City of Contented Industries

September 25, 2012

  • “They’re playing mad scientist with people’s lives”… America’s most violent city lays off entire police force…
  • Meanwhile, manufacturing jobs set to grow by the millions… will Corporate America beg Americans to take their jobs back? Heh.
  • Is Bernanke as ignorant a man as we think? Or does he just play one on TV? Doug French thinks there’s more to Ben’s story…
  • America’s farmers feed cows gummy worms… car washes in Malaysia offer ‘free gift’ from the world’s oldest profession on your 10th wash… readers debunk the “teach a man to fish” theory… and more!


  The New Jersey city that became the poster child for yawning budget deficits and high crime during The 5‘s look at how the crisis could play out in your hometown… has now voted to disband its police force.

America’s most violent city, Camden, N.J., will lay off its entire police force, breaking all prior contracts, and begin to rely on a county-run force instead. Starting anew, the plan’s advocates say, will allow the city to add 130 more pairs of boots on the ground to respond to rampant crime.

“Camden Mayor Dana Redd and Frank Moran, the city council president,” The Huffington Post reports, “say the city cannot afford its current contract with the police department, which includes generous pension and health care benefits and perks like longevity pay.

“Shifting to a county-run force allows the city to negate the current contract and start from scratch with lower salaries and less benefits for officers.”

 The Camden “plan is unproven, untested and unstudied,” one detractor told the HuffPost. “They’re playing mad scientist with people’s lives.”

  “Camden, N.J., used to be the home to the entire Campbell’s Soup factory,” we wrote early last year, “It was home to RCA and the world’s first color television. They invented the drive-in movie theater. With almost full employment, innovation and massive manufacturing output, the mayor once proclaimed the place ‘the city of contented industries.’

“But just like what we’re seeing play out right now, they eventually got in over their heads…”

130  At the time, city leaders had already been forced to lay off a quarter of the city workers — including nearly half of the police force and one-third of the firefighters.

“The fear quotient has been raised,” said Rev. Heyward Wiggins, pastor of the local church. His fellowship once held choir practice on Thursday and Friday evenings. He canceled those. Members are simply too afraid of being out after dark.

Fellow Camden resident George Watson feared for his life… and home. He told the local news that “[Criminals will] be coming into the houses… they know you can’t call the cops. There won’t be any cops to call.”

And with the current plan, help is even further away — just one of the many things foretold in our “Mother of All Bubbles” forecast here.

  In sharp contrast, manufacturing jobs will continue to grow by 5 million over the next decade, according to the Boston Consulting Group (BCG).

With ongoing worldwide labor riots, rising global wages and equalizing expenditures, the cost advantages for American companies to produce goods overseas are shrinking. And according to BCG, a mass migration of jobs back to the United States will be, and already is, taking place.

According to BCG’s “Made in America, Again” report, in less than three years, the U.S. will have a cost advantage superior to Germany, Italy, France, the U.K. and Japan in several industries including machinery, chemicals, transportation equipment along with electrical and appliance equipment.


  • “America’s natural gas boom from shale (commonly referred to as ‘fracking’) has provided this country with some of the cheapest natural gas prices around the world. For the foreseeable future, natural gas prices will remain 50-70% cheaper in the U.S. versus Europe and Japan
  • Labor costs in other developed economies will be 20-45% more expensive compared with the costs of hiring U.S. workers
  • The U.S. could grab additional exports from the aforementioned nations to the tune of $130 billion annually
  • Average manufacturing costs in China will only be 7% lower compared to in the U.S in 2015.”

If this is all news to you, our resource hound Byron King has been saying this for months. In fact, for so long now that it’s become a little drab for Mr. King… and he’s moved on to something that he says is right now “on the verge of something with the potential to top them ALL.”

[Ed note. How do we reconcile the demise of a city like Camden, N.J., and the birth of 5 million new manufacturing jobs? It’s a recurrent phenomenon in U.S. history Patrick Cox calls the “Phoenix Event.”

We began formulating our own “Remade in America” thesis at a small inn located in Fells Point in southeast Baltimore over a year ago. We brought together a new team of researchers and writers to understand what new ideas small companies were bringing to the table. More to come on what opportunities we expect to rise from the ashes… just one of those ideas was coincidentally sprouting right in our own backyard.

Don’t miss out on the part of The 5 in which you can take action and put some of your money to work by harnessing one of these important new trends. Click here to learn more.

