The Rude Awakening

Hot Coffee In the Face of Wall Street

URL: http://www.agorafinancial.com/afrude

Updated: 13 hours 34 min ago

Bailout Fatigue Syndrome, Part II

Fri, 11/21/2008 - 05:03

Laguna Beach, California

·      Investigating the government-sponsored destruction of capitalism,
·      From apocryphal $600 toilet seats to all-too-real squandering of public funds,
·      What’s up with Warren? Berkshire shares trend in an unfamiliar direction and plenty      more…

Eric Fry, reporting from Laguna Beach, California…

The S&P 500 Index tumbled 6.7% yesterday. Warren Buffett’s Berkshire Hathaway plummeted 7.7%. For this miserable year-to-date, the S&P and Berkshire have both lost about half their value. In this market, no one gets a “hall pass.” Not even the Oracle of Omaha.

At the end of yesterday’s blood-letting, the S&P 500 found itself at its lowest level since 1997. Berkshire hit its lowest level since 2003. What makes this comparison so interesting is that there was no comparison whatsoever between the two until very recently. At the end of September, Berkshire was down only 7% on the year, despite a 20% drop in the S&P.

But this stock market icon has been making up for lost time. Why? Because Warren Buffett engaged in some very un-Buffett-like activities. Several months ago, he sold an enormous quantity of naked put options against a smattering of equity indices, including emerging market indices. In other words, when global stock markets fall, Berkshire loses money. When they fall a lot, Berkshire loses lots of money, at least on a mark-to-market basis.

The options Berkshire sold don’t actually expire for more than 14 years. But that’s an irrelevant detail. These securities have a value that reflects the trend of global markets, and that value increases when global markets fall. Since Berkshire is short these securities, up in price means up in losses.

Berkshire has already booked a loss of $6.7 billion on this trade, and the markets have been tumbling anew since then. So the losses are clearly much larger now…which is probably most of the reason why Berkshire shares have come under such severe pressure of late. Meanwhile, bond investors have also become a bit skittish about Berkshire. The cost of insuring $10 million of Berkshire bonds against a default for the next five years has soared to about half a million dollars. That’s about the price an investor would typically pay to insure a near-junk credit!

Selling naked puts doesn’t seem very Buffett-like. For one thing, it has nothing to do with company analysis and everything to with market-timing. For another thing, the tactic employs leverage that increases as the bad bet gets “badder.”

The Buffett faithful are aghast. Why would their hero do such a thing? Your editors have no idea, but they have a couple of guesses. For starters, even geniuses believe their own press sometimes. Buffett is a billionaire. If that is an accident, it is an accident that occurred against astronomical odds. But just because he has been right most of the time does not mean that he is right all of the time. Nor does it mean that he is immune to occasional lapses of judgment.

This high-risk trade of his might still work out. But if it does, it would have worked out despite the fact that it contradicted some of Buffett’s investment tenets. For one thing, Buffett has referred to derivative contracts like the ones he is currently short as “financial weapons of mass destruction.” And so they are proving to be. In a related observation, Buffett recently remarked, “leverage [is] the only way a smart guy can go broke.”

Warren Buffett still has some pennies in his pocket, but fewer than he had just one month ago. Thanks to Berkshire’s sliding share price, Buffett’s net worth has decreased by a whopping $22 billion since the end of September.

Don’t weep for Warren just yet, however, he’s still got about $32 billion left. But his apparent misstep reminds us of a famous saying by John Maynard Keynes: “The markets can remain irrational longer than you can remain solvent.”

Buffett sowed the seeds of his fortune in the lows of the 1974 bear market. But if he had been old enough to attempt similar “opportunistic purchases” in the early days of the 1930 bear market, he would have lost everything and we would never have known his name.

Buffet is right to believe that stocks are cheap. But he is wrong to underestimate the possibility that they might get cheaper still. He is wrong to dismiss the possibility that significant portions of American capitalism may be broken and cannot be easily repaired.

Perhaps that’s why the stock market is falling…because American capitalism is broken. Because portions of it are rotten to the core. And instead of tearing out the rot and laying in a fresh lumber, we have decided to patch the cracks with spackle, slap on some fresh paint and hope that it holds up for a while longer.

There is simply no substitute for failure. Bankruptcies, like wildfires, clear the way for new growth. Without them – both bankruptcies and wildfires – the old, diseased growth crowds out the new growth and impedes revitalization.

The bailouts that are flooding out of the Treasury are merely nourishing the old growth…and that’s not going to produce prosperity for anyone.

Maybe THAT is why the stock market is falling.

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—————————————–

Bailout Fatigue Syndrome, Part II
Eric J. Fry

American capitalism is broken, at least a little broken.

Remember the Pentagon’s $600 toilet seat? Remember that appalling example of “government waste?”

Ignoring for the moment that the Pentagon did not, in fact, pay $600 for a $12 toilet seat, this apocryphal story from the early 1980s became a popular icon of governmental ineptitude and largesse. If our elected representatives would squander $600 on a toilet seat, the voting public reasoned at the time, how else would these good-for-nothing numbskulls squander taxpayer money?

Here’s how:
•            $219,000 to fund a “curriculum package” to teach college students how to watch television.
•            $1.2 million to study the breeding habits of the woodchuck.
•            $150,000 to study the Hatfield-McCoy feud.
•            $1,500,000 to buy a statue of the Roman god, Vulcan, in Birmingham, Alabama.
•            $50,000 to fund a tattoo removal program in San Luis Obispo County, California.
•            $26,000 to study how thoroughly Americans rinse their dishes.
•            $90,000 to support the Cowgirl Hall of Fame in Fort Worth, Texas.
•            $150,000 to promote “Therapeutic Horseback Riding” in Apple Valley, California.

How appalled we Americans were to lean that our Federal government had squandered so much money in so many absurd ways! We were utterly indignant.

But that was then and this, unfortunately, is now.

With the passage of time, these quaint examples of governmental waste recall a simpler era - an era when the US government sometimes balanced its budget, when Americans sometimes spent less money than they earned, when dysfunctional finance companies sometimes went bankrupt and when criminally negligent CEOs sometimes received pink slips rather than multi-million-dollar paydays.

In the modern era, the Pentagon might actually spend $600 for toilet seat, but no one would care. Indeed, most of us taxpayers would happily support buying $600 toilet seats for every commode in Washington, DC, if, in exchange, the Treasury Department would discontinue handing billions of dollars to companies that should be swirling down the drain of a commode.

The U.S. government no longer spends $600 on toilet seats; it showers billions of dollars on finance companies, which then spend hundreds of thousands of dollars on spa treatments for top executives.

But wait, that’s not all!

The same finance company executives who conducted the “Hiroshima-zation” of the American financial system by reducing it to a smoldering pile of toxic rubble are now lining up to receive billions of dollars of taypayer-funded bonuses.

This is epic audacity, even for Wall Street.

The Wall Street elite has spent so many years feeding at the trough of its clients and shareholders that it can’t seem to break itself of the habit. Of course, why would it want to break this delightful habit?

The folks on Wall Street who believe themselves entitled to a bonus fail to appreciate at least one important fact: they have already received a bonus – they still have their jobs. Thanks to taxpayer dollars, they still have their jobs. That’s an extraordinary bonus. How about a little gratitude…and maybe even a morsel of humility?…

And we won’t even begin to ask these folks to consider acts of charity…or to make reparations…but we shouldn’t rule it out.

“The executives in companies that get bailout money should have their base salaries reduced by 10 percent for 2009,” one disgruntled investor tells Bloomberg News, “and they should pay back a substantial portion of their 2007 bonuses to the government for the financial devastation they oversaw, fostered and, in some cases, directly caused. Their sense of entitlement is appalling.”

Paying back a portion of their bonuses?…Hmmm…Now that’s an interesting idea. What would that look like exactly?

For illustration purposes, let’s draw a random name out of a hat. Ah, here’s one: Chuck Prince. Let’s see, Chuck Prince, was CEO of Citigroup from 2003 until late last year. During that time, he presided over the construction of the house of cards that was Citi’s pre-bust balance sheet. As the first cards began ripping away from the fringes of Citi’s precarious financial structure, Prince took “full responsibility” for the initial capital losses, then took a $38 million severance check to the bank and cashed it.

Citi’s losses continue to escalate into the tens of billions of dollars. Chuck’s millions continue to earn interest. Something doesn’t feel right here. To be sure, Mr. Prince has not legal obligation to return the funds to Citi shareholders and/or employees…just a gigantic moral one. In other words, there’s no particular reason why Prince should hand the money back…except that didn’t deserve the money in the first place.

If so inclined, Prince could return the funds to the employees who are now losing their jobs. A quick, back-of-the-envelope calculation reveals that Prince could return his $38 million by handing a check for $730 to each of the 52,000 soon-to-be-fired Citi employees. Merry Christmas from Ol’ Saint Chuck!

Or he could just keep the money, like every other criminally negligent former CEO has done. To err is human, to keep money you obviously do not deserve is utterly inhuman. But who knows, maybe I’d keep the $38 million also. $38 million doesn’t goes as far as it used to, but it still buys a lot of golf balls.

One of my closest friends earns about $42,000 per year as a research scientist – working to find cures for diabetes. Her societal contribution is not absolutely essential, but it is valuable. In fact, I would submit that her contribution is of greater value than the collective societal contribution of the 50 highest paid individuals in every Wall Street firm…COMBINED.

In other words, if Wall Street’s top guns all joined the bread lines tomorrow – or at least the caviar-topped blini lines – the world would be no worse off. Of course, the same exact thing could be said of many professions, including my own.

But the difference between most of us gainfully employed individuals and most Wall Street top guns is that we did not create the debacle that destroyed the financial wellbeing of millions of individuals, and neither are we whining that our economy-destroying antics deserve multi-million-dollar bonuses.

“Please explain how miserable performance of biblical proportions warrants any bonuses, particularly using money from me the customer and taxpayer,” said Glenn Brown, 67, who recently retired after 21 years as a researcher in the department of surgery at Beth Israel Deaconess in Boston and as an adjunct assistant professor at Harvard Medical School. “I don’t understand how they can even conceive of doing that.”

Your editors at the Rude Awakening don’t understand either. But we don’t make the rules, we just ignore them.

American capitalism is broken, at least a little broken. So take your time wading back into the slop. In other words, preserve your capital first, risk your capital second.

—- Breakthrough Technology Report —-

Shocking, Never-Before-Seen Report: Expert Researcher Stakes Reputation to Reveal Staggering Profit Potential…

Your Great-Grandfather Saw the Railroad Come to Town, But Did He Profit From It?

Your Grandfather Watched the First Model T’s Roll Down the Street. Did He Get Rich?

Your Father’s Generation Witnessed the Rise of Computers. How Much Did He Make On Them?

The Next Massive Wealth Creation Starts NOW. Here’s How YOU Could Give Millions to Your Family’s Next Three Generations.

The world learned of what could be a historic breakthrough on Nov. 19 — and you can still get in before the news spreads… Continued Here

—————————————–

[Rude Endnote: Lastly, don’t forget to grab your free I.O.U.S.A. DVD/Personal Bailout Report before the complimentary pre-release stock runs out. If the publicly-funded bailout of moribund, criminally negligent companies and their CEOs has you livid, this package is a must. Check it out here.

Until next time…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com

Categories: Agora Financial

Bailout Fatigue Syndrome

Thu, 11/20/2008 - 04:41

Laguna Beach, California

·      Throwing the TARP over the corpses of America’s worst performers,
·      A closer look at Wall Street’s “cash-hemorrhaging” finance companies
·      A graphical display of the grotesque bear market anatomy and more…

Eric Fry, reporting from Laguna Beach, California…

Treasury Secretary Henry Paulson appeared before the House Financial Services Committee Tuesday to provide an update on the Treasury’s spiffy, new $700 billion Troubled Asset Relief Program (T.A.R.P).

Secretary Paulson repeatedly reminded the Committee members that the TARP’s initial mandate was to re-liquify the banking sector so that banks might resume “normal” lending activities. But some members of the Committee repeatedly suggested that the TARP might do even more…like re-liquify the auto sector…or re-liquify the growing community of mortgage-defaulters.

Your editors here at the Rude Awakening have been entertaining a related thought, “Why not re-liquify the stock market?” Is there any troubled asset that needs relief more urgently than the stock market?

This deeply troubled asset tumbled another 427 points yesterday, bringing it to fresh 5-year lows. It’s clear the stock market could use some federal assistance.

During the last several months, many investors have declared “the bottom” of the bear market. So far, many investors have been wrong. The bottom may be drawing near, but it hasn’t arrived just yet. The chart below depicts the hypothetical outcome of buying an S&P 500 Index fund on each of the last eight Friday’s.
Notice a pattern? Every single purchase would have produced a loss. Not ONE would have produced a gain.

This chart tells us absolutely nothing about the future, but it shows us very clearly just how painful – and treacherous – the recent past has been. The chart also shows us very clearly that the Treasury’s bailout efforts to date have failed to produce any measurable benefit for the stock market. The economy isn’t looking too spry either.

The TARP, which is the most celebrated of all the Treasury’s newly minted bailout acronyms, made a splashy debut by “investing” $25 billion apiece in nine of America’s largest finance companies. These unprecedented handouts, Fed Chairman Ben Bernanke explained Tuesday, “[were] critical for restoring confidence and promoting the return of credit markets to more normal functioning.”

Maybe so, but signs of “normal functioning” in the credit markets remain more hope than substance. Meanwhile, signs of the normal dis-functioning on Capital Hill remain all too real. Back on September 29, the House of Representatives defeated the initial version of the TARP because it would have cost too much.
Just a few weeks later, however, a kind of bailout mania has gripped the nation, and almost no one bothers to ask how much the bailouts will cost, or where the money will come from.

We’ve simply stopped counting. But on some level, somewhere deep down, every American knows that the bailouts aren’t free. Every American knows that we’ve borrowed a heck of a lot more money than we could ever actually repay. But are we worried? Not really. Lenders worry more than borrowers.

And so we continue to borrow money and continue to avoid uncomfortable questions about repayment schedules and continue to toss around billions of dollars of bailout funds as if we just won them at a roulette table. Nevertheless, the nation’s financial sector continues to implode, little by little, day by day.

Perhaps the banking sector, and the nation at large, would have been even worse off without all the federal bailout programs. But as the Treasury adds zeros and digits to its various “lending facilities,” the financial sector adds zeros and digits to its quarterly losses.

In other words, this bailout stuff isn’t going so well…which suggests at least two courses of action: 1) Investors should still steer clear of the finance sector and 2) Investors should not yet abandon all hope for gold; inflation might surprise on the upside.

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—————————————–

Bailout Fatigue Syndrome
By Eric J. Fry

When the Treasury finally abandons its bailout programs and/or the executives at the cash-hemorrhaging finance companies finally exhibit more humility than chutzpah, the economy and the stock market will have reached the bottom.

But it doesn’t feel like we’re there just yet…

So far, the Treasury Department, Federal Reserve and FDIC have cobbled together about $2 trillion worth of bailout programs, along with an unknown-trillion-dollars worth of implied and actual guarantees. What do we have to show for all of this financial firepower? Nothing more than a smoldering pile market capitalization and implausible declarations of victory.

Bailouts aren’t all bad, they’re just mostly bad. They’re bad because they tend to subsidize failure, rather than to underwrite future success. Failure consumes capital investment, success multiplies it. Like UN food programs, bailouts tend to land in the hands of crafty despots, rather than needy orphans. In other words, bailouts tend to produce exactly the sort of capital misallocation that prolongs economic stasis and impedes recovery.

When the TARP tosses billions of dollars at a hodgepodge of finance companies, for example, does it actually save anything of long-term economic value or does it merely preserve museum pieces?

The Treasury has funneled $150 billion into the AIG cesspool, but the beleaguered insurance company continues to stink up the place. The company just posted a fresh $25 billion loss in the third quarter, and is probably amassing another multi-billion-dollar losses for next quarter. And yet, somehow, in the tortured logic of the powers that be, it’s okay to waste $150 billion on AIG, but not to waste $25 billion on GM, Chrysler and Ford.

The logic, if you can follow this, is that AIG’s failure would be a “systemic risk,” GM’s failure would merely be a catastrophic. To be clear, GM doesn’t deserve a bailout any more than AIG does…or any less. AIG miscalculated in such a spectacular fashion that it will receive six times the money that GM will NOT receive. Does that make sense?

In some ways, yes. No one wants a systemic risk walking around on the streets. But at the same time, what do we gain over the long term by resuscitating a model of incompetence like AIG, when we could be investing billions in lots of competent enterprises.

If the brain trust at AIG did not realize that policy-holders sometimes file a claim, too bad for AIG. It should go bankrupt. A blind monkey could write an insurance policy without considering the risk of a claim. A blind monkey could also figure out that if you write lots of policies on the identical risk – or family of related risks – you can kiss your actuarial assumptions goodbye. But blind monkeys almost never rise to the top ranks of a major insurance company.

We’ve got nothing against blind monkeys, but we don’t believe they should receive multi-billion bailouts from the Federal Government. Because, you see, when blind monkeys fail, sighted mammals can take their place, and usually operate a business more successfully. That’s called, “Economic Darwinism”…and we could probably use a little more of that about now.

If we’re going to waste $700 billion…or $2 trillion…let’s waste it on the folks who are building successful businesses…not on the folks who have demonstrated a penchant for colossal failure. Alternatively, let’s waste it on the folks who are trying to save their homes. In other words, let’s waste it on the effort to restructure existing mortgages. As a last resort, we could waste $2 trillion subsidizing journalists who write daily financial columns containing the words, “Rude Awakening.” But this would truly be a last resort.

If the government really wanted to INVEST the TARP funds, rather than squander them, it would buy a $25 billion interest in America’s nine BEST companies (whatever those might be). But that’s not the TARP’s mission. The TARP’s mission is to throw good money after bad, with the hope that the bad money becomes good again.

Good luck.

The TARP, itself, is a troubled asset. In fact, this particular tarp is beginning to look an awful lot like a shroud – an ornately embroidered gossamer that the Treasury Department is wrapping around the lifeless remains of the financial sector. The Treasury Department continues to insist that this shroud…er, tarp…will restore the financial sector to new life and vitality. We don’t believe it.

The financial sector is more King Tut than Lazarus. It will not come back to life, at least not in anything resembling its current form; it is dead already. The pyramids and the gold and the perfumes did not make King Tut any less dead. His 5-star Egyptian mummification/spa treatment did not bring him back to life. Likewise, dressing the ashen frame of brain-dead finance companies in $700 billion worth of bailout baubles will serve only one purpose – to send $700 billion into the afterlife as well.

Don’t send your money there too. Beware the financial sector…still.

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—————————————–

[Rude Endnote: Only time will tell whether the bear market pattern outlined in the above chart will continue to spill red across traders’ screens. That said, early indicators don’t bode well for a refreshingly green day in the markets today.

Asian stocks took yesterday’s U.S. selloff as their cue to shed a few more billion in shareholder wealth. The stronger Yen hampered Japan’s export sector, which slumped 7.7% in October compared to the same period last year. By the day’s close the Nikkei had slouched 6.9%.

Hong Kong’s Hang Seng and the Aussie All Ordinaries index fell 4.2% and 4.3% respectively while South Korea’s Kospi ended down 6.7%, posting its eight consecutive loss.

European investors are still digesting the barrage of bad news emanating from all corners of the globe. As we write to you this morning, London’s FTSE is about 2.25% in the red while Gremany’s DAX and France’s CAC are down 2.8% and 3.2% respectively.

A barrel of oil goes for about $52.30 while gold, with a rare splash of green on our screen, is up just over eight bucks at $744 an ounce.

On another note, thanks to all the readers who wrote in with suggestions for your wandering editor on his upcoming tour through India and South East Asia. We’ll be meeting up with local investment experts from Mumbai all the way through to Cambodia and will be sure to bring you the boots-on-ground news.

In case you need to contact us along the way, whether to offer travel or investment tips or any other Rude suggestion, we can be reached at the address below.

Until next time…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com

Categories: Agora Financial

Going Long Life

Wed, 11/19/2008 - 06:14

Dubai, UAE

·      Breakthrough technology announcement DUE TODAY – details below,
·      What on earth is an iPS cell…and how can it help me live longer?
·      Sorting the perennial cynics from the inquisitive skeptics, and plenty more…

Joel Bowman, reporting from Dubai in the Persian Gulf…

“You’re always so cynical,” a friend jibed at your editor over dinner recently. “So doom and gloomy, that newsletter of yours.”

“Perhaps you mean skeptical,” we offered, enjoying the compliment we thought our friend had intended for us.

“Fine, then you’re a skeptic. So does that mean things always have to be so apocalyptic? The economy in tatters… the world of finance in ruins… real estate here in Dubai shot to hell…that kind of thing?”

“Not at all,” we replied, cheerily. “Certainly it doesn’t have to be that way…it’s just that, at this very point in time, there is little evidence to the contrary.”

As a Rude reader, and thereby somewhat contrarian by nature, you have most likely endured similar conversations in your own life…especially in recent times.

To be clear here, most skeptics are only too happy to alter their outlook from pessimistic to optimistic…but only when facts permit. That is a rather large caveat. Simply denying a terrible reality, no matter how hard you try, does nothing to diminish its existence.

Would we like to wake up in the morning and report that a major U.S. bank just ADDED 53,000 jobs, for instance? Sure! But the fact that Citi just CUT that many employees will still stand, regardless of what we type in these humble pages. We would like to report that the rate of foreclosures in the U.S. FELL in October but, again, the tough fact that they ROSE by a whopping 25% is hardly subject to the whimsy of one delusional editor.

Even the fallen Hollywood star of Tom Cruise might wish his somewhat compromised public image still flew as high as it did in the days of Top Gun and Jerry McGuire. Alas, for the Maverick today, it is more a case of “Show me the reality!”

Likewise, regardless of the level of political chicanery emanating from D.C. and beyond, the outlook for the real economy is, quite simply, not good. Job losses are at their worst in over 5 years, the stock market is in the dumps, and consumer confidence is quickly evaporating…even the bellwether drivers of automotive production in Detroit are hanging on by the thread of a governmental promise.

Rather than mitigate these harsh truths, denial merely serves to intensify them. If anything, skeptics should be setting politician-sized rat traps up and down the streets of the capital for any talking head who dares state otherwise.

Above rant notwithstanding, there are many things to be optimistic about in today’s investment environment; it’s just that you have to look a little harder to find them. In fact, some of the most profitable opportunities are not even visible to the naked eye. In the column below, our resident emerging technology expert, Patrick Cox, identifies one such breakthrough that offers “staggering” potential for nimble investors. Details below…

—- Breakthrough Technology Report —-

Shocking, Never-Before-Seen Report: Expert Researcher Stakes Reputation to Reveal Staggering Profit Potential…

Your Great-Grandfather Saw the Railroad Come to Town, But Did He Profit From It?

Your Grandfather Watched the First Model T’s Roll Down the Street. Did He Get Rich?

Your Father’s Generation Witnessed the Rise of Computers. How Much Did He Make On Them?

The Next Massive Wealth Creation Starts NOW. Here’s How YOU Could Give Millions to Your Family’s Next Three Generations.

The world will learn of what could be a historic breakthrough on Nov. 19 — and you can get in before the news breaks… Continued Here

—————————————–

Going “Long Life”
By Patrick Cox

For the first time in history, we are seeing a rapidly emerging medical technology with the power to dramatically extend life spans. As a result, no technology on Earth has greater potential for investors.

To quickly review, stem cells are unique in human biology. Unlike all other cells, they are immortal and can be programmed, or potentiated, to replace any aging or damaged cell. Whether you want new skin, a new heart, new knee cartilage or new eyes, all these things are theoretically possible using stem cells therapies.

There were, however, two serious barriers to this exciting technology. The most obvious was that the only source of stem cells was embryos. This not only raised ethical questions, but it raised the possibility that stem cell therapies would require immune system repression. Just a year ago, many scientists believed these barriers were insurmountable. Stem cell therapies were in the same class as jet packs and flying cars. As a result, Big Pharma shied away from the partnerships that new scientific fields usually enjoy.

Then, last year, the entire picture changed. In rapid succession, five groups of scientists proved that adult cells could be reprogrammed to become stem cells using four transformative genes. The mechanism for introducing these genes into the adult cells was viruses.

Let me explain.

Viruses can’t reproduce on their own. They invade host cells and hijack their genetic mechanisms. In effect, they inject their own genetic code into host cells to duplicate themselves. By attaching these four transformative genes to the viruses, scientist tricked them into genetically reprogramming adult cells into stem cells.

These revolutionary new cells are called induced pluripotent stem, or iPS, cells. They are identical to embryonic stem cells. Mouse skin cells were transformed to iPS cells. They were then allowed to continue developing into living mice. Still, however, skeptics doubted that the almost alchemical power of stem cells had finally been released. The reason was that the virus used for producing these iPS cells was a retrovirus.

Retroviruses are associated with cancers and remnants lingered in the iPS cells. Obviously, therefore, the FDA would not allow their use in human therapies.

At the time, I predicted that the problem was temporary and would be worked out in a few years. I was wrong: It took months. A few weeks ago, Harvard researchers announced they had transformed adult cells into iPS cells using the adenovirus. The virus used was referred to in the press as a cold virus because it produces symptoms similar to those of the common rhinovirus. After a few cell divisions, it is completely deactivated.

This is amazing, astonishing news. I don’t have room here to go over even a few of the implications of this momentous breakthrough. I will remind you, however, that stem cells can be programmed to replace any cells in your body with perfect, youthful versions. Think about what that means. The financial implications for investors are staggering.

Harvard’s stem cell biologist Konrad Hochedlinger said, “I have never seen a field move forward as fast as this one.” That’s an understatement. In practical terms, this breakthrough means that right now, we could take a little of your blood and clone you. At this very moment, scientists have the ability to rejuvenate your heart and vascular tree. Not only that, but the telomere length of these replacement cells will have a longer life span than your heart and arteries had on the day you were born.

Few people know this and, consequently, few understand the virtually unlimited potential for both our species, in general, and early investors in this space, in particular.

There is another reason to expect stem cell stocks to increase in value. The cold virus breakthrough prompted pharma giant Pfizer (NYSE:PFE) to announce a major new emphasis on stem cell science. Pfizer’s previous timidity was caused by ethical concerns that arose from using stem cells lines derived from human embryos. Now that this issue is moot, Pfizer has jumped into the field with both feet, fully clothed.

Pfizer’s executive director of global research and development John McNeish said, “These cells will be tremendous in drug discovery. They will help us understand personalized medicine, genetic variation, ethnic populations, what biomarkers to follow.” Later on, McNeish says, Pfizer will market stem cells to rejuvenate aging and damaged organs and tissue. Insiders consider this the tipping point the industry has been waiting for.

We can expect that, finally, the holders of important stem cell patents will form partnerships with big pharmaceuticals. This has always been the pattern with biotech.

Adding to the excitement, another remarkable event has just taken place that will benefit companies in the RNAi space, though the benefits are a few years out. That’s the price drop on a complete genetic blueprint I talked about above. The company, Complete Genomics, says it will map your DNA for $5,000 next year. Moreover, I expect the price tag will drop to $1,000 within another two years.

At this price, gene mapping makes sense for the individual, the industry and insurers. For individuals, gene mapping could enable preventative therapies for genetic diseases. Insurers will also see cost savings here and Pharma will accelerate genetic research as part of drug development. The more DNA maps there are, the faster researchers will be able to identify the genetic causes of both diseases and resistance.

Because RNAi gives us the ability to switch individual genes on or off, RNAi companies stand to benefit massively from an increased understanding of our genome. The more maps correlated to medical histories that exist, the more we will know - and, unbelievably, the faster progress will be made.

Investors looking to go “long life” might like to consider this the investment of a lifetime.

[Joel's Note: It’s certainly an exciting time for readers of Patrick Cox’s Breakthrough Technology Alert. Pat expects an announcement later today that will blow the stem cell space wide open, creating huge profit potential for a few key companies involved. He’s also recommended one sub-$3 stock for his subscribers to own when the news does hit. At this market cap, the stock is far too small for us to divulge its name to our entire readership, but if you are interested in learning more, please feel free to check out Pat’s latest report right here.

Well, that just about ends it for us today.

Let’s see here…longer life…stronger hearts…massive profit potential…and they said we were all doom and gloom. Ha!

Until next time…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com

Categories: Agora Financial

Buy Low…If You Dare

Tue, 11/18/2008 - 03:51

Dubai, UAE

·      The Fed’s exploding balance sheet - $1 trillion…$2 trillion…$3 trillion…more!
·      Uncovering the counter-intuitive psychology of finance,
·      Rare baseball cards, abundant dollar bills and plenty more…

Chris Mayer, explaining inflation to a nine-year old, reports…

Some concepts I can explain to my 9-year old son, Calvin, but economists with advanced degrees can’t seem to get it. Calvin, named after my favorite ballplayer (Cal Ripken, though my wife hates it when I say that. “We didn’t name him after Cal Ripken, we just liked the name!”), wanted to know how the dollar lost value over time. He wanted to know why things got more expensive over time.

I explained it very simply. He likes to play this card game in which the players get different creatures and each of them has certain abilities. I explained to him how he valued certain cards highly because they are rare and hard to get. If the cards were easy to get and common, then they would be less valuable. This he understood.

So I told him that dollars work the same way. As the government prints more of them, they become less special. They buy less. We call this inflation.

Today, the Federal Reserve is laying the groundwork for massive inflation. “Over the past year,” Grant’s Interest Rate Observer notes, “the central bank’s balance sheet has grown by 133%. It was only yesterday when annual growth of 13% seemed aggressive, if not reckless, and certainly inflationary. Ten times that aggressive-if-not-reckless-and-certainly-inflationary rate of expansion is a fact that takes some getting used to.”

Over the last three months, Federal Reserve Bank credit is up 1,560%, reports Grant’s. It was only in September that the Fed’s balance sheet crossed $1 trillion for the first time. On Nov. 5, it scooted past $2 trillion. By year-end, says the president of the Federal Reserve Bank of Dallas, it could slide right on past $3 trillion. Our Federal Reserve seems hellbent on making Argentina look like Switzerland in terms of monetary restraint.

Why is this ballooning balance sheet inflationary? The Federal Reserve increases its assets by buying stuff — financial assets of banks and others. The Federal Reserve pays for these assets by creating money that did not exist before. That’s it. Simple as pie.

Of course, our government is not acting alone. Central banks across the globe are doing the same thing, if with somewhat lesser vigor, at the moment.

In any event, it means paper money will buy less. We may see nominal prices — for oil and gold and metals — continue to fall in the short term, but long term, I think we’re set up for some huge re-flation in 2009.

If I’m right, the overall stock market might continue to struggle for a long time to come. But selected resource stocks could do very well. I’m thinking of the many beaten-up stocks in the energy sector that have become extraordinarily cheap.

Yeah, I know it’s a bear market right now – a brutal bear market – but that means diligent investors can find some excellent values.

Recession Runs Rampant

Mon, 11/17/2008 - 07:01

Dubai, UAE

·      Losses in equities worldwide top $25 trillion. What say ye, Obama?
·      Japan, eurozone enter recession, Gulf bourses continue to tumble,
·      Turning fear into profit: A special volatility report, and plenty more…

Joel Bowman, reporting from Dubai in the Persian Gulf…

The bloodletting continues.

On Friday the 15-nation Euro-zone announced that it is officially in a recession. GDP contracted by 0.2% for a second consecutive quarter over on the continent with Germany and Italy leading the way backwards. France narrowly escaped an “official” recession – two consecutive quarters of negative growth – by the narrowest of margins, posting 0.1% growth.

It has been 15 years since the last time Europe experienced such a large-scale downturn. Back then, of course, each country was able to act independently on monetary policy. Now they must seek permission from EU executive before rushing to save their own behinds. We wonder how the bureaucratic behemoth is taking the news and, more to the point, how it will react.

Socialist E.U. MPs were quick to satisfy our curiosity, outlining their solutions hours after the recession was announced in a report containing five helpful tips on how to deal with it. They read:

Targeting measures to help on those who need it most and in particular small firms and vulnerable households. This will involve rapidly restoring levels of lending to households and businesses, especially SMEs
A European ban on mega-bonuses and golden parachutes;
Refusal of compulsory redundancies
Implementation of a European Green Investment package to boost the economy, avoid a long-lasting recession and help Europe to meets its climate and energy goals
Revival of the Doha world trade talks to reach successful, development-friendly conclusions.

Let’s see here… We’ve got a promise of more talking, an increase in needs-based lending, protectionism in the job market, oversight on private compensation and a twist of environ-socialism, just to keep the voters happy. We’ll be interested to see how that turns out for them.

Meanwhile in capitalist Japan, the world’s second largest economy is losing fluids quicker than like a hemophiliac in a samurai fight. It too announced this morning that the long gray cloud of recession hangs over its islands. Growth there slowed 0.1% during the past three months, on top of a 0.9% slump the previous quarter.

It seems recession known’s no party lines.

Here in the Middle East, where the political process has scarcely evolved beyond medieval feudalism, markets continue their relentless slide, wiping out billions of investor dollars and bringing the much-lauded real estate sector to its knees.

Since July 1, Dubai’s real estate index has shed a stunning 75%. Emaar, the largest developer in the region, has fallen more than 57% in the past seven trading days alone! When even the king’s newspapers start using words like “battered” and “thrashed,” you know you’re in trouble.

Preposterous as it may seem, the expectations of kings, prime ministers, dictators and the Joe the Plumbers of the world now rest on the shoulders of one man. In the column below, Bill Bonner takes a closer look at all the hoopla surrounding the president-elect and offers a few guesses for what’s in store next…

— Special Gold & Options Trader Report —

You Know Gold is Undervalued…

…but it’s not going to stay at these low prices for long. The way the market is looking, soon every investor will be rushing to the precious metal for safety.

Luckily, you’ll have gotten there first…and not to the already overbought, mega-producers. The place to be during the gold rally is in the tiny metal mining and exploration companies, frequently located in Vancouver, British Columbia.

Learn more about how these “Vancouver leapers” could make you $1,000, $5,000 – even $40,000 – in a single day. See Here For Details

—————————————–

O! BAMA! THE WHOLE WORLD TURNS ITS WEARY EYES TO YOU…
by Bill Bonner

Mr. Obama became the president-elect of all the Americans last week. No man’s coffee tasted better on Wednesday morning than it did on Tuesday…no woman’s perfume smelled sweeter. But all over the world, people felt better about themselves, as if the human race had achieved something important.

At least a McCain victory would have caused the press to hold its tongue. Instead, commentators drew all the wrong conclusions and made fools of themselves. Some thought it meant America’s redemption from the sin of slave trade. Others saw a historic transformation that they couldn’t put in words and shouldn’t have tried.

“They did it. They really did it,” wrote the Guardian . “…the American people yesterday stood in the eye of history and made an emphatic choice for change…”It’s the “End of the National Nightmare,” said TIME magazine.

Amid the effervescence came the French. Obama’s victory “arouses a wild yet reasonable hope,” claimed Bernard-Henri Levi in the Financial Times . Mr. Obama’s election will affect us in “at least three concrete ways,” he continued…a decisive turning point in dealing with the ‘racial question’ in the US…hope for an America that began doubting its “famous mission”…and with Obama representing the USA, “anti-Americanism…will have a harder time surviving and it will be forced to revisit its sales pitch.”

Nobody knows what America’s “famous mission” is – certainly not the Americans themselves. And if those are his ‘concrete’ ways, we’re glad Mr. Levi is not building bridges. There was nothing concrete about the hopes Mr. Obama’s victory arouse. Just the contrary…they are all in the ether.

They shouldn’t let French philosophers comment on American politics; they take the whole thing far too seriously. Besides, you never know what they are talking about anyway. But Le Monde saw it clearer. Not only was the paper happy to see the United States finally rinse the stain of racism out of the Stars and Stripes, it was glad to see Americans give free market capitalism the flush too.

Obama will be “reviving the role of regulation in the U.S.; [devising] tax policies to smooth out increasingly wide socio-economic divides; planning a health-care system appropriate to the country’s wealth,” said the paper. In other words, he will be putting in a system of state-directed capitalism, just like they have in France.

None of the commentators we read really understood Obama’s triumph. They saw it in a yearning for truth and a stretch for progress. It was nothing of the sort. The last thing voters want is the truth; they will reject it if it is put in front of them. Instead, what they want is diversion from the real world. What they hope to get from their leaders is a kind of entertainment…in short, a fantasy. Something to cheer them up when they are down. Or something to give them a fright when they are up.

You’ll recall from last week, the last period of Great Calamity – 1914-1945, with its wars, epidemics, Dust Bowls, hyperinflation, Great Depression, mass murders, bankruptcy and revolutions. It was in the middle of this period that Americans elected Franklin Roosevelt, who told them they had “nothing to fear but fear itself.” It was all in their heads! It was a whopper, but it was the whopper they wanted to hear.

And then, on right side of the Atlantic, Britain chose Winston Churchill as prime minister, in May 1940. Churchill crossed his fingers and put his hand behind his back immediately, claiming that Britain was not fighting to save its overseas empire, but to “save the whole world.” He promptly kicked out any official who was “exercising a disturbing or depressing influence,” that is, any who dared to tell the truth about Britain’s disastrous military situation.

Just weeks later – in France, after suffering the most humiliating defeat in their history, the French recalled an old man to power, Philippe Petain. The hero of Verdun made the French feel that they had just regained their national glory, not just lost it. But at the time, France’s fantasy seemed on more solid ground than Britain’s…which just goes to show how unreliable history can be. Sometime make-believe becomes real; usually, it doesn’t. Britain got the backing of the Roosevelt administration – which had promised voters to keep America out of the war – and beat the huns; Churchill died a hero. Petain died in disgrace.

