06/10/11 Baltimore, MD Mr. Market must be looking at the bond market the way an IMF chief eyes a chambermaid….
But first, let’s look at what happened yesterday…
Finally, a day when the Dow did not go down. Instead, it went up 75 points.
Otherwise, oil rose above $100…the 10-year T-note yield rose to 299 basis points…and gold gained $4.
A mixed, inconclusive day, in other words.
But trying to keep up with the trends is a waste of time anyway. You get whipsawed and beaten up.
Better to get ahead of the trend. Which ain’t easy. Because you’ve got to figure out which direction the trend is headed.
So….dear reader….what’s going on?
We asked you first!
Here’s a letter from one of our Family Office members:
(1) If we redefined GDP to EXCLUDE all government spending, because it is all “recycled” earnings of the private sector, how does the whole question of recovery vs. recession/depression look? I suspect this is one way to reconcile the fact that the financial community says we are in recovery, but Main Street says the opposite. Seems like a good topic for the Daily Reckoning.
(2) If all financial reporting were referenced to gold, rather than USD, how does the picture look? (Actually I know the general answer to this one; the economy looks AWFUL, and housing is back to pre-1990 levels.) I find it interesting that all the financial asset managers I’ve talked to REALLY don’t like it when I ask “how is your performance relative to gold?”.
As to the first question, the answer is simple. Take out the feds – who are redistributing wealth, not creating it – and US GDP growth was about zero for the last decade.
There. That’s a trend. Here we are in the 21st century. With all that technology. And all that money. And all those sophisticated Wall Street geniuses allocating capital like nobody’s business. And what do we get? Growth at about the same rate as during the Middle Ages.
Remember how the latest communications technology was supposed to speed up growth? How could you have forgotten? Back in the ‘90s it was taken for granted that faster, better communications would make people smarter, more efficient and more productive.
It was widely believed that the old ways of creating wealth – by saving, learning, investing – were obsolete. Because you didn’t need savings. You could build on knowledge!
No more trial and error. Mistakes were soooo 20th century!
That’s what they said.
We knew it was nonsense. Imagine Napoleon’s starving, freezing troops…trapped in Russia. Those that didn’t freeze to death were shot to pieces by the Russkies. Imagine giving them the blueprint to a nuclear bomb. Or even the designs for an aeroplane. Or, give them an iPad! What good would it have done them? None!
Every bit of information that is not useful is a burden.
But most people didn’t see it that way. They thought the communications revolution would speed up the rate of GDP growth and make us all rich.
It didn’t happen that way. The decade following the communications revolution was dry, desolate, and barren. Take out the feds’ redistributed loot and the private sector registered approximately no growth at all.
It was a complete bust. A failure. A flop.
Go figure.
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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[Mr. Market must be looking at the bond market the way an IMF chief eyes a chambermaid…]
ROHLMAO
In my engineering job, instant information saves heaps of time, maybe 85%. But it reduces employment by eliminating researchers, stenographers, typists, many draftsmen… I recon the information age created huge efficiency which was stolen in other ways.
You asked: “If all financial reporting were referenced to gold, rather than USD, how does the picture look?”. There is a similar question you can ask: “How would it look if GDP was expressed in Euro and the US is compared with the Eurozone”. The answer is here: the-great-anglo-saxon-financial-crisis.com
The relevant question is not; How is your portfolio doing relative to Gold? and it is not How is Your Portfolio doing as meansured in U.S. dollars.
No; The real Question is…
How is your portfolio doing in terms of what it will purchase in goods and services. That is called the real return, my friends, the real return.
You’re welcome.