Best Stocks To Buy Right Now: Constellation Brands (NYSE: STZ)
Constellation Brands (NYSE: STZ), the largest wine company in the world by revenue and the largest premium wine company, offers a value-priced play on the potential growth of the US wine market.
Constellation also owns 50% of Crown Imports, the joint venture that distributes Corona Extra and Corona Light, the best selling imported beer in the US. As well, Constellation owns Svedka Vodka, one of the fastest growing premium vodkas.
The company’s well-known wine labels include Woodbridge and Robert Mondavi (acquired in 2004), Vendange (2001), Franciscan Oakville Estate, Estancia, Ravenswood, Arbor Mist (1998), and Clos du Bois (2007).
If you notice a number of acquisitions on this list, that is because Constellation spent the decade between 1998 and 2007 building up its position as the largest premium wine maker in the US, with sizeable positions in the UK, Canada, Australia and New Zealand as well.
Best Stocks To Buy Right Now: ETJ
High food prices aren’t helping either, for the same reasons. US consumers spend less of their total income on these two items than their counterparts in the developing world, where higher food prices will cause social disruption.
Covered-call funds typically give investors the advantage of producing income in flat markets, but don’t do well in quickly rising or falling markets. We like the idea that gently rising or falling markets can be profitable for such funds.
One such fund we’ve previously recommended is the Eaton Vance Risk-Managed Diversified Equity Income (ETJ). Its advantage is in the risk-managed part of its title. The fund sells calls like most covered-call funds, but also buys puts to guard against a market decline.
Today the fund trades at a steep discount of 9.5%, and offers a yield of 10.1%. We think their new policy of buying protective put spreads is a prudent strategy, although it may have scared off some current holders, depressing the price.
The largest holdings are in information technology at 18.04%, financials at 15.58%, health care at 11.82% and consumer staples at 11.45%.
Best Stocks To Buy Right Now: Zalicus (ZLCS)
Zalicus (ZLCS)—my top pick for a biotechnology stock breakout in 2011—is proving its worth, based on fourth-quarter results.
The company burned $2.1 million in cash during the quarter, and ended the period with $46.5 million in cash and equivalents. As is usual with development-stage biotech companies, aside from cash levels and cash burn, the accounting numbers were less important than management’s program update.
Zalicus has one product on the market: Exalgo, for chronic pain, marketed by a subsidiary of Covidien (COV).
When Covidien reported their results, they mentioned “good sales of our new Exalgo” product. I had forecast $400,000 in Exalgo royalties to Zalicus in the December quarter, so I was pleased to learn that they hit that right on the button.
With the initial distributor inventory back in balance, from here on Exalgo royalties should track prescription growth.
This year, I expect Covidien to target 12,000 frequent prescribers and sell about $50 million in Exalgo, yielding around $4 million to Zalicus at my 8% royalty estimate. Sales should increase to $100 million in 2012, $200 million in 2013 and level off at around $300 million in 2014.
The associated royalties of at least $8 million, $16 million and $24 million will help fund research and clinical trial expenses, with no stock dilution. Zalicus says the royalty rate is “tiered,” so my 8% estimate is conservative.
Best Stocks To Buy Right Now: Cloud Peak Energy (CLD)
One company is likely to take advantage of Asia’s long-term growth without bearing its share of risks. It’s Cloud Peak Energy (CLD), the fourth-largest thermal coal miner in the US.
Unlike base metals, thermal coal (which is used to generate electricity) is highly leveraged to long-run GDP growth.
Despite all the imbalances in Asia, the continent still benefits from an increasingly educated workforce, millions of people moving to cities, and so on. I believe Asian economic output and electricity demand will be much higher in 2021 than in 2011.
Of course, generating all that electricity will require a lot more thermal coal, even if nuclear and renewable energy become much more prevalent. Moreover, China and India have both become significant coal importers in recent years amid soaring demand.
Cloud Peak has not fully taken advantage of these trends and is trading for an exceptionally low valuation. We believe both are poised to change.
Best Stocks To Buy Right Now: UPS (NYSE: UPS)
UPS delivers economies of scale, operational efficiency, and an attractive dividend approaching 3%, write Josh Peters and Keith Schoonmaker of Morningstar DividendInvestor.
UPS (NYSE: UPS) is the colossus among global transportation companies, and powerful barriers to entry guard its economic profit. Its $45 billion of revenue in 2009 exceeded the combined sales of the four largest North American railroads.
The stock looks about fairly valued here, but we’re encouraged that the company’s recent 10.6% boost to its dividend will be the first of several handsome increases as the global economy revives.
Despite its extensive unionization and asset intensity, UPS produces returns on invested capital about double its cost of capital and margins well above those of its competitors. We credit the firm’s leading package density and outstanding operational efficiency, enhanced by extensive investment in information systems.
UPS and its competitors have turned to Asia and developing nations for growth, and we think UPS has a lot of runway left to build speed. Even existing operations have revenue expansion potential because of the firm’s rare pricing power.
While rapid changes in shipping demand during 2009 demonstrate the potential for short-run uncertainty because of macroeconomic factors, we are only optimistic about UPS’ future—and expect solid, if not record, results for 2011.
No Letup in Sight
UPS is in fine shape, financially speaking, with a Morningstar credit rating of A-. The firm has increased its use of debt in recent years, both to satisfy pension obligations and repurchase shares, but debt burdens remain fairly modest. In 2010, the dividend represented 53% of earnings, and the indicated payout ratio for 2011 looks to be around 50%.
While UPS operations are cyclical thanks to the high fixed costs of supporting its worldwide network, profits covered the dividend with room to spare even in the trough year of 2009 (per-share earnings of $2.31), and free cash flow remained strong.
While the cyclical nature of its business has kept UPS from raising its dividend every year, it has either increased or maintained its dividend for more than four decades, and the dole has risen in ten of the 12 years since the stock’s 1999 debut on the public market. (This probably has a lot to do with the fact that an impressive 36% of outstanding shares are Class A stock owned by employees, retirees and descendants of founders.)
The compound growth rate for dividends over the past decade has been a handsome 10.6%, although this pace includes an upward drift in the payout ratio (which averaged 39% from 2002 to 2007).
chart
Click to Enlarge
We believe overall global parcel-shipping market expansion and consistent price increases will enable UPS to grow at a compound annual rate of 8% during the next five years, a pace we expect the dividend to match.
At the stock’s current yield of 2.8%, we think UPS can deliver average total returns approaching 11% a year.
Best Stocks To Buy Right Now: TAL International Group (TAL)
TAL International Group (TAL) is one of the world’s largest lessors of containers and chassis. The company buys intermodal containers that can be transported on ships, trucks, and railcars—enabling containers full of goods to travel great distances with a minimum of handling.
TAL’s operations include buying, leasing, and subsequently selling multiple types of intermodal containers. TAL is also involved in reselling containers to container traders and users, as well as financing port equipment, such as container cranes, reach stackers, and so on. The company owns 856,000 intermodal containers.
Full Speed Ahead for Trade
Demand for containers dwindled in 2009, but rebounded with a vengeance in 2010. TAL’s utilization rate reached a record 98.6% at the end of 2010, even though the company added 180,000 containers during the year.
Container purchases are primarily financed by the company’s bond offerings. TAL’s bonds are rated “A” by Standard & Poor’s, and carry an interest rate of 4.8%.
Strong demand is causing a global shortage for containers, which is driving leasing rates and resale prices significantly higher—all to the benefit of TAL. Part of the stronger demand can be attributed to reduced direct container purchases by TAL’s shipping customers, which are trying to avoid new capital expenditures.
TAL has ordered another 180,000 containers for delivery in 2011, many of which have already been committed to leases. As a result, the company expects profits to accelerate during the next several quarters.
Sales increased 7%, and earnings per share catapulted from $0.72 in 2009 to $2.32 in 2010.
Best Stocks To Buy Right Now: Pfizer (NYSE: PFE) & Abbott Laboratories (NYSE: ABT)
Those are Pfizer (NYSE: PFE) and Abbott Laboratories (NYSE: ABT). Maybe I’ll take those in order.
Pfizer is a stock where everyone’s worried about the Lipitor patent expiring later in 2011. But there’s much more to Pfizer than just Lipitor.
If you look to 2012—which will be the first full year after the Lipitor is gone from Pfizer—the company should earn somewhere north of $2 a share, by our estimates as well as the guidance of the company.
The stock is trading at $19 or thereabouts, so you’re looking at a company that’s trading at roughly nine times earnings once you’re past this one negative event. That just seems way too cheap a price for that stock.
