Friday, May 5, 2006

Nothing New Here

A must-read article for those interested in staying ahead of the game.

From the link:

And "as the decline in purchasing power of fiat currencies is magnified, gold will start attracting even more interest from individuals that are seeking an alternate 'currency'," said Emanuel Balarie, a senior market strategist at Wisdom Financial.


Now there are "trillions of dollars floating around and as people flee paper money (dollars), gold and silver money become attractive competitors," said Peter Spina, a chief investment strategist at

One could say, "gold IS money," he said.


"As more and more investors start allocating more resources in gold, we could see $800 and as high as $1,000 by year's end," said John Person, president of National Futures Advisory Service.

"All the elements are in place for such a move, and it would not be unrealistic to achieve in a relatively short period of time," he said.

As I've said before, govern yourselves accordingly.

Stephen Colbert, Cheap Shot Artist

I recently found myself drawn into a genial discussion with a couple of much-more-liberal-than-I colleagues that started with Stephen Colbert's execrable performance at the White House Correspondents' dinner. My opinion was that it was pathetically unfunny; they, like much of the lefty blogosphere, thought it was hilarious because Colbert told off the president. This confirmed to me that liberals have a very peculiar sense of humor. Funny for them is being rude to people, especially Republicans. Their brain's humor module is stuck at the level of laughing hysterically when someone breaks wind.

Anyway, I allowed to my colleagues as how I thought that Colbert displayed exceedingly bad manners, whether the president was Bush, Clinton, or any other human being. They thought he gave a bravura performance, courageous in the manner of Nathan the prophet telling off king David in the Old Testament. I had trouble thinking of Colbert as Nathan. Nathan was risking his life, Colbert was taking advantage of the President's graciousness and inability to control the event to beat him up in public. This wasn't prophesying, it was an ugly bully punching a man who wouldn't, and couldn't, fight back.

The conversation evolved into a discussion of Iraq and the reasons for going to war. One of my interlocutors said that he could have perhaps been supportive of the invasion had Bush made the case on human rights grounds, but that since the President lied about WMD my colleague couldn't support the war, much less Mr. Bush. I thought this strange for two reasons.

I suggested that it just seems extraordinarily implausible that Bush lied about WMD. Everybody in the world thought Saddam had them, defectors were telling us he had them, we know he used them in the nineties. The only people who were giving countervailing evidence were the weapons inspection teams who merely said they couldn't find them. And besides, Saddam was acting just like he would be expected to act if he were indeed hiding the proscribed weapons. In light of all the testimony that this notorious killer did have them, which was opposed only by the testimony of the inspectors who might well have been duped, the only responsible thing for Bush to do was to assume that Saddam did indeed have WMD. It would have been folly to assume otherwise or to give Saddam Hussein, of all people, the benfit of the doubt. Besides, if Bush really knew there were no WMD he also had to know that the truth would come out eventually, and his presidency would be ruined. Why would he risk that? It just doesn't make sense to me, I said.

This line of reasoning was received as if it had never been heard before, which didn't surprise me much.

Moreover, I pointed out to my colleague, if you acknowledge that there in fact was a case out there that you would have found a compelling justification for war, then you can't be disappointed that we invaded just because that wasn't the argument stressed by the White House. After all, by your own lights there was good reason to invade. It's just that your reason wasn't the reason that the Bushies chose to present most forcefully to the public, so how can you now argue that Bush was wrong to go in?

There were shrugs and foot shuffling and coffee cups being refilled, and the subject was changed as others came into the room. Seeing that the conversation had run its course, I returned to grading papers, reaffirming silently to myself my conviction that Stephen Colbert was still an embarrassment and a cheap shot artist.

On Happy Cinco de Mayo

While some may take this lightly, I'd like to take this opportunity to relate a recent event that happened to me. I was traveling to the city where my daughter attends college to bring her home for the weekend and it was raining cats and dogs. I was on a six-lane highway in the middle lane when a car entered the highway from an entrance ramp. As the car came onto the highway, it lost control and started spinning. I didn't see it until it was next to me and it was too late to avoid it. It whacked the right rear side of my car sending me into a clockwise spin and as I tried to recover, I went into a counter clockwise spin...traveling down the highway at 65 miles per hour with other traffic eventually passing me in both the left and right lanes. This continued for several hundred yards. I felt like I was in a NASCAR race.

