New Post!

Yes indeed. It’s been quite some time since my last post (which is currently beginning to make so much sense in hindsight, i.e. the U.S. Mint knew it wasn’t worth it to sell gold coins at retail value of $740 an ounce, as it was awaiting word from the Fed on interest rates).

Otherwise, little has changed in the financial markets. The fundamentals have not gotten much better. The refreshing short-term interest rate may only make it worse. But I’m sure you’ve read that.

The reason I felt the urge to post was in regard to the fact that I just finished another great book, one which I had intended to read for some time entitled The Richest Man in Babylon. It was a great read and I’d suggest it to anyone who has time for a factually accurate Shakespearean-like guide to the mindset of the wealthy.

Much of the book was more entertainment than enlightenment, though some things, one which I refer to as the “Babylonian Budget” were of note.

Bablyonian Budget

10% of your hard-worked earnings are yours to keep and should never be given to anyone else.

20% of your earnings should be used to pay back your debt over time, and

70% of your earnings, and no more, should be set aside to cover the costs of living.

[Notice how all those numbers above add up to an even 100%, something the average credit card owner wouldn’t understand].


Another thing I found interesting is the constant emphasis on real wealth (something the average Wall Street mathematician wouldn’t understand), is that real wealth is something you can eat, live in or store indefinitely (not a fiscal asset backed by the credit of a corporate entity or government).

Upon reading the book, it was rather interesting how this real wealth, in whatever form it came was amassed and assessed with gold, silver and copper. These are the evaluators of intrinsic value since they are, of themselves, of real value.

How much you make or break in the stock market cannot be evaluated by a depreciating currency but only by measure of a physical commodity that serves a purpose in and of itself (some more so than others).

So how many gold coins do you own? How many silver prices have you earned this year? How much copper could you buy if you were to “cash out” at tomorrows opening bell? What’s your real value?

To imagine that the world economy currently supports markets worth 8 times gross global production (the sum of all GDP combined), is mind-boggling. As Glen Beck put it “It doesn’t take a genius to realize what type of mess we’re in”. Too much money chasing too few goods, mark the words of every rational economist since Adam Smith, is going to result in less money to buy goods (either by the Keynesian definition of “Inflation” – higher commodity prices – or that of “Deflation” – lower asset prices).

When the bank managers are calling out that the lending game is up, what they mean is this: For the past 25 years the primary focus has been on making more money tomorrow than you have today. From now on, its going to be more about assuring that the money you had yesterday is still there today.

I find it hard to comprehend…
The fact that I wasn’t even alive at the beginning of this bull market,
How few analysts there are around today who were around then,
That people may one day revere gold as they now do stocks,
What $500 trillion would actually look like,
Or that, once again, Wall Street will be caught with its pants down.

Times be changing. Own what you have.

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