Posts Tagged ‘water’

Why Most Of The Western Half Of The U.S. Is Completely Unsuitable For Strategic Relocation

May 13th, 2014

united statesIf there is one thing that you cannot live without, it is fresh water.  Just try it some time.  Seriously – try to live for 24 hours without using a single drop of fresh water.  You will quickly learn how indispensable it is.  Unfortunately, a lot of people that are “strategically relocating” to another part Read more…

Economy, Government, World News

The Colorado River, The High Plains Aquifer And The Entire Western Half Of The U.S. Are Rapidly Drying Up

May 24th, 2013

water droughtWhat is life going to look like as our precious water resources become increasingly strained and the western half of the United States becomes bone dry?  Scientists tell us that the 20th century was the wettest century in the western half of the country Read more…

Consumer, World News

What Is Money When The System Collapses?

November 17th, 2012

Things Are Getting Worse As Median Household Income Has Fallen 4 Years In A Row

September 13th, 2012

New numbers that have just been released show that things are getting worse for American families.  According to the U.S. Census Bureau, median household income declined to $50,054 in 2011.  That is a 1.5 percent decline from the previous year, and median household income Read more…


U.S. Power Supply Will Be Impacted By Water Shortages

August 24th, 2012

Rick Mills: Electricity enables our modern life style – the degree of dependency we have built into our lives in regards to “power on demand” has raised expectations that plentiful electricity will be available to us 24/7. Read more…


Eurozone Finance Chiefs Deep-Six the Euro!

June 15th, 2011

The currency mini-rebound did well yesterday, all day… But then came the European session this morning, and more problems with the Greek bailout, and the bickering going on back and forth between the Eurozone Finance Chiefs… All this has deep-sixed the euro (EUR) this morning. The single unit is down 125 cents! So, when I left the office yesterday, the euro was 1.4445… this morning, it’s 1.4315, and looking like it wants to visit the 1.42 handle soon.

And to makes matters worse for Greece, the unions today are staging protests, because they don’t like any austerity measures one iota. Hmmm… I don’t think they’ve got their heads on straight… For like I said yesterday, what’s more important is the “Honor of the Nation” at stake… So go ahead and protest and see the country default, then you won’t get any of your demands anyway! I really don’t want to talk about this stuff this morning, but that’s what’s going on right now as I type away with my fat fingers.

The rest of the currencies, for the most part, are weaker, thus following the Big Dog, euro, down this morning. Yesterday, though, we saw some good rallies in the currencies. For instance, the Canadian dollar/loonie (CAD), which had drifted lower in recent weeks, saw Canadian Finance Minister, Jim Flaherty, grease the tracks for a rate hike… Flaherty said, “We need to remind Canadians that historically low interest rates will not be here forever, that interest rates really only have one way to go, and that’s up.”

These words put some strong wind in the loonie’s sails, and revisited the $1.03 handle, after spending weeks in the $1.02 handle… And yes, the price of oil rose $1 yesterday, so, that too helped the loonie get moving!

Another central banker with a rate hike on his mind is the Reserve Bank of Australia’s (RBA) Governor Stevens, who said that, “policymakers will need to raise interest rates at some stage.” He went on to say that “the underlying rate of inflation is more likely to rise than fall, in the next few years.” So… For all of you new to class… That’s central bank parlance for: interest rates are going higher, very soon!

The Aussie dollar (AUD) held firm, only slipping a few cents through the morning. So… The Eurozone/Greek debacle hasn’t allowed the Aussie dollar to take full advantage of these comments by RBA Governor Stevens… But at the same time, the comments have prevented the Aussie dollar from suffering like its kissin’ cousin across the Tasman, the New Zealand dollar/kiwi (NZD)…

One currency that I see getting sold this morning is confusing to me, and given the Eurozone/Greek debacle, the uncertainty meter rises, which until this morning, meant that the Swiss franc (CHF) would march higher in value… But not today! The franc is getting sold right next to the euro, and is down 2-cents from earlier in the week. The Swiss National Bank (SNB) said yesterday that they were going to have to keep interest rates on hold, given the strength of the franc… And just as soon as they said that, the franc began to fall!

But still… Given the geopolitical problems of the world, and the debt problems of the Eurozone peripheral countries, the franc has been the safe haven currency for everyone… But not today… But here’s my thought on this… While I still feel the franc is overvalued, it doesn’t change the fact that the franc is the currency everyone has flocked to with all the problems of the world… Well, those problems haven’t gone with the wind, so this weaker franc certainly represents a cheaper level to buy, eh?

I was watching a bit of TV last night, and saw the film footage of the two levees that broke in Northwest Missouri, flooding tons of farmland… And on that farmland you could see the tips of the corn stalks sticking out of the water… and that got me thinking about a lot of things… First and foremost the devastation to those farmers… That’s so sad… And second… All those damaged crops… In a year when food prices are already soaring, (forget Big Ben’s “transitory inflation”), that doesn’t lend any help to those soaring food prices.

