| The Weekend Edition - August 21-22, 2009 |
Don't worry - Bernanke has saved the world economy! The Mogambo Guru on the worst thing that could happen to us... Patrick Cox on innovations set to revolutionize the medical world... Dubya: the worst president in history? Doug Casey explores... The end of cheap water could be near, warns Chris Mayer... Bill Bonner on why there is no recovery...and more!
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The Daily Reckoning's Highlight of the Week:
Bernanke Should Knock on Wood
Baltimore, Maryland
"We saved the world from disaster," said Fed chief Ben Bernanke in a speech in Jackson Hole, Wyoming on Friday.
"The world has been through the most severe financial crisis since the Great Depression," he said. "As severe as the economic impact has been, however, the outcome could have been decidedly worse."
Wow. So, despite the fact that the cries for a new global currency are getting louder...and jobless claims are up...and consumers aren't spending...Bernanke is declaring the world economy "saved" from disaster?
Interesting. I guess we'll have to wait and see...but Bill Bonner, remains unconvinced.
"Thursday's news tells us that despite press reports of a recovery, the key indicators of real economic growth are still falling. Almost one out of ten mortgages are now delinquent. And the rate of foreclosures is increasing faster than any time in the last 30 years. Housing prices, meanwhile, fell 16% in the 2nd quarter, from a year earlier, according to the National Association of Realtors."
Keep reading for the rest in this week's Highlight of the Week, below...
In the real economy, people are cutting back...with the inevitable results we discuss every day here in The Daily Reckoning. One major consequence of reduced demand is too much supply. The factories built in China to supply products to America during the bubble years now find they have no market.
Currently, overcapacity and oversupply are causing prices to fall. Falling prices mean rising currency values. Each unit of 'money' buys more stuff. But there are many competing currencies, and they don't all rise and fall together. Even in a world of deflation, some currencies will deflate more than others.
The dollar is, of course, the world's main money. In a sense, the whole world economy is under its heel. But it is a heel that has never been dipped in the river Styx. It is now a heel that waits for an arrow.
PIMCO is the biggest manager of bond funds in the world. It says the greenback is going to lose its status and lose its value.
"Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure," says its Emerging Markets Watch report. "The massive amounts of U.S. dollar liquidity produced in response to the crisis" doom the currency.
Meanwhile, our old friend Jim Rogers says he is moving all his assets out of dollars and buying Chinese yuan. And Warren Buffett warned this week - writing in the New York Times - that "greenback emissions" threaten the whole world econo-system.
But what does it mean? What are the threats to you? What are the opportunities? If you pay your bills and keep score in dollars, what does it matter if the dollar loses value against the yuan? If prices are generally falling, the dollar is actually getting stronger, isn't it? So what if some other currencies are getting even stronger still?
Colleague Bill Jenkins, at Master FX Options Trader puts in his two cents:
"We lived through a financial earthquake in 2008. The effects of it are still being felt. Aftershocks may still be ahead. But predicting when they'll strike is just as hard as predicting natural earthquakes. We had a number of prognosticators for years telling us about what would happen last year; it's just that they didn't know when. And that is the hard part of the life of a prophet.
"And while it is equally difficult to tell when the next economic tremors will hit, we can look at the numbers and make some predictions as to their cataclysmic effect."
Bill goes on to say that he thinks the U.S. is headed for another shockwave...which will include another round of dollar buying - even while the 'experts' are touting 'green shoots' and a return to normalization.
[While Bill Jenkins doesn't see rosier days in the cards, he does see more opportunity to play the global turmoil, using some choice foreign currencies. Learn about his recession-proof gains by clicking here.] The above is just an excerpt from Bill's standout essay from this week. You can read it in its entirety on The Daily Reckoning site - it's an essay you don't want to miss. Get it here.
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| ALSO THIS WEEK in The Daily Reckoning: Were you busy enjoying the dwindling days of summer and missed a Daily Reckoning essay this week? No worries - we have them all catalogued for you, below...
Let Them Inflate
by The Mogambo Guru
Tampa Bay, Florida
"...inflation in prices is the worst thing that can happen to us, and which is exactly what is going to happen to us because the damnable Federal Reserve is creating unbelievable, staggering amounts of money and credit..."
The Impact of the Genome
by Patrick Cox
Marco Island, Florida
"If American pharm's prices and profits are controlled by the same people who run the Post Office and Medicare, it will not be good for R&D. It will not, however, stop progress. It will only shift it offshore."
Baby Bush: The Worst President in History?
by Doug Casey
Vancouver, British Columbia
"Why do conservatives seem to have this warm and fuzzy feeling for George W. Bush? I can only speculate it's because Bush liked to talk a lot about freedom and traditional American values, and did so in such an ungrammatical way that it made him seem sincere."
The End of Cheap Water
by Chris Mayer
Gaithersburg, Maryland
"Fresh water, like oil, is getting a lot harder to find for 40% of the world's population. It will get worse before it gets better. The days when we think of water as a cheap resource are coming to a close."
No Recovery, Not Now...Not Ever
by Bill Bonner
Ouzilly, France
"Borrowing to consume is merely tricking stuff from the future to enjoy in the present...It would be better to invite the future in...let her collect her debts...and then get on with things. Yet government officials on both sides of the Pacific continue their numbskull efforts to revive the bubble economy."
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Don't forget: on this coming Monday, August 24, at noon, Strategic Short Report's Dan Amoss is going to uncover the next major bank stock set to crash. If you'll recall, Dan also called Lehman's bankruptcy five months before it occurred (and led readers to as much as $20,000 in gains.)
Now he's pinpointed another major bank, with a 192 year-old history and 37,000 employees, whose crash is going to hit shareholders like an A- bomb.
This bank made risky loans to people who, unfortunately, are losing their jobs quickly...without jobs, these people won't be able to pay the bank back. The bank management is using accounting tricks to hide these losses from their shareholders, while some of the same executives even appear to be quietly dumping their own shares at peak prices...
They can't hide it forever...and for investors with their ear to the ground, this means an opportunity to triple your money, as a whole new wave of downside profit opportunities emerges.
This Monday, we'll release Dan's full report - including the name of the company set to tank, the proof as to why their share price could plummet, and a simple way to make money betting against their stock. To learn how you can get this report - and 30 days of Strategic Short Report for just $1 - click here.
Enjoy the rest of your weekend,
Kate Incontrera
The Daily Reckoning
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You'll have the chance to learn all this...for just $1. But you only have until noon, Monday, August 24, to take advantage of this offer.
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| | | | The Daily Reckoning - Special Reports: | History of Financial Disasters: Will you be Wiped Out? US Recession: By far the Weakest Recovery Introducing the Single Best Way to Make Sure You'll Never Run Out of Money... | |
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