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An Ivy League Education and They STILL Can't Think for Squat

Phoenix Capital Research's picture




 

The US Federal Reserve has bet the farm… and the Republic on the idea that they can
inflate us back to a recovery.

 

In plain
terms, Bernanke and pals believe that if they can make the stock market rise,
people will feel richer and will start spending money again, insuring that the
US economy (which is 70% based on the consumer) will come roaring back to life.

 

The problem
with this sort of thinking is that it’s so superficial as to be laughable,
especially for those claiming to have an advanced education from a top university.

 

Indeed, the
fact that the S&P 500 goes from 1,000 to 1,330 DOESN’T mean that those who
own stocks are that much wealthier. This
is because the nominal price of stocks (what the S&P 500 is priced at) IS
NOT the same as the PURCHASING POWER of stocks.

 

Here’s the
S&P 500 priced in US Dollars. Looks like investors are getting a lot richer
in a hurry doesn‘t it?

 

 

Now, here’s
the S&P 500 priced in Gold: a currency that the Fed CAN’T turn into toilet
paper and a real measure of purchasing power:

 

 

In simple
terms, those who own stocks have not actually increased their wealth in anyway
since March 2008. All they’ve done is owned an asset that increased in nominal
terms ONLY when it’s priced in a rapidly devaluing currency (the US Dollar).

 

The fact
that our monetary system is run by guys who believe that “stocks rise = WEALTH”
should give you the chills. Using this level of intelligence, you could rack up
$500,000 in debt buying fancy clothes and then claim you’re wealthy cause you
look like you have money (which by the way is something many people have done).

 

This is
nothing new for the financial world. Research from the London Business School shows that when you account for
inflation, stocks have often LOST money for DECADES despite rising
substantially in nominal terms.

 

A great example of this is France where investors saw NO increase in
purchasing power from stocks (as in ZERO) from 1912 to 1977.
That’s right, nearly THREE
GENERATIONS of investors LOST wealth by owning stocks in France during the 20th
century.

 

So if you want to buy the
whole “I’m missing out by not owning stocks” BS which is slung around like it’s
true, you’re being conned into the biggest scam of the century (literally). You’re
also actively voting for Ben Bernanke (more on this in another essay) by
supplying him with more phony evidence to claim that his insane monetary
policies are working.

 

On that
note, if you’re getting worried about the future of the stock market and have
yet to take steps to prepare for the Second Round of the Financial Crisis… I
highly suggest you download my FREE Special Report specifying exactly how to
prepare for what’s to come.

 

I call it The Financial Crisis “Round Two” Survival
Kit
. And its 17 pages contain a wealth of information about portfolio
protection, which investments to own and how to take out Catastrophe Insurance
on the stock market (this “insurance” paid out triple digit gains in the Autumn
of 2008).

 

Again, this
is all 100% FREE. To pick up your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.

 

Best Regards,

 

Graham
Summers

 

PS. We ALSO
publish a FREE Special Report on Inflation detailing three investments that
have all already SOARED as a result of the Fed’s monetary policy.

You can
access this Report at the link above.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Mon, 04/11/2011 - 16:43 | 1159019 SheepDog-One
SheepDog-One's picture

AA down -2% after hours, glowing pumper headline or not. Unless the Bernank can intervene this looks like it could get ugly with contagion.

Mon, 04/11/2011 - 15:31 | 1158683 Racer
Racer's picture

What does the S&P look like priced in € or £?

Mon, 04/11/2011 - 15:01 | 1158555 ex VRWC
Mon, 04/11/2011 - 13:43 | 1158320 Urban Redneck
Urban Redneck's picture

$ vs. WEALTH

Gold & Silver are easy & advantageous comparisons over the short term.  Real estate vs. S&P looks very different over the short term.  But over the LONG term (200 years)...

