My High Dividend Stocks Blog http://myhighdividendstocks.posterous.com Most recent posts at My High Dividend Stocks Blog posterous.com Fri, 15 Apr 2011 08:54:22 -0700 Keeping Capital in a Depression. http://myhighdividendstocks.posterous.com/keeping-capital-in-a-depression http://myhighdividendstocks.posterous.com/keeping-capital-in-a-depression

Keeping Capital in a Depression

by Doug Casey

Recently by Doug Casey: Save, Invest, Speculate, Trade, or Gamble?

 

 

 

Nothing is cheap in today’s investment world. Because of the trillions of currency units that governments all over the world have created – and are continuing to create – financial assets are grossly overpriced. Stocks, bonds, property, commodities and cash are no bargains. Meanwhile, real wages are slipping rapidly among those who are working, and a large portion of the population is unemployed or underemployed.

The next chapter in this sad drama will include a rapid rise in consumer prices. At the beginning of this year, we saw the grains – wheat, corn, soybeans and oats – go up an average of 36% within one month. In the same time frame, hogs were up 30.7%. Copper was up 29.1%. Oil was up 14%. Cotton was up 118%. Raw commodities are the first things to move in an inflationary boom, largely because they’re essential to everything. Retail prices are generally the last to move, partly because the labor market will remain soft and keep that component down, and partly because retailers cut their margins to retain customers and market share.

We are in a financial no-man’s land. What you should do about it presents some tough alternatives. “Saving” is compromised because of depreciating currency and artificially low interest rates. “Investing” is problematical because of a deteriorating economy, unpredictable and increasing regulation, rising interest rates and wildly fluctuating prices. “Speculation” is the best answer. But it may not suit everyone as a methodology.

There are, however, several other alternatives to dealing with the question “What should I do with my money now?” – active business, entrepreneurialism, innovation, “hoarding” and agriculture. There’s obviously some degree of overlap with these things, but they are essentially different in nature.

Active Business

Few large fortunes have been made by investing. Most are made by creating, building and running a business. But the same things that make investing hard today are going to make active business even harder. Sure, there will be plenty of people out there to hire – but in today’s litigious and regulated environment, an employee is a large potential liability as much as a current asset.

Business itself is seen as a convenient milk cow by bankrupt governments – and it’s much easier to tap small business than taxpayers at large. Big business (which I’ll arbitrarily define as companies with at least several thousand employees) actually encourages regulation and taxes, because their main competition is from small business – you – and they’re much more able to absorb the cost of new regulation and can hire lobbyists to influence its direction. Only a business that’s “too big to fail” can count on government help.

It’s clearly a double-edged sword, but running an active business is increasingly problematical. Unless it’s a special situation, I’d be inclined to sell a business, take the money, and run. It’s Atlas Shrugged time.

Entrepreneurialism

An entrepreneur is “one who takes between,” to go back to the French roots of the word. Buy here for a dollar, sell there for two dollars – a good business if you can do it with a million widgets, hopefully all at once and on credit. An entrepreneur ideally needs few employees and little fixed overhead. Just as a speculator capitalizes on distortions in the financial markets, an entrepreneur does so in the business world. The more distortions there are in the market, the more bankruptcies and distress sales, the more variation in prosperity and attitudes between countries, the more opportunities there are for the entrepreneur. The years to come are going to be tough on investors and businessmen, but full of opportunity for speculators and entrepreneurs. Keep your passports current, your powder dry, and your eyes open. I suggest you reform your thinking along those lines.

Innovation

The two mainsprings of human progress are saving (producing more than you consume and setting aside the difference) and new technology (improved ways of doing things). Innovation takes a certain kind of mind and a certain skill set. Not everyone can be an Edison, a Watt, a Wright or a Ford. But with more scientists and engineers alive today than have lived in all previous history put together, you can plan on lots more in the way of innovation. What you want to do is put yourself in front of innovation; even if you aren’t the innovator, you can be a facilitator – something like Steve Ballmer is to Bill Gates. It will give you an excuse to hang out with the younger generation and play amateur venture capitalist.

This argues for two things. One, reading very broadly (but especially in science), so that you can more easily make the correct decision as to which innovations will be profitable. Two, building enough capital to liberate your time to try something new and perhaps put money into start-ups. This thinking partly lay in back of our starting our Casey’s Extraordinary Technology service.

Hoarding

In the days when gold and silver were money, “saving” was actually identical with “hoarding.” The only difference was the connotation of the words. Today you can’t even hoard nickel and copper coins anymore because (unbeknownst to Boobus americanus) there’s very little of those metals left in either nickels or pennies – both of which will soon disappear from circulation anyway.

We’ve previously dismissed the foolish and anachronistic idea of saving with dollars in a bank – so what can you save with, other than metals? The answer is “useful things,” mainly household commodities. I’m not sure exactly how bad the Greater Depression will be or how long it will last, but it makes all the sense in the world to stockpile usable things, in lieu of monetary savings.

The things I’m talking about could be generally described as “consumer perishables.” Instead of putting $10,000 extra in the bank, go out and buy things like motor oil, ammunition, light bulbs, toilet paper, cigarettes, liquor, soap, sugar and dried beans. There are many advantages to this.

Taxes – As these things go up in price and you consume them, you won’t have any resulting taxes, as you would for a successful investment. And you’ll beat the VAT, which we’ll surely see.

Volume Savings – When you buy a whole bunch at once, especially when Walmart or Costco has them on sale, you’ll greatly reduce your cost.

Convenience – You’ll have them all now and won’t have to waste time getting them later. Especially if they’re no longer readily available.

There are hundreds of items to put on the list and much more to be said about the whole approach. The idea is basically that of my old friend John Pugsley, which he explained fully in his book The Alpha Strategy. Take this point very seriously. It’s something absolutely everybody can and should do.

Agriculture

During the last generation, mothers wanted their kids to grow up and be investment bankers. That thought will be totally banished soon, and for a long time. I suspect farmers and ranchers will become the next paradigm of success, after being viewed as backward hayseeds for generations.

Agriculture isn’t an easy business, and it has plenty of risks. But there’s always going to be a demand for its products, and I suspect the margins are going to stay high for a long time to come. Why? There’s still plenty of potential farmland around the world that’s wild or fallow, but politics is likely to keep it that way. Population won’t be growing that much (and will be falling in the developed world), but people will be wealthier and want to eat better. So you want the kind of food that people with some money eat.

I’m not crazy about commodity-type foods, like wheat, soy and corn; these are high-volume, industrial-style foods, subject to political interference. And they’re not important as foods for wealthy people, which is the profitable part of the market. Besides, grains are where everybody’s attention is directed.

But there are other reasons I’m not wild about owning any amber waves of grain. Anything you want to plant will practically require the use of a genetically modified (GM) seed from Monsanto. I’m not sure I really care if it’s GM; all foods have been genetically modified over the millennia just by virtue of cultivation. And $1 paid to Monsanto typically not only yields the farmer $5 of extra return, but produces lots of extra food – which helps everybody. But I wouldn’t be surprised if someday the giant monocultures of plants, all with totally identical purchased seeds, don’t result in some kind of catastrophic crop failure. This is a subject for another time, but it’s a thought to keep in mind.

In any event, agricultural land is no longer cheap. But I don’t suggest you look at thousands of acres to plant grain. Niche markets with niche products are the way to fly.

I suggest up-market specialty products – exotic fruits and vegetables, fish, dairy and beef. The problem is that in “advanced” countries – prominently including the U.S. – national, state and local governments make the small commercial producers’ lives absolutely miserable. Maybe you can grow stuff, but it’s extremely costly in terms of paperwork and legal fees to sell, especially if the product is animal based – meat, milk, cheese and such. Niche foods are, however, potentially a very good business. Eternal optimist that I am, I see one of the many benefits of the impending bankruptcy of most governments as again making it feasible to grow and sell food locally.

Above all, though, this isn’t the time for business as usual. You’ll notice that “Working in a conventional job” didn’t occur on the list above. And I pity the poor fools working for some corporation, hoping things get better.


Get more valuable advice on how to survive in a crisis in The Casey Report – a monthly newsletter brimming with top-notch analysis of U.S. and world events, economic research, trend forecasts and investment advice for the big-picture investor. Details in this free report.

April 14, 2011

Doug Casey (send him mail) is a best-selling author and chairman of Casey Research, LLC., publishers of Casey’s International Speculator.

Copyright © 2001 Casey and Associates

The Best of Doug Casey

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 14 Apr 2011 13:01:19 -0700 Your Gold Coins. http://myhighdividendstocks.posterous.com/your-gold-coins http://myhighdividendstocks.posterous.com/your-gold-coins

Your Gold Coins

Gary North

Reality Check (April 12, 2011)

If you did what Bill Bonner and I have been recommending for a decade, you own gold. Bonner began promoting the purchase of gold in the year 2000. I strongly promoted this for my subscribers after September 11, 2001, when the Federal Reserve began pumping up the monetary base in earnest. Neither of us has ever stopped recommending holding money in gold.

I have stressed holding coins, especially tenth-ounce American gold eagles.

I am writing this for those readers who did what I recommended, have quadrupled their money (on paper and in digits), but who may be getting cold feet.

There are good reasons for buying gold. But you should have an exit strategy in mind. You need to consider this.

http://www.garynorth.com/public/7880.cfm

We are told by the mainstream financial media, which never told investors to buy gold over the last decade, that gold is in the final phase of a bubble market. But how can any market be a bubble market when the mainstream financial media are not running report after report on the bubble, telling readers and viewers about how much money people are making.

What mainstream financial outlet warned investors loud and clear, issue after issue, in 1999 that the dot.com market was a bubble? I told my subscribers in February and March of 2000 that it was, and that they should get out. But I published a newsletter. I was not mainstream.

What major outlet warned people in 2006-2007 that the real estate market was a bubble, that wise investors were getting out? I did in November 2005.

Bubbles always continue for months or even years after old timers say they will pop. Old timers have trouble estimating the fear of the buyers at being left out and the fear of lenders at being left out. The two sides -- debtors and lenders -- keep the dance of doom going much longer than old timers can imagine possible. But eventually the dance ends.

I spoke at Lew Rockwell's conference. One of the speakers is a banker. He lives in Las Vegas. He was taught by Austrian School economist Murray Rothbard. He earned a masters degree in economics. Then he went into banking.

As an Austrian School economist, he understands the business cycle. He understands that the Federal Reserve system has pumped money into the economy, creating a housing bubble since 1996. He knows this boom will bust.

He has no illusions about this housing market. Compared to him, I have been Pollyanna. He spoke of the mental outlook of the builders in Las Vegas. They all know it can't go on, but they are determined to party until it does. "Then they will declare bankruptcy and start over," he said. This is their exit strategy.

He was correct. It happened. He lost his job as a Las Vegas banker. He is now a senior staff member at the Mises Institute.

I went on to write the following:

I think a squeeze is coming that will affect the entire banking system. The madness of bankers has become unprecedented. They have forgotten about loan diversification. They have been caught up in Greenspan's counter-cyclical policy of lowering the federal funds rate. Now this policy is being reversed. Rates are climbing. This will contract the loan market. Banks will wind up sitting on top of bad loans of all kinds because the American economy is now housing-sale driven.

http://www.lewrockwell.com/north/north416.html

But I was on the fringes of the investment community. The bubble was about to burst, but the media attracted viewers and readers by staying on the bandwagon. To call attention to what should have been obvious would have reduced the audience. The editors knew better.

So, when I read articles about gold in a true bubble market, I know it isn't. The salaried reporters with no savings, underwater in their homes, and in a dying industry are merely writing what their editors think will sell.

What sells? Articles that confirm what conventional viewers and readers want to hear, namely, that they were not really losers by staying out of the gold market (they were), and that those who buy good now will lose everything (they won't), and that now is a good time to buy stocks and bonds (it hasn't been ever since March 2000).

