Agora Financial’s Rude Awakening

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Abu Dhabi, UAE

• Something for nothing…and what happens when you actually get it,
• The real demand for real commodities and why it ain’t lettin’ up!
• The high-flying hopes of the mad dash to cash and plenty more…

Joel Bowman, reporting from Abu Dhabi in the Persian Gulf…

We spent the morning up in Abu Dhabi with Kevin Kerr of the Resource Trader Alert today. Kevin was presenting at a conference for sovereign wealth reserve, pension and institutional fund management. In other words, telling blokes with a lot of money how best to make more.

The series of speeches, talks, graphs and PowerPoint presentations that preceded Kevin almost sent yours truly to sleep, if we’re to be entirely honest with you. Managers of mammoth funds droned on in a seemingly endless parade of monotony. Each told of excessively complicated ways to eek out a 2% return on this and a 0.9621% return on that. They informed us, through a litany of pie charts and dotted lines how to reduce volatility by a fraction of a percentage point and how to increase alpha by the most minutest of measurements.

How they could be so precise in their estimates, predictions and forecasts remains a mystery to your non-mammoth-fund-managing editor. And perhaps that’s why they make the big bucks. More likely, we reckon, is that not a single person in the room actually knows where oil will be 24-hours from now, or where the dollar will be in 1,440 minutes time.

Offering a decidedly less esoteric presentation, Kevin spoke of real supply and real demand of, you guessed it, real commodities.

“People argue that much of the price escalation in commodities is due to speculation,” observed Kevin from the podium. Most of the audience nodded in agreement.

“But try asking the millions of people in China and India whether they purchase rice on the off chance they will be able to sell it to their neighbor for a profit,” Kevin countered. “Demand is real, people, very real.”

And Kevin would know, too. His Resource Trader Alert portfolio is one of the best performing in the biz…which is why he travels from the world advising the mega-managers on how to best play the story of the century.

Attendees at today’s conference paid $10,000 per ticket to hear Kevin’s full presentation. But, because you’re an Executive Series member, we’ve secured a special “guest pass” to what Kevin calls the “World’s Most Secretive”Millionaire’s Market.”

So, before we get into today’s Rude Awakening, we’d like to invite you to have a quick read of this report which details all you need to know. Click here for Kevin’s Guest Pass access.
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Victims of Success
By Bill Bonner

Our labors here at The Daily Reckoning can scarcely be called labor at all. Our role is nothing more than to point a finger and laugh. And our biggest challenge each week is merely to decide what to laugh at first. Clowns to the left of us…jokers to the right…and here we are.

As always, we are spoiled for choice. Nothing is droller than watching people in a desperate race to get rich. They are like pioneers in a land rush, riding hell for leather across the Great Plains. They jettison anything that will slow them down…tossing off dignity, common sense and caution as if they were pianos being thrown off top-heavy wagons along the Oregon Trail.

Of course, when they finally get their stakes into the ground the whole romance of it fades fast. They actually have to sweat to turn the earth and make something out of the land they’ve claimed. No wonder they prefer the rich, flying hopes of the mad dash itself. It’s not the lure of the hard work and gritty production at the end that attracts them, but the heady illusion that they will somehow get rich without working at all…as if the land will
fructify on its own, like the fabled Land of Milk and Honey that kept Moses wandering around the desert for 40 years.

Almost all of modern finance is based on similar propositions, propositions that couldn’t possibly be true. Of course, that is precisely what makes them endlessly appealing to so many people. The truth, on the other hand, is disappointing, like a bathing suit on an aging man. It is not at all what people want to look at. They’d much prefer to leave some things in the dark and imagine them as they wish they were – that they can get rich without saving…or that their economy can flourish without anyone actually making anything.

Everyone hopes to get something for nothing; and the worst thing that can happen to them is actually getting it.

But there were other sorts of travel – indulged in not by those racing to get rich, but by those who were already rich. The Grand Tour was a feature principally of the 18th and 19th centuries. It was a kind of finishing school for the wealthy and the intellectually ambitious. Typically – as if it were possible to find a typical pattern – a young man or woman with a certain social standing would leave England or America in order to explore the continent.

