The Atlas Shrugged risk

The biggest threat to America right now is not government spending, huge deficits, foreign ownership of our debt, world terrorism, two wars, potential epidemics or nuts with nukes.

The biggest long-term threat is that people are becoming and have become disheartened, that this condition is reaching critical mass, and that it afflicts most broadly and deeply those members of the American leadership class who are not in Washington, most especially those in business.

Unfortunately for our creditors, only about 1% of Americans pay around 40% of all income taxes. There are roughly 100 million U.S. households, which means about 1 million people are currently paying for about 40% of all the income tax receipts.

That doesn't count the big contributions these folks make to the tax base as a whole – their corporate taxes, their sales taxes, the payroll taxes they pay on their employees, etc. What if this 1% – these million people – decided they don't need a big income anymore? Or what if they decided they'd rather live somewhere else... some place where the weather is always perfect... where a great bottle of wine costs $5... where a steak dinner (grass-fed beef, no hormones) costs $10?

At many points over the following six months, we sold options for prices that only made sense if the stocks traded for less than zero – an impossible outcome. We made average gains in excess of 50% in less than six months on nearly two-dozen different positions.

We only lost money twice selling puts. It was, quite literally, the only time in my entire career the stock market was simply giving money away for free. But... I warned my subscribers the situation couldn't last. And once the volatility faded, we wouldn't be able to earn enough money selling puts to compensate us for the risk of holding the option. Today, volatility has almost disappeared and options pricing is horrible (for sellers). What should we do?

"As a matter of fact, when it come to the fiscal irresponsibility practiced over the last serveral decades, and which is really what will ultimately destroy this country, there is absolutely no difference between the two parties. Furthermore, do you think that if Black Americans such as Walter E Williams or Thomas Sowell were in charge of policy they would make the same choices of a Barack Obama? I suspect your circle of influence when it comes to Black folk is terribly limited and your view is entirely conditioned by what you know about corrupt Black democrats in this country. You owe your intelligent readers, both Black and White, and apology for your thoughtless comments." – Paid-up subscriber L Verne Carty

Porter comment: I knew when I wrote the piece about Detroit I would be accused of racism by lots of readers. I could have ignored race in my telling of the history, but ignoring race wouldn't have changed any of the facts. And the truth is that race matters in Detroit politics. The truth is, race has played a major and complex role in Democratic policies over the last 40 years – particularly in urban areas. For many ambitious, talented, and intelligent black men and women, the civil rights movement led to a career in politics. This generation of black politicians (who are nearly all Democrats) has an overwhelming belief in the power of the government to improve people's lives. They believe this because the civil rights movement was so successful.

Unfortunately, these men and women don't understand the many negative consequences when the government moves from granting equal rights to manufacturing equal outcomes. These black Democratic politicians have held on to power – despite the disastrous outcomes of their policies – largely because they have continued to promise their mostly black constituents they can deliver more benefits from government. These promises come with a racial undertone because their constituents know very well who will pay for these government programs: rich white people.

On the other hand, there are numerous leading black intellectuals – like Walter Williams and Thomas Sowell – who have stopped to ask the obvious question: Has the expanded role of government helped the black community or hurt it? These men, however, are not Democratic politicians. They do not run for office with the explicit promise of using the government to redistribute wealth. And unfortunately, neither of them is currently the president of the United States.

As anyone who knows me would tell you, I am not a racist. And I am not prejudiced. But I simply won't pretend race has not played a major role in urban politics, even though pointing out these facts is uncomfortable and puts me in jeopardy of being called a bigot.

Finally... 90% of the time I would agree with you that there is no difference between the two major political parties. But I don't think this is true when it comes to race. The Republican Party is not only the party of Lincoln, its policies are, to a much greater extent than the Democrats, blind to race. The Republican Party has consistently opposed affirmative action and other racially motivated government policies. For this reason, lots of folks consider Republicans to be anti-black. I think the opposite is true. I believe the way Democrats pander to racial interests is the real bigotry.

And I think what the government has done to black communities – largely at the insistence of black Democratic politicians – over the last 40 years is a horrendous crime. At some point – and I think it's happening right now in the current mayoral election in Atlanta – the black community is going to turn the tables on the black Democratic leadership. I think we'll see a time when it is the black caucus that's the most libertarian. They've certainly suffered the most under big government.

Discussing these ideas – and having the freedom to write about them without knee-jerk accusations of racism – is critical to a better understanding of politics in the United States. I hope you'll reconsider my points and your evaluation of my character.

Porter comment: Believe me, Tom, I agree with you. I would much prefer to own all of the stocks I recommend, if for no other reason than to assure people I believe 100% in what I've written. (I would also prefer to actually own my recommendations because they have been enormously profitable...)

So why do we have a policy that prohibits it? The reasons are legal and regulatory. The Securities and Exchange Commission (SEC) is working hard in court (against yours truly) to extend its authority over what's merely being written about stocks. As you surely know, we don't engage in brokerage, banking, or investment management. We don't offer any personalized advice. And so, we don't wish to be regulated by the SEC.

Also, you should understand the SEC exists to protect the interests of Wall Street's big banks and brokers – folks whose work we regularly criticize. Wall Street wants to put a muzzle on me and other letter writers like me, who constantly expose their conflicts of interest and the sometimes fraudulent nature of their businesses. We also believe strongly in the freedom of speech. I think you ought to be allowed to write and publish your opinions and your research on stocks, without fearing the government is going to come after you in court. (Believe me, it is expensive as all hell to fight the government in court.)

So... the SEC has been arguing in court that securities laws passed in the 1930s after the Great Depression give it the right to regulate newsletters because they claim our writing is done "in connection with the purchase or sale of securities." This so-called "in connection with" language is the key limiting factor of the SEC's legislative mandate. We are afraid if we buy and sell the stocks we write about, the SEC will be able to argue successfully that our writing is a part of our personal investing and therefore is "in connection with" the purchase and sale of securities.