Addison Wiggin – April 4, 2012
- Which is the bigger sign of the times? A public act of suicide in Greece or a public act of extortion in Washington?
- Faber’s forecast: What to do when the “well-to-do” lose 50% of their wealth
- The flip side to emerging-market growth: Chris Mayer goes bargain hunting in down-and-out Western economies
- The profitable discovery that escaped even cutting-edge scientists… how your cost of living rises this Sunday… a trunkful of weird fees tacked on to a car rental… and more!
“I don’t want to leave debts to my children,” we’ve just learned an elderly man shouted before putting a pistol to his head and pulling the trigger.
“This was a symbolic suicide,” said one of the passers-by in Syntagma Square, in the heart of Athens. “If it hadn’t happened here, in the square, in front of parliament, no one would notice.”
From what we can tell, we’re not sure anyone is noticing.
The facts of the case made it to The Wall Street Journal. It happened this morning toward the end of rush hour. The man left no suicide note, but from his last words, it was evident he was despondent over his debts.
The news is only a few hours old… too soon to tell the impact. Perhaps it will touch off an uprising in the PIIGS countries; recall the Arab Spring began with a man setting himself on fire in Tunisia because the police harassed him for selling vegetables without paying off the proper authorities.
On the other hand, it may go as unheralded as that of Andrew Wordes.
“America has a large stake in how Europe fares,” asserted International Monetary Fund chief Christine Lagarde at a speech in Washington yesterday, chastising U.S. citizens for losing focus during the most boring and drawn-out crisis in human history, “and how the world fares.”
“Americans might ask themselves: Why should what happens in the rest of the world concern us? Don’t we have our own problems?” she pleaded. “In today’s world, we cannot afford the luxury of staying in our own mental backyards.”
Really.
Ms. Lagarde argued the U.S. should put up more cash to bail out Europe. Because, apparently, funding 17% of the IMF’s operations isn’t enough. She did, helpfully, however, offer very little in the way of details as to what magic she thought the U.S. government could employ to conjure up the money…
“Looking at the bailouts and the money printing,” opines Marc Faber on the situation in both Europe and the United States, “they have postponed the problems and actually made them larger.
“Somewhere down the line,” the Gloom Boom & Doom Report editor tells CNBC, “we will have a massive wealth destruction that usually happens either through very high inflation, or through social unrest, or through war, or a credit market collapse.”
“Maybe all of it will happen, but at different times.”
He continues that that well-to-do “people may lose up to 50% of their total wealth. They’ll still be well-to-do; instead of having a billion, they’ll have, say, 500 million. But I think there is a massive wealth destruction coming down the line.”
In the event of a crisis, Dr. Faber still likes farmland. Or an island if you can afford one. Real estate, in Australia, New Zealand and Canada, rates high… along with foreign stocks, precious metals held outside the United States and collectibles like diamonds, stamps and art.
[Ed. note. The good doctor is a crowd favorite at our annual Symposium in Vancouver; we’ve invited him back again for this year’s edition. Early-bird registration is still available; learn how to lock in the lowest possible rate at this link.]
“I think that the correction period is not yet over,” adds Dr. Faber on the subject of gold. Which has tumbled $55 in less than 24 hours.
At last check, the bid was $1,616. The most dramatic part of the sell-off came at precisely 2:00 p.m. EDT yesterday.
The sell-off comenced right after the Fed mintes were released yesterday. As Dr. Faber suggests, we may see continued selling in the gold market, but our outlook remains unchanged. We see gold as a buy… and a cheaper buy, at that.
Actually, nearly every asset class was hammered at that moment when minutes of the Federal Reserve’s March meeting were released.
Like archaeologists examining hieroglyphs, traders examined the minutes for signs of the imminent QE3 they ardently hoped for.
Finding none, thus realizing the next hit off the easy-money crack pipe won’t be coming for a while yet, they hit the sell button on nearly everything… yesterday and today:
- The Dow has surrendered 200 points. The 13,000 level is in jeopardy. The S&P 500 has already broken below 1,400
- Silver, as usual, took it worse than the aforementioned gold. The spot price as of this writing is $31.36
- Oil is down to $101.38, a level last seen in mid-February
- Even Treasuries are taking a hit: The yield on a 10-year Treasury has perked up from 2.17% to 2.25%.
The only beneficiary is the greenback. The dollar index is up to 79.8.
Not that anyone at the Federal Reserve will be interested, but the cost of Easter dinner is up significantly this year.
At 80 cents a pound, wholesale ham prices are more or less unchanged from a year ago… but the figure far outpaces the five-year average of 55 cents a pound.
Blame it on the cost of pig feed, which is mostly corn. Right now, corn’s running about $6 a bushel — down from last summer’s $8 record, but still well above historical norms. “Even in the face of a bumper crop, with the highest planting expectations since 1937,” writes Daily Resource Hunter’s Matt Insley, “the price of corn has barely been affected, still trading in its six-month trading range.”
Beyond this weekend, that doesn’t bode well for the cost of Thanksgiving dinner… which as we noted last fall rose 13% last year.
The current sell-off notwithstanding, oil could touch its 2008 high of $148, according to the Texas energy tycoon T. Boone Pickens.
“Global supply is tight,” he says. And he doesn’t believe Saudi Arabia has the spare capacity to ease that tightness. “No, I don’t think they can can cover. If they do, they’ll cover it out of storage” — not added production.
