http://www.321gold.com/editorials/daughty/daughty042005.html
Gold was down last week, and down a lot, and I feel bad for those of you who have followed the advice of The Mogambo and bought gold and silver, and are standing outside of my house, clamoring for your money back, as per my Famous Mogambo Guarantee (FMG), which promises TWICE your money back if my advice is bad. Unfortunately, you neglected to read the disclaimer in footnote 123, in the back, in small print, where you would have read, in Latin, "This whole Mogambo thing is a big scam, and you ain't gonna get your money back. The Famous Mogambo Guarantee (FMG) that you are buying is worthless, and this Prospectus is less than worthless, in that several trees died to provide the paper to print this bogus crap on it."
But, although you are angry and disappointed, and we are both getting really irritated by my wife laughing at you and screeching, "I told you so! I told you not to trust him, but would you listen to me? No! Now get off my lawn! Take your flaming torches and wait down the street until he goes to the store later, probably for a donut, or a pizza, or a pizza made with donuts, I dunno. But you can mob his car and beat the hell out of him then!" But, and I cannot stress this enough, 1) do NOT wait down the street, 2) do NOT mob my car, 3) do NOT beat the hell out of me, and 4) keep buying gold, because if gold does NOT soon start moving up and turning profits like a glorious gushing well that is spewing dollars all over the place, then it will be the first time in all of 5,000 years of history when it did NOT so respond when a misshapen, mal-invested, over-leveraged and highly-indebted Big Government economy got to this egregious point in its headlong drive towards national bankruptcy. And trust me when I say that they ALL got to this point, to one degree or another, because governments are always eventually filled with corrupt buttheads, and especially so after long, credit-fueled booms. And when they all saw that they couldn't, or shouldn't, raise taxes, they all typically decided to invade a neighboring country and steal THEIR money, or confiscate the money of the Jews, or just print the damn money they needed, which was the worst option, as it increased the money supply, which had to eventually find its way into the prices of things, because there is nowhere else for money to go, except into things, which makes the original problem worse. Just like we are doing now, and although we are creating money and credit with both hands, we only invade other countries to steal their oil.
So, and this is the Mogambo Investment Tip Of The Day (MITOTD), these pullbacks in the price of gold and silver are golden (pun intended) or silveren (if you get my drift) buying opportunities, because half of a very famous investment strategy is to "buy low." One day, the other half of that phrase, "sell high," will make you want to name your children and grandchildren "Mogambo" out of sheer dumb-ass gratitude for giving you such good advice, and you will fly me up to the kid's christening or the bar-mitzvah or bris something, thinking that I will give the kid a present of some cash, but I won't.
And gold is low-priced by a long shot, and silver is so grossly under-priced that I would call silver "the buy of the century."
- Richard S. sent me a nice forward entitled "Taylor On US Markets & Gold, Roach, Hoye and Russell All Point Toward Deflationary Pressures" which the rest of the article expanded upon by providing some of these guys' thinking, which I distill, because I know how important and busy you are, into this pithy Mogambo Executive Summary (MES) which is "Doom for assets."
Unfortunately, this does not mean that consumer prices are doomed, as I am finding just the opposite, having done the grocery shopping this morning, and then coming back to the office and reading that the New York Times has figured that food prices have risen by 20-30% in the last year or so. Naturally, I insult the Leftist NYT with things like "No kidding? And where in the hell have you been for the last couple of years that this is only NOW coming to your stupid attention, you Leftist-trash buttheads?" In fact, consumer prices are zooming, to which I will readily attest, having, as I said, done the grocery shopping this morning, and my eyes are still having trouble focusing from where my brain blew a fuse at the cost. It haunts me.
And why does this haunt me? Well, if you will stop throwing pretzels at me for one damn minute, I will tell you. It is for two distinct and separate reasons. Firstly, when my check bounces, the store manager is going to be very grumpy with me again, and the next time I go into his store we are going to get into a real tussle where I am valiantly struggling to break free from the clutches of the security personnel (Bob and Wheezer) while simultaneously trying to explain to him that I am willing to settle for 70% of the amount owed, which I figure is fair, because I am paying him with dollars that were earned two years ago, and thus they are more valuable than ordinary dollars earned today, because in that two-year period the dollar has lost 30% of its value, all thanks to the damnable Federal Reserve creating so damn much money and credit, which turns into new, lower-value dollars when somebody borrows them, and the Fed has been doing this day after day, week after week, month after month, year after year, decade after decade, until my heads hurts from thinking about the effect this is going to have on rising prices as all this money winds its way around and around the world, buying things, and then, because he is stupid or because he is smart enough to see through my transparent ruse, he will say "no."
And the second reason I will reveal by asking a question. Do you think that the French Revolution happened because prices for consumer staples deflated after their government printed up all that money? Hahaha! You think that the misery of Weimar Germany was caused by food being cheaper after the government printed up all that money? Again, I say, or chortle mirthlessly, as you knew I would, "Hahaha!"
And food prices are going to get worse, as Michael W. Hodges of the Grandfather Economic Report has a little bad news about that when he notes "Not only is the technology product sector in deficit, but the U.S. Department of Agriculture Economic Research Service estimates 2005 will be the first year in nearly 50 that America will not turn an agricultural trade surplus."
