Footfalls Echo in the Memory

"Footfalls echo in the memory. Down the passage which we did not take. Towards the door we never opened. Into the rose garden." T. S. Elliott, 1888 to 1965.

A couple of trillion stimulus dollars later we're little better than we were before all that spending. The initial reading of second quarter GDP showed 2.4% growth. Big deal. Normally the reading this close to the bottom of a recession would be closer to 7%. The first revision to the second quarter number comes Friday the 27th. I say we'll be lucky to show 2% growth. Worse than the number, which will be revised a final time the end of September, is the trajectory. To quote Johnny Cash: Down, down, down and the flames got higher.

Uncle Ben (UB) is a renown student of the Great Depression. His conclusion regarding said Depression's lingering pain was that the Fed didn't throw enough money at the situation. He studied an event where the policies taken didn't work. He should have studied an event where the policies taken DID work.

The Panic of 1920 began every bit as badly as its' 1929 cousin but lasted only 18 months. There was a 17% plunge in GDP and unemployment jumped from 4% to 12%.

in 1920 Woodrow Wilson was President but was totally incapacitated by a stroke and so could do nothing. Basically his wife was President. Then Harding took over in March of 1921. His Commerce Secretary, Herbert Hoover, yup that guy, advised an array of government interventions to turn the economy around. Instead Harding cut the federal government's budget nearly in half between 1921 and 1922 and reduced taxes across the board. The Fed was a non-player. By August, 1921 signs of recovery were evident. In 1922 unemployment was back to 6.7% and by 1923 it was 2.4%. "Down the passage which we did not take."

So, We're All Doomed (WAD) but what can we do to be less doomed than the great mass of sufferers? First, pay down and get out of debt. (See the 4th Rule of Life). Second, as I keep saying, buy gold. A coin or two a month and more if you can afford it. Third avoid common stocks. By this I mean stocks such as IBM, Dupont, JP Morgan and the like. I do not mean Master Limited Partnerships (MLPs) like PAA, PWE and preferred stocks like MSJ. Also the high yield closed end funds from PIMCO could be a good bet. Have a gander at PHK, PKO and PFN to name three. These are risky but with Bill Gross and the boys minding them some faith is warranted. The groups I mentioned have hefty payouts and should offer somewhat of an umbrella in the scatological tempest we are entering.

Some are hopeful that a Republican takeover of one or both houses of Congress will turn things around. I disagree. Such a happening would stop anymore dimwitted ideas from becoming law but would not undo what has been done. For that we must wait for succeeding kings which means 2012 at the earliest. Yipe.

Gold's price at the time of my June 24 posting was $1242. By the time of my July 19 imparting it was down to $1181 and I said "not to worry". Gold is now $1229 so I hope you didn't worry. We're about to enter the months of the year when gold performs best. Have no idea where it will end up but strongly suspect it'll be a lot higher than $1229.

Get out of debt, buy gold, hunker down and cast scorn, in moderation, on those who voted for Obama. See 12th Rule of Life: Don't rush to attribute to malice what can be explained by stupidity.

WAD