Read This Blog: You are losing your wealth daily

This blog is vitally important, please suffer through it


I have an ING stock account that was designed to automatically buy shares in any odd-lot amount every month.  It was a handy way to invest before stocks became dubious and being in the dollar crazy. Now, I only have a few thousand shares in a Canadian gold mine and I am waiting for them to find mud, so my shares will jump through the .01 per share level.


ING has created a new place to park uninvested money, a bank account.  This is in addition to their money market for uninvested funds.  Here are the respective rates in the advertisement:

New FDIC Insured  Cash Balance	Money Market   Cash Balance
0.50% APY1	0.01%

How are returns calculated?

Wow.  Half a percent! FDIC insured!  I wonder what PayPal is offering?


This announcement is a reminder to look at the real inflation rate to see how how the dollar is doing to preserve our wealth. If you do anything, go to the end and see how your dollar is doing vs. gold.


There is a great site that undoes the lying in government statistics which you can find by clicking on the headline. If you are a grown up, you lived through inflation during the Carter years, Carter now being the second worst president.

Inflation

There was near hysteria over the Carter inflation rate, he was 1977 to 1981, so the government met the problem of hysteria by redefining inflation so it could report more attractive numbers.


The government would never lie (also called "errors") to us, would they?


From John Williams 2004 introductory essay on the manipulation of numbers and the theory behind "shadow stats" from the above site:

· As former Labor Secretary Bob Reich explained in his memoirs, the Clinton administration had found in its public polling that if the government inflated economic reporting, enough people would believe it to swing a close election. Accordingly, whatever integrity had survived in the economic reporting system disappeared during the Clinton years. Unemployment was redefined to eliminate five million discouraged workers and to lower the unemployment rate; methodologies were changed to reduce poverty reporting, to reduce reported CPI inflation, to inflate reported GDP growth, among others. 

The new inflation rate does not include food and fuel. This is what we used to call lying. Still you can rest assured, if you get your news from TV, as your gas prices double, there is no inflation.


Say, what could cause inflation?



Since inflation is classically  defined in relation to the monetary base, I guess we ought to look at that. See graph.


If you are an economist, you will not see anything out of the ordinary under the Obama reign. Still, give it a try.


The current dispute over the debt ceiling is about not having more increases as debt requires the increase of the monetary base through creating "money."


Do notice the shaded area that captures the whole crap shoot. Notice the correlation between monetary base and the real inflation rate in the first graph.


Bottom Line:  If you get 1/2% interest and your dollar is devaluing at 10% a year, your money is vanishing.  Is this just the whim of economics?  


No, it is an intentional inflation. In the end, it is the transference of your wealth to others.  It is stealing designed by the people we elected into office. I repeat:  it is stealing. The government and banks will NEVER tell you this as they are taking your money. Your stock broker will NEVER recommend you buy gold. 


In addition, since it is humanly impossible for citizens to pay our national debts, inflation is the only way we can water down our money so we can pay our bills. You will lose your wealth, investors will lose their return, and no one will invest in the U.S. so our interest rates will skyrocket. 


A John Williams analysis in 2008 and he still stands behind it:

...The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression. Hyperinflation could be experienced as early as 2010, if not before, and likely no more than a decade down the road. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement....

This simple fact is why gold is so popular, from Seeking Alpha:

I suppose I should find the coffee vs. dollar graph.
-------------------------


A closing note from Williams:

...As a result of the systemic manipulations, if the GDP methodology of 1980 were applied to today's data, the second quarter's annualized inflation-adjusted GDP growth of 3.0% would be roughly three percent lower (effectively netting to zero percent or below). In like manner, current annual CPI inflation is understated by about 2.7% against the pre-Clinton CPI methodology (would be about 5.7%), and the unemployment rate is understated by about seven percent against its original design and what many people would consider to be actual unemployment (would be about 12.5%). 

