“Paper money eventually goes
down to its intrinsic value – zero.” Voltaire
(1729)
Dean LeBaron
Art of Compounding
Bill Cara
CK's ICKO
Dr. Michael Berry
Gather.com
Must read:
Seymour Schulich's
new book entitled...Get Smarter;
Life and Business Lessons with Derek DeCloet (Key
Porter Books)
This should make
your day.
Classics!
The Last Laugh - Bird and Fortune -
Subprime and
The Admirals Interview and
Iraq Oil and
Conservative MP
and
Army
August 2008: Compliments of Vanity Fair...
Bringing Down Bear Stearns
by Bryan Burrough
- MUST READ
May 2008: Compliments of Harpers Magazine...
Numbers racket: Why the economy is worse than we know
by Kevin P. Phillips
July 2008:
Of Maes and Macs: From Ridiculous to Sublime
by Eric Sprott and Sasha Solunac
August 3, 2008: Compliments of LeMetropolecafe.com...
Henry Paulson has lost the control over US finance,
economy
by F. William Engdahl
August 1, 2008: Investment Round table from Business
Times Singapore
-
"Making
sense of the bear market"
Chart of the day (31/07//2008)
Compliments of Michael Hyman... The blue line is
inflation in the US using the 1980 calculation, before
it was dramatically manipulated, the recent Bush
administration is the red line

July
31, 2008: Compliments of Richard Russell...
Gresham's law is commonly stated as follows -- "Bad
money drives out good money." In the sense that the
"good money," the intrinsic money, is hoarded,
hidden, taken off the market.
Gresham's law is named after Sir Thomas Gresham
(1519-1579) an English Financier in Tudor times.
All modern money is "bad money" in the Gresham
sense, since the only reason fiat money is money is
because the government deems it to be money. In
other words, it's money by government fiat.
Today, fiat money (Federal Reserve Notes) has
entirely replaced commodity or Constitutional money.
Fiat money has driven out gold and silver coins and
also intrinsic money.
I'm looking at an actual bill, series of 1922, that
says "Ten Dollars in Gold Coin." On the bottom of
the bill it states, "Payable to the bearer on
demand." I'm looking at another actual bill, series
of 1923, that says "One Silver Dollar." Across the
bottom it says, "Payable to the bearer on demand."
Both of these bills are history, they are antiques
and collectors items.
Thus, Gresham's law still lives, as valid today as
when it was when it was put forth in the 1500s. Bad
money has again driven out good (intrinsic) money.
July 29,
2008: Compliments of Richard Russell...
Global Scoreboard -- percentage gained or lost so far
this year --
INDEX
S&P 500 -13.97%
Frankfurt DAX -20.68%
London FTSE 100 -17.62%
Hong Kong Hang Seng -19.97%
Paris CAC-40 -23.04%
Tokyo Nikkei 225 -14.03%
ASIA
Seoul Composite -17.39%
Singapore Straits Times -16.71%
Sydney All Ordinaries -23.33%
Taipei Taipex -17.54%
Shanghai Shanghai B -41.60%
July 28, 2008: Compliments of the Washington Post
and thanks to Seymour...
China's Cars, Accelerating A Global Demand for Fuel
-
MUST READ
by Ariana Eunjung Cha
July 22, 2008:
Gold Bullion Essential Facts
by Anthony S. Fell
-
MUST READ
July 19, 2008:
Compliments of the Wall Street Journal...
Why No Outrage?
by James Grant
-
MUST READ
June 2008: Compliments of Absolute Return...
Eric Sprott Survivalist by Barry Cohen
July 24, 2008:
These paragraphs from the August GQ magazine tell
you why --
"Oil is the fluid foundation of globalized society
and has also contributed mightily to the increase of
the global population. After the Second World War
(lost by the Germans in no small part because they
ran low on gasoline), the spread of
petroleum-derived industrial fertilizers caused
agricultural yields to double between 1947-1979 --
the world population did the same - and today we are
in the ironic position of trying to supplement the
oil supply with biofuels reliant on petroleum from
fertilizer.
"Petroleum also serves as the primary feedstock for
an array of petrochemicals capable, as the word
plastic implies, of assuming almost any shape and
consistency: I am writing this on a plastic keyboard
and you are reading it on a page printed with
plastic-based ink while poor people wearing plastic
sandals are elsewhere carrying water in plastic
jugs.
"According to a recent study, the historical ratio
of U.S. economic growth to increased petroleum use
is a tidy one-to-one, which naturally leads you to
wonder what a peak and decline in petroleum use
would do to our habitual prosperity. The moment you
see the Die Off graph, you get the idea: If the
availability of fossil fuels, which have done so
much to increase the productivity of people and
nature alike, were to drop off, mightn't this tip
everything else into a swoon?"
July 24, 2008:
I hadn’t seen Forstmann’s name in years. He once
lorded over one of the world’s most famous private
equity firms, Forstmann Little. For a time, it was,
as the Journal notes, “the most successful private
equity firm in the world, renowned for both its
outsized returns and its caution.” When things got a
little too crazy, Forstmann chose not to play. For
two years, he sat on $2 billion of uninvested funds.
That’s discipline you don’t find often, in any era.
Ted Forstmann’s caution saved his firm a lot of pain
when the private equity market collapsed later. As
the interview made plain, old Forstmann has that bad
feeling again. “Buffett once told me,” he said,
“there are thee ‘I’s’ in every cycle. The
‘innovator,’ that’s the first ‘I.’ After the
innovator comes the ‘imitator.’ And after the
imitator in the cycle comes the ‘idiot.’” We’re in
the idiot phase now, he says.
July 21, 2008:
An excerpt from LeMetropoleCafe.com... NEW YORK,
July 21, 2008: (Reuters) - Senior Goldman Sachs
Group Inc investment banker Kendrick Wilson will
take a leave of absence to advise U.S. Treasury
Secretary Henry Paulson on the nation's banking
crisis, people familiar with the matter said on
Monday.
Wilson, a vice chairman of investment banking and
chairman of Goldman's financial institutions
business, has played a key role advising banks on
capital raising and reorganizations.
He is expected to help address the crisis gripping
banks, Wall Street firms and mortgage lenders, the
sources said. He is expected to serve without pay
through January, when President George W. Bush's
second term ends.
Goldman declined to comment on the matter. Treasury
officials were not immediately available.
Wilson, 61, joined Goldman in 1998 and was a leading
dealmaker during the bank merger boom of the late
1990s. Previously he was a vice chairman and head of
investment banking at Lazard, Freres & Co, which he
left amid a period of management turmoil at the
partnership.
He was president of Ranieri & Co from 1988 to 1989,
a firm set up by famed mortgage securities banker
Lewis Ranieri. He was a senior executive vice
president for now-defunct brokerage E.F. Hutton in
1987.
The Dartmouth College graduate served in the Vietnam
War as a U.S. Special Forces officer…
-END-
Paulson is a Dartmouth man too. As Adrian notes…
Bill,
Banker Leaves Goldman Sachs To Aid Paulson
The GS South Office continues to expand!
QUOTE
While a number of details still must be worked out,
Mr. Wilson, 61 years old, is expected to serve
without pay, in a period through January, the people
familiar with the matter said. President George W.
Bush made a personal call to Mr. Wilson in recent
days, asking him to assist Mr. Paulson.
END
Being on the inside is so lucrative you don’t need a
salary!
Cheers
Adrian
Wilson has been called in to assist Paulson because
the markets are a mess behind the scenes.
It is remarkable how many Goldman Sachs honchos end
up at the U.S. Treasury in some capacity. GS is like
a junior varsity pipeline for the varsity. There can
be no doubt the quid pro quo here is a pipeline of
information back to GS about financial conditions
and the markets. Can there be any wonder why Goldman
Sachs out trades the world quarter after quarter?
The odds of the market going lower from here are
high and that the bulk of the correction is over. As
the US stock market sinks, along with the real
estate market, gold and silver are going to become
increasingly attractive investments to many who
never thought about them before.
July 18, 2008:
Scoreboard
-- year to date.
Crude up 34.7%
Ethanol up 5.9%
Heating oil up 41.7%
Natural gas up 40.9%
Unleaded gas up 27.4%
Aluminum up 31.8%
Copper up 23.4%
Gold up 16.2%
Platinum up 24.5%
Silver up 26.2%
Cattle up 1.0%
Corn up 38.4%
Cotton up 2.9%
Lumber up 4.7%
Orange Juice up 13.2%
Soybeans up 26.9%
Wheat down 8.5%
July 16, 2008:
Compliments of our good friend Larry Jeddeloh of the
TIS Group;
strategist and technician extraordinaire...
