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As the U.S. Dollar Tanks, Investing Overseas The Dark Side to Debt Reduction
The victim, a Johns Hopkins student, grabbed the wallet from the young intruder’s hand. He then wisely acquiesced, handing over his cash ($40.00). The suspects, 6-8 males, between 8-15 years of age, wearing dark hoods and dark pants, promptly fled westbound. Earlier that evening, two similar juveniles approached a Hopkins employee walking westbound on the same stretch of E. Madison. Once again, a juvenile displayed a knife and demanded money. This time, however, the victim refused to comply. He continued to walk westbound. The suspects, two males, between 8-14 years of age, wearing dark hoods and dark pants, fled the scene. One would assume these incidents were related. One would also assume the juveniles quickly surmised the benefits associated with the law of large numbers. For their efforts, they’re now $40 richer. In what we can only assume to be an unrelated incident, three armed men wearing dark clothing and ski masks stole four paintings by Cezanne, Degas, van Gogh and Monet worth from a Zurich museum, police said today. For their efforts, they’re now $163.2 million richer. They also seem to be quite familiar with the law of large numbers. And speaking of large numbers, we read a few snippets from Saturday’s New York Times that got us thinking. The Times reports that revolving debt — the nasty little interest-bearing IOUs for which thank Visa, MasterCard and American Express — reached a record high $943.5 billion in December. The annual growth rate of revolving debt keeps inching up as well, reaching 9.3 percent in the fourth quarter of 2007. ********************************* Just 5 Minutes of “Work” Pays Cautious 39-Year-Old Auto Parts Supplier $900 in Pure Profits Do you have five minutes to “work” like him starting Sunday night? If so, you can have four FREE months to try out this revolutionary options research service… But you have to hurry, this offer ends soon… Check it out here… ********************************* The Times also notes that the Federal Reserve found that roughly 4.34 percent of 100 largest bank’s credit card portfolios were delinquent. For those counting, that’s roughly $40,947,900,000.00 in delinquent debt. But what’s another $41 billion compared to the more than $135 billion in credit losses and write-downs banks worldwide have announced since the turmoil in the U.S. housing market started last year? According to David Jolly of the New York Times, some analysts estimate that total write-downs could reach $800 billion. Meanwhile, bubble chasers continue itching for the next big thing. “Put this banking mess aside already,” they clamor. “What’s next?” The “next big thing” our friends at the Daily Reckoning opine, “will be downsizing, cutting back, making do. Barely on the radar screen now, thrift is coming into focus more clearly day by day. So far, people are a bit embarrassed about it...a bit ashamed that they have had to cut back. But soon, it will be popular...fashionable...and finally, almost obligatory.” Hmm… “Prices are rising in Europe as in America. Bread is up 12% in Germany over the last 12 months. Butter has gone up 45%. Milk 25%.” Higher prices often stem from printing more dollars. “Force-feeding the rest of the world $2 billion a day (more consumption),” Warren Buffett reminded us last week, “is inconsistent with a stable dollar (more inflation).” We share Mr. Buffet’s concern. Bernanke keeps printing. Politicians keep promising. Bridges keep crumbling. Wars keep spending. We read this week that the projected total cost of Medical care for U.S. veterans of the Iraq and Afghanistan wars will top $500,000,000,000, a figure on par with the total military spending to wage these wars to date. ********************************* Government-Guaranteed Gold This new U.S. government-backed guarantee lets you own gold with no risk...but with 100% of the gains should gold prices take off. Here’s the catch... You must act on this by March 11, 2008...or you risk missing the official deadline and getting shut out of this forever... Check it out here… ********************************* And speaking of military might, Defense Secretary Robert Gates estimated in testimony before the Senate Armed Services Committee, the Pentagon will spend upwards of $685 billion next year alone. That’s $170 billion more than the $515 billion the president proposed in his first-ever $3 trillion budget. If that weren’t enough, Gates doesn’t even expect that number to stick. “I have no confidence in that figure,” he admitted. You can expect the estimate to rise in the near future. A hundred billion here…a hundred billion there. Who’s counting? Apparently, no one. But that’s not to say the S&P can’t weather the storm. The companies representing the Standard & Poor’s 500 Index now derive 49% of revenue from foreign markets, up from 30% in 2001. Meaning, those with money to burn (southeast Asian consumers) should keep earnings reports strong. Stronger repatriated currencies should only bolster this trend. Unfortunately, we tend to think many Americans believe strong a S&P equals a strong American economy. We tend to see another American economy. We see an economy riddled with debt, more debt and even more debt. We tend to see the American consumer eerily close to tapping out. Thirty-four percent of American’s now believe they were among the “have-nots.” It serves to reason. More than 405,000 homeowners lost their homes to foreclosure last year. With no homes or credit cards, where will the SUV nation get its cash? Well, we’re not so sure. China perhaps. But the Chinese seem reluctant. Maybe they’re saving they’re Yuan to buy more oil. They too may have noted the Pentagon’s preparation plans for $225 oil. In short, it seems to us that cutbacks are the only option. With a stroke of the pen, as Roosevelt did in 1933 and Nixon did in 1971, the government can confiscate the currency and tear it to shreads. In either case, the thief, the politician and the banker are seemingly playing the same game. They're playing the law of large numbers. Whether they steal by the sword or steal by the pen, their craft effectively erodes the tangible wealth of the grad student walking home after a hard day's work. Consequently, our hero isn't left with many options. He can always study to become a legislator or a central banker. If that doesn't work, may we suggest dark hoods and dark pants? Until next time, P.S.: As you can tell, the U.S. stock market doesn’t look good right now. That’s why I started a new service last year that gives readers the chance to invest overseas without all the hassle that goes into it. Most people shy away from investing overseas because it can be confusing at times. But, I take care of all that. It has already produced some nice profits for my readers. And now, you can take a look at my latest find right here… Editor’s Note: As always, you can send any questions or concerns to us at jim@pennysleuth.com. |
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| Christopher has spent the last two years doing investment research primarily focused on emerging markets, specifically China and Hong Kong. <click here for full bio> |
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