And then speaking of inflation… Wholesale inflation is rising very quickly in the US. The Producer Price Index (PPI) for May increased 7.3%… (The Fed only looks at the number minus food and energy, which was +2.1%) … But since we all need and use food and energy almost every minute of our day, (don’t forget the things that run on electricity while you sleep!) I’m going to keep them in the number, and say that with rising Wholesale Inflation like this, you can expect that businesses won’t be able to hold down Consumer Prices very much longer…

Of course, we’ll see the stupid CPI (Consumer Price Inflation) number today… But it doesn’t mean a hill of beans to me, given all the hedonic adjustments that have been made to it since the mid-’90s. I prefer to go to Shadow Stats guru, John Williams, and see what he has calculated for inflation using the pre-’90s method… I know that I’ve explained all this before, so I won’t go into it here… But think about the base root cause of the housing meltdown, and thus the financial meltdown… And you’ll get there… And it’s all centered around the hedonic adjustments that were made to CPI…

OK… Enough of that! Well, Retail Sales in the US for May were as I said I thought they would be… Disappointing… Recall, I told you that the forecasts were all over the place, but the final forecast going into the print was for a -0.5% fall in sales… Retail Sales weren’t that bad, but still “disappointing”, falling -0.2%… And like I also said yesterday, if the markets take an “old school” reaction to the number, the dollar will get sold… And that’s exactly what happened yesterday!

Today, the data cupboard has stupid CPI, but more importantly, the Empire Manufacturing Index, (NY region), and the Total TIC Flows, and two of my faves… Industrial Production and Capacity Utilization… If you really want to get the pulse of business in the US these two pieces of data do just that… And… Capacity Utilization is one of the few “forward looking” pieces of data.

Did you hear or see the Fed Chairman on the TV yesterday? When I saw him speaking, I was reminded of a quote by our friend, Jim Rogers about Big Ben… I can’t say it, or else I’ll get my hands slapped, but it’s quite funny, and you should Google it… Anyway… The Fed Chairman said we shouldn’t use the debt ceiling/limit as a “bargaining tool” to get spending cuts… OK. I’ll buy that one… But… What should we use, Ben Bernanke? Ahhh, grasshopper… He didn’t offer any such alternatives… So… With no alternative, what’s a country to do? I guess we use the debt limit as a bargaining tool, and hope that it doesn’t come to a default…

One of these days, though… And probably long after I’ve left for the green, green grass of home (died), that will be the only choice of the US… To just default on all its debts, and wipe the slate clean… Until that happens, though, the tax burdens on our grandkids will be tremendous! And the loss of freedoms will have mounted… I love those little rugrats of mine, but at the same time, I wonder how they will deal with all this in the future…

A couple of years ago, I wrote a letter to Delaney Grace and read it at the Agora Financial Investment Symposium… I’ll have to update it now, to add Everett the EverBaby, and B.C. Braden!

OK… This has got me going in a direction that I need to pull out of, and fast! Do you see now, why my drinking buddies don’t ever get me going on this stuff, and keep me focused on sports and music? HA!

And I just saw the news headline that will do that! Eurozone Industrial Production rose 0.2% in April, making the annual increase 5.2%… (4.8% was forecast)… This is good news for a region that needs a good shot of seashells and balloons every now and then!

So… One more thing before we head to the Big Finish… I see where the Fed members are discussing the adopting of an explicit inflation target (like most of the countries around the world use!) Former Fed member, and (Mark Twain Bank Advisor) Laurence Meyer believes that “this may be a done deal, though not one likely to be implemented soon, and perhaps not until economic conditions return to closer to normal.”

OK… So the Smart Alec like me would say to that… “Oh, I guess that means we’ll never implement them” But… All I can say to this is that it’s something that’s been missing from the Fed’s mandate for a long time… Throw the number out there and then we get to see when to expect policy adjustments!

Then there was this… From (thanks Scott!)…

Time is running out for Minnesota’s parks, highway rest stops and public universities, not to mention 36,000 state employees.

If Gov. Mark Dayton and lawmakers don’t agree on a budget by June 30, the state government is expected to shut down. The state moved one step closer to this outcome on Friday by sending layoff notices to much of the state workforce.

And then there was something else I wanted to mention this morning… I saw last night that Texas has created 213,000 jobs in the past 2 years! WOW! That’s a great thing! Way to go Texas! Get the accountable for that (Gov. Rick Perry) to run for president, apparently he knows what’s needed!

To recap… The currency rally lasted all day yesterday, but met up with more bickering between Eurozone Finance Chiefs this morning, and the rally was halted… The euro has sold off more than 125-cents, but currencies like the Aussie and Canadian dollars are holding on to gains, because each respective central bank head talked about hiking rates soon. Retail Sales in the US were disappointing, and Wholesale inflation is soaring…

Chuck Butler
for The Daily Reckoning

Eurozone Finance Chiefs Deep-Six the Euro! originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Eurozone Finance Chiefs Deep-Six the Euro!

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.


The ONLY Stock You Should Consider Buying in this Sector

June 3rd, 2011

The ONLY Stock You Should Consider Buying in this Sector

Economists love to run a series of experiments based on “Game Theory,” testing whether individuals rationally account for the actions of others before making their own moves. When it comes to companies in the dry-bulk shipping industry, only one player has been acting rationally. The rest have been making foolish moves, making life brutal for investors — except for those who have been smart enough to own that one rational player.

After the economic downturn in 2008, the industry was suddenly beset by too many ships chasing too few customers. The Baltic Dry Index (BDI), which is a handy proxy for the rates these companies can charge to lease their fleets, plunged sharply, from around 11,500 in the spring of 2008 to just 2,000 18 months later.


3 Ways to Profit from "Blue Gold"

May 6th, 2011

3 Ways to Profit from

Years ago, when my cousin Andrea was in law school, she and my dad were talking about the “hottest” area in the law — water rights. This was probably 15 years ago and today Andrea is one of the nation's leading experts on the death penalty. Dad and I were joking the other day that if she had gone into water law, her house would probably be a lot bigger.

In general, water rights and the field of water delivery is a huge topic, with many big players, from G-7 nations to large municipal water utilities to industrial equipment makers to smaller concerns, which actually buy up water rights and sell the commodity to water systems. T. Boone Pickens, the legendary oilman and dealmaker, is one huge player. And when fortunes like that get into “developing” sectors, I tend to take notice.

