Looking Down The Barrel
Richard Daughty, The Mogambo Guru - The Daily Reckoning
"...What in the hell can one do to protect wealth? What can the normal, modern paranoid-wacko employ to hold at bay all the frightful forces of evil that he sees rising all around him? Double-barreled shotguns is a popular answer, of course, to keeping things at bay. But as for protecting wealth, this is the same question that people have been asking themselves since wealth was invented. We are brought back, as it always brought them back, to our old yellow-metal friend, gold..."
The Mogambo Guru
- The Fed created $6.9 billion in raw credit last week, to a new record high. Government debt bought outright was up only $1.7 billion, but also to a new record.
- "The bubble was going to burst sometime," said Chris McCarty. Chris is the survey director at the University of Florida's Center of Survey Research for Consumer Confidence. "With credit cards lowering their standards... lower interest rates on homes and cars... and people refinancing their homes for 125 percent of what they are worth, I could see this coming a mile away."
Me, too, Chris. And when you see something coming from a mile away, why not use the lead time and set something up to make, you know, a little money? And, since anybody with half a brain can see more and more economic calamities besetting the USA and the dollar, why not take this lead time to set up something to make a little of that moolah?
As I lean heroically and inspiringly into the wind, my flashing blue eyes scanning the distant horizon, my hand shielding my aforementioned flashing blue eyes against the blinding sun. How thrilling! So, what shall it be? Stocks? No. Bonds? No. Real estate? No. Foreign stocks and bonds and currency and real estate? Probably yes, in some cases, with the proviso that if anything goes wrong, you are going to be a foreign devil who is suing a home-boy, and who is a long, long way from where the money is, and where the courts are.
Then what does one use? What can it be? What in the hell can one do to protect wealth? What can the normal, modern paranoid-wacko employ to hold at bay all the frightful forces of evil that he sees rising all around him? Double-barreled shotguns is a popular answer, of course, to keeping things at bay. But as for protecting wealth, this is the same question that people have been asking themselves since wealth was invented. We are brought back, as it always brought them back, to our old yellow-metal friend, gold.
We know that since the monetary inflation of the Fed is abetting the deficit-inflation of the Congress, price inflation is guaranteed to soar one day. And that means that gold will also, one day, soar. And, perhaps it is just me, but there is just something about a guaranteed soaring price that appeals to my sense of gluttonous avarice. Why EVERYBODY is not buying gold is beyond me. It is a guaranteed winner! Guaranteed!
- On page 63 of the April 12, 2003 issue of the Economist magazine we are treated to an interesting tidbit. According to the World Economic Outlook, housing booms have been followed by busts 40% of the time. Hmmm. So, in the other 60% of the time the boom was followed by, what? Stable prices, where nobody who bought a house made a profit when they sold?
I say that 100% of the time housing booms have been followed by busts, if you consider a failed speculative investment in housing as a bust. Personally, when I make a bet that doesn't turn out, I consider it a bust, and perhaps this explains all my whining and crying and acting like a spoiled little child at every setback.
And when I make a bet that only gets me my money back, I consider that a bust, too, only one of a lesser degree. But that may just be me. For instance, I know that you are an enlightened and sophisticated person, and have all this unflappable serenity about you, and how nothing seems to bother you in your Buddha-like contentment, but I tend to go all to pieces at the least little thing. And I am sure that the last person in that real-estate speculation line, who got in the game late, and therefore lost the bet that prices would continue to rise, would agree with me, too.
The lesson here is obvious: house prices do not always rise. Duh.
Further, the magazine points out that the same study shows that the housing busts do twice as much economic damage as stock market busts. Bummer. But this intuitively correct, in that houses cost hundreds of thousands of dollars and stocks can be had for as little as a few bucks a pop. It would seem axiomatic that there would be a bigger fallout in housing busts than in stock busts, simply because the amounts involved are so disproportionate.
Amazingly, there is a quote from Alan Greenspan, too, who is quoted as saying that there is no bubble in house prices, "...arguing that there is no national housing market in America, and no sign of excess supply." Now this farcical sentence amazed me.
First, as much as I disdain Alan Greenspan and the Fed, I cannot imagine him saying that there is no bubble because there is no national market. Huh? What in the hell does that even mean? Just because prices are not rising uniformly throughout the country, because there is no national market, then there is NO bubble? Imagine the look on my face when I heard that, because I gotta admit that I never even heard even a mention of that theory before!
Further, I say that of COURSE there is no sign of excess supply, or even adequate supply, or else prices would not be rising! But that is a long way from saying anything about bubbles.