No institutional or wealthy individual investor (who
wants to stay wealthy) should be without Larry's superb
research.


July 15, 2008:
Compliments of Ron Rosen, who writes the Rosen
Market Timing Letter...
"This world has been functioning for decades on
faith and trust in paper money and the politicians
backing it. One day, hopefully, citizens of the
world will know better than to trust their
politicians with anything that vaguely resembles
money. The pain associated with this learning lesson
is in the process of being hammered home. There may
be some violent corrections on the way up to the
ultimate destination for gold, silver, and their
shares. However, the percentage of the price
corrections should remain relatively normal. As the
climb in price becomes more extensive and violent,
the corrections may become shorter in time consumed.
A “blowoff” is what the precious metals complex is
in the process of beginning.
"The gold market chart of 1978 closely resembles the
gold market chart of 2008. The patterns, once a
breakout above a previous multi-year high occurred,
are nearly identical. If you compare the first seven
months after the breakout to a new all time high
occurred in 1978 to the first seven months after the
breakout to a new all time high occurred in 2008 you
will see nearly identical patterns. In 1978 gold
rose from the breakout price of $192 to the ultimate
high of $873. That was an increase of 450%. If the
current gold breakout from the $850 high increases
by 450% the ultimate high will be $3,825.00.
However, we are living in more dangerous financial
times than existed in the 1978 to 1980 period."
July 15, 2008:
(Bloomberg) -- The dollar declined to a record low
against the euro on speculation Federal Reserve
Chairman Bernanke and Treasury Secretary Paulson
will say credit-market losses are hurting U.S.
economic growth.
The currency also weakened to the lowest level in
more than a month against the Japanese yen and to a
25-year low versus the Australian dollar on concern
confidence in the debt of Fannie Mae and Freddie Mac
will wane even after the U.S. government pledged
support for the two-largest buyers of home loans.
The pound surpassed $2 for the first time since July
1 after U.K. inflation quickened to the fastest pace
in at least 11 years.
July 14, 2008:
Score Board -- Year to date -- All Down with a bow
to globalization --
Index
S&P 500 -15.59%
Frankfurt Dax -23.73%
London FTSE 100 -18.51%
Hong Kong Hang S -20.24%
Paris CAC-40 -26.96%
Tokyo Nikkei 225 -14.82%
ASIA
Seoul Composite -17.37%
Singapore Straits Times -15.55%
Sydney All Ordinaries -21.07%
Taipei Taipex -14.83%
Shanghai Shanghai B (China) -39.94%
July 11, 2008:
Dow vs. Gold
-- The ratio
between the Dow and gold has hit a new low. Today,
one share of the Dow will buy only
11.44
ounces of gold -- that's down from
43.75
ounces back in July 1999. In other words, since
mid-1999 the Dow has lost
73.8% of
its value in terms of real money -- gold. Talk about
a silent and insidious bear market, you're looking
at one.

July 9, 2008: (Bloomberg) -- Fannie Mae paid a
record yield over benchmark rates on $3 billion of
two-year notes amid concern that the U.S.
mortgage-finance company doesn't have enough capital
to weather the biggest housing slump since the Great
Depression.
November 6, 2007:
(Bloomberg interview with Kathleen Hays) "This is
worse than the S&L crisis. This is the first time -
this is the worst credit bubble we've ever had in
American history. No - ever in American history have
people been able to buy a house with no money down,
never. That's never happened anytime in the world.
So, we have the worst credit bubble. It's going to
take a long time to work its way out. You don't cure
a bubble in five or six months... It takes five or
six years."
Jim Rogers
July 7, 2008:
Again, from the Telegraph. Very important in
conservative circles.
Of all the leaders, only Stephen Harper - the
talented but curiously neglected Canadian prime
minister - is able to point to a popular and
successful record in office.
Some will regard it as alarming that, in current
times, world leadership should rest with Canada. But
the Canadian Tories are a model of how to behave
during a downturn.
They have kept spending in check and reduced taxes.
They are playing their full role in world affairs,
notably in Afghanistan.
Rather than canting about saving the world (Mr
Harper, in his quiet and courteous way, is a
Kyoto-sceptic) they have addressed themselves to
curing remediable ills and, above all, to putting
their own affairs in order.
If the rest of the world had comported itself with
similar modesty and prudence, we might not be in
this mess
June 12, 2008:
Compliments of The Diplomat... Agenda;
Smash and grab
The
Diplomat Analytic Unit
July 3, 2008:
(Bloomberg) -- When President George W. Bush went to
his first Group of Eight summit in 2001, a dominant
issue was the dollar -- the strong dollar, that is.
The U.S. currency was on a record-setting streak,
and the free-marketeering president wasn't going to
stand in the way.
On the eve of Bush's last G-8 appearance, the
dollar's gyrations are again in the crossfire. This
time, it is a weak currency, upended by slumping
growth, a housing recession and record gas prices,
that is gnawing away at the world economy.
The dollar's 41 percent drop against the euro during
Bush's term writes the economic epitaph of an
administration that set out to restore American
preeminence. Instead, Bush heads to Japan next week
for his final international summit with diminished
leverage as Russian and Chinese influence grows.
July 3, 2008:
Scoreboard so far in 2008 for commodities -- (all
items below are plus except for pork bellies and
wheat).
Aluminum (lb.) 36.7%
Cattle (lb.) 8.12%
Coffee (lb.) 12.7%
Copper (lb.) 34.5%
Corn (bushel) 64.4%
CRB index 32.0%
Ethanol (gal.) 20.8%
Gasoline, unleaded (gal.) 43.4%
Gold (troy oz.) 13.2%
Lumber (1,000 bd. ft.) 3.1%
Natural gas (Btu) 78.9%
Oil, heating (gal.) 54.0%
Oil, lt. swt. crude (barrel) 49.6%
Platinum (troy oz.) 35.7%
Pork bellies (lb.) -19.7%
Silver (troy oz.) 23.9%
Soybeans (bushel) 37.3%
Wheat (bushel) -2.2%
July 3, 2008 --
July 3 (Bloomberg) -- When President George W. Bush
went to his first Group of Eight summit in 2001, a
dominant issue was the dollar -- the strong dollar,
that is. The U.S. currency was on a record-setting
streak, and the free-marketeering president wasn't
going to stand in the way.
On the eve of Bush's last G-8 appearance, the
dollar's gyrations are again in the crossfire. This
time, it is a weak currency, upended by slumping
growth, a housing recession and record gas prices,
that is gnawing away at the world economy.
The dollar's 41 percent drop against the euro during
Bush's term writes the economic epitaph of an
administration that set out to restore American
preeminence. Instead, Bush heads to Japan next week
for his final international summit with diminished
leverage as Russian and Chinese influence grows.
July 2, 2008: Had
you invested and held on since 1980 you would have
done best again in the S&P and worst in silver and
gold.
But wait, does that mean that gold and silver are
now going to catch up to some of the other items?
After all, the S&P is selling at twelve times its
1980 price while gold is only 1.4 times its 1980
price.
Today, these items cost X times as much as in 1950;
Y times as much as in 1967, and Z times as much as
in 1980:
Gasoline 16 times 1950; 12 times 1967; 3.3 times
1980
Crude oil 49 times 1950; 45 times 1967; 3.6 times
1980
Gold 25 times 1950; 25 times 1967; 1.4 times 1980
Silver 21 times 1950; 9 times 1967; about the same
as 1980
Surfboards 13 times 1950; 7 times 1967; 3 times 1980
Homes 28 times 1950; 12 times 1967; 4.3 times 1980
Income 18 times 1950; 7 times 1967; 2.8 times 1980
S & P 500 77 times 1950; 15 times 1967; 12 times
1980
CPI 9 times 1950; 7 times 1967; 2.6 times 1980
July 2, 2008:
Scoreboard -- year
to date:
S&P down
12.5%
Frankfurt
DAX down 21.7%
London FTSE
down 15.1%
Hong Kong
Hang Seng down 20.5%
Paris CAC
down 22.6%
Tokyo Nikkei
down 12.0%
Seoul
Composite down 12.1%
Singapore
Straits down 16.1%
Sydney All
Ordindary down 18.0%
Tapei Telex
down 12.9%
Shanghai
Shanghai B down 42.6%.
June 30, 2008:
Compliments of Pollitt & Co. Inc...
