Friday, September 2, 2011

A Fierce One-Two Punch Wallops Financial Markets

9/2/2011 Portland, Oregon - Pop in your mints…
Just when you thought it couldn’t get any worse, Friday delivered a doozy of a one-two punch to the financial markets.  The jobs report everyone watches showed that no new jobs were added in August.  While this should come as no surprise to the sober and observant, most traders and economists took it square on the jaw with their gloves down at their sides.

The Chart of the Day, courtesy of the Money Game, shows what intelligent people like yourself, fellow taxpayer, already know.  This recession is not like anything the current authorities have ever dealt with before.  It is a balance sheet problem that has only one solution, widespread default.

The second punch came in the form of a lawsuit filed by the US Government against some of the heavyweights in the banking industry.  A list of the defendants can be seen here and lo and behold, Bank of America is one of them.

There is much to think about over the coming weekend, but we think Michael Pento of EuroPacific Capital summed it up best in and interview yesterday:

“…do not keep money in the bank.  You have to buy something that the government cannot duplicate by fiat.”
By fiat, he means currency or, by extension, bonds that are denominated in them.  Starting in January, the FED’s cheapest money ever begins to hit main street.  Then inflation will be on everybody’s mind.
Stay tuned and Trust Jesus.

Stay Fresh!

P.S.  For more ideas and commentary please check out The Mint at

Key Indicators for September 2, 2011

Gold Price Per Ounce:  $1,884 PERMANENT UNCERTAINTY

Thursday, September 1, 2011

Ode to the Auto Feo, Part V – The Bitter End

9/1/2011 Portland, Oregon - Pop in your mints…
With the markets relatively calm until the sparks fly later next week, we conclude our tale.  Our tale is, among other things, a recount of the recent history of Bank of America wrapped up in a vehicle metaphor:  “Ode to the Auto Feo,” originally inspired by the recent passing of a vehicle that taught us many valuable lessons.
You can catch up with the “Ode to the Auto Feo”, Parts I,II, III, and IV by clicking on the following links. 
Our story continues:
After careful reflection, we could see that our reasons for adopting the fateful “gasoline only” policy in the Auto Feo were two-fold and that they reflected two of our character traits which, taken individually are admirable, yet when combined, can lead to terrible decision making.

The first and most obvious of these traits is frugality.  While we do not think of ourselves as especially frugal, we do tend to choose certain items or activities upon which to focus our frugality.  This focused frugality in and of itself can prove extremely useful where investments in proven strategies are concerned.

The second, perhaps less obvious, trait which was expressing itself in this decision was our sense of adventure.  This trait can prove extremely useful when there is something to be gained from the undertaking and adequate margin for error for the undertaking’s failure. 

The terrible decision, then, comes when we combine this sense of adventure, which, we repeat, requires ample margin for error, with our frugality which, by definition, does not provide for any margin of error.
Hence, in retrospect it was obvious that adopting the gasoline only policy in the case of the Auto Feo was a terrible decision.  The only thing to be gained was sheer entertainment value reaped by those unaffected by the decision, a group that you, fellow taxpayer, are happily a part of.

Now that we understand the motivation for such a decision, we offer you the inspiration.

We were inspired by the desire to avoid buying a quart of oil each week (frugality) and, by extension, to avoid further staining our driveway with oil spilled out of the engine block.  To accomplish this, we discovered (or perhaps imagined) an experiment that the military had conducted in which they had never put oil in new vehicles and had been able to rely on the resulting engine shavings caused by the friction to serve as a sort of permanent lubricant for the pistons as they slammed up and down in the engine block.

Now most sane persons and certainly those who are mechanically inclined will quickly realize that there is a big difference between our situation with a 17 year old vehicle which held two quarts of oil and the military who had new vehicles which had never been filled.  There was also a big difference in our respective circumstances.  The military could afford to lose a few vehicles to this sort of experiment.  We, on the other hand, would be walking if it did not pan out.

The experiment began with promising results.  The vehicle’s performance, which was not that great to begin with, deteriorated only slightly.  This did not concern us as.  After all, we only had 1.5 miles to drive each day.  We continued through rain and shine, confident that we were actually on the verge of improving the Auto Feo’s performance and significantly extending its useful life.

Like so many of today’s fiscal and monetary policies, the delusion of sustainability was to be, uh, sustained until the day it came to a catastrophic end.

Six more months passed and two things happened in quick succession.  One turned out to be an omen, while the other an illusory victory.

