside of Conservative youth and related circles the predominant strains seem to be that of a more populist, traditionalist and nationalist bent on the one hand, with a fervent anti-state, pro-free market, and libertarian force on the other. Both may disagree on minute policy proposals, but both want to see the end of the current consensus that has dominated politics for decades which was created by New Labour. They want property rights to be restored, taxes and regulations to be cut, our foreign policy to be independent of the American Empire, and for Britain’s state to be cleared out of weak civil servants, ex-Communist special advisors, and fifth columnist NGOs. For those wanting change, a new alliance between the traditionalist and libertarian factions may be necessary in order to overturn the dominance the middle ground modern Tories have had over the party for decades.

But whatever happens over the next few months and whatever leader the Conservative Party gets, it will not save them from the British public’s derision and their membership’s anger. Nor will they forget the state Britain was put in by Boris Johnson or renew their faith in the institutions of this country. Out of every crisis comes opportunity and the grassroots right must not be dismayed or demotivated. On the contrary, they should work hard at building up alliances with like-minded renegades and seek to create as much noise and trouble as possible in the months and years to come. 

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Have We Kicked the Can to the End of the Road?

06/09/2022Liam Cosgrove

With “recession“ dominating economic headlines these days, many have forgotten the K-shaped versus V-shaped recovery debate of late 2020. 

Still riding the high of stimulus checks and PPP loans, nearly all market pundits concurred that we were largely out of the woods of financial turmoil. Their disagreement lied in whether the rebound would take place in the real economy (V-shaped) or solely in asset prices (K-shaped), leaving Main Street behind.

While 2021 saw euphoric asset valuations and even a precipitous decline in unemployment, it now appears that both camps may have been incorrect. With roaring inflation, an ominous negative GDP print, and the S&P nearing a bear market, Peter Atwater, an expert who focuses on investor confidence, believes we are on the cusp of a financial crisis on both Main Street and Wall Street.

To illustrate how this might play out, Atwater highlights the common practice by which the wealthy borrow against their asset holdings at historically low rates to fund expenditures. Rising rates and quantitative tightening have the potential to not only increase interest fees, but also lower the value of the pledged collateral, potentially triggering margin calls for the upper echelon of society. 

Atwater points out that personal loan volumes (mortgages, margin debt, etc.) have increased to a greater degree than those of credit card loans. This is a sign that Wall Street may be more levered, thus more vulnerable to monetary tightening, than Main Street. Whereas the Main Street, many of whom are not asset owners, might actually welcome a decline in asset prices, especially in real estate. Instead, the Average Joe’s main concerns today are food and gas prices.

These realities give insight into the policy path central bankers may choose, who are in a difficult position as they attempt to quell inflation with pressure from Wall Street who have gotten used to lofty asset prices. 

Will the Fed sacrifice Wall Street to protect Main Street? Atwater isn’t sure that it’s that simple. 

He believes there is one key point central bankers seem to be ignoring: potential business failures. With over 30% of the companies in the pre-pandemic Russell 2000 being zombies (i.e. companies with revenues barely sufficient to service their debts), it’s hard to see how raising interest payments will not initiate a wave of bankruptcies and accompanied layoffs.

Therefore, even if the Federal Reserve elects to help the little guy by taking on inflation, the pain may instead be felt in the jobs market.

For all the details on Peter’s insights, listen to his full interview with Wealtion, hosted by Stephanie Pomboy, 

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How Not to Read

05/31/2022David Gordon

Raymond Geuss is an influential political philosopher, and I hope to review his new book, Not Thinking Like a Liberal,(Harvard, 2022) on another occasion.  Geuss is a confirmed enemy of liberalism, both classical and modern, He dislikes both Rawls and Nozick; in fact, his attitude toward Rawls falls little short of hatred. This interferes with his ability to read these thinkers with care.  He says that one feature he dislikes  of the way philosophy has come to be done  "is the one which Robert Nozick described in the preface to one of his books. He says he wanted to give an argument so powerful that it would fuse the brain of those who heard and understood it and force  them to accept it. Even apart from the visibly sadomasochistic element in this,  it does not seem to me that an approach that conceptualizes discussion in this way, as the search for this kind of argument or refutation, is the most likely way to attain any kind of understanding  of the world." (p.9. Amazon Kindle edition)  Guess hasn't noticed that the point of Nozick's discussion is to oppose this way of doing philosophy in favor of a non-coercive form of discussion.  Because Nozick is an enemy, he cannot recognize that he and Nozick are for once on the same side.

