 I see a
bad moon a-rising
Richard Daughty
...the angriest guy in economics
The Mogambo
Guru
Archives
January 13, 2005
- Foreign central banks poured another whopping $8.4 billion
into their custodial holdings at the Federal Reserve last week,
taking us to a new, all-time, hard-to-believe record of $1.344
trillion, as they furiously try and keep this ridiculous and
bankrupt economic system going.
In that regard, in the January 10 issue of Barron's was a line
in Jim McTeague's "D.C. Current" column, in which he
said, referring to the recent push for tax system overhaul, "Broad
reforms that make good economic sense are not good politics.
Too many powerful interests have too big a stake in the existing
tax system to allow its dismantling." And ditto everything
else because of the dense web of corruptions that bloom during
long bull markets, as faaarrrr too many powerful interests gradually
acquired faaaarrrrr too big a stake in every freaking thing,
especially ones which were financed by unbelievable amounts of
fiscal AND monetary excesses, and doubly especially one in which
the borrowed money was leveraged to the point where people are
only putting down 1% of the size of the bet (or less!). My God!
It's insane!
But looking at the end of the boom, the savvy dudes at DailyReckoning.com
write "Credit binges do not typically end in inflation.
Debt loads are not usually lightened so easily. People need dollars
to pay the interest on loans, and to pay back the principle.
What usually happens at the end of a credit boom is that money
becomes harder and harder to get. Debtors are stretched; they
can no longer increase spending. Businesses have surplus capacity
already; they cannot profitably add factories and workers. Capital
spending slows down. Consumer spending slows too. Money becomes
scarce."
And this is not just about us peasants and how we will be out
here rummaging around in each other's garbage cans looking for
useful or tasty items. But not only will we suffer a scarcity
of profits, but there will be a scarcity of tax revenues flowing
to a huge, ravenous, grasping, greedy government that has no
instinct as finely honed as that of raw survival.
But while it may be true that credit binges don't typically end
in inflation in asset prices, raise your hand if you think that
the current situation is typical, and then The Mogambo will laugh--
hahahaha! --with that stupid laugh of his that indicates utter
disdain for your intelligence, which causes you to get all huffy
and storm out, slamming the door, and that is why nobody ever
raises their hand unless they are new in the area and just moved
here from someplace that has a lot of pollution that destroys
people's brains. But when the dollar falls to some pathetic low
value, I am telling you that the Chinese are going to be looking
at those lovely bushels of corn, and those luscious soybeans,
and wheat, and copper, and commodities of all kinds, and they
will seem cheap to them because of the devalued dollar. And since
demand usually picks up when prices go down, and they will import
more of them into China. Then the Chinese producers are going
to whine in that singy-songy Chinese way that sounds like "Sum
hoy dim hong dow flied lice chow mein" that the Americans
are selling at prices that are so low that humble Confucian man
cannot compete against imperialist Yankee aggressors. And then
the Chinese government will slap tariffs and duties on imports
of American commodities to 1) mollify the whining Chinese producers,
and 2) get boatloads of tariff and duty money to expand Chinese
government spending, especially on those poor peasants who are
getting crushed in the resultant inflation. And then we Americans
will, predictably, retaliate by threatening them with tariffs
of our own, and if that doesn't work, then with nuclear annihilation
or something military. And then the Chinese will lower the tariffs
a little, and we will make concessions, such as giving them nuclear
missiles. The end result will be a rise in prices for Americans,
and around these parts when prices go up we call it "inflation"
because when we called it "Bob" nobody paid attention.
- Brady Willett, of FallStreet.com wrote an interesting essay
entitled "Make My Day, and I'll Pay You Back Tomorrow."
He writes, "One industry that isn't in recession today,
but could be an indicator for recessionary times tomorrow, is
payday loan stores and/or pawn shops. The companies in this group
provide high interest, short term loans, they cash checks for
obscene fees, and offer pawn shop asset-backed loans to consumers
in need. As the soaring stock prices suggest, business has never
been better for these lenders."
"The number of payday loan stores nationwide has more than
doubled since 2000 to more 22,000 (in 2003), and revenues have
consistently grown by double digits since the 2000 recession.
Are people taking payday loans with sometimes a 276% annual interest
rate (EZCorp in Indiana) because their savings are in order?
