Stingy Customers

MARKET REVIEW: Stingy Consumers

“Tight-fisted consumers holding onto their cash are stifling the U.S. economy!” rants’s Borzou Daraghi this morning. “Wall Street is royally freaked out… for heaven’s sake, stingy consumer, spend money! Max out your Visa card! Otherwise you’ll ruin the economy!”

“…this is exactly the trouble with rate cuts,” responds The DR Blue Team’s Dan Denning. “Stimulating demand through ‘easy money’ leads people to spend what they don’t have. Businesses, seeing more money come in, mistakenly perceive the demand as real. They invest in new factories and new goods. They hire more people. The boom starts rolling…

“But the demand is illusory. Sooner or later, consumers have to pay back the debts” or pile on more… just to keep the economy afloat. When the layoffs begin to mount – 47,000 this year alone from Lucent – consumers get pushed to the brink… and even with exhortations from newsletter editors and magazine columnists… they simply can’t do any more to help. Then what?

The Dow dropped down 38 Friday at 10,416 cutting short a two-day winning streak. The Dow lost 159 this week. The S&P 500 index gained a couple to 1205; the Nasdaq added 6 to 2029.

ADD’L PRICES FOR THE WEEK: Gold, Oil Gas and the CRB all rise… currencies trade sideways…

Gold: $267

Crude Oil: 27.02

Natural Gas: 3.16

CRB Index: 203

Dollar Index: 117

The Euro: .87

British Pound: 1.42

Japanese Yen: .81

By Bill Bonner


“…it probably would have been better if the “Committee to Save the World” – Robert Rubin, Larry Summers, and Alan Greenspan – had failed. A modest boom would have been followed by a modest bust. Instead, they succeeded so well that it looked as though the world’s central bankers had finally mastered the secrets of managed currencies. Investors bought stocks and bonds, while consumers bought cars, houses, and whatever else they wanted. And here we are…”


“…Paul O’Neill is the type of character who exists only in America. He is a straight talker, and an optimist by avocation as well as vocation. O’Neill has been having a winning streak. But even ardent self- improvers stumble…and fashions change…”

A Wenesday Guest Essay by Daniel Denning

“…Hmmn… Kazakhstan. Risky? Perhaps. But here at the Daily Reckoning, we like to overturn the occasional emerging market rock to discover what slithery creatures lie beneath. Just a few months back, we took a peek to see if the light of progress had penetrated the Dark Continent…today, we peer into the heart of another beast: Central Asia…”


“…What we find most interesting in the Amazon story is how the distance between ‘pro forma’ and GAAP numbers – like the space between opposing river banks – seems to widen as the big river nears the end of its course. On a pro forma basis, Amazon is expected to reach profitability by the end of this year. But when normal accounting rules are applied – the Amazon river may freeze over first…”


“…On Friday, I posed the question: upon whom will the deadweight of Greenspanism fall? When? All government actions – whether making war, taxing citizens, or forcing funny money and artificial rates of interest upon them – leave a path of destruction. Today, I take a peek into the open boxes of two of tomorrow’s victims: the Investor and the Consumer…”

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HEADLINES, NEWS AND INSIGHT: It’s “Savings” Stupid… Whither the Greenback?…How Much Will Becoming A “Successful” Investor Cost You?…Cayman Islands – Under The Gun…..

The Key To Capital Formation: Savings!
by Dr. Kurt Richebacher

Compared to Europe, American economics has traditionally been short of theory and long in statistics. Yet today it is virtual anarchy at the macro front. Protracted runaway credit and money expansion, negative personal saving, a massive shift in resource allocation towards consumption and a balance-of-payments deficit of monstrous size – all these egregious financial and economic maladjustments have zero relevance for American policymakers and economists.

Cracks In The “Strong Dollar” Policy?
by Marshall Auerback

What if the market decides it no longer believes in the dollar as a safe haven? What if views on the dollar shift as rapidly as they did in respect of the Korean won or Thai baht in 1997? Since the dollar index reached a fresh 16-year high on July 5th of this year, it has sustained a sharp reversal – notably against most leading European currencies.

Your Wall Street Tuition
by Dr. Steve Sjuggerud

You have now lived through the second worst time in history to be an investor. The Nasdaq is still down over 60% from its highs, which is only topped by the 89.2% loss in the Dow from 1929-1932. And we may not be done yet, as we are still under RED LIGHT conditions. Hopefully this painful period hasn’t cost you many millions. But I would like to ask you, what did you get for your money?

The Crude Truth
by John Myers

Some die-hard Pollyannas will argue about new technologies or giant discoveries just waiting to gush to the surface. But if you talk to oil insiders, a typically optimistic bunch, you see unanimous conviction in their eyes that oil reserves are rapidly dwindling. Meanwhile, our dependency on crude grows each day.

The Cayman Islands: Zero Taxes, but Bank Secrecy
by Robert E. Bauman

Measured in assets under management, the Caymans rank as the world’s fifth-largest financial center. Offshore business accounts for roughly 30% of its gross domestic product. Many of the world’s most reputable companies do business through subsidiaries registered in the islands. And until a year ago, all these operations were conducted in statutorily guaranteed secrecy, under the “Confidential Relationships (Preservation) Act.” Not anymore…

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One of the nice things about living in France is… if you want news about what’s happening in the US – you have to go find it.

The “news” here is not thrust upon you…there’s no Tom Brokaw drooling out the latest government spending scandal… there’s no screaming headlines trying to force you to take seriously the threat of global warming…there’s very little Martha Stewart…

Those things exist of course, but curiously they’re written in French.

One entertaining picule that does make its way across the Atlantic with regularity, however, is the frequency with which the president proves – in public – what a drone he is.

What follows is a poem made up entirely of actual quotes from George W. Bush. (The quotes have been arranged only for aesthetic purposes, by Washington Post writer
Richard Thompson.)


by George W. Bush

I think we all agree, the past is over.

This is still a dangerous world.

It’s a world of madmen and uncertainty

and potential mental losses.

Rarely is the question asked

Is our children learning?

Will the highways of the internet become more few?

How many hands have I shaked?

They misunderestimate me.

I am a pitbull on the pantleg of opportunity.

I know that the human being and the fish can coexist.

Families is where our nation finds hope, where

our wings take dream.

Put food on your family!

Knock down the tollbooth!

Vulcanize Society!

Make the pie higher! Make the pie higher!

Vive la Liberte,

Addison Wiggin,

The Daily Reckoning

P.S. For a lighter look at the world of contrarian ideas click here: Daily Reckoning Jokes. We take no responsible for the content of these jokes… infact, for the most part, we didn’t even write them… we “borrowed” them from the web, or DR readers – enjoy!

The Daily Reckoning