Mark Faber, who recommends owning gold as a hedge against a declining dollar, recently wrote this: "In my opinion the Fed funds rate should be at 5% . . . That will provide real interest rates. I don't think the Fed will increase interest rates to a positive real rate. So, I'd say to an investor, he should have at least 20 to 30 percent of his money in precious metals."

When asked about his opinion about renewed fears of a bubble forming in the gold market, the student of the Austrian School of economics theory scoffed at the pundits who say the gold trade has become crowded. Faber said he routinely sees less than 5% of attendees at his speaking engagements raise their hands during his casual sentiment polls regarding the precious metals. Sometimes he sees no hands raised, he said.

http://bit.ly/FaberGold

There are many ways to own gold. The ones that most investors choose, and which most investors will rush into during the final phase of the bubble, is in fact not gold. It is a promise to invest in gold. It could be an ETF, which is a form of derivative. It may be a commodity futures contract -- another promise.

But what about gold, in contrast to a promise -- "cross my leveraged heart and hope to die" -- to invest in gold on your behalf?

Gold coins are gold.

WHY GOLD COINS?

The problem with today's economy is that it is built on promises and trust. It is therefore built on debt.

In the United States, the financial promises always come back to these:

1. The Federal Reserve System will remain the lender of last resort. 2. The Federal Deposit Insurance Corporation (FDIC) will pay off all bank accounts up to $250,000. 3. The U.S government stands behind the FDIC's promise with a $600 billion line of credit. 4. The government can get this money from the Federal Reserve System, if necessary.

The problem with these promises is this: the ultimate insurer -- the FED -- can fulfill its obligations in a deflationary crisis only by hyperinflation. That means that the only sure guarantee against the systemic failure of the American banking system is the destruction of the dollar.

If we get the latter, do you want promises to pay gold, which can be settled legally by the payment of digital dollars? Or do you want coins where you can get your hands on them?

On the other hand, if the FED ever refuses to create money, and if the banking system then begins to implode, do you want promises to pay that were issued by a limited liability corporation, such as a futures exchange?

In between hyperinflation and a deflationary banking collapse, people can buy and sell promises to pay gold. They can pay 28% on all profits (no capital gains protection). They can become self-conscious speculators. There is nothing wrong with this.

But what if you are speculating against long-term price deflation? Then you want paper money. But paper money leaves you at the mercy of the Federal Reserve System and the commercial banking system. Mass inflation could appear rapidly (up to 20% price increases), followed by hyperinflation (anything from 20% to infinity).

What if you want an asset that will do well in mass inflation or hyperinflation, but which will not do as badly as most other leveraged capital assets in a banking collapse?

I keep getting this answer: gold coins.

BUT WHICH GOLD COINS?

That depends on what you are trying to hedge against.

If you are a national living in a country whose mint produces gold coins, buy those gold coins. If you are ever in an emergency situation where you need gold fast, and you want to barter it for something you really need, the person on the other side of the transaction will recognize the mint's stamp. He will be more likely to barter.

Do you want a one-ounce coin? Not if you are bartering for small items. You want the smallest-weight coin that your national mint produces. On the other hand, if you want gold as an investment, for which you plan to exchange your coins for digits in a bank, you should buy the most common one-ounce coin with the lowest premium: the Krugerrand. This low premium is consistent. You buy low; you sell low.

If you want something in between, buy a one-ounce coin from your national mint.

The tenth-ounce American eagle commands a premium above the one-ounce eagle these days. This could go away in a selling panic. Be aware of this investment threat.

Americans do not have a true free market with coins produced by the U.S. Mint. Ron Paul held hearings on this issue recently. The Mint keeps getting back-logged with orders during panic-driven periods. It sells only to coin dealers. This creates a premium for coins when these logjams occur. You can read about the problems here:

http://bit.ly/TooFewCoins

PROCRASTINATORS PAY PREMIUMS

Most people listen to a story for years before taking action. This has surely been true of the story of gold. When Gordon Brown, as Chancellor of the Exchequer, sold off half of Britain's gold, 1999-2002, he depressed the world price. He sold it at an average price of $276 per ounce.

http://bit.ly/BrownGold

This was a massive transfer of wealth from the British government to other central banks, which bought most of the gold. This kept down the market price, as central banks shifted demand from the private markets to the Bank of England's bars of gold.

This was the last chance for gold speculators to get in on the deal cheap. Not many people did, of course, because not many people ever buy close to the bottom of any market.

So, gold has steadily moved higher over the last decade. Still, the procrastinators procrastinate.

I don't mean Joe Lunchbucket and Tom Temp. The vast majority of Americans have no liquid savings above a few thousand dollars in the bank. Fewer than 50% have pensions of any size, and the money in these tax-deferred accounts are not at their disposal. The funds they can invest in are not related to gold. They are categories that will keep the fund managers from a lawsuit when markets collapse: American stocks, American bonds, and Treasury debt.

Gold is an investment asset. It therefore will not become popular short of an economic collapse -- hyperinflation followed by a depression. The average person owns no gold coins, nor will he anytime soon.

Where would he buy them? How could 100 million households buy a single gold coin per household? This would be impossible. There are only a few small coin stores in any community. They are mostly mom-and-pop outfits. The U.S. Mint could not meet the demand.

When Wal-Mart has a gold coin section in the jewelry department, then we can start talking about a possible bubble in gold. Not until then.

As more people on the fringe of the Tea Party find out about American gold eagles, they will start buying. This will force up the coins' premiums.

As word gets out about the scarcity of small-weight gold coins, there will be more interest in owning them.

As word gets out that the Federal Reserve's exit plan is a myth, they will start looking for hedges. Gold is a hedge against serious price inflation.

The government is working hard for existing gold coin owners. The government clearly cannot bring the budget deficit under control. Congress has no intention of doing so. When the government can borrow $1.6 trillion a year at rates as low as four-one-hundredths of a percent (90-day) to under 3% (7 years), why should we expect Congress to cut spending?

CONCLUSION

If you have yet to buy a single gold coin, buy a tenth-ounce American eagle to get started. That will not bankrupt you. It will get you over the hump.

Most Americans will never take this initial step. Those who procrastinate will pay a high premium when they at last think: "Maybe I really do need some gold." If you don't know where to start looking, start here:

http://bit.ly/GoldEagles

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Sun, 03 Apr 2011 17:28:27 -0700 Beware the Demon of Inflation. http://myhighdividendstocks.posterous.com/beware-the-demon-of-inflation http://myhighdividendstocks.posterous.com/beware-the-demon-of-inflation
The Mogambo Guru brings you some horrifying facts concerning price increases reported by several groups that tend to under-report such things.  You need solid high dividend stocks in your stock portfolio because the increase in consumer goods prices are higher than reported.  To get a better understanding of why read this article: http://bit.ly/CPILies
 
Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.
 
Be seeing you!
 
Apr 1, 2011
Beware the Demon of Inflation
from The Daily Reckoning by The Mogambo Guru
The 5-Minute Forecast came to me in an email with the subject line reading “5-Minute Forecast – Everybody Panic.”

Naturally, as a guy who is always on the verge of panic because of the fact that all the monstrously excessive amounts of money that the Federal Reserve is creating will cause inflation in prices, this affected me greatly.

I assume this recommendation to panic is because the monetary base shot up by a whopping $90 billion last week as the Federal Reserve continues its insane over-creation of money so that it can monetize, through the year, a couple of trillion dollars or so in government deficit-spending over the next year, so as to try, try, try to spend our way out of bankrupting debt by creating more debt, to create more money for the government to borrow and spend, all of which will cause prices to rise, rise, rise, which I interpret to mean, “We’re Freaking Doomed (WFD)!”

Well, I was half right in my original conclusions, in that they noted that “Easy money is already having its affect in the US Wholesale prices, which trotted upward in December and January, reached a full gallop in February,” which is when “The producer price index (PPI) rose 1.6%.”

Gulp! This is the rise in prices in one month! And annualized, The 5 calculates it to be 19.2% inflation in prices!

And the bad news is that a 19.2% annual inflation is “for finished goods. If you move further back in the production chain, prices for crude goods rose 3.4% last month.”

My heart was racing at such horrific inflation news, and forcing myself not to start screaming, I instead concentrate on the positives involved here: they did not annualize a compounding 3.4% inflation, and gold and silver will be guaranteed to rise along with the general, roaring inflation, and they will rise even more with a Big Fat Kicker (BFK) from the general sense of panic in the economic/financial world when all those fiat-money chumps will be flooding, in a panic, into the relatively tiny gold and silver markets, bidding the prices of gold and silver to insane levels.

With a subsiding fear, I calmed down enough to read that they went on “And February was no fluke. PPI for crude goods has risen 20.7% over the last six months since February’s gain,” which is so easy to simplistically annualize by merely multiplying 20.7% inflation times 2 to get an annual inflation rate of 41.4% that I am, despite my best efforts, again in a full-fledged Mogambo State Of Panic (MSOP), feeling those familiar crushing pains in my chest and a racing, pounding heartbeat.

Like the kind of stabbing pains and numbness in my left arm I got when the Bureau of Labor Statistics (BLS) announced that the US consumer price index (CPI) rose 0.5% last month – which works out to inflation running at a fast 6% annual clip, and rising.

The Wall Street Journal reported it as, “Energy prices surged 3.4% during the month, while food prices jumped 0.6%.”

Without a soundtrack of kettledrums pounding “boom boom boom” and the sound of ravenous wolves howling close by to tip you off about the sense of terror here, you can still hardly repress a shudder when The Journal goes on, “Even though markets have cooled recently, the rise in commodity prices from recent months is expected to continue making its ways from producers to consumers.”

I love the next part, as it trots out some guy named Alan Levenson of T. Rowe Price saying, “If that holds, by summer this impulse toward higher monthly food-price gains should diminish somewhat,” which appears to mean that prices will keep rising, but not quite as fast for some reason that I cannot imagine, and this makes it OK.

And even with the prices of housing falling, the cost of home ownership (“measured as the cost of renting the home you own”) increased 0.6% y/o/y, which I assume means that although the value of houses is going down, water heaters still need replacing, the television needs updating and there is a leak in the roof over the kid’s head that she is whining about because the stain on the ceiling looks like a werewolf looking at her.

I reassuringly told her that it kind of looks like a werewolf, alright, but it’s better than resembling the horrible demon of inflation getting ready to eat us alive, gobbling the guts out of me, her, and everybody she loves, when prices rise so high because the evil Federal Reserve keeps creating more and more money to buy up government bonds so that the government can try to spend its way out of bankruptcy by going farther into bankruptcy.

“And besides,” I said, “Werewolves are mythical creatures, and don’t really exist, while the devouring demon of inflation is very, very real.”

So she said, “So it is better that it resembles a werewolf?”

I said, “Yes, it is! And even the horrible monster of inflation is easily defeated by merely buying gold and silver. So we are covered both ways, my little darling, so that neither werewolves nor the horrible Federal Reserve can harm us!”

That’s when I asked her, “Can you say ‘Whee! This investing stuff is easy!’”?

Reassured, she closed her eyes, her face radiant with a cute little smile as she said, in a voice almost a whisper, “Whee!” before she fell fast asleep.

The Mogambo Guru
for The Daily Reckoning
 
Link to original article: http://bit.ly/fl8CHD

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 17 Mar 2011 21:16:51 -0700 US Inflation Worse than Zimbabwe? http://myhighdividendstocks.posterous.com/us-inflation-worse-than-zimbabwe http://myhighdividendstocks.posterous.com/us-inflation-worse-than-zimbabwe

03/17/11 Baltimore, Maryland – If you live in the United States, your cost of living – even by official stats – is rising twice as fast as in Zimbabwe.