The rise of the middle class in emerging markets in India, Asia and Africa is typically seen as great news for the consumer products and automobile sectors, but it's also a boon to basic service providers. People who have lived their lives in abject poverty and gain wealth want iPods and Buicks, sure, but there are a lot of steps in between. One of those steps is to ensure access to basic services like potable water.

The result is that total worldwide water demand is growing by about 6% a year, which is far faster than the aggregate growth in worldwide economic output. The bottom line is that water demand is outrunning the market, and it will be a major source of profits in the decade to come.

There are several ways to play water, but I like three better than the others because they're real game-changing areas and that's what my service Game-Changing Stocks is about.

Here are my three favorite ways to play the boom in “blue gold” spending…

Opportunity #1 — turning salt water into potable water
The first is desalinization (aka, desal), the process of removing the heavy salts from seawater. For years, this process required water to be boiled and the steam left behind the salts was then collected.

But this is a very expensive way to get water on a large scale. What was needed was a way to get water on a larger scale at an affordable price, one accessible to the budget players in addition to the oil sheiks. That process is called reverse osmosis, which is when water is blasted a high pressure through a series of special filters.

Most people assume — wrongly — that desal is needed on desert islands and on seaports, where an ample supply of saltwater is readily available. While that's true, the process is also needed in areas that are on the brink of exhausting their existing supply, such as California, and in areas in the middle of the country where groundwater resources have, for one reason or another, become brackish.

The fourth market is in areas where water supplies are potentially controllable by a hostile neighbor. This is especially true in the Middle East, which exists on 1% of the world's freshwater supply and where every major water source crosses at least one international boundary. The market for desal plants is huge.

The trick to building a desal plant is to either have an unlimited supply of energy to power the robust pumps that force the water through the filters or, failing that, to use a special bit of equipment that recycles the energy within the plant. This piece of equipment, almost shockingly, is supplied almost universally by one company.

Investing in this company and in others that own and operate desal plants, is one of my favorite areas of water investing. But water treatment, not just for saltwater but in general, is also a huge area of growth. Some 20 public companies are involved in this sector.

Opportunity #2 — track China's spending
The other area that has game-changing potential isn't really a sector but a country — China. Firms that supply China with water, water equipment or both are going to see significant growth in coming years.

For example, for years China denied it was building a major dam on the Yarlung Tsangpo River. It wasn't until April of last year that they finally came clean — after satellite images had been released of construction taking place. China officially told its Indian neighbor that it had begun this massive project. Even then, Chinese officials were quick to say they wouldn't be diverting any water; the dam is purposed to create electricity. I think that's a farce.

China is the world's fourth-largest water customer, consuming 2.8 trillion cubic meters a year — a number that will rise as more and more citizens are elevated to the middle class and will be able to afford a municipal water hookup, which, though it seems strange to Americans, is still something of a luxury in thousands of Chinese villages and cities.

About 100 cities in China — today — face severe water shortages. That's not because China lacks the physical water but because much of China's water is heavily polluted by industry and rapid urbanization or otherwise, so getting the world's most populous country “up to code” is going to provide dozens of companies with billions of dollars in revenue. China spends an astonishing $200 billion a year on water infrastructure.

Opportunity #3 — thinking like Pickens
Another area I like is companies that do what Pickens has done: securing the legal right to water in areas where it's scarce and so that they can name their price. This is an especially promising play in the Southwestern and Western United States. An acre-foot of water — enough water to cover an acre of ground with one foot — can cost $1,000 in Dallas but it can bring three times that in Nevada or Arizona. The companies that control the water market in these areas will be able to name their price. All those lawyers that my cousin should have emulated have made sure of it!

Action to Take –>

ETF, Uncategorized

The Best Way to Deal With Squatters

April 20th, 2011

We have just returned from the ranch. We’ll give you a brief resume of our visit. There is not much of financial interest in it…unless you are interested in how to not make money in cattle ranching and wine growing. But life isn’t all about making money. And if these Daily Reckonings had stuck to economics and investments, over the last 11 years, your editor would have gone mad years ago.

“You have to understand,” began our lawyer in Salta. “This is a political problem. It’s not a legal problem. You have all the rights on your side. But you don’t have all the politics on your side.”

Our man was explaining how to deal with the problem of squatters. There are 20 or so families who live on our land. Most of them have been there for generations. They have no title to the land they live on, but by custom, recognized by law, they are allowed to continue raising their goats, cattle and sheep on thousands of acres of mountain wilderness.

There are only two requirements. First, they must pay us a token number of animals in “rent.” These animals are largely unsaleable. So we usually don’t bother to collect them. But without the gesture of payment, the people become squatters. And if they are allowed to squat for 20 years, they become legal owners of the property.

Second, they must respect the mutual agreements regarding water and grazing rights that have governed this area for hundreds of years. Beginning in the month of August, for example, they are only allowed to use water one day out of four. Water is scarce in the winter and spring. It must be allocated fairly.

“Whatever you do, don’t try to throw them off your land – even if they don’t pay. I have a client – a rich guy from Buenos Aires. He was in a similar situation. When some of his people wouldn’t pay – you know, they get stirred up by the idea of “indigenous rights” – he took them to court. Of course, he won. But that was just the beginning. One of the leftist political parties got wind of the story. They decided to make a big deal of it. They printed a newspaper that told the story about how he threw poor women and children off his land and then burned down their houses. It was mostly lies. But it was useful politically for them. They even got Christina Kirschner to make a visit so she could be seen protecting poor people from wicked landowners.

