Rocky Mountain High!!

   Winners. They are easy to spot.  They just do things differently than the rest. They make the extraordinary look routine, while others struggle to make the ordinary look routine. Winners live in the present, always thinking in terms of "I am or I will". Others are often consumed by their vision of the future - or in some cases, live in the past - but rarely in the now, like winners do. "I could & I did" is the mantra of also-rans. The fact winners live in the moment is what allows them to produce when the stakes are the highest.

   In sports (just like in life), you would think the winners would be the most naturally gifted.  Those who can run the fastest, think the quickest, or throw the hardest should produce more than their quota of winners. Yet for some reason, when you look at winners as a group - the most physically gifted rarely make the cut. Wilt Chamberlain is a perfect example. Many would consider him the most physically gifted player to ever lace  up sneakers. Yet, few would describe him as a winner.   While he had all the physical tools, he was lacking more important qualities -  like heart, dedication, and a killer instinct. Those traits as well as an uncanny sense of timing is what produces winners. 

This past Sundays  Bronco/Steeler playoff tilt - Tim Tebow,  with his usual flare for the dramatic rallied his team in overtime to win another big game.  As a 40 year follower of NFL Football, and a lifetime Bears fan, believe me, I have seen plenty of bad  quarterback talent. I can safely say as far as Tebow in concerned - I have never seen a worse throwing motion on any quarterback ever.  Not only does he have the slowest release I have ever seen - he throws closer to sidearm than overhand. There has never been a quarterback who gets more done with less talent than Tebow. When you combine the fact he has a very hard nosed style of play and a complete lack of talent - its tough to believe he will thrive in the league long term.  Having said that, I cannot believe what I have seen from him this year already. He has engineered multiple late-game winning drives. Its one thing to see experienced Quarterbacks do that, its something altogether different to watch a Rookie do it. Peyton manning won only 3 games all season as a rookie. Rookie quarterbacks, no matter how talented, simply do not win in the NFL. The fact he is winning is what makes Tebow so fascinating to watch. He is doing it, as a rookie, in  an unconventional way, with little talent, on the biggest stage (NFL Playoffs) in a clutch manner. Stated another way - he produces when it counts the most. In Bagholders book, that makes Tebow a winner.

   It will be some compelling drama this weekend when Tebow takes his show on the road against the Brady bunch. Bagholder believes Tebows magical season will come to an end. Brady, a winner in his own right, is also the stuff of greatness. Greatness is an entirely different beast - we will save that for another blog.  In the mean time, Patriots on the money line - like Tebow -  is a winner!!

Buy or Sell - Homegamers Edition

 Buy or Sell - U S Residential Homes. We here at Mytwocent$ will weigh the facts, one at a time as they relate to the big picture & let the chips fall where they may. The way bagholder sees it, these are the most relevant facts in no particular order:

1. Nominal dollar price -This seems a logical place to start. According to these US census bureau NUMBERS, the median nominal price of US homes has risen every decade. This has held true for the last 8 decades. Its not so much that housing has gone up in value - it hasn't.  Its because the dollars purchasing power is being systematically destroyed. Since Our leaders are spending $$ we don't have like drunken sailors, the printing (devaluing) will not be stopping anytime soon. Throw in the fact that housing prices today are a fraction of prices just five years ago, it seems reasonable to expect higher nominal prices ahead. BUY

2. Gold price - The reason we include the ounces of Gold required to purchase a home is to remove the distortion created by measuring the homes value in depreciating Dollars. Because dollars can be counterfeited & Gold can't; the price in ounces of Gold should give us a more accurate reflection of whether homes are - historically speaking - a buy. Looking again at the US Census Bureau NUMBERS, we see in 1940 & 1980 about 80 ounces of Gold were required to purchase a home. What is interesting about those two years is they both came on the heels of decades with massive dollar devaluations.  The pattern suggests the next bottom will be in 2020 following a decade of massive dollar dilution. Today, it takes 146 ounces to buy a home & its trending lower.  With Gold in a Secular Bull, and homes in a Secular Bear - it seems reasonable to expect the ratio to contract further. SELL

3. Supply/Demand - There is currently an 8 month supply of homes on the market, with many more sitting on the balance sheets of US Banks - just waiting for the market to turn-around. The fact there is a noticeable supply overhang could only mean the real $$ value is lower than todays trading price. On the Demand side, there are millions of people who have been removed as buyers from the housing market, thanks to foreclosures & short sales. Millions more are out of work. It is safe to say, demand is falling. Economic law states, in order to balance excess supply with falling demand - price must go down.  SELL

4. Trend - the recent trend in housing prices is clearly down. We here at Mytwocent$ are big believers in "a trend remains a trend, until proven otherwise". It is very difficult to see anything on the horizon, especially when you consider the supply/demand issues addressed above, that will change this down trend. The only plausible possibility would be massive dollar devaluation. This is the only real card Gman has to play if he wishes to reverse the recent down trend - in nominal terms anyway.  Since trends tend to run longer than anyone believes possible - and the peak of 2005-06 home valuations has all the earmarks of a popped bubble, this points to lower prices ahead. SELL

