NEWS ARTICLES

March 2010 How To Survive the 21st Century
52nd Article in the "How To Survive" Series by Andrew Molchan

Where is the economy and our firearms industry going?

(February 12th, 2010) At the SHOT Show I was talking to a gun dealer from Texas who said he loved my articles, and looked forward to every issue of American Firearms Industry. However, he also said, "You seem to spend a lot of time talking about how good you are at predictions."

I replied, "Yes, that's true, but it has nothing to do with ego. Everyone who personally knows me would say that I do NOT have an ego problem. The communications reality is that if I don't remind people of how correct I've been, then most people would not remember.  There is the 'prophets paradox' that says the best prophets are wrong most of the time."

The gun dealer looked puzzled and said, "What does that mean?"

I replied, "For example, in 1964, I predicted that the US would lose the Vietnam War.  Everyone I spoke to at the time said that my analysis was either a complete joke, and/or I was insane.  What I usually heard was, 'How can you even image that the country that defeated Germany and Japan only twenty years ago was going to lose to a bunch of Gooks running around in black panamas?' In reality, the US was not chased out of Vietnam until 1975, so for 11 years I was wrong."

I went on to say, "Even after 1975, the US military's 'mental set' became the German Army's 'mental set' of 1919 to 1945.  The war (Vietnam for the USA, and WWI for the Germans) was NOT lost by the military. The war was 'lost' by home front 'traitors.' In the case of Germany, the 'traitors' were German Jews. (Thus setting the stage for the holocaust.)  In America, the 'traitors' were news reporters, and those who did not 'support the troops' and stand by the President."  I continued, "Another example was in 1974-75 when I predicted the 911-type airplane attack, and tired (very unsuccessful) to arm pilots. On September 11th 2001, exactly what I warned against happened. However, for over a quarter century my enemies (like the totally ineffective sky marshals) could said that I was wrong."

I finished by saying, "More recently, in late 2004, I started saying that real estate was a bubble that had to explode. However, for the next three years I was wrong. I don't bring these facts up because of ego. I bring them up as examples of even though my predictions might be 100% at odds with the current popular beliefs,  I have an excellent track record. For example, there was only one person in the world who correctly predicted the outcome of the November 2008 Presidential election EIGHTEEN MONTHS IN ADVANCE OF THE ELECTION and that person was me."

ONE YEAR AGO.  In the March 2009 issue of American Firearms, on page 6, in the How To Survive  column dated February 25th 2009,  I wrote about the then new  stimulus program, "Forty percent  of President Obama's trillion dollars of 'stimulus' is going to 'stimulate' economies outside of the USA. When you have an open system (such as the USA is now) then Keynesian economics becomes counter-productive. In an open system, the more you spend the faster you become bankrupt.  All of the hot air talks about the trillion-dollar stimulus bringing back yesterday...  that's a delusion. There will be 'false dawns' but overall the economy will stumble sideways for years."

ONE YEAR LATER.   As predicted, the economies of China and Asia were "stimulated" with American money and boomed while the US economy essentially moved "sideways" with 15% real world unemployment, and America's biggest manufacturing company (General Motors) on life support. The biggest "false dawn" was the stock market bubble of March 2009 to January 2010.

TIMES CHANGE.  I'm calling January 2010 the "top" of the "corrective bubble." There will be sucker rallies in 2010. Take them as an opportunity to sell your long positions. I've already sold 100% of my long stocks, even the "good" ones. I think there's one chance in three that in 2010 the DOW will go below its March 2009 low.

AMERICA BECOMES JAPAN.  In the January 2010 SHOT Show issue of this magazine, In this How To Survive column, dated November 14th 2009, I wrote on page 10, "Four months ago I said that the Federal government would use every trick in the book to keep the stock market going up until after December 31st so they can collect more taxes.   The US Government must have brought in some Japanese experts. However, in the 1990s our friends in Japan could only manipulate their stock market for so long, and I'm sure the same will happen in the USA." As predicted, the US stock market did stay up into January, and the government will collect more tax from "stock capital gains.

