Is the Country Ready Now?

by Addison Wiggin – April 26, 2011

  • Time for another tussle? Ron Paul to announce "exploratory committee"… meanwhile, what are they are smoking in Washington…
  • "Within a hair of a double dip"… Case-Shiller delivers "worst" housing numbers on several fronts
  • Jim Nelson on some defensive assets with long-term strength… and why he's bailing out now
  • Gold stumbles, silver tumbles… James Turk on why silver's epic run isn't over yet
  • A heavy "knock on the door"… shades of "security clearances"… and things "I wish I could forget"… readers take aim at the State Department's proposed passport application

On Oct. 30, 2007, we got in a tussle with a reader. Can you imagine?

On that day, it was because we weren't stumping for Ron Paul as conscientiously as Lew Rockwell.

This morning, we see we may yet get another chance. Dr. Paul is holding a press conference today in Iowa. We're told he'll launch an "exploratory committee" — that fateful first step toward a run for the presidency.

In 2007, we suggested the country — pre-Lehman, pre-stimulus, pre-bailouts — wasn't ready for the medicine Dr. Paul prescribes.

Perhaps now that we've seen a few trillion-dollar deficits and a community organizer who's proven equally adept at military adventurism as his "aw, shucks" predecessor… a few more people are willing to go to the pharmacy… or, at the very least wondering now what that mysterious lump is.

"This would seem to be an ideal year for Paul," muses the Washington wonk weekly National Journal: "Since the last election, the Republican Party has moved much closer to his view on deficit reduction. All of the party's top-tier presidential hopefuls are focusing on lowering debt, government spending and tax rates, issues Paul has long advocated."

"Ron Paul Is Starting to Make Sense," reads the headline the May issue of Esquire. He "is the most important politician in America today," the profile begins, "because he's the rare politician — maybe the only politician — who always says exactly what he really believes.

"Unlike Paul Ryan, Haley Barbour, Mitt Romney, Mitch Daniels and Mike Huckabee, who all raised taxes while calling for lower taxes, Ron Paul gives us a chance to examine the ideas currently driving the conservative movement in their pure form."

We'll see.

One way to examine those ideas is by picking up a copy of Liberty Defined. Or begin with this review penned by our own Gary Gibson.

While Dr. Paul is away in Iowa, the nabobs in Washington are twittering over two "competing visions" of the way forward — the 12-year budget plan of the president and the 10-year plan of Rep. Paul Ryan.

We can see why. The difference between them is "vast":

Hmmn… shall we raise the national debt by 84% in the next 10 years, or merely 62%? To even suggest the national credit card may be revoked long before then… well, that makes you a "kook" in these parts.

Still for a growing number of people in "flyover country," it's starting to make sense… and get real.

"In Washington," comments Lifetime Income Report's Jim Nelson "it is time for political grandstanding. While defense spending has historically been an extremely unpopular subject to cut, sentiment is beginning to change.

"Secretary of Defense Robert Gates has recommended a series of spending cuts. And now, even the Obama administration is feeling the heat. Defense is no longer as seemingly safe as it ordinarily is."

True, the "cuts" being discussed are phony-baloney Washington cuts, merely curbing the projected rate of growth over the coming years. Thus, "we still don't expect long-term problems for companies like Northrop or Lockheed Martin. But we could be facing a tougher market for their stocks."

In other words, perceptions can trump reality… so Jim is advising readers to get out of Northrop Grumman — one of the recommendations he made to charter subscribers 26 months ago. Result — a 65% gain, including dividends.

"It's time to take our cash out and put it to use in some of our more-lucrative opportunities." To learn what those opportunities are, check out this presentation.

Meanwhile, the real source of financial doo we're in — the post-bubble housing market — is looking piqued once again.

One measure of it's health, the Case-Shiller home price index "is within a hair of a double dip," says David Blitzer, chairman of the Case-Shiller committee at S&P.

"There is very little, if any, good news about housing," Blitzer lays on.

The 20-city index fell 1.1% in February, the seventh straight monthly decline. The year-over-year decrease, 3.3%, is the worst since November 2009. The index itself is barely above the trough it set in April 2009:

Year 2000 here we come!

Whatever gains were had from the succession of Washington's quick-fix homebuyer tax credits have evaporated.

We do, however, have some anecdotal evidence today that the luxury housing market is turning delusional again. Once again, the checkered homebuying history of actor Nicolas Cage:

In January, Cage managed to unload his Beverly Hills mansion for $10 million, having bought it in 2007 for $37 million.

Now comes news about his former home in Las Vegas. This one he bought in 2006 for $8.5 million, only to lose it to foreclosure. The next buyer paid $4.2 million last year.

That buyer has now put the 14,000-square-foot spread back on the market… for $7.9 million.

Among the home's unique features: a six-person steam shower

Even the broker handling the listing calls the price "unrealistic," and said so to Bloomberg News, no less. "There's a lot of inventory," he says, "a lot of homes like this waiting for an owner."

In the 15 months ended in March, 25 homes in Vegas sold for more than $3 million. Seven of those homes either sold at a loss, or were foreclosures.

"These days," says the hapless broker, forgetting to talk his book, "there are no traditional sales. They're all short sales or bank-owned."

