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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
 
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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

US Treasury Bond Interest Rates: Nowhere to Go But Up

I’m feeling under the weather today, so please enjoy this funny commentary from the Mogambo Guru.

I do want to say one quick thing.  SafeBulkers Inc. (SB) is getting pummeled today at a loss of 4.33%.  It opened at $8.70/share and is down to $8.40/share.  This is one of the best dividend stocks.  I would be an excellent buy below $7.50.  I’m not aware of any exposure to the Japanese earthquake/nuclear crisis.  I will keep monitoring.

Disclosure: I don’t own SafeBulkers (SB) right now.

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Mar 14, 2011

from The Daily Reckoning

Charts from contraryinvestor.com show that, as of right now, there is going to be almost $1.8 trillion in US Treasury debt maturing this year, and all of it will need to be “rolled over” by issuing new debt.

Perhaps it is also instructive that they also note that “Just shy of 50% of UST debt ‘rolls’ within three years.”

What this means, in practical terms, of course, is that We’re Freaking Doomed (WFD). “Why?” you ask. “Because,” I helpfully explain, “rising rates of inflation mean higher rates of interest that borrowers, especially deadbeat bankrupted governments, must pay when they try to rollover such massive amounts of debt!”

And what were interest rates three years ago when half of all Treasury debt, now rolling over, was first issued? I don’t know exactly, but the graph of “US Treasury Bond Interest Rate History” at observationsandnotes.blogspot.com shows that interest rates were higher in 2008, and lower now in the range economists call “squat,” meaning that rates have nowhere to go but up.

Well, perhaps you would be interested to know that the interest rate on these bonds is lower than at any time since the ’50s, and is just inches away from the all-time, record-low of 2% set in 1940.

Or perhaps you would be staggered, clutching your heart and screaming, “Nooooooo!” when you learn that the average interest rate over the years was somewhere just under 6% ever since the low of 2% set in 1940, which means that interest rates would have to double – double! – from here just to get back to the average interest rate paid on bonds since 1971!

And why was 1971 the big inflection point where interest rates went nuts? Because that was when volatility in interest rates really started Going Freaking Nuts (GFN) because, not by coincidence, Nixon severed the last threads of connection between the dollar and gold.

And there is a personal reason, too for picking that date. Before 1971, I was a fresh-faced kid, his whole bright future ahead of him, but who decided to make one idiotic, disastrous decision after another until I ended up here, decades later, a bitter little man wearing a bullet-proof vest and a tinfoil hat, hiding in the closet under the stairs and typing out hate-mail to the Federal Reserve (“Dear Federal Reserve morons, I hate you! Signed, Hateful in Florida”) and the Congress (“Dear Congress morons, I hate you! Signed, Hateful in Florida”).

And even before that, back to 1900, interest rates were low, and swings in interest rates were much more muted, too, because the dollar was mostly on the gold standard, which are two of the beauties of the gold standard, as we are seeing by just standing up and going over and looking out at a world on the verge of panic and ruination thanks to the Federal Reserve creating So Freaking Much Money (SFMM) for So Freaking Long (SFL).

And when the people of the world do panic, they will run to gold and silver, and their prices will soar, making this investing stuff so easy that you just gotta say, with every bit of earnestness you can muster, “Whee!”

The Mogambo Guru
for The Daily Reckoning

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.

The Surprising Price of Wheat

The Surprising Price of Wheat

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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
 
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