Vancouver, Here We Come

The Daily Reckoning – Weekend Edition
July 22-23, 2006
Baltimore, Maryland
by Kate “Short Fuse” Incontrera


Today’s missive will be short and sweet, dear reader. The DR HQ has been a flurry of activity this week as we prepare for Tuesday’s Agora Financial Wealth Symposium in Vancouver, British Columbia.

The conference is sure to be very interesting…this year, in addition to presentations from all of your favorite DR columnists, we’ve thrown in a few special guests for good measure. Most of these speakers come from very different backgrounds and disciplines, but at the Symposium one common thread will be tying them together: empire.

This year’s topic, which the speakers were asked to base their speeches and presentations around, is “Investing in the Age of Empire.” With titles like: “Welcome to Speculation Nation,” “The Beating Heart of Empire,” “Can the Economy Survive Washington?” and, courtesy of the Mogambo, “We’re All Freaking Doomed!” the Symposium promises to be one of the most important investing events of the year.

We look forward to meeting some of our readers in Vancouver – and to those of you who can’t be there, never fear! Your editor, in addition to a few other “roving reporters,” be writing a synopsis of the day’s events, so be on the lookout for an additional report in your inbox each day next week.

Short Fuse
The Daily Reckoning

P.S. The Agora Financial Wealth Symposium is one of those rare times that all of our analysts and experts are gathered not only in the same country – but in the same building! But there is a way to have access to all of their insights and advice all year long: join the Agora Financial Reserve. With the Reserve, you get all of Agora Financial’s top research for life. In addition, you get to some pretty great perks – like free admission to the Agora Financial Wealth Symposium.

— Daily Reckoning Book Of The Week —

Empire of Debt: The Rise of an Epic Financial Crisis – Now a NY Times Best Seller!
by Bill Bonner and Addison Wiggin

“Watching the news is a bit like watching a bad opera,” say best-selling authors Bill Bonner and Addison Wiggin. “You can tell from all the shrieking that something very important is supposed to be happening, but you don’t quite know what it is. What you’re missing is the plot.”

After a generation of being spoon-fed reality by media, it’s understandable that Americans are confused about the state of their nation. In their newly released book, 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.

THIS WEEK in THE DAILY RECKONING: The United States’ Comptroller, David M. Walker, once said that the United States could be likened to Rome before the fall of the empire – and of course, we couldn’t agree more. See what else he has to say about our country’s financial state in Bud Conrad’s “Government Debt: Termites in the House,” below…

Kudzu in Alabama     07/21/06
by Bill Bonner

“Thus did the humbug of modern democratic government take root throughout the world – like kudzu in Alabama. In certain places, such as the Soviet Union, the weed covered everything.”

Government Debt: Termites in the House    07/20/06
by Bud Conrad

“The government can’t go bankrupt because they are the government, and along with a complicit Federal Reserve, they can meet any debt obligation because they have the printing press. That is precisely the problem.”

History – The Great Teacher      07/19/06
by Puru Saxena

“I’ll let you in on a secret, which is essential to your success as an investor. You must understand that the central banks don’t raise interest rates to fight inflation.”

Buyer’s Market in Water Utilities    07/18/06
by Chris Mayer

“In a big-picture sense, water utilities look like a great place to be. The conditions that helped produce those great returns in the past look only more favorable going forward. The basics of the business have not changed.”

Old-People Economics     07/17/06
by The Mogambo Guru

“The biggest mistake the old people made is thinking that the government they elected is looking out for them. Ha!”

FLOTSAM AND JETSAM: It’s no secret that the U.S. empire is feeling financially squeezed – below, Chris Mayer explains what’s in store for America in the near future…

The Imperial Squeeze
by Chris Mayer

Next week I’ll be in Vancouver for a conference where the topic is Investing in the Age of Empire. What does that mean? When I think of empire, I think of something big, bloated and overextended. While empires are many things, they always go broke. They debase and depreciate their currencies. Their skeletal structures break down. They can no longer move men and machines and produce the way they once did. Too many people live on the imperial dole. The weight of the warfare/welfare state crushes them.

The real crisis of empire is a financial crisis. Military defeats are only the final outward manifestation of that collapse. America, by many lights, fits the description of an empire. Where along the imperial development scale America sits is hard to say. But one thing we can say is that the empire is feeling financially squeezed.

You’ve heard all the numbers about debts and deficits and the weakening dollar. Let’s connect the dots in smaller ways, as we usually do in Capital & Crisis. We begin in the American Midwest.

Chicago expects to sell the city’s Midway Airport sometime next year. Why? Because Chicago is facing a financial crisis. It’s broke. Or in the more delicate language of the Financial Times:

“The long-term lease of Midway is the latest initiative by Chicago to plug its budget gap. It follows the $1.83 billion sale of a toll road and will be closely watched by other U.S. cities and states facing a fiscal squeeze caused by rising pension deficits.”

Undoubtedly, overseas bidders will dominate this process. Then, we’ll suffer through another Dubai ports fiasco, in which many will wring their hands and worry about foreign ownership of critical American infrastructure. America, as I’ve noted in other places, is far behind in privatizing its infrastructure. Privately run roads, airports, bridges and marine ports are common in Europe, for example.

Circumstances, though, will force America’s hand.

Last year, Chicago sold (actually leased via a long-term concession) its Skyway toll road. The proceeds went to pay off debt. The whole episode, in microcosm, illustrates what many cities in America face. As The Washington Post observed: “Governments don’t have — or are unwilling to raise – the billions needed to rebuild the nation’s crumbling infrastructure.”

Since then, as The Wall Street Journal reports, “Indiana has leased its 157-mile turnpike for 75 years for $3.8 billion. Other states, including New York, New Jersey and Delaware, have considered privatizing toll roads, but haven’t done so.”

The nation needs to repair and upgrade its roads. Look at what the American Society of Civil Engineers has to say about America’s roads:

“34% of America’s major roads are in poor or mediocre condition
Driving on roads in need of repair costs U.S. motorists $54 billion a year in extra vehicle repairs and operating costs – $275 per motorist.

“Traffic congestion costs American motorists $63.2 billion a year in wasted time and fuel costs. Americans spend 3.5 billion hours a year stuck in traffic. Already, there are more than $25 billion in projects in the works, as governments turn to private firms to build and run new toll roads.”

Editor’s Note: Chris Mayer tells us that the infrastructure story is just starting. It’s deep and broad and long term, and he’s written about the water infrastructure crisis – and a few ways to profit from it in his latest report.

The Daily Reckoning