Dear Reader,

Last week I had the chance to sit down for lunch with an old friend whom I have mentioned in these pages before, though I forget what pseudonym I used for him at the time, so I'll call him Phil for privacy purposes.

The basic storyline is that Phil, now 73 years old, is about as all-American as a person can get. Like many dear readers and yours truly, Phil grew up in the era where kids were left to discover the risks and rewards of life, uncushioned by overprotective parents or a cosseting, meddlesome government. So much so that what were common practices back then would literally cause your children to be taken away from you by the state today. While the list of relevant examples is long, I'll toss out just a smattering to make the point.

• No car seat belts. And it was worse than that. I remember wrestling with my brother and sister in my mother's convertible Chevy as it barreled down the road, with the tussle ranging from the back seat to the front and back again. 
  
  "Stop roughhousing!" I recollect my mother saying on one occasion. "It's not a house!" one of us little brats replied.
  
  Today, the engine wouldn't grow cold before family services dragged us off to a foster home.
   
• Free-range kids. On the typical summer or weekend day during the school year, we would gobble down our white-bread toast and Cap'n Crunch sugar pellets and head out the door to find friends, only rarely bothering to call ahead.
  
  In my case, that involved a walk or bike ride (no helmet) of about a mile. In short order, a small gang of us would be roaming the landscape or climbing in someone's ratty old boat and heading out into the shark-infested bay (I know because we would on occasion hunt them). Our parents would never know where we were or had been until we returned home at the end of a long day dirty, exhausted, and sometimes slightly wounded from some semi-dangerous antics.

In all those formative years, only one acquaintance ever got seriously injured: Gerry Magoon, who wandered too close to an open storm drain during a torrential downpour. (They found his body in the bay two days later.) But all things considered, I suspect the mortality rate due to accidents for our group was on par with the national average back then, and probably today – though the level of "protective services" has grown exponentially since then.

• Battle boys. While today the idea of a schoolyard fight is enough to trigger a call to the police, with the kids involved sentenced to life on Prozac, back in the day if someone insulted your mother or otherwise got seriously sideways with you, standard operating procedure was to step out back of some convenient structure and settle the matter then and there. No one got seriously hurt, at least in my direct experience, but we all learned lessons, such as actions have consequences and sometimes life just isn't fair… the latter being when you lost.

I drift, as I am prone to do. The point I am making is that Phil's character was forged in an America where self-reliance wasn't a talking point but a fact of life. It was also an era where the ideal of the American Dream was never closer to reality – where most families had two parents and people typically held only a few jobs over their lifetimes, in time retiring with a reasonably comfortable pension.

Following that dream, Phil attended university, in time earning a master's degree in counseling and worked with troubled kids before ultimately accepting a job as a wrestling coach for a major university. From there, he joined a well-known company in the business of selling exercise equipment, where he became a senior manager.

Today, despite being sound of mind and in remarkably good physical condition at 73, Phil and his wife are dead broke. They have no savings and are scraping by on Social Security. So much so that they haven't yet turned on the heat in their house, despite it being winter in New England.

To unlock precious cash, they would happily sell their house – their last asset – but the real estate agent can't even get anyone to swing by for a look. As for getting a job, forget it. Even with his master's and a ready willingness to work for peanuts to help the most troubled of kids – those jobs are going to the legions of new college graduates. Old folks need not apply.

"Where did you go wrong?" I asked as lunch wound down. "What mistakes did you make that led you, the quintessential self-reliant, educated, hard-working, honest American to this desperate position?"

Pausing a moment to gather his thoughts, Phil replied, "My broker lost almost all of our savings in 2000. He sounded so knowledgeable, so confident. I trusted him, and he blew it all up – everything I had saved."

"And I got screwed by my company," he added. "I ran the entire sales operation for twenty years, and again and again the guy that owned the business promised me equity, but something always kept coming up that delayed it actually happening. Then one day he sold the business, and I got nothing. The new guys wanted me to keep running things and said that they would pay for an annuity so I'd have an income stream when I retired, but they never quite got around to it. When I finally pushed them on it, they fired me."

"So, it seems that the biggest mistake you made in your life was being too trusting?"

My comment caused him to rock back in his chair for a moment, a reflective look on his face, before answering, "Yes. I guess that would be it. I was too trusting."