So we have to now import food, and with a falling dollar? Yow! Stock up on food now, because this means that grocery prices will just keep getting higher and higher as the dollar falls lower and lower, which it will, because the boneheads in Washington are actually trying to devalue the dollar!
- An Asia Times article entitled "China's fury doesn't wash, but why the froth?" by Marc Erikson is about how the Chinese are supposedly expressing their fury and anger by demonstrating in the streets, all because Japan has new school textbooks that downplay the fact that Japan acted in a murderous, despicably barbaric way during WWII, especially when they were in China killing Chinese people, young, old, children, and babies, by the score.
Fortunately, the Chinese are not as upset about how America does not emphasize in our school textbooks our horrific record of invading countries, bombing countries, shooting rockets at countries, arming the enemies of countries, assassinating leaders of countries, killing hundreds of thousands of people, and all the other arrogant bully stuff we have done and, apparently, are getting away with. Whew! Dodged that bullet! Or, if they ARE demonstrating in the street about the USA, this Erikson guy doesn't mention it.
But Mr. Erikson is not sure that the Chinese people are actually angry at anything, but that this may be something much more sinister. "The obvious question is," he asks, "why was all this cooked up, for what purpose, and why now? One thing, though, is quite certain: the Chinese claim that Japan is to blame for the unrest is absurd.
"But after seeing what I saw in Shenzhen, I know that the Chinese government and/or Communist Party got this thing going and kept it going. Students might do this sort of thing on their own. But in Shenzhen there are no students. It's a special economic zone chock full of contract workers from all over China."
As to what this may mean, you do not have to wait for The Mogambo to sober up and tell you. In fact, Mr. Erikson does that for us, giving us time to order another round of drinks with those cute little umbrellas in them. As we sip and fence ("Thrust! Parry! Riposte!") with those little plastic swords, he stays on the job and writes, "To be systematic about it, there seem to be three possibilities: 1) the government wants to divert attention from pressing domestic problems; 2) Communist Party factional issues are fought out in a strange arena; 3) Beijing wants leverage to stoke up nationalist fervor for international gain. Neither 1) nor 2) can be entirely ruled out."
A government trying to divert attention from domestic problems by rabble-rousing? I thought that was an American invention!
-
Unfortunately, you made, on average, zero percent a year for the entire seven-year stretch. Furthermore, it is impossible for everyone to make money in the stock market, because if it WAS possible, then all a country would have to do is print money, give it to the people, who would then buy shares with the money, and then they could all sit back and watch with glee as they all got wealthy, and everybody in the country could retire in luxury! And if you think THAT is going to happen, then, and at the risk of repeating myself, "Hahahaha!"
Of course all the boneheads on CNBC and their "usual suspect" guest list all DO believe that this is possible, and that is why they are all sure, absolutely sure, that this is the perfect time to pick up more shares of stock. Any shares. Just buy. Now. And lots of them.
- Richard L. Solyom, Chairman of the Sound Dollar Committee, has written a nice summary of the essay "THE FEDERAL RESERVE SYSTEM: A FATAL PARASITE ON THE AMERICAN BODY POLITIC" by Dr. Edwin Vieira, Jr. Mr. Solyom writes, "Dr. Vieira's central theme is that today's scheme of Federal-Reserve-System fiat currency and fractional- reserve banking is plainly unconstitutional, inherently fraudulent, economically unworkable in the long run, and subversive of America's political traditions of individual liberty and private property."
He adds, showing himself to be the sunny optimist, "Hopefully, Dr. Vieira's message will prove to be a warning that comes, if none too soon, at least not too late."
"Hahahahaha!" says The Mogambo. "Of course it is too late! It is far, far too late! Head for the hills, dragging your precious metals and machineguns behind you!
- Rob Peebles, in his Prudent Rear Random Walk column, notes that Ed Easterling has written a new book entitled "Unexpected Returns-Understanding Secular Stock Market Cycles." The salient point is that when the price earnings (P/E) is high, then the subsequent rewards for buying stocks at these high P/E ratios are low, and when the P/E is low, then the, as you would expect, subsequent rewards for buying stocks are higher.
And where are we now? The P/E on the SP500 is around 20, which is on the very high side, historically, although not in the extremely high side (like it has been in the last few years) and not in the insanely high side, which is where a lot of Nasdaq stocks dwell, mostly because they have little earnings, but have, people think, good prospects for one day actually having some. Which they won't.
- Bob Wood, of Kaizen Managed Assets, has been reading a book called "The Decline and Approaching Fall of the U.S." and it has shook him up pretty bad. For instance, for 1998, 1999, 2000 and 2001 the deficits were (less trust fund assets) $725.5b, $738.0b, $667.6b and $816.6b respectively, which, when added together, comes to $2.947 trillion. Those are just the budget DEFICITS!
Ugh.
**** The Mogambo Sez: The surprising resilience of the stock market to go up in the face of all of this is not surprising, as the Fed is on record as saying that they stand ready, willing and able to use "unconventional" methods to keep the markets from imploding (what they refer to as their dreaded "deflation"), including, but not limited to, buying futures, shares, bonds, mortgages or even land and houses. And I am sure that a lot of pressure is being brought to bear from foreign governments, whose citizens have invested a lot of money in American assets, and they sure as hell want to make sure that prices do not fall.
Richard Daughty