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Importance of Establishing a 401K

Posted On: 2006-07-13Length: 1:10:51

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There we go. This is Johannes Ernharth, for the Johannes Ernharth show. Glad you all are here if you are listening at this point. I've invited a few people to join in with us today and hopefully they'll be able to make their way in. Otherwise, this is the inaugural show and, hoping to get something rolling here as far as Podcasts go and so forth, and get a little bit of, I have this material out there to build on and low and behold came across Talk Shoe within the last 48 hours and they've been very impressed with what I'm saying and here we are. But, basically in today's show, what I want to cover are a handful of things. First off I want to give a bit of an introduction as to why this show is being rolled out, something about my background and how that all fits in but, beyond that, we're going to touch on a couple of key things that we see developing out there on the forefront. For those of you who have not had a chance to read up on anything about the show so far, we're going to be hitting on things, everything from economic issues from the financial environment to politics to foreign policy. I'll try to take a fairly positive approach, but also fairly realistic look at those sorts of things without being terribly polyanic about what's going on out there. I'll do a little bit with, through a local lens here in the Pittsburgh region, I think it's a great example for people around the world to kind of get a feel for what's going on the U.S., but also for people living in the U.S. to get a feel for, you know, what can happen in a city that has a lot of opportunities, but also puts up a lot of barriers in its own way; and I think a lot of great examples are right on our doorstep here for, if you're living in Pittsburgh, to work with. Beyond that, we'll take a little bit of a look through this historic lens as well, and just try and, you know, pull in current events as they happen and keep the show fairly loose beyond that, and have hopefully have a lot of people calling in on it eventually and build up a good listenership. But, that's basically the objective. And, hopefully that's going to be working for everybody who has a chance to listen to this. Beyond that, we'll be touching on a couple of key things. I run a couple of blogs out there, one is Vigilant Investor, and that's sort of an offshoot. Part of my background is in investment financial service related field for about 16 years, and have, through, over the last 5 years after, especially after the bubble bursting in 2000. I have really taken a hard look at what a lot of wall street does, and what a lot of the retail advisory side of things do, the people who are actually delivering to the smaller mid-sized clients - clients out there, which are the majority of Americans who have less than 5 million dollars in their pockets and in most cases a whole lot more - or, a whole lot less. But, through that investigation with my business on that side, I just came across a whole alternative way of looking at the economy and some of the things that have been going on out there. And, really have found that I've actually grown a little bit jaded about my own industry along the way, and the jaded part is not entirely all that new because there has been a lot of that building over the years relative to just some of the things that I've been seeing, with 15 years in the financial services with respect to regulation, taxes, all that kind of stuff. I'm going to touch a little bit on that as well. Basically, that is instigated, or motivated from a recent article that I saw inter-industry I guess you could call it, from the organization that has a lot of membership. An organization that is basically for professionals who provide services for the entrepreneurs out there, small businesses and even larger businesses. But, help them help small businesses operate their 401Ks, their pensions and so forth. So, it reminded me of a few things, of why I got to where I am today which is basically talking to you on Talk Shoe and doing Podcasts and so forth and blogging. After that, we're just going to pretty much see where things go, we're going to try to keep everything within an hour, touch on a couple of the current events and go from there. But, at any rate, why don't we just roll right on it to this recent issue, a news letter that I got from a group, an affinity group that helps with pensions and so forth. It's a group called ASPA, American Society of Pension Actuaries and I was just reading an article in there, it's part of what I do is to try to keep abreast of the many cumbersome regulations out there. And, boy, if there's anything that bothers me in my business is how much time people that do what I do full time, just how much time we waste with keeping abreast of just absurd amounts of regulation, taxes, and all that kind of stuff. You can literally spend hours and hours and hours of every day just to catch up and what the latest changes have been and what this ends up doing to the industry, especially if your just an investor out there, someone who is trying to do a financial plan or anything along those lines. Or, you're a small business trying to set up a 401K. It just makes things so complicated that you can't go to just one person and have them help you out. You're actually, things are so complicated that you actually have to go to specialists, and it's getting worse and worse. And when I got in the business in 1991, you found that there were a lot more would you guess, we would call general practitioners out there and one person could handle a lot of different elements of, you know, investing and so forth, financial planning.. And today it's just become so complicated, thanks to compounding 15 additional years of regulation, tax codes and so forth that it's just, you know, to go to, to set up a pension, you go to a pension specialist. And that's all they do 24-7. If you go to, you want someone to invest your pension, you now have to go to someone that pretty much focuses in on pension-style investing. It has become it's own niche. And, a lot of this is just an offshoot of just a complexity that surrounds it. It doesn't have to be that way. But getting back to my original point, the American Society of Pension Actuaries, ASPA is what they're called, set up this newsletter basically saying that they are celebrating a new proposal out there in Congress. I don't have the exact proposal in front of me, but it's an alternative to pension reform. And, for those of you who don't monitor this kind of stuff and I don't expect anybody to if they don't do this 24-7. But, a while back George Bush was, part of one of his tax proposals was going to actually make it a lot easier for people to save, and one of the chronic problems we have out there in America is that people just aren't saving as much as they need to and what a lot of people have done is they've chosen to spend their money rather than save it. And, those who do find that when they do find that when they do save it, it's getting whacked by taxes to easily, we could get into the history of pension law, but we'll spare you that. But, bottom line is just that the complexity of establishing a 401K, or, is its own burden all alone. But, for the average person who is maybe not with a company, who wants to save more than the minimum IRA amounts, you're facing an uphill battle in term of efficiently saving. And, when you take a look at the numbers out there, one of the big concerns that a lot of people have in Congress, and a lot of Americans should have a concern about it, even though most of them are oblivious to it right now is a complete lack of savings among people who are getting closer to retirement. And, that's something that is going to be a big, bad issue for the baby boomers who on average at this point, and the boomers begin retiring pretty much right about now, I guess the biggest group starts at 2008, and then the bulk starts happening in the teens and the early 20's. But, the average baby boomer only has about 55 thousand dollars saved to their name, and the rest, they're going to be expecting it to be coming from other sources, like social security and that for citizens, taxpayers, voters, means that the burden of social security is going to be massive, and we already know how short social security is relative to having enough money to do what it's supposed to be doing, and you know, congress always diddles on the side. But, without reforming it, but the bottom line is that this is getting back to George Bush's reform or his proposal, it was designed to allow for more simplified tax advantage savings. What he was going to do, in order to help alleviate the burden off social security, he proposed they should create new tax savings accounts, special savings accounts for retirement, and then a special