07/13/10 Tampa, Florida – In my monthly report to Glabbnarxx, the new despotic Overlord for this sector of the galaxy (and who, I heard, is supposed to be a real pinhead of a dork), I included the news that as a result of oceans of money being created and spent, you would think that none of the sentient inhabitants of this planet called Earth would buy bonds to receive the paltry, miserable, fixed coupon stream from the already-overpriced bonds because of the horrifying, unstoppable inflation in consumer prices that will soon, and surely, result from all the insane amounts of money being created by the Federal Reserve, which was then borrowed and spent by the federal government, and thus the price of bonds will soon fall in response to such inflation in prices, handing a huge capital loss to any moron who bought bonds at today’s extremely high, ludicrously high, insanely high prices (and thus interest rates at such extreme, ludicrous, insane lows).
This report has surprisingly caused a stir at SubSector Central Command, as it shows that the cumulative intelligence of Earthlings is lower than previously estimated, and I was ordered to send corroborating evidence so that they could see for themselves.
So, I sent them a quote from Agora Financial’s 5-Minute Forecast, where they report, in black and white, that the yield on the 2-year note is unbelievably below 0.6%, something “that’s never happened before, even during the worst of the 2008 crisis.”
And with inflation in consumer prices, even using the government’s own figures, being 2% per year, you have ask yourself, “Am I dreaming, or are these people stupid or what?”
Suddenly, I know that I am not dreaming because I see Chuck Butler from EverBank, whom I had previously dreamed say that I was not dreaming, and he apparently thinks that there is too little information to decide whether bond-buyers are stupid or not, although he does admit that “You have to ask yourself this question: What do I have to gain from buying a Treasury that’s yielding all-time lows?”
And this guaranteed loss of capital when bond prices decline from these lofty heights, I say that bond buyers are idiots with more than my usual degree of contempt, because even the lying government admits to inflation in consumer prices being 2%, although the actual increase in prices is, according to John Williams of shadowstats.com, running at least triple that.
Even the Consumer Price Index, although manipulated and tortured to practically eliminate all evidence of inflation, has risen from 177 in 2002 to 218.2 today in 2010, a 23% rise in only 8 years, which comes out to an inflation in prices of 2.65%!
I am happy to note that I am not the only one who is concerned about inflation in prices that will be caused by the Federal Reserve creating so much money, as Howard S. Katz of thegoldspeculator.com is also mighty concerned, and he says, as I say, as all intelligent people say, “The Fed’s printing of money causes prices to rise.”
And since the Federal Reserve has been creating money for as long as there has been a Federal Reserve, Mr. Katz notes, “there has not been a single year of price decline in the US since 1955.”
And with that kind of evidence of continual, simmering, ultimately-ruinous inflation, how can you not be frantically buying gold, silver and oil? Remember: In 1955, gold was $35 an ounce, silver was 90 cents an ounce, and oil was $1.93 a barrel.
And with real-life examples of the Federal Reserve’s effect on gold, silver and oil, even from before the Fed went insane and started creating So Freaking Much (SFM) money, buying gold, silver and oil is obviously the ultimate no-brainer! And best of all, it’s easy enough to make you giggle with absolute delight and say, “Whee! This investing stuff is easy!”
The Mogambo Guru
for The Daily Reckoning
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
“the price of bonds will soon fall in response to such inflation in prices, handing a huge capital loss to any moron who bought bonds at today’s extremely high, ludicrously high, insanely high prices (and thus interest rates at such extreme, ludicrous, insane lows).”
Is this the “buy high, sell low” strategy I’ve heard so much about Oh Great One? Where I buy a bond for a very high price that returns almost no interest, then sell it at a loss to someone who makes more interest than I did? So I’m basically paying that person to buy my worthless paper? And then that person, who is trapped in an inflationary spiral, sells it at a loss to someone who makes more from it in interest than he did? So that in the end, everyone who ever touches the piece of paper I bought also loses money?
Thank you for enlightening me Oh Great And Wise Mogambo, for this matter did make my head hurt. Gee, this investing stuff *is* easy!
of course, the bond will, or perhaps will, quit performing and then what have you?
The Government of Canada offers Real Return Inflation Protected Bonds which rise in value based on increased inflation and pay out interest on an increasing basis as inflation rises. They are guaranteed by the Government of Canada and are cheap now because interest rates are so dismal low.
The US also provides inflation-proof bonds
Hey! Have you registered as a Foreign Agent with the Feds?