Three Cheers for the Dow Jones Industrial Average!

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The Daily Reckoning | Saturday, March 16, 2013 Up or Down: Wherefore art thou Dow Jones Industrial Average... Readers weigh-in on eminent domain and speaking ill of the dead... Plus, all this week’s reckonings archived for your perusal over a few green beers... --------------------------------------------------------------- New Tobacco Discovery, Better Than ObamaCare? One man's quest to help people quit smoking has led to what could be the most important “accidental” health discovery since penicillin. And for you — it could be the biggest potential “profit bonanza” in a decade. Learn more about this amazing opportunity right now, right here. Joel Bowman, reckoning today from Buenos Aires, Argentina... The Dow finally registered a down day yesterday...but only slightly...and only after having posted the longest winning streak since 1996. So, does that mean the economy has recovered? Or could the reverse actually be true? Eric Fry takes a closer look in this week’s feature column. [Nota Bene: This column originally appeared on Friday, March 15, 2013.] The Daily Reckoning Presents... Record Highs Despite Epic Lows By Eric Fry Three cheers for the Dow Jones Industrial Average!...or four, if you like. Since setting its first new record high in more than four years last week, the beloved Blue Chips have marched ahead to six more record- high closes. In all, the Dow has advanced ten straight days — the longest winning streak since 1996! One would think the economy is smelling like a rose...rather than pushing up daisies. But one would be wrong, as ZeroHedge pointed out last week. On the day the Dow logged its first of seven straight new highs, ZeroHedge trotted out a kind of financial “The Way We Were” — comparing today’s economic conditions to that of October, 2007, when the Dow set its previous record high: Dow Jones Industrial Average: Then 14164.5; Now 14164.5 Regular Gas Price: Then $2.75; Now $3.73 GDP Growth: Then +2.5%; Now +1.6% Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million Americans On Food Stamps: Then 26.9 million; Now 47.69 million Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion US Debt as a Percentage of GDP: Then 38%; Now 74.2% US Deficit (LTM): Then $97 billion; Now $975.6 billion Total US Debt Outstanding: Then $9 trillion; Now $16.4 trillion Labor Force Participation Rate: Then 65.8%; Now 63.6% Consumer Confidence: Then 99.5; Now 69.6 S&P Rating of the US: Then AAA; Now AA+ Gold: Then $748; Now $1583 In other words, the Dow made a new record high despite the economy’s performance, not because of it. Perhaps the stock market “knows” something about the future that is humanly unknowable. Perhaps it “sees” something that is invisible to the human eye. Perhaps it knows and sees the advent of a great economic revival. Perhaps. Your editor has no idea what the market knows or sees; he only knows that he doesn’t see it. What your editor does see is a stock market that the masses adore, residing in an economy that the masses abhor. So maybe it is not hope that is driving the stock market to record highs, but despair. Maybe stocks are rallying because investors are afraid to do anything else with their capital — maybe they are afraid to risk their capital in an economy that features zero interest rates, stifling regulatory regimes and capricious tax laws. Bottom line; the Dow’s record-setting performance tells us nothing about “why.” The stock market is silent on this point. Perhaps it is too terrified to speak. One thing we know; the rallying stock market stands in stark contrast to the bear market in economic vitality. We also know that bull markets are unfolding in all the wrong places. Unemployment, government debt, food stamp participation, “No knock” SWAT raids and “No trial” drone strikes are all in bull market mode. The nearby chart tells part of the tale. Sure, the Dow has reached a record high, when measured in dollars. But the index is not even close to a record high when measured in gold, food stamp participation or “extrajudicial” drone strikes. Each of these metrics, in its own way, reflects a government that is “hard at work.” The fact that the Dow, priced in gold, remains very far away from a record, suggests that Chairman Bernanke is working overtime. His dollar-printing escapades have played a very big hand in the Dow’s record-setting climb. By devaluing the dollar, in other words, Bernanke “inflated” the Dow price. The doubling of both food stamp participation and drone strikes during the last five years reflects a different form of governmental hyper-activity. But this hyper-activity shares the identical DNA as Bernanke’s money-printing. All these activities express the genetic traits