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Great Depression Online Archive Issue:

Eating Rabbit for Dinner

Great Depression Online
Long Beach, CA
June 23, 2009

Inside This Issue You Will Discover…

*** Listening to Market Voices
*** The 1930s and 1970s Simultaneously
*** Eating Rabbit for Dinner
*** And More

Listening to Market Voices

Markets rise and markets fall.  So, too, they fall and they rise.  Sometimes a little.  Sometimes a lot.  But always one or the other…most of the time.

For example, the DOW fell nearly 55 percent from 14,279 on October 11, 2007 to just 6,440 on March 9, 2009.  Then the DOW rose 32 percent closing above 8,500 on May 6th.  But since May 6th…the market’s been flat.  Yesterday it closed at 8,339.

“Markets make opinions,” goes the saying.

But what if the market has nothing to say…as it has since May 6th?

The stock market, of course, is only one voice of many.  So let’s open our ears up and listen to what some other key market voices are saying…

Since March 9th, 10-Year Treasury yields are up 90 basis points.  Oil’s up about 55 percent.  The dollar’s lost about 9 percent against the euro.  And gasoline here in the golden state is up 40 percent.  In fact, yesterday morning, at our corner station, it cost us $3.05 per gallon for the cheap stuff.

What does it all mean?

“It’s a reflection of the Federal Reserve’s policy of dollar debasement,” says one thinking individual.  “The increase in oil and gas prices is an indicator economic growth is returning…greater demand is driving prices up,” say another.

The 1930s and 1970s Simultaneously

We’ve said it numerous times on these pages.  We believe the current stock market rally is nothing more than a bear market rally…a sucker’s rally that’ll bring good people, good money, and great expectations back to the market before decimating them once again.  We’ve even drawn parallels to the ultimate suckers rally in 1930 that brought the DOW up 48.1 percent before crashing a full 89.2 percent from its initial peak.

Yet when the stock market crashes again – perhaps in late summer or early fall, if not sooner – will bond yields fall, will oil fall, will the dollar rise, will gas prices fall?

That’s what happened when stocks fell in earnest between September 2008 and March 2009. 

But since then the deficits quadrupled and the Federal Reserve’s dropped the federal funds rate to nearly 0 percent and has been buying Treasuries with money it creates out of thin air.

For this reason, during the next wave of the stock market crash, U.S. debt may no longer garner the perception of ultimate safety like it did before.  To the contrary, it may be avoided like the plague. 

In this scenario, money would flee the stock market and would run to non-dollar based assets.  In other words, as the stock market falls…the dollar would fall too.  Bond yields would rise, along with oil and gas prices and perhaps all other resources of some tangible value.

Stock market investors would be ruined…yet bond market investors would be ruined too.  The destructive qualities of the 1930s and 1970s would occur simultaneously. 

Our advice: panic!  Then read this.

Eating Rabbit for Dinner

One of the many things we didn’t appreciate until we became a father was just how exhausting and expensive it is.  No vacations…no markdowns – not even on father’s day.  We’re not complaining.  In fact, we wouldn’t have it any other way.  We just have a deeper appreciation for it all than before.

For example, last Sunday morning, after opening our father’s day card, and trying on a new pair of shoes, our wife informed us the in-laws – and several outlaws – were coming over for a barbeque.  That meant we had plenty of chores to do…and quick.

We edged the yards, cut the grass, cleaned the grill, hosed off the outdoor kids toys, tested the spa water, emptied the trash, and more.  Then, after pausing a moment to drink some water, it was off to the market, where we emptied our wallet to buy steaks and all the fixings…well almost all, that is.  For cousin Caesar brought the rabbit.

“It’s good,” promised Caesar, grinning through a gaping hole in his front teeth which we presume was knocked out in a Mexico City scuffle back in his native country.

Yet by the pungent stench we’d wafted on the neighborhood for nearly 40 minutes while roasting the thing on the grill, we were certain it wouldn’t be good.  Still, as we bit into it, we hoped somehow it would taste like chicken.  Alas…it didn’t.

We choked down a bite or two and then, when no one was looking, promptly discarded our plate in the trash.

“Next time we’ll bring crocodile,” said Caesar with a wink.

We hope he was kidding.  We imagine our neighbors do too.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  Nathan Slaughter over at Half-Priced Stocks identified more than 200 money-making companies trading at the largest discounts to their fair business value since 1987.  He’s found markdowns of 50%, 60%...and even 78% off.  Learn more here: Half-Priced Stocks.

 

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