Believe me, I do have original thoughts. I have them all the time! On occasion, I run across a book, which is so fine, worthwhile, accurate, and timely, that I feel I must quote from it. So I will. The book is new, and titled EMPIRE OF DEBT, by Bill Bonner, and Addison Wiggins. I will quote from pages 308 and 309, plus some more maybe, depending on the space I have. But BUY THIS BOOK. You’ll love it. The following does not apply to metals stocks, but to the run of the mill stocks, of which close to 2 billion are traded each day. Metals stocks are related to the metals, whereas other stocks, are related to huge corporations who like to sell stock to raise money, pay bills, and well, I quote:
“Over time, all investors are destined too lose money, for the cost of the Wall Street Casino must be paid. Brokers, analysts, deal-makers, financiers, fund managers, account managers – all the financial intermediaries who make up the Wall Street industry – draw salaries and pensions as long as they draw breath. That money, too, must come out of investor’s pockets, so that over the long run, the average investor’s real return must be lower than the actual return from the investments. And many, including most of the little guys, will actually lose money.”
“The typical investor in public markets has no idea of what he is doing. Putting his money into a stock or mutual fund brings him a temporary happiness. He sees himself as Kirk Kerkorian making a bid for General Motors or a Warren Buffett shrewdly moving on an insurance company. “I bought Google,” he tells his wife. His chest expands. He feels a crown of authority on his head and imagines his most private part growing. For he has mastered the most sacred and all-powerful right of our time: with a single gesture he has joined the Knights Templar, the Freemasons, and the local country club. He is in. He is with it. He gets it. He is one with all the other swells who make up this wondrous economy. He has gone to Wall Street like Sir Galahad to Camelot.
He does not realize the misery awaiting him. Only later, much later, does he discover that he is not a hero, but a chump – an insignificant speck of dust on Wall Street’s white shoes. The scene would be depressing if there weren’t something gloriously comic in it. Wall Street is doing nothing evil; it is merely doing its job – separating fools from their money.” “The root of the misconception is the nature of investing, at least, the public form of it. The idea of it is that a man can get rich without actually working. All he has to do is put his money “in the market” by handing it over to Wall Street, and through some magic never fully described, it comes back to him ten fold. There must be some science to it, he imagines, some wisdom that investment geniuses came up with years ago that – like penicillin or quinine – is now available to him. But it is not so. Instead, the whole edifice of Wall Street is built on a hollow wish: that you can get something for nothing.” The text goes on to tell the correct way to buy a stock, and it isn’t magic.
“Capital gains in housing and stocks is a fraud. A house produces no more “income” just because it is more expensive. Instead, the utility remains exactly the same. You could double the price of all the houses in the United States, and Americans would still not be a penny richer; unless they could sell their houses to foreigners. A house cannot go up in value. It can only go up in price. Since stocks and real estate are so widely held, an increase in prices spreads throughout the entire society, like consumer price inflation, so the average home-owner or stockholder is not much better off. He can sell his stocks at a profit, but he has to buy others back at higher prices. Like- wise, he can sell his house for more than he paid for it, but he still will need a place to live. And it will cost him more money.”
“The more people all come to believe the same thing, the more they must all be surprised, because as they become more and more sure of themselves, they tilt the odds against themselves. From barely 100 following the crash of 1929, the Dow is now over 10,000. Who can doubt the tendency is up? Yet, adjusted for consumer price inflation, the Dow is only about 500, and most of that increase is merely cyclical.”
And finally, the last few words of the book, and I urge you to spend a few bucks and buy it. I got mine at Amazon for $18, as I remember. “What is peculiar and promises to be entertaining about the U.S. debt empire is that it is more absurd than most; which is to say it is less likely to last very long. That does not mean that the United States will disappear. But you should be prepared for a write down of its debt at any moment. You do not want to go to your grave after saying an unkind word to your mother. Neither do you want to wake up to a market crash with a portfolio of junk bonds, tech stocks, and U.S. dollars. There is never a good time to die. Nor is there a good time for a crash or slump. Still, death happens. Be prepared. Say something nice to your mother. Offer a bum a drink. And buy gold.” I love that last sentence!
Well, here’s the way I see it. There are about a billion and a half shares of stock are traded each day, and they probably have an average share price of say $40. That’s about 60 billion dollars a day in stock trades. When the NASDAQ crashed, it is said that $5-$7 trillion went down the tubes. Sir Alan is ’injecting’ into the economy, more dollars per year than are traded in the stock market each day. A lot more. This is known as ’liquidity,’ and it means that all the stocks traded, are progressively worth less because of the amount of dollars that are bring printed. This also means that since dollar numbers are on a severe upward trend, prices of everything are also on the same trend upwards. Tootsie Rolls, gallons of milk, and movie theatre tickets, are all going upwards in dollar prices. Yet they are the same items. Nothing changes except the price one has to pay for them in all currencies. All currencies are being debased, because all are being recklessly printed and have no backing.
Are gold and silver going up? Yes, in prices paid for them in all currencies. They are the same gold and silver however, so they haven’t changed one iota. The Tootsie Rolls probably come off of the same machine which made them when I was a kid, buying a package for a nickel. The gas I bought for twenty cents is now more than twelve times that much, but it’s the same gas. The gold and silver are the same, whether it was hoisted off of the Central America, as I wrote about last week, fresh from the mint, or the 18 cents over spot I now have for used hundred ounce silver bars in lots of five. Silver bars have no moving parts, so who cares if they are not brand new? They have good hallmarks. All tangible things, be they consumed, owned, collected, or sat on, remain the same tangibles year after year, as their prices go up in crummy currencies. So why stay in them? Would you stay in a leaky boat? What’s the difference? Dollars are leaking purchasing power every day, week, month, and year. Jeeze guys, please get out of dollars! Protect yourself.