The Daily Reckoning - Celsius 9/11 (Mogambo Guru)

verfasst von Firmian, 20.07.2004, 19:33

-->Celsius 9/11

The Daily Reckoning

Baltimore, Maryland

Monday, July 19, 2004

---------------------

*** Inflation? What inflation?

*** Stocks drift lower...the dollar too. Gold holds above
$400...

*** What's an MBA worth? Nothing! The genius of
Christianity...and more!

---------------------

Inflation was supposed to be a 'sure thing.' Turns out,
it's not so sure after all. The latest figures show the CPI
barely moving. Meanwhile, the money supply is actually
falling...stocks are slipping...and the dollar continues to
give ground against the euro. Gold sits tight, comfortably
above $400, and bonds are moving up!

Of course, it is the middle of the summer. And if anyone
cares, he doesn't work here at the Daily Reckoning. We are
as footloose and carefree as a tramp.

Still, we can't help but have guesses and opinions. Our
guess is that it is not inflation that worries the Fed;
it's deflation. Businesses are not borrowing. Which means,
in order to get money into the economy, the Fed has to rely
on the government and the consumer. The government has
already done all it can. And the consumer? Unlike business,
which borrows to increase capital investment and
employment, nearly every penny a consumer borrows is thrown
away; he buys a hot tub for his back yard and ends up
poorer and more vulnerable than before. Like it or not,
sooner or later, he is forced to stop borrowing. That
moment may not be close. But it is certainly closer.

We pass the baton to Eric, somewhere along the Eastern
Seaboard...

---------------------

Eric Fry, reporting from Baseball's birthplace...

- Today, your Manhattan-based editor finds himself in
Cooperstown, New York - the fabled birthplace of"America's
pastime." Cooperstown is tucked deep into the countryside
of upstate New York, so distant from Manhattan that dairy
cows easily outnumber Starbucks outlets...

- For the next few days, your editor's son will play
baseball here at the Cooperstown"Field of Dreams" Park,
and for the next few days, in this idyllic hamlet, the game
of baseball will seem every bit the national pastime of
American folklore.

- But baseball hasn't really been America's pastime since
early in the Hoover administration. The de facto national
pastime is"speculation," popularized at the Field of
Dreams known as the New York Stock Exchange. Throughout the
1990s, the game's popularity surged, as the entire nation
embraced the notion that stocks always go up in the long
run.

- Here in the short run, however, stocks are going down.
The Nasdaq Composite is nursing a loss of more than 7% for
the month of July alone. Last week, the tech-laden Nasdaq
tumbled 3.2% to 1,883, while the Dow slipped 73 points to
10,139.

- Now that the stock market has been drifting lower for
three weeks, it is beginning to deliver some real pain -
not the leather-clad, bullwhip-snapping variety, but the
sort stealthy agony that results from falling asleep on the
beach under a blistering sun. Slowly, almost imperceptibly,
the Nasdaq Composite has scorched the epidermis of millions
of investment portfolios.

- How did this happen? For weeks, the stock market has
seemed as listless and harmless as a summer day. Yet,
somehow, this seeming lethargy has produced some sizeable
losses. Even so, the stock market seems not to favor any
particular direction. It rises a bit, then falls a bit,
then rises some more...but this annoyingly lifeless market
has shown no clear preference for either a bull move or a
bear move.

-"Never sell a dull market short," say the seasoned
traders on Wall Street. But we should not deduce,
therefore, that dull markets are to be bought. Clearly,
this dull market could rally sharply on a moment's notice -
just to inflict a measure of pain on the increasingly smug
bears as well.

- But sustained upward progress must overcome a handful of
adverse trends: interest rates are rising from 46-year
lows, while crude oil flirts with record highs. These two
trends are sufficiently grave to undermine even the most
deserving of stocks.

- Meanwhile, bullish investor sentiment has been hovering
near all-time highs, which is never a good sign, while the
VIX Index of options volatility has been languishing at
multi-year lows. Low volatility typically indicates
investor complacency. A crowd of bullish, complacent
investors is not what you typically find when stocks are
cheap.

- Examined through the flawless prism of hindsight, we
notice that the stock market's advance topped out - more or
less - at the precise moments that oil hit a record high
and the Fed initiated what most investors believe will be a
new cycle of rising interest rates. These adverse trends
are with us still. Throw a large crowd of bullish investors
in the mix and that Field of Dreams on Wall Street may soon
resemble a"Field of Nightmares."