Looking at Abbott, it’s in a very similar situation in that they have one blockbuster drug, Humira, and people are thinking that Abbott today is going to be like Pfizer was a couple years ago where they’re just dependent on this one blockbuster.
Abbott is also just trading at a very cheap price. They should earn somewhere just below $5 a share, and the stock is in the mid 40s. So again you’re looking at a stock trading at about nine times earnings.
Or, if you want to strip away Humira and just assume that that falls off the planet a year from now, you’re looking at a stock that’s trading ex-Humira at about twelve times [earnings], which is still—even if that drug was gone—a very low price for a company of Abbott’s quality.
5 Famous Pharma Stocks to Sell Now
There’s a lot of talk about the recently passed health-care reforms in the wake of the election, and some investors are wondering if provisions of the legislation could be rolled back. I won’t pretend to know what’s going to happen in Washington in the future, but I can tell you that no matter what happens to the so-called “Obamacare” initiative, a number of health-care stocks are in dire straits — and no amount of politicking is going to help them.
Specifically, I’m talking about a group of battered drug makers that have seen poor earnings performances lately and are up against looming patent expirations and fierce competition in emerging markets.
Here are five famous pharmaceutical stocks that you should sell immediately:
Abbott Laboratories (ABT)
Abbott Laboratories (NYSE: ABT) is engaged in the discovery, development, manufacture and sale of a variety of health-care products. Since January, ABT stock has dropped 6.6%, compared to gains of 9.5% and 9.3% for the S&P 500 and Dow Jones, respectively. While the stock regained slightly in September, ABT has lost 3.5% since October. While ABT has outperformed earnings estimates for four consecutive quarters, it has been by only one cent each quarter. Abbott stock currently trades at $50.45.
Sanofi-Aventis S.A. ADS (SNY)
Sanofi-Aventis (NYSE: SNY) is also involved with the research, development, manufacture and marketing of health-care products. The company is known for its pharmaceuticals, including vaccines, as well as its animal health-care products. Year-to-date, SNY stock has slid 9.4%. Additionally, Sanofi-Aventis has missed earnings estimates two of the last three quarters. While the stock has regained slightly in the last few months, it is still down from its 52-week high of $41.59, with a current price of $35.62
Teva Pharmaceutical Industries (TEVA)
Global pharmaceutical company Teva Pharmaceutical Industries (NASDAQ: TEVA) produces and markets a wide range of generic drugs. Its major products are Copaxone for multiple sclerosis and Azilect for Parkinson’s disease. Since January, TEVA is down 9.6%, compared to gains by the broader markets. After a productive September, TEVA has dropped 3.7% since the start of October. Trading at $50.80, TEVA is only a few dollars removed from its 52-week low of $46.99.
GlaxoSmithKline PLC ADS (GSK)
GlaxoSmithKline (NYSE: GSK) works with vaccines, over-the-counter medications and various other health-care consumer products. The company’s main products deal with the following: respiratory system, central nervous system, cardiovascular and urogenital, metabolic, anti-bacterials, oncology and emesis, dermatalogicals and vaccines. GSK stock is down 4.1% in 2010, despite seeing gains in September and October. Additionally, GSK reported a quarterly earnings drop of 3.5% in its last income statement, which certainly has disappointed shareholders.
Pfizer Inc. (PFE)
Research-based, global pharmaceutical company Pfizer Inc. (NYSE: PFE) rounds out the list of big pharma stocks to sell. Year-to-date, Pfizer has watched its stock decrease 6.5%, compared to gains by the broader markets. Analysts aren’t buying into Pfizer, as they have downgraded their earnings estimates to 47 cents a share this quarter after and actual EPS of 54 cents a share last quarter. A quarterly earnings decline of nearly 70% is another reason why Pfizer is a stock worth selling.
As of this writing, Louis Navellier did not own a position in any of the stocks named here.
Specifically, I’m talking about a group of battered drug makers that have seen poor earnings performances lately and are up against looming patent expirations and fierce competition in emerging markets.
Here are five famous pharmaceutical stocks that you should sell immediately:
Abbott Laboratories (ABT)
Abbott Laboratories (NYSE: ABT) is engaged in the discovery, development, manufacture and sale of a variety of health-care products. Since January, ABT stock has dropped 6.6%, compared to gains of 9.5% and 9.3% for the S&P 500 and Dow Jones, respectively. While the stock regained slightly in September, ABT has lost 3.5% since October. While ABT has outperformed earnings estimates for four consecutive quarters, it has been by only one cent each quarter. Abbott stock currently trades at $50.45.
