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“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