5 Stocks With Takeover Appeal

December 14th, 2010

5 Stocks With Takeover Appeal

Any shareholder of a company that has been bought out can tell you that takeovers are often lucrative propositions, often delivering quick double-digit gains.

But overall, acquisitions have a reputation for destroying shareholder value at the acquiring company. Studies place the failure rate at between 60% and 70% of all deals. The main reason for this is that companies usually pay too much when buying another company and can stem from too much optimism on supposed synergies from a merger, getting caught in a bidding battle with another acquirer, or a target thinking their company is worth far more than the going rate for the business.

Fortunately for investors, a high failure rate has done little to temper enthusiasm for deal-making activity. And the current market environment is ideal for acquisitions. Tepid economic growth means it has become very difficult to grow organically, or by growing sales internally. Acquiring market share is a primary means toward growth these days and will continue to be as long as global economies remain stuck in neutral.

With that, here are five companies that stand out for their takeover appeal.

Uncategorized

5 Stocks With Takeover Appeal

December 14th, 2010

5 Stocks With Takeover Appeal

Any shareholder of a company that has been bought out can tell you that takeovers are often lucrative propositions, often delivering quick double-digit gains.

But overall, acquisitions have a reputation for destroying shareholder value at the acquiring company. Studies place the failure rate at between 60% and 70% of all deals. The main reason for this is that companies usually pay too much when buying another company and can stem from too much optimism on supposed synergies from a merger, getting caught in a bidding battle with another acquirer, or a target thinking their company is worth far more than the going rate for the business.

Fortunately for investors, a high failure rate has done little to temper enthusiasm for deal-making activity. And the current market environment is ideal for acquisitions. Tepid economic growth means it has become very difficult to grow organically, or by growing sales internally. Acquiring market share is a primary means toward growth these days and will continue to be as long as global economies remain stuck in neutral.

With that, here are five companies that stand out for their takeover appeal.

Uncategorized

“Tax the Rich to Cut the Deficit… Just Don’t Tax Me”

December 14th, 2010

What new thoughts for a Monday morning?

Corruption is not only at the top. Like a Christmas pudding steeped in rum, the whole economy – from top to bottom – reeks of it. Here’s the latest proof from Bloomberg:

Americans want Congress to bring down a federal budget deficit that many believe is “dangerously out of control,” only under two conditions: minimize the pain and make the rich pay.

The public wants Congress to keep its hands off entitlements such as Medicare, Medicaid and Social Security, a Bloomberg National Poll shows. They oppose cuts in most other major domestic programs and defense. They want to maintain subsidies for farmers and tax breaks like the mortgage-interest deduction. And they’re against an increase in the gasoline tax.

Let’s see, how does that work again? Yeah, balance the books…says the noble citizen…but make sure it’s at someone else’s expense. Make the rich pay.

That’s how corruption works. People want something for nothing all the time. But only some of the time are they able to get it. Now, Goldman gets free money from the Fed. The taxpayers expect free money too. And so, the whole society lives a lie – that each man can live at the expense of someone else.

But why CAN’T people live by taking money from the rich? Well, of course they can. For a while. Maybe even a long while. But not forever. And every time they spend someone else’s money, the less money there is left to spend.

The rich are just as self-interested as everyone else. Take away their money and they dodge. They feint. They play dead. They hire lobbyists, bribe Congressmen and play the game. If that doesn’t work, they hide their loot and flee.

The problem with trying to live at the expense of others is that others don’t like it much. They stop producing and try to live at someone else’s expense too. And pretty soon, you have a nation of poor zombies…feeding on the little living flesh still left alive.

Bloomberg continues:

…a spate of recent studies, including one by President Barack Obama’s debt panel…say reductions in Medicare, Social Security, military and other spending are necessary to curb a deficit that totaled $1.29 trillion in the fiscal year ended Sept. 30, or 9 percent of the gross domestic product.

“The idea that we can solve our structural-deficit problems merely by asking more of the well-off is totally unrealistic,” said David Walker, who was US comptroller general from 1998 to 2008 and now leads a group advocating against deficits. “The math simply doesn’t work.”

According to the Dec. 4-7 poll, taken days after Obama’s commission sounded an alarm over the nation’s “unsustainable fiscal path,” the public still believes it’s more important to “minimize sacrifice” than to take “bold and fast” action to pare the $13.7 trillion national debt.

The one place Americans are willing to see sacrifice is in the wallets of the wealthy and Wall Street.

While they say they strongly support balancing the budget over the next 20 years, when offered a list of more than a dozen possible spending cuts or tax increases, majorities opposed every one of them except imposing a bigger burden on the rich.

A majority backs raising the cap on earnings covered by the tax on the Social Security retirement program above the current limit of $107,000. Two-thirds would means test Social Security and Medicare benefits. Six of 10 would end tax cuts for the highest-earning Americans. And 7 of 10 favor a tax on Wall Street profits.

Regards,

Bill Bonner
for The Daily Reckoning

“Tax the Rich to Cut the Deficit… Just Don’t Tax Me” originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
“Tax the Rich to Cut the Deficit… Just Don’t Tax Me”




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

“Tax the Rich to Cut the Deficit… Just Don’t Tax Me”

December 14th, 2010

What new thoughts for a Monday morning?

Corruption is not only at the top. Like a Christmas pudding steeped in rum, the whole economy – from top to bottom – reeks of it. Here’s the latest proof from Bloomberg:

Americans want Congress to bring down a federal budget deficit that many believe is “dangerously out of control,” only under two conditions: minimize the pain and make the rich pay.

The public wants Congress to keep its hands off entitlements such as Medicare, Medicaid and Social Security, a Bloomberg National Poll shows. They oppose cuts in most other major domestic programs and defense. They want to maintain subsidies for farmers and tax breaks like the mortgage-interest deduction. And they’re against an increase in the gasoline tax.

Let’s see, how does that work again? Yeah, balance the books…says the noble citizen…but make sure it’s at someone else’s expense. Make the rich pay.

That’s how corruption works. People want something for nothing all the time. But only some of the time are they able to get it. Now, Goldman gets free money from the Fed. The taxpayers expect free money too. And so, the whole society lives a lie – that each man can live at the expense of someone else.

But why CAN’T people live by taking money from the rich? Well, of course they can. For a while. Maybe even a long while. But not forever. And every time they spend someone else’s money, the less money there is left to spend.

The rich are just as self-interested as everyone else. Take away their money and they dodge. They feint. They play dead. They hire lobbyists, bribe Congressmen and play the game. If that doesn’t work, they hide their loot and flee.

The problem with trying to live at the expense of others is that others don’t like it much. They stop producing and try to live at someone else’s expense too. And pretty soon, you have a nation of poor zombies…feeding on the little living flesh still left alive.

Bloomberg continues:

…a spate of recent studies, including one by President Barack Obama’s debt panel…say reductions in Medicare, Social Security, military and other spending are necessary to curb a deficit that totaled $1.29 trillion in the fiscal year ended Sept. 30, or 9 percent of the gross domestic product.

“The idea that we can solve our structural-deficit problems merely by asking more of the well-off is totally unrealistic,” said David Walker, who was US comptroller general from 1998 to 2008 and now leads a group advocating against deficits. “The math simply doesn’t work.”

According to the Dec. 4-7 poll, taken days after Obama’s commission sounded an alarm over the nation’s “unsustainable fiscal path,” the public still believes it’s more important to “minimize sacrifice” than to take “bold and fast” action to pare the $13.7 trillion national debt.

The one place Americans are willing to see sacrifice is in the wallets of the wealthy and Wall Street.

While they say they strongly support balancing the budget over the next 20 years, when offered a list of more than a dozen possible spending cuts or tax increases, majorities opposed every one of them except imposing a bigger burden on the rich.

