Joel Bowman, sifting through the mailbox, in Taipei, Taiwan... Our inbox is so full of idiots, anyone snooping might think we operated a website ending in ".gov"... Our faithful (and unfaithful) readers were busy over the weekend, nominating their choices for this year's Daily Reckoning Financial Darwin Awards. It's a tough field, to be sure, so we're keeping the polls open for a couple more weeks. The contestants thus far are varied and plentiful... One reckoner raised a hand for "Arnie Schwarzen-begger"...while another voted for the terminator's entire state of California. Utah and Alaska also received state dishonors. And then... "My vote goes to the US Government and the 'man of the year' helicopter Ben," opined another reader. "Though to be fair, he didn't do it alone. No man could have. It took Alan and Henry and Tim and countless other arrogant men to get to that place in time where you could financially cripple a whole world. "Mostly it took the American people themselves who got so caught up in their TV shows and their high standard of living that they did not notice the biggest heist in the history of the world, taking place in plain view! It's as though someone walked into their living rooms and started methodically removing all of their things and they didn't even notice. The thieves are about to unplug the TV. It should be interesting to see what happens." At a quick glance, the ".govs" have it by a long shot over the ".orgs" and the ".coms"...but the votes keep comin'. Could it simply be a case of too many clowns and not enough circuses? "I nominate Barnes Banking of Kaysbille Utah for the Darwin Award," writes another reader. "They have recently been taken over by the State and the FDIC." Horizon Bank, based in Bellingham, Washington (to which we assume the reader is referring) may be extinct, but is it really uniquely reckless? Being taken over by the FDIC seems awfully like "resume padding" for these Darwin Awards. After all, this IS a depression. Competition is stiff. And just as every hopeful employee cites "conversational [restaurant] Spanish" or "enjoys traveling," on their curriculum vitae, so can a laundry list of banks claim being absorbed by the FDIC as a buffer qualification. Last year alone 171 lenders fell into the federal insurer's arms...then the FDIC itself went broke! It seems even lending money to people who can't or won't ever repay it doesn't set one bank apart from the others. There were plenty of nominations for individuals, too. One reader from Virginia submitted the following list of dedicated devolutionists... "The incomparable John Thain, formerly of Merrill Lynch, who worried more about decorating his office than guiding his firm... "Robert Nardelli, value destroyer extraordinaire, first at Home Depot and later at Chrysler, whose focus was solely on negotiating generous separation packages for himself... "Chuck Prince at Citigroup, who couldn't stop dancing while the music played, and is probably still dancing... "Rick Wagoner, former CEO of General Motors, whose peerless vision couldn't see anything coming." Impressive as the nominations have been so far, we're really looking for an idiot to stand above the rest. These are competitive times indeed. It will take a truly prize moron to stand atop this bunch. You can still email us with your Financial Darwin Award nominee right here: 2009darwinawards@gmail.com. And, don't forget to make sure you grab a buck along the way too. Our colleague, Dan Amoss, is offering a $1, one-month trial membership to his Strategic Short Report research service in conjunction with our own Darwin Awards competition. Dan's readers have made a small fortune betting against ill-fated corporate dinosaurs like Lehman Bros. and Washington Mutual. Right now he has his eye on a trucking company that he says, "expanded too aggressively at the peak of the credit boom." With capacity shrinking fast, Dan's predicting 150% profits for his readers. Get his next alert here for $1. Meanwhile, in today's issue, we bring you an essay from Hong Kong-based money manager, Puru Saxena. Your editor caught up with Puru last week for some Chinese food and a chat about the general state of the world. Puru told us he's long gold and energy and, as you might have guessed from those positions, not optimistic for the future of the West. "In the US, for example, they've got a Federal Reserve bank that is neither 'Federal' nor does it have any 'reserves,'" he joked. "We're bullish on growth markets, metals, assets that can't be 'printed' and, therefore, inflated out of existence." In the essay below, Puru explains the common and fundamental flaw in most peoples' thinking about inflation and why the mistake can be so