In this column, How To Survive, in the January issue of American Firearms, that was printed and mailed in December of 2009, on page 14, I wrote:"WHERE TO PUT YOUR INVESTMENT MONEY?  An old friend of mine, named Bud, recently asked me, 'Where would you put your money?' I said that in my view there's NO place to put your money that's both safe and with a reasonable return. It's a choice of what is the least bad place.  At the very top of my immediate bad places to have money are stocks and gold with a buy and hold strategy."

I went on to write, "One of my best friends, Tony, is a major gold bug. I'm sorry, but I'm 85% sure that gold is going down in 2010. I call it like I see it, but for Tony's benefit I sincerely hope I'm wrong."

On page 14 of that issue I went on to say, "Here is a plan you might consider. Sell 20% of your long stocks in January 2010. With that 20% buy some ProShare Ultra Short S&P 500 (SDS) shorts.  When long stocks go down you'd shift more into SDS, and eventually sell them (late in 2010) at a profit." In January 2010 ProShares short the S&P 500 (SDS), was $32.89 a share. Today, February 12th, 2010, the SDS is $37.90 a share. I also recommended shorting gold with ProShares GLL. In January GLL was $9.20 a share, and today, February 12th, 2010, it's $10.50 a share.

THE US DOLLAR? Most of my predictions fly in the face of "popular opinion."  This is one reason why I bring up the factual record.  Even though what I recommend is NOT what's popular and fashionable at the time, for the mega trends my past record has been 85% correct. For over a year it's been "fashionable" to say the US dollar is going to crash because of inflation. This is one reason why gold sales have been so high in the USA. My regular readers know that for months I've been saying that the US dollar will increase in value for probably the next year.  Well, the US dollar, as I predicted five months ago, is going up compared to most other currencies including the Euro.

WHAT MOST INVESTORS LIKE. Most stock buyers want advice from investment clowns. They love the Cramer clowns on TV.  I'm sure Cramer is a nice person, but he's part of a big group that I call "fetch the stick" investment clowns. Cramer is a good example of the group. He'll recommend a stock and its like, "fetch the stick doggy, go fetch the stick...run boy...run!" All of the Cramers of the TV world know that what most stock buyers want is instant gratification. Sure, if you have three million suckers watching your TV show and you say, "Go buy this stock." Certainly it's going up the next day.  Then all of the good dogs wag their tails and think, "I sure was smart. I got the stick!" However, most of the time, while the suckers were driving up a recommended stock the "smart money" was selling.  Three months later, the once recommend stock is down, but nobody notices because all of the dogs are out running after other sticks.

NO CONNECTION. I watch the investment clowns on TV, and I think very carefully about what they are saying. I seldom watch TV but when I do my brain is switched "on."  Most of the time, like 75% of the time, what's happening in the markets has zero real world connection to the reasons the TV "performers" mention. Its like, "The is dollar (or whatever) is down so stocks are up." The next day later it's, "The dollar (or whatever) is down so stocks are down." Its like, "The sun came up in the East today so stocks are _____," (whatever fits.) Most of the actors who talk on TV about finance have no clue of what's really happening with the big picture. However, they know there lack of knowledge makes no difference because their audience is mainly stick chasing dog wannabes.

What Is The Economy Going To Do In 2010?

Do you want to hear what you'd like to hear? Or, do you want to know what I really think?

What 80% of All Americans Wants To Hear.  President Obama will spend America back into 2005 prosperity. The DOW will go to 20,000 by 2011. All the deficits will magically go away and somebody else (not you,) but the "rich" will end up paying for everything. In the Middle East, Osama bin Laden will be killed and every Muslim in the world will become a Step ‘in Fetchit yes boy for American policy.