Finally, I came to rest and got my car off the highway and backed up to where the other vehicle was stopped along the side the road. I got out and checked on the people in the other vehicle to make sure no one was injured. That wasn't easy to do as no one spoke English. As it turns out, the driver had no drivers license, and no identification to speak of although while he was fumbling around in his wallet I couldn't help but notice several hundred dollar bills. He showed me a social security card that said "Good Only In New York". What's with that?

I called 911 and eventually a state trooper arrived to take information on the accident. After he was done collecting the information from the other driver he proceeded to get my account of what happened. In the process he casually mentioned that "this happens all the time" i.e. Mexicans flaunting the law and causing damage to Americans.

The other driver was sited for driving too fast for conditions and for driving without a license but it's unlikely he'll ever pay the fines as it will be next to impossible to find him.

The experience could have been much worse. My car could have rolled and been totaled and I might have been killed. After it was all over and I pulled away proceeding down the highway and despite the fact that I had to hold the steering wheel at a 45 degree angle to go straight I said a short prayer to God to thank him that I was alive.

Some Perspective Please

There are those who would have you believe the fact that the DOW is only 200 points from its all-time high!

The truth of the matter is that the old all-time-high of the market was at 11,723 but that was in January January 2000 dollars. If you use an inflation calculator you will see that works out to 13,785 without taking into account another 2% for the inflation this year. In other words we'd have to hit approximately a Dow of14,000 to truly make an new high.

One has to ask themselves what the agenda is for the media to misrepresent the situation. As I mentioned here only last month.

The DOW at 11,700 still only equals 17 oz gold, whereas Dow 11,700 in Y2K was equal to 46 oz.

Now ask yourself which investment preserved one's wealth better over the last 5 years.

From The "R" Man

Richard Russell has been writing the Dow Theory Letters for 48 years. He is gifted with a combination of knowlege and wisdom in things concerning the markets. Here's some of his latest thoughts...

Looks like the Fed has the nation on steroids. And it's not only the Fed, it's the central banks of the world. You see, nobody wants an "over-priced" currency, because everybody wants to sell to the US. And it's a very competitive world (think China and India and Asia), so if you want to sell to the US you have to compete, and that means you have to have a competitive currency. How do you keep your currency cheap against the dollar? Easy, you churn out a load of your own currency and with it you buy dollars. This keeps the dollar up and in comparison, your currency remains competitive.

Of course, when you're manipulating like this, there are always problems. One problem, if you want to call it that, is that there is one hell of a lot of paper money swishing around the world. In fact, you can say that the world economy is floating on an ever-rising ocean of paper money.

Well golly gee, isn't that inflationary? You bet it is, and the inflation is starting to hit full force. First it hit world real estate and housing, then it hit raw materials and oil, and now it's hitting everything consumers use -- such as food, transportation, college tuition, medicine -- well you name it.

You think gold is going up because of Iran or Iraq or because of less production from the gold mines? Forget it, gold is going up because it's reflecting and discounting coming inflation. You can call gold "real money" or you can call it the "golden barometer of inflation." Either description is accurate and either one will do. When the world goes mad, men seek the protection of gold. It's as basic as that.

What we're seeing now in gold and silver is the biggest story of the year and probably the biggest story since the great bull market since stocks topped out in 1980. Only the public, the crowd, the masses, don't see the story yet. But the markets see it. And I see it, which is why I keep writing about it. I've been on this story for about five years -- pushing, urging, cajoling my subscribers to "get with the story," and, of course, the story is the coming inflation and the revival of gold.

The alchemists of old spent their lives looking for a way to turn lead and other base metals into gold. They never succeeded. But there are alchemists today -- these latter-day alchemists have found a way to turn junk paper into gold. Here's how you do it -- you take your junk paper dollar to a coin dealer, and you tell the dealer you want to swap your dollars for gold. And presto, you can change your junk paper dollars into gold. Try it, I guarantee that it works. But don't let all your friends in on this secret, because in time they'll all try it -- and in doing so they'll drive the price of gold higher. I don't want them to do that -- at least, not until I'm finished buying all the gold I want.


