Thursday, July 23, 2009

Agora Financial Investment Symposium Day 2: A Libertarian, Futurist and "Liberal Republican" Walk into A Bar...

The Daily Reckoning

Agora Financial Investment Symposium Day 2: A Libertarian, Futurist and "Liberal Republican" Walk into A Bar...

Wednesday, July 23nd, 7:33 A.M. PST
Vancouver, British Columbia

Dear reader,

A battle of opposing philosophies brewed in the aether surrounding the Symposium.

I knew it would come.

Let me explain: A core disagreement mind-struck me when I saw today's list of speakers for the Agora Financial Investment Symposium.

You can sum up the idea-rift this simply: can government prevent a future financial meltdown or not?

As you'd expect, the conference room forms as much of a free market mecca as you might find in the investment world.

And yet two of today's speakers - Barry Ritholtz and to a lesser extent James Howard Kunstler - embrace different forms of government action to solve the problems that they would detail in their speeches today.

And, to make things even more personally interesting, I perch near the line of absolute anarcho-capitalism.

So these gov't vs. no gov't, regulation against no regulation scuffles would intrigue me. And perhaps fire me up.

But despite my personal opinions, I'll present their cases to you as I heard them, without filter, to leave you free to make up your own mind.

Let me delve into the specifics by reporting on Barry's speech and his position on the bailouts and overall American financial blowup...

By way of introduction, Barry is a very well-known financial blogger, seems omnipresent on money TV, has just written a book entitled Bailout Nation, and acts as CEO and Research Director of Fusion IQ. Busy guy.

He detailed his visions of more ideal role of stauncher regulations in his speech called Capitalism after the Crash.

He presented a slight twist on the regulation argument: rather than focusing on the regulation vs. non-regulation tack, he focussed on creating a climate where Wall Street can't buy politicians, turn them into shill-whores and get laws written or repealed to suit their ravenous greed.

So, put simply, Barry stressed that regulation itself isn't the problem. The problem is how big corporations bought the regulations they wanted. And acted accordingly once the laws they wanted got written.

He likened this tawdry situation to treating a heroin addict by giving them a bunch more heroin. Of course the end is death...

Here are some specific examples he offered:

  • The repeal of the Glass-Steagall Act. This allowed consumer banks to act as investment banks, so now they could monkey around and put your deposits at risk.
  • The Commodities Futures Modernization Act was passed, helped along by Enron and AIG. This left over-the-counter derivatives in some shadow "market" without regulation or even knowledge of their price.
  • The change in the net capitalization rule. Simply put, this change allowed Wall Street firms to more than double the amount of money they could borrow to bet with. The allowed leverage amount went from 5 to 1 to 12 to 1. At some firms it ended up at over 30 to 1...
  • Changes in how the ratings agencies could receive fees. These agencies used to be paid by bond buyers. Then model changed and the bond sellers paid the ratings agency, so this could lead to favorable ratings so the bonds could sell easier.
  • So that's how Barry tried to show that the diddling confluence of Wall Street and the government led to the American meltdown. He stresses that the laws need to be changed to prevent the recklessness that whose aftermath we now clean up.

    I told you where I lean. But there's my objective synopsis of his speech.

    I think you should hear it for yourself to see what you think... which is why we've recorded everything for you. And why - up until Midnight on Monday - we're giving you the chance to get these recording for a significant discount.

    Then the sarcastic Jim Kunstler hit the stage with his radically compelling vision of tomorrow's America in his speech called The World Ain't What it Used to Be.

    First, he stressed this interesting concept: trash the word "consumer" because it's degrading and implies we have no obligation to anyone other than ourselves.

    That idea alerted me to a personal moral underpinning that subtly wove through almost all of Jim's indictments of America and his visions of change. But let's drill into his speech a bit more...

    He berated the Swindlers and Frauds. It's nigh time for the prosecutions to begin.

    And so we can expect no more "something for nothing wealth" that came out of those frauds and swindles. So we come to the strange situation that we can no longer act as a debt economy.

    Then Jim turned to oil's blaring finitude and how it's coming scarcity will forcibly redefine America. Some of his points:

  • We've passed Hubbert's peak, but the downslope is far steeper than we thought. So we'll have even less oil than anticipated in the nearer term - and that oil will be harder to find and purchase...
  • There's an oil export crisis - where already depleting exporters use more and more of their own oil. For instance, Mexico, which has been #3 to America will not be able to export any oil at all in a few years.
  • We'll see more and more "oil nationalism." So oil will go off the free markets and sent to special customers that aggressively lock up supply.
  • Almost all of the oil infrastructure is sclerotic and old. 50 years or more. We're talking derricks, pipelines, refineries, drills. The human workforce ages rapidly, and soon we won't have enough skilled people to run this industry.
  • So the supply side of oil looks pretty grim for America.