The Real Gold Production
June 30, 2008:
There's also an interesting article in this week's
Barron's. It's an interview with Peter Schiff,
president and chief global strategist for Euro
Pacific Capital. Following are a few paragraphs from
the Barron's interview --
". . . we haven't been through anything like what we
are going through now. The United States has really
been living in a fool's paradise, or a phony
economy, probably for more than twenty years. But
our economy has been growing bigger and bigger. We
have been able to convince the world to lend us
money and to provide us with goods that we don't
produce and that we can't afford to pay for with
exports. And it has gotten to the point now where
the problem is so big, especially since the
real-estate bubble.
"We have borrowed so much money from abroad. Our
trade deficits are now very big, and our industrial
base and our infrastructure has been allowed to
decay for so long, that we are now at a point that
we can only survive as an economy thanks to the
charity of the rest of the world. They have provided
us with all the goods that we can no longer produce
because we lack the industrial capacity. And they
have to lend us the money because we don't have
savings anymore."
June 25, 2008:
Compliments of The New Scientist...
Danger Zones
June 23, 2008:
The following is from Jim Cramer's piece in the
current issue of New York magazine. On his TV
program Cramer puts on his wild man act, but he's
very smart, and he knows Wall Street as well an
anyone. I like Cramer's writing: it's serious and
minus the antics ( Richard Russell) --
In 25 years on Wall Street, I have never seen things
this bad. We've had some tough times: the 1987
stock-market crash, the collapse of the
once-all-powerful Drexel Burnham Lambert, the
immolation of long Term Capital, the post-9/11
calamity, and the dot-com implosion. Every one of
these events rocked the Street, causing pay cuts and
layoffs and creating a sense of doom. But this time
is different; it's doom itself.
Wall Street closely guards its layoff numbers, but
piece together the evidence and a grim picture
appears: an estimated worldwide total of 4,000
dismissals at Morgan Stanley, 5,000 at Merrill
Lynch, 7,000 at UBS, and 16,000 at Citigroup. Even
the extremely profitable Goldman Sachs is letting
people go in some departments. Then there's Bear
Stearns. A year ago, Bear was the firm to work at.
People talked of the Era of Bear. Now it's gone.
Vanished. With more than 10,000 of its 14,000 former
employees either looking for work or soon to be laid
off by its new owner, JPMorgan. Right, JPMorgan --
the firm that seemed to pants the Fed and Treasury
when it snapped up Bear Stearns for a pittance.
Well, it now appears possible that Morgan may have
grossly underestimated how terrible the Bear bond
portfolio may be. The thinking on the Street was
that Morgan couldn't miss; it got $30 billion in
guarantees against losses. But now it looks like the
losses might exceed the guarantees.
June 23, 2008:
Recent articles; compliments of The Telegraph...
By Ambrose Evans-Pritchard, International Business
Editor, the Telegraph.
The Royal Bank of Scotland has advised clients to
brace for a full-fledged crash in global stock and
credit markets over the next three months as
inflation paralyses the major central banks.
"A very nasty period is soon to be upon us - be
prepared," said Bob Janjuah, the bank's credit
strategist.
A report by the bank's research team warns that the
S&P 500 index of Wall Street equities is likely to
fall by more than 300 points to around 1050 by
September as "all the chickens come home to roost"
from the excesses of the global boom, with contagion
spreading across Europe and emerging markets. Such a
slide on world bourses would amount to one of the
worst bear markets over the last century. RBS said
the iTraxx index of high-grade corporate bonds could
soar to 130/150 while the "Crossover" index of lower
grade corporate bonds could reach 650/700 in a
renewed bout of panic on the debt markets.
"I do not think I can be much blunter. If you have
to be in credit, focus on quality, short durations,
non-cyclical defensive names.
"Cash is the key safe haven. This is about not
losing your money, and not losing your job," said Mr
Janjuah, who became a City star after his grim
warnings last year about the credit crisis proved
all too accurate.
RBS expects Wall Street to rally a little further
into early July before short-lived momentum from
America's fiscal boost begins to fizzle out, and the
delayed effects of the oil spike inflict their
damage.
"Globalization was always going to risk putting G7
bankers into a dangerous corner at some point. We
have got to that point," he said
"The political fall-out could be substantial as
finance ministers from the weaker economies rail at
the ECB. Wider spreads between the German Bunds and
peripheral markets seem assured," he said.
Ultimately, the bank expects the oil price spike to
subside as the more powerful force of debt deflation
takes hold next year.
.......................................
Morgan Stanley warns of 'catastrophic event' as ECB
fights Federal Reserve
By Ambrose Evans-Pritchard, International Business
Editor. the Telegraph.
The clash between the European Central Bank and the
US Federal Reserve over monetary strategy is causing
serious strains in the global financial system and
could lead to a replay of Europe's exchange rate
crisis in the 1990s, a team of bankers has warned.
"We see striking similarities between the
transatlantic tensions that built up in the early
1990s and those that are accumulating again today.
The outcome of the 1992 deadlock was a major
currency crisis and a recession in Europe," said a
report by Morgan Stanley's European experts.
Jean-Claude Trichet is taking a hard line on rates.
Just as then, Washington has slashed rates to bail
out the banks and prevent an economic hard-landing,
while Frankfurt has stuck to its hawkish line -
ignoring angry protests from politicians and squeals
of pain from Europe's export industry.
Just as then, the dollar has plummeted far enough to
cause worldwide alarm. In August 1992 it fell to
1.35 against the Deutsche Mark: this time it has
fallen even further to the equivalent of 1.25. It is
potentially worse for Europe this time because the
yen and yuan have also fallen to near record lows.
So has sterling.
The point of maximum stress could occur in coming
months if the ECB carries out the threat this month
by Jean-Claude Trichet to raise rates. It will be
worse yet - for Europe - if the Fed backs away from
expected tightening. "This could trigger another
'catastrophic' event," warned Morgan Stanley.
June 16, 2008:
We got a confirming, second Hindenburg Omen
observation Monday, June 16th, so we now have an
official Hindenburg Omen potential stock market
crash signal on the clock. This means, there is an
approximate 25 percent probability that we will see
a full blown stock market crash within the next 120
days, taking us into a risk zone through October
2008. This is significant as the odds of getting a
stock market crash on any given random day is less
than one-tenth of one percent. Further, we can tell
you that there has not been a stock market crash
over the past 25 years without a confirmed H.O. The
odds of a significant stock market decline that is
not a crash is higher than 25 percent. For those of
you looking for more details, go to our Guest
Articles section and read our last article on the
H.O. NYSE New 52 week Highs were 80, with New Lows
at 78, the lower of the two being 2.40 percent of
total issues traded Monday, which were 3,240, above
the 2.20 percent threshold. The first of these two
observations was June 6th. This is the first
confirmed H.O. since October 2007, which led to a
mini-crash.
Monday's McClellan Oscillator rose to negative
-54.69. The Summation Index fell to positive +
873.84. The significance here is that major declines
often occur once the Summation Index drops below
positive + 1,000, so this is a negative development.
NYSE New Highs rose to 80, with New Lows falling to
78. This is an indication of an unhealthy market.
Subscribe now at www.technicalindicatorindex.com as
we follow this dangerous market set-up.
Best regards,
Robert McHugh, Ph.D.
June 12, 2008:
Thanks to our friend CK... Husky could be on the
brink of a major break out to the upside from the
current flag pattern.
Fundamentals are good and its very resilient to the
volatility. Today’s volume was high. It may be a
bottom.

Thanks to our friend CK...John: Looks like the
Americans failed to build-up inventories for the
air-conditioning season. Inventories are now as low
as the end of summer in 2005 month which was at the
same price level as are now. Last year, even with
help from LNG, inventories were low, but the price
of Natural Gas depressed. Now LNG is gone to
somewhere else no help for American.
As this summer unfolds, the demand could be
unusually high as the forecast indicates that global
warming will kick in full fledged. Air-conditioning
is a North American necessity. No cut backs should
be expected. This could push the NG to $16 U.S. We
better hold on to our NG stocks.

June 11, 2008:
The following
paragraph was written by Bill Gross of PIMCO as he
angrily complains about the US's use of phoney and
deceptive inflation statistics --
Investment success depends on an ability to
anticipate the herd, ride with it for a substantial
period of time, and then begin to reorient
portfolios for a changing world. Today's world,
including its inflation rate, is changing. Being
fooled some of the time is no sin, but being fooled
all of the time is intolerable. Join me in lobbying
for change in US leadership, the attitude of its
citizenry, and (to the point of this Outlook) the
market's assumption of low relative US inflation in
comparison to our global competitors.
