In the Midst of the Storm

New unemployment claims continue to run over 400,000 per week.  Inflation continues to grind away at our incomes and savings.  Good old Folgers coffee at the local Sam’s Club has risen from $9.xx to $14.xx  (+50% increase) for a 48-ounce container in the last eighteen months – mostly since Bernanke’s disastrous QE2.  Meat, cheese, beans, and even peanut butter continue to climb in price as a weakened dollar and advancing fuel costs cut into profits.  Corporations have cut all the fat trying to improve profits while dealing with stagnant or decreasing revenues.  Uncertainty and instability are hampering growth.  More people are trying to save more money even as the rates for “safe” Certificates of Deposit pay less than 1% and are negative relative to inflation.

The stock markets have taken a hit, and they are going to recover a little.  I would not be at all surprised to see Obama’s speech tonight lead to a modest rally tomorrow just on the basis of the fact that several corporate bureaucrats will be in attendance at the teleprompter reading. (UPDATE:  Oops -- looks like I was dead wrong about this -- no one was impressed with the Pass-it-now President.) Markets and economies operate on Chaos Theory.  I offer no investment advice.  I currently have no individual stocks, but I have about 15% of my investments still in equity mutual funds – a couple of value funds, a mid-cap, a foreign fund, and a very small amount in a couple of growth funds.  Otherwise I am 85% in bonds and cash – not counting tangibles.  I am trying to stay flexible enough to go either way.  A big market correction would probably see me dumping some money from bonds to equities. 

Gold was either vastly underpriced three or four years ago or is somewhat over priced now.  My read of inflation would have it somewhere around $1000/ounce, and I would buy it anywhere near that now.  Silver is the same way.  I would start buying again around $30/ounce.  I suspect that speculation and FUD is driving the rise over the last year.  I may well be wrong, and gold will hit $2500 and silver $100 before next year’s election.  It’s quite possible, especially if the Fed unleashed QE3. 

Obama is going to be talking a couple of hours from now.  He will offer nothing new.  More government spending with tax increases down the road – after November 2012.  He will offer tax credits to employers to hire new workers.  He will demonize Congress, the Republicans, and the Tea Party.  The speech will mainly be an attempt to create a wedge issue on which he can campaign.  I think he will get a small bounce in approval among his core supporters – the unions, welfare queens, teachers, and other government workers.  Everybody else will be getting home from work, eating dinner and getting ready for some football.  The bounce won’t last.  Nothing in the way of tax increases or increases in the deficit is going to get through the House.  The Senate is already sitting on House-passed jobs bills.  In other words, the teleprompter is programmed strictly for politics tonight. 

I am not going to watch to see if I am right. 

Herbert Hoover may have been a Republican, but he was, like Obama, a progressive.  Also like Obama, he responded badly to the Crash of ’29.  His policies of government intervention in the private sector drove America into a depression.  The election of Roosevelt continued and double-down on Hoover’s policies resulting in the Great Depression – soon to be called the Great Depression of the 20^th Century so as to distinguish it from the one into which we are headed.  I have little hope that even the best conservatives in the House, the Senate, and the Presidency can turn the ship around in time to keep us from running aground. 

You might think of it like this:

Since they had been without food for a long time, Paul stood up among them and said, “Men, you should have listened to me and not have set sail from Crete and incurred this injury and loss.  Yet now I urge you to take heart, for there will be no loss of life among you, but only of the ship. … So take heart, men, for I have faith in God that it will be exactly as I have been told.  But we must run aground on some island.”

Now when it was day, they did not recognize the land, but they noticed a bay with a beach, on which they planned if possible to run the ship ashore.  So they cast off the anchors and left them in the sea, at the same time loosening the ropes that tied the rudders. Then hoisting the foresail to the wind they made for the beach.  But striking a reef, they ran the vessel aground. The bow stuck and remained immovable, and the stern was being broken up by the surf.  The soldiers' plan was to kill the prisoners, lest any should swim away and escape.  But the centurion, wishing to save Paul, kept them from carrying out their plan. He ordered those who could swim to jump overboard first and make for the land, and the rest on planks or on pieces of the ship. And so it was that all were brought safely to land.   --Acts 27:21-26, 39-44  (Emphasis mine)