savings account for catch all types of things. He was talking about minimums or, maximums of up to 10, 12 thousand dollars a year in an account like that, which far exceeds the current thresholds in IRA's as well as when you have an account that can be used for anything it's far more flexible than an IRA, which basically a lot of people are hesitant if you only have 56 thousand dollars saved, you probably don't have a whole lot sitting around for emergency purposes and a lot of people don't want to get their money tied up in an IRA in case they have an accident or something, and they're going to be really [...] without putting money away for retirement. The result is that people's money gets taxed as their trying to save. At any rate, Bush's proposals from my standpoint, and you'll get to know my standpoint going forward is to air on the side of freedom of individuals. What people do, what they need to do, get government out of the way and stop making things so complex, you'll find that people will actually solve their own problems. But when you put up barriers like taxes or complex regulations people will steer clear. Well, enter the ASPA organization, this is the newsletter that I was reading, comes across and it says that they're absolutely for this new proposal that is counter to what Bush was going to do. And, a little bit of history here, about a year ago ASPA basically came out against any flexibility in opening up savings accounts for individuals. Basically preventing people from doing any kind of saving on their own. And ASPA basically said, "look, we're worried that this is going to harm 401Ks.." and so forth. But, from the standpoint of individuals getting people to save, that pretty much is meaningless. I mean you want people to start saving otherwise social security runs the risk of going bankrupt and besides it's people's money, let them save, let them have tax-free savings. ASPA instead, supporting a proposal now that would mandate all businesses to have a 401K, period. It would require every business has to have one. Now think about that. From ASPA's standpoint, they say that, plain as day in their own newsletter that this is what's best for members. And, even though it's forcing it on the general public and basically telling everybody that it's mandated that you've got to have a required retirement plan. Now, what that basically does is it forces a lot of expenses on small businesses that otherwise can't afford them - number one, and number two what it does is it basically takes a lot of freedom out the hand of entrepreneurs and adds one more barrier to joining the entrepreneur class. And, one of the things that just bothers the heck out of me, doing business [in this] country, especially after having lots of clients who were small business owners and entrepreneurs. It's just the amount of barriers that government is constantly putting in the way of people who are trying to make things happen. And, you know, what you get are fewer and fewer who are capable of succeeding. And to some degree that limits the competition, but on the flip side what it really does is it also arose, I think really one of the great things about this country, which was that the American dream was there. You know nowadays to take a shot at the American dream, you need to have a fleet of attorneys and a fleet of lawyers just to get out of the box to start something up. With that or you go with something that's totally pre-packaged and you sell yourself to a franchisee or something and they take care of all those hassles for you. But, that's just not the same as being truly free, that's basically being forced into a box. But the bottom line is that the whole ASPA newsletter reminded me of one of the biggest problems in this country, and that is just how lobbyists in this country, professionals that are supposedly out there for the best interests of their clients, because I guarantee you, all these ASPA members are out there telling their clients they're looking out for their best interests. When in reality you read their own newsletter, they're looking out for their members' own best interests. And the best thing for members would be to simplify their lives, and the best thing for their clients would be to limit the complexity, and even if you could get rid of all 401Ks or greatly simplify them so that anybody can contribute and come and go, that would be what the easiest thing would be. If you eliminate all the testing, compliance regulations, and the average listener out there probably has no idea, but the amount of, the number of hoops that an employer has to go through just to set up one of these plans is crazy. Tens of thousands of dollars for bigger clients can be 3, 4, 5 thousand dollars for a smaller employer situation. And it's just a waste of money. It really should just be a matter of setting up accounts for participants of the employers putting money aside in trust, a fairly simple process, and yet, between the department of labor and the IRS, thanks to Congress you have just all these barriers to getting something done efficiently. And that leads into other areas of planning. I mean, as a general planner, one of the bigger concerns you always have with doing any kind of investing is what are the tax consequences going to be, and you look at all sorts of different things - estate planning is another great example. Again the average person out there doesn't have an estate problem, but I remember a few years ago, getting similar notices, actually e-mails from inter-industry insurance groups, big insurance production groups for life insurance, or associations affiliated with the Bar Association, that kind of thing, out there trying to rally support against the estate tax being eliminated. And, the reality is for anybody who is out there holding himself out as a financial professional to a client, who has an estate tax problem, you should be rallying against the estate tax because that's the best thing for the client, but instead what I get are these form letters from the industry groups and private companies that specialize in estate planning telling me to protect my own career, I need to send letters to the Congressmen to make sure that these laws are not repealed, and I lose my income. And, for those of you who don't know, people who are in the estate planning business, that's multi-billion dollar revenue generator. That's for law firms that get to drop all the documents, for all sorts of custodial groups that set up trusts, the special ways to have money pass through generations, all that kind of stuff. Just extra complexity, and it's big business for a lot of people. Insurance agents sell a ton of insurance, we're talking hundreds of millions of dollars of insurance. Big premiums, big fat commissions and they make very good salaries all because of this state tax that's created. And, where I'm going with all of this, and I could give you countless other examples, but the real issue here is that one of my big gripes with my own industry and you'll hear me talk about this a lot [...] and the point of this show is not to be a financial planning solution type show, or to give investment recommendations or anything along those lines but, the point that I'm trying to make here is that a lot of people in my business have their own self interests first and foremost. And that's nothing that's out of the ordinary in business after all, why would you go through the headaches of starting the business without trying to get the rewards of doing so unless you're purely a non-profit, which is rare. But, most of these people out there who are doing what I'm doing are very supportive of this kind of stuff, I don't want to say everybody, but it's kind of crazy that someone is holding out, supposedly looking out for the best interest of individuals whether they're a small client with small issues, or a big client with a big estate issues or whatever the case may be. The bottom line is the industry trade groups are lobbying Congress day in and day out to keep things as complex as possible. That is going on. And that's, you know, that's really a big sign of one of the big problems with the United States these days. Generally, we wonder why a lot of jobs go abroad to places like China or Indonesia or India. Well, look at the amount of complexity that you have in just one industry there. And I literally could write a book on this kind of stuff. Another great example is, did a recent post on the Vigilant Investor website about 529 plans. These are college savings plans for individuals. Congress said, "you know what, people aren't saving enough for college, college is getting too expensive..." What do they do, they create the 529 law, which allows people to get some tax advantages to set some money aside for college. Seems pretty simple, right? Not really, what they did instead was they gave the 529 rule making to each state. And each state sets up its own special plan with its own regulations, and