Some Mary Kay Perspective

David Galland, the Managing Director at Casey Research, summed up the election as below. I wish my "cliff notes" from yesterday's post were as good.

Dear Readers,
One of the most memorable lines I’ve ever heard, I heard while standing in line at a kid’s store in a nearby town.  Even though short, the checkout line had ground to a halt thanks to an irate woman blocking further progress. “She said I could put it there!” she nearly shouted, her face red.  “I’m very sorry, ma’am, but she didn’t have authority to let you do that,” politely explained the man whom I recognized from previous visits as the proprietor of the well-run store.  “Well, then why did she say I could put it there!?!” she asked angrily, stabbing a finger accusingly at a blank space on the checkout counter.  “It was a mistake on her part,” the owner answered patiently. “This is a place of business – my business – and we can’t just let anyone who wants to put things on our checkout counter.”  Casting upon him a steely glare she growled, “Okay, fine! Then just give me my box back!”  With the line still stopped and his customers, me included, looking on, the shop’s owner rummaged around beneath the counter in search of the missing box. Thanks to continued muttering by the angry roadblock, it quickly became apparent that the box in question was meant to harvest business cards from anyone interested in a free makeover from Mary Kay cosmetics. It also became apparent that the box was nowhere to be found.  Even so, the steaming MK rep made it abundantly clear she wasn’t going anywhere until the handsomely decorated cardboard box was back in her hands.

“It’s my property, and I want it back!” she stated in no uncertain terms, giving no ground and entertaining no discussion on the topic, then reinforcing her wrath with a stream of invective while tapping her foot expectantly.  It was at this moment that the proprietor gave up the search for the lost box and, rising up to his full height behind the counter, delivered the memorable line.  “Stop!” he said, emphasizing the point by extending his hand and arm in the forceful manner associated with well-trained crossing guards.  Having halted the MK representative mid-insult, the proprietor delivered his coup des mots.  “Ma’am,” he said, cool as a cucumber, “With all the suffering and misfortune in this world today, do you think we could try to keep this matter in perspective?”

I’ve forgotten her exact response, but if memory serves it was along the lines of, “Huppity huppity uhnn.” With nothing more to say, she took an embarrassed glance at the unsupportive faces of the people she had been holding up, then slinked out of the store.  When it came my time to pay, I smiled widely at the store’s owner and thanked him profusely; for so succinctly saying what so desperately needed to be said… for the excellent entertainment… and for enhancing my spoken repertoire with a useful phrase to be henceforth trotted out whenever confronted by anyone making something out of nothing.

For example, in the context of yesterday’s elections, the punditry is all agog about the big changes to be ushered in by the Republicans regaining much of their lost political clout.  To which I might respond…“With all the suffering and misfortune in this world today, do you think we could try to keep this matter in perspective?”  Appropriate? I think so, and here’s why.  From a big-picture perspective, history clearly shows that in all the ways that actually matter – at least to those who care about personal freedoms and the fostering of a strong economy – it has hardly mattered a whit which of the two entrenched political parties are at the top of the leader board.  Sure, there have been fleeting periods of some small improvements in those key criteria – and these periods have come about during the reigns of both Democrats and Republicans – but it’s mostly been a one-way street toward more government, and the attendant costs of that shift.  On that point alone, one is entitled to be skeptical about any real change coming to pass.  That’s the big picture.

Grinding down a level to the present time, however, we note that the Republican resurgence is largely being attributed to voter concerns over the damaged economy and out-of-control government spending – concerns, you know, we share.  One poll reported that fully nine out of ten people exiting the voting booth said that they thought the economy was in bad shape.  So, now we have the House of Representatives solidly in the Republican camp, and the Senate divided by a razor-thin margin. The big house, of course, is still occupied by Obama. But other than the power of the presidential veto – a double-edged political sword should any of the Republicans’ cut-the-government initiatives actually make it through the Senate – the man is now largely isolated and irrelevant.  No question about it: the real fireworks will be happening in Congress. While we can’t know everything that’s going to be proposed, it’s safe to say that – given the Republican surge – the legislative agenda will be replete with initiatives aimed at undoing some of the worst damage inflicted over the last few years.  And that’s where things get interesting, but maybe not in the way you’d expect. I’ll tell you why in a moment, but first a bit more spade work is required.