Gross' piece is answered by David Fuller of
FullerMoney. I include David's response below --
My view - We have long advocated that investors look
on the markets as an international beauty contest
where they can pose as the judges. This means
evaluating whether it is advisable to be in
equities, bonds, commodities or cash and what mix of
those asset classes one should have to reflect
global market conditions.
Given the fact that US growth is slowing, the
domestic economy is in severe recession and
inflation remains an issue; it is reasonable to ask
whether one wants to be overly exposed to Wall
Street and the Dollar. However, excellent investment
opportunities will present themselves in the USA,
and some companies will do very well in an
inflationary environment, not least the better
multinationals, but more opportunities will probably
arise elsewhere.
The US 10-year yield bottomed in 2003 and bonds are
now in a secular bear market. The recent fall in
yields found support above the lows near 3% and
would need to sustain a move below that level to
offset scope for a rally towards the upper side of
the base over the coming years. Yields took 22-years
to fall from their accelerated peak and may yet take
as long again before they reach the highs of this
secular move.
This is a long-term cycle, and it will not be the
same as the last bond bear market, but it will give
context to almost every other asset class over the
coming decades.
June 11, 2008 --
The US national debt as of May 7, 2008, was $9.35
trillion. Just the interest on the US debt is now
$500 billion a year -- which is equal to the cost of
the Iraq war for five years. The cost of servicing
this outlandish debt grows every year. Since
September 2006, the debt has increased at an average
of $1.46 billion per day!
June 9, 2008:
How's it going? The items below show the percentage
of gain or loss so far in 2008 --
S&P 500 down 7.33%
Dow down 7.95%
D-J Transports up 14.87%
D-J Utilities down 3.98%
Crude oil up 44.3%
Ethanol up 3.4%
Heating oil up 50.4% (wait until winter comes).
Natural gas up 69.7% (same as above).
Unleaded gas (gal.) up 43.2% (say bye to SUVS).
Gold up 7.3%
Silver up 17.6%
Platinum up 36.2%
Copper up 19.5% (stand guard over your pipes and
copper gutters).
Aluminum up 25.2%.
Wheat down 8.4%
Corn up 42.8% (thank the idiots in government for
this one).
Soy beans up 21.6%
Cattle down 1.06%
Lumber up 4.0%
Cotton down 1.5%
June 3, 2008:
They don't come any smarter than El-Erian, who
worked at PIMCO, switched to running the huge
Harvard endowment fund, then back to PIMCO for more
money and co-running a huge PIMCO fund. Here's what
El-Erian is saying (courtesy of Newsmax):
El-Erian: Sovereign Funds Saved Wall Street
Investments in major financial institutions by
sovereign wealth funds over the past year helped
save the U.S. financial system from a meltdown, says
Mohammed El-Erian, co-CEO of Pacific Investment
Management Co.
“Imagine what the U.S. financial system would look
like if $69 billion in capital did not come in
November, December and January from the sovereign
wealth funds,” El-Erian, former head of Harvard
University’s endowment, said at a recent investment
conference.
“It would have been a lot messier. The credit crunch
would have been a lot worse. The de-leveraging would
have been a lot more severe.”
U.S. financial institutions have suffered more than
$160 billion in losses and write-downs since the
subprime mortgage crisis began last year. So the
investments by foreign funds played a major role in
shoring up the balance sheets of these troubled
firms.
The investments include:
• Abu Dhabi Investment Authority’s $7.5 billion
purchase of Citigroup convertible securities in
November.
• Kuwait Investment Authority’s $3 billion purchase
of Citigroup stock and $2 billion purchase of
Merrill Lynch stock in January.
• Temasek Holdings of Singapore’s $4.4 billion
purchase of Merrill Lynch stock in December.
• Government of Singapore Investment Corp.’s $6.9
billion purchase of Citigroup stock in January.
• China Investment Co.’s $5 billion purchase of
Morgan Stanley convertible securities in December.
Some critics of the funds have expressed concern
that they will try to translate their economic power
into political power, working against U.S.
interests. El-Erian acknowledges this worry, saying
the sovereign funds “have an obligation that comes
with the new power.”
U.S. and foreign officials have called for the funds
to make public all their investments and intentions.
In February, the European Commission called for an
international agreement to limit the political
influence of the funds.
Their financial influence certainly won’t shrink
anytime soon. So-called SWFs now control more than
$3 trillion in assets, and the International
Monetary Fund estimates that total will rise to $12
trillion within four years.
In a recent interview with Reuters, El-Erian also
said that the damage from the credit crisis has
moved from the financial sector to the consumer
sector.
“This one is morphing from a financial sector
disruption that hit Wall Street hard to one
impacting Main Street, through mounting pressure on
consumer confidence on account of both lower growth
prospects and higher inflation,” he told the news
service.
The Reuters/University of Michigan consumer
confidence index dropped to 59.5 in May, its lowest
level in 28 years.
The government needs to stabilize the housing sector
to pull the economy out of recession, El-Erian says.
“Otherwise, the consumer will face excessive
pressure in the form of higher prices, lower
availability of credit, declining employment, and
the negative wealth effect from falling house prices
and higher foreclosures.”
June 2, 2008: Breaking News from MoneyNews.com
Top Money Managers Name Their Picks
NEW YORK -- Hundreds of investors packed into the
Time Warner Center in New York for the annual Ira W.
Sohn Investment Research Conference on Wednesday to
hear top money managers discuss their favorite stock
picks.
Reporters were barred from disclosing details of the
event until Thursday.
Here is a list of the investors and some of their
choices:
Bill Ackman, Pershing Square Capital: Wendy's
International, which has agreed to be bought by
Nelson Peltz's Triarc Cos, the Arby's restaurants
owner. "We own all we can, a share less than the
poison pill," said Ackman.
Bill Miller, Legg Mason Capital Management: Buy AES
Corp, Freddie Mac and Health Net, which he hopes
will merge with Aetna, which the fund also holds.
David Einhorn, Greenlight Capital: Sell Lehman
Brothers short, because they haven't written down
structured investments enough.
Chris Hohn, Children's Investment Fund: Support his
firm's proxy battle at railroad company CSX.
Richard Pzena, Pzena Investment Management: Buy
Citigroup. "This is classic value. There is lots of
stress. When we come out of this, the upside is
huge."
Bill Browder, Hermitage Capital: Buy Aldar
Properties, the largest Abu Dhabi real estate
developer. "Abu Dhabi is the richest country in the
world and this is the cheapest real estate company
in the world."
Michael Price, MFP Investors: Buy Allied Irish Banks
but don't buy recent rights offerings by Citigroup
or UBS. "Citi's perpetual preferreds have nowhere to
go but down." Price also likes Vornado Realty Trust,
McGraw-Hill and GenCorp.
Douglas Teitelbaum, Bay Harbour Management: Buy
distressed debt in Harrah's Entertainment and stock
in Trico Marine, Navistar and Alliance One, one of
two major sellers of tobacco to cigarette companies.
"Cigarette smoking is up 3 percent worldwide. We
think this stock is just dramatically cheap."
Josh Fink, Enso Capital Management: Buy
MagIndustries, a Canadian company that produces
potash, magnesium and other materials. "Potash
prices are on fire!" Also short Brazilian aircraft
maker Embraer.
Robert Bishop, Impala Asset Management: Buy Fording
Coal Trust, a Canadian royalty trust, one of few
makers of coal for steel production. "It's the best
pure play in the metallurgic coal sector and a
potential acquisition target."
Carl Icahn: Support his dissident proxy slate at
Yahoo and don't support Democrat Barack Obama. "I
personally think he'd be a terrible president."
May 27, 2008: George Soros: "We’re in a Period of
Wealth Destruction"
Famed billionaire George Soros doesn’t mince words
when it comes to the credit crisis. Read the
following interview --
The U.S. has weathered the "acute phase” of the
crisis, which he calls the worst since the 1930s,
the chairman of Soros Fund Management and founder of
the Quantum Fund said in several interviews
recently. "The days of rapid financial wealth
creation are over. We’re now in a period of wealth
destruction. It’s going to be very hard to preserve
your wealth in these circumstances,” he told
Moneymagazine.
The Fed’s rate cuts, down to 2 percent from 5.25
percent eight months ago, ultimately won’t prove
enough, Soros says. "The Fed’s first duty is to
prevent the financial system from collapsing. It’s
shown it can do that, and the markets are breathing
a sigh of relief. But we can’t avoid the fallout in
the real economy,” Soros says.
Recession is ahead, as is inflation and a flight
from the U.S. dollar. But the Fed cannot simply
increase the money supply as it might in normal
circumstances to fight the recession. At least not
without serious inflationary consequences, Soros
warns.
