--------------------- Special Offer --------------------------- How to Profit from the "Obama Boom Sectors" In the past 6 months alone the Dow has dropped -29%. Meanwhile, 12 out of the 14 ETFs that Nathan Slaughter flagged for his ETF Authority readers back in September have seen gains of up to +402%. What's next? Get ready... Nathan's just uncovered four "Obama boom sectors" that are about to receive a tsunamic injection of government cash. The $3.6 trillion-plus stimulus plan should send his top ETFs soaring. Here's how to profit today. --------------------------------------------------------------- A Talk With Tim Geithner by Bill Bonner Paris, France Our phone rang yesterday. You know, the hotline we set up to help Treasury Secretaries and Finance Ministers cope with the problems of the global financial meltdown? We picked it up...it was Tim Geithner! Imagine our surprise. But we explained that we were delighted to help and proceeded to outline the problem he faced and suggested a course of action. What follows is merely a recitation of our conversation: "Tim," (we were on a first-name basis right away) "look, we know it's tough. You were called in to do an impossible job. And now everyone's taking shots at you - blaming you for the whole thing... "As if you could have known that things would turn bad, just because every clown on the street was making multi-billion dollar mistakes... "As if you should have said something when you were watching the crisis build from your perch at the Federal Reserve Bank of New York... "As if you might have used your regulatory power to prevent the banks from making catastrophic speculations... "Yes, it's all very unfair...terrible...but let's look at what's really going on and see what we can do about it. "We need to recognize, first, that this is not just a regular recession. So you can forget the usual recession remedies - a few points off the Fed funds rate...a little counter-cyclical fiscal spending. This is much more serious. "What we have here is a depression. It's a depression because it requires a fundamental restructuring of the international financial model. You know how it worked during the Bubble Epoch; Asians made things...Americans bought them. Asians made money; Americans spent it. Asians saved; Americans borrowed. And now the Asians have money; and Americans have debts. Not really very complicated, is it? "Well, these programs of trying to bailout businesses...and the banks...and the economy...you can see how they are all a waste of money. All of these efforts are trying to revive the old model. They're trying to free up credit so that Americans can buy more! Now, we don't really have to explain why that won't work, do we? More debt won't do Americans any good; more IOUs from Americans won't do China any good. "Instead, the model has to be taken apart and reconstructed. China needs to sell more to people with money - its own people, mainly. Americans need to pay down their debts before they can take up serious consumption again." "But wait, Bill," Mr. Geithner interrupted. "Won't that cause serious disruptions? When Americans save, in order to reduce their debts, they take away the single primary source of demand for the world economy. If they don't begin buying soon, businesses all over the world will go broke. That's why I've spent so much money trying to bail out the banks. Americans have no money. So the only way they can spend is if the banks provide credit. So, we have to save the banks first...then they'll begin lending...and then the economy can begin growing again." "Uh...no. That's not how it works. Even if you make all the banks solvent, whom are they going to lend to? Who's going to borrow? Americans have too much debt already. Right now, if they get any money, they're holding onto it...and using it to pay down their debts. They're not going to start spending just because a bank offers them a loan. They'll only want to spend money if they think inflation is returning..." "Well, Ben is working on that..." "And maybe he'll eventually succeed. But it doesn't matter. The old model - where the Chinese lend us money so we can buy their products - is broken. It can't be fixed. Because the more Bernanke causes inflation...the less the Chinese want U.S. dollar assets...meaning, the less they want to lend to us. And if Bernanke doesn't cause inflation, Americans won't want to part with their money. So, they'll buy fewer Chinese products - and China will have less money to lend back to us. We're trapped in both directions. Forget it." "Well...what's the solution then? I'm new to this job. I've got to do something..." "Tim, get a grip on yourself. There isn't really anything you can do. Capitalism has to do its work. It's got to destroy the businesses and the investments that were built up on the false promises of the