Agora Financial’s Rude Awakening

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Ouzilly, France

• Gold bounces as nervous traders await tomorrow’s housing report,
• The perils of trading conviction for faith,
• The tale of Mr. Dollar’s Rolls Royce and plenty more…

Joel Bowman, reporting from Dubai in the Persian Gulf…

“I’m sorry sir,” the fellow behind the counter told us on the weekend. “We don’t have any more of those in stock right now.”

“Demand picking up again?” we asked.

“We sold out yesterday,” the man continued. “The Indians come to cash in their savings before they go home for the summer holidays. The guys who came in last week really got a good break. Gold is a bargain right now.”

Your editor was attempting to do a little discount shopping over the weekend after his favorite metal suffered a lashing over the past month. Gold sold off all the way down to the mid $770s last week before clawing back around 1$ over the weekend. It sits about three bucks shy of the $800 as we write.

The conversation went more or less the same as this at the next store…and the next. Finally, at the fourth and last store of our visit, a man named Sahir came to our rescue.

“We don’t have any on hand,” he started, “but if you don’t mind waiting a few minutes, it can be arranged.” 

Seeing the relief in our expression, Sahir gave instructions to two young men in the back of the store. One dashed out the front door and disappeared into the winding streets outside. The other brought us a hot cup of Indian chai tea and pulled out a seat for us. While waiting for the delivery-man to return with our (relatively small) gold bar, we asked Sahir how he feels about gold’s recent selloff.

“I have mixed emotions,” he muttered. “On the one hand, it’s obviously very good for business. Our sales are way up. Then, on the other hand, it’s almost painful to let it go at these prices.”

Indeed, business HAS been good this year for Dubai’s gold traders. The value of gold traded in the first half of 2008 jumped 48% from the same period last year to 48 billion dirhams (or about $13 billion), according to the Dubai Multi Commodities Center (DMCC).

“Despite high volatility in prices, gold trade through Dubai has continued to surge,” Ian MacDonald, director for gold and precious metals at DMCC said last week.

“Demand for gold has been resilient to global market conditions,” he continued. “The sharp rise in prices earlier this year has been a prime driver in improving export volumes, and has boosted the role of gold as an inflation-hedging instrument.”

But where to from here?

It is often said that the cure for high prices is high prices, but might the same not be said – all else being equal – for low prices too? Might a massive selloff in this finite commodity also induce some excited, discount shopping from eager dollar-hedgers?

Maybe…maybe not. Perhaps the full faith of the world is suddenly back behind the seemingly moribund US dollar. Perhaps a renewed faith in fiat currencies will trump the yellow metal, sending it back down to the doldrums of the early 2000s. Perhaps money rooted in faith really is all an empire needs to fund its lavish lifestyle at home and abroad.

Preferring to err on the side of conviction, your editor understands little about empty promissory notes used in place of and in exchange for real assets…especially notes backed up by broke governments with mounting debt. To us, paper money feels a little like hot potatoes – as soon as we manage to get our hands on some, we try to pawn it off on the faithful as quickly as possible so that we may convert it into something that requires no faith whatsoever.

With that in mind, we invite you to enjoy the following column by Bill Bonner. In it, Bill takes a look at the cost of blind faith in money, politics and religion with his characteristic brand of wit and humor.

More below…

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Sugar Daddy God
by Bill Bonner

“Daddy God,” is how Victoria Osteen refers to Him. Honestly. We’re not making this up. When Mr. Joel Osteen took a wife, it was Victoria that he got, for better or for worse. And now the two of them preside over a mega-church in a suburb of Houston. Mr. Osteen is the author of a super bestselling book, Your Best Life Now . God wants us to be prosperous, he argues, in front of thousands of worshippers. How does he know what God wants? He speaks “face to face” with God, says his wife, making him the first person ever to do so. (What did He look like? Has anyone asked?)

Over in Atlanta, the Rev. Creflo Dollar Jr., seems to be doing even better. He and his wife, Taffi, entertain at another huge church, drive around in a Rolls Royce, and have a private $5 million jet to move them from one speaking engagement to another.

Mr. Dollar, like Mr. Osteen, believes in the power of God to move mountains, but they trust in the Almighty Dollar to smooth out the little foothills in their way. Last year, for example, Mr. Dollar sent 100 of the local Fulton County police officers checks for $1,000 each – a month after two traffic tickets the Reverend Dollar had received had been downgraded to warnings.

And back in the Lone Star State, Kenneth Copeland and his main squeeze, Gloria, have done even better – with 4 jets at their disposal. Mr. Copeland, the subject of a MoneyWeek article last month, is also said to have a parsonage the “size of a hotel,” probably more like a huge Motel 6 than a Crillon.

This might be just another part of the baroque spectacle that makes America such an amusing place. But there is more to the story, which is – as you might guess – the subject of today’s column.

Gibbon blamed the fall of Rome at least in part, on Christianity; it encouraged a retreat from the battle for money and power, he said. Now, Kevin Phillips, in a new book, Bad Money, charges the pentecostal wing of American Christianity with undermining the U.S. empire in the opposite way. He argues
that the evangelicals pushed the Republicans down-market. There, the yahoo voters brought them temporal power – 30% of Republican voters identify themselves with an evangelical sect. But they also hollowed out Republicans’ traditional respect for sensible finances.