of a government that continuously expands its power “for the greater good,” a government that belives its influence enables progress, rather than impedes it, a government that considers itself so essential to the march of human civilization that it will dehumanize any individual and sanction any uncivilized act to achieve its objectives...for the greater good, of course. Maybe that’s why the Dow is setting records...because big, intrusive, debt-financed governments are such a potent source of national prosperity. Maybe. But we’re still inclined to believe that “the government is best that governs least.” Whatever the reason(s) for the Dow’s record-setting performance, your editor does not begrudge the Blue Chip Index its moments in the sun. Three cheers for the Dow Jones Industrial Average! Regards, Eric J. Fry for The Daily Reckoning CUSTOMER SERVICE ANNOUNCEMENT: My records say we could owe you, dear subscriber, exactly $2,044 in subscriber benefits. You are eligible to claim this amount due to your loyalty as a subscriber. However, you have only until midnight Tuesday, March 19th to let me know whether you want to receive these benefits... or simply let them expire. Please let me know as soon as possible. To learn how to claim these benefits, simply click here. Sincerely, Andrea Michinski Customer Service Director, Agora Financial ALSO THIS WEEK in The Daily Reckoning... The Kabuki Theatre of Demopublicans, Part I By Doug Casey Doug Casey’s latest book, Totally Incorrect, gathers his iconoclastic views in a tidy package to stimulate and possibly dismay readers. In an interview with The Gold Report, Doug elaborates on some of his most radical ideas and offers his view of where the markets are likely to head in 2013. Read on... The Kabuki Theatre of Demopublicans, Part II By Doug Casey The Gold Report: In the conversation titled On 2013, you say 2013 will be ugly, but merely a warm-up for 2014. Yet the economic trends appear to be positive: the end of quantitative easing by year-end, increased domestic oil and gas production resulting in inexpensive energy for decades to come, more manufacturing jobs, and less unemployment. Is this slow-growing economic recovery masking the effects of the deficit and unfunded liabilities, thus allowing politicians to kick the can further down the road? Why do you think 2013 and 2014 will be so bad? Read on... A New Chapter for Turkey? By Frank Holmes In 2012, Turkey was the best performer among the emerging markets we track on our Periodic Table showing a decade of returns. All developing countries rose last year, but stocks in Turkey climbed an astounding 56 percent. While visiting the country last week, I was happy to see my explicit knowledge of Turkey’s growth was supported by my tacit knowledge. Read on... China’s Debt Bomb By Chris Mayer China seems to do everything big. It has the largest power station in the world and the longest high-speed railway line. It also has the world’s largest public bathroom (which can hold over 1,000 people) and the world’s largest pyramid. So when it came to attempts to pull its floundering economy out of the muck, the Chinese went big. Economist Ben Simpfendorfer writes that China’s total credit stimulus in the four years since 2009 was worth $11 trillion. “Enough to buy the world’s entire oil supply for three consecutive years,” Simpfendorfer writes, “even with oil prices at above $100 a barrel.” Read on... Is the Secular Bear Market Coming to an End? By Barry Ritholtz A decade ago, I concluded that we were in the early stages of a secular bear market, and that investors needed to adjust their risk postures accordingly. Back in December 2003, I penned a piece for the Stock Trader’s Almanac, titled Managing the Very, Very Long Term, based on this blog post from November 2003. Long time readers know this is a major theme to for me. Much of my commentary, presentations and investing posture has been about longer term, secular cycles. Read on... The Great Government Payback What if you could get steady and predictable income checks sent to you four times every year... without being “on the dole”? Believe it or not, this is now possible. A small group of “in the know” people are already raking it in. The best part: You could collect as much as three times as much income as popular dividend-paying stocks. Click here to discover all the details of what we call the “Great Government Payback.” The Weekly Endnote... And now, it’s over to a few readers for some thoughts, ideas and rumors... First up, Reckoner Roger writes in response to an article penned by long time DR favorite, Chris Mayer, whose piece on eminent domain appeared this week in Laissez-Faire Today... Chris, thanks for a great article. In essence, the “taking” of private property by eminent domain is