Bubble Epoch. The faster it does it, the better. A number of banks need to go broke...and a lot of big businesses, too. You can try to hold it off with taxpayers' money...but you're just making the whole process of restructuring longer, and more expensive, than it needs to be. "Tim, have faith. Let it be. Give capitalism a chance." "I can't do that. I'd be fired." "Maybe...but at least you'd go out with a little dignity. "Wait...how about this...? Take your case directly to the American people. Go on TV for 10 minutes at a time, once a week. Each week, explain to them what is going on. Gain their confidence by telling them the truth about what went wrong, and about why the bailouts don't work. "Then announce a program of Dynamic Restructuring. Drag a few bankers and businessmen into a public square and have them beheaded. Force Wall Street employees to go to re-education camps, where they will be taught how to do simple math. Tell the auto industry to come up with a prototype with five wheels, in order to give a boost to the tire manufacturers. Tell the nation that the national language is changing to Swedish - because the economy there seems to work better. Start a campaign to encourage tourism from Europe by making the nation more authentic and different. Getting people to dress in buckskin outfits like Native Americans. Then, get all those people who are living in tents because of the crisis to switch to teepees..." "Sounds crazy..." "Well...of course, it IS crazy. Completely ineffective too. But at least it wouldn't be harmful. It's just meant to distract the yahoos while capitalism does its work." "Good thinking...I'll get right on it." No matter how much sense we try to talk into Mr. Geithner and whoever else may call our hotline looking for advice, the money for these bailouts have already been spent...and it came directly out of your pocket, as an American taxpayer. We can't convince the government to look out for their citizens, so you are going to have to look out for yourself...with your own 'personal bailout'. All the resources you need are in our "Emergency 'Personal Bailout' Bundle"...and there is still time to get yours. See here. Now, we turn to Addison and Ian in Baltimore for more news.... "Stocks just finished their first positive month in since August," writes Addison in today's issue of The 5 Min. Forecast.
"On March 11th, by order of the commander, we took down the Crash Flag. The rally had begun just two days before. After yesterday's 1.2% gain, a healthy rebound from Monday's selloff, the Dow ended March with a 7.7% gain - one of the best March performances since 1928, second only to March 2002. "For the month, the S&P 500 and NASDAQ fared even better." Each weekday, Addison and Ian bring readers the The 5 Min Forecast, an executive series e-letter that provides a quick and dirty analysis of daily economic and financial developments - in five minutes or less. It's a free service available only to subscribers of Agora Financial's paid publications, such as Energy & Scarcity Investor. Their latest report details three coming government mandates that could allow you to make over $63,000 in gains. Check out the full report for all the details...but act fast, the first of these mandates could occur as soon as tomorrow, Thursday, April 2. See here. And back to Bill, with more thoughts... The rally seemed finished on Monday. Yesterday, we weren't so sure. The Dow rose 86 points. Oil is holding at $49. The euro has fallen to $1.32. And gold has dropped to $918. "Cramer calls the bottom," says a headline. Jim Cramer says its time to BUY! If we're not at the bottom now, he says, we're only a couple percentage points away. We doubt he is right. The Dow will probably fall to 3,000 before we're finished - so it has a long ways to go. And the economy is still weakening. Seven states now have jobless rates higher than 10%. And housing prices are not only falling - they're falling faster than ever. In January, according to Case-Shiller, prices fell 19% from a year before, the highest rate ever recorded. Overall, house prices are down 26% from their highs. "Russia backs return to gold standard," says another headline. Enemies of the dollar system are joining forces. The Chinese, the Russians...the Europeans... Pretty soon, they will be irresistible. But probably not before Bernanke's efforts to produce inflation bear a surprising and bitter fruit. Our Dollar Crash Flag remains up. And finally, a question from a dear reader: "Back in the '70s Jerome Smith claimed we were exporting our inflation to foreign countries and it was the reason that gold did not rise. Could this be the reason why gold is not rising in price above $1000 now in the U.S.A.?" During the '80s, '90s and '00s, the United States exported dollars. Those dollars caused a huge inflation - in asset prices. That