Loading ...Another week, another couple hundred posts, that have lifted the spirits, brought a smile, sometimes a serious thought….just another week under the Tent. Thanks.
Best to all, Farmboy (who some days of late, has seen the light of hope, shine a little more clear and brighter. Who has learned, golden reflections come not only from hard shiny metal rounds….but from hearts, of folks under the Tent)
Thanks for the Gary North article. But I wouldnt worry a whole lot. Hardly any really.
President Bush sez our Economy is strong. Bernanake and friends all said while growth in the US would probably slow for awhile, it would still continue to grow, if slightly.
And just a few weeks ago, some gas station in Atlanta was selling gasoline for .28 cents a gallon. (Course, when they moved the decimal point where it was supposed to be….lol)
And if Hillary gets elected, we all gonna get health insurance. Course, after watching FEMA handle Katrina, and watching HUD handle public housing…I might be celebrating that idea a little early?
And Im pretty sure, all this corn into Ethanol is going to cut a penny or two off the gallon of gasoline. Course, not sure what we will be eating when that happens? But I probably worry too much.
Now when the new President gives amnesty to 20 million illegals, Im sure that will help fight inflation by keeping the working man’s wages down…so there is some good news.
And I remember reading once, where war is really good for our economy. So with Iran making so many headlines these days, figure our economy is due for a ‘boost’ shortly.
Mostly tonight, I am thinking how proud I am of Hillary and Osama. What kind of leaders they will make? Was watching the nightly news and both of them had soundbytes…both saying how the shootings at the University in Illinios should lead to better security for students.
Good to know both of them are up to speed on what is happening in this country, and can offer up televised responses almost immediately. Even before rigor mortas has set in on the victim’s bodies. Even before the bodies are put in the ground. Now a more cynical person might think they were just using this tragedy to gain thier own advantage. Pick up some votes. Furthur thier own agenda.
Just keep the train pictures coming. Some days, that is the only good ‘news’ I see, Best, Farmboy (Who thinks I wouldnt have drunk so much Jack, if I hadnt run out of Kona Coffee. Some things are worth gettin drunk over…grin)
I highly suspect colic is caused by allergys to milk. It can also cause congestion, runny nose ect. that in some forms of severe congestion can lead to pneumonia as it is aspirated. And more sever diarrhea which can lead to dehydration. Most have the mild form causing gas and colic, baby doses of simethicone products ..gas.. over the counter anti gas drops for baby..taken as prescribed can help. Regular milk doesn’t have all the vitamins and iron a baby needs. I gave my babys extra iron nursing, one allergic to milk, and cows milk worse I had to nurse her for two yrs…bla. Nursing babys get extreemly attached to their nest and don’t want you leaving for any amount of time, very hard yrs. But as she got older it went away. Some never do, called lactose intolerant I believe, although they can have processed milk like cheese ect.
Gary North’s REALITY CHECK
Gold’s price:
www.GaryNorth.com/snip/300.htm
To subscribe to this letter:
www.snipurl.com/subscribenow
Issue 728 February 15, 2008
DRIP, DRIP, DRIP: THEN THE DAM COLLAPSES
So do stock markets.
Day after day, there is bad news from the banking
sector in Europe and America. There is bad news from the
housing markets all over the world. There is bad news from
the Institute for Supply Management, which reports on the
state of suppliers. The service sector in January fell to
41.9%, with 50% as the borderline between contraction and
expansion. In December, it was 54.4%. This is a very
sharp decline.
The drip, drip, drip of bad news has a cumulative
effect. It undermines investors’ confidence in the
economy. This calls the stock market into question.
PANIC SELLING
Panic selling does not hit a market without warning,
smashing it into a meltdown that lasts for years. It hits
after years of nagging doubts, followed by months of bad
news in relentless sound bites, and then one unpredictable
event that triggers a massive one-day sell-off, which is
followed by more days of sell-offs.
