Due to one thing and another, I am only just now beginning today's missive. "Now" being 10 AM. Normally, I would be starting closer to 7:00 or even 6:00 AM – so I will have to hurry along or be responsible for causing our always patient production team to work into Friday evening, after an already long and very busy week.
To speed things along, it is my intention not to engage in long essaying but rather to fly through some snippets that caught my eye this week, as well as to share with you a couple of contributions from colleagues and one from a dear reader.
As we set off on today's adventure in musing, I have the music turned up loud on a song titled Angel by Massive Attack, a largely overlooked English group that is now defunct. You may recognize the song from Guy Ritchie's excellent movie Snatch, featuring a terrific English cast along with Brad Pitt in a stellar role as a gypsy boxer.
Later on, I plan on telling you about two other movies I've seen recently that appear to have been seen by almost no one – but which I enjoyed quite a bit and hope you will, too (at least if you have a somewhat warped sense of humor!).
But first, on with the musing...
The primary reason I'm running late today has to do with my needing to help out with some kid delivery chores this morning.
As I drove about, I discovered that one of the roads I would normally use in fulfilling my mission was closed by roadblocks due, I imagine, to road repair work. Upon hitting the road block, I had to reverse course and take a substantial detour.
Turning around, I wondered why the road crew hadn't put up a sign indicating the road was closed back at the main intersection leading to it, but I shrugged and muttered something along the lines of, "Typical government operation."
Driving back home, this idea of roadblocks took root in my mind. You see, only governmental entities can set up roadblocks – at least legally.
Obviously, there are times when such roadblocks are entirely appropriate. For example, when a bridge is found to be near collapse, or has actually collapsed. In that case, putting up a roadblock to let drivers know that the road is a no-go makes perfect sense. (We could debate whether or not this function could be delegated to private enterprise, as it almost certainly could, but for the sake of argument, let's just assume that putting up such a roadblock falls within the purview of the "night watchman" model for government.)
Outside of cases where the road is actually damaged to the point where driving is either impossible or ill advised, there should be almost no roadblocks set up. Sure, one might drop a temporary warning sign down to let people know that there is a road crew fixing potholes ahead and that sort of thing, but an actual roadblock should be a relatively rare thing.
Now consider a world where government officials, as often as not operating hundreds or even thousands of miles away, dictate that permanent roadblocks are to be constructed here, there and everywhere – based not upon the specific condition that a road is out, but rather based on political expediency, cronyism, imaginary threats and donations by influential lobbyists.
In a world like that, where roadblocks are set up all over the place and without any real thought to the consequences, imagine how difficult it could be to get from Point A to Point B. In fact, it would not be out of the question that the single road leading to your house could be blocked, leaving you no way out.
While that seems rather extreme, I would contend that it is a valid metaphor for the world we now live in.
To make the point, a couple of weeks ago, I discussed my recent travels to Ireland and Portugal and the devastating consequences the actions of the European central planners have had on those economies.
Before the European Commission, the Portuguese fishermen did quite well, thank you. Not long after Portugal's admission into the Eurozone, however, they woke up one morning to discover a regulatory roadblock requiring them to destroy their fishing boats, thereby preventing them from earning their livelihoods. In effect, the single road leading to their houses had been blocked.
Another example can be seen in energy policy here in the US. The politicians bray about the need for energy independence, but then kowtow to the environoids and special interests by littering the landscape with roadblocks that prevent energy companies from achieving that independence.
Now, some among you will argue that such roadblocks are essential in steering the sheep – er, the populace – towards greener pastures. But were the roadblocks in front of nuclear-power generation really required? Was the technology, now in use for over 50 years, really the equivalent of a road out ahead?
What if, rather than roadblocks, the US government had simply put up a warning sign and let the insurance companies and the builders of the nuclear plants work together to make the plants essentially bombproof, and therefore warranting insurance at affordable rates?
On the topic of affordable rates, the government has set up another sizable roadblock in the path of savers. By meddling in the market in order to allow the debt-bloated government to continue its out-of-control spending, the Fed has suppressed interest rates to the lowest levels in US history. Almost overnight, retirees and others who counted on the yields earned on savings to cover living costs have come to a dead stop in front of a roadblock placed in the way of their most pressing needs. Their finances now in tatters, even people in their 70s who have worked hard and saved all their lives are being reduced to serving up French fries at fast-food joints.
