By Bill Bonner
"The bulk of the money in this world is managed in a cover-your-ass
fashion."
Thus speaks a modern day Zarathustra; a prophet of the school of
'behavioural finance,' Mr Whitney Tilson, fund manager, founder of T2
Partners, and Financial Times columnist.
As an investment theory, behavioural finance turns out to be a full-dress
version of the familiar truism about the fool-and-his-money. What worries
the behaviourists is the way investors make mistakes by following their
impulses...with nary a sign of rational profit- maximizing. If only the poor
suckers would stick with sober investment analysis, complain the
behaviourists, drumming their fingers in a nervous, academic sort of way.
Think about it. Here, an investor holds a stock too long. There, another
buys a fund simply because everyone else is buying it. A third bumbler
investigates so much he gets 'married' to his picks, having put so much time
and effort into them.
We might feel sorry for the poor fools for we realize that we make all those
'mistakes' ourselves...only, we wonder if they really are mistakes.
You see, the problem with the behavioural finance chaps is that they don't
go far enough. They pretend to analyze what people do, and then compare it
to what some fictional, non-existent investor 'ought' to do. So, today, we
ask the question, why should he?
If we investors do not really invest the way a theory says we should, where
is the fault? Where is the error?
In ourselves or in the theory? Why, after all, should investors behave in
any other way than the one they are accustomed to?
The behaviourist professors assume that man is essentially a rational,
profit-maximizing creature who simply makes 'mistakes.' But these 'mistakes'
are no mistakes. If an investor does not invest the way the professors think
he should, it is because he is not the animal they think he is. In other
words, we investors do not invest merely to make money.
If our only goal were to make money, we would go into pornography, illegal
drugs or even worse, hedge funds!
Yes, if men were only money-makers, we would go door-to- door in trailer
parks, offering zero-down, no-interest, negative amortization loans on new
houses. And we'd give a discount for buying two of them. Where we met
resistance, we'd throw in a subscription to one of those nifty Internet porn
sites for free with every purchase.
And maybe some crack cocaine too, just to ease the settlement.
But the 'lumpeninvestor' does not have only money-making as his goal. Making
money is merely a part of a whole complex of desires and prejudices that
drives him to his much-deserved fate. The lump wants not only to make money,
you see, but also to feel both wise and hip, both daring and cautious. He is
certainly willing to try contrarian investments, only so long as everyone
else is too!
And that is why in the hard world of investing, the lumps are losers. For,
in investing, what tends to go up are just those things that have gone down.
But, buying down-and-out investments is not what the average investor wants
to do. Why? Because it makes him feel marginalized, odd, in danger. It makes
him feel like an outsider when he wants to feel anything but, and would as
soon forego his profits to pay for that privilege. In fact, the lump tosses
and turns at night, unless he is firmly and squarely bedded down in the
middle of the vast herd of other slumbering fools.
The lumps may not maximize their investment returns...but they judge being
able to sleep well worth the cost.
Other investors don't care so much about making the right decision as they
do about avoiding the wrong one.
Such men fear losses less than laughter. They dread most of all being in a
position where anyone - especially their wives - might point a finger and
call them a jackass. To tell the truth, they would rather actually be a
jackass, financially speaking, than be accused of being one by an ignoramus.
And, what do you do to avoid your wife's criticism? Why, you do exactly what
Citibank or Lehman Bros does. Or what the Federal Reserve Bank tells you to
- even if it means taking out an adjustable rate housing payment.
Yet another lot of investors exhibit a loyalty we can only admire. They
stick with an investment sector - or even an individual company - through
thick or thin, rich or poor, success or failure...until death do them part.
And death often does. Others tend more to be bad boyfriends, dropping their
poor girls as soon as another bit of skirt wiggles in front of them.
But, of course, if you believe the behaviourist geeks, the cads are only
being rational, profit-maximizers. Not a whisper of spring fever in the
blood at all.
But if investment decisions really were such cold- blooded, binary choices -
one clearly right, the other clearly wrong - computer programs might make
them for us just as well. Only, computers don't get to read tomorrow's
headlines any sooner than we do and even a silicon chip can't tell which
investments intend to go up or down.