"That’s why I think this crisis is so serious. The
Fed’s power to intervene is limited,” Soros says.
Soros anticipates further sharp declines in housing
prices. "Americans ultimately won’t escape this
episode without suffering a noticeable decline in
their standard of living,” he warns in an interview
with USA Today.
Soros says the Fed’s efforts to pump cash into the
banking system to ease liquidity and the
government’s $168 billion economic stimulus package,
including millions of tax rebate checks, will not be
enough to ignite a recovery. What’s more, he adds,
even as the clean-up continues, new bubbles are
already forming in commodities markets and perhaps
in China. The Asian giant faces serious domestic
inflation and export weakness if the U.S. downturn
spreads abroad, Soros warns. "China is not immune to
the worldwide dislocation that started here,” he
says.
As for his own money, Soros has put most of it in
the hands of other managers in the form of an
endowment fund. But he’s back in the game in this
market, he tells Money. "I came out of retirement
and set up an account to hedge their positions,” he
says. The strategy then was to short the dollar and
U.S. and European markets and to go long in emerging
markets. "That worked last year, but this year bonds
kept going up and emerging markets down, so I’m
about even,” Soros says.
As for how we got here, Soros turns toward the
philosophical side of economics. He sees the
subprime crisis as the event that pricked both the
housing bubble and what he calls a 25-year-long
"super bubble,” one he contends originated in the
"debt-laden policies of the Reagan administration.
Russell Comment -- Amazingly, Soros did not trust
his own money-managers. He went so far as to set up
a fund that hedged what he though might be the
mistakes of the people who managed his money!
May 9, 2008: Chart compliments of Richard Russell
and StockCharts.com ...
Did we break the long term uptrend in January 2008 and
have we just rallied back to the breakdown point?

May 6, 2008:
Gold -- first, a metal and fuel rundown, or what
they've done so far in 2008 ---
Aluminum up 25%
Copper up 31.4%
Platinum up 26.1%
Silver up 13.2%.
Gold up 4.8%.
Crude oil up 25.0%
Ethanol (gal.) up 6.8%
Heating oil up 25.4%
Natural gas up 49.5%.
Unleaded gas (gal.) up 23.0%
Is the Fed saying that there's no inflation?
May 5, 2008: Question 29 posed to Warren Buffett and
Charlie Munger at the Berkshire Hathaway Annual
Meeting this past weekend in Omaha, Nebraska...
Doug Hicks, Akron Ohio. Oil will run out this
century. Considering US policy is to do nothing
until last second, will we face World War III? Will
oil companies go to zero?
WB: Oil won’t run out - it doesn’t work this way. At
some point the daily productive capacity will level
off and then start declining gradually. There is the
depletion aspect and the decline curves. We are
producing 86m barrels per day or so, more than ever
produced. We are closer, by my calculations, to
almost our productive capacity, than we have ever
been. I think our surplus capacity is less, and
quite a bit less, than in past. Whatever that peak
is, whether 5 or 10 yrs, the world will adjust, and
we will think about it. Adjustments will cause
demand to taper off. I don’t know how much oil is
there, but there are lots of barrels of oil in
place. We never recover total potential. We may have
better engineering recovery in future. It is nothing
like an on and off switch. You may still have
enormous political considerations to get access to
available oil since it is so important. There is
nothing you can do over short period of time to wean
the world off oil.
CM: If we get another 200 yrs of growth dispersed
over the world while population goes up, all oil
coal and uranium will run out so you will have to
use the sun. I think there will be some pain in this
process. I think it is stupid to use up hydrocarbons
of world so quickly. Stupid when there are few and
limited alternatives. What should we have done? We
should have brought all the oil over from Middle
East and put it in our ground. Are we doing it now?
No. Government policy is behind in rationality. If
we have a prosperous civilization, we must use the
sun.
WB: Charlie, what is your over/under for oil
production in 25 yrs?
CM: Oil in twenty five years, down.
WB: If this is true, that is a big number. China is
doing 10m cars this year, so down in 25yrs is
significant.
May 5, 2008: Question 26 posed to Warren Buffett and
Charlie Munger at the Berkshire Hathaway Annual
Meeting this past weekend in Omaha, Nebraska...
Q26: New York City. American Express and Washington
Post – big positions. How do you get confident
enough?
WB: If we were running only our own money, 75% of
net worth outside Berkshire has never been a
significant amount. Several times I have had 75% of
my non-Berkshire net worth in a situation. You will
see things where it would be a mistake not to act.
You won’t see them often, and the press and your
friends won’t be talking about them.
CM: Sometimes I have had more than 100% in
individual investments.
WB: You just had a good banker.
WB: Look at LTCM – they put 25x their money in
things that had to converge – but couldn’t play out
the hand. There are people in this room with more
than 90% of their worth in Berkshire. I saw things
in 2002 in junk bonds. You could have bought Cap
Cities in 1974 – selling for 1/3 the property value,
with best manager and in a good business. You could
have put 100% in Coca-cola when we bought it and
that wouldn’t have been a dangerous position.
CM: Students learn corporate finance at business
schools. They are taught that the whole secret is
diversification. But the exact rule is the opposite.
The ‘know-nothing’ investor should practice
diversification. Diversify– but it is crazy if you
are an expert. If you only put 20% in the
opportunity of a lifetime – you are a not being
rational. Very seldom do we get to buy as much of
any good idea as we would like to.
May 3, 2008:
Compliments of the Globe and Mail...Buffett
v. Schulich: The biggest bet out there
by DEREK DeCLOET
May 1, 2008:
Adrian Van Eck, who edits the well-known Financial
Forecast Letter in his latest report writes, "My
clear impression is that he (Bernanke) feels that
money supply is far more critical than interest
rates when it comes to promoting growth." He adds
that Bernanke has pumped $200 billion of M-2 money
into the US economy this year. "As you can see,"
adds Adrian, "the M-2 uptrend is continuing. If our
studies in 2007 still hold up, Dr. Ben probably
introduced another $200 billion in the shape of M-3
money. This is not usually available to the public.
It is in the form of larger CD's, which can be used
as bank reserves."
April 25,
2008: It turns out Obama is a smoker. He better not
do this in public. It's now a no-no.
April 29,
2008: (Bloomberg) Federal Reserve Chairman Ben S.
Bernanke is persuading investors that the financial
markets are working again. The Standard & Poor's 500
Index gained 8.4 percent since the central bank
backed the purchase of Bear Stearns Cos. on March
16. Companies sold $45.3 billion of debt last week,
the most ever. High-yield bonds are poised for their
best month in five years and mortgage securities are
outperforming.
April 28,
2008: Compliments of the WSJ... Wrigley's board was
concerned about the certainty of the financing for
the deal given the tight credit markets, said
William Perez, Wrigley's president and CEO. The Mars
clan knew early on that it would need a partner to
complete the transaction. Mr. Buffett fit the bill,
both for his deep pockets and reputation for
discretion.
Mr. Wrigley said that part of the reason Mr. Buffett
got involved was because "he's one of the few people
in the world with access to large sums of capital"
and because "he tends to do things very quickly and
very efficiently."
A key figure behind the transaction was Goldman
Sachs partner Byron Trott. Mr. Trott has worked for
Mars and Wrigley and is a favorite of Mr. Buffett,
who said of the banker in his most recent investor
letter: "I trust him completely." People involved in
the transaction say these relationships were crucial
to its success.
Mr. Trott, representing Wrigley, approached Mr.
Buffett about joining with Mars. A longtime admirer
of Mars, Mr. Buffett readily agreed.
April 25, 2008: The current issue of National
Geographic magazine (entire issue) centers on China.
This is a great issue. The article is written by
Peter Hessler who went to China in 1996 with the
Peace Corps. to teach. Hessler has been back to
China recently. His story and his observations are
fascinating. The Chinese are most interested in the
US. My suggestion, since a quarter of the world is
Chinese, is that we become very interested in China
and the Chinese people. Here are a few excerpts from
the Hessler article --
About his young students: "They were the first
Chinese to grow up in the post-Mao period. Most had
been infants in 1978, when Deng Xiaoping initiated
the free market changes that eventually became known
as the Reform and Opening. Nearly all my students
came from the countryside, and when they were small,
the nation's population was still 80 percent rural.
Many of their parents were illiterate; some of their
grandmothers had bound feet. A number of my students
were the first people from their village to attend
college.