A majority backs raising the cap on earnings covered by the tax on the Social Security retirement program above the current limit of $107,000. Two-thirds would means test Social Security and Medicare benefits. Six of 10 would end tax cuts for the highest-earning Americans. And 7 of 10 favor a tax on Wall Street profits.

Regards,

Bill Bonner
for The Daily Reckoning

“Tax the Rich to Cut the Deficit… Just Don’t Tax Me” originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
“Tax the Rich to Cut the Deficit… Just Don’t Tax Me”




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

The IMF and the ECB on Perfecting Stupidity

December 13th, 2010

This week’s winner of the coveted Mogambo Bluster And Incompetence Award (MBAIA) goes to Dominique Strauss-Kahn, the Managing Director of the International Monetary Fund.

I will skip the part where I heap disdain on the IMF and say rude things like how I think that the IMF is a worthless bunch of incompetent, self-serving, socialist scumbags.

And I will skip the part where I tried in vain to get in touch with this IMF moron so that I could inform him of his winning the prize, and invite him to fly here, at his expense, to pick it up.

So he won’t be coming, and it is too bad, too, because I already had the trophy, which is a plastic item molded to look like a pile of dog-poop, which I thought was both highly appropriate to the award, and very cheap, too, as I already had some left over from Halloween when I put them on the porch to discourage kids from coming up and knocking on my door.

I figured that this “mine field” would discourage them from bothering me with their lame “Trick or Treat” routine, holding out their sacks for me to fill from my bowl of delicious candy, a cornucopia of yummy chocolates, nuts, nougats, peanut butters and caramels in a kaleidoscope of tempting colors and flavors, and all mine, mine, mine.

Instead, I will get right to the part where I explain why Mr. Strauss-Kahn wins this prize.

According to Bloomberg, Mr. Strauss-Kahn, who will hereinafter be referred to as Incompetent Blustering Bozo (IBB), said that (and I quote) “the European Central Bank is doing its job ‘perfectly’ in handling the region’s debt crisis”! Hahaha!

How could he not win? Hahaha! And now that the sheer incompetence of the ECB has succeeded in destroying the entire economy of Europe with its ridiculous monetary excesses to allow the funding of various socialist bunglings, you probably want to know, as I wanted to know, as all thinking people want to know, “What in the hell is the ECB doing so ‘perfectly’ that another laughable incompetent is compelled to comment upon it?”

Well, it’s funny you should ask, and personally satisfying that you should ask with such a rude and scornful tone to your voice, because the ECB said that the bank would leave its benchmark interest rate unchanged, which is now at approximately zero, and “will delay its withdrawal of emergency liquidity measures to combat ‘acute’ market tensions.”

Hmmm! “Combat acute market tensions.” The phrase kept going over and over in my mind, as I intuitively sensed something potentially useful in that phrase. “Combat acute market tensions.”

Sure enough, the next day – the very next day! – my boss calls me into her office and wants to get all huffy with me, partly about how I am “accosting” my coworkers and telling them that they are “stupid” for not buying gold, silver and oil as protection against the terrible inflation in consumer prices as a result of the Federal Reserve creating so much new money.

Mostly, however, she was “in my face” about how I keep losing money for the company, which I patiently explained was not my fault. It was, I explained, the fault of all my customers, who were all idiots, and all my staff, who were idiots, too, and who were always hatching their little schemes behind my back, undermining my authority and making me look bad as they plot to thwart me at every turn to turn my successes into failures, like I can’t hear their constant secretive whispering, or see their furtive scurrying around, like the treacherous little rats they are.

My boss is not convinced, of course, and so, in a flash of inspiration, I said, “The company must pump more money into my operation to combat acute market tensions, you moron, like the European Central Bank is doing, because the president of the International Monetary Fund said that to do so would be perfect! Perfect!”

Well, it might be “perfect” for the ECB and the IMF, but around here it’s a non-starter, and after a short discussion about who is the REAL moron around here (me), I was pretty discouraged.

On my way back to my crummy little office, I suddenly realized that things were not so bad. I still had a plastic pile of dog poop as an asset, and I had the Federal Reserve creating massive amounts of money, to make the inflation, that will cause my gold, silver and oil to go up, which is another asset, and one that will soon make me rich enough to quit this stinking job and get away from a stupid boss that can’t see a Fabulous Mogambo Plan when she sees one.

And I also remembered that buying gold, silver and oil stocks is so easy, and suddenly the dark clouds of despair were lifted, and I merrily thought to myself, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

The IMF and the ECB on Perfecting Stupidity originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The IMF and the ECB on Perfecting Stupidity




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

The IMF and the ECB on Perfecting Stupidity

December 13th, 2010

This week’s winner of the coveted Mogambo Bluster And Incompetence Award (MBAIA) goes to Dominique Strauss-Kahn, the Managing Director of the International Monetary Fund.

I will skip the part where I heap disdain on the IMF and say rude things like how I think that the IMF is a worthless bunch of incompetent, self-serving, socialist scumbags.

And I will skip the part where I tried in vain to get in touch with this IMF moron so that I could inform him of his winning the prize, and invite him to fly here, at his expense, to pick it up.

So he won’t be coming, and it is too bad, too, because I already had the trophy, which is a plastic item molded to look like a pile of dog-poop, which I thought was both highly appropriate to the award, and very cheap, too, as I already had some left over from Halloween when I put them on the porch to discourage kids from coming up and knocking on my door.

I figured that this “mine field” would discourage them from bothering me with their lame “Trick or Treat” routine, holding out their sacks for me to fill from my bowl of delicious candy, a cornucopia of yummy chocolates, nuts, nougats, peanut butters and caramels in a kaleidoscope of tempting colors and flavors, and all mine, mine, mine.

Instead, I will get right to the part where I explain why Mr. Strauss-Kahn wins this prize.

According to Bloomberg, Mr. Strauss-Kahn, who will hereinafter be referred to as Incompetent Blustering Bozo (IBB), said that (and I quote) “the European Central Bank is doing its job ‘perfectly’ in handling the region’s debt crisis”! Hahaha!

How could he not win? Hahaha! And now that the sheer incompetence of the ECB has succeeded in destroying the entire economy of Europe with its ridiculous monetary excesses to allow the funding of various socialist bunglings, you probably want to know, as I wanted to know, as all thinking people want to know, “What in the hell is the ECB doing so ‘perfectly’ that another laughable incompetent is compelled to comment upon it?”

Well, it’s funny you should ask, and personally satisfying that you should ask with such a rude and scornful tone to your voice, because the ECB said that the bank would leave its benchmark interest rate unchanged, which is now at approximately zero, and “will delay its withdrawal of emergency liquidity measures to combat ‘acute’ market tensions.”

Hmmm! “Combat acute market tensions.” The phrase kept going over and over in my mind, as I intuitively sensed something potentially useful in that phrase. “Combat acute market tensions.”

Sure enough, the next day – the very next day! – my boss calls me into her office and wants to get all huffy with me, partly about how I am “accosting” my coworkers and telling them that they are “stupid” for not buying gold, silver and oil as protection against the terrible inflation in consumer prices as a result of the Federal Reserve creating so much new money.

Mostly, however, she was “in my face” about how I keep losing money for the company, which I patiently explained was not my fault. It was, I explained, the fault of all my customers, who were all idiots, and all my staff, who were idiots, too, and who were always hatching their little schemes behind my back, undermining my authority and making me look bad as they plot to thwart me at every turn to turn my successes into failures, like I can’t hear their constant secretive whispering, or see their furtive scurrying around, like the treacherous little rats they are.

My boss is not convinced, of course, and so, in a flash of inspiration, I said, “The company must pump more money into my operation to combat acute market tensions, you moron, like the European Central Bank is doing, because the president of the International Monetary Fund said that to do so would be perfect! Perfect!”