Woe unto the investor who is caught fully invested in
that initial sell-off. He will look in horror, paralyzed,
denying the obvious. The market keeps going down, day
after day. Tout TV commentators (age 30) interview fund
managers, who deny that it’s a meltdown, recommend “buying
sector stocks,” and say, “Buy on the dips.” Dips? The
market is collapsing. Then the poor soul who bought and
held finally calls his broker or sends a message to his
retirement fund: “Sell!”
Too late.
Once smashed, a market can take years to recover.
Gold and silver did not recover for 21 years, 1980-2001.
We have seen this kind of sell-off more recently. It
began on March 24, 2000. On that day, the NASDAQ peaked,
intra-day, at 5132.52. It closed at 5048. This marked the
end of the dot-com bubble. You need to see a graph of that
collapse, just to remind yourself of just how bad it can be
next time.
www.GaryNorth.com/snip/482.htm
It bottomed on October 9, 2002 at 1114.
On January 2, 2002, it closed at 2059. That was down
60% from the peak. The chart of that decline looked bad.
But wasn’t good news straight ahead? Hadn’t the bad news
been discounted? No. The NASDAQ fell another 46% over the
next ten months. Look at the chart.
www.GaryNorth.com/snip/483.htm
Today, it is in the range of 2300.
The consumer price index has risen by over 20%, 2000
to 2008. (www.bls.gov). It rose by 15%, 2002-2008. So,
discounting for price inflation, the NASDAQ is lower today
than it was in early January, 2002. Plus, the person who
bought and held in 2002 suffered a 46% loss of capital in
2002. Had he sold in January and repurchased in October in
a tax-deferred IRA or other retirement fund, he would have
avoided this loss.
I know people who told me in January, 2000, that the
NASDAQ’s price/earnings ratio of 206 was reasonable. I
thought it wasn’t, and I warned my readers to sell in
February and March.
No one on Tout TV ever mentions this. No one says,
“This can easily happen again.” No one says, “The NASDAQ
has been in a bear market ever since March 24, 2000. The
recovery after October 2002 is a bear market rally. That
rally is fading.”
VOLATILITY
Day after day, the Dow is up or down 100 points or
more, sometimes 200, sometimes more. Why? If the best
forecasting minds on earth agree on the value of shares,
shouldn’t the Dow rise or fall by under 50 points?
Shouldn’t there be a trend, one way or the other?
We are seeing massive moves in and out of shares. The
experts are not only not agreed, they are not agreed in a
fundamental way. These are not random moves, in the sense
of movements in response to unknown changes in perception
at the margin. These are clashes between fundamental views
of the future of this stock market and the international
economy.
Yes, these views are at the margin. All economic
change is at the margin. But these are much larger moves
than normal. There are investors at the margin are much
more aggressive, and they do not agree on what is coming.
The investor with money in his pension fund looks at
these swings, and he has to wonder: “What’s going on? Why
is the stock market so volatile? Why are downward moves so
big? Why does the market rebound briefly, then fall
again?”
He sees volatility, and he senses confusion at the
top. The big boys who allocate enormous pools of money
just cannot get their act together. Yes, there are always
bulls and bears, but the bears rarely are in a position to
swing the market this widely. When they are in this
position, this indicates that the stock market is at a
crossroads.
Volatility is great for about 3% of commodity futures
speculators. These are the people who make money. But
volatility is not good for stock market investors. It
points to major changes in both the economy and the market.
Most stock investors do not want volatility. They
want steady capital gains, year after year. They have not
gotten this since March, 2000. What they have gotten is a
nearly flat Dow Jones and S&P 500, and a much lower NASDAQ,
accompanied by steady price inflation. They are getting
poor slowly. They have not yet lost hope in the stock
brokers’ mantra, “The U.S. stock market has risen by 7% per
annum.” Not in 1966-1982. Not since 2000.
The victims who invest in a broad index of stocks have
lost money for eight years. They refuse to change. They
refuse to call their fund managers and say: “Sell my stocks
and move the money into a money market fund.”
Yet they watch what is happening, and they get
nervous. They refuse to sell. The smart ones who have
automatic investing each paycheck have most of this money
go into stocks. But they don’t like what they hear about
subprime loans. They don’t like what they see in the stock
market charts.