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How the Old Right Vindicates Murray Rothbard

05/24/2022Aaron Cummings

As geopolitical tension reaches a historic peak in recent memory, it reveals some of the earliest lore from 20th century libertarian thinkers and the conservatism that flourished at the time.

Ludwig Von Mises was establishing his ideas during the distressing times of WWII. Rothbard was also analyzing the Great Depression with economic concerns rather than political ones.

The Wall Street Journal generally has been supportive of libertarians in the past, but their Old Right allies have been recently critiqued for holding the same views. Among many others, J. Edgar Hoover is cited as a pivotal figure for the Cold War, while Rothbard highlights his populist approach to politics. This was among the most effective examples of the era and those who were receptive to the writings of Russell Kirk or the campaign of Huey Long had a space to call their own.

Warren G Harding and Calvin Coolidge represent the Old Right, which is free from the clutches of the postwar era and best identified by Robert Taft. Many of his quotes resemble a GOP platform that are rarely promoted publicly:

“Our armament program should be based on defending the United States and not defending democracy throughout the world.”

The momentum of the Old Right is often juxtaposed against the foreign policy decisions of WWII. Not only was it a humanitarian endeavor, many 20th century thinkers saw the nonintervention stance as a figment of the past that didn’t adapt to international threats. The Old Right emphasizes that the anti war sentiment is a timeless one and not excused based on emerging ideologies. The libertarians continue that legacy to this day by focusing on national topics over intervention.

Many of these views are not represented in modern campaigns. However, Ron Paul championed them on the national stage with his presidential run. The nonintervention consensus was a key distinction between Donald Trump and the 17 Republicans he ran against. The historic significance around ending the War in Afghanistan harkens back to Taft’s America First platform.

The FDR era was deemed as a watershed moment that, “won the enmity of conservatives.” Like the aftermath of WWII, the right would continue to respond based on the most influential aspects of The New Deal. Its revolutionary impact on the nation left conservatives trying to outcompete it with economic substitutes and cultural trends. The most visible example of Roosevelt’s impact was the continuation of Wilsonian foreign policy. Despite his reputation, Eisenhower was much more in tune with Taft’s hesitation on world affairs and that became a rarity after the FDR presidency.

Nostalgia has been a key asset to postwar conservatism, defined by its sympathies to Wilsonian foreign policy and Cold War framework. The fiscal priorities that were expected from both parties were shattered by The New Deal. Despite the Great Depression remaining in the collective psyche, it was popular to fund any projects that benefited financiers and supported anti-communism. This trend continued beyond the destruction of the Soviet Union and while this helped libertarians in terms of rhetoric, it was a short-term trade off that didn’t accommodate their anti-war stance. Rothbard outlined that a shift in one aspect of policy would not address all political concerns. Instead, there lies a systematic task ahead of conservatives and libertarians alike. He prescribes a new outlook on future platforms by confronting the policies of the past and writes:

We shall break the clock of the New Deal. We shall break the clock of Woodrow Wilson's New Freedom and perpetual war. We shall repeal the 20th century.

Donald Trump was a breakaway from that trend and his legacy is part of an inter-generational history of populism. Contrasting with the climate of 1920s conservatism, the concerns of the prewar right have deeper roots outside their respective eras. As these populist strains spread through Europe, it is clear that the Old Right has revitalized energy that thrives beyond economic reform. It was not a platform exclusive to the early 20th century, since many policymakers are moving away from neoconservatism and embracing the populist approach.

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How Efficient Is the Market, Really? Challenging the Chicago Hypotheses

In 2008 Warren Buffett issued a public challenge to the industry he most despised: hedge funds. Charging its clients 2% of assets under management plus 20% of any profits, Buffett wagered none of them could beat the annual return of the S&P 500. That bet was accepted, and ten years later the token wager of one million dollars was duly paid to the charity of Buffett’s choice.

Below is a graph depicting the results of the participating funds against the returns of an S&P 500 Index:

While it is true that the period in question featured an historical bull market, reaching back into the data and the history of major market participants reveals that the same would have been true at almost any point in the last forty years. Only a handful of investors, a literal handful, have been able to beat the market for their clients in the long run after fees and transaction costs are considered. Buffett, himself on that list, is so confident in the superiority of investing in broad-based index funds that he is said to be leaving the majority of his estate in them for his wife.

Other wealthy investors have taken note, with the share of assets under hedge fund management falling over the past five years.