Politicians and Economists love their statistical manipulations.  The distinctions between Inflation and Currency Devaluation Purchasing Power go long way towards explaining why TPTB have a fetish for physical wealth (beit PM, real estate, or whathaveyou).  I came across this nugget while trying to find the acerage for Mount Vernon (6500 acres).

http://en.wikipedia.org/wiki/George_Washington

Historians estimate his estate was worth about $1 million in 1799 dollars, equivalent to about $18 million in 2009 purchasing power. Source: Robert F. Dalzell Jr. and Lee Baldwin Dalzell, George Washington's Mount Vernon (2000) p. 219; Purchasing power was calculated at Lawrence H. Officer and Samuel H. Williamson, "Purchasing Power of Money in the United States from 1774 to 2009," MeasuringWorth, 2010

So:

6500 acres of prime urban and suburban real estate just outside of Washington, DC, in one of the wealthiest counties in the US.

$1 million in 1799 dollars $153/acre

$18 million in 2009 dollars $2769/acre

I know the US real estate market is hurting, but try finding land in Fairfax County for $2769/acre without moving the decimal point.

Money and Wealth are measured very differently, especially over time.

Mon, 04/11/2011 - 22:26 | 1160108 Matto
Matto's picture

Interesting, just been looking at the purchasing power of the UK pound dropping losing 91% of its value as per a basket of standard goods since 1971. Not sure what that works out as about 6% compounding annually? Then you have the devalution against broader asset classes such as property etc and you can see the huge gap between CPI and 'purchasing power'.

Mon, 04/11/2011 - 13:42 | 1158315 Diamond Jim
Diamond Jim's picture

So the market goes up and everyone "feels" rich....the market hasn't made it back to 14,000, so we are still behind the curve here. All it takes is for Joe 6 pack to go to the gas station and fill up, or for sally muckinfutch to go grocery shopping and that feeling of "rich" disappears. The only ones that do not understand this are the ones that made out like bandits from QEs and bail outs...banksters, those in the investment houses and of course Uncle Ben.

Mon, 04/11/2011 - 13:34 | 1158297 Stuck on Zero
Stuck on Zero's picture

The question is not what affect this has on the United States.  For the people running the government and the Fed they derive satisfaction from personal wealth gains and exercise of power.  Is there anyone in the ZeroHedge audience who wouldn't legally print a trillion dollars to keep fifty million of it?  That fifty million they could quickly transfer to gold and silver bullion in offshore banks.  Fess up now.

Mon, 04/11/2011 - 13:44 | 1158321 falak pema
falak pema's picture

I fess up. I would take 100 million at least!

Mon, 04/11/2011 - 13:42 | 1158318 Bartanist
Bartanist's picture

I wouldn't do it, but then I am odd.

Mon, 04/11/2011 - 13:31 | 1158289 darkaeye
darkaeye's picture

"If Yale, Harvard and Princeton were truly "higher education," why are their graduates at the forefront of most of our problems?" - Edward Ulysses Cate

Mon, 04/11/2011 - 13:31 | 1158286 oklaboy
oklaboy's picture

ever get the feeling that the 3 card monte on a streeet coner is a bteer bet? 

Mon, 04/11/2011 - 13:27 | 1158275 rlouis
rlouis's picture

A couple of  years before Bush jr did the "cash back" to every american to stimulate the economy I had read a study that quite plainly stated that people are more inclined to save a one time windfall compared to spending a recurring stream of income (paychecks).  And that was pretty much what happened.  I was amazed the people advising him didn't know that because I was just a layman perusing econ books.

Have to agree, the education is only as good as the student - it's the papers and contacts that are valued.  In real life the mongrel is a much better behaved animal than the high strung in-bread with papers.  Considering that bush, kerry and gore all came out of the ivy league pretty much diminshes the value of over paid professors and their ability to teach through the fog of student hangovers. 

Mon, 04/11/2011 - 13:26 | 1158271 Bartanist
Bartanist's picture

Maybe it would have worked when an increase in money supply meant that money was pumped back into the economy in terms of manufacturing and infrastructure.

However, when 70% of the economy is consumer, most of the money pumped into the economy goes 2 places.

1. China (and the Middle East) ... or wherever the consumer goods are being manufactured

2. Inflation

The money does not go into real investment that comes from value creation .. and value creation comes from labor.

However, being a product of the US business education system, I can tell you that it is designed to create drones who parrot the common myths and shallow conclusion of business and economic theory and not train people to think objectively. (be clever, but not objective or altruistic)

Mon, 04/11/2011 - 14:54 | 1158526 gmj
gmj's picture

Also, the rich don't invest in the US anymore.  And they don't pay much in taxes.  Too much of US GDP is disappearing into the global economy.  Many rich Americans make their money overseas, and spend and invest it overseas.  So we have created a perfect engine for national self-destruction.    

Mon, 04/11/2011 - 13:11 | 1158224 Hedgetard55
Hedgetard55's picture

Price it in silver, not that pussy PM gold. Market has lost 70% in last three years.

Mon, 04/11/2011 - 13:08 | 1158208 forexskin
forexskin's picture

In plain terms, Bernanke and pals believe that if they can make the stock market rise, people will feel richer and will start spending money again, insuring that the US economy (which is 70% based on the consumer) will come roaring back to life.

this is just the cover story. this is really a massive transfer of claims to wealth and future productivity. but as long as this line gets news, 'we' get to participate in the drama while mandrake picks our pockets.

Mon, 04/11/2011 - 12:48 | 1158117 Boilermaker
Boilermaker's picture

Have you ever had an ivy league 'consultant(s)' come into your organization to 'help' you do things better?

You haven't experienced comedy until your read a report from those out-of-touch Captain Obvious dipshits.  Mix pretentious mentalities with arrogance, elitism, and an utter lack of any practical experience and you've created a cocktail of complete stupidity.

Mon, 04/11/2011 - 14:04 | 1158384 llyodblankfeinsucks
llyodblankfeinsucks's picture

Boilermaker,

 

I read your comment and broke out laughing, oh man so fricking true. I used to work for very large tech firms and they loved bringing in the Bains/BCGs/McKinseys of the world to camp out in my office and the offices of my intelligence counterparts so they could tap us for our intelligence and insights that  they could then try and resell to our company...precious and when I refused to give them some pieces of intelligence yep I got some arrogant twentysomething reminding me she went to Oxford and that I just had to tell her what she wanted to know. Uh no, figure it out for yourself you little  twit. Watched them regurgitate my intel to my management and of course the execs knew it was mine, and better yet, then watched them totally misinterpret it- indeed, with hilarious results! My company finally fired them but HOW much money did they pay them first and for what exactly?

Mon, 04/11/2011 - 14:28 | 1158198 falak pema
falak pema's picture

Spoken like a true boiler maker, expert in having to support as obfuscating spin merchants, well padded, finely clad, bum holes letting off duly processed steam according to ivy league code books after a hundred dollar lunch at client's expense.

Mon, 04/11/2011 - 12:46 | 1158115 nevadan
nevadan's picture

And the really cool part is that while losing purchasing power as the stock market goes up in nominal terms is a tax liability is incurred at the same time.  What a deal.

Mon, 04/11/2011 - 14:29 | 1158291 SheepDog-One
SheepDog-One's picture

Lose real purchasing power, yet still get the tax bill for a fake market 'wealth effect' rise!! Now thats SWEET!

Mon, 04/11/2011 - 12:42 | 1158090 B9K9
B9K9's picture

Man, if you really think they believe their own lies, you've still got some catching up to do.

Also, it's not important that you understand they are lying, or even that they know you know they're lying.

Since everyone @ the table understands the truth, the only thing that matters is (a) they are in charge; and (b) what are you going to do about it?

Mon, 04/11/2011 - 13:32 | 1158290 SheepDog-One
SheepDog-One's picture

I agree, they DO get it and its their plan to so weaken the structure all it will take is 1 blasting cap and the whole system implodes in on itself! No way do these life-long bankers NOT get that printing mountains of money and monetizing the debt does not lead to total disaster! To think that the PHD bankers DO NOT GET IT is the real insanity here!

Ignore all the daily normalcy bias banter back and forth, and see the simple truth and plan accordingly!

Tue, 04/12/2011 - 14:02 | 1162328 BlakeFelix
BlakeFelix's picture

To be fair though, they are in a tough spot.  Print and the system erodes, then crashes, don't print and it crashes.  The erosion isn't good for anyone, but it buys them time.  Not like you can be in that crowd and just say "Today lets reinvent American capitalism, stop being comically rich parasites and all get real jobs!" without getting laughed at, I'd imagine.

Mon, 04/11/2011 - 13:19 | 1158245 aheady
aheady's picture

My thoughts exactly after reading the headline.

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