David Horvitz Will Do Amazing Things For You

On his website, David Horvitz lists whimsical, heartfelt things he'll do for a fee.

For example, he writes, "If you give me $250, I will read The Little Prince in front of the New York Stock Exchange on Wall Street in the middle of a work day," or "If you give me $1, I will sit in silence and think about you for one minute," or "If you give me $68.33, I will take an old friend to lunch. I will take a photo of us together. I will mail you the photo, tell you what we ate, and briefly describe our history as friends," or "If you give me $30, I will walk around New York, and the first homeless person I see I will buy him or her whatever he or she wants to eat," or "If you give me $1,626, I will go to the small Okinawan island called Taketomi and send you an envelope filled with star-sand" (pictured above).

The inspiring site makes you feel giddy when you read it. I've never seen anything like it.

Have a funny weekend.

(Video via Paige)

Etsy Friday: Ma Petite Amy

I'm not the best vintage shopper. When I go to a flea market, I never seem to find the gems that everyone else does. Also, it smells weird.

So I'm overjoyed at Etsy's growing collection of amazingly curated vintage shop! Here on Cup of Jo, we've highlighted Ramona Vintage, ShopGoodGrace and Ultra Retro (which, sadly, closed recently).

Today, it's my pleasure to introduce Ma Petite Amy, a Vancouver-based shop offering sundresses, 1970's secretary dresses, and blouse-y tops. (She also uses belts to great effect.) I'm obsessed with this shop, and I'm sure you'll love it, too -- just don't buy everything before I do!

Ballet is so beautiful.

Also calming. P.S. Mama and Marie-Laure, this post is for you. :)
(Via Vanessa)

Calming Down...

After watching that traumatic elevator video, I need a lovely, peaceful photo to chill me out. This shot from Mav should do the trick. Doesn't it make you want to head to Vancouver immediately? Wide open spaces, people!

Elevator Phobias

Although I live in Manhattan, a city known for its small spaces, I'm a tried-and-true claustrophobe. I haven't taken the subway for four years (can you believe?!) and, while I take elevators, I'm very aware of every screech and bump and sometimes hold my friends' hands. So you can imagine my reaction when I saw this New Yorker story about a man trapped in an elevator for 41 hours! This terrifying video of his endless circling didn't help either. Alex told me not to watch it, but I did anyway. (It was a bad idea.)
(Illustration by Garance Dore)

Spotted Trend: Flower Ties

Last night, I noticed the weirdest thing. I was at a party and realized that almost half the dudes (all incredibly stylish) were wearing pastel flowered ties. I haven't seen a pastel flowered tie in years (have you?), and all of a sudden they were filling the room. Mark my words, flowered ties are the next big thing! Lena Corwin will be psyched.

(Photo by Lena Corwin.)

Lovely Rooms

This might be the most beautiful room I’ve ever seen. Don't you kind of love all the clutter?
(Via TinyK)

Only Yesterday

20 April 2008

In June 1931, Frederick Lewis Allen, the respected editor of Harper's Magazine, completed his brief and impressionistic history of the United States from the end of the Great War (World War I) through to the stock market collapse of 1929, and on to the outset of the great depression. He titled the work "Only Yesterday."

This is a classic historical document, which has been archived by Project Gutenberg Australia. It is worthwhile and relatively easy reading.

Allow me to borrow from Mr. Allen's own words to describe his effort at contemporary history:

"This book is an attempt to tell, and in some measure to interpret, the story of what in the future may be considered a distinct era in American history: the eleven years between the end of the war with Germany (November 11, 1918) and the stock-market panic which culminated on November 13, 1929, hastening and dramatizing the destruction of what had been known as Coolidge (and Hoover) Prosperity.

"Obviously the writing of a history so soon after the event has involved breaking much new ground. Professor Preston William Slosson, in The Great Crusade and After, has carried his story almost to the end of this period, but the scheme of his book is quite different from that of mine; and although many other books have dealt with one aspect of the period or another, I have been somewhat surprised to find how many of the events of those years have never before been chronicled in full. For example, the story of the Harding scandals (in so far as it is now known) has never been written before except in fragments, and although the Big Bull Market has been analyzed and discussed a thousand times, it has never been fully presented in narrative form as the extraordinary economic and social phenomenon which it was.