$100 Trillion Zimbabwe Note

Yes, Zimbabwe…the country where at its worst $100 trillion is worth about 30 of the US variety…and good for four loaves of bread.

Yesterday, the Zimbabwe National Statistical Agency announced that consumer prices slowed last month to an annualized 3%.

But this morning, here in the good ol’ USA, the Bureau of Labor Statistics (BLS) announced the US consumer price index (CPI) rose 0.5% last month – which works out to a 6% annual clip.

Congratulations.

Of course, most of the increase in CPI was driven by higher energy costs and, to a lesser extent, higher food costs. So for Washington policy wonks and central bank honchos alike, the rise in prices doesn’t count.

Food and energy costs are “volatile” and not reflective of “underlying trends” as detected by such farseeing folk:

  • Gasoline up 4.7% (56% annualized)? Doesn’t matter
  • Public transit up 1.9% (23% annualized)? Statistical noise
  • Food consumed at home up 0.8% (10% annualized)? What part of “volatile” don’t you understand?

Thus the “core” CPI, for people who only eat iPads, rose a scant 0.2%. That’s an annualized 1.2%, on the low end of the Fed’s inflationary sweet spot. Print away.

Addison Wiggin
for The Daily Reckoning

Read more: US Inflation Worse than Zimbabwe? http://dailyreckoning.com/us-inflation-worse-than-zimbabwe/#ixzz1GvAMSdwl

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Sat, 12 Mar 2011 21:03:24 -0800 You Call It Inflation, I Call It Theft. http://myhighdividendstocks.posterous.com/you-call-it-inflation-i-call-it-theft http://myhighdividendstocks.posterous.com/you-call-it-inflation-i-call-it-theft
 This is an excellent article from Forbes by Bill Flax.  Tell your children the truth about inflation when they are ready to hear it.  Encourage them to save.  Saving is capital formation.  Teach them to be entreprenuers that serve customer's market needs and they will set for life.
 
Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.
 
Be seeing you!
 

You Call It Inflation, I Call It Theft

Mar. 3 2011 - 5:05 pm | 5,977 views | 0 recommendations | 5 comments
IRS building on Constitution Avenue in Washing...

Image via Wikipedia

On my daughter’s birthday, she received a crisp new $5 bill, which she promptly deposited in her piggy-bank. Never foregoing an opportunity to expound on free market principles, I warned about her susceptibility to a subtle means of theft even more devious than a burglar breaking in at night against whom you might get a clear shot.

Usually, when she asks why it’s, “Because I told you so!” But for inflation, because Washington wills it, that explanation hardly suffices. And as often as economic prognosticators prescribe currency debasement as some miraculous panacea, her question is a good one. Why do we suffer inflation?

I searched online for “benefits of inflation.”

Inflation Spurs Growth – The theory goes something like this: Since savers realize the value of their money will erode, they spend more quickly thus stimulating the economy. If we believe tomorrow brings higher prices, we buy today. Basically, we spend before the monetary authorities steal our money’s value. Hmm.

The proponents of consumption-based stimuli overlook the essentiality of saving. While burying your money in the ground wastes its talents, most save via bank accounts or through the purchase of capital assets. Thus saving makes investment capital available for new businesses hiring new workers and creating new products that sustain and beautify life. The accumulation of capital drives growth.

Inflation discourages saving. Inflation buries capital into the ground as people flee toward real estate as a protective hedge. Inflation stymies growth.

Inflation Decreases Debt Burdens – If we borrow say, $14 trillion and then cheapen our debt through dollar devaluation, the repaid lenders can’t buy as much thanks to diluted dollars being returned to them.  Inflation essentially harms savers for the benefit of borrowers. Every dollar borrowed requires a dollar saved. The economy gains nothing by such mischief.

Generally, borrowers aren’t responsible for this debauchery so it’s not fair to label it theft. In government’s case, dilapidated debts at least rise to the level of fraud. Why does Washington willfully reward the profligate by cheating the prudent? Ah yes, because they exude profligacy.

Inflation Increases Asset Values – As the dollar falls, the price of our assets raises commensurately. Stocks, real estate, etc. surge. That sounds wonderful, but their value increases against what? Since the prices for everything else rise too all we’ve secured is a nominal gain for tax collectors to confiscate. We derive no real benefit.

A stock that cost $20 thirty years ago would need to fetch over $50 today just to match the CPI, understated as it remains.  If it now costs $40, you pay the IRS on the $20 nominal gain even as your stock actually lost value.  Washington thus rewards itself for its own reckless monetary policy. The more they inflate, the more they take.

A similar phenomenon nails your wages. As your salary increases, you pay more taxes even as you can afford less. A two percent raise increases your tax bill two percent, but if prices also rise only the IRS derives any benefit.

Inflation Offsets Unemployment – The Philips Curve, the illusion that increasing inflation decreases unemployment, remains a staple of macroeconomics even as few still publicly acknowledge its role. Bernanke, Geithner et al remain smitten by the Philips Curve.

To succeed, this essentially entails deceiving workers. Since the price of labor, your wage, is less elastic than many other costs, businesses can raise prices quicker than can employees increase their salary demands. As businesses raise prices to cope with inflation, the cost of labor proportionally lowers. Thus, in Keynesian theory, more workers can be hired as inflation dilutes your pay.

Remember this when you hear some self-proclaimed friend of the working man imploring that we accept inflation as a means to expand employment. They peddle pay cuts for workers in real terms versus free marketers who promote wealth generating growth. Growth affords higher living standards for all. Inflation silently erodes living standards.

Inflation Promotes Exports – While few non-economists still accept the Philips Curve, the crowd espousing inflation as a facilitator of exports proves more enduring. Exporters love dollar debasement.

In theory, if the dollar falls then anything priced in dollars becomes cheaper for someone holding say, euros. But the dollar and the euro are merely measuring sticks. The underlying transaction involves trading our goods. Currency is a tool; a ticket of exchange. Currency simplifies trading relative to bartering. You may not want my output, but you definitely want my dollar so that you can acquire what you do want.

For illustrative purposes only, ignoring taxes, regulatory burdens, and transportation costs or differing local tastes, if the dollar equals the euro and it takes a dollar to buy a dozen eggs then it too will take a euro to buy those eggs.  Purchasing price parity.

But as the dollar plummets, a euro is now worth more. Thus it takes more dollars to buy eggs, but it still takes but one euro. Domestic eggs didn’t become cheaper in euros. This isn’t some mysterious or complicated economic theory or even subject to debate. It’s elementary school mathematics: the transitive property. If A equals B and B equals C then A too must equal C. Making A not equal B doesn’t change the value of C.

Markets are not perfect and as well as the arbitragers perform, timing differences remain. Gutting the dollar never makes eggs cheaper in euros other than timing discrepancies, which can make or break producers. Firms whose inputs are denominated in one currency and their outputs in another frequently get jilted.

As the dust settles, things must balance, but if you bought a dozen eggs yesterday in dollars to sell them tomorrow in Euros, the dollar’s lack of certainty promotes intrigue. Inflation wobbles the scale hindering international commerce.

When parties trade of their own volition, by mutual consent and to mutual advantage, both expect to gain and both should, assuming an honest scale. When Washington deliberately engineers a false balance, the likelihood that someone gets harmed rises dramatically. Cheating your trading partners can win the day, but isn’t a successful long term strategy.

Like the Philips Curve, promoting exports by debasing the currency effectively pokes the pendulum. The inflation driven exhilaration proves fleeting as the pendulum swings back like a wrecking ball. Some latch onto the pendulum as it soars higher, but others get whacked as it returns.

Inflation is deceitful and ineffective. It swindles savers, fleeces lenders, pumps taxes higher and triggers malinvestment. It doesn’t reduce unemployment; it whittles away your wage. Nor does inflation promote exports, but it does make international trade more frightening.

If inflation succeeded, it would be merely dishonest. But as history proves, it never works. Neither Bush, nor Obama’s weak dollar policies did anything to alleviate the overblown “trade deficit” and much to undermine growth. There is no evidence that inflation fosters exports or employment.

As Washington plunders the value of our property and expropriates the product of our labor, inflation reduces us to servitude. Debasement is a despicable ploy the government uses to rob you blind. Period.

So what do I tell my children?

Link to original article: http://blogs.forbes.com/billflax/2011/03/03/you-call-it-inflation-i-call-it-theft/ 

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 03 Mar 2011 13:25:21 -0800 Marc Faber's March Outlook: Falling Stocks, Wicked Inflation, and Middle East Turmoil. http://myhighdividendstocks.posterous.com/marc-fabers-march-outlook-falling-stocks-wick http://myhighdividendstocks.posterous.com/marc-fabers-march-outlook-falling-stocks-wick

Image001

Marc Faber’s March Outlook: Falling Stocks, Wicked Inflation, and Middle East Turmoil

By Nathaniel Crawford Mar 1, 2011, 12:48 AM Author's Website  

Marc Faber is out with his latest issue of the Gloom, Boom and Doom Report, which is always a must read for serious investors. This month’s report covers his outlook for the stock market, gold, oil, and the future for the US and global economy. Here are some of the highlights:

1. Stock Market–Still bearish in the short-term. Faber cautions against being bearish longer-term as long as the world is printing money, which will continue to inflate nominal stock prices. That said, technical indicators suggest a market correction. In particular, Faber notes the declining number of new 52 week highs, overly optimistic sentiment, and breakdowns in major stocks like Hewlett-Packard and Wal-mart. Furthermore, corporate insiders are selling stocks at a furious pace (855-1), indicating that they believe now is time to take profits, not risks.

2. Emerging Markets—Faber is still bearish on emerging markets in the short-term, and he expects world markets to correct further. However, emerging markets should be bought on the decline, especially since many of them are already down from their November 2010 highs. He notes that many institutions have been rotating out of EM and into developed markets, despite EM having better fundamentals. Some EM stocks have fallen 20-30%, which makes them a good value compared to US stocks. EM markets with the lowest forward PE ratios are Russia, Hungary, Turkey, and Brazil, which are good places to invest. Other markets to consider are Malaysia, Thailand, and Singapore where you can get good dividend yields.

3. Gold—To Faber the risk concerning gold is not whether it goes up or down, but the risk lies in not owning any of it in your portfolio. Gold could face a correction, but this does not bother him. He advises people to continue to accumulate gold and silver by dollar cost averaging every month. Strong fundamentals favor gold long term–not just because of money printing by central banks, but also because demand from emerging markets like China are increasing at an extraordinary rate. In 2010 China and India accounted for 50% of total gold demand in 2010. This number will only increase, providing strong support to the gold price.

4. Oil and Energy Stocks–The price of oil will remain high for the foreseeable future because of the unrest and likely further deterioration in the Middle East, along with inflationary policies by the world’s major central banks. Faber postulates that Pakistan could be the next domino to fall which would be a catastrophe for the world as it has nuclear weapons. While oil has spiked to $100 recently (WTI Crude), Faber thinks it will remain above $90 due to these these factors. Regarding energy stocks, they have a had a nice run, and investors should take profits or wait for a pull back before initiating new positions. Favorites are Chesapeake Energy and Suncor Energy.

5. Retail Stocks–Faber thinks retails stocks are vulnerable right now as rising food and oil prices reduce consumer spending. Wal-Mart is the classic example of difficult conditions for retails stocks, after the retailer reported another decrease in same store sales. If you want a real proxy for how the economy is doing, follow Wal-Mart’s stock price which has been flat for the past 2 years.  Faber even advises people to short the Retail Index (RTH) with a tight stop-loss.