In bubbles, prices always rose, because supply was always less than demand. Just like in houses. In bubbles, the price rises far above historical trends. Just like in houses. In bubbles, one day the prices stop rising. This is the next step in our little story. In bubbles, the price falls back to, or below, historical trends. This is the next-next step in our story.
I could conclude that Alan Greenspan is insane, which I have always suspected when I am in a charitable mood. When I am not in such a mood, I believe that he is an agent of a enemy power sent to destroy the United States by destroying the economy. So far, it looks like I have been right, no matter WHICH mood I am in.
- Canada raised interest rates in response to rising inflation. Mexico has consumer price inflation running at over 5%. So, the country to the north of us has inflation rising, and the country to the south of us has inflation rising. Yet, somehow, the USA is immune? Hahaha!
Here at home the CPI came out, and we are still in complete denial about inflation. The number was up 0.3% for the month, which when multiplied by twelve comes out to a whopping 3.9%. Of the nine categories of prices listed in the WSJ article about the number, seven were up and two were down, and the strict average increase y/y was 2.3%. In the accompanying table, "all urban consumers" paid prices that were 3% higher than a year ago.
And yet yahoos, whom I suspect can't even spell "economist" but insist on so calling themselves, have all jumped up from playing with their crayons in their little playpens and said how this is so fantastic, and how inflation is so tame, and how this is positively the best news they have ever heard. They blithely strip out that pesky volatile food and energy component, since nobody uses food or energy anymore, and then they dance around the mutilated carcass of the CPI number shouting hosannas.
Wrong. Three percent inflation for last year, plus three percent inflation this year, and three percent inflation next year means that prices will be up at least 9% in three short years.
The perfect quote is from that same 4/17/03 WSJ article, and I quote, "The special 'chained' price index was up just 1.2% from a year earlier, near the bottom of the 1% to 2% range that many Federal Reserve officials consider ideal."
Setting aside for a moment the overt fraud of using "special chained" prices, which understates the nominal inflation, the truth is that prices should, in the ideal world, be naturally FALLING slightly, as competition and economies of scale and all that stuff lower the costs of production. Then the consumer, namely you and me, would then have more money in our pockets after buying the stuff we have to buy, and we can use that extra money to consume more stuff, thus raising our personal standard of living. But nooOOOOooo! Having LESS money left over at the end of every freaking month is good? A declining average standard of living is good? In fact, an average inflation of 1 to 2 percent a year is ideal? My God! How in the hell have we gotten to this point? All eyes point to the Fed.
And let me join with the Bundesbank and thinking people around the globe, and say that 3% price inflation is horrible, and demonstrates profound, abysmal incompetence on the part of the Fed and Alan Greenspan to even suggest otherwise.
And the people at the lower end of the wage scale, thanks to capital replacing workers, have incomes that always lag the rise in general, fast-adjusting wages. These people with slow-adjusting wages are being directly harmed. Again. And I will say that whacking the population on the head by lowering their standard of living by 3% a year is NOT "ideal", and that any Federal Reserve official, or any dimwit "economist" who says otherwise, should have their faces slapped hard and often.
But then again, this is just another example to prove that the Fed, and the vast majority of smug jackass people who call themselves "economists", are clueless nitwits, and you can tell them I said so. And that I stuck my tongue out at them in surprisingly childish disrespect.
- Theodore Butler, writing in James R. Cook's "Market Update" newsletter, is not only so immensely bullish on silver, but the title of his latest essay was "Pounding the Table", in which he figuratively pounds his fist on the table and strongly advocates buying silver out the ying-yang. He makes an impressive argument when he notes that there literally IS no more above-ground silver anymore, because it has all been used up, and also that demand is increasing, as it is used so extensively in manufacturing processes and stuff. As such, the supply-demand imbalance is quite impressive.
Without even thinking about it, I found myself rising up out of my chair, and walked over to the bookcase, and got an old copy of the CRD Commodity Yearbook. Imagine my own surprise when I realized I had gotten up off my fat, lazy keester, to go get a book! Getting up off my fat lazy keester to fetch something snack-like and, sniff sniff, positively reeking of chocolate is one thing. But for a book?
Anyway, looking at the chart of silver back to 1920, one thing seems certain; silver has not kept pace with inflation over that period.
One thing that I might add is that silver seems to historically trade, on average, somewhere between, oh, say, a sixteenth of the price of gold up to one-seventieth, like it is now. Remember when gold went to $850 in 1981? Well, silver went to $37. "Hmmm," I say to myself.
