Market Review: 2005 - The Year in Review

Well, it’s that time of year again. Time to look back one last time before hopping into the New Year – and while sifting through 12 months of DR issues; we realized that the American consumer dominated our thoughts in 2005.

Whether they are buying million dollar homes, or $300 flip-flops, it’s clear that Americans like to spend, spend, spend – and they believe that the flow of easy money is never-ending.

“All of a sudden, we felt the same odd sensation that we recall from the late ’90s…the fin de bubble feeling… that too many people were enjoying themselves too much,” Bill Bonner wrote in late June of this year.

“We sat down at a sidewalk cafe where you had to serve yourself. The two of us each had a salad and a glass of white wine. The bill came to 26 pounds – or nearly $50. Our modest bachelor pad in a nearby building costs over $3,000 per month. Elizabeth is looking for an apartment; she believes it will cost nearly $15,000 per month to move the whole family to London. Where do people get so much money?

“But that too is a typical fin de bubble hallucination – that money will always be there when you need it.”

You can read this whole essay – Fin de Bubble, 2005 – along with eleven others we’ve selected to mark the passing of 2005. The range of topics is wide: democracy in Iraq…energy concerns…Hurricane Katrina…empire…the best of the Daily Reckoning has got it all. You can find the entire list below. In the meantime:

We raise our glass to you, dear reader, and to a New Year filled with health and happiness!

Happy 2006!

Kate Incontrera
The Daily Reckoning

P.S. This is your final reminder…if you haven’t secured your spot in the Agora Financial Reserve yet, you need to hurry – you only have until January 1, 2006. Don’t pass up this opportunity…by becoming a Reserve member; you will have access to all of our services and advisories and any special report we publish for life!

P.P.S. Don’t worry – we didn’t spend all of our time focusing on the past year…the bright minds that make up Agora Financial have put their collective heads together and made 11 predictions for 2006.

— Daily Reckoning Book of the Week —

The Little Book That Beats the Market
by Joel Greenblatt

This is a short and simple book that convincingly explains how anyone can use a “magic formula” to more than double the stock market’s return. The formula is new, unique, simple – encapsulating the best of Buffett. The incredibly robust results are a clear breakthrough in both the academic and professional world. The simple aspect is the key.

As improbable as it may seem, all readers will learn to “beat the market”.


THIS YEAR in THE DAILY RECKONING: You wrote in – we listened. The essays below touched a nerve for many of our readers, and whether you thought they were insightful, entertaining or controversial, we have them all here…

by The Mogambo Guru

“The lesson seems to be that a country and everyone in it cannot continually borrow and spend their way to prosperity, no matter how many Congressional buttheads say that they can. But you can borrow and spend…”

by Bill Bonner

“They are not necessarily any better than those chosen by other means – but at least the regime change is achieved without violence. That is the progress of politics of the last three centuries: force is replaced by fraud.”

by Justice Litle

“While food is necessary for survival, energy is necessary for growth…and no country is growing at a faster clip than China. Their demand for energy increases everyday, and we explore their strategies to ensure energy security.”

by Marc Faber

“Millions of Americans have been viewing their humble abodes as their own, personal ATM. Marc Faber wonders when people will realize that they shouldn’t have everything riding on their household assets…”

by Mark Skousen

“Americans take pride in their workaholic tendencies and their desire to succeed at all costs…but a Chinese philosopher asserts that this way of life will only be successful in working yourself into an early grave.”

by The World Famous DR Playwrights

“World Exclusive! The first play ever to be published on the housing bubble. The scene opens in Cafe Hon, a local eatery in the midst of this Siren’s song…”

by Addison Wiggin

“The dollar just busted through its 200 day moving average. With a brief tour through history, Addison Wiggin points out, never has a “reserve currency” been so overburdened by national debt. This is an opportunity to sell…”

06/24/05 FIN DE BUBBLE, 2005
by Bill Bonner

“In the midst of real estate mania, Americans are ready and willing to believe anything…that their homes will always rise in value, that their debt will never catch up with them, and that the American empire is unshakable…”

by Kurt Richebächer

“While economic optimists try to downplay America’s non-existent economic recovery – Dr. Richebächer looks at financial development through a different lens – and sees a more permanent softness in the U.S. economy…”

by Bill Bonner

“Among the sea of those who believe the government dropped the ball in the aftermath of Katrina – there is one man who points out that we put way too much faith in American politicians. See what the ultimate contrarian has to say…”

by Byron W. King

I cannot speak for the Almighty, but I believe that this boom has more to do with the monetary expansion of Mr. Alan Greenspan, and the predictions of a fellow named Dr. M. King Hubbert, than with the Big Guy upstairs.”

by Bill Bonner

“The codgers refinance their houses, pay with credit cards, and vote for whoever promises them the most of someone else’s money. In politics, and in money, the grumps go along with whatever is popular – just like everyone else.”


THIS WEEK in THE DAILY RECKONING: It has been quite a somber week for us at The Daily Reckoning – and for everyone at Agora, Inc. as a whole. We lost Thom Hickling, a DR founding father and an integral part of the Agora family, to a car accident in Africa. He will be sorely missed. “Thom Hickling, RIP” is Bill’s eloquent farwell to his good friend and colleague, below.

Spontaneous Order    12/30/05
by Bill Bonner

“We are often asked: “So, what exactly do you guys do again?” Admittedly, sometimes we wonder the same…but Bill Bonner did a brilliant job of enlightening his employees at this year’s holiday meeting…”

Thom Hickling, RIP    12/28/05
by Bill Bonner

“Somehow, Thom could create a party just by walking into a room.”

Secrets of the Near Dead   12/27/05
by Bill Bonner

“In line with his true contrarian nature, Bill Bonner believes that the more out of touch with the current thinking an investor is, the more valuable his opinions. Read on…”

Menace to Society    12/26/05
by The Mogambo Guru

“The highlight of every holiday season for us here at The Daily Reckoning is the annual Christmas card from our friend, The Mighty Mogambo. And in this holiday spirit, we give you…The Mogambo’s Monday Essay (TMME)…”

The Daily Reckoning