picks its own provider for investments, keeps your hands tied as to who you can use. So on like, say a traditional IRA or something like that, or any brokerage account you set up at E*trade or Schwab or wherever where you can pick you know, virtually any investment under the sun. You go on to one of these 529 plans, you're pretty much stuck with one or two products. And that's it, you're forced into that. And, of course the local state legislature here in Pennsylvania for example picked Lincoln Financial, Delaware Investments, which are, you know, Pennsylvania based companies right in Philadelphia, just down the road from Harrisburg. It's no coincidence that they don't allow you to use somebody else's program. You know, if it seems like quick pro quote, usually is, where there's smoke there's fire and I'm sure if you went and interviewed anyone in the legislature they're not going to say that they got kickbacks or anything to use the local state firm. I guarantee it that's why they're using it. Now, not a lot of people know of Lincoln, some people do, not a lot of people know of Delaware. It's not to say they're bad companies, but odds are that most people going out there if they were to invest their 529 the same way they would do their IRA, would not be picking any of those companies if they were given the freedom to do so. And that again, that's the key point here is, all these regulations and these parasitic relationships really curtail peoples' freedom. And tying back into the point I was just making a minute ago, we're wondering why all these businesses start going abroad. Well, you know, when you're losing businesses to communist China you got to start scratching your head. Why is that happening? And it's not just about labor, it's about the barriers and complexity here in doing business in the U.S. And I think that's one of the themes you're going to see getting a lot more press going forward and as well as things not talked about a whole lot. But, the whole system in the U.S., people blame it for being too free market oriented. And you hear a lot of criticism from the left about the free market is to blame for this or that, or it's capitalism to blame. And the reality, which you have here is not, it's not capitalism and it's not free market. It's this weird amalgamation of, you know, maybe some private interests with government. And, that's parasitic capitalism where the big players can pool their money together or themselves pay to get access to Congress or the state legislatures and the rules get passed, and you hear a nice fancy law with a nice name that says, oh the economic security act for retirees of 2006, we think it's a great act being passed by Congress, and you get politicians standing in front of it with all the great news and so forth about their great new act. And, in reality what they've done is pass something along the lines of a 529 plan, which is just way restrictive and limits your options and takes your freedom away - and maybe gives you a couple of tax advantages. But then you have to scratch your head, is it worth it? And to boot what it does is it creates a whole new planning niche within my industry, the financial services, which you didn't need before. But now people that do what I do are wasting their time learning a whole new set of rules and regulations about which there are now you know, 50 or 60 books written just to stay on top of it. And, you know, a lot of this exercises, is just, futility you're wasting a ton of time doing things that you probably shouldn't be doing, and that's really just counterproductive to the economy because it's really not contributing anything that is genuinely needed. It's really creating a lot of action and activity to comply with arbitrary rules, and arbitrary regulations. You know, it reminds me of you know, it's like if I went to your door tomorrow morning and I greeted you at your doorway, you know for breakfast and said, "hey, you know, I'm Johannes Ernharth, here I am. Here's a letter of what I do and by the way I planted a bunch of mines out in your front yard today and my job is to help you cross that mine field every day without getting blown up. And, I might charge a certain fee for that." And you might be excited that you're not getting blown up, but when you scratch your head and think about it, it was a lot nicer before you had a minefield and the minefield wasn't necessary. And, yet here you are paying to cross that minefield. And I do the math on this sometimes; I look at how many different accounts people need to have set up now to deal with different tax laws, different regulations. It's just a complete waste of money, and really what people should have is one investment account for themselves, one for their spouse, one jointly, and that's pretty much all you should need. And instead we've got 5000 different accounts and the complexity and increased costs and so forth. And the CPA's and the attorneys, they're a part of this as much as anybody else as well. I mean, the attorneys out there used to, you go back 150 years ago in this country, 100 years ago attorneys basically did contract work. Now people do business. These days you got a whole subset that are tax attorneys, and you look at the tax code, you stretch it from end to end, you know, the thing is probably 15 feet high. Same thing with accountants, they used to do you know, very important accounting type things, auditing and so forth, making sure businesses' books are together and so forth and now they're tax pros. And every couple of years the rules change, and every couple of years they get to bill their clients. It's a big racket. And people should wake up about that and start voting in a way that frees them of those kinds of burdens. And they should be aware when they go to their accountant, when they go to their attorney, or they go to their financial planner, have a talk with them and ask them are they actually supporting this kind of garbage. Because, that's what's going on, and you know, if everybody's doing that kind of stuff, nobody's really creating anything that's of any kid of value. And, you know, regulations, they just choke your economy. But, so that's pretty much, you know, for that subject. Moving on, a couple of things I want to touch on. Let's take a look at, you know, the news lately related to what's been happening in the markets. And what I'm going to try to do here is take, you know, if you're concerned about your 401K or your investment accounts that kind of stuff, again the point is not to give investment advice or you know, answer questions about how to set up an account this way or that, but rather to take a different look at what's going on in the economy and what is going on in the markets. And, hopefully broaden people's perspective a little bit, because I think that as people wake up to some of the less well known trends that are developing, and some of the structural problems fundamentally, I think people will be surprised that they're not getting a lot of this news on the main stream through your [Bloombergs] or your MSNBCs and so forth. Occasionally you'll see it rear up and king of poke its nose through the surface and you'll catch a good debate on something. But, by and large people just tend not to talk in terms that really convey what's going on. As a lead into my concern with the economy, is that it's not as healthy as people think. And I think that we're dealing with a credit bubble problem - and I'll elaborate on what a credit bubble is. A lot of this it tied into federal reserve systems, central banking and not just in the U.S., but across the globe. And the subject that nobody talks about, partially because it's kind of complicated, and when you get into anything that's related to economics, most people [...] over and economics is known as the dismal science precisely because it is really boring. If anybody's taken an economics class and didn't get a huge lift out of it, so that you decided to become an economics major you probably found it to be a little bit dulls-ville oriented, and that's even for people who even bothered to take, you know, had the motivation to take one or two classes in it. But, what I'm going to try to do is give a less of a scientific approach and less of a pure economic type of an approach that you might hear in an economics class. But try to give a little more of an historic perspective, a tell maybe a little more of a story through an historic lens melding in some current events. Because I think that that might help the story a little bit, well a little bit more, make it understood better without you know, getting into, you know, deep [...] as you might [...] the current Fed. Governor [...] testimony to Congress and so forth. But, in any event what is going on? What is a credit bubble? What's going on in the economy right now? We take a look at the headlines over the past few weeks, we see that the markets have been pretty volatile. We know that [...] there the