Thursday, October 25, 2012

A Valuable, Valuable Clue As To What To Do

October 25, 2012


Mogambo Guru

Junior Mogambo Ranger (JMR) Philip S. kindly forwarded an entertaining email to me, containing a lot of facts about, of all things, the year 1910.  


Now, I gotta tell ya,  I can remember a lot of things, mostly as a result of living a lot of years and thus spending a lot of years finding out about a lot of stuff, but 1910 was not one of them.


Accordingly, on the Mogambo Hierarchy Of Interest (MHOI), it always rated a big, fat zero since I have never heard anything about 1910 that I could use.  For instance, maybe in 1910 there was some wonderful hair tonic to grow my hair back, only fuller and more luxuriant, or some glorious elixir to give me a powerful, studly physique with bulging biceps and washboard abs, but without exercising, preferably in an inexpensive pill, that works overnight, while I sleep, so that I wake up refreshed, strong as an ox and looking like a million Hollywood bucks.


Now THAT'S as a 1910 I could use!


So, perennially scoring the proverbial "none of the above", I thought I would be immediately bored to death with some doofus email about 1910.


It turns out I was wrong!  It was more interesting than that, from an economics standpoint, by which I mean from an inflation standpoint, by which I mean prices going up, by which I mean the inevitable result of creating too much money and credit, by which I mean that the evil Federal Reserve is creating massively too much money and credit so that the horrid Obama administration can deficit-spend roughly $1.5 trillion a year, by which I mean we're talking about annually adding national debt equal to ten percent of GDP, by which I mean This Is Too Freaking Insane For Words (TITFIFW).


For instance, from the email we learn that in 1910, "The average US wage in 1910 was 22 cents per hour."


We later learn that "The average US worker made between $200 and $400 per year."


Well, I immediately sense that this is the perfect opportunity to show off my skills in using a calculator, and so I start to look for mine, and I couldn’t find it, eventually gave up after a fruitless twenty seconds or so, and reluctantly did the long-division by hand, over and over, seemingly getting a different result every damned time, until my hand got a cramp and I was really grumpy.


In doing so, I found out two interesting things. 1) Doing long-division with paper and pencil is more confusing than I remember, and 2) The average US worker (working 52 weeks a year) worked somewhere between 909 hours per year (a lousy 17.5 hours per week) and 1,818 hours per year (a more respectable 35 hours per week).


Immediately, the nimble Analytical Mind Of The Mogambo (AMMTM) concluded "Seventeen hours a week working? What a bunch of lazy bastards they were!"


Of course, I am not going to call them "lazy bastards" out loud since that would cause, as it always does, those people who are merely standing nearby to perk up, happily start talking trash about me, and how I am the King of Lazy Bastards, and that I am, by consensus, the laziest bastard in town, no matter what town I am in, and definitely the laziest man any of THEM ever met. Ever!


And it's not like I don't patiently and clearly explain to them that "I am not here to do any work, you lowlife morons! I am only here to (insert variously 'Get a paycheck,' 'Sit on my fat ass,' or 'Eat like a pig')!" 


Yet, unbelievably, they look at me like I am the crazy one!  Me!  I mean, why ELSE would I even BE here, ya morons? For my health?


"So," I can hear you asking yourself, "what does any of this have to do with anything?  Is there a point? Will he ever get to the point? Why am I wasting my pathetic life reading such Stupid Mogambo Crap (SMC), anyway? What in the hell is WRONG with me?"


Well, since you are so impatient, I'll tell you the point: It has to do with inflation in prices, and how intelligent people fear inflation, especially the kind where people cannot afford to buy food, which is the big killer of economies and countries, and then there is usually a war with somebody, and the whole thing is a Big Freaking Bankrupted Mess (BFBM).


More to the point, in 1910 "Sugar cost four cents a pound."

Eggs were fourteen cents a dozen.

Crappy coffee was fifteen cents a pound.


