The Inanity of Groupthink

September 18, 2012

  • Pandemonium! What happens when the planet collectively goes insane all at once…
  • Occupy Wall Street’s anniversary… three charts only a 1%er could love…
  • Chaos in the Middle East rages on… Byron King makes a call… Patrick Cox shrugs it off…
  • 30-year-old chart explains why China is about to roll over the U.S… and more!


  What’s gotten into the Chinese?

According to Japan’s Kyodo News, there were Anti-Japan protests in “at least 100 cities in China,” and “about 7,000 people near the Japanese Consulate General in Shanghai chanted:

“Destroy Japan and retrieve Okinawa”…

“Boycott Japanese products” and…

“Beat Japanese imperialism.”

Looks like someone didn’t get the memo.

Like all goofy protests, very little sense can be made of the things people say when they go marching

But at least the Chinese protesters will help kick off an entire episode of The 5 dedicated to the insanity of groupthink…

 Today marks the 81st anniversary of Imperial Japan’s invasion of China. Protests across the country began last week after the Japanese government bought a small group of resource-rich islands from private owners in the East China Sea.

“Both countries claim them as part of their territory,” The New York Times reports, “but Japan exercises control over them.” The uprising couldn’t have come at a worse time for Japan, as their newly appointed ambassador croaked after only two days on the job.

“Reacting to anti-Japan protests that struck parts of China over the weekend,” The Wall Street Journal report reads, “some of Japan’s largest companies on Monday shut factories, advised their employees to stay home and closed shops.” The moves have apparently “aggravated tensions” between the world’s second- and third-largest economies.

  Japan firms are running for cover. “Panasonic Corp. shut a factory in Qingdao city, Shandong province, after demonstrators shattered the factory’s windows, destroyed some of its equipment and set the building on fire,” reports the Journal.

Honda and Mazda both halted operations at plants in China.

“Canon Inc. also said it was suspending the operations at three of its four main factories in China for cameras, photocopiers and printers on Monday and Tuesday, due to safety concerns.

“Fast Retailing Co., which operates about 145 stores for its Uniqlo casual clothing brand across China, temporarily closed 16 stores Monday. On Tuesday, it closed 42 stores, a spokeswoman said.

“Shares of Japanese companies closely tied to China traded lower Tuesday morning, as the broader market largely shrugged off the renewed tensions.

Along with the mentioned Japanese companies, Sony suspended two of seven plants, Seven & i Holdings Co. (7-Eleven) closed stores in Beijing and Chengdu, construction giant Komatsu halted all plant operations and Mitsumi Electric Co., distributor of electronic components, had its plant broken into in Qingdao and part of it burned down.

Che Guevara is dancing in his grave.

130  Far, faraway from the Far East, yesterday marked the one-year anniversary of the American-born protests known as Occupy Wall Street.

Maybe you remember hearing just a tad about them last year?

With an estimated 300-400 protesters turning up yesterday in NYC, and almost half of them getting arrested, it seems they’re back and didn’t miss a beat.

In spirit of Occupy’s one year, we’ve dug up some charts from that only a 1%’er would love.

While infamous for getting the diagnosis right, yet ordering up more disease as a cure… the progressives do know how to crunch the numbers, we’ll give them that.

  According Alan Krueger, the chairman of Obama’s Council of Economic Advisers, “the shift in income inequality over the last three decades is the equivalent of moving $1.1 trillion of income from the 99% to the top 1% every single year.”

What’s this one show? The higher the “harder we work” line goes up, the flatter the “get paid” lines get ironed out.

Saving the best for last, according to the Economic Policy Institute, “CEO pay at American firms has risen 725%, more than 127 times faster than worker pay over the same time period.”

  And then there’s the tinderbox of the Middle East.

“Turmoil in the Middle East benefits precious metal prices,” Byron King writes, shaking us back into the global hullabaloo.

“Call it the ‘fear trade’, if nothing else.

“Of course,” Mr. King goes on, “close to home, you have the ‘Federal Reserve trade’ as well, for gold and silver, what with Fed Chairman Ben Bernanke last week announcing more quantitative easing — QE3. My take is that QE3 won’t do anything to help the economy. Just today, the Financial Times all but pooh-poohed QE3 because the intended beneficiary — the housing market — is backlogged with mortgage processing.

“Overall,” he explains, “QE3 is just another way for the Fed to bail out the banks and jam more inflation into the U.S. money supply. We’re already seeing the impact in gold and silver prices, for both physical metals and certain of the better-run miners.

[The 5 Note: If you haven’t yet found a good way to buy and store your physical metals, may we politely suggest you look into opening a Hard Assets Alliance account?

We’ve been hammering away about them for good reason.

As you’ll see, HAA is one of the simplest ways to buy, sell, store and take delivery of precious metals. They’re still waiving the account opening fee. And word has it that they’ve lowered all their pricing, too. Sign up for free, right here. Please note that we may be compensated if and when you fund your account… but we wouldn’t make this offer available unless we believed it offered outstanding value.]