---------------------

Bill Bonner, back in Baltimore...

*** Does higher education really pay off?

'Probably not' is our answer. And Jeffrey Pfeffer,
professor at the graduate business school in Stanford,
seems to agree with us - at least with respect to MBAs.
"There is little evidence," says he,"that mastery of the
knowledge acquired in business schools enhances people's
careers, or that attaining the MBA credential itself has
much effect on graduates' salaries or career attainment."

In the late '90s the job market was so competitive that
some firms that normally hired only MBAs were forced to
take people with only undergraduate degrees. Guess what?
They did their jobs about as well as those who had MBAs.

Pfeffer points out that while a degree from a prestigious
business school marks you out as someone who is smart and
ambitious - and therefore someone who is likely to succeed
- you will probably succeed just as well without the
degree. It is being smart and ambitious that makes the
success...not the B-school training.

*** More notes from the strangers in a strange land...

"Oh...if I had only been there...with my armies behind
me...how I would have gotten revenge on the people who
killed Jesus..."

- Clovis, King of the Franks - recently converted to
Christianity - perhaps missing the point.


Received via email:"Become a fully ordained church
minister within 48 hours.

"As a lawful minister, you will be authorized to perform
the rites and ceremonies of the church!

"Perform Weddings, Funerals, Perform Baptisms, Forgiveness
of Sins, Visit Correctional Facilities.

"Want to open your own church? Press here..."

There you are, dear reader. Within 48 hours you can - if
the advertisement is to be believed - forgive your own
sins, and those of others. Whatever it costs, it is surely
a bargain. With an ordination in your back pocket, you
might even go out and commit more sins this afternoon...and
forgive them before dinner.

In no other country we know of, is man's relationship with
the Almighty so convenient. So quick. So easy.

No wonder Americans are so keen on religion. In all of
Christendom, no people go to church more often. De
Toqueville noticed the connection between Americans'
freedom and Americans' religion nearly two centuries ago.
Without strong religion, he wondered what glue would hold
the republic together. The fatal weakness of democracy was
no secret; as soon as the masses realized they had the
power to vote themselves into other peoples' pockets there
might be no stopping them. All that stood in the way was a
sense of right and wrong. As long as America is good, said
de Toqueville, it will be great.

We went over to Grace and St. Peter's church yesterday.
What a handsome church it is...and what a relief to find a
service in a language we understand. We're talking about
the 'old' lingo of the Episcopal Church, the language of
the King James version and the 1928 prayer book. The chants
and creeds - the Apostle's Creed, the Nicene Creed, the
Confession, Sanctus, Benedictus - were imprinted on us back
in the '50s. We knew them by heart and recited them easily.

Then, in the late '70s, a new prayer book decree went out
upon all the land. Henceforth, ye shall speak the words of
the prophets and the gospels as if they were born
yesterday. The result has always sounded strange and
foreign to us. Introducing the communion, for example, the
priest used to say -"drink ye all of this." It was changed
to"drink this all of you." In the gospel, where Jesus used
to say,"I will make you fishers of men," the new,
diversity edition turns it into"I will make you fish for
people," which always makes us chuckle, since it sounds as
if Christians are about to be pan-fried at any moment.

If religion is enjoying a boom in America, you could prove
it at Grace & St. Peter's. You could have packed all the
attendees into a good-sized SUV and had room left over for
luggage. Still, the church put on a good show - complete
with 'asperges,' incense and a sung service. The priest
said nothing memorable. But then, we've been going to
church for more than half a century, and cannot remember a
single Episcopal sermon worth hearing.

(By contrast, a brother-in-law - a Southern Baptist
minister - always gives a good barnburner of a sermon...)
Jesus of Nazareth never went to Harvard, but he had his
eyes open. He noticed that life was not nearly as simple as
a presidential candidate or stockbroker might lead you to
believe. You don't necessarily get by getting, he pointed
out. You get by giving, said he. You don't find real glory
in great works...but in good ones. Nor do you enjoy freedom
by casting off all your chains...but by willingly enslaving
yourself to Christ. And if you want to live forever, you
have to die.

Most people regard these paradoxes with suspicion, if not
loathing. But they have so many parallels in nature - and
in natural markets - that one suspects they must reflect
some hidden architecture to life itself: investors make the
most money by buying the most despised assets (those with
the lowest prices per dollar of earnings). (The meek
inherit the earth.) An investor faces his greatest risk of
loss at the very moment when he becomes most sure of
himself (pride goeth before a fall). And the most
successful investments are those in which investors
eventually lose the most money (the first shall be last).