Want another? Look no further than Obamacare. Check out this article from Reason.com that shows the sort of convoluted logic that has gone into creating a series of related roadblocks. As one wit put it, if you think healthcare is expensive today, wait until it's free.
One of those roadblocks has to do with the considerably higher taxes embedded in the law that will shift yet more funding from the private sector to the public. Here's the text from an email sent to Doug Casey by a financial professional friend of his this week.
You may have had only a casual interest in the debate over the Obama Health Care bill, and even if you followed it closely, the headline discussion seemed to be more on the inclusion of millions of uninsured citizens, the penalties for not being insured, etc., vs. the fact that this is a noticeable income tax increase on investment income.
For those who have an adjusted gross income of $200k ($250k for joint returns) or more, the number on the bottom of the first page of your 1040, which comes before itemized deductions, charitable gifts, or personal exemptions, there is a +3.8% uncapped tax applied on all investment income (capital gains, interest, dividends, etc.), plus an obscure provision of the code known as the Pease, which reduces the value of itemized deductions, adding another +1.2% to the tax rate.
Be aware that if the current "Bush tax cuts" are not extended, the current long-term capital gains tax rate of 15% will go up by two-thirds to 25% beginning 1/1/2013. The top rate on dividends will nearly triple from 15% to 44.6%!! Ouch.
Unlike Social Security taxes, which are capped, the Health Care tax is uncapped. The mouthy Warren Buffett is finally getting his wish – paying more than a 15% tax rate. Instead of just writing a check for more, which he is certainly welcome to do, as an advisor to the administration, he probably had some influence on getting it applied to all higher-income Americans.
As you know, I am not a tax attorney nor an accountant, so am sending this as a heads-up, and if it is relevant to you, you should confirm the details with your tax advisors.
On the topic of throwing up more tax roadblocks, here's one from overseas… sent along in an email from our own Vedran Vuk. In Vedran's own words…
"Most of the time when we think about raising taxes, it's the threat of millionaires leaving. We don't usually think about them not coming to a country. Here's an interesting case of Zlatan Ibrahimovic signing a soccer contract for 14 million euro per year. If the new tax goes through in France, he will be taxed for 75% over the first million euros. If the tax does go through, good luck attracting multi-million-earning players to France. A lot of people in the 99% will be pretty unhappy when all of their sports teams become horrible as a result of the tax.
"Here's the link to the story on Bloomberg."
My favorite quote from the article is…
"Ibrahimovic will earn 14 million euros annually, sports daily L'Equipe reported. Sports Minister Valerie Fourneyron said that indicates that European football needs more regulation."
Yes, just what the world needs – more roadblocks, this time to block decisions that the football team's management believes it needs to make in order to win (and therefore attract fans, sell tickets and raise rates to sponsors).
Earlier this week, I ran into a public-high-school English teacher and asked how the education business was going these days. His response was, "Do you have four days for me to tell you all that's wrong?"
When I assured him that I did not, and that my attention span was rather limited in regards to such subjects, he foreshortened the discussion by telling me that it seems almost every month now some team or another shows up from the government in order to introduce a new teaching program or methodology.
"And the really frustrating thing," the English teacher told me, "is that none of these people has ever taught school. In fact, it becomes very clear, very quickly, that they really have no idea what they're talking about and that the new protocol was conceived by some bureaucrat with no teaching experience either."
It was rather eye-opening for me to hear such language emanating from the mouth of a public-high-school teacher – in my experience, most of the people who choose that profession are largely on board with the whole big-government thing.
Yet, it seems that more and more people are beginning to catch on to the idea that central planning is not such a great idea. It's how you end up with roadblocks where roadblocks don't belong.
It is almost a certainty that, in time, the bureaucrats and their many roadblocks will be shoved aside. I say that because there really is a limit to how long people will put up with being denied access to their fundamental rights of life, liberty and the pursuit of happiness. There is only so long that entrepreneurs will put up with having to navigate around more and more roadblocks in order to provide a product or service to consumers, when such roadblocks serve absolutely no useful purpose.
Unfortunately, the length of time required to move back towards a free market is likely to be vast. That's because there is still a considerable swath of the voting public who actually buys into the idea that government is a force for good and that without it, equality and justice would go by the wayside.