"Further research will undoubtedly disclose errors and deficiencies in the book, and the passage of time will reveal the shortsightedness of many of my judgments and interpretations. A contemporary history is bound to be anything but definitive. Yet half the enjoyment of writing it has lain in the effort to reduce to some sort of logical and coherent order a mass of material untouched by any previous historian; and I have wondered whether some readers might not be interested and perhaps amused to find events and circumstances which they remember well--which seem to have happened only yesterday--woven into a pattern which at least masquerades as history. One advantage the book will have over most histories: hardly anyone old enough to read it can fail to remember the entire period with which it deals.

"As for my emphasis upon the changing state of the public mind and upon the sometimes trivial happenings with which it was preoccupied, this has been deliberate. It has seemed to me that one who writes at such close range, while recollection is still fresh, has a special opportunity to record the fads and fashions and follies of the time, the things which millions of people thought about and talked about and became excited about and which at once touched their daily lives: and that he may prudently leave to subsequent historians certain events and policies, particularly in the field of foreign affairs, the effect of which upon the life of the ordinary citizen was less immediate and may not be fully measurable for a long time. (I am indebted to Mr. Mark Sullivan for what he has done in the successive volumes of Our Own Times to develop this method of writing contemporary history.) Naturally I have attempted to bring together the innumerable threads of the story so as to reveal the fundamental trends in our national life and national thought during the nineteen-twenties."

An insightful episode in the work is Mr. Allen's recounting of the events of Tuesday, October 29, 1929 and their aftermath through November 13, 1929. I will quote the original work at length here:

"The big gong had hardly sounded in the great hall of the Exchange at ten o'clock Tuesday morning before the storm broke in full force. Huge blocks of stock were thrown upon the market for what they would bring. Five thousand shares, ten thousand shares appeared at a time on the laboring ticker at fearful recessions in price. Not only were innumerable small traders being sold out, but big ones, too, protagonists of the new economic era who a few weeks before had counted themselves millionaires. Again and again the specialist in a stock would find himself surrounded by brokers fighting to sell--and nobody at all even thinking of buying. To give one single example: during the bull market the common stock of the White Sewing Machine Company had gone as high as 48; on Monday, October 28th, it had closed at 11 ¹/₈. On that black Tuesday, somebody--a clever messenger boy for the Exchange, it was rumored--had the bright idea of putting in an order to buy at 1--and in the temporarily complete absence of other bids he actually got his stock for a dollar a share! The scene on the floor was chaotic. Despite the jamming of the communication system, orders to buy and sell--mostly to sell--came in faster than human beings could possibly handle them; it was on that day that an exhausted broker, at the close of the session, found a large waste-basket which he had stuffed with orders to be executed and had carefully set aside for safekeeping--and then had completely forgotten. Within half an hour of the opening the volume of trading had passed 3,000,000 shares, by twelve o'clock it had passed 8,000,000, by half-past one it had passed twelve 12,000,000, and when the closing gong brought the day's madness to an end the gigantic record of 16,410,030 shares had been set. Toward the close there was a rally, but by that time the average prices of fifty leading stocks, as compiled by the New York Times, had fallen nearly forty points. Meanwhile there was a near-panic in other markets--the foreign stock exchanges, the lesser American exchanges, the grain market.

"So complete was the demoralization of the stock market and so exhausted were the brokers and their staffs and the Stock Exchange employees, that at noon that day, when the panic was at its worst, the Governing Committee met quietly to decide whether or not to close the Exchange. To quote from an address made some months later by Richard Whitney: 'In order not to give occasion for alarming rumors, this meeting was not held in the Governing Committee Room, but in the office of the president of the Stock Clearing Corporation directly beneath the Stock Exchange floor. . . . The forty governors came to the meeting in groups of two and three as unobtrusively as possible. The office they met in was never designed for large meetings of this sort, with the result that most of the governors were compelled to stand, or to sit on tables. As the meeting progressed, panic was raging overhead on the floor. . . . The feeling of those present was revealed by their habit of continually lighting cigarettes, taking a puff or two, putting them out and lighting new ones--a practice which soon made the narrow room blue with smoke. . . .' Two of the Morgan partners were invited to the meeting and, attempting to slip into the building unnoticed so as not to start a new flock of rumors, were refused admittance by one of the guards and had to remain outside until rescued by a member of the Governing Committee. After some deliberation, the governors finally decided not to close the Exchange.

"It was a critical day for the banks, that Tuesday the 29th. Many of the corporations which had so cheerfully loaned money to brokers through the banks in order to obtain interest at 8 or 9 per cent were now clamoring to have these loans called--and the banks were faced with a choice between taking over the loans themselves and running the risk of precipitating further ruin. It was no laughing matter to assume the responsibility of millions of dollars' worth of loans secured by collateral which by the end of the day might prove to have dropped to a fraction of its former value. That the call money rate never rose above 6 per cent that day, that a money panic was not added to the stock panic, and that several Wall Street institutions did not go down into immediate bankruptcy, was due largely to the nerve shown by a few bankers in stepping into the breach. The story is told of one banker who went grimly on authorizing the taking over of loan after loan until one of his subordinate officers came in with a white face and told him that the bank was insolvent. 'I dare say,' said the banker, and went ahead unmoved. He knew that if he did not, more than one concern would face insolvency.

"The next day--Wednesday, October 30th--the outlook suddenly and providentially brightened. The directors of the Steel Corporation had declared an extra dividend; the directors of the American Can Company had not only declared an extra dividend, but had raised the regular dividend. There was another flood of reassuring statements--though by this time a cheerful statement from a financier fell upon somewhat skeptical ears. Julius Klein, Mr. Hoover's Assistant Secretary of Commerce, composed a rhapsody on continued prosperity. John J. Raskob declared that stocks were at bargain prices and that he and his friends were buying. John D. Rockefeller poured Standard Oil upon the waters: 'Believing that fundamental conditions of the country are sound and that there is nothing in the business situation to warrant the destruction of values that has taken place on the exchanges during the past week, my son and I have for some days been purchasing sound common stocks.' Better still, prices rose--steadily and buoyantly. Now at last the time had come when the strain on the Exchange could be relieved without causing undue alarm. At 1:40 o'clock Vice-President Whitney announced from the rostrum that the Exchange would not open until noon the following day and would remain closed all day Friday and Saturday--and to his immense relief the announcement was greeted, not with renewed panic, but with a cheer.

"Throughout Thursday's short session the recovery continued. Prices gyrated wildly--for who could arrive at a reasonable idea of what a given stock was worth, now that all settled standards of value had been upset?--but the worst of the storm seemed to have blown over. The financial community breathed more easily; now they could have a chance to set their houses in order. "It was true that the worst of the panic was past. But not the worst prices. There was too much forced liquidation still to come as brokers' accounts were gradually straightened out, as banks called for more collateral, and terror was renewed. The next week, in a series of short sessions, the tide of prices receded once more--until at last on November 13th the bottom prices for the year 1929 were reached. Beside the figures hung up in the sunny days of September they made a tragic showing:

Company	High price Sept. 3, 1929	Low price Nov. 13, 1929
American Can	181 7/8	86
American Telephone & Telegraph	304	197 1/4
Anaconda Copper	131 1/2	70
Electric Bond & Share	186 3/4	50 1/4
General Electric	396 l/4	168 1/8
General Motors	72 3/4	36
Montgomery Ward	137 7/8	49 1/4
New York Central	256 3/8	160
Radio	101	28
Union Carbide & Carbon	137 7/8	59
United States Steel	261 3/4	150
Westinghouse E. & M.	289 7/8	102 5/8
Woolworth	100 3/8	52 1/4

"The New York Times averages for fifty leading stocks had been almost cut in half, falling from a high of 311.90 in September to a low of 164.43 on November 13th; and the Times averages for twenty-five leading industrials had fared still worse, diving from 469.49 to 220.95.

"The Big Bull Market was dead. Billions of dollars' worth of profits--and paper profits--had disappeared. The grocer, the window-cleaner, and the seamstress had lost their capital. In every town there were families which had suddenly dropped from showy affluence into debt. Investors who had dreamed of retiring to live on their fortunes now found themselves back once more at the very beginning of the long road to riches. Day by day the newspapers printed the grim reports of suicides.

