The Korelin Economics Report
Candy Index & Banana
Update
Al Korelin
www.kereport.com
dispatched Sep 20, 2007
posted Sep 21, 2007
Get ready kids, unless you
get a boundary exception, you are about to go from Everything's
Great" Middle School to that "other" high school
in the bad part of town - "Recessionary High."
Your school district officials
are doing everything they can to keep you out of there, but it
may just not work. A few days ago, the District Superintendent
and the Board members lowered the discount rate a whopping 50
basis points. The people of Egotistical.
Ville were ecstatic and to
prove it they bought all the candy they could get their hands
on, raising the "Candy Index" over 300 points.
And, to make things even better, the very next day the Superintendent
and the Board promised to help out all of those poor people who
loaned money to the silly monkeys who couldn't really afford
to buy all those bananas, but did it anyway. Once that bit of
news got out, candy sales again skyrocketed. Boy, I sure hope
the people eating all those candies don't get sick.
But, you know what, they just
might.
Tree sales, where the monkeys
live, just don't seem to be getting any better. A lot of the
monkeys thought they were when they heard that loan applications
were up 24% in August, but they didn't read between the lines
and consider that these loans were, to a large extent, for the
other monkeys who had been "borrowing for bananas"
in the past and could not afford to pay the interest rates which
were about to go up to the unaffordable level on their existing
loans.
This same thing had happened
in the past and here's what a small group of Egotistical Villians
did to protect themselves.
Back then a couple of things
did concern some of the folks in Egotistical Ville just like
they should concern you today. First of all, they realized that
the Superintendent had borrowed so much money that he would reach
his limit in less than a month. They also knew that when the
inflation numbers were published to "calm everybody down"
that those numbers left out the very key elements of food and
energy. Finally, they realized the importance of reading between
the lines and they applied that practice to the news about rising
mortgage applications. They very quickly came to the conclusion
that the dreaded condition which Recessionary High was named
after might, after all, be right around the corner. Not for sure,
but certainly a possibility.
Interestingly enough, these
folks all belonged to the same investment club. What they did
is a good lesson and one that will keep you from going to Recessionary
High and instead enrolling in that great private school in the
other part of town.
At one of their meetings, they
talked about the various alternatives for the club's dollars.
They pretty much agreed that
none of them really wanted to get sick so they decided not to
buy any more candy. As a matter of fact, since candy prices were
so high they decided to sell all that they had and get some profits.
Then they talked about what
to do with all of that cash.
They realized that they could
invest in things that were good for them like companies involved
in looking for and producing copper and nickel. They knew that
historically in a serious recession, the prices of these things
went down because industries didn't want as much as they had
in the past. But, in the very next second they realized that
this was not "historical times". "Today",
one of them said, "we have huge demand coming from places
where it did not exist before". "Heck", he said,
"even if Egotistical Ville and other parts of the world
don't grow very much for a while, the demand will still be higher
than it ever was in the past".
Then they talked about where
they could put the rest of their dollars. "You know",
another one said, "I have been reading the Bible and some
history books and I learned that gold and silver have always
maintained their value and that when things really get tough
they even go up in value. Boy, it makes sense to me that we should
learn from God and from
the people who wrote those history books and invest some of our
cash in both gold and silver".
So they did just that. They
did it because they knew that they would win regardless of what
happened. And you know what? They did! As a matter of fact, just
a few days later, gold and silver began to go up significantly
in price.
As the leader of the investment
club, a fellow by the name of Rick Rule, said to me a while back,
"if you can't make a million dollars in this market you
don't deserve to be in it".
I talk with people like Rick
six days a week on my radio show, The Korelin Economics Report.
I have learned so much from these folks that today I feel I am
protecting my family from financial hard times. Listen to our
Weekly Show, our Daily Show or our Korelin Economics Minute.
It is heard around the world on the radio and also on the internet
at www.kereport.com.
* * *
Al Korelin
is the founder of A.B. Korelin and Associates, Inc., a firm that
specializes in regulatory consulting services to small companies.
He is the host of The Korelin Economics Report, an internationally
syndicated radio program. The Korelin Economics Report can also
be heard on the Internet at www.kereport.com.
Al Korelin
email: alkorelin@comcast.net
website: www.kereport.com
321gold Ltd
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