Agora Financial’s Rude Awakening

Jump to Comments

Ouzilly, France

• The U.S. dollar: Freewheeling since 1971,
• Russia, Iran and Venezuela on “how not to manage your nation’s energy,”
• Catching falling knives in the property market and plenty more…

Joel Bowman, reporting from Dubai, UAE…

Over the weekend we posed a version of the following question to the
inimitable Rude populace:

“Will gold reach $1,000 before oil hits one hundred bucks?”

The responses came in as thick and fast as a Middle East oil geyser.

“I believe that oil will hit 100.00 USD before Gold makes 1000.00 USD” writes
one Rude reader. “I believe that it is going to be a real horserace, but oil
will win by a nose!”

“Everybody knows where all the gold is,” chimes another Rude fellow. “It’s
all in safe places. Everybody knows where all the oil is. It’s mostly in
unsafe places. I’m placing my bet on $100 oil showing up ahead of $1000
gold.”

“Oil is much closer to $100 than gold is to $1000, so my bet would have to be
on oil,” opines another reader from Owings Mills, Maryland, “but our
wonderful folks at the Fed might well push gold to $2000 before oil hits
$200.”
 
Curiously enough, of the many emails we received here at Rude H.Q. on the
subject, not a single reader questioned whether gold or oil would actually
make their hypothetical targets. The only point of contention was as to which
would hit their respective mark first.

It’s almost as if violence and uncertainty are in a sick race with stupidity
and incompetence to send the both of them to the moon.

In today’s Rude column, Bill Bonner takes a look at geo-stupidity, macro-
incompetence and all the boobs engaged in ensuring your financial and energy
security continue toward astronomical premiums. Enjoy…

—– Wall Street’s Creative Accounting Can’t Save You From… —–

THE “SUBPRIME” TIME BOMB TICKING UNDER WALL STREET

Thought you were “done” with the property bust?

Think again - then get ready as a deadly subprime lending time bomb ticking
under Wall Street sparks the worst property-led recession of the last 76
years!

This triple-edged “housing hedge” strategy could shelter both you and your
money against the fallout IF you let me rush it to you FREE, as soon as
possible…Claim Your Report Here .

————————————————–

Dumb, Dumber, Dumbest
By Bill Bonner

Central banks provide about the same social function as a distillery. They
lift up moods and lower I.Qs. They increase liquidity and dry up brain cells.
As long as the easy credit flows, people feel lucky. But the longer the lucky
streak lasts, the dumber people get.

From the buckle of America’s snow-belt comes proof:

Earlier this week, we passed along this report from the N.Y. TIMES:

“By 10 a.m. Saturday, more than 700 people filled a hall in the convention
center here for what real estate agents say is the largest auction of
foreclosed properties ever in Minnesota… the crowd was standing-room only,
with more waiting to enter.”

Housing prices in the US are falling nationwide for the first time since the
Great Depression. Prices are just beginning to fall in Britain, Ireland and
Spain too. But in the minds of most house buyers, it is still a bull market.
They have lived with rising prices for so long they can’t imagine anything
else.

“The market’s really low right now, so you can get a good price,” said one
buyer, a waitress who was not looking for a place to live, but a place she
could fix up and sell.  “Even if you can’t sell it right away, if you just
sit on it and sit on it, it will go up.”

What has happened? The world’s luckiest people seem have drawn the wrong
conclusions; the wit seems to have gone out of them. They take even the
smallest downturn for a buying opportunity. Still no recession; property
prices down less than 10%; stocks near an all-time high; officials say the
worst is over – and they believe them!

Down here in the sunny Argentine it is a different story. While creditors
compete for a chance to lend money to English speakers, who bothers to offer
credit south of the Rio Plata? Lenders down here have gotten smart; they ask
questions. They know how fast money can move. They wonder if they’ll ever get
it back…and what it will be worth when it returns.

The biggest financial innovation of the last half a century occurred on
August 15th, 1971.  That was the year that the US government put wheels on
the US dollar; henceforth, it was 100% gold-free. It could go wherever it
wanted.

