PARIS – We took the Eurostar train back to Paris from London last night.
In our wagon was a group of Chinese businessmen.
Drinking, laughing… they were a bit uncouth by European standards. But they were having a good time.
While we were in London, the cabbies were remonstrating against something – ride-sharing app Uber, we suppose. A dozen cabs must have passed before one stopped to pick us up on our way to St. Pancras railway station.
Arriving at the Gare du Nord, we feared something similar.
We’ve never seen a line of people we wanted to join. The long file waiting for cabs was another of them. So we walked across the street to have dinner at the famous Terminus Nord.
This proved a good choice. The old brasserie must be one of the best in the city – lively, bright, with good service and good food.
And by the time our dinner was complete – oysters followed by magret de canard – there were plenty of taxis and few people waiting for them.
Sex, Drugs, and Republicans
We used to live in Paris. And we have a business in London. So we made the same trip every week for more than five years.
But four years ago, we left the Paris-London commute behind. Now, as T.S. Eliot put it, we’ve returned to the place where we began and knew it for the first time.
This morning, we sit again in the Café Poussin, reading theFinancial Times.
Yesterday, we noted that practically everyone writing in the “pink paper” was a moron. We’re disheartened to say so. But it appears that a night’s sleep has done them no good.
On the front page, we learn that the “FBI seeks to hire teenage cyber sleuths…”
We need to read no further. This is a program that is doomed to fail.
Teenagers’ personalities are still unformed. As they evolve, security clearances in hand, they will encounter sex, drugs, and Republicans. They will inevitably be led into lives of radical crime or honesty – both of which are verboten to the feds.
Over on page two, we discover that the European Central Bank has learned nothing over the last quarter-century.
“Deflation raises prospect of more quantitative easing,” says the headline.
Haven’t they been following what happened in Japan?
Apparently not. The Japanese have been fighting deflation for 25 years – with quantitative easing, ZIRP, and other claptrap. And what are consumer prices doing in Japan today?
Falling! QE doesn’t boost inflation on Main Street. But that doesn’t make it unpopular… especially with the bankers and cronies on Wall Street who benefit from rising asset prices.
And on page four, we find Christine Lagarde in the news. The IMF chief is probably a good bureaucrat. She may even be a good lawyer and a nice drinking companion. A pity she knows nothing about economics.
Yesterday, she told the world “the rapid drop in commodity prices is posing problems for resource-based economies.”
The crowd must have fallen silent, each person wondering if she would be able to come up with something even more obvious, self-evident, and banal.
As it turned out, she warned about “volatility” and “decelerating growth.” Speaking for half an hour in Washington, she managed to come up with not a single spark of insight or information worth reporting.
One of the most incredible stories was not in the FT, but in Global Mining Observer (GMO).
The source tells us that insiders at Anglo-Swiss commodities giant Glencore are planning to poke naïve shareholders in the eye.
This is a perfect example of why Wall Street is no place for innocent mom-and-pop investors.
Glencore cronies took the company public in May 2011 at $59 billion… loaded it up with debt… and used the money to fix themselves up with huge bonuses, payouts, fees, options.
According to GMO, having enjoyed the choice pieces of meat, they are now planning to dump the carcass.
“What a colossal piece of black-hearted chicanery,” says colleague Dan Denning in our London office. This will go down as one of the “greatest pump-and-dump schemes ever.”
The insiders are now planning to take Glencore private again. Having sold at the top, they will buy back the assets at what appears to be the bottom.
Glencore’s share price is now at about $1.36 – down from $7.90 at its 2011 IPO. (More on this below in Market Insight…)
How to Live on $500 a Month
We continue to get emails from readers who have suffered fender benders – or serious accidents – on life’s financial highway.
More than any other factor, divorce seems to leave the pavement slick and treacherous. Now, readers report that they are at or near retirement age… with few resources.
What should they do?
You will not miss the irony: Your editor is not a poor man, far from it.
What expertise has he in this area?
But he remembers with fondness the poverty of his youth. And he uses his imagination to think about how he might recapture the poverty, if not the youth.
And he put the question to his team of crack researchers: What if you wanted to live well on $500 a month? What would you do?
We take $500 as a starting point. Most of the readers we’ve heard from report struggling to live on around $1,000 a month in income.
We will aim to live on $500… and save $500. In five years, we will have $30,000 (the significance of which will become apparent later on).
Our researcher Nick Rokke responded quickly:
There are few dinners at the Terminus Nord in this budget. But we’re making progress.
Tomorrow – container houses… gypsy wagons… and more!
Further Reading: You can also find a cheaper way to live by moving overseas. Our friends over at International Living have compiled a list of inexpensive places where you can live the good life on nothing more than your Social Security check.
Glencore’s share price dive is also a sobering reminder of what can happen when you buy into highly cyclical sectors, such as commodities.
As you can see below, Glencore’s share price has fallen by 88% since the company went public in May 2011.
Because a percentage loss hurts your portfolio more than an equal percentage gain helps it, investors who bought Glencore shares at its IPO now need a 733% gain to get back to break-even.
Real Gasoline Created Without Using Oil
A Brookings Institution report claims a new process “will account for 24% of all of the liquid gas supply in the U.S. by 2017”… And it won’t involve a single drop of oil…
These Mutual Funds Could Be Ticking Time Bombs
The IMF has warned investors to steer clear of big positions in mutual funds that carry a lot of high-yield (aka “junk”) debt. These funds could get wiped out if everyone rushes to sell at once.
Volkswagen Suppressed Whistle-blower Reports in 2011
The news just gets worse for Europe’s largest automaker, Volkswagen. New reports reveal that it buried whistle-blower reports about its cheating on emissions tests four years ago…
Today, a question about yesterday’s issue on “helicopter money.”
What is the difference between monetary and fiscal easing?
Helicopters drop money on everyone… these are milk delivery trucks to the political elite.
– Ted A.
Chris comment: You’ve hit the nail on the head. “Helicopter money” is free money for politicians.
Fiscal easing is all about deficit spending. When a government spends more than it takes in from taxes, it runs a budget deficit. It can fund this deficit either by raising taxes or raising borrowing.
Monetary easing, on the other hand, involves central banks trying to boost the money supply by making credit cheaper so people borrow more.
“Helicopter money” combines these two types of easing.
Basically, governments spend more. But they fund that spending through central bank money-printing, not by raising taxes and issuing debt.
This week, for example, Jeremy Lawson, the chief economist at one of Britain’s biggest pension providers, Standard Life, argued that central banks could even inject money “directly into household bank accounts” if need be.
Of course, if creating wealth were as easy as putting more money in people’s bank accounts, the Soviet Union would be still with us today. The problem is unintended consequences…
As a senior official of the Fed put it following the 2008 meltdown: “Devaluing a currency is like peeing in bed. It feels good at first, but pretty soon it becomes a real mess.”
In Case You Missed It…
Yesterday we shared a note from our friends at Stansberry & Associates.
They’ve uncovered an anomaly in the resource markets. And it’s creating an opportunity to make as much as 500% gains over the next several years.