Link to original article: http://wallstreetpit.com/64261-marc-fabers-march-outlook-falling-stocks-wicked-inflation-and-middle-east-turmoil

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Sun, 27 Feb 2011 19:15:03 -0800 Food Price Inflation Calculator. http://myhighdividendstocks.posterous.com/food-price-inflation-calculator http://myhighdividendstocks.posterous.com/food-price-inflation-calculator

Food Price Inflation Calculator

by Richard Daughty
The Daily Reckoning

Previously by Richard Daughty: Buying Silver While It’s Still Relatively Cheap

 

   

Mark Thornton of the Mises Institute writes, “The price of everything seems to have skyrocketed. Only housing, the dollar and inflation-adjusted income are negative.”

I immediately interrupt to wittily say, “Well, housing is going down because nobody wants to buy a still-over-priced-yet-even-lower-quality house that now needs painting, a new water heater, some leaky things fixed and a new roof, especially now that inflation-adjusted incomes are negative!”

The stunned silence at my rudeness was all I needed to continue, “And the ridiculous fiat dollar is going down in purchasing power because the foul Federal Reserve is creating So Freaking Much Money (SFMM) that, vis-à-vis other dirtbag fiat currencies of other dirtbag countries running budget deficits, the dollar is going down in value faster than they are because the Federal Reserve is creating more new money than all the rest of the world’s dumb-ass, dirtbag central banks put together!”

Seeing that everybody is completely stunned by the way I just barged into the conversation with one of my patented Stupid Mogambo Remarks (SMR), I, thus emboldened, powered forward by thoughtfully stroking my chin as if contemplating something profound, whereupon I go on, my voice rising in a crescendo of pain and outrage, “But if you calculate all prices in ounces of gold, you will find that prices will have actually gone down! I’m not sure exactly how to prove it, but this has to mean We’re Freaking Doomed (WFD)!”

Apparently, Mr. Thornton is not sure how to calculate it, either, but is perhaps suggesting that the horror may be found in the fact that “World food and commodity prices are up 28% over the last six months.”

I was surprised that I did not edit his remarks to end with at least one exclamation point, and also surprised at his use of a 6-month time-frame, instead of annualizing it, at least in some simplistic linear manner that a dolt like me can understand.

In doing so, he unwittingly provides an opening for Showoff Calculator Man (SCM), as I happen to be an absolute whiz at multiplying numbers by 2!

Putting my calculator where my mouth is, I quickly crank out 2 X 28% = 56% inflation! See? I CAN do it!

On the other hand, 1.28% X 1.28% = 1.64%, which would seem to be a massive 64% annual inflation when compounded, even more so than the simple 58%. Yikes!

Mr. Thornton ignores me, and goes on, “Higher food prices set off the revolutions in Tunisia and Egypt and the mass protests in countries like Algeria, Jordan, Yemen, Bahrain and Iran. People in these countries buy more unprocessed foods and spend a much higher percentage of their income on food, so they have been severely impoverished by Bernanke’s QE2.”

Of course, being an American, all I really care about is how it affects me, an American, and American prices, and how in the hell I am going to afford higher prices on my American income which has, as he said earlier, gone down when inflation-adjusted.

In that regard, Joel Bowman, Managing Editor here at The Daily Reckoning notes, “Wholesale prices jumped 0.8% in January. The producer price index (PPI) has now jumped 3% over the last four months. And no, that’s not an annualized figure.”

Again, Showoff Calculator Man (SCM) comes to the rescue, and multiplies 3 times 3% to get 9% inflation, which IS an annualized figure, and more than 9% inflation when compounded, and which is scary enough to send me running, running, running, like the paranoid little weasel that I am, to the safety of the Mogambo Secret Bunker (MSB).

I was hurriedly shutting the bunker’s door when I heard Mr. Bowman go on, “Note that the PPI headline number is for ‘finished goods’ – stuff that’s ready to be sold direct to consumers. In the category of ‘crude goods,’ the figures are far worse – up 3.3% in January, and up a staggering 15.8% over the last four months.”

The last four months! That’s almost 48% inflation a year! Man, if ever there was a time to buy gold, silver and oil, this is it! Whee! This investing stuff is easy!

February 26, 2011

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron’s, The Daily Reckoning, and other fine publications.

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Tue, 15 Feb 2011 18:14:02 -0800 Why is price inflation raging in China, but not in the US? http://myhighdividendstocks.posterous.com/why-is-price-inflation-raging-in-china-but-no http://myhighdividendstocks.posterous.com/why-is-price-inflation-raging-in-china-but-no

Image002

Why is price inflation raging in China, but not in the US?  Both countries and their central banks showered banks with stimulus money.  The short answer to that question is because the Chinese state-owned banks kept lending to businesses and individuals while US commercial bankers have tightened lending.

The fractional-reserve lending process creates money.  Money creation adds to the money supply that comprises people’s checking accounts (M1).  People spend the money in their checking accounts to purchase goods.  More money chasing the same amount of goods leads to higher prices (all other things being equal).  To better understand how this process functions to create money click here: http://en.wikipedia.org/wiki/Fractional_reserve_banking .  Also, Murray Rothbard’s “The Mystery of Banking” is a bit longer, but it is so elegant an explanation of this process that affects us all.  http://mises.org/resources/614/Mystery-of-Banking-The

The US commercial bankers are not lending the over one trillion dollars in excess reserves that they received from the Federal Reserve.  Lending is the process in which the reserves are transformed into M1 money supply.  Individuals in the US are going to experience massive price inflation once the bankers expand lending.  These price increases will make the 1970’s seem like a sunny afternoon.

The Chinese government bankers do not face negative career sanctions if they drive their banks and country into the ground.  Only the biggest US banks are protected by the Federal Reserve.  All other bankers are tightening for their lives.  The biggest banks are not lending to shore up their pathetic balance sheets.

They Chinese government bankers are lending like crazy despite the obvious price increases in goods and real estate in China.  Their price increases are going to lead to strife in China.  There are millions of unmarried, unemployed Chinese males due to the government’s one child policy that are facing increased prices and poor employment prospects.  That spells revolution in most historical cases.

What is happening in China will happen to us.

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.  I will also help you time your purchases of non-correlators to the stock market like commodities and precious metals.  Their prices will be impacted by the events in China, the US, and Europe.

Be seeing you!

Chinese shoppers struggle with spiraling prices

Chinese shoppers struggle with spiraling prices as government tries to cool inflation

A woman selects vegetables on a store inside a market in Beijing, China Tuesday, Feb. 15, 2011. A jump in food prices pushed China's inflation higher in January, adding to pressure on Beijing to control surging living costs. (AP Photo/Andy Wong)

, On Tuesday February 15, 2011, 5:33 am EST

BEIJING (AP) -- Spiraling prices have made the grocery store a scary place for Chu Yun, a 27-year-old office clerk.

"Prices for everything are going up and it seems it will never stop," Chu said as she hunted bargains in a supermarket. "I have no confidence prices can be brought under control this year. I think they will keep going up."

China's public is struggling with a monthslong surge in food prices that has defied government efforts to combat inflation with interest rate hikes, price controls and a campaign to boost vegetable and grain output.

On Tuesday, the government reported inflation accelerated in January, rising to 4.9 percent from December's 4.6 percent. That was driven by a 10.3 percent jump in food costs amid tight supplies and strong demand.

Economists expect more sharp price rises in coming months because China faces a problem it cannot quickly fix: Demand is outstripping food supplies, while high global commodity prices mean it can't fill the gap cheaply with imports.

"Inflation is unlikely to come down substantially in the first half of the year," said Mark Williams of Capital Economics. Analysts expect more rate hikes, but Williams said that on their own, "they aren't going to bring more crops to the market."

Inflation is dangerous for China's leaders because it erodes economic gains that underpin the Communist Party's claim to power. And it hits the poor majority hardest in a society where millions of families spend up to half their incomes on food.

That is politically awkward as Beijing tries to enforce stability ahead of a once-a-generation handover of power next year to younger Communist Party leaders.

"The political backdrop of the transition is paramount in the policymakers' minds," said Dariusz Kowalczyk, senior economist at Credit Agricole CIB. "They realize the poorer people who still are the majority of China's population are hurt by inflation to a larger degree than they benefit from growth."

Beijing has tried to mollify the public by paying food subsidies to poor families, holding down prices in university cafeterias and ordering local leaders to see that vegetable markets have adequate supplies. It has tried to diffuse public frustration by claiming hoarding and price-fixing by speculators is partly to blame.

But analysts say Beijing also failed to act quickly enough to head off inflation after it deflected the 2008 crisis by flooding the economy with stimulus money and bank lending. The economic rebound gave consumers more money to spend and banks are pumping out loans despite orders to curb credit.

Beijing has raised interest rates three times since October, but economists say more rate hikes are needed and it will be months before the effect is seen.

"It seems Chinese policymakers are behind the curve in fighting inflation," Kowalczyk said. "They have been too cautious."

The headline inflation numbers hide even sharper increases in key items.

In January, the price of fresh fruit soared by more than a third from year earlier, while eggs rose by a fifth, the National Bureau of Statistics reported.

At the Xinya Shopping Center, a supermarket on Beijing's east side, the price of sugar is up 80 percent over a year earlier, while high-quality rice costs 65 percent more, according to manager Wang Yongyi.

"Since the second half of last year, we have been busily changing the price tags to mark the prices up," Wang said. "It seems that the more control we had from the government, the higher prices rise."

Inflation could also spill over into higher Chinese export prices. That might raise costs for Western consumers but also could help countries such as Vietnam and India compete with China as suppliers of clothing, furniture and other low-cost goods.

Global Sources, a company that connects Chinese suppliers with foreign customers, said this week that a survey of 232 Chinese companies found 74 percent of them raised prices last year -- some by up to 20 percent -- due to higher costs for materials and components.

"China is steadily moving away from being the world's low-cost source of various products," the company said in a report released this week.

A separate Global Sources survey of 385 foreign buyers last month found 31 percent were increasing purchases from Vietnam due to higher Chinese prices.

Higher inflation also might prompt Beijing to slow the rise of its currency, the yuan, against the U.S. dollar to help its exporters compete. That might add to strains with Washington and other governments that complain the yuan is kept undervalued, giving China's exporters an unfair advantage and adding to its huge trade surplus.

Adding to pressure on food supplies, China's northeast faces a crippling drought that threatens its winter wheat crop. Global wheat prices are high, limiting Beijing's ability to fill the gap by boosting imports at a reasonable price.

The government has launched a $1 billion campaign to save the harvest with emergency irrigation and cloud-seeding to make rain.

"I hope the government can rein in the food price rises this year, or else people's lives will be greatly hurt," said Wang, the supermarket manager. "No matter how high prices go, people need to eat anyway, right?"

AP researcher Yu Bing contributed.

China National Bureau of Statistics (in Chinese): http://www.stats.gov.cn

China's Economic "Hard Landing" Will Cause a Commodity Crash, Says Gary Shilling

by Peter Gorenstein

China, now the second largest economy in the world, is headed for (relatively) hard times, says economist Gary Shilling, president of A. Gary Shilling & Co. He expects the economy will experience a "hard landing within this calendar year or perhaps the first half of the next calendar year," he tells Aaron Task in this accompanying clip.

China's Hard Landing Is Another Country's Boom

Shilling says a hard landing will result in 6% growth, not the double-digit growth they've been used to over the past decade. The irony, of course, is that kind of growth in the U.S. and other developed countries would be considered an economic renaissance. But not in China.

It's the Inflation, Stupid

China is currently trying to battle inflation that rose 5 percent in January and included a 10 percent gain in food prices, putting new stresses on domestic consumers. Shilling says rising prices are an ill effect of China's $585 billion stimulus package implemented in 2009, in the wake of the global financial crisis. 

The stimulus package, which amounted to 12% of the Chinese economy -- twice as large a percentage as the U.S.'s stimulus -- has manifested itself in a commodity and speculative real estate bubble that Shilling thinks is set to pop.

