A Lehman Moment for Commodities?

LONDON – Today, we continue our philosophical look at what you should do if you are running out of time and money. (You can catch up on Part I here.)

Where do we begin? With how to add wealth? Or how to lose it? The way to lose it is simple. You buy something that is not worth the money you paid for it. You are instantly poorer, whether you know it or not.

 

fat_spies_by_jdeer69-d60927gThe pleasingly plump.

Illustration by jdeer69

 

 

DJIADJIA, daily – still unsettled – click to enlarge.

 

That is what is happening today to stock market investors. The stocks they bought were not worth the money; now Mr. Market is letting them know. On Monday, the Dow dropped almost 2% to 16,002 points. Next stop: 15,000.

“It’s a bear market,” says Jim Cramer. It will be a “bloodbath,” says billionaire investor Carl Icahn. We don’t know. But our guess is that 10 years from now your stocks will be worth no more than they are today.

The biggest losers on Monday were in the commodities and biotech sectors. Well, Glencore – one of the world’s largest resource companies – is one of the companies not buying them.

Glencore shares have lost 75% of their value so far this year. If commodities prices stay at these low levels, it could be worth nothing by the end of the year. Glencore could be headed the way of Lehman Brothers…

 

GlencoreGlencore, daily. On Tuesday the stock recovered a bit, after Glencore tried to refute speculation about its imminent demise with a press release “responding to speculation”… click to enlarge.

 

Biotechs dragged the Nasdaq down yesterday. But the sector is still up more than 425% since 2009. Plenty of room left on the downside, in other words. Icahn, by the way, seems to have signed on as an advisor to Donald Trump. This is a good thing. The presidential hopeful needs advice.

Trump unveiled his tax plan yesterday. It looked good to us, with a top rate of 25%. You have to give him credit. Few career politicians, aspiring to the Oval Office, would dare a major overhaul of the tax code.

Over the years, every pig in America has muscled up to that trough. A more conventional candidate wouldn’t take them on. But Mr. Trump is refreshingly naïve in many ways. He often doesn’t know what he’s talking about; he hasn’t been thoroughly coached by the cronies.

 

donald-trump-cartoon-luckovichTrump: yet to receive crony instructions.

Cartoon by Mike Luckovich

 

A Necessary Philosophy

But let us turn from how to lose money to how to make it. We left Paris early this morning. It was still dark. It’s that time of year. The days grow short… and damp… and dwindle down. The sidewalk was slick with decaying leaves. The hint of approaching death makes the dying autumn days especially rich, like the last bites of a favorite dessert.

And over Paris this morning shone a “super moon” that must have set hearts yearning for something. But what? Romance? Love? Pity the poor tin heart – like an empty trash bin – that looked at that full moon lighting up the slate roofs of Paris and wished for money.

 

paris supermoon-2Super-moon over Paris – a money moon?

Photo credit: Charles Platiau / Reuters

 

But money is our beat at the Diary. We will stick with it. But money means nothing without philosophy. Beyond what we need to survive, money has no importance. Is it good? It is bad? It depends.

We need a simple philosophy to make sense of it – to guide us past the Gucci bags… past cable TV… and past the million-euro apartments of the 16th arrondissement. Not that there is anything wrong with them. But they are expensive.

And if you don’t have money, you need to be able to pass up luxury, gluttony, and self-indulgence with your nose in the air… not with your shoulders bent in defeat and self-disgust. And for that you need philosophy. Or at least aesthetics.

All people – unless they are saints or mental defectives – want to feel good about themselves. That is their primary aim in life and the only reason they are interested in money (save the minimal amount for survival). Since we are a competitive species, we feel good about ourselves in direct measure as we feel superior to those around us.

If we are trim, it does no good unless those around us are not. If we are smart, we get no advantage from it unless others are dumb. And if we are rich, it is only meaningful to the extent that others are less rich.

But so clever is our race that we are able to find superiority almost everywhere. If we are fat, we redefine the corpulent spectrum so that we are “pleasingly plump,” while others are “unhealthy” and “too thin.”

