Investing in Paramilitary Software (TYL)

With the most recent riots in Baltimore and ongoing tensions in Ferguson and elsewhere, we feel it timely to return to one of the themes we’ve been discussing here for the past several years, and that’s the notion of civil breakdown and all it entails for good folks like you.

But before we do, there are others who’ve opined on the issue from a moral standpoint far better than we ever could, and we want to refer them to you before we get on with the general financial and survival issues pertinent to the theme.

Police Aggression?

The first is blogger Chris Martenson, who normally writes on an array of issues – mostly market- and economy-related – but whose focus on police violence, we believe, deserves everyone’s attention. It can be found here, and even for those who find little reason to blame police for what’s been happening of late, his findings are both penetrating and disturbing.

POLICE-AGGRESSION

The other – would you believe – is Baltimore Orioles vice-president John Angelos, who picks up on a related theme here, and whom we quote at length below for the depth of his perception and his courage to speak up.

He says like this (underline ours) –

[The]American political elite have shipped middle class and working class jobs away from Baltimore and cities and towns around the U.S. to third-world dictatorships like China and others, plunged tens of millions of good hard-working Americans into economic devastation, and then followed that action around the nation by diminishing every American’s civil rights protections in order to control an unfairly impoverished population living under an ever-declining standard of living and suffering at the butt end of an ever-more militarized and aggressive surveillance state. The innocent working families of all backgrounds whose lives and dreams have been cut short by excessive violence, surveillance, and other abuses of the Bill of Rights by government pay the true price, an ultimate price, and one that far exceeds the importance of any kids’ game played tonight, or ever, at Camden Yards.

Aside from the demagoguery of the first few sentences, the man’s got the idea altogether straight. And that is – that police don’t receive increased paramilitary, anti-terrorist and riot dispersal training and equipment for nothing. They get it to use it. There’s simply no possible way that what you train and rehearse for day after day, year after year, you will not do. Regardless of the situation.

So when Chris Martenson details how two cops violently beat a 5-foot-4 inch nurse, gleefully body-slamming her twice on the ground for speaking on her cellphone while driving, you know there’s something more than run-of-the-mill police sadism involved here.

And as VP Angelos points out, all of this stems from an abrupt shift in the thinking of the nation.

THINKING

It used to be that the individual was the ultimate repository of value in this country, and the job of the police was to serve and protect that individual from societal elements that were predatory and/or otherwise dangerous. But that’s no longer the case. Today the job of the police is to show you who’s boss. And who is boss? Why, none other than the state. The state has now become (in the minds of those same ‘elites’ that Angelos refers to – including academia, the media, the courts, the government and the vast army of bureaucrats that serves them) the new ultimate value to be served and protected in American society.

And Lord help you if you openly challenge that assumption.

It’s not a happy development, and it could be there are still places where Americans are cloistered from the reality we’ve described above. But one way or another, and likely sooner rather than later, everyone will feel the sting of the anonymous state’s all-powerful and omnipresent agents.

And that leads to a trade, Matty?

Have we ever let you down?

Part of the vast government surveillance apparatus and the bureaucracy that supports it is a handful of software companies that develop operations packages that monitor everything from prisoners to students, patients to court and police databases, municipal records, citizen files and all else in between.

And one company has been extraordinarily successful in marketing such software.

They’re called Tyler Technologies (NYSE:TYL), they’re growing quarterly revenues at a 20% year-over-year clip, they have a ridiculously high P/E ratio of 69 (!), and the stock has appreciated some 8300% over the last fifteen years.

Here’s a two year chart of TYL –

TYL-CHART-VOLUME

The stock popped after earnings were reported last week, but have now returned to more reasonable entry levels, and we say it’s time to trade.

The best way to play it is to sell PUT options. We’d favor a five or six month time horizon below the rising 137 day moving average – say, between $100 and $115.

Warning: Moral Hazard!

The thought of profiting from part of the same machine that’s turning out to be sorely oppressive may seem odious to some, and we understand that sentiment. At the same time, we have to remain true to our purpose here – and that is to make money for our readers. If it’s not to your taste, don’t put on the trade. But don’t cry, either, if the initiative scores big and could have helped you purchase that small town, woodsy getaway you always pined after…

Many happy returns,

Matt McAbby

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