ALL IS WELL
Don StottThe Mormons have a wonderful hymn, titled, "Come, Come, Ye Saints." At the end of some phrases, are the words, "All is Well, All is Well." I am not a Mormon, but that is a lovely, stirring hymn. Makes me think of Sir Alan, CNBC, et al, and their continual telling us that "All is Well." For three years now, the same refrain has been spoken, in various phraseology, but the theme is, "All is Well." The facts do not bear that out: Consider:
The S&P P/E ratios sit at 32, meaning that stocks are selling at 32 times their earnings. Good stocks are considered to have a P/E ratio of ten or under. Corporate earnings are dismal. Alcoa (Aluminum Corporation of America) cut costs by $1 billion, but still has a 7% decline in income. IBM make a bit more profit, but only because of laying off thousands, and cutting costs to the bone. Trillions have been lost in the stock market, and trillions more are going to be lost…in my opinion.
The US trade deficit will be over $500 billion this year. This means that $500 billion more dollars leave America, than comes in; an all time high, and growing. Remember, I mentioned the siphon? How long before there is no capital left to siphon? The "experts" don't seem to worry. How come?
It was also announced that the red ink the federal government will run up next year, is estimated to be $455 billion. It was "estimated" to be half that, a few months ago. Of course, the off budget items, and black budget stuff, is not mentioned. It would be much worse, except they have been stealing the Social Security funds for years, to help out with the deficits, and the Boomers are now applying, so there won't be a surplus much longer. The deficit does not include Iraq, Afghanistan, and homeland defense either, so will it be $600 billion in the hole? $750 billion? Since DC rarely tells the truth, no one knows. The total federal government debt, is about $44 trillion, give or take a few bucks, counting the unfunded promises for future payments. This also does not include the hideous debts and bureaucracy which will come about, when the local corner drug store, or super market's prescription department, must finagle payments from Uncle Sam. "All is Well?"
Consumer debt is at an all time high, in the hundreds of billions of dollars, and climbing at a 5.1% annual rate. Bankruptcies are also at virtually all time highs, and climbing. Credit card defaults are at 18% at one company, and I am sure the others are similar. Corporate retirement funds have been robbed to pay bills, and they are hundreds of billions in arrears, with no known way to repay what is owed future retirees. "All is Well?"
Sir Alan, says he will keep interest rates as low as the now are, till recovery is complete, and even lower them more, if necessary. Japan did the exact same thing, but it didn't help much, did it? Japanese real estate, is selling for about half of what it was at its peak, and the Nikkei is more than 30,000 points lower than it's peak. In 1987, when the stock market crashed, it lost 22% of its value in a single day. This, at today's Dow level, is 2,000 points in a single day. Richard Russell thinks gold and the Dow will cross at 3000. Is this what is in store for America? "All is Well?"
American Airlines has mortgaged every single plane they fly, and United should have declared official bankruptcy months ago. The layoffs continue. "Officially," the unemployment rate is 6.4%. The retail trade lost 13,000 jobs in June, professional and technical services 33,000, and manufacturing gave up 56,000 jobs…just in June. Unemployment claims are at record highs, and have been over 400,000 per week, for the last 22 weeks. "All is Well?"
A client of mine, called his mortgage company about an error they had made, and the call was picked up in India. The IRS is having returns examined in India, and the firm of A.T. Kearney predicts that 500,000 jobs in the financial sector, will be sent overseas in the next five years. A Forrester Research study, estimates that in the next 15 years, 3.3 million service industry jobs, and $136 billion in wages, will go overseas. A college graduate in India, with a BA in accounting, will earn $5,000 per year, and an MBA will make $12,000. At home, a graduate of the Harvard Business School, will get over $100,000. "Heigh Ho, Heigh Ho, it's off to India they go." "All is Well?"
