-->Pigs Get Slaughtered

The Daily Reckoning

Paris, France

Tuesday, 16 December 2003


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*** Is the world a safer place? Not according to investors!

*** Stocks down... gold up... down hits new all-time low...

*** Money supply falling... Saddam, a democrat?... and more!

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Is the world a safer place, now that Saddam Hussein is
behind bars?

It is probably safer for Iraqis. Who knows? Only time will
tell... and time tends to keep its secrets to itself, even
under intense interrogation.

But the stool pigeons on Wall Street twittered all day
long. At first, their song was a happy morning ditty... the
one we expected - celebrating the liberation of Iraq from
its last elected president. (More below... )

Then, as the day eroded, the melodies changed. Even the
approach of Santa Claus and the arrest of the world's most-
wanted man could not keep the little twerps in a cheerful
mood. The price of gold began to rise. Stocks began to
fall. The dollar fell, too. By the end of the day... gold
was more expensive than it was at the day's beginning.
Stocks were cheaper. And the dollar had hit a new all-time
low against its main rival, the euro.

If it is a safer world, investors could not seem to see it.

A friend once asked people living in a Baltimore ghetto
what kind of interest rate they would expect if they lent
money. The answers always surprised him. For the lenders
wanted 50% to 100% interest for a single year. People in
bad neighborhoods know that life isn't safe.
(Statistically, a young black man in Baltimore or
Washington is about as likely to get gunned down as a
trooper in Baghdad over the last six months.) The borrower
might not be around to pay up. Or he might not be able to
pay, or forget that he owes you the money. Or he might just
disappear.

The rare ghetto lender who is also a Daily Reckoning reader
might add currency inflation or collapse of the dollar
standard to his list of worries. Even if he gets his money
back, it will almost certainly be worth less than he
expects.

Only in safe, stable, rich societies - notably Switzerland
and Japan - do asset values remain high and interest rates
remain at low levels for long periods of time. Borrowers
tend to live long enough to pay up... and the currencies
tend to hold their values.

But today's news brings word that now even Japan and
Switzerland have joined the race to destroy their
currencies. The latest figures show the money supply
growing in both countries at rates even higher than in the
U.S..

Also in the news analysis is the disturbing thought: that
while a crackpot dictator was unlikely to disturb the
world's peace... there are plenty of people now in Iraq who
might. And while Saddam once held them in check, now they
are free to express themselves... armed with Saddam's old
weapons and a shiny new cause.

Investors might have also noticed that Saddam's capture
brings no relief to America's debtors... no profits to
America's industries... nor any new jobs to its workers. It
reduces the federal deficit by not a penny... nor does it
cut the trade deficit by a single bill.

As the bright sun rose over Manhattan, investors must have
come to see the world more clearly. It was not evolving
towards the old Alps, they must have come to realize, but
towards the South American pampas... or the African
Savannah... or the corner of Charles Street and North Ave.
in Baltimore... or anywhere that life is more
uncertain... less stable... and less safe.

And now to Eric Fry with his insights for the day:

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Eric Fry, writing from Wall Street...

- The"Hussein Rally" packed even less firepower than the
deposed dictator's fictional"weapons of mass destruction."
Sunday morning brought word that U.S. forces had finally
apprehended the elusive Saddam... and the impartial media
wasted no time rooting for a rally on Wall Street.

- The lumpeninvestoriat drifted off to sleep Sunday night,
knowing that the morrow would bring another star-spangled
stock market rally. After all, the lumps must have been
asking themselves, what could be more bullish for stocks
and the dollar than capturing Saddam?... Almost anything, as
it turns out, would have been more bullish.

- Catching Saddam did no more to boost the stock market
than catching a cold. News of Hussein's capture sparked a
sharp rally in the U.S. dollar during Asian trading, along
with a corresponding sell-off in gold. But the dollar rally
fizzled even before the New York trading day began.

- The embattled buck had rallied all the way to $1.213 per
euro in Asia. But the rally quickly reversed itself, as the
dollar slumped to $1.231 per euro during the New York
session - the ragged currency's eighth new record low
against the euro in nine trading sessions.

- Likewise, the stock market's euphoria faded quickly, as
the Dow's early 98-point gain became a 19-point loss by the
closing bell. The Nasdaq's morning rally also crumbled, as
the pricey high-tech index dropped 1.5% to 1,918. The gold
price followed an opposite course, falling early in the day
and rallying in the afternoon. The spot gold price fell to
a low of $401.55 during Asian trading, before reversing
course to finish the New York session nearly unchanged at
$409.75.

- So score another point for the gang in the Daily
Reckoning's Paris office! Yesterday morning, they stared
boldly into the face of a rallying stock market and fired
off this prescient salvo:"Stocks, bonds and the dollar
might rise nicely on the news of Saddam's capture. 'Sell!'
is our advice. Saddam's regime may have posed no threat to
U.S. security, but his capture could well be one of those
decisive irrelevancies that mark the end of a
trend... Unless Saddam can find a bucket of anthrax
somewhere... there is not likely to be much more good news
out of Iraq, Washington, or anywhere else. No more tax
cuts. No more spending increases. No more rate cuts."

- It's true, like the proverbial girl-who-has-everything,
U.S. investors seem to lack nothing at all. What surprising
gift could the fates possibly bestow to a lumpeninvestoriat
that already possesses 8.2% GDP growth, a booming housing
market, a rallying stock market, military and monetary
hegemony and an unlimited line of credit with the rest of
the world?

- Maybe the fates have a different sort of surprise in mind
- the sort of surprise that causes the lumps to scream for
mercy, rather than squeal with delight. Maybe the dollar
will fall below the levels that Greenspan, Bernanke and
Bush deem to be bullish for the U.S. economy... and maybe it
will continue falling until it hits levels that foreign
investors deem to be frighteningly bearish.

- Or maybe the bear market in stocks will resume at an
inconvenient time for the millions of investors who are
buying overpriced stocks today in the hopes of recouping
the money they lost buying overpriced stocks in 1999. On
the other hand, maybe the U.S. economy and its beloved
stock market will continue swaying gently to and fro, like
young lovers on a porch swing.

-"We have been watching the stock market rise... and the
dollar fall... for the last few months. It all seemed so
gentle, so sweet," your Paris editors remarked yesterday.
"As if breaking records in new debt, in federal deficits,
in trade imbalances and bankruptcies made no difference
whatsoever. Somehow, it would all turn out all right, like
a romantic comedy with a happy ending... This pleasant
delirium... the intoxicating jig of democracy-
building... rising stocks... increasing debt... and a gently
falling dollar... will have to end sometime. Why not now?"

- Your New York editor's friend, Jay Shartsis, a
professional options trader with R.F. Lafferty in New York,
says,"The Dow's new high last week wasn't confirmed by the
broad market, creating a sell signal. Last week's new Dow
high was not confirmed by the Transports or Utilities.
Probably more important, none of the Nasdaq, Russell 2000
or Wilshire 5000 confirmed it either - all much broader
measures than the Dow."

- Shartsis also frets that several investor sentiment
surveys are indicating near-record extremes of bullish
sentiment. Bulls tend to multiply like bunnies shortly
before major stock market corrections. Net-net, the stock
market's technical health"looks ominous," says the long-
time option trader.

- To recap: the former Iraqi tyrant is now a jailbird, but
that provides no protection whatsoever against the tyranny
of owning overpriced stocks.

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Bill Bonner, back in Paris...

*** America's money supply - M3 - is actually falling. It
dropped 0.3% in November. Cause: unclear. Effect: unknown.
Importance: unsure. Significance: ominous.

*** The median house price in San Diego County has been
rising at an 18% annual rate and has now reached $450,000.
Alas, this is a lot more than the median would-be homebuyer
can afford. At this rate, reports the San Diego paper, only
15% of the county's residents can buy the median house.

What do you get for $450,000? How about this: a dumpy
little house two blocks from the beach - with 598 sq. feet
of living space - advertised at $445,000.

Hmmm....about the same per-square-foot as central Paris...

*** The International Herald Tribune provided a helpful
series of photos describing Saddam Hussein's career. We
were surprised by one of the captions:"Saddam Hussein
after his 1997 reelection."

Reelection? Wait a minute; we thought he was a dictator! Is
he an elected dictator? What's that? We thought the whole
point of the war - after the WMD and Al Qaeda connections
went missing - was to build a democracy in the desert? Was
it a democracy already?

Any discussion of politics is fraught with error and
confusion from the get-go. The defining feature of a
democracy is that people get to cast a ballot. If they want
to elect a dictator, well... that's up to them.

All democracies are frauds, but some are more fraudulent
than others. In October of 2002, Saddam Hussein held a
referendum on his leadership after already having served
his nation for two decades. He got 100% of the votes. He
was, of course, the only candidate. Even more remarkable,
not a single eligible voter failed to do his civic duty -
every one of them turn out to vote... and everyone voted to
let Saddam Hussein reign for another 7 years.

The central humbug of democracy is that voting makes
acceptable things that would otherwise be deplorable:
stealing, killing, and bossing people around. Voters
believe that a majority gives them the right to tell others
what to do. That is why the rich pay higher tax rates than
the poor; there are fewer of them. Then, the politicians
turn the robbery into a virtue... claiming they act in the
name of 'fairness.'

But the language of politics is full of chicanery. George
Bush is a 'conservative,' remember.

*** We met frequent DR contributor, Byron King, in
Baltimore last week, for the first time. He is just the
sort of man we like - a jolly skeptic.

Byron offers more thoughts on the shifty sands of
contemporary politics:

"G.W. Bush campaigned as a candidate of down-home West
Texas values like thrift and hard work, featuring
conservatism with a prominent sense of Christian
compassion. W campaigned as the candidate of limited-
government, a more restrained and even 'humble' foreign
policy, and as the one who better understood the key
elements of national economic growth. I believed him then,
during the campaign, and I believe that he believed himself
at that time.

"But three years into office, it seems to this observer
that W has morphed into Woodrow Bush on foreign policy and
Franklin Delano Bush on domestic policy. (Maybe not FDR
entirely. He has not caved-in on at least one important
point. We can still own gold for the moment.) And with
steel tariffs and recent impediments to trade with China,
as well as W's willing complicity with the FED as it
destroys the underlying value of the national currency,
there is a whiff of Herbert Hoover Bush in the air.

*** News reached us yesterday that our book has reached No.
1 on the NY Times business best-seller list."Financial
Reckoning Day" knocked Paul Krugman's"The Great
Unraveling" off the top spot.

According to the NY Times, where Krugman works as a
columnist, his tome is"mainly about economic
disappointment, bad leadership and the lies of the
powerful." Whereas our own book,"Financial Reckoning Day,"
is mainly about stupidity - stupid economists, stupid
leaders, and stupid investors. The New York Times write-up
says it reveals"How to protect investments in a
deflationary depression economy due to an aging population
and a swing back from the recent financial booms"...

.. which sort of gives the game away, doesn't it? Buy gold,
dear reader. Sell the dollar.

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The Daily Reckoning PRESENTS: Back by popular demand, a
gruesome tale of one poor hog's fate. This DR Classique was
originally broadcast on 21 January 2002.


PIGS GET SLAUGHTERED
By Bill Bonner

"It's the fat pig that feels the butcher's knife."

- Old Chinese saying


Pigs have little brains. But then, what good would a bigger
one do?

Mr. Deshais had sawed through the pig's skull. The brain
cavity opened like the halves of a walnut, revealing an
organ not much larger than a potato.

"When I was a boy," he recalled, handing me the slimy glop,
"the kids always got to eat the brain. Tell Madame Bonner
to cook it with a little olive oil and onions. It is
delicious, probably the best part."

By then it was late in the day. We had worked all
afternoon, butchering one of the pigs - a large, white
female. The grim work was done. Now, Mr. Deshais and
Patrice, a farmer from the village, reminisced as Henry
turned the crank on the meat grinder.

"A few years ago, all the farmers raised pigs. This time of
year, you'd see hogs burning all over the place," recalled
Patrice.

He was talking about the traditional way the hair is burned
off. But maybe I should back up and explain the entire
process to you. Who knows, if the economy enters a
depression... we may all be raising hogs in our backyards.
You can save this little memoir and refer to it at
slaughtering time. Or, become a vegetarian.

Mr. Deshais had begun by entering the pigsty and choosing
one of the 4 pigs we'd been raising for the last 6 months.
He chose one of the smaller pigs - saving the better
specimens for breeding.

Fixing a rope around the pig's leg, he let it out into the
farmyard and tied the rope to a doorpost. Mr. Deshais
looked unhappy."I don't like killing my animals," he said.

"You don't seem to mind killing the chickens," Patrice
teased him."Besides, it's worse for the pig.""That's
different. Chickens don't have any feelings," Mr. Deshais
replied. Then, he petted the hog gently, with his right
hand. His left hand held a sledge hammer.

The pig seemed to know something was up. She would not be
calmed. Instead, she squealed and fought against the rope.

My son Edward, 8, had come to help. He had been full of
boyish eagerness when we set off for the farmyard. He
entered the pigsty and wanted to help Mr. Deshais with the
rope and got in the way. But now, he dropped back... almost
hiding behind the tractor.

Mr. Deshais raised the hammer and brought it down solidly
on the pig's head. The animal squealed as though it were
being killed. But it had not been knocked out. It took
another blow... and then another... before the pig finally
fell. By then, the pig's squeals had alarmed everyone. Even
the cows, grazing in the nearby field came over to the gate
to see what was the matter.

