Friday, December 17, 2010

Armageddon on the Way, Nothing Normal about what is happening to Bond Markets

12/17/2010 Cochabamba, Bolivia Pop in your mints

We can’t shake the feeling that Armageddon is on the way for Bonds Markets in general and especially for any form of debt owed by a government of any size, no matter how powerful.  The Keynesians believe that government debt is simply a myth, just another data point in their mechanical view of the world.  Is private debt shrinking?  Public debt must expand.  In their fantasy world, as private debt is expanding, Public debt shrinks.

We do not know what planet Mr. Keynes lived on, but here on planet earth, government officials make promises to obtain votes.  These promises cost money.  Usually a lot more money than the government takes in.  Remember, the government, by definition, cannot do anything productive, economically speaking.  It can provide protection and justice, which has a price, but as for productive efforts, they are almost exclusively inept.  Ditto for “government investments.”  Investments worth making do not need government assistance.

Back to our point, public debt never shrinks as Keynes thought it would when the government in question runs a surplus.  Too many promises to keep, “investments” to make, wars to wage.  You see, Empires are built in the 21st century by incurring debt, not by paying it off.

Thursday, December 16, 2010

Austerity - Not Everyone is a Fan, Higher rates Crush Bonds and Pummel Stocks

12/16/2010 Cochabamba, Bolivia Pop in your mints

Ah, the price of austerity.  In a world where up was up and down was down, where all was what it seemed and things worked “as they should”, any attempt to save money or generally economize would be a good thing.  All the more if it meant that the government was retreating from intervening in the economy in areas where it can only do harm.  That would be 99% of government intervention with the remaining 1% being upholding valid contracts between parties.

Alas, this is not the world in which we live.  In Greece we see rioting as the government attempts to do the wise thing and cut back.  Like any bad credit risk, they are not cutting back by choice but rather at the behest of their creditors.  Like an addict needing intervention, so are the debt ridden nations of the western world.  Concretely, Greece wants to change its labor laws to give people incentive to work and by extension business incentives to hire them.  Naturally, this is an affront to “workers rights” that cannot be tolerated. 

Spain’s credit rating is on the verge of being lowered and generally the uncertainty of just what will occur in Europe has investors jittery.  In the US, at least we can count on the FED and Congress to continue to trash the currency.  The masters of the Euro are not so sure about trashing the currency but for some strange reason do not want to let any sovereign debt go bad.  Sorry EuroFEDS, you can’t have it both ways.

Bonds continue their descent with no end in sight.  This usually means that they may actually rise in the coming days.  Don’t be fooled.  Any strength in the Bond markets should be taken for nothing more than a hallucination and a selling opportunity.  Stocks were taken down today by the “Mega Maid” suction of the collapsing Bond Market.  Higher rates make re-financing or rolling over existing debt harder.  It must be either paid or written off.  The money for these activities must come from somewhere and, directly or indirectly, it comes out of equities.

Wednesday, December 15, 2010

Bond Market Tumbles Downhill and Why Bolivia May Avoid The Collateral Damage

12/15/2010 Cochabamba, Bolivia Pop in your mints

A quick look at the markets shows that Bonds are continuing a capitulation that is beginning to border on dramatic.  Market forces will always overpower any government, military, or central bank on the planet.  Never bet against them.  The case against Bonds has been clear for some time now.  The trick is guessing when what is obvious will become common knowledge.  It is at that point that the Market executes its judgment.

The verdict is in:  Bonds are guilty of gross oversupply.

From our perspective here at The Mint, we believe that this dramatic rise in Bond yields is one of the warm up acts to the grand finale which involves high rates of inflation (probably hyperinflation) and the disintegration of the US Dollar system that has dominated the financial world for nearly a century.

Now that we know how the play will end, what will be interesting to see is how the rest of the acts will play out.  But before sitting back to enjoy the fireworks, ensure that you have adequate protection for your assets, meaning a portion of them in real estate or preferably physical Silver and Gold.  A month’s worth of food could come in handy as well.  Once that is taken care of, you truly have little to worry about.  Now help your family, friends, and neighbors do the same.

Tuesday, December 14, 2010

A Victory for Freedom! Pondering Relative Wealth in The Plurinational State of Bolivia

12/14/2010 Cochabamba, Bolivia – Pop in your mints

A quick glance at the news today reveals that a Judge in Virginia finally decided to read the constitution.  He has in essence ruled, in a matter that will certainly end up in the Supreme Court of the land, that Americans cannot be compelled to purchase something.  In this case, it is health insurance.  In 2014, if you do not purchase health insurance, then you have to pay a fine.  The requirement to purchase health insurance is logical if you want to make health care reform work.  Unfortunately, making health care reform “work” requires surrendering liberties to the government that we reckon a majority of gringos are not willing to let go of.

At The Mint we believe that Freedom is more important than universal health care and hope that this provision is struck down.  It is one thing to give incentives to purchase something, which the government shamelessly does as a backdoor subsidy to many industries via the tax code.  It is quite another to require the purchase of something and impose a penalty if you do not purchase it.  The latter reeks of totalitarian desperation to support a broken industry.

So chalk up one minor victory for Freedom!  Now on to our musing of the day…

We are relaxing down here in the southern hemisphere in what, in economic terms, may be one of the poorest countries on the planet.  How do you define poor?  It is all relative, of course.  If you are defining wealth in terms of an increase of US dollars or their equivalent that are traded in exchange for goods and services, then yes, you could call Bolivia poor.

Monday, December 13, 2010

Signs The FED is Failing on its Ill-Fated Mission, Bond Markets Imploding Like the Metrodome´s Roof

12/13/2010 Cochabamba, Bolivia – Pop in your mints…
We have spent the past couple of days attempting to get our wits about us.  After a 24 hour excursion to the southern hemisphere in multiple airplanes in between sea level and La Paz, which boasts the highest altitude commercial airport in the world, to Cochabamba, our home away from home.  You will forgive us if we are seeing things upside down.

Today we see that Bolivia was the only nation not to sign off on the climate pact in Cancun.  One thing we love about Bolivia is that it refuses to go along with the rest of the world.  Bolivia did not sign off because they did not feel that it went far enough to protect the "pachamama", or mother earth.  Oddly enough by not signing off on the deal, it could become home to anyone seeking a "pollution haven" similar to a "tax haven" in the bahamas.  We pray this does not happen but the speculation will help us prove a point about the effectiveness of government action.  Try to stay with us.

What we are witnessing we can hardly believe.  Not because it is happening but because in a strange way we were able to predict it.    We tried to communicate what we saw coming by using words like "Armageddon", by showing footage of "Mega-Maid", and other strange tactics.  As certain as we were of the logic of what we saw, we did not quite believe that it would come about so soon.  It used to be that once we were sure of something the only sure bet was against it.  Now, we cannot even be guided by trusting our own incompetence.  What to do?