Obviouslybusiness is booming at payday loan/pawn companies because
the so called 'recovery' has left so many Americans behind."
And this is exactly what you would expect from an inflationary
monetary policy! When you create so damn much credit and money,
for so long a time, the rich get richer, and the poor get poorer.
After awhile, the social unrest gets extreme, and the idiots
in Congress and the Federal Reserve all decide that what this
country needs, and I mean really, really needs, is more spending
and more creation of money and credit, making it all worse and
worse! And then they stand around, asking each other "What
in the hell is The Mogambo so mad about?"
- If you want something that ought to send you screaming down
the street, in an article entitled "Optional Reading",
Edgar J. Steele writes, "As of June 15, the value of stock
options must be expensed by American business firms. With stock
options, never is there a financial statement hit taken by the
company. The hit always is borne by existing shareholders, whose
stock values become diluted as the company merely issues new
stock to employees exercising their options, a non-event for
income-statement purposes."
So is there really a new economy, where stock options allow everybody
to win and nobody loses? No. He goes on to say "A direct
lift from existing shareholder wallets, in other words."
But now (cut to a video of an asteroid smashing into the earth
where dinosaurs are hurled into the air and they all have these
surprised looks on their faces) all that has changed. Starting
June 15, "The accounting entry is: debit expense and credit
liabilities, just like wages, which is what stock options are,
after all." Wow! Talk about taking a hit to the income statement!
And not only that, which is plenty, but he goes on to say "P/E
(Price/Earnings) ratios, already stratospheric by historical
standards, will evaporate altogether for many firms (divide by
zero or a negative and get infinity)." His advice? "Get
out of stocks and bonds and do it now."
And it get worse from there! According to an article entitled
"US Pension Pain 'To Get Worse' " by Dan Roberts in
The Financial Times, "Actuaries at Towers Perrin estimate
the average Fortune 100 company is now storing up more than $3bn
in deferred pension costs that have yet to show up in published
profit and loss figures." Three billion apiece! They go
on to note "Towers Perrin, an independent consultant, calculates
that the deferred cost for the 81 largest defined benefit pension
schemes in the US grew approximately 5 per cent in 2004 to $252bn."
And of course, no day is complete without somebody showing me
that inflation is roaring back to life and is consuming us all.
In his spare time, he has figured out that "In 2002 dollars,
the Dow actually has gone from 8,000 to 6,000. You actually lost
25% of your nest egg over the past two years!" So, as an
example, if you had $100,000 in purchasing power two years ago,
and now you have only $75,000 in purchasing power, thanks to
the devaluation of the dollar by 25%, and you want to privatize
Social Security by forcing people to put money into the stock
market? Hahahaha!
And speaking of reforming Social Security, not that it is such
a hot topic, everybody wants to run their mouths about it, including
the horrid Leftist Paul Krugman, who recently penned "A
Fake Solution to a Made-up Crisis."
First off, he admits that Social Security is "running a
surplus, thanks to an increase in the payroll tax two decades
ago." Well, duh! Let me write this down! If you increase
taxes, a government program will get more money, and if they
get enough money, then they will run a surplus. Wow!! It seems
so obvious when it is pointed out to me like that! I slap my
forehead ("ouch!") at the revelation! Why didn't I
realize that all you need to do to get more money is, and I laugh
at the utter simplicity of it all, to raise taxes!
Taking the Krugman Economic Miracle ("increase taxes, show
a surplus!") he announces, "As a result, Social Security
has a large and growing trust fund." Then he hits us with
the laughable line "When benefit payments start to exceed
payroll tax revenues, Social Security will be able to draw on
that trust fund." Hahahaha! See, the way that he thinks
it works is that this surplus goes into some trust fund, see,
sort of like this big ol' box with a lock on it, and it is loaded
with lovely cash or something, and then you just stick your hand
in there and grab a fistful when you need some money.
Now that he has established the "facts" to suit himself,
it isn't until a later paragraph that he reveals, with a slap
at the people who want to privatize Social Security, "Privatizers
say the trust fund doesn't count because it's invested in U.S.
government bonds, which are 'meaningless IOUs." Wrong, bonehead!
