Addison Wiggin – October 26, 2011
- “Will your children be better off than you?” Stunning unanimity among the general public and readership of The 5…
- Stocks gyrate on news and rumors from Europe… but what’s this? Why gold’s back above $1,700 for the first time in a month
- Cops sweep in on OWS protests in seven cities… Michael Pento on the demonstrators’ “legitimate gripes”
- Hanging bankers in effigy along I-95… Readers share their worries for the future… and your next-to-last chance to secure our high-end technology advisory at more than 60% off…
Since we’re in the mood, let’s begin today’s 5 with a question: Do you think your kids or grandkids will be worse off than you?
We’ll give you a moment to think about it.
[One moment]
Fifty-seven percent of Americans responding to a similar question posed by The Hill predict today’s young people won’t live better lives than their parents.
In addition, 69% believe the nation is “in decline,” and 49% are “very worried” about the nation’s future. Another 34% say they’re only “somewhat worried.”
What’s most striking about these numbers is how banal they’ve become. No fewer than eight polls conducted this month have asked people whether the nation is on the “right track” or the “wrong track.”
The numbers are startling in their consistency, between 73-81%.
A small item to illustrate the larger picture: Last week, a government commission wrapped up three years of work looking into the proverbial “waste, fraud and abuse” among government contractors in the Iraq and Afghanistan wars.
It concluded the government “misspent” between $31-60 billion.
Where did it go?
You’re not allowed to know for 20 more years. The records won’t be available for public review at the National Archives until 2031, because they contain “sensitive information.”
“The ‘ruling junta’ governing the U.S.,” comments our friend Ralph Benko from the Lehrman Institute, “seems to have forgotten an axiom critical to its legitimacy: ‘the consent of the governed.’”
“Americans of all parties and ideologies bitterly cling to a fundamental American principle, stated in the Declaration of Independence, that we ‘are endowed by their Creator with certain unalienable Rights,’ … and ‘That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.’”
“A supermajority says that their intention,” says Benko, summing up the polling data, “their well-being and their very dignity are being violated.”
“My biggest concern,” a reader writes responding to similar questions we posed to those expressing interest in our Project X, “is inflation eating away my retirement funds. The second concern is the erosion of the value of the U.S. dollar. The third concern is the ‘after-tax and after inflation’ value of Social Security payments.”
As you may be aware, we’ve been conducting a small survey of our own. So far, the responses aren’t the sort of thing you can quantify. But they are quite revealing. There is a high degree of anxiety among your fellow 5 readers.
“America’s deepening debt is my biggest worry,” writes another. “I’m more concerned about the future health of our country than I am about my own situation, but it does make it difficult to know what to do regarding investing.”
“I worry,” writes another, “that America will lose its reserve currency status and our standard of living plunges even more.”
“I also worry I won’t have enough wealth for a comfortable retirement. I also worry about how much power China has over us in the future and that politicians in D.C. don’t wake up to our predicaments.”
“My biggest concern,” writes a fourth, “is the systematic destruction of our financial system. Nobody in power, either in the U.S. or anywhere else in the world, is the least bit concerned about doing something substantive to reign in the colossal level of sovereign debt.”
“They all know is it is way too late, so they plan to plunder the system while it collapses.”
More below.
Major U.S. stock indexes are up and down minute to minute depending on the news coming from Europe.
As of this writing, leaders are convening in Brussels. It appears there’s broad agreement that Greek bondholders should take a 50% hit. The Dow has recovered 53 points of yesterday’s 207-point loss.
But neither the negotiations nor the movement of the indexes are something a daily letter can hope to keep up with.
Nor is it worth the bother.
“The euro,” reads a recent note from U.K fund manager Pyrford Intl., “we’re now all heartily sick of reading about it. Everyone has a view, and everyone is profoundly ignorant at the same time.
“No one knows the answers — there is no template, no relevant past experience.”
Amen.
And welcome to the beginning of the end as the “Mother of All Bubbles” begins to hiss and wriggle.
“The EU crisis is extraordinarily complicated on a lot of levels,” says our managing editor Chris Mayer, determined to forge on anyway. “With 17 different countries that can’t seem to agree on much, it is hard to handicap an outcome.”
