Britannia Radio

The Weekend Edition - June 27-28, 2009 It's the rebirth of thrift here in the United States... Eric Janszen shares his view of the ?-shaped "recovery" ahead... The Mogambo is blown away by the fall in US household wealth... Frank Holmes thinks the time is right for gold stocks... Puru Saxena examines a massive transfer of wealth... Dan Amoss on the perils of debt-driven economic bubbles... --------------------- Special Offer --------------------------- The "Forever Oil Crash" Has Already Begun The era of "cheap oil" is long gone...but there are two investments that could give you a powerful shield against the fallout ahead - and have the potential to soar, despite the current market turmoil. Keep reading... --------------------------------------------------------------- The Daily Reckoning's Highlight of the Week: Americans Rediscover Thrift Baltimore, Maryland The theme that kept popping up in our missives over the past five days was US consumer spending - or rather, the lack thereof. Though the imminent recovery of our economy is being touted far and wide, Americans have begun squirreling away funds...just in case the sky is, in fact, falling. Americans are spending less on 'luxuries.' They have decided last season's shoes are good enough for this summer, and that they don't need those designer jeans. In fact, it was reported on Friday that Saks Fifth Avenue is cutting orders by 20 percent after posting losses in each of the last four quarters. Americans, Bloomberg reports, "are shutting their wallets and building their nest eggs at the fastest pace in 14 years." And it's not just retail taking a hit. Restaurants are hurting as well, as Bill points out in the DR Highlight of the week, below... America's middle class has rediscovered thrift. There are a number of sit-down restaurant chains that cater to the middle class - Applebee's...Chili's...Ruby Tuesday and a few others. They expanded greatly during the '90s and '00s in order to meet the desires of the big spending masses. But now that the masses aren't so free and easy with their money, The New York Times reports that they are in desperate competition for remaining diners. This competition is manifesting itself as price deflation. Applebee's offers dinner for two for only $20. Chili's advertises entrees for just $7. Ruby Tuesday's is going for a 2-for-1 deal. Buy one meal, get one free. All of them are making heavy use of discount coupons. Oversupply is producing deflation. Prices are falling as suppliers fight for demand by offering more for less. And over at the Red Roof...the roof has already caved in as the chain has defaulted on its mortgage debt. This is what you'd expect at the end of a long period of credit expansion. EZ credit brought forth too much demand and too much supply. Now, the demand is disappearing...and the suppliers struggle to hold on. Even now, we're facing an economy in which 70% of our economic output depends on consumer buying. No buyers, no recovery. This is natural, normal and perhaps necessary to a market economy. And it will take years to sort out. Roofs have to fall in on thousands of enterprises, speculators and households. Then, the rebuilding can begin. (In the meantime, The Richebächer Letter's Rob Parenteau tells us that there is a move you can make to protect yourself - and profit - during any further downturn in consumer sales. See it here.) But the Bernanke Fed is not about to let nature take her course. The Fed is on the road to ruin...and it's not about to "exit" yet. Deflation is still enemy number one. Don't expect any tightening from the Fed anytime soon, dear reader...it is far too soon for that. The above is just an excerpt from Bill's standout essay from this week. You can read it in its entirety on The Daily Reckoning site - it's an essay you don't want to miss. Get it here. --------------------- Special Offer --------------------------- With Gold, Who's Laughing Now? With all the flak you've taken for singing gold's praises, wouldn't it be nice to laugh back? Well, today's your lucky day... an opportunity to make up to 20X your money. We have a VERY limited number of spots - so get in now! --------------------------------------------------------------- ALSO THIS WEEK in The Daily Reckoning: The past week of the DR hit on all the major economic trends and topics. New contributor Eric Janszen of iTulip borrows a letter from the Cyrillic alphabet to describe the lack of recovery he sees ahead. The always educational (and entertaining) Mighty Mogambo looked at the often terrifying data that makes up our economy - after all, someone has to do it. From San Antonio, Frank Holmes explained why this economic climate is perfect for gold stocks. Puru Saxena examined a major transfer of wealth that is now in progress. And, last but certainly not least, Strategic Short Report's Dan Amoss explained why what has been happening in the U.S. economy is, quite simply, unsustainable. You can find them all, below... The Cheh Shaped Recovery: The Political Pig Pile, Defusing the Dollar Bomb, and Oil and Water: Deflation Forecasts and $70 Oil By Eric Janszen Bedford, Massachusetts "While we read about U and V and L shaped recoveries, we had to go to Russia's Cryllic alphabet for the '?' to find a letter shaped like the outcome we see for the end of the FIRE economy, a crash, a rebound, and a long decline - unless current policies change." Nightmarish Financial Numbers By The Mogambo Guru Tampa Bay, Florida "But perhaps this seeming fascination with velocity has something to do with why Bloomberg.com reports that 'U.S. household wealth fell in the first quarter by $1.3 trillion, extending the biggest slump on record, as home and stock prices dropped.' Yikes! And in just the first three months of the year!" Why Now Could Be the Time for Gold Stocks By Frank Holmes San Antonio, Texas "Another bullish indicator for gold and gold stocks is that, for the first time in my 20 years at U.S. Global Investors, pension fund consultants and other gatekeepers for large institutional investors are advocating an exposure to gold." Transfer of Wealth By Puru Saxena Hong Kong, China "Most people seem to forget that these fiscal spending programs aren't creating any real wealth and are simply transferring wealth from the savers to the debtors. Essentially, governments are taking money from the solvent and re-distributing these funds amongst the insolvent." Unsustainable Economic Activity By Dan Amoss Jacobus, Pennsylvania "This is why it's healthier (yet politically unpopular) to have small, frequent recessions to keep supply and demand in balance, rather than have massive debt bubbles followed by nightmarish depressions and currency debasement. Such are the perils of government-promoted, debt- driven economic bubbles. It's like trying to live on a diet of candy and energy drinks, rather than wholesome food." --------------------------------------------------------------- And lastly, as Bill told us, in the Highlight of the Week, above, U.S. restaurant chains that had flourished in the last ten to 15 years are now struggling to make ends meet. It is a trend that will most likely continue, as more and more Americans go back to basics. Here in Baltimore, in fact, there is an overwhelming move toward supporting local farmers, or even growing your own produce. This is not just a local trend. Across the country, people are reducing money spent on going out to eat and are embracing their cooked-at-home meals and dinner parties. It's the 'rediscovery of thrift', as Bill puts it. And Dan Amoss believes that this is a trend to pay attention to, because these restaurants that grew so rapidly during the bubble years will have a hard time adapting in the post bubble world. Dan has identified two restaurant chains that are highly unlikely to bounce back from the hit they've taken in the current slump. "Put options on two restaurant chains could each return at least 150% in a few months," he recently told his Strategic Short Report subscribers. To get in on this play, please see here. That does it for us. Enjoy the rest of your weekend! Best regards, Kate Incontrera The Daily Reckoning --------------------- Special Offer --------------------------- The $2.5 Trillion Gorilla in the Room This is vital. Because, you see, a lot of Americans - and a lot of people in the rest of the world - are counting on credit-card carrying American shoppers to jumpstart the global economic engine all over again. But it isn't going to happen. And you don't want to bank your investments on the idea that it will. Or you'll risk even bigger losses than many Americans have suffered already. Here's how you can save yourself and boost your profits during the coming time bomb...   The Daily Reckoning - Special Reports: Fiat Currency: Using the Past to See into the Future US Recession: By far the Weakest Recovery Introducing the Single Best Way to Make Sure You'll Never Run Out of Money...