I thought I was still asleep and merely dreaming when I opened up Barron's and
saw that the earnings of the S&P 500 have dropped to US$28.75, which is
down from last week's $45.95, which is down from last year's $78.80.
In case you were wondering, this level of earnings is down to where it was in
1995, and at that time the S&P 500 was selling for about $450, versus
today's $770, and which makes the price-to-earnings soar to an
almost-unheard-of 27! A P/E of 27! Hahahaha! So you can see why I thought I was
dreaming!
This evaporation of earnings also probably explains why the S&P 500 index
is at $770.05, down from last year's $1,353.11, meaning that if you had bought
the index last year, you have lost
almost half your money in nominal terms, and you have lost ever more when
calculated in inflation-adjusted terms, as the dollar has lost buying power in
the last year which has made food and necessities get higher in price, higher
and higher until I am screaming out the window, "The Federal Reserve, creating
all that money and credit in the banks - so that somebody could borrow all that
new money and use it to buy such mountains of public and private debt - is
stupid-beyond-madness, you lowlife morons, and now we are all freaking doomed
because all the world's money is going to crap as, suddenly - as part of a
coordinated, global economic stimulus - whole mountains of money and credit are
being created so that governments can try to spend their way out of bankruptcy!
We're freaking doomed, you morons!"
And although my stupid neighbors protest about my screaming like that, the fact
is that it is worse than that, because the USA, with its $14 trillion economy,
has a federal government that is going to spend, over the next year, all the
money in their usual $3 trillion-plus budget, but also another $2 trillion or
so over the next year - $5 trillion in government spending, at a cost of $3
trillion in new debt, all in a $14 trillion economy! Gahhhhh! We're freaking
dooooooooomed!
I did not mention that there are only about 100 million non-government,
non-taxpayer paid workers in the US, which means that there are only 100
million workers who can make a profit with which to pay taxes, which means that
$5 trillion in government spending is a staggering $50,000 for Every Freaking
One (EFO) of those non-government, non-taxpayer paid positions! And you think
THAT is going to work out for the best? Hahahaha!
Well, most people (the majority) do; and maybe you do too. And if so, I love
your optimism. In fact, I envy your sunny optimism, even as I deplore how
stupid you are; (although I already knew you were pretty stupid because here
you are, reading my stupid Mogambo Guru newsletter, and I gotta tell ya, that's
a classic sign of stupidity!)
In order to explain it away, I say that my personal stupidity was caused by
asphyxia after being choked by some beautiful woman's big jealous brute of a
boyfriend who jumped me from behind - which sounds so much more romantic and
macho than the truth, which is, "I was born sorta like this, and then it got
worse after I banged my head a lot as I grew up, suffering damage through
various childhood accidents and my heart being broken by cruel, manipulative
girls, and then more slamming my head against the wall in disbelief as an adult
at the sheer stupidity of the neo-Keynesian econometric economics being used by
the Federal Reserve to create so much excess money and credit that it produces
inflation in prices and inflation in the size of government, either of which is
enough to destroy us a hundred times over!"
But don't get me started with heart-rending, sorrowful stories of how I am
living proof that girls don't date guys who are both creepy AND broke (although
I found that they will tolerate one or the other for short periods of time)
because it is time for Living Mogambo Theater (LMT)! Yippee!
Now, sit back and enjoy my riveting performance, for which I should have won an
Oscar - and WOULD have won an Oscar if it had been filmed (which it wasn't,
maybe from government goons always sabotaging me, but mostly by I just made it
up right now! Hahaha! The joke's on me!)
Anyway, my powerful voice becomes eerily hollow and booming, my face a study in
fear, as I say, "And when roaring inflation happens, thanks to the damned
government spending more money to buy their way out of bankruptcy caused by
their previous deficit-spending and the damned Federal Reserve creating the
money and credit to finance this insanity as they financed the
excess-money-and-credit insanity that got us here in the first place, everyone
and everything are ruined!"
I slowly crumple to the floor, a pathetic, wasted husk of a man, my every move
a subtle nuance of woe and utter despair. Suddenly, I spring up, my features
drawn into a mask of horror, my stentorian voice blaring out, "And then the
damned government usually finds a way to get into a war against scapegoat
foreigners, which is Really Bad News (RBN) nowadays when you consider that
foreign countries and foreign people (who admittedly speak foreign languages
that nobody can understand and they probably don't either), have been hurt even
more than we morons here in the United States, and in their case, they are
RIGHT: A foreigner caused all their trouble! Us! Hahahaha!"
My laughter echoing in the theater, the lights come up as the camera slowly
pulls away to get, on film, the powerful, thrilling close, "And yeah, although
the 'foreign devils' are truly us Americans, the filthy bastard that did it all
is Alan Greenspan, disastrous former chairman of the Federal Reserve, who did
it by merely creating too much money and credit, which pounded down interest
rates, to pay for it all! If you can't pay for a boom, you don't get a boom,
and if you don't have a boom, you don't have a bust!"
After pausing for dramatic effect, I go on, "And so all this mess is because of
Greenspan, by both egregious commissions and omissions, legal and illegal, day
and night, more and more, which explains why food costs more nowadays, and has
always been costing more and more for as long as you can remember, and why
everything has now turned to crap in the inevitable bust that always follows a
monetary boom!"
Instead of the thunderous applause that I thought I was going to get, maybe a
few shouts of "Encore!" or "Bravo, Mogambo!" there was only silence. Looking
up, I peer out to see that the place is empty and that everyone has left the
theater and gone home, not even waiting for the boffo ending.
Hmmm! I immediately suspect script troubles, but the important thing is that I
never got to tell them about how they should be buying gold, silver and oil
right now, which was the point of the whole thing!
But I am telling you to buy them, which is almost as good, I figure.
But if you were one of those people who walked out on my wonderful theatrical
performance, then don't buy gold and go to hell, you tasteless moron who
wouldn't appreciate real cultural excellence if it came up and pissed on your
damned shoes!
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 2009, The Daily Reckoning.)
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Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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