"Coolidge-Hoover Prosperity was not yet dead, but it was dying. Under the impact of the shock of panic, a multitude of ills which hitherto had passed unnoticed or had been offset by stock-market optimism began to beset the body economic, as poisons seep through the human system when a vital organ has ceased to function normally. Although the liquidation of nearly three billion dollars of brokers' loans contracted credit, and the Reserve Banks lowered the rediscount rate, and the way in which the larger banks and corporations of the country had survived the emergency without a single failure of large proportions offered real encouragement, nevertheless the poisons were there: overproduction of capital; overambitious expansion of business concerns; overproduction of commodities under the stimulus of installment buying and buying with stock-market profits; the maintenance of an artificial price level for many commodities; the depressed condition of European trade. No matter how many soothsayers of high finance proclaimed that all was well, no matter how earnestly the President set to work to repair the damage with soft words and White House conferences, a major depression was inevitably under way.

"Nor was that all. Prosperity is more than an economic condition; it is a state of mind. The Big Bull Market had been more than the climax of a business cycle; it had been the climax of a cycle in American mass thinking and mass emotion. There was hardly a man or woman in the country whose attitude toward life had not been affected by it in some degree and was not now affected by the sudden and brutal shattering of hope. With the Big Bull Market gone and prosperity going, Americans were soon to find themselves living in an altered world which called for new adjustments, new ideas, new habits of thought, and a new order of values. The psychological climate was changing; the ever-shifting currents of American life were turning into new channels.

"The Post-war Decade had come to its close. An era had ended."

There is much more in Mr. Allen's original text. Don't miss his chapter on the styles, fashions and conceits of the 1920s. You don't need my insights to instruct you in the parallels to our era. Further, the chapter on the Florida real estate bubble - yes, the 1920s Florida real estate bubble - is not to be overlooked!

I attribute the classic aphorism, that those who cannot remember the past are condemned to repeat it, to Santayana. This lesson is applicable to broad swaths of Mr. Allen's text.

You may read the original work - online - here.

Is the US Dollar Doomed?

19 April 2008

The idea that the US dollar is on the road to ruin is a familiar concept in the field of alternative economics and investment theory. It is by no means a mainstream concept - yet.

John Williams, whose work I have cited previously, has issued a warning that the US dollar could move into hyperinflation as soon as 2010.

Mr. Williams in this case is cited by Jay Taylor, who states in a recent article:

"Such a claim may seem incredible to most of us who have never lived in such an environment and have enjoyed the benefits of economic and political stability all our lives. To be sure, we have experienced some uncomfortable times like the deep but short-lived recession of 1981-82 and the double-digit inflation of the 1970 Carter Presidency. But I believe Williams makes a very, very strong case for hyperinflation with the dynamics driving it very much like that of the German Weimar Republic. Williams shows how it will be absolutely impossible for the U.S., as a massive debtor nation, to meet its trillions of dollars of obligations going forward, given: (a) foreign savers bailing out of the U.S. dollar, and (b) the obligations of the U.S. now exceeding even a 100% tax rate imposed on Americans!"

Let's allow Mr. Williams to speak for himself.

"The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression. Hyperinflation could be experienced as early as 2010, if not before, and likely no more than a decade down the road. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement.

"The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to meet their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets."

While Mr. Williams' work is well-supported, and many of his premises sound, I do not expect the collapse he describes.

Rather, I expect the other nations of the world to join with the US in the inflation of their currencies (meaning engagement in blatant money-printing). Thus, while the US dollar will be dramatically devalued going forward, so too will the currencies of most of the economic powers of the world. (For more information about the potential for global economic disaster, click here.)

The relevant question, then, becomes whether the US dollar is more troubled than the currencies of its peers. Let me defer here to Richard Russell, the noted investment advisor based in nearby La Jolla, California, who lived through the Great Depression during his coming of age years in New York City.

Interestingly, Mr. Russell, who has no point to win other than describing the world as he sees it, presents a viewpoint that parallels that of Mr. Williams. Mr. Russell speaks in terms of "doom" for the US dollar, as follows:

"The US has put itself in the incredible position of fighting an expensive war with borrowed money. Even without the war, the US is living on borrowed money. Our national debt is in the process of surging well past the $9 trillion mark. The wonder is that the dollar is viable at all.