While the commissions and fees hedge funds charge are large, what explains the basic inability of the average fund, staffed by ivy league quants doing cutting edge analysis running state of the art software, to significantly beat the market over the long run?

The answer, at its core, is the Efficient Market Hypothesis.

In the words of its author, Chicago School economist Eugene Fama (1970), the Efficient Market Hypothesis (EMH) is the belief that “prices reflect all available market information.” The implication being that, if they didn’t, arbitrage opportunities would arise, and prices would be corrected by those large investors with the resources to identify and make such corrections. The focus of the theory, therefore, is on information and its impact on prices.

EMH makes four basic assumptions: rationality, risk aversion, responsiveness to new information, and some amount of randomly distributed error (aka Malkiel’s “Random Walk”). Further, it takes three generally accepted forms:

  • Weak-Form Efficient: above market returns cannot be gained from past market data (aka: technical analysis), but can be had from some kinds of fundamental analysis.
  • Semi-Strong-Form Efficient: prices reflect all publicly available information. Prices will only change with new information, the emergence of which is assumed to be more or less random (thereby negating any prospect of above market returns via fundamental analysis).
  • Strong-form Efficient: even with access to insider information an investor cannot beat the market.

Immediately, one can see that the strong-form of the EMH cannot possibly be true. Insider trading is illegal for a reason, and deals like Berkshire’s recent purchase of a large stake in videogame company Activision immediately before it was announced the company would be acquired by Microsoft raise eyebrows.

Between the weak and semi-strong forms, however, there is a lot of gray area. And many economists since the 1980s, including the Yale’s Robert Shiller and Chicago’s Richard Thaler, have made arguably the largest contributions of their careers studying the various ways in which markets apparently misbehave according to the various forms of the EMH.

To take a few examples, seasonal effects defy even the weak form of the EMH. The so-called Santa Clause rally is perhaps the best known of these phenomenon. Regardless of the wider macroeconomic conditions, market momentum, or exogenous risks, investing strictly on the basis of calendar dates, from the last five trading days in December through the first of the new year, has yielded a return 75% of the time. From a statistical standpoint, this is improbable, though several rather mundane facts may explain the anomaly: equities are generally at a cyclically lower level to start December due to tax reasons, professional traders being on vacation makes for lighter volume and fewer short sellers, and purchases in anticipation of another observed historical tendency, the January Effect.

In his analysis of P/E ratios, Shiller provides possibly the strongest evidence against the semi-strong-form EMH:

What he found was that buying and holding companies with relatively lower P/E ratios over the long-term produced the highest returns over those periods – something fundamental analysis and projections of future earnings could contribute to optimizing.

As pioneers in behavioral and narrative economics, both Thaler and Shiller also believe that the stories we tell ourselves about the stock market matter – how much, they can’t quantify. So, too, that systemic biases in thinking, such as the herd effect and hot hand fallacy, can drive market action in ways EMH would not predict – such as the 1990s IPO tech bubble, the rise of the cryptoverse, the implosion of LTCM, or the London Whale.

As far as bubbles go, Shiller correctly forecast both the tech bust in the late 1990s and the ticking time bomb in the housing market in the mid-2000s. But it is worth noting that while in retrospect everyone admits prices of mortgage backed securities were mispriced in accordance with their actual level of risk for several years in the mid-2000s, it was impossible to convince anyone of that at the time. Indeed, Thaler admits that while bubbles exist, we can really only prove they were bubbles after the fact. Afterall, there were plenty of buyers in every case, and who was anyone to say for certain that the future wasn’t going to be radically different from the past? Or that buying equities whose prices were rising wasn’t rational and efficient, value being subjective? Afterall, what is the value of something if not what amount it trades for between informed market participants freely exchanging?

Under such circumstances, an investor who thought they had identified such an inefficiency in the market and sought to profit from it by going short might wind up running out of money before the market ran out of enthusiasm: as with George Soros in the 1990s and tech.

Shorting being both risky and expensive, in such circumstances the great irony is that the rational thing to do for the average participant from a game theoretical standpoint is to ape the market and go along for the ride – hopefully using their self-awareness of actual risk levels to jump ship at some point before the crash.

It seems clear that between a combination of momentum trading, innovative strategies, superior analysis, high frequency trading for momentary and infinitesimal price arbitraging opportunities, and guessing correctly at future trends, can lead some firms to obtain above market returns. However, once fees and expenses are considered, the actual return to investors has been below the market average. Furthermore, virtually no funds or managers are able to sustain above market returns over the long run.