Subscribers probably remember my discussions of the 50% Principle as applied to gold. The 50% Principle should be used very carefully -- and only in situations where an average or an item such as gold has traveled a long way over and extended time period.

When gold declined from 850 (1980) to 250 (2000) I noted that it has lost a total of 600 points. Half of that loss would be 300. Adding 300 to 250 gave us 550, which was the halfway point of a protracted 20 year decline. When gold closed decisively above 550 and held there, I stated that under the 50% Principle, gold should approach and probably better the old high of 850. On that basis, I became even more bullish on gold, and I personally bought a lot more gold, while urging subscribers to do the same -- "buy gold and sit." So far, the upward ride on the back of the gold bull has been fairly easy. It may not always be this way.

When gold passed the 550 level and clearly held above the level (with a lot of backing and filling around 550), I turned even more bullish. And I continue to see gold heading for a test of the old 550 level. But this time, unlike 1980, gold will hopefully move to and above 550 with a lot less excitement. So far, incredibly, the bull market advance in gold from 250 to 684 has stirred up little excitement. This suits me fine. Let's hope it continues -- as the great "stealth bull market" in gold moves on.

What about the stock market? I not only follow the money, I try to go where the money is, and I try to direct my subscribers on the same path. Of course, there's money to be made in the stock market. The stock market advance has been very selective, and if you can locate the right sectors, you can make big money. But I continue to insist that the real story is in the undervalued area -- it always is.

The essence of Dow Theory is in its emphasis on values, in the purchase of undervalued items and the later sale of overvalued items. Right now, the great value is in gold, which is still well below its peak price recorded more than 20 years ago.

The best estimate I've seen for price inflation since 1980 is around a 400% increase. I bought my house in 1979, and that's about the increase I've seen in the value of my house. I've seen restaurant prices increase by 400% since 1980, I've seen ice cream cones increase 400% since 1980. So with gold at 800 in 1980 and gold at 684 today, I see gold as flagrantly undervalued. That will change. And it is changing. Markets aren't stupid. Sometimes they're ahead of reality, sometimes they're behind. But ultimately they always adjust to reality.

What's the stock market doing now? The stock market is obviously being "fired up" by surging liquidity and inflation (well, surging liquidity is inflation). But with the Dow selling at over 20 times trailing earnings and yielding less than 3%, I'd say the market is expensive. Most stocks are expensive, but that doesn't mean they can't go higher. I just don't feel that stocks are great values here, and I like to buy great values. Or let me put it this way -- I don't have the nerve to load up with stocks here. And to make real money, you've got to take a big position. Before I can take a big position, I've got to have faith that I'm buying bargains.


As I said earlier, I believe the biggest story in the markets today is the bull market in gold. The irony is that everybody seems to be looking somewhere else. Which is fine with me. The higher gold rises while everybody is looking the other way, the better. Let the great "gold stealth bull market" express itself. My subscribers and I hear the song.

Charlie Daniels on Illegal Mexicans

Charlie Daniels is obviously a patriot. Here's his take on The Mexican Standoff.

It's an "in your face" action and speaking just for me I don't like it one little bit and if there were a half dozen pairs of gonads in Washington bigger than English peas it wouldn't be happening. Where are you, you bunch of lily livered, pantywaist, forked tongued, sorry excuses for defenders of The Constitution?

Have you been drinking the water out of the Potomac again? And even if you pass a bill on immigration it will probably be so pork laden and watered down that it won't mean anything anyway. Besides, what good is any other law going to do when you won't enforce the ones on the books now?

This country needs more people like Charlie.

Stopping Illegals

Mickey Kaus at left of center Slate has evidently been reading Viewpoint on how to handle the illegal alien problem. Well, at least his solution is similar to ours:

Two consequences follow:

1) Any system of employer-based enforcment should probably be applied only to new hires, not existing employees. Existing illegal employees wouldn't be "legalized," but they wouldn't be subjected to non-charade, computerized checks of their social security cards, for example. They'd just continue working as before.