“In the end, they caused so much trouble for him that he couldn’t stand it. He had to pay off everyone – the politicians, the poor people…the lawyers. It ended up costing him a fortune.

“So don’t think about trying to get rid of the people who aren’t paying. Instead, just make sure you hold them to the terms of the their deals with the other families up there. As long as they’re respecting the rules for using water and grazing their animals on the right land, don’t worry about the rent. It isn’t important anyway. Just try to get along with them.”

That seemed like good advice. Besides, the economics of the situation are on our side. Or they’re against us, depending on the way you look at it. Life up in the mountains is so hard…so unforgiving…so unprofitable that the next generation of squatters doesn’t seem to want to stay here anyway.

Of course, the same could be said for the ranch itself. It is not profitable. From what we can tell, it will never be profitable.

Here are the basic numbers. We have 500 cows spread over thousands of hectares. It is high, cold and dry. We’re lucky if 50% of the cows have calves each year…many of which do not survive. And then, when they go to the market, the young animals are thin – only 120 kilograms. This gives us a total income of about $30,000, with which we need to pay a staff of 6 gauchos, along with gasoline, tools, taxes, and all the other expenses of running a working ranch.

Why do we bother? Why don’t we leave…along with the squatters? We’re not sure…

Driving down to the ranch from Salta, we found the land greener than we’d ever seen it. After three years of drought, this year it rained.

“We got 250 millimeters of rain this year,” Jorge reported. “About 4 times as much as last year.”

The hills were green. The mountains were green. Cachi, the big mountain we see up the valley, was white, covered with snow. Even the desert floor itself was green.

“It’s so beautiful…so spectacular,” said Elizabeth as we drove up the valley. But the same water that turned everything green also made it difficult to arrive. We could not cross the river at the usual ford. We had to drive an additional half hour. Then, arriving at the farm, where there was usually a dry riverbed, we found another river. Could we get across? We didn’t know. But there was a track leading into the water and coming out on the other side. We put the truck in 4-wheel drive and plunged in. It took us to the other side without too much trouble.

Everybody at the ranch seemed happy. Jorge had a big smile. Maria seemed relaxed. All the gauchos too – Nathalio, Javier, Pedro, Norberto, Gustavo and Jasimiro – all seemed to be in good spirits.

At first, we attributed this era of good feelings to the backhoe. Then, we realized; it was just the rain.

“Oh, it is a great tool,” said Jorge of the backhoe. “We can do things we never could do before. We’ve been able to clear out many of the rocks from the fields. And we’ve been able to put in a water pipe so the cattle out in the field won’t have to walk all the way down to the river.”

To give you an idea of the scale of these infrastructure improvements, the water line is 5 kilometers long. It takes water from a spring in the mountains and feeds it to the middle of the high pasture.

“Wow… You did all that with the backhoe?” We were impressed.

“No… We just cleared the track with the backhoe. We dug the trench by hand. We wanted to save the backhoe for other things.”

Sunday was a special day in the religious calendar. Palm Sunday. We celebrated it at the little church on the ranch with a priest who drove up from a town down in the valley. We are not exactly True Believers. But we never miss a good show, especially when it offers the hope of everlasting life. To tell you the truth, we’d probably settle for twenty years or so more. But if eternity is on offer, who are we to refuse it?

Arriving at the church at the appointed hour, our “palms” in hand…we found no one there, except Maria, who explained that the padre had been held up by the river.

When he finally arrived so did dozens of local people…women and children mostly. We said hello to everyone and introduced ourselves to the priest. He was a replacement padre, while the usual man was in Rome on a special training mission.

“Where do you come from?” he wanted to know.

We explained that we were a family from the Irish diaspora currently living in the USA.

He seemed to be a likeable fellow…warm and agreeable. He gathered the worshippers at the front door and proceeded to give them a remarkable discourse.

In a nutshell, Jesus entered Jerusalem, his path strewn with palm fronds, in the traditional manner of welcoming a king. He must have known it was a set up. But he went along with the prophecy of Isaiah anyway, entering the town on a burro.

But then came the remarkable part…

“And here you have a family of Irish people as owners of the ranch. You are very lucky, because the Irish are very religious. Very good Catholics.

“So you can follow their example. They set a good example for you. Obey them. When they tell you to work, you should work. And help make this cattle ranch a great success.”

“Where did he come from?” Edward whispered.

We found out later. Franco’s Spain! He had left Spain in 1970 and had been in the valley ever since.

Perhaps we should have set him straight. We are not really Catholics; we’re Episcopalians. And we’re not really Irish either.

But then…who cares? This isn’t really a cattle ranch either…

More to come…


Bill Bonner
for The Daily Reckoning

The Best Way to Deal With Squatters originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2


Read more here:
The Best Way to Deal With Squatters

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.


3 Reasons To Still Own Gold (or Finally Buy Some)

April 20th, 2011

3 Reasons To Still Own Gold (or Finally Buy Some)

I recently watched the classic man-eating fish movie “Jaws” and the latest action in the precious metals space reminded me of the tagline for the film, “Just when you thought it was safe to go back into the water…”

Is it safe to swim in the water? Or is Jaws still lurking out there, the physical embodiment of a financial world gone lethal? Can gold still protect us?

Gold has had a magnificent run during the past 10 years, doubling in value since 2008 alone. Gold has set and broke several new price records, most recently reaching $1,500.00 per ounce on the Comex division of the New York Mercantile Exchange in Tuesday's (April 19) trading.

The most commonly-traded gold exchange-traded fund (ETF), the SPDR Gold Trust (NYSE: GLD) ETF, followed suit, closing just shy of $146.00 a share, an all-time high. Mirroring these moves was gold's less valuable (and possibly more appealing sibling) silver, which has been hitting 31-year highs almost daily.