“But the essence of the problem is that some of these governments — like Greece — borrowed money they cannot repay. So either the rest of the EU comes to their aid, or they default. A default means lots of losses for banks (and others) holding the defaulted debt.”
“Surely, an EU meltdown would affect the U.S. How many skeletons do U.S. banks have in the closet? Hard to say.”
“But I do think one thing happens inevitably: A whole lot of paper money gets printed to pay the bills, no matter what. Either the European Central Bank prints a lot of money to bail out everybody or the individual European nations — abandoning the EU — start printing their own money again.”
“Might this be good for hard assets of the shiny variety? Might the people of the EU buy gold and silver after watching their savings melt away? I think they will. It’s another reason why gold isn’t a sell — and probably won’t be — for quite some time yet.”
Indeed, gold has rallied $65 since news broke yesterday morning that a planned meeting of EU finance ministers had been canceled. The spot price is up to $1,726.
This is the first time gold is above $1,720 since its September swoon. Silver, meanwhile, is up to $33.61.
“The catalyst [behind the move in the metals] is… that there is no solution to the European problem,” commented Sprott Asset Management’s John Embry this morning. “All of the optimism that’s been out there has been based on the thought there was a solution and that the solution was going to be imminent.”
“There are now clearly cracks in that facade and once again people are viewing gold as the ultimate safe haven and they know they better get some of it.”
If Americans are nearly united in the belief the country is on the “wrong track,” they’re not nearly as united on the proposition that Occupy Wall Street can set it right.
Asked the impossibly broad question of whether they agree or disagree with the movement, 43% said they agreed, and 27% disagreed.
On the other hand, 66% of those asked believe that “wealth distribution” in America should be “more even.”
Whatever that means. Hmn. We sense a tide of political coercion rising.
“I believe these protesters have a legitimate gripe,” comments Michael Pento on the OWS following local news that the Parks and Recreation department is planning a clean sweep of McKeldin Square here in Baltimore.
“They are acutely aware that the middle class of this country is not so slowly being destroyed. They know real median wages have dropped 10% in the last four years, just since Wall Street and Banks received their bailouts. […and bonuses, we might add].”
“Of course, their solutions involve wealth redistribution and the punishment of success. That would be completely unproductive. What they should strive for instead is the abolishment of the country’s most powerful bank, which is the Federal Reserve.”
“The Fed systematically destroys the dollar and robs savers of their wealth. Our central bank is the culprit for the chasm that exists between the poor and the ultra-rich.”
“By eroding the value of the dollar, the Fed has stolen away the purchasing power of most Americans — causing discretionary income to plummet and leaving many unemployed.”
“In addition” (Pento can’t help himself, which is exactly why we brought him aboard), “the tax, wage and regulation policies of this country have caused the all-important manufacturing base to become decimated.”
“Without a solid and diverse manufacturing base, our nation has mostly produced low-paying service-sector jobs. It won’t be until we once again embrace a balanced budget, sound money and less government that we will see significant job and real income gains.”
“At that juncture, we can stabilize the currency, increase savings, keep inflation in check and rejuvenate the middle class. Until then, we will witness the Occupy Wall Street movement metastasize at a daunting rate.”
Metastasize, we remind readers, is the verb doctors use to describe the process by which deadly cancers migrate from one vital organ to another.
Circuitously fulfilling a forecast we made six years ago, the cops have moved in to clean house around Occupy movements in least seven cities.
Oakland police brought out tear gas and arrested 100 people when a crowd of about 1,000 refused to disperse. Cops in Atlanta arrested 50. Ditto in Albuquerque.
Crackdowns are also under way in Tucson, Tampa, Orlando… and, as mentioned, here in Baltimore. What the cops plan to do in our charming city, we’ll find out this evening.
Meanwhile in Miami, public anger has taken a turn to the macabre…
“Give a Wall Street banker enough rope,” the graffiti begins on a wall alongside Interstate 95. It ends like this…
“He looks real,” says an artist who calls himself “Above” to Miami New Times. “As I was putting him together, he started to freak me out.”