5. Cost to build - US residential homes are trading today at a fraction of what it cost to build them. On the face of it, that fact seems absurd. Logic would suggest homes should never trade that low.  At a minimum you would expect homes to sell for at least what they cost to build. Yet, here we are today with homes trading at substantial discounts to building costs. Bagholder has been told by his insurance company he has to carry 200k worth of Insurance even though his house at todays market value might be 120k. The reason is the cost to rebuild. It is simply not reasonable to expect this condition to be a permanent one. We will see the day again when homes trade at a premium to building costs. That portends higher prices ahead. BUY

6. Rental income - The amount of $$ a property will produce in Rent has historically gone a long way towards determining the market value of the house. If the spread between what it cost to buy the house & what it can be rented out for gets wide enough - then well capitalized investors will step in and bid up the property price to help close the gap. Arbitrage 101. Five years ago in Phoenix a 200k house would cost you $1100/month to buy & would rent for about the same. Today, that same house cost 100k (or $550/month). The rent that place will bring has increased slightly thanks to the large quantity of people who have been foreclosed on & thrown into the rental market (because they don't have the credit to buy). The spread between current rental income & buying price is as wide today as bagholder has ever seen. This too portends higher home prices ahead. BUY

7.  Taxes - While property taxes are an afterthought to most folks purchasing a house, they shouldn't be. Do you ever really own the property if you have to pay Gman 2-3-4-5% of its value every year?  Bagholder has watched the value of his home get whacked in half the last few years, yet his property taxes only went down 9%. The problem is taxes are only going to go up over time. Raise them high enough, relative to the value of the property & nobody will want to buy them. Case in point, Detroit - where the median home cost only $6,000.  In many cases they cost less, all that is required is you getting current on the taxes. As municipalities struggle for revenue, its only a matter of time till they raise taxes - again and again. If they raise them high enough, like in Detroit, demand will be non-existent & home prices will fall. SELL

8. Median wage - while this might not seem relevant to median house price, there is a connection. It speaks to what working man can afford. In 2010 4.4 years median wage would get you one home. That is over double the time required to work to purchase a home in 1940, 1950, 1960, 1970, 1980, and 1990 - and 1/3rd higher than in 2000.  In terms of hours worked & wages paid, housing prices are the highest they have ever been. We have to work more hours than ever before just to afford a median home. It does not seem reasonable this trend could persist much longer. Which means either wages paid will be going up, or house prices going down. Since wages going up is not likely anytime soon that leaves house prices heading lower. SELL. 

9. Interest rates - This is the proverbial sword of Damocles. It hangs over the Real Estate market like impending doom. Eventually Interest rates will rise. When they do, the purchasing power of home buyers will evaporate. The effect will be a complete collapse of the bid underneath the residential home market.  The powers that be know this to be fact. This is one of the reasons why they have been holding down interest rates below true market levels (propping up the bond market is another). Like a beach ball held underwater, microscopic interest rates are not a permanent condition. When those rates turn up, and they will eventually - home prices will get crushed. SELL

10. Bankers Position. As far as financial savvy goes, Bankers are a crafty lot. They rarely lose. With that in mind - bankers are Long residential homes - like never before. Not only are they Long - they are withholding supply from the market. This behavior suggests they are looking for higher prices down the road. Of course, this logic is only sound if the Bankers intentionally built their Long position. What if bankers are victims of their own greed and they were trapped into their long positions. If thats the case, lower prices may lie ahead. You can make a case for both higher  & lower prices ahead, based on the the behavior of those in the financial know. This is a tough call, but Bagholder just can't see bankers as victims. He believes they built their position intentionally and this fact points to higher prices ahead. BUY 

    These are the 10 most important considerations Bagholder can come up with in determining the direction in which US house prices are heading. According to my math, there are 4 Buys & 6 Sells.  This certainly does not give us anything definitive, unless of course you weight some of these facts as worth considerably more than others. For instance, Bagholder believes Interest rates to be the strongest sell argument & Bankers position to be the most compelling Buy argument.  Also, had we looked at these 10 facts in 05-06,  9 of 10 were a sell. The recent pullback in price has turned four of these facts bullish.  Bottom line: even if residential homes are not a buy right now - they are certainly moving in that direction. Thoughts?

Investment Aphorisms

  This is the first part of a two part blog covering some of the best bits of Unconventional wisdom Bagholder has been fortunate enough to obtain in his 30 year investing career. 

1.  The herd always loses.  The value of this cannot be over-estimated, which is why it has been listed first. In my three decades of studying financial markets, there is no easier way to make money, than betting against the herd. Consider this hypothetical.  XYZ has a universe of 100 traders. 98 are bullish, 2 are bearish.  Lets assume the asset increases in price, even though a rising price in that scenario is near impossible - this is hypothetical.The 98 who were long get to carve up the money from the two who were short. Problem is, when you divide the proceeds from the two into 98 piles, the bulls aren't making hardly any money.  Now consider the reverse, XYZ goes bankrupt - the two bears get to carve up all the money from the 98 bulls. In other words, each bear gets paid off by 49 bulls. 49 times your stack - now thats a ripper.  It is also why the masses must lose in the long run - even when they are right there is no money to be made. In the mean time, those betting against the masses only need be right once in a while to multiply their wealth. Still not convinced? In or example, the Bears can be wrong 48 times, right once - and make money. The masses however, can be right 48 times, wrong once - and lose money. The real lesson to be taken from this is being on the right side of a trade is only a small piece of the puzzle. The big piece is having the herd on the other side. While most people in the financial markets spend their time trying to be right, those actually making money - are doing it betting opposite the herd.