Gold “mania” is seemingly at full strength. But questions remain. Is profit taking the next move? What if you are among the majority of investors who have yet to dip a toe into the water? Is it safe to dive in?

Let's look at three fundamentals regarding gold, along with the rational outlook that should correspond with these facts:

1. Inflation Naturally, I'm not referring to core inflation, also known as the government's consumer price index (CPI). The CPI is like the calm surface water that hides the beast beneath.

Headline inflation, which is the measure of the total inflation in the economy, is running very hot. There is increased demand for resources thanks to growing economies worldwide and corresponding shortages developing in food, energy and elsewhere. Gold is benefiting from inflation and there seems to be little reason to expect it to slow down.

Money creation in the United States has excess dollars chasing these aforementioned goods. Some think this is a good thing. Some will argue that the Federal Reserve will eventually sop up the extra liquidity. But the reality is they never really will. The dollar has lost 95% of its purchasing power since 1913, the birth-year of the Fed. I see no circumstances under which the dollar will not continue to fall long-term. It will bounce up now and then, but if nothing else, the past 40 years have cemented the dollar's future — and the trajectory is to the ocean floor.

2. Demand − From people, institutions and governments — gold is wildly in demand like the cheesy “Jaws” merchandise sold during the record run of the movie in the 1970s. Faith in virtually all currencies has been shaken, if not destroyed, and will probably never be restored.

The dollar's reserve currency status is threatened. More than threatened, it is visibly on the way out. What was once mere speculation has evolved into blatant measures to see it replaced. It will happen, but it will also take years. When we see countries like Venezuela and China trading with each other without using dollars (or any other currency) the evidence is irrefutable.

We also see many countries increasing their gold holdings (China's has increased from 600 metric tons to 1,054.1 metric tons since 2003), the logical defensive strategy when saddled with hundreds of billions in depreciating dollar reserves: stockpile commodities and natural resources. I give you dollars and you give me gold, oil, or steel — that's a fine exchange for me.

3. Government spending − The U.S. government is losing its credibility. Speculation that the United States will have its credit rating lowered was fueled this week after ratings agency Standard & Poor's lowered its outlook on U.S. debt from “stable” to “negative”.

The United States is the largest debtor nation in the world, nee, in all of human history. Once upon a time, it was the largest creditor nation in the world. In the 1980s, it loaned other countries money, money it really had. Now it borrows massive amounts to service its debt. The nation's well documented entitlement obligations are helping to catapult its annual budget to fantastical extremes.

Action to Take –> Keep your gold or buy some. The facts argue that gold should continue to rise; and not just in dollar terms. Many of these observations can be applied to other countries and currencies as well. I'd love to be optimistic regarding the United States' financial future, but right now things look grim. Jaws is still out there.

– Steven P. Orlowski

P.S. — We found an obscure mining company that tossed back 19% in dividends last year (plus another 34% in capital gains). If you think that's impressive, wait until you see this video…

Disclosure: Neither Steven Orlowski nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: Steven Orlowski
3 Reasons To Still Own Gold (or Finally Buy Some)

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3 Reasons To Still Own Gold (or Finally Buy Some)

Commodities, ETF, Uncategorized

American Fear

March 26th, 2011

Whether they realize it or not Americans live in a constant state of fear every day. I’m not referring to the fears of everyday life like losing a job or having an accident of some kind, but rather a more sinister and devious fear; a fear that Americans only dare talk about around the water cooler or at cocktail parties so as not to be taken seriously; a fear they try to mask with a with a whimsical tone of sarcasm or indifference. Whether Americans want to admit it or not, it’s the single greatest fear in their lives: fear of the government.

Right about now there are those reading this thinking: Don Cooper is a drunk. To which I reply: what’s that got to do with it? Maybe more people should drink if that’s what it takes to sober up and confront what they are really afraid of.

In their defense, I’ll admit that reality is scary. No argument that living in delusion is warmer, safer, cozier, and easier. Pretending is always more fun than reality, that’s why we go to the movies. But fear of the government is a fear that invades a person’s soul and – since the government intervenes in every aspect of our lives – it affects every move we make every day.

Fear of the government is hard to recognize and acknowledge. It’s a fear that we are taught early on in life and to which we become accustomed. We inevitably end up tucking it away in the far reaches of our minds in order to function “normally” every day and live our lives. But just as a car backfiring will trigger a sense of fear from a shell-shocked veteran, so too can the State trigger that sense of fear they’ve instilled in us.

One need only ask: when you see a cop in your rearview mirror with his lights on, do you feel a sense of safety and comfort or do you get a shot of adrenaline from your body’s “fight or flight” reflex? Do you immediately start asking yourself what he could possibly pull you over for, other than the fact that he was abused as a child, bullied at school and his mother didn’t love him, and now he’s going to whittle away at that chip on his shoulder by abusing you.

As you search for your proof of government permission to drive (i.e., your license), and your government permission to own the car (i.e., your registration), and your proof of government mandated insurance, do you do so calmly and with a smile on your face and with gleeful anticipation of speaking with someone who gives of himself to serve and protect you, or do you do so nervously, fumbling through your papers hoping everything’s up to date and acceptable to him for fear of being detained for whatever reason and having it affect your job, your family, and every aspect of your life?

And when it’s all over, do you feel glad that it happened or are you just glad it’s over? Later that evening do you recount the story to others with a sense of pride, or do you do so with a sharp tongue and kick yourself for all the things you wish you would have had the presence of mind to say at the time but didn’t? Do you feel happy that you have to pay $150 to the government because you were driving down the street faster than the government allows you to, or are you angry?