The omen appeared one late Spring evening when we came upon the Auto Feo in the parking garage on our return commute to find that the driver side window had been shattered and the vehicle’s contents, which consisted of a Bible and a pair of jumper cables, had been clumsily rifled through.  The thief took the jumper cables.

With the bi-annual emissions test that is required in Oregon just one week away, our frugality again kicked in and we resolved to use clear plastic and duct tape to temporarily replace our driver-side window until we could be sure that the vehicle would be cleared by the authorities to operate another two years.
Note to self:  If you need to cover a broken out window in a vehicle, make every attempt not to use opaque or transparent plastic.

We hobbled along for a week of near misses at intersections with limited visibility out of our driver’s side.  On a Saturday, we made the trek to Hillsboro to submit the Auto Feo to the automotive equivalent of a colonoscopy.

Arriving at the emissions testing center, we found ourselves apologizing unnecessarily for the condition of the vehicle and explaining that we wanted assurance that Oregon’s green gods would allow the vehicle to continue to operate on the roads of their realm.

“We wanted to see if it would pass before fixing the window,” we offered.

“Looks like its seen better days, let’s take a look,” said the attendant.

She was apparently unfazed by the appearance of the vehicle and we later thought that apart from these people, only body shops and junkyards see more pathetic looking vehicles on a regular basis.

We winced as we watched the attendant place the probe into the Auto Feo’s tailpipe and had to remind ourselves that it was not human.

“Looks like it failed,” said the attendant.  “But it did improve at 2,000 RPMs,”

“Can we give it another try?” we offered in a desperate last ditch effort to forestall the diagnosis.

“Why not?” said the attendant.

And then a miracle occurred.  The Auto Feo passed the emissions test.

We joyfully drove home and quickly arranged to have the driver’s side window replaced.  Our experiment was going swimmingly and the emissions test somehow validated our hypothesis.  The military was right, we are better off not adding oil to your vehicle!

Our delusion, which was now government sanctioned, was allowed to carry on.

Astute readers will quickly draw a parallel between our Auto Feo tale and Bank of America and the current banking system in general:  Our emissions test is a metaphor for the so-called stress tests that have been run on the banks in America and Europe in an attempt to shore up confidence.

When will these delusions end?

In the case of the Auto Feo, two short months after the government sanctioned emissions test gave it the green light, we were forced to make a journey farther than our normal 1.5 mile daily jaunt.

The Bitter End - Rest in Peace, Auto Feo!
Through knocks, heaves, and roars, the Auto Feo dutifully carried us on our route until, a mere .5 miles from home, the Auto Feo froze up.

We feared the worst but in our optimism we had the vehicle towed to our house.  We waited for the morning.

The next morning, it started!  This truly was a miracle.

Alas, the miracle was that the Auto Feo was simply saying goodbye.  For in the evening, when we jumped in to drive it home, the Auto Feo did not immediately respond.  A brief heave was all it could muster as we cranked the starter.  And then, all was silent. 

Our experiment was a failure, the Auto Feo had passed on.

Bank of America has been in the news a lot lately, and for all the wrong reasons.  The behemoth is too big to succeed and for every client that is making money, there seem to be two or three who are going bankrupt, leaving B of A to foot the bill.

Although management will never admit it, the Bank is now throwing Hail Marys late in the fourth quarter in a desperate attempt to raise capital.  While this is exciting to watch, you probably don’t want to put your money on the team who has resorted to such a desperation tactic.

Returning for one last, painful look at our automobile metaphor, It appears that the FED has decided not to change the oil (i.e. replace member banks’ worthless assets for fresh cash) and the banks will be left to lubricate their engines with the metal shavings as its worthless assets disintegrate on the balance sheet.
How long until B of A seizes up?

Stay tuned and Trust Jesus.

Stay Fresh!

