PRIVATE CLIENT LETTER
This letter is intended only for accredited investors who are clients of either Blackburne & Brown or C-Loans, Inc. You signed up for this letter with Blackburne & Brown or by using C-Loans.com. Removal instructions are below. Today we'll discuss how the Fed is trying to bring drinking water to a drowning man.
Joke
Du Jour
Walking up to the counter at a fabric store, a pretty girl asked, "I want to buy this material for a new dress. How much does it cost?" "Just one kiss per yard," replied the lecherous, male clerk. "That's fine," replied the pretty girl. "I'll take ten yards." With expectation and anticipation written all over his face, the clerk quickly measured out and wrapped the cloth, then teasingly held it out. The lovely girl politely accepted the package, pointed to a little old man standing beside her, and said, "Grandpa will pay the bill."
We Don't Need More Debt
When the Fed wants to increase the nation's money supply, it doesn't actually print up currency and spend it. Instead, the Fed encourages its member banks to make more loans.
Now, however, the United States is so awash in debt that we can't handle the payments on all of our existing debt. Therefore the Fed really isn't solving our debt problem when it tries to increase the "money supply" even further. It's like bringing drinking water to a drowning man.
The country needs a new way to create money. The final chapters of my new book, set in a time of economic depression, street violence and near-anarchy, suggest a possible solution.
The coming $600 per family tax refund is a step in the right direction, but it may only buy us a few more months. After all, the following month a whole new set mortgage payments, auto payments, and credit card payments will be due.
Expert Testimony Joke
One day at a criminal trial, an eminent psychologist was called to testify as a defense expert. A severe, no-nonsense professional, she sat down in the witness chair, unaware that it's rear legs were set precariously on the back of the raised platform. "Will you state your name?" asked the district attorney. Tilting back in her chair she opened her mouth to answer, but instead catapulted head-over-heels backward and landed in a stack of exhibits and recording equipment. Everyone watched in stunned silence as she extricated herself, rearranged her disheveled dress and hair and reseated herself on the witness stand. The glare she directed at onlookers dared anyone to so much as smirk. "Well, doctor," continued the district attorney without changing expression, "maybe we should start with an easier question."
Deflation as the Default Mode
The coming $600 per family tax rebate is probably a good idea. Absent the promise of this coming rebate, however, the economy would probably have already slipped into a deflationary recession. To see deflation in action, just consider recent oil prices. After reaching $100 per barrel, oil prices had slipped back to around $89 per barrel two weeks ago, before the tax rebate announcement and when the threat of recession was seriously looming.
Because of the reverse multiplier effect, it is important you truly appreciate that deflation is now the default mode. What this means is that if the Fed isn't regularly lowering interest rates, then deflation in asset prices will begin. If the Federal government is not regularly sending out tax refund checks, then deflation will begin. If the Federal government is not starting some new war or deficit-spending in some big, new way, then deflation will reappear.
Deflation is now the default mode. The stock market would probably fare very poorly in a severe deflation. Long term Treasury bonds would probably soar in value in a severe deflation.
Lawyers and Engineers Joke
Three lawyers and three engineers are traveling by train to a conference. At the station, the three lawyers each buy tickets and watch as the three engineers buy only a single ticket. "How are three people going to travel on only one ticket?" asked one of the three lawyers. "Watch and you'll see," answers one of the engineers.
They all board the train. The lawyers take their respective seats, but all three engineers cram into a restroom and close the door behind them. Shortly after the train as departed, the conductor comes around collecting tickets. He knocks on the restroom door and says, "Ticket, please." The door opens just a crack and a single arm emerges with a ticket in hand. The conductor takes it and moves on.
The lawyers saw this and agreed it was quite a clever idea. So after the conference, the lawyers decide to copy the engineers on the return trip and save some money. When they get to the station, they buy a single ticket for the return trip. To their astonishment, the engineers don't buy a ticket at all. "How are you going to travel without a ticket," asks one perplexed lawyer. "Watch and you'll see," says one of the engineers.
When they board the train the three lawyers cram into a restroom, and the three engineers cram into another one nearby. The train departs. Shortly afterward, one of the engineers leaves his restroom and walks over to the restroom where the lawyers are hiding. He knocks on the door and says, "Ticket, please."
Nice Article About Farm Land Prices in USA Today
On the front page of the newspaper, USA Today, on February 5th was a very nice article, Farmland More Valuable Than Ever - Demand for Ethanol, Exports Drive Up Prices.
For more information on corn farm investments, please click here. You may also want to call Warren More in our office at 800-606-3232 and get on our waiting list for the next deal. You can also email Warren at wmore@blackburne.com.
Operation Joke
Two little kids were in a hospital laying next to each other. The first kid leaned over and asked, "What are you in here for?" The second kid said," I'm in here to get my tonsils out, and I'm a little nervous." The first kid said, "You've got nothing to worry about. I had that done to me once. They put you to sleep, and when you wake up, they give you lots of Jell-O and ice cream. It's a piece of cake!" The second kid then asked, "What are you in here for?" The first kid responded, "Well, I'm here for a circumcision." The second kid said, "Whoa! I had that done when I was born. I couldn't walk for a year!"
Robert Prechter on Gold
I read an interesting new article by the Elliott Wave guru, Robert Prechter, about gold. He asked the question about whether gold would do well in the coming deflation.
Prechter argued that gold would probably fall sharply in a deflation, much like oil, but it probably would not fall as much as other assets, such as stocks or homes, because gold has bubbled up far less than these other assets.
I agree. I think gold could temporarily fall 30% from today's prices.
But I still think everyone should own some gold. The Fed and the Treasury are determined to save the banking sector. In order to save the banking sector, the Fed and the Treasury will probably have to find some way to prop up real estate values.
One way to prop up real estate values and to ease the debt service burden on over-leveraged consumers would be to debase the dollar. And if the dollar is debased further, gold should sharply benefit.
So I continue to recommend U.S. Treasuries, gold, and corn farm land. And remember, physical gold held in your own hands cannot default.
Getting Old
"Old age ain't no place for sissies." -- Bette Davis
Trust Deed Investments
For information about investing in 9% to 11% first trust deeds, please click here.
Camel Joke
Q: What do you call a camel with no humps?
A: Humphrey.
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Vacuum Cleaner Joke
An enthusiastic door-to-door vacuum cleaner salesman goes to the first house in his new territory. He knocks, and a really mean, tough-looking lady opens the door. Before she has a chance to say anything, he runs inside and dumps garden soil all over the carpet. He says, "Lady, if this vacuum cleaner doesn't do wonders cleaning this up, I'll eat every bit of it." She turns to him with a smirk and says, "You want ketchup on that?" The salesman says, "Why do you ask?" She says, "Because we just moved in, and we haven't gotten the electricity turned on yet."
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Sick Mother Joke
I heard a story about a mother who was sick with the flu. Her darling daughter wanted to be a good nurse. She fluffed the pillows and brought a magazine for her mother to read. And then she showed up with a cup of tea. "You're such a sweetheart," the mother said as she drank the tea. "I didn't know you could make tea." "Oh, yes," the little girl replied. "I put the tea leaves in the water like you do, and I boiled it, and then I strained it into a cup. But I couldn't find a strainer, so I used the flyswatter." "You what?" And the little girl said, "Oh, don't worry, Mom. I didn't use the new flyswatter. I used the old one."
My New Book Could Save Your Retirement
I believe that those savers who truly understand the risks of deflation right now should be able to preserve enough of their 401k's to retire in their sixties.
However, those who think that the Fed can always just "print up" some more money or just drop money from helicopters may sadly be forced to keep working well into their 70's. I'm sorry if that sounds really-really mean, but the risks of deflation right now are significant.
My new book, The Reverse Multiplier Effect - When Crushing Deflation Destroys America, is a financial thriller that explains the dangers and significant chances of deflation. You really need to read it. And it's a fun read too - lots of action and adventure as you learn a bit more about economics.
Cherry Pie Joke - A Long One ... But Nice
A woman was getting a homemade cherry pie ready to put into the oven when the phone rang. It was the school nurse. Her son had come down with a high fever, and would she come and take him home? The mother calculated how long it would take to drive to school and back, and how long the pie should bake, and concluded there was enough time. Popping the pie in the oven, she left for school.
When she arrived, her son's fever was worse and the nurse urged her to take him to the doctor. She drove to the clinic as fast as she dared. She was frayed a bit more as the doctor emerged from the examining room and handed her a slip of paper. "Get him to bed," he told her, handing her the prescription, "and start him on this right away."
By the time she got the boy home and in bed and headed out again for the shopping mall, she was not only frayed, but frazzled and frantic as well. And she had forgotten about the pie in the oven. At the mall she found a pharmacy, got the prescription filled, and rushed back to the car, which was locked. There were her keys, hanging in the ignition switch, locked inside the car.
She began searching the mall for a wire coat hanger -- which turned out not to be easy. Wooden hangers and plastic hangers were there in abundance, but shops didn't use wire hangers anymore. After combing through a dozen stores, she finally found a wire hanger. Hurrying out of the mall, she halted. She stared at the wire coat hanger. "I don't know what to do with this!" Then she remembered the pie in the oven. All the frustrations of the past hour collapsed on her and she began crying. Then she prayed, "Dear Lord, my boy is sick and he needs this medicine and my pie is in the oven and the keys are locked in the car. Lord, I don't know what to do with this coat hanger. Dear Lord, send somebody who does know what do with it, and I really need that person NOW, Lord. Amen."
She was wiping her eyes when a beat-up older car pulled up to the curb and stopped in front of her. A young man, twentyish-looking, in a stained T-shirt and ragged jeans, got out. He was coming her way. When he drew near, she stepped in front of him and held out the wire coat hanger. "Young man," she said, "do you know how to get into a locked car with one of these?" He gaped at her for a moment and then plucked the hanger from her hand. "Where's the car?" She had never seen anything like it -- it was simply amazing how easily he got into her car. A quick look at the door and window, a couple of twists of the coat hanger, and the door was open.
When she saw that, she threw her arms around him. "Oh," she said, "the Lord sent you! You're such a good boy." He stepped back and said, "No, ma'am, I'm really not a good boy. I just got out of prison yesterday." She jumped at him and she hugged him again fiercely. "Bless the Lord!" she cried. "He sent me a professional!"
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