In August of 2002, natural gas prices were $2.64 per million BTU's, (British Thermal Units) and according to the Dept of Energy, by January of 2004, the price will be more than $9.00 for the same amount, tripling in a year and a half. The Iraq debacle, is costing $4 billion a month, and no end is in sight. How much is Afghanistan costing? Are the figures true? "All is Well?"
What simply amazes me, is that most Americans seem to think, if the polls are correct, that "we are on the road to recovery." How can they actually believe that? Over and over again, financial advisors tell their clients that "gold is going nowhere." Sure, only up 35% in two years. Does your savings account pay 35% over a two-year period? Or does it pay 1%? Does your CD pay 35% over a two-year period? Or is it maybe 2%? With the money supply increasing "officially," at close to 8%, doesn't this mean we are having 8% inflation, rather than the 1.2%, the government reiterates over and over again? Three tractor-trailer loads of $100 bills were found in Iraq, headed for the Syrian border. Billions of dollars. Were they counterfeit? Does it really matter? Real or counterfeit, all add to the currency supply. In wartime, opposing governments always counterfeit the enemy's currency, so as to make it worthless. Real, or counterfeit, it all adds to the money supply. We are doing it to ourselves now, with the printing press and limitless check writing by the bureaucrats.
It is sort of like painting yourself into a corner. The economic situation in America, and the entire world, is extremely shaky. Monsoons of currencies, are the only solution available to governments of all nations. The power of printing press currencies, are becoming less powerful every day, because the more they print, the less they are worth, and this means ALL currencies. "Strong" currencies, are merely comparisons to others that are sinking, not actual measurements of purchasing power. If there were six rusty ships, and all were pumping out water to stay afloat, they are all going to sink eventually, as pumps wear out, holes get larger, waves can capsize, and the ultimate end, is sinking. Comparing the Yen, Euro, Dollar, Pound, Peso, and Franc to each other, is like watching six ships sink. The ship with the best pump, may last longer, catch up occasionally, and even repair the breach. The hulls are thin and rusty though, and trusting in any of the ships is a fool's bet. No currency is backed by anything, and all are merely pieces of paper, that are not redeemable in anything, other than more paper "money."
An Associated Press story on July 12th says this: (A long story, but I'll quote only part of it.) "Washington - Agriculture Department employees used government credit cards to pay tuition for bartender school, to buy Ozzy Osbourne tickets, lingerie and tattoos, and to make a down payment on a car. A random audit by the department's inspector general, of just 300 of the 55,000 department employees who carry the government credit cards, showed they had charged $7.7 million in personal purchases in a six month period from Oct 1, 2001, to March 31, 2002. The cardholders took out $196,000 in cash, used them to pay off personal debts, and used them at adult clubs, brothels, sporting events, and to buy jewelry." Note this is for only 300 cards of 55,000 in one bureaucracy! Where is the public outrage over this story? Where are the fulminating Senators? Imagine the fraud committed by the entire government employee pool, with probably hundreds of thousands of cards. Just in credit card fraud, the fed employees may be running up the red ink by a hundred billion a year. "Money," as the dollar is called, cannot continue to buy next month, what it will buy today, due to their extreme proliferation. This is a simple economic fact; and not open to argument. It is as impossible for the dollar to retain its purchasing power, as it is for water to run uphill.
"Gold will never go anywhere," is absurd. 35% ain't hay, it seems to me. Gold doesn't change. It's the same gold and silver. Only their prices change, and are even manipulated. Government and bank manipulating gold and silver, by selling, leasing, futures trading, and other obfuscations, merely postpones the inevitable. They've got to do it, in a vain attempt to save themselves. An old simile might be, "rearranging the deck chairs on the Titanic." Tangible, physical things, will always outlive pieces of paper with ink on them. Paper with nothing in back of it, is just paper. In the end, it has always been used to take to the bathroom or to start fires. I am so sick of the persiflage and stupidity of the media and public, that it makes me want to retch. Is all well? Hell no. Protect yourself.
July 18, 2003
Don Stott has been a precious metals broker since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com
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