We are now entering the doubt stage. It has taken
eight years of negative returns in stocks. These years can
never be recovered.
Meanwhile, gold went from under $300 to over $900.
The stock market touts who never told you to buy gold
now tell you it’s too risky. The “Wall Street Journal” ran
a story, “How to Survive The New Gold Rush” on January 29.
What was the advice? Don’t buy gold. Why not? (1) Gold
can be “extremely volatile.” (2) Gold “hasn’t always kept
up with inflation.” (3) Better to invest in a commodities
funds, “advisers say.”
What advisors? The blind boneheads who didn’t put
gold in their portfolios or recommend gold, from $257 to
$900. Instead, they said “buy a index fund of U.S.
stocks.” And what did that do for investors after March,
2000? Nothing, at best. Capital losses at worst (NASDAQ).
In short, these unnamed advisors are losers until
proven innocent. Losers deeply resent winners. They
deeply resent gold because gold’s rising price announces:
“The policies of the Federal Reserve System, the U.S.
Treasury, and Wall Street have produced losses for eight
years.”
THE PSYCHOLOGY OF FEAR
Some of my subscribers have read my warnings about
real estate, Federal spending, and the tight-money policies
of Bernanke’s FED for two years.
Others have refused to read my reports.
A few people have taken me seriously and have
reallocated their portfolios. They got out of stocks and
into other asset classes, such as gold.
But most readers have just sat there. They have
nodded in agreement, but they have not picked up the phone
to call their broker or pension fund manager to tell them
to sell their shares.
The average investor doesn’t read information sources
like mine. They prefer to rely on the mainstream financial
press, which is advertising-supported. They prefer to read
articles that are favorable to stocks, which is what
mainstream financial press advertisers are paying editorial
departments to publish.
But doubts are growing. Day after day, the news from
the banks, from the American auto industry, and from the
housing sector is depressing. The drip-drip-drip factor is
eroding the foundation of confidence that is necessary to
sustain rising stock markets.
We are seeing the undermining of the foundation of the
bulls: investor optimism. There is no way that the news
coming out of the financial sector can be interpreted as
optimistic. The good news relates to specific companies.
The bad news applies to entire sectors of the economy, and
two of the biggest, housing and autos, are in trouble.
General Motors lost $39 billion in 2007. How does any
company lose that much money and still stay in business?
Yet the recession has not hit yet.
THE NEXT SUBPRIME LOAN CRISIS
In the February 13 issue of “USA Today,” on the front
page of the Moneyline section, we read this headline: “Car
loans stretch to 7 years or longer.” The subhead is
accurate: “Down the road, risky practice could hurt sales.”
But it was not sufficiently scary. Here is what is should
have read:
Auto industry adopts subprime loans. Owners will
walk away when their cars’ equity is gone.
The depreciation effect in autos is constant and
unrelenting. Unlike houses, which used to appreciate — if
owners put enough maintenance money into them — cars
depreciate from the moment the new owner drives off the
lot. Seven years out, nobody but poor people and me will
buy that car.
Here is some car buyer who doesn’t understand compound
interest, equity, and upside-down loans. He just wants a
new car. He cannot afford to buy one for cash. He has no
savings. But he wants that new car. So, he signs his name
on a $25,000 car loan that he will be paying for when the
car is worth $2,500.
Using an amortization calculator, we find that a
$25,000 loan at 6.5% for 7 years requires a monthly payment
of $371.24. That means $4,455 a year. What will the car
be worth in year 7? Probably less than $4,455.
Then there is the question of falling demand for cars.
In years five through seven, he will not buy a new car.
Why not? Because his old car, which he will still owe
money for, will have no equity. He will still be in debt.
The debt will exceed the re-sale price of the car. The
only way that he will get enough money to pay off the loan
is for the new car company to offer to buy it at a trade-in
price large enough to pay off his debt: above market value.
Alternatively, the car company will re-finance his old
loan and apply it to a new loan. But then the new loan is
really upside-down.