Well, it might be “perfect” for the ECB and the IMF, but around here it’s a non-starter, and after a short discussion about who is the REAL moron around here (me), I was pretty discouraged.

On my way back to my crummy little office, I suddenly realized that things were not so bad. I still had a plastic pile of dog poop as an asset, and I had the Federal Reserve creating massive amounts of money, to make the inflation, that will cause my gold, silver and oil to go up, which is another asset, and one that will soon make me rich enough to quit this stinking job and get away from a stupid boss that can’t see a Fabulous Mogambo Plan when she sees one.

And I also remembered that buying gold, silver and oil stocks is so easy, and suddenly the dark clouds of despair were lifted, and I merrily thought to myself, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

The IMF and the ECB on Perfecting Stupidity originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The IMF and the ECB on Perfecting Stupidity




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Who am I? What is Money? The Fed is Here to Help.

December 13th, 2010

“I am a macroeconomist rather than an historian. My focus will be on broad economic issues rather than details.”

Professor Ben S. Bernanke, “The Macroeconomics of the Great Depression: A Comparative Approach,” 1995

“These days central banking is my line of work as well. Before that, I was an academic economist and economic historian.”

Federal Reserve Chairman Ben S. Bernanke, “Economic Policy: Lessons from History,”April 8, 2008

60 MINUTES:  “You’ve been printing money?”

BERNANKE: “Well, effectively, and we need to do that.”

“60 Minutes” interview, March 15, 2009

CONGRESSMAN JEB HENSARLING, (R-TX.) “Will the Federal Reserve monetize the debt?”

CHAIRMAN BERNANKE: “The Federal Reserve will not monetize the debt….”

Federal Reserve Chairman Ben S. Bernanke, Testifying before Congress on June 3, 2009

BERNANKE: “One myth that’s out there is that what we’re doing is printing money. We’re not printing money.”

“60 Minutes,” December 5, 2010

“New research shows that one of the first signs of impending dementia is an inability to understand money and credit, contracts and agreements.”

New York Times, “Money Woes Can Be an Early Clue to Alzheimer’s,” October 31, 2010

“It would be fair to say that monetary and credit aggregates have not played a central role in the formulation of U.S. monetary policy since [1982], although policymakers continue to use monetary data as a source of information about the state of the economy.”

Federal Reserve Chairman Ben Bernanke, Open Opportunity Economic Forum, Washington, D.C., November 1, 2006

Response to Federal Reserve Chairman Ben Bernanke:

“…Is it really possible for a policy described as ‘monetary’ to be formulated and implemented without money playing a central role in it? Indeed, the suggestion that monetary policy can be conducted without assigning a prominent role to money seems like an oxymoron – a statement containing apparently contradictory terms, if not worse: for the literal meaning of the Greek word ‘oxymoron’ is ‘pointedly foolish.’”

Lucas Papademos, Vice President of the European Central Bank, Open Opportunity Economic Forum, Washington, D.C., November 1, 2006

“I don’t fully understand movements in the gold price.”

“Bernanke Puzzled by Gold Rally” Wall Street Journal blog, June 9, 2010

“[The rising gold price is] strictly a monetary phenomenon…an indication of a very early stage of an endeavor to move away from paper currencies…. What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.”

Former Federal Reserve Chairman Alan Greenspan, Bloomberg, September 9, 2009

BERNANKE: “Well, this fear of inflation, I think is way overstated.”

“60 Minutes,” December 5, 2010

“The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

Federal Reserve Chairman Ben S. Bernanke, Bloomberg, June 9, 2008

“We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

Federal Reserve Chairman Ben S. Bernanke, speech at the Federal Reserve Bank of Chicago, May 17, 2007

“[T]he recent capital inflow [has shown up in] higher home prices. Higher home prices in turn have encouraged households to increase their consumption. Of course, increased rates of homeownership and household consumption are both good things.”

Federal Reserve Governor Ben S. Bernanke, speech before the Virginia Association of Economics, March 10, 2005

“Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run.”

Federal Reserve Chairman Ben S. Bernanke, Washington Post, November 4, 2010

60 MINUTES: “Is keeping inflation in check less of a priority for the Federal Reserve now?”

BERNANKE: “No, absolutely not. What we’re trying to do is achieve a balance. We’ve been very, very clear that we will not allow inflation to rise above two percent or less.”

“60 Minutes,” December 5, 2010

“The unwarranted assumption that ‘creeping’ inflation is inevitable deserves comment. This term has been used by various writers to mean a gradual rise in prices which, they suggest, could be held to a moderate rate, averaging perhaps 2 percent a year….Such a prospect would work incalculable hardship….Even if it were possible to control it so that prices rose no more than 2 percent a year – the price level would double every 35 years and the value of the dollar would be cut each generation. Losses would thus be inflicted upon millions of people, pensioners, Government employees, all who have fixed incomes, including those who have their assets in savings and long-term bonds….”

Former Federal Reserve Chairman William McChesney Martin, Senate  testimony, 1957

“If a policy of active or permissive inflation is to be a fact, then we can rescue the shreds of our self-respect only by announcing the policy. That is the least of the canons of decency that should prevail. We should have the decency to say to the money saver, ‘Hold still, Little Fish! All we intend to do is gut you.’”

Malcolm Bryan, President of Atlanta Federal Reserve Bank, 1956

EXPLANATION OF THE FEDERAL RESERVE’S “QUANTITATIVE EASING” OBJECTIVE:

“[T]here is a…prosaic way of obtaining negative interest rates: through inflation. Suppose that, looking ahead the government commits itself to producing significant inflation. In this case, while nominal interest rates could remain at zero, real interest rates – interest rates measured in purchasing power – could become negative…. Ben S. Bernanke, Fed chairman, is the perfect person to make the commitment to higher inflation…. [T]he goal could be to produce enough inflation to ensure that the real interest rate is significantly negative….”

Professor Greg Mankiw, “It May be Time for the Fed to Go Negative,” Wall Street Journal, April 19, 2009

Mankiw is just the man to recommend such policies:

“[W]hen you look at the mistakes of the 1920s and 1930s, they were clearly amateurish. It is hard to imagine that happening again – we understand the business cycle much better.”

Professor Greg Mankiw, Wall Street Journal, February 1, 2000

“If it were possible to take interest rates into negative territory I would be voting for that.”

Federal Reserve Governor Janet Yellen, speech at the University of San Diego, then-President of San Francisco Federal Reserve Bank, February 22, 2010

60 MINUTES: “Do you anticipate a scenario in which you would commit to more than $600 billion?”

BERNANKE: “Oh, it’s certainly possible”

“60 Minutes,” December 5, 2010 [Note: $600 billion is the amount of money Bernanke has stated he will to print to buy Treasury securities during "QE2" - Quantitative Easing, Part 2.]

The Fed “could theoretically buy anything to pump money into the system” including “state and local debt, real estate and gold mines – any asset.”

Unnamed Federal Reserve official to the Financial Times, 2002

“Hello, young man. I’m with the Federal Reserve. Today, we’re buying baseball cards.”

Cartoon in Grant’s Interest Rate Observer, 2010; Federal Reserve official is speaking to a boy at his front door.

“The truth is the current Fed governors, together with their crack staff of Ph.D. economists and market analysts, are as close to an economic dream team, as we are ever likely to see…. The best Congress can do now is to let the Bernanke bunch do its job.”

Professor Greg Mankiw, Harvard University, New York Times, December 23, 2007. Mankiw was chairman of President George W. Bush’s Counsel of Economic Advisers

60 MINUTES: “Can you act quickly enough to prevent inflation from getting out of control?”

BERNANKE: “We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.”