There have, of course, been periods where this was not true. The first decade of the 2000s as well as the ten years between 1965-1975 would have seen buyers of the S&P 500 index suffer a slight loss, while investor at the most successful funds of their time would have shown a positive return.

All things considered, for the average person planning for retirement, assuming they have neither the time or training to do the level of due diligence and analysis required for making superior individual stock selections, they really have been best off buying and holding broad based index funds rather than trusting to expensive, and often wrong, “experts.”

Whether or not this will continue to be true over the next several years, only time will tell.

As George Bragues argued in the QJAE in 2014, the data clearly reveals markets behave irrationally at times with respect to prices, earnings, dividends, acquisitions, et cetera; however, the market is not irrational either in that it is gradually self-correcting, bubbles are difficult to spot, and even more difficult to time.

Building on Shostak’s critique of Markowitz’s Modern Portfolio Theory, what this means for the efficient Austrian portfolio will be the subject of another discussion.

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How the West Was Won: Counterinsurgency, PSYOPS and the Military Origins of the Internet, Part 3: The War is Over, The Good Guys Lost

COIN+TELPRO was a series of illegal operations conducted by the FBI between 1956-1971, to disrupt, discredit and neutralise anyone considered a threat to national security, including members of the Women’s Liberation Movement and even the Boy Scouts of America.

And it wasn't just the customary wiretapping, infiltration and media manipulation, the FBI committed blackmail and murder.

In the 1960’s a Washington Post expose by army intelligence whistle-blower, Christopher Pyle, revealed a massive surveillance operation run by the Army, called CONUS Intel. It involved thousands of undercover military agents infiltrating and spying on virtually everybody active on what they deemed ‘civil disturbances.’ It turns out, many of those targeted had done nothing even remotely subversive, unless you consider attending a left-wing college presentation or church meeting, revolutionary.

These programs came to a head in the 1970’s, when an investigation by the US Senate, conducted by the Church Committee, uncovered decades of serious, systemic abuse by the CIA. As if predicting the internet as an instrument for mass surveillance, Senator Frank Church warned that the NSA's capabilities could "at any time could be turned around on the American people."


Before the internet, the deployment of PSYOPS was limited to legacy media and permitted only on foreign soil. But that all changed in 2013, when the government granted themselves permission to target ordinary Americans.

Conceived at the end of the cold war as the Broadcasting Board of Governors, USAGM is a lesser-known government agency charged with broadcasting thousands of weekly hours of US propaganda to foreign audiences, that has played a major role in pushing pro-American stories to former Soviet Bloc countries ever since Perestroika.

For decades an anti-propaganda law, known as the Smith-Mundt Act, made it illegal for the government to conduct PSYOPS against US citizens. But that all changed in 2013 when the National Defence Authorization Act repealed that law and granted USAGM a licence to broadcast pro-government propaganda inside the United States.

To what extent US citizens are being targeted by propaganda is anyone's guess, since PSYOPS largely take place online, where it's difficult to distinguish between foreign and domestic audiences.

What we do know is that in 2009 the military budget for winning hearts and minds at home and abroad had grown by 63% to $4.7 billion annually. At that time the Pentagon accounted for more than half the Federal Government's $1 billion PR Budget.

An Associated Press (AP) investigation in 2016 revealed that the Pentagon employed a staggering 40% of the 5,000 working in the Federal Government's PR machines, with the Department of Defence, far and wide, the largest and most expensive PR operation of the United States government.

The Facebook’s-Intelligence-Harvard Connection

Consistent with the opaque nature of Facebook's origins, shortly after its launch in 2014, co-founders Mark Zuckerberg and Dustin Moskovitz brought Napster founder Sean Parker on board. At the age of 16, Parker hacked into the network of a Fortune 500 company and was later arrested and charged by the FBI. Around this time Parker was recruited by the CIA.

To what end, we don’t know.

What we do know is that Parker brought Peter Thiel to Facebook as its first outside investor. Theil, who remains on Facebook’s board, also sits on the Steering Committee of globalist think tank, the Bilderberg Group. As previously stated, Thiel is the founder of Palantir, the spooky intelligence firm pretending to be a private company.

The CIA would acquire an equity stake in the firm through their venture capital arm, In-Q-Tel. At the time of his first meetings with Facebook, Theil had been working on resurrecting several controversial DARPA programs.

Which begs the question: With intelligence assets embedded in Facebook's management structure from the get-go, is everything as it seems at 1 Hacker Way?