As to the financial results of federal operations, the application of accrual accounting and generally accepted accounting principles to federal operations shows an actual fiscal year 2003 deficit of $3.7 trillion, as reported by the U.S. Treasury, versus the reported cash-basis $374 billion....

We Are Here

If we use the statistical parameters of the 1980's, our inflation rate, today, is 10.7%  (Not zero as the Obama government reports).

Real unemployment is around 18% and rising. (Not 9%)  As government workers get fired, as is now starting as the age of stupidity comes to an end, and people fall off unemployment, the rate will push quickly into the 20 - 25 percent area.

If all the banks crashed two years ago and the FDIC had to pay all the persons insured, it would have paid less that 50% of what the the banks got as transfers from you, sorry the government.

Three of my favorite sources say that if there is no new "easing" of the debt by June (i.e. remove the debt limit so we can give away more trillions) the dollar collapses.  Look at gold from $6,000 to $25,000 an ounce.  Of course, this is not an investment - it is staying even with inflation.  Get this straight.  If you are in dollar investments, not engaged in foreign investments, your investment will crash.  Understand, what is good for Wall Street is good for Wall Street, as it is a transfer of your money to them (once it is printed up.)

Mr. Forbes predicts a gold standard soon.  It would take five years to implement. Thereafter, there is no need for the FED.

Oil will skyrocket, along with food, coffee, etc.  Any item that depends on foreign nations being paid with dollars is on the launching pad. This is already happening, but is a well hidden item, unless you are looking clearly.  Smart money is preparing.  Key in the word "smart."

PIMCO, the worlds largest bond house, an American company, does not buy US Treasuries. Understand what this means. China has stopped buying, in any size, for four months.  We have been living off the greatness of previous generations and, now, the profligate children find themselves crushed.  Once the dollar is detached from being the exchange medium for oil, Obama has succeeded in turning us into a has been in need of Marxism.

If silver, now just under $40 per ounces (I told you to buy at 11) were valued according to 1980s parameters, when Hunt brothers were at work, it would be $850.  Understand where we are and do not use old ideas of "money."  What did you think when I said buy at $11, 12, 14?   Investment houses, your experts, DO NOT WANT YOU TO BUY METALS.  They want you to buy paper.  Why would you think they are in  your corner?

These are the times I warned against. It is almost too late to prepare.  Just get our of the dollar or US based investments.  Now.

On the other hand, get any fixed mortgage you can find.   Own things.  Don't count on your retirement, pension, or even social security.  Seriously.

And, to repeat myself, stock up on coffee and peanut butter.  New item:  the government in all its guises is after you.  You will see the animal's fangs each day. It is feeling hunger pangs. The local school district spends $19,000 per student while the catholic school in Saratoga spends $8,500 and has a 99% entry into college.  Gluttons die first, but they have fangs. Don't speed, for one thing.

Look around.

Perhaps, I am not crazy.

Welcome to perspective

I began to listen to a message on a good investment site and was drawn into a long, quiet lecture that fully earns a giant OMG.  (Click on title)

The Middle East is far more complex that we thought, we being those outside the government who are, apparently, running around in a panic.  Here is a list of topics

1.  Sunni v. Shia (the return of the Ottoman Empire?)

2.  Tupi oil field

3.  China is planning to increase use of uranium TEN times.  (OK, that is not 10%, it is 1000%)  The rest of the world is close behind in a buidling spree. 

All the information makes sense and is known. The key here it all the diverse trends, seemingly so, have been tied together.  The consultant expects a war in the Middle East, and we are preparing for it, but it is not directed at us.

History shows a tremendous lift in oil  prices even with mild news. (Author predicts $220 in the coming year) In Brasil, the new Tupi oil find holds more oil than the middle east or Russia.  It is there all the deep water drilling rigs are going after the idiocy in the Gulf and the adminsitrations playing high school student council with oil drilling controls.

Finally, not only is urnanium logical, it will be HUGE and SOON.