They majored in English -- a new subject for a
nation hoping to overcome a history of troubled
foreign relations. Ever since the Opium War, the
Chinese had wavered between perceiving the outside
world as a threat or an opportunity, until Mao's
xenophobia resulted in over two decades of
isolation. But Deng took the opposite approach,
encouraging foreign trade, and in the 1900s all
middle schools and high schools began to institute
mandatory English courses. The nation faced a severe
shortage of instructors, and most of my students
would go on to teach in small-town schools.
But already it was becoming more common for Chinese
to see the outside world as an opportunity, and
usually my students showed intense curiosity. They
asked endless questions about American customs,
laws, products. Don, who had grown up in one of the
poorest homes of all my students, composed a letter
to Robert J. Eaton, then the CEO of the Chrysler
Corporation. "My hometown is Fengdu, I hope you have
heard its name," Don wrote. "But my hometown's
economy hasn't been developed. So I want to
establish a factory for making cars and trucks."
They were dreamers, and I could tell that some of
them were bound to wander far from home. In every
class certain students stood out, like a young woman
named Vanessa. She was beautiful, and her English
was among the best in the class, but mostly her
ideas were different. "Someday, I will visit the
U.S. to see the wide, eternal Midwest Prairie," she
wrote. "And I want to know what the Indians look
like, and what kind of life they lead. ‘Dance with
Buffalo’ is my dream."
April 24,
2008: "In recent years, the euro has increasingly
become the global reserve currency of choice (gold
excepted), not least by creditor nations. The ECB
and its member states did not seek this role.
Instead, they inherited it by default." Quote from
David Fuller of FullerMoney out of London.
April 21,
2008: Compliments of Bloomberg and with thanks to
Ken...Chart
of write-downs by global banks
April 22,
2008:
Thanks to
Steve for the Helicopter Ben action figure.
April 11,
2008: If you're planning to attend opening-day
festivities at the Chinese Olympics, please buy your
tickets early because those tickets are going fast
and the price (no scalping allowed) is $4000 a seat
(cushions extra).
April 11, 2008
-- Washington Post (last week) -- Offering the
gloomiest assessment of personal economic progress
in close to half a century, a survey has found that
most Americans think they have not made economic
progress in the last five years, as their incomes
have stagnated and they have increasingly borrowed
money to finance their lifestyles. As many Americans
struggle with declining housing values, increasing
food and energy prices, and growing unemployment
after a long period of flat wages, well more than
half of respondents are either losing ground
economically or stuck in the same place. The squeeze
is particularly tight for those who are low-income
and for the 53% of Americans who classify themselves
as middle income.
April 10, 2008
-- From today's LA Times: Washington -- With the
Senate poised to take new action on the mortgage
crisis and the house at work on the more sweeping
proposals, the Bush White House is grudgingly giving
ground on its ideological opposition to government
intervention in the marketplace. After months of
reluctance to pressure lenders to write down the
principal on troubled mortgages, the administration
announced Wednesday that it is now willing to do
just that.
April 10, 2008: The score so far in 2008 -- Dow down
5.50%, S&P down 7.75%, NASDAQ down 12.45%, gold up
11.8%, silver up 22.8%, platinum up 35.1%.
March 28, 2008:
Compliments of Le Metropole Cafe...The gold open
interest fell 1226 contacts to 427,954. The silver
open interest dropped another 748 contracts to
148,182, a further confirmation that yesterday’s
surge was more commercial shortcovering.
The silver COT report finally revealed some of the
commercial short covering I keep alluding to…
*The large specs reduced longs by 11,365 contracts
and decreased shorts by 948 contracts.
*The commercials increased longs by 3,388 contracts
and reduced shorts by 8,769.
*The small specs reduced longs by 2,441 contracts
and reduced shorts by 791.
The gold COT report was one of the most stunning I
can recall, and reveals just how rigged the gold
market is at the moment…
*Large specs reduced longs by 17,776 contracts and
also reduced shorts by 1,509.
*The commercials reduced longs by 5,093 contracts
and reduced shorts by a STUNNING 38,096 contracts.
*And get this, the small specs reduced longs by
4,497 contracts, yet increased shorts by 12,239.
This is NOT how tops are made in markets. One thing
we are witnessing here is the unhinging of markets.
What we have is the United States Government and
allies becoming more short, while other commercials
are running for the hills as fast as they can. On
the other side are surging physical markets in gold
and silver. This is leading to an upside explosion
of EPIC proportions.
March 27, 2008 --
An interesting article appeared in yesterday's Wall
Street Journal. The article pointed out that
atypically, the stock market has made no progress
over the last nine years. Almost every category of
investments from bonds to T-bills to commodities to
real estate to gold has done better than the stock
market. "When dividends and inflation are factored
in, the S&P 500 has risen on average 1.3% a year
over the past ten years," states the article. Last
Tuesday, the S&P 500 stood at 1352.99 -- this was
actually below its price of 1362.80 recorded in
April of 1999.
The WSJ article compares the current "lost decade"
in stock returns to the period of 1929 to 1942 and
again to the period of 1966 to 1982. My comment is
this -- everything depends on when you buy your
stocks. If you had loaded up on investment grade
stocks in mid-1932, you'd have been buying stocks at
5-7 times earnings and receiving dividends of 7% to
10%. Had you held your stocks and reinvested the
dividends, you'd be WAY ahead of the game by 1942,
even though the Dow was only 92 in 1942.
March 27, 2008:
SINGAPORE, (Reuters) - South Korea's National
Pension Service, the world's fifth biggest pension
fund, will no longer buy U.S. Treasuries because
yields are too low, the Financial Times reported on
Thursday.
It said the move could signal a big shift by
financial institutions away from U.S. government
debt into higher-yielding assets.
"It is difficult to buy more U.S. Treasuries because
the portion of our Treasury investment is already
too big and Treasury yields have fallen a lot," the
newspaper quoted Kwag Dae-hwan, the head of global
investments at the pension fund, as saying.
"We need to diversify our portfolio away from U.S.
Treasuries and we find asset-backed securities and
corporate debt more attractive because of wider
credit spreads."
March 26, 2008:
California freefall: Home prices down 26% in
February
Signs of distress are piling up in the California
housing market, where prices are falling at three
times the national rate of decline.
--Statewide, median sales prices fell by a stunning
26% from year-ago levels in February, with home
prices dropping at a rate of nearly $3,000 a week,
the California Association of Realtors reports.
Further, the CAR says the Fed's interest
rate-cutting campaign "will have little near-term
direct effect on the housing market."
March 25, 2008:
Food Inflation: (from MoneyNews.Com) -- MEXICO CITY
- If you’re seeing your grocery bill go up, you’re
not alone. From subsistence farmers eating rice in
Ecuador to gourmets feasting on escargot in France,
consumers worldwide face rising food prices in what
analysts call a perfect storm of conditions. Freak
weather is a factor. But so are dramatic changes in
the global economy, including higher oil prices,
lower food reserves and growing consumer demand in
China and India.
The world’s poorest nations still harbor the
greatest hunger risk. Clashes over bread in Egypt
killed at least two people last week, and similar
food riots broke out in Burkina Faso and Cameroon
this month. But food protests now crop up even in
Italy. And while the price of spaghetti has doubled
in Haiti, the cost of miso is packing a hit in
Japan.
What’s rare is that the spikes are hitting all major
foods in most countries at once. Food prices rose 4
percent in the U.S. last year, the highest rise
since 1990, and are expected to climb as much again
this year, according to the U.S. Department of
Agriculture.
As of December, 37 countries faced food crises, and
20 had imposed some sort of food-price controls.
For many, it’s a disaster. The U.N.’s World Food
Program says it’s facing a $500 million shortfall in
funding this year to feed 89 million needy people.
On Monday, it appealed to donor countries to step up
contributions, saying its efforts otherwise have to
be scaled back.
In Egypt, where bread is up 35 percent and cooking
oil 26 percent, the government recently proposed
ending food subsidies and replacing them with cash
payouts to the needy. But the plan was put on hold
after it sparked public uproar.
March 21, 2008: HON. RON PAUL OF TEXAS IN THE HOUSE
OF REPRESENTATIVES...
Paper Money and Tyranny
(September 5, 2003); dated but most relevant.
March 14, 2008: Thanks to our friend Elliot for this
great analogy...
John - In discussing the ups and downs of the
market, one has to admit that they are much more
violent of late.
The swings get bigger and more frequent.
Does this remind you of something...
The famous Tacoma Bridge that every engineer knows
about.
The bridge began resonating; it wobbled slowly, at
first, and eventually much more voilently and of
course it finally collapsed.
It was a long bridge with not much breadth. One
might say we have had a long Bull Market based on
little breadth; at any time.