What I Really Believe. Stocks in 2010 will have a few sucker rallies, but overall the markets will go down. Possible WAY down. (If there is a sucker rally - sell everything.)  Outright deflation will take hold, and there will be liquidity shortages everywhere. (Major collection problems for almost everyone.) The US dollar will increase in value because although long-term the US dollar has profound problems, short term (the next 18 months) the US dollar will be the LEAST BAD major currency. Gold will go down. The face value of bonds will go down. Interest rates will creep up. Real world unemployment and underemployment will grow worse. USA real estate will continue its decline. In 2010, all of the world's stock markets will go down.  As I predicted a half year ago, there is a high probability of a significant terrorist attack inside of the USA in 2010.

Military Advice to President Obama.  President Obama is talking about, "Bringing our troops home from Iraq, and Afghanistan, and ending the war." However, I believe that the "leaders" in Washington D.C. are military schizophrenics. In the real world, one leader can start a war, but baring a 100% crushing victory it takes two or more sides to end a war.

Al Qaeda has ZERO intentions of ending this war until the Palestinian/Gaza conundrum is resolved.  President Obama knows this, but he chickened out, and that's why there is a high probability of terrorist attacks inside of the USA starting in 2010. President Obama wants to leave the party, but Osama bin Laden has the key to the door. (The good news is the bad news, the attacks will skyrocket gun and ammo sales).

After The Above Grim Comments.   It's time for something lighter. Well, perhaps not that light, but different. Here's a tail of war and peace, staring Andy's "two cows."

Two Graduate Cows

Two cows graduated from the Hans Morgenthau School of Military Grand Strategy at the University of Chicago.  The two cows had the highest grade point average in the history of the University.

Admiral Mike Mullen, Chairman of the US General Staff at the Pentagon, was chaffing from growing criticism about the American military NOT winning any significant shooting campaigns anywhere in the world since World War Two. Enacting a program to improve grand strategy planning, the General Staff drafted the two cows into the Army and made them second lieutenants. They sent the two cows to the Middle East headquarters of General David Petraeus - the regional commander.

The two cows entered the General Petraeus' command bunker all bright eyed and bushy tailed. "Good morning, Sir. Two cows reporting for duty."

General Petraeus was hunched over a large map of possible targets. He was holding a large magnifying class. He didn't look up, "Yeah, great! Why don't you two go find something to do?"

"Yes, Sir," the two cows answered. "However, the General Staff sent us to help you. Can we respectfully ask how you're planning to win the war in Afghanistan?"

The General looked up with a clearly annoyed look on his face. "I'm going to bomb the bastards back into the fourteenth century!"

The cow's foreheads developed deep furrows of worry, and they said, "But, Sir, ninety nine percent of the people in Afghanistan are already living in the fourteenth century." The next day General Petraeus transferred the cows back to the Pentagon.

Honesty Is Not The Safest Cow Policy

At the Pentagon the cows went into the General Staff's war room. All of the generals and admirals were busy passing thick, numerous reports among themselves. The cows said, "We are supposed to be working at grand strategy analysis.  Can we respectfully ask you how you are going to defeat al Qaeda, and Osama bin Laden, so we might make suggestions?"

The Staff was clearly irritated by the question, and finally one of the generals stopped passing reports around and said, "We are following tried and true principles of warfare. This is a text book war and we are definitely and without question going to have a text book victory.  We're going to bomb and systematically destroy all of al Qaeda's power centers.  We're going to destroy their railroad yards, their main bridges, their war factories and their airports. The US Navy is going to sink their ships at sea, and destroy their ports. The US Air Force is going to shoot their airplanes out of the skies, and bomb every al Qaeda electrical plant and oil refinery into oblivion. We're going to have a surge of troops, a big surge of troops, and we're going to capture al Qaeda's Parliament building. Then we'll have an even bigger surge of troops, and with vigor, we'll surge forward and plant the stars and strips of old glory over the ruins of Osama bin Laden's presidential place."

The two cows had expressions of extreme pain on their faces as they replied, "But, Sirs, al Qaeda does not have any of those targets!" The next day Admiral Mullen transferred the two cows to permanent guard duty on the Aleutian Islands.

