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alstry (35.44)

Are Dollar Bears Dollar FOOLS???????

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January 25, 2009 – Comments (22)

Alstrynomics will have to break trend again.....what else is new......it is not easy being a shepard amongst a flock of sheep in a woolen sweater factory.

First what is a dollar....it is a zero interest rate note backed by the Full Faith and Credit of the United States GOVERNMENT.........NOT THE US PEOPLE.

The US Government has currently about $11-$12 trillion dollar of debt if you back out entitlements.  OH MY GOODNESS...did I just say $11-$12 Trillion?????   Yessireeeeeeeeee!!!!!!!!

As a holder of dollars, versus yen, juan, francs or whatever.....my concern is the ability of the holder to pay me back......

In order to assess that, I have to look at the solvency of the debtor and the collateral it has supporting its debt.....

So let's look at what the US GOVERNMENT owns........it owns mineral rights in Alaska and the Gulf of Mexico amongst a bunch of other places, it owns valuble water rights, it owns timber rights, it owns incredible Federal Park lands,  it owns a ton of fantastic buildings and museums, it controls a fanstastic productive infastructure generating trillions of dollars of tax revenues per year.....all this PROTECTED by a military second to none.

If you think about it.....few currencies in the world are backed by soooooo much natural resources as the dollar.......so commodity inflation should actually make the dollar RISE in value unless the US Government prints an incredible amount of dollars to balance out the offsetting rise in collateral.  Not too much different than a bond increasing in value when the makers ability to pay improves.

Who woulda thunk???.....commodity inflation actually strengthens the US Dollar....see this is the difference between Alstrynomics and Economics......Alstrynomics looks at the world practically......Economics forgets to apply the facts to reality and lives in a theoretical world.

Have you ever seen an economist value the assets of USA Inc against its debt???  The practicioners of Alstrynomics do it all the time, because as Americans, we view ourselves as shareholders and the Consitution is the bylaws which set the framework for our business.

The above analysis works just applying the natural resource interests of the US Government and NOTHING else.   Then add in the fact that US Government receives 1/3 of the profits of EVERY decent income earning business and individual in America not to mention the hundreds of billions it obtains from other taxes each and every year and other revenues sources.

Right now...rumors are flying around that one little drug company that starts with the letter W....well not sooo little, is about to be purchased for $65 Billion dollars......$65 BILLION dollars!!!!!!!  Then compare that to USA Inc and ask yourself what is USA Inc really worth?????

My guess is that you will find that the current debt load of the US Government, relative to the value of its assets and income stream, is far better than just about any major currency in the world.  And if commodity prices rise in value, the US Government owns a ton of commodities and the dollar should rise as well.

My favorite Foolians, and you know who you are,...... isn't that why you buy Gold Stocks??????  To indirectly benefit from the rise in Gold prices. Think of the US Government owning a 1/3 interest in the profits of EVERY Gold company in America.....not a bad thing to own if I say so myself......and you Fools called Alstry a gold doubter????? Shame on you.  Everytime I write a check to pay taxes, I think of it as my diversification investment into the income stream of some of the largest Oil and Gold companies in the world.  Everytime I collect dollars, I think of it as owning an interest in a bunch of commodity companies.

Alstrynomics doesn't want to burst your bubble about Gold.....just pay your taxes and and collect dollars and you will own a well diversified portfolio of commodity investments just by being a citizen of the United States of America and/or holding a bunch of dollars.  You think many Europeans or Japanese can say that????  However, Canucks can:)   How do you think the yen is gong to fare with EXPORTS DOWN 35%???????

The problems facing America are far more complex than the economic value of its currency or Government.  Those are pretty much in check.   The issues we face now are more political in nature as we have been mismanaged for the past few decades.  How this next CEO will turn out is anyone's guess....but Alstry always likes to maintain a VERY OPTIMISTIC BIAS until proven otherwise.....so what do I say for now???????

OBAMA!!!!!!  OBAMA!!!!!!!   OBAMA!!!!!!!!!  OBAMA!!!!!!!! 

CAUTION:  An economic analsyis of America's States, private businesses, and individuals leads to very different conclusions in many many cases.  So please don't confuse the the nature of the Alstrynomic analysis.

22 Comments – Post Your Own

#1) On January 25, 2009 at 10:18 AM, TMFJake (73.50) wrote:

Alstry for Treasury Secretary!

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#2) On January 25, 2009 at 11:19 AM, rofgile (99.30) wrote:

Nice post.  I agree that in truth (rather than in numerical dollar amounts) the USA is phenominally rich.  

I think your analysis above has been been one of the best written in a while.  Now, if you see the above as truth - that the USA owns a huge amount of land and natural resources (and has some of the brightest people resources in the world) - are things really going to be as bad as Alstrynomics has predicted???