Paradoxes are humbling. They flash like warning signs:
"Watch out," they say,"because the exact opposite of what
you think is probably also true." We caught on to this
trick here at the Daily Reckoning when we realized that the
way to investment success was not by knowing more than the
other guy, but by knowing less. Recognizing how little we
really knew gave us an investment edge...humility became an
advantage, a conceit. It made us feel superior!

The real genius of Christianity is its modesty. It keeps
the world improvers from making too much of a mess of
things. People - even Christians - are prone to delusion
and self-aggrandizement. Too often, they begin to think
that they know how to make things better, not just for
themselves, but for everyone. They want to be
engaged...they want to do something...they want to vote!
They boss others around, take their money - calling it
'fair taxation' - or bomb the hell out of them. Before you
know it, they are no longer good, but corrupt and pathetic.

"Do unto others as you would have them do unto you," is not
only a nice saying to put into needlepoint and hang on your
wall, it is also a cautionary platitude. It reminds you
that it is better to sweep your own doorstep than to try to
change your neighbors' bad habits. While there is plenty of
evil in the world that might be cast out, generally, the
best a man can do is to make sure he is not part of it.

---------------------

The Daily Reckoning PRESENTS: They said he was a big fat
stupid white man. They said he was a traitor. They called
him obscene. Now he's got a movie.

Celsius 9/11
starring The Mogambo Guru


The Treasury cranked out $6.9 billion in actual, hot-off-
the-presses cash last week, which is probably a record of
some kind, and not the good kind of record - the kind where
you get to shake your bootie and party down on the dance
floor.

In the same week, Foreign Holdings at the Fed leapt by
another $10 billion, which is that magical place where all
those central banks soak up and store their U.S. debt
before it gets recycled back to the U.S. It represents an
estimate of foreign holdings of U.S. dollars.

Now, not only does the system have to manage this flood of
'fiscal policy money' and 'trade deficit dollars' that is
being poured into the world's economy by the Bush
administration and the Congressional boneheads in the
U.S.A., but also the other gigantic wad of money being
created by the idiotic Europeans who are as intellectually
corrupt as we are.

I say this because European bureaucrats continue to ignore
the fact that Germany, France and Italy - which together
make up about 90% of the whole freaking Euroland economy -
are running deficits that exceed 3% of GDP...or what is
also known as 'puke point', the level that they all agreed
was the farthest limits that rational, sane people, who had
the benefits of a good education, could allow.

And let's not forget the Japanese, who are bogged down in a
budget deficit equal to 7% of their GDP.

So now you know why Jean-Claude Trichet, a guy who is known
for exactly this kind of stupidity, was put in charge of
the EU central bank, and why we have Alan Greenspan, also
well known for this kind of stupidity, in charge of the
American central bank.

Since the need to identify a scapegoat is arriving, it is
time to start casting a little blame. Rising to the
occasion, the Mogambo strides up to the microphone at
Cannes and announces that his Mogambo Movie Company has
started production of its new release:"Celsius 9/11."

This fabulous documentary explains that the banking system
is the one to blame, just like it always is. Using
newsreels, tapes, congressional testimony, candid
photographs, gossip and rumors, vicious innuendo, bogus
interviews, outright lies and fabricated evidence, it
captures, wonderfully, how all throughout history, in every
country, in every time and space, economic crises are
always caused by bankers.

There is simply no other agency that is able to perform
such miraculous magical acts of alchemy, which, nowadays,
we call 'creating money out of thin air.' Money, beautiful
money!

The process starts when somebody takes on a debt. It's then
accelerated through the fractional banking system, which
magnifies and leverages the debt, 'making' more money
available for more people to borrow, and helping them go
even further into debt! It's a self-reinforcing
process...creation leads to borrowing which leads to more
creation, and more borrowing that causes more money to be
created. To be borrowed. Which causes more money to be,
well, you get the idea.

Or as Bob Moriarty explains in an essay entitled"Battle of
the Titans" on 321gold.com,"The cause is simple. In a
fractional reserve system, even a gold fractional reserve
system, all money is created by loaning money into
existence. And the more loans you make, the more profit you
can make. It is a perpetual motion machine. Just as long as
you keep expanding the money supply (inflation) everything
works. Or until people borrow far more money than they can
afford to pay back. At that point the system implodes and
deflation sets in as the money supply collapses."