The entire auto industry will be forced to extend
subprime loans to buyers who are ever deeper in debt.
These are subprime buyers of depreciating assets. They are
the people who will default on their home loans and walk
away. They will walk away from auto loans, too.
America’s two consumer industries, housing and autos,
are now utterly dependent on long-term debt. They cannot
survive without massive permanent debt. The public accepts
this, and therefore submits to lifetime debt. They do not
intend to pay it off. They intend to roll it over.
This is also the assumption of the U.S. Treasury. Its
debt is perpetual. It is for consumption — the purchase
of votes — and not production. The voters have accepted
lifelong debt, at an ever-expanding rate, as basic to all
politics. This attitude is universal in the West. It is
not confined to the United States.
“Deficits don’t matter.” This is what politicians
proclaim to voters, and economists then affirm as the well-
paid court prophets of the modern world. Debt is forever.
The pious Christian in the pew prays, “Forgive us our
debts, as we forgive our debtors” (Matthew 6:12). But when
the ultimate debtors — the banks and the governments –
decide to inflate away their debts, the pious souls who
prayed that prayer and voted for the politics of debt will
at last understand that God is not mocked. “For they have
sown the wind, and they shall reap the whirlwind” (Hosea
8:7a).
CONCLUSION
The volatility of stocks point to economic conditions
that are not understood. The economic fools in high places
who approved the subprime loans that are now going bad did
not see what was coming until July, 2007. These fools
committed their firms and their clients to debt packages
that were toxic. They did not understand their credit
portfolios any more than the subprime borrowers understood
the adjustable rate loan contracts that they signed.
Governments and central banks are now bailing out the
dim-witted bankers to the tune of billions of low-interest
loans and direct funding. Governments are also offering
band aids — or proposals for band aids — to postpone the
debtors’ day of reckoning. But politicians know whose
bread must be buttered: the multinational bankers’ bread.
They will be bailed out. The home owners, busted, will
return from whence they came: the land of the renters.
No one really cares. They don’t care that large banks
are too big to fail. They don’t care that small home
owners are too small to be worth saving. As long as the
government intervenes to keep the debt structure alive,
voters don’t care whose money gets used to do the bailing.
We are addicted to debt. But as the addiction grows,
it becomes to big not to fail. It will fail. The question
is: In what way? Outright default or mass inflation? I
predict mass inflation.
But not yet. Not this year. The downward pressure of
the contracting housing sector and autos will keep downward
pressure on prices.
The drip, drip, drip of bad economic news will
eventually break the average mutual fund investor’s will to
resist this downward pressure.
“Sell!”
“To whom? At what price?”
Evening EQ.
Good to hear there is progress on the chair. Somehow I kinda figured, you where still working on it in ’sections’. (grin)
Next time you get the chance, take a really close look at the American Dollar World Reserve label, I think you will see it is already starting to peel off? Probably something to do with the Gold Fumes from nearby painting you been doin.
Best, and enjoy your weekend, Farmboy
Well just read the post sinbad wrote, yikes! Im saving it to pass down so may grandbabys never drink that stuff.But in Calif. soy formula price isn’t much different than regular. The almond milk is interesting I may try it. But for growing infants lacking essential nutrients for brain function and growth. And honey given to a child under 1 yr can cause clostridium boltism that developes in theyre intestines.Although don’t think he meant it for babys, in-case young lurkers mis understand .
Well, I must admit there have been a few nights (grin), when I reckon I put on a ’show’.
Unfortuantly, me and Ole Jack have mostly parted ways. I just couldnt keep up. Figures it would be a bottle, that found a way to humble self, vividly point out failures and weakness. Figure, it might have even been an ‘Unseen Hand’, when He couldnt find a way to bring me to my knees, maybe he recruited Ole Jack, to get er done? And just maybe, it was time to grow up a little, learn a lesson or three. Sounds about right….since I cant think of but a few times, I ever done anything the easy way. (grin)
And besides, after reading the shennigans from our government….listening to CNBC, and watching the ‘Election Process’ of our next President….dont guess any ’show’ I could put on, would come close to comparison. You know Fully, if I was not seeing this, hearing all this, with my own eyes and ears…I dont guess there is a person alive, could ever convince me….how crazy things have gotten.