Dow Jones, the S&P 500 [...] simultaneously, if you were paying attention to that in the news you were also hearing things about commodity prices going up as well. Like oil, things like your industrial metals, your coppers and your precious metals, your gold and silver were all hitting new highs - almost going parabolic. I take a look at the Dow Jones Industrial today, I see we're down 167 or so, down to 10, 846 and that's a pretty big drop the past couple of days. Asian markets [...] shaky as well, they're down [...] similar issues and just a lot of concern out there. You've seen some pretty crazy things happening with bond prices as well. Now, again I'm not going to get into, you know, the finer details of why the markets move or [...] talk about some of the more broad themes about what we think, what I think might be going on here, and why people ought to be concerned on a political front maybe in terms of how you go about looking at your elections going forward, and as well as how you go about your finances. And, the important thing to consider that, you know, are we looking at the economy taking off and the markets going up and investments being okay, or are we looking at the economy actually drifting into a slow down and if so, is that going to be a mild recession, or could we be looking at something a lot worse, something more like the 1970's or is there a possibility that we could actually have something that's kind of like the 70's and also kind of like the 30's, the great depression. And, you're not going to find many people talking about things on those terms, the economy on those terms, but when you start getting familiar with some of these structural problems you will at least have your eye on that ball. Because there is unfortunately, because of our situation, a bit of a precipice on the other side here if a few things don't go as some of the policy makers hope they will go, or intend that they will go, or believe that they will go. I guess you could argue and debate as to which of the three, those three they actually think, whether they actually believe it or they're just saying it and hoping that it will work out. But, let's get into this, what is a credit bubble? A credit bubble basically is: our country these days, the United States, is very much dependent on expansion of debt. Consumers, the U.S. government need debt in order to make the economy work. And we look at the amount of debt in the country 20, 30 years ago, it was very small compared to today. The ratio of debt to economic growth in this country keeps growing and it is growing unabated. And the last five years, the economy depended almost entirely on debt in order to come out of the recession that started in 2001. Now that's an alarming figure, when you consider that previous to that, most times we've come out of a recession, we have seen instead of an assumption of more debt by consumers and governments, typically what you see is, the balance sheet rather than getting in worse shape is actually, it gets in better shape. People tend to save more, they stop spending as much. What that does, is it tends to deepen a recession because the more you spend, the less the economy is doing well. But on the flip-side, as once the economy gets a few of the things cleaned out, the cause of the recession in the first place, some of the bad spending decisions and so forth, what you end up getting is a much healthier starting point. Now we can roll up to 2001, 2002 or go back to 2000 and take a look at what happened there. We had the, in 2000 the tech bubble was in full swing at the beginning of 2000. We had the sock puppet reality of the 'dot coms,' we had everybody believing that every super stratospheric PE ratio, the priced earnings ratio was going to go on indefinitely into the future. And, instead what you got was a big bubble bursting starting in March of 2000. At first, what everybody was being told on all the major news stations, including everybody in my industry is, you know, we were watching this unfold in front of our own eyes, and trying to get a feel for what was going to happen. And, we were getting told by all of our news and information inter-industry information, that "oh, don't worry about this, this is just as small reaction that's going to turn around, it's going to correct, but it's going to be confined mostly to that 'dot com' craziness." And, I think that most anybody who remained somewhat sober during the 1990's understood that the 'dot coms' were crazy. And, you know when you have companies being started by 26 year olds with great ideas, being given 100 million dollars for first round funding without a sign of profit ever, something was amiss. When evaluations of tech companies were standing so large that you could buy GE, GM and so forth all in the price of one tech stock, you knew you had a problem. But, that seems like it was going to be confined to the 'dot coms' and maybe into the technology side of things. For the most part, what most people didn't see coming was that the equities would go down as a whole and all of the other problems would happen. But, progressively through into 2001, we had that indication of recession and that the economy had slowed down to the point where the official government members said, "okay, we're in a recession." And, from there, things dipped and turned around pretty quickly. And if you follow the official numbers we were at a recession in pretty short order. And, since then we've been hearing nothing in the news but good news about how the economy is doing well. We've been hearing more and more about deficits, the federal deficit of course is one, but the big deficit has been the trade deficit that means U.S. consumers are spending a lot more broad than they are earning. It would be you know, look at it from the household level, and it's always easy to, I think break down things like the deficit into more human terms. If you have a household and your family spends more than it earns, you have a deficit. Well, in this country, at the moment, we run about a 7 percent deficit. We spend 7 percent more than we earn and we have to borrow the 7 percent to make up the difference. All that said, the deficit was one of the features that came out of that recession, more pronounced than it was before. And we look at that recession, even though we've been told by the federal reserve, and by the Bush administration, a lot of politicians that everything is moving along smoothly and not to be concerned about some of the job deterioration, the job losses in manufacturing, because we're now a service economy, all that kind of stuff. We think that there is another way to look at this, about what's been going on. For starters, in the early part of this decade, 2000, 2001, while the stock market began to plummet, the federal reserve began to drop interest rates and it began to really bloat up, really increase the money supply. Now this gets a little bit into history. I mentioned that, you know, central banks and so forth have a lot to do with where we are today and why that we think there's a lot of problems. And this, you know, without getting too complicated, you go back to what is a central bank. Central bank is what is in charge of your currency. It's supposed to be the steward of money. And what the federal bank in this country has done over the past 95 years, federal reserve, actually about 95, about 90 years or so ago, created in 1911 by a law and it took what had been formally a more private bank by bank institution, which was you know, the currency system backed by individual banks and reserves of gold, put it in the hands of the federal reserve, which within about 20 years or so manage to figure out a way to cause the U.S. government to have to default on the dollar and that happened in 1935 during the depression when F.D.R., Franklin Delano Roosevelt actually had to change the ratio of what the gold standard meant. Now, a lot of people don't know this but the dollar used to be backed by gold. The definition of the dollar in the United States prior to the federal reserve and for the first so many years was actually one-twentieth of an ounce of gold. So, anybody who had a dollar out there, if you had 20 of them you could walk into a bank and get an ounce of gold. Now, just for perspective, today I look at the price of gold, where are we now...gold is trading up at 661 dollars an ounce. Okay, now you figure it took you 20 dollars to get an ounce and now it's trading at 661, something clearly has changed. Or, something is clearly changing. Under F.D.R. as I mentioned we defaulted once and we change that ratio from 20:1 to 35:1, or thereabouts. And that lasted up until Nixon in about 1972. And that 35:1 exchange was not for private citizens anymore. So whereas before 1935 you could go into a bank with your dollars and get gold and they had to have that gold on deposit, otherwise they were in trouble. After that, the only people who could get gold were foreign