It isn't just privatizers who recognize that the trust fund has
no money! It's everybody! Those IOUs are gigantic, unfathomably
huge, overwhelming amounts of money owed to lots of people, who
are all counting on getting that money back, and so it is therefore
FAAARRRR from being "meaningless." Being IOUs, yes,
but meaningless, no. Huge, yes, so therefore meaningless, no.
He never admits that the surplus in the Social Security system
has been spent by Congress, and there is nothing in that stupid
lockbox except those IOUs, although he does try and put a pretty
face on it when he says that those IOU's "have the same
status as U.S bonds owned by Japanese pension funds and the government
of China" and that the taxpayer is required to pay off those
IOUs, just the same as "The bonds in the Social Security
trust fund are obligations of the federal government's general
fund." In case you were wondering what a "general fund"
is, it is (and I am pointing right at you) you. Much like soldiers
are called G.I.s, which is short for "Government Issue",
you are "G.G.F." because you are expendable "government
general fund" trash, and they are going to get money out
of you. But, if it makes you feel any better, at least you are
higher on the hierarchy above Mogambo Trash (MT), so at least
you have THAT going for you.
Later on in the article he admits that the problems of Social
Security pale to insignificance beside the other two financial
horrors, namely the current monstrous fiscal deficit and the
Medicaid/Medicare nightmare, which rhymes, making it easy to
remember in case this shows up on a pop quiz in class today.
He doesn't mention, strangely enough, the $650 billion trade
deficit, which is also a financial horror.
And, of course, we have Laura Tyson, the economist who was one
of Clinton's insiders when he was running the country into the
ground, and who is now the dean of the London Business School,
running her little mouth in the Economic Viewpoint column in
the January 17 issue of Business Week, entitled "Social
Security Crisis? What Crisis?" While first noting how many
old people depend totally on Social Security (20%) and how many
get a "majority" of their income from Social Security
(67%), she notes that Social Security would be on sound footing
with a decrease in benefit payment amounts and an increase in
taxes. Hahahaha! This is the brilliant thinking that got her
where she is today? Cut benefits and increase taxes? This is
the best she can do? This is the fabled Leftist compassion? Hahahahaha!
Such is the idiocy of the Left, who first create a huge government
program, impose taxes to pay for it, continually raise taxes
to expand the program and increase benefits. Then finally, after
it has grown to be a huge, suffocating part of the economy where
may people are dependent on it, and it predictably falls apart,
that's when you decrease benefits and raises taxes! And then
they wonder why I have so little respect for them that I write
them hate mail (For example, "Dear Leftist jerk; Kiss my
butt.. Signed, Angry Stranger Who Is Not The Mogambo (ASWINTM)").
Then she says that the present value shortfall in the Social
Security revenues over the next 75 years is $3.5 trillion. Hahahaha!
Adjusting for inflation, that piddly $3.5 trillion over the next
75 years will balloon to hundreds of trillions of dollars, if
not quadrillions of dollars, or whatever in the hell is beyond
a trillion. Remember; the current dollar has lost 96% of its
value in the last 92 years, thanks to the Federal Reserve. Now
that they have really gotten the hang of it here lately, I am
sure that they will devalue the dollar at an increasing rate
from here on out. I will save you the trouble of laboriously
computing the deficit over the next 75 years as the dollar loses
ANOTHER 98%, or 99%, or 99.999% of its value. It is a lot, and
future historians will look at Tyson's $3.5 trillion dollar estimate
and laugh at her and anybody who listened to her.
- I recently met Ted Butler, one of the main point men in the
fight against the obvious manipulation of the silver market,
and he is a real nice guy and big enough to break me in half
if he wanted, and I hope he doesn't. In his latest commentary
at Investment Rarities newsletter, "Friedman's Theory holds
that, on a relative and absolute basis, there is less silver
remaining underground than any other important metal" according
to the United States Geological Survey."
So Ted (and notice that I am calling him Ted instead of Mr. Butler
because I noticed that there were a lot of witnesses around,
and so I actually called him "Ted" to his face and
he did not get, as is usually the case, real testy, although
I think I saw his fist clench in rage, so I am probably pressing
my luck a little bit here) went and looked the USGS data himself,
and sure enough, it seems to confirm ("and validates"
says Ted) Friedman's Theory.