According to Lauren Smith, writing for Wrong Kind of Green:

“Some of Facebook’s allure to users is that Mark Zuckerberg and his friends started the company from a Harvard dorm room and that he remains the chairman and chief operating officer. If he didn’t exist, he would need to be invented by Facebook’s marketing department.”

By the same token, if Facebook didn't exist it would need to be invented by the Pentagon.

To achieve this, you would need to embed government officials in Facebook's leadership and governance. Cherry picking your candidates from, say, the US Department of Treasury, and launching the platform from an academic institution, Harvard University, for example.

According to the official record, Zuckerberg built the first version of Facebook at Harvard in 2004. Like J.C.R Licklider before him, he was a psychology major.

Harvard's President at that time was economist Lawrence Summers, a career public servant who served as Chief Economist at the World Bank, Secretary of the Treasury under the Clinton Administration, and 8th Director of the National Economic Council.

Now here's where it gets interesting. Summers' protege, Sheryl Sandberg, is Facebook’s COO since 2008. Sandberg was at the dials during the Cambridge Analytica scandal, and predictably, manages Facebook’s Washington relationships. Before Facebook, Sandberg served as Chief of Staff at the Treasury under Summers and began her career as an economist, also under Summer, at the World Bank.

Another Summers-Harvard-Treasury connection is Facebook’s Board Member, Nancy Killefer, who served under Summers as CFO at the Treasury Department.

It doesn’t end there. Facebook’s Chief Business Officer, Marne Levine also served under Summers at the Department of Treasury, National Economic Council and Harvard University.

The CIA connection is Robert M. Kimmett. According to West Point, Kimmett “has contributed significantly to our nation’s security…seamlessly blending the roles of soldier, statesman and businessman. In addition to serving on Facebook's board of Directors, Kimmett is a National Security Adviser to the CIA, and the recipient of the CIA Director’s Award.

The icing on the cake, however, is former DAPRA Director, Regina Dugan, who joined Facebook’s hardware lab, Building 8, in 2016, to roll out a number of mysterious DARPA funded-projects to, essentially, hack people’s minds with brain-computer interfaces.

As luck would have it, just before Duggan’s arrival at Facebook, the social media giant orchestrated the controversial mood manipulation PSYOP, known as the Social Contagion Study. The experiment would anticipate the role social media went onto play during the pandemic.

In the study, Facebook manipulated the posts of 700,000 unsuspecting Facebook users to determine the extent to which emotional states can be transmitted across social media. To achieve this, they altered the news feed content of users to control the number of posts that contained positive or negative charged emotions. As you would expect, the findings of the study revealed that negative feeds caused users to make negative posts, whereas positive feeds resulted in users making positive posts.

Once we understand this, it becomes clear how fear of a disease, which predominantly targeted people beyond life expectancy spread like wildfire in the wake of the Wuhan Virus. In locking down the UK, Boris Johnson warned the British public that we would all lose family members to the disease. When nothing could be further from the truth. The pandemic largely happened in the flawed doomsday modelling of epidemiologists, it happened across the corporate media, and it happened on social media platforms like Facebook. It wasn’t so much a pandemic, but the social contagion experiment playing out in real time.

But there was more than just social media manipulating our emotional states, fear, shame, and scapegoating was fife throughout as the British government deployed behavioural economics to, essentially, nudge the public towards compliance.

Launched under David Cameron's Government, the Behavioural Insights Team (BIT), (affectionately known as the Nudge Unit), are a team of crack psychologists and career civil servants tasked with positively influencing appropriate behaviour with tiny changes.

But according to whose measure of appropriate behaviour, exactly?

A clue lies in the fact that BIT was directed by Sir Mark Sedwill during the first lockdown. He’s one of Britain’s most senior national security advisors with links to M15 and MI6.

That’s an intelligence operative ruling by psychological manipulation. Though we are led to believe, in a democracy the government is an agency of the people, given force of law by the will of the people.

But what happens when our consent is manipulated by those in power?

One consequence is that the foxes take charge of the chicken coop. Another is that we begin to see drastic changes to the constitutional landscape. Politicians acquire impunity from public scrutiny and an entire nation is kept under house arrest.

But this demonisation of the masses is also the backwash of a protracted counterinsurgency crusade waged on ordinary people. When the Berlin wall came down in the nineties and decades of counterinsurgency was rendered obsolete, the battlelines moved from East to the West, from the Soviets to the lower orders of society. The mythos of communist infiltration, that gave rise to the threat of terrorism, is the ancestor of today’s biosecurity state. A government that tightens its grip, using fear of a common enemy, will find no shortage of common enemies, to continue tightening its grip.