central banks. So the central bank of France or the central bank of wherever, Japan could come back to the United States and say, "here's 35 dollars, give us an ounce of gold." And that exchange rate held until 1972, and at that point Richard Nixon was left with no choice but to turn off that feature. And basically default again by saying, "we're not going to allow you to get gold out of our treasury for dollars anymore, we're going to cancel that." And, what happened over those years is the federal reserve kept printing money. And one of the key things to understand about money is that money is basically a store of wealth, currency is a store of wealth. If you get paid 10 dollars today, the idea is that, you know, a year from now you can pretty much exchange 10 dollars and get a similar amount of wealth without having to hold on to whatever it is that' s not money. You know something that might be perishable. I mean nobody wants to sit on you know, 10 lbs of ground beef or a bunch of apples that are going to go bad, you'd rather sell those, get some currency and be able to exchange it later for something that you need. And that's why we use money. But, when you print money, you end up actually devaluing its purchasing power. And a very simple way of looking at that is, that if you have, if you had a hundred dollars in existence entirely in the whole world over, and let's say an apple cost 10 dollars, well if you doubled the money supply to 200 dollars that apple is going to go up to 20 dollars. It's that simple. The more you have of something, the less it's worth. That's why nobody cares about sand, and people care about oranges, or they care about gold. The less you have of something, the more it's worth in so far as it's valued. So, same applies to dollars. And I think that what people don't understand is that we have an ongoing constant system in this country. The federal reserve is always printing dollars. That's what they do, every year. And they devalue your purchasing power. So, if I go back and I can show charts of this, we've posted these up on our web-site, Vigilant Investor, a number of times. But, I could show you a hundred dollars of purchasing power in 1914 around the time when the federal reserves started. What you could get for 100 dollars now only gets you about 3 dollars of purchasing power today. So, the federal reserve, just by continually printing money has devalued the currency. Now, that technically is the definition of inflation. You go back and you open a dictionary, the definition of inflation back in 1913 was "printing money." Today we refer to more of the symptoms of that. When people see the prices going up we say, "oh, no that's inflation, gas prices are going up right now, oh that's inflation." That's the reaction to inflation. It's the reflection of inflation. And one of the things that's confusing about what happens there with inflation is that it doesn't happen evenly, even though the government might have a statistic, they call it CPI, that measures inflation, consumer price index. They'll tell you, "oh, it's going up 3 percent right now, the average Is 3.5 percent," But it doesn't average evenly across all goods. Some goods go up a whole lot more than others. But, tying that back into our current situation in this credit bubble, what we over the past 5 years was a big massive injection of more money supply. And really it was a continuation of what had been going on pretty much since the mid-90's. And all of that money basically got out there, created a lot of activity. Made people feel like there's wealth out there. But, the reality is that it really wasn't generating genuine growth as much as it was creating economic activity. And there's a fine difference between the two. So, you know, I can show up at your doorstep tomorrow and give you an extra million dollars. You go out and spend that, yeah, you're going to feel pretty good about it. But, from the economy standpoint, you got that one million dollars of purchasing power, if I counterfeited that money, you got that purchasing power stolen from everybody else. That's how you got it. The only reason that money has wealth is because everybody else's dollar is now worth less. And that's basically what has been going on over the past five years, and again even the past 10 years. You go back to 1995, you can see that the money supply pretty much has doubled in the United States when you measure it by broad measurement. Things like M3, which is a statistic people use for the money supply. Now, the concern there is that, what does that mean for the economy? People think that the economy has been doing pretty well and now we're entering into a recession. What we would say, what I would say, is that you know, that's true on one level, but on a broader level what we just did is we just got ourselves out of a recession, which was a reaction to a bubble created by maybe too much money supply getting [...] into the tech sector and causing crazy things to happen - the bubble euphoria, tech stock euphoria, dot com euphoria. All that stuff needed really to be cleansed out, and a lot of other things needed to be cleaned up in the economy because the way it was going about, is not the most effective and efficient. Hence, we have that recession, once people come to terms that, wow, maybe that wasn't such a good idea, everybody starts backing off, that's where you get the bubble bursting. What should have happened probably is that that recession should have been a lot deeper. And instead it was a very superficial recession, and what the federal reserve did through our banking system - and again, not to get too complicated but, how money supply enters our economy is largely through the banking system. And, I mentioned it's a credit bubble we're talking about. People get that money supply through the banking system. The federal reserve makes it available through the banks and people borrow that money, and they go out and spend it. And, we have a new bubble today, largely tied into their credit, and we look into areas like housing is a great example. The money supply coming though the back system there, when we drop interest rates very low, people start borrowing that money for things like mortgages, anything that's interest rate sensitive and they start purchasing things with that money. And, what we saw over the last 5, 6 years is that as interest rates drop, house prices especially in the most populated areas like Los Angeles, Boston, Washington, San Francisco and down in Florida have just started going parabolic, 150 percent increases in just a few short years for example. And, what that really translates into, or how that came about was that, you know, from a monthly payment standpoint, from a monthly mortgage payment standpoint people could borrow more money and keep their payments the same or even get a smaller payment. So they're willing to pay more for a house. So, a house that costs 500 thousand dollars for example is going to be a lot cheaper, when your mortgage rate for a 30 year mortgage is 5 and a quarter percent verses how it is when it's at you know, say 7 or 8 percent. Your payment is going to be nearly half as much. That's a huge advantage and people are going to say, "well if I can afford a little more, I'll buy more," So all that money, and we're talking, literally talking trillions of dollars getting injected into the economy out of thin air, starts chasing that limited supply of housing, suddenly you get a boom. And as it starts ricocheting more and more and you keep that money supply open and keep it increasing, more and more people get on board to the point where you look at what's been happening over the last year and a half, suddenly you have people who have been doing the flipping. You have condo flippers; there's actually a web site out there called condoflipit.com, or there's flipmyhouse.com, different 'flip my home dot com' type sites where people literally buy, the condo flip for example down in Florida, you buy units of un-built, pre-built interests in condo units, condo housing, or condo apartment buildings and you trade them. It's kind of like the day-traders of the late 1990's. You remember when people would quit their day jobs, and it was a lot more profitable just to on your butt in the kitchen wearing your boxers and day trade. It was so easy to make money doing that, people didn't bother doing anything else. And the reality is that a lot of that, just the same as today was created, was the venting of all that money supply going in one direction, then it became a bubble. So that's what we're seeing now is that housing, it's a big concern because now that interest rates have started to rise a little bit, you're starting to see that housing prices aren't going up as much, and people suddenly are not able to, especially the ones who were speculating and doing the flipping and trying to buy houses for investment, a lot of those people were doing it with borrowed money and