So far, Beijing has unsuccessfully tried to cool the economy by raising interest rates three times since October.  It won't have the desired effect, Shilling argues.  "I think that they are probably going to overdue it."

Commodity Crash Coming

That hard landing is bad news for commodity prices.  He's betting against the entire commodity complex, saying once the industrial metals such as copper fall, it will cause a domino effect in agricultural products such as cotton, wheat and soy beans.

That commodity crash will also manifest itself in weaker "commodity" currencies such as the Australian dollar, the New Zealand dollar and, to a lesser degree, the Canadian dollar.

Link to original article: http://finance.yahoo.com/tech-ticker/chinas-economic-hard-landing-will-cause-a-commodity-crash-says-gary-shilling-yftt_535929.html

Image001

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 10 Feb 2011 15:22:43 -0800 How the Fed Fuels Unemployment. http://myhighdividendstocks.posterous.com/how-the-fed-fuels-unemployment http://myhighdividendstocks.posterous.com/how-the-fed-fuels-unemployment

Read this excellent, short article on how the Federal Reserve policies fuel unemployment past and present.  A basic understanding of Austrian economics can save you thousands of dollars by preventing you from being hoodwinked by the Fed and its shills in the financial press organizations (CNBC, Wall Street Journal, etc).

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

How the Fed Fuels Unemployment

by Thomas J. DiLorenzo
by Thomas J. DiLorenzo
Recently by Thomas DiLorenzo: Another Court Historian’s False Tariff History

Testimony of Dr. Thomas DiLorenzo
Professor of Economics, Loyola University Maryland
Committee on Financial Services, Subcommittee on Domestic Monetary Policy and Technology
Wednesday, February 9, 2011
2128 Rayburn House Office Building

Mr. Chairman and members of the committee, I thank you for the opportunity to address the issue of today’s hearing: "Can Monetary Policy Really Create Jobs?" Since I am an academic economist, you will not be surprised to learn that I believe that the correct answer to this question is: "yes and no." Monetary policy under the direction of the Federal Reserve has a history of creating and destroying jobs. The reason for this is that the Fed, like all other central banks, has always been a generator of boom-and-bust cycles in the economy. Why this is so is explained in three classic treatises in economics: Theory of Money and Credit by Ludwig von Mises, and two treatises by Nobel laureate economist F.A. Hayek: Monetary Theory and the Trade Cycle and Prices and Production. Hayek was awarded the Nobel Prize in Economic Science in 1974 for this work. I will summarize the essence of this theory of the business cycle as plainly as I can.

When the Fed expands the money supply excessively it not only is prone to creating price inflation, but it also sows the seeds of recession or depression by artificially lowering interest rates, which can ignite a false or unsustainable "boom" period. Lower interest rates induce people to consume more and save less. But increased savings and the subsequent business investment that it finances is what fuels economic growth and job creation.

Lowered interest rates and wider availability of credit caused by the Fed’s expansionary monetary policy causes businesses to invest more in (mostly long-term) capital projects (primarily real estate in the latest boom-and-bust cycle), and there is an accompanying expansion of employment in those industries. But since the lower interest rates are caused by the Fed’s expansion of the money supply and not an increase in savings by the public (i.e., by the free market), businesses that have invested in long-term capital projects eventually discover that there is not enough consumer demand to justify their investments. (The reduced savings in the past means consumer demand is weaker in the future). This is when the "bust" occurs.

The economic damage done by the boom-and-bust policies of the Fed occur in the boom period when resources are misallocated in the ways described here. The "bust" period is actually a necessary cure for the economic miscalculations that have occurred, as businesses liquidate their unsound investments and begin to make decisions on realistic, market-based interest rates. Prices and wages must return to reality as well.

Government policies that bail out businesses that have made these bad investment decisions will only delay or prohibit economic recovery while encouraging more of such behavior in the future (the "moral hazard problem"). This is how short recessions can be turned into seemingly endless ones. Worse yet is for the Fed to create even more monetary inflation, rather than allowing the necessary economic adjustments to take place, which will eventually set off another boom-and-bust cycle.

As applied to today’s economic situation, it is obvious that the artificially low interest rates caused by the policies of the Greenspan Fed created an unsustainable boom in the housing market. Thousands of new jobs were in fact created – and then destroyed – giving an updated meaning to Joseph Schumpeter’s phrase "creative destruction." Many Americans who obtained jobs and pursued careers in housing construction and related industries realized that those jobs and careers were not sustainable after all; they were fooled by the Fed’s low interest rate policies. Thus, the Fed was not only responsible for causing the massive unemployment that we endure today, but also a great amount of what economists call "mismatch" unemployment. The skills that people in these industries developed were no longer in demand; they lost their jobs; and now they must retool and re-educate themselves.

The Fed has been generating boom-and-bust cycles from its inception in January of 1914. Total bank deposits more than doubled from 1914 to 1920 (partly because the Fed financed part of the American involvement in World War I) and created a false boom that turned to a bust with the Depression of 1920. GDP fell by 24% from 1920–1921, and the number of unemployed more than doubled, from 2.1 million to 4.9 million (See Richard Vedder and Lowell Galloway, Out of Work: Unemployment and Government in Twentieth-Century America). This was a more severe economic decline than was the first year of the Great Depression.

In America’s Great Depression economist Murray N. Rothbard demonstrated that, once again, it was the excessively expansionary monetary policy of the Fed – and of other central banks – that caused yet another boom-and-bust cycle that spawned the Great Depression. It was not the Fed’s subsequent restrictive monetary policy of 1929–1932 that was the problem, as Milton Friedman and others have argued, but its previous expansion. The Fed was therefore guilty of contributing greatly to the massive unemployment of the Great Depression.

In summary, the Fed’s monetary policies tend to create temporary and unsustainable increases in employment while being the very engine of recession and depression that creates a much greater degree of job destruction and unemployment.

February 10, 2011

Thomas J. DiLorenzo [send him mail] is professor of economics at Loyola College in Maryland and the author of The Real Lincoln; Lincoln Unmasked: What You’re Not Supposed To Know about Dishonest Abe and How Capitalism Saved America. His latest book is Hamilton’s Curse: How Jefferson’s Archenemy Betrayed the American Revolution – And What It Means for America Today.

Copyright © 2011 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

The Best of Thomas DiLorenzo at LRC

Thomas DiLorenzo Archives at Mises.org

Here is the link to the original article: http://www.lewrockwell.com/dilorenzo/dilorenzo200.html

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 10 Feb 2011 12:20:31 -0800 Would you like to make 44% on your investment with no downside risk? Let me explain. http://myhighdividendstocks.posterous.com/would-you-like-to-make-44-on-your-investment http://myhighdividendstocks.posterous.com/would-you-like-to-make-44-on-your-investment

Would you like to make 44% on your investment with no downside risk?  No, I’m not talking about an extremely high dividend stock.  I’m talking about nickels.

The lowly five cent nickel in your spare change is actually worth 7.3 cents today due to the nickel and copper metal content.  That equates to 144% of face value (hence the 44% gain).  The US government is planning on changing the composition of the nickel to make its metal content less than five cents.  They are doing this because it costs those knuckleheads nine cents to mint a nickel coin.  The nickel remained unchanged since 1946.  The old copper pennies are worth nearly 300% of face value, but they comprise only about 15% of the penny population.  You have to spend time and effort to separate them from the zinc pennies.  Every nickel in that $2 roll is exactly the same.

Visit the website www.coinflation.com to see the current metal value of various American coins.  It even shows you the calculation for the curious members of our readers.

I ask for nickel rolls whenever I break a $5 or $10 bill.  Most young cashiers will immediately fork over one or two rolls.  I accumulate about $20 nickels each month without going out of my way to acquire them.

I recommend that you accumulate a couple hundred dollars in these coins as part of your emergency cash savings.  They can easily be converted back into cash at a bank if you keep them in their paper rolls in the event you need to use the emergency money.  Otherwise, just let them sit there and hedge against inflation as the Federal Reserve inflates the money supply like crazy.  If a deflation occurs, then they will never fall below their face value.  There is no risk.  What are you waiting for?  Take two dollars out your pocket and ask a cashier at the grocery store or the bank inside Wal-Mart for a roll of nickels.

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

The Nitty Gritty on Nickels

James Wesley, Rawles

As I've mentioned before in SurvivalBlog, U.S. Five cent pieces ("Nickels") should be considered a long-term hedge on inflation. I recently had a gent e-mail me, asking how he could eventually “cash in” on his cache of Nickels. He asked: "Are we to melt them down, or sell them to a collector? How does one obtain their true 7.4 cents [base metal content] value?" My response: Don't expect to cash in for several years. I anticipate that there won't be a large scale speculative market in Nickels until their base metal value ("melt value") exceeds twice their face value ("2X Face"), or perhaps 3X face.

Once the price of Nickels hits 4X face value, speculators will probably be willing to pay for shipping. By the way, I also predict that it will be then that the ubiquitous Priority Mail Flat Rate Box will come into play, with dealers mailing Nickels in $300 face value increments. The U.S. Postal Service may someday regret their decision to transition to "Flat Rate" boxes for Priority Mail with a 70 pound limit.

Once the price of Nickels hits 5X face there will surely be published "bid/ask" quotations for $100, $300, and $500 face value quantities, just as has been the norm for pre-1965 U.S. 90% silver coinage since the early 1970s. (Those coins are typically sold in a $1,000 face value Bag (weighing about $55 pounds), or a "Half bag" (containing $500 face value.) Soon after the current Nickels are dropped from circulation, we will see $300 face value boxes of Nickels put up for competitive bidding, on eBay.

An Aside: Nickel Logistics

Nickels are heavy! Storing and transporting them can be a challenge.

I've done some tests:

$300 face value (150 rolls @$2 face value per roll) fit easily fit in a standard U.S. Postal Service Medium Flat Rate Box, and that weighs about 68 pounds.) They can be mailed from coast to coast for less than $25. Doing so will take a bit of reinforcement. Given enough wraps of strapping tape, a corrugated box will securely transport $300 worth of Nickels.

The standard USGI .30 caliber ammo can works perfectly for storing rolls of Nickels at home. Each can will hold $180 face value (90 rolls of $2 each) of Nickels. The larger .50 caliber cans also work, but when full of coins they are too heavy to carry easily.

Legalities

Since late 2006 it has been illegal in the U.S. to melt or to export Pennies or Nickels. But it is reasonable to assume that this restriction will be dropped after these coins have been purged from circulation. They will soon be replaced with either silver-flashed zinc slugs, or tokens stamped out of stainless steel. (The planned composition has not yet been announced.)

By 2015, when the new pseudo-Nickels are in full circulation, we will look back fondly on the days when we could walk up to our local bank teller and ask for "$20 in Nickels in Rolls", and have genuine Nickels cheerfully handed to us, at their face value.

Death, Taxes, and Inflation

It has been said that "the only two things that are certain in life are death and taxes." I'd like to nominate "inflation" as an addition to that phrase. For the past 100 years, we've been gradually robbed of our purchasing power through the hidden form of taxation called inflation. Currency inflation explains why gold coins and silver coins had to be dropped by the U.S. Mint in the 1930s and 1960s, respectively. Ditto for 100% copper Pennies, back in 1981. (The ones that have been produced since then are copper-flashed zinc slugs, but even the base metal value of those is now slightly greater than their face value.)

Inflation marches on and on. Inflation will inevitably be the impetus for a change in the composition of the lowly Nickel. Each Nickel presently has about 7.3 cents in base metal ("melt") value, and they cost the Mint more than 9 cents each to make. You don't need a doctorate in Economics to conclude that the U.S. Mint cannot continue minting Nickels that are 75% copper and 25% nickel--at least not much longer.