While we can’t yet know all the new legislation that will be pushed forward by the reinvigorated Republicans – or drooping Democrats, for that matter – it’s a fairly safe bet that most such legislation won’t make it all the way through the briar patch in order to become law. That’s what gridlock is all about.  That said, rightly fearing for their own fates in the 2012 elections, some Democrats may be tempted to jump the aisle and support the Republicans in passing government-rollback legislation over the next year… legislation that even Obama might be reluctant to veto.

Huzzah, some dear readers might be thinking. Not so fast…The problem with the coming episode of gridlock goes back to the fact that the nine out of ten people mentioned in the poll were right – the economy’s a mess.  Over the last year, the only thing that has kept it from getting downright dire has been the government’s unhesitant intervention… its unleashing trillions of dollars of new money into the economy and supporting failed institutions with trillions more by buying up toxic mortgages, offering purchase incentives, suppressing interest rates, offering tax credits, and so forth.

The entire article:
http://www.caseyresearch.com/displayCdd.php?id=578

Reducing The BOOT Print

The Boogeyman is everywhere and he's "comin' to get us".  There's Al Quaeda, the Axis of Evil, all Muslims, Taliban, Pakistanis, Osama, Iranians, and whoever else we need to get the herd to come together.  The fear factor is very powerful and effective.  Newt is starting to use it to emerge as the frontrunner for Team Red.  The idea below is contrary to the fearmongering and lowering the "boot print" would solve the problem.  But, of course we can't.  FOUR percent of the worlds population consuming 25% of the world's oil requires us to control "the heartland".

"The U.S. spends more on maintaining overseas government operations than all the rest of the world’s nations combined. While the cost of ending our involvement in perma-wars, turning off the lights at military installations, canceling aid and subsidies to foreign governments will cause widespread pain and misery – both at home for the dismissed soldiers and overseas for our allies – doing so is likely to improve our security by dramatically reducing our boot print on the face of the globe."
Source: Casey Research

Print Baby Print

"The Keynesians would take great umbrage at the idea that the government is left with no viable options at this point. The solution is clear to them – more stimulus. And this time around, no skimping! A paltry $800 billion isn’t even going to begin to get the job done. Rather, if two trillion dollars of freshly minted money is what it takes to kick the U.S. economy out of its swoon, then so be it. Hell, make it three if that’s what it takes – we can worry about the (inflationary) consequences later. Economists who look to someone other than Keynes for guidance, have other ideas – but not many. And, as per my comments above, none that would be even remotely palatable to the man on the street. That goes double for the politicians (of both parties), who rely on the proletariat to provide them with the votes that keep them in power and in porridge."
Source: Casey Research

Tectonic Monetary Shift

"The most pressing macro-observation I’d like to make – an observation that’s critical for investors to understand (though most don’t or won’t) – is that the tectonic monetary shift now underway is truly global in nature. And it’s not going to be over until a new and markedly different monetary regime has been implemented."
Casey Research

Casey's Case For A Gold Run - Part II

"That’s because when people lose faith in a currency, as they will before this crisis is over, they unfailingly rush to exchange the unbacked paper money for something more tangible. While pretty much anything with an intrinsic value will do – real estate, antique cars, old masters – for all the reasons that Aristotle enunciated, gold is viewed in a class of its own, and so has an unblemished history as a universally accepted store of value.* And, thanks to its portability, divisibility, durability, and consistency, it has also always been looked upon as a convenient form of money."
Casey Research

Bond Rush

"Based on my experience as a co-founder of a mutual fund group, I can tell you that if there is one sure thing in this world, it’s that when investors rush en masse into an investment category, it is invariably at almost exactly the wrong time to do so. Is that the case with today’s rush into bonds?"
Source: Casey Research