suddenly you know the longer they can't sell that house without a big gain, the more their costs of carrying that house go up and suddenly you have some issues there. The problem with the past 5 years is that all of that money supply went a certain direction, it created a new bubble and now we're sitting on a very precarious situation where if the housing market tilts downward, you can see a lot of people having some problems. And one example is that, I've seen some statistics out there that show that of all jobs created in the last five years since the recession, over half of them have been related to the real-estate industry, the housing industry. And if you think about that, I can count on, you know, I need more than a couple of hands to count all the people that I know who changed what they were doing and got into being a real-estate broker or real-estate agent or mortgage broker or decided to expand their construction facilities. And, a lot of people out there who buy new equipment for construction, they've worked in contracting and so forth, that now are depending on the boom continuing, and what happens is that interest rates continue to rise. If they go up to a level where suddenly nobody wants to jump around from house to house like they did, suddenly everything slows down and you have problems. Another big issue has been also related to interest rates and related to credit has been that in especially the most inflated areas like in California, in the L.A. area, you have houses out there that just became so unaffordable that even though mortgage rates, the 30 year mortgage hit a 50 year low about a year ago, a year and a half ago, people still could not afford the average home price in their region. So what they did instead is they went to what's called an adjustable rate mortgage. And these are heavily promoted also by the mortgage industry for average people. But the idea is, look if the payment is too heavy for you on a 30 year, lets go with an adjustable rate, a 3 year. For three years you get a really low rate and then you know, by the time it adjusts you'll be making more or maybe you know, you'll just have to move if that doesn't work out, or maybe you're planning on moving or expecting a big raise before then, all sorts of different justifications. But the bottom line is that over the last 3 years we've seen a record amount of adjustable rate mortgages being [...] as well as the greatest easement of lending standards for homebuyers that we've ever seen. It's never been so easy to get a loan for people who formerly were considered to be sub-market borrowers. Another very popular type of loan was the, there's now the zero principal. Basically all you're doing is paying interest and you're basically not buying your home so much as renting it from the bank. The problem with anything like that is, you're basically rigging things so that you can get into a home. And, all because originally, the money supply was rigged up and juiced up there to create activity and the reality was that nobody would have ever done that on their own had not the Fed. printed all that money, it's unnatural. And really what it's done is it has dislocated a lot of wealth from where it was, in the hands of savers. We'll talk about that in a second, who are the savers and who is getting hurt by it. It dislocates that money from them and sends it to where the hottest money is moving around. In the late 90's it was the dot coms, the technology and today, for the past couple of years it's been in the housing industry inflating up a new bubble. That's a problem there. And what it does is it hurts a lot of people who are very dependent on low risk savings investments, and forces them to do things that they probably wouldn't do with their money. I've seen a lot of people who would have formally would have invested in CDs over the past couple of years, they can't live on CD rates, because it's just too low. So what have they done instead? Well, they've increased their stock holdings or maybe they go into junk bond funds instead of government bond funds because the government bond funds don't pay enough. I've seen all sorts of stuff happening because, again the federally reserve artificially lowers interest rates, print so much money and you have a problem with the rate system here where people can't save and those who are trying to save are losing money to inflation. If you're only earning, you know, 3 percent on your savings vehicle, and inflation is running at 3 and a half, then you have a problem. You know you're losing a half percent all the time. And, that doesn't even take into account subject for another time, because we're running a bit late on time here for the hour, the time we have. But, the reliability of official numbers like CPI and GDP which are either understated or overstated and have been so for about, going on 30 years now. And the reality is inflation probably is running closer to 7 or 8 percent when you take a look at those numbers, but again we'll save that for a different day. But, picture inflation running at 7 percent, really, and if you look at food prices, you look at gas prices, you look at natural gas and oil prices, that kind of stuff, inflation is running a lot higher than what people are led to believe through CPI. And, again if you're earning a CD savings rate of you know, 4 percent in an inflation environment that's really 7, 7 and a half percent, you're getting crushed. And, all that new money that's being printed is coming out of the pockets of those people who are losing their purchasing power. That's basically where it's coming from. And, you know, that's the system, it's not phrased that way, but that's the reality and what you have in our system today, the economists and so forth that support that kind of a structure, the policy makers who tell us it's all no harm, they're telling us that, "oh look at all this economic activity we're creating." And that true, they are creating economic activity but it's not backed by anything, it's backed by thin air. It's not as if we're producing something that creates wealth. If you build something, or you plant something, or you manufacture something you actually have an increased of wealth but just by you know, minting dollars out of thing air, that's what Idiamean did, that's what your third world countries, you know, you now go down there and it costs you 10 million pesos for an apple. That's what they do. And yet, we're kind of doing the same thing, but maybe not at the same pace, but we're getting to a point now where that kind of thing is catching up with us. Now, in closing, now I have about 10 more minutes here to go before our hour show is going to wrap up here, it's important to understand how that could be closing up on us a little bit here. I mentioned before the trade deficit, and that we spend about 7 percent more than we earn every year in this country. A lot of that has been going on since the 1990's, is pretty much when it really gained its footing and its, keeps increasing. And our recent numbers show a modest decline in the trade deficit, but they're still the 6th largest annualized numbers that we've ever seen for a trade deficit. So it's far from going away. And what trade deficit basically means is that U.S. consumers are spending money abroad, a lot of it. Now, what that does to the U.S. economy is kind of funky. Some people will tell you, "don't worry about the trade deficit, all that means is that we're spending abroad, we're getting a good deal with the foreigners, deal with all the mucky jobs where they can be the manufacturers and we can just be the service people, isn't that great?" And to which most of your critics will say, "well, yeah but we're accumulating debt in exchange for what we're getting, we're borrowing." And they will then reply, "well, that's not such a big deal because, what that says to us is that foreigners think that the U.S is such a great place to invest their money and they are more than happy to lend it back to us." And there's nothing wrong with borrowing in a good business environment, big businesses do it all the time. Many entrepreneurs borrow money, their seed capital gets going and that's all true. But, I don't think the analogy really works that well because if you look where a lot of that money is going, that we're borrowing, it's not getting invested into necessarily the entrepreneurial side of things here in the U.S. A lot of that money, lets follow the trail of money here, the U.S. consumers spend you know what is it, 7 billion dollars more than we earn every day, something along those lines, we've got to finance that every day all right? So, we spend that money, say it goes to China, a Chinese manufacturing company that maybe makes computer screens or computers or TV sets, you know LCD home theatre equipment, whatever it is now invests that money into expanding it's capacity. So now it suddenly has a manufacturing base there, and it's invested in that. And