2. Markets move in a manner that hurts the most participants possible. In a way, this is a corollary of truth above. Examining the history of financial markets, you see this played out, over and over. The tech mania in 1999 had everyone piling in the long side of the Nasdaq, the few who were short - cleaned up. In the mid 2000's everyone was getting long housing. My plumber had 3 homes, my carpet cleaner had 4. With everybody getting long housing in 2005-06, the market was ripe to crash- and crash it did. Scanning the financial markets today for "lopsided" trades, there are a couple obvious ones. The Bond Market and the Gold Market.  My local Chase branch is offering 13 month CD's with a return of .8%. I hand them a thousand dollars, 13 months from now I get back $1008, and a tax bill for 1/3 of the $8 profit. No rational thinking individual would make that trade.  And yet, pension funds, retirees, foreign countries - just to name a few, are all piling on the long side of that trade. Are they all irrational? In a word, yes.  The reasons are psychological in nature.  Man is a linear thinking individual. This means he looks at the past, and extrapolates it into the future. He sees positive returns for decades, and so he has been conditioned (much like a lab rat) to think the positive returns will continue indefinitely. Anyone looking at the bond market today has watched it go up for so long now, they are absolutely hypnotized. They are like religious zealots, all the contrary evidence in the world (like .8%) won't get them to change their mind. Much like the housing market of 05-06, todays bond market looks ripe to crash. 

3. Conventional wisdom is anything but. All Markets are rigged. Stock market, Gold market, or the market for 1916-D dimes; it really makes no difference. Sometimes the price is rigged too high, sometimes too low. Sometimes the rigging is short term, other times its long term. Make no mistake though, all markets are rigged in a manner designed to pick the pockets of the masses. In any given market, there are players who because of their size and resources effectively control that market. They have an angle. They know before the smaller participants which way a market is headed. When you consider some of the larger markets on the planet (like Gold) the players who control that market have more than enough money to get the MSM to trumpet whatever they want as "conventional wisdom".   Think of the  1970's - mass inflation, oil embargo, energy crisis, sky high interest rates.  You could hardly dream up a more bullish scenario for Gold - or a more bearish one for bonds.  Conventional wisdom by 1980, thanks to a decade of escalating inflation had the effect of getting anybody even remotely interested in the Gold Market onto the LONG side of the trade, while simultaneously scaring them out of their Bonds.  Conventional wisdom was wrong on both counts then, just as its wrong today. Todays wisdom: Gold is in a bubble. With fresh memories of other popping bubbles, joe everyman thinks "I don't want anything to do with another bubble - I better stay away from Gold."  Those of us skeptical of the conventional wisdom have to ask … Is Gold really in a bubble, or are market makers paying their MSM friends to scare people away - thus keeping the trade lopsided? 

4. The key to multiplying wealth is understanding how Bull markets progress.   Bull markets are a product of the paper aristocracy. They create them for the purpose of adding zeroes to their wealth. Since you can't create bull markets, the best chance you have to multiply your wealth is to identify a Bull market early, layer into a position, and sit tight. Bull markets have 3 phases. First is accumulation (buying) by those in the know. Second is the run-up in price which (if properly managed) slowly sucks in the masses. The last phase is the distribution (selling) by those in the know to the ignorant masses. Bull markets tend to run for a generation (18-30 years). The reason is, it takes a generation of paper aristocracy conditioning - to get the masses all on the wrong side of a trade.  When Bulls are first born, they progress at a relatively steady rate - often finding support at the 200 day moving average. . The advances are punctuated by very sharp pullbacks which will often wipeout months of gains in only a week or two. Price action like that shakes out all but the staunchest of bulls, while trapping greedy Bears.  As bull markets age, the rate of price appreciation increases. By the end of the Bull market, participation will be widespread. A deep understanding of how bull markets progress is the key to identifying them while still in the accumulation phase (before the run-up in price). The 21st century Gold bull is now 11 years old & it is still in the accumulation phase. Considering the blueprint laid out here, its easy to see how this Gold bull could easily run for another 15 years.  

Game Changers

Where is the outrage? 

  In the past week  our Congress has passed legislation (and Obama signed) that permits the US Military to detain whomever they wish indefinitely including US citizens on US soil; provided they think you may have terrorist ties.  In one fell swoop, they have effectively eliminated HALF the Bill of Rights for US citizens. Bagholder can't be the only person who sees the National Defense Authorization Act (NDAA)  as a game changer.  

4th amendment is now Gone - no more judges signature required to detain people, invade their homes & and seize them or their property. Of course, they are required to think you have terrorist ties - before they do any of this. 

5th amendment, Due process is now gone. In fact, how about NO process. They can deprive you of liberty and property as they wish. Of course, they are required to think you have terrorist ties - before they do any of this. 

6th & 7th amendments, your right to a speedy jury trial is now Gone. Nothing ambiguous about the word "indefinite", which is how long the new law allows them to detain you before you see the inside of a court room. Of course, they are required to think you have terrorist ties - before they do any of this. 

8th amendment, restrictions on cruel and unusual punishments are now gone. We can be whisked off to Guantanamo for Big Bob's cockmeat sandwiches whenever Gman decides we need it.  Of course, they are required to think you have terrorist ties - before they do any of this. 

   The puppeteers have grown weary of having the masses enjoy sanctuary within their homes. They no longer want to be compelled to provide us with our day in court. Thats all been replaced with the NDAA. While many of you are thinking Gman has no intention of abusing their new powers, Google Jose Padilla. Gman was a wee bit upset about the people pointing out his illegal treatment of Padilla - so they have simply legalized the treatment. 

   Ther NDAA is arguably the single most important piece of legislation passed (as they have gutted the bill of rights) in the history of this nation, and there is irony in that it merits 20 seconds on the ten O'clock news in between a story on an old couple who got mugged at their ATM - and doctors who scammed medicare for non existent procedures totaling  21 million dollars before finally getting caught. The decision by the local news to sandwich the reporting of NDAA between 2 other crimes on humanity, is very telling.   

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  The second Game changer we will discuss is MF Global. For those living in caves, MF Global was a futures trading firm. They had approximately 140,000 clients with futures accounts. The futures market is not like the stock market. When you buy a stock for $10 and it goes to $20, you make $10 and nobody loses. Futures are different in that every dollar made comes directly out of someone else's pocket. Thanks to lousy management investment decisions, MF Global was forced to claim bankruptcy.  

   In a normal corporate Bankruptcy, clients are made whole first - then creditors & bond holders - then stock holders.  What makes the MF Global story a game changer is they are effectively altering the order of who gets made whole first. The bank (JP Morgue) which was on the other side on MF Globals losing bets, has arbitrarily decided to seize the assets inside the accounts of MF Global Clients. In effect, they are cutting to the front of the line. 

   Jim Willie, aka the "golden jackass" theorizes the Morgue gobbled up MF Global to avoid having to deliver physical on their precious metal paper shorts - which was slated to begin the next day.  The timing IS impeccable. There are other incriminating facts as well which support his theory. Many of the clients with accounts at MF Global were among those who were in line at the comex window looking to take delivery of their Gold & Silver, when MF collapsed. JP was the bank who was going to have to deliver physical metal to those MF clients. Instead, those MF clients have been locked out of their accounts - many with existing open positions they can't access (in the futures world, that means unlimited potential losses). Even more disturbing, is JP registered deposits of physical metal into their vaults equivalent to the amount of metal missing from MF global client accounts. If I'm on a jury - thats enough to convict.

  One of the primary reasons the US is the global power it is today, is because of the rule of Law. We have rules in place designed to protect the masses from the predatory behavior of the JP's of the world. There are really only two possible scenarios from here. The powers that be will make those clients whole - or the system is broken. Either we have rule of Law here, or we don't.  If they can seize 140,000 futures accounts, why not 1/2 million mutual fund accounts, or a couple million brokerage accounts? 

This is a very dangerous fork in the road we stand at today. Bagholder is optimistic in that he believes those clients will eventually be made whole, those running MF Global will be Perp-walked, and JP will cough up the Silver (or default officially). Stay tuned.

Attention Kmart Shoppers

  Kmart Blue-light specials. They came without warning, they didn't last long, were good while supplies lasted,  and were very often ridiculously low prices on something you didn't want (but occasionally needed).   As marketing gimmicks went, It was one of Bagholder's favorites. It was economics in action at a very base level.  Sell shampoo for a dollar that normally cost $5 - and it will fly off the shelf.  Thats how free markets work.  The Gold & Silver market today is reminiscent of a Blue light special. 

  Gold is on special today by any reasonable standard. Relative to its 200 day moving average, its the cheapest its been in 3 years. In fact, It is below its 200 day moving average for only the 3rd time in the last 7 years.  Its trading about 17% off its all time high, only twice in the last decade has it traded lower. As with all blue light specials, this one on Gold won't last much longer. The fundamentals underlying the price advance in Gold the last decade are stronger today than they have ever been. 

  If you understand nothing about the Gold market, Know this: Checking the structure of the market (who is on which side of the trade) we find the most bullish COT report Bagholder has ever seen. Right Now, the Paper aristocracy (banksters) is the longest they have been in decades. Meanwhile, man on the street is the Least Long he has been in decades. We  may have to depart for the emergency room soon - as looking at this weeks COT report gives Bagholder  one of those 4 hour Hard-ons.   

 Gold is a better deal today at $1600, than it was ten years ago at $265. A decade ago Central banks were dumping 400 plus tons a year on the market, today they are net buyers. A decade ago Gman man wasn't  printing $$ with reckless abandon, today - not only is he printing - he has openly admitted it. Ten years ago real interest rates were positive and falling, today they are negative and falling (better yet). Ten years ago, the US Government wasn't obviously bankrupt; today they are beyond bankrupt, both morally & financially.

  The powers that be are running a Bluelight special on Gold, solely to increase confidence, temporarily, in Gmans paper. Do not expect the special to last. Gold has returned 22% per year for ten years running. We here at Mytwocent$ are well aware of how bull markets progress, consequently we know the % return the next ten years will dwarf the 22% of the last ten. For the record, another decade of 22% per year gets us north of $10,000/oz by 2020. Bagholder believes $10,000 will be taken out well before 2020. 

Let's Drain the Swamp!!

I'm Bagholder, and I approve these messages...

Ron Paul Moving up in the Polls!! It seems Ads like this one have created a, well, lets just say - disturbance in the Force.

   We have linked the Enslavement" before - but if you haven't seen it - Take the time now!!

Was that incredible or what?

Poems Everybody, Poems

Poetry is nearer to vital truth than history. - Plato

  Bagholder has always had an affinity for Poetry. Expressing complex thoughts, with a bare minimum of well chosen words can be one of life's great pleasures to behold. Some of the best poets of the last half century have utilized their talents writing lyrics for music. Rocknroll, rap, country - they all have their share of poets. A good poem, just like a good piece of Art, is subjective. The best works speak differently to different people, depending upon what they choose to see.  Todays blog will discuss one of Bagholder's favorite (because of its elegance & simplicity) obscure rocknroll tunes from the 1980's, along with some of the many plausible interpretations. 

There is unrest in the forest, There is trouble with the trees, For the maples want more sunlight And the oaks ignore their please. The trouble with the maples, (And they're quite convinced they're right) They say the oaks are just too lofty And they grab up all the light. But the oaks can't help their feelings If they like the way they're made. And they wonder why the maples Can't be happy in their shade. There is trouble in the forest, And the creatures all have fled, As the maples scream "Oppression!" And the oaks just shake their heads So the maples formed a union And demanded equal rights. "The oaks are just too greedy; We will make them give us light." Now there's no more oak oppression, For they passed a noble law, And the trees are all kept equal By hatchet, axe, and saw.

 Could this be a statement on Republicans (Oaks) who have it all, taking advantage of the poor underprivileged Democrats (Maples)?  The analogy seems perfect when you consider that maple trees need shade to survive, whereas with uninterrupted direct sunlight (which they clamor for) they would die. Life is no different, as Democrats aren't happy unless they are taxing those who produce; and heaven forbid  they ever get the complete control they clamor for, it would literally - kill the country……Or  

 There are a lot of parallels to the feminist movement of the 1970's. Women (maples) scream for equality, while men (oaks) can't understand why women jus don't accept their role - and "be happy in their shade".  The feminist movement, like the maples,  was screaming for something they really didn't need/want.  They fought for the right to abandon their traditional role of stay at home & raise kids, in favor of slaving 40 hours a week for some green paper.   It is difficult imagining any rational group of people wanting to make that trade, let alone marching on DC to get it done……Or

  Could this be a statement on civil rights and the whites (oaks) oppression of the Black (Maples) searching for equality (light). The civil rights movement was a "noble" one, was it not?  The hatchet, axe & saw are the implements of equality in our poem. In the real world, the tool of implementation is  Affirmative action. While the intent was noble, you cannot legislate morality.  Consequently, society (the forest) as a whole is worse off……Or   

 Is this poem an allegory on the failures of communism's never-ending quest to ensure equality for all? History has shown repeatedly, any efforts to create equality where none exists naturally  is destructive for all involved.  True to marxist dogma, the trees are made equal by cutting down the strong. As a result, there is no more rich in the forest, only poor. 

  While republican/democrat, male/female, black/white, rich/poor are all reasonable interpretations of the oaks & maples.  We here at Mytwocent$ believe these are all  false dichotomies created for the sole purpose of shifting focus away from the real enemies, on to false ones.   In every case the two combatants have more in common with each other than they dare admit, all the while the real threat goes unnoticed. It is textbook divide & conquer strategy executed perfectly by the kleptocrats running this country. They keep the masses squabbling over petty differences, as they go unnoticed pillaging the planet. It truly is, poetry in motion. 

Pay No Attention to the Man Behind the Curtain

It is well known in Literary circles that Baum's masterpiece The Wizard of Oz is an allegory for monetary reform cleverly disguised as a children's fictional tale. Oz was written in the late 1890's when the single biggest political issue, by far, was monetary reform. Baum himself, placed a disclaimer in the introduction of the book stating "OZ" was just a children's tale. Thinking logically, why put a disclaimer in the book at all, unless its known, in advance, people will perceive the story to be something more than a fictional tale. The characters & the symbolism within are much too dead-on to be a mere coincidence. It speaks to Baum's Genius that he could condense the political/monetary landscape as well as all the players of the 1890's, into a fictional tale to which anyone could relate. His genius is further evidenced by the timelessness of "Oz". While the present political landscape is certainly different than the 1890's; The players and the lessons to be learned are even more applicable today.  

   The great and powerful Wizard of Oz himself, is the symbolic representation of Government (Gman). In todays world, Gman is looked to for answers to everybody's problems - just like the Wizard of Oz. He is seemingly all-powerful, unless you are fortunate enough to get a peek behind the curtain - where Gmans deceptions and ineptitude are made obvious. Truth is Oz, just like Gman today, has no answers. Gman is little more than a giant complex wealth re-distribution machine created to mislead people into believing the cure for what ails them requires looking to Gman, instead of an inward looking examination of self. This was a minor problem in the 1890's, today its an epidemic. 

 Then we have the Wicked Witch representing the interests of the Paper Aristocracy. They seek to control people - plain & simple.  The Witch used flying monkeys to further her cause, today's Paper Aristocracy uses the MainStream-Media (granted, they don't fly, but they are monkeys none-the-less). The Witch used a crystal ball for clairvoyance, todays Paper Aristocracy simply make the headlines. The Witch used fear as her chief instrument of control. Today's Paper Aristocracy has gathered most every form of human frailty known including fear, greed, vanity, power, and ignorance; and forged them into the finest instrument of control mankind has ever seen - paper money.   

  Dorothy symbolizes the will of the people, the electorate. As a group - they are not particularly savvy - but they do have common sense. Dorothy, like the US electorate is not perfect, as her reasoning is easily swayed by emotion, distraction, and specious tales of woe. Dorothy was a lost soul looking only for a way back home, to a simpler more black and white world.  She buys into the proffered nirvana of the Emerald city (read: green paper) just as the US electorate bought into the Bankers pitch of fiat paper money.  Dorthy and her companions obsession with the Emerald city (and its supposed answers to their problems) is no different than peoples blinding obsession with paper money today. Just think how many folks you know who would tell you their lives would be so much better if they just had more, green paper. The victims come from all walks of life too. Farmers (scarecrows), industrial kings (lions),  workers (Tin men), and munchkins (poor) all have their share of wretched souls lost beneath a sea of paper money.

Once Dorothy gets to the Emerald city, she realizes immediately the system is fraudulent. She and her companions discover they held the answers to their problems, all along. In her case the Ruby slippers, which are not Ruby at all. Hollywood made them Ruby red to stand out on screen, taking advantage of the fact Wizard of Oz was among the first color films ever made.  In the book they are silver slippers which gave Dorothy the means to go where she wanted. In other words, to be free. Free people, by definition are not controlled, which explains why the silver slippers were so coveted by the witch. The key to Dorothy's freedom was silver. In today's world, buying physical silver is the only way to unlock and remove the shackles of paper money. Slaves keep their money in paper, free men keep theirs in Silver. 

   In Oz, the yellow brick road is the path to nirvana. Everybody knows it, but until Dorothy comes along - nobody follows it. Is Gold really any different today? History is clear, a Gold standard is the answer to todays economic woes. Just like the munchkins of Oz who wouldn't follow the yellow-brick road, the masses today continue to play the rigged games (stock, bond, and money markets) of the paper aristocracy, becoming more impoverished every day. Gold was the path in the 1890's, it is the path today. The Paper Aristocracy (just like the wicked witch) is doing all they can to push people off the Gold path. They know Gold is the anecdote to the paper disease they spread. 

  Perhaps the best lesson to be taken from Oz is While the yellow brick road may have led into the Emerald city, it also led out. Emerald city, like paper money, is one giant con. It has only the power we give it. Real power, the power to change the way things are, lies within. You are not obligated to play the fiat money game, any more than Dorothy and her companions were required to stay in the Emerald city. You have the power to buy precious metals and take control away from the Paper Aristocracy.  Dorothy needed the Lion, Scarecrow, and Tin man to make her journey. In like manner, you need  brains, heart, and courage to recognize Gold for what it is - the only way out of the FIAT paper hell.

 Remenber, In Oz, the yellow brick road was not without scare.  In today's world, we have msm monkeys screaming "bubble" on every Gold rally & "popped bubble" on every pull back, hoping to push the lost souls off the yellow brick road!! Do not be fooled, this is a clear cut case of life needing to imitate art. Follow the yellow brick road!! Follow follow follow follow follow the yellow brick road!!

The great and powerful Bagholder, hath spoken. 

Down the Stretch They Come .....

   They are turning for home in the race for the Republican nomination for President & the accompanying right to savage the big O in next years election.  As this is written, Cain has a slight lead in the polls over Romney. There is a gap to third where its Gingrich, and then Paul. With less than 4 months until the nomination is decided, it seems clear the next president will come from this group.

  Cain.   Very difficult to determine if this guy has a real shot, or is he just the flavor of the month like Perry & Bachman before him. What is clear at this point, people like him.  Maybe its the catchy 9-9-9 plan, after all, Americans love to be marketed. He speaks with conviction too, which goes a long way.  He is an exceptionally skilled businessman.  For example, he currently has a healthy slice of the electorate convinced we need a national sales tax. Can you imagine the skill (and chutzpah) involved in selling the American people on the idea of a national sales tax? Thats like selling sand to the Arabs. Bagholder cannot believe his eyes.
  Cain has done it by dangling two juicy looking cherries - 9% corporate tax & 9% personal income tax. For the record,  the economy would flourish under those conditions. The fly in the ointment however, is the national sales tax.  Right now Gman has two sources of income - the corporate tax and the income tax. A national sales tax gives them a third tap on our money. It would almost be tolerable, if the rates were required to stay at 9-9-9. In reality though, once the sales tax is passed, it is only a matter of time until they start changing the rates - for the worse. This is why Cain and his 9-9-9 will ultimately be found wanting.  Current odds 6-1

  Paul.   In words of one syllable: He would shrink the size and scope of Gman the most. That fact alone is enough reason to elect him.  Ron Paul is  a man before his time. People will look back a generation from now and see the wisdom in his words they can't see today. Thats the thing about genius, its rarely recognized immediately.  It takes time for the slow witted masses to catch on to the wisdom.
   In the meantime  Ron "the 13th floor" Paul gets no help from the media, no money from the establishment, and no respect from his peers. He is clearly the most distinguishable candidate on many fronts as reported here.
   While the media might attack the statements & Ideas of the other candidates, they rarely attack the other candidates personally, like they do with Paul. The "Name calling" treatment, it seems, is reserved solely for Paul.   I have heard him called almost every slanderous name there is like crazy - looney - nutty - insane, the list is endless. They don't dare address his ideas, they just attack him personally.  The reason for this is obvious. Paul, and his Ideas represent a direct threat to the establishment.
  The way the "haves" see it, Paul must be stopped.  So the media breaks off some disrespect for Paul by branding him a lunatic every chance they get. Sad, really. Current odds 99-1

   Gingrich.  The only reason this guy is still in the race is thanks to his skill as a debater.  In this regard he is way ahead of his competitors. Most of them (when they are not repeating sound bites) struggle to string together two nouns and a verb in a complete sentence, Obama included.  Newt, on the other hand, has full command of adjectives & adverbs which makes him extremely persuasive when he speaks. He eloquently states the conservative case with extreme vigor, and in a concise manner. For those who don't know him, he is very likable, at first gaze.
  The real problem with Newt is the dark personal history. It will turn a lot of people off.  He also has the added problem of being the only candidate who will not siphon large chunks of votes from traditionally democratic constituencies. I'm sure Cain could pull in more than the 7% of African American votes Mcain pulled.  I'm sure Paul could pull the anti-war/pro drug crowd from the D's. Romney seems to poll the best among women. But there is no group on the Democratic side from whom Newt will pull votes.
  When you factor in Newt's personal baggage, with the fact he will have to unite conservatives (cause he sure aint getting any liberal votes) like never before - suddenly the advantages of his articulate manner  & acerbic wit seem minimized. Current odds 5-2

  Romney. Seems like its his nomination to lose. One by One all the other candidates have had their day in the sunlight, which was followed by a sharp drop in the polls as the electorate sized them up (see Bachman & Perry) and said No Thanks. Romney has consistently polled at or near the top of the field. He has the most money and the strongest organization. This makes him  the obvious choice of the "haves".  Traditionally the GOP has always given the nomination in turn. Its Romney's turn now, just like it was Mcain's turn 4 years ago.
   While he is the odds on favorite to get the nomination, of all the candidates listed here he will struggle the most against Obama in the general election because there really is no discernible difference between him & Obama. They are both holier than thou, disingenuous policy hacks who will grow government spending to unprecedented levels because they both fundamentally believe more Gman is the solution to everything.  While Romney would deny that with words, his deeds would say differently.  He implemented socialized medicine, supported tarp & the bailouts, and increased taxes.  This hypocrisy will cost him dearly in the general election.   Current odds are 7-5

  Obama.  At some point, he has to own this economy. Any of the other four are more than capable of hanging the economic albatross around Obama's neck.  His road back to the white house looks increasingly tougher to navigate precisely because of the stagnant economy. History would suggest his chances are slim, at best. He does have the full support of his party and complete access to a sizable campaign war-chest. He also gets a bye into the finals - unlike the other four who will continue beating each other up. He also has many rich & powerful friends. The value of these should not be underestimated.
  In spite of all those things, we here at mytwocent$ are of the opinion Romney is the only one Obama could beat in the general election. Even that would require some divine intervention as the economy would have to be rebounding sharply by this time next year. That hardly seems plausible when you consider the Obama administrations  record of economic ineptitude over the last 3 years. The road for Obama to hoe gets even tougher when you consider a few groups (young, independents,  & hispanics) who went big for him 4 years ago are abandoning him in droves today. Current odds are 6-5

Unemployment ... Users Guide

 There is a growing angst in this country which manifests itself differently for everyone. The unease is palpable as very few can put into words the exact source of it, but they know its there. This is part and parcel of what the OWS (occupy wall street) demonstrations are all about - misdirected angst. In our last blog we discussed how rising prices are not possible in a capitalist society with sound money. Today we will discuss another little known fact about a capitalist society with sound money, Unemployment is not possible either. Did you know the word unemployment was not added to Webster's dictionary until the 1930's. For centuries, with the using of sound money there was no such thing as unemployment.

 It took the creation of the FED in 1913 less than 20 years to generate a problem (unemployment) where there never was one before. Now, just like with rising prices - people think rising unemployment is the natural state of being; when in fact it is created intentionally by the "haves"  to lower the real wages paid to the "have nots" here in America.

It wasn't too long ago where a college degree guaranteed a job for life. Nowadays, not only does that degree not even guarantee work - but it usually comes saddled with a student loan the size of a mortgage which is not erasable by bankruptcy. In other words, you have to pay it. As we all know - debt is the money of slaves. So in effect, those with student loans outstanding lucky enough to find jobs, are little more than indentured servants of the state. And you thought slavery was abolished - lolol

  As the best & brightest this country has to offer graduate College (in debt to their eyeballs), they tend to gravitate towards one of the 3 power professions - Politicians, Lawyers, and Bankers. Problem is, none of those professions create anything tangible as they are all parasites feeding off those who produce. Meanwhile, the people who actually make things (and create jobs) have to kiss the rings & line the pockets of said parasites long before ever opening a business and/or producing anything.  Until this fact is addressed, unemployment will continue to grow like a weed. 

  My apologies in advance if this comes as a shock, but wages paid in this country are much too high.  If you are an employer, then you know what I mean. If you are an employee, chances are you lack the proper vantage point (and education) to understand why real wages paid in this country are headed significantly lower (including yours). Looking big picture, why would any employer hire an American worker (with an obscene list of Gman given rights) for 10 bucks an hour, when there are Billions of people worldwide willing to do the same job for 10 bucks a day. Oh, and without all the Gman granted employee rights...... 

Most of the world is willing to work today for the paper equivalent of a dollar an hour. Market forces will demand wages paid here in the US get more in line with wages paid around the world. If they don't, Unemployment will continue to grow. While it may seem unimaginable today, within a decade labor here in America will be working for the equivalent of a dollar an hour, just like the rest of the world does today. If you expect unemployment to fall there really is no alternative, as the Haves can either pay a 150 million Americans less - or pay billions worldwide more. You don't need a Doctorate in Economics to know how that will progress.

  As if high real wages & obscene government regulations aren't driving jobs overseas fast enough, the intellectuals in Washington currently have the corporate tax rate set at the 2nd highest of any nation on the planet. Only Japan (another comatose economy) has a higher tax rate.  I doubt seriously, our leaders will even acknowledge there is a connection between high tax rates & growing unemployment.

  Perhaps the most sinister element of  Gmans behavior is his marginalizing of the problem by changing the way the "unemployed" are counted.   John Williams at shadowstats claims unemployment today stands at 26% if measured like it was in the Jimmy Carter era. Those are depression level numbers.  So rigging the unemployment percentage down to, say 9% - like they claim it is today - has the effect of defending the "haves" from insurrection by convincing the "have nots"  things are not as bad they seem. Goebbels would be proud.

   For those who care to look at history, unemployment skyrocketed in the 1930's & 1970's.  Immediately following the rise in unemployment came HUGE US Dollar devaluations and ultimately a sharp fall in real wages paid to employees. Historically, its a familiar script.  Those playing the "great game" need a rise in unemployment today, to properly foment (ignorant) demand for the coming devaluation tomorrow of our beloved dollar.  The devaluation is necessary to bring the US labor market back in balance with the rest of the planet. We can't just start paying people here a dollar an hour as they would not accept the pay cut. What they will do however, is allow themselves to be boiled slowly like the "proverbial frog" as the US $$ is devaued by 90 percent over the next decade.

   The net effect a decade from now, will be to pay workers everywhere the equivalent of a dollar an hour. Sure, it will be called ten bucks an hour - but the purchasing power of that ten bucks a decade from now will be the same as one dollar today. Working man does not comprehend what is happening to his wages because he does not understand the distinction between real wages & nominal wages. This is the source of the national angst. Working man is focused on how many $$ he gets for his work (nominal) instead of what those $$ can buy (real). So he loses ... in spades. To properly comprehend what is happening to you, it is imperative you understand the distinction between nominal & real. 

 What is perhaps most interesting about the con is working man knows he is getting shafted, but cant figure out who or what or how - because he can't see it.  His nominal paycheck is as high as its ever been, but that check does not go as far as it used to - because the purchasing power of the actual wages paid is falling. In my parents era, it was possible to work a menial job, like say a janitor and support a wife & kids on that salary. Today, there is no chance of that for a janitor - because real wages paid in this country are falling at a staggering rate. Even worse, the current rise in unemployment portends that the falling rate of real wages paid is about to accelerate to the downside. Fcking Brutal.

 For 200 years in this country, It was part of the American dream that while the woking man toiled - he did so secure in the knowledge his children would have it better.  Ours may well have been the last generation in America to be raised by parents who believed that.  Despite the negative tone of today's blog, the news is not all bad. Now that you know about the coming dollar devaluation, there is nobody to blame but yourself if you do not start storing a signifigant portion of your wealth in something other than US dollars. Gold & Silver are ideal. Buy an ounce…take the ride.