If we are dumb, we focus on our “common sense,” as opposed to the uncommon nonsense of the “pointy-headed intellectuals” (to borrow a phrase from George Wallace).

And what if we have no money? Then spending money is vulgar, shallow, and pointless!

 

Pity the Rich

One person feels superior because of what he owns. Another for what he does not. Still another for what he knows. And another for what he knows not. And one feels superior from who he is, while another measures his stature by who he is not.

But the one who feels superior to them all is the one who owns nothing, knows nothing, and is a complete nobody. He is free from the vanities that clutter others’ lives!

In 10th-century Europe having little became fashionable. People gave up their possessions in search of a life of contemplation. They wanted to get away from the distractions and temptations of everyday life, so they could live in a purer way… in simplicity and godliness.

 

St._Benedict_delivering_his_rule_to_the_monks_of_his_orderSt. Benedict handing his rulebook (“ora et labora”) to his monks at the monastery of St. Gilles, AD 1129

 

So great was the demand for poverty that the monasteries and convents could scarcely keep up with it. They had to build new ones all over the continent. But there is no need to insist. We just need to recognize that there are people with little or no money who live well. And there are people with a lot of money who live badly.

Our goal will be to live better. We will take as a challenge and a point of pride to do so without spending money. We will have less, but we will treasure our frugality as a man might value a collection of old cars or well-developed biceps.

Then – as our days decline, our appetite wanes, and our energy subsides with the tide of life – our treasure of nothing increases, for we will need less and less. A bed. A book. A candle. What more could we want?

Yes, we are talking about a program of radical deprivation and happy pennilessness. Our goal would be to feel superior to rich people… without having any money. We will wear our new-found love of poverty as a badge of honor… and use it to get rich!

Already, we pity the rich. In our empty coffer, we have the greatest treasure of all – the hope of happiness. Yes, dear reader: Blessed be the poor. For they enjoy the gift of ignorance. They still believe that they could be happy… if only they had more money!

 

lottery-cartoon-funny-funniest-lotto-winner-picturesThere’s always the lottery …

Cartoon by Mark Hughes

 

This, of course, is an illusion that only the poor can afford. Rich people know better. They have too much money. They know it cannot buy them happiness. That’s why the suicide rate in Aspen is three times the national average.

But how lucky are the poor! They still have hope! They might win the lottery. They might get a raise or a better job. They might inherit money from a rich uncle. Money is always close at hand.

So, happiness must be too… only a funeral or a lottery ticket away. More to come… including the practicalities. How DO you get more money?

 

Charts by: StockCharts, BigCharts

 

Image captions by PT

 