Nowadays the historical ratio between the two is waaaayyy off to the tail of that bell-curve. Now, if one believes that things revert to the mean, then all one has to do is set up a highly leveraged derivative that would prosper when the price-gap narrows. Namely, selling gold short and using the money to buy silver.
What makes it even more interesting is that he says that on 2/27and 28th it looks like there was a single big buyer of 6,000 contracts (30 million ounces) of silver options at $6 and $7 per ounce, which is, according to Theodore Butler, "In my memory, this was the largest single options transaction in the 20-year history of the COMEX silver options market." That this history-making trade occurred at prices that are 50% out of the money, and over such a short period, is verrrrryy interesting.
He goes into some ideas on who and why, but without nearly enough conspiracy theories or sex-scandals to suit me. Anyway, the bottom line is, he is "pounding the table" that, in essence, silver cannot possibly go down in price, silver may stay at this price for a while, or silver will almost certainly explode to the upside, to the tune of $40-$100 per ounce. Hey! Nice move! The big question is, "when?"
Well, the options expire on November 24, Mr. Butler says. You do the math.
- James R. Cook himself says, in speaking of things macroeconomic in general and the Fed in particular, that "This brand of monetary policy courts disaster. It's no more than raw inflating and monetary debasement practiced on a gargantuan scale. This unprecedented folly will reverberate through history. It promises the most negative possible outcome for the country." Now, personally the most negative outcome is one where I am affected in some adverse way.
Nevertheless, I'm not sure that the Fed's behavior is all that unprecedented. History is full of idiot countries doing this. Yes, their cataclysmic implosions, or what Mr. Cook refers to as "the most negative possible outcome," reverberated throughout history. Until recently, that is. Mere history does not reverberate in any craniums at the Federal Reserve anymore. Not only are they are not reverberating, but, as evidence proves, they are actually doing, and have been doing, the same damn thing!
He goes on to say, "Unfortunately, efforts to reinflate the bubble are a treadmill to disaster. Inflating is a policy that cannot last. We face two alternatives. Either the dollar will be destroyed through hyperinflation, or we will have a great depression. No other options exist." But, I say, look on the bright side! Maybe you'll be driving down the street and a bus will careen out of control, and then jump the median in the road, landing on and smashing into your car, killing you and your whole family instantly, and then neither you nor they will suffer either the hyperinflation OR the depression!
But, I am not even sure that the choice is between a hyperinflation or a depression. I can easily envisage both. And more.
Now let's turn our attention to Kurt Richebächer, who opines that, "Around the world, economies are sliding into recession, stock markets are crashing, interest rates are plunging and budget deficits are soaring - and above all, profits and business fixed investment are slumping. There has been nothing like it in the whole postwar period." Wow! Nothing? Wow! Now, what does that have to do with the stock market and how can I make a few bucks? He says, "At the same time, all macro and micro signs point to further sharp falls in stock prices and corporate profits."
Steve Puetz, of the eponymous Steve Puetz Letter, agrees with this bunch of gloomy dudes. He says, "The U.S. economy is inexorably heading for its longest and deepest recession." Apparently somewhat of a technical, quant-type guy, he says, "Mutual fund cash stands at record low levels. Over the past three decades, similar low cash levels materialized in May 1972, September 1976, and March 2000. In every previous case, severe multi-year bear markets followed. This is the first major sell signal that's flashing right now." So when will it be safe to buy? "Based on these major sell signals alone, it's probably safe to assume that there is still at least another two to three years left before the current bear market ends." Wowser! Note the qualifier of "at least".
- The Specialists are looking more and more bearish. And now that some of them are under investigation, this ought to make them, I would think, more nervous. These ARE the same guys who respond to complaints about the way that they rig things to their advantage by replying, "If you don't like it, then YOU come out here and put up YOUR money."
Of COURSE these guys rig their activities to give themselves profit! It is implicit in the rules that the market-maker cannot be allowed to go bankrupt. That is why these Specialists figure out how much they need to cover losses, and then they merely assign those losing bets to other contract holders via a lottery-like system. The losers are supposed to be picked by chance. But the winner will never be picked by chance. The winner is always the Specialist and the other market-makers.
And it has a certain necessity to it, I guess. But when you sell short an option, and watch in helplessness as it is sold against you to guarantee you a loss in order to bail out the Specialist, and without them having to even tell you about it for a couple of days, then my personal well-of-compassion tends to run a little dry.