Which means that the whole idea of a rational profit- maximizer - a perfect
investor who doesn't make mistakes
- is so lacking in any connection to reality, we can safely classify it as a
bloodless intellectual fraud.
That is why our ingenuous and irrational investor is right, after all.
Knowing that the success or failure of his investments - money-wise - is
mostly beyond him, he goes for the non-monetary rewards - bragging rights,
sound sleep, social cache, derriere-covering, wife-
pleasing...skirt-chasing.
He may be a fool to finance professors. But, in the real world, he is a man.
Bill Bonner, August 23rd 2006
The Daily Reckoning Brings you: Tasty Morsels of Deficit Spending
by The Mogambo Guru
"And this pathetic performance occurs despite the fact that the government
has been buying huge, huge, HUGE amounts of war materiel from the 'defense
industry' and running up enormous, enormous, ENORMOUS deficits to pay for
it!"
Money must be getting tight, as Total Fed Credit is up only $1 billion from
last week, foreign central banks are cutting back on their gluttony (adding
only $4 billion to their holdings at the Fed), and now I am forced to make
the painful choice between paying for the kids' damned dental problems or
getting that expensive new driver that is GUARANTEED to give me another 15
yards off the tee, curing my accursed fade-away slice problems forever. And
this will (in the final analysis) make me a whole lot happier, and will last
a hell of a lot longer than anything that stupid dentist does, too.
("See you again in six months, suckers!")
But it is neither golf nor dentistry that disturbs my already restless
slumber; it is inflation that makes me wake up screaming in the night, with
a spasmatic trigger-finger, and my loud, irritating voice issuing both wails
of fear and sulfurous curses to add to the incessant Mogambo Inflation Alert
System (MIAS) buzzer - which indicates that monetary inflation is raging,
raging, raging around the globe, as all the central banks are busily,
busily, busily creating money and credit at monstrously high rates of
issuance, averaging (as I understand it) about 14% a year. That means that
inflation in prices will continue to get worse and worse
- as will my aforementioned sleeping and trigger-finger problems.
And surely things are going to get heated up pretty soon thanks to inflation
- especially when the middle class starts whining; Congress really comes
alive then. And speaking of that, we have Ty Andross of TraderView.com
newsletter reporting that "the broad middle class has not shared in the
wealth of this expansion except for the bubblicious appreciation of their
home values."
He adds, picturesquely, that they were "robbed at night while their money
was sitting in the bank and the Treasury's printing presses churned out
dollars and credit by the trillions", which made every dollar of that
appreciation in the house worth less! And then the homeowner had to pay
higher property taxes and insurance premiums on the now-expensive house!
Hahaha! I'll bet THAT is not in the stupid little econometric models the
stupid Federal Reserve uses! Hahahaha! What dorks!
And all that price inflation was spawned by the Federal Reserve, since it
created the money and credit to finance a stock market boom, and a bond
market boom, and a derivatives boom, and a financial-services industry boom,
and then a housing boom. All now busted, to one degree or another.
And while the inflation "problems" of the stock and bond markets is one
thing to be officially ignored, the inflation in the effective prices of
houses (taxes, mortgage and insurance) and the subprime mortgages that
spawned it, now has the idiotic Congress frantically looking into it (at
long last), now that the bust is here and it's too late to prevent the boom
that caused the ensuing bust that they are so bent out of shape about.
And why will the government try and bail out these homeowners and investors
who are looking at huge losses in a housing bust? Taxes, I figure! Same as
always!
Congress is surely aghast at the prospect of trillions of dollars of losses
being deducted on tax returns next year, and for years to come, too.
I mean, next year the federal budget balloons to a whopping $2.9 trillion,
up from $2.7 trillion this year, and so the LAST thing they need is less tax
revenue coming in!
But feigned ignorance and subsequently being aghast at the results also
comes naturally to the Federal Reserve, which has an annoying habit of
ignoring (and lying
about) inflation in prices, especially the kind of willful ignorance about
the results of creating inflation in money and credit, as perfectly
illustrated by the essay "Inflation and the Ironic Productivity Tax"
by Richard Benson of Benson's Economic & Market Trends newsletter.