Moments after the Case-Shiller numbers came out, gold tumbled below $1,500 for the first time since Thursday. At last check, the spot price was $1,495. It's options expiration day, so volatility comes as little surprise.

Gold stocks, too, are taking a well-deserved beating. The HUI Index tumbled 2.5% yesterday, and is down another 1.4% as of this writing. The drubbing comes largely at the hands of Barrick Gold, one of index's major components. Barrick is bidding $7.7 billion for the Australian copper miner Equinox Minerals.

Under the hood, we see Barrick's exposure to nongold production right now is about 10%. With the bid, management hopes to double that amount. But with copper prices still near historic highs, traders figure this is rotten timing and Barrick would be overpaying.

All good news if you're looking for bargains. In the junior space, many intriguing names are still holding their own — including Chris Mayer's two favorites. They're still below his buy-up-to price… but probably not for long.

Chris is so eager to tell you about them, he convinced us to drop the price on his premium advisory Mayer's Special Situations. Be advised: Because these shares are thinly traded, only 5% of readers will be allowed access to this offer. Best to move on this while you still can.

Silver is taking the biggest thumping of all. The spot price is now down $5 from $49.66 — a high set only 36 hours ago.

But… "Silver is still in 'backwardation,'" explains James Turk of GoldMoney, getting a little wonky on us. In the futures pits, "backwardation" is a phenomenon which means the current month's price is higher than many months farther out.

"Over the past three months, the price of silver has nearly doubled," James points out, "yet the 'backwardation' has not disappeared. Markets are not designed to work that way — the higher [front-month] price is supposed to entice people to sell their physical and hold dollars instead.

"I think the market is quite clearly sending the signal that people would rather hold silver, instead of paper money."

Turk concludes: "The bottom line is that as long as silver remains in backwardation, price declines will be short-lived. Silver has not yet reached a top on this move."

Thus it's still not too late to venture into the silver space if you haven't already. Here are six ideas on where to begin.

Weakness in the metals is not translating to dollar strength as you might expect. The dollar index is down to 73.8. The Swiss franc has hit another all-time high against the dollar.

The euro has firmed to $1.46 — its highest in 16 months.

Stocks are powering ahead, the major indexes up more than 0.5%. In fact, the S&P 500 is just a couple points away from exceeding its February high of 1,344.

"The financial doo-doo," writes a correspondent, carrying on a theme, "is only ankle deep, but we are in head first.

"It's all a matter of perspective."

The 5: Could be, as the late comedian Dave Allen observed, Hell is when we're all in doo-doo up to our lower lip.

("Sundays are the worst," Allen quipped. "That's when Satan goes water-skiing.")

"Thanks for the tip on the proposed passport application questions," a reader writes. "I posted my comments on the link you provided… Oops, gotta go, there's heavy banging on my door."

"The questions you cite," adds another, "are exactly those that appear on government security clearance applications."

"I'm sure the government must have some super-important reason beyond me to even think it needs this kind of information," writes a third, copying us on the comment she left at regulations.gov, "but I too have some reasons why this kind of information will do very little good:

  1. Before I get started, the time for some people to fill out such a form is days, not minutes.
  2. The hospital where I was born has been demolished for too many years for me to remember anymore.
  3. I can't remember the name of the person that gave me that gardening job 45 years ago. Or a couple of others since. Some I wish I could forget.
  4. One of the houses where I lived burned down and, to my knowledge, was never rebuilt. Who knows what the address was. One heating company where I worked is now a shopping mall.
  5. The name of the elementary school I attended is now called something different — last I heard.
  6. Ditto my high school.
  7. Two companies I worked for went bankrupt years ago. And the employers long gone — both ways.
  8. Two companies I worked for I was self-employed. (On my credit report they have the wrong information on one and I can't get it corrected.)
  9. Both parents are gone, so getting some of these answers are pretty much lost (no siblings or close relatives).
  10. Even the area codes have changed for most of these places, including where I live now. (This happened two years ago here.)
  11. Many of the places I lived and worked were before ZIP codes were invented.
  12. Some phone numbers had letters where we have numbers today. Remember the party lines? That likely means something else today. We didn't have a phone until I was 15. I lived five places by then — that I know of.
  13. At least three companies I worked for have sold out to someone else — likely more.
  14. At least one place I lived there was no address that I know of, only a rural postbox at the end of the dirt road I lived on.

"Well there's more, but you get the idea. I wish I had your kind of time to sit around and verify this kind of stuff from who knows how many people.

"It should only take about 45 minutes each, right?"

Rigght!

Addison Wiggin

The 5 Min. Forecast

P.S. Liberty Defined, writes Gary Gibson in a well-received review of Ron Paul's new book at Whiskey & Gunpowder, "is certain to make people on both sides of the left-right political debate uncomfortable.

"Dr. Paul decries the welfare state beloved by those on the left, but repeatedly shows that such a state is just the other side of the coin of the interventionist foreign policies of those on the right.

"The chapter on taxes is probably the best. It sums up so many of the important themes: private property, liberty versus coercion, public education, economic misallocation and the voracious appetite of the state."

Each of the 50 chapters tackles a single topic in no more than 10 pages, sometimes as little as three. As intellectual food for thought goes, it's quite the buffet. You can get a copy at 20% off from Laissez Faire Books right here.

rspertzel

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