From Green Pass to Digital Nexus

Strong-arming the world’s population under the rubric of biosecurity would not have been possible without the internet, and if the expulsion of the military and intelligence community from academic institutions in the 1960's had not resulted in the creation of Silicon Valley, they would not have acquired total information awareness, the precursor to the Green Pass.

But this formidable goal also caused the US to morph into the opponent it had been fighting during the cold war, as predicted by public intellectuals in the 1960s.

And so, with an annual budget of $750 billion and 23,000 military and civilian personnel in their employment, the Pentagon failed to denounce what many armchair researchers called out in the early days of the pandemic. That a global coup was underway was patently obvious, as crisis actors played dead in Wuhan, China.

Instead, those charged with protecting the west from Soviet-style putsch failed to apprehend it happening right under their noses. It's not so much that they were caught with their trousers down, it’s that they aided and abetted the coop. Years of fighting a statist, expansionist adversary, caused the intelligence state to mutate into their nemesis, namely China.

It is uncanny that the country with the worst human rights record on earth became the global pacemaker for lockdowns, as western democracies exonerated their existential threat and bowed to China’s distinct brand of tyranny.

As a result, the big tech data analytics pioneered by Silicon Valley luminaries, that was road tested in China, finally landed on the shorelines of western democracies.

And in an ironic twist of fate, the intelligence state created at the end of world war II, under the National Security Act, conceived the very corporations that would bring about the end of constitutional democracy, that would author a new bill of rights from their own community standards de jour, and that would shift us from sovereign nation states to global governance, into the collectivist future the Pentagon had been charged with protecting us from.

As Goethe quote goes ‘None are more hopelessly enslaved than those who falsely believe they are free.’ Namely, anyone still looking through rose-tinted lenses in the digital age, oblivious to the fact they are victims of systematic addiction. The bread and circuses of the internet influences the same dopamine rewards centres and neural circuitry motivators as slot machines, cigarettes, and cocaine, as was originally intended by psychologists like JCR Licklider, at the helm of this new technology that would exploit basic vulnerabilities in the human psyche.

As we descend further into the maelstrom of the digital age, the algorithms will get smarter, the psychological drivers will become more persuasive and digital rubric will become more real. Until eventually we will lose touch with reality altogether. But don't worry, this war of attrition is happening in conjunction with the roll out of new software and devices, and most will be too busy building their digital avatars or dissenting on social media to know any better.

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How the West Was Won: Counterinsurgency, PSYOPS and the Military Origins of the Internet, Part 2: The Military Origins of the Internet

As Sasha Levine reveals in his ground-breaking book, Surveillance Valley, at the height of the Cold War, US military commanders were pursuing a decentralised computer communications system without a base of operations or headquarters, that could withstand a Soviet strike, without blacking-out or destroying the entire network.

The project was coordinated by the Defence Advanced Research Projects Agency (DARPA), created by President Eisenhower in 1958, for the development of technologies that would expand the frontiers of science and technology and help the US close the missile gap with the Soviets.

DARPA has since been at the vanguard of every major advancement in the development of personal computers ever since the cold war, culminating in 1969 with the first computers being in universities across the US.

A few years later DARPA would develop the protocols to enable connected computers to communicate transparently across multiple networks. Known as The Internetting Project, DARPA’s prototypical communications network, the ARPANET, was born in 1973.

Fast forward to 1990 and the ARPANET was officially decommissioned, and the Internet privatised to a consortium of corporations including IBM and MCI. Eventually the federal government created a dozen or so network providers and spun them off to the private sector, building companies that would become the backbone of today's internet, including Verizon Time-Warner, AT&T and Comcast. That’s the same six corporations who not only own 90% of US media outlets, they control the flow of global communications, through a process of absolute vertical-horizontal alignment of legacy media with digital media, and the infrastructures and technologies that enable their mass communication.

J.C.R. Licklider

A central player in the development of the ARPANET, who many consider the founding father of computing, was American psychologist, J. C. R. Licklider.

Lick, as he was known, was the first Director of the agency tasked with executing DARPA's information technology programs, The Information Processing Techniques Office (IPTO), that has been responsible for just about major advancement in computer communications since the sixties.