He writes, "It dawned on me that the one thing the government never reports
on is that the dollar in my pocket will buy me more next year. Indeed, my
dollar should buy more because of the relentless increases in productivity,
and I should in reality be better off if I saved money, rather than spend
it."
I leap to my feet and shout, "Bravo! Well said! An increasing standard of
living is the whole promise of productivity!"
Ignoring me completely, he goes on to say, "But, in my lifetime, my world
has only known inflation, so buying goods today that I will need tomorrow,
and stashing them away, has proved to be a better investment than saving
cash in the bank. As a consumer, when I think about the escalating cost of
food today, I realize I really didn't benefit at all from all those
productivity gains!"
So where did the benefits of productivity increases go?
He explains, "With inflation, the government has basically stolen/taxed my
share of productivity away."
He dryly and sarcastically notes, "It's ironic that the best and brightest
at the BLS are employed to figure out how to use fancy statistics to rob
their grandparents of their social security increases". After which, he goes
on to calculate, "If money and credit growth were restrained, I estimate the
dollar could purchase about two percent more each year, and we would be
living in a saver's paradise." And a spender's paradise too, as prices would
go down each year!
He calculates that productivity, as measured by the Consumer Price Index,
deliberately understates inflation, and "Taking productivity out of the
Price Index means that when the CPI shows three percent, in reality it's
more like five percent." 5% inflation! Yow!
We glean a little macroeconomic forecasting lesson when he says, "So, when
looking forward, it is important to remember that whenever productivity
slows down, inflation will suddenly pick up", which I take to mean that if
productivity drops, you should immediately short bonds! Hahaha! This
investing stuff is so easy!
"Now that I clearly understand how this productivity tax works," Mr. Benson
goes on to say, "I am less inclined to buy inflation-indexed bonds and more
inclined to buy gold and silver. I believe precious metals are more likely
to track the real inflation numbers."
"And why is this?" you ask with that cute little innocent, quizzical look on
your adorable, trusting face. Instantly I am on my feet to deliver a
stirring and powerful condemnation of the Federal Reserve for creating all
that money and credit, gradually working the crowd into an absolute
blood-frenzy, see, ending with me being declared King Mogambo by cheering
throngs of adoring people ready to obey my every command, and given
unlimited powers of retribution and vengeance! I cruelly sneer as I laugh
the hollow laugh of the damned, "Hahaha! Let the games begin!"
However, I was not prepared for Mr. Benson apparently being so appalled at
the prospect of a King Mogambo, and he quickly preempted my plan for a
speech leading to world domination by pithily summing it up by saying, "The
U.S. is inflating like crazy, and it's only going to get worse."
Already angry at being thwarted in my attempt to deliver the Speech Of A
Lifetime (SOAL) that would have lead to my being crowned King, the news that
inflation is "only going to get worse" makes me angrier and angrier, until I
race home to fire off flaming emails and faxes to my Congresspersons ("Dear
Butthead, I hate you for allowing the Federal Reserve to create all that
money and
credit!") and the Federal Reserve ("Dear Buttheads, I hate you, too!").
But while stocks, bonds and houses may not be going up in price (and may be
going down in price!), the kinds of things you and I have to buy to satisfy
our insatiable wants and needs for tasty morsels and various kinds of fun,
ARE going up in price...every one of them! That is the horror of it all!
And speaking of raging price inflation, Doug Noland of the Credit Bubble
Bulletin says that last week "M2
(narrow) 'money' rose $9.1bn to a record $7.164 tn (week of 3/19). Copper
gained 2.5%. May crude surged $3.59 to $65.87. May Gasoline jumped 5.7% and
May Natural Gas 4.4%. For the week, the CRB index gained 1.9% (up 3.1%
y-t-d), and the Goldman Sachs Commodities Index (GSCI) surged 4.2% (up 7.9%
y-t-d)."
And now Bloomberg.com reports that we have entered a portal to what I think
may be characterized as the Worst Of All Worlds (WOAW): The economy is going
down and prices are going up. More specifically, "Manufacturing growth in
the U.S. slowed more than forecast last month"
as "The Institute for Supply Management said its factory index fell to 50.9,
from 52.3 in February."
And what's worse, "raw-materials costs jumped, reinforcing concerns that a
cooling economy isn't reducing inflation" as "A sub-index of prices rose the
most in seven months."
But worst of all, "measures of employment and new orders declined."
All of this is provided as more proof of the eerie accuracy of the economic
indicators, like the leading indicator has been right in forecasting future
economic activity, in that it has been going nowhere for quite a while and
thus has been predicting today's lower economic activity.
Specifically, we now find that in February, durable goods orders fell by
0.1% when you exclude aircraft orders - which was huge - but including
aircraft, durable goods orders, it would have risen by 2.5%!
Making an economy out of airplanes! Hahaha!
And this pathetic performance occurs despite the fact that the government
has been buying huge, huge, HUGE amounts of war materiel from the "defense
industry" and running up enormous, enormous, ENORMOUS deficits to pay for
it!
How much defense industry spending? Well, Mark Skousen of Forecasts and
Strategies newsletter says, "the U.S.
government's share of GDP spent on defense has gone from 3% to 3.7% since
September 11, 2001", adding, "while other nations collectively have declined
from 2% to 1%."
Well, as uncannily correct as the leading economic indicator has been in
forecasting this slowdown, the lagging economic indicator (which can be
characterized as measuring burdens and future inflation) has been on a
relative tear, and has been absolutely prescient in predicting the inflation
that we are seeing.
And the coincident indicator has always been right about current conditions
all along, too. It looks like three out of three!
On the site bbj.hu, which apparently got the news from somebody else, there
was the headline "Central Bank gold holdings fall to lowest since 1948" and,
"Gold holdings by central banks and other government organizations declined
for the eighth straight year in 2006, to the lowest in almost 60 years,
figures from the International Monetary Fund show. Bullion holdings were
867.6 million ounces last year, down 1.2% from 2005."
So where is all of this gold? Well, it turns out, "Of the 4.98 billion
ounces of gold in inventories at the end of 2005, 52% was in the form of
jewelry, 18% was in central bank vaults and 16% was investor owned."
As to why this may be important, we turn to the famous and handsome John
Embry of Sprott Asset Management, writing in the March 30 issue of
Investor's Digest under the title "The Time For Gold 'To Go Ballistic'
Approaches". He starts off by explaining, "In reality, it isn't the price of
gold that changes, but the value of the paper currency in which it is
denominated. I have made the case many times that paper money is being
seriously debased, and I think my position is strongly supported by the
recent spate of money-supply growth numbers that have emerged from around
the world."
He then ticks off the annualized growth of some broad money supplies, namely
Eurozone M3 up 9.0%, UK M4 up 13%, China M2 up 15.9%, South Korea up 10.6%,
Australia
M3 up 13%, United States M3 up 10%, Russia M2 up a staggering 48%.
And if you are wondering how the dollar is faring right now, after this kind
of debasement, Yahoo.Reuters.com reports, "The dollar fell around 3 percent
against a basket of major currencies in the final quarter of 2006." This is
a huge move! Huge!
I know what you are thinking: "That Mogambo Idiot (TMI) has gotten off the
subject again, which was supposed to be about the world's gold. And so why
in the hell is he is yammering about money supplies? Who needs this crap?
Screw this! What's on TV? We got any beer left?"
If you were not so rude, impatient or thirsty, you would have soon learned
that Mr. Embry feels, "we are very, very close to that key moment when there
could be insufficient central-bank gold to meet mounting demand.
As I have said before, that is when the gold is price is going to go
ballistic."
This assessment agrees perfectly with that of Richard Russell, of the Dow
Theory Letter, who says that he thinks "the dollar will die a slow, probably
a very slow death. It will be death by inflation. In other words, the dollar
will, over the years, lose an increasing amount of its purchasing power."
