This from Ted Butler, the best silver analyst I ever read, at www.silverseek.com

The article is available at this link:

http://www.investmentrarities.com/06-16-08.html

Silver is still what - $33 below the price it traded for in
1980? It's about $17 an ounce today.

Know of anything else that's trading for one third of the price it traded or sold for 28 years earlier?

I'm sure everything's fine with the following announcement. Farmers selling their corn for motor car fuel. Not much of anything in the larder. No reserves. No plans to increase reserves. Nothing to see here, folks…just move along.

WASHINGTON - Larry Matlack, President of the American Agriculture Movement (AAM), has raised concerns over the issue of U.S. grain reserves after it was announced that the sale of 18.37 million bushels of wheat from the USDA’s Commodity Credit Corporation's Bill Emerson Humanitarian Trust.

“According to the May 1, 2008 Commodity Credit Corp's inventory report there are o­nly 24.1 million bushels of wheat in inventory, so after this sale there will be o­nly 2.7 million bushels of wheat left the entire CCC inventory,” warned Matlack. “Our concern is not that we are using the remainder of our strategic grain reserves for humanitarian relief. AAM fully supports the action and all humanitarian food relief. Our concern is that the U.S. has nothing else in our emergency food pantry. There is no cheese, no butter, no dry milk powder, no grains or anything else left in reserve. The o­nly thing left in the entire CCC inventory will be 2.7 million bushels of wheat which is about enough wheat to make ½ of a loaf of bread for each of the 300 million people in America.”

The CCC is a federal government-owned and operated entity that was created to stabilize, support, and protect farm income and prices. CCC is also supposed to maintain balanced and adequate supplies of agricultural commodities and aids in their orderly distribution.

“This lack of emergency preparedness is the fault of the 1996 farm bill which eliminated the government’s grain reserves as well as the Farmer Owned Reserve (FOR),” explained Matlack. “We had hoped to reinstate the Farmer Owned Reserve and a Strategic Energy Grain Reserve in the new farm bill, but the politics of food defeated our efforts. As farmers it is our calling and purpose in life to feed our families, our communities, our nation and a good part of the world, but we need better planning and coordination if we are to meet that purpose. AAM pledges to continue our work for better farm policy which includes an FOR and a Strategic Energy Grain Reserve.”

AAM’s support for the FOR program, which allows the grain to be stored o­n farms, is a key component to a safe grain reserve in that the supplies will be decentralized in the event of some unforeseen calamity which might befall the large grain storage terminals.

A Strategic Energy Grain Reserve is as crucial for the nation’s domestic energy needs as the Strategic Petroleum Reserve. AAM also supports full funding for the replenishment and expansion of Bill Emerson Humanitarian Trust.

The May 1, 2008 CCC Inventory report may be reviewed here: http://www.fsa.usda.gov/Internet/FSA_File/wid2a.pdf <http://www.fsa.usda.gov/Internet/FSA_File/wid2a.pdf> .

Is it just me or is the recession boogie man overrated?

Don't we get a winter every year, good and bad seasons from our favorite sports team, low tide as well as high?

Recessions, as I understand them, are where the economy shrinks for 6 months. People shop less. And they only measure negative economic events like this backwards, after factoring in all the positives they can possibly find to make things look better…

They seem as normal as rain. We get a boom, we get a recession. We got drunk, we had a hangover. Isn't there something even moral about having to pay the consequences of our actions?

Here's a recession hint: Go play with all the stuff you ALREADY own.

Or as Groucho said, "I like a good smoke, but sometimes I take the cigar OUT of my mouth. (Do you need me to tell you that I added emphasis?) (I did.)

