Category: Economics & Investing

Guest Editorial: Honey, I Vaporized My Customers, by John Mauldin

By now, everyone knows that the subprime crisis started with non-existent lending standards which resulted in the large numbers of foreclosures we are seeing today. Those foreclosures will be rising throughout the year. We are not near anything like the top of the rising number of foreclosures. Ben Bernanke said last July that losses from the subprime would be in the $100 billion dollar range. True confession. I think I wrote six months earlier that it would be $200 billion. I point that out to make the point that I am an optimist by nature. The latest “bidding war” number …


Letter Re: Forever Postage Stamps as an Inflation Hedge

Sir; You have written favorably of the US Postal Service Liberty Bell (“Forever”) stamps. Short history: The US Post Office Department was reorganized and became the US Postal Service effective July 1971. Employees of the Post Office then became employees of the Postal Service, but saw no changes in their paychecks. They looked the same. More recently, the Postal Service has likely accumulated significant cash from selling the “Forever” series. The government’s pledge is that the stamps will henceforth be honored as postage without supplement……no more adding one or two cent stamps’ postage (or more) to the already purchased forever …


Hedge Fund Redemption Suspensions–Tax Bills are Adding Insult to Injury

You’ve probably read about the seven Hedge Funds controlling $5.4 Billion have been forced to liquidate or suspend redemptions in the past month. Many of their investors had been leaving their full principal intact, quarter after quarter. In many many cases they want to continue to “let it all roll”, so they then used other funds to pay the tax bills on their hedge fund earnings. But now, with redemptions (cash outs) halted, not only will they lose most or all of their principal, but they must also pay the 2007 income tax on the “gain” for the calendar year. …


America’s Mountain of Debt: The Good, the Bad, and the Ugly

Collectively, Americans have accumulated a mountain of public and private debt in the past 20 years. The essential nature of all debts is that they someday must be repaid. Debts can be broken down into three categories: The Good. This is debt with low fixed interest rates, secured by tangible assets that have value that exceeds the amount of the loan. Everything is copasetic as long as the borrowers have a steady cash flow and can make their payments The Bad. This is debt that is either insufficiently secured, or that has a nasty contractual surprise waiting, such as an …


Letter Re: Galloping Bulk Food Prices

James, Just a quick report on what I’ve learned about buying bulk grains and beans. We have a local bulk food depot. I called to place an order. The guy checked with his wholesaler for prices, then called me back. He was aghast. He said everything was up around 25% since he had placed his last order two weeks ago. And up about 100% since the first of the year. The reason, the wholesaler reported, was demand from folks stocking up. The wholesaler was sold out of many items. Then I called an Amish bulk food store about an hour …


Debate on Pending Legislation Reveals the Depth of Debasement of Our Currency and Coinage

The US House of Representatives is currently debating HR 5512, (the “Coin Modernization and Taxpayer Savings Act of 2008”) legislation that would further debase our coinage. According to a article in The Chicago Tribune titled Change for a Penny?, pennies will soon be made of steel instead of zinc. Although the bill leaves it up to the Treasury, presumably, five cent pieces would be made of zinc instead of their current alloy of copper and nickel. I’ve warned SurvivalBlog readers that this was coming, and that they should start saving nickels. Coincidentally, reader RBS sent us a link to an …


The Ides of March–The Dreaded Margin Calls Have Begun at Banks and Hedge Funds

This week the news wires were abuzz about the Bear Stearns bailout. It all started with a margin call. An investment banking insider tipped me that there will be perhaps as many as five more “margin calls that can’t be answered” next week. Three names mentioned as possibly getting the dreaded call are Goldman Sachs on Tuesday and both Morgan Stanley and Lehman Brothers on Wednesday–on the same day that each reports their first quarter earnings. The word on the street is that all three may need to be bailed out, to varying degrees. Who is standing in the wings …


Letter Re: Wait and Buy Farm Ground Near the Bottom of the Market

James, I wanted to address some of the discussion about buying [farm] ground. I know the situation may be different in the West since the flood of Californians may never result in lower prices than are currently available. But the following is my view of the current situation in the Midwest . Keep in mind that farmland has rarely acted in the same way as housing prices have. For one there is not the mass subsidization of farm land purchasing like housing. (think GI loans, first time buyers loans, Freddie Mac and Sallie Mae, etc) The perils and pitfalls of …


Credit Collapse: The Depression Countdown Begins

SurvivalBlog includes plenty of gloom and doom, but I do my best to not be a ranting and raving alarmist. The recent torrential flood of bad economic news, however, has led me to now urge greater preparedness. Don’t quit your job and head for the hills yet, but by all means redouble your efforts to get ready. In my estimation, we are now on a short countdown to economic depression. Back in early 2006, I first warned about derivatives trading. Since June of 2007, I have been warning about the larger implications of CDOs. In January of 2008, I pointed …


“Official” Statistics on Population, Employment, Income Levels, Money Supply, and Inflation?

James: In a recent Odds ‘n Sods item, you cited a article published by The New York Times: You stated: “A key data point mentioned in the article: ‘The median household [in the US] earned $48,201 in 2006, down from $49,244 in 1999, according to the Census Bureau.’ “ That’s from changing population dynamics and more careful surveys of low-income families. For comparable populations, income has risen as you ought to expect. Consider the results for “Worked Full Time, Year Round, Both Sexes, White”… For 1999 income: Persons in this group: 81.7 million Mean income of all persons in this …


The Four Gs Update: Have You Got God?, Groceries?, Guns?, Gold?

In the next few paragraphs I’ll be tackling four issues that for many years, I’ve labelled “The Four Gs.” One of my contemporaries, Richard “Doc” Sweeny, even made the concept into and acronym: GGGG, for “God, Gold, Guns, and Groceries.” God. I consider faith in God the cornerstone of my family’s preparedness. Faith in God’s sovereign control of the future gives my family hope and peace in these troubled times. If there is no hope, then why prepare? Our hope is in Christ Jesus. Groceries. There are continuing reports of shortages around the country of wheat flour, corn meal, rice, …


Letter Re: Some First Hand Experience with Mass Inflation

Dear Mr. Rawles, I lived in Romania in 1993 and 1994 at the height of runaway inflation. It was not a pretty time to see the land of Count Dracula! A meal that cost 5 Lei in 1990, was 2500 Lei in 1993. My rent was paid in Deutsche Marks, as the landlord would not take Romanian currency. However, I had to stay three days in Bucharest prior to my departure for home. I paid nearly 4 Million Romanian Lei for the room, and it was crummy and shabby to boot! By that time, I think the Lei to Dollar …


Letter Re: Comments on Farm Land Versus Coastal Land

Regarding the recent comments in SurvivalBlog, I have no experience with coastal land. I do have experience with farm / rural land. In my part of the Midwest, "junk" land (rough land not really fit for farming or pasture…and not holding valuable timber) could be purchased all day long 10-12 years ago for $500-$750 per acre. I recently attended a sale of several parcels good only for hunting and the price was $3,000+ per acre. Top quality tillable land—great for corn, soybeans, wheat? Within the last 90 days a 1,500 acre parcel sold for $6,500 per acre. 10-12 years ago, …


Letter Re: Inflation in Zimbabwe Approaches the Wheelbarrow Stage

Greetings! It’s not quite a wheelbarrow full of money yet, but check out accompanying the photo in this news story. I guess that I should invest in a separate ALICE pack, for when ‘Helicopter Ben’ starts dropping off my paycheck – that way I can at least schlep it all to the grocery store, and keep my hands free to operate small arms. Check out the slide show imbedded in the article as well – shows just how far Rhodesia/Zimbabwe has fallen. – Bob in Pittsburgh


Two Letters Re: 21st Century Property Squatters

Dear Jim: < Sarcasm On > Your disappearing home equity got you down? Behind on your mortgage? What if you could live payment free for up to 8 months or more and walk away without owing a penny? See: You Walk Away < Sarcasm Off > The foregoing is a real solicitation to delay the foreclosure process. When real estate parasites like this have a business helping deadbeats game the foreclosure process, you know the Schumer is starting to really hit. Not that I have much sympathy for the crooked bankers and lenders being taken advantage of here (just wait …