DWS Funds is a "member of Deutsche Bank Group", which it says right on the
cover of DWS Active magazine, an outfit that has somehow, without me actually
noticing, over the years taken over some holdings of mine, so that now I sit,
locked in a bunker and peering out at a hostile world through a periscope,
wondering how a bunch of foreigners, who almost certainly hate my guts, in this
case Germans, took possession of my American mutual fund, and thus took
possession of my money, probably like somebody took possession of the Federal
Reserve and thus took possession of America’s money, in which case we know
exactly who it was, and it was Alan Greenspan and then Ben Bernanke, two
villains who chaired the Federal Reserve and whose names will live in infamy
because of the inflationary terrors unleashed by their irresponsible creations
of more and more money, even more
treacherous so than the attack on Pearl Harbor in 1941, which gave rise to that
"live in infamy" phrase, as these are The Guys who destroyed the buying power
of the dollar and destroyed the USA.
Anyway, the magazine doesn't get into any of that, or even mention how I hate
the Federal Reserve with an incandescent, white-hot fury, and instead presents
an interesting graph titled "Where are interest rates headed next?", which
showed the yield on 10-year Treasury bonds graphed from 1954 to 2009.
It is interesting in many ways, I suppose, but the only one I am interested in
is the one where the only logical conclusion one can draw is, "Head for the
hills! We're freaking doomed!"
In this particular case, in 1954, where the graph begins, the yield on the
10-year bond was about 3%, and it gradually increased exponentially, rising and
rising, faster and faster, exponentially, until reaching its high in 1981, when
the 10-year bond yielded a juicy 15.32%! Nice!
Thus 1981 would have been the perfect time to buy longer-term bonds yielding
around 15%, because ever since 1981, rates have been falling in a mirror-image
exponential fashion until they are now, 28-years later according to the graph
and 29 years according to the calendar, again yielding around 3%!
The lesson is in the knowledge that because the price of a bond changes
inversely with the yield, the guys who bought long-term bonds in 1981 have
gotten BOTH the 15% yield AND a huge increase in the value of the bonds as
interest rates fell!
Taking the completely simplistic interpretation, this means not to buy bonds
now, or at any time in the next 28 years, if there is anything to this 55-year
cycle thing, which I doubt because nobody has ever suggested that there is such
a thing as a 55-year cycle, and I just made it up because it sounded alarmist
and I am actively trying to get people freaked out enough to say, "Throw Obama
and his coterie of incompetent One-Worlder socialist government-hacks who have
never had a real job or started a real business, and thus have no idea of how
anything works outside of academia and government, out of office, down the
stairs, and out, out, out into the slimy side streets and fetid back alleys, to
live with the other diseased vermin found there, and where they shall be
forever shunned as unclean," which I admit is a little too stilted in language,
for one thing, and I don't think it is going to happen for another, although it
should, and would, if I could get "The Mogambo Omnipotence Act" through
congress, whereby I could seize complete dictatorial power.
And if you are, indeed, buying government bonds now, then you are indeed a big
idiot, and people are justified in laughing at you derisively, pointing at you
and saying, "Look, children! There is the moron that was buying long-term
government debt at the end of the 55-year interest-rate cycle that the
Wonderful And Wise Mogambo (WAWM) first introduced to the world in a paragraph
above!"
Well, I know that it seems cruel to belittle such morons and mental defectives,
especially since the losses they will suffer from doing such a stupid thing as
buying bonds at the lows of the new Mogambo 55-Year Cycle Theory (M55YCT) will
destroy them, which makes adding Stinging Mogambo Insults (SMI) to their very
real injury seem petty and vicious, which, I admit, it is.
In my own defense, "petty" and "vicious" are actually just two of my more
prominent Mogambo Personality Traits (MPT), along with related other
characteristics such as angry, paranoid, surly, sarcastic, cynical and
(depending on your definition) borderline psychotic.
In case you were wondering, the average yield on the 10-year government bond
since 1954 until 2009, from the 55-year period's opening and ending lows of 3%
and including the 15.32% high right there in the middle in 1981, is, according
to these guys, 6.36%, which means that the current 10-year yield of 3.3% is
about half of the long-term average! Who the hell would buy bonds now, except
the mentally defective or government, as redundant as that is turning out to
be?
I make this point only because I am obsessed with inflation in prices because I
am obsessed with the way people go crazy in response to inflation in prices,
mostly because I am obsessed with how these bankrupted, starving morons are
going to see how high gold, silver and oil have risen as their poverty and
misery increased, and then they will remember how I was always yelling at them
to buy gold, silver and oil for all those years, and how I called them "morons"
when they didn't.
And then I am obsessed that they will figure that I must have a lot of gold,
silver and oil, and that maybe they would come over to my house and assault the
Big, Beautiful Mogambo Fortress (BBMF) to get a little of that sound money and
valuable assets with which to relieve their wretchedness, and I will watch with
my finger on the trigger while my wife and kids will be grabbing at my arm,
pleading, "Don't shoot! They are our friends and neighbors, and I see grandma
in the crowd, too!" while the mindless mob keeps getting closer and closer,
step by step, more menacing by the minute, and you don't know what to do!
And in my panic I will remember the last time this kind of situation came up
was when the minister said to me, "Do you take this woman to be your wife, to
love and to hold, in sickness and in health, blah, blah, blah?" and how THAT
turned out!
So, desperate for some good news, I was gratified when I turned the page to see
another spiffy graph, titled "Positive Correlation"! Something positive!
Well, it shows what appears to be the coefficients of correlation, where
everything ranges between 0.0 (no correlation) and 1.0 (perfect correlation),
as applied to inflation in consumer prices over the last five years versus
various interest-sensitive things, like short-term bonds, large-cap equities
and TIPS bonds, with the numero uno - number one, top dog and winner by half a
length! - asset showing the highest correlation with inflation being (may I
have the envelope, please?) floating-rate loans!
The rate on these loans correlates the highest with subsequent inflation, with
a correlation coefficient at just under 0.5, swamping the second-place entrant,
commodities, which came in at about 0.28!
I say, "Hmmm! Interesting!" in that low, mirthless, hollow laugh of Pure
Mogambo Greed (PMG) as I perceive, perhaps, some interesting advantage in the
use of these particularly interesting facts!
Unfortunately, I, as a pathetic genetic freak, deserve a Handicapped Parking
sticker because I lack, through a genetic defect that is no fault of my own,
the requisite intelligence to understand how to take advantage of the facts,
further hampered by a genetic defect of a complete lack of ambition, overlaid
with a genetically-determined lazy streak a mile wide.
All of this tragic genetic mumbo-jumbo prevents me from ever being rich enough
to ever finally get out of this little stupid nowhere town, where all the
stupid people are so stupid that they don't buy gold, silver and oil in
response to the horrific inflationary implications of the unholy Obama/Federal
Reserve alliance creating and spending So Freaking Much (SFM) money, a
situation that makes whole swaths of neurons in your brain sputter (Zzzt!
Zzzt!) and die horrible deaths from merely contemplating it!
Fortunately, I found a better investment than shorting bonds, which is a
guaranteed winner in itself: buy gold, silver and oil, which are all
unbelievably undervalued by a Long, Long Shot (LLS), and getting longer,
shot-wise, with every new dollar created by the Federal Reserve to feed the
insatiable, grasping maw of the government.
All of which make gold and silver and oil go up in price, which is the whole
point of investing, and again proving that "Whee! This investing stuff is
easy!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2010, The Daily Reckoning.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
