Curried Wealth Building
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December 14, 2008
Issue 24  -  Economy Worsens

The general economy grows worse each week with no end in sight. Traffic at stores and malls is way off from past Christmas seasons. Restaurants are EMPTY compared to just 6 months ago. The cargo traffic is way down from urbansurvival.com:

Container Cargo Cratering:

Probably middle of next week before we get the complete picture, but already it's clear in some of the early West Coast container traffic reports that things are continuing to deteriorate down on the docks. The Port of Los Angeles reports

November outbound traffic was down 12.83% and inbound traffic (e.g. coming to the US) was down 9.69% - worse than October and down 10.4% for the month.

Over the bridge in Long Beach, November container traffic inbound was down 13.6% compared with year-ago figures and worse (from a balance of trade standpoint) the outbound containers were down 23.6% for a fiscal YTD decline of 8.9% and a decline for November of 16.8%

As if that's not enough to kill the trucking business, we notice that the state of California has put in tough new air pollution standards that will cost may truckers their jobs. As KMPH TV notes, "Regulations could put local truckers out of business."

 
Yet, I see CNBC pundits saying that things are starting to turn around, the end is near, and other nonsensical things that to all but the blind are completely false. If there is less product entering the country than of course the country is in a down trend. How can things get better if there is less to buy? Remember the economy is 70% consumer based. This means that the gross domestic product is largely reliant on the consumer. The other 30% is business consumption and we know that is declining just based on the rash of layoffs taking place.

Couple that with the bank closures and this is closer to a depression than a recession. So far this year there have been 30 banks and savings and loans closed by the FED. This mean hundreds of branches and the accompanying jobs are gone. This also means less people to lend, and to lend to. How can that be good for the economy?

Recently, interest rates on treasury bills went negative on surging demand. This is confusing to most as to who would "lend" money and pay the borrower? What is happening is that there is so much fear in the markets that people want safety and they are perceiving treasuries as safe. Why you would consider a bill or bond from a de facto bankrupt entity (the U.S) is beyond me. It must be a true lack of understanding as to the real extent of the problems that face this country. To make things more interesting, the last time treasury rates went negative was 1929. Doesn't exactly fill you with confidence does it?

There is no way in the world that this country will be spared the problems that ALWAYS result from the very behavior this country has practiced over the past 15 years. Namely, forward spending with debt financing, which is the act of moving purchases forward in time. Companies do this all the time for tax purposes. Consumers do it, on the other hand, for moving pleasure forward. The only problem is that the purchase must be paid for at some point. This means that consumption that was to take place in that future year, is now not possible as the funds are used for debt reduction.  Consumption is headed down, take that to the bank.  Consumer stocks, especially luxury and nonessential type stocks, (Starbucks, Saks, etc..) will not fare well in the coming year. 

This is a time of capital preservation. Stocks are risky, bonds are just plain crazy, and real estate is toast. Gold and silver stocks will probably make a ton of money but the only thing assured is the physical metals. Everything else has counter party risk and may end in worthlessness. Gold is becoming harder to get. Listen to me. Obtain some for you and your family. A terrible time is approaching for this country and you don't want to be in the majority of the coming game.

Gold holders will probably be the only survivors of this mess and not have to start completely over. What I mean by that is most citizens of the United States will literally be wiped out. Square one, just out of college type wiped out. Don't be one of them. If you want help let me know. currymagic@gmail.com Take care.