Good Article on Commodities

I came across this little report recently that reaffirms some of my long term views about the future. The single largest problem our world faces is population growth and the demand on resources this presents. Oil production is really the major factor that has allowed world populations to grow at the rate they have grown. The developments in seeds and fertilizers are also responsible. I think we are going to find that we will soon be, (if we haven't already) experiencing limits to oil and fertilizer production that simply cannot keep up with expanding population growth. China realizes this. They invest heavily in trying to maintain their future supplies of these resources. This is going to mean long term prices are going to be going up, and in my opinion probably a large drop in standard of living for the next generation.

Read the article. It's worth your time.

Link to article

This Credit Rating Agency Has it Right

I've wondered for quite some time how the United States with a 12+ trillion dollar debt, has maintained a credit rating higher than China, a country with a huge mega surplus of cash. It makes no sense. We all know about the S&P threats to lower the US credit rating but one credit agency has gone ahead and rated it the way it should be.  China should be ranked higher than the US in credit. The US takes it's rightful place with countries like Brazil and Japan. By the time we wake up and realize we have a problem it will be far too late. I'm glad my portfolio is very protected against inflation.

http://www.marketwatch.com/story/us-gets-c-credit-rating-lower-than-mexico-2011-04-28

Inflation

If you look at the government numbers we have minimal inflation. Remember back when gas was hitting $4.50 - $5.00 a gallon in some places and food and health care costs were also going up just as fast? The government reported next to no inflation. It was a joke.

The government has been slowly devaluing your currency for ages and they changed the way they report inflation to keep you in the dark. I came across this article today which looks at the way the government used to report inflation, and if they still did it this way today inflation would be over 10 percent, which seems in line with what I'm seeing in my day to day expenses. article

Peter Schiff talks about how the government reports inflation quite a lot in his book Crash Proof. I've been a big fan of Peter Schiff, though I find it sad someone who saw the stock market crash coming couldn't make a profit from it, but I digress...

Another piece of evidence for inflation if through the permanent portfolio. The permanent portfolio divides assets into 5 categories and equal weights them. Precious metals, commodities, growth stocks, treasuries, and swiss franc assets. The ticker is prpfx. It's a mutual fund based on the Harry Browne  concept of the permanent portfolio.

This fund is designed to beat inflation by a couple of percentage points. Why has it been on fire the past decade? It's because inflation has been a lot higher than people want to believe in my opinion. It's done it's job staying ahead of inflation by a couple of percentage points. Sure the chart looks like the fund is kicking @#$ and taking number but not so much when real inflation is taken into account. It probably demonstrates that people are afraid of the prospect of their long term savings losing value. 

 We are becoming poorer every year without realizing it. The sad thing is that when the government is forced to stop printing money things are going to get ugly because we will face the implosion of our service economy. It's a no win situation.