in turn they have to do something with the dollars that they just earned. They can't spend "dollars" in China, they use what they call the yuan I think is the pronunciation for it. But the bottom line is they need Chinese currency, and they have to convert it. So they basically exchange it with their central bank, central bank now has it, what are they going to do with it? Well, they can't really spend dollars either necessarily if they could. But, what they've chosen to do over the past 10, 12 years if they've lent it back to the U.S. They've borrowed U.S. treasuries, they've bought U.S. treasuries I should say, not borrowed, we've borrowed the money. The U.S. government has. They've bought U.S. securities. In the late 1990's a lot of it went into the U.S. stock market, a lot of the trade deficit until that burst. More lately, over the last five years, it's gone into the U.S. Bond market. Now, what that has had the effect of doing is that it has depressed our interest rates because of their willingness to lend back those dollars that we've spent over there, it has driven our interest rates down. Now that's a matter of supply and demand. If you don't have to pay high interest rates to borrow money, you're not going to, right? If someone's going to give you super low interest rates to borrow money you'll take it. And, only will you borrow if you have to at a higher interest rate. Well, that's what's being going on over the past couple of years is that we borrow that money back at a very low interest rate, that's worked out very nicely. And, keep in mind that the U.S. consumer in the first place has spent a lot of money that has been that freshly printed money. And especially over the past couple of years, a lot of that was borrowed out of home equity, we look at home equity loans something in order of 660, 670 billion dollars in 2004 about 650 billion dollars in 2005 yanked out of people's homes and pushed out of the economy. That's reverberated around, that's also contributing to the deficit. But getting back to the critique of are deficits good or bad, you know, the people who are supportive or are indifferent to deficits will tell you well, again, "these foreigners are willing to lend to the U.S., isn't that great?" And I say, "well, hold on a minute, what are we turning around and using that money that we're borrowing for? Are we investing it in something that is going to produce a ton of income?" Because that's the sign of entrepreneurship 101. You borrow at one rate, you invest it into your company, you get manufacturing going or whatever it is you're doing and then you earn more than your interest payments in order to turn a profit. And then you keep the difference. You expansive interest is one level, you're earning a lot more, for instance your profit, okay? What we've been doing in the United States is not exactly that way. We've, heck I mean you look at the federal deficit, the federal U.S. government has been borrowing a lot of that money, it turns around and it basically saddles the tax payer with some more debt, and then it goes into it's deficit spending routine which is, what does the government spend money on, entitlement programs, lately on a lot of war, billions of dollars of things that they're going to go to Iraq and get blown up, so you don't have a lot to show for that afterwards. Theoretically, you'd have a peace dividend at some point. But the bottom line is that it's not as if it's still sitting around in a manufacturing plant here, you've blown up a lot of which you've produced. That, and the consumers have, to get on the individual personal side here, invested it into their home theatres or a big addition on a home or into driving the prices up on homes that a lot of people can barely furnish. And you may drive around these neighborhoods and it's surprising at how many of these homes don't have furnishings in them. Because they're so big and people who are in them really can't afford to furnish them yet. But -

Caller: Can I just jump in with a quick question? I'm listening along to what you're saying, and you already touched on a little bit about the home equity falling and I'm sure most people are leveraged to the hilt. What role though do you think that that had in helping soften the last U.S. recession, or shorten it, or, you know something deeper, you know, does that ultimately pay dividends in it's own right, you know, to return to a profitable and strong economic cycle?

That's a good question, I think that without a doubt it softens the recession. The question is what is the short-term benefit verses the long term result? Part of the problem with expanding money supplies we have is that it becomes a bit of an addiction, sort of a parallel, where once we get that injected into the economy, it gets difficult to not continue doing it. We look at over the past couple of year, and this gets into what we call, it's sort of the theory of business cycles and credit business cycles. But ordinarily you go through a good economy and it slows down a little bit. When you get more of a boom, then you have a little bit of a bust. If you have a big bubble, then you have to have a more severe. So, anytime you have a really good period of time, ordinarily there's a bit of a correction afterwards, which things have to be cleaned out. When you look at the size of the bubble we had, the exuberance and frankly, some of the craziness and even stupidity that we saw in the late 1990's, the recession that we got out of that was miniscule compared to the size of the bubble. And it arguable, and one of the points, the positions that I take is that what we've done is effectively tapered over by printing that money supply, having to rectify some of the problems. Now on the surface -

Caller: So, by having a softer recession that passed a couple of years ago, you're saying that we're more likely to go deep into the next recession [...]

We've really pushed off the reckoning day if you will, and while the more superficial signs of the previous bubble, you know, the sock puppets and all of that, you know the ghost town type of thing that you saw afterwards - that got cleansed out, the more you know, the more radical, you know, never had a profit, never were showing signs of profit. A lot of that got cleaned out, but what you still had though with the lowering of interest rates were basically allowing the entire business community to refinance out of what were more ordinary interest rates to well below average interest rates. So, now everybody is now hooked onto that, and what's next is the big question. And, you know, I was mentioning before about that cycle where foreigners are lending to us and that's all good and fine but there's a point at which, foreigners get to a point, they say, "okay, we have all this debt that we've been borrowing, we've been lending it to you, all these dollars through the trade deficit, but we're at a point where we're kind of getting, reaching our limit for how much U.S. debt that we want to have, that is at interest rates that are functionally at 50 year lows, well below average." And that's what we're beginning to see, is that there is less and less appetite for that kind of debt. Which is why our interest rates have finally begun budging up after staying, you know, really low, defying all expectations for about two or three years now. They bought them out and they stayed, or remained low. And now we're seeing them picking up and that's where were seeing the housing market is now beginning to react. All the sudden mortgage rates, you know, 30 years are closer to 6 and three-quarters verses 5 and a quarter. And that's changing the dynamic there. But, there's no doubt, back to your question that by printing that money and injecting it out there that it enables you to resolve the immediate problem, but again it is a bit of an addiction issue. I could show you money supply stats. We did a post probably a week ago or so where the amount of debt and credit you needed, generally credit through the money supply expansion to create an equivalent amount of Gross Domestic Product, GDP, this sort of economic growth, was pretty much at a ratio of 1:1. So for every dollar you borrowed, you got a dollar of economic growth out of it. That ratio starting shifting in the late 60's and in the 70's and it went to 2.5:1 in the mid-eighties, by the 90's is was 3:1 and we're currently at 4.4:1. So you get to sort of a law of diminishing returns and you think about it on a more common sense level. You know, you can't borrow indefinitely, you just can't keep pretending that okay, if we keep borrowing that we're not going to have to pay it off someday. When, especially when a lot of that borrowing is coming out of not pure production backed growth in the economy, but rather, simply the printing of money. There's nothing backing that money that gets injected in there, which is why that ratio starts shifting. So, what ends up happening is the people who had that