Among the many frauds of the Reagan-Bush II period, few were gaudier than the “prosperity gospel.” Preached in America’s gamy religious outposts, the concept does for religion what the neo-conservatives did to conservatism, what modern portfolio theory did for Wall Street, and what Keynesianism did to the economics profession – it a made a monkey of it.

In politics, the neos turned conservatism inside out. The old conservatives were wet blankets, do-nothings and naysayers. When news spread of Calvin Coolidge’s death, for example, people asked, “How could they tell?” But the new conservatives are the life of the party. It is said that George W. Bush “doesn’t even know the meaning of the word can’t.” (Of course, there may be other words he doesn’t know the meaning of.) And the neocons’ idea of political economy was similarly liberated from any residual notions of conservatism and common sense. “Deficits don’t matter,” said Dick Cheney,
speaking for every wishful thinker since Caligula.

On Wall Street and the City, the old conservative doctrines were put away with top hats and spats. In place of prudence came derring-do. In the place of reasonable salaries came breathtaking bonuses. Mortgage lenders no longer studied a borrower’s finances to make sure he was a good credit risk; they didn’t even take his pulse. And they no longer seemed to care whether their takeovers, triple-A paper, and structured products made any real financial sense; it was enough that they paid a fee.

In economics, too, somehow, the world’s leading economists bent the figures into a preposterous new shape so appealing that even a teenager could love it. An economy can get richer by living it up, they said; and the purpose of central banking was to encourage consumption rather than capital formation.

Was it any wonder that the pulpits sank into the honey too? Along came Jim and Tammy Faye Baker with a sexy new religion – spreading the get-rich gospel over the TV waves. Then, poor Jim got sent to prison for fraud, and when he came out he renounced the new doctrine. But other couples – for some reason these preachers seem to work in husband and wife teams, like Juan and Eva Peron – picked up the tablets. Soon, they had convinced millions to give up the hard-benches of the old Calvinists and sink their plump derrieres into some of the cushiest seats in Christendom.

Churchgoers at Mr. Dollar’s World Changers church services wave envelopes full of cash, reports the Atlanta paper. On the big screen, they offer testimonial proof of the ‘financial blessings’ that came their way after they began sending the preacher 10% of their pre-tax earnings: “The congregants…yell in joy as ushers pass the white buckets down the row to collect the envelopes. After more singing, Dollar preaches… He relentlessly attacks the idea that Christians should limit material possessions. Christians have for too long let the ‘devil’s crowd’ get all the money, power and real estate, he says. Then he tells congregants to say, ‘I want my stuff.’”

“I want my stuff,” they repeat, laughing.

Politics, money, religion – the flim flam was the same everywhere. It was the promise of something for nothing, gain without pain, Easter without Good Friday. But with America’s housing prices falling and unemployment rising, the Pentecostals will find it harder to get their stuff than ever. Maybe God didn’t want them to be wealthy after all. On the evidence, maybe He just likes a good laugh, like the rest of us.

—- Breaking Report: Royalty Program Reopens —-

Closed to New Investors for the Last 6 Years — Now Open Again… The “Chaffee Royalty Program” That Turned Every $1 Into $50

In 2002, the same royalty “paycheck program” that paid out $50 for every $1 invested… decided to shut the door to new “members.”

In 2008, that door is open again…and it just got easier than ever to “make money while you sleep”…

But there’s no telling when it could close again…So you’d better collect your own “Chaffee Royalties” right NOW! Read On For Details

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[Rude Endnote: Lastly today, the dollar reversed a three day gain overnight, selling off against the world’s major currencies ahead of tomorrow’s housing report. Many analysts expect the figures to be rather dismal, including a Bloomberg News survey, which reckons U.S. housing starts may have dropped by 9.9% in July to an annual rate of 960,000. That would be the weakest rate in 17 years.

Many also believe the greenback’s recent rally is unsustainable in the long run and that economic realities will bring the buck crashing back down to earth before too long.

We don’t know, of course, but we like to protect our investments either way. Buying gold is one way to do that. Currency hedging is another. There are various instruments available for protecting your wealth, one of which is EverBank’s latest certificate of deposit.

The EverBank Debt-Free Index CD is comprised of equal parts Singapore dollar, Japanese yen, Swiss franc, Australian dollar and Brazilian real. The “Debt-Free” part is pretty important here, especially given the heavy load the US economy is carting around on its back. In fact, all 5 of the above mentioned economies have zero trade deficits - a pretty good place to start if you’re hoping to protect your wealth and out-perform a weak U.S. dollar.

The CDs are available in three and six month terms. For more information, read on here: EverBank’s Debt-Free Index CD.

We’ll be back with more tomorrow morning but, until then, don’t forget to email your thoughts on today’s column to the address below.

Until then…

Cheers,

Joel Bowman
Rude Awakening

aussiejoel@the-rude-awakening.com