But my petty gripes aside, they seem to be betting on a down market in the next couple of weeks, and probably sooner than that.
- I wandered over to the businesscycle.com website and casually clicked on their indicator of future inflation. Admittedly, their data set only goes back to 1994, but the numbers since January 2002 have been the highest of the whole series.
I'm not sure what that means, if anything actually, but since I am already 100% convinced, with a dead-bang, can't-miss, certainty of surging price inflation because of all of this Fed foolishness, I naturally interpret the data as complete validation of my entire theory, and one more bit of evidence to add to the mountain of evidence as to why I should be installed as the Number One Economist Hotshot in the Land, with a crown of some kind. Made of gold, of course, for that extra little bit of irony and symbolism.
- Bill Bonner, here on the Daily Reckoning site, wrote a nifty little essay entitled "Empire of Dirt", which is a witty and incisive journey down the path of history of empires, starting with the Romans, who had the first big-time empire. One interesting little tidbit from those days of the glory that was Rome was that, "Augustus ordered the government-owned mines in Spain and France should be exploited 24 hours a day, a measure which increased the money supply significantly and also led to rising prices. (It is estimated that between 27 BC and 6 BC, prices in Rome doubled)." Now, if I count correctly and that is 21 of our Earth-years, then the old HP 12C says that is an annual inflation rate of, let me check those figures again, 3.3%.
Now, I know what thought came into your mind right there. We have that kind of price inflation right now! So how could it have been so bad for the Romans, and yet all we hear is how that kind of inflation is, to hear the commentators and economics-airheads tell it, "tame, non-existent, benign, nothing to worry about, at the lowest level in 40 years, relax and smile smile smile!"
Back at our history lesson, things percolated along until "In 64 AD, in Nero's reign, the aureus was reduced by 10% of its weight. Thereafter, whenever the Romans needed more money to finance their wars, their public improvements, their social welfare services and circuses, and their trade deficit, they reduced the metal content of the coins. By the time Odoacer deposed the last emperor in 476, the denarius contained only 0.02% silver."
Well, sticking to the script, America used to have gold and silver money, too, and at 100% by weight. Now, showing how those stupid Romans dawdled and dallied for 413 years, good old American know-how and grim determination did the same thing to our money in less than 180 years, less than half the time! Their money was still had 0.02% silver in it, and ours has absolutely none! Romans. Hah! I snort in disdain.
The next empire was Spain. "For Spain, the conquests were extremely profitable - after they found huge quantities of gold and silver. But nothing ruins a nation faster than easy money. The money supply grew larger with every ship's return from the New World. People felt rich, but prices soon soared." Damn! See what I mean? Every time we get the money supply all goosed up and have people getting rich and having a wonderful time, those damn prices soar!
This all started, I supposed, around 1500. Then, "The Spanish government defaulted on its loans in 1557, 1575, 1607, 1627. and 1647. The damage was not only severe, it was long-lasting. The Iberian peninsula became the 'sick man of Europe' and remained on bed-rest until the 1980s." Wow! Talk about your bear markets, huh? A lousy fifty year empire and then 335 years of pain!
- Richard Russell editor of the Dow Theory Letter, writes, "What is so worrisome at this point is that great bull markets tend to beget great bear markets and 'great values.' Here's what I'm talking about. At the 1949 bear market bottom the S&P was selling at 5.4 times earnings (and those were honest earnings) while providing a dividend yield of 7.6%."
So, take Mr. Russell's figures, and let's assume that the earnings of the SP500 are entirely honest. To have a bottom in this 2001-2003 bear market equivalent to stocks in 1949, the SP500 would have to fall to 151! For a dividend yield of 7.6%, using current yields, the SP500 would have to fall to 217.
Let's mosey over and take a look at what the SP500 is selling for right now. I yelp "Yikes!" which is a word I am using here to indicate shock and surprise.
Speaking of earnings, the latest declared earnings, according to the latest Barron's, dropped 1.5% to $27.59, and now the new P/E is north of 32. Thirty-two!
- Doug Noland, the hardest-working man in economics today, writes that the year-to-date issuance of asset-backed securities is running 22% ahead of last year's record pace.
And he notes that stuff China has been making for the export market are also being sold to their own growing middle class. "The per capita disposable income of 500 million urban residents rose 8.4 percent in the first quarter to 2,355 yuan." If 500 million people is almost half of their total population, and thus half the people in China have had disposable income raised by over 8% in one year? Wow!