And in the end, do you send the money to the government even though you don’t agree with it? Even though you feel it’s unfair to have to pay so much money yet you’ve harmed no one? Of course you do. And why? Because you’re afraid of what the government will do to you if you don’t. In the end, you’ll retreat back into your cubby-hole of delusion in order to justify paying the fine by convincing yourself that what you did was wrong, the government was right, and you deserve the punishment.

My favorite delusional argument from those still attached to the matrix is that they pay their taxes voluntarily. To these people I ask: when you do your tax returns, do you take as many deductions as the government will allow you? Of course, the answer is always yes. Then I ask them that if they could take enough deductions such that their tax liability was zero would they do so? Again, not surprisingly, the answer is yes. I then ask them that if their preference is to pay zero taxes then why don’t they simply refuse to pay taxes. Inevitably, that’s where their train of thought always runs out of track. Of course everyone knows the answer: because they’re afraid of what the government will do.

I challenge everyone to ask themselves: when was the last time you even thought about the possibility you might be robbed, your house broken into or shot at? Can you even remember? Now ask yourself when was the last time you were afraid of doing something that could be deemed “illegal” by the government and for which you could be fined, detained or arrested? Something like not wearing a seatbelt, speeding, making a U-turn, going through a yellow light, not crossing the street at the cross-walk, riding a bike on a sidewalk, forgetting your license at home, taking too many deductions on your taxes, talking on your phone while driving, not allowing strangers to touch you or your children at the airport, cutting down a tree on your own property, owning and transporting a gun, collecting rain water and the list goes on. I would wager the answer is: daily! The first word out of everybody’s mouth when asked a normal, completely benign question these days is: “Well legally…” It’s first and foremost on our minds, and why wouldn’t it be, there are 76,000 pages to just the federal register alone. Some argue that everyone commits at least three felonies every day!

Ignorance is a dangerous thing, and it must be stopped in our lifetime, fo’ it kill somebody.

At the end of the day, all government mandates are enforced at the end of the barrel of a gun, and that scares the hell out of everyone, as it should. But if we truly believe we are free then we have to start acting like it. It’s time we cared about something bigger than ourselves. It’s time we stopped living our lives in fear.

Having said all that, I’m not holding my breath. It’s proven to be difficult to convince people that freedom is more important than the real housewives of New Jersey.

And that’s why I drink!


Don Cooper
for The Daily Reckoning

American Fear originally appeared in the Daily Reckoning. Daily Reckoning founder Bill Bonner recently wrote articles on stagflation and the great correction.

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American Fear

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.


The 3 Most Undervalued Stocks in Brazil

February 22nd, 2011

The 3 Most Undervalued Stocks in Brazil

In the past 40 years, not once has the United States' stock market been the best performer in the world in any given year. At best, American stocks have been finding their way into the middle of the pack, and given enough time, the U.S. stock market's results are often in the bottom 20% of all developed markets.

That's why it's important for investors to allocate at least a small portion of their portfolio to international stocks. With the right strategy, the potential rewards are much greater and often carry no more risk than buying a U.S. stock.

Buying shares of an overseas company isn't difficult, either; many companies have shares that trade on U.S. exchanges just like an American stock.

So if you should put some of your money in international stocks, where should you look?

If the forecasts are right, then Brazil's economy will be shoulder-to-shoulder with China, the United States and India by the year 2050. That's quite a growth spurt in the works, considering Brazil's economy is currently only the eighth largest in the world. But 2050 is a long way off, and the investment-worthy opportunities are presenting themselves today — you can't sit on the sidelines with a “wait and see” approach if want to make money from them.

It's not just a pipedream, either. The numbers South America's biggest country have been putting up in recent years do indeed suggest that this Latin American powerhouse will be everything it's expected to be. In fact, it's already on the way. While Brazil was bumped around by the global recession like the rest of the world in 2009, its GDP only fell 0.2% that year. By 2010 it was back on track with a growth rate of 7.8%. Its GDP is expected to grow by another 4.5% in 2011, compared with an expected growth rate of 3.2% in the United States.

Vale SA (NYSE: VALE) may be one of the ideal ways to take a stake in Brazil's accelerating economy. Although categorized as a mining stock, the description doesn't quite do the company justice. Yes, it mines industrial metals — mostly iron — but it also operates several plants and mills to turn what it mines into marketable steel products. Moreover, the company has its own transportation infrastructure that's open to other paying customers. It even generates much of its own electricity to offset the expense and volatility of buying it from a utility company.

All in all, a snapshot of Vale's operation makes for a pretty nice picture. But that's not even the compelling part for investors. What does every growing country need? Infrastructure… If Brazil is going to become a powerhouse by 2050, then Vale is going to build a great deal of the framework behind that growth.

An industrial giant isn't the only smart investment play in Brazil, though.

Believe it or not, consumers who are glued to their cell phones isn't an American phenomenon. It's becoming a global phenomenon, including in Brazil. Cellular phone service provider Vivo Participacoes S.A. (NYSE: VIV) is not only well aware of this, but is profiting handsomely because of it.

Simply put, things went from good to better for Vivo Participacoes in 2010. The company is on pace to earn $2.33 per share for fiscal 2010, and the number is forecasted to reach $2.82 in 2011. That projected growth rate of 21.0% translates into a forward-looking price-to-earnings (P/E) ratio of about 12., compared with the current P/E of 15.6 for the S&P 500.