As Stephen J. Lukasik, a contributor to the ARPANET project reflected in his paper ' ‘Why the Arpanet Was Built’ ‘Lick saw information technology and behavioural and cognitive science issues as connected.’

Lick was essentially predicting how the internet would go on to evoke real world social processes that have radically transformed how we communicate, organise and process information. It is no coincidence that a psychologist of ‘Licks calibre was at the vanguard of a new technology designed to exploit basic vulnerabilities in the human psyche.

In the 1960’s Lick oversaw DARPA’s strategic interest in a new frontier of information technology, called Brain Computer Interfaces (BCI’s). In his famous paper, considered one of the most important in the history of computing, Lick put forward the then radical idea that the human mind would one day merge seamlessly with computers. He was anticipating the evolution of AI and the role that DARPA would go on to play in funding just about every major advancement in BCI technology over eight decades, including Elon Musk’s brain-machine interface company, Neuralink.

The Vietnam War

The ARPANET brought together the Pentagon’s war machine with university research departments and the Bay area’s counterculture scene. Inspiring much of the anecdotal idealism that would define the early years of cyberspace as a liberating new frontier for humanity.

But war hawks and intelligence analysts had other ideas. If the lessons of the Vietnam war were anything to go by, the future of US warfare would not be with nation states, it would be with ideologies, or more specifically, grassroots movements, such as the Viet Cong, who had the power to stoke the flames of civil unrest, that could lead to uprisings, or worse, revolution. Alternative approaches were, therefore, needed to infiltrate and disrupt this new threat to the free world.

As the war raged in Southeast Asia, another psychology PHD, Robert Taylor, joined DARPA as the agency's third director. Taylor transferred to Vietnam in 1967, to establish the first computer centre at the Military Assistance Command base in Saigon, a central pillar in the DoD’s psychological warfare operations.

The move was endemic of the changing rules of military engagement that saw DARPA, and indeed, this new technology, playing a major role in the war effort, both in Southeast Asia, and at home on US soil, against the growing anti-war movement.

In 1968, Taylor and ‘Lick published their seminal paper "The Computer as a Communication Device." Laying out the future of what the Internet would eventually become. The paper began with the visionary statement: "In a few years, men will be able to communicate more effectively through a machine than face to face.” Anticipating the meteoric rise of social media, particularly Facebook, in the decades to come.

Bringing the PSYOP Back Home

The origins of Facebook coincide with a controversial military program that was mysteriously shut down the same year Facebook launched.

The military program in question, LifeLog, was developed by DARPA’s Information Processing Techniques Office, with the stated aim of creating a permanent and searchable electronic diary of a person’s entire life. A dataset of their most personal information.

But would people willingly give up a record of their private lives to a military intelligence social media platform?

Probably not. Enter Facebook.

LifeLog, meanwhile, was ostensibly shut down. But this was not the first nor the last time that a project of this magnitude would be proposed.

In a 1945 article for The Atlantic, Vannevar Bush who directed the US Army's psychological operations during World War II, discussed his hypothetical project, The Memex, as a device “in which an individual stores all his books, records and communications, and which is mechanised so that it may be consulted with exceeding speed and flexibility."

In immortalising people's lives, it was hoped that LifeLog would eventually contribute to the emerging field of artificial intelligence (AI), that could one day think just like a human, intersecting with another DARPA backed project - the Personal Assistant That Learns (PAL) - a cognitive computing system designed to make military decision-making more efficient, which was eventually spun-off as Siri, the virtual assistant on Apple's operating system.

But LifeLog is just one part of the story. There was another DARPA program that also ‘disappeared’ one year before Facebook made its debut. Often cited as the precursor to Facebook. The Information Awareness Office (IAO) brought together several DARPA surveillance and information technology projects.

The stated aim of the IAO was to gather and store the personal information of every US citizen, including their personal emails, social networks, lifestyles, credit card records, phone calls, medical records, without, of course, the need for a search warrant. This information would funnel back to intelligence agencies, under the guise of predicting and preventing terrorist incidents before they happened. Reminiscent of Project Camelot’s early warning radar system for left wing revolutionaries.

Despite the government, apparently, abandoning their gambit for total information awareness over ordinary Americans, the core of the project survived.

I draw your attention to Palantir, the spooky data analytics firm founded by Facebook’s board member, Peter Thiel.

Despite being portrayed as science fiction in the firm Minority Report, Palantir’s predictive policing analytics have been deployed extensively against insurgents in Iraq and by police departments in the US.