And so it is that the US and virtually all of the large economies around the world are still firmly in the grip of the notion that central planning is the only way to get to the green pastures that surely must be just over the next hill. Or, more specifically, the next round of legislation and policy machinations (read "roadblocks").
If there has ever been a starker example of the mindset of the current administration and its many followers than a comment made by President Obama this week, I can't recall it. You have probably heard this comment, but it bears repeating.
"If you've got a business, you didn't build that. Somebody else made that happen."
His point is that essentially that all human progress is due to the good work of governments. That without governments, there would be no roads to set up roadblocks on. There would be no Internet. There would be no body of case law, nor a judicial system to enforce that law. There would be no telephones.
I contend that this view of the world is essentially the opposite of the tenets of the capitalist/free-market model. In the view of Mr. Obama and his ilk, We the Sheeple are all but helpless without the government to lead us forward.
That the US government's activities as a share of GDP have gone from well under 10% at the beginning of the last century to over 40% today – and will go over 50% by the time Obamacare is fully implemented – makes it clear that this country is now operating on principles that run completely contrary to those that promote success and economic well-being.
The consequence of continuing to operate on this model will be a steady decline in the quality of life for most Americans, while favoring a ruling elite that produces nothing… except more roadblocks.
Ayn Rand will someday be celebrated as a futurist.
But how does one fight back? Grab a gun? Don't even think about it: the Second Amendment may have been intended to protect against a tyrannical government, but the actual truth is that the weaponry of the US government is so incredibly advanced at this point that even the most well-armed militia wouldn't last a minute.
Besides, shoot-ups and wars are terribly destructive and no fun to anyone except psychopaths.
So, what's the solution? On that topic, here's the first of our two guest commentaries today… from a Casey's Club member with whom I enjoy corresponding because of his shining intellect and his rare command of the English language. For his own reasons, he wishes to remain anonymous.
By Anonymous (a Casey's Club member)
You again stimulated me to scribble when you related in the Daily Dispatch of Friday, July 13, Thomas Ricks' mad proposal to draft America's children into a kind of mind-mashing concentration camp worthy of Hitler's Germany or Meiji Japan. Just as you crisply summarize, some of the ideas of America's contemporary Left are so outré as to appear facetious, while others are already insidiously at work, with or without parental approval or knowledge. But we ignore them and their madness at our own peril and the peril of the Republic.
I thought you would like to know of or be reminded of some people who, as stealth freedom fighters of the twentieth century, have resoundingly bested both their crypto-Nazi federal and state governments. In their pilgrimage from liberty to imprisonment and back to liberty again, they endured arduous stress under nearly irresistible force that threatened the very existence of their families and way of life.
Not some kind of allegory, rather, this is a true account right out of American history, and one that every leader who is concerned to restore liberty should know by heart, whether he copies its example or not.
Because, you see, the people who triumphed did so as completely as people can in this mortal life, not as it is so often portrayed, and has been in the relatively recent mythology-iconography of Star Wars. In that fable created out of the mind of a single man (supported by a creative staff of hundreds, if not thousands), the great Death Star was destroyed (twice? In six films?) by a "lucky shot" by the series' Good Guys.
In the real, gritty, sweaty, body-odor life of the mid-twentieth century, the Death Star of overweening government was flatly nullified by men – as backed up by their families – whose decision-making was principial, not accidental, not "lucky." Morally determined to preserve what they reckoned God had given them, they persevered and eventually prevailed.
Today, this kind of behavior bemuses the public – it amazes. And well it should, given that David had a better chance of winning against Goliath, considering that he at least had a slingshot and some smooth stones. The simple folk who won against their self-declared implacable enemies of state and federal governments had no weapon but their principles and their discipline.
This, then, is the account of the education (and tax) war of the Amish of Pennsylvania against the dual Sith Lords of state and federal governments.
A peaceable people – a society in which the bearded men refuse to wear moustaches because such were worn by the military men of Switzerland (and the Netherlands) hundreds of years ago when these sects reared up and began to be noticed – the Amish refused to pay either state tax or federal Social Security, or to permit their children to be trained in government schools.
The government, in turn, ordained that these were among the worst of social Fifth Columns, undermining the very basis of statist sovereignty. Why, what would the Emperor Meiji have done had some flaky subjects of one of His Imperial Majesty's daimyos decided to reject the Education Department's latest approved textbook? HAR! No difference: Heads were decreed to roll.