    But what about how we use the stuff?

  • Petroleum agriculture is sheer folly, using it to make fertilizer and power massive machinery. We waste oil and gas to suck cheese doodles out of the soil. We can't do this forever, but when it must change, there's gonna be a problem because we haven't prepared.
  • The way we move across America - happy motoring and airlines. Gotta change.
  • Gotta change the way we inhabit the land. Suburban sprawl forms the greatest misallocation of resources in the history of the world. A total squandering of our post-war wealth.
  • He then stressed the need to ditch the crumbly, sprawly, wasteful interstate highway system to rebuild the rail system...We need a New Urban Movement composed of walkable cities and towns that with a nearby agricultural landscape consistent with energy realities...

    I could go on and on about his urgings. And I stress that you ought to listen to his whole speech for yourself.

    He definitely proposes interesting ideas and brave ways to tackle the problems he says we face. But the grand scope of these potential solutions makes me wonder if they'd inevitably bring about a massive growth of the state and its influence on our lives.

    This same fear struck me when I listened to Barry's proposed re- invention and re-invigoration of the state's role in corporate and financial governance.

    But I'll leave you to form your own take on their speech when you listen to it on your own when you get your audio set of the Symposium...

    The next speaker also talked of the future, but in a more positive, heartening way...Breakthrough Technology Alert's Patrick Cox took the stage for his inaugural Symposium presentation.

    His topic? The dramatic upslope of human achievement...and how to invest in its inevitability.

    And just hours after Patrick's talk concluded - his Breakthrough Technology Alert portfolio booked a dramatic achievement too...

    Bristol Myers Squibb announced their intention to buy one of Patrick's recommended companies at $16 a share.

    Where and when did Patrick recommend it?

    $4.74. In Mid-December 2008.

    Great gain for only 7 months of hold time, right?

    That's a 238% gain!

    If that sounds promising, wait until Patrick's other breakthrough tech companies in these fields start to move:

  • Quantum computing that can make a supercomputer that'll fit in your coat pocket
  • RNA interference that can turn on or off any gene
  • Robots that can soon serve us
  • Nanotechnology that will revolutionize materials science and medicine, among many other fields...and
  • Youth and life-extending biotechnologies that are already in development
  • Far out, futuristic stuff.

    Do you want to know exactly which companies in these fields he mentioned in his presentation?

    If so, the complete AF Investment Symposium audio set will deliver them to you.

    With the audio set you will get a recording of Patrick's main session speech and the exact picks Patrick mentioned in his small-group talk later in the afternoon. The whole thing is available for a limited time at a steep discount. Remember - as soon as the Symposium closes, however, this incredible savings does too.

    Do yourself a favor and get the audio set - complete and in crystal clear quality - right here. If I seem insistent - it's with good reason. You see, Patrick's great day was simply a warm up...

    Because Ajit Dayal - Founding Director of EquityMaster and Agora Financial's man-on-the-ground in India - also took the main stage today.

    In fact, Ajit is currently neck deep in developing a new emerging market research service currently titled BRIC by BRIC.

    And, BRIC stands for the same thing it did in yesterday's alert: Brazil, Russia, India and China.

    You may recall that Marc Faber, Chris Mayer and Eric Fry all hit on investing in some or all of these countries yesterday. And when I hear so many speakers enthusiastic about those emerging economies, my excitement only deepens.

    And what did the Indian native Ajit's have to add?

    He reflected back to 1999 tech stocks "forged the future." Not BRIC stocks.

    Remember - tech in 1999 was basically Internet stocks. The vast majority of these companies had no products, earnings, or chances in hell of maturing into respectable businesses.

    At that time, Ajit always got this question: "Why buy emerging markets?" With all the action in tech - who needed to think about emerging markets?

    Well - Ajit answered that question by comparing Indian-firm Infosys to IBM from 1999 to present. And guess what? Infosys slammed IBM over the last 10 years...

    Then, Ajit hit the crowd with his investment thesis: BRIC - China and India specifically - will rise, again. But not as fast as you think...

    You see, in the year 1500 - China and India created more than half of global GDP.

    But in the West, we forget how powerful this region once was - and will be again.

    For example, Ford came to India in the 1990s to build cars for the huge and growing Indian middle class. What happened...?

    3 years later, Ford India sold fewer cars in an entire year than one noted dealer in suburban Florida sold in a single month!