 Overseas, the Chinese and Venezuelans have agreed to develop one of the world’s largest gold mines, together.

Last year, Venezuelan president for life Hugo Chavez recalled 200 tons of his gold reserves from the hands of “mafia and smugglers,” in a plan to end the “dictatorship” of the U.S. dollar.

Chavez then announced an oil deal with China, allowing the Middle Kingdom to secure oil supplies in exchange for low-interest loans.

Today, they’ve announced they’re joining forces to mine Las Cristinas. In typically humble fashion, Chavez describes the mine as, “one of the biggest resources of gold that exists — not only in Venezuela, not only in Latin America… but in the world!”


The mine will be taken over by China International Trust and Investment Corp. (Citic).

So it goes.

 “Is Bernanke just ignorant of the economics of adjustment?” asks our Laissez Faire ink slinger, Doug French. “Or is there more going on? Very few commentators have considered this possibility. They mostly take Bernanke at face value. It’s time that we look a bit deeper, remembering that the big banks are the Fed’s main clients.

“Let’s first consider one of the great mysteries of current Fed policy,” Doug writes. “Why is the Federal Reserve paying banks 25 basis points on their excess reserves parked at the Fed? This policy guarantees that banks have greater incentive to do nothing, rather than lend to you and me. In this way, the Fed’s policy seems to be at war with Bernanke’s stated objectives.

“Of course, a quarter point doesn’t sound like much. But it has made a world of difference. Since the Fed put the policy in place during the dark days of October 2008, there is now over $1.4 trillion sloshing around the central bank. Before 2008, there were exactly zero excess reserves held by the Fed.”

  Various pundits “have been puzzling about it for years,” Mr. French continues. “Even the grand old man of tight money, ex-Fed chair Paul Volcker, doesn’t understand why the Fed is writing checks totaling $3.75 billion a year to the nation’s banks.

“I don’t quite understand,” French cites Volcker, “why they’re putting all this money into the economy and then paying interest on excess reserves of the banks, which is where the banks are parking some of the money.”

“And remember,” Doug continues. “the Federal Reserve sends most of its income to the U.S. Treasury. The Fed transferred $76.9 billion in earnings to the U.S. Treasury during 2011, but it could have transferred nearly $4 billion more. That won’t balance the budget, but that’s another few billion dollars that taxpayers are ultimately on the hook for.

“It’s suspicious if nothing else.”

[Ed. note. If you missed Mr. French’s mind-blowing piece on TAG last week at The 5, this is part deux of the eye-opening series continued here.]

  The markets continue to ebb as the S&P slides down a point, to 1,455. Nasdaq, 5 points, to 3,155. And the Dow has shaved off 13 points so far today, to 13,545.

Gold shed $2 from its recent spike and is now sitting on the nose of $1,765.00. Silver lost 18 cents herself… and is now hovering around $33.90.

  Oil lost a little under a half a point, to $91.57.

“It’s been a great run,” Chris Mayer left us with yesterday about oil. Today, he’s back to elaborate on why he thinks oil’s downturn is sticking around.

“Crude oil is 230% above its long-term average in inflation-adjusted terms,” Chris writes. “Besides, it is not as if we can’t see what will slay the oil price. There are many sharp swords all over the place.

“Let us consider demand. The biggest economies on the Earth — the United States, Japan, China and the EU — are all slowing down or contracting.”

On the supply side, “New technology continues to unveil giant sources of supply once thought uneconomic. David Fingold, a portfolio manager at DundeeWealth, writes:

‘More oil? It turns out that on top of U.S. oil shale, Alberta oil sands, West Africa and Brazil there’s yet another massive source of oil that may be coming to market. It’s called the Bazhenov Shale, it’s in Russia and it’s big. I’m no geologist, but I’ve been told it’s similar to the Cardium in Alberta. Exxon starts drilling there next year. The energy boom of the 1970s ended when the North Sea and Alaska North Slope came on line at the same time. It seems likely more than two major fields will hit the market this decade. It’s hard to see oil becoming relatively scarce anytime soon.’

“The Bazhenov shale could be another game-changer for the oil industry,” Mr. Mayer announces. “It is yet another massive oil source to add to a list that keeps getting longer as new technology cracks open sources once thought unreachable.

“People will come up with all kinds of reasons to discount the new oil supplies. But history shows that human beings are creative and tenacious.”

