The Definitive Guide To Financial Planning
The Definitive Guide To Financial Planning
Japan's economy contracted more than the government initially estimated in the fourth quarter because of a downward revision to capital investment and consumer spending.Take away the juice; the juice junkies slow down.
Back in the US, the Republicans proposed to take away a little bit of the deficit. The Democrats proposed to take away less. The Senate rejected both proposals.
The Fed has no intention of taking away anything. There is some talk of 'exiting' the zero interest rate/ QE programs.But it is an empty bluff, in our opinion. They won't give up their fix until they have to.
The economy is too weak. Households are too fragile. And the recovery is a sham.
In the news yesterday was a discussion of how much the hike in oil prices will cost the typical family. Gasoline prices have gained about 30% in the last year. April crude traded yesterday at over $100, for the first time in 2 years. This will cost the typical family about $700 per year. That money will have to come from somewhere. Taking it away is sure to cause pain somewhere else. Bloomberg continues:
Nouriel Roubini, the New York University economist who became known for his pessimistic forecasts before the financial crisis, told reporters in Dubai on Tuesday that an increase in oil prices to $140 a barrel could even cause some advanced economies to dip back into recession.*** "The columnists and the media have greatly misunderestimated the pain in the lower and middle classes," said a friend at lunch.
"I was talking to my aunt yesterday. She lives in Pennsylvania, out by Pittsburgh. Of course, that's not the most dynamic part of the country. But people there have to eat too. These are working class people, you know. She said that both her sons-in-law had lost their jobs and hadn't been able to find work for more than a year. And her son lost his business and his house.
"What I think is happening is that the big money in the richest part of the economy is distorting the whole picture. If you look at the averages, they don't look that bad. Because there are a lot of million-dollar paydays at the top. But at the bottom, wages aren't going up - if you can find a job at all. And the cost of living is rising. I bought gasoline yesterday. I paid more than $3.50 a gallon. I filled up the tank. It cost me $85. Okay, not a big deal. But there are a lot of people in this country who don't have that kind of money.
"That's why so many people are on food stamps. There's a whole big segment of the population that is struggling. We don't see them. They don't live where we live. They don't shop where we shop. They don't work where we work. They don't eat in the same restaurants. But they're out there."
*** What's going on down on the pampas?
"Most of South America - including Argentina - is in the midst of an economic boom," writes our old friend Doug Casey.
Argentina has a financial crisis about once every 10 years. The last one was in 2002. Another one should be coming up.
But it may not be so bad. What makes financial troubles painful is debt. If you have a house that is worth $200,000 one year...and $100,000 the next, so what? It is the same house. Its roof and walls give the same service.
But if you owe $150,000 on your house, you wince at the thought of a 50% drop in house prices. If you have to refinance, you will have to come up with at least $50,000 to swing the deal.
Argentina - thanks to its own incompetence and instability - has little debt. Fewer than 6% of houses in the country are financed, says Family Office colleague, Robert Marstrand, who lives in Buenos Aires. Who would lend to an Argentine?
So, now the country is practically debt-free. Its assets can go up and down. Crises can come and go. It's like a roller coaster. Whee!
But how are things out at the farm? We put the question to our farm manager, expecting to hear that another drought had dried up the pastures and forced the sale of our remaining cattle. But no! Instead, it is raining in the Andes. In fact, it is raining so much that roads have been washed out. Our farm manager has not been able to get up there to visit. But he sends this update:
Bill, it has been raining hard. The grass is growing again. The roads areLong time Daily Reckoning sufferers will recall that we 'bought the farm' in Argentina about 5 years ago. Since then, one calamity after another has beset us. It is as if we were in the Old Testament - with a plague of bees one year...ants the next. Meanwhile, rainfall fell from 300 millimeters the first year...down to 60 last year. The place was drying up and threatening to blow away like tumbleweed.
It is a cattle ranch. But, as a visitor from Buenos Aires asked recently, 'what do the cattle eat?'
We wondered the same thing. There is nothing there but rocks, cacti, and desert sand. It was then that we realized that we must have bred a new race of lean, low-cholesterol animals, which we call "sand fed beef."
When we began there were more than 1,000 head on the property. Now, we're down to less than 500. Too bad. Cattle prices have been going down in real terms since 1974. During that time the US cattle herd has declined by about a third. We don't have numbers for the decline in Argentina, but it has probably been even greater, as farmer switched to growing soy and other grains.
This fall in production has finally led to an up-tick in prices. And now, the monsoons have arrived. We've gotten 240 millimeters, says the farm report.
Rain, higher prices...hey, the cattle business is looking up.
"Senor Bonner," our farm manager wrote with cheerful news, "this year we won't lose so much money."
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.