Yet, in this event, the miraculous overcame the mundane; the cosmic, the banal: The Amish appeared in court, stated their disbelief and disapproval of statist education, taxation and welfare, and declared that the State of Pennsylvania and the US government were simply, flatly, wrong to demand compliance with any such ungodly nonsense. They insisted that training children would remain the family's duty and right, and that the poisonous dogmas of overweening American government would have no part in it.
Easy to say.
But of course, the court ordered government schooling and tax-paying to commence at once; the Amish said that they would in no wise comply. End of discussion.
They were, in the manner of good old American jurisprudence, found guilty as charged and sentenced to serve time in the Federal Penitentiary – presumably to become penitent for their intemperate insubordination. In an act calculated to incite flight and afford an opportunity to act with the deadly force for which both Pennsylvania's and the federal government were renowned, the prime defendants were released upon their own recognizance. They simply promised to present themselves to begin their sentences on the required dates.
Came the date, the men were all present and accounted for, each with his neighbor who had driven him and accompanied him as a spiritual and emotional bulwark in what appeared to be the beginning of bleak, lengthy imprisonments. The convicted men were indeed incarcerated.
Then came the miracle: After a relatively short while, the inimitable geniuses in the uppermost ivory towers of government began to feel a dull, gnawing anguish that what they had done was not only wrong, it was obviously wrong, and even each of the most common dolts to whom the elective franchise had been given could see this without the least reflection or hesitation.
How, in fact, could the all-knowing, beneficial, father-like (uncle Joe-like) government justify incarcerating the men folk of a community that was, above all, peaceable and harmless?
In this event, the governments could not, and the governments caved, starting with the federales. They sent craven lackeys to the incarcerated with a "deal" that had been cooked up in Washington, DC, in which these folks were provided with a "get home free" card, courtesy of the IRS and the then-nanny-state's equivalent of today's Department of Education.
At this remove – and this is certainly not any kind of "scholastic" interest of mine, nor am I able to remember all of the details after laying the subject down twenty-plus years ago – I cannot recall whether the first concession was that the Amish could legally avoid paying FICA and income tax, or whether their children could be "educated" in local one-room schoolhouses in which eighth grade would fulfill their duty to government, if not to God.
In these eight grades, the children were expected, in the case of boys, to come out knowing how to do the math to frame up a timber barn; the girls were expected to know how to figure recipes, scaling ingredients from between two to fourteen (!). They all were expected to learn the German of their fathers (Pennsylvania Deitsch) and the English they would need to go about in the world of the "English." (Their cash crops were not their grain crops – a third of which went to feed the horses and oxen used to till, plant and harvest – not the fecundity of their kitchen garden vegetables, but their livestock, the raison d'être of the Amish farm. Bartering with each other, they demanded from the English cash on the barrel head.)
The Amish one-room schoolhouse provides pretty good "training," and radically above the scandalous non-standard of modern American "education."
Absolution had been granted from FICA and federal tax based on the fiction that all the Amish did day in, day out amounted to "charity," voluntary service, and not "work." Only a government apparatchik could devise such an Animal Farm reversal of the plain truth. Therefore, no income tax could be levied on all this charity work (nor Social Security, already long since pronounced by the Supreme Court to be nothing but a tax).
Indeed, if you venture into the environs of Lancaster, Pennsylvania, today, you will find men selling fine oak dining sets, travel trailers, horse harnesses, and plant air and diesel engine repair services, all for a "donation."
Am I, in extolling the approach of these godly folk, being a goody-two-shoes, or a baddy-one-shoe?
First of all, there is a venomous point embedded in the idea that Mr. Ricks floats, namely that the American family is incompetent to say how its young shall be raised. There is considerable evidence to support such a view. But even when children are allowed to grow up like Topsy, brains turned to mush and morals turned to selfish consumerism, they are better off, and America is better off having them, than if they were to be converted into cadres of Hitler-Jungen, swarming forth to enforce the next busy-body scheme of the government power-mongers who would warm our bodies by setting our pants on fire.