While reading down the list of soon to be ‘Black Hole Data, (And thanks AuGirl, read a little furthur down the posts tonight and seen where you latched on to that story as well), after reading down the list, I found myself wondering….why when the markets open up on Tuesday, why anyone with half a brain cell, wouldnt finally just pull everything they have in paper markets, and get while the gettin is good? I mean, I hear about all these Fall St investors and traders….have seen them pause on the tradin floor, awaiting the next ‘report’. Just pondering this evening…..IF they really traded based on those reports…needed those reports,…granted those reports such ‘Sacred Reverence’….??, well, I wonder how they will now justify even playing in the markets? Seems, silver and gold may gain a few more folks, in the weeks to come. Think a few more folks will adopt the Wanka Investment line of thought: Gold and Silver…portable Real Estate.
Wouldnt surprise me at all, to hear (due to costs dont ya know) they wont even announce who ‘wins’ the Presidential race come this fall. Not that it would mean much anyway, save for Dr Paul, I dont see much a difference in our choices anyways. Lucky for us, we can still vote our choice of Precious. Wonder how much longer that will last?
Best this evening, Farmboy (who is beginning to question, if being more sober, and somber,….well, there are some posts I read here and tell self, “You picked a fine day to quit drinking!) LOL Coming out the other side, little worn and torn,…and more appreciative of the pillow and rug under the Tent. Dont care the govt has decided to tell us even less….(like who believed most of what they said anyway), wouldnt trade the posts under the Tent, for all thier ‘Official Reports’ . Spit
I guess they must have many, many other bases covered too!!
Two of ours had colic on breast milk only. Milk dries up early, though, so moved to cows, no problems.
Colic is a real problem! Still don’t know what causes it.
Nobody has to buy formula. Just use cows’ milk, diluted three parts milk to one part water. Moreover, if you use milk straight from the fridge, and water straight from a boiling kettle, it comes up to the right temp. immediately! Voila!
along in its conversion to a final golden surface. It is advancing, now that POG is holding on (just barely) to a price above $900. So there is progress and I will post a picture of the progress sometime soon if the price of gold can manage to hold above 900.
The support legs for the chair are a problem. They will be the last to get a coat of fresh golden paint, especially the leg labelled ‘US dollar as the world’s reserve currency’. Until that label can be removed, that is as long as the US dollar is the world’s so-called reserve currency, that supporting leg is never going to take on its rightful golden hue. So it may be awhile until this conversion to gold, with a solid foundation, is completed on my beloved trading chair. But we’re working on it, in expectation that the US dollar is not going to be the reserve currency forever. Cheers. Equiz.
…..take it away partner…
Been reading about your cholesterol thing. Fresh OJ once a day. Also if your able, exercise, bringing ur heart rate up to 100 plus will burn it.
The stock market doesn’t help, stress makes cholesterol..yes u can make ur own in stress, maybe some survival mechanism. So after u watch the stock market, go exercise and other forms of stress. Doesn’t have to be extreem I think for that. But it isn’t gonna help much if you turn around and eat fried chicken cooked in poly saturated fats, even if it does taste better. Also not eating just before u go to sleep, which people are getting in a habit of doing. If you do think low cholesterol, or your almonds. Vegies and other fibers like salad which men seem to have a problem with..they go for the meat, helps pull toxins out of the body while going through the digestive tract. Drinking fluids before you eat may help retard the appetite for too much..meats..and help keep u hydrated ..digestion needs water it other wise could drain from you. Maybe Isra has more info on that.
“There is only a relatively small group of investors who very seriously believe that there is a high level of risk that the (financial) system could break down. You only need a relatively small group to believe this to move the price of gold.” In other words, the metal’s price behavior reflects the trivial obsessions of a discredited fraction of investment opinion.