That got me started thinking about how the prices we pay for these things are relatively low, according to the inflation calculator at the Bureau of Labor Statistics, as they calculate that it now takes $23.37 to buy what one dollar bought in 1913 (the farthest back the program can calculate). 


And even though 1913 is three full years after 1910, that's still a whopping 2,337% inflation!  And that staggering loss of buying power of the dollar comes from just 3.14 % inflation per year, compounding!


So anybody -- and I mean anybody! -- telling you that 5% inflation is a worthy goal, "to prevent deflation" in the prices of stocks, houses and overvalued things in general, is a complete and irredeemable moron, which I deftly prove by noting that this outrageous idiocy is the actual opinion of the horrible Ben Bernanke, lowlife loser chairman of the catastrophic failure known as the Federal Reserve, and whom I nominate as King of the Keynesian Econometric Nitwits.


Now, after that unsavory-yet-satisfying bit of completely gratuitous rudeness and scornful disrespect, I will now, at last, add that spicy, piquant bit of extra horror that is so traditional during the Halloween season.


In this case, the terror of John Williams of still calculating inflation the correct, old-fashioned way, and finding the chilling, terrifying result that inflation in prices is now over 9% per year, compounding!


And by "compounding" we mean, of course, "growing exponentially", which is the problem with debt growing at an exponential rate: After all these years and decades of creating massive amounts of debt (and therefore new money) to both spend and to pay the interest due on an even more unbelievably colossal amount of existing debt, the upward-sloping curve of debt ("curve of death!") is getting pretty steep, the required amount of new money necessary to "keep on keeping on" becomes truly unbelievable, and soon, after that, things will really start getting completely irrational.


What to do? Beyond screaming in outrage and vowing to use the upcoming elections to wreak righteous revenge on the elected scumbags who caused all this mess, you mean? What to do?


That's a good question! Hundreds of millions of people in the last 4,500 years of world history, in millions of other countries and governments, have faced this Exact Same Question (ESQ) because their rulers were this same kind of Stupid Corrupt Scumbags (SCS).


So, pray tell, what did those hundreds of millions of people do? What Did they do? What did THEY do? What did they DO?


I mean, if we knew what they all did, and how it worked out for them, it could provide a valuable, valuable clue as to what to do!  


Hmmmm! "A valuable, valuable clue as to what to do"! Catchy!


Anyway, my fabulous bon mot aside, what history boils down to is that when the value of the currencies kept going down and down because the governments acted like they always do, the people who owned gold and silver (and got the hell out of town with it) did very well.


Those who owned all other things did, unfortunately, not.


So, I ask incredulously, how can this "investing thing" get easier when it is so glaringly, grotesquely obvious that the corrupt Federal Reserve is now, year after year, creating enough money equal to a tenth of GDP?


Causing massive price inflation? So that the insane federal government can borrow and deficit-spend that selfsame tenth of GDP? All because the US economy is now disgustingly distorted, monstrously malignant, twisted and totally, totally dependent upon massive, gagging amounts of government spending?


If you suddenly feel sick to your stomach, like me whenever I think of it, cheer up! I have good news at last!


What to do? It's not for nothing that Junior Mogambo Rangers (JMRs) around the world eagerly accumulate gold and silver bullion, and who say to themselves as they do, "Whee! This investing stuff is easy!"


And with 4,500 years of history backing their play, how can they lose? Easy and guaranteed!  Whee!

Wednesday, October 17, 2012

The Fabulous Mogambo Rational Dullard Portfolio (TFMRDP)

October 17, 2012

Mogambo Guru        

If I was a betting man, a hard-core gambling man, I mean a real long-shot kind of man greedily looking to make a ton of money in a hurry, using minimal investment, without doing any work, I would start accumulating out-of-the-money SP500 put options and/or short futures, starting right around in here someplace.


However, I am definitely NOT a betting man, because I really, really, really hate to lose money.  That's why I invest only in gold and silver: They are a sure-fire, can't miss, "a winner every time" kind of thing, as definitively proven by 4,500 years of history, compared to almost everything else being a guaranteed long-term loser, as evidenced by that selfsame 4,500 years of history.


Instead of opening old wounds ("You bet HOW much money doing WHAT, you lowlife, irresponsible, deadbeat moron?"), let me show you why I am thinking of making bets again.   As is Completely Freaking Obvious (CFO) from a cursory glance at the graph at, the SP500 price/earnings ratio has been clearly rolling over since 2001, when the market made its last high, and is seemingly on its dismal way to plumb new lows, making suckers out of people who bought-and-held equities over the preceding 30-year bull market that began in 1980.


In short, just as it has done 4 times since 1870, or roughly averaging every 30+ years or so, the bull market is again falling apart, and people holding equities are again going to lose their money, as they sadly must, since it is mathematically impossible for everyone to take more out of the stock market than they put into it.


Thus, the majority of investors take long-term capital losses, which is the cruel punch line of the biggest swindle of all: putting your retirement money into the stock market.


And how about adding the additional pain of inflation-adjusting those big losses?  Don't ask! For God's sake, don't ask!


So, hating to lose is why I completely quit making bets of any kind.  And my wife didn't help matters when her "loving support" consisted of, at breakfast one morning, saying "It's only a lousy dollar on the stupid lottery, you whining jackass!  If you are so upset to lose One Stinking Dollar (OSD) a week, why do you buy the damned lottery ticket when you know you are going to lose? I mean, it's not like they didn't TELL you that the odds of winning are 18 million to one, you whining bonehead!"


Of course, the kids cheerfully chimed in "Whining bonehead! Whining bonehead!"  


I, to my dismay, had nothing to offer in my own defense, except to cleverly say "Shut up! All of you just shut up!"  Unsurprisingly, their uninspired, dull response was "No, YOU shut up!" to which I wittily replied "No, YOU shut up!"   I expected that the repetitious repartee would soon end, but it didn't, and instead went on and on.


I will spare you the ugly details, except to say that there was a lot of yelling and screaming and crying (mostly me), and someone stole one of my waffles when I wasn't looking,

probably when I was busy throwing a childish tantrum because I was, firstly, righteously upset about my own children causing the eternal question "How sharper than a serpent's tooth is an ungrateful child?" to spring to mind.


Secondly, I was upset that I was rudely rebuffed when I carefully explained to them, in calm, cool, soothing tones, as befits a tender, loving father, "I am playing the lottery because we are freaking desperate, you little morons! The foul Federal Reserve is destroying us with a horrifying exponential/ logarithmic over-creation of money and credit, which means prices will have to rise in a terrifying inflation to absorb all of that new money coursing through the economy forever, and the response to such an economic horror is that the evil Federal Reserve creates even MORE money and credit, making everything worse!"


They were not impressed with that answer, as the odds of my hitting the lottery are probably better than the odds of my making money in the stock market, especially using a stupid buy-and-hold strategy. The fact is, as I never tire of pointing out, it is mathematically impossible for the majority of investors to take more out of the stock market than they put into it, thus the majority of investors will always realize a cumulative long-term capital loss, with the last guy to buy stocks taking the biggest hit.


And now, scarily, the current bull market that began in 1980, when Reagan started the fiendish fad of slashing taxes and making up for it by deficit-spending untold billions and billions of dollars, is -- sure enough!  -- about 30 years old, the P/E line is predictably rolling over, private debt is at a maximum, and the cyclical, boom-bust nature seemingly inherent in the history of economics is, again seemingly, repeating itself.


In case you were wondering, the P/E ratio is currently a tad above 16, which is sort of on the high side.  If things run to form, the SP500 will, with fits and starts, bottom-out about ten or twenty years from now ("mark your calendars!") when the price/earnings ratio is about 5 or below.


"So," I hear you asking, "How low will the SP500 actually go, since you think you are so smart and you run around shooting your mouth off like you know everything?"   


Well, consulting the Mogambo Triad Of Awesome Prediction (MTOAP), consisting of 1) mystical chicken bones, 2) things I vaguely remember from a long time ago, and 3) making up the rest to "fill in the gaps," the resultant Official Stupid Mogambo Opinion (OSMO) is that the index will probably fall down to around 100 (assuming there are 500 companies left to make up the index!), or less (assuming there are not), whereupon everyone gets squat, or, if you prefer, in the original German, "Squatzumwalletgebangenschlag."


I am so gloomily pessimistic because I expect a complete, cataclysmic catastrophe to strike (checking my watch) any second now, partly because of this eerie "every 30-year cycle" thing,  but mostly because of the fact that everything and everyone is up to their ears in suffocating debt, and so the horrid Federal Reserve is always creating so much, so impossibly much, so unbelievably much, so terrifyingly overmuch money (and corresponding more debt) over the last Half Freaking Century (HFC), and never more than Right Freaking Now (RFN)!!!


I will not go into an elaborate, jargon-filled scientific explanation about the concluding three exclamation points at the end of that last sentence, but suffice it to say that it doesn't take a Junior Mogambo Ranger (JMR) to know one important thing: That much more new money means that much more new inflation in prices, and thus (extrapolating to the obvious, horrifying historical and theoretical conclusion) We're Freaking Doomed (WFD)!


And when you couple this P/E thing portending disaster, with the government's promise of higher taxes for years to come, wouldn't the rational investor sell before the December 31 cut-off, so as to realize taxable gains this year when taxes haven't gone up yet, as they must soon?


And when you combine all that with looming, dooming specter of inescapable trillion-dollar federal budget deficits for years and years to come, all requiring the Federal Reserve to create massively more money and credit to both absorb all that new Treasury debt and to pay the gigantic, growing, gagging interest payable on the massive, monumental mountains of existing public and private debt, all at terrifying levels never before seen in history, it seems, even to a complete dullard like me, that a really rational investor would be selling equities and loading up on gold, silver and oil.


Thus, we behold the genesis of The Fabulous Mogambo Rational Dullard Portfolio (TFMRDP), holding only physical gold, physical silver and oil stocks, and destined, as it surely is, to be the best investment advice that any paranoid, angry, cynical and hateful old man, who has studied the Austrian School of economics and thus "seen the light," ever gave.


And did I mention easy? Why, that's the best part! It's easy, too, as I prove by gleefully exulting "Whee! This investing stuff is easy!"

Wednesday, October 10, 2012

Mogambo Hunka Hunka Bunker (MHHB)

October 10, 2012

Mogambo Guru


I was hunkered down in the Mogambo Hunka Hunka Bunker (MHHB) after having worked myself into another panic about the inescapable inflationary terror that will surely follow the monstrous amounts of money being created by the corrupt Federal Reserve and other central banks, including the horrid International Monetary Fund.


I was trying desperately to calm down, hoping to feel safe behind triply-locked doors, armed to the teeth and surrounded by microwave burritos, gold, silver, oil stocks.  After awhile, and after a hastily-consumed burrito, I knew I was going to be "fine."


In fact, I will probably "a lot more than fine," with the wide sweep of possibilities ranging from the mundane "I'll be fine" to the classic "I'll be astronomically wealthy in terms of the sheer tonnage of neat stuff that I can buy, including enough money to pay off the wife and kids and finally shut them up about how I don't give them enough money to spend on their worthless trinkets, doodads, shoes, medical treatments and all that dental crap because I maniacally invest all our money in gold, silver and oil, demonstrating that I am smarter than all of them put together, entitling me to reap the rewards of a snazzy new car, maybe with some fancy mag wheels, in which to haul my worthless butt to the golf course, or just use the car to ride around looking for more things to buy, playing the radio and honking the horn at pretty girls walking down the street who are (as I am perfectly aware so I don't need to hear it again from you) young enough to be my granddaughters."