We put it to you today that that event caused more stupidity than television.
With their old rides pimped up with these new, post-’71 dollars, Americans
took to the financial highways…and ended up in places they’d never been
before. Now, they’ve seen almost everything  — from the treacherous swamps
of sub-prime ARMs, which were used to sell houses to people with no money… to
soaring skyscrapers of securitized debt, based on mortgage contracts with no
real security in them…to a Mt. Saint Helens at home (an $800 billion US
current account deficit)… to the Vesuviuses and Krakatoas of foreign exchange
reserves piling up overseas (in the last 4 years,  $2.8 trillion has been
added– more than in the entire prior history of the United States of
America.)

You’d think they would have learned something. Instead, it is as if they –
and the entire rest of the world, too – got home, pulled into the garage,
closed the garage door, revved up their dollar-fueled motors, and breathed
deeply. Pretty soon, they could barely find their car keys, let alone put two
and two together.

In Venezuela, Russia and Iran – for example — higher oil prices bring lower
public policies. Hugo Chavez would probably have been out of office by now –
a coup in 2002 nearly sent him into retirement in Cuba – had it not been for
the rising price of petroleum.  In Russia, Vladimir Putin seemed to be on the
right track when he got into office.  Russia’s low cost labor and flat, 13%
tax rate, brought about a boom. But then, when oil became dear, property
rights became cheap. Now, Putin is using his control of energy resources as a
stick to beat up everyone on the supply line. And in Iran too, high oil
prices work like foreign aid – helping to keep incompetents in power and dumb
policies in place. 

In Bolivia, rather than put its gas on the world market, Trotsky admirer Evo
Morales proposes to build a pipeline over the Andes, 1,500 km long, in order
to sell it to the Argentines. The Argentine national energy company,
meanwhile, buys the gas at something close to world prices…and sells it to
voters for half as much. 

In China…anyone who still believes that prosperity and democracy go hand in
hand ought to take a look. Despite the biggest economic boom in the history
of mankind, the country is still run by communists. Their economic strategy
consists of trying to sell more product to consumers in the West who don’t
need the stuff and can’t really afford to pay for it.  

In America, judged on the evidence above, the quarter century long credit
binge  must have killed off more brain cells than a presidential address. And
in Britain, the yeoman householder is as dim as his American cousin; he
thinks he’s going to get rich by grabbing buy-to-let properties at cap rates
lower than LIBOR!

Meanwhile, high commodity prices retard the learning process even here in
Argentina.  The wife of current president Nestor Kirchner is expected to win
an easy victory on Sunday, not because of her proposals or policies, but
because she’s not making any.  Instead, “soybeans, wheat and corn are doing
the talking,” says colleague Paola Pecora.  High commodity prices make
Argentines feel lucky too.  (Si se habla castellano, lea su comentario a
MoneyweekES.com) 

But Argentines haven’t had such a long run of good luck as the rest of us.
Their wits are not yet as dull. 

“Don’t trust anything the government tells you,” said a local cab driver.
“They’re all liars. Most of them lie about half the time. If they have an
Italian surname, they lie 75% of the time. And if they’re talking about the
economy, they’re lying 100% of the time.”

[Joel's Note: Anyone confident in the competence of the above-mentioned
politicians is not going to enjoy Bill Bonner’s newest book. For the rest of
us, a brand-spanking new copy can be ordered here:

Mobs Messiahs and Markets: Surviving the Public Spectacle in Finance and
Politics ~ Bill Bonner and Lila Rajiva

—– Cash In On The Dollar’s Long Decline ——

If You Strike While the Iron is Hot, This Great Dollar Decline Could Set You
Up For Life!

Fair Warning: We’re about to pull the trigger on a whole new series of trades
with vehicles that could make you 266.9% … 815% … 1,600% … up to 4,400%
richer! Click here read the full report .

———————————————————–

Rude Endnote: As for your oil and gold comments, the polls have oil as the
clear favorite. Does that mean your expecting some kind of disruption here in
our new home, the Middle East? Say it ain’t so!

Addison and Ian will be along with the movements of both these commodities in
addition to all the economic and politic news they can possibly cram into 5
minutes. Look out for their 5-Minute Forecast to hit your inbox after lunch.

Cheers,

Joel Bowman
Rude Awakening