Today, in the U.S.A., the Bush Administration has worked hard to make people fearful – with its torture chambers and preposterous “threat levels.” But the terrorists wouldn’t cooperate; they failed to blow up even a trash truck. Alas, now the mob sweats – and for good reason. People are afraid of losing their houses, their jobs, and their retirements. Losses in equities worldwide top $25 trillion. In U.S. housing alone, some $4 trillion has disappeared. That’s why Obama won; it has nothing to do with national redemption or Sarah Palin. When the world was safe and plush…the mob wanted to feel the frisson of danger. What the public wants now is safety: a movie with a happy ending, not a horror flick. Obama appeared the calmer, more intelligent, candidate. Voters could imagine him as the “black Roosevelt” giving soothing fireside chats and telling the lies they most wanted to hear.

And so, in the national narrative, one cockamamie bamboozle takes the place of the one that went before. Americans were supposed to be fearful; now they are supposed to be confident. They were supposed to be racists; now they are supposed to colorblind. They were supposed to defend free market capitalism to their last breath; now they turn to the state and beg it to protect their last dime.

[Joel's Note: Bill Bonner is the founder and editor of The Daily Reckoning . He is also the author, with Addison Wiggin, of the national best sellers Financial Reckoning Day: Surviving the Soft Depression of the 21st Century and Empire of Debt: The Rise of an Epic Financial Crisis .

Bill’s latest book, Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics, written with co-author Lila Rajiva, is available now by clicking Here: Mobs, Messiahs and Markets

— When Fear = Profit: A Special Volatility Report —

The volatile month of October saw the VIX Index hit an all time high of 89.53. Put simply, the markets are bucking and kicking like we’ve never seen before .

With such unpredictability, it is difficult to know where to invest, if at all.

There is, however, one man who has been relishing the recent whipsawing market conditions. Steve Sarnoff has been on an absolute tear lately. His last five picks have all more than doubled… and are sitting at cumulative highs of 1,222%.

Take a different approach and learn how to make fear in the markets work FOR you with Steve’s Options Hotline Service Right Here

—————————————–

[Rude Endnote: We welcome all comments from communists, tsars, free-market thinkers, kings and Mr. and Mrs. Joe and Josephine Plumber alike. If you would like to have voice an opinion, send your comments in to us at the address below.

Until next time…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com

Categories: Agora Financial

$60 Oil…And Why it Won’t Last

Fri, 11/14/2008 - 03:49

Pittsburg, Pennsylvania

·      An 11% intraday rally to turn those frowns upside down,
·      Oil stocks soar near 16% since yesterday’s lows – more on that,
·      The IEA’s “patently unsustainable” warning and plenty more…

Eric Fry, reporting from Laguna Beach, California…

There’s nothing like a little 11% intraday rally to bring a few smiles back to investors’ faces! But let’s not pry too deeply into yesterday’s delightful rally…or ask too many probing questions. We wouldn’t want to turn those smiles upside down. Yesterday was nice, but the Dow is still trading below where it ended last week, not to mention 33% below where it ended last year!

In case you missed all the action, the Dow Jones Industrial Average soared 869 points from its mid-day low of 7,966 to its closing price of 8,835. So anyone who happened to have purchased stocks at yesterday’s lowest point, and then sold everything at the close, would have netted 10.9%, before commissions. (This theoretical return would have topped six of the last eight ANNUAL performances by the Dow). On the other hand, if you did NOT sell all your stocks at the close of yesterday’s trading, you might be wondering – and worrying – about what’s coming your way next. So are we…

First, the good news: Up is better than down. No matter how flimsy and/or unsustainable this rally might be, most investors are grateful for it.

Now the bad news: Dramatic, one-day rallies are usually the stuff of bear markets, not the stuff of bull markets…as recent experience testifies. The spectacular 936-point rally on October 13 led to an equally spectacular sell-off two days later that erased the entire gain. Likewise the 890-point rally on October 28 produced little more than false hope and frustration, as this advance completely vanished during subsequent trading sessions.

So as much as we enjoyed yesterday’s trading action, we trust it like a chicken trusts a poultry farmer. But let’s not dwell on the negatives. Let’s enjoy our respite from the agonies of bear-market investing and look around for a rose to smell.

Ah…here’s one: Oil stocks performed even better than the overall market yesterday, as the Energy Select ETF (NYSE: XLE) soared nearly 16% from its lows of the session to its closing price.

Conveniently, oil stocks started rallying just minutes after we dispatched yesterday’s Rude Awakening, which urged readers to buy beaten-down energy stocks. (If only Mr. Market would be so compliant all the time, our task here at the Rude Awakening would be quite a bit easier).

Even after yesterday’s move, energy stocks are still beaten-down…especially if one believes that $57 oil is a greater aberration than $147 oil. In yesterday’s column, our colleague, Greg Guenthner, remarked, “The [long-term] allure of oil is hard to refute…Now is the time to buy oil. The second quarter of 2008 saw the largest drop in oil prices in 17 years. But with OPEC slashing its production outlook for the rest of 2008 and 2009, it’s unclear just how long prices will be able to stay under $100…much less under $57.”

In today’s column, our resident geologist and man of letters, Byron King, reinforces Greg’s bullish outlook for the oil sector. “$60 oil is simply too cheap,” says King, “This price is below the cost of most new sources of production. So if you’re thinking that $60 is the new market price for oil, you might want to stand a little farther away from your gas tank when you fill up your car…because you’re obviously inhaling fumes.”

Byron details his bullish argument in the column below…

— Energy & Scarcity Investor Insider’s Report —

Urgent Notice For American Energy Users: Introducing…

The Breakthrough That Could Put Oil Refineries Out of Business

This tiny company’s private technology refines crude oil as it’s pulled out of the ground…And you can get in on it today for a potential 250% gain this year . For the rest of this must-read report, click here

—————————————–

$60 Oil…And Why it Won’t Last
By Byron King

I’ve been getting a lot of calls and e-mails from people asking about the falling prices for oil in recent weeks. The immediate explanation is that world economic activity is decelerating. Demand is falling. OPEC announced cuts in output. But the markets still believe that economic decline will trump the ability of OPEC to prop up the price of oil.

Enjoy cheap oil while it lasts.

Just over the horizon, things are about to become dicey. This week, the International Energy Agency (IEA) will release a new report on the future of world energy. In its World Energy Outlook, the IEA will state categorically: “Current global trends in energy supply and consumption are patently unsustainable.”

There’s not much wiggle room in that statement. According to the IEA, despite the recent fall in oil prices, the medium- and long-term outlooks for energy supplies are grim. Conventional oil output is destined to decline. Demand will still grow, however, especially in the developing world. And the twain shall only meet by prices rising to clear the market.

The IEA performed a comprehensive study of 800 of the world’s largest oil fields. And it concluded that depletion in conventional oil fields is occurring at a rate in excess of 9% per year. (That’s an average. We see depletion rates in excess of 15% in Mexico’s Cantarell field, for example.) This means that absent large amounts of new drilling, new investment in enhanced recovery and new discoveries, the current worldwide oil output will decline by over 9% per year. And if it keeps going along this trend (there’s no reason why it won’t), the base of world oil output could conceivably dry up within seven-10 years.

Don’t get me wrong. The world won’t run out of oil in seven-10 years. That’s not how it works. It’s just that volumes of conventional oil are declining. The takeaway point is that the energy markets will tighten up, like a hangman’s noose around the collective neck of the oil-consuming world.

So how long will we have to wait for this “future” to show up? Well, how long will the current worldwide recession last? I don’t know. But I do know that if you can afford to be patient with your funds, you should be buying at this very moment the companies that own oil reserves in the ground, and the oil service companies that extract oil and natural gas. These firms should eventually stage a comeback as oil prices rise again.

According to the IEA, even with massive levels of investment in the oil patch, the best estimate is that the global oil industry can reduce the rate of depletion to perhaps the 6% range. So the world energy industry will have to run faster just to keep from falling too far behind the demand curves.

Again, you need to keep in mind that current energy prices are just too low to support the level of energy investment that the world needs going forward. (Meanwhile, the U.S. government is spending trillions of dollars just to bail out the banks and bankers, not one of whom runs pump jacks.)

The IEA estimates that the oil industry will have to invest over $350 billion per year to counter the steep rates of decline in output. And even that will not be sufficient to maintain levels of output for traditional forms of crude oil. Thus, much of the future investment will have to go toward extracting other kinds of hydrocarbon substances. And these “other kinds” tend to be very expensive to develop.

There are many different kinds of hydrocarbon molecules in the world. The total worldwide carbon base actually adds up to a very big number, and that is NOT including the carbon that is part of the current living biology of the planet. For now I’m just discussing the fossilized carbon like oil, natural gas, bitumen in tar sands, oil shale and coal.

The big problem for the non-oil forms of carbon is the cost of converting it into a viable fuel. We see that, for example, in the Canadian tar sands projects. Lots of steel, concrete, labor, machinery, water and energy input — all to extract this thick, gunky crud that has to be upgraded to something that looks like diesel fuel.

The tar sands are full of hydrocarbons, but they are not inexpensive to extract. The same goes for every other non-convention hydrocarbon source.

The nearby chart shows the total hydrocarbon resources in the world and the relative costs to convert them into a barrel of oil or oil equivalent. This is my summary, based on several different government and academic compilations:

These are big numbers, right? And they can supply a lot of energy over a long time…at a price. But that price will almost certainly be more than $60 a barrel…much more.

[Joel's Note: As you saw yesterday, when oil stocks rallied almost 16% off their intraday lows, there is still plenty of upside “wiggle room” in the energy sector. Byron has spent the past few years scouring the planet from Alaska to South Africa to find the very best energy plays for his Energy & Scarcity Investor readers. If you are interested in this explosive sector, you might like to check out his service now, while oil is still hovering around $60 and stocks are relatively cheap. Read on here to learn how to get involved.