I can only hope this is not a premonition or
precursor of what is to come in the market.
Certainly, if left unchecked, it may be the final
outcome. E.
March 13, 2008:
CAN THE REAL BULL MARKET PLEASE STAND UP?
by Ed Bugos
March 12, 2008:
Greg Hebert of CFRA's Business@Night provides
an excellent analysis on the RESP
March 12, 2008:
From our good friend Dean LeBaron... The three rules
to understanding Canadian-American relations by
Daniel Drezner
Drezner comments on why Canadians leaked a purported
memo about Obama's stand on NAFTA. He writes that
all understanding about Canadians are based on three
very simply rules of thumb. First, Canadians are the
most polite people on earth. Second, Canadians are
also the most passive-aggressive nationality on
earth. Finally, Canadians are really schizophrenic
about American attention. The Canadians are doing
what they're doing because they don't want any
Americans taking Canada for granted. But they'll do
it as politely as possible.
Daniel Drezner is an associate professor of
international politics at Tufts University.
March 12, 2008:
John: Thanks to our friend Simon for this 'good
catch'... I just read the news on Chinese Official
News Agency XinHua - web site www.xinhuanet.com
(warning, it is in Chinese.)
One of the prominent rice experts, Yuan LongPing,
the world's "father of hybrid rice," is calling for
auditing state-owned warehouses. He claims that
state-owned warehouses are overstating the wheat
inventory on hand to claim more maintainance
reimbursements from the Chinese government. And
those warehouses are renting out those empty
warehouses to other businesses to earn rental
income. He also claims that he is aware of at least
two warehouses, which are overstated.
March 11,
2008: Welcome to the modern stone age by M Asif
Half naked, half covered with leaves, barefooted,
with shoulder-long hair and a spear in hand, hiding
in a cave
or on a tree, ready to ambush the prey--this is the
scene that traditionally portrays the stone-age
life.
Fortunately, that time is gone, but the people of
Pakistan are now having a new version of it, "modern
stoneage,"
thanks to the energy crisis in the country.
The ingredients of modern stone-age are slightly
different, however. Now the people in Pakistan would
still be
spending their days and nights in darkness, though
not of caves, but of well built, spacious and modern
homes
and villas fitted with precious chandeliers and
florescent lights. They would be having modern ovens
in their
kitchens but still unable to prepare food. Digital
televisions, computers and hi-fi electronics would
be there,
sitting in drawing rooms and lounges, but soulless.
Expensive air-conditioners and refrigerators, but
nonfunctional.
Credit goes to load shedding, and to the unplanned
disruption of electricity and gas. The equation is
simple and straightforward -- the life mankind
cherishes today is totally dependant on secure
supply of
sufficient and affordable energy. No matter how
luxurious and high-tech gadgets you have got, they
are of no
use unless you supply them with the energy they
require to operate.
Man has become a slave of energy. The trend started
with the Industrial Revolution in the West. The
change in
this part of the world, however, started appearing a
few decades ago. The lifestyle over this period has
transformed to become hugely dependant on energy.
Presently less than 60% of population is connected
to the
electric grid. Back in 1947, the figure was much
lower than 10%. What would be the energy requirement
of an
average Pakistani at that time? It was only a wee
bit of oil that would be needed to light lamps and
wood to
prepare food. Electricity and gas would still have
no role to play. Compared to that, as of 2008, an
average
Pakistani in his everyday life relies on numerous
energy run gadgets -- i.e., electric lights, fans
and air
conditioners, irons, fridges, heaters, ovens,
televisions, computers, automobiles, pumps and
motors. It is
roughly estimated that compared to 1947, an average
citizen of Pakistan now consumes 20-25 times more
energy.
Societies can no longer exist and progress without
sufficient and secure supply of affordable energy.
Despite its
crucial role, energy is becoming increasingly scarce
in Pakistan. A dire energy crisis has already dawned
upon
the country. As of the beginning of 2008 there is a
shortfall of nearly 4,500 megawatts of electricity.
Bearing in
mind that these are not the summer months (when the
demand goes up due to the more frequent use of
energyintensive
appliances) one can gauge the severity of the
problem. It is not just the scarcity of electricity
that is
driving people crazy, but that of gas as well.
Collectively, the trouble with the two sources of
energy has driven
an ordinary Pakistani into the Stone Age. The
absence of electricity and gas for 10-15 hours a day
has forced
people to rediscover the long lost candles and
kerosene lanterns. The energy crisis also affects
industry,
agriculture, businesses, health, education and
transportation.
A student who has lived and studied under electric
lights all his life how can be suddenly forced to
use the
candle and lantern. Exporters are missing their
deadlines – reports from the textile sector indicate
that textile
exports have been seriously affected by the energy
crisis and that this year's export targets are not
going to be
met at all. Industry is not getting the supply of
electricity and gas at its required level in order
to run on full
throttle. Lengthy load shedding and power breakdowns
have made its life extremely difficult. As a matter
of
fact, factories, running on gas, are being refused
the supply of gas. Even their gas supplies are being
disconnected leaving them in the middle of nowhere.
Consequently, over the last couple of months tens of
thousands of factories have locked their gates. It
has made more than one million workers lose their
jobs. It
implies there are hundreds of thousands of families
who are being made to pay the price the most – they
are
being ripped of their only source of income. The
closure of industry is costing the country billions
of Rs. every
day. The situation is thus prone to lead immense
socio-economic consequences. The whole country is in
a state
of chaos.
The implications of the crisis are so severe that no
one is able to carry on with his daily routines.
People are crying and begging for enough electricity
and gas that could meet their basic needs. They are
hoping
for things to get better in a matter of days. How
innocent they are. They don't know the crisis
Pakistan has
plunged into is far too complicated. Country's
indigenous energy resources, gas and oil are already
stretched to
limits. Hydropower capacity is also on a journey
downhill. Contrary to that demand is on rise,
resulting into a
growing gap between demand and supply. The
proportion of the indigenous energy resources is
skewing in the
overall supply mix. In recent years, energy security
has added to the matrix of challenges. It is all
going to be
like a roller coaster. Apparently over the next few
weeks, things may look getting better but the
balance of
evidences suggests any improvement would only be
marginal and temporary. The remedy measures that are
being promised are too little and far too late. The
phrase 'one stitch at time saves nine' unfortunately
perfectly
applies here. The energy equation of the country has
gone out of balance. The damage that already has
been
caused is not easy to repair now. It is going to
take a good number of years before the crisis is
truly over
provided that momentous energy policies are prepared
and implemented on war footing. Lets stay optimistic
and hope this time honest and meaningful efforts
would be made to address the crisis on long-term
basis.
Otherwise, things may get worst. Alarm bells are
ringing. There are already scenes of deep unrest in
the
society. Protests are being seen across the country.
Having in mind that energy is of utmost importance
for
national sovereignty and the socio-economic
prosperity, muddling through is not an option any
more as this
situation could spin out of control and lead to
irreparable damage.
The writer is a lecturer in renewable energy at the
Glasgow Caledonian University, UK.
Email: dr.m.asif @gmail.com
March
10, 2008: Compliments of MarketWatch...
Derivatives the new 'ticking bomb'
March 9,
2008:
Secrets of the Bank of England Revealed at Last!!
March 9, 2008: Inspirational Figures... Winston
Churchill:
The Man Who Saved The World (dated but
relevant)
March 6, 2008: It
can't happen here -- well can it? Harare, Zimbabwe
-- The Zimbabwe currency tumbled to a record low of
25 million for a single US dollar yesterday,
currency dealers said. With Zimbabwe dollars mostly
available in bundles of 100,000 to 200,000 notes,
one $100 note bought nearly 40 pounds of local notes
at the new market rate yesterday.
March 6, 2008: Bumper sticker seen in Silicon Valley
-- "Please God, Just One More Bubble."
March 6, 2008: Martin Barnes of the Bank Credit
Analyst writes, "The latest batch of US economic
data gives further support to the view that a
recession is underway. It may not be particularly
severe, but the recovery is likely to be unusually
shallow given the headwind of an extended
deleveraging cycle."
March 5, 2008:
Compliments of Whiskey and Gunpowder...
Devilish Deals by
Jamie Ellis
March 5, 2008:
Compliments of Richard Russell...