not any different than the “taking” of private property for other uses: zoning, setbacks, urban renewal, even taxation, just to name a few. In every single case of taking, whether legal or illegal, someone is forced to give up private property for the use and/or abuse of someone else. We understand that illegal taking is wrong — theft, fraud, murder, rape, slander, etc. What is not so clearly seen is that legal taking is just as wrong. In the eighth commandment to the Hebrews, Moses said, “You shall not steal.” Ever since people have corrupted that in many ways. “You shall not steal, except by majority vote.” “You shall not steal, except by government action.” “You shall not steal, unless you are driven to it by external circumstances.” Private property in America today is not private at all. It is controlled and regulated, perhaps even expropriated, by society in general and civil governments in particular. A man’s home is not his castle. It can be taxed away from him. It can be zoned out of existence. It can be condemned and taken by eminent domain. It can be seized and destroyed because it doesn’t meet the “standards” of the community. In short, private property doesn’t really exist at all. Everything is owned by the State or society. This is not liberty or freedom, it is socialism and far too many people buy into it because they do not understand what it really means to be free. I would rather live next to a junkyard and breathe free than to live in a gated community where every blade of grass must be manicured to exact specifications. Keep up the good work. DR: We’ll pass you kind words along. Thanks, Roger. Next up, Reckoners R.E. write in to say... It is not an “irony” that the small banks will be, in effect, destroyed by this new regulating action. It is not as if this result will be an unplanned or unexpected result. It will be made to “appear” as though it was unexpected, with the help of the highly- controlled, liberalist, progressivist mass media, and that our sweet, well-intended, government bureaucrats were merely attempting to prevent such a horrible thing such as bank failures and bailouts from becoming necessary in the future. But the demise of small banks and small businesses in general, and the concentration of industry on a fewer, large conglomerates in particular, has been “the plan” all along. It is only an “irony” to those who do not see (or, rather WILL NOT see) that this has been, in fact, “the plan” all along by the megalomaniac “one-world”-ers who have done everything they can to control governments, economies, the media, and so-called “education” for several centuries now. It is only an “irony” to those who actually believe that our government(s) are really here to help us! And finally, Reckoner James writes in to complain about our pithy last words for the late Hugo Chavez. (“Chavez is dead,” we wrote at the time. “Now that we have wasted three words on his obituary, let’s move on.”) Writes James... I trust that your own obituary won’t be as uncharitable. Speaking ill of the dead is neither clever nor witty. DR: So what if the guy is dead? Does passing from this life somehow exonerate him for the crimes he committed during it? Is death some special feat heretofore unachieved by the human race? Kings, empires, currencies...all things eventually come to wither and decay. Even pigs die... If “speaking ill of the dead” is considered bad taste, then those who refrain from doing so presumably enjoy a rosily warped view of history. “Boy, that Hitler fellow sure was a bad guy...but, you know, he’s dead so, I guess we just say nice things about him nowadays.” What a load of politically correct hogwash. Chavez impoverished his country and went to the grave, not a moment too soon, having stolen for his porcine self a vast personal fortune. The people of Venezuela were made all the poorer under his reign of fear and tyranny. El Comandante left behind a trail of destruction and pain from which it will likely take generations to recover. So yes, even pigs die...and a good thing it is, too. --- Feel free to email any thoughts you have to the address below and... ..enjoy your weekend. Cheers, Joel Bowman Managing Editor The Daily Reckoning’s Editor at Large Contact via Email: joel@dailyreckoning.com Follow on Twitter: https://twitter.com/JoelBowman ---------------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your Editor at Large at joel@dailyreckoning.com Additional articles and commentary from The Daily Reckoning on: Twitter Facebook DR iPhone APP The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. To end your Daily Reckoning e-mail subscription and associated external offers sent from Daily Reckoning, feel free to cancel your free subscription here. 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