Hedgies these days are racing into commodities.  Even big institutional institutions, such as Cal Pers, are rushing into commodities.  CalPers and Cal State Teachers Pension Funds are trying to get their allocation up to $7.5 Billion in their centabillion endowments.  Where have these people been?  The rise in commodity prices began in the first quarter of 2001.  The cut rate Greenspan plan of the 2001-03 era spawned a multitude of raw material price spikes.  There were articles on the web.  Morningstar dug up its old research in the early 1980s showing that bull equity markets and bull commodity markets were inverse…and we'd just done a half gainer off of the Y2K tower, splat onto the pavement.  Where were all these brilliant MBA and PhD types, the financial rocketeers of our time, with all their brilliant computers and the ability to type out a quadrillion number without breaking into an emotional sweat.  Huh?  Where?

They're piling into commodities.  And they're all showing up in early 2008.  Way to go, Charlie.  You were waiting perhaps for the two digit years decade to get going?

It reminds me of the old beatniks in the 1960s.  They were all hip, sophisticated dudes.  Each was unique in his own special way.  Yet they all seemed to wear goattees, or have facial hair.  They all feigned an interest in berets.  They all wore casual clothes leaning toward sloppy, but in elegant shades of black somehow.  They all worshipped poverty.  They all expressed an interest in the poetry of Alan Ginsberg, or poetry in general.  (Or in colonel…)

If hedgies were all that smart, why are they all jumping into commodities the first two months of 2008, seven years after the train left the station? 

It's cause hedgies are behaving like beatniks.  9000 unique and special snowflake hedge funds…each looking at the others trying to get a clue…and then copying what they see.  No wonder their performance sucks.  Being early means taking a risk.  "Not on MY watch," they said.  Not having any conviction means never having to say, "Oops, I meant to do that." 

Periodically…I mean on a regular basis, some young journo punk writes a piece about how Warren Buffett has gone over the hill and no longer has what it takes to be a good investor.  I recall there was one of those little pieces in Barron's in early 2007 about Warren hadn't beaten the S&P for the past 6 weeks or something.  And Barron's, which really ought to know better, printed the damn thing.  

Let us review one bit of Buffettology here.   When Warren and Charlie bought Gen Re back in about 2001, the big reinsurer came with about 22,000 pieces of doggerel known as "derivatives,"  such things as Collateralized Debt Obligations, Credit Deferred Swaps, and even alleged "permanent insurance" products which were used to plump up earnings for a few unsavory corporate types.  Warren and company spent the next four years getting rid of the derivitive sewage.  He lost about $250 million bucks selling financial products, all of which were listed as profitable on the books when he got them. 

Gee, how would Wall Street banks and brokers feel about only losing $250 million on their toxic garbage they can't sell at any price these days?  I believe Da Boys have poured over $125 Billion down the write-off drain.

As a new rule, we should take the periodic piece knocking Buffett as an intermim peak indicator in the market, soon to be followed by much silent crow eating on the part of journo jerk writers, and hopefully the publication that printed it.

Oil hits $100 a barrel, and that's all the media can talk about.  ONE story a day with bad news in it, that's the limit.  Mr. Newscast Producer said, "Don't mess with the shoppers."  (Well, he may not actually have  said it for publication…but  he would have said it…if he'd been in a mood to be honest that day.)

(And don't get me started about how the new nominal high over $850 is nowhere near where gold should be on an inflation adjusted basis.  Even the dopey calculator at www.bls.gov says an $850 price back in 1980 should be over $2000 today.  Chevrolets were $7000 in 1980.)

This could be a pretty interesting year for commodity-like things.  But don't tell Big Media.  They'd only ignore it anyway.  "Hey, look at that bikini over there…"

Whoopie, a new 12,000 high for the Dow, and how nice for the Replicants. Could I rain on this parade? Oh, but of course.

The Dow Jones Industrial Average (DJIA) of 30 stocks is calculated by adding up the dollar closing prices of 30 "representative" stocks of our economy and then dividing by a divisor. I'll slow down if I'm going too fast for some of you…

The DJIA Index is denoted in "points"

you can take a 30 stock Raw Score of about 1499 and divide that by the teeny divisor.  Or take the raw score and mulitply by 8. Yeah, 1500 times 8…carry the 4…comes out to about 12k. (Nightly Business Report says, $1 of stock value is more than 7 points in the DJIA. Can you smell the "Never give a customer an even break" aroma?)