Kenneth Gerbino is one of those guys who really has a
handle on how these things work, and says"The United
States at this time, since the 1930s, has made tremendous
progress and advancements in all areas...science,
technology, medicine, arts, etc., but the truth of the
matter is that, in the field of economics, the opposite has
occurred. An incredible regression has developed. Economic
policies today are much, much worse than in 1929. The five
economic evils are all alive and well in modern America:
big wasteful government, high taxes, paper money,
government debt and budget deficits. But the worst practice
is the creation of money out of thin air, which always
brings on inflation, higher interest rates and disrupts the
normal free market economy."

All that money, all that glorious, fabulous money, turns
into, first, debt to finance economic expansion, and then,
only later, the decline and deflation. The eventual and
inevitable decline is caused by prices going up, pushed up
by all the money. And then people stop buying as much
stuff, and economic decline sets in.

And why don't they buy as much stuff? I can't speak for
everybody else in the world, but for me and everybody I
know, it is because of the double-whammy that the Germans
might call der Dopplekopfwhackenmachen: a) my income is not
rising enough to b) allow me to afford to buy things whose,
c) prices are rising faster than my income.

And then comes, if you are at all adept at the Austrian
school of economics, the inevitable bust, which is one of
the ingredients when you play in the sandbox of the Boom-
Bust Cycle.

And if you are NOT familiar with the Austrian school of
economics, then I suggest that you make reading the
Mises.com website a part of your everyday online browsing,
and after a year or so you will notice a large decrease in
the number of times that you scratch your head in
bewilderment, and a HUGE increase of the number of times
that 1) you agree with me that Austrian economics is the
only one that is logically correct, intuitively obvious,
historically proven, and contains an intellectually
compelling line of economic thought, 2) you agree with me
that central bankers are the actual culprits who cause our
miseries because they do NOT believe in the Austrian school
of economics, and 3) you will stand shoulder to shoulder
with me to declare that what this world needs is a good
low-calorie, low-carb, low-fat chocolate cookie that you
can eat by the bagful and never gain an ounce in weight.

Or, as Mr. Moriarty so clearly explains,"Here's something
you have never read before. With the exception of wartime
periods, between 1783 and 1913, inflation was zero.
Essentially we had no inflation. But as soon as the Federal
Reserve system came along, here comes inflation. Using the
government's own figures, we can soon see that to equal the
purchasing power of $100 in 1913, we would need $1,840
today. All the product of the Federal Reserve system."

In case you were wondering, that works out to an annual
inflation of only 3.25%. The knotheads we call American
economists call this"benign inflation" and"low
inflation." It is not.

As if to provide a nice coda to my remarks, the dollar has
started back down, and it is falling faster now than it was
when it was rising, which is in keeping with the general
theory that things decline faster than they grow or are
smashed quicker than they are built.


Regards,

The Mogambo Guru
for The Daily Reckoning

---Mogambo Sez: I have been getting calls from desperate
people wanting to, mostly, know what is going on with the
decidedly lackluster performance detailed in the mutual
fund statements that are showing up in their mailboxes like
bricks, and quite a few inquiries about when I am going to
return their BBQ grill or pay back some of the money I owe
them.

To each of these topics I am at a loss to explain. I was
real embarrassed about it, until I read that Marc Faber,
yes THAT Marc Faber, he of Marc Faber Ltd headquartered in
Hong Kong, who admitted, when you read between the lines of
what he literally said, that perhaps the Mogambo is not as
stupid as everyone says, and handily explains that my
confusion is because"We live in the midst of the largest
financial bubble the world has ever known. World bubble-
isation is courtesy of a monetary phenomenon that lacks
antecedents. Never before has any country printed as much
money or extended as much credit without melting down the
printing presses. The credit madness is difficult to
comprehend. It is hard to understand in relation to past
economic imbalances, because none exist."

All I know, and all anyone knows, is that it will not work
out. We just don't know how, or when.

Thread gesperrt

 

gesamter Thread:

• The Daily Reckoning - Celsius 9/11 (Mogambo Guru) - Firmian, 20.07.2004, 19:33
  • Daily Reckoning -"Ã-lpreis bestimmt weiter das Schicksal der Märkte" - Sorrento, 20.07.2004, 23:49