And as for gold, he says, "Another irony is this - essentially, holding gold
is a rich man's escape. The reason is that gold doesn't pay interest, and it
doesn't pay dividends. The rich man can hold a large amount of gold, and it
doesn't affect his life style. The poor man, the middle class man, can't
afford to hold a significant portion of his assets in gold. No, the average
American remains at the mercy of his government and the Fed. He's doomed to
see his savings (assuming he has any savings) taxed away or inflated away",
as will his increasingly meager earnings, I might add.
To tell you the truth, I disagree with the idea that only the rich can buy
gold. When I see the enormous amounts of money the middleclass and the poor
spend on pure trash every year, I say, "And you want me to believe that out
of all that money, they can't manage to buy a stinking half-ounce of gold a
year? Or some silver? Hahaha! Don't hand me that crap!"
I think that the important point is that gold is a "rich man's escape",
which, by definition, means that rich people will be buying gold to effect
their escape! And given the staggeringly huge amounts of money now in the
world (mostly owned by the rich!), versus the pitifully small amount of gold
in the world, this could be Really Big Time Stuff (RBTS) indeed, because 1.)
History has shown that rich people always take their money and rush to the
safety of gold at the inflationary ends of booms (like this one), 2.) Gold
is essentially (like all
markets) an auction market, and 3.) Rich people bidding against other rich
people for a finite supply of gold, with unimaginable amounts of money, is
the stuff of which auction history, and newspaper headlines, is made!
And the good news, the better news, the best possible news, is that gold is
still selling at only about $660 a lousy ounce! What a screaming bargain
when viewed against what is surely coming, just like it has always come!
Unbelievable! But, "Whee!"
To a suspicious little creep like me, I naturally connect Mr. Embry's point
that there may not be enough central-bank gold to satisfy demand, to Bill
Murphy of Le Metropole Café citing a Dow Jones report that "The
International Monetary Fund has proposed to increase transparency in the
gold market by publishing statistics that reveal the amount of gold loaned
and swapped into the market by central banks."
What? This surprises the hell out of me! Then I remember (and make some
rude, disparaging noises) that the IMF has mismanaged itself, which comes
mostly from the fact that no country needs to borrow any money from the IMF
these days, as the entire world has long since gone completely freaking
insane with creating all this excess money and credit in which the world is
currently sloshing greedily around.
Now, with the slowdown in the "bail-out-and-meddle-in-
your-sovereign-affairs" business, the IMF desperately needs more money with
which to overpay themselves and maintain their expensive little lifestyles,
empires and power, to which end they recently actually proposed to sell the
gold (their capital) that the United States loaned them to fund the damned
IMF in the first place!
What thieving arrogance!
Rebuffed, I guess, this proposed new disclosure rule by the IMF to reveal
the actual gold holdings of central banks is, I figure, just the usual slimy
blackmail.
"Give us more money, or we will tell what you did!"
(Which is sort of how I ended up getting married, but that's another ugly
story, which I don't want to get into because I will cry like a baby and get
all embarrassed. And then angry. Very angry. And nobody wants that!)
Exactly what the central banks did (but not how much) is hinted at by the
news that "Although they provide regular reports of their gold purchases and
sales, central banks don't currently reveal how much gold is loaned and
swapped."
But there are just too many tremors, and tremors in central bankers
everywhere, not to think about predicting earthquakes in the gold market,
and getting long gold.
And speaking of central bankers, from Bloomberg we read, "Federal Reserve
Chairman Ben S. Bernanke said monetary policy is still aimed at combating
inflation even though risks to economic growth are multiplying. 'Our policy
is still oriented towards control of inflation, which we consider to be at
this time to be the greater risk,' he told the Joint Economic Committee of
Congress in Washington."
Bernanke is reported to have said, with no hint of embarrassment,
"uncertainties have risen, and therefore a little more flexibility might be
desirable." The Mogambo is also reported to have said "Hahaha!" in snarling
disdain, and if you didn't read or hear about it, it obviously means that
this highly-illuminating Mogambo Editorial Comment (MEC) was censored by
government goons, which that proves they're all out to get me. And it also
proves that snooping government agents and spies are prowling around in my
bushes, probably right now, and thus I am fully justified in ruthlessly
hosing down the shrubbery with withering machinegun fire until I feel safe
again (or until I run out of bullets, whichever comes first).
