Thanks. Sometimes the more I study the more confused I become, especially when I run across studies that warn against acting on what I believe to be true.

Thanks. Sometimes the more I study the more confused I become, especially when I run across studies that warn against acting on what you believe to be true.

That’s a pretty standard view among mainstream financial planners and stockbrokers. For them the past 70 or so years constitutes the “normal” world, and in that time the market has always come back. So buy good stocks and bonds and let them ride.

Their mistake (and it’s the same mistake most economists seem to be making) is that they’re looking at only one side of the ledger. Since the Depression we’ve been inflating history’s greatest credit bubble, which has allowed corporate earnings and home prices to rise artificially and kept government bond yields low. But each new market recovery has come with a higher level of debt, and now we owe so much that the whole show is about to end.

The guys preaching traditional buy and hold (especially those recommending long-term bonds) will spend the next few years fielding calls from pissed off clients, and then they’ll be fired. Poetic justice for sure, but still, you have to feel for their families…

Instead, we went across the street for Chinese. Instead of spending 20 bucks, I spent less than 12 and there’s still enough left over for a decent snack or lunch.

I suppose KFC will be going out of biz pretty soon.

Yes, it’s certainly an indication of the middle-class march toward reduced living standards. I’ve heard some food suppliers are reducing their package sizes in order to keep the image of stable prices (same as inflation). Costco seems popular these days. I’ve almost eliminated eating out and when I do, I find a coupon first. My wife has become an Ebay expert, finding bargains that undercut retailers such as Home Depot and most clothing outlets.

Retailers are being squeezed at the margins. For the first time I can remember our average sale per prescription drug has fallen steadily for the past 2 years from $50 to $40 while, during the same period, I’ve seen acquisition costs for brand and generics drugs rise. We’re selling more generics cheaper than ever before and our average gross profit per prescription is where it was 10 years ago.

I’m sympathetic to John Williams’ more accurate statistics on inflation and unemployment. Even that CPI doesn’t seem like a great measure of inflation because I think it includes residential rents rather than actual homeownership costs/prices. If home prices were thrown into the mix, I think we would see higher inflation during the 2002-2006 property ladder boom and, subsequently, lower inflation or even deflation during the 2007 – present housing market crash. It’s obvious to anyone other than our mainstream media commentators that government stated inflation and unemployment figures are increasingly rosier than reality would dictate.

For the first time in our 25 consecutive year marriage, we are checking the mailers for food prices. This is different for us because we had always just bought what we wanted. Vine tomatoes hit $3.49 lb. here in Southern California and that’s the day I pulled out the coupons.

As for oil, the price seems dependent on whether we choose to reward the Russians and punish the Chinese or vice versa.

All the Best,
Thrash