Now, if they get credit cards up and running at full steam, that 8% can be increased by a multiplier of, hmmm, how do you say "minimum payment due" in Chinese?
And let's not forget Russia! Bloomberg News reports "Russia's economy expanded 6.4 percent in the first quarter, the fastest growth since the last three months of 2000, after oil, gas and metals producers boosted exports and service companies tapped soaring domestic demand." Note the exquisite phrase, "soaring domestic demand."
This "soaring domestic demand" may be helping drive the 15% consumer price inflation they have, too. So, you gotta take that 6.4% economic growth and temper it with 15% inflation, but one is much harder put to discount "soaring domestic demand."
- The U.S. Treasury reported a federal deficit of $58.7 billion for March. Only half way through the fiscal year, Total Spending is up 6.7% to $1.078 Trillion, while Total Receipts are down 6.1% to $825 billion, and a budget deficit of $285 billion.
Now, Total Spending being up 6.7% is certainly nothing new, as I don't even remember a time in my whole life where is was NOT up, and it would be terribly exciting and novel to report that it had somehow gone down. No, it is that Total Receipts thing that has me tossing and turning in my sleep.
Less taxes being paid is a bad, bad thing. And a decline of 6% is horrific. And one reason it is horrific is that it will get worse from here. Same with state budgets. If you think things are bad now, you just wait. One day you will wistfully pine for the relative innocuousness of your problems today.
Actually, to be truthful, the thing that really keeps me tossing in my sleep is a little cartoon I saw a long time ago. The king and the queen are standing on the ramparts of the castle, and he says to her, "Oh, no! The barbarians are inside the gates and are registering to vote!"
I would be getting back to the point, but so many alarm bells are ringing in my head that my brain thinks the building is on fire.
- A buddy of mine, Douglas Osterman-Burgess, is a generic-cigarette distributor, mainly to convenience stores and places like that. And as such, he has a pretty good handle on things in the real world, whereas I only know of it from what I see on television and what I can glimpse by peeking through tightly drawn curtains. Plus, he is a bright guy who reads a lot, and as Yogi Berra once so famously said, "It's amazing what you can learn just by reading."
Putting this arsenal of firepower to work, he has something to say, and I gather that he has a real gloomy outlook based on many, many things, especially those he observes in the course of his work. The majority of which are, unfortunately, a litany of problems associated with the American work ethic, the American school system, and the problems caused by Congress, which are THE cause of the economic problems.
He reports that the nation-wide rise in cigarette taxes is causing a system-wide rise in the predictable smuggling of cigarettes, tax-stamp counterfeiting, tax-avoiding cash sales, etc. But as regards cigarettes themselves, he thinks that people do not abandon their usual brand without a big reason, much as people do not divorce a spouse without a big reason. Nevertheless, his fortune is being made in dealing in cheap smokes, as people are increasingly abandoning Marlboro's at four bucks a pack in favor of generic smokes at less than a buck-fifty a pack. He is, however, refreshingly candid about his success. "If nicotine is a drug, " he says, "then I figure that selling cut-rate drugs to a nation of addicts ought to be a no-brainer."
Anyway, on the bright side, Douglas says that he has talked to a lot of guys who would seem to have informed opinions, and they concede that Bush and the Fed have the firepower to keep this bloated, cancerous carcass of an economy going until after the elections in '04. And that they will move heaven and earth to do so until Bush can win re-election. So, that means we may have a little more time to casually buy more and more gold at artificially depressed prices. This is so, so sweet!
- Frank Shostak, an adjunct scholar at the Mises Institute, is one of those guys who make you scratch your head and say to yourself, "There are some really bright degreed guys around who really understand this stuff. So why aren't any of THEM in charge of the Federal Reserve?" Anyway, he writes, in his new Mises.com essay, "Does a Falling Money Stock Cause Economic Depression?" Well, cracking wise, I say that, personally, I have never experienced a falling money stock that DIDN'T cause me economic depression.
He writes, "Most economists ...are of the view that the policy makers of the Fed have learned the lesson of the Great Depression and know how to avoid a major economic slump." And what is that, you ask? Well, since the only tools they have is interest rates and money supply, then it follows as night follows day that their solution lies in more interest-rate bashing and money-supply expanding.
Let's apply those lessons to the busy mother of today. Problem: the toddler is drawing on the wall with his crayons. Old solution: take away the crayons and clean the wall. New Fed Solution: give the kid more crayons.