Okay, well, maybe it doesn't actually mean all that, but it DOES mean that
the Fed wants to ignore inflation, although preventing inflation and
attendant boom/bust cycles is the reason that power over America's money was
given to the Fed in the first damned place! They obviously haven't done
their damned jobs - I mean, look at the record! They've failed miserably!
And now, they still don't want to do their damned job; they want "more
flexibility" to give us more of the same! This is insane! And yet Congress
does nothing! Nothing! I am incensed!
But wait! I may be too hasty! With a sudden, powerful insight, I realize
that I could use this unusual stalling technique to my own advantage: Since
my Annual Employee Evaluation is coming up soon, I evilly twirl my mustache
as I scheme to myself, "This 'more flexibility'
thing could come in very, very handy indeed!"
Goals not met? I cry out "I need more flexibility!"
Losses mounting? I wail, "I need more flexibility!"
Employees and customers in open revolt at my arrogance and incompetence?
With a tone of voice that speaks volumes about what I am going to do to my
boss's car if this Evaluation thing doesn't work out for me the way I want,
I say, through clenched teeth, "I need more flexibility!"
Another way of looking at it was provided by Bloomberg:
"Bernanke said the central bank last week dropped its stated tilt toward
higher borrowing costs because policy makers wanted more room to maneuver."
Thanks! Now I realize I need more room to maneuver, too! I need room to
maneuver! For God's sake, give me room to maneuver!
The message is clear; my boss now hates and fears me more than ever, and the
Fed is clearly signaling that lots of inflation is in our future, as it is
the price we must pay to bail out the blinding, incandescent incompetence of
the Federal Reserve under Alan Greenspan, who created the housing bubble,
which was created to bail out the busted stock market bubble, and the bond
market bubble, and the size-of-government bubble that he also created.
Grrrr!
And how bad is inflation in consumer prices? Bloomberg itself provides an
answer with "The Fed's preferred inflation benchmark, the personal
consumption expenditures price index, minus food and energy, has been at or
above the two percent comfort zone of at least six Fed officials for 34
months. The price measure rose 2.3 percent for the twelve months ending
January."
Three years! Three long, long years of inflation above zero, which is de
facto evidence of their incompetence, and even more so when you realize
that, in reality, even that unacceptable recent 2.3% measure of inflation
actually understates inflation by about four to seven huge percentage points
or so! Gaaaaah! We're freaking doomed!
Even worse, "An index of 18 industrial materials tracked by the JOC-ECRI
Index is up 2.5 percent year-to-date, and 12 percent over the past year. Oil
prices are climbing."
John Stepek, of MoneyMorning at Money Week.com, must have overheard us
talking about oil prices climbing, and says that in Britain, "The rising oil
price was one of the major factors driving official inflation figures higher
across the globe in the past few years. It's also served as a convenient
excuse for politicians to point to - 'rising inflation isn't our fault, we
can't do anything about the oil price' - as Tony Blair effectively said last
year."
He says that he was reading an interesting report from Donald Coxe of BMO
Financial Group, who says, "he's also not expecting the Fed to cut interest
rates. And the reason is that the world is very short on food, at a time
when demand has never been stronger."
As to what this means, he correctly notes that I am an American, I am
stupid, and thus, carefully tailors his answer with, "This means that U.S.
consumers are about to find that their burgers, their buns, their daily pint
of milk, and everything else they eat are going to tick up in price over the
coming year."
By this time I am actually gagging on Mogambo Vomit Of Fear (MVOF), and
since I was so preoccupied with making the crucial decision of whose lap I
was gonna barf in, I almost missed him saying, "The latest U.S. producer
price index data from February showed that food prices rose 6.8% on the
previous year. It's little wonder - data from the U.S. Department of
Agriculture suggests that the amount of coarse grains left over this year to
carry over to the next 'could be the lowest - in relation to consumption -
in decades.'" Gaaaaah! MVOF!