very costly... --- Outstanding Investments Gold Investing Report --- From Hulbert's #1 Ranked Advisory Letter Over a Five-Year Period... Even if Gold hits $2,000 by the end of 2010 here's a hidden way you can get in for less than one cent per ounce Over the next two years, you'll witness the greatest surge in gold prices in market history - at least 119% above where gold sits today, as I write this. But even better, I've just discovered a way for you to sneak into the soaring gold market for next to nothing, with what I call "penny-per- ounce" gold. That is, doing this is a "backdoor" way to own as much of a position in gold as you like... for the equivalent of paying a single cent per ounce. Get All The Details Right Here. --------------------------------------------------------------- | ||
The Daily Reckoning PRESENTS: Most people see "inflation" when it hits the prices of the goods and services they purchase. They don't realize that this is merely the consequence of inflation. Why does this subtle nuance even matter and, more importantly, how should it inform the way you invest? Guest columnist, Puru Saxena, has the details... Inflation 101 By Puru Saxena Hong Kong, China Inflation is a hidden tax, an insidious crime against the public. It is the easiest way for any government to confiscate the savings of the public and for generations, wealth has been transferred in this manner. Remember, money is supposed to be a store of value, however due to reckless central bank-sponsored inflation, it can no longer fulfill this critical role. Unfortunately, nobody questions the inexplicable loss of the purchasing power of their savings, thus, central banks get away with financial murder. Inflation distorts the economy, it brings great harm to the public and it encourages speculation and mindless risk-taking. In fact, inflation acts as a poison for retired people since they are no longer able to earn more money in order to maintain their standard of living. So, thanks to inflation, most senior citizens are unable to enjoy the fruits of their labor. Before we delve further, we want to make it absolutely clear that inflation is defined as the increase in the quantity of money and debt within an economy. And contrary to what the governments want you to believe, inflation is certainly not an increase in the general price level within an economy. Instead, an increase in the general price level within an economy is a consequence of inflation. Allow us to explain this subtle yet critical difference: For the sake of simplicity, let us assume that America's money-supply is US$100 and this is the amount available to buy the five oranges its economy produces. Common-sense dictates that under this situation, each orange will cost US$20. Now, let us introduce a banking-cartel called the Federal Reserve, which is able to extend credit (via its debt-based fractional reserve banking system); thereby inflating the supply of money within America to US$1,000. Under this scenario, with a 10-fold increase in money available to purchase the same amount of produce, each of the five oranges will now cost a whopping US$200! An orange is still an orange; it does not change. What changes is the purchasing power of the paper money that is used to buy that orange. Hopefully, you can see from the above-simplified example, how an inflation in the supply of money and debt causes prices to increase within an economy. Furthermore, in its attempt to manipulate the masses, the establishment does everything in its power to suppress the official 'inflation barometer'. Governments achieve this goal by shamelessly doctoring their Consumer Price Index (CPI) and Producer Price Index (PPI) calculations via various seasonal and hedonistic adjustments. The chart below highlights the discrepancy between the CPI-U published by America's Bureau of Labor Statistics and the SGS Alternate CPI, which is calculated by Shadow Government Statistics using the old methodology. As you can see, over the past 20 years, prices have been rising much faster than the officials would have you believe.
Let there be no doubt, inflation is a total disaster and our world will be a better place without this reckless money-creation. Contrary to official dogma, our world experienced tremendous progress during the 19th century, and there was no inflation during that period. The chart below shows the changes in America's Consumer Price Index (CPI) over the past two centuries. As you will observe, the CPI fell for most of the 19th century as the purchasing power of the American currency rose. However, since the formation of the Federal Reserve in 1913, the CPI has exploded causing the purchasing power of the US dollar to spiral downwards.