Perhaps - if all the above is true - could it be that the media has overstated our problems relative to reality?  Could we have already hit the bottom in the markets and could this be a nice time to be investing in American companies (excuse me, in American countries that actually make something that the world wants - please do not include service, software, iphones, and financial derivatives that are not really needed/wanted)?

As for the debt of our country versus our assets - are our assets liquid?  Can we or would we ever sell any state to another country?  Nope.  Does the US really own the gold and silver that is mined?  Not right now it doesn't, though they could nationalize the mines...

Food for thought I guess.  I am of the opinion right now that A) things are not so bad as predicted because the US truly is wealthy beyond world comparison at the moment (even with a paper debt, we have real assets).  B) The numerical debt of the US govt and private bank debt will be eased or erased by creating paper or digital money from the heavens of the US govt.  C) gold, silver and other asset prices will rise as we find that the dollar (which is also our debt) is minimalized by the US goverment. 

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#3) On January 25, 2009 at 12:25 PM, jgseattle (35.24) wrote:

"Does the US really own the gold and silver that is mined?  Not right now it doesn't, though they could nationalize the mines..."

The US government absolutely owns the gold.  Not sure of the % but the Departmant of the Interior leases a lot of land for gold mining and exploration.  And is paid for the lease and by the OZ if I am not mistaken.  Think of all the gold on public lands.  Nevada one of the big gold producing states is 80% owned by the federal government. 

I think that just because you have a lot of assets does not mean you are in good financial health.  One has to manage the assets well and get a market price for the assets.  I do not think the government has/or will do a good job at this as long as politicos are more interested in getting reelected than doing long term good for the citizens of the U.S..

And you would think that a government with ALL these assets and ownership would be able to manage their finances without taking on debt.  Another example of poor management.

I am assuming your 1/3 ownership is because businesses pay taxes.  I wonder what the effective tax rate on businesse are?  For me it is about 16.5%, and if you look there is no 16.5% tax rate.  So in really the government owns something less than 1/3 of all business and the effective tax rate does not even consider international earnings that are not repatriated. 

Now one last idea.  If you are in government and control the printing press and you have debt of $11T with tax collection and  income from your extensive assets less than your current expenditures what are you going to do?  Print money.  And yes the money is backed by the full faith of the government but that does not mean it will have the same VALUE.  I think this is why someone invented finances and NPV and real returns.

You know based on past posts I am not sure of the deflation/inflation path the U.S is on but this post does not in my mind present a good arguement for the value of the dollar. 

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#4) On January 25, 2009 at 12:28 PM, kaskoosek (85.49) wrote:

Alstry

Wow you really know how to defend your thesis eventhough the facts point in the different direction.

Let us go back one year in time, when inflation was rampant and commidity prices were sky high.

How was the situation better?

Americans didn't have enough gas money to go to work. Do you think in such a situation the US government will be better off.

America is a net importer of basic material and not the other way around. Get you facts straght.

The GDP numbers in the US are fake, because they are consumption and very little production. It is mostly services catered for domestic consumption only.

If you are unable to provide the rest of the world anything useful then your currency is utterlesly worthless.

The only reason the dollar isn't toilet paper is because it has "reserve currency" status. 

 

 

 

 

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#5) On January 25, 2009 at 12:47 PM, MarketBottom (29.25) wrote:

The US is the policeman of the world, and until some other country wants to take on that role, the USD and other countries willingness to buy our debt will not stop.

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#6) On January 25, 2009 at 1:03 PM, kaskoosek (85.49) wrote:

MarketBottom

The US hasn't forced anyone, actually it was the opposite.

China for example pegged it's currency to help exports. Report this comment
#7) On January 25, 2009 at 1:12 PM, MarketBottom (29.25) wrote:

kaskoosek

I don't have a clue what you mean by your comment????

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#8) On January 25, 2009 at 1:30 PM, UltraContrarian (31.53) wrote:

So alstry, you hate Japan and the yen right now.  What is your favorite short there - FXY, MFG, NMR, MTU?

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#9) On January 25, 2009 at 1:38 PM, kaskoosek (85.49) wrote:

MarketBottom

 

I thought u ment that the US was forcing other countries to buy its debt.

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#10) On January 25, 2009 at 2:04 PM, MarketBottom (29.25) wrote:

kaskoose

No, the US acts as the policeman of the world in many ways, by protecting shipping and commerce, and ensuring peace in many regions, at great expense to the US Taxpayer. Many countries do not help in this role.

Debt held by foreign countries only amounts to about 5 trillion.