Perhaps you think me holier-than-thou in extolling the moral superiority of those who forced their governments to blink by peacefully shaming them. It surely is a hard path to tread. By way of telling you a little more about me, let me remind you of a cartoon I bet you have seen many times:
In the torrid Arizona desert, a blazing sun has made a veritable inferno, flat sandy reaches, searing heat, mountains in the distance not promising anything cooler than hell itself. In the foreground, a blasted tree, so long dead as to be nearly petrified; on its single anguished limb, a pair of vultures.
The morning sears upon them unto high noon, and one turns reflectively to his partner: "Patience?! Hell! Let's KILL somethin'!"
Ah, I betray my inherently violent Scots Borderer roots – it was not for nothing that the English King's Royal (pain-in-the-arse) Uncle Duke So-and-So and the whole English army sedulously avoided my ancestral homeland, since he was well advised our folk would have whittled his force down to a nubbin… La Guerra Fría was going on elsewhere besides España. It dies hard, this yearning to live free.
David again. I've always said that we have best clients in the world, and that article again provides the proof. Do you have something you'd like to contribute? Send it my way at firstname.lastname@example.org and I'll read it, though I won't always have time to respond.
Speaking of just killing something, this week the US Secretary of State, Hillary Clinton, has been wandering the world making it clear that the US has green lighted an attack on Iran. Here's just one of many references… from Ynetnews.com.
WASHINGTON – US Secretary of State Hillary Clinton discussed on Wednesday the top priorities of US diplomacy around the world, saying that Iran wants to be attacked by somebody because it would unify the Iranian public and legitimize the Islamic regime.
However, Clinton clarified in an interview with Charlie Rose and Former Secretary of State James Baker, that the US is "serious that they (Iran) cannot be allowed to have a nuclear weapon."
The Iranians can't wait to be attacked? You just can't make this stuff up. As a follow-up, the martial Mrs. Clinton told a news conference that America would "use all elements of American power" to prevent Iran from getting a nuclear weapon. I wonder why the Canadians aren't rattling their swords at the Iranians? Or the Brazilians? Or pretty much anyone? I mean, who died and made the US the Sith Lords?
Playing its part, within just minutes of learning of a suicide bomb targeting Israeli tourists in Bulgaria, the Israeli government had fingered the Iranians as the culprits. An amazing bit of forensic work, given that the attack was the work of a suicide bomber, operating in a faraway country.
Please, don't misunderstand. If I were in charge of protecting Israel, which is in a very bad neighborhood, I wouldn't hesitate a moment in trying to turn the world – and especially the world's largest military power – against my sworn enemies.
My only point is that it is clear, at least to me, that the neo-con agenda of trying to clear the Middle East of all threats to Israel is still in full gear. With Syria within a few days of regime change, Iran is pretty much on its own in the Parthenon of Evil (as the US and Israel see it).
War is, therefore, almost inevitable – because the regime there will not be allowed to stand, and there is no way they are going to go quietly into the night.
As the military planners and state department no doubt see it, once Iran is brought to heel, clearing the way to flush out the nests of recalcitrants (Hezbollah, etc.), then the Middle East will settle down into happy little clans of goat farmers.
I suspect that it won't be quite so easy, and not very long before the next wave of malcontents appear on the stage in that region to once again stir things up, giving the US a reason to continue pouring billions down the drain in that long-troubled region "in our national interest."
At least that's the way I see it. But I plan on checking my premise, and will, with former strategic advisor to the Joint Staff, Dr. Thomas Barnett – at our upcoming Navigating the Politicized Economy Summit, co-hosted with Sprott, Inc., on September 7, 8 and 9 at the beautiful Park Hyatt Aviara Resort in Carlsbad, California.
Dr. Barnett, author of The Pentagon's New Map, will be presenting his views and taking audience questions on the current and coming geopolitical environment at the banquet. Registration is now open, and early-bird prices prevail. The complete faculty list, schedule and registration can be found here.
Shooting in a Movie Theater? It Was the Tea Party! Last night, there was another mass shooting here in America. And once again the nation's reporters, though armed with next to zero information about the shooter, were quick to begin trying to pin the heinous act on their personal bogeymen… including, of course, the Tea Party. Here's a brief look at some of the terrible reporting flying around the place, again from Reason.com.
