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This was creating social problems, as it is tough for parents to manage offspring who make more than they

do. Sadly, the wheels have since come off the commodity boom. Since the 2011 peaks, copper (CU) had shed 35%, gold (GLD) has given back 36%, and iron ore has been cut by 40%. One research house estimates that some $150 billion in resource projects in Australia have been suspended or cancelled. Budgeted capital spending during 2012-2015 has been slashed by a blood curdling 30%. You can also see the bloodshed in the currencies of commodity producing countries. The Australian dollar has led the retreat, falling 18% from early this year. The South African Rand has also taken it on the nose, off 15%. In Canada, the Loonie is getting cooked. he permabulls were at least right for a decade. What the cheerleaders failed to reckon with was the cruel arithmetic of the commodities cycle. These are your classic textbook inelastic markets. Mines often take 10-15 years to progress from conception to production. Deposits need to be mapped, plans drafted, permits obtained, infrastructure built, capital raised, and bribes paid. By the time they come on line, prices have peaked, drowning investors in red ink. So a 1% rise in demand can trigger a price rise of 50% or more. There are not a lot of substitutes for iron ore. Hedge funds then throw gasoline on the fire with excess leverage and high frequency trading. That gives us higher highs, to be followed by lower lows. I am old enough to have lived through a couple of these cycles now, so it is all old news for me. The previous bull legs of supercycles ran from 1870-1913 and 1945-1973. The current one started for the whole range of commodities in 2000. Before that, it was down from 20 years. While the present one is short in terms of years, no one can deny how business cycles have been greatly accelerated by globalization and the Internet. Some new factors are weighing on miners that didn’t plague them in the past. Reregulation of the US banking system is forcing several large players, like JP Morgan (JPM) and Goldman Sachs (GS) to pull out of the industry. That impairs trading liquidity and widens spreads—not developments welcomed by falling markets. The prospect of rising US interest rates is also scaring away capital. That raises the opportunity cost of staying in raw metals, which pay neither interest nor dividends. My pet theory, which no one else seems to recognize, is that the evolving makeup of the Chinese economy will permanently slow demand for commodities. As the country moves from an export led manufacturing based economy to a domestic, services driven one, the need for expensive foreign resources declines. Much of the metal intensive infrastructure in China, like railroads, freeways, shipping, and housing has already been built out. The new frontiers require only brainpower, silicon chips, and a decent broadband connection to boost GDP. What we may in fact be seeing is a 3-4 year mini down cycle within a longer-term secular bull cycle that is still alive and well and could have another 10-15 years to run. That implies that we may be closer to the end of this down move than the beginning. To survive, many traders have dumped the “buy and hold strategy that served them so well for a decade. They have adopted a much more trading oriented approach, which is increasing volatility. I certainly would not be initiating any new shorts down here, as some of the more aggressive hedge funds are doing.

. But when it came to electronic parts. to making $100 million on the Apple IPO in just three years. The phrase “only in America” comes to mind. learning Morse code at the required five words a minute. Whenever I had a design problem. and the early days at Apple. his universal remote control idea. capacitors. I had gained my radio license. The tome filled in the holes about what I knew about the man: the wives.000” ). and a path opened that eventually led me to Woz. By then he had gained a lot of weight. You also learn a lot about electronics and basic computer hardware and software design. While there are a lot of 5th grade science teachers who wish they were billionaires. I grabbed it and devoured the pages in a couple of days. I was an ambitious young vice president at Morgan Stanley. So while other kids collected baseball cards. and rheostats. Then the transistor came out. resistors.” I later heard that Woz went to work for some kind of fruit company designing computers.I first spoke to Steve Wozniak via HAM radio when I was 12 and he was the 14-year-old president of the Homestead High School radio club in Cupertino. iWoz. which sounded stupid to me. my dad was pretty stingy with allowance money. but then the State of California dropped a big fat scholarship to the University of Southern California in my lap. That is what Woz did for ten years. Steve is still an all right guy. and ran into Woz again while escorting Steve Jobs around to big institutional investors hawking an Apple (AAPL) secondary share offering (click here for “Apple’s Next Stop: $1. A decade later. When I finally stumbled across his autobiography. there is only one billionaire who aspired to teach 5th grade science. and suddenly building projects. I had an unlimited budget. as that is where he saw the future. the rock concerts. He fascinated me with stories about how he had gone from scrounging around for $12 for a bootleg chip. but Woz was always a guy who marched to a different drummer. He seemed to know everything about electronics. and we parted ways. like simple computers programmed with basic “1’s” and “0’s” suddenly became possible. The last thing he taught me was this really cool way to make long distance phone calls for free with something called a “blue box. California. Despite the billions. I was stocking up on tubes. By junior high school. I planned to attend De Anza College in the San Francisco Bay Area to hook up with Woz. With seven children. Woz always had a solution.

WWII. but everyone else’s around the world. and then repaying the debt in devalued future currencies. it never has to pay it back. This is why bonds became known as “certificates of confiscation” during the seventies. in effect. Korea. future ending Roosevelt debt? In short. borrowing massively.00. minimal. By the time the 20 and 30 year Treasury bonds issued in the 1930’s came due. It says “Coffee: 5 cents. but enables us to reap immediate benefits. and a cheap steak at Outback cost $10. and spending it all. This is one of the main reasons why we have governments. Here is my shopping list: $1 trillion $1 trillion $1 trillion $1 trillion $1 trillion – – – – – new Interstate freeway system additional infrastructure repairs and maintenance conversion of our transportation system to natural gas construction of a rural broadband network investment in R&D for everything ut did have the last laugh. who received. He made a fortune in real estate. Unsurprisingly. So what ever happened to the despised. Not a penny should go to new social programs. betting correctly on the inflation that always follows borrowing binges. not only ours. In the end. and often negative real. . falling roughly 90%. About 300 years ago.What my grandfather’s comments did do was spark in me a permanent interest in the government bond market. followed by England and every other major country. The government. France was the first. stimulating the local economy. Who paid for this free lunch? Bond owners. and the great inflation that followed. It tells us that the government should be borrowing as much as it can right now with the longest maturity possible at these ultra low interest rates. Long-term capital investments should be the sole target. it went to money heaven.” That is where the Roosevelt debt went. I would borrow $5 trillion tomorrow and disburse it only in areas that create domestic US jobs.00. There is a lesson to be learned today from the demise of the Roosevelt debt. This is not a new thing. and why they have grown so big. only had to pay back 10 cents on the dollar in terms of current purchasing power on whatever it borrowed in the thirties. Remember. it was the risk avoiders who picked up the tab. Hamburgers: 10 cents. Steak: 50 cents. And here I like to use the old movie analogy. and Vietnam happened. when someone walked into a diner in those old black and white flicks? Check out the prices on the menu on the wall. The purchasing power of the dollar cratered. In effect. Coffee was now $1. If I were king of the world. governments figured out there was easy money to be had by issuing paper money. inflation adjusted returns on fixed income investments for three decades.00. a hamburger $2.

There are more jobs linked to this industry then most morons spouting off about how great Toyota is care to realize. Good luck America. the American public is stupid and if those of you who say "let 'em fry" actually mean it. then I pray to all things holy that your job and town go down the toilet with the auto companies. with the Congress and public that we have it doesn't look goodg . and every other government perk under the sun they have ZERO room to chastise someone in private industry. Secondly. until the Congressmen stop getting paid junkets. personal tax relief. Give me a freakin' break.I weep for the future of our nation when moronic Congressmen are lambasting CEOs over perks.