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The Daily Reckoning | Wednesday, October 20, 2010 Why Obamacare is stifling business and the best thing Congress can do, Eric Fry interviews Dr. Marc Faber for the DR Video Series, Plus, enjoying South America's pulsing model-magnet city all to yourself... ------------------------------------------------------- Most Important 500-Square-Miles on Earth Becomes Private Property It was a stretch of barren landscape just a couple hundred miles away from the North Pole. But locked with it sat a 50-year supply of the most important class of industrial metals known to man. Earlier this year, for the first time ever, a single company took hold of this land... And altered the course of the world's high-tech market forever. Learn more here. The Latest Installment of the Daily Reckoning Video Series Eric Fry interviews Dr. Marc Faber Joel Bowman From Punta del Este, Uruguay... We depart from our usual reckoning format today to bring you an unusual one. As promised in yesterday's edition, we are proud to present the newest installment of our Daily Reckoning Video Series. Headed up by Kate Incontrera, associate producer of the critically acclaimed documentary I.O.U.S.A., the DR Video Series project is dedicated to bringing you insights from some of the leading contrarian minds in today's investment world. We'll alert you to these presentations as they come online, but you'll always be able to access the archives on our homepage, here. In our latest presentation, The Daily Reckoning's Eric Fry sits down with Dr. Marc Faber to talk deflation vs. inflation, the emergence of developing economies and the ever-changing landscape of today's investment environment. This interview was conducted on the sidelines of our annual investment symposium in Vancouver, where a few dozen of the brightest financial minds converge each and every year to discuss and debate the trends of our times. Please enjoy Part I of Eric and Dr. Faber's discussion, right here: Note too that full transcripts of each and every video in our series are available on the homepage, right here. As always, your comments and suggestions are welcome. For more of Dr. Faber's take on all things financial, Fellow Reckoners are invited to enjoy his guest essay, below... Why Some People DIDN'T Go Broke In The Bust From 2008 until now, some people watched their gains go UP...as high as 448%, 556%, and even 579%. On what? Not gold or blue chips. And obviously not real estate. Yet they could soon do it - and so could you. Click here to watch the free new video that shows you how. The Daily Reckoning Presents "Print, Print and Print" Dr. Marc Faber [Ed. Note: The following is an extract from the October edition of Dr. Faber's indispensable monthly newsletter, The Gloom, Boom & Doom Report.] No matter what central bankers and the cheerleading, mostly useless academics who surround them pronounce in their self-created aura of infinite academic "delicacy and refinement", under the auspices of the Fed they will do precisely one thing: print, print, and print. Sadly, as Mignon McLaughlin observed, "The know-nothings are, unfortunately, seldom the do-nothings." I should like to emphasize once again that the US Fed will continue to monetize massively on any sign of either further economic weakness or a more meaningful (10% or so) financial and property market decline. In the world I described above, the increased supply of dollars will flow somewhere. Recently, CNBC interviewed 81-year-old Bernie Marcus, one of the founding partners of Home Depot. (He was CEO between 1979 and 1997.) Marcus, who is a self-made man and completely level-headed and without arrogance of any sort, described how he and Arthur Blank (the other co- founder) struggled when they opened their first store in 1979, in Atlanta. For example, at 10 pm on his 50th birthday, he said, he was still in the store, moving boxes around without air-conditioning, because they needed to save money. He then said that he doesn't mix with "important people", such as Jeff Immelt of GE, and smooth-talking bankers and academics; instead, he talks daily with small businessmen, which is what he was when he started his business. He then cited several examples of people who run small businesses and who had told him how difficult business conditions were. He suggested that, like the king in a fairytale, Mr. Obama should dress up at night like a pauper and go out and talk to business people. According to Marcus, King Obama would then realize how unpopular he is and how destructive his economic policies have been for small businesses. He also suggested that the academics at the Fed and in the administration should, for once in their lives, go out and work, instead of sitting in big glass office towers and having no clue about what is ailing the economy. Marcus then emphasized that none of the small businessmen he talked to had any plans to hire staff, because they felt there was far too much uncertainty about what kinds of regulations and laws Congress and the administration would come up with next. All his business friends and customers had told him that Obamacare would be a complete disaster for them. (It imposes on small businesses enormous non-medical tax compliance. It will require them to mail IRS 1099 tax forms to every vendor from whom they make purchases of more than US$600 in a year, with duplicate forms going to the IRS. Obamacare will also fund 16,000 new IRS agents...) Asked what he would suggest as a solution, Marcus, who looks much younger than his age and is still very alert, responded that the US would be greatly helped if Congress went on a holiday for two years, as this would prevent the government from doing even more economic damage. I have mentioned on previous occasions the critical views of other businessmen, such as Lee Iacocca (formerly of Chrysler) and Paul Otellini (CEO of Intel). Like Marcus, their view is that regulation is stifling capital spending and any employment gains in the US. But, whereas the "Otellinis" of this world are more in touch with large corporations, Marcus - whose philosophy is: "Whatever it takes" - is cultivating relationships with a vast number of ordinary people who run their privately owned businesses and have sales of from half a million to 100 million dollars. Marcus was also very critical of the various financial bailouts (unlike the self-serving and hypocritical Charles Munger). But one point he made was particularly interesting. He said that the business people he talked to had access to credit; that banks were willing to lend them money! But they had no interest in borrowing funds given the current regulatory uncertainties. I should mention that Marcus is the antithesis of economic policy decision makers and academics who imagine themselves to be of infinite delicacy and refinement and suffer from "a narrowing of the mind" - not because they travel, but because they have never in their lives worked in a real business. But, obviously, he knows what