Without Later Regrets

Don't miss out on the opportunity to hedge on inflation with Nickels. Just like the folks who failed to acquire silver dimes and quarters in the early 1960s, you will kick yourself if you fail to stock up on Nickels. Do so before they are debased and the older issue is quickly snatched out of circulation. The handwriting is on the wall, folks. Stop dawdling, and go to the bank and trade some of your paper FRNs for something tangible.

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Tue, 08 Feb 2011 09:52:28 -0800 QE2 and Its Effects: Treasury Bond Rates Rise http://myhighdividendstocks.posterous.com/qe2-and-its-effects-treasury-bond-rates-rise http://myhighdividendstocks.posterous.com/qe2-and-its-effects-treasury-bond-rates-rise

Treasury bond rates are rising.  The graph below clearly indicates this.  The bond investors do not believe Federal Reserve chairman Ben Bernanke’s bullcrap.  That’s why rates are rising.  They are wising up.  Rising rate indicate that some bond investors are shuffling their feet quietly toward the exit.  There will be a panic at some point.  They all think they can get out of the burning building in time.  The burning building is the bond market.  Not all of them will.

On a related note, American Capital Agency Corp. (AGNC) reports 4Q2010 earnings this afternoon.  I’m curious to see how their net interest rate spread holds up.  Notice that short term rates have barely moved since the Federal Reserve started to implement QE2.  Check back later this afternoon for my blog on AGNC earnings.

QE2 and Its Effects: Treasury Bond Rates Rise

Gary North

Feb. 7, 2011

Here is what the Federal Open Market Committee announced on November 3, 2010.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

http://www.federalreserve.gov/newsevents/press/monetary/20101103a.htm

Here is what has happened to bond rates since then.

Image001

  

Image003

http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/Historic-Yield-Data-Visualization.aspx

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Sun, 06 Feb 2011 15:01:18 -0800 Marc Faber: Bernanke Is a Liar. http://myhighdividendstocks.posterous.com/marc-faber-bernanke-is-a-liar http://myhighdividendstocks.posterous.com/marc-faber-bernanke-is-a-liar
Marc Faber and several others (e.g. Jim Rogers, Peter Schiff, Ron Paul) who understand Austrian economics predicted the housing crisis and the financial crisis.  Knucklehead Keynesian economists like Ben Bernanke and all the talking heads on CNBC failed to see the coming crisis.  They are ignorant liars.  Enjoy the short video below.
Marc Faber: Bernanke Is a Liar

Bull Source

Investor Marc Faber talks with CNBC about the false economic recovery, Egypt, emerging economies, and inflation.

Faber believes the global economy may be okay for the next six months. “We have to realize that it’s an artificial recovery driven by ultra-expansionary monetary policies and also ultra-expansionary fiscal policies,” he comments. Faber predicts that deficits will lead to renewed problems down the road.

“The annual cost of living increases are more than 5% today and the Bureau of Labor Statistics is continuously lying about the inflation rate, including Mr. Bernanke. He’s a liar. Inflation is much higher than what they publish.”

Faber says the true cost of living increase for most US households is 5-8%, and just below that in Western Europe.

Reprinted with permission from Bull Source. You can subscribe to Bull Source posts for free here.

February 5, 2011

© 2011 Bull Source

Dr. Marc Faber [send him mail] lives in Chiangmai, Thailand and is the author of Tomorrow's Gold.
 
 
Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and stong balance sheets.
 
Be seeing you!

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Wed, 26 Jan 2011 12:37:27 -0800 Don't Trust the Inflation Numbers http://myhighdividendstocks.posterous.com/dont-trust-the-inflation-numbers http://myhighdividendstocks.posterous.com/dont-trust-the-inflation-numbers

Don’t trust the government reported price inflation numbers otherwise known as the consumer price index (CPI).  The government’s Bureau of Labor Statistics under-reports the true price increases that we all experience as we buy food, shelter, energy, healthcare, entertainment, and transportation.  I wrote about this in greater detail in August of 2010:

http://bit.ly/riggedCPI

You might be asking yourself why would the BLS change their methodology for computing the CPI?  The reason is simple.  The two largest federal welfare programs: Social Insecurity and Medicare would go broke dozen of years earlier without the rigging of the CPI.  It is in every president’s and congress’ best personal best interest to delay the day of reckoning.  Rigging the CPI helps to kick the can.

The Federal Reserve and the monetary base

There will be massive price inflation caused by all the money that the Federal Reserve has created out-of-thin-air since late 2008.  The Wall Street Journal author does not understand the mechanics of money creation.  The Federal Reserve creates the money and buys assets (usually US government debt like they are doing now with QE2).  This expands the FED’s balance sheet and adds money to the monetary base.  Prices don’t go up until the monetary base gets transformed into money that actually goes into people’s bank accounts. 

The fractional-reserve banking process in a nutshell

The banks receive the freshly printed dollars or digital dollars in their accounts for the US government debts that they sold to the Federal Reserve.  The banks can then lend almost all of the money they received from the FED – OR – they can choose to not lend it.  They have chosen to lend very little of it.  They call the money above the legal reserve requirement the  “excess reserves”.  The banks are holding over a trillion dollars as excess reserves.  When banks lend they create new money.  For example, if the legal reserve requirement was set at 10% (it is much lower than this), then Bank A that received a $1,000 deposit from a customer would be allowed to lend $900 and would have to keep $100 as reserve.  The person who received the $900 loan from Bank A would deposit $900 into his checking account at Bank B until he was ready to spend the loan money.  Bank B could loan $810 to someone else while keeping $90 (10%) as legal reserves.  This is how money is created.  A $1,000 increase in the monetary base multiplies many times through this process.  The M1 money supply increases.  Prices increase.

If the banks lent that money in a manner like they did in 2006, then prices would roughly double in a relatively short time.  Keep this in mind as you read the WSJ article below.

Economy by Brett Arends (Author Archive)

Don't Trust the Inflation Numbers

A surprising number of people on Wall Street will tell you not to worry too much about inflation.

After all, they'll say, just look at the numbers. The inflation picture is incredibly benign. In the past 12 months the Consumer Price Index has risen just 1.5%—a remarkably low rate. And when you strip out volatile food and energy costs, they'll say, it's even lower—a meager 0.8%.

It doesn't stop there. Many economists will point out that wages are also rising by less than 2% a year. With so many people still out of work, goes the line, labor costs are going to stay low for a long time too. So what's the worry?

Clearly, a lot of investors agree. Inflation-protected government bonds, which people would buy to protect themselves if they were worried, have fallen in price in the past couple of months. Gold, another inflation hedge, is down. Ten-year Treasury bonds yield less—3.3%—than they did when President Eisenhower left office.

It's crazy. There is plenty to worry about. As you battle to manage your family's finances, be aware that there are three reasons why inflation needs to be on your radar screen.

• First, the official inflation numbers should be taken with a fistful of salt.

Over the past 30 years, the federal government has made a lot of changes to the way it calculates inflation. It's taken place under presidents of both parties. Each change in methodology has come with plausible-sounding justifications. But, as if by magic, each change has had the effect of flattering the numbers. Funny, that.

According to one rogue economist, John Williams at Shadow Government Statistics , if we still calculated inflation the way we did when Jimmy Carter was president, the official inflation figures would look about as bad as they did when ... Jimmy Carter was president. According to Mr. Williams's calculations, if we counted inflation under the old system the official rate wouldn't be 1.5%. It would be closer to 10%.

Mr. Williams is just one voice. But it makes sense to treat the government numbers with skepticism.

Under the official calculations, if steak prices boom, the government just assumes you buy cheaper hamburger instead. Presto—no inflation!

Or consider the case of Apple ( AAPL: 344.46*, +3.06, +0.89% ) computers. We all know Macs are expensive. And we know Apple doesn't discount. The cheapest Mac laptop today costs $999. A few years ago, it also cost $999. So the price is the same, right?

Ha. Not according Uncle Sam. Using a piece of chicanery called "hedonics," Uncle Sam calls this a price cut. His reasoning? You're getting more for the money. Today's $999 Mac is lighter, fancier and faster than last year's $999 Mac. So the government calculates that the "real" price has actually fallen.

How's that work in the real world? Try it. Go into your local Apple store and ask for 50% off thanks to hedonics. (If you do, please, please video the exchange and put in YouTube. We could all use a good laugh.)

Instead, the government is worrying about deflation, partly because of all the "cheap" MacBooks out there.

• The second reason to treat the official inflation figures with some mistrust is that they look backward. They register what just happened, not what's about to happen next.

OK, so the prices of many things haven't risen. Yet. But if the laws of economics mean anything, they will have to. Why? Because costs are rising.

Economists need to stop focusing just on labor costs. The world has plenty of surplus labor. But look at raw materials. Around the world prices are skyrocketing, from copper to cocoa. The United Nations Food Price Index has just hit a new record high. Oil's back near $90 a gallon. Wheat prices have nearly doubled since last summer.

Soaring food prices helped spark the revolution in Tunisia. According to Alex Bos, commodities analyst at Macquarie Securities in London, other governments—especially in North Africa—have responded with panic buying of foodstuffs.

Algeria alone, he says, has bought about 1.5 million tons of wheat this month—maybe triple its usual amount. Saudi Arabia is rushing to build up grain supplies. Corn supplies are as tight as they were back in the inflationary 1970s.

Sooner or later this is going to show up in your supermarket, or at the mall, in higher prices.

Just ask McDonald's ( MCD: 75.40*, -0.08, -0.10% ) . Or paints and plastics giant DuPont ( DD: 50.36*, +1.32, +2.69% ) . Or Kleenex and Huggies maker Kimberly-Clark ( KMB: 65.21*, -0.40, -0.60% ) . Or 3M ( MMM: 89.18*, +0.68, +0.76% ) . Or Coach ( COH: 54.61*, +1.52, +2.86% ) . These companies, and many others, have warned in recent days that they're getting squeezed by rising costs. They'll either eat the costs, which will hit the stock, or pass them on. How is this not inflation?

• The third reason to be mistrustful of the inflation picture? Simple. Economics.

We are flooding the world with extra dollars. The Fed simply invents as many as it likes. In the past couple of years, to try to keep the economy out of a tailspin, it has more than doubled the size of the so-called monetary base.

A dollar bill has no intrinsic value. Dollars are only "worth" something because you can exchange them for a haircut, or a pair of shoes, or a book from Amazon.com ( AMZN: 175.63*, -1.07, -0.60% ) . So if you drastically increase the number of dollars without a commensurate increase in the number of goods and services, each dollar must, by definition, be worth less. That's another way of describing inflation.

So far, this inflation seems to have shown up in the unlikeliest of places. It's like Whac-A-Mole. The price of vintage wines has skyrocketed 57% in the past year, according to the Liv-ex Fine Wine 50 Index . Real estate prices across China are in a bubble. So long as the Chinese tie themselves to the U.S. dollar, they are importing our inflation. But, once again, one wonders how this can be called benign.

Is inflation certain? I'm wary of any predictions. Casey Stengel once said, "Never make predictions, especially about the future." Mr. Stengel would have lasted three days as a Wall Street analyst. But he won five World Series in a row, and he knew a thing or two.

Maybe inflation really will stay tame. But I'm not counting on it. I'm not buying the conventional wisdom, and neither should you.

Published January 26, 2011

Read more: ROI: Don't Trust the Inflation Numbers - SmartMoney.com http://www.smartmoney.com/investing/economy/roi-dont-trust-the-inflation-numbers-1296052731208/#ixzz1CAwwqdMx

Subscribe for free today at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets to help you overcome the crushing effects of monetary inflation.

Be seeing you!

