Stock Market Repair

Stocks for the Long Run - Jeremy Siegel

According to Pablo Galarza of Money, "His 1994 book Stocks for the Long Run sealed the conventional wisdom that most of us should be in the stock market."

Jeremy Siegel, at first you were elated when you pulled out the economy's dipstick and it showed that the car was actually creating extra oil. Unfortunately, it wasn't oil at all. The excess was simply water leaking in from the radiator. I'm sorry. You've blown a conventional wisdom head gasket. There's also a problem with your timing belt. A few weeks in the shop and we'll have it as good as new for you though.

In addition, Yale economist Robert Shiller, who wrote Irrational Exuberance (Princeton, 2000) warns that even a 20 or 30 year holding period is not necessarily risk free. This is because the 20th century, on which many of Siegel's conclusions are based, was the most economically successful century in the short history of the United States and will not necessarily repeat itself.

Head Gasket, Blown, Is this serious?

It is because (1) it will be expensive to replace, (2) it is probably the result of some other underlying problem, and (3) additional repairs may be required in addition to replacing the head gasket itself.

That pretty much sums up our economy these days. Don't you think? We're spending trillions of dollars on repairs. There is another underlying problem that is often conveniently ignored (we're sending vast amounts of our money to China so that they can all drive cars just like we do someday, at least in theory). And lastly, additional repairs will be required. In fact, the repairs themselves will need repairing. Think TARP, TARP II, TARP III, and so on.

FAQ: Timing Belt info

Q. I've heard horror stories about broken timing belts. What's the straight Scoop?

The biggest issue with failed timing belts on Fiats is the catastrophic damage that can occur.

This also applies to fiat currencies.

Fiat money

Usually, a fiat-money currency loses value once the government which acts as the issuer refuses to further guarantee its value through taxation, but a strong private banking system and consensus of the population may prevent this.

Wow. Pardon my language, but we're screwed. I'm fairly certain we don't have a strong private banking system nor do we have a consensus of the population. In fact, those in debt seem very responsive to the idea that inflation can actually save us.

February 7, 2003
Inflation: the solution to all problems

If soaring debt service costs causes the government to increase inflation, selling the policy may be an easier sell than one might think, since the government isn't the only habitual debtor. The American people have been amassing piles of debt for years, on credit and in the form of instruments such as home mortgages. In fact, it was those home mortgages that have kept the economy afloat to the extent that it is today.

We managed to get oil to $147 a barrel just by hinting that inflation might be an option. Imagine what the price of oil would hit if we did more than hint. There would be vast unintended consequences.

Oil, Water Are Volatile Mix in West

Energy Firms Buying River Rights Add to Competition for Scarce Resource

But if the price of oil rebounds, the potential payoff is big: the federal government estimates 800 billion barrels of oil, triple the known reserves of Saudi Arabia, lie under the Rocky Mountain West.

For now, the energy companies are not using most of the water they've claimed; they're leasing some of it to other users, most often farmers. But they are stocking up on water rights to be sure they won't be caught short.