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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Aubie Baltin
March 18, 2010
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DEJA VU ALL OVER AGAIN
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total collapse of the currency system involved."
~Ludwig Von Mises

To begin, in order to get a clear understanding of today’s true picture, we must first realize that the latest economic boom is built on a lie. Instead of a foundation of real GDP growth, it was based on a manipulated low inflation rate and tidal wave of new “out of thin air” Fiat money. That flood of cheap money did what it always does; produce a BUBBLE of risky investments and massive speculation.  And as night follows day, “A house built on a weak foundation will not stand”. After having just brought the world to the second worst bear market in history while almost taking down the global financial system in the process, within 2 years we have come back with another Tsunami of new money in an attempt to reverse the inevitable. The key to ask yourself, “Is there a second shoe that is about to fall and when will it fall?”

THE BIGGEST PONZI SCHEME

Has anyone bothered asking why banks that are so stuffed with money are refusing to lend?  And if they are not lending, where are all profits of the “too big to fail” banks coming from, as 20 banks a month are closed or merged by the FDIC?
One reason is that the pendulum on risk management has swung to ultra-cautious levels. But the more logical reason is that they know that all their reported profits are really Phantom Profits and are only due to the accounting rule change that allows them to no longer mark their Toxic Assets to market, but to a model of their own choosing instead. Furthermore, they have stopped most foreclosure proceedings so they no longer have to realize their losses. Meanwhile, they are only able to continue to show profits because they are still on the FED’S intravenous feeding tube: Borrowing money from the FED at 1/2% and buying FHA (government guaranteed) Bonds yielding 5% that do not require any reserves to be maintained. Fantastic Deal If You Can Get It: Getting paid to be part of a government charade. 
However, there is an ominous problem waiting in the wings: The days of commercial real estate refinancing are at hand. A good part of them won’t qualify for refinancing or will be required to be refinanced on existing terms, irrespective of the huge decline in cash flow and value of the property—extending and pretending--some of the destroyed value will still exist at the next refinancing date. Sooner or later, all the Toxic Assets on their books will have to be realized. That is the real reason why they are not lending. They've got to hold on to every dollar they have to hopefully fill the lurking commercial and private real estate holes or else they, too, will be gone."

WILL WE EVER LEARN?

The powers that be have once again learned nothing from this near death experience because here we are again, printing money and monetizing debt like there is no day of reckoning, in another vain effort to paper over our problems and create prosperity with the printing press. It's too bad that our expert (Bernanke) on the 30’s Depression seems to have only learned to repeat the exact same mistakes of the past without ever realizing that Past Is Prologue.

We have seemingly survived the credit crisis and all appears to be well in the world.  However, looking through all the misinformation and propaganda, we soon discover that there is that age old cancer growing that is many times bigger than the one Greenspan created.  Can you hear the rhyming? This cancer isn't going to show up in real estate or credit markets, those bubbles have already burst. This time our new BUBBLES are flaring up again in the Stock Markets and as inflation in the Commodity and PM markets, while Bank lending to small and medium sized business continues to evaporate as the real economy continues its slide into Depression.

THE BUBBLES OF 2010

Witness the strange resilience of Oil to $80+ despite a worldwide shrinkage in usage in the face of huge new energy discoveries and an unexpected strong dollar for the past 3 months. And YES, Gold is still holding over $1100. Sugar is at multi-year highs. Copper is less than 15% from all-time highs etc., etc. Stock markets all over the world instead of crashing are trying to break out to new highs. The fact that the world’s stock markets are rising on ever decreasing volume doesn’t mean anything. Don’t bother us with the facts, Aubie; you’re always being a KILL JOY. But what else should we expect?  All that new “out of thin air” money has to go somewhere.
The commodity markets are now poised to unleash a massive inflationary storm. I think there's a very good chance that storm will strike this spring.
The dollar is now deep into its bubble rally and most likely putting in it’s top at any time. It is only being kept afloat by all the other Fiat currency’s race to the bottom. When it finally resumes its down trend, the flood gates could break and we will have to deal with the unintended consequences of our new FED Chairman’s Socialistic actions.


THERE ARE NO PAINLESS LONG TERM CURES FOR INFLATION & RECESSIONS

There are no painless solutions for curing inflation, especially during an ongoing Recession. The only cure is to let the Free Market clean house and set the stage for the next boom (1866 -1896, the 1920’s and 1980’s). The cure is to raise rates and drain liquidity (Reagan 1980) to induce a Recession or a short Depression, if that is what it takes. The alternative is a 20 year Depression as in the 1930’s. Does anyone really believe our elected officials will choose that difficult but correct course of action, even if they knew what that action entailed?

On the other hand, doing more of the same leads to higher and higher inflation and running the presses faster and faster to stay ahead of rising prices, eventually culminating in a hyperinflationary spiral, and a loss of our reserve currency status, especially if government debt is allowed to spiral out of control, beyond the point of no return.