“I don’t want to spend too much time beating up on the Fed here,” Byron continues. “Indeed, there’s another aspect of life on Earth that’s driving gold and silver prices higher. That’s labor unrest in South Africa. Recall my discussion about the platinum strikes in South Africa in a note last month?

“Sad to say,” Byron writes, “things have not improved in that beautiful, yet afflicted, land. Indeed, over the past month, labor strikes have spread to other mines and mining companies, rippling out from the original site owned by London-listed Lonmin Mining Co.

“The long and short of the mining issue is that platinum and gold production is falling in South Africa. It’s bad for the mining companies, and bad for overall global supply.

“Thus, when you watch gold and silver prices rise over time, be sure not to place all the blame on Ben Bernanke of the Fed or the Islamic revolutionaries in the Middle East. Always remember that there are multiple reasons for some things.”

Yesterday, Byron left us with actionable advice, “Investment wise, get the heck out of the Middle East. Go elsewhere, where the oil is. I cannot see how this ends well.”

So where should you go? Byron’s answer may surprise you. He’ll tell you all about it in this controversial presentation

As you may remember, this is the same presentation that caused us to place a wager on whether or not the predictions inside will come true.

We’re still awaiting the “winner.” If you haven’t taken a side yet, get up to speed on the idea right here.

 “I see nothing specifically meaningful about any particular riot,” our tech-arbiter Patrick Cox shrugs. “Riots in countries without individual liberty or democratic rights are always hard to interpret, as they are often instigated directly or indirectly by regimes seeking to distract citizens from fundamental dissatisfaction with their state.

“The Occupy movement was, likewise, fostered by forces who believed, erroneously, that they could re-create the social forces that were evident in the ’60s for their own political purposes. It is, however, trivial and irrelevant.

“Overall,” Patrick goes on, “the effect of civil unrest internationally is to make the developing world a less-attractive place to invest and work. This was the case in the past, and we are seeing forces reinforce the dichotomy between the West and the rest. Moreover, the meltdown of the EU is recreating financial conditions reminiscent of the mid-20th-century when Europe was struggling with continual crises and conflict.

“The nature of the conflict today is, thus far, financial, rather than martial, but its impact is similar. Already, we’re seeing Spanish and French banks bleed assets. The United States and Canada, already enjoying a new energy boom with its associated advantages in commodity chemicals and manufacturing, are and will be the primary beneficiaries and recipients of fleeing capital, both human and financial.

“Financial markets are like beauty contestants in a never-ending pageant. You don’t have to be beautiful to win, however. The least-ugly in a contest of flawed contestants can win bigger than the marginally more attractive in a lineup of true beauties. Canada is the least ugly today and Canadian markets will benefit most from international civil disturbance. Runner-up America, however, has an established foreign investment infrastructure in place due to long experience as the world’s largest tax haven.

“Look for the Dutch in particular to continue in their role as facilitators of this traditional arrangement. Australia and New Zealand are also looking pretty good, at least after a few pints. War, of course, is the increasingly likely wild card, which would force a major recalculation.”

 Despite the global pandemonium, the markets slug along today…

The Dow is down a hair, 3 points lost, to 13,550. The Nasdaq is down two hairs, 6 points lost, to 3,173.

While analysts continue to debate the $4 drop in oil yesterday in 20 minutes, oil continues to slide, sitting at $96.10 a barrel.

Gold is up $6 from our look yesterday, sitting at $1,776. Silver is up a nickel and some change at $34.55.

  I couldn’t agree with Chris more, that now is the time to buy real estate,” our income enthusiast Kelly Green writes to us, getting us back on track with the French-Mayer housing debate.

“Jim and I are always looking for great ways to collect income,” Kelly writes, “and 8-12% sounds pretty enticing. But we wanted to find a way to take advantage of the real estate recovery without putting out tens of thousands of dollars.

“And even though we like housing,” Kelly explains, “we wanted to find a way to invest that had a safety net just in case the recovery drags its feet for a bit.

“That’s how we came across the newest play we’re sharing with readers later this week, it’s paying a 4.7% dividend. Not only that, but 47% of its business comes from a sector that will explode as housing recovers. But even if that recovery is dragging, the other 53% is our nonhousing safety net.

“This isn’t the 8-12% Chris is collecting from rental properties,” Kelly admits. “But it’s definitely a safe way to collect 4.7% regardless of the housing recovery. And a ton more as the recovery continues.”

Jim Nelson and Kelly plan on revealing this play later this week to their Lifetime Income Report readers.

Along with housing, they’ve also found a way for you to claim an instant “paycheck” on any gold or silver stocks you may be holding. Instant payouts run into the thousands. Full list of participating stocks found here.

  “I agree with Doug,” one reader writes in as the opposing force, “overall that the housing market in the United States isn’t a good investment. However, real estate is the most-localized type of investment. It’s not like purchasing commodities, for which the price is the same all over the world.

“Prices are still very low even if they have not bottomed out and there is a massive amount of opportunity to be had if you are in the right local market. Just because the average value of homes is dropping does not mean all areas are.”