"Needless to say that such massive monetary pumping amounted to a massive exchange of nothing for something and to a severe depletion of the pool of real funding, that is, the essential source of current and future capital needed to sustain growth. When things start declining for whatever reason, banks get nervous" he says. "In response to this, banks curtail their lending activities and this in turn sets in motion a decline in the money stock."
Now, the Big Question is "How is it possible that lenders can generate credit out 'of thin air' which, in turn, can lead to the disappearance of money?" The answer is surprisingly simple. When I borrow money from you and subsequently pay you back with interest, the M1 money is all still there, and has traveled full circle back to where it came from.
On the other hand, since the Fed created the money out of thin air to start with, when the money comes back, there is no original owner of money, and so it disappears! He notes that right after the stock market crash in 1929, M1 dropped and kept dropping for years.
Then I took a look at our M1 with renewed interest. And it looks kinda peaked.
But this is just the start of the gloomy outlook that we seem to share. He continues, "Again, note that contrary to popular thinking, depressions are not caused by tight monetary policies, but are rather the result of previous loose monetary policies. On the contrary, a tighter monetary stance arrests the depletion of the pool of real funding and thereby lays the foundations for economic recovery. Furthermore, the tighter stance reveals the damage that was done to the capital structure by previous monetary policies."
One of the complaints I have about this article is that the growth of Fed credit is shown as a logarithmic graph. So, when you look at it, the line goes up at about a forty-five degree angle, and in a straight line. It doesn't look too bad, as it looks like the chart of everything for the last few decades.
But, had the graph had been nominal-dollar arithmetic, which is how things are in the REAL world, the graph would appear entirely different. Out here on the tail of that graphed line, which is where we are, representing as it does the up-to-the-minute here and now, that line of Fed credit would be zooming almost straight up. With the logarithmic scale, it seems to be merely increasing at a constant rate.
And what does this have to do with anything? Well, my little buckeroo, this represents the dark side of the Miracle of Compound Interest. When the Miracle of Compound Interest is working FOR you, then it truly is miraculous. But when it is working AGAINST you, then one is forced to come up with an antonym for "miracle" that is appropriate in degree.
- Mark M. Rostenko, editor of The Sovereign Strategist investment newsletter, writes, "With almost half of credit-card holding Americans (i.e. most Americans) effectively bankrupt, do we have the basis for a traditional economic recovery, that is pent-up demand"? Well, he doesn't think so and neither do I. He remarks that, "Recoveries happen after a period of slowdown during which consumers tighten up, and limit their purchasing in order to pay down some debt and improve their bottom lines. That creates 'pent-up demand' which uncoils like a spring as increasingly financially sound consumers hit the stores, eager to get back to shopping."
But that period of relative deprivation that builds up that pent-up demand is not happening. In fact, the opposite is happening, as consumers are taking on, paradoxically, more debt! He says, " Americans are in debt up to their ears, half of them are effectively bankrupt and most are likely living paycheck to paycheck in a time when unemployment is rising. And the folks at the Fed want us all to believe that lower interest and mortgage rates and increased borrowing will solve the problem! I'm not a thermodynamics professor nor an expert on volatile substances, but I think there's a reason why firefighters don't pour gasoline on burning houses. Somewhere in there is a lesson that the Fed would be very wise to heed."
But they won't. They can't. The time for paying heed to things was many, many moons ago. Ugh.
--- Mogambo Sez: If Robert Prechter is right, and social mood precedes and defines economics, which is a theory that I am increasingly starting to appreciate as what may be one of the most profound insights in the last few hundred years of economic thought, then it seems appropriate to start to panic. But it is part of a great feed-back mechanism, since losing your life's savings in a stock market collapse would almost certainly cause your mood to fall, too. All things are connected to all things.
There was an episode of the Simpsons in which Principal Skinner tells Ms. Krabappel that he admires her ability to be personally offended by broad social trends. At the time I thought it was another clever and funny line. But now that I am at the end of a long reflective period, I find that I am exactly like Ms. Kabappel. I, too, am being personally offended by broad social trends. And not only that, but I am also getting really, really scared of broad social trends, too.
Alone late and night in a locked, lead-lined bunker, my feverish mind puts the collapse guaranteed by Austrian economics together with Prechter's social mood theory and worsening economics statistics, especially exponentially increasing debt, and I get, uh-oh, here comes that feeling of panic! I reflexively grab for a handgun and a bottle of anti-anxiety pills.
The Mogambo Guru Lives!
Richard Daughty,
for The Daily Reckoning
www.dailyreckoning.com
Richard Daughty is general partner and C.O.O. for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise the better to heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning, and other fine publications.
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