“60 Minutes,” December 5, 2010

“There is no validity whatever in the idea that any inflation, once accepted, can be confined to moderate proportions.”

Former Federal Reserve Chairman William McChesney Martin, Senate testimony, 1957

60 MINUTES: “You have what degree of confidence in your ability to control this?”

BERNANKE: “One hundred percent.”

“60 Minutes,” December 5, 2010

“Mr. Bernanke has used the analogy of a golfer with a new putter: Unsure how it will work, he finds the best strategy is to tap lightly at first and keep tapping until the golfer figures out how best to use the putter. [Quoting Bernanke]: ‘When policymakers are unsure of the impact that their policy actions will have on the economy, it may be appropriate for them to adjust policy more cautiously and in smaller steps than they would if they had precise knowledge of the effects of their actions.’”

Wall Street Journal, October 27, 2010

“We have been living in a fool’s paradise…. [If] the central bank creates money or if you like the phrase better, prints money, I think it can only do one thing, depreciate the currency.”

Former Federal Reserve Chairman William McChesney Martin, before the American Association of Newspaper Editors, 1968

“We are in the wildest inflation since the Civil War.”

Former Federal Reserve Chairman William McChesney Martin, from his farewell speech, 1970

“Inflation is a means by which the strong can more effectively exploit the weak. The strategically positioned and well-organized can gain at the expense of the unorganized and aged.”

Federal Reserve Governor Henry C. Wallich, Commencement address at Fordham University, 1978 [Note: Wallich was born in Germany in 1914. He was nine years old, living in Berlin, during the 1923 German inflation.]

“[T]he increasing uncertainty in providing privately for the future pushes people who are seeking security toward the government.”

Federal Reserve Governor Henry C. Wallich, same address, 1978

“[L]ower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment.”

Federal Reserve Chairman Ben S. Bernanke, Washington Post, November 4, 2010

Bernanke simply assumed his QE2 operation would drive down interest rates (the bold will). Just the opposite has happened. Federal Reserve Chairman Martin understood the foolhardiness of such a quest when professors prodded him to do the same:

“It has been suggested, from time to time, that the Federal Reserve System could relieve current pressures in money and capital markets without, at the same time, contributing to inflationary pressures. These suggestions usually involve Federal Reserve support of the Unites States Government securities market through one form or another of pegging operations. There is no way for the Federal Reserve System to peg the price of Government bonds at any given level unless it stands ready to buy all of the bonds offered to it at that price. This process inevitably provides additional funds for the banking system, permits the expansion of loans and investments and a comparable increase in the money supply – a process sometimes referred to as monetization of the public debt. This amount of inflationary force generated by such a policy depends to some extent upon the demand pressures in the market at the time. It would be dangerously inflationary under conditions that prevail today. In the present circumstances the Reserve System could not peg the government securities without, at the same time, igniting explosive inflationary fuel.”

Former Federal Reserve Chairman William McChesney Martin, 1957

60 MINUTES: “If you had a message for the American people in this interview what would it be?”

BERNANKE: “…I’d say first of all the Federal Reserve is here and is going to do everything possible to support the economy.”

“60 Minutes” March 15, 2009

“Think of all these people, decent, educated, the story of the past laid out before them – What to avoid – what to do, etc…. – trying their utmost – What a ghastly muddle they made of it! Unteachable from infancy to tomb – There is the first and main characteristic of mankind.”

Winston S. Churchill, Discussing World War I, 1928

Conclusion: Sell Bernanke and the U.S. dollar; Buy gold and silver.

Regards,

Frederick Sheehan,
for The Daily Reckoning

[For more of Frederick Sheehan's perspective you can visit his blogs here and at www.AuContrarian.com. You can also purchase his book, Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, 2009), here.]

Who am I? What is Money? The Fed is Here to Help. originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Who am I? What is Money? The Fed is Here to Help.




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Real Estate, Uncategorized

Who am I? What is Money? The Fed is Here to Help.

December 13th, 2010

“I am a macroeconomist rather than an historian. My focus will be on broad economic issues rather than details.”

Professor Ben S. Bernanke, “The Macroeconomics of the Great Depression: A Comparative Approach,” 1995

“These days central banking is my line of work as well. Before that, I was an academic economist and economic historian.”

Federal Reserve Chairman Ben S. Bernanke, “Economic Policy: Lessons from History,”April 8, 2008

60 MINUTES:  “You’ve been printing money?”

BERNANKE: “Well, effectively, and we need to do that.”

“60 Minutes” interview, March 15, 2009

CONGRESSMAN JEB HENSARLING, (R-TX.) “Will the Federal Reserve monetize the debt?”

CHAIRMAN BERNANKE: “The Federal Reserve will not monetize the debt….”

Federal Reserve Chairman Ben S. Bernanke, Testifying before Congress on June 3, 2009

BERNANKE: “One myth that’s out there is that what we’re doing is printing money. We’re not printing money.”

“60 Minutes,” December 5, 2010

“New research shows that one of the first signs of impending dementia is an inability to understand money and credit, contracts and agreements.”

New York Times, “Money Woes Can Be an Early Clue to Alzheimer’s,” October 31, 2010

“It would be fair to say that monetary and credit aggregates have not played a central role in the formulation of U.S. monetary policy since [1982], although policymakers continue to use monetary data as a source of information about the state of the economy.”

Federal Reserve Chairman Ben Bernanke, Open Opportunity Economic Forum, Washington, D.C., November 1, 2006

Response to Federal Reserve Chairman Ben Bernanke:

“…Is it really possible for a policy described as ‘monetary’ to be formulated and implemented without money playing a central role in it? Indeed, the suggestion that monetary policy can be conducted without assigning a prominent role to money seems like an oxymoron – a statement containing apparently contradictory terms, if not worse: for the literal meaning of the Greek word ‘oxymoron’ is ‘pointedly foolish.’”

Lucas Papademos, Vice President of the European Central Bank, Open Opportunity Economic Forum, Washington, D.C., November 1, 2006

“I don’t fully understand movements in the gold price.”

“Bernanke Puzzled by Gold Rally” Wall Street Journal blog, June 9, 2010

“[The rising gold price is] strictly a monetary phenomenon…an indication of a very early stage of an endeavor to move away from paper currencies…. What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.”

Former Federal Reserve Chairman Alan Greenspan, Bloomberg, September 9, 2009

BERNANKE: “Well, this fear of inflation, I think is way overstated.”

“60 Minutes,” December 5, 2010

“The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

Federal Reserve Chairman Ben S. Bernanke, Bloomberg, June 9, 2008

“We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

Federal Reserve Chairman Ben S. Bernanke, speech at the Federal Reserve Bank of Chicago, May 17, 2007

“[T]he recent capital inflow [has shown up in] higher home prices. Higher home prices in turn have encouraged households to increase their consumption. Of course, increased rates of homeownership and household consumption are both good things.”

Federal Reserve Governor Ben S. Bernanke, speech before the Virginia Association of Economics, March 10, 2005

“Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run.”

Federal Reserve Chairman Ben S. Bernanke, Washington Post, November 4, 2010

60 MINUTES: “Is keeping inflation in check less of a priority for the Federal Reserve now?”

BERNANKE: “No, absolutely not. What we’re trying to do is achieve a balance. We’ve been very, very clear that we will not allow inflation to rise above two percent or less.”

“60 Minutes,” December 5, 2010

“The unwarranted assumption that ‘creeping’ inflation is inevitable deserves comment. This term has been used by various writers to mean a gradual rise in prices which, they suggest, could be held to a moderate rate, averaging perhaps 2 percent a year….Such a prospect would work incalculable hardship….Even if it were possible to control it so that prices rose no more than 2 percent a year – the price level would double every 35 years and the value of the dollar would be cut each generation. Losses would thus be inflicted upon millions of people, pensioners, Government employees, all who have fixed incomes, including those who have their assets in savings and long-term bonds….”