"I note that none of the presidential candidates are even talking about the debt -- or the $53 trillion in unfunded liabilities that we are facing (other estimates are higher). In fact, I believe we have gone so far in our debt and deficit situation that I just don't see how we're going to navigate out of it. The dollar, it seems to me, is ultimately doomed. The only question is timing, and here we're talking the impossible. It brings to mind Keynes' thesis -- 'The market can stay irrational longer than you can stay solvent.' In other words, even though the US dollar appears doomed, if you short the dollar, you can very easily go broke before the dollar finally succumbs (in fact, the oversold dollar may be in the process of advancing now).

"So what do we do? I've been thinking about this for a long time, and I realize that there is no perfect answer, no ideal defense. You see, for the first time in modern history there are grave doubts about the very viability of our money. Even during the Great Depression, nobody doubted the value of a dollar. The dollar was 'as good as gold.' The only problem was -- nobody had dollars. Everybody was broke. Deflation swept the land, and money was scarce. I could give you a list a yard long of things I could buy in those days for a nickel. Talk about nickels, I would use nickels to take the subway to school, and I would use seven nickels to buy lunch. A movie cost three nickels. Nickels were useful, dimes were scarce and dollars were treasures.

"Today it's a different story. Today there are too many dollars around -- but the world is questioning the viability of the US dollar. I understand there are places (China, for instance) where people do not want dollars. If they do receive dollars, they exchange them for another currency as quickly as possible."

How does Mr. Russell visualize the ultimate demise of the dollar?

He states, "My guess is that the trouble will start when the oil-producing nations start quietly unloading their dollars. China will likely do the same. Gradually, the word will emerge -- 'the dollar is a doomed currency.' Diversify as far as you can, and get out of dollars as quietly as you can."

Does Mr. Russell's prediction of doom for the dollar spell hyperinflation by 2010?

It's certainly possible, but hardly foreordained. While currencies can unwind quickly when their holders lose confidence in them, one lesson of history is that many twists and turns - including lengthy periods of reprieve - can usually be expected before such watershed events come to pass.

So, is the US dollar doomed?

I'm not going to argue with the likes of Richard Russell. At some point, the US dollar will certainly fail as a currency - though I think not so soon as 2010, and not necessarily in my lifetime - though recent opinion voiced in The Economist reaffirms the growing consensus that currency crises of grave proportions now appear foreordained for the upcoming decade.

Is it wise now to seek investment alternatives to the US dollar?

That has certainly been the case since at least early 2002, and gold has given no indication of unreadiness to continue bearing its historical burden as the currency of last resort in uncertain times.

So - hyperinflation by 2010?

Possibly, but in my view unlikely.

Ultimate failure of the US dollar, and grave crises for the US dollar as a currency over the coming decade?

Yes, in my view, the next decade will continue to be a difficult period for the US dollar. Whatever it does in terms of other currencies, its real purchasing power will continue to erode for the foreseeable future, and this will be detectable through the continued advance in the dollar value of gold..

The US dollar is clearly doomed. It is on an inevitable course to failure. But the death of the US dollar will prove a long emergency. It is a drama - with the current episode now in its sixth year - that will be told in terms of decades, not in terms of years.

($9000 gold as the US dollar collapses? Click here.)

_

Michael Yon - A Man To Watch

12 April 2008, 14 & 16 April 2008 (revised)

As a dual US and Canadian citizen living 80% of the year in Canada and 20% of the year in the US, I get up-to-date on news of the American presence in Iraq mostly when I'm in the US, as I am now.

Thanks once again to the Wall Street Journal, I have discovered another lead to which we need to pay attention.

Michael Yon, an independent journalist with a background in special forces - not journalism, writing in a Friday Op-Ed piece in the Journal, suggests that we are no longer fighting the (strategically inept and obviously losing) Iraq War of 2004-06.

As perhaps the "most-embedded" of all American journalists, he asserts that under General David Petraeus, we have truly been winning hearts and minds - particularly among the Sunni community - since 2007.

I probably don't have to tell you that this is a story not often heard in Canada, where our focus is very much more on the leadership role of Canadian troops in the Kandahar region of Afghanistan. (Nor should I have to tell my Canadian readers that the US media pay little attention to the Canadian story in Afghanistan. That seems to be how war goes. When our countrymen and women are at war, it is they whom we watch.)

However, whether you are Canadian, American, or a member of any other democratic society, you have to pay attention to what Mr. Yon is saying for the obvious reason that he is there as an eyewitness.

I infer that Mr. Yon spoke himself to the Iraqi translator who, when threatened with death, asked that his heart be buried in America.

A story such as this sounds emotive, but blunt appeals to emotion are not actually Mr. Yon's style. His preference is to describe objectively what he sees and let you - the reader - figure it out for yourself.

Why are roadside bombings down? Because an insurgent can't bury a 1500-pound "tank buster" in a main thoroughfare without being noticed by the neighbours, who now call the Americans to notify them.

Yon states, "... in Baqubah in June 2007, politics was crucial. Casualties were a fraction of what we expected because, block-by-block, the citizens told our guys where to find the bad guys. I was there; I saw it."

Yon, who is on the ground with the soldiers, sees the Iraq War now being won. How come? Yon writes, "As the outrages of Abu Ghraib faded in memory – and paled in comparison to al Qaeda's brutalities – and our soldiers under the Petraeus strategy got off their big bases and out of their tanks and deeper into the neighbourhoods, American values began to win the war."

Yon makes clear how and why al Qaeda's forces are being discredited in Iraq: "The al Qaeda terrorists don’t save themselves for the seventy two virgins promised to suicide bombers. They love drugs, prostitutes, and the power of the gun. The gay al Qaeda informant in Moment of Truth in Iraq is classic. Whenever his al Qaeda lovers abused him, he supplied American forces information to kill them."

Last week, I shared Jim Rogers' idea that it will cost more to try to prevent the recession than it will to let it proceed on its own course.

This week, let me paraphrase Michael Yon's idea, blending his thoughts with my own.

Mr. Yon believes that the leadership of General Petraeus (initiated on February 10, 2007), with its emphasis on building relationships with citizens on the ground, has redirected the course of the Iraq War. If he is correct, it might now cost more to walk away from the perceived still-losing pre-Petraeus battle than now to commit America's (obviously critically over-stretched) resources fully to support a possibly winning battle plan under the leadership of a competent new general (Mr. Petraeus).

In other words, the war in Iraq under General Petraeus may no longer be the same losing effort that characterized the US intervention from mere weeks following its inception through early 2007, at least in the minority Sunni regions of the country. While the Iraq War was clearly conceived and then executed both wrongly and ineptly from early on (in my view), Yon suggests that perhaps this war could now be salvaged - not specifically for the US, for which the salvage operation will certainly prove excessively costly regardless of which course is followed - but for the people of Iraq, who may ultimately fatigue of being bullied and exploited by armed strongmen on both the Sunni and (possibly) the Shi'a sides.

Financially, this will prove an excessively costly ($3 trillion or more) war regardless of whether the United States pulls out soon or stays for the longer term. To the shame of the Bush administration, much else could have been accomplished with the funds that have been and will be deployed in Iraq - including but not restricted to the rebuilding of New Orleans, assistance to strapped homeowners, improved health care, and better management of government indebtedness - not to mention the building of better relations with Middle Eastern countries. It is possible that Mr. Bush will be remembered as the president who bankrupted America, subsequent to his history of mismanaging oil sector businesses prior to his election to the presidency.

I share none of the misplaced and inept militaristic idealism and adventurism of the Project for the New American Century cabal around president George W. Bush that designed this war. I continue to believe that we would live in a better and safer world today if we had not invaded Iraq.

But of course, none of the above are questions for today. Today's strategic question is: "What is the best achievable outcome of the intervention, and by what means, given where we are now?" Our present financial question is also quite simple: "What will be the full costs of staying, as opposed to the full costs of leaving, at this present point in the US-engendered Iraqi conflict?"

In short, if victory - meaning the achievement of relative peace, stability and freedom in that country - remains possible, then that is certainly the most desirable strategic outcome.

Further, if a positive outcome is possible - from our present point of engagement, even at greater immediate cost, the achievement of stability in Iraq would almost certainly also prove our least costly long-term financial (as well as strategic) alternative.

To cut our costs based on a strategic assessment of present failure foretells further, and difficult-to-predict, but probably also entirely unacceptable, and very likely greater, future costs arising as inevitable and partially-predictable consequences of the current emergency.

If stability and freedom in Iraq are actually achievable, this would entail further balanced consideration of John McCain's presidential candidacy. If the Iraq War is recoverable from here, then Mr. McCain's statement of determination to remain in Iraq may yet be found to be vindicated.

I'm not yet well-enough versed in the area of American politics to select a "best" candidate for my vote for the office of president, as most of my knowledge is in the Canadian sphere. Mr. McCain is not by any means consistently "right" in my view - particularly on a range of tolerance-based social issues, where members of the American right recurrently go "wrong." Obama and Clinton easily top him with respect to most issues of broad social tolerance.

(14 April 2008: I would like to add here what in my view is a positive note for Mr. Obama, who has recently demonstrated that his insight into the American psyche is quite deep - so deep in fact that he has recently found it necessary to apologize for his statements over the weekend about feelings of "bitterness" in American communities. Mr. Obama's incisively accurate observations were obviously uncomfortably close to the mark for a broad spectrum of self-interested Americans who have objected to his take on some of the factors which sustain a rarely acknowledged long and dark stream in the psyche of mainstream America.)

In light of the upcoming election, the truth is that we presently have only three candidates to choose from (at this time), and will ultimately have only two. My guiding question in this sphere remains, which of these (now three) obviously imperfect choices will be best for the country and for the international community?

My mind isn't made up yet. I don't begin to support Mr. McCain's or any other candidate's full political agenda. I'm starting to think that Mr. McCain, who favours staying in Iraq "as long as it takes to win" may be holding to a position worthy of further consideration. I would not have reached this conclusion prior to entertaining Mr. Yon's fresh ideas on the present state of the Iraq War.

I continue to be repelled by the anti-investment stands of both Mr. Obama and Ms. Clinton, whose intention to continue penalizing savers and investors at the expense of proposed new or expanded health and social programs will depend for its execution on further injections of wealth into the American economy by precisely the individuals they propose to tax more heavily. The inherent contradiction in Clinton and Obama's economic policies in my view spells potential disaster for the American economy under their oversight.

In presidential politics, as in war, our choices are limited by what is possible in the present moment.

Let us now return to the topic of the Iraq War itself.

Mr. Yon writes: "Over the past 15 months, we have proved that we can win this war. We stand now at the moment of truth. Victory – and a democracy in the Arab world – is within our grasp. But it could yet slip away if our leaders remain transfixed by the war we almost lost, rather than focusing on the war we are winning today."

Is Mr. Yon a propagandist?

Well, here is the definition from Wordweb: "Propagandist: A person who disseminates messages calculated to assist some cause or some government." So yes, his work is definitely propagandistic. He is taking a side. He wants to see this war won for the lasting benefit of the Iraqi people and for the vindication of the American soldier (more so than for the vindication of the American government, a position which is admirable), and he uses various rhetorical devices to persuade us of his case.

The more important question in my mind, therefore, is this one: "Is Mr. Yon speaking the truth?"

Again, my initial impression, and thus the more important answer, is also "Yes."

Mr Yon, it seems to me, is a man of truth. Based on this assessment, this man and his message are not to be ignored.

(16 April 2008: As my study of this issue has progressed, my present impression is that Mr. Yon may be describing truthfully - a successful intervention among Iraq's now-marginalized Sunni population in a Middle East now increasingly dominated by Shi'ite Iran. I am not certain if Mr. Yon's narrative is as applicable to the Shi'a as to the Sunni regions. Neil MacDonald of the CBC in Canada offers an excellent Canadian critique of Mr. Bush's Iraq war here.)

Mr. Yon is author of the just-published "Moment of Truth in Iraq" (Richard Vigilante Books). He has been reporting from Iraq and Afghanistan since December 2004. (I specifically do not endorse many of the other books available from Mr. Yon's very right-wing publisher, the anti-tolerance themes of which I strenuously oppose.)

My advice - look this guy up. I'm planning to look further into Mr. Yon's ideas.

And, as three of my four stepchildren are now members of Canadian military families, let me add this US-based military motivator link for them (supplier of the above Yon poster).

30 August 2008: Click here for an update on Mr. Yon's move to Afghanistan to report, again from the front lines, on the AfPak conflict.
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The Psychology of Gold and Gold Stock Investing: Of Irresistible Forces and Immovable Objects

12 April 2008

This entry must be brief, but it represents the culmination of much thinking.

Since the gold bull market began, gold stocks - meaning producing gold miners of all sizes, emerging gold miners, and gold explorers with approved feasibility studies - have always sooner or later caught up with and then exceeded the advances of gold. That is, until February 2006.

Since February 2006, this familiar pattern has failed to reassert itself.

While there has been much discussion of the rising costs of gold mining, I think the greater factor right now is paradoxically the same one that is driving the price of gold ever higher - illiquidity in the investment markets.

Quite simply, gold mining - from exploration to proving up resources to getting the material out of the ground (in an environmentally-acceptable manner) to refining and selling the product - is an incredibly complex, uncertain, and capital intensive process.

That is, operating a gold mine is exactly opposite to owning gold.

There is no investment simpler than owning gold. There are no interest payments, no coupons, no stock certificates, no annual reports, no government regulations or investigations. The value is in the possession of the physical metal itself. The primary complicating factor is storing it safely, but that is far less complex than developing and operating a gold mine. And you can now arrange for others (for example, Streettracks Gold Trust, Kitco, the Bullion Vault, and many more) to hold your gold for you.

And that, in short, is today's problem.

The drying up of liquidity in the financial markets means that for now, there are fewer funds available for investment in new projects of any kind, let alone a project as complex or unpredictable as developing a gold mine.

Think further, though. This same phenomenon that is presently discouraging the construction of new mines (apart from those being developed by already cash-rich larger mining companies) is contributing further to the relative scarcity of gold, driving its price higher still.

So too, illiquidity in the financial markets makes gold more attractive, because gold is always exchangeable for other items of value when the need for such exchange arises. Add to that the influence of financial uncertainty and money supply inflation around the globe (you can print all the money you like - just ask Robert Mugabe - but you can't create more gold at will), and you have the recipe for a continued surge in the now 7-year-old gold bull market of the present millennium .

Therefore, the irresistible force referred to in my title is certainly the ever-rising price of gold.

While many are now calling a top in the current gold price, I'm not so sure we are there yet. In today's crisis environment, the fundamentals are stronger for gold than we have seen since the 1970s stagflation era. Gold may still prove to have more room to rise.

The immovable object referred to in my title is illiquidity in the financial markets.

Basically, when investment funds are flowing freely, particularly in an inflationary environment as now exists, speculative ventures - such as mineral exploration and mine development - can be funded because that kind of "overflow" of funds characterizes speculative markets.

The same bubbling markets that could fund the development of so-called "financial innovations" in the mortgage sector also produced overflowing funds which poured into mineral exploration and development stocks - until about February-April 2006. Then the flow of funds gradually dried up.

Since February 2006, market liquidity has been evaporating, and this environmental shift has hurt the gold miners and explorers - particularly the smaller players who rely upon external sources to fund their ventures.

In short, the speculative money has now dried up, and the mineral explorers and developers are feeling it - big time - right along with the mortgage lenders and the indebted consumers!

Here then, is the ultimate paradox - the fundamental contradiction. Gold miners and explorers are holders of gold, just as are gold investors and most global central banks. It is just that their gold is in the ground, waiting to be recovered - through processes that will be lengthy, complex, uncertain and costly.

As current fundamental market conditions continue to boost the price of gold - in my view, probably more than currently expected by most investors - at some point, investment in exploration and mining projects will appear less risky than investing in mainstream assets in uncertain times.

Owning shares in gold miners and explorers will once again be perceived as another way to be a holder of gold - an investment position that will be ever more greatly esteemed as the value of gold continues appreciating, and particularly if competing asset classes plateau or clearly begin to decline in value.

So, my prediction is that today's paradoxical psychology in the gold mining and exploration sector is set to shift at some unknowable future point in time.

When this psychological shift occurs, don't be caught off guard. And don't be surprised to see a dramatic turnabout in investor psychology.

In the investment world, over many centuries, there have been few investment vehicles of more mythic proportions than gold and silver mines.

The time will come again, when the irresistible force (accelerating gold prices) meets the immovable object (market illiquidity), and one force or the other must yield while the other predominates.

When this happens, my call is that it is the irresistible force which will prevail.

The market value of gold mining and exploration shares will surge again, very likely when least expected.

The scale of the phenomenon may prove astonishing when it finally occurs. There is much activity beneath the surface, and it should prove very powerful when manifested in the marketplace!

I wish I knew when. However, my guess is - it will be soon enough....