Reward time for the incompetent
By The Mogambo Guru
There are signs of stupidity and panicky desperation everywhere, such as the
Dow Jones Industrial Average index going up last week when earnings fell to
US$132.14 from $146.15! Earnings went down, but the shares went up because
there were more buyers than sellers! Hahaha!
If you think that the fall in earnings to $132.14 from $146.15 is a lot, then
congratulations! You are right! It is a huge loss of 9.6%! So, earnings fell
almost 10-freaking-percent, yet the underlying stocks went up? Hahaha!
I know what you are thinking, as I am thinking the same thing; we can use this
to show our supervisors that we are valuable employees because in producing
losses we make the company
more valuable! Therefore, we deserve a raise! A big raise, instead of being
placed on probationary status!
And we, as valuable employees, are sick of having to park on the other side of
the parking lot and want nice spots right up front, too!
Deep down, you know this is not going to work, but stocks astonishingly rising
after they start making less money is a fact. And so faced with such a paradox,
you look around to see if you are in a bar somewhere, which would explain why
you are so drunk out of your mind that you have misunderstood something
important. But you are not, and immediately you then think, "I have had another
medication error, or a stroke or something, because nothing makes sense
anymore! Stocks are going up when their earnings fall!"
In case you are not impressed with a 10% fall in earnings, maybe you will be
impressed that as a result of earnings falling and prices going up, the
price-to-earnings ratio is now a stunning 87, when the long-term average P/E
for stocks is about 12, and where stocks usually top out at a P/E of about 21!
Hahahaha! Who are these idiots buying these stocks?
Of course, a little of this buying had to do with some panicked short-covering
as lots of guys looked around and saw that the government's frantic search for
a scapegoat for our economic troubles are, with some justification, looking at
the flagrant abuses in short sales, and being short could mean A Bad Day at
BlackRock.
Perhaps as a result of all of this corruption and stupidity, I never seem to
tire of thinking about silver, and thinking about ways to get some more silver,
and how I don't have any money to buy any silver unless I cut back on the food
that I feed the kids (I can't eat that cheap, nasty crap myself; it makes me
sick. But it's obviously okay for them! I mean, they're still alive, right?),
or get them jobs in some illegal sweatshop by making them pose as illegal
immigrants willing to work for less than minimum wage. Or both!
But the wife says "no" to that fabulous plan, and to many MORE other Mogambo
Good Ideas (MGI), too. And that kind of constant negativity is why I would love
to just get the hell away from all of them and their ceaseless, selfish,
suffocating demands, like, "Please come to my birthday party, daddy!" and,
"Just tell us that you love us, daddy!" Ha! All I need is some silver, so when
it finally explodes to the upside, it's "Sayonara, chumps!"
And while I don't know when that will happen, I do have an idea how high silver
will get in price. The historical high for silver was set 531 years ago in
1477, topping at (using the purchasing power of 1998 dollars) a princely $806
an ounce. By comparison, the price of silver less than $19 an ounce today, and
was only about $5 an ounce in 1998, after having bottomed at under $4 an ounce
in 1992.
Now, fast-forward to today as our 2008 dollars, which have fallen 50% in
purchasing power since 1998, means that the all-time high price for silver, set
in 1477, now stands at $1,012 an ounce, measured in the buying power of 2008
dollars! Over a thousand dollars an ounce! For silver! Whee!
In case you haven't noticed, we're unmistakably coming off the lows of a
530-year bear market in silver and, theoretically, entering a long bull market,
which ought to be exciting to people who have a lot riding on silver gaining so
much in price (me), or even just keep up with this kind of thing, like, for
instance, Israel Friedman, writing at InvestmentRarities.com, who notes that
there are 5 billion ounces of gold sitting around someplace in the world, but
that there are only 2.5 billion ounces of silver, even though five times as
much silver is mined every year than gold.
Therefore, silver is being consumed at prodigious rates, which is why Mr
Friedman says, "Silver is needed to maintain and improve future standards of
living. Gold is needed for luxury and emotional reasons. Silver is for the
optimist, gold for the pessimist."
In that optimistic vein, Mr Friedman says, "I honestly believe that silver must
eventually sell for five to 10 times what the price of gold may be."
And that is just the kind of profit that I need! Whee!
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.)
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