Former Federal Reserve Chairman William McChesney Martin, Senate  testimony, 1957

“If a policy of active or permissive inflation is to be a fact, then we can rescue the shreds of our self-respect only by announcing the policy. That is the least of the canons of decency that should prevail. We should have the decency to say to the money saver, ‘Hold still, Little Fish! All we intend to do is gut you.’”

Malcolm Bryan, President of Atlanta Federal Reserve Bank, 1956

EXPLANATION OF THE FEDERAL RESERVE’S “QUANTITATIVE EASING” OBJECTIVE:

“[T]here is a…prosaic way of obtaining negative interest rates: through inflation. Suppose that, looking ahead the government commits itself to producing significant inflation. In this case, while nominal interest rates could remain at zero, real interest rates – interest rates measured in purchasing power – could become negative…. Ben S. Bernanke, Fed chairman, is the perfect person to make the commitment to higher inflation…. [T]he goal could be to produce enough inflation to ensure that the real interest rate is significantly negative….”

Professor Greg Mankiw, “It May be Time for the Fed to Go Negative,” Wall Street Journal, April 19, 2009

Mankiw is just the man to recommend such policies:

“[W]hen you look at the mistakes of the 1920s and 1930s, they were clearly amateurish. It is hard to imagine that happening again – we understand the business cycle much better.”

Professor Greg Mankiw, Wall Street Journal, February 1, 2000

“If it were possible to take interest rates into negative territory I would be voting for that.”

Federal Reserve Governor Janet Yellen, speech at the University of San Diego, then-President of San Francisco Federal Reserve Bank, February 22, 2010

60 MINUTES: “Do you anticipate a scenario in which you would commit to more than $600 billion?”

BERNANKE: “Oh, it’s certainly possible”

“60 Minutes,” December 5, 2010 [Note: $600 billion is the amount of money Bernanke has stated he will to print to buy Treasury securities during "QE2" - Quantitative Easing, Part 2.]

The Fed “could theoretically buy anything to pump money into the system” including “state and local debt, real estate and gold mines – any asset.”

Unnamed Federal Reserve official to the Financial Times, 2002

“Hello, young man. I’m with the Federal Reserve. Today, we’re buying baseball cards.”

Cartoon in Grant’s Interest Rate Observer, 2010; Federal Reserve official is speaking to a boy at his front door.

“The truth is the current Fed governors, together with their crack staff of Ph.D. economists and market analysts, are as close to an economic dream team, as we are ever likely to see…. The best Congress can do now is to let the Bernanke bunch do its job.”

Professor Greg Mankiw, Harvard University, New York Times, December 23, 2007. Mankiw was chairman of President George W. Bush’s Counsel of Economic Advisers

60 MINUTES: “Can you act quickly enough to prevent inflation from getting out of control?”

BERNANKE: “We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.”

“60 Minutes,” December 5, 2010

“There is no validity whatever in the idea that any inflation, once accepted, can be confined to moderate proportions.”

Former Federal Reserve Chairman William McChesney Martin, Senate testimony, 1957

60 MINUTES: “You have what degree of confidence in your ability to control this?”

BERNANKE: “One hundred percent.”

“60 Minutes,” December 5, 2010

“Mr. Bernanke has used the analogy of a golfer with a new putter: Unsure how it will work, he finds the best strategy is to tap lightly at first and keep tapping until the golfer figures out how best to use the putter. [Quoting Bernanke]: ‘When policymakers are unsure of the impact that their policy actions will have on the economy, it may be appropriate for them to adjust policy more cautiously and in smaller steps than they would if they had precise knowledge of the effects of their actions.’”

Wall Street Journal, October 27, 2010

“We have been living in a fool’s paradise…. [If] the central bank creates money or if you like the phrase better, prints money, I think it can only do one thing, depreciate the currency.”

Former Federal Reserve Chairman William McChesney Martin, before the American Association of Newspaper Editors, 1968

“We are in the wildest inflation since the Civil War.”

Former Federal Reserve Chairman William McChesney Martin, from his farewell speech, 1970

“Inflation is a means by which the strong can more effectively exploit the weak. The strategically positioned and well-organized can gain at the expense of the unorganized and aged.”

Federal Reserve Governor Henry C. Wallich, Commencement address at Fordham University, 1978 [Note: Wallich was born in Germany in 1914. He was nine years old, living in Berlin, during the 1923 German inflation.]

“[T]he increasing uncertainty in providing privately for the future pushes people who are seeking security toward the government.”

Federal Reserve Governor Henry C. Wallich, same address, 1978

“[L]ower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment.”

Federal Reserve Chairman Ben S. Bernanke, Washington Post, November 4, 2010

Bernanke simply assumed his QE2 operation would drive down interest rates (the bold will). Just the opposite has happened. Federal Reserve Chairman Martin understood the foolhardiness of such a quest when professors prodded him to do the same:

“It has been suggested, from time to time, that the Federal Reserve System could relieve current pressures in money and capital markets without, at the same time, contributing to inflationary pressures. These suggestions usually involve Federal Reserve support of the Unites States Government securities market through one form or another of pegging operations. There is no way for the Federal Reserve System to peg the price of Government bonds at any given level unless it stands ready to buy all of the bonds offered to it at that price. This process inevitably provides additional funds for the banking system, permits the expansion of loans and investments and a comparable increase in the money supply – a process sometimes referred to as monetization of the public debt. This amount of inflationary force generated by such a policy depends to some extent upon the demand pressures in the market at the time. It would be dangerously inflationary under conditions that prevail today. In the present circumstances the Reserve System could not peg the government securities without, at the same time, igniting explosive inflationary fuel.”

Former Federal Reserve Chairman William McChesney Martin, 1957

60 MINUTES: “If you had a message for the American people in this interview what would it be?”

BERNANKE: “…I’d say first of all the Federal Reserve is here and is going to do everything possible to support the economy.”

“60 Minutes” March 15, 2009

“Think of all these people, decent, educated, the story of the past laid out before them – What to avoid – what to do, etc…. – trying their utmost – What a ghastly muddle they made of it! Unteachable from infancy to tomb – There is the first and main characteristic of mankind.”

Winston S. Churchill, Discussing World War I, 1928

Conclusion: Sell Bernanke and the U.S. dollar; Buy gold and silver.

Regards,

Frederick Sheehan,
for The Daily Reckoning

[For more of Frederick Sheehan's perspective you can visit his blogs here and at www.AuContrarian.com. You can also purchase his book, Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, 2009), here.]

Who am I? What is Money? The Fed is Here to Help. originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Who am I? What is Money? The Fed is Here to Help.




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Real Estate, Uncategorized

On the Importance of Bond Traders

December 13th, 2010

Gold shot up $13 an ounce, to $1,397, as soon as the Comex opened at 8:20 AM EST. The yield on a 10-year Treasury note is up to 3.37%.

Yet there’s no news, no fresh data point to make traders itchy. Just an unfriendly environment if you’re making government policy…or a great one if you’re willing to bet against them succeeding.

The 10-year yield is now at a six-month high. It has risen 100 basis points – a full percentage point – since early October.

Through last week, this was largely a function of the Bernanke Backfire – bond traders frightened by the Federal Reserve’s renewed pursuit of easy money.

Key Markers in the Rise of 10-Year Treasury Yields

But a good chunk of this increase has come in the last week. Bond traders have something new to be frightened by – the Grand Bargain that President Obama and the Republicans in Congress reached last week.

Sure, it extends current tax rates at all levels of income. But it also includes a host of goodies like an extension of unemployment benefits and a cut in the payroll tax of two percentage points.