Finishing off a second burrito, mid-bite, out of the corner of my eye, I could see the Mogambo Monetary Seismographs (MMSs) going crazy, their inky needles wildly scritching and scratching frantically across the paper.   I thought to myself "That's odd!  How could such tinny sounds actually be the hoof beats of the Horsemen of the Apocalypse?" 

Well, that was entirely too melodramatic, I admit, but that's the kind of crappy mood I was in, detached, as if in a dream, and not the good kind of dream where beautiful ladies run their fingers through my hair, breathing huskily and saying "Oh, Mighty Manly Mogambo (MMM)!  I am thrilled by your raw, seething antipathy towards the evil Federal Reserve creating so much excess money and credit because it will destroy the dollar, destroy the economy and destroy us, and I am enthralled and entranced by your seething hatred of the corrupt, low-IQ Congress that lets them get away with, as you would charmingly call it, Monstrous Monetary Crap That Will Destroy Us All (MMCTWDUA)."


Normally, I am eager to fall into such a dream state and resist anyone rousing me from it, especially saying something like "Wake up! You are going to be late for work!" or "Wake up! The boss wants to see you in her office right now!"


But no such luck.  I was brought back to stark reality and the fullness of its ugliness by my eyes falling on the 5-Minute Forecast, written by Addison Wiggin. 


"As of Monday, Oct. 1," he writes, "the national debt stands at $16,159,487,013.300.35. This means the government racked up $1,369,146,684,743.20 in new liabilities last year."


If you are intimidated by incomprehensibly large numbers, or your brain refuses to understand what it sees, or you are like me and just too slow-witted to immediately comprehend what the hell is going on, then permit me to simplify.


To wit: The usurper Obama and his horrid, neo-Marxist administration overspent the government's revenues by a whopping $1.4 trillion dollars in the last twelve months! 


How much is $1.4 trillion?  This is more than all the individual and corporate income taxes paid to the federal government, combined!  In fact, it is more than half of the $2.3 trillion total federal tax receipts, including Social Security and Medicare taxes!


The $1.4 trillion deficit -- alone!  -- is a gigantic 9% of the Whole Freaking Economy (WFE) of the USA!  Choking on my outrage, I stammer out "Unbelievable! One out of eleven dollars of GDP is deficit-spent by the federal government!"


Of course, this always sets me off about the horrible Supreme Court, which made it all possible by ruling, over and over again, that the Constitution of the United States did not really, really, really mean it when it was stipulated that money "shall only" be silver and gold, which would have prevented any undue expansion of the money supply, and which would have prevented any of this bankruptcy crap from happening, and which was the whole purpose of the Founding Fathers writing into the Constitution the requirement that money be only gold and silver.


But it was the Congress that created the Federal Reserve, which is not federal and it has no reserves, yet it was given the power to completely control our money, despite it being owned and run by a large, shadowy bunch of greedy people, including foreigners.


So, who is to blame, Congress or the Federal Reserve?


Steve Saville of The Speculative Investor says that "We've speculated in TSI commentaries that unwavering devotion to bad economic theory (a type of stupidity) is the most likely reason for the Fed's introduction of a new inflation program at this time. There are other plausible explanations, but in general terms it boils down to this: the Fed is either stupid, or evil, or stupid and evil."


Later on, he admits "We'll go with evil and stupid."


And if the Federal Reserve is evil and stupid, and the Congress is corrupt and stupid, what is the smart thing to do?


I'm glad you asked!  Buy gold, silver and oil!  Gold and silver because that has always been the smart play for the last 4,500 years when governments behaved so despicably, and oil because it is now so completely vital, to so many people, that they must pay any price.


And with the insane overproduction of new money and credit by the filthy, foul Federal Reserve, the price of oil can go nowhere but up when the purchasing power of the dollar has nowhere to go but down.


And you need but look deep, deep into my bloodshot eyes to see the utter, utter sincerity there to believe me when I say, with the aforementioned utter, utter sincerity, that it doesn't get any easier, or smarter, than that. 


That's why I say "Whee! This investing stuff is easy!"