Given the fiat-based monetary system and banks' vested interest in expanding credit, we have no doubt that most nations will experience very high inflation over the coming decade. Accordingly, we suggest that long-term investors protect their purchasing power by allocating capital to precious metals, commodity producers and fast-growing businesses in the developing world. Joel's Note: Puru Saxena publishes Money Matters, a monthly economic report, which highlights extraordinary investment opportunities in all major markets. In addition to the monthly report, subscribers also receive "Weekly Updates" covering the recent market action. Money Matters is available by subscription from www.purusaxena.com. Puru is also the founder of Puru Saxena Wealth Management, his Hong Kong based firm, which manages investment portfolios for individuals and corporate clients. He is a highly showcased investment manager and a regular guest on CNN, BBC World, CNBC, Bloomberg, NDTV and various radio programs. Copyright (c) 2005-2009 Puru Saxena Limited. All rights reserved. --------------------------------------------------------------- And now over to Bill Bonner, who has today's reckoning from London, England... The stock market fell 100 points on the Dow index on Friday. We hope Daily Reckoning readers are out of US stocks. Sooner or later this jig is going to be up. You don't want to be heavily invested when it does. Right now, the market is dilly-dallying. Investors are enjoying a picnic. Alas, they've spread their picnic blanket on the side of Vesuvius. It could blow up at any time. We are in a depression. Not yet a 'great' depression. But it's a pretty good depression; and we'll take what we can get. Depressions take time. They go away eventually, but not before they've done their work. Among the jobs this one has to do is to knock stocks down to bargain levels. Or hold them down while inflation takes them to bargain prices. Either way, we've got a long road ahead. In the meantime, we'll keep our Crash Alert flag flying. The dilly-dallying could end any day - in a panic to get out of stocks. Depressions are illusion-killers. One fellow imagines that somehow he will be able to afford a new house - even though he hasn't got a real job. A real estate investor thinks the market for new condos in Florida always goes up...no matter how many they build. GM believes it will muddle through somehow... It loses money on each sale; maybe it can make it up in volume! The job of a depression is to destroy illusions...to bring people down to earth. And that begins with questions: Is this stock really worth 20 times earnings? What happened to the buyers? How do I know the bank is solvent? In this weekends' Washington Post, a columnist wonders what GM executives were thinking when they allowed the best automotive franchise in the world go broke. They probably weren't thinking much at all. They didn't need to. Business was good for a very long time. American auto sales expanded for an entire century. Remember the glory years...'50s...the '60s? GM came out with new and better models every year. People paid attention - they measured the fins...admired the chrome...and listened to the roar of GM horsepower. The highway system was getting better and better. Salaries were increasing - at least, until 1973. Gasoline was 25 cents a gallon. Everyone wanted to 'See the USA in a Chevrolet.' But nothing fails like success. GM was the world's biggest and most successful company. Naturally, it attracted parasites. The unions wanted more and more - more paid time off...more health care benefits...better retirement programs. Management became parasitic too. It was too comfortable and too well-paid to resist. Everyone went along...getting what they could get...all the way to bankruptcy. "When a machine broke down and stopped the assembly line," explains Paul Ingrassia in his book Crash Course, "workers would take an unscheduled break and wait for an electrician or machinists instead of rushing to fix it themselves. Only skilled tradesmen were allowed to repair machinery, even if ordinary workers were capable of doing it - rules enforced not only by the national contract but also by the separate local contracts at each factory. The electricians or machinists often took their time getting to where they were needed, so that the plant would have to go into overtime to make up for lost production and everybody would get more money." As GM goes, so goes the nation. The 20th century saw Detroit hustle and bustle...then it went on cruise control. That was true of the whole country, too; America was so successful she couldn't overcome it. Like the labor unions at GM, every major group got a little edge...a little advantage...food stamps for the poor...bailouts for the rich... And everywhere you looked there were more petty tyrants enforcing pettifogging, perverse rules. "This sidewalk is closed," announced a municipal employee, working on the sidewalk on Charles Street in Baltimore last week. It was a silly matter. But Americans have become so burdened with claptrap rules that they no longer question them. And they've become so accustomed to being bossed around that the fight has gone out of them. "No, it's not," your editor replied, stepping over a pneumatic hose. "Dumb son of a b****," came the response... --- The Lifetime Income Report Presents --- Enroll today and immediately start collecting "pension paychecks" every 15 days, for the rest of your life... Retirement, Plan B: Without doing a single moment's work, now you can legally sneak onto the "payroll" of nearly 1,000 of America's best companies...
--------------------------------------------------------------- And more thoughts... There was no joy in Baltimore on Saturday night. The Ravens lost their game against the Colts. Football is often said to be a substitute for armed warfare. It has its strategies, its heroes, and its casualties. The city of Baltimore - or most of it - would probably have preferred a win against the colts to a win in Afghanistan or Iraq. War is a game played for mortal stakes. But there is less difference between war and football than is generally realized. There is nothing at stake in most wars - just like football games. Still both sides are so keen to win they make fools of themselves. Supporters wave flags and sing victory songs. And if their team wins, THEY feel like winners, even though they played no role whatsoever in the victory. Nor are all wars bloody affairs. Many societies conducted stylized warfare...often with very few battlefield casualties. The West was able to dominate the world, say some military historians, because the Greeks...and later the Romans...and later the Europeans...were more ready to die. Regards, Bill Bonner, for The Daily Reckoning --------------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com | ||
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