He’s not the only one…
“I received an email,” writes a Reserve member, “from a less-trusted source than Agora that claimed the megabanks had transferred their derivatives from their trading accounts to their capital accounts, and thereby the FDIC becomes responsible for insuring their derivatives.
“Say it isn’t so. Please, say it isn’t so. The four largest U.S. bank holders of derivatives are holding over $200 trillion in face-value derivatives. And while some of them are stock options, others are credit default swaps insuring against EU default!!”
“If true, the I.O.U.S.A. insuring this dreck will surely be lighting the fuse of the biggest improvised financial explosive device on Earth.”
The 5: Consider the fuse lit… at least in the case of Bank of America, whose transactions we chronicled a week ago today.
Trouble is, you’re understating the numbers. The total net notional value of derivatives held by insured U.S. commercial banks is $249 trillion.
“My biggest concerns” a reader writes as we return to the responses to our Project X questions, “are running out of money in the next few years and the government being able to ‘dip’ into my bank account to pay down the national debt without my permission or being able to stop them!”
“My next concern is not knowing a definite plan that will help rebuild my wealth as quickly as possible, with little risk.”
“I am retired and living on Social Security and a small pension,” responds another, “My home and car are paid for. I am in good health with no insurance. None. My income is less than $1,500 per month.”
“And you ask me what are my biggest concerns?”
“What happened to that idealistic young woman who did everything ‘right’ and now has so little after 67 years in the system? And I’m one of the lucky ones. I’m still a dreamer. I bought two acres of land a couple of years ago and want to have food grown on one acre of it. I already planted a dozen fruit trees this past summer.”
“How do I grow my income so I can use Agora Financial recommendations to help my children and grandchildren have a better life? I am happy to be warm and dry and safe and fed. What will their lives be like in the next 10 years? Thank you now for all your help.”
Thank you for your participation so far. (If you’re interested in the project and you’d like to chime in, you can take the opportunity to do so here. Your input is critical to the success of the project.
We realize that we’ve been, well, circumspect in revealing anything of interest about the project. We’ve never done anything like this… but that’s not the only reason. It’s also because we expect only those serious about the issues we’ve seen expressed get involved. As a reader of The 5, you’re surely in that group. But it’s up to you to decide if you want to do something about it.
There’s still time to indicate your interest… and share your biggest concerns if you want to. Here’s where to register to be a part of ‘Project X’.
Regards,
Addison Wiggin
The 5 Min. Forecast
P.S. “‘Get rich quick’ is a pipe dream and often a scam,” writes our tech maven Patrick Cox. “It’s also grammatically incorrect. ‘Get rich slowly’ is, on the other hand, a very attainable reality. [And would meet the approval of both Strunk and White.]”
“You can try to out-trade the supercomputers sitting on the floors of the big exchanges if you want,” concedes Patrick, “They’re located there because they have the advantage of the time that it takes light or electricity to travel even a few blocks. This allows the firms who pay fortunes to the exchanges for proximity to the trading computers to beat firms located just down the street.”
“Or you can invest in the future, which no computer can calculate.” With that, Patrick points to the oft-told but always-illustrative tale of the late John Templeton: “He started his investing career in 1939 by borrowing about $10,000, which was real money in those days.”
“With war escalating in Europe and most investors in panicked despair, he bought 100 shares in each of the 104 companies priced under a dollar on the New York and American stock exchanges.”
“Almost all were innovation startups, and 34 were in bankruptcy. He then ignored his portfolio for four years. At that point, only four of the 104 were worthless and he had quadrupled his money” — smack in the middle of World War II.
“It wasn’t luck.”
“Templeton was one of the few who understood portfolio mathematics. It is axiomatic that a diversified portfolio of true innovation companies held for the long run will pay off big. This is based on the simple assumption that human progress will continue and things will get better.”
It’s the assumption on which Patrick makes his picks for his premium advisory Breakthrough Technology Alert. For the next 36 hours, you can get started building your own fortune on the same principles John Templeton built his… and at more than 60% off the regular membership fee. This offer expires tomorrow at midnight.