Bunny Rabbits

"In time, however, the government is going to run out of bunnies… be careful."
Casey Research

The Execution of Paul Revere

"In classical drama, as well as real life, the bearer of bad news is often executed, simply for having brought it."
John Hornig, Casey's Research

Gold Supply

" I think in order to properly characterize what’s happening in the industry, it's important to start from a big-picture perspective, which is that by and large the masses in this country are not involved in precious metals. In my experience, the move we've seen in gold over the last decade has primarily been from international investment – sovereign wealth funds in the Orient, petrodollars in the Middle East, India buying from the IMF, Russia and Japan accumulating, etc. If you factor in that very, very few people in this country have even held a gold coin – let alone own any gold, or understand the reasons to own it, or will even accept the arguments for owning it – I think the primary distinguishing characteristic of this market will be that people won’t be able to get product when they want it. The rising price in and of itself will not be the main hurdle. For the most part, people will overcome price, because they’ll want to own it. The real issue will be getting product in a timely fashion, and that will become difficult for the average American. People are afraid. They’re afraid of what's happening geopolitically, economically, fiscally, and want to hold on to their gold. As they should, because this is exactly the kind of circumstance gold is for. So I would argue that as gold and silver creep higher, there will be more and more buying and less and less selling. And less selling means less product for buyers. People are afraid. They’re afraid of what's happening geopolitically, economically, fiscally, and want to hold on to their gold. As they should, because this is exactly the kind of circumstance gold is for. So I would argue that as gold and silver creep higher, there will be more and more buying and less and less selling. And less selling means less product for buyers. Junk silver bags are becoming much harder to get. And I think the higher gold goes, the faster silver will disappear.Acquire as many gold and silver ounces as you can. In the end it’s not about price paid, it's about number of ounces. View the supply issue as critically as you would the price, because I believe that more than anything else, the lack of available supply will mark this industry."
Andy Schectman - Miles Franklin (Interview with Casey Research)

Casey's Case For A Gold Run

Casey Research makes a nice historical case for the future gold boom.

The Mortgage Facts

Most take for granted what they hear from the media and what is regurgitated from their friends and peers. It's very rare that data is presented and examined in the media. Usually it's broad statements that are usually explaining why events happened in the past. Politics are the same way. I still remember Ross Perot holding up his chart of the U.S. debt and speaking of that "sucking sound"! It was refreshing to see a politician present some real data and discuss a solution.

Casey Research presents the chart below. It confirms that we are in a "default lull" of the adjustable rate mortgages (ARM's). April 2010 will kick off the next round of chaos. June 2011 could be the peak. Buckle your chinstraps!
Source: Casey Research

Lunatics, Malcontents, and the Narrow Minded

"After many years of direct and tangential involvement with gold markets, I believe I have a pretty good understanding of its historic role as money, as well as a speculative medium. There are many, however, including those -- maybe especially those -- involved in the world of high finance, who sniff their noses at the mere mention of the barbaric relic, relegating it to the realm of lunatics and malcontents. Yet when you think about it, to turn a blind eye to any asset class seems remarkably narrow-minded, if for no other reason than it ignores the fundamental truth that markets go up and markets go down, based upon the prevailing trade winds. There is a time for gold, just as there is a time for sugar, or stocks, or bonds. Further, to dismiss gold entirely in favor of financial assets, which most of the smart chaps tend to do, strikes me as the ultimate conceit given that so many of those financial assets are constructed out of nothing more tangible than academic theory. Simply, to believe in the latest fashionable derivative is to believe in the infallibility of humankind. I will take the other side of that trade at a snap of the fingers."

David Galland, Casey Research - November 10, 2009



"I ventured into new territory today and bought the XAU (gold/silver index). It should be another educating investment!"

Random Roving - January 17, 2002 (back in the pre-blog days)



Since 2000:
-Gold is up 285%
-S&P500 is down 20%



This cycle change has been highlighted in several prior posts about the Dow/Gold Ratio.
http://randomroving.blogspot.com/2009/02/dow-jones-industrial-average-gold-ratio_22.html