And there are no – none, zip, zilch – spending cuts to accompany them.

“The deal demonstrates a total lack of will to cut the fiscal deficit even a smidge,” says Strategic Short Report editor Dan Amoss. “Holders of US dollars and Treasury bonds will react; they’ll soon realize that the US government’s long-run budget projections are even further off the mark than they typically are.”

In that vein, we note Uncle Sam ran a $150.4 billion deficit during November, according to the Treasury Department – the 26th consecutive monthly shortfall. And the largest ever in a month that starts with an “N.” Revenue was higher than a year ago, but spending was higher still.

Of course, that’s just the “official” number. According to Treasury’s own website, the national debt grew during November by $191.9 billion. Good grief.

“In the last month, the interest rate on that key benchmark – the 10-year Treasury note – is up 28%,” Chris Mayer, editor of Mayer’s Special Situations, agrees while looking at the prism from yet another angle. “So the US government’s funding costs have just gone up 28% in the last month.

“Those big deficits need financing and – finally – the market is wondering just how good a credit old Uncle Sam really is.

“Economist John Williams, who looks over the government’s books and ferrets out the truth in the footnotes, reports that the annual deficit is now running at a pace of $4-5 trillion. This includes the change in unfunded liabilities, such as Social Security obligations.

“This is a lot to finance and Wednesday’s sell-off is our first indication that the market may be choking on it.”

As the bond vigilantes awaken from their slumber, we’re reminded again of Bill Clinton’s infamous line, spit out in fury during a White House meeting early in his first term, told in Bob Woodward’s book The Agenda:

“You mean to tell me the success of [my economic] program and my reelection hinges on the Federal Reserve and a bunch of f*****g bond traders?”

No doubt, a similar “discussion” is under way today. Except the number of zeros has grown substantially…as has the desire for the federal government to save everyone from everything.

Addison Wiggin
for The Daily Reckoning

On the Importance of Bond Traders originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
On the Importance of Bond Traders




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

On the Importance of Bond Traders

December 13th, 2010

Gold shot up $13 an ounce, to $1,397, as soon as the Comex opened at 8:20 AM EST. The yield on a 10-year Treasury note is up to 3.37%.

Yet there’s no news, no fresh data point to make traders itchy. Just an unfriendly environment if you’re making government policy…or a great one if you’re willing to bet against them succeeding.

The 10-year yield is now at a six-month high. It has risen 100 basis points – a full percentage point – since early October.

Through last week, this was largely a function of the Bernanke Backfire – bond traders frightened by the Federal Reserve’s renewed pursuit of easy money.

Key Markers in the Rise of 10-Year Treasury Yields

But a good chunk of this increase has come in the last week. Bond traders have something new to be frightened by – the Grand Bargain that President Obama and the Republicans in Congress reached last week.

Sure, it extends current tax rates at all levels of income. But it also includes a host of goodies like an extension of unemployment benefits and a cut in the payroll tax of two percentage points.

And there are no – none, zip, zilch – spending cuts to accompany them.

“The deal demonstrates a total lack of will to cut the fiscal deficit even a smidge,” says Strategic Short Report editor Dan Amoss. “Holders of US dollars and Treasury bonds will react; they’ll soon realize that the US government’s long-run budget projections are even further off the mark than they typically are.”

In that vein, we note Uncle Sam ran a $150.4 billion deficit during November, according to the Treasury Department – the 26th consecutive monthly shortfall. And the largest ever in a month that starts with an “N.” Revenue was higher than a year ago, but spending was higher still.

Of course, that’s just the “official” number. According to Treasury’s own website, the national debt grew during November by $191.9 billion. Good grief.

“In the last month, the interest rate on that key benchmark – the 10-year Treasury note – is up 28%,” Chris Mayer, editor of Mayer’s Special Situations, agrees while looking at the prism from yet another angle. “So the US government’s funding costs have just gone up 28% in the last month.

“Those big deficits need financing and – finally – the market is wondering just how good a credit old Uncle Sam really is.

“Economist John Williams, who looks over the government’s books and ferrets out the truth in the footnotes, reports that the annual deficit is now running at a pace of $4-5 trillion. This includes the change in unfunded liabilities, such as Social Security obligations.

“This is a lot to finance and Wednesday’s sell-off is our first indication that the market may be choking on it.”

As the bond vigilantes awaken from their slumber, we’re reminded again of Bill Clinton’s infamous line, spit out in fury during a White House meeting early in his first term, told in Bob Woodward’s book The Agenda:

“You mean to tell me the success of [my economic] program and my reelection hinges on the Federal Reserve and a bunch of f*****g bond traders?”

No doubt, a similar “discussion” is under way today. Except the number of zeros has grown substantially…as has the desire for the federal government to save everyone from everything.

Addison Wiggin
for The Daily Reckoning

On the Importance of Bond Traders originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
On the Importance of Bond Traders




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Buy Silver…Again!

December 13th, 2010

With the ongoing recession looming over the US and foreign economies, China seems to be coasting through with continuing growth through its exports. This trend does not seem likely to continue in the coming months.

Below I will explain why and what steps you can take to secure your investment portfolios.

A couple of weeks ago I was in Hong Kong attending the Roskill International Rare Earths Conference. I was “only” in Hong Kong, or “China Lite,” as one jaded acquaintance put it. There’s just no pleasing some people.

It’s as if the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Hong Kong just don’t tell you enough. No. By some peoples’ standards, you have to see the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Shanghai if you really want to experience the China story.

Hong Kong offered plenty of stimulus for one long trip. So do I have any takeaways, besides a couple of nice suits from my new Hong Kong tailor? You bet!

Over the past 20 years, the key enabler of China’s development was strong, export-led growth.

With Hong Kong handling much of the cargo, China exported its way to dramatic prosperity, fueled by boatloads of imported Western currency – dollars, yen, euros, etc. But that good fortune, and easy money from overseas, has come to a screeching, grinding halt.

The global financial crisis has moved in for – apparently – the long haul. Here in the United States, we’re not enduring a typical, post-World War II, run-of-the-mill business cycle recession. It’s not just the economic equivalent of a “standing eight count” in boxing. No, I’d say that the US economy is hard down on the mat.

Indeed, I believe that the current US economic situation is far graver than even the much-advertised Great Recession. When something recedes, that implies that it’ll come back. If something recedes a lot, then it should come back in a big way, right? Thing is, I can’t see how the US economy will come roaring back in any big way, and not anytime soon.

During a US recession in the olden days, for example, businesses would lay people off from a plant and then call the workers back when times were better. Today, businesses have laid people off, but then, in many instances, closed the plant for good and sold all the machinery for scrap. Under these circumstances, there won’t be any recalls.

And if history is any guide, the United States cannot have an economic rebound without something like a recovery in housing. That’s not happening, what with the banks still broken, lending stingy and the mortgage industry a total mess.

Nor is there significant evidence that other Western economies are poised for a major comeback. Really, which other economies are rebounding? Ireland? Italy? Britain? Japan? Nope. Even the mighty German economy isn’t growing fast, and they brag about it.

So looking ahead, where’s the continuing export-led growth for China? How can past patterns of trade and prosperity continue for China – and, by extension, for Hong Kong? Or stated differently, what does this mean for the future?

It’s likely that the slowdown of external demand will throttle back China’s ability to grow at its recent, historic rates. But is the Chinese leadership prepared to process and adapt to this new reality?

In the best light, the decline of foreign demand means the Chinese should channel less investment into their export model. The Chinese should redirect more investment toward internal consumption.

That’s easy to say. But will this happen? Can China internalize its growth? Well, to be fair, it’s already happening to some extent. Many China-based operations – for example, companies like Foxconn and Toyota – are paying Chinese workers higher wages. This translates into more purchasing power at the Chinese grass-root level.