Get a beer and listen to the talk.

Numbers, deflation, inflation

Some recent numbers of interest from the WSJ:

• Gold SPDR ETFs in first six months of 2010:  up $7.4 billion
• Long Term Treasury Bonds 1/10 to 8/1/10:  + 15.5%
• S&P from his 1/07 to 8/6/10:  - 28.35
• Home price average from 2006 to today: - 29.1%
• 2010 Consumer Price Index:  +1.4%   (projected: +1.5 to 2%)

These numbers show the continuing disinflation and deflation as to prices. The FED is fearful of deflation as it will hurt the government coffers and Wall Street; further, it is immune to jerry-rigging, unlike inflation.

In a these times, it doesn't hurt the average person with gold or even cash sitting around at a modest return. Stocks are problematic as demand declines and companies continue to batten down the hatches. Still, a solid consumer-based stock, best with a  dividend, should survive well enough.  

As noted previously, one school of thought was to go all-in on government long term bonds, which you see above have done very well.

IMPORTANT:  TIPS can lose principal in deflation. They are great during inflation, however.  The WSJ says zero coupon bonds, aka strips, are better since return is locked in and the dividends are reinvested at that rate. Of course, then what do you do if inflation takes off?  It is not easy for real people to jump in and out of investments, most of us have jobs.

Hedging seems a good plan.  Perhaps, have some TIPS and some cash. If deflation appears, take a hit on the TIPS, but the cash will balance it. Then, when it looks like the high inflation is coming, buy TIPS.

If we slide into deflation, cash is king, the opposite of its status during inflation.  You can see the money changers who deal in credit do not want deflation.  Here, if you can find a pleasant return or good dividend, that may be the smartest thing.  In deflation, you will want to have your money in US cash, the opposite of the threat I have been harping about.  We are at the crossroads.

To paraphrase Hamlet, there is much provenance in the fall of a rate.  It is not be now, it be later. If it not be inflation, it will be deflation....   And so on.  One has to hedge one's property.  Prepare for both events, as both will come.  If not now, later.

If you speculate and guess right, you come out way ahead.

One of the early mega-wealthy Russian tycoons ordered thousands of Lada cars, with the help of a down payment garnered from friends, as he was certain the Rubble would crash, and I mean crash.  It did and he purchased the cars for pennies on the old Rubble as the contract price was in inflated currency. This would be akin to actually getting a fixed mortgage before an inflation.

So,  defense and offense is good.  Waiting in line for the shearing is not, as you can be whip-sawed in both directions.  

Metals and Inflation Update.

I like this diagram, so make believe is subtly relevant to this entry.

I didn't make a quick profit yesterday as the markets collapsed. My open order was way to high.

If you missed events on Wall St., check out any site to see the collapse. The story is there was a sell entry mistake (1 billion instead of 1 million) that caused Proctor and Gamble to collapse, dragging down the entire market in minutes. A huge, short-term collapse of many stocks.  I mean huge.  Love those computers.

Meditate on what this price collapse tells us about the market.  One push, without any connection to fundamental facts, put the entire market in a free fall.  We are exposed.

Call me paranoid, like everyone else, but I have a hard time believing there was human error.  It was a brilliant way to make money, if you are a fraud. Personally, I would investigate George Soros, then China, then the administration.  Check for foreign accounts in the name of whoever is supposed to have made a wee error. See if he or she is still working in the U.S. in a week.

I am keeping my little stash long term, so no problem.  As the markets drop, I don't.  I am a little early in my pessimism, but I am infallibly correct, I think.

Anyway, here is the point of the blog.

An indicator of Christmas future:

I don't think anyone needs to be a veteran investor to get the gist of this movement. You can say we are in a gold bubble, but notice Greece collapsed, their are riots in the streets, and all eyes are on Portugal, France, and so on.  When people are facing ruin and hunger, the social contract is over.