    You see, the American-centric Ford perceived a different notion of "middle class growth" than India delivered...and their huge bet went bust-o.

    Ajit then made his big pivot: We can't assume BRIC will emerge and dominate overnight. You can anticipte stumbles. Bumps in the road.

    Given this emerging, but not quite as fast as we think case for India and China - Ajit then leveled some sobering advice on Symposium attendees - "Make India and China a part of your portfolio. Just don't go overboard."

    Ajit's key sectors to target? Well, I can give you one here.

    Infrastructure firms.

    Not surprising, I know, considering the growing populations and the amassment of huge wealth...

    But some of Ajit's other suggestions were, in fact, quite a surprise.

    To get the complete details, access your copy of the complete Symposium audio set right here.

    So, I bet you wonder "where was the GOLD talk?"

    The case for gold came from the President of EverBank World Markets and Daily Pfenning author Chuck Butler.

    Chuck got off to a fast start too...

    His first point?

    Barack Obama is the new FDR. Which spells big trouble for the dollar...

    In the wake of FDR's 1934 Gold Reserve Act - the dollar dropped 41%.

    Gold rose from $20.67 to $35 an ounce.

    Today, we're running a $1.2 trillion deficit for the year - still with nearly 6 months to go.

    And our reckless printing - it strangles the dollar.

    Even worse, your "part of the tab" stands at $37,000. That amounts to an unimaginable federal debt of $11 trillion. And growing...

    Plus, from 2002 through July of last year, the dollar index shed 40%.

    Guess what? It's all great news in the long-term for GOLD!

    You're going to need more gold too...

    Because as Chuck unpacked the Baby Boomers and their precious Social Security - he pointed out that Social Security ate up 14% of income tax revenue last year. Already a hearty chunk...But it will devour a huge 27% in 2020.

    It's only going to get worse...Tax increases, devaluation of dollar, decreased spending. We'll see all three.

    This is the heart of the impending catastrophe.

    So it boils down to trouble, trouble, and more trouble.

    But Chuck was kind enough to offer solutions. Big ones too...

    Here's how it breaks down...

    His basic "old model" of asset allocation went something like this: Go 10% cash, 20% bonds, 30% stocks, 40% real estate.

    But Chuck offered a new plan. A better plan. A plan for the next decade...

    Now I can't tell you all about it here - but I can tell you about 40% of it...

    Currencies and precious metals EACH make up 20%...

    Good diversification, in this new world reality, is an insurance policy.

    And as a part of the complete audio set - you can hear about Chuck's insurance policy-and his complete program of new asset allocation recommendations. You can access your limited-time discount on the complete audio set right here.

    Again - the audio set gives you all the power of the AF Investment Symposium - from the comfort of your own home.

    It's as good as being here...but without the hours and hours of travel time.

    PLUS - you get the convenience of listening in to all the ideas, the recommendations, EVERYTHING...whenever you want. Wherever you want. For good.

    Because the Symposium is a power-packed but seemingly short 4 days. The audio set will last you forever.

    Don't miss this chance to lock in your own complete audio set at a 40% reduced rate. Simply click here now to complete the secure order form.

    I'll be back tomorrow with my next dispatch.

    Hot-handed Resource Trader Alert Editor Alan Knuckman, Outstanding Investments Editor Byron King and the ever-controversial Doug Casey will speak...and it should be another humdinger of analysis and specific picks!

    Details tomorrow...

    Greg Grillot
    Roving Reporter
    Vancouver, British Columbia

    P.S. I sat in an enlightening, small-group Breakout Session that covered no less than 10 microcap resource stocks. Everything from gold to uranium to income opportunities. Obviously I can't reveal such tiny companies in this letter. But a special report summarizing every single Breakout Session - and the stock picks offered in them - will be yours free as a companion to your audio set. Oh, and make sure you get it now so you get the discount...

    P.P.S. The Whiskey bar just ended. Wow, did sparks fly. It's a rough- and-tumble panel discussion with a free form and freer booze. You can hear it all on the audio set. But for now I need to offer you the panel members' individual "trades of the decade"

  • Patrick Cox: Life extension stocks
  • Chris Mayer: Short Treasuries
  • Doug Casey: Short Treasuries, Long gold and agriculture commodities
  • Byron King: Short Treasuries
  • Barry Ritholtz: Be careful in biotech, be extremely selective.
  • Eric Fry: Short Treasuries
  • Interesting theme there, yes? Well I urge you to get your audio set now, while it's cheap, so you can listen to the entire firey Whiskey Bar and get every specific recommendation offered at the Symposium...

    Agora Financial

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