This is, of course, nothing new for the Chinese. The convergence of big tech data analytics with social credits has been deployed for many years by the CCP to weed out and punish dissidents, who can find themselves held indefinitely in political re-education camps for holding the wrong set of political beliefs.

But it must also be accepted, these Orwellian methods of repression did not originate in China. The encroachment of the CIA onto the public sphere has been happening since the 1960’s, when the US imported decades of counterinsurgency from the soviet satellites to tackle the anti-war and civil rights movements. This was ramped up in the wake of 9/11. Now through the backdoor of COVID-19 total information awareness is coming home to roost, as China’s social credits system has been implemented on the back of the Green Pass.

Before anti-vaxxers and conspiracy theorists, you had civil rights and anti-war activists. The ideology guiding dissent may have changed, but the military tactics used to counter it remain the same.


If insurgency is defined as an organised political struggle by a hostile minority, attempting to seize power through revolutionary means, then counterinsurgency is the military doctrine historically used against non-state actors, that sets out to infiltrate and eradicate those movements.

As David Galula, a French commander who was an expert in counterinsurgency warfare during the Algerian War, emphasised:

“In any situation, whatever the cause, there will be an active minority for the cause, a neutral majority, and an active minority against the cause. The technique of power consists in relying on the favourable minority in order to rally the neutral majority and to neutralise or eliminate the hostile minority.”

Overtime, however, the intelligence state lost touch with reality, as the focus of its counterinsurgency programs shifted from foreign to domestic populations, from national security risks to ordinary citizens. Particularly in the wake of 9/11, when the NSA and its British counterpart, GCHQ, began mapping out the Internet.

Thanks to Edward Snowden’s revelations in 2013, we now know that the NSA were collecting 200 billion pieces of data every month, including the cell phone records, emails, web searches and live chats of more than 200 million ordinary Americans. This was extracted from the world's largest internet companies via a lesser-known, data mining program called Prism.

There’s another name for this, and its Total Information Awareness. What ceases to be worth the candle is that people’s right to privacy is enshrined under the US Constitution's fourth amendment.

Few understand how lockdowns are ripples on these troubled waters. Decades of counterinsurgency waged against one subset of society, branded insurgents for their Marxist ideals have, overtime, shifted to anyone holding anti-establishment views. The predictive policing of track and trace and the theory of asymptomatic transmission are the unwelcome repercussions of the intelligence state seeking total information awareness over its citizens.

Throughout COVID-19 anyone audacious enough to want to think for themselves or do their own research has had a target painted on their back. But according to the EU, one third of Europe is unvaccinated. This correlates precisely with David Galula’s theory of counterinsurgency, that suggests one third of society is the active minority ‘against the cause,’ who must be neutralised or eliminated.

When Domestic Populations Become the Battlefield

The use of counterinsurgency in the UK goes back to colonial India in the 1800s. According to historians, this is the first time the British government used methods of repression and social control against indigenous communities, audacious enough to want to liberate their homeland from Imperialist rule.

These tactics was deployed extensively during The Troubles in Northern Ireland against another anti-imperialist faction, also looking to liberate their homeland from The Crown.

Much of the lessons learned in Northern Ireland were later transferred into the everyday policing and criminal justice policies across mainland Britain. And it wasn't just dissenters who were targeted by these operations, it was anyone with left wing ideals, particularly trade unionists who, it could be argued, were conspiring with the Kremlin to overthrow parliamentary democracy.

I draw your attention to the spying and dirty tricks operations against the 1980s miners' strike. This continued right up until 2012, when the police and intelligence communities were implicated in a plot to blacklist construction industry workers deemed troublesome for their union views. The existence of a secret blacklist was first exposed in 2009, when investigators from the Information Commissioner's Office (ICO) raided an unassuming office in Droitwich, Worcestershire, and discovered an extensive database used by construction firms to vet and ultimately blacklist workers belonging to trade unions.

If you want to know what happened to the left, look no further than Project Camelot’s early warning radar system for left wing revolutionaries. Decades of infiltration has recalibrated the left into genuflections of establishment interests. It was the unions who scuppered the easing of lockdowns in the UK and consistently called on the Department of Education to postpone the reopening of schools.

From the infiltration of unions to the co-option of activism, a judge-led public enquiry in 2016 revealed 144 undercover police operations had infiltrated and spied on more than 1,000 political groups in long term deployments since 1968. With covert spymasters rising in the ranks to hold influential leadership positions, guiding policy and strategy, and in some cases, radicalising those movements from within to damage their reputation and weaken public support.

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