03/23/11 Paris, France – What were we talking about yesterday? Oh yes…something about a big, nasty bird…and Japan.
First, let’s report the news from yesterday…then we’ll come back to this subject. To give you a preview, Japan is using quantitative easing – money printing – to cover the holes in its budget. With the need to rebuild its economy and its infrastructure, our guess is that it’s going to do a lot more of it.
Back in the USA, stocks went up a bit yesterday. (Or they went down a bit, we can’t remember…) Gold and the dollar were about even. Nothing much worth reporting, in other words.
But investors, politicians, and economists all seem to think the economy is on the road to recovery. The only people who don’t seem to believe it are the people who actually live and work in the real economy – people who shop at the supermarket and depend on wages.
Which reminds us of a funny incident. A Fed governor recently tried to explain to an audience of ordinary citizens how the government figured the “core” inflation rate. The lumpen didn’t go for it at all. They heckled the poor man. “When was the last time you went to the supermarket,” they asked.
The most recent inflation numbers tell us that prices rose 0.5% in February. For the mathematically challenged dear reader, this is an annual rate of 6%, or 550 basis points above the rate at which the Fed lends money.
But wait…the feds tell us not to pay any attention to this number. They want us to focus on the “core” number, from which they’ve taken out the things that are going up – food and energy. Having taken out the prices that are going up – even though they are essential items – they thus magnify the items that are left. Notably, housing. And guess what? Housing is going down. So, falling house prices make it possible for the feds to report a low “core” rate of inflation – which is a lie and a fraud. The average family is actually spending more and more money just to keep food on the table and gas in the tank.
And here’s another counterfeit figure from the feds: it was widely reported last week that the unemployment rate was down to its lowest level in almost two years. The unemployment numbers are so cruelly twisted by the feds we feel sorry for them. The most obvious way is by means of “seasonal adjustments.” Look what seasonal adjustments did to the latest numbers. USA TODAY has the report:
WASHINGTON (AP) – Unemployment rose in nearly all of the 372 largest US cities in January compared to the previous month, mostly because of seasonal changes such as the layoff of temporary retail employees hired for the holidays.
The Labor Department said Friday that the unemployment rate rose in 351 metro areas, fell in only 16, and was unchanged in 5. That’s worse than December, when the rate fell in 207 areas and increased in 122.
Other seasonal trends, such as the layoff of construction workers due to winter weather, also contributed to the widespread increase.
Nationwide, the unemployment rate dropped to 9% in January from 9.4% the previous month. It ticked down to 8.9% in February. But the national data is seasonally adjusted, while the metro data isn’t, which makes it more volatile. The metro data also lags the national report by one month.
See what we mean? Fewer people actually have jobs, but if you “seasonally adjust” the numbers, unemployment is going down.
Prices are going up everywhere too, but if you take out the stuff that is going up, you see prices stable.
And here are some other little facts that come to our attention this morning: one out of ever five houses in Florida is vacant. Holy sawgrass! How are the feds going to show housing prices going up?
Back to Japan…
We were just pointing out that while everyone is looking for “black swans” it may be the white ones that bite. They might be imposters. Scratch the paint off and they’re often gray…and nasty.
Take QE2, for example. The Japanese are running out of money. The government already owes 2,000% of annual tax receipts…the savings rate is falling to zero…and deficits are bigger than ever.
What’s a poor Japanese central banker to do? Turn to QE! It hasn’t worked yet. But it hasn’t done any harm either. The inflation rate in Japan really is near zero. Japanese exporters are desperate to bring down the yen. Everyone wants a little inflation…everyone wants more money to rebuild after the recent disasters…everyone wants QE!
So, give it to them…good and hard!
Which is why we think Japanese stocks are a good bet. They’ve been going down for 21 years. They’re cheap. If the economy bounces back – as Warren Buffett cheerfully expects – Japanese stocks will do well. If the economy doesn’t bounce back…as we cheerfully expect…it will be off to the races with QE. The effects won’t be immediate, we predict. But they will be dramatic. One day, prices will soar. People will rush into stocks to protect themselves. Japanese stocks will be the world’s top performers…like Zimbabwean stocks were at the height of that country’s recent hyperinflation.
Buy Japanese stocks now. Put them away. Wait until you read about them in the paper.
Bill Bonner
for The Daily Reckoning
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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To buy Japanese stocks you can buy the Exchange Traded (index) Fund with symbol EWJ.
But how to hedge the currency risk?
Is there a long-term Janpanese bond ETF that I can sell short?
So what!?!??! Are you surprised? If so, ask an American Indian if a smart person would believe anything the government says. The American Indian had to learn the hard way.
We at the government are allowed to lie to you. It is you who will be prosecuted and imprisoned under the laws we make if you lie to us.
http://youareproperty.blogspot.com/2010/08/lie-to-us-go-to-jail-we-lie-to.html
At the end of your emailed article you commented on men as beasts of burden.
I too gave up what I thought was my dream job due to my wife dying and having kids to raise. I too had an identity crisis and was forced to reevaluate every aspect of my life. If your friend wants to return to being a draft animal, then so be it, but he is running from the opportunity to look within and find much more than an external identity. He could find who he was really created to be and the joy apart from distraction. There is pain when one sees the Truth, but also joy.
Reuters reports that New York Federal Reserve Bank President William Dudley was heckled at a speech in Queens today when he suggested that the rising cost of food is offset by how cheap iPads are.
Dudley said said that while food prices may be rising, the cost of some other goods are going down, which evens out the overall inflation picture. The Fed’s inflation estimates do not take into account volatile energy or food prices. The crowd was not impressed:
“Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,” he said referring to Apple Inc’s (AAPL.O) latest handheld tablet computer hitting stories on Friday.
“You have to look at the prices of all things,” he said.
This prompted guffaws and widespread murmuring from the audience, with one audience member calling the comment “tone deaf.”
“I can’t eat an iPad,” another quipped.
Food prices have been on the rise in the country since November 2009. Americans should expect to pay about 4 percent more for food this year than last, a Purdue University economist told UPI News. Consumer confidence dropped this month, in part over inflation fears.
Fri Mar 11, 3:22 pm ET
Fed official heckled: ‘I can’t eat an iPad’ By Liz Goodwin
http://news.yahoo.com/s/yblog_thelookout/20110311/us_yblog_thelookout/fed-official-heckled-i-cant-eat-an-ipad
Somebody help me. 385,000 unemployment claims a week, 1.5 million a month. 192,000 jobs created last month and the unemployment rate goes down. How so? If I’m wrong please let me know
He says japanese stocks have been going down for 21 years in his opening statement and then says now is a good time to buy them? I have never heard that earthquakes and Tsunamis helped to increase stock prices. Maybe it really does not cost any money to rebuild this mess.
Rising food and fuel prices mean little. The average American spends 5% of his income on food.
The price of gasoline doubling only means a difference of about $1500 a year in expenses to me. That may be a lot to some Americans, but to me, it’s nothing. (I’m not rich, either.)
Still, it’s dishonest not to include these prices in the core inflation measures.
No sense to get mad at the fed. The trick is to get even. There must be ways. You all here seem to be all good creative thinkers so lets hear some of those ideas regarding the lying rats at the fed, and the concept of the fed.