A Matter of Trust

The whole concept of trust is fascinating, at least to me, in that it is intrinsically intertwined in almost every important aspect of life… so much so that it might be considered a dominant aspect of the human experience.

In the case of Phil, his failure to understand the consequences of giving his trust too freely has left him in a state of penury at an advanced age – which is about as dire a consequence as I can imagine. Yet, I suspect that most people give the matter of trust hardly a passing thought.

Allow me to amplify with some personal experiences and by asking you to think about some of your own.

Trust in business. Another good friend of mine, a Brit working in the States, took what was supposed to be a quick business trip to Canada, but when he tried to board the plane to return to the States, he was denied re-entry, even though all his papers were in order and he had owned and run a successful business employing dozens of people for almost two decades.

It seemed someone had called the immigration authorities and told lies about him. That someone, it turned out, was his trusted bookkeeper who had been systematically embezzling, including stealing the company's tax payments, and was looking to buy time to finish her looting. By the time the mess was resolved and he was allowed back into the country six months later, the looting was complete. Meanwhile, the IRS, upon being informed of the situation, unhelpfully demanded immediate payment of all the stolen tax payments, with interest and penalties, causing the business to fail.

Such stories of bad employees and bad partners screwing over partners are as plentiful in history as the sands on Waikiki beach. That doesn't mean one shouldn't trust the people who work for them, or their business associates or partners. But the concept of "trust but verify" is particularly apt in a business setting. If you don't have effective controls in place on the important aspects of your business, you might want to give that some further thought.

In addition, in a situation such as Phil's, where he was promised equity that never quite materialized, he could have and should have drawn a hard line on the floor while he still had the clout to influence the transfer of the equity – in his prime, as opposed to when his career was winding down. If you have an unfulfilled agreement of the sort that Phil had, be polite but be persistent and diligent in ensuring the agreement is delivered upon.

Also on this general topic, you need to be attentive to the character of people you rely on. Not so long ago, we were working with someone who, over the course of dinner, told us in great detail that he was über-skilled at a certain sport. The opportunity to play said sport together arose shortly thereafter, at which point it quickly became clear that the whole story had been a fabrication. In a later discussion about the matter, his cavalier reply was, "Well, I guess I was blowing smoke up your skirt."

Think about that for a second. Here's a person I am doing business with who is willing to create a fiction out of thin air, then shrug it off as if it's nothing. While he's not a bad guy, how could I possibly continue a business relationship, when to do so would have meant soldiering on, never knowing whether what he was telling me at any given time was fact or fiction? And so the business relationship came to a screeching halt. Sorry, when it comes to being dishonest in business, it's one strike and you're out – at least in my world.

A less important but still useful illustration of the point comes from a local optometrist. Every time I would go in to see him for a checkup, he would ask if I had dry eyes. No, I would reply. A few minutes later, he would ask again… and continue dropping it into the conversation until, just to get him to move on, I said something like, well, once in a while my eyes might get a little red and itchy. At which point he would hand over some eye drops, then proceed to bill my insurance company a hundred dollars or so for a medical consultation.

For the first couple of visits, his scam didn't register in my mind – but when it did, I changed doctors. We all have choices in this life, and I steadfastly refuse to do business with people I know to have bad ethics.

Trust in personal relationships. Trust in a relationship extends far beyond the big drama of straying mates. I know a guy with a large trust fund who married a much younger woman, even though it was apparent to everyone – including him – that she was just after his money. Even before they married, he laughed off everyone's concerns, one time telling me it was no big deal – he was just following in his father's footsteps as he had been married four times. The last time I saw her, she was standing outside of an investment property he owned, a clipboard in hand, taking notes on possible resale value. The last time I saw him, he was sweeping the floor at a local deli (what she didn't take, his broker helped him lose in the 2000 crash).

On a more mundane but almost more important level, do you do what you say you are going to do in your relationship? Does your spouse know that you are a person who lives up to your promises? It's easy to forget those promises in the daily swirl, but successfully living a life in close concert with another very definitely requires the solid glue of trust. Which reminds me, I need to go let the dogs out.