was the major source of hot air for the Bubble Epoch. In the present time, the Bubble has burst. The United States inflates the money supply... but now, the money goes right into bank vaults, drawers and cashboxes. The worldwide financial meltdown has eliminated about $50 trillion of nominal wealth globally. Even if the feds have put back in $14 trillion - in various forms, little of it actually reaching peoples' pockets - it is a small and futile gesture, compared to what has been lost. So, no...the United States is no longer exporting inflation. At least, not yet. Right now, it has no inflation to export. And when it attempts more monetary inflation on a grander scale, it risks having to re- import all those dollars it once exported. In other words, when the world finally takes fright over the declining value of the dollar...the green paper is likely to come pouring forth from vaults and mattresses all over the planet. People will be eager to get rid of it, triggering a big drop in the dollar's value - almost overnight. Until tomorrow, Bill Bonner The Daily Reckoning --------------------- Special Offer --------------------------- A Government Decision That Will Add to Your Bank Account - As Early as Tomorrow A recent government announcement will dramatically change the way energy is produced in the United States - and early investors have the unique opportunity to grab gains as high as 661%. You are among the very few to hear about this announcement...and the window to act on it is very small...and could close as soon as April 2. So, what are you waiting for? The government has handed you the opportunity to make one of the first big fortunes of the 21st century. You just need to make your move. Get all the details here. --------------------------------------------------------------- | ||
| The Daily Reckoning PRESENTS: The past few weeks have been a wild ride... Between the government dumping money on companies that don't need it, forcing out CEOs and getting into the car business, it doesn't look like the 'fun' is going to stop anytime soon. However, Bill Jenkins points out, below, that there are some laws that even Congress can't change. Read on... Laws Congress Can't Change by Bill Jenkins Pylesville, Maryland It's been a wild week, with irritations ratcheting higher and diplomatic tempers flaring. "And now nothing shall be withheld from them which they have desired to do..." I mentioned this quote several weeks ago. It comes from one of the many attempts that foolish men have made to be as God. It also brought about one of the greatest cataclysms in history. You can read the whole thing in Genesis 11. For us, it applies heavily to the advances of government into the field of business. It only makes sense: the occupants of the White House and the Capitol have done such a good job with their budgets over the years, they just want to help everyone else (over the cliff, that is). It began, as it always does, with just the camel's nose in the tent. A bit of money here, some bank guarantees there. But then, as the fable tells us, the rest of the camel wanted in. The government insisted on foisting money on companies that didn't even need it. Washington's excuse? If the only companies taking the money were the ones that needed it, those companies would suffer a "stigma." But if every company took the money, even if they didn't need it, the bad ones couldn't be singled out. We, of course, would never know the difference between the two. So much for more transparency in government. Now the companies who didn't need the money are lashing back. Having to pay 5% interest on money they didn't need to borrow is only a greater liability to already burdened companies. But the government's fun still wasn't over. It forced out a CEO at AIG, now one at GM... and it passed a stimulus plan that required contractual bonuses be paid, then issued a 90% tax on them when the public outcry became too great. Now Chrysler is being pressured to bring green cars to the market by none other than their new "boss," the Obama administration. Of course, they already have a green car, but the "boss" says it's too expensive for the public to afford. So, essentially, he pulled the plug on it. Frankly, I'd like to know why he thinks that Chrysler's greenie is too expensive. It certainly could not cost more than the bailout price tag they have forced each of us to shoulder. Expensive is a relative term. Make no mistake about it, we are living in times that will likely produce great changes in the world. There is a certain theory that attempts to explain the history of the world through great cataclysmic events. Some are occurrences in Nature; some are wrought by the folly or the genius of men. Let me say at the outset that I am a subscriber to this philosophy, so have no illusions about what I am saying.