  “From my perspective,” one neutralizing reader writes, “both of your writers’ positions have merit — French telling people to stop throwing more good money after bad and walking away is likely to prove sensible over time — why pay a premium for a diminished asset?

“However,” our reader goes on, “he says the resale market is at eight-year lows while he states there are already millions of homes in default ready for a distressed sale. My question to him is this: If the value of a house has dropped, say, 50%, is he suggesting that qualified buyers should continue to wait for further price reductions??? My point is there is no guarantee this will be the case for the future. As those millions of foreclosed houses come to market, they will be rolled over to more-qualified buyers to live in or as rentals or they will be bulldozed.

“As far as Chris Mayer is concerned, he was a banker too, and if I summarize him: Buy now at significantly less than replacement costs and take advantage of the low mortgage rates. Investing for profit in rental properties is always based on ROI and there appears to be a surplus of renters now and on the horizon. Again, there is no guarantee this will continue to play out exactly as suggested. However, why wait for a potential ROI of, say, 20% when you can get 15% today???

“As always, lots of homework and due diligence will prevail — that’s the only guarantee.”

  “Revolution in China? I’d believe that,” one reader writes in response to last Wednesday’s 5, just in time to chime in on today’s revolution rhapsody.

“The attached was given to me by a Hungarian professor 30 years ago,” our reader continues, “who fought the Russians in the streets of Budapest.

“The U.S. system has a set of constraints on both the left and the right. The U.S. system constantly moves between the two walls, on the left and the right, but the two walls hold the U.S. system in place.

“Communist systems are like a very large ball in a very shallow ‘V’ held in place by small supports. Once these supports in communist systems give way, look out — no one knows where the ball will roll.

“This happened in Russia, and it sure in the heck will happen in China someday.”

The 5: Let’s just hope the Chinese ball doesn’t come rolling this way…

  Any female student or former student, if she is even halfway decent looking, can fix herself up and sell her tail,” one reader disperses to us in response to yesterday’s 5, thankfully not citing sources, “but the poor guys are in real trouble. Or are there a bunch of rich bitches out there looking for gigolos?”

The 5: Not sure, but if you find there are, it’s a pretty untapped market.

  I would have thought that students prepared to go to college would not be so stupid as to accumulate such debt,” another wrote, a little bit more on the point of the story. “Why not work for a living and save for college? It’s got to be a better way. You might even find you don’t have to go to college.”

The 5: What? No four-year booze fest after high school? Now you’re asking too much!

  “What’s the price of knowledge?” we ask ourselves, looking over the trillion-plus student loan debt from yesterday.

After Jeffrey Tucker’s passionate, “F&ck you, Bernanke” contribution yesterday, we decided to get his take on the matter…

“On the first point,” Jeffrey writes, “students imagine that they will graduate and make the big bucks by waving a degree around. New freshman aren’t so stupid, but a generation got snagged by this myth.

“On the second point,” he continues, “to work before college is an excellent idea. Maybe you will discover that college involves a huge opportunity cost and is not worth it. It’s worth making an informed choice, regardless.”

To level out the opinion field, we also contacted our intrepid Harvard-trained rockhound Byron King, who commented: “As a Harvard grad in Geology, I’m many years ahead of the latest commodity bull market. Still, it’s clear that the long-term resource bull market IS driving the economics of who gets a job after university.

“I’ve said it more than once” Byron writes, about to say it again. “When you see someone grabbing a degree with the word ‘Studies’ at the end of it, you’re looking at someone with an employment problem — or, rather, an unemployment problem.

“What’s my advice to undecided youngsters out there? Figure out what you like, but… whatever you do, work hard and get good at the sciences! Of course, my bias is toward things that help find and deliver resources out of the ground. Overall, hard sciences, geology and related fields are a great way to make sure you have the basics to find work and stay employed in the future. With 7 billion people living on this world, we’re in the midst of a resource and materials play that won’t end anytime soon.”

Indeed. Until tomorrow…


Addison Wiggin

The 5 Min. Forecast

P.S. Thought you might like this story…

“Nobody had any clue he was hoarding the gold,” Carson City Clerk Alan Glover told the Las Vegas Sun.

Browsing through the newsfeeds today, I stumbled across a story about a 69-year-old The Associated Press describes as a “Carson City recluse” who was recently found dead with only $200 left in his checking account.

“But,” AP goes on, “as Walter Samaszko Jr.’s house was being cleared for sale, officials made a surprise discovery: gold bars and coins valued at $7 million…

“Based on just the weight of the gold alone,” AP writes, “Glover estimates their worth at $7 million. Because some of the coins appear to be collector’s items, the value could go much higher, he said…

“Samaszko was ‘anti-government,’ Carson City’s Nevada Appeal reported, and a few conspiracy theory books were found in the home along with several guns.”

“He never went to a doctor,” Glover told the newspaper. “He was obsessed with getting diseases from shots.”

Ahh… the classic gold-collecting, “rich white guys with no life” mainstream-meme rearing its head again.

We’re onto your tricks, lamestream


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