he is talking about. (Home Depot now employs over 300,000 people.) Now, does anyone really think that, under the conditions Marcus has described, the Fed's increase in the quantity of money will flow into US employment and real wage gains? As Marcus likes to say, "You must be kidding!" The money flows will continue to boost employment in emerging economies, along with their wages and asset prices. The best way to visualize this process is to think of a huge money- printing machine in the US that produces an unlimited quantity of dollars. Most of these dollars flow to the corporate sector, financial institutions, and wealthy individuals. A large proportion of these dollars is then transferred to emerging economies through the US trade deficit and investment flows, and boosts economic activity and increases wealth in emerging economies relative to the US. Some of these dollars then find their way back to the US and support Treasury bond prices. But since fewer dollars find their way back to the US than exit the country, the dollar has a weakening tendency against emerging market currencies and, especially, against hard assets whose supply is extremely limited compared to the money that the money machine keeps spitting out. Regards, Dr. Marc Faber, for The Daily Reckoning Joel's Note: Dr. Marc Faber, an Asian-equities sleuth and the original bear on Japan, is the editor of The Gloom, Boom & Doom Report. Dr. Faber has been headquartered in Hong Kong for nearly 20 years, during which time he has specialized in Asian markets and advised major clients seeking down-and-out bargains with deep hidden value - unknown to the average investing public - and immense upside potential. Dr. Faber is the author of the bestseller Tomorrow's Gold. Stay tuned for Part II of Eric's interview with Dr. Faber, to be featured in a future edition of The Daily Reckoning. All presentations in the Daily Reckoning Video Series can be found here. American Nuke Bomb LOST Under Ancient Ice Fields Way back in 1968, an American B-52 crashed in northwest Greenland... Unfortunately, the nuclear bombs on board got forever swallowed by an ancient ice sheet... But there's an unknown penny stock set to rise 2,000% from this sorry situation. Sound unbelievable? Watch this presentation for proof... And finally... Joel Bowman As we mentioned earlier in the week, Bill Bonner is tending to his "sand-fed" beef in the northern outposts of Argentina. If all goes to plan, he'll be back sometime later this week... Meanwhile, your managing editor is doing a bit of his own wayfaring around the southern continent. We've spent the past week or so in Uruguay, an oft-overlooked country wedged between Spanish-speaking Argentina to the west and Portuguese-speaking Brazil to the north. We began in the old trading port town of Colonia del Sacramento, which is only a couple of hours from Buenos Aires by ferry. So convenient is the commute, in fact, that many Argentines and visa-seeking tourists take weekend or even day trips to escape the heat of the capital during the summer months and/or to acquire necessary travel documentation. From there we took a (Wi-Fi-enabled!) bus to the capital city, Montevideo, which, at first glance anyway, appears to be a quieter, quainter version of its much larger sister city, back across the Rio del Plata. In any case, we weren't there long enough to get a good read on the place, although the Ciudad Vieja (Old Town) is well worth a look. If you do happen to find yourself in Montevideo, be sure to wander down to the port area where, every weekend, the old loading docks come alive with a tantalizing array of street music and local food and wine. You'll find about half the city's population crammed into the area's many restaurants and bars. Next up, on the recommendation of a Brazilian reader, we made the journey east from the capital city to an ocean-side town familiar to many down here. "Find time to make it to Punta del Este," our Brazilian Reckoner wrote, "an amazing display of Argentine off-shore wealth." We've been here less than 24 hours but already get a sense of what the city must be like in high season, which runs approximately from December through February. In the "chilly winter months" (it's 75 and sunny here today), the white sandy beaches are virtually empty save for the occasional dog walker. But in the summer months, the place comes alive with bikini-clad fashionistas all looking to score modeling contracts from the top South American agencies that swoop on the city for that very reason. We've been told the city's population actually swells from a sleepy 7,500 in the low season to over 500,000 during those balmy, hedonistic days of high season. Obviously, we'll have to return in a few months to let you know what all the fuss is about. In the meantime, we've got the beaches and restaurants all to ourselves. Until tomorrow... Cheers, Joel Bowman, 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 Plaza II What a remarkable period in financial history! We can hardly believe our luck. Absurd things are happening. John Maynard Keynes was wrong about practically everything. But he was right about this: There is no subtler, surer means of overturning society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a way that not one man in a million is able to diagnose. Money Printing: How Counterfeiters Saved the World Why Bernanke’s Money Printing Promises Spell Disaster Doubling the Value of Silver I love this because it has that compellingly subtle promise of even more delicious profits in silver after a potential price increase of 30% to $29 an ounce “in the first run up”! There is a wonderful potential inherent in the phrase “in the first run up,” which, in this case means “a breakout of eventually $30 then $50 an ounce,” which is a doubling from here! Whee! Alan Greenspan and the Effects of “Creating More” Reaching for Yield in the Bond Market Gathering Storm: Govt’s, Central Banks Pushing Toward Even Bigger Meltdown A group of 18 investment experts and fund managers have joined together to publish a new book called, “The Gathering Storm,” in an attempt to sound an urgent alarm about how the global economy may be spiraling toward a “doomsday” that’s far worse than anything that’s been witnessed during the past three years. The Top Performing Markets in Emerging Europe China: US has “Clearly a Double Standard” on Exchange Rates The Daily Reckoning: Now in its 11th year, The Daily Reckoning is the flagship e-letter of Baltimore-based financial research firm and publishing group Agora Financial, a subsidiary of Agora Inc. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Published daily in six countries and three languages, each issue delivers a feature-length article by a senior member of our team and a guest essay from one of many leading thinkers and nationally acclaimed columnists. Cast of Characters: Bill Bonner Founder Addison Wiggin Publisher Eric Fry Editorial Director Joel Bowman Managing Editor The Mogambo Guru Editor Rocky Vega Editor