Actually, most people who ever think about such things believe that all of existence began with a great cataclysm. You can call it the "Big Bang" - no matter if you're referring to the "Big Bang" that set the evolutionary process in motion, or the "Big Bang" of God creating the heavens and the Earth. At some point, life came into existence - a big event in the universal process of all things. Of course, this is the point where the two theories begin to diverge from one another. Evolution has no more "Bangs" left in its bag. It is a slow and relatively even process from there on. Which is, I suppose, why it takes them billions of years to get to the point that God was able to accomplish in six days. But for the recorded history of men, it has been one cataclysm after another, of varying sizes and types. Famines, floods, pestilence, earthquakes, volcanoes... and other natural disasters take their toll, but seem to always right themselves over time. The follies of men, however, are a different matter. The wonderful world of economics is no exception, and has no exemption. As I have said before, economics bears within itself the very principles by which God has made it to be governed. The Law of Supply and Demand is not dependant upon Congress. It was not invented by the whim of elected or appointed regulators. It is not governed by the United Nations, the International Monetary Fund or the European Union. It brings to mind a letter someone once sent to Congress. Perhaps you've heard about it before. If not, please enjoy: Senator John W. BrickerI suppose we ought to give Gerald high marks for even knowing the term "supply and demand," since I tend to think you might be hard-pressed to find it in the vocabulary of modern high school students. I have long felt that it would be a good question for Jay Leno's "Jaywalking" segment of the Tonight Show. At any rate, the laws of economics are established by a much Higher Power than we will ever be. And while we are at it, we should also understand that the Power is stronger than we can ever successfully contend with. This is why, try as we might, we cannot substitute our own economic devices and have them succeed. So let's put a finer point on all this. The value of a nation's currency is built upon the honesty behind it. Even a currency backed by gold becomes worthless if the government holding the gold cannot be trusted. While in days gone by it was easier for authorities to debase a metal and get away with it, all such obligations now are simply based on a government's willingness to part with its gold. Of course, these days it does not happen. And while the United States has been an expert in telling other countries how to morally treat their people, we have been robbing them blind! It has gotten so bad that even the Evil Empire and the Red Menace have seen through our chicanery. We may look upon them as people less "evolved" than we are, but the jig is up. Our hypocrisy has been found out. We have become like the man in the Biblical parable who tried to remove a speck from the eye of his friend, when he himself had a log in his own eye. "First remove the log from your own eye, and then you will see clearly to remove the speck that is from your friend's eye." Seems like pretty simple (and common-sense) advice. But in the words of newspaperman Horace Greeley, "Common sense is very uncommon." I began this by saying that cataclysmic times are upon us. We are seeing the shaping of men and nations. We are setting the groundwork for the impoverishment of generations. Spain fell in line with the prevailing models of economics by bailing out its first bank in a quarter of a century. And with a broad brush it painted its regional banks as "heavily exposed to property developers struggling during a deep recession." I have told you often of the difficulties prevalent in Europe. Here is but one more piece of evidence. Authorities are planning to solve this with 2-3 billion euros - but, oddly enough, have promised up to 100 billion euros. Wow! That's a huge disparity. I believe they may think it will take more than just 2 or 3 billion. On the same topic, European Central Bank President Jean-Claude Trichet sees more ongoing deterioration all across the Eurozone. Market forecasts believe Brussels will announce a 50-basis-point rate cut later this week. Germany, which makes up about 25% of the euro economy, is looking for an acceleration in economic deterioration. This is a cataclysm. Central Banks are flying blind with an instrument panel that has no configuration for the geography. The fixes they are trying will lead us to Zimbabwe (hyperinflation) or Tokyo (perpetual slump). Pick your poison. In the meantime, I am forced to look for more overall dollar strength. The United States still possesses the deepest markets and the "deepest pockets" in the world. If other economies continue to fail, fiat currency supply and demand will favor the dollar. And by "deepest pockets," I mean they are committed to inflating their way out - and have more ability to do so than anybody else. I know looking for dollar strength seems a little backward while they are inflating. But the truth is, ever since the credit crunch, everything has been turned on its ear. If you are new to the currency markets, say within the last couple of years or less, likely most of this action makes very little sense to you. But in these times we must remember this axiom: The market will eventually adjust to actual realities. In the meantime, it will be moved by perceived ones. As long as fear filters through the markets, the currency flows will come back to the dollar. When there are periods of vacillation between fear and risk, the currencies can swing wildly. Regards, Bill Jenkins for The Daily Reckoning Editor's Note: Bill Jenkins, founder and managing editor of Master FX Options Trader, knows the Forex currency markets inside and out. After 20 years and a string of losses following other people's crack advice, Bill created his own system for cashing in on tiny currency fluctuations between the British pound and the U.S. dollar. Now you have a chance to benefit from his "lifetime" of hard-earned experience. As Agora Financial's resident currency specialist, Bill's advice has led readers to gains of 33% in a week... 70% in four days... and 100% practically overnight. And we've broadened the service to include the euro, yen and other currencies in these volatile trading markets. |
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