A High-Speed Car Chase! Once again the Huffington Post drops several ballots in the drum for the week's worst reporting, including this one on the "high-speed car chase" involving paparazzi and the driver of the car carrying Tom Cruise and his daughter. According to the HuffPo, the driver rushed through New York's streets at breakneck speeds of up to 45 miles an hour in a 25-mile-an-hour zone. The horror! The poor girl must have been terrified. If you can handle the nerve-jangling excitement of the thing, then you can read the full story here.
Seeing as this may be relevant to many readers, I decided to include a reader's question, and our reply, in today's edition.
Thank you for your very informative comments and for the quality of newsletters from Casey Research.
I often discuss the present economic situation with a friend of mine and what the future may hold for precious metals and the global economy in general. This is what he recently wrote to me. I would appreciate your opinion on the matter since I share the same concerns.
"I have been heavily invested in precious metals/shares since 2002. I agree that the PMs and their shares will eventually explode upwards. However, there is another prevalent school of thought which thinks that all the stock markets (not just the PMs) are on the verge of a major (up to 90%) contraction, i.e., worse than 2008, later this year, perhaps even before the US election. They present some excellent arguments in this regard.
"Given both the European and US debt situations and their slowing economies, I think that this is a distinct possibility. If it happens, all stocks, including the PMs, will be pulled down. Although my portfolio has since recovered, it lost 54% in 2008. I have yet to see any analyst discuss these two possible scenarios in the same article, but the danger of the latter preceding the former is always on my mind."
Also, as a hedge against such an event, I was going to suggest the possibility of buying put options as insurance for the near to medium term. What do you think?
Answer One, from me:
My standard answer to this sort of question is that no one should own any more gold stocks than they are comfortable losing half on. And I like to remind people that, when it comes to a solid company working on a great project and with lots of cash in the bank (the sorts of companies we like to follow in the International Speculator), there is the risk that you will sell in panic during or immediately after a crash.
Gold stocks will definitely get knocked back in a crash (though I personally think the scale of the correction you are worried about is a bit on the extreme side), but if history is any guide, then the gold stocks will come roaring back first and farthest as the government invariably restokes the monetary fire in response to the crash.
As for gold itself, the best way to view it is as insurance for your net worth. If you are worried about a big correction – and you probably should be – then reduce your overall exposure to precious metals to an amount that, if you were to lose half, it would not affect your quality of life one iota. So, maybe 20% of your portfolio – meaning you are mentally prepared for a 10% loss?
Terry Coxon weighs in: I don't like the idea of using put options to make the puzzle go away. If an investor is worried about owning something, he should sell it. Buying off uncertainty by paying option premiums gets expensive, and if there is no crash, you lose the option premium – and you'll probably still be worried and need to buy another option.
There is an additional problem with using puts to protect against a big crash. Short positions in options (which always open the door to margin calls) are one of the standard tinker-toy pieces used by people who build derivatives. If the big crash comes, price movements could be so rapid that margined options accounts go to negative value before than can be closed out by a margin call. The Options Clearing Corporation could be left holding the bag and become insolvent – to the dismay of investors who thought they were using options to reduce risk.
David again. I hope those answers are some help. But even as I say that, I know that a number of dear readers are well underwater on their gold stocks just now, and suggesting moderation in the size of their holdings is probably of no real help (though we have warned readers on this point too many times to count in the past, especially when markets are flying).
All I can say is that, while the politicized nature of the economy – i.e., where politicians enact all sorts of schemes to keep the free market at bay – makes forecasting the timing of things all that more challenging, the economic fundamentals and the consequences of those fundamentals cannot be avoided forever.
On that front, the chart here is from a new report by the folks at UBS on the threat of hyperinflation in the world's largest economies. As you can see, the world's monetary base is soaring.
Hold on to your gold.
Running out of time, so just a couple of funnies this week…
The Heaviest Element Known to Science
The CSIRO in Australia has discovered the heaviest element yet known to science.
The new element is Governmentium (Gv). It has one neutron, 25 assistant neutrons, 88 deputy neutrons and 198 assistant deputy neutrons, giving it an atomic mass of 312.
These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lefton-like particles called peons.
Since Governmentium has no electrons or protons, it is inert. However, it can be detected, because it impedes every reaction with which it comes into contact. A tiny amount of Governmentium can cause a reaction normally taking less than a second to take from four days to four years to complete.
