Commentary for the Week of March 8

[I never imagined that this commentary would revive the inflation-vs-deflation debate, but since it has, I'll let it run for a second day.  Please don't be shy if it is the good news concerning lawyers to which you would like to respond. RA] Two wholly unexpected economic developments suggest that the Great Recession may have a silver lining.  How does an America with more farmland and fewer lawyers sound? Apparently, hard times are helping to bring about both. Regarding the farmland, thousands of acres that had been purchased by speculators for residential development have fallen so steeply in price that farmers are snapping up the parcels for agricultural use. In many cases, according to a story in the Wall Street Journal, the growers are paying distress prices for land that had been bid into the ionosphere by speculators as recently as five years ago, just before the Great Recession began. To take a dramatic example, a Phoenix-area dairy farmer recently paid $8 million for a 760-acre alfalfa and cotton field that had been sold to a developer in 2005 for $40.8 million, according to the Journal. “Everything in this area is coming back into farmer’s hands,” said the buyer, one of four brothers.  That’s the kind of news that could help take the sting out of high grocery prices, especially since a resurgence of family farming in the U.S. promises to reduce those prices over time. For now, though, because strong crop prices are helping to drive this healthy trend, we should perhaps keep the long-term benefits in mind when we watch the register tape unspool at the checkout counter. As for the lawyers, the schools that train and graduate them are coming under heavy pressure from Congress to divulge data related to job placement and student-loan debt. The suspicion

Stocks came roaring back to end the week on an ebullient note, supposedly encouraged by the latest evidence that Europe is finally putting its financial house in order.  While the New York Times resisted the temptation to spread this drivel across the top of its weekend editions, the Wall Street Journal eagerly took the bait, offering up the following headline:  “Europe Pulls Back From Brink”.  Time for a victory lap for Europe?  Not so fast. While we’d like to think that somewhere in the nearly 800 words that followed, the four Journal reporters credited with writing this mush-up would have provided some further details of the latest “plan” to “save” Europe, no such details were forthcoming. As far as we could determine, the manic buying spree that lifted the world’s bourses on Friday took its inspiration from whatever ephemeral hopes attach to the political ousters of top leaders in Italy and Greece. Perhaps that’s why the Journal went no deeper than a single quote from some hedge-fund dorkwad  to substantiate the premise of a headline saying that Europe had “pulled back” from the brink. Here’s the quote, in case you, too, are looking for a reason to buy stocks come Monday:  “Hope for better management in Greece and Italy is causing the market to breathe a bit of a sigh of relief.” That’s it. Re-read the story a dozen times and you’ll find no further explanation. Recall that earlier in the week, the speculators and algo traders who have come to dominate the world's bourses sold the Dow Industrials down nearly 400 points in the space of a few hours,  joining in a global avalanche that caused hundreds of billions of dollars worth of valuations to evaporate. So why the sudden leap of faith on Friday?  We’ll probably never know.

Groupon’s $700 million IPO last week proved that thieves and lunatics, working hand in hand and impelled by naked greed, remain a dominant force in today’s markets. With America rapidly on its way to becoming Nickel-and-Dime Nation, perhaps those who snapped up 35 million Groupon shares at huge premiums on opening day knew what they were doing? We were reminded of Groupon’s visceral appeal this morning when we opened a G-mail from them promising $5 off the next Groupon purchase.  Had we known this opportunity-of-a-lifetime would be sitting in our mailbox when we awoke, we would scarcely have slept the night before.  Imagine what the company would be worth if it can sell just one $10 Groupon to each and every Chinaman. If and when that happens, and assuming the Chinese don’t rip off the idea first, Groupon at $28 per share may turn out to have been a steal. Or perhaps not. There is always the chance that Google will come along, even before the Chinese have stolen the idea, and do it better themselves. Google, as everyone knows, does whatever it is doing better than just about any other company. That is why Microsoft’s Bing! search engine isn’t even in the race, despite ginned-up statistics that would have us believe the product is quickly saturating its market.  In fact, Bing! has gotten as far as it has only with a huge, artificial boost from Microsoft’s weekly laxative of security patches, gratuitous updates and other bitware effluvia. Turns out that one of those updates stealthily inserted a Bing! search field into Firefox’s tool bar, and that it takes a registry hack to get rid of it. (Warning: Half-measures will only allow Bing! to return again and again and again, like the proverbial bad penny.) If you want to know

[Mining stocks got you down? Do you shake your fist at the sky whenever a $100 rally in gold causes nary a ripple in exploration shares?  If so, get ready for a major mood change, because precious-metal stocks that have languished for years are about to blast off. That’s the prediction of our savvy friend Chuck Cohen, a NYC-based financial consultant who specializes in mining issues.  He spells out the reasons for his strong optimism below.  RA] I am as frustrated as the rest of the gold true believers, because so many of us have focused on the smaller exploration shares. In fact, I guess by now that many of you have either pared down your holdings or even completely jettisoned these "losers." I see several reasons or theories why they have behaved so poorly since 2005 in spite of gold's spectacular rise. And because I believe in studying technicals visually, I am posting four charts from ancient history to help you get a longer-term perspective. I hope this proves both instructive and encouraging to you, because it has been very exasperating and even discouraging to many of us. Theory number one: The stocks will never move because the gold cycle is almost cooked. At least, that is what so many quotable market experts have postulated.. Never mind that they have never put one penny in this sector -- these gold mavens are as certain now as they were when gold was selling for $250. Instead, be safe, and buy bonds for that 3% certainty. I totally dismiss this theory, since there has probably never been a market that has been up 11 straight years and not had some kind of speculative climax. 'Too Speculative!' Theory number two:  Junior mining shares will stay basically at these levels, as they are

[In the guest editorial below, our good friend Tom McCafferty, a veteran commodity trader and author of numerous books about trading and the markets, recalls the challenges of boot camp in sizing up America’s economic predicament.  The nation will need every ounce of strength, courage and Yankee know-how it can muster to avoid slipping into a deep economic coma, says Tom. Are we up to it?  With Europe on the brink of collapse, we may find out sooner rather than later. RA] “Get off your dead ass and onto you dying feet!” Those of you who spent your wayward youth as part of the Corps can remember your First Sergeant bellowing these words, as you ended a rest break half way through a 50-mile hike at Camp Lejeune on a hot August day.  Guess what?  Europe is about to become you new First Sergeant. Europe is headed for a major depression … like the good old days of 1929!  The Great Depression lasted over a decade in the U. S., even with all the market and job creating stimulus FDR could beg, borrow and steal from Congress.  It took World War II to get us working again.  Then, if we, our allies and even our enemies, hadn’t bombed just about every factory and storage facility in the world, leaving the U.S. with the only working factories and cargo fleet intact in the world, we still might not have gotten out of it.  The Great Depression could easily have gone on for decades and decades. If Greece thinks they deserve a 100% haircut on their precious bonds and opts out of the EU, you can bet half the banks in Europe and a few in the U. S. will tank.  This will be quickly followed by Italy, Spain, Portugal, and Ireland

[Back in July, Cam Fitzgerald asserted here in a guest editorial that policymakers would eventually succeed in stabilizing the global financial system, triggering a huge bull market in stocks. He also asserted that commodities and precious metals would not participate in the rally. In the essay below, Cam shouts “I told you so!”  Readers may find themselves disagreeing, however, especially since precious metals have shown signs of life in recent days. RA] “Remember you read this. I am right, and I know it.” Those haughty words were my parting shot when I responded to comments about a guest essay I’d written here in July, “Commodity Bear Says 2012 Election Holds Key.” I had gone out on a limb, expressing my honest opinions that day and the next without a shred of doubt showing under my wrinkled shirt. It was my vision of the future. Commodities were going to fall along with gold, while stocks, particularly blue chips and defensives, would rise sharply in the months ahead. Not satisfied with that prediction, I dug a deeper hole for myself. There would be no QE3, I stated. Commodity speculation had already brought us to the brink of a new recession. Ben Bernanke would not make the mistake of trying that approach again. Instead, I asserted, policy tools would be employed to jump-start the recovery we needed, and this time it would not cost billions to achieve. At the heart of these efforts were the odds that some strategic efforts would pay dividends in improving the electoral chances of the president. I wondered at the time whether I’d regret my boldness. The responses that followed overwhelmingly rejected my theory. The local crowd dumped on me with glee. Mob rules. “Who are you going to position yourself with, Jim Rogers or Cam Fitzgerald?” one

For securities traders who take their cues from the headlines, we cannot recall a more challenging environment. Do we buy, or do we sell, when the news is obsessively concerned with…Kim Kardashian? Our collective descent into the sordid details of her worthless life is evidently the price we must pay for a slow-news month. Considering the alternative -- reading about the latest hairbrained scheme to save Europe -- perhaps we should be grateful to the Kardashians?  In any case, we’re stuck with them for now, and we can only hope there is no higher form of intelligence in the universe watching earthly civilization topple head-long into such a deep abyss of prurience. Unfortunately, there is no getting around the shame of it:  America’s most famous – and for all we know, most talented – fellationist has been rewarded beyond a publicity agent’s wildest dreams with a claim on our attention that would surpass that of Jesus were he to return to Earth.  Avoiding further details of her publicity-seeking exploits is enough, almost, to drive one to MSNBC in search of a Kardashian-free zone. Unsurprisingly, the story-of-the-hour concerning our sloe-eyed, semen-swallowing callipygian lass has spread well beyond the sensation-mongering E!  The otherwise respectable Associated Press, for one, delved yesterday into the question of whether E! should feel any shame over its plan to re-broadcast the wedding even though Kardashian’s summer marriage to pro basketball player Kris Humphries lasted all of 72 days. Shame?  You’ve got to be kidding. Like the fictional Broadway hit “Springtime for Hitler,” Kim’s story is so good-bad that it will probably run forever. The original nuptial broadcast – “Kim’s Fairytale Wedding: A Kardashian Event” – drew the largest audience in the tabloid network’s history, perhaps demonstrating that the jihadists are not entirely wrong in their belief that

[Don’t look too closely or you’ll see that, when the Fed makes loans to banks, it is a cheap parlor trick that involves neither actual money nor any real lending. In the guest commentary below, Robert Moore, a frequent contributor to the Rick’s Picks forum, explains what is really going on. RA] What is the difference between counterfeiting and lending? The Merriam Webster dictionary defines the noun “loan” as follows: 1) Money lent at interest; 2) Something lent for the borrowers temporary use; 3) The grant of temporary use. A loan typically involves an asset that is idle (like spare money, a spare house, or a spare shovel) which someone else can put into economic use; and the rent typically comprises compensation for said use. Rents typically cover wear and tear (if the real asset is a durable good), or are offered as a premium or share of generated profits, paid in good intention for the purpose of showing your appreciation for the lender’s generosity in extending their financial asset for your use. But definition number one above is the one I want to focus on here: money lent at interest. Recently, the wheels seemingly fell off the wagon with that one, because, since early 2009, the Federal Reserve has been “lending” money to large commercial and foreign banks at effectively 0% interest. Why is this important? Look again at the definitions above. If the loan is money, but without interest (which a 0% rate certainly implies), then the lender’s motive behind the loan must be “for the borrower’s temporary use”- meaning that the Fed must be expecting the banks to return the money at some point; otherwise, the “loan” becomes a gift. Now, for a moment, just imagine that your neighbor stops by on a warm Saturday afternoon and

[In the essay below, Tom Waldenfels, aka “fallingman,” a regular contributor to the Rick’s Picks forum, explains how an America steeped in the ideals of freedom lost its way.  A political perversity of the day, he notes, is that one earns the label “progressive” by arguing for more  government control over our lives.  Is the system too far gone to save? Read on for Tom’s answer. RA] What constitutes progress for us as a species? Is it defined by advancements in science and technology?  Can we point to the rise in living standards these advances have made possible and say that’s what progress is all about? Sure, that’s a big part of it, but I’d like to suggest that this kind of visible and easily measurable progress is actually an artifact of an advancement that’s more fundamental and far less appreciated.  I’m alluding to the spotty but impressive progress we’ve made over the centuries in relating to each other on a non-violent, consensual basis. Lord knows, it wasn’t easy.  Those who enjoy dominion over others don’t readily give up their control, and much of the world’s population still suffers under the thumb of the some ruler or another who uses brute force or threats of violence to keep the people in line.  Subjugation by force is still the norm, unfortunately.  But a radically different arrangement has been pioneered in the last few hundred years where the power of the state and its thuggish rulers is minimized.  People are far more free to do what they want, with whomever they’d like, and that has changed the world, unleashing an incredible surge of creative energy.  The result?  A level of material prosperity no one could have dreamed of, for one, and the priceless ability to control one’s destiny. True Progress In this