But then we’re also seeing stories about raging inflation in prices for food and energy at the Chinese retail level. And the vast multitude of Chinese people without the pay raises, who do not work for foreign companies, are stuck with the inflation as well.

Point is, there’s nothing easy for China in making the transition from massive investment in formerly booming export-led growth to a new focus on internal consumption.

I believe that there’s still a lot of thinking and planning in China that’s stuck in the mind-set of economic boom times from the early part of this decade. We’ll probably still see gross overinvestment in obsolete economic ideas coming out of China. Entire industries will pursue growth and expansion in markets that are no longer there. The world will face the consequences of resources filtering through a trade model that’s no longer valid. So what does all this mean for investors? Well, it means that there’s even less reason to trust in national currencies over the long haul.

Sure, the local currency is how you keep score. It’s what you get paid in. It’s what you use to buy a house, pay bills, buy groceries, take a trip, etc. But looking forward, in any and every currency, inflation will nibble away at your wealth and savings.

What can you do? You can’t change the world, right? No, but it gets back to that idea that you still want to own physical gold and silver as core holdings in your portfolio. For the past couple of years, I’ve been saying “5-10% in precious metals, or more if it helps you sleep at night.” I’m going to change that to “At LEAST 10% in precious metals, or more if it helps you sleep at night.”

I believe silver is probably a better play right now, with more upside than gold. I’d go for silver coins, without seeking any numismatic value. Just go for the Silver Eagles – bullion value – or any other high-quality metal issue from reputable mints.

Regards,

Byron King
for The Daily Reckoning

Buy Silver…Again! originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Buy Silver…Again!




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Buy Silver…Again!

December 13th, 2010

With the ongoing recession looming over the US and foreign economies, China seems to be coasting through with continuing growth through its exports. This trend does not seem likely to continue in the coming months.

Below I will explain why and what steps you can take to secure your investment portfolios.

A couple of weeks ago I was in Hong Kong attending the Roskill International Rare Earths Conference. I was “only” in Hong Kong, or “China Lite,” as one jaded acquaintance put it. There’s just no pleasing some people.

It’s as if the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Hong Kong just don’t tell you enough. No. By some peoples’ standards, you have to see the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Shanghai if you really want to experience the China story.

Hong Kong offered plenty of stimulus for one long trip. So do I have any takeaways, besides a couple of nice suits from my new Hong Kong tailor? You bet!

Over the past 20 years, the key enabler of China’s development was strong, export-led growth.

With Hong Kong handling much of the cargo, China exported its way to dramatic prosperity, fueled by boatloads of imported Western currency – dollars, yen, euros, etc. But that good fortune, and easy money from overseas, has come to a screeching, grinding halt.

The global financial crisis has moved in for – apparently – the long haul. Here in the United States, we’re not enduring a typical, post-World War II, run-of-the-mill business cycle recession. It’s not just the economic equivalent of a “standing eight count” in boxing. No, I’d say that the US economy is hard down on the mat.

Indeed, I believe that the current US economic situation is far graver than even the much-advertised Great Recession. When something recedes, that implies that it’ll come back. If something recedes a lot, then it should come back in a big way, right? Thing is, I can’t see how the US economy will come roaring back in any big way, and not anytime soon.

During a US recession in the olden days, for example, businesses would lay people off from a plant and then call the workers back when times were better. Today, businesses have laid people off, but then, in many instances, closed the plant for good and sold all the machinery for scrap. Under these circumstances, there won’t be any recalls.

And if history is any guide, the United States cannot have an economic rebound without something like a recovery in housing. That’s not happening, what with the banks still broken, lending stingy and the mortgage industry a total mess.

Nor is there significant evidence that other Western economies are poised for a major comeback. Really, which other economies are rebounding? Ireland? Italy? Britain? Japan? Nope. Even the mighty German economy isn’t growing fast, and they brag about it.

So looking ahead, where’s the continuing export-led growth for China? How can past patterns of trade and prosperity continue for China – and, by extension, for Hong Kong? Or stated differently, what does this mean for the future?

It’s likely that the slowdown of external demand will throttle back China’s ability to grow at its recent, historic rates. But is the Chinese leadership prepared to process and adapt to this new reality?

In the best light, the decline of foreign demand means the Chinese should channel less investment into their export model. The Chinese should redirect more investment toward internal consumption.

That’s easy to say. But will this happen? Can China internalize its growth? Well, to be fair, it’s already happening to some extent. Many China-based operations – for example, companies like Foxconn and Toyota – are paying Chinese workers higher wages. This translates into more purchasing power at the Chinese grass-root level.

But then we’re also seeing stories about raging inflation in prices for food and energy at the Chinese retail level. And the vast multitude of Chinese people without the pay raises, who do not work for foreign companies, are stuck with the inflation as well.

Point is, there’s nothing easy for China in making the transition from massive investment in formerly booming export-led growth to a new focus on internal consumption.

I believe that there’s still a lot of thinking and planning in China that’s stuck in the mind-set of economic boom times from the early part of this decade. We’ll probably still see gross overinvestment in obsolete economic ideas coming out of China. Entire industries will pursue growth and expansion in markets that are no longer there. The world will face the consequences of resources filtering through a trade model that’s no longer valid. So what does all this mean for investors? Well, it means that there’s even less reason to trust in national currencies over the long haul.

Sure, the local currency is how you keep score. It’s what you get paid in. It’s what you use to buy a house, pay bills, buy groceries, take a trip, etc. But looking forward, in any and every currency, inflation will nibble away at your wealth and savings.

What can you do? You can’t change the world, right? No, but it gets back to that idea that you still want to own physical gold and silver as core holdings in your portfolio. For the past couple of years, I’ve been saying “5-10% in precious metals, or more if it helps you sleep at night.” I’m going to change that to “At LEAST 10% in precious metals, or more if it helps you sleep at night.”

I believe silver is probably a better play right now, with more upside than gold. I’d go for silver coins, without seeking any numismatic value. Just go for the Silver Eagles – bullion value – or any other high-quality metal issue from reputable mints.

Regards,

Byron King
for The Daily Reckoning

Buy Silver…Again! originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Buy Silver…Again!




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Lies, Lies, Lies: The New Foundation of the Financial System

December 13th, 2010

Lies, lies, lies…

The days are dwindling down fast now. There are only a precious few left in 2010. The Dow rose 40 points on Friday. Gold fell off $7.

But let’s forget the market action for a little while…most of it is noise anyway.

It is time to relax a little. Time to think.

“Everybody is so busy now,” said a colleague in Australia. “No one has time to think. Instead, we’re busy answering our email or checking our Blackberries. It’s amazing. You get in an elevator and everyone pulls out a phone. No one talks anymore. Or looks at anyone. Or has a thought.

“I don’t even think we writers bother to think anymore. We’re too busy. We have to produce too much material. We don’t really have anything to say…but we say a lot.”

Of course, that’s been true at The Daily Reckoning for years. We were always ahead of the trend. We write every day, whether we have something to say or not.

Do we have something to say today? To tell you the truth, we don’t know yet. But let’s begin by thinking about this…a quote from The Daily Bell we passed along on Friday:

“The problem with where America is now is that the country has been built on one lie after another for the past decade and the lies show no signs of slowing down.”

And then, there’s this from Charles Hugh Smith via Marc Faber:

“…the status quo would collapse were systemic fraud and complicity banished. Rather than the acts of evil conspirators, they have become the foundation of the US economy and financial system…”

You will recall how Goldman Sachs wowed the whole world with its dazzling trading. Day in, day out…the traders at Goldman made money. The firm turned in “perfect” trading quarters, with not a single day showing a loss.