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Sat, 22 Jan 2011 11:28:07 -0800 The Surprising Price of Wheat http://myhighdividendstocks.posterous.com/the-surprising-price-of-wheat http://myhighdividendstocks.posterous.com/the-surprising-price-of-wheat

The Surprising Price of Wheat

leadimage

01/20/11 Tampa, Florida – I was intrigued by the title of the essay “The Cheapest Thing on Earth” by Nathan Lewis here at The Daily Reckoning.

I was interested because I thought that such a tasty trivia tidbit could come in handy, like this morning when I could have used it as a distraction when my kids were calling me “cheap” because I wouldn’t open up my wallet and give them another king’s ransom for some new dumb reason; I forget what, but there was a lot of crying and wailing about it, whatever it was.

This is where I could have said, to throw them off, “Cheap? What do you know about cheap? Do you know what is the cheapest thing on earth? Huh? Do ya? Huh? Do ya? Yes or no?!”

Instead of providing me with the answer, he starts off with a pop quiz! Damn!

And when I say “pop” quiz, I mean exactly that, as he says, “Quick: name an asset, publicly traded, that is the cheapest in a hundred years.” Pop!

I, of course, had no idea, and instead of admitting it, I quickly read ahead, hoping to immediately find the answer, only to be surprised when he taunted me. “Houses?” he asks. “Nope. Stocks? I don’t think so. Commercial real estate? Bonds?”

By this time I was pretty peeved, and getting bored, too, as I was sure that if it was, indeed, none-of-the-above, then this was going to devolve into something about investing in something obscure, the significance of which would elude me even if you explained it to me over and over again, in a company I never heard of, and, probably, in a country I never heard of, either.

Just before I gave up reading in disgust, he dared to taunt me one more time, the bastard! “Not too many, are there?” he asks.

At this final insult, my mind screamed, “Damn you! Damn you to hell! Tell me now, or I will fire off a flaming email that will be both highly insulting and vaguely threatening!”

I could almost hear his cruel, mocking laughter as he rudely called my bluff, and further insulted me and my false bravado with, “Now here’s a tougher one. Name an asset that is near the lowest price in all of human history.”

Arrgghhh! In all of human history? By this time I am angry and distraught, mostly angry, that somebody was exposing my stupidity and ignorance!

Suddenly, I am gasping for air and screaming that if he doesn’t tell me the answer pretty soon, I am going to start hearing those voices in my head again, and (now that you mention it) if I listen really closely, I can almost hear them already, way off in the distance, screaming to be heard and obeyed.

And we all remember how it turned out the LAST time that happened.

Obviously intimidated by the sudden revelation of the strange, powerful forces he is unleashing, he quickly announces, “The answer is: wheat”!!

I admit that I personally put those two final exclamation points at the end of his sentence as an emphasis, both to indicate surprise and to remind you that there are surely significant ramifications of this “price of wheat” thing, the horrors of which I never allow myself to even think, except during sleep, and then hopefully only when I am dreaming of being with some beautiful young thing, and maybe with some of her friends, too, who are all naked and sweaty and grunting and heaving and writhing around in some surreal bacchanalia of some kind, where the only interruption is the masses of people outside wailing and crying that “The price of food is up so much that we are burning things and looting grocery stores in mindless anger and desperation, and we are looking for the Fabulous Mogambo Seer (FMS) to pledge our undying allegiance and love because he predicted that this inflationary hell is Exactly What Would Happen (EWWH) when the stupid Federal Reserve kept creating more and more fiat money, creating astonishing amounts of money, creating outrageous amounts of money, creating So Much Freaking Money (SMFM) for so, so long that We’re Freaking Doomed (WFD)!”

I can reliably report, thanks to these dreams, that the sound of people starving to death is a real “mood killer,” perhaps on a par with the horror that wheat is now at the highest price ever, even going back to Biblical times, which is probably why those old Bible-era people were always “breaking bread,” and eating unleavened wheat crackers, and consuming miscellaneous cheap wheat products instead of having, you know, a few tasty tacos or maybe a pizza once in awhile, which I figure must have been because they were very expensive or something, which is why you never hear of anybody eating them.

Anyway, I immediately used this new information-as-icebreaker at the supermarket, and told the cashier, as she rang up my groceries, “I’ll bet you don’t know that wheat is at its lowest price in recorded history, but climbing fast because the horrid Federal Reserve is still creating So Freaking Much Money (SFMM) that the terrifying, heartbreaking misery and suffering of inflation in the prices of subsistence prices of items, like wheat, is guaranteed! Guaranteed, I tells ya!”

She just dragged my frozen burrito across her laser scanner, the irritating “beep!” noise only underscoring her complete lack of interest.

I went on, helpfully adding that they also said, “Actually, the entire agriculture complex, including corn, beef, pork and beans could fit this description.”

Again the lonely “beep!” as she listlessly ran my bag of Oreo Double Stuf cookies through the beam, her face never changing, not even to make the time pass with idle conversation about, for example, how much she adores cute old guys who buy such delicious cookies, or how my eyes twinkle so charmingly, or even to say how she noticed I kept looking at her boobs. You know; anything.

Giving up, I took my groceries in hand and parted without giving anyone my usual advice, which is to “Buy gold and silver right now, using whatever money you can glean from your stupid little job, because inflation is going to eat us alive, and a weird, distorted economy will make it even more hellish, all thanks to the horrid Federal Reserve continuing to create so much excess money. And buying gold and silver is so easy that a bunch of bored, underpaid worker-bees in a low-margin business like you can do it! In fact, it’s so easy that even morons say, ‘Whee! This investing stuff is easy!’”

The Mogambo Guru
for The Daily Reckoning

Author Image for The Mogambo Guru

The Mogambo Guru

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications.

Read more: The Surprising Price of Wheat http://dailyreckoning.com/the-surprising-price-of-wheat/#ixzz1BnH5UDUA

 
Wheatprice chart, 2000-2009
 
Be seeing you!

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Mon, 10 Jan 2011 18:39:03 -0800 Volcker Leaves the Obama Team http://myhighdividendstocks.posterous.com/volcker-leaves-the-obama-team http://myhighdividendstocks.posterous.com/volcker-leaves-the-obama-team Bill Bonner reports that former Federal Reserve chairman Paul Volcker has left the Obama economic advisory team (www.dailyreckoning.com). This means that there is no dissenting opinion to Ben Bernanke's money printing and historic low interest rate madness. Don't get me wrong. Massive double digit price increases are on there way in the next couple of years regardless of Volker's presence. Volker could have dampened the eagerness to print more fiat dollars once price inflation reaches double digits. Imagine the public outcry when gasoline reaches $6.00 per gallon. Perhaps we haven't seen the last of Mr. Volker.

Please click on the Google Ads if you like the content of this blog. I'm relying on the ad feedback to determine the profitability of this blog. Go to www.myhighdividendstocks.com if you don't see the ads.

Prepare for massive price inflation that makes the late 1970's look like a great time. Ignore warnings of deflation until the Federal Reserve abandons quantitative easing and they refuse to buy Treasuries. High dividend stocks can help you stay ahead of the price increases. Subscribe to www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 30 Dec 2010 18:15:23 -0800 Why Gold has been Money and will be Money Again http://myhighdividendstocks.posterous.com/why-gold-has-been-money-and-will-be-money-aga http://myhighdividendstocks.posterous.com/why-gold-has-been-money-and-will-be-money-aga
I'm a fan of physical gold coins.  They should comprise at least 5-30% of you non-house net worth.  Too bad there are no high dividend gold stocks.  Please enjoy this short article on why gold has historically been money.  
 
 
Every central bank in the word is inflating its money supply.  Some are inflating faster than others.  The US central bank, the Federal Reserve, is leading the way with QE2 and its massive inflation of late 2008.  The Bank of Japan is barely inflating.  That is why the Yen is stregthening versus the Dollar.
 
Enjoy the article and please click on the Google Ads to let me know you like the contents of this blog.
 
Happy New Year and be seeing you!
 
 

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Mon, 27 Dec 2010 11:23:36 -0800 Why You Shouldn't Trust the Core CPI Numbers http://myhighdividendstocks.posterous.com/why-you-shouldnt-trust-the-core-cpi-numbers http://myhighdividendstocks.posterous.com/why-you-shouldnt-trust-the-core-cpi-numbers

This article from The Daily Reckoning’s Addison Wiggin is spot on.  The CPI numbers are rigged to keep Social Security and Medicare solvent a few extra years.  This is why your high dividend stock portfolio must generate at least a 6% - 10% return to beat the real price inflation caused by the FED’s counterfeiting.

Please click on the Google Ads if you like the content of this blog.  I’m using the results from those ads to evaluate the reader growth rate and financial viability of this blog.

--------

Why You Shouldn’t Trust the Core CPI Numbers

12/15/10 Baltimore, Maryland – Consumer prices rose 0.1% in November…and less than a percent over the past year. If you strip out food and energy – which government number crunchers do, because those prices are allegedly “volatile” – you still get a 0.1% increase.

That’s the “core” CPI, and that’s what the monetary mandarins at the Federal Reserve care about when drafting plans to buy Treasuries, control interest rates, goose employment numbers, order pizza, drink wine, play Xbox 360 or any of the myriad other things they do during their FOMC meetings.

As a group, they can’t be pleased with the number. Over the last year, despite trillions of dollars in government stimulus and quantitative easing, core CPI has risen a scant 0.8% – far below the Fed’s “sweet spot” of 1.6-2.0%.

But whom are we kidding? Even the “headline” figure, the one including food and energy, is suspect.

Our friends at Casey Research put out this chart a couple months ago. The column in the far right – CPI-U – is actually lower now than it was then, all those other columns notwithstanding:

Image001

How does the government pull this off? We ask constant readers to indulge our newer ones as we revisit three of the most common tools the statisticians use…

  • Substitution. If steak becomes more expensive, and you buy hamburger instead, then the Bureau of Labor Statistics reasons your cost of beef has stayed the same – no inflation!
  • Hedonics. If the 2011 model of a car costs more than the 2010 model, but it also comes with more standard equipment, the BLS reasons you’re still getting the same value for your money – no inflation!
  • Geometric weighting. Nothing fancy here: If the price of something goes up, the BLS simply makes it count for less in the CPI relative to everything else. If the price comes down, it counts for more. Voila!

These changes started with the last round of Social Security “reform” under the auspices of Alan Greenspan in the early ’80s. The idea was that if CPI were lower, Uncle Sam could pay out less in Social Security benefits.

You can see the end result over time maintained by our friend John Williams of Shadow Government Statistics. Mr. Williams calculates economic numbers the way they did back in the Carter era. The “official” CPI number is in red. The shadow stat is in blue:

Image002

In the meantime, the Federal Reserve statement issued after yesterday’s meeting amounted to, “steady as she goes” on the ill-fated QE2. The Fed, looking at current “official” CPI numbers, sees “deflation”…

And so the plan to goose the system with $875 billion in Treasury purchases that started last month will continue to at least double the official rate from whence it sat while they were kibitzing over bagels before the meeting began yesterday morning.

Sooner or later, reality is going to catch up to the gamed statistics. Indeed, “an inflationary outbreak is very likely,” says Chris Mayer, editor of Mayer’s Special Situations.

History is on our side.

“The dollar has done nothing more reliably than lose its value over time,” Chris points out. “I think the future will be no different. People who worry about deflation – that, somehow, the dollars in our pocket will actually buy more in the years ahead, not less – will not only be wrong. They will be broke.

“Writer Jason Zweig points out that ‘Since 1960, 69% of the world’s market-oriented economies have suffered at least one year in which inflation ran at an annualized rate of 25% or more. On average, those inflationary periods destroyed 53% of an investor’s purchasing power.’

“That is why I believe that being prepared for inflation is the most important investment decision we have to face in the coming decade. If you aren’t prepared, then the consequence is a mean hit to your wealth.”

