Investing for the long-term? Inflation ruins everything – and that's why investors need to Buy Gold today...
THE ECONOMIST magazine says we ought to start taking defensive action, and maybe putting in some barbed wire on that exposed left flank out by the garage, by reporting that:
"America's jobless rate is now 0.6 percentage points above the cyclical trough reached in March 2007."
If you are like me, you yawned and were bored at such a measly increase – and that must mean it's now time for a snack. But we don't have anything tasty to hand, and all my colleagues have started hiding their lunches from me.
So what to do?
My second thought is that my blood sugar is too low – because my first thought was to just attack my co-workers, throw them aside, and ransack their desks until I find something yummy to eat. And I'll keep this search-and-consume mission going, desk by desk and cubicle after cubicle, until I pass the point where marginal utility equals marginal cost; the point where the hassle just ain't worth another Twinkie or candy bar.
But I was saved from both strenuous activity and further musings along that line when The Economist went on to say that the significance of this piddly little 0.6% move, which is probably just a statistical rounding error as far as I am concerned, is much more than that. For as Merrill Lynch points out:
"At no point in the past 60 years has the unemployment rate risen by more than half a percentage point from its trough without the economy slipping into a recession."
Oops! Maybe it is because of that blood sugar thing, or maybe out of envy that The Economist magazine has such spread and influence while I am stuck here in this stupid little closet...cloistered "away from the other employees" at their stupid request, and nobody ever listens to me anyway...but I feel compelled to get right in their faces to remind Merrill Lynch and The Economist magazine that also "at no time in the last 60 years" has the definition of recession been so grossly distorted by the fact that the miserable squirt Alan Greenspan and the equally miserable Michael Boskin came up with all those inventive ways to discount inflation by "adjusting" prices for changes in quality (the car costs twice as much, but you get fancy hubcaps!) or potential utility (the computer costs twice as much, but is assumed to have gone up in value because it is twice as fast but cost less than double!).
The CPI inflation index, in other words, is a real stupid load of crap because you only use your faster computer to goof off at work...playing games of Solitaire at the same slow speed and downloading pornography – which slows everything down because the computer still has to go around compacting files and looking for places to store it all.
The effect is that the rise in nominal GDP is not adjusted for the full effects of inflation, making GDP look bigger than it is. For example, if Mogambo Enterprises sold 10 widgets last year for $1 apiece, then Mogambo GDP was $10. If this year Mogambo Enterprises sells only 8 widgets, but at $2 apiece, it looks like we made money! We had total revenue of $16, whereas last year we only booked $10. Everybody is happy until my boss realizes that inflation was 100%, and so Mogambo Enterprises had a real, inflation-adjusted loss of 20%.
This must be the reason why I never seem to tire of screeching in my Loud Mogambo Disagreement (LMD) about the ridiculous idea of "investing for the long term" and that putting your money into common stocks to fund a retirement is a loser of an idea, and only idiots could possibly believe that investors as a group can take more out of a bucket than they put in it.
But it is a hard slog to convince people of something contrary to what everyone seems to agree on, even though there is not one shred of evidence that such a preposterous notion could possibly be true, and my throat is raw and sore from yelling and calling people idiots for believing something so Utterly, Utterly Stupid (UUS).
Now, I save my energy, as now I have a chart from Chartoftheday.com, which "illustrates the Dow adjusted for inflation since 1925." As they say, "There are several points of interest...
"For one, when adjusted for inflation, the bear market that concluded in the early 1980s was almost as severe as the one that concluded in the early 1930s. It is also interesting to note that the inflation-adjusted Dow is now less than three times higher than where it was in 1929 and a little over double where it was in 1965. Not that spectacular of a performance considering the time frames involved."
Then they go on to show how the damned Alan Greenspan and his despicable Federal Reserve created so much monetary inflation that all that money and debt slopped over into everything. For Chartoftheday.com continues, "However, the magnitude of the bull market of 1982 to 1999 (even when adjusted for inflation) was truly of historic proportions. While the Dow is currently more than 1,000 points above the dot-com peak that occurred eight years ago, today's chart does illustrate that on an inflation-adjusted basis the Dow still trades below its 1999 peak."
So nobody made any money in the stock market in over eight years? Hahaha! "Investing for the long term"? Hahaha! "Investing for retirement"? Hahahahaha, what idiocy!
And what the chart shows, but nobody is saying, is that it wasn't until 1960 that the Dow high, again rose high enough to equal the very peak in 1929. (The Dow remains even further below its 1999 peak in terms of Gold Prices...)
"Investing for the long term"? Hahaha!
In short, inflation ruins everything, and yelling about it won't make it better. You have to let gold yell for you instead.