The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • How to Get Ahead in Today’s Economy
      “Literally On Fire” This week brought forward more evidence that we are living in a fabricated world. The popular story-line presents a world of pure awesomeness. The common experience, however,  falls grossly short.   There are many degrees of awesomeness, up to total awesomeness – which is where we are these days, in the age of total awesomeness, just a short skip away from the Nirvana era. What is Nirvana, you may wonder? We only know for sure that Nirvana is what...
  • Full Faith and Credit in Counterfeit Money
      A Useful Public Service There are nooks and corners in every city where talk is cheap and scandal is honorable.  The Alley, in Downtown Los Angeles, is a magical place where shrewd entrepreneurs, shameless salesmen, and downright hucksters coexist in symbiotic disharmony.  Fakes, fugazis, and knock-offs galore, pack the roll-up storefronts with sparkle and shimmer.   The Alley in LA – in places such as this, consumers are as a rule well served by applying a little bit of...
  • Gold and Gold Stocks – Conundrum Alert
      Moribund Meandering Earlier this week, the USD gold price was pushed rather unceremoniously off its perch above the $1300 level, where it had been comfortably ensconced all year after its usual seasonal rally around the turn of the year. For a while it seemed as though the $1,300 level may actually hold, but persistent US dollar strength nixed that idea. Previously many observers (too many?) expected gold to finally break out from its lengthy consolidation pattern, but evidently the...
  • US Money Supply Growth Jumps in March , Bank Credit Growth Stalls
      A Movie We Have Seen Before – Repatriation Effect? There was a sizable increase in the year-on-year growth rate of the true US money supply TMS-2 between February and March. Note that you would not notice this when looking at the official broad monetary aggregate M2, because the component of TMS-2 responsible for the jump is not included in M2. Let us begin by looking at a chart of the TMS-2 growth rate and its 12-month moving average.   The y/y growth rate of TMS-2...
  • Fear and Longing - Precious Metals Supply and Demand
      Waiting for Permanent Backwardation  The price of gold dropped 9 bucks, while that of silver rose 3 cents. Readers often ask us if permanent backwardation (when gold withdraws its bid on the dollar) is still coming. We say it is certain (unless we can avert it by offering interest on gold at large scale). They ask is it imminent, and we think this is with a mixture of fear and longing for a higher gold price.   Lettuce hope this treasure is not cursed... but it probably is....
  • Scorn and Reverence - Precious Metals Supply and Demand
      Shill Alarm One well-known commentator this week opined about the US health care industry:   “...the system is designed the churn and burn... to push people through the clinics as quickly as possible. The standard of care now is to prescribe some medication (usually antibiotics) and send people on their way without taking the time to conduct a comprehensive examination.”   From the annals of modern health care... [PT]   Nope. That is not the standard...
  • Global Turn-of-the-Month Effect – An Update
      In Other Global Markets the “Turn-of-the-Month” Effect Generates Even Bigger Returns than in the US The “turn-of-the-month” effect is one of the most fascinating stock market phenomena. It describes the fact that price gains primarily tend to occur around the turn of the month. By contrast, the rest of the time around the middle of the month is typically far less profitable for investors.   Good vs. bad seasonal timing...   [PT]   The effect has been studied...
  • Tales from “The Master of Disaster”
      Tightening Credit Markets Daylight extends a little further into the evening with each passing day.  Moods ease.  Contentment rises.  These are some of the many delights the northern hemisphere has to offer this time of year. As summer approaches, and dispositions loosen, something less amiable is happening.  Credit markets are tightening.  The yield on the 10-Year Treasury note has exceeded 3.12 percent.   A change in pace: yields are actually going somewhere. There is...
  • Is Political Decentralization the Only Hope for Western Civilization?
      Voting with their Feet A couple of recent articles have once more made the case, at least implicitly, for political decentralization as the only viable path which will begin to solve the seemingly insurmountable political, economic, and social crises which the Western world now faces.   Fracture lines – tax and regulatory competition allows people to “vote with their feet” - and they certainly do. [PT]   In the last few months, over 3,000 millionaires have...
  • Why the Fundamental Gold Price Rose - Precious Metals Supply and Demand
      Gold Lending and Arbitrage There was no rise in the purchasing power of gold this week. The price of gold fell $22, and that of silver $0.19. One question that comes up is why is the fundamental price so far above the market price? Starting in January, the fundamental price began to move up sharply, and the move sustained through the end of April.   1-month LIBOR (London Interbank Offered Rate – the rate at which banks lend euro-dollars to each other). LIBOR and GOFO...
  • “Sell In May And Go Away” - A Reminder: In 9 Out Of 11 Countries It Makes Sense To Do So
      A Truism that is Demonstrably True Most people are probably aware of the adage “sell in May and go away”. This popular seasonal Wall Street truism implies that the market's performance is far worse in the six summer months than in the six winter months. Numerous studies have been undertaken in this context particularly with respect to US stock markets, and they  confirm that the stock market on average exhibits relative weakness in the summer.   Look at the part we...
  • Gold and Gold Stocks – The Gloom Patrol
      Fun with Positioning and Sentiment Last week we discussed the gold sector “conundrum” – the odd fact that there is apparently quite strong demand for gold despite a macroeconomic environment that would normally be considered quite bearish for the metal. Gold recently seems to have lost its last remaining inter-market “ally” if you will, as the dollar has begun to enter an uptrend as well. Positioning data in precious metals futures are nevertheless rather remarkable, given the...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

The Review Insider

Dog Blow

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist