Holiday Reading

I probably won't post again until next week so I here is a bunch of reading material for your holidays.  I'll mix in a few videos as well.

So I really like the information from Stansberry Research.  If you don't follow them, I think you should.  I'm not going to put the latest piece from Porter Stansberry on here.  It's fairly long, but here is the link.  I don't think you have to login to read it.  If you can't get in and you want to read it, let me know.  I will email it to you.  Here are some of the highlights.  Even they are long...

The Corruption of America 

The truth is, I am optimistic. I believe our country is heading into a crisis. But I also believe that... sooner or later... Americans will make the right choices and put our country back on sound footing.

For decades, we have papered over these problems with massive amounts of borrowing. But now, our debts total close to 400% of GDP, and America is the world's largest borrower (after being the world's largest creditor only 40 years ago)... And the holes in our society can no longer be hidden...
 
The question we are trying to answer is: What would per-capita GDP numbers look like, if we used a real-world currency, like gold, or a basket of commodity prices, instead of the paper-based U.S. dollar? What would the figures be if we measured GDP in sound money instead of the government's funny money?
Here's how we figured it out. We took the government numbers for nominal GDP and measured them first against commodity prices, and later (after it began to trade freely) gold. We used a standard commodity index (the CRB) up to 1975 and gold post-1975. The result of this analysis shows you the real trend in U.S. per-capita GDP, as measured on a real-world purchasing power basis.
Our analysis shows you what's actually happened to our real standard of living. The results, we suspect, will surprise even the most bearish among you.
America is in a steep decline. 

Consider, for example, annual sales of automobiles. Auto sales peaked in 1985 (11 million) and have been declining at a fairly steady rate since 1999. In 2009, Americans bought just 5.4 million passenger cars. As a result, the median age of a registered vehicle in the U.S. is almost 10 years.
Our data shows that real per-capita wealth peaked in the late 1960s. Guess when we find the absolutely lowest median age of the U.S. fleet? In 1969. At the end of the 1960s, the median age of all the cars on the road in the U.S. was only 5.1 years. Even as recently as 1990, the median age was only 6.5 years.
Rich people buy new cars. Poor people do not.

The average college student now graduates with $24,000 in debt... and by his late 20s has racked up more than $6,000 in credit card debt. Meanwhile, median earnings for Americans aged 25-34 equals $34,000-$38,000. (Source: Demos.org, "The Economic State of Young America," November 2011.)
Can you imagine starting your life out as an adult with a personal debt-to-income level at close to 100%? What does this say about the state of our economy?

It's not only the young that are having trouble in America. It is also the old.
Debt levels among households headed by people older than 62 have been rising for two decades. The average mortgage size for this population is now $71,000 – five times larger than it was in 1987 (adjusted for inflation), according to William Apgar of Harvard's Joint Center for Housing Studies.

Older Americans are also more reliant on credit card debt than ever before... credit card debt. From 1992 through 2007 (which is the latest data available) older Americans took on credit card debt at a faster pace than the population as a whole. According to USA Today, lower- and middle-income Americans aged 65 and older now carry an average of more than $10,000 in credit card debt, up 26% since only 2005.

Given average interest rates of 20% for these debts, it's a fair bet that these obligations will never be repaid. But they will have a terrible impact on the standard of living of these older Americans.

Bloomberg news published an article based on confidential sources about how Henry Paulson, the former CEO of Goldman Sachs and the Republican U.S. Treasury secretary during the financial crisis, held a secret meeting with the top 20 hedge-fund managers in New York City in late July 2008. This was about two weeks after he testified to Congress that Fannie Mae and Freddie Mac were "well-capitalized."

I knew for a fact that what Paulson told Congress wasn't true. I wrote my entire June 2008 newsletter detailing exactly why Fannie and Freddie certainly had billions in losses that they had not yet revealed to investors – $500 billion in losses, at least. There was no question in my mind, both companies were insolvent – "zeros," as I explained.

And yet, in front of Congress, the U.S. Treasury secretary was saying exactly the opposite. Either I was a liar... or he was.

Then... only a few days later... what did Paulson tell those hedge-fund managers?
He told them the same thing I had written in my newsletter. He told them the opposite of what he'd said publicly to Congress. He told these billionaire investors that Fannie and Freddie were a disaster... They would require an enormous, multibillion-dollar bailout... The U.S. government would have to take them over... And their shareholders would be completely wiped out.

Here you had a high-government official, explicitly lying to Congress (and by extension, the general public), while giving the real facts to a group of people who represented the financial interests of the world's wealthiest folks. The story didn't come to the public's attention for two years.

**(This isn't racist, just statistics)** I'll start with one of the biggest factors in the decline of our civilization – the link between welfare, education, crime, and politics.

Let me give you some of the numbers that define the enormous scope of these problems.
According to the NAACP, Texas taxpayers spent $175 million in 2009 to imprison residents from a small part of Houston – only 10 zip codes out of 75. Thus, people from neighborhoods that are home to only about 10% of the city's population account for more than 33% of the state's entire $500 million annual prison spending. These neighborhoods are overwhelmingly poor and African American.

In Pennsylvania, taxpayers will spend $290 million in 2009 to imprison residents from just 11 of Philadelphia's neighborhoods, representing about 25% of the city population. On this relatively small urban area, the state will spend roughly half its $500 million prison budget. These neighborhoods are overwhelmingly poor and African American.

In New York, taxpayers will spend $539 million to imprison residents from only 24 of New York City's 200 different neighborhoods. Only 16% of the city's population lives in these areas, but they will account for nearly half of the state's $1.1 billion prison budget. These neighborhoods are overwhelmingly poor and African American.

In Detroit, only 27% of the black male students in the school system graduate from high school. This is not a racial problem: Only 19% of the white male students graduate from those same schools. What's causing this problem? A complete breakdown of society. When communities can no longer teach their children the most basic academic skills, such as reading, math, history, literature, and economics... what future can we expect? And what kind of society do you expect after several generations of total ignorance?

These problems are still found primarily in urban areas, but they are spreading across the country. In Pinellas County, Florida, only 21% of black male students graduate from high school. In Palm Beach County, Florida, you find a similar number. Likewise Duval County, Florida... and Jefferson Parish, Louisiana... and Charleston County, South Carolina. In Nebraska, only 40% of black male students graduate from high school. In Nevada, only 45%. In New York state, only 25%.

Take Newt Gingrich. The white, Republican former House speaker was paid $1.6 million for "consulting" by Fannie Mae and Freddie Mac during a period of time the two firms were under constant attack by Newt's fellow Republicans. Were the attacks efforts to truly reform a major threat to our financial system... or were they merely shakedowns? All we know for certain is Fannie and Freddie collapsed, just as many Republicans warned they would. The Republican effort to reform the firms failed. Newt collected $1.6 million.
  
If you think I'm exaggerating the problems we face or the far-reaching impact of the entitlement culture we've allowed to develop in America... then explain the following fact...
The 10 largest American bankruptcies in history have all occurred in the last decade: Lehman Brothers ($691 billion), Washington Mutual ($327 billion), WorldCom ($103 billion), General Motors ($91 billion), CIT ($80.4 billion), Enron ($65 billion), Conseco ($61.4 billion), MF Global ($41 billion), Chrysler ($39.3 billion), and Thornburg Mortgage ($36.5 billion).

I believe they will choose more freedom rather than more totalitarian rule. I don't believe Americans will tolerate martial law for long – even in the advent of a real emergency, which I do believe will occur.
What gives me confidence for the future? Gun sales, for one thing. U.S. citizens legally own around 270 million firearms – about 88 guns per 100 citizens (including children) today.
That's a hard population to police without its consent. America is the No. 1 country in the world as ranked by the number of guns per-capita. That plays a major factor in the kind of government you will see take root in America. Things might go too far in this country for a while... And I'd argue they've been going the wrong way for too long. But the government can only take things so far before they'll be faced with a very angry, well-armed opposition.
If the government attempts to take our guns... my opinion would change immediately. But that's one right the Supreme Court has been strengthening recently. It gives me hope that most people in America still understand that the right to bear arms has little to do with protecting ourselves from crime and everything to do with protecting ourselves from government...

***************************************************************************

Here is a cool video of the best sports videos in one montage.

***************************************************************************

I'm going to continue to harp on gold and silver until everyone I know understands what I'm saying.  Don't let the paper trading trick you into thinking there is an abundance of there precious metals.


Watch these two videos from Kyle Bass and Eric Sprott.  The best minds in the metal markets.

***************************************************************************


Goldman Sachs estimates the latest bailout amounts to nearly 63% of all European bank debt maturing in 2012. Consider the larger issue. This from Porter's August issue of Stansberry's Investment Advisory…

In Europe, the 90 largest banks must finance 5.4 trillion euro in debt over the next 24 months – 45% of GDP. That's not counting any of the European sovereign debt that must be refinanced over the next two years, which I estimate will add another $1.5 trillion-$2 trillion euros to the credit required.

The ECB calls the latest liquidity efforts a "Long Term Refinancing Operation." But it's quantitative easing, plain and simple. We bet it's not enough… We'll see another, larger bailout before the end of next year. Remember… we've already seen the ECB buy hundreds of billions of dollars in sovereign debt and the Federal Reserve open the dollar swap lines with the ECB. This is yet another doomed effort.

 Co-chief investment officer at PIMCO Bill Gross – and our favorite billionaire bond investor who uses social networking website Twitter – was actively commenting on Europe's refinancing efforts. He "tweeted": "What does #LTRO stand for? 1. A shell game; 2. Cash for trash; 3. Three-card 'monti'; or 4. All of the above."


****************************************************************************

As I said, silver is unlike gold because industry consumes a huge amount of silver.

It has more than 10,000 uses. (Inventors filed more patents on silver uses than any other precious metal in the world.) And when silver is used for most industrial and technological purposes, it is used up forever... It simply costs too much to try to recycle the tiny bit of silver from every cell phone or casino chip.

Just consider these facts...

• Americans throw away 130 million cell phones every year. Together, these phones contain more than 46 tons of silver.
  
  
• One out of every seven pairs of prescription glasses sold in the U.S. (more than 1 million pairs a year) contains silver to protect the eyes from damage caused by sunlight.
  
  
• The plastics industry uses more than 22 million ounces of silver in the making of polyester fabrics.
  
  
• 500 ounces of silver are used in each Tomahawk missile. The U.S. recently launched 112 of these missiles into Libya ($1.96 million worth of silver).