P.S.  For more ideas and commentary please check out The Mint at

Key Indicators for September 1, 2011

Gold Price Per Ounce:  $1,825 PERMANENT UNCERTAINTY

Monday, August 29, 2011

Ode to the Auto Feo, Part IV – Acceptance and Admiration

8/29/2011 Portland, Oregon - Pop in your mints…
It was another beautiful weekend here in the Northwest, safely away from Irene and all of the mayhem that it has left in its wake.  Summer arrived a bit late this year and, like recent stock market rallies, has had trouble gaining traction.
One must be content with the days of sunshine that come our way, for our instinct tells us that they will not last.  For us here in the Northwest, that means days of sunshine must be enjoyed to the fullest.  In the stock market, it means that any near term rally should be seen as an opportunity to sell.
In the long run, as the wheels come off the US Dollar mobile, stocks should outperform most other paper assets.  In the short run, with Bank of America imploding, the resulting black hole threatens to suck a few trillion dollars out of the stock market.
Bank of America is too big to succeed and is in a hurry to raise capital that they do not need.   Given the incredible incentive that most Bank Executives have to misrepresent their circumstances, it is a wonder that investor would take them seriously.  Anyone who is not obligated to hold B of A stock and is still holding it is performing an act of charity, for that money will go quickly down the drain.
But enough about B of A, we have a story to tell.
That story is the sordid tale of the Auto Feo.  You can catch up with the “Ode to the Auto Feo”, Parts I,II, and III by clicking on the following links. 
Our story continues:
We arrived at home much later than we imagined.  What should have been a brief run across town to kick the tires on a vehicle that we should have passed on had now become a frustrating and humiliating odyssey.  We were stuck with a car that seemed doomed to be scrapped within the week.  Our only consolation was that we had “only” dropped $1,300 on this bitter lesson.

We drove the overheating, smoking beast into our driveway.  We were dripping with sweat as we were forced to turn the heat on in a desperate attempt to moderate the vehicle’s temperature as the thermostat was not performing its designated function.

Still, our ever supportive wife was optimistic:

“It only needs to make it the 1.5 miles each day,” she reassured us.
“And it has air-conditioning!”

She appeared as sold on the vehicle as we were until the smoke, which we were later to identify as oil leaking from the engine block onto the exhaust system, began to fill the thick summer evening air.
The smoking of the Auto Feo produced a dry ice effect coming out of the hood on the passenger side which we were never able to repair (the only attempt the mechanic made served to make it worse.)
Then, she saw the keyhole, or lack thereof.  She shook her head.

“You say you didn’t notice this?”

All we could do was shrug.  It was an oversight of classic proportions, like forgetting to make gravy for Thanksgiving dinner.  There was no reasonable excuse that could be offered.

Her look confirmed what we had now known for about 90 minutes, we had been taken.

What could we do?  Given the discovery of the oil leaking and the lack of the keyhole, we deemed the vehicle unacceptable.  We had to attempt the unthinkable.

“We will humble ourselves and ask the Iranian to undo the deal,” we proclaimed, as if the matter were firmly under control.  Swallowing one’s pride seemed preferable to seeing a testament to our own ignorance and impatience in our driveway.

We will spare you the details of our three telephone calls to the Iranian that ranged in tone from bold appeals to the man’s honor to tearful groveling.  True to form, He out-groveled us and admitted that the cash had gone to his brother that fateful night.

We were stuck.

A Unique Vehicle - The Discovery of a James Bond Smokescreen

The next two weeks served to confirm that we had just made the worst purchase in recent memory.  In addition to the inconvenience of entering the vehicle from the passenger side and the permanent smoke screen that the vehicle threw off as it drove:

-We experienced random starter issues (i.e. the vehicle started or failed to start completely at random)

-The cherished air conditioner broke in a plume of smoke on 3rd day,

-After 7 days, the odometer stopped turning, which explained how a 1993 could have a mere 143,000 miles.

Still, the vehicle ran and served its purpose of carting us to and from the train station, a mere 1.5 miles down the road, and even though the starter worked only when it chose to, it rarely failed to start the motor after teasing us for a time.

With the initial bad taste out of our mouth, a strange sort of respect began to grow between ourselves and the mistreated vehicle.

“Just give us 12 months,” we told the trusty steed, which was obviously on its last legs.
Somehow, it seemed to understand, and six months passed without incident.

At that point, we decided to embark upon a dangerous experiment, an experiment that in hindsight was so ridiculous that it made even B of A’s robo-signing of foreclosure documents seem reasonable by comparison. 

We decided to put an end to the annoying smokescreen the vehicle threw off the cheapest way we could think of.  From that point forward, the only fluid we would put into the Auto Feo was gasoline.
Like B of A’s robo-signing adventure, it was bound to backfire.

Stay tuned and Trust Jesus.

Stay Fresh!

P.S.  For more ideas and commentary please check out The Mint at

Key Indicators for August 29, 2011

Gold Price Per Ounce:  $1,789 PERMANENT UNCERTAINTY