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The Shameless, Blame-Shifting, Minneapolis Fed

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July 22, 2009 – Comments (7)

I've been a bit too busy to blog and comment lately.  Still, it never ceases to amaze me the amount of quality work that gets churned out here on a daily basis.  Thanks to TMFSinchiruna, binve, speedybure, abitare, and Dare in particular for your recent posts.  I really enjoyed them. 

Here is an article from economist/historian Thomas DiLorenzo conerning the 2008 Annual Report of the Federal Reserve Bank of Minneapolis, titled "The Current Economic Crisis: What Should We Learn from the Great Depressions of the 20th Century?"

http://mises.org/story/3580 (Are the hyperlinks working yet?)

For the Fed to even begin "learning" about the Great Depression of the 20th Century, it would first to have to admit that credit expansion in the mid-to-late 1920's fueled the boom which eventually collapsed.  Only then might they see the parallel to today.  We know this won't happen though, which is why most CAPS bloggers don't take the Fed very seriously. 

The article is short and sweet, and tells us what we already know:

"Fed economists — like mainstream macroeconomics in general — are intellectually bankrupt and clueless at best or dishonest propagandists at worst." - Thomas DiLorenzo

The Mises Institute has really stepped up its game lately as well, now pumping out three articles a day, as opposed to the two per day that had run for many years.  Hopefully the quality will not suffer as a result.

On Friday, Morgan Reynolds had his A History of Labor Unions from Colonial Times to 2009 published for the Weekend Reader. 

http://mises.org/story/3553

I highly recommend it.

Since I don't have much time, here are a few thoughts.

Inflation is here.  This is purely a Fed-fueled stock market rally.  Anyone shorting stocks right now is playing a very dangerous game.  Inflation, no matter how many times it runs its course throughout human history, always fools the masses.  Every time.  You feel richer, but you're actually poorer.

Earnings are dogsh*t and there is red ink everywhere.  I can find only 1 out of 100 stocks that I research to even be worthy of a second look.  Give me a little positive cash flow and reinstate your dividends to old levels and maybe we'll talk. 

I like Breitburt Energy, Fortunet, Constellation Energy, and Activision.  I think they're undervalued.  That's about it.  And I'm not even that high on those.

(Disclosure: I own stock in all these companies.)

I don't trust most balance sheets and I discount all assets by 30-50%.

I don't like mining companies.  They are too heavily indebted.  If I start holding physical gold, and can the GLD and SLV ETF's, Goldmoney.com may be my next stop.

Debt is death.

Condos built in 2006 are the best shopping.  You get a brand new building and 70% of the units are in foreclosure or short sale.  Sure you've got a put up with a bunch of mopy neighbors whining about their credit problems, but there are worse things in life.

California could use less government.  In the long run, this budget crisis will be a blessing.  In the short run, there will be pain.

You can't learn to invest by not investing.  You have to put your own personal fortune at stake.  That is why bureaucrats can never invest money better than the private sector.  They're not playing with their own money.

The Washington Nationals are the perfect team to represent America's political capitol.

David in Qatar

7 Comments – Post Your Own

#1) On July 22, 2009 at 1:30 AM, starbucks4ever (97.43) wrote:

There are certainly many overpriced companies and sectors, but 1 of 100 worth a second look is way too harsh. I'd say 10% still offer a very good value.

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#2) On July 22, 2009 at 1:59 AM, whereaminow (< 20) wrote:

zloj,

I drive a very hard bargain :)  I have to, since I am by nature a very reckless person.

David in Qatar 

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#3) On July 22, 2009 at 4:19 AM, DaretothREdux (39.93) wrote:

David,

Thanks for the mention! I have been blogging a lot lately. I am still shocked that I only posted one blog last month.

I have a question though:  Debt is death.

If we are going to experience inflation, and you have debt at a fixed rate of interest, then wouldn't that actually be good for you?

Assuming that you can keep up with inflation via precious metals or "undervalued" stocks or property, then won't your debt actually shrink the more inflation occurs relative to Purchasing Power?

Thanks in advance,

Dare

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#4) On July 22, 2009 at 5:11 AM, whereaminow (< 20) wrote:

DaretothREdux,

I have a question though:  Debt is death.

If we are going to experience inflation, and you have debt at a fixed rate of interest, then wouldn't that actually be good for you?

It's a trap.  For the typical American, the only fixed rate of interest you have will be on your home.  We know what happens when inflation fuels a rise in home prices.  The increased equity is confused for savings.  People take out second mortgages, spend more liberally, etc..  Then comes the crash.  The highly leveraged are the ones who suffer the most.

There is no way to keep up with inflation unless you are the ones doing the inflating.  For the rest of us, some win and some lose.  The winners win a little less than they would have.  The losers lose a little more.  The inflaters win either way.  It's a con game.

Understanding the purpose of inflation is what transforms a person from a worshipper of the State into a realist.  When a man finally realizes that the State purposefully steals from its citizens, then purposefully lies to cover its tracks with flowing prose about quantitative easing, leveling the playing field, too big to fail, etc... that is when a man beings to learn about the real world.

David in Qatar

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#5) On July 22, 2009 at 8:27 AM, XMFSinchiruna (27.35) wrote:

whereaminow

I don't like mining companies.  They are too heavily indebted.  If I start holding physical gold, and can the GLD and SLV ETF's, Goldmoney.com may be my next stop.

Not all mining companies are heavily indebted. Have a look at GG if debt is your primary focus. 

http://www.fool.com/investing/general/2009/05/08/how-rich-is-goldcorp.aspx

"With more gold in reserve than China's central bank, far less debt on the books than most of its rivals (just $95 million), one of the lowest cost profiles in the sector, significant potential discoveries from ongoing exploration, and one of the world's most exciting new mines nearing production, I view Goldcorp as top-rate proxy for bullion in a vault."

 

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#6) On July 22, 2009 at 9:05 AM, whereaminow (< 20) wrote:

TMFSinchiruna,

Thanks Sinch.  I'll give them a closer look. I promise you this: if and when I do start investing in mining companies, I'll be starting my research with your posts. 

David n Qatar

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#7) On July 22, 2009 at 12:37 PM, 4everlost (29.35) wrote:

whereaminow

Thanks for another great link.  I checked out the author's archives and have added his other articles on my to-be-read list.

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