At the beginning, this traveling was not only hard, it was dangerous. There were thieves and kidnappers all along the route…as well as rude inns, where travelers would likely get bitten by fleas…or come down with a serious illness. Many were the travelers who set off on the Grand Tour and never came back.

Why did they bother? Because they thought the past – particularly the classical period – had something to it that was worth learning. History may not repeat itself line for line, they realized, but the themes of the past tend to recur. Besides, if you are looking for a way to understand the present and guess about the future, what else do you have to go on other than the experience and lessons of the past?

Gradually, over the two centuries, conditions of travel had improved so much that towards the end of it – even into the early 20th century – young ladies from good American families made the trip with their maiden aunts or tutors and wrote romantic essays and novels about the travels.

One of the most important stops along the tour, for example, was the Coliseum, which for most of that time was a neglected ruin.

It is in the shadows of the Coliseum that a story by Edith Wharton, called “Roman Fever,” takes place – in which two American matrons, Mrs. Slade and Mrs. Ansley, experience a little contretemps. The latter of the two conceives her lovely daughter, Barbara, in some moonlit corner of the ruin – with Mrs. Slade’s husband!

But the Grand Tour was more than an opportunity for hanky-panky. It was an opportunity to discover the roots of our western civilization. The theory is that by discovering the roots, we better understand the tree…and its fruits.

If Julius Caesar had not won the battle of Alesia against Vercingetorix, whom he brought back to Rome in chains, he probably never would have crossed the Rubicon or made himself emperor. Nor would he have subdued Gaul. And if he had not subdued Gaul, he could not have conquered England. And if England and France had not been conquered, Europe might never have been Romanized…and there would not have been a Dark Age…or a Renaissance. Which means that the culture that flourished in Western Europe…and was carried on the Mayflower to the New World…would never have developed. We don’t know what the world would be like without that, but it wouldn’t be the same world we have today.

Thank God the frogs lost, says Jacques Bainville, author of a history of France. But what Bainville forgets is that the patterns of history are only seen clearly in retrospect, and even then, people don’t learn much from them. Napoleon had the disastrous history of Sweden’s invasion of Russia by Gustavus Adolphus to teach him. But that didn’t stop him from making the same mistake.

This basic plot line was described best by Marcus Aurelius:

“Consider the time of Vespasian. You will see the same thing: men marrying, begetting children, being ill, dying, fighting wars, celebrating, trading, farming, death of others, grumbling at their present lot…coveting a consulate, coveting a kingdom. Then, turn to the times of Trajan: again everything is the same, and that life too is dead…”

So even if, as people say, we Americans have no history…what of it? And then, while the typical American may not know much history, that doesn’t mean he has none. His country did not spring forth out of nothing; in fact, it has thousands of years of history, and its first and most celebrated citizens knew it.

[Joel's Note: Bill Bonner is the founder and editor of The Daily Reckoning . He is also the author, with Addison Wiggin, of the national best sellers Financial Reckoning Day: Surviving the Soft Depression of the 21st Century and Empire of Debt: The Rise of an Epic Financial Crisis .

Bill’s latest book, Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics , written with co-author Lila Rajiva, is available now by clicking here: Mobs, Messiahs and Markets 

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[Rude Endnote: “Is it over? Depends on your horizon,” write one Rude reader to our query of whether the worst of the financial pain is over…or if we are just in the early innings.

“For the next several months, perhaps,” our reader continues. “As you know, nothing goes straight up or down, and confidence seems to be returning to the market.

“But ultimately, I think we’ll see that January wasn’t the lowest the market will go. I think it will go much, much lower in the end, but we’ll have plenty of ups and downs between now and then.

“Ultimately, I think we are still headed for a depression, and a deep and nasty one at that, but the Fed will still try to pull some tricks, which will work for a short time, then some more tricks, and on and on, until there are no more tricks to try. And then — watch out!”

We’ve been warned.

Until tomorrow…

Cheers,

Joel Bowman
Rude Awakening