The CIA Goes Cow

The CIA, in a clandestine operation, smuggled the two cows off of the Aleutian Islands. The CIA brought the two cows to their secret operations center in Bangkok, Thailand. The center was disguised as a bar and brothel called, The House of the Setting Sun.

The head of CIA Bangkok operations introduced himself to the two cows as Dr. Mir Dagon. He told the two cows that his division had just received new orders from Washington D.C., and this division had to formulate all of the possible scenarios involving a land war between the USA and China.  Dr. Dagon knew of the cow's academic record and wanted them to go into China as undercover cows.

Spy Cows

The two cows went into China posing as representatives of Ben and Jerry's ice cream stores.  The cows spoke to Chinese generals, and told the generals that they could give the generals a special 90% cost reduction for B&J ice cream store franchises if the  generals used their influence in Beijing to get the Chinese government to give B&J an exclusive right to sell Soy Sauce flavored ice cream in China. The cows thus had a chance to talk to several generals, and they let that conversation wander onto military subjects.  After four weeks the cows hurried back to Bangkok.

Dr. Dagon asked, "So, what did you find?" The cows were excited. "In school, we learned that the prime groups for infantry troops are males, ages sixteen to twenty eight." Dr. Dagon yawned, "Yeah, everyone knows that - so what?" The cows went on, "Yes, but in China today, for every one hundred females ages sixteen to twenty eight there are one hundred and twenty males. We had three different Chinese generals during three different meetings tell us that China could lose five million male troops on the battlefields, and the male-female ratios in China would still favor females. Chinese generals do NOT care about battlefield loses!"

Solution Cows

Dr. Dagon was clearly worried.  "The excess of Chinese boys is something we hadn't much thought about." He turned to the cows, "What do we do?"

The cows had a look of confidence. "We formulated a plan. After the Democrats lose the election this coming November 2010, you hire Congressman Barney Frank, and give him five hundred million dollars. You send him to China to start a gay pride movement.  Mr. Frank would bribe Chinese officials to make male gay marriage legal." Dr. Dagon's eyebrows went up, but the cows continued. "You know how in nineteenth century USA, we had mail-order Chinese brides?" Dr. Dagon answered with an apprehensive, "Yes." The cow's voices grew a little louder, "The CIA uses its influence and gets states like California, and so forth, to change their laws so that polygamy is legal between males. It's only polygamy if it's marriage between different sexes. Then rich gays like Hollywood and New York City producers and directors could order dozens of Chinese boys as brides. It would reduce the excess Chinese boy power."

One of the CIA members in the group, named Jack, turned to Dr. Dagon and said, "This might work. Think of the celebrity endorsements we could get. We could arrange a US, TV game show called, Win Your Chinese Boy Bride."  Jack raised his hand and started writing in the air. "Think of the great ad slogans we could put together, like, Support America's Troops and Order Your Chinese Boy Bride Today. It's Better To Shoot In Bed Than On The Battlefield."

Another CIA member of the group stood up. "President Obama said he wants more gays connected to the military. We could make Chinese boys a part of the GI Bill. Leave the military with an honorable discharge and the government will buy you a Chinese boy."

A third member of the CIA group turned to Dr. Dagon and said, "We've been trained to formulate plans that play to America's strong points. President Obama, our commander and chief, always says that one of modern America's biggest assets is its diversity.  The USA is the world leader in diversity. Having polygamous marriages between Americans and Chinese boys expands and honors that great tradition of diversity. It's clearly in America's national interests, and a wonderful move forward into world peace.

Dr. Dagon was deep in thought. Finally he turned towards the cows. "This whole area needs to be examined in more depth. However, nobody outside of the CIA must know of this plan until we're ready for the decisive thrust forward."  The next day the CIA sent the cows back to the Aleutian Islands.

Spy Cows Will Be Continued.

Look for the next chapter in AFI Magazine. In the next segment of Cows, Osama bin Laden visits the two cows on the

Aleutian Islands.

All the best,

Andrew Molchan
Systems Analyst, Editor and Publisher.