Once on the ground, Mr. Deshais took a knife and forced it
into the throat. The idea was to puncture the aorta of the
heart. He cursed himself for having driven the knife in too
high up the neck. But it found its mark anyway - blood,
bright red blood, spurted out.

"Get the pan," shouted Patrice."Don't waste the blood." A
skillet was held under the neck to collect the blood, used
for making blood sausage.

But the hog was not dead. It revived, even as its blood
gushed out. Some of the blood missed the pan, as the pig
thrashed about on the ground. Patrice seemed to regret
every drop.

Finally, the blood flow dropped off to a trickle and the
pig stopped breathing. Where only a few seconds ago, the
big animal howled and squirmed, now the life force had gone
out of it. Edward approached cautiously. The killing was
over. All of sudden, it was quiet. The cows stood silently
looking at us as though we were murderers. The hogs, still
in the pigsty, said not a word.

Your editor wondered how men could kill one another.
Killing a hog is hard enough.

But that is the way of the world; pigs are raised up just
so they can be brought down. Who are we to argue with the
scheme of things? If not for the desire to kill it
prematurely, the pig would never see the light of day. Pigs
die sooner than they hope, that is all. But maybe we all
do.

In many ways, the pig had a good life. She rooted around in
a field while the weather was good. When temperatures
dropped in November, we moved her to a cozy stall. She
never went hungry. She never had to read the editorial
pages, listen to the radio, or attend a political
convention. Never once did she go to the dentist nor ever
file an income tax return. She had a good life.

We then tied the rope around both of the pig's back legs
and hoisted it up with the tractor. The corpse was taken
back near the house. There, it was laid on a pile of straw
and covered up as though it was to be given a Viking's
funeral.

The straw was lit and soon blazed up. After a few minutes,
the pig was turned over and more straw added. The idea was
to burn off the hair and sear the skin.

"This is the old-fashioned method," said Mr. Deshais."They
don't do it this way in the slaughterhouses. They just dip
the animal in scalding water to get the hair off. But this
way is better, the skin has a better flavor."

By this time, the pig looked like the victim of a four-
alarm blaze in a Baltimore rowhouse, blackened by fire and
smoke. Mr. Deshais pulled off the smoking hooves and then
we washed the body with hot water and scrapped the skin
with bits of old terracotta roofing tiles. The rough tiles
did the work of coarse sandpaper.

The hind legs of the corpse were then lashed to a wooden
ladder, with the animal's underside facing us. Mr. Deshais
sliced the belly open, carefully cutting through the fat to
the intestines. The trick is to remove the animal's innards
without puncturing them. The first step is to cut out the
lower end of the intestinal track - which is now at the top
- and tie a string around it.

Then, working downward, the internal organs are freed from
the intestinal cavity... until they finally fall out."What
are you doing?" asked Henry, arriving at the scene of the
crime."Can I watch?" Henry's latest career goal is
medicine. He believes he might make his fortune as a
surgeon. Thus, he watched the butchering with nascent
professionalism.

"Just throw them all away," said Mr. Deshais of the
animal's plumbing."In the old days, we would have used
them. But they're not worth fooling with." Of course, the
liver, heart, and tongue and some other pieces I didn't
recognize were saved.

After the insides were hollowed out, Mr. Deshais cut off
the head and put it in a bucket."We'll use that for the
sausage," he explained. He had already bought some sheep's
intestines to be used to make them.

Then, he cut through the entire body from top to body -
down the middle. The result was two sides - on which the
cuts of meat were fairly obvious.

But inside the chest cavity was a thin layer of fat and
meat.

"Oh... take this," said the gardener turned butcher,"this
is the best cut of meat on the entire animal. Eat it
tonight." He carefully sliced the fat off a thin piece of
muscle, which we did eat at our evening meal. (He was
right... it was delicious.)

Blood sausage is made by grinding the fatty meat from the
pig's head and neck, with onions and parsley... and then
cooking it with the blood. Be sure to put a little vinegar
in with the blood to prevent coagulation before the sausage
is cooked. Once cooked, the"links" of sheep intestine are
filled up with the"black sausage" mixture.

There are, of course, details to be mastered and recipes to
exchange. Curing the hams, for example, is an art. In some
places, men would sooner share their wives with other men
than share their ham-curing recipe. And what to do with the
remains of the head... and the miscellaneous other parts
that rarely appear on a menu in the Anglo-Saxon world?

I don't know, dear reader.

But you have the general idea. If a serious breakdown in
the division of labor occurs, you will be ready for it.


Your correspondent...

Bill Bonner