Governmentium has a normal half-life of 2-6 years. It does not decay but instead undergoes a reorganisation in which a portion of the assistant neutrons and deputy neutrons exchange places.
In fact, Governmentium's mass will actually increase over time, since each reorganisation will cause more morons to become neutrons, forming isodopes.
This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as critical morass.
When catalysed with money, Governmentium becomes Administratium, an element that radiates just as much energy as Governmentium since it has half as many peons but twice as many morons. All of the money is consumed in the exchange, and no other byproducts are produced.
A Cost-Effective Way for a Single Mom to Find a Mate?
By Ankur Shah, Southeast Asia Equities analyst for World Money Analyst
If you find yourself struggling in the current "risk on"/"risk off" market environment to make a decent return on your portfolio, you may find solace in the fact that you're not alone. Even the professionals, meaning large institutional investors, are struggling to achieve positive real returns. The German newspaper, Der Spiegel, recently interviewed Yngve Slyngstad, the chief investment officer of Norway's wealth fund. Slyngstad is responsible for managing $558 billion largely earned from the country's oil revenue.
In the article, he states, "In the past we searched for risk-free returns… today we know that what we mainly have are investments with return-free risk." It's clear that many investors attempting to insulate themselves from further volatility have looked to sovereign bonds as a place to hide. Unfortunately, given the generational lows in interest rates, investors in most government bonds are facing negative real returns and undeniably "return-free risk."
In the book, This Time Is Different, economists Carmen Reinhart and Kenneth Rogoff conduct an overview of financial crises going back eight centuries. By reading the book, you realize that financial crises have been a part of financial markets since the beginning.
The earliest crises were typically caused by a monarch who overstretched his finances in a time of war and then debased the coinage by reducing its gold or silver content to fund the budget shortfall. The advent of central banking has made the currency debasement process much more advanced, but the principles remain the same. The easiest way for modern-day politicians to deal with huge government debt loads is through direct monetization, which typically results in higher rates of inflation. Thus, investors, especially those nearing retirement, need to remain focused on real rates of return.
With the US 10-year Treasury currently yielding 1.63% and inflation at 1.7%, investors are barely maintaining the purchasing power of their investment, let alone generating a positive real return.
Although it appears irrational to lock in a marginally negative real return, investors are simply reacting to the continuing crisis in Europe and recent spate of negative data points coming out of the US. From my perspective, it's highly likely that the US is heading into another recession.
The year-over-year change in real personal income growth provides an example. Lakshman Achuthan of the Economic Cycle Research Institute notes that "personal income growth has never remained this low for four months without the economy going into recession. At least in the last 60 years."
Additionally, the June ISM data came in at 49.7, reflecting contraction in the US manufacturing sector. More importantly, it was the first below-50 print since July 2009. With the rush of recent negative economic news, we've seen this story before. In prior slowdowns, central bankers were able to successfully pull back the global economy from the brink of recession through coordinated monetary interventions (QE2 in 2010 and LTRO in 2011).
At this point, Wall Street and many investors believe that this pattern can continue indefinitely. Furthermore, it would be unwise to bet against another round of monetary heroism by the world's central bankers.
However, it's clear that with each round of quantitative easing, the impact on the real economy becomes ever more fleeting. Thus, investors find themselves in a difficult situation – either facing negative real yields from "secure" sovereign debt or placing their faith in an equity market that continually needs new doses of monetary stimulation. What, then, is the right course of action for one's investment portfolio?
As a Casey Research reader, it's clear you already know about the benefits of investing in the resource sector and owning gold. However, there is another highly valued asset that can help boost your real rate of return while minimizing volatility in the current market environment.
High-quality dividend-yielding stocks have proven to outperform the overall market with less risk over long periods of time. A study done by Standard & Poor's found that A-rated stocks outperformed C&D-rated stocks by 3.8 percentage points from 1968 to 2004. In addition, the A-rated stocks produced an annualized return of 13.1% with half the standard deviation of the C&D-rated stocks.
Although high-yielding US equities are a good place to start your search for investments offering positive real returns, a carefully selected portfolio of high-yielding international equities offers the added benefit of providing currency diversification and the potential for much higher yields.
The chart below displays current dividend yields for the major developed markets globally. The dividend data are based on iShares MSCI country ETFs and derived on a TTM (trailing twelve month) basis. Interestingly, the US equity market currently offers the lowest dividend yield among all developed markets.