—————————————–

[Rude Endnote: There’s plenty of green on the screen this morning, for a change. Hong Kong, Japan and the Aussies all posted gains overnight in the range of 1.5-2.7%. Europe, too is surging higher. London’s FTSE is up 3.2% as we write while France’s CAC and Germany’s DAX are up 2.5 and 3.5%.

Investors in this peaceful little pond, the Persian Gulf, must be salivating on the sidelines as they watch the rest of the world’s gains.

GCC indexes copped a absolute pounding this week with the Dubai Financial Market and the Kuwait Stock Exchange the worst hit. So much trouble was a brewin’ in downtown Kuwait City yesterday that the government closed the bourse down and told protesting traders to take the rest of the day off and cool down a bit. Still, at “only 31%” down for the year, Kuwait’s index is nursing losses not even half that of Dubai.

Either way you look at it, it’s enough to send a cool breeze up your dishdasha.

Until next time…

Cheers,

Joel Bowman

P.S. Those complimentary I.O.U.S.A. DVDs are flying out the door. If you haven’t grabbed one yet, you can do so here. Pre-release giveaways are limited.

The Rude Awakening
aussiejoel@the-rude-awakening.com

Categories: Agora Financial

Surviving the Selloff

Thu, 11/13/2008 - 08:49

Baltimore, Maryland

• Crude falls below $57 – what it means for the future of “cheap” energy,
• IEA announces startling oil field decline rates,
• Global markets continue selloff, “Flash Action” market moves and more…

Joel Bowman, reporting from Dubai in the Persian Gulf…

We begin this morning’s musing with a question for our Rude reader: How much is 26.3 trillion dollars?

A figure this large is somewhat difficult to fathom, so let’s put it into perspective. $26.3 trillion is equal to approximately:

13.15 trillion times the amount your editor has in his back pocket,
Two million, six hundred thousand times the total prize pool of the world’s richest golf tournament,
2,768 times the amount of money spent annually to fight the AIDS virus,
14.6 times the annual GDP of France, the seventh largest economy in the world,
More than two and a half times what the U.S. National Debt Clock would read…had it not run out of space to post the disastrous figure,
The estimated amount needed to fund the world’s insatiable energy consumption until the year 2030.

Leaving aside golf, viral epidemics and the financial plight of your editor for just a moment, let’s turn our attention to that last point. According to the International Energy Agency, the world will need to pump well over one trillion dollars into energy development and production each year just to maintain “adequate supply.”

Unfortunately for the car-driving, plane-flying, grocery-eating, plastic using, crop-fertilizing, factory-working population of the world, maintaining adequate supply might be harder than first thought.

As the credit crisis chokes off funds needed to keep the moribund banking system alive and thieving, it also drains liquidity from other sectors. Squeezed by exposure to collapsing financial institutions and facing do-or-die margin calls, mega-funds around the world have been forced to sell off profitable positions en masse. Having delivered investors relatively handsome returns in the first half of the year, commodity positions were among the first items up for grabs as institutional outfits scrambled to raise cash and keep their head above water.

Gold, ags and, perhaps most notably, oil are well off their record highs of earlier in the year. The world’s grease fell to $56 per barrel overnight, a fresh twenty-month low.

With crude more than 60% off its July high, oil-producing nations around the world are watching the profit margin of the primary (and often only significant) export evaporate before their eyes. Consequently, belts are tightening, supplies are taken off the market, and crucial exploration and development projects are being shelved.

Couple markedly decreased investment in the sector with accelerated production declines in many of the world’s premier oil fields and pretty soon you’re looking at a steep price hike in the not-too-distant future; one that could potentially dwarf anything we saw in the run up to $147 per barrel.

In the column below, our resident small cap expert, Greg Guenthner, examines the frighteningly precarious fundamentals on which future oil supply now hinges. If you are a member of the population we mentioned above (the car-driving type, etc.) this will impact you directly. Details below…

— Energy & Scarcity Investor Insider’s Report —

Urgent Notice For American Energy Users: Introducing…

The Breakthrough That Could Put Oil Refineries Out of Business

This tiny company’s private technology refines crude oil as it’s pulled out of the ground…And you can get in on it today for a potential 250% gain this year. For the rest of this must-read report, click here

—————————————–

Surviving the Selloff
By Greg Guenthner

The Great American Debt Machine has come to a grinding halt. One only has to look toward the auto industry for a glimpse of how it’s all playing out. Right now, U.S. auto dealers are coping with a triple threat: soaring energy costs, a difficult credit crunch and the industry’s worst sales drop in 15 years.

“Car dealers are like the canaries in the coal mine,” Sheldon Sandler told the Associated Press. Sandler is the founder of Bel Air Partners, a firm that helps car dealers find options when they want out of the business.

Inventory is languishing at car lots all over the country and customers are scarce, with many unable to obtain auto loans as the credit crunch escalates…Doom and gloom seems to surround us…and reasons to buy stocks seem as scarce as altruistic investment bankers. During times like these, it’s all too easy to become caught up in the moment. Fear is a powerful emotion. As the markets continue to crumble, many investors lose sight of their goals. They sell positions indiscriminately; they become irrational.

The sell-off we’re experiencing right now is global. And no stock or commodity has escaped the devastation. That’s why we’re looking at a scarce and valuable resource for steady long-term gains: oil.

One energy guru recently made a big bet on oil. He repurchased shares of Exxon, ConocoPhillips, Pioneer Natural Resources, BP and Statoil — all at rock-bottom prices. We say he RE-purchased these shares because, in a prescient move, this sage sold off every oil stock he owned in May…back when oil was sitting atop $129 per barrel.

Richard Rainwater knew he would be leaving the party a bit early to the party — and probably miss the top — when he sold his oil investments back in spring. But he also knew that the gains from his $300 million invested in oil stocks and futures were in jeopardy.

“I just felt that America was not ready for $4 gas and we would see a pause here,” he told Time magazine in June.

Rainwater cashed in his profits just before oil’s peak in July. Now, he’s ready to do it all over again, spreading his millions across Exxon, ConocoPhillips and other big-name petroleum pushers.

Rainwater’s outlook is simple: Increased worldwide demand will continue to push the oil price up in the long term. Rainwater’s not alone, either. Analysts and industry experts — like oil tycoon T. Boone Pickens and OPEC President Chakib Khelil — have been making it perfectly clear…oil won’t be down too long.
On July 11, 2008, oil made a record ascent to $147.27 — a 123% jump in only 12 months. Since that momentous event, however, it has been all downhill for the energy sector. As the nearby chart illustrates, oil stocks (yellow line) have been closely tracking the downward trajectory of crude oil (blue line).

With oil sitting below $60 right now, oil aficionados like Pickens are bracing for the run-up to come. “The Saudis claim they have more oil; they don’t. The president wasted his time to go to Saudi Arabia, to say, ‘Give us more oil.’ They can’t give any more oil…they’re stacking up the money as fast as they can stack it up,” warned Pickens in an interview with CNBC.

The allure of oil is hard to refute. With finite supplies and unquenchable demand, it’s clear why many investment houses put oil above $200 in the near future. According to Pickens, it’s just a case of an oil-hungry economy overwhelming producers: “Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87 million. It’s just that simple. It doesn’t have anything to do with the value of the dollar.”

Now is the time to buy oil. The second quarter of 2008 saw the largest drop in oil prices in 17 years. Now with OPEC slashing its production outlook for the rest of 2008 and 2009, it’s unclear just how long prices will be able to stay under $100…much less under $57.

[Joel's Note: Right now Greg’s Bulletin Board Elite investment service is available for a 50% discount…but only until midnight tonight. In it he explains how “Flash Action” market moves can help you turn $500 into a whopping $14 million. Sound too good to be true? Read on here and decide for yourself. You’ll get one final reminder before the half price offer expires tonight, then it’s all over.

—- Bulletin Board Elite “Flash Market ” Strategy —-

One Month and Three “Flash Action” Market Moves Could Be Your Chance to Turn $500 into $14 Million

It’s happened before and it could happen again — starting as early as Thursday, Nov. 13 …

With hundreds of billions of dollars in liquidity sloshing around the marketplace, eagerly seeking a safe place to whether the financial meltdown, these three “Flash Action” market moves could launch your portfolio into the stratosphere.

There has scarcely been a more exiting time to invest…provided you know where to position your cash! Get Onboard While Positions Last Right Here

—————————————–

[Rude Endnote: Expect another spectacularly tumultuous day in the markets today. Futures point sharply lower for Wall Street after Asian and European markets were dealt another uppercut overnight. Japan’s Nikkei 225 , Hong Kong’s Hang Seng and the Aussie All Ordinaries all fell over 5%.

We don’t have time to go into the catastrophic events unfolding here in the Gulf region right now, but if you Google “Kuwait bourse 40-month lows” you’ll soon get the general gist of things.

Until next time…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com

Categories: Agora Financial

Government-Guaranteed Depression

Wed, 11/12/2008 - 06:32

Dubai, UAE

·      An in-depth look at the long, hard road ahead for Obama,
·      Is your 401(k) in danger of being stolen? What some congressmen have        proposed,
·      Learning from others mistakes AND successes, plus plenty more…

Joel Bowman, reporting from Dubai in the Persian Gulf…

It is often said that, mistakes being inevitable, the best we can hope for is to learn from them. This is most often true…except in the case of fatal error, in which instance others may learn from you. With that in mind, let’s go mistake hunting.

We’ve long maintained that Dubai is really just like America…on steroids. Where the U.S. has supersized Wal-Marts, for example, the UAE has indoor skiing at the mall. While militant enviro-nuts around the world scream for the U.S. to rein in its carbon emissions, the UAE happily spews out the second highest per capita emissions of any country on earth (approx. 7 million tones per person annually). While the U.S. endures a reputation for obesity, the percentage of national UAE adult suffering from diabetes stands at an incredible 19.5% (world average, approx. 5%).