Surely, one of the junior traders would have miscalculated at least once? Or a seasoned old pro, after a well-irrigated lunch, take his fat finger and hit the wrong button? Nope. Not once did Goldman’s trading machine err. It was uncanny. Almost unnatural.

Who was on the other side of those trades, we wondered? Trading is a zero sum game. One side wins. The other loses. So some poor schmuck must have taken a loss for every gain earned by Goldman’s geniuses. Imagine him taking his lumps day after day…and still coming back for more. How could anyone stand so many losses? What kind of fighter could take that kind of beating and still be on his feet? And yet, there were no major new bankruptcies announced during that period. How was it possible? Who was losing all that money?

We don’t know. But we know who the schmuck was …the poor sap was us! Had it not been for Senator Bernie Sanders from the Green Mountain State, who was curious enough to insist, we would never have known what had happened to the Fed’s $1.3 trillion in bailout cash. Now we know. Goldman helped itself 212 times – roughly every business day – during the 12 month period beginning in March ’09, all the while telling the world that it needed no bailout.

Lies, lies, lies…

The first lie was the biggest whopper of all – that you could get rich by spending money rather than saving it.

The second was that the stock market would make you rich. All you had to do was to buy a well-balanced portfolio and hold for the long run.

When that one ran into a wall, along came the lie that you couldn’t lose money in real estate.

There was also the lie that the free market would make people rich…and if it didn’t, the authorities would force it to do so!

Then there was the lie that an economy saturated in debt could be stimulated to heights of prosperity by splashing on more debt.

And then there was the lie that you didn’t need real money in the system; the authorities could manage a flexible, paper money system so as to help maintain full employment.

And then, after half a century of adding cash and credit, when the Wall Street speculators cried and moaned, we were told that they were “too big to fail.” They needed to be saved.

Then came the lie that monetary and fiscal stimulus would lead to “recovery.”

When recovery didn’t come, we were told that QEI would do the trick – so they pumped hundreds of billions of dollars into Wall Street’s failed institutions. When it didn’t work, we got QEII.

And now, the federal government is headed to bankruptcy. We are told not to worry. No need to change course. Tax. Spend. Overspend. Stimulate.

The same goofballs, liars and incompetents who have brought us this far say they’ll take care of us.

Which is what we’re worried about.

Bill Bonner
for The Daily Reckoning

Lies, Lies, Lies: The New Foundation of the Financial System originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Lies, Lies, Lies: The New Foundation of the Financial System




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Real Estate, Uncategorized

Lies, Lies, Lies: The New Foundation of the Financial System

December 13th, 2010

Lies, lies, lies…

The days are dwindling down fast now. There are only a precious few left in 2010. The Dow rose 40 points on Friday. Gold fell off $7.

But let’s forget the market action for a little while…most of it is noise anyway.

It is time to relax a little. Time to think.

“Everybody is so busy now,” said a colleague in Australia. “No one has time to think. Instead, we’re busy answering our email or checking our Blackberries. It’s amazing. You get in an elevator and everyone pulls out a phone. No one talks anymore. Or looks at anyone. Or has a thought.

“I don’t even think we writers bother to think anymore. We’re too busy. We have to produce too much material. We don’t really have anything to say…but we say a lot.”

Of course, that’s been true at The Daily Reckoning for years. We were always ahead of the trend. We write every day, whether we have something to say or not.

Do we have something to say today? To tell you the truth, we don’t know yet. But let’s begin by thinking about this…a quote from The Daily Bell we passed along on Friday:

“The problem with where America is now is that the country has been built on one lie after another for the past decade and the lies show no signs of slowing down.”

And then, there’s this from Charles Hugh Smith via Marc Faber:

“…the status quo would collapse were systemic fraud and complicity banished. Rather than the acts of evil conspirators, they have become the foundation of the US economy and financial system…”

You will recall how Goldman Sachs wowed the whole world with its dazzling trading. Day in, day out…the traders at Goldman made money. The firm turned in “perfect” trading quarters, with not a single day showing a loss.

Surely, one of the junior traders would have miscalculated at least once? Or a seasoned old pro, after a well-irrigated lunch, take his fat finger and hit the wrong button? Nope. Not once did Goldman’s trading machine err. It was uncanny. Almost unnatural.

Who was on the other side of those trades, we wondered? Trading is a zero sum game. One side wins. The other loses. So some poor schmuck must have taken a loss for every gain earned by Goldman’s geniuses. Imagine him taking his lumps day after day…and still coming back for more. How could anyone stand so many losses? What kind of fighter could take that kind of beating and still be on his feet? And yet, there were no major new bankruptcies announced during that period. How was it possible? Who was losing all that money?

We don’t know. But we know who the schmuck was …the poor sap was us! Had it not been for Senator Bernie Sanders from the Green Mountain State, who was curious enough to insist, we would never have known what had happened to the Fed’s $1.3 trillion in bailout cash. Now we know. Goldman helped itself 212 times – roughly every business day – during the 12 month period beginning in March ’09, all the while telling the world that it needed no bailout.

Lies, lies, lies…

The first lie was the biggest whopper of all – that you could get rich by spending money rather than saving it.

The second was that the stock market would make you rich. All you had to do was to buy a well-balanced portfolio and hold for the long run.

When that one ran into a wall, along came the lie that you couldn’t lose money in real estate.

There was also the lie that the free market would make people rich…and if it didn’t, the authorities would force it to do so!

Then there was the lie that an economy saturated in debt could be stimulated to heights of prosperity by splashing on more debt.

And then there was the lie that you didn’t need real money in the system; the authorities could manage a flexible, paper money system so as to help maintain full employment.

And then, after half a century of adding cash and credit, when the Wall Street speculators cried and moaned, we were told that they were “too big to fail.” They needed to be saved.

Then came the lie that monetary and fiscal stimulus would lead to “recovery.”

When recovery didn’t come, we were told that QEI would do the trick – so they pumped hundreds of billions of dollars into Wall Street’s failed institutions. When it didn’t work, we got QEII.

And now, the federal government is headed to bankruptcy. We are told not to worry. No need to change course. Tax. Spend. Overspend. Stimulate.

The same goofballs, liars and incompetents who have brought us this far say they’ll take care of us.

Which is what we’re worried about.

Bill Bonner
for The Daily Reckoning

Lies, Lies, Lies: The New Foundation of the Financial System originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Lies, Lies, Lies: The New Foundation of the Financial System




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Real Estate, Uncategorized

Urgent: Our Forecasts for 2011

December 13th, 2010

Martin D. Weiss, Ph.D.

Larry Edelson, among the very first to predict that gold would one day exceed $1,000 per ounce …

Monty Agarwal and Claus Vogt, the analysts I’ve chosen to invest my own portfolios …

Mike Larson, one of the few in the country who accurately predicted both the real estate bust in 2005 and the recent real estate bottom in 2009 …

Plus, Ron Rowland, our specialist on ETFs … Nilus Mattive, our specialist on income stocks … Bryan Rich, our foreign currency expert … Richard Mogey, chief researcher of the Foundation for the Study of Cycles … Tony Sagami, our authority on Asia … and Sean Brodrick, our expert on up-and-coming natural resource stocks.

Our forecasts for 2011 cover it all: Stocks … bonds … the U.S. dollar … gold … oil … natural resources … emerging markets and more. PLUS, we also give you our initial investment recommendations for the year ahead.

This exciting presentation has enormous implications for every dollar you have invested and every penny you count on for your retirement. They could make you a bundle if you heed them. You could lose a bundle if you don’t.

IMPORTANT: This is your final week to view this critical presentation — the forecasts and recommendations it contains are too time-sensitive for us to leave it online much longer.

Good luck and God bless!

Martin

Read more here:
Urgent: Our Forecasts for 2011

Commodities, ETF, Mutual Fund, Real Estate, Uncategorized

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