 

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#11) On January 25, 2009 at 5:05 PM, mliu01 (< 20) wrote:

It is not 11 or 12 trillions.

Entitlement programes alone is about 40 trillions.

Now with the govt gurantee on bank debt, the debt is about 20 trillions.

So 40 + 20 = 60 trillions.

Now add the new kids in town: States bailouts, Pension bailouts, sipc bailout, Big 3 bailout and FDIC bailout. So tell me how much will it be??? And overspending of overstimulation. We could end with 100 trillion debt. I guess that is nothing, if zimbabewee can print 1 trillion note. 100 trillion isn't a big deal.

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#12) On January 25, 2009 at 6:29 PM, milpo (81.28) wrote:

Now this is what CAPS should be about.  Having someone like Alstry actually explain Asltrynomics and the rational behind it.  Everyone already knows that we are in a pickle.  Remember Alstry, once a pickle never a cucumber again.  Now guide us on what we should do with all these pickles.

Great dialogue.

Heartfelt best,

Milpo

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#13) On January 25, 2009 at 7:48 PM, jesusfreakinco (28.90) wrote:

You are way low on your 11, 12 trillion number.

Watch this to get the real scoop:

www.iousathemovie.com

JFC

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#14) On January 25, 2009 at 8:00 PM, jesusfreakinco (28.90) wrote:

Al,

Doesn't your thesis lead you to the conclusion that Russia is just as valuable as the US with their wealth of resources and high tax rate?  What about Canada?

unless the US Government prints an incredible amount of dollars to balance out the offsetting rise in collateral  -ummm...is this what is happening now?

Nationalizing oil and gold companies - now that's a new one.  I see more taxes on the companies coming, but nationalization to take over profit making companies (as opposed to nationalization of banks which IS sorta hapenning now).  I can't see a 'land grab' of that sort happening.  That is Chavez-like, not Obama-like.

Al - I think you are losing it...

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#15) On January 25, 2009 at 8:14 PM, alstry (35.44) wrote:

JFC,

No...not losing it at all.

You will see how right I am in the upcoming weeks and months.

You will likely see much greater pain for us all in the near future, we will all have to make sacrifices, but in the end it will set the foundation for future success.

As far as comparing Russia to the US.........hard assets is only one component of wealth, productive capacity is another and much more important component....what do you think the GDP of the US is compared to Russia...or any other nation for that matter???

The gold bug nuts seem to think that gold is the only component of a nation's wealth or currency.  Alstrynomics looks at the whole picture to synthesize and distill its projections and conclusions.

Life is dynamic, things may change, but this is just the way the facts lay out right now.

 

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#16) On January 25, 2009 at 9:44 PM, Nainara (< 20) wrote:

According to Alstrynomics, the Zimbabwean dollar is an excellent and secure way to hold your savings. Zimbabwe is a country blessed with extremely fertile land abundant natural resources.

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#17) On January 25, 2009 at 10:01 PM, alstry (35.44) wrote:

Actually,

Relative to its GDP, Zimbabwe's soverign debt eclipses that of the US Government's.  As I said in my previous comment, natural resources is simply one piece in the puzzle......that has more than one piece.

I am not sure why it is sooooo hard for Fools to understand that, absent entitlement obligations, the US soverign debt is relatively benign compared to most other nations in the world from a variety of different metrixes....and if you combine them all....it is no wonder Warren Buffett says he wouldn't bet against the USA.....

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#18) On January 26, 2009 at 12:12 AM, kstarich (30.83) wrote:

Al,

THank you for another informative post.  I am not fond of the idea of a new one world order and I do not have faith in Obama to due the right thing with our resources. 

I don't believe we need to go through the degree of pain you suggest.  It seems the government wants to create more pain as Obama continues to suggest that it is going to get much worse. 

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#19) On January 26, 2009 at 1:57 AM, kaskoosek (85.49) wrote:

Your argument is flawed and does not follow platonic reasoning.

If the US government decides to throw trillions of dollars in the market, the currency becomes worthless whatever resources you think you have.

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#20) On January 26, 2009 at 8:55 AM, eldemonio (98.86) wrote:

You're silly.  I agree that the US has a lot to back the dollar - but you can't be serious is thinking that printing more and more dollars, taking on more and more debt actually strengthens the dollar, can you?  If so, you might want to rename Alstrynomics to Asseninomics.

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#21) On January 26, 2009 at 9:09 AM, alstry (35.44) wrote:

Alstry is always silly.

But you are a Fool if you don't think other countries aren't printing faster.  Since dollars are relatively priced against other currencies, well you should be able to take it from there....

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#22) On January 28, 2009 at 9:44 AM, djemonk (< 20) wrote:

This was a good, and needed, insight into what you've been talking about.

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