In short, the U.A.E is just like the supersize country…only super-supersized. It stands to reason then that, as the U.S. suffers a super-sized financial fiasco, the City of Gold would go one better…

This week Dubai finally joined the elite of the elite when it comes to embarrassing market meltdowns. After plunging over 16% in the first two trading days, Dubai’s DFM Index may now rub shoulders with the likes of Russia, Iceland and Ukraine in the illustrious “Sub 60% YTD Club.”

There are so many inputs to credit here (the rest of us will cal them “lessons”), and so little space available, that a brief run through the list will have to suffice. Please forgive us if we miss anything out.

First of all, such a calamitous collapse wouldn’t have been possible without insidious government intervention into the everyday life of the economy. Distortion of market fundamentals, rent caps, wage manipulation, ongoing “Emiratization” of the labor force, bloated welfare programs, intervention into the banking and construction sectors, nationalization of the emirates resources and the blatant and severe restrictions on freedom of the press have all played their part.

Of course, a giant public relations scam is nothing without a complicit public. To everyone who “bought on spec” with the primary goal of dealing your property off to an even bigger idiot, we salute you! The magnitude of the Dubai real estate bubble (think man-made palm islands, the world’s tallest building, “The World,” etc.) and the coming collapse would not have been possible without your ponzi-like antics.

According to The National newspaper, “Residential prices for Emaar Properties’s signature Downtown Burj Dubai development have fallen by at least 22 per cent, with reductions of up to 50 per cent within the Burj Dubai tower itself.”

Local real estate brokers are trying to sure up investors who, having sensed that the game might be up, are scrambling for the door, selling at and even below zero-premium. Such a panicked exodus must have seemed so unlikely when the centerpiece tower sold out in record time. (The tower is not even due for completion until late next year!)

The situation is so intense that Llyods TSB Middle East, a British bank, has even stopped issuing mortgages for UAE apartments and is now requiring a 50% down payment for villas.

Predictably, major players in the real estate sector have been absolutely crushed. Emaar Properties, a government owned joint stock venture and the region’s premier real estate developer, was among the worst hit. The company’s precipitous decline over the past month has outpaced even the DFM itself, falling almost 45%.

We earnestly recommend that those contemplating vying for leadership positions in the One World Economy (Prime Ministers Brown and Rudd, president-elect Obama) take a good look at the havoc excessive government intervention has visited on individual nations before they apply it to the world at large. (Case studies of Russia, the UAE, Venezuela and Iran might be a good place to start.)

Learning from others’ mistakes, of course, is only one way to “edumacate” yourself. Paying attention to their successes is at least equally enjoyable and, more often than not, far more profitable.

With that in mind, we offer you a few thoughts on the global economic predicament from Dan Amoss, editor of the Strategic Short Report. Against the backdrop of the imminent global recession Dan has offered his readers the chance at racking up cumulative gains of over 1,400% on his closed SSR positions. We reckon that’s a success rate we can learn a thing or two from. Enjoy…

- Protect Your Assets With The Strategic Short Report -

Introducing…

The Bear Market Strategy So Powerful, Governments Have Tried to OUTLAW It At Least Three Times

Even as markets continue to implode, wiping out billions across global indexes, a handful of investors are reaping the rewards of playing the short side. Last year, this unique strategy even made as much as $10.96 million per day for one astute investor…

Now, for the first time, we’re revealing the five-step secret that lets you do this. Grab Our Full and Detailed Report Here

—————————————–

Government-Guaranteed Depression
By Dan Amoss

The American people voted for change…and now they’re going to get it. But the change they get may not be the change they expect Obama to deliver. Something more sinister may be coming our way.

After an historic election and inauguration, president-elect Obama will enter office with a huge list of challenges. These challenges — from a contracting economy to large-scale corporate bankruptcies to soaring national indebtedness — will undoubtedly restrict his agenda.

Let’s hope Obama recognizes the need for incentives, profits, and capital investments in the economy. The economy cannot be taxed and regulated without potentially severe consequences. Former Fed Chairman Paul Volcker (and the last Fed chairman to provide adult supervision for the banking community) is an Obama adviser. So Obama should be apprised of the consequences of Carter-era deficit spending and money printing.

At the very least, Obama must act as a check on the potential for a Democrat-dominated Congress to turn a recession into a depression.

For example, some in Congress are floating a proposal to steal your 401(k), sell the proceeds, and invest in “government-guaranteed” retirement accounts. The only thing this Marxist idea would guarantee is a depression. Call or write your congressman if you feel that your 401(k) is in danger. We shouldn’t allow them to steal more from prudent savers than they already have.

Keep in mind that presidencies rarely resemble campaigns. President Bush campaigned on limited government and a humble foreign policy, and we got the opposite. To top it off, we had the illusion of real growth, with credit and housing bubbles that led to the greatest misallocation of resources in history.

The free market has been falsely accused for this financial crisis. But the free market didn’t get us here; a combination of government spending and crony capitalism did. Much ink is wasted on how we need to re-regulate Wall Street, but the fact is that the problem would never have grown so large without agency conflicts.

The agency conflict on Wall Street is the mentality of “heads I win, tails you lose.” CEOs, traders, and mortgage-backed security factories were paid more for taking more risk. So it shouldn’t surprise us that they overdosed on leverage to magnify returns, without considering risk.

Performance pay should be based on creating long-term shareholder value, not on meeting next quarter’s earnings estimate. A good place to start would be bonuses in the form of restricted stock that does not vest for 10 years. I doubt Lehman would have blown up if employees were paid modest salaries with the potential for sizeable ownership stakes in the future.

Much of our current mess resulted from totally complacent, incompetent boards of directors. Carl Icahn has good ideas for how this can be addressed without excessive regulation. Icahn explains how most corporate boards behave like government bureaucrats in this post . In my view, we need an economy in which everyone acts like owners, rather than CEO-pillagers.

A banking system built upon on a foundation of paper money also contributed to this crisis. The Treasury and Fed allowed institutions to grow “too big to fail.” Without taxpayer subsidies (i.e., Fannie and Freddie — two of the worst crony capitalist institutions in history) and the subsidy of Fed rate cuts, housing prices would have kept growing in step with household income. Instead, house prices went to the moon. Precious capital was thrown into a black hole when mortgage-underwriting discipline went out the window and homebuyers deluded themselves with bubble psychology.

When the current deflation fears are finally slain by widespread recognition that paper money is limitless, we’ll probably see a return to inflation and higher long-term interest rates.

For now, though, demand for bonds remains strong (rates remain low). So the government will likely keep issuing record amounts of new Treasuries and use the proceeds for bailout after bailout, instead of for productive uses. In other words, the government will toss billions of dollars at walking corpses like AIG – a company that produces nothing but spectacular losses and embarrassing headlines – instead of tossing billions of dollars at companies that produce essential items like barrels of oil or bushels of wheat. When governments toss easy credit toward non-productive industries, the supply of currency soars relative to the supply of goods and services. We call this phenomenon, “Inflation.”

The U.S. government’s massive borrowing requirements over the next several months will absorb a lot of the private capital that would otherwise fund various productive enterprises. So that means that farmers and miners and manufacturers will struggle to secure the credit and investment they need to finance their production. And if farmers can’t get credit, they can’t plant crops, which means that grain supplies are likely to fall…and prices to rise.

As Albert Einstein observed, “The significant problems we face cannot be solved by the same level of thinking that created them.” If the federal government proposes “solutions” to this crisis with the same type of thinking that got us here, we could be in for a very long period of economic pain. America’s status as a destination for foreign capital is at stake.

If the new government fails to act wisely and understand how we got here, the only “government guarantee” we’ll have is depression.

Joel’s Note: The silver lining on this doomy cloud is, of course, that short selling experts like Dan Amoss still have plenty of “walking corpses” left to expose. As we mentioned above, Dan’s readers are having an absolute field day right now, raking in gains from fraudulent, ineptly stewarded financial institutions of all stripes. They grabbed an incredible 462% on put options Dan recommended on Lehman Bros. just recently, for example. In fact, the total cumulative gains on Dan’s closed positions stand at an incredible 1,459% - an average upwards of 97% per trade!

Employing a bear market strategy is not just about understanding that the emperor has no clothes on, it’s about putting money on it and enjoying the rich rewards that come when the giants fall.

Although most of Dan’s current open positions have already leapt well above his original “buy up to” price (much to the delight of his readers), you can still get in on the some of the action. One particular play, for instance, has “only” jumped 17% since he first recommended it, well below the 70% average gain currently showing for the rest of his open positions.

If you would like to start taking these companies to task – and enjoying the profits that come along with it – you can read Dan’s full bear market strategy report right here. If not, it could be a long, miserable winter out there.

— The Sovereign Society Research Report —-

The Ingenious “Mammoth Hunting Strategy” Revealed …

This is a rather unusual story…

Recently a team of Harvard and MIT researchers made a scientific breakthrough that has unlocked the “predictability” of exotic investments. In fact, using just a few proprietary “trigger” signals… 84 “Big Game Hunters” had the opportunity to experience what most Americans never will - $232,500 in just 71 days .

While these kinds of profit opportunities fly well outside of most people’s “comfort zone”… those who consider themselves “Big Game Hunters” should absolutely consider implementing this methodology for themselves.

Read on here to discover every detail of this phenomenon.

—————————————–

[Rude Endnote: It occurs to us that, to the casual observer, it might appear that your editor has been on a bubble-hopping gallivant for the past few years. We’ve lived, for various lengths of time, in New York, Southern California, the U.K. and, to top it off, we currently reside in the place we like to call “Dububble.”

The more astute observer will quickly recognize that there is scarcely a patch on this great wondrous orb of ours that has managed to avoid financial catastrophe. Just about every major world index is in the red, many in the high double digits.