So even if you wanted, say, a few tons of silver as part of your
retirement portfolio, there just doesn't happen to be much silver
left on the planet! And there is no way to get anymore, either!
We've used it all up! Hahahaha!
Now this is where the highly-sensitive nose of The Mogambo (HSNOTM)
detects-- sniff sniff sniff snort sniff sniff! --an imbalance
in the supply/demand dynamic, which is a pretentious little phrase
that I threw in there to make myself look like a big man who
seems to know what he is talking about and maybe impress some
girls, although it is obvious that I don't.
But before I could press my advantage, he steals my thunder and
says, "I don't doubt for a moment that there will be increased
mine production in response to a significant spike in silver
prices. But the irony is, if the reserve and resource data are
correct, higher production only reduces the number of years minable
silver will be available. Therefore, higher silver mine production
would, ironically, be bullish", as increased mining would
merely exacerbate the shortage!"
- For those who fret that the government might confiscate their
holdings of precious metals, Chris Powell of GATA got a response
to a question to the Treasury department from Roberta K. McInerney,
who bills herself as Assistant General Counsel, (Banking and
Finance), Department of the Treasury. She writes "I am writing
in response to your e-mail of November 29, 2004, which forwarded
a question from a constituent of Congressman Larson's as to whether
the Treasury Department could force the redemption of U.S. gold
bullion coins at face value, or the surrender of foreign bullion
coins.
"In Public Law 97-258 (Sept. 13, 1982), Congress eliminated
a statute (12 USC 248 n) which had allowed the secretary of the
Treasury to require individuals and others to deliver to the
Treasury gold coins, bullion, and certificates. As a result,
this statutory authority no longer exists."
- Reader Jim S. notes that Mark Twain wrote "All Congresses
and Parliaments have a kindly feeling for idiots, and a compassion
for them, on account of personal experience and heredity."
Hahahaha!
- One of the current ideas is that we must return to being a
nation of savers. Maybe yes, maybe no. If you are saving money
in your bank account and earning little to no interest on your
money, like now, while inflation is raging, like it is now, and
which will be soon even MORE raging, then you will look at it
and exclaim "The word 'raging' doesn't do it justice! We're
being eaten alive here!" and you would be, of course, right.
So saving money will be losing money, as the purchasing power
of those piddly little savings of yours go down and down. So
saving money in an environment like that is stupid. But people
are not stupid. The Mogambo is stupid, but most people are not.
But then again, The Mogambo also hates and fears his government,
and all governments, and most people do not. On the other hand
The Mogambo also thinks that aliens from outer space are living
under his house, but most people do not, and one day they will
rue their folly about that, too. But people are not saving money
now, and are instead taking insane risks with their money in
a desperate gamble to at least keep up, and maybe even come out
ahead, of the ruination of their money! And they are likewise
poking at The Mogambo with sharp sticks, trying to make me go
away, but they are not poking under their houses with sharp sticks,
either.
- The Market Nugget.com newsletter notes that, "With the
VIX remaining close to 8-year lows, writing options offers very
little premium; however, buying puts as insurance against a decline
in the market can be done at reasonable cost." I don't talk
much about my days as an options trader, although I still have
nightmares about it, but let me tell those of you who are considering
writing options, let me warn you that the market-makers in options
are guaranteed to make profits, as that is part of the deal.
And so they can pick, at their total discretion, a bunch of other
option writers to close out at a loss, so that they can make
that guaranteed profit. It is all perfectly legal, and there
ain't nothing you can do about it. And it WILL happen to you
on a regular basis, so feed THAT little tidbit into your calculations.
- We are also thankful to the Market Nugget for this entertaining
and enlightening analysis of the minutes of the latest FOMC meeting.
They write "Completely ignored are other portions of the
minutes, which paid homage to the importance of rising asset
prices. Specifically, the minutes stated: 'In their discussion
of important sectors of the economy, participants noted that
increasing equity and home prices had boosted household net worth,
leaving consumers well positioned to maintain a brisk pace of
spending.' " In other words, Americans are like ignorant
little children, ready to go farther and farther into debt to
get a bigger TV.
Hahahahaha! This is the level of thinking of the morons at the
Fed! Hahahaha! Get a load of this economic theory: Because you
had the wherewithal to borrow money to drive asset prices up,
then the resultant higher equity in those assets thus give you
the wherewithal to borrow MORE money, to go farther into debt!