A caveat: Pickens doesn’t see the U.S. benchmark price — West Texas Intermediate — hitting $148. But Brent crude, a more representative figure for the rest of the world, is $123.21 this morning.
Growth in the U.S. service sector slowed last month, according to the ISM nonmanufacturing survey. The March figure clocked in this morning at 56, down from February’s one-year high of 57.3.
Private employers added 209,000 jobs last month in the estimation of ADP, the payroll outfit. This number also moved in the wrong direction from the previous month. Neither number is helping buck up the market.
“Now is the time to scope out that Spanish villa you always dreamed of owning,” says Chris Mayer, eyeing the opportunity side of the European crisis. “If you are patient, you’ll probably be able to buy it for a pair of old shoes, the way prices are falling.”
“Spain still carries huge debts on property not worth anywhere near the mortgages on them. Fitch Ratings found that repossessed homes in Spain were 43% less on average than the debts they carried. Home prices in Spain have fallen between 20-58% from the highs.”
“It seems as if this has been the story for the Western world since the financial crisis began in 2007. If you look at what’s happened from the onset of the financial crisis until now, there is a definite pattern to the winners and losers.”
“But don’t jump to obvious conclusions,” Chris advises. “The right-hand part of this chart promises to be rich in deep value.” By way of example, he points to a Greek engineering and construction firm. “It has 20 years of profits, 36% of the share price in cash, earns most of its revenue outside of Greece and trades for only 3.3 times trailing income while paying out a whopping 7.7% yield. Sounds good to me.”
“Those kinds of prices already reflect a world of pain. Buy a basket of stocks like these and hang on and making money seems as easy as lying down.”
The euro crisis is the other side of Chris’ thesis in his new book World Right Side Up: Yes, there’s ample opportunity in the emerging and frontier markets, where people are reaching for middle-class standards of living. But in the ash heap of the Western world lie some real treasures you can pick up super-cheap.
Chris reveals more opportunities like these, gleaned from his extensive travels, during an “online adventure tour” we’re organizing in advance of the book’s publication. You can come along for the ride on Thursday, April 12 — that’s a week from tomorrow. Sign up here — there’s no cost and no obligation.
The “miracle nutraceutical” Patrick Cox has been onto for more than a year now is reaching critical mass — judging by the reaction to his keynote address last weekend at the Personalized Life Extension Conference.
This conference brought together dozens of people with big money looking for a place to put it in the biotech space… and Patrick delivered no shortage of ideas, from stem cells to anti-cancer vaccines.
But perhaps the most enthusiastic reception was for anatibine citrate, a compound found in tomatoes and bell peppers. It’s the key ingredient in an anti-inflammatory product that’s allowed Patrick to resume his paddleboarding hobby.
It’s also enabled one of the scientific community’s movers and shakers to recover more quickly from ultramarathons. One of the other speakers was Bill Andrews, CEO of Sierra Sciences. Patrick didn’t know until they met up at the conference, but Andrews swears by this nutraceutical — enough to put his family on it.
But others in attendance were hearing about it for the first time. Which goes to show that even for specialists in the field, there are knowledge gaps. Patrick did his part to fill in those gaps over the weekend… which could easily prove another catalyst for the company that makes this product.
To learn about several others, you might want to check out this report Patrick just finished updating.
“We rented a hotel room in Delaware — $50 (with points perks),” writes a reader continuing our thread with his own tale of new taxes and weird fees. “Total bill was $54 — the $4 for an ‘occupancy tax.’ OK, we expect this.”
“Our car was involved in a fender bender, so we rented another for eight days while ours was in the shop”:
- The basic time and mileage fee: $287.92, plus ‘energy recovery fee’ (like you’re too lame to hedge your gas prices)
- Vehicle license recoup: $0.98/day ($358/year), way more than it costs to register a Corolla in New Jersey
- 7.00% sales tax (a‘temporary New Jersey tax to help ameliorate education costs’ — ha!)
- ‘Security fee: $5.00/day.’
“Excuse me, a fee? The word implies payment for services rendered. According to the rental agent, these monies go directly to the Deprtment of Homeland Security, not to the rental company. And DHS services for my rental car? The dog did not sniff it for explosives. The driver and passengers were not screened, X-rayed, or patted down. The alert signs on the highways mostly show gobbledygook.”
“So I received no services for my eight-day rental. And it’s insulting that they should call it a ‘fee’ rather than a ‘tax.’ I should contact my senators/representatives and see how they pulled this particular wad of wool over my eyes.”
The 5: If you do, be sure to let us know what they say. Might have some high entertainment value.
Cheers,
Addison Wiggin
The 5 Min. Forecast
P.S. The Dow is selling off hard this week, but Abe Cofnas’ sample trade anticipating the Dow’s movement is still good.
Recall from Monday’s episode that Abe laid on a range play — expecting the Dow to remain within a range between 12,975-13,275. So far, so good. If the trend keeps up, it means a 15.6% gain by the close on Friday.
Meanwhile, Abe’s making his way back from Asia, where he got the rock star treatment signing the Chinese-language edition of his book Sentiment Indicators.
Abe’s in Sydney right now, but he keeps the market’s pulse from wherever he happens to be. Stay tuned…