As Chris mentioned yesterday, “I am interested in putting my money in areas where the odds favor me. Increasingly, I don’t see the odds favoring me when it comes to oil prices. To me, oil is much like stocks in 2000 or housing in 2006. It’s overpriced and it will come down at some point.”

  “This year’s drought is pushing up food prices,” American Public Media (APM) reports, “and, no doubt, influencing what you eat. It turns out the drought is influencing what American dairy and beef cows are eating, too.”

As 2012’s drought wears on, the ever-useless FEMA is usurping responsibility by stating, “There is no national drought policy.” Classified as one of the worst in decades, it completely destroyed half of U.S. corn, pushing prices up to record highs.

“FEMA doesn’t deal with droughts”… Err…what do you guys do, again?

What are some farmers doing to quell this situation? “Kansas dairy farmer Orville Miller says he’s replacing about 5% of his cow feed with chocolate,” APM continues. “‘Cows love chocolate,’ Miller says. ‘When I feed the cows, they go nosing through their total mixed ration trying to find pieces of chocolate and they’ll eat those out first.”

While Miller also feeds his cows taco shell rejects, other farmers are replacing feed with the more cost-effective french fries, ice cream sprinkles, cereal, cookies, marshmallows and gummy worms.

“Cattle can utilize gummy worms just the same way we can,” Fanning tells APM. “They put on a lot of weight with those products because they’re high in sugar.”

It gets worse: The farmers are getting the sacchariferous “salvage” from candy companies’ throwaway product that’s been broken, spoiled or oversugared.

Marilyn Noble at the American Grassfed Association, acting as the only apparent voice of reason, says, “Cows were meant to eat grass, not candy.”

  Traveling around the world, you get used to different ideas and customs. Here’s one for the “we didn’t expect that” file.

A carwash in Kuala Lumpur, Malaysia, which been open for three months was raided by police. Apparently, they’d formed a partnership with a local massage parlor in which patrons were able to redeem free sex after their ninth wash.

Levy Li Su Lin, Miss Malaysia: not likely to be the premium for your 10th visit.

“To get the extra ‘offer,’ customers had to send their cars for washing nine times within a certain period,” Officer Emmi Shah Fadhil said. “The 10th car wash will entitle them to free sex.” Upon raiding the participating massage parlor, the police squad found five customers on their “10th wash.”


  “You guys are wrong!” responds a reader, with some verve. “The saying is ‘Give a man a fish and you feed him for a day. Teach a man to fish, and he will hop in the boat and drink a beer with you’!”

The 5: Amen.

  “You might think teaching someone to fish would feed them,” another reader writes with a response destined for the Laissez Faire repository of inane regulations. “Not quite the case in Alaska anymore.

“Lack of fish returning closed the season early on kings as well as silvers here on the Kenai Peninsula, leaving a lot of tourists very disgruntled, not to mention the average-size halibut on a charter boat less than 20 pounds, with a two-fish limit! How would you like to pay $300 for a six-hour charter and get back about 12 pounds of fillets. Ouch!

“It is getting harder and harder to subsist off the land here. Same goes for moose hunting: You have to shoot a bull that is at least 50 inches wide (antlers) or three brow tines. There were only 17 legal moose taken on the entire peninsula last season, and there were over 235 killed by automobiles or starvation. Got to hand it to the gov, they really know to rain on your parade!”

  “Realistically,” our last reader for today comments, “if you want to shrink government and get any economy moving, there is only one way to describe how to do it:


“Needless to say, this country and a lot of others in the West are sorely lacking in this quality. This quality is something no government wants anybody to have and will do and promise anything to take it away from anybody and everybody. All that so they can replace it with innumerable regulations and an autocratic bureaucracy to enforce compliance. What is this thing we seem to be lacking in? It’s easy.”

The 5: Easy for you to say. Scroll up a few time segments.


Addison Wiggin

The 5 Min. Forecast

P.S. Moments before we hit “send” on today’s 5, we received this email from our options specialist Steve Sarnoff:


“The small caps are under renewed pressure today, dropping a little over 1%, as euro stress is returning to boost the U.S. dollar and pressure risk asset prices. Our ‘protective play’ on this unfolding scenario is doing its job… we’re up 61% in less than a week.

“Thanks, and all the best,


Mr. Sarnoff’s track record has been impeccable. To get in on his next recommendation, please subscribe here.


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