And this is at a time when there have been, "16 straight years of favourable
growing conditions in the Midwest - the world's leading producing region.
This is an historic winning streak."
So, to recap, we ended up with nothing in savings, at the end of remarkably
long booms in stock markets, bond markets, houses, size of governments, and
now even in commodities, too? Hahaha! I laugh in derision because, I mean,
isn't this supposedly an overwhelmingly Christian nation, and thus shouldn't
we, as a people, overwhelmingly know about the Biblical admonition to save
during the fat years in preparation for the cyclically-inevitable lean
years? Hahaha! We're religious idiots, too!
As further evidence of that, I point to the Economist magazine article about
Lynn Westmoreland, "a Republican from Georgia", who appeared on the Comedy
Channel's hit show, the Colbert Report, and who "co-sponsored a bill to have
the Ten Commandments displayed in the Capitol."
Mr. Colbert reportedly asked him to name the Ten Commandments. He could
name, in all, seven.
It is not just The Mogambo and a few of you other gold- bug, whack-job,
paranoid lunatics out there ("Hi, Lucy!"
"Go to hell, Mogambo!"), who are buying gold, as MoneyandMarkets.com
breathlessly reports, "Dubai's Gold Souk, an open-air market that contains
some 500 gold shops, is the largest retail gold market in the world.
An estimated 500 metric tonnes of gold, or nearly 18 million ounces, are
bought and sold each year. In the gold souks of Dubai, both the ultra-rich
and regular citizens are buying gold. I watched wealthy businessmen,
construction workers, and imams all snatching up the yellow metal."
And speaking of prices and gold, Junior Mogambo Ranger
(JMR) Richard D writes "I got this from Sinclair newsletter. 1941 prices.
Gallon of Milk $0.34
Loaf of Bread $0.08
New Auto $925.00
Gallon of Gas $0.15
New Home $6,954.00
Average Income $1,231.00 pa
Dow Jones 110
Gold $34.60"
I note with a certain satisfaction that, since 1941, gold has pretty much
held its own against the rest of the items on the list, which are all up
about 20 times (except milk - which is government-subsidized, so who knows -
and the Dow Jones, which is up by over 100 times
- which is now also government-subsidized by the Plunge Protection Team, so,
again, who knows.
So, is the stock market overpriced in relative comparison to everything
else, or is everything else under-priced in relation to stock prices? A lot
will depend on your answer, but it is bad news either way.
Ugh.
**** Mogambo sez: If GATA is right, and the gold market is being manipulated
with the collusion of the central banks (and I have absolutely no doubt that
it is, and would be stunned, absolutely stunned, to learn that it wasn't), I
again think of John Embry and his phrase, "the gold price is going to go
ballistic" when central banks can't meet demand.
My Mogambo Profit-Sensing Gland (MPSG) recognizes the screamingly obvious
profit that will come when this kind of manipulation ends (as it must), and
it squirts a jolt of "greed hormone" into my bloodstream. In response, I
look at my pitiful stash of gold and silver, and I compare that to how
freaking much wealth I want to have when the inevitable explosion in gold
finally happens, and I wonder "Do I have enough?" which is Polite And
Genteel Mogambo-Speak (PAGMS) for "Has my embarrassing, gluttonous greed and
unspeakable depths of avarice been satisfied with this pathetic little pile
of gold and silver?" Upon reflection, I find the answer is, of course, "no".
Then I wonder, "Should I get a job, to earn some money with which to buy
more gold and silver?" Again, upon reflection, the answer is, of course,
"no".
Then I wonder, "Should I make the wife and kids drop out of school, get
second jobs so that they can buy their own food and clothes (saving me a
bundle!), and maybe pay a little room and board around here (the little
worthless, parasite freeloaders!), and then use the money to buy more gold
and silver?" At last, I arrive at a solution I can live with. Even optimal,
in its own way!
So while I don't know how it works out for you, and you'll do what you do,
but whatever you do, you'll find that you are usually better off if you do
what you know you should do, as this gold and silver thing is "do it or it's
doo-doo!"