Trust in yourself. It seems a bit ridiculous to even ask, but do you trust yourself? Before snapping off a quick, "Of course!" you might want to give it just a bit of thought. Though it may be logical that no one will look after your own interests better than you, when you get right down to it, a lot of people do a pretty poor job on that front… to give just one example, my megarich friend with a loving family who drank himself to close to death, then finished the job in a sleazy hotel room with a heroin-cocaine "speedball."

Less dramatic, people regularly eat an extra helping of pie or a double serving of lasagna – even though their guts already obscure their belt buckles. Exercise? Maybe tomorrow.

For many, if someone treated their body the way they treat it themselves, they'd call the police.

On a less physical plane, many people develop hardened biases that, if impartially examined, would be revealed as delusional and in some cases detrimental. For instance, thanks to the state of public education and societal norms these days, many children are raised believing that they are exceptional – that they can literally do no wrong in anything. Everyone is to be included, and everyone is special. A bad grade (if that's even possible)? It's the teacher's fault. Poor at a team sport? No worries, you get your turn at bat nonetheless.

It reminds me of a true story Neil Howe, author of The Fourth Turning, tells about a young adult working at her first real job. When the time came for her first job review, their supervisor began telling her that her performance was substandard, at which point the employee pulled out her cell phone and called her mother, quickly summed up the situation, and then handed the phone over to her supervisor so that her mother could set him straight.

Could it be that by trying to protect our children, we have left them disconnected from the hard realities of the world – and thus unprepared to cope?

We humans are actually very capable at seeing something with our own eyes, then interpreting it as something entirely different. It's why even eyewitness testimony is so often found to be inaccurate. We are even capable of manufacturing memories about past events that never happened. You can test this for yourself by asking a relative or friend of some duration (it works especially well with teens) to remember some entirely made-up event. Provide some level of detail and watch what happens. More often than not, after a bit of reflection, the person will answer in the affirmative, that they do in fact remember the incident… then refuse to believe you when you tell them you made the story up.

There is no real action item here, other than to be sure to step back once in a while and check your assumptions, and not to be so quick to trust even your own eyes or interpretation of events. In other words, make a deliberate attempt to look at both sides of a story.

Trust in investing. As my friend Phil found out so painfully, this is one you definitely need to pay close attention to. If your broker is commissioned, you have to start from the perspective that it is in his interest to get you to trade – and that if you don't trade, he may not be able to cover the car payments. Ditto the mutual fund sales guys, coin dealers, and the talking heads on CNBC who work for the financial firms.

Of course, the reason that people turn to these "experts" is because they don't trust themselves when it comes to making investment decisions. And, in many cases, correctly so. But that fact reveals the horns of the dilemma. Namely that if you want to do well with your investments, you have exactly two choices: (1) trust someone else, or (2) learn enough to trust yourself. Even if you want to work with an advisor, it is only by learning enough about investing to trust yourself that you will be equipped to know whether someone else is worth trusting.

This may surprise you, but I don't even trust that the services published by my own company, Casey Research, will point me down the right road or tell me which investments are sure to double or better over the next few years.

Let me clarify by stating, unequivocally, that no one knows what investment markets are going to do tomorrow, let alone a year or two down the road. They are far too complex to allow accurate prediction. Likewise, no one knows what specific stocks or commodities are going to do over time. Anyone who tells you that they know is either fooling themselves or trying to fool you.

When it comes to Casey Research, what I do trust – and trust completely – is that our researchers and editors will work like mules in the attempt to get a firm understanding of the most likely economic and investment scenario we'll experience and the best ways to invest should that scenario come to pass. As I am intrinsically involved in the daily flow of research, I pay close attention to the work we do, and am confident that the work is of the highest quality and therefore very useful to me in my own investing – but I still do my own due diligence to make sure the recommendation checks out and fits in with my own portfolio.

When it comes to investing, no one will pay closer attention – or should – than you. Do your own due diligence. And never forget, there is no such thing as money for nothing (unless you are a banker, that is), and if something sounds too good to be true, it probably is.

Most of all, invest in your own investment education, or risk ending up like my friend Phil.

On this general topic, don't take your bank or brokerage house's safety for granted, either, a lesson underscored by the mess at MF Global. Because there are so many hidden risks these days, the simplest way to get some protection on this front is to spread your money around a number of different high-quality institutions – preferably in more than one political jurisdiction. In terms of deciding which banks are safe to invest in, there are a number of services, such as Institutional Risk Analytics, that offer helpful and reasonably priced reports on a bank's health.