The dividend yield for the Spanish market jumps out on the graph, but it's clear that this is due to the ongoing bear market in Spanish equities. In this instance, the high-dividend yield signals the possibility of future cuts in dividends, beginning with the undercapitalized banking sector.
The Singaporean equity market, on the other hand, offers an attractive yield combined with a currency that has the potential to appreciate relative to the US dollar. Unique investment opportunities can be found in the current market environment – it's just a matter of starting your search in the right market.
For instance, I recently uncovered a Singaporean company for World Money Analyst that offers exceptional free cash flow, a stable recurring revenue model, and reasonable upside potential at current price levels – not to mention a 5% dividend yield. Additionally, in the upcoming July issue of WMA, I've highlighted an opportunity to invest in preference shares that are senior to common equity, available to retail investors and offer a 4.4% dividend yield.
In the current "return-free risk" environment, international equities remain one of the few investment options that have the potential to maintain your purchasing power and generate positive real returns.
[Ankur Shah is the Southeast Asia Equities analyst for World Money Analyst – a new letter published by International Man that regularly identifies publicly available high-yield, lower-risk opportunities around the globe. Click here to learn more about our 100% risk-free test drive – including three highly actionable special briefings designed to get you started on the right foot right away – but only available for a limited time.]
David again. I am a big fan of the World Money Analyst (I helped them find the right analysts around the world to fulfill their mandate of finding opportunities, wherever in the world they may be). The latest edition was just released and is excellent. For a limited time, it's only $59 a year and comes with a money-back guarantee. Check it out.
Per my comments at the beginning of this missive, there are a couple of movies I've seen recently that surprised me in a good way. The first was an extremely-low-budget film starring Will Ferrell called Casa de Mi Padre that is largely a spoof on the genre of Mexican telenovelas. By low-budget, I mean on the order of about $6 million – which is roughly the budget for a hairstylist on the average movie these days.
What's interesting, and very humorous given Ferrell plays the lead, is that the film is almost entirely done in Spanish with subtitles. One exception is the scene where a DEA agent confronts Ferrell's character and asks him if he speaks "American."
Here's a trailer for the film, which should pretty quickly allow you to decide if the movie is for you. Personally, I found it hilarious.
The second film is called Lockout, about a tough-guy ex-CIA agent who is tasked with saving the president's daughter after she is trapped on a low-orbiting prison station. The movie will remind those of you who know it of one of my old favorites, Escape from New York. It is gritty, violent, exciting, but with one additional ingredient that makes it stand out from the typical action adventure film – humor. You can view the trailer here. As you do, you will only get a glimpse or two of the humor, but I can assure you it is there, and it makes a good action flick a very entertaining one.
Southern California Phyle Meeting. It's been awhile, but I received an email from the organizer of this phyle to let us know that they are starting back up again with a meeting on July 28 from 1:00 to 4:00 PM at their usual haunt, the Steelhead Brewing Company, 4175 Campus Drive in Irvine, California. Drop us a note at phyles@CaseyResearch.com and let us know if you plan to attend, so we can let the organizer know (there's only room for about 30 people.)
Warning: Zombie Governments Have Hijacked Your Economy! Today's governments are becoming larger and more destructive by the day. With out-of-control spending, increasing regulatory burdens and ever-changing rules affecting the economy and investment market, it's time to face the facts:
The economies of most of the world's largest countries have been hijacked by their governments… and it's only going to get worse as the sovereign debt crisis spins out of control.
The single easiest way to get fully informed about the truth of today's politicized economy, the consequences that will unfold over the months and years just ahead, and how you as an investor can avoid the risks and earn a profit…
… is the Navigating the Politicized Economy Summit co-hosted by Casey Research and Sprott, Inc., September 7, 8 & 9 in beautiful Carlsbad, California.
This timely event will feature a truly blue-ribbon faculty including former US Comptroller General David Walker, top market strategist Donald Coxe, legendary bond manager Lacy Hunt, resource investing legends Eric Sprott, Doug Casey and Rick Rule… and that's just for starters!
For example, G. Edward Griffin, author of the best-selling Creature from Jekyll Island, will also be there, and you'll be impressed with the rest of the faculty, too.
And with that, I will sign off for the week by thanking you for reading and for being a Casey Research subscriber!