wealth stored in their dollars, they tended to be the more responsible types, the entrepreneurial types that knew how to grow a business, to build a business. And instead what you have is when you start printing money, well let's say you know, you have simplifier models, you have one really good business person out there who really knows how to do things and, it reminds me of the old statistic, they say if you took all the money and divvied it up among everybody, within 10 years the, your top business people would have it all again. Just because they know how to operate businesses. And they know what to do with it. And, now, you can get into the finer arguments and pros and cons of that but the fundamental core thing is by printing money supply, you're yanking the money and wealth away from that, those types of people. People tend to be maybe more conservative or more saving oriented and you get it into the hands of the people who are going to move it around. Which again, on the surface level gives you economic activity, which people say, that's great, growth and so forth. But, when you consider what it also does, is that's why you suddenly have people you know, going, you need to do a reality check. Why on earth would, were, pets.com a viable business concept were people willing to pay, you know, 40, 50 dollars a share in 1999? Largely, that's because, you know, so much of that money was sloshing around in an environment where, you know, reality kind of got dislocated from, you know what was really happening. And, of course, you know, after everything shook out the reality was that you know, it was impossible, it was you know, there was nothing real behind that. And we can go back and look at the 1920's what happened there - we had the go-go 20's, and everybody was believing, that you know, that this was an unprecedented era, and you read all the history books about what was happening there, you look at the film and so forth and what people were writing about, and you follow what they did with the money supply post WWI, federal money reserve really cranked up the money supply, just flooded the environment. And part of that was to help out some of the banking issues, a lot of the money went to Britain, they were having problems there, they were defaulting on the pound because they basically they didn't have the coal to back up what they had done to get themselves through WWI and so forth. But the bottom line is that in the U.S. all that money supply, all those new U.S. dollars were sloshing around, giving everybody the impression that there was all this economic growth happening. That people were actually you know, growing the economy when in reality all we were doing was fractionalizing the purchasing power restored, retained in each dollar. And, throwing it around so that more people had access to it. And the more that gave the impression that the economy was really growing, the more people began to believe things that really weren't real, but that you know, boy we're in this unprecedented time, things are so good, we're so smart, it's the 20's, and bang, you have the big bubble crash and you have the depression [...] there's a lot of oversimplifying it greatly, but it's not too dissimilar from what happened in the late 1990's where God, anybody who had a dot com idea for a while there, you know, people were rolling those things out left and right. And you know, seriously, they were good ideas, they were solid business plans and so forth, a lot of opportunity there. But on the flip side, I mean everything that had a dot com on the end of it was not, you know, old waiting to be [...] created, you know with tech. And, it's a similar situation there [...]

Caller: I like the fact that you're, I mean obviously you have a tremendous depth of knowledge with respect to markets and economics and I like the fact that you're going back to look at history. I actually can't talk further on this talk cast today. But I'm very interested in the general picture you're painting is one that we're sort of heading for a fall, we've deferred paying the piper, we've softened the blow in this last recession. I guess what I'd really like to hear from you, and I'm going to go and subscribe to your Podcast and just listen to the recording or future shows but, I guess what I'm really interested in since I tend to buy into your premise, is what should an individual do to prepare for, you know, this coming fall? So if you can address that now, or in a future show I'd love to know.

I definitely will. I'll touch on that you know, going forward. I think that you know, the most easy answer is to consider, re-evaluating how people look at their real returns verses nominal returns in what is your yard-stick for measuring that. And re-calibrating that into a more classic context verses, we kind of have our modern finance way of looking at things, measuring things against what the stock market is doing, this or that and you know very relative sort of return approaches. And what we recommend doing, what I recommend doing always is to take a look at not just, you know, what is the measure the yardstick for today? And that's what I'll elaborate on when it comes to looking at that. But I think more broadly, I think people ought to take a good look at the historical, the context of what has happened in the past. I think nobody has a crystal ball and can tell you, "oh here's what's going to happen going forward." Although we have some good indicators of what can happen. And we really are on uncharted waters right now. Never have we had so much debt. Never have we gone through such vast money supply expansions. Never have we had all these simultaneous factors, you know, sinking up together. The last time we went through a major recession in the late 70's, early 80's, we didn't, our balance sheet was really clean comparatively. And here we are at this point. So, and again I think keeping in mind always the addiction analogy. The last thing you do for an addict is give them more of the drug that got them in a problem. And you know, an addict always needs more and a little more to keep that high, and that's kind of where we are with this money supply thing. I think monitoring what the federal reserve reaction is going to be and keeping our eyes on what Congress is potentially going to do should some of these dominos start to fall. And there's always the off chance that you know, maybe it's not going to. But I think it's best, that's just you know we're kind of punting the problem off for the next cycle. And, whereas I didn't think we would come through this cycle as well as we did, it never ceases to amaze me. But this time it's, you know, I think it's going to be a little bit harder and then if we make it through this time, the next time it's going to be even harder. And you know, each time we make it through is the real sad part is the cliff on the other side is that much higher. Rather than just allowing us to go through the recession in 91 would have been the best thing. But you got to go so definitely subscribe we'll continue talking about it and we'll go from there. Otherwise, I think that on that note, we're going to wrap up this week's show. We've gone a little bit beyond our hour, we're not at a hour five, and hour ten or so. But a lot to talk about to where things are going and we hope that our listeners don't get put to sleep with some of this stuff. But going forward I want to make it a lot more interactive where we can get the callers to step on in and ask questions like we had wrapping up the show there. But bottom line is there's some interesting things going on. There's an old ancient [...] Chinese curse maybe, but it's may you live in interesting times and it's, here we are. And while on one level people might be lulled into a false sense of security with, you know the latest reality TV episodes, survivor, or you know, American Idol and that kind of stuff on one level. But when you start looking at things on this level. It's a little bit sobering, and it's not to say that the world is going to end tomorrow or anything like that, but we think that it makes sense for prudent people, vigilant people to keep their eye on the ball. And just understand this kind of stuff, because it can affect what you do. It should affect what you do on a variety of levels. Not just related to the financial question that was asked a few minutes ago, but also related to what you do with your family, how you vote and your outlook on social issues and should we do this or that. And, we'll elaborate more, but that's pretty much it for the show today. I want to thank everybody for taking the time to get this far through. And this is the first episode, and we're going to keep going and try to get things more streamlined so it will only be onward and upward from here. But, thanks for listening and enjoy, take care. And, until next time, this is Johannes Ernharth, see you then.

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