Most people don't understand the meaning of the
91-day Treasury bill. On the "Gold Report" site I
just read an interview with my old friend, Ian
McAvity (he's a Canadian and he publishes the
advisory called "Deliberations.") I thought the
following interview with Ian was an excellent
treatise on the 91-day T-bill, the item I've been
recommending. Ian, by the way, believes we're in a
primary bear market with two more major down-legs to
go. In the interview Ian talks about Jim Benham,
another good friend of mine and a pioneer in owning
T-bills. When I started in this business in the
1950s people didn't know what a T-bill was.
TGR: Right. So what do we do with our money?
IM: For the typical American, you go directly to
Treasury Bills. The dollar’s losing value; you’ve
got a negative cost to carry, but the value of a
Treasury Bill is that’s the final form of paper that
the government cannot tinker with. Because the
91-day T-Bill auction is what keeps the wheels of
the system turning. If you had a one-year note, you
might suddenly discover some sort of emergency
declared and be told that your one-year note’s now a
five-year note. They couldn’t possibly do that with
a 91-day T-Bill or the system comes to a halt.
I keep thinking back to the wisdom of Jim Benham,
who originally worked in the Fed and then founded
the old Capital Preservation Fund. He ultimately
sold it to American Century; I am not sure whether
they still follow the policy. But I always remember
Jim speaking to audiences in the ’70s emphasizing
that you want to own a direct T-Bill. You don’t want
a swap or an option or some piece of paper from
somebody else between you and the Treasury. He was
ahead of his time, but that was the cleanest piece
of paper that existed. In my mind, this is exactly
the environment where an attitude like that should
be taken.
When I get people saying, “Why should I own a
Treasury Bill; it’s only going to pay me 2%, and
that’s taxable?” the point I make is that the
Treasury Bill is 100 cents on the dollar of buying
power when everything has fallen 50%.
TGR: Exactly.
IM: When you’re buying everything at half price,
then what was the yield on the Treasury Bill? You
don’t buy them for yield; you buy Treasury Bills to
stand still when everything else is melting down.
This is the best description I've read on the reason
for owning T-bills. Or to put it another way, if you
want to be safe, then why be "half-safe," go the
whole way with a Treasury bill.
March 5, 2008:
What's hot, so far, in 2008? Not much in the way of
stocks, but --
Aluminum up 29.9% in 2008.
Copper up 29.7%
Gold up 17.6%
Silver up 36.6%
Platinum up 46.7%
Natural Gas up 27.9%
Crude up 6.7%
Cotton up 27.9%
Coffee up 21.3%
Corn up 21.9%
Soy Beans up 28.9%
Wheat up 23.5%.
Watch your food bills in coming months!
March 4, 2008:
(Bloomberg) -- Manufacturing in the U.S. shrank at
the fastest pace in almost five years and
construction spending fell the most since 1994 as
the economy moved closer to a recession. The
Institute for Supply Management's factory index
dropped to 48.3 in February from 50.7 the previous
month, the Tempe, Arizona-based group said today.
Fifty is the dividing line between contraction and
expansion. At the same time, the Commerce Department
reported that spending on building projects slumped
1.7 percent in January, more than anticipated.
The collapse in housing is rippling through the
economy as consumers pare spending and factories cut
production of cars, furniture and appliances.
Traders are betting the Federal Reserve will be
forced to reduce its benchmark interest rate by 0.75
percentage point at its March 18 meeting.
March 4, 2008:
(Bloomberg) -- The dollar fell for a sixth day
against the yen and traded near a record low versus
the euro as traders increased bets that the Federal
Reserve will lower interest rates by 0.75 percentage
point this month.
The dollar index, which compares the currency to
those of six trading partners, fell as futures
showed a 74 percent likelihood the Fed will reduce
rates to 2.25 percent. Last week, traders saw no
chance of a cut that steep.
"Don't fight the dollar weakness," a team of
strategists at Zurich-based UBS AG, wrote in a
research report published today. This week's U.S.
data "will likely increasingly suggest a recession,"
they wrote.
February 29, 2008: Today (latest figures) we hear
that one percent of the entire US adult population
is either in jail or in prison. That's 2.31 million
adults. This makes the US the highest incarcerator
in the world.
February 29, 2008: "Price falls of this magnitude
are likely to mean more than 10 million Americans
would have negative equity in their homes, and more
than 2 million foreclosures would take place over
the next two years.” former Treasury Secretary
Lawrence Summers,
who served under President Bill Clinton.
February 29,
2008: Some History; compliments of Richard
Russell... In January 1980 gold topped out at a
price of 850 US dollars per ounce. Down goes gold --
down and down, year after year until gold reaches a
low of 256 in August of 1998.
There, despised and ignored, gold sinks to its
historic bear market low. From its ignominious low
of 256, a new primary bull market is born. But 28
years of decline has soured the US public on gold.
If they are interested at all, they abide by the
wise men of the government and the Federal Reserve.
"Gold is history," they are told. "Gold is a story
who's time has past." "Gold is a relic from another
era, a useless metal used in fancy dentistry and in
jewelry.
Under a cloud of disinterest and false tales, gold
starts up again. Slowly, almost surreptitiously,
gold rises to 300, then to 400, to 500 and 600.
Nobody is interested. Some of the old gold mining
stocks move higher. They pay no dividends. Nobody is
interested in them. Names from the past appear and
are taken over. Dome Mines, Homestake and Campbell
Red Lake. Skeletons dancing into view and then
disappearing.
Gold works its way still higher. A few people
remember that gold is money, and they suggest that
gold be purchased. But frequent sharp declines and
occasional deep corrections frighten the early
buyers of gold. They take their profits.
Nevertheless, the metal reaches the 700s. A small
group of admirers known facetiously as "gold-bugs"
urge their followers to buy gold. "It's cheap,"
insist the gold-bugs, "gold is as cheap as dirt --
buy it."
Then, in January 2008, gold does the impossible. It
breaks out above its old 850 peak-level of 1980.
After 28 years of being held back, gold bursts is
chains and breaks free. Gold pushes above 850 into
space never seen before by the yellow metal. It's
like a prisoner who, having been held in a dungeon
for 28 years, suddenly escapes from the darkness of
his cell and emerges into the glare of sunlight.
Twenty-eight years of compression has been released.
The advance above the 850 level is still quiet,
almost eerie -- but relentless. "It's speculative
nonsense," growl the analysts, "it's manipulation by
a crazy element that is living in the past." But
gold continues to work higher. By February gold is
nearing the thousand-dollar-an-ounce mark.
In the meantime, silver, the other monetary metal is
pushing towards twenty dollars an ounce. Silver,
that sold as low as 23 cents an ounce in 1932, is
now selling close to twenty dollars an ounce. "Lowly
silver at twenty bucks a pop, I don't believe it."
In the meantime, the US is dealing with an
incredibly difficult situation. The nation is
straining under the onus of a potential housing
collapse. The new Federal Reserve Chairman, Ben. S.
Bernanke, is fearful that the housing disaster will
send the nation into recession and worse --
deflation. Bernanke is well aware that the two
thirds of US families own their own homes, and that
consumer buying is responsible for 70 percent of the
Gross Domestic Product of the US. On top of
everything else, the great banks of the US are in
trouble. Bernanke must save the banks and he must
hold back the forces of deflation.
But good Lord, what about inflation? The Fed has
made its decision. Their first task is to keep the
US out of the grip of recession. This allows gold
and silver to further express themselves. The lid is
off 28 years of compression and imprisonment. The
great bull market in precious metals pushes higher.
In the background, twenty central banks from around
the world print their fiat paper in an orchestrated
effort to insure prosperity.
Meanwhile, the great gold bull has broken free of
its chains. A strange and unprecedented union of
forces has emerged. The US public is unaware of the
great phenomenon that is playing out before their
eyes. Somewhere ahead, the US public will enter the
bull market. Will it be in 2008, in 2009, in 2010?
The timing, as we might suspect, is known only to
the mysterious gods of the market.
February 28, 2008: Compliments of the Wall Street
Journal...Trader
Hits Jackpot in Oil,
As Commodity Boom Roars On Mr. Hall Bet Early On
Market Shift; Buoying Citigroup by ANN DAVIS
February 22, 2008: Why one should own Pengrowth
Energy Trust...
"To protect yourself against the predation of
inflation, ideally you own gold. But gold is really
a rich man's play. I say that because gold pays no
interest, and the average American needs all the
interest or dividends that he can collect. So at
present, assuming a person has any savings (and
that's a large assumption) he would like to receive
a safe and attractive return on his money. But what
can he get today? Interest rates are low and stock
dividends are minute. Thus, if the average American
has any savings, he cannot afford to buy gold and he
can't get much of an income from his investments.
All this in the face of a steadily rising cost of
living." Richard Russell.
February 22, 2008: After the Boomers