The EU currency is on the way down and, perhaps, is in its death knell.  Why would Germany want to be supporting Greece, Portugal, Spain, Ireland...? We can be sure German is losing all interest in a Fourth Reich. So, the U. S. dollar is the best place to move money - for a little while.  However, we are only having coffee in the base camp as we dimly look up to see the largest avalanche in history has started, seemingly far away.

Note, that the U.S. and other governments had a policy of interlinking economies in order to prevent war, a good idea with, hello government!, unintended consequences.

So, mull this over and act accordingly.  Remember, when everyone figures out what is happening, it is too late to act.

Recall, it is easy to buy silver coins, called "junk silver" without any record being made, knowing that if the collapsing financial systems hit us hard, the coins will have street credibility.  Even having a Canadian savings account will be a good investment.

Get out of stuff, except for food. If you can, believe it or not, take out a loan, assuming you can pay it back, because a fixed loan now will be free money in a few years.  You could take the loan proceeds and put it in silver, then a high interest bond, as will normal in a few years, and make a profit on the spread, but that is arcane for most people.

In my early legal career, there was a time when house loans were 3%, but in a year or so, interest rates were in the 20% area.  I tried to buy a  condo in N.H. and went to the bank, ready to go, but stopped when they said the interest rate was 28%.  I am not making this up. Anyone can figure out what to do in this scenario, if he or she thinks it is coming.

I have seen very few things that are certain in this life, but inflation, perhaps hyper inflation if the administration isn't stopped, is coming. Don't listen to the talking heads on TV, the are tools of traders.

My latest idea is one should invest in the U.S. stamp.  The one with no cent amount on it.  It is a first class stamp.

If you get a treasure trove of these, this is what will happen. Inflation will drive up the cost of first class mail and you will have locked in today's price.  Further, the government, being irresponsible, has spent more than it can take in, contrary to its fantasies, so the real price of the stamp will also go up.  Further, there will be no record of the stamp purchase, other than a business deduction, if that makes sense for you.  Its like buying  TIPS bond that can be traded for food.

OK, if this seems odd, holding the U.S. dollar, to be PC,  demonstrates a challenged mindset. Find your own protective vehicle and let us know.

The dominoes are falling

First, Greece is collapsing, France, Portugal etc to follow, then Germany. The dollar will look strong as it becomes the place to put EU.  That is an illusion


The TIPS, the US inflation protection bonds were moving up this week, according to Bob, this is contrary to the dollar moving up.  Historically, the TIPS should go down. The smart money is moving into them.


Gold and silver are up, but historically they should be down as the US dollar is strong.....but....  


So get that silver or TIPS, now.  Forget timing the market. The first domino is falling. Today's blips will be the floor of tomorrow.


================


Washington Post, from Greg:

HI lawmakers vote to limit Obama document requests

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The Associated Press 

Tuesday, April 27, 2010; 11:03 PM

HONOLULU -- Hawaii legislators have passed a measure allowing a state agency to ignore repeated requests from a person or organization for PresidentBarack Obama's birth certificate.

The measure approved Tuesday by the state Legislature would carve an exemption in the state's public records law and allow officials to ignore all kinds of duplicative requests, including those for Obama's birth certificate.

Hawaii Health Director Dr. Chiyome Fukino has issued two statements since 2008 saying she had seen vital records proving Obama is a natural-born American citizen. Obama was born in Honolulu to a Kenyan father and an American mother.

But state officials say they still get between 10 and 20 e-mails each week seeking verification of Obama's birth.

The bill now goes to Gov. Linda Lingle.

The bill is SB2937.

----
I like it when Fukino refuses to release information for privacy reasons, then tells you what is on file. Not a good lie. Who knows where the conclusion came from that the vital records prove Obama is a natural born citizen?  The hearsay of a clerk who was not suppose to release any private information?  The newspaper? Facts would be wonderful, no.  So, absent non-hearsay facts, just apply Occam's razor. 