Gaahhhhh! My eyes are bugging out! This is advice from competent
economists? This is how wealth is created? Does this sound like
good advice to YOU?
Also commenting on the same FOMC minutes, Peter Schiff of Euro
Pacific Capital writes "Among the concerns expressed by
members were interest rates being too low to contain inflation,
price pressures threatening growth, excessive speculation resulting
from low interest rates, growing federal budget deficits, the
expanding current account deficit, and declining foreign demand
for dollars. Let me be the first to welcome the Fed members to
a little place I like to call 'reality.' "
- Eric Fry at Daily Reckoning notes that Arch Crawford, who is
the editor of Crawford Perspectives, indicates that the U.S.
stock market will crash before March 23. "It could be any
time between now and then."
So what is it that has gotten Mr. Crawford so alarmed? "At
this very moment," he says, "Mars is in opposition
to Uranus, which is bad news for the stock market...Every serious
crash since World War I has occurred within the same 40% of the
Mars/Uranus synodic longitudinal cycle."
Planets? Stars? Laugh if you want to, but Mr. Crawford has a
record of accurate predictions that most of us would kill for.
For a little background on Mr. Crawford, Mr. Fry writes "For
nearly three decades, Crawford has been consulting astronomic
phenomena - as well as an array of earth-based technical indicators
- to determine buy and sell signals for his subscribers."
But there is more to Mr. Crawford that looking at planets and
stars. I am not sure if he used a powerful telescope or not,
but he also notes that he has seen that the cash level in the
Rydex money-market fund relative to other Rydex mutual funds
is quite low. He explains: "If this number is relatively
low, traders are more fully committed [i.e. bullish], and if
this number is relatively high, they are more or less confused
or fearful. Right now, they have the lowest cash levels since
March 15, 2002, which means they are more committed than normal.
As a contrary indicator, it is now bearish, along with all the
others."
- Chris Mullen and Peter Spina at GoldSeek.com note that the
BLS report of employment added 78,000 jobs, about half of the
gain, in the category of assumed jobs, also humorously known
as "ghost jobs." Gene Epstein, in his Economic Beat
column in Barrons, is talking about it too, and waxes optimistic
about how inflation-adjusted factory output and wage growth are
just fine, thanks. He does, actually, tell you that he uses the
statistic (the Personal Consumption Expenditure Deflator) that
just happens to be at the low end of inflation estimate. So,
when you adjust for inflation by just a teensy bit, then-- wow!
--statistics can be made to pop!
However, if you use, like I do, the upper end of the inflation
estimates (and I recommend that you use that one, too, because
the effects of inflation are so horrendous that perhaps Barry
Goldwater was right when he famously said "Extremism in
the defense of liberty is no vice. Moderation in the pursuit
of justice is no virtue" (thanks for Bob Wood for supplying
the quote!) because you do not know the meaning of the word "liberty"
until you lose it, and you do not know the meaning of inflation
until you get it, and trust me when I say you will not like either
one) then the numbers are a lot less uplifting, and in fact are
quite gloomy.
But Mr. Epstein is not as sanguine as it appears about payroll
employment when he ends the column with the advice to beware
that, "In January, be prepared for a plunge of more than
2 million" jobs, and he includes a little graph to show
that this huge plunge in jobs is an annual event for the BLS,
as they correct their previous errors.
- John Mauldin, who writes the highly informative FrontLineThoughts.com
newsletter, writes, "When the next recession comes in 2006
or 2007, the stock market will drop. Average drops during a recession
are 43%. The Baby Boomer generation will realize that the stock
market is not going to bail out their retirement hopes. They
will stop spending and start saving with a vengeance. Problem
solved, only it creates more problems. The world will not like
it when the American consumer retrenches." No truer words
were ever spoken! If Americans don't buy, then China stops selling,
and then China must stop exporting, and then China doesn't make
any money, and then China has no dollars to buy US debt, which
happens to come at the same time when America's government is
desperate for money, and is trying to issue tons and tons more
debt. But nobody is buying! So the Fed buys it! And the new money
that the Fed creates out of thin air to buy the debt seeps into
the world's economy, and all that money is chasing the same amount
of goods, which is actually falling, and that REALLY causes inflation,
and the inflation causes the Mogambo to run into his spiffy concrete
bunker to lock the door and hide in the corner, whimpering like
the little wuss I am.
He adds that crystal balls are unusually fuzzy for everybody,
because "With Fed manipulation and foreign central bank
buying, we are in new territory. The old rules may no longer
apply, or be applied differently. Pay attention, gentle reader."
Perhaps one of the reasons for that may be found in an essay
by P. Zihlmann, on GoldSeek.com, entitled "Time to Divest
Your Dollars". Mr. Zihlmann notes that one of the reasons
that The Mogambo is so pessimistic is that "At the bottom
of the previous two dollar bear markets, US debt represented
a value of 1% of US GDP in 1987 and 5% of US GDP in 1995. In
2004, at the end of the third quarter, US debt measured $4.4
TRILLION, or 42% of GDP!"
- I was recently invited by Tony Wile and Bernard NotHaus to
a meeting at FreeMarketNews.com on the planning for a silver
conference. Being The Mogambo, naturally I have many, many good
ideas, but the best one was that I would portray Zelda, the pretty
little hatcheck girl who dreams of starring in a Broadway musical,
singing and dancing her way into the hearts of America, wearing
silver high-heel shoes on her feet and a big, beaming smile on
her face.
You could have heard a pin drop, and the meeting went downhill
rather quickly after that for some reason. But because I promised
to sit down and shut the hell up, I was allowed to stay long
enough to listen to people who DO know what they are talking
about. One of them was David Morgan of Silver-Investor.com, and
while I am not above stealing all of his stuff, to tell you the
truth there was too much of it to remember. But the lesson beneath
it all is brevity itself; buy silver, and lots of it.
- I have been ill the last two days, and am sluggish and out
of sorts. Naturally, I am whiny and demanding and wondering why
everyone is not running around waiting on me hand and foot, perhaps
applying soothing compresses to my fevered brow, or how about
peeling me a grape? Maybe a peeled grape tastes good to a man
as uncomfortably close to death as I! Maybe we would discover
a miracle cure, which I shall call The Mogambo Miracle Grape
Cure (MMGC)! But could I get anybody to peel me a lousy grape?
No! (In the script, it says "Mogambo: with sneering, sniveling
voice, 'And now we'll never know, will we?' ").
But I was so lethargic that out of the corner of my half-closed
eyes I saw my letter carrier, a snappily-dressed official representative
of the United States Postal Service making her appointed rounds,
trying to put a bill in my mailbox. Of course I'm yelling like
I'm being killed as I struggle heroically to my feet and start
running to the door, but I am so slow that by the time I got
there she was already running halfway down the street, and I
could see her, way down there at the end of the street, laughing
at me and zig-zagging amongst the trees and cars, and we both
knew I couldn't get off a shot at her from this distance. And
then she turned the corner so that I could no longer see her,
but I could still hear her laughing, laughing, laughing at my
pain. So now there's another damn bill to pay, and so you can
imagine the kind of mood I am in.
So it doesn't take much imagination on your part to figure out
my reaction to an AP wire service piece entitled, "Airline
Workers Face Bad Economic Outlook." There was supposed to
be as sub-head, which was supposed to read, "Mogambo says,
'Big Freaking Boo Hoo Hoo' " but somehow it got "lost"
in editing or something, like I'm going to believe that.
Anyway, the article goes on to say, "The airline industry's
relentless drive to slash costs, amid a backdrop of high fuel
prices and low fares, is leaving employees with a bleak financial
outlook." I am obviously at death's door here, and to show
you how far gone I am, I don't even have the strength to look
for the VCR remote, even though the porn film I am watching has
finished, and all I see on the TV screen is snowy static, and
the speakers are making this fuzzy noise like "ssccchhhhhhhhhh."
But even in my misery, I heroically rise to the occasion and
say "Hey, memo to airline industry! Get real! That is the
predictable result of inflation, you morons! And you are not
the only ones, you whining little snots! Everybody suffers, dudes!
At least YOU have the advantage of being able to have prices
to raise, and thus save yourself. But what about us, the peasants
out here on the labor side of life? And for that matter, what
about the people who cannot even work? They have no freaking
way of increasing their incomes as even a partial defense against
higher prices because they cannot sell their labor."
Where are the newspapers decrying "Mogambo Employees Face
Bad Economic Outlook" thanks to MY relentless drive to cut
costs against a backdrop of high fuel prices, sinking sales,
falling revenue, and my habit of paying them with checks that
bounce (which saves me a ton of money each week! So that's another
little trick they DON'T teach you in that snooty MBA program!)?
- An excerpt from the MoGu was in the Jan 10 issue of Barron's
this week, and so I bow deeply as my stupid pseudo-Oriental way
of saying "thank you" to Anita Peltonen, who is the
editor of the Market Watch column, for spreading the gospel of
The Mogambo (GOTM), and I gotta tell ya that this Peltonen person
has seen into the soul of the Mogambo (SOTM) when she quoted
me as calling the Federal Reserve "incompetent and corrupt,"
and how we are doomed as a result, and how it all could have
been so easily prevented if our money was still silver and gold,
as freaking required by the Constitution (which I say while gritting
my teeth in raging Mogambo anger (RMA)) and then we would not
be in this unfolding cataclysmic collapse of the economic system,
and then there would be no Mogambo, and then maybe I would have
gotten a REAL job, and maybe been somebody my family could be
proud of, instead of being just another lunatic relative calling
himself "The Mogambo" and walking around in broad daylight
dressed up in these ridiculous tights and cape, and wearing this
stupid propeller beanie on my head, all the time screaming obscenities
at the Federal Reserve, and the Congress, and the Supreme Court,
and how we are ALL FREAKING DOOMED DOOMED DOOMED!
- Stephen Roach of Morgan Stanley has noted that "Annual
inflation in U.S. home prices is now running at a 25-year high
of 8.8 percent, with 15 states experiencing double-digit increases
in residential property values between mid-2003 and mid-2004."
And although he is too polite to say so, so are property taxes.
And for those hapless people who listened to Alan Greenspan when
he encouraged them to buy overpriced houses with adjustable mortgages
at the lowest interest rates he could manufacture with his profound
monetary excesses, the rise in rates is giving those people an
education that they will never forget, if they are capable of
learning lessons, and I have my doubts about that.
- Bob Snyder, our man in the hospital industry, tells me that
he is sure that the healthcare crisis as getting bigger, and
there is no end in sight. Government continues to mandate that
the hospitals provide services to everybody who shows up, but
fewer and fewer of the ones who show up in the emergency room
have any health insurance. His hospital is seeing a lot more
of these poor people, and while there is some token payment from
Medicare, Medicaid, and other pots of money to assist the poor
and uninsured, those reimbursements are either frozen or actually
declining. This means, of course, that the cost will be added
to the bills of those who DO have health insurance, resulting
in higher prices, which means health insurance premiums will
continue to go up. Or it means that the governments will authorize
higher payments to the hospitals to pay for the healthcare of
the indigent, and that means higher taxes.
In the same vein, James Cook of Investment Rarities recounts
that his company is facing another year of huge increases in
health insurance, and notes that the poor and their families
are using emergency rooms as their sole source of healthcare.
Here in Florida, the state government is also cutting payments
to providers of residential care for the profoundly retarded,
including huge cuts in nursing, so that means that suddenly,
after all these decades when nursing WAS considered necessary,
now the government stance is that nurses are no longer necessary,
because if anything goes wrong, then they can always just go
to the emergency room! Hahahaha! Brilliant! Government at its
best!
Now let's pause here, because I want to emphasize in my irritating
Mogambo way (IMW), which usually involves me jumping on top of
something and screaming in this weird, un-human way (some people
call it "other-worldly" which always makes me laugh
when I think "You don't know how right you are, puny Earthling!"),
that we tax-paying people, who also pay for health insurance,
which means you and me, amigos and amigettes, are going to pay,
and pay, and pay, and pay for all of this through either higher
taxes or higher health insurance premiums. Or both. Probably
both. Yes, now that I think about it, the more I am sure that
it is both. So write "both" on your answer sheet.
And now that I am thinking about it, I am starting to go a little
bit bananas here, and these little monitors I have to wear are
all beeping "beep beep beep!" Sure enough, the next
thing I know I am in the holding cell down at police headquarters,
and all the other detainees are giving The Mogambo a wide, wide
berth, because they know, in that instinctive, primitive, feral
way that low-IQ criminals have, that The Mogambo is one bad and
dangerous dude, and who will make these piercingly loud monkey
noises and fling feces on them if they get too close. So I look
up at the TV and I saw the news broadcast, and they had this
amazing tape of me leaning out of the window and yelling, "Are
you some kind of mental defective? Is that what you are? Huh?
Is that what you are, you idiots? Are you so insane, or so stupid,
or so blindingly ignorant that you think that the huge reduction
in our living standards by this roaring inflation, not just in
healthcare-related costs, oh nooooOOOOOoooooo, but in almost
every freaking thing you can name, is NOT going to cause a lot
of unrest? And that unrest is NOT going to turn into anger? And
anger is NOT going to turn into rage? And that rage will not
turn into Rage Of The Mogambo (ROTM)? Is that what you think,
you dumb freaking morons?" Everyone in the holding cell
watched in rapt fascination as I am struggling to rip my shirt
off and bare my manly Mogambo chest (MMC) in preparation to leaping
down into the crowd and committing mayhem amongst the idiots
and maybe instill a little intelligence in their thick little
heads courtesy of the rampaging fists of the Mogambo (RFOTM),
and although they removed the audio track, you could tell by
reading my lips that I was both loud AND obscene (LAO), which
is my way of multi-tasking and achieving higher productivity.
But all of sudden, a phalanx of policemen rushed up and were
very rude to me, like it is MY fault that 1) people are so stupid
that they don't even realize that socialist-lite government is
still socialist government, and that it will end badly because
it has to, or 2) nobody ever explained to them at the police
academy that you do NOT search for concealed weapons in a suspect's
groin area by repeatedly kicking me in that particular area,
and that includes getting a running start and taking turns, and
3) this is the predictable outcome for a democracy or a republic
when the voters learn they can vote to give themselves the money
of other people, or when voters learn to elect people who will,
in turn, give them the property of other people. And free healthcare
is just one of the things they want, and sure enough, free healthcare
is what they got.
The lesson is that there is no stopping socialized medicine,
as we are obviously getting it crammed down our throats one way
or the other.
- Stephen Roach of Morgan Stanley figures that interest rates
have a long, long way to rise from here. He writes, "Given
its publicly avowed concerns about the confluence of inflation
and speculative risks, the Fed now has no choice other than to
push the real federal funds rate into the restrictive zone. In
my view, that means at least 100 bps beyond neutrality -- consistent
with a nominal federal funds rate somewhere in the 4% to 5% zone."
- "Inflation Destroys the Fabric of Society" is an
essay by George Crispin on the LewRockwell.com. site. He writes
"18 years ago the Consumer Price Index was 109.6. Today
it has reached 191. What you could buy for a dollar 18 years
ago would take $1.74 today." This comes out to 3.1% inflation,
which is lower than the current rate of inflation as reported
as 3.5%. He goes on to reveal the horror of it; "As the
new money works its way through the economy, prices rise. The
first receivers of the new money gain at the expense of the later
receivers. Inflation, then, confers no general, social benefit;
instead it redistributes the wealth in favor of first comers.
Those stuck with the loss include fixed income groups, ministers,
teachers, people on salaries, those on fixed money contracts
made before the price rise, life insurance beneficiaries, retirees,
landlords with long term leases, bond holders and other creditors,
and those holding cash." In short, all of us who are not
first in line to get, and use, the money take the loss. And when
you look out of the window, you realize with a start that this
Crispin dude knows exactly what he is talking about.
Ugh.
*** The Mogambo Sez: A Creedence Clearwater Revival song
keeps going through my head, and it goes, "I see a bad moon
a-rising."
Jan 12, 2005
Richard Daughty
email: scgcjs@gte.net
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Daily Reckoning
Richard Daughty
is general partner and C.O.O. for Smith Consultant Group, serving
the financial and medical communities, and the writer/publisher
of the Mogambo Guru economic newsletter, an avocational exercise
the better to heap disrespect on those who desperately deserve
it. The Mogambo Guru is quoted frequently in Barron's, The
Daily Reckoning
and other fine publications.
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