As an aside, researchers have found that there are only two ways that a person can be perceived as credible. The first is to just be credible, but the second is rather devious – it is to say something that is perceived as going against your own self-interest. Note my above reference to Casey Research. Did you think that by saying I don't trust Casey Research, it made me more credible?

Everything I wrote above is how I actually view things, but that's secondary to the point I am trying to make – that there are a number of techniques people can use to influence your thinking. One very successful broker I have watched work the crowds before is truly a grand master at the game, using phrases such as, "You probably don't want to open an account with me, I'm far too speculative for you." By the time he's done with his self-deprecating spiel, people can't wait to throw money at him.

There is an excellent book on this topic, Robert Cialdini's Influence: The Psychology of Persuasion. I highly recommend you read it – in addition to being a fascinating read, it will help you recognize subtle and not so subtle attempts to influence you without you even being aware of it.

Trust in government. Understanding the nature of government and learning to be very skeptical about the institutions that together comprise a government is essential to building a secure future.

So, should you trust your government? In the interest of time, I'll let former president Bill Clinton answer that question.

This topic of trust in government is so important because so much of the news that people rely on in making critical decisions about business, investments and much more emanates from the government.

The government says inflation is running at less than 3% and will remain contained forever. Do you trust that data? If so, then owning precious metals might not be the best move. Merkel and Sarkozy act as if they have a solution to what ails Europe. Do you trust that they do, or trust that their solution – which does nothing to address the piled-up sovereign debt – will be effective? There are investment decisions to be made.

Today the BLS released data that says that US unemployment has fallen to 8.6%. Are you buying it? Or have the numbers been so jiggered that the actual improvement might be from, say, 19% to 18.6% – percentages some independent analysts think are closer to reality? As a business person, does this mean recovery is really happening and so you should begin to plan an expansion?

In my opinion, when it comes to any set of government-produced data and analysis, you have to do your own due diligence, because there is so often a clear conflict between telling the truth and the goals of the career politicians – namely, to kick the can down the road long enough to finish up their political careers.

On this general topic, our own Bud Conrad has been working as hard as an entire team of mules for an article in the upcoming edition of The Casey Report on just how serious the euro crisis is, and how it may boomerang on the US economy. The next edition will be published next week, and you can read it with a full money-back satisfaction guarantee – details here.

Misplaced trust in government can have far more dire consequences than just wiping out your wealth. For instance, my dear partner Doug Casey has come to believe that the US is on a steady slide towards becoming a police state. While I tend to be the optimist in the organization, the evidence is piling up that suggests that Doug might be right. You've probably seen the many videos showing acts of institutionalized police brutality, or articles on the loss of constitutional rights in the government's frantic, well-funded rush to batten everything down against the terrorists.

Pundits on the right side of the political spectrum – a group that purports to be in favor of smaller government and to be champions of liberty and all that – long ago rolled over on this issue and now have become the biggest proponents of giving the Big State a big stick. Consider, for example, the ludicrous statement made by Fox News commentator Megyn Kelly that the pepper-spraying incident at the UC Davis campus was much ado about nothing, saying that the pepper spray was "a food product, essentially." Gee, I wonder how she'd enjoy having a can of that food product emptied in her maw?

Worse than that, and I will try to keep calm on this one, the frickin' US House and now the Senate have passed a bill that allows the US military to scoop up anyone thought to be a terrorist – a remarkably broad term – and detain them without trial indefinitely. And the law applies to US citizens, living in the United States.

Really? Seriously? What? Eh? Come again? Huh?

Of course, the average red-blooded American might not share my outrage, saying something like, "If you're doing nothing wrong, then you got nothing to worry about. No big deal, get over it."

To which I would answer by suggesting that they review their history books, noting as they do the number of instances where something that is not considered "wrong" one year might be considered very wrong a few years down the road. Up until the days before World War II, there was nothing wrong about being a gypsy, gay or Jewish in Germany – before it became a "crime" punishable by death.

So, who might the military use its new powers on in the future? One possible scenario might be that some crazed and misguided self-proclaimed anarchist successfully pulls a Guy Fawkes, taking down a large government building – á la Timothy McVeigh. At that point, might the new law be used to lock up anyone who has ever written in support of anarchism as a viable alternative to the coercive powers of the state? Especially if that same person occasionally travels to the Middle East and has in the past amused himself by playing dress-up in the local garb?