But this doesn't even scratch the surface. The cell phone and smart phone revolution is just getting started in Brazil, with the bulk of the potential growth still ahead rather than in the past. Latin America's mobile phone market grew 28% in 2010 and is expected to grow by 76% in 2011. Smartphones were the big driver of that growth: that market swelled by 145% in Latin America last year.

In other words, Vivo is in the right place at the right time.

Finally, long-term investors should consider Brazilian water utility and sewage service provider Companhia de Saneamento Basico (NYSE: SBS) – or SABESP — as a way to tap into the growth of a country that's rapidly becoming a modernized, growing nation.

Even by water utility standards, SABESP shares are undervalued. Its trailing P/E of 6.4 and the projected P/E of 6.8 are unheard of for U.S. water utility stocks. As of right now, the average P/E of the United States' major water utility stocks is a hefty 26.1 (the cheapest is American Water Works (NYSE: AWK), with a trailing P/E of 18.5). Yet, none of the major water utility names based in the United Sates have even come close to earning and growing as consistently as SABESP has in the past five years.

Throw in the fact that Brazil's population is expected to grow from 200 million now to 260 million by 2050, and those people will need running water to and from their home, and you've got a big built-in growth opportunity.

Action to Take –> Is Brazil poised to be the world's leader in 2011? Maybe, maybe not. Statistically speaking though, it is likely to outpace the U.S. market no matter how things shape up this year. Any or all three names would offer a smarter risk/reward ratio than most domestic stocks.

– James Brumley

P.S. — We've just identified six surprising events that could break your portfolio wide open in 2011. Knowing these pivot points in advance lets you focus your investing strategy like a beam of light in the dark… and make a lot of money in a hurry. Get them free by simply watching this video presentation.

Disclosure: Neither James Brumley nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: James Brumley
The 3 Most Undervalued Stocks in Brazil

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The 3 Most Undervalued Stocks in Brazil


These Ignored Stocks Consistently Beat the Market

February 18th, 2011

These Ignored Stocks Consistently Beat the Market

A profitable investment strategy is to buy into a stock with a major catalyst that can potentially take hold and send a stock price higher. That's obviously easier said than done, but many savvy investors who identify a catalyst early on can often snag the stock just before it moves and before the rest of the crowd.

Big changes at a company are a good place to look for catalysts, be it a new management team, new product or a major acquisition. One of the single best catalysts for a stock is often a spinoff. This is when a company separates, or “spins off” a division in order for it to become a publicly-trade company in its own right.

Spinoffs have a good track record of beating the market, according to the Journal of Financial Economics. There are a number of reasons for this. From the new company's perspective, new freedom often means the chance to grow market share and reduce costs without distractions from


Three ETFs To Play Water Shortage

February 16th, 2011

Both macro and microeconomic forces suggest that the global water sector is destined to see exponential growth paving the path to opportunity for the PowerShares Water Resources (PHO), the PowerShares Global Water (PIO) and the Guggenheim S&P Global Water (CGW).

From a macro perspective, incomes in developing nations are expected to rise and populations around the world are expected to continue to expand pushing up demand for water. In fact, at current growth rates, it is expected that demand for water will grow by nearly 6 percent annually. This growth is expected to be most prevalent in emerging Asia, where India is expected to see its water demand more than double and China’s to rise by more than 30 percent over the next 20 years.

Further price support in the essential commodity is likely to be driven by a deficiency in supply. Of the water that can be found around the world, a mere 1% can be used for agricultural purposes and human consumption. Additionally, research suggests that soil moisture levels on Earth are declining which could potentially lead to depletion in fresh water tables around the world.

Global supply constraints are further being enhanced due to rapid growth that has been seen in Asian nations which has lead to contamination of rivers and lakes and polluted groundwater. In fact, the World Bank estimates that China’s growth is expected to result in a supply shortfall of nearly 200 billion cubic feet within the next two decades.

In a nutshell, a monumental supply and demand imbalance is developing in the water sector which will likely result in water scarcity and force an influx of investment into the sector on both the domestic and international stage. As mentioned above, some ways to capitalize on the water sector include the following:

  • PowerShares Water Resources (PHO), which boasts environmental services giant Veolia Environment (VE) and flow control equipment specialists Flowserve Corporation (FLS) in its top holdings.
  • PowerShares Global Water (PIO) boasts French-based Suez Environment, which specializes in producing, distributing, treating, and recovering water as well as wastewater treatment specialists Kemira Oyj in its top holdings.
  • Guggenheim S&P Global Water (CGW) holds Swiss-based Geberit AG, which specializes in water sanitary systems and the transportation of water through piping systems.

Read more here:
Three ETFs To Play Water Shortage



Obama on Auto-Defrosting Refrigerators

February 12th, 2011

I’m the guy who just last week managed to find a plumber who would increase the water pressure in my entire house, defying government controls and thereby causing all appliances to work better. It’s not surprising that this was necessary. Government regulations have made a mess of our daily lives. Whether it is banning effective products or mandating inferior functionality in our appliances and fixtures, government’s role here is indisputably to degrade our quality of life.

So I was stunned to hear President Obama claim exactly the opposite in a speech to the US Chamber of Commerce. He ridiculed those who predicted disaster from government regulations as far back as 1848. “It didn’t happen,” he said. “None of these things came to pass.” Then he went further to say that government regulations “enhanced” industry and “made our lives better.” Regulations “often spark competition and innovation.”

What immediately came to mind is a picture of a race in which some overlord is clamping shackles on the runner’s feet. No, that does not stop the race. The runners develop innovative ways to keep going. Nor does competition stop; it might even become more intense as runners develop new skills they would otherwise not need. All that’s true, and yet we wouldn’t look to this race as the one that is going to set new speed records. Everyone would be better off without shackles.