Nonetheless, Hawaii and The Washington Post agree Obama had a Kenyan father.

Slaughterhouse Cases, 83 U.S. 36 (1872): The Court discussed (not an opinion on the subject)  the Citizenship Clause of the Fourteenth Amendment:the phrase 'subject to the jurisdiction thereof' was intended to exclude from its operation children of ministers, consuls, and citizens or subjects of foreign states, born within the United States

 The Supreme Court has not directly ruled on exactly what natural born means. Nonetheless, Mr. Obama's father was a British citizen and returned home after school.  He was the subject of a foreign state and his son was his son - perhaps a dual citizen who was required to renounce his British (Indonesian?) citizenships.  I have no idea why I am in triple space and can't remove it.

Hyper-inflation projection

Below is an FYI article. 

My REIT is up 87% in the past three weeks and pays some 15% in a dividend. If I had more money I would be prospecting more, so what I can do is suggest you carefully look into REITs. Carefully. If you guess right, it is the best of times; if you guess incorrectly, well...

Think of it this way, some day real estate stabilizes. (Indeed, in the Northeast, it is merely bad, if you stay away from Long Island.) REIT's, Real Estate Investment Trusts, are required by law to return 90% of their profit to shareholders. If a company is still alive, now, and still paying dividend's, which are double digit these days, then it may well be the buy of the decade. One's 15% dividend to could become 30% or more. Its a great way to get into real estate without actually doing anything or attempting to get a mortgage.

I have found "investment grade speculation." You rarely see that.

====
Here is an echo of my weeping and gnashing, which I hope helps spreads the message:

Brace For Hyper-Inflation

Posted Apr 15, 2009 02:30pm EDT by Henry Blodget in Investing, Recession

Related: DIA, SPY, ^GSPC

From The Business Insider, April 15, 2009:

The economy is cratering, so the Fed is printing money. When the Fed prints money, this eventually produces inflation (more dollars, same amount of goods).  Ben Bernanke assured us yesterday that, this time, the Fed's money-printing won't eventually lead to inflation because the moment the economy begins to recover, the Fed will stop printing money and start burning it. Specifically, the Fed will start selling assets instead of buying them and thus shrink the money supply. Unfortunately, Ben is unlikely to keep this promise. Why? Several reasons:

• First, it will be hard to confidently assert that the economy in full recovery. Remember, in 2007, Ben (and most other people) thought the economy was in great shape as far as the eye could see. He and most other observers missed that disastrous turning point. So why do we think he'll correctly spot the next one? Especially because, if he blows it by jacking up rates too early, he'll kill the recovery.
• Second, there will be intense political pressure to MAKE SURE that the economy is in rip-roaring health before hammering consumers and businesses by raising interest rates. Everyone loves low interest rates. And they'll only stop screaming about your taking them away when they're fat and happy (which will be long after inflation really gets going).
• Third, the US government desperately needs low interest rates to fund its soon-to-be-monstrous debt load, so there will be another source of pressure on Ben to keep rates low. When we finish with all this stimulus, we're going to owe a boatload of money. We're really going to allow our Fed chief to send interest rates to the moon and jack up our refinancing costs?
• Fourth, many of the assets that Bernanke has been buying to print money won't be easy to sell. This time around, the Fed isn't just buying easy-to-sell Treasuries. It's buying trash mortgage assets, et al. To reduce the money supply, it will need to sell them to someone. But who?

In the latest issue of the Institutional Risk Analyst, Chris Whalen hammers this last point home. Chris thinks we're now officially addicted to low interest rates and that Bernanke will be both unwilling and unable to raise them significantly when the time comes. And the failure to raise, them, of course, will lead to hyper-inflation.

The better answer? Stop denying reality and force the country to take its losses. Restructure existing debts, instead of encouraging people to borrow more. That, after all, is what got us into this mess in the first place.

I can add those trash mortgages have never been properly priced, so it is likely they are being bought at a stupid price.