For example, Doug Casey, who wrote these outrageous words in 2006:

 By definition, democracy means "rule of the people," monarchy means "rule by one," oligarchy means "rule of the few," and so forth. Anarchism means only "no rule." It doesn't mean "chaos," "disorder," or "violence." Like so many words, its true meaning has been misappropriated and twisted. The popular perception of an anarchist is a man dressed in a black cape skulking about with a round bomb, fuse lit. And certainly there have been violent anarchists, just as there have been violent Americans, violent Christians, violent parents and violent doctors. But that's never been an essential or even an accidental characteristic of any of them.

Paradoxically, anarchism is the gentlest of political systems. It is the political manifestation of the ancient Chinese Taoist philosophy, what philosopher Alan Watts called the "watercourse way," where everything flows unrestricted, at its own pace, to its own level. Some have suggested that I abstain from using the word anarchy because it carries so much emotional baggage and arouses atavistic fears. But ideas should speak for themselves, and semantics should be used to clarify, not obscure, their meaning.

In many ways, reality is just a creation of widely shared opinions. Nothing should be accepted just because it exists, including the state. Concepts take on lives of their own, unless someone challenges them. And the concept of the state is sorely in need of a challenge.

Doug Casey, The International Speculator, April 2006

David again. President Obama, whom I don't trust as far as I can climb up a greased pole, which is to say, any more than any other politician, has promised to veto the bill – and I'm completely with him on this one. If he doesn't, it will significantly speed up our own preparations to live elsewhere.

Here are a few links on this story: From the New York Times; Ron Paul's views from the Washington Times; and Spencer Ackerman from Wired.

Be outraged. And more to the point, be vigilant – the situation is getting dangerous. Not because someone is likely to kick your door down tomorrow, but because that this sort of legislation could be passed by a solid majority vote shows how degraded the situation in the US has become. Should it become law, the final pieces will be in place for a coup de grâce on liberty should something that looks like 9/11 occur again. As the odds of that occurring are fairly high, so is the resulting crackdown.

Paranoia? A glance at the wholesale trampling of individual liberties and justice that has occurred since 9/11 would suggest otherwise.

Trust and your currency. Related to trusting government is the matter of placing trust in the currency units those governments issue… and that people use to store so much of their wealth in.

There are a number of analysts who say that the great deleveraging the world is now undergoing ensures that the price of gold is going to collapse, because the monetary inflation can't keep pace with asset destruction, and therefore the price inflation that will drive gold higher from here won't materialize. This completely ignores the question of confidence in the purchasing medium… the fiat-currency units. While we continue to believe that price inflation will materialize and that it will surprise on the upside, the more immediate risk has to do with people losing confidence in the currency itself.

Last week, the European powerhouse of Germany had a failed bond auction. Not because people are worried about the government, in my opinion, but because they worried that the currency the bonds were denominated in – euros – might not be around or would be seriously debased by the time the bonds came due. The poison in this brew is, of course, the very real potential for interest rates to start rising across the board. At that point, it will become quickly apparent to more than just us that the debts of many leading governments are unpayable under any circumstances. If investors stay away from the steady auction of government Treasuries – over there and here in the US – then the central bankers will have no choice but to monetize, dooming the currencies and any wealth held that is denominated in those currencies.

Which brings me to an article on the latest news on Europe and the machinations the central bankers announced this week to such fanfare, from our own Bud Conrad.

The Latest Central Bank Disasters

By Bud Conrad

The problems of Europe are described in news story after news story. Most notably, the weaker governments of the Southern European countries have been facing difficulties borrowing enough to pay their bills. The interest rate for Italian bonds spiked over 7%, almost double that of last summer. A crisis is brewing. These countries cannot manage their debt, so the fear has spread to the big, overleveraged European banks that hold much of the government debt.

The chart below, borrowed from Zero Hedge, shows the three-month London Interbank Borrowing Overnight Rate (LIBOR). The rate has been rising because investors are no longer comfortable that the banks are secure enough to repay loans. US money market funds have pulled back from making new loans to the European banks, so they face a liquidity shortage. Depositors in these banks have been looking for other places to keep their money safe.

In essence, the rate increases are showing a loss of confidence that could lead to a "run" on the banks. The worst in the list is Crédit Agricole (CA-CIB), which sports a leverage ratio of 67 to 1 and just closed its operation in South Africa, in what looked like a quick sale for liquidity.

(Click on image to enlarge)

The Fed Is Printing Again

The news story that surprised everybody on November 30 was that the Federal Reserve, in conjunction with most other central banks, was cutting its interest rate for providing currency swaps to only 50 basis points above the Overnight Index Swap rate. Stock markets all jumped on the news because the Federal Reserve would be providing additional liquidity. The Dow alone was up 490 points. This is a Fed bailout of European banks under the pressure of Europe's distress. It is a form of printing money. The Fed prints dollars and gives them to the ECB, and the ECB prints euros to give to the Fed. Congress was not even notified. Central bank "printing" is limited only by how much other central banks want to borrow. The ECB can provide loans in dollar terms to its banks, removing liquidity concerns that could force a bank into collapse.

Since the Fed gave us no indication of size, I provide the chart below that shows the last swap program jumped to almost $600 billion within a year during the first stage of the credit crisis in 2008. The problems look more serious now, so my projection is that this program could be even bigger. The consequence of printing new money is, of course, to debase the dollar and the euro simultaneously, so gold jumped $35 on the day. I see the action as a desperate move to keep European banks from failing, which could cause losses for US banks. It is an indication of how dire the European situation is, not an indication of a new solution to weak debtor countries in Europe.

(Click on image to enlarge)

Fed Cancels Treasury Sale

In the flurry around the big, coordinated swap rate cut to 50 basis points over OIS, you may have missed this important piece of news:

The Fed canceled its Permanent Open Market Operation to sell off short-term debt as part of the Twist operation. Twist was announced as a program to lower long-term rates by buying long-term Treasuries at the same time as selling short-term Treasuries. They aren't following through with the sale that would drain money and possibly raise rates at the short end of the curve. I predicted this would happen when the Fed announced the program because their commitment to maintain the short-term rate below a quarter-percent out to 2013 would mean they couldn't do both. Here is a snapshot of the announcement:

(Click on image to enlarge)

Their explanation of "system difficulties" is hiding the real reason, which is that they can't keep the rate low if they sell Treasuries. The Fed is looking more evil by the hour, even if their direction is obvious: to bail out banks, then bail out governments, and then to screw the little guy with low interest rates on savings and big inflation. Some people are waiting for the Fed to announce a new QE3; I have said for months that it was already here. The combined actions this week confirm our position that we can't trust the dollar – or any currency, for that matter – so the long-term case for gold is again confirmed.

China Cuts Reserve Requirement

China announced that it was cutting its reserve requirement by 50 basis points. That means that Chinese banks have a little more leeway in making more loans. By itself, the pronouncement is modest, but its importance is that it is a change of direction because China had been tightening its policies for a couple of years to slow its real estate bubble. The most recent PMI (Purchasing Manager Index) dropped to 49 in November from 50.4 in October, confirming the trend I indicated in the last issue of The Casey Report. The slowing is probably part of the reason for the central bank shift. The cut in reserve requirements is further easing, not unlike that of the other central banks, and brings us back to the scenario of worldwide economic slowing and central bank stimulating to expand economies that has led us to where we are – debasing currencies and watching gold move higher. The printing process isn't over, so we can see more paper in the future, meaning gold is a long-term investment despite its big rise to date.

A Final Word (or Two)

David again. Wrapping up on this matter of trust, I think it has never been more important to be a skeptic. My favorite T-shirt – the one I try to remember to wear when flying – has the words "Question Authority" blazoned across the chest.

These days it would be better if it read "Question Everything." For instance, the true nature of today's stock market, driven by high-frequency traders using incredibly sophisticated computers that anticipate what you are going to buy and sell before you do so. Or the latest mash-up of financial legislation and whether it might contain within its hundreds of new regulations time bombs that will take the system down.

We are a country – a world – that is in a state of extreme flux, with no political principles other than retaining power and no limits to the institutionalized manipulations that will be undertaken to keep the house of cards from collapsing.

That is not to say that everything, everywhere, is dark and dangerous. One can’t live their life in fear, even if there are legitimate things to fear. But if there has ever been a time to remember what it means to be self-sufficient, to do the hard work required to trust your own judgment when it comes to the important matters of your money, your future, then this is it.

Sitting around the house worrying, or rushing after one new idea after another without first having a solid foundation of personally verified knowledge to inform your decisions, all but ensures you will be a victim, versus a victor, as this crisis crests and ultimately concludes (as it will, in time).

These days it's never been easier to end up like my friend Phil – the American Dream twisted into an American nightmare.

Food for thought, I hope.

I need a laugh.

Friday Funnies

The first of today's funnies is from longtime subscriber, correspondent and soon-to-be collaborator Dennis Miller (not that one, another one).

Dead Horse Theory

The tribal wisdom of the Dakota Indians, passed on from generation to generation, says that "When you discover that you are riding a dead horse, the best strategy is to dismount."

However, in government more advanced strategies are often employed, such as:

1. Buying a stronger whip.
2. Changing riders.
3. Appointing a committee to study the horse.
4. Arranging to visit other countries to see how other cultures ride dead horses.
5. Lowering the standards so that dead horses can be included.
6. Reclassifying the dead horse as living-impaired.
7. Hiring outside contractors to ride the dead horse.
8. Harnessing several dead horses together to increase speed.
9. Providing additional funding and/or training to increase the dead horse's performance.
10. Doing a productivity study to see if lighter riders would improve the dead horse's performance.
11. Declaring that as the dead horse does not have to be fed, it is less costly, carries lower overhead and therefore contributes substantially more to the bottom line of the economy than do some other horses.
12. Rewriting the expected performance requirements for all horses.

And, of course…
13. Promoting the dead horse to a supervisory position.
 

This is from another regular contributor to these funnies, friend and fellow La Estancia de Cafayate community member Garry Johnson.

A golfer is in a competitive match with a friend who is ahead by a couple of strokes. "Boy, I'd give anything to sink this putt," the golfer mumbles to himself.

Just then, a stranger walks up beside him and whispers, "Would you be willing to give up one-fourth of your sex life?"

Thinking the man is crazy and his answer will be meaningless, the golfer also feels that maybe this is a good omen, so he says, "Sure," and sinks the putt.

Two holes later, he mumbles to himself again, "Gee, I sure would like to get an eagle on this one."

The same stranger is at his side again and whispers, "Would it be worth giving up another fourth of your sex life?"

Shrugging, the golfer replies, "Okay." And he makes an eagle.

On the final hole, the golfer needs another eagle to win. Without waiting for him to say anything, the stranger quickly moves to his side and says, "Would winning this match be worth giving up the rest of your sex life?"

"Definitely," the golfer replies, and he makes the eagle.

As the golfer is walking to the clubhouse, the stranger walks alongside him and says, "I haven't really been fair with you because you don't know who I am. I'm the Devil, and from this day forward you will have no sex life."

"Nice to meet you," the golfer replies, "I'm Father O'Malley."

Links

Is it possible to reverse heart disease? As I hope to live to be 120 or so, the progress being made in reversing heart disease is great news. Hopefully it will pay off.

The story behind the story on the central bank action? This story is interesting in that it precedes the coordinated central bank action discussed by Bud earlier. It points to a clear straw in the wind, coming from the big mining companies, which were starting to notice that credit and liquidity was drying up.

China – we told you so. For a number of months now, and as recently as last month, we have been clawing the data coming out of China and warning of impending problems. Those problems are beginning to become apparent, with the Chinese manufacturing index now heading decidedly south.

Words from the very wise. Frank Giustra is without question one of the smartest people in the resource industry. Actually, make that one of the smartest people in the industry, period – witness the fact that in the 1980s, he exited the resource business and went to Hollywood, where he founded Lionsgate Entertainment, accomplishing the truly Herculean task of creating a major studio before returning to the mining business ahead of the kickoff of the current bull market. That's how you become a billionaire. In short, when Frank writes an article, which he does only rarely, it is automatically a must-read. Here's an article he just wrote on the global economy and investments for the Vancouver Sun – read it and pass it on.

And with that, and with my usual apologies for going on so long and to the production team for running late, I will sign off for the week by thanking you for reading and for being a Casey Research subscriber.

David Galland

David Galland
Managing Director
Casey Research