But Obama’s claim really goes further than saying that somehow industry overcame the costs of regulation. He suggested that we are actually better off than we would otherwise be due to regulations. And he gave the specific example of automatically defrosting freezers. He really did. Here is the statement:

The government set modest targets a couple decades ago to start increasing efficiency over time. They were well thought through; they weren’t radical. Companies competed to hit these markers. And they hit them every time, and then exceeded them. And as a result, a typical fridge now costs half as much and uses a quarter of the energy that it once did – and you don’t have to defrost, chipping at that stuff and then putting the warm water inside the freezer and all that stuff. It saves families and businesses billions of dollars.

Well, this is a precise claim, and it can be checked out. Thanks to many commentators on the Mises Blog and LvMI’s Facebook page, who did some extensive sleuthing, here is what we found.

In 1928, the US Patent Office issued a patent for “defrosting of the cooling element or unit of a refrigerating system.” Still, invention is one thing and marketing and production is another. It took a very long time for these to be seen in real life. More and more patents were issued all throughout the 1920s and 1930s. Most likely, the innovations occurred before this time and would have sped more quickly into the consumer market without the patents, but regardless, an article in Chain Store Age in 1947 writes as follows:

“Auto Defrost,” a recently developed electronic circuit for automatically controlling water defrosting of refrigeration coils has been announced by the Bush Mfg. Co., Hartford [founded 1907], Conn. Advantages claimed for this device are its low price, its ease of installation on existing water defrost systems, and it works independently from the refrigeration system.

Recall that Obama spoke of how the relevant regulations came about “a couple of decades ago.” Well, his timing is off by some 63 years! What’s more, these items were already reaching a retail market by 1948.

A March 13, 1948, edition of the Billboard posted a story datelined from Oakland, California:

Frosted Food O’Mat, Inc., of this city is readying a new ice cream vending machine, designed for grocery stores, super markets, and department stores. Dispenser will be offered both as a coin-operated and a manual device. The vendor will hold up to six flavors, and its makers claim that it has an automatic defroster.

By 1951, these items were already being pushed in homes. An advertisement in Popular Science reads as follows:

Von Schrader Mfg., Co: Amazing Attachment MAKES OLD REFRIGERATORS INTO MODERN Automatic Defrosters! Thirty Million Prospects. Sell without “selling pressure” on sensational Free Trial Plan. Just plug it in and leave it. Frees women from drudgery and mess of defrosting. Saves electricity. Keeps food longer, better. Gives longer life to refrigerator… Women buying by the thousands!

By 1958, it seems like the great innovation was already old news. An advertisement in Life Magazine from 1958, this time from Westinghouse, references a “frost-free, Auto-Defrost Refrigerator” as if it was nearly a standard feature. The main pitch here is that the refrigerator has “cold injector” that chills food faster. It is also styled in the “Shape of Tomorrow.”

Now, this is interesting to me since I can remember problems with freezers in my own lifetime, so it is not automatically crazy to believe that something happened in the regulatory environment of the early 1970s that would have prompted the universalization of frost-free freezers. During this period there began a government push for energy efficiency, and makers were required by government to meet certain targets, just as the president says.

But there is a serious problem. An automatic defroster increases, not decreases, the overall energy use of refrigerators and freezers. As this government report said in 1998: “Refrigerators with automatic defrost have higher occupant consumption (on a label-normalized basis) per unit of occupant activity than refrigerators with manual defrost.”

In other words, the more straightforward way to meet regulations would have been to take defrosting devices out, not put them in! The devices therefore exist not because of standards but in spite of them.

All evidence suggest that the truth is precisely the opposite of what Obama claimed. Frost-free freezers came about in the normal market way. A company found a way to package it as a luxury good available in some markets. Another company saw the advance and emulated it, offering it to still other markets (though the process was likely slowed by the government regulation called the patent). Other companies saw the potential for solving a monstrous household problem and began making them more cheaply and more efficiently, as the target market gradually went from luxury to mainstream. Over time, the improved product was ubiquitous.

This is pretty much the story of every innovation in the history of the world. Whether it is the spinning wheel or the smart phone, private companies innovate in order to outdo their competitors in serving the consumer. They all have reason to become ever more excellent in the service of others. They learn from each other and improve on what exists (in the absence of patents).

It is hard to imagine the alternative scenario that inhabits Obama’s mind. It goes something like this: Private enterprise comes up with a technology that it can fob off on customers and people like it fine but for some maddening problem. Private enterprise doesn’t care. So long as the profits are there, the problems persist. No one in the private sector has reason to change anything. Stasis prevails.

Government regulators, who are constantly scouring around consumer markets to find ways to innovate and improve products, notice the problem and issue some mandate. After some careful deliberation, they march into manufacturing plants with guns:

Listen up: our citizens have a problem with their freezers. They are building up ice. We want you to find a way, some way, to fix this problem. You have until next winter to figure it out. If you do not, you are dead meat.

Industry complies under the gun, scrambling to improve products only because government bureaucrats demand it. Under government edict, enterprise makes the thing, and problems go away. This process is repeated for thing after thing and we are gradually made better off, thanks to the central planners and wise public servants who know better than everyone else. Under this model, the entire developing world might be improved in a matter of months!

This is of course sheer fantasy. So is the claim of Obama that we should be grateful to regulators for all the blessings that flow to us. How many iPhone apps have bureaucrats invented? Will the president’s next claim be that bureaucrats gave us the Wii?


Jeffrey Tucker
for The Daily Reckoning

Obama on Auto-Defrosting Refrigerators originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.

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Obama on Auto-Defrosting Refrigerators

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.

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