Addison Wiggin
for The Daily Reckoning

Read more: Why You Shouldn't Trust the Core CPI Numbers http://dailyreckoning.com/why-you-shouldnt-trust-the-core-cpi-numbers/#ixzz19LBybZFb

----------------

Be seeing you!

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 25 Nov 2010 06:29:57 -0800 The Duel Over the FED's Dual Mandate http://myhighdividendstocks.posterous.com/the-duel-over-the-feds-dual-mandate http://myhighdividendstocks.posterous.com/the-duel-over-the-feds-dual-mandate

The Duel Over the Fed's Dual Mandate

FONT SIZE
By: Peter Schiff

Given the opposing views of the potentially parsimonious new Congress and the continuously accommodative Federal Reserve, there is a movement afoot among Republicans to eliminate the Fed's "dual mandate." Prior to 1977, the Fed only had one job: maintaining price stability. However, the stagflation of the 1970s inspired politicians to assign another task: promoting maximum employment. This "mission creep" has transformed the Fed from a monetary watchdog into an instrument of social policy. We would do well to give them back their original job.

The imposition of the "dual mandate" was informed by the Keynesian belief that inflation and unemployment don't mix. An economic concept known as the "Phillips curve" postulates that low levels of one cause high levels of the other. But, like many things in modern economics, the curve is a fiction. There is no real reason why low inflation would produce unemployment or full employment would create inflation.

On paper, at least, the Fed has appeared to strike the balance that Congress demands. But this is a fool's errand. The Fed's dual mandate is the equivalent of asking a corporate CEO to maximize shareholder value by giving away as many free products as possible to consumers.

The best way for the Fed to ensure maximum employment is to focus on its one true job - creating price stability. The irony of the dual mandate is that by trying to satisfy both, the Fed ensures that we will get neither.

While it is true that increases in inflation may occur concurrently with drops in unemployment, there is no logical causality that can be implied. Any correlation simply results from inflation lowering the real cost of employment. Put simply: because inflation reduces wages in real terms, employers can afford to hire more people. So it's lower wages, not inflation, that puts people to work.

Inflation does nothing to alter the structural issues that cause unemployment. Like everything else, the labor market is governed by the laws of supply and demand. High unemployment results from a wage structure that is too high relative to demand. Demand for labor is a function of productivity, or more accurately, profitability per worker. Absent higher productivity, which takes time to develop, the only way to clear the imbalance is for wages to fall. However, government and unions typically prevent this from happening. Economists describe this as wages being "sticky" on the downside.

Over-taxation and over-regulation further restrict demand and add to unemployment. On that front, one of the worst offenders is the minimum wage law. It doesn't actually raise wages for anyone, but simply renders unemployable many low-skill workers. By creating inflation, the Fed effectively lowers the minimum wage. Another cause is extended unemployment benefits. Since these payments narrow the disparity between employment and unemployment, and in some cases may even be preferable to accepting a low-paying job, workers are incentivized to reject employment opportunities that they might otherwise accept.

To get around these roadblocks, the Fed lowers the cost of labor through inflation. However, this inefficient solution to a simple problem creates negative consequences for the economy. While wages may go up with inflation, goods prices usually rise faster. The net result offers no benefit for workers. By tricking workers into accepting lower wages, the Fed allows politicians to claim meaningless victories.

In addition, wages are only one cost of employment. Even as inflation lowers real wages, other factors can work to increase employment costs. In the current environment, higher payroll taxes, new health care mandates, economic uncertainty, and the potential for even higher future taxes to fund large budget deficits are all offsetting the "benefits" of lower wages. On top of that, large current budget deficits are crowding out small business credit. The result is that employment costs are rising despite lower real wages. Taken together, these policy mistakes are creating a toxic, job-killing mix.

The other fallacy of the dual mandate is that a fully employed workforce demands higher wages, forcing business to raise prices. More employment increases the supply of goods and services. Yes, employment raises demand, but that demand is satisfied by the additional supply created by a productive economy.

Since wages are the price of labor, wages are themselves prices. To say that rising prices are caused by rising prices makes no sense. Workers cannot demand higher wages unless the increases are justified by higher productivity. If they are, such wage gains will not result in higher goods prices.

The real reason that prices rise, for both goods and wages, is that the Fed creates inflation. This policy undermines the economy by destroying both current savings and the incentives to accumulate future savings. Since savings finance capital investment, lower savings equal weaker economic growth.

So, the best way for the Fed to create maximum employment is to focus on the single mandate of price stability. While a few elected officials seem to be figuring this out, most are just as clueless as the Fed. Unfortunately, even if Congress succeeds in changing the Fed's mandate, there is not much chance that monetary policy will change significantly. Keynesian thinking is so ingrained in Bernanke and his colleagues that they will exploit any wiggle room in their directives to jump back in the driver's seat and send us ever faster toward the edge of an economic cliff.

About the author: Peter Schiff
Peter Schiff picturePeter Schiff, President & Chief Global Strategist of Euro Pacific Capital (http://www.europac.net), is one of the few non-biased investment advisors (not committed solely to the short side of the market) to have correctly called the current bear market in U.S. dollar denominated assets...


Be seeing you!

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Wed, 29 Sep 2010 22:27:38 -0700 Be Very Afraid: The 'Experts' Are Running the Economy http://myhighdividendstocks.posterous.com/be-very-afraid-the-experts-are-running-the-ec http://myhighdividendstocks.posterous.com/be-very-afraid-the-experts-are-running-the-ec

Be Very Afraid: The 'Experts' Are Running the Economy
by Thomas E. Woods, Jr.

Recently by Thomas E. Woods, Jr.: Some Americans Distrust Authority

When Young Americans for Liberty at Indiana University first invited me to speak last year, the group ran into resistance from the university administration. Having consulted the economics department, the relevant university office declared that I was "uncredentialed," and that perhaps a professor from IU’s economics faculty could give a nice lecture instead. I was uncredentialed, presumably, because my education at Harvard and Columbia was in history, not economics.

The student group refused to take this lying down, and made such a stink in the local media, pointing to my bio and the reception of my book Meltdown – including the friendly coverage it received from mainstream outlets like Barron’s, CBS.com, and UPI – that the university not only reversed its stance but even partially funded my appearance, which took place on September 21 of this year.

 
The Indiana Daily Student (circulation 15,500) offered me a 600-word guest column in the wake of my appearance. Here’s what I wrote, which they published verbatim (complete with a comments section). ~ Tom Woods

 
The free market did not cause the financial crisis, and the Elmer’s glue and Scotch tape our wise leaders have applied to the economy are only prolonging the agony. That’s the thesis of my 2009 New York Times bestseller, Meltdown.

That’s not a popular thing to say in Bloomington, I learned several months ago.

When Young Americans for Liberty at IU hit a bureaucratic stone wall in trying to invite me to campus – a problem I can’t say I’ve run into at any other university – the local media took notice. But it was the comment sections that were a particular hoot. It was as though I had insulted Stalin in the old Soviet Union. Who does this idiot think he is? How dare he speak of our wise overlords that way! Why, they’re just looking out for the good of the people! And so on, as if I’d stumbled into some kind of cliché competition.

Then, when the university reversed itself and even helped fund my appearance, the comments switched to, "If I had time, I’d go over there and set this guy straight!" Uh-huh. The large crowd that came to hear me a couple weeks ago couldn’t have been friendlier.

What I explained at IU was that asset bubbles, like the housing bubble we’ve just lived through, do not occur spontaneously. If people bought lots of houses on the free market, interest rates would rise as the banks’ loanable funds were depleted. That would put an end to speculation in real estate.

 
But thanks to the Federal Reserve System (or simply the "Fed"), which is no part of the free market, large infusions of money created out of thin air kept interest rates low, and thus perpetuated the bubble. During an asset bubble, demand for the asset in question rises, as does its price. Where would people get the money to keep buying an increasingly costly asset if the government’s officially approved money machine weren’t there to flood the economy with cash?

 
It was this interference with interest rates, pushing them well below where the free market would have set them, that set in motion the classic boom-bust cycle we’ve just witnessed. F.A. Hayek won the Nobel Prize for showing how central banks like the Federal Reserve, by interfering with interest rates and not allowing them to tell entrepreneurs the truth about economic conditions, divert the economy into unsustainable configurations that inevitably come undone in a crash. (Hayek belongs to a tradition of free-market thought called the Austrian School of economics.)

None of this has anything to do with the free market.

Adding fuel to the fire was the so-called Greenspan put, the unofficial policy of the Greenspan Fed that promised assistance to private firms in the event of risky investments gone bad. What kind of incentives do you suppose that created?

The point of being in college is to learn how to think beyond clichés. Forget the quacks who told us, cluelessly, that everything was fine with the economy in 2007. Look instead to modern spokesmen of the Austrian School like Peter Schiff, Ron Paul, and Jim Grant. You know, the people who, unlike your professors (who, by the way, tried to keep a dissident voice from speaking on campus), predicted the recent crash to a T.

Want to know what really happened to the economy, and why your job prospects are so bleak? Watch Peter Schiff’s YouTube "Why the Meltdown Should Have Surprised No One." That’s the first step toward becoming the independent thinker that four years at IU are supposed to make of you.
 

September 30, 2010

Thomas E. Woods, Jr. holds a bachelor's degree in history from Harvard and his master's, M.Phil., and Ph.D. from Columbia University. He is the author of ten books, including the just-released Nullification: How to Resist Federal Tyranny in the 21st Century, and the New York Times bestsellers Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, and The Politically Incorrect Guide to American History. Visit his website and blog, follow him on Twitter and Facebook, and subscribe to his YouTube Channel.

Copyright © 2010 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 19 Aug 2010 17:42:20 -0700 High Dividend Stocks - Safeguarding against the loss of purchasing power http://myhighdividendstocks.posterous.com/high-dividend-stocks-safeguarding-against-the http://myhighdividendstocks.posterous.com/high-dividend-stocks-safeguarding-against-the Why are you contemplating investing in high dividend stocks?  I consider high dividend stocks those yielding over 6%.  One reason could be that you want your dividends to outpace so-called "inflation".

What metric best measures the loss of your money's purchasing power at the hands of the Federal Reserve?

If you ask people at work and on the street how much prices go per year on average, then you are likely to get the answer 3-4% per year from 80% of them.

As horrendous as annual consumer price increases of 3-4% are...the story doesn't end there.  You've had this nagging feeling your whole adult life that the prices you pay for shelter, food, energy, healthcare, utilities, and entertainment add up to a whole lot more that 3-4%.  Well, you were right and a gentleman named John Williams over at www.shadowstats.com can confirm you hunches with actual numbers (http://www.shadowstats.com/alternate_data/inflation-charts).

You see, the consumer price index (CPI) is a collossal lie to put off the day of reckoning for Social Security, Medicare, and a myriad of pensions.  These ponzi schemes and underfunded pensions go broke faster when consumer prices rise.  Past presidential administrations convinced the Bureau of Labor Statistics to modify the methods of computing the CPI in order to kick the bankrupcy can beyond their presidency.  You can read about how they changed the computations at ShadowStats.com.

The bottom line is that actual real life consumer price increases are several percentage points above what the government reports.  Right now, according to ShadowStats.com the rate of consumer price increases of a representative sample of goods is about 8%.

Media_httpwwwshadowst_fbhwe

Now do you understand why I think you need to investing in high dividend stocks yielding more than 6% with earning power and strong balance sheets.  The earning power and strong balance sheets ensure the dividend and provides an opportunity for capital appreciation in the market price in your stock.

There will be many choice stocks yielding over 6% when this bear market rally finally fizziles.  Be patient, save your capital, and get ready to buy when everyone else is fearful (think of the fear below the March 2009 lows).

Permalink | Leave a comment  »

]]>
http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic