Posted On: 2006-09-27Length: 54:13
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Alright everybody. Welcome to another edition of Vigilant Investor online, live stream cast. I hope everybody is tuning in and having a good old time this Wednesday evening. Yeah, boy an exciting day in the markets and so forth. If you had a chance to pay any attention to it which by and large most folks didn't. But before I get ahead of myself, you're listening to a little Cold Play in the background there, a tune called Don't Panic, got, good exposure in a movie called Garden State which if you're ever trying to identify with, where the 20 something crowd is these days I think that gives you a good sense of where they are. As far as I can tell the film doesn't really resonate all that well with the older set simply because, you know, the 20 something crowd is not where a lot of people are. I'm thirty something, 38 to be very shortly here and I can tell you this much, it sort of resonates with me but not a whole lot. And it's one of those interesting things, as you get older, definitely you see the changes take place but anyway, I digress. This is Vigilant Investor, I'm Johannes Ernharth and thanks for listening in to this week's edition. We're going to be talking today about a number of things, most importantly is the subject of the show that's been posted up on vigilantinvestor.com, and that is books that you can give a good read and get your arms around the big picture that are not your standard conventional investment books. A lot of our whole point in Vigilant Investor we always say is to help people avoid blind spots, to not get duped, to not be a fall guy has always been our theme. And we look at a lot of different things when we come up with our view for our firm at Ernharth group and we take of course all the conventional standard ways of doing things to, into the mix. But what we see in the investment community largely is a tendency to be very myopic within what is done within the investment management community. Everybody focuses in on those things almost exclusively and consequently there is a lot of, as my dad used to refer to, used to use the phrase, intellectual incest, where you get a lot of people agreeing with each other, everybody does things the same way but they don't get a lot of outside perspectives sometimes now. It's not to say if you flip on MSNBC which I had on a good portion of today while I was doing other things and boy there's a lot of dissent there as to what the markets meant and so forth with the Dow Jones testing a new high. It's been, boy a full, near 6 years now since we've had a high in any of the three major indexes. But, the Dow was floating around with it and never quite got up to a point where it could fully go over. Today the Dow wrapped up at 11,689 when I was watching, and it was 716 or something along those, so it got very close but it just couldn't quite get over. Nasdaq today, oh net for the Dow was up about 0.17 percent, Nasdaq today was up 2.05 percent, or excuse me 2.05 to 2,663 and that's just under a tenth of a percent gain. The S&P 500 just at 0.02 percent up at 1,336. We're seeing a lot of new opportunities out there for the indexes, their definitely testing, trying to test, well Nasdaq of course isn't anywhere close, but the S&P and the Dow are both trying to test highs. It would be interesting to see if they actually make it. And very likely they will we'll talk about some of that in a few minutes here. Probably the bigger news today was bond rates doing a little bit of a reversal. And that's been the past couple of days. We've had a very favorable bond market over the past few months where anybody who was looking to benefit from interest rates rising, they got a lot of benefit for a little while there but then the reversal happened, there was a big flight to safety with the emerging markets doing a reversal, a lot of money coming out of those areas, a lot of that was tied to the Yen Carry Trade. And subsequently U.S. bonds did very well for a little while there but if we take a look at the bond yield curve for example, still a little bit inverted in the 5 year and the 2 year from the 6 month. And the 10-year is still under the 2-year, and the 30-year is stretched out there. And, if we were to look at rates now 10 year is at 459 or excuse me, yield, where as the 3 month is at 466. So, we still are a little bit inverted there. Last week we were at 471 and 472, so the, excuse me 484, and, excuse me, the 10 year was at 472, yes, and last month the 10 year was at 478 with the 3 month and the 2 year, let's say the 2 year at 486 verses 478. So we've been inverted here for a while and ordinarily that's recessionary indicator, which leads a lot of people, and a lot of debate that I saw on MSNBC thankfully is questioning, you know why is it that the Dow Jones Industrial is testing these new highs in the face of what ordinarily with bonds is a recessionary indicator an inverted yield, a curve that ordinarily tells you things are about to slow down, which ordinarily isn't good for stocks. Now, getting back to, let's see, let's just do quick other headline here. Oh, a big thing that really did a reversal on the Dow, the Dow seemed to be chugging along just fine there, and if you were to look at the chart today, it looked like it was going to keep testing, testing, each time it tested it got a little bit higher, and then around 2 o'clock today, big news on oil. Oil basically did a big reversal and dumped about 2 dollars and natural gas is still taking it on the chin. That leads to, I think when you get into the commodities, a lot of people have been saying that there has been a commodities bull market, and a commodities bubble and now that's starting to back off. I just don't see it happening, I look at where oil has been, and I look at what's been going on with money supply, I look at what's been going on with real inflation, and all sorts of things. I just don't see oil really dropping down a whole heck of a lot. And, one of the interesting things that people haven't been talking a lot about has been what's happened with the unleaded gasoline. Everybody is very excited to see gasoline prices down dramatically in the past few weeks from where they were, the average was above 3 dollars a gallon and now we're looking at 2.50, 2.30 you know almost pushing down to below 2.00 in some areas. Which is a heck of a boost to the consumer who has been struggling to deal with these for a long while. And, these prices, and when gas prices are higher the way it works, you have less discretionary income to do with other things and theoretically that's going to slow the economy down. And I think that's what we're seeing with some of the economic numbers across the board where things actually have been slowing down, and that's what the bond yields have been telling us with the reversal and so forth with the, excuse me, with the inversion of the curve. Now, commodities, let's talk about what's happened with gasoline over the past couple of weeks. If you had your ear to the ground at all with the financial markets, you've heard about the hedge fund Amaranth that did a big blow up. That was, I understand at one point a 12 billion dollar hedge fund with some pretty fancy managers doing some pretty crazy things there. And, they were using leverage, which is where you can get in trouble. You borrow money and leverage on up and control more market than you actually have in your pocket you can run into problems and that's what happened to them on some natural gas bets. They lost about 6 billion dollars, that's with a "b" in about a week's time. And largely that was because they had to unravel a bunch of trades to, that they had out there at a very inopportune moment. Basically, fire selling what they had to prevent the entire fund from going under. So you look at a fund that had been a hedge fund, that had been about 12 billion dollars is now down to 3 billion dollars, and, very nearly blew up. But, of course the usual suspects step on in and they're picking up the pieces. And those are the Citibanks and J. P. Morgans of the world are coming in to do the clean up and help do the bail out kind of thing, which is the same old song, same old song. Granted it's not as big of a bail out as the great infamous long term capital management fiasco of 1998 where they controlled over a hundred billion dollars worth of leverage that was, good God, 3 hundred million was controlling a hundred and some billion, it was a crazy ratio, I think it might have been 3 dollars for every 100 dollars they were controlling. It was absurd. But, let it suffice to say that the Feds stepped in backing up the Citibank and so forth, J.P. Morgan, the usual investment banking community and Wall Street came in cleaned it up and saved the world from financial catastrophe, and actually saved themselves a lot of money in the process. Now, that ties into where we were going with some of the book recommendations I have for everybody to take a look at. Because when you start hearing me talk about things like the Federal Reserve stepping on in and they're cleaning it up like they always do with a little bit of a derogatory tone, I think you have to understand the background behind it because a lot of people hear that same phrase and say, "well, what the heck's wrong with that? That's what the Federal Reserve is for, they're supposed to step in there and organize these kinds of fix ups and get things back to restore order to save the economy, to save, the last thing we need is a hundred and 12 billion dollar hedge fund to vanish over night and cause gridlock in the in vestment banking community across Wall Street and everybody in the whole economy collapses." And that's the theory and that's what we're told and well heck, we don't want to have that happen, right? Well, maybe not, we have to look at the whole picture. So, one last thing I want to make a comment on to help enunciate where I'm going with these books is what happened this past couple of weeks with respect to Goldman Sachs and their commodity index. The Goldman Sachs commodity index did a big switcheroo the past couple of weeks which directly has impacted, did I say natural gasses I meant to say unleaded gasoline, please correct your mind there and get natural gas out of the woodwork there. But, with unleaded gasoline, what they ended up doing is adjusting the percentage that in their commodities fund, na - unleaded gasoline, I keep trying [...] natural gas there, the unleaded gasoline represented in the actual commodities index. If you were to look at where it was before, I think it represented over 8 percent, I don't have the exact figure in front of me right now on my computer screen, but it had represented over 8 percent and I believe they dropped it down into the 3's, the low 3 percent. So, what you're having there is roughly a 5 percent decline in the amount that an index is representing your unleaded gasoline. And when that ends up happening is it reverberates throughout all of Wall Street. Because what a lot of people are doing out there is using that index as their bogie, their target, their measure, to which they compare for their own commodities management. So when Goldman Sachs begins adjusting, Wall Street begins adjusting. How, of course I could get into Chicago as well with the actual futures pits over there, everybody starts adjusting as to how they are basically keeping their portfolios balanced. So, if you can imagine this, when Goldman does this, effectively what you have is liquidation in the amount of nat - of unleaded gasoline that you have represented in a portfolio. Which of course is a demand issue. So, as demand goes down, this is all economics 101, or you know, I think anybody who hasn't even had economics 101 knows about supply and demand where if demand goes down, you know prices are going to go down. People are just aren't going to be, yeah, prices got to go down with it and that's consequently what we had happening with gasoline, unleaded gasoline. Now, let's tie this up a little bit tighter here. Who is in charge of the U.S. treasury at the moment? Mr. Paulson used to be the CEO of Goldman Sachs. Who does Mr. Paulson work for now? Well as the Treasury he works for President Bush. Ladies and gentlemen we are in the midst of an election season and there is a lot of talk about the Democrats sweeping out the Republicans and boy, how coincidental must it be for suddenly a thing like gas prices dropping just in time for the November election? How about that? Coincidence? Do you think? Oh, it's conspiracy, of course, right everybody says it's going to be conspiracy here, but how can you say that kind of stuff. Believe me, I talk to people about these sorts of things and I hear a lot of people just looking at me, or they just tell me, now that's just crazy, if that's really what was going on, who in the heck would tolerate it? So, that gets us, it's the perfect segue to the subject of today's radio show and that is the 10, I don't know about the 10 best books, but the, what I think are some of the best books to take a look at in order for you to break out of that box of perception to understand a little bit more about what is going on out there. How things work beneath the scenes. We get a little bit of a bigger picture about what is going on there in the greater context. How the world functions. And Vigilant Investor again, one of the things that we have, you know, we created the site was to connect the dots, not just purely from the financial perspective but in fact actually from a little bit of an anti- purely investment perspective. You won't see a lot of investment talk on Vigilant Investor when we're writing about stuff. We usually don't talk a whole lot about things like the markets here on the Vigilant Investor Show, we like to bring in subjects like history, economics, which is numbers and so forth and some theory, but we're not getting into, you know, should you be in this investment or that investment. And we get into things like politics and power, and geopolitical push and pull. Not to say that all of Wall Street doesn't look at that but, I think it greatly discounts a lot of what is not considered to be the conventional read on things. If it doesn't fit in the box that everybody is familiar with, the intellectual incest concept, then it's thrown out, baby with the bath water and very few people take a look at it. So, let's start with our books here and give it a review, and go from there. And I'll talk a little about not just the book as to why, but also try to give a little bit of an example if one applies as to how it makes sense today in today's real world. So, without further adieu, let us get into the book subject for today - the meat of the show. And, I'm just going to move around a little bit here and, let's get a little Bumper music going here while I pull things together... [music]
Alright, thank you for your patience there, those of your who are watching on the Youtube edition of Vigilant Investor, you'll see that I have my stack of books right here, next to me on my studio desk and, oh, one other thing I need to let you know, you can call in, this is a live call in show, good heavens, let me give you the phone number it is (724) 444-7444. And, oh as a bit of a, sort of tidying up kind of thing we have a few guests coming on in the next few weeks. We'll have Robert Bloom in, scheduled for some time in October, we're still fine tuning that and he's going to talk a little about the Federal Reserve, and a really great show coming up not next week but the following week is going to be with John Williams shadow stats, his shadowstats.com, he runs a site that basically really drills into the facts behind the numbers coming out of Washington D.C. That interview I think will be a lot more sensible if you have an understanding of what we're about to talk about with these books too, because if you just hear John talking about things out of the blue, saying you know, how could this be? If you start reading some of the books I'm going to recommend you'll not be scratching your head so severely but in any event...goodbye music...that was Thievery Corporation by Lebanese blonde, Garden State soundtrack is a great soundtrack, I really did like that soundtrack more that the film itself. In any event, first book, book number one. Well I had, I'm trying to do this in a nice logical format here from a start to finish approach where you start with some books and you move on and you kind of build upon one another. And I was kind of torn as to whether I wanted to start with a Murray Rothbard book, The Case Against the Fed or The Real Lincoln from Thomas DeLorenzo. Both are excellent books and, both are not terribly long reads, Rothbard's Case Against the Fed is a little bit shorter but let's just start with that for the sake of starting out with it. What I like about Rothbard's Case Against the Fed and you can also read, he has a pamphlet out there, you can go to misus.org to download it, it's in PDF format if you want, What Has the Government Done to Our Money? The thing that I like about Murray Rothbard gets really into nicely is the history of how there's always been a struggle in the United States between the banking community and more or less the monopoly type, not just industrialists, we all know about industrialists, we all get taught this in school about how the industrialists ran, a little bit of you know, corporations in the late 1800's who were basically really sticking it to all of the poor people who were coming over to work from immigrants and how we needed to have unions and all that kind of stuff coming up, but very few people were actually talking about what was going on in the background with some of these guys and especially the banking community as well as the railroad communities and so forth. There are some books on it but, what's often not understood, but Rothbard does very well is he ties together the fact that some of the biggest, your tycoons our there your J.P. Morgans of the world who are running the banks, your Rockefellers who are behind Citibank, they were behind the big railroads and so forth. They were the ones who were actually doing the monopoly building. They were the ones trying to build the trust. We all know a lot of that but what's not so much understood is that they were also the ones who were behind the anti-trust movement. They were the once financing it, they were the ones lobbying for it and they were the ones trying to get really, laws passed that were under the [...] of anti trust and monopoly breaking. But really what these laws ended up doing was very much allow things to fall right into their lap. And the Case Against the Fed from Rothbard is a good introduction to that as a background, but also the banking community, gives you a history of what was going on in banking though the 1800's. And, really from the start, from the constitution onward you had two factions fighting over whether there should be a national bank or not. Should banking be exempt, should banking be just like any other business or should we fall into the trap like Europe, Great Britain, a lot of other nations had relative to having a central bank. There was a struggle there. The founding fathers all talked about how terrible idea having a central bank was, because you lose control over, really money. And those who control money are very much in charge. So, the Case Against the Fed, I'd recommend it. It is all of, what are we looking at, maybe a hundred and seventeen, hundred and fifty pages and you can see it here on the Youtube video, not that big of a book. Excellent read just to kind of put things into perspective relative to what was going on there. We never were taught that in history class, at least most of us weren't. Definitely weren't taught that in high school history but maybe you got it in college history if you got that far, but definitely give that book a look. The second book, The Real Lincoln by Thomas DeLorenzo is a, I think just an eye opener. Everybody in the United States looks at Abraham Lincoln as Saint Abe. The best guy since sliced bread, basically kept the United States together. What's not understood is how much Abraham Lincoln was the first real hyper politician out there to be doing some of the things that were getting done under him. I look at the Civil War after having read The Real Lincoln as not just the Civil War. Of course, you go down to the south, people refer to it as the war against the States, the war of succession. These things were, you know succession was something that was implied originally in the constitution, that's what the south, a lot of them, thought they were fighting for. Lincoln, I never said what I was going to do there with the, I refer to the Civil War as really the war that established lobbyists in Congress, because it was a war over taxes largely and a war over benefits to north eastern industrialists at the expense of the south. And, Thomas DeLorenzo really lays that out, that the real Lincoln is not this great guy that everybody believes him to be. He jumped to the head of the slavery parade when things were going badly in the Civil War, and so forth. But, you know, again, you're going to hear say these sorts of things on the radio, on the streamcasts, if you download the Podcast, and you're going to say, "yeah, you're full of it, you know this is Abraham Lincoln, you're bad mouthing him, he freed the slaves, he did all these other great things." Give the book a read, and keep an open eye. And that reminds me of one thing that I wanted to tell you is a quote from Daniel Boorstin, another one of my favorite books, but it's not in this top list here. It's called the Discoverers and in it Daniel Boorstin basically, and I'm going to paraphrase this quote, says the greatest block to progress was not the lack of knowledge it was the illusion of knowledge. And it is the believe that people know things that really aren't there and if you go back in history all the way through what Galileo had to deal with, you know, is the world round, is it not, is it flat is, you know, what rotates around the what? All these things were the illusion of knowledge originally, and were replaced by facts eventually. So, history is one of those things that get written in a certain way and sounds conspiratorial in some ways when you say it's not taught to us for a reason but as I go through this list you may come to believe that maybe it's not taught to us for a reason we are being taught in government schools, they are big supporters of the federal government, big supporters of central planning, bug supporters of collectivist education and boy, without Abraham Lincoln kind of ushering that through the door he's really paved the way for a lot of that to get set up, without Lincoln you do not have that potential. Now, I got ahead of myself on one of my books and I wanted to have The 48 Laws of Power, and I've forgotten who is the Author but I'm actually looking over on a shelf where, and I'm not going to jump up here away from the microphone and so forth out of the studio to grab it, but 48 Laws of Power, you can look that one up is the next book that I want to talk about. And really what it is, is basically chapter after chapter, 48 chapters on Laws of Power. And, what they heck is a law of power? Well, in history, let's not even go that way. The 48 Laws of Power basically takes core premises of if you want to call them laws or tools or rules that could be applied to your benefit if your objective is to be powerful. Now that could be used, or to use power I should say, and to get a benefit one way or the other. That can be for bad reasons nefarious reasons or it could be for good reasons. But, the tools are there to do with them as you wish. And, I'm sort of hesitant to say, you know go out there and read that book because if you're a total jerk and you start reading that book you might get some ideas on how to put the screws to people. But, fundamentally what the book will illustrate to a person who typically is going to be listening to the Vigilant Investor, which is I think someone who is open minded and searching for answers and not a way to maybe abuse other people, it gives you examples of specific methods that were used consistently through time over history, going all the way back to old empires of China, all the way up to the courts of France and Paris and in London and up in even more modern times. To see these things actually laid out in illustrations in how they were done, you start saying to yourself you know initially when you open it up and you read one of the laws on power and you say to yourself, "well who in the heck would be doing this," you would say, "well this is so obvious, how can people not see it coming?" But then when you actually see it illustrated in actual examples from history you stop scratching you head and you say, "holy moly, this is a different way to look at things." And suddenly you read that book and you watch the news or you watch what goes on in the trail of politics and the trails of foreign policy over a couple of years and over months and weeks and so forth and you start connecting the dots a lot differently. Probably the best thing that it teaches you is to, you know just like we've always been told, one of the clichés out there is, you know, follow the money is pretty basic. But, one of my core rules is don't pay attention to what people say, don't pay attention to a stated objective, a policy objective, when you're talking about politicians or even on Wall Street sometimes when you're talking about, you know, billions of dollars being moved around or millions and hundreds of millions, pay attention to what is happening instead. Because oftentimes that's really the objective. You know people can't be that stupid. How many times has government screwed things up? How many times does a politician say, oh this is our intention to do this over here, and something completely different happens? They, can't be that consistently dumb. They can't be that consistently bad at what they do. And we all know that government is not terribly efficient in a lot of ways, it's sort of not to get it off the hook entirely, but you know really, maybe the intents were for things to go a certain way. Maybe it was to have a bigger government, maybe it was to have the project to go over by 200 million dollars or whatever it might be. Maybe the big dig wasn't supposed to be wrapped up at its initial price tag. Maybe it wasn't by accident. A lot of people got rich, a lot of people had benefits from it, a lot of people got jobs a lot of union members got benefits and so on, and so forth. And that's not to say that specifically in that situation it's planned out, but good heavens you can't go through life blind or with blinders on, read the book, get a better feel for what all is potentially going on out there. That leads me to a couple of books once you have those under your belt. And I recommend that again, so far we've gone through The 48 Laws of Power, and you could even start off with that book if you want just a cold dose, but I thought maybe The Real Lincoln and The Case Against the Fed would prime you for that because you get a little bit of the sense of some of the power plays being set in motion and the consequences of what came out of certain actions, to suddenly look at The 48 Laws of Power and say, "hey, maybe that's not just a, you know, a crazy concept." Next book would be The Illusion of Victory, and this is a great book just simply because it really drills into Woodrow Wilson and what came of World War One. Woodrow Wilson is very much a misunderstood guy in a lot of ways he's, you know, I think a lot of people, if you read about him look at him as the guy who tried to get the UN started and boy he saved Europe during WWI and these were things again taught in high school and middle school and elementary school about good old president Wilson what a great guy. But, The Illusion of Victory really is I think a great critique by Thomas Fleming. It, what it does is it really lays out some of the again duplicitous things that were going on in advance of WWI. You know, boy, people have a very short memory when it comes to wars and all the things that Wilson was saying prior to the war, prior to WWI, we'll keep you out of it and so forth, you know, everything ended up being a lot different that what he stated. Really, you know his goal was to get the League of Nations rolling and a bunch of other stuff, but you read this book, The Illusion of Victory, you'll get a completely different picture of what Wilson was. And it also becomes a lot clearer as to why WWII actually happened. And it's not to say, boy if Wilson wasn't there WWII might not have happened, but there's a lot of good arguments that would suggest that you know, number one, WWI was not the United States' war, why did we get involved. Well, you know a lot of it was banking interests and again that gets us back to the Case Against the Fed, you know you do a lot of banking out there and you get the banking families tied together, and the banking interests tied together, Britain had a lot of war debts, Britain was getting a run on the gold, and the Federal Reserve starts cranking up the printing press and all these things, read about it, understand it because here we are in 2006, this is what's going on, but if you don't have an historic perspective as the old hyper cliché goes, those who do not know history are doomed to repeat it. And ladies and gentlemen, if you're reading the Vigilant Investor all we're talking about is that we're repeating it as we speak, okay, these are things that are unfolding. While I'm on The Illusion of Victory and Thomas Fleming, I'm going to pull up another book here, I'm reaching behind me, this is, was actually written before the illusion of victory by Thomas Fleming, this is the New Dealer's War, FDR and The War Within World War II. And this is a very good revealing expose of what was going on in FDR's circle of guys, long before WWII ever came on the radar screen. And the calamity that was Wilson led to ultimately, the go go 20's the stock market crash, the depression and then you get FDR coming in to pick up the reigns and save us all. But, FDR is another one of these guys, he's a hero. FDR, boy, you know, we really long for the days of FDR because he did all these great things, he helped the poor and if it wasn't for him the depression would have gone into you know for ever and ever and ever. That's a load of garbage people. It's what you're being fed in high school, middle school and so forth. And again, what I'm saying is going to sound like conspiracy and you know people hold up the sign of the cross when they hear conspiracy. But look, you want to get a little bit of vision beyond just what everybody else is thinking out there, give New Dealers War a read. You will have a much broader perspective as to and some pretty serious facts, I mean this thing is well documented, all the dealings going on behind the scenes, with Stalin and all the dealing going on with a lot of socialist planning and so forth and how they could roll it out. And again the banking community, tied in there very, very closely because boy, banking interests, especially once you start controlling money and lending, you make a mint when you're basically minting things out of thin air. And, no wonder we are where we are today. When you can look at it though that lens. Now, lets move on here to the next book and I don't have this one in front of me either, but I'd recommend as long as we're coming out of this Illusion of Victory and a New Dealer's War, series of things I'd recommend and this is an author again a lot of people are going to hold the sign of the cross up to. And, one of those guys I even don't fully agree with on a lot of issues and even on some of the book, but it is Republic, not and Empire by Patrick J. Buchanan. Now Patrick Buchanan of course, everybody has these perceived notions of how Patrick, some of them are possibly true, others most certainly are not. Bottom line is, read the book because what it does, is it goes back and ties together pretty much from the beginning of the United States through present day, how we have shifted from being what is functionally a republic, a freedom based, liberty based republic, where individuals rule the roost to getting into this empired, democratically elected empire. And a lot of people would bristle at the suggestion that we're an empire, but yeah, that's what we are, and you could theoretically be a good empire and not have to worry too badly about a lot of things, but an empire also has some negative connotations about it that may or may not be good. And, those are things that need to be digested. And if you're scratching your head as to what we're doing in the Middle East at this point and can't figure out how we got there, and you're not a big, huge supporter of open ended wars or you feel duped that we got into Iraq give that book a read because it will give you a broader context of why we probably ought not to be doing too much out there and why our founding fathers were always warning us away from entangling alliances. They were anti-alliance. Don't get into alliances with other countries because they suck you into their problems. Number one and number two, don't go meddling in other people's business all the time because what ends up happening is that your allies' enemies become your enemies. And, boy, you know, everybody knows that Al Qaeda is against freedom of the United States simply because we're free and we're the freest people, we smile all the time. But, I mean, come on, we've been meddling in the Middle East for close to a hundred years now, maybe not that long but the Shaw of Iran we basically propped up, we've been propping up the Saudis for oil for decades, we were actually Sadam Hussain's buddy for a lot of years. And, as long as he was our guy against Iran and we didn't mind a lot of these crazies in Afghanistan as long as they were fighting the Soviets etc, etc, etc...you [...] Israel. We've got all these different things going on in the mid east, it's no wonder that eventually you're going to have people forming a rebellion. It happened to the Romans when they were there, it happened to the British when they were there it happened to the French in Algiers, we'll scratch our heads, no wonder they're flying planes into the World Trade Center okay? It's not to say that I'm defending the G Hotis, or defending what a lot of these conversion of the sword type people. You know, I listen to those guys and I you know, hey, you look at history and you know that the Muslims sect tried to sack Vienna a couple of times, were fought off at the gates of the Ani. I, myself have Serbian background and I knew a lot of the Serbs felt betrayed that the west took sides with the Albanians because the Serbs had been fighting right up through Serbia, the Muslim invasions over centuries back in 1300 there was a great battle on the fields in Serbia and so forth they talk about. And again it's not to justify Slobodan Milosevic and eye for an eye and all that garbage but you need to have the historic perspectives. So, enough on that, let's move on to a few other things. We're going to shift over to fiction here okay, those have all been non-fiction up to this point and for those of you, and I have a hunch that if you're listening to this show you've probably heard of Ayn Rand already and you maybe have read her two major works, I'd recommend both of them, they're both long, they can be a little tedious at times, but I think they really lay out some interesting things. First one is The Fountainhead, take a look at it, and the second one is Atlas Shrugged, these are both great books, Fountainhead, Atlas Shrugged. The Fountainhead basically tells the story of just an individual trying to be himself and do his own thing, and maybe it's a little romanticized, maybe it was a little unreal, Ayn Rand was a little bit of a kook on some levels with her objectivism and had kind of that cult following. I think you need to keep, you know a little bit of a sober head about Ayn Rand's general lunacy on some levels. But on the flip side, philosophically, she really, really, really understands human nature, she really, really, really, understands the power, how power is abused, how power is used and her characters deal with situations and circumstances through both of those books that are phenomenally real life. And once you begin seeing through the veil a little bit of what goes on there, those books are fantastic and you know as long as you're not a collectivist type that thinks everything needs to be centralized and run by the government those books will resonate very well with you. And if you haven't checked them out, good heavens they are, they should be part of every kid's reading in high school and should be a part of any American lit. type class because they are phenomenal works. And unfortunately because they tend to polarize, and be very anti socialist anti collectivist anti organized labor and so forth, they don't' get a lot of play in the U.S. because, boy a lot of people who are in the media love socialism, they love big labor, they love the little guy and anybody who is entrepreneurial, free spirited or free market oriented, boy they must be evil and greedy. Well not so. These books really lay out why looking out for your own interests is not such a bad thing, number one and number two, basically having good rules about you know, don't do to people what they don't want you to do. And it's kind of a Christian principle there, I mean if you go back to the do onto others as you would have them do onto you; the fundamental philosophy of Ayn Rand's books are, you know look if someone's not in agreement don't, just leave them alone, it's their own business, let them do what they will. But boy a lot of people don't like that and boy a lot of people are threatened by that too. So give those books a read, that's The Fountainhead and Atlas Shrugged. Now, we're getting to the end of the show here about to wrap up, we're pushing 40 minutes on recording so far. The last couple of books I think are very good. One is going to be, you know it's a classic, if you haven't read it, shame on you. It's one that should be part of every school kid's curriculum, it's Animal Farm and it could even be taught in early middle school. Sixth grade, seventh grade. This is Orwell of course, George Orwell. And, if you haven't read 1984, pick that up, but before then, give animal farm a read. This is all of, you know I've got a version that's fairly recent here and 124 small pages, I mean, with big print. You've got to read it, and what it really captures very well is how power is manipulated, how people can be through allegory of a farm where there's a revolution against the farmers the animals take over and there's some really smart animals who decide to push things their way, and everybody else is so complacent or just not educated enough to understand. Before you know it, it's not what they thought it would be, and the rules are changing in front of people's eyes but nobody remembers what it is and you know, I'll tell you what a lot of people say ah, that's a bunch of garbage we, you know, we don't have to worry about that kind of stuff. Well, I'll tell you right now, in America, you're not so free as you think. We may be the land, the freest of lands but we are no longer in the land of the free. You cannot do a lot of things in this country like you used to be able to, and if you laid out some of the rules today that we have put upon ourselves, that we have chained ourselves with, the people a hundred years ago would just be scratching their heads saying, "how on earth did you allow this to happen?" They could not fathom it. So, people say, "it's all for the better," and so forth, and maybe it's not. But, we're keeping these books we can get into philosophy in 5000 different directions, you know should things be libertarian or not, well we're not going to go that way, I want to try to keep these books focused in on the core principle here which is, what's going on with the economy? What's happening to the United States in a direction that's ultimately affecting your pocket book. You as a listener, you're investments, your 401K, your bank statements, your purchasing power, your dollar, all those sorts of things. Now another book that is on my list I would recommend reading is at this point would be the Griffin book, the it's called, Look at the Creature From Jekyll Island. And that is Edward Griffin, G. Edward Griffin, it is a you know, one of those books that just makes your jaw drop. Even if you're not going to read any of these other books, pick this book up. I mean good heavens. If you don't understand what the Federal Reserve is, and you don't understand the U.S. banking system, sounds like a really dry subject, but good God almighty, it's like, you know, not seeing the man behind the curtain. Honest to God, if there's any book that really ought to be taught to everybody, it's The Creature From Jekyll Island, and that's just because once you understand how the banking system works, how the Fed came to be, understanding the Fed is a cartel of private interests that basically has a license to print money into existence, they lend it into existence, who are these people? They are a bunch of private business people. They lend us the dollars we use and we as taxpayers turn around and pay interest on it. Excuse me? We do what? How does this sound, you, me, Mr. Listener, Mrs. Listener, lets get together, sit in a room run a printing press, print money out of thin air, we'll loan it to people and let them use it and we'll earn interest. Sound like a good deal? Perfect. That's basically what's going on. Oversimplified to some degree but The Creature From Jekyll Island gets into the depths of not just that basic core premise but also drills into the, you know, what's going on with bail outs. Who is really benefiting from a bail out? We're all told that their would be economic calamity and chaos and so forth, well that'll bail out. But in the end these are big powerful banking interests, the same old crowd on Wall Street; what happens when a country gets bailed out? We bailed out Mexico in 1994, we bailed out, you know it's happened time and time again, we're always believing that this is a good reason and today we wonder why oil is at 65 dollars a barrel and why it was up in the mid 70's a couple weeks ago. Just because of the mid east? No, no, no, no. Before 9-11, oil was already starting to drive up. So, it can't just be that. Why is health care so expensive? Well, because we've got all of these problems. Well, no, it's high demand item, just like oil and energy. People are going to put their first dollars towards what they need most. Energy, healthcare, what about college? College costs are going through the roof. Well people go to the banking system, the banking system is where that newly printed money comes out, and they take loans, put their kids through college, and I know people who, I've sat down with people who tell me that they would rather die in the poorhouse and file for bankruptcy afterwards as long as they can put their kids through college. You've told me this. And who is providing that money that they have that interest on? That they're going to pay interest on? It's the banking system. Where's that money coming from? Through the fractional reserve banking system being printed out of thin air and so on and so forth. And yet, we wonder why college costs are going up 14 percent a year. We scratch our heads, what's going on, what's wrong with education. And then all these [...] things health care, energy, education, we need to get the government involved you know you've got these people running around, Congressmen having these, let's drag the oil executives up in front of everybody and parade them around and let's get policies for education, this party's not for education, but that party is, and no vote for us, vote for us, we'll save you all from these terrible things. It's inflation, it's inflation in a very basic sense. A lot of people don't understand that inflation just doesn't go around evenly. We're all told, hey go look at CPI it's only 3.1 percent, well my butt. 3.1 percent on average, well again tune in in a couple of weeks when we have John Williams on the show because we'll talk about that number being fudged. Inflation is probably closer to 9-10 percent. When we really calculate it how it used to be calculated 30, 40 years ago, before the politicians really go their hands into it, to start changing what it really looked like. Of course that's conspiracy. Well, start reading these books on my list, we'll post this list up on vigilantinvestor.com, and you can get a good, you can get a good feel for what the story is all about. I'm going to pause just one second here, I think I just got a notice that my Talk Shoe connection was broken and hopefully I didn't lose my recording. Okay, well I'm back here again and a very brief pause there, we just take a look at, I have a couple of monitors I've got to look at while I'm yapping away here and I failed to look at my Talk Shoe interface, talk shoe is a great service, I recommend everybody check it out. But what ended up happening here is I was told I lost my connection but it appears as if we're still recording here so I'm going to continue the show, and hopefully the stream is still out there for you all, every indication tells me it's still going on. So, if that is the case we should all be happy. But, okay well I'm going to wrap up here we're now on 47 minutes and we're well into an hour of stuff here. Last couple of books that I think everybody needs to read, I'm just going to go down these lists very quickly. Number one, Robert Prechter, Conquer the Crash. Good book, it's a couple of years old. This is where we tie all the history, all the conspiracy or not kind of stuff into one very neat package. And you get a good read as to, you know, what's going on with the financial system? What's happening right now? Why are the markets gyrating? Why is the economy not so good? What's up with this federal deficit that's you know, going through the roof? What's up with the trade deficit that's at billions, what's up with the, you know, the U.S. debt that's at 8.5 how many trillion? It keeps getting bigger and bigger and bigger. So, what does that mean? What does it mean when the federal reserve issues a private study that says that, questions is the U.S. going bankrupt with 80 trillion dollars of unfunded obligations, unfunded liabilities? Well talk with John Williams in a couple of weeks about that. The real deficit on an annual basis for 2005 was 3.5 trillion when we use present value of future obligations, promises like Social Security, Medicare and Medicaid. You just can't pretend they don't exist. When you use GAP account, generally accepted accounting principals that every business out there has to use, but the government gets away with not using. Okay, so Conquer the Crash is one of those books, Empire of Debt is the other. Conquer the Crash is by Robert Prechter, Empire of Debt, let me actually say before you read that read Financial Reckoning Day, that by Bill Bonner and Adison Wiggin, and again they did another book to follow up, which is Empire of Debt, The Rise of Epic Financial Crisis. Now, those are a lot of books. I'll be the first to tell you. I'm going to put them up on vigilantinvestor.com for you to take a look at. And again I'm going to be here for another minute or two before the show comes to conclusion. So, (724) 444-7444, call on in with any questions and if you do call on in you're going to need a pin number, Talk Shoe id. Excuse me, talkcast id. Is 982 when you call in. I forgot to tell you guys that, maybe that's why I'm not getting any calls today, although you can always go to talkshoe.com and if you're trying to figure out how to get through during the live broadcast. Every 9PM, Wednesday nights, always tune in, that's when it's live, you'll be able to ask questions, and you'll be able to ask questions of John Williams in a couple weeks when he's coming through as well. We have a whole other list of folks who are on our, trying to get a hold of list for interviews and so forth. And we'll hopefully get more of those posted up as we get approvals and confirmations I should say. Moving back in to the call in again it's (724) 444- 7444 talkcast id. 982 and you need a pin number that's going to be 222-333-4444, it's like a phone number. 222-333-4444. We're working with Talk Shoe to get that number knocked down a little bit. So, well in conclusion ladies and gentlemen I do appreciate you all giving me your time and your listen here, it's a long show, and what we may do is break it down into two parts for downloading with a Podcast id., Podcast, but that will be worth your time to definitely let your friends know about it and hopefully it's a good basis for you to, to start and learn about what really is going on out there and for everybody's sake, have a broader perspective of what's happening. I think, come back to Vigilant Investor of course regularly, the vigilantinvestor.com and you'll get a very good daily dose of how to connect the dots for all these things. Because it is unfolding as we speak. If you listened to our Doug Wakefield interview last week, Doug really lays it out there, things are not as they seem. If you watch MSNBC very understated as to just how tense things really are. And we think that people really ought to boy not give short shift to the credit bubble and how messy things potentially are. It could be ugly, we'll have to see how it all shakes out of course, nobody knows, but you know, that's that. But well, it's time for me to wrap up the show now, we at just under, well just over 50 minutes. So, let me give you closing disclaimers here that I like to give just to make sure that you don't go out there and do something you shouldn't do. The Vigilant Investor, ready? Here we go. The Vigilant Investor live streamcast and Podcast recording and the information on the vigilantinvestor.com web site is for entertainment and informational purposes only. It should never be considered as investment advice. Investment asset classes and other subject matter potentially covered should never, under any circumstances be construed as specific advice recommendations for you listeners and readers of this show and website. Please always consult an experienced professional for making any investment or financially related decision. So, with that, tune in next week, Wednesday night, we're going to have another great show, a little more, touch on what's going on in the economy, it's been a few weeks since we've done that. And we might even sneak in a guest if we get a confirm on some of these things. But if not, definitely in two weeks, don't miss John Williams, Shadows of Government Statistics web site shadowstats.com, check it out if you want to hear what he has to say. Well be providing links on Vigilant Investor to a site this week as we prep up for that interview, so don't miss it. We'll talk to you later, and take care.