Why Are We Like This?

The Daily Reckoning – Weekend Edition
November 11-12, 2006
Baltimore, Maryland
by Kate "Short Fuse" Incontrera


Your editors traveled to New York City this past week for more meetings about the documentary we are making based on everyone’s favorite book, Empire of Debt.

While we were at a bar in Manhattan, (yes, we were working. There’s nothing better than a few libations to get the creative juices flowing…) an older woman began chatting us up. The conversation inevitably turned to why we were visiting New York, and as we explained our movie to her, she responded the way most d intrigued, then confused…and slightly put-off.

"Why are you like this?" she asked, as we explained to her more about Empire of Debt and what we do here at The Daily Reckoning. "I mean, I have friends that are in debt, I know people that are filling for bankruptcy and are in danger of losing their homes, but why write, day in and day out, on such an utterly depressing subject?

"Really," she said, shaking her head in amazement, "why are you like this?"

We laughed, because so many people think the exact same thing. We field that question from family, friends and co-workers almost everyday.

But we’ve been giving the question some thought lately, and want to point out that we aren’t "like this" because we want to be the "gloom and doomers" that we’re so often accused of being – but because we find everything we write about fascinating.

When we pen the DR six days a week, we do it so you, dear reader, have another choice of what to read in the sea of mainstream media chatter. As we wrote in Empire of Debt, "Watching the news is a bit like watching a bad opera. You can tell from all the shrieking that something very important is supposed to be happening, but you don’t know what it is. What you are missing is the plot."

That about sums it up. The Daily Reckoning hopes to explain to you the plot, or the circumstances surrounding various economic situations. And we realize that we are talking about serious topics, but we hope to so in a way that everyone, even someone who is not well-versed in the finer points of debt, deficits, interest rates, jobs numbers, etc., can understand – and even find some the goings-on amusing.

And if you don’t find any of that amusing, there is always Bill and his gypsy wagon to entertain you.

Short Fuse
The Daily Reckoning

P.S. More details of our New York trip to follow later on in the week. In the meantime, we’d like to point out that you don’t have to be a grumpy curmudgeon to be a good investor – just keep your eyes open for good, solid companies, and not flash-in-the-pan stocks. In fact, small-cap guru James Boric has just found two sound companies that are poised to beat the market by 19-fold in the next six months.

— The Daily Reckoning Book of the Week —

Empire of Debt: The Rise of an Epic Financial Crisis – Now available in paperback!
by Bill Bonner and Addison Wiggin

After a generation of being spoon-fed reality by media, it’s understandable that Americans are confused about the state of their nation. In Empire of Debt, Bonner and Wiggin wield their sardonic brand of humor to expose the nation for what it really is – an empire built on delusions.

Americans are rapidly facing a choice: recognize these dangerous delusions and take steps to avoid their collapse. Or remain ignorant of them and risk losing all of their wealth when the house of cards comes crashing down.

Daily Reckoning readers can purchase their copy of the book that The
Economist called one of the top ten books that will "tell you what’s really going on" – at a discount – by clicking here:

"The Most Feared Book in Washington!"

THIS WEEK in THE DAILY RECKONING : The big event of this week? The elections. And Susan Walker points out that this election season felt more like 1968 than 2006…find out why in her essay, below.

The Million-Dollar Trailer, Part II   11/10/06
by Bill Bonner

"One of the prime examples that the housing bubble is coming to an end: when the 21st century first budded out, only 5% of mortgages were of the so-called ‘sub-prime’ variety, now, one in four were to sub-prime borrowers."

Avoid the Crap Stocks    11/09/06
by James Boric

With the Dow at all-time highs, the average investor think that there is no way he can lose. But what he fails to understand a couple things: after a rally stocks generally fall. A lot. And second, most of these stocks are discarded cast offs, or "crap." James Boric explores…

Housing Speculation Hangover   11/08/06
by Dan Amoss

"Everyone has their own opinion on the housing market – some say we’ve reached the bottom…others say we still have a ways to fall. One thing is certain, the situation is going to worsen for real estate speculators."

How 2006 is Like 1968    11/07/06
by Susan W. Walker

"In American politics, financial markets, and polarization, it feels more like 1968 than 2006. Susan Walker explores the financial markets to see what kinds of rifts have developed, and how they mirror the rifts in the political world. Read on…"

Economic Spaghetti     11/06/06
by The Mogambo Guru

"Like most economic systems, everything is seemingly fine until, without warning, some errant combination of unseen forces shake your happy little world to the core. And of course, the Mogambo has a theory based on this. Read on…"

FLOTSAM AND JETSAM: Well, the elections are over, thank God. The best news of all is that we will no longer have to listen to the drivel each
candidate puts out about the other. Here in my home state of Connecticut
we got an especially full plate of hot air. Tough congressional races led
to a lot of muck being thrown about. Kevin Kerr explores…

Is It 2008 Yet?
by Kevin Kerr

Joe Lieberman battled it out with the "official Democratic candidate" Ned Lamont, a wealthy Greenwich businessman. Lieberman, ousted by his own party, ran on an independent ticket and won. Go figure. I personally didn’t vote for either of them. The fact of the matter is when all the votes are counted across the country, I am not sure what, if any, impact it will have on our portfolio.

Justice has done an excellent job cleaning up the portfolio as well, as bagging some gains this year, and now as we head into the uncertain waters of 2007, the portfolio is in fine shape.

One sector that has done very well for us over at RTA and is looking brighter each day is the grains. Corn, wheat and beans have all been impacted favorably by the terrible drought in Australia and growing
worldwide consumption of corn for ethanol. Key corn equities like ADM, Monsanto and Deere all stand to benefit as corn trades near 3.30 and is headed toward 4.00.

In the last few weeks, RTA subscribers cleaned up in a big way as their corn options came to fruition after a long struggle. Now, we may not know who will be president in 2008, but we do think that corn prices will be considerably higher if demand continues. We are using long-dated 2008 4.00 calls for this play. Minimal risk up front, tons of time and, hopefully, a big payday if we are right.

One more big factor — yup, China!

According to Bloomberg,

"China, the world’s second largest corn producer, may export less of the cereal next year because of growing consumption and rising domestic prices. The country may ship as little as 1 million tons in the year ending August 2007, said Pan Huabin, analyst at Beijing Orient Agribusiness Consultant Ltd., which is affiliated with the Agriculture Ministry. Exports were 2.4 million tons in the first 10 months of this year, 69% down on 2005.

"’The government is trying to retain more of the grain to meet growing domestic use in animal feed and industry,’ said Pan, adding exports may fall to virtually nothing after April. Dwindling shipments from China may help extend 10-year highs in Chicago corn prices and open opportunities for U.S. exporters, including Cargill Inc. China is using more of the cereal for feed, sweeteners and starch as rising incomes boost food consumption… highs in Chicago corn prices and open opportunities for U.S. exporters, including Cargill Inc. The country is producing more ethanol from corn as an alternative source of energy."

There is no doubt about it, the grains are in a bullish trend and will be for some time to come.

So the elections are over, yet believe it or not, 2008 is right around the corner. So if you miss all those campaign ads, just wait: They’ll be back. The good news is that the resource markets are likely now entering the second leg of the multiyear run, so this is a great time to get in.