2) A border wall or fence, widely denounced as the crude favored scheme of the meanest, yahoo, Know-Nothing elements of the Republican House, is in fact the most compassionate enforcement solution. A wall intrinsically blocks only new entrants. It's a physical grandfather clause! It leaves current illegals where they are.

Would this "grandfathered" solution--leaving existing illegals working in their current jobs--amount to legalization or amnesty, and thus act as an incentive to would-be illegals still on the other side of the border? I don't think so, because the benefit of already being here--being left alone--would only be valuable to the extent border controls were effective. If the border remained porous, existing "grandfathered" illegal workers would only have obtained the ability to avoid border controls that were meaningless anyway. If the border controls weren't meaningless, would-be illegals now in Latin America and elsewhere would have an incentive to sneak into the country and work--in the hope of being grandfathered-in later--but by the same token they'd have less ability to do so. (They'd have to get over a wall and get around an effective system of employer-based document verification.)

Also, the existing, left-alone "grandfathered" illegal workers a) still wouldn't be legal and b) couldn't change jobs without subjecting themselves to the non-phony, computerized document check. Eventually, as they left those jobs, they'd be put to the same choice (self-deport, or work underground, etc.) as would have been put to them if they'd never been "grandfathered." But the process would be drawn out over years. And by then, there might be a guest worker program for which they could qualify (perhaps by returning home and waiting at the end of the line, perhaps more easily).

Let's hear it for a "mean, Yahoo, Know-Nothing" solution to a serious problem.

Of course, strict enforcement of the border would require that politicians be able to withstand allegations of racism and sundry other mean epithets. This reality drains away any hope we might have had that an effective border security system (i.e. a fence) would ever be implemented. Politicians, after all, are not distinguished by their willingness to risk public obloquy to defend a principle.

Happy Cinco de Mayo

Today being Cinco de Mayo we were reminded that Monday was the day when immigrants, both legal and illegal, sought to shut down the economy by staying home all day - a rather peculiar way to make the point that you want to come here to the U.S. in order to work.

Anyway, I have to say I didn't notice any inconvenience caused by the absent immigrants, but perhaps some of you did. In fact, the only noticeable impact of Monday's protest for most of us was that, as one wag put it, there was a lot less tension on the highway since the fear of being hit by an uninsured motorist was substantially diminished.

He Can't Help it and Neither Can We

That Zacarias Moussaoui was given life in prison rather than the death penalty disturbs us much less than the jury's reasoning for their sentence. They, or at least several of them, evidently felt his life should be spared because he suffered an abusive childhood.

Very well, but if a miserable childhood means the terrorist doesn't deserve to die then why does he deserve to be imprisoned for the rest of his life? If he is the way he is for reasons he cannot help then why does he deserve punishment at all? The answer, an enlightened juror might give, is that he actually doesn't deserve to be punished. No one does. We are creatures at the mercy of forces we don't control, forces which mold and shape our behavior in ways of which we are only dimly aware, if at all, and we are not, therefore, in any sense responsible for what we do. Our behavioral decisions are really not our doing. We, like everything else in the cosmos, are little more than particles subject to the laws of physics. We are enchained and cannot free ourselves.

Then why imprison him at all, you might ask. The reply our enlightened juror would offer is that we need to protect ourselves from such as Moussaoui and prison is the best way to do it. Thus, no one in prison really deserves to be there. There is no such thing as guilt, at least not moral guilt. Prisons are just ways of protecting society from people whose determined choices have harmful consequences to others.

But if there is no guilt, if all of our choices are determined for us, why shouldn't society simply decide, as a consequence of the influences shaping its judgment, to execute the lot of them?

Unfamiliar Weapon tells us that:

Abu Musab al-Zarqawi is shown wearing American tennis shoes and unable to operate his automatic rifle in video released Thursday by the U.S. military as part of a propaganda war aimed at undercutting the image of the terror leader.

Yeah, but I'll bet if they gave him a butcher's knife he'd feel a lot more comfortable with it.