Still, for the serious bubble enthusiast, it’s best to get right up close to the action; so close, in fact, that the delusion is almost palpable and the very anatomy of the scam can be seen with the naked eye. After all, how can we expect to learn from others mistakes if we don’t pay vigilant attention while they make them?

As always, we are open to your thoughts, suggestions and constructive comments. Fee free to email us at the address below with all things Rude.

Until next time…

Cheers,

Joel Bowman

P.S. Oh yeah, don’t forget to grab your free copy of the I.O.U.S.A. DVD. Addison tells us the complimentary “pre-release” inventory is running low, so you’ll want to be quick - JB

The Rude Awakening
aussiejoel@the-rude-awakening.com

Categories: Agora Financial

Betting on Gambling

Tue, 11/11/2008 - 05:11

Baltimore, Maryland

·      Could small-caps lead the market out of its slump?
·      Three tiny companies with rock solid fundamentals and P/Es under 7,
·      Limited inventory I.O.U.S.A. DVD giveaway and plenty more…

Greg Guenthner, reporting from Baltimore, Maryland…

A couple of weeks ago, I huddled with some of my colleagues to discuss the state of the financial markets and to exchange investment ideas. Meetings like these are always interesting, but rarely dramatic. However, this particular meeting had a decidedly different feel to it. Only one individual in the room – a short seller – had been enjoying himself during the previous weeks. Everyone else had been suffering some amount of pain and frustration.

“What’s next?”…That was the question on everyone’s lips. That’s still the question today.

This financial meltdown is mauling almost every asset class. Stocks are trashed. Corporate bonds are a wreck. Emerging markets are crushed. Energy prices are tumbling. Commodities generally are in the dumps. Safe havens? Get outta here!…Even gold is trending lower. There has been nowhere to hide…except T-bills.

But there is a ray of sunshine; stocks have not been this cheap in more than twenty years…and many stocks are as cheap as anything you could have found at the market lows of 1974. No, we don’t think your should borrow a massive amount of money to invest, hoping for a quick turnaround. But it is time to cautiously look at the opportunities the market presents…

Often, it is the small companies that lead the charge toward market recovery. Just take a look at what some of the market specialists are saying:

“When you look back over the last 10 recessionary environments, what tends to lead back on the upside is small-cap equities.”

— William Greiner, Chief Investment Officer of UMB Asset Management

“Like springtime crocuses, small-cap stocks flourish once the harsh cold of a bear market is over… Because small-caps are undervalued once the market turns around, they benefit disproportionately from an earnings recovery.”

— Larry Light, Wall Street Journal

Now, who knows when the bear market will end, or when the stock market will find a bottom? After the Dow’s 1,000-point rebound on October 13, we all hoped the worst was over. That rebound, however, proved to be nothing but a tease. Over the following weeks, the Dow proceeded to give back every one of those 1,000 points. Then stocks rocketed higher again…and then tumbled again.

Despite these 1,000-point gyrations, the Dow has managed to crawl almost 9% above its bear market low of 8,175. Unfortunately, the beleaguered index would need to gain another 60% to return to its all-time high! So that gives you some idea how far the mighty have fallen. And many of the less-mighty – the small cap stocks – have fallen even farther. But this is where our sad story takes a turn for the better: A lot of very fine stocks are wearing deeply discounted price tags.

Just look at a stock like Neenah Paper (NP: NYSE), a small-cap paper manufacturer that saw its share price slide 80% despite very solid fundamentals. Or look at stocks like chip-maker Silicom Ltd. (SILC: NASDAQ) or chemical manufacturer Buckeye Technologies (BKI: NYSE), both of which have solid fundamentals and P/Es under 7.

Even though the markets have been anything but kind to investors lately, a few courageous (and historically successful) investors are making a good case for buying up some undervalued stocks right now.

Warren Buffett, who has never claimed the ability to predict short-term stock market action, is one of the investors who is beginning to make some purchases. “A simple rule dictates my buying,” the Oracle of Omaha explains, “Be fearful when others are greedy, and be greedy when others are fearful.”

We agree…and we think it’s time to get greedy…at least a little greedy.

—- Bulletin Board Elite “Flash Market ” Strategy —-

One Month and Three “Flash Action” Market Moves Could Be Your Chance to Turn $500 into $14 Million

It’s happened before and it could happen again — starting as early as Thursday, Nov. 13…

There has scarcely been a more exiting time to invest…provided you know where to position your cash! Get Onboard While Positions Last Right Here

—————————————–

Betting on Gambling
By Greg Guenthner

Warren Buffett amassed his multi-billion-dollar fortune by investing in companies that were both exceptional and exceptionally low-priced. In other words, he did not merely buy low-priced stocks; he bought the low-priced stocks of great companies.

In last year’s letter to shareholders, Buffett explained that he looks for businesses that he can understand, have favorable long-term economics, able management, and a sensible price tag. If you want to play off of Buffett’s strategy, the first thing you’ll want to look for is a business model you can count on.

Understanding what you own is an essential part of investing. During the tech bubble, as Internet companies grew at an impressive clip, Buffett stayed away, simply because he didn’t understand their business prospects. The decision turned prophetic when the bubble burst and online companies went belly-up one by one.

“The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down,” explains the Oracle of Omaha.

The computer hardware industry is also a prodigious consumer of capital, as is the auto industry. But the gaming industry is quite the opposite, which is one reason we like it, especially when the economy falls on hard times.

When the going gets tough, people count on Lady Luck to turn their misfortunes into riches. A Rockefeller Institute of Government study cited in a recent New York Times article reveals lottery revenue has experienced steady growth over the past decade. Even more telling is lotto’s highest rate of growth: during the post-Sept. 11 recession of 2001-2002.

Some may call it a case of misplaced priorities…but in times of financial stress, more people resort to gambling on lottery tickets to pull themselves out of economic hardship. In other words, you might not have the money for a new high-def flat-screen TV, but you can still pull a couple of dollars together every week for a chance at millions.

Even though most players know the chances of hitting that multimillion-dollar jackpot are slim, they’re willing to stay in the game… Here’s a telling quote from the piece in The New York Times:

“‘When people view themselves as doing worse financially, then that motivates them to purchase lottery tickets,’ said Emily Haisley, a postdoctoral associate at the Yale School of Management who in July published a research paper on lotteries in the Journal of Behavioral Decision Making. ‘People look to the lottery to get back to where they were financially.’”

Scratch-off tickets offer those with little disposable income a quick gambling fix. State-run lotteries have taken notice and have expanded their offerings to include slightly pricier scratchers with multiple chances to win. Costing anywhere from $5 to even $50, these tickets offer multiple chances to win bigger prizes. And the tickets still have the instant-win draw of the traditional $1 scratcher.

Massachusetts, the state with the highest per-capital ticket sales, recently introduced new instant-win tickets — a move that helped the lottery hit record sales topping $4.7 billion for the fiscal year. These new and improved scratchers are enticing many low-budget gamblers to take their chances locally, instead of traveling to casinos. Make no mistake about it — this is a huge draw.

The lotto industry’s recent bump in popularity coincides with a recent slump in national casino revenues. Take the grand-daddy of them all, Las Vegas. In 39 of the last 40 years, Vegas’s gambling revenues rose. Only one time during those 40 years did they fall. But this rare occurrence is about to repeat itself.
Revenues in 2008 are lower than last year’s. Apparently, Vegas is not as recession-proof as it used to be.

But most of the gamblers who can no longer afford the trek to Sin City can still afford to buy a scratcher or two. That’s why the lottery business is one of the very few that can flourish in good times and bad. I’d call that a solid bet.

Warren, if you’re reading this column, I’ve got some recommendations for you.

Joel’s Note: Greg is currently recommending one pure lottery play to his Bulletin Board Elite readers. The stock trades for less than a dollar and right now you have a chance to get in on it before it makes the jump…but you’ll have to be nimble. Grab all the Details Here

—- Attention: Limited Inventory I.O.U.S.A. DVD Giveaway —-

Just released . . .

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How much of that $810 billion Wall Street bailout will land in your account? Not a dime. Meanwhile, our new FREE “Emergency ‘Personal Bailout’ Bundle” shows you…

What a sham the bailout is, how we got here, and what happened to the America we used to know.

How to rescue your retirement with up to 78 personal “bailout” checks instead, paid direct to your account over the next 24 months.

And how to salvage the financial security of your children, your grandchildren and America itself.

Again, it’s all free — as long as you claim everything before I give away all the free “pre-release” materials I have on hand. Click Here To Claim Your Copy

—————————————–

[Rude Endnote: Investors saw an early mob rush after the weekend renegotiation of AIG’s taxpayer-funded lifeline. As has been the case with every single bailout since all this commotion began, the market rallied…and then realized what had just happened.

After an early mini-rally, the Dow resumed its seemingly endless downward spiral to close the session 70 points lower. Realizing they’d been had, Asian and European promptly surrendered Monday’s gains overnight too. The Hang Seng gave back 4.75% and the Nikkei 3%, while the Aussies and Brits coughed up 3.4% and 2.5% respectively.

Emergency sirens are not a cause for celebration, Rude reader; they are a reason to be fearful. When you hear politicians blabbering on about One World Economies, United Fronts Against Financial Crises, Universal Bailouts and the like, it might help to imagine them as an ambulance speeding towards your residence.

Before you cheer their arrival, ask why they are heading to your house in the first place. Then, when you find them in the living room affixing an oxygen tank to grandma, be sure to ask what they are filling it with.

Until next time…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com

Categories: Agora Financial

Turning Chinese

Mon, 11/10/2008 - 07:11

Ouzilly,

TaoEconomics

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