Well, since most, I mean more than HALF, of the Dow 30 stocks actually trading lower than they were back in March of 2000, I decided to do some research.  Nobody was really explaining HOW parts of index could mostly be lower, and yet the Index itself was hitting new highs.  And isn't that nice for the Replicrooks.

In one of my old adult ed workbooks, I'd written down that as of June 5, 2000, the Dow's divisor was 0.18238596. That means that the Dow's March 2000 high of 11722 had a Raw Score of approximately 2137. I'll skip the decimals and the slight mismatch on dates here.  I want you to know though, that my Hewlett Packard 12C calculator did these calcs with batteries to spare.  At the Dow's high back in the spring of 2000, $1 of stock value equated to only about 5 and a half points on the Index.

Presto Reducto, our new high on the Dow has been caused by reducing the divisor…and the public snoozes on.

(And don't even get me started on the drop in the purchasing power of the money invested in the Dow stocks - caused by the 30% dunk of the dollar in the last 6 years…)

On Planet Wall Street, figures may not lie, but we should bet much more often that liars can still figure, especially in an election year.  Over 43% of the population DO figure that somehow the Bush Administration lowered the price of gasoline in the last 2 months.  Why won't the public consider the possibility that other scams are at work in our other markets?

Wednesday, October 11, 2006

Dear Ben:

This scurrilous screed was found in Alan Greenspan's papers at the FED after he retired. Apparently it's a draft of a speech he intended to give at the Jackson Hole Conference in August of 1997. (As you might not have heard, there was a rather long cocktail hour that year and Al passed out in the raspberry puree.)

Al's obviously still trying to compensate for his lame "irrational exuberance" comment the previous December at the Washington Economics Association dinner. And the speech is written on the back of one of the envelopes the new redback $100 dollar bills were delivered in. What should I do with this?

Eddie G.
Enc.

————————————————–

"THE FEDDY'SBURG ADDRESS

Four score and seven years ago our FED Fathers brought forth on this continent, a Euro-notion, conceived in dynasty and dedicated to the proposition that all Central Bankers are created superior.

Now Me are engaged in a great financial war in this country, testing whether our FED or any Central Bank so conceived and so dedicated, can forever endure. Me are met here in the lap of luxury far from the great New York battle field center of that war. Me has come to dedicate a portion of tonight's dinner as a final resting place for those who here gave their energies that our FED might continue to live. It is altogether fitting and proper that Me should do this.

But in a larger sense, Me can not dedicate - Me can not consecrate - Me can not hallow, much less stomach — this rubber chicken. The brave Bankers, opulently living and dead, who struggled at the Open Market desk, have consecrated this lousy chicken, far above My poor power to add or subtract. The world will little note nor long remember what I say here, but it can never forget what I said and did in D.C. It is for Me the living, rather, to be dedicated here to
the unfinished work which they who founded Central Banking have thus far so nobly advanced.

It is for Me to be here dedicated to the great task of gold elimination remaining before us — that from the present success of paper currency we take increased devotion to that cause for which FED Bankers in history have given the last full measure of devotion — that Me here highly resolve that gold shall not have died in vain — that this FED, under Me, shall have a new birth of secrecy, derivatives and market manipulation — and that the FED of New York, by New York, and for New York, shall not perish from this earth."

——————————————————-

Friday October 13, 2006

Dear Eddie:

It's yesterday's news. An atomic bomb blew up in the Far East last Monday, and the price of gold is lower today than it was before the damn thing went off. If the stupid Chinese haven't learned by now that our price stomping game in New York is effective, they never will. Gold won't help them. Gold is no longer the go-to financial safety net for anything. Gold can't even help itself. WE don't have to rededicate to anything, WE've won.

Do whatever you want with Al's creepy little parody. Spill it on the internet if you want. If a Princetonian student had handed it in to me, I'd have flunked 'em. Nobody will understand it anyway. Once we take housing down, the clueless, goldless middle class will be in chains in a year.

Bennie B.

Cf: www.geezerboomer.com