Sanofi-Aventis S.A. ADS (SNY)
Sanofi-Aventis (NYSE: SNY) is also involved with the research, development, manufacture and marketing of health-care products. The company is known for its pharmaceuticals, including vaccines, as well as its animal health-care products. Year-to-date, SNY stock has slid 9.4%. Additionally, Sanofi-Aventis has missed earnings estimates two of the last three quarters. While the stock has regained slightly in the last few months, it is still down from its 52-week high of $41.59, with a current price of $35.62
Teva Pharmaceutical Industries (TEVA)
Global pharmaceutical company Teva Pharmaceutical Industries (NASDAQ: TEVA) produces and markets a wide range of generic drugs. Its major products are Copaxone for multiple sclerosis and Azilect for Parkinson’s disease. Since January, TEVA is down 9.6%, compared to gains by the broader markets. After a productive September, TEVA has dropped 3.7% since the start of October. Trading at $50.80, TEVA is only a few dollars removed from its 52-week low of $46.99.
GlaxoSmithKline PLC ADS (GSK)
GlaxoSmithKline (NYSE: GSK) works with vaccines, over-the-counter medications and various other health-care consumer products. The company’s main products deal with the following: respiratory system, central nervous system, cardiovascular and urogenital, metabolic, anti-bacterials, oncology and emesis, dermatalogicals and vaccines. GSK stock is down 4.1% in 2010, despite seeing gains in September and October. Additionally, GSK reported a quarterly earnings drop of 3.5% in its last income statement, which certainly has disappointed shareholders.
Pfizer Inc. (PFE)
Research-based, global pharmaceutical company Pfizer Inc. (NYSE: PFE) rounds out the list of big pharma stocks to sell. Year-to-date, Pfizer has watched its stock decrease 6.5%, compared to gains by the broader markets. Analysts aren’t buying into Pfizer, as they have downgraded their earnings estimates to 47 cents a share this quarter after and actual EPS of 54 cents a share last quarter. A quarterly earnings decline of nearly 70% is another reason why Pfizer is a stock worth selling.
As of this writing, Louis Navellier did not own a position in any of the stocks named here.
Friedman, Government Thieves, and Gold
I’m not sure who Don Cooper is (should I? — I don’t subscribe to cable) but his message certainly does resonate with me. Though I’m in The Garden State, and he’s in The Peach State, we are people of like mind. They’re will be differences, of course, but I think we both have this aversion to coercion — or rather, in the government’s case, extortion. It’s interesting isn’t it that when the Mafia pulls this stuff it’s a crime — when the government does it it’s patriotism for the common good.
Ho, and don’t talk about eminent domain! Why not just call it droit de signeur and be done with it! Recently a neighboring town confiscated a family farm — after a long legal battle — that had been a working farm for over a century. Evidently a working farm is a “distressed property” when it’s encroached upon by suburban development. And the kicker — they condemned it for the purpose of preserving “open space”.
Evil and stupid — gotta love it.
Publish if you will, but don’t use my name as I am (justifiably) paranoid.
And another…
Hello Gary:
I found the article American fear interesting. A little more than a decade ago, I visited Russia. I went to the beautiful city of St. Petersburg. It was the first time I had really been in a different culture. I had read about some of the differences between Americans and Russians, but one of them seems so little until you think about it. Russians walk very close together. When I was walking with an attractive tour guide of the opposite gender I really liked that. Russians walk shoulder to shoulder with each other. When they speak, the person who speaks, standing shoulder to shoulder, has his mouth barely inches from the other person’s ears. They speak softly. The American on the other hand stands with a space between them and the other person. An American man on a date with his girlfriend will often stand further apart than two Russian friends simply walking to a store. This note is going somewhere, don’t worry. Well, I remember after being only with Russian s for two weeks, falling into the habit of speaking softly and rubbing shoulders with my tour guide. Then I heard these people speaking loudly. I hadn’t even paid attention to their speaking. I said to my tour guide, “those people are speaking so loud.” She replied, “They are speaking English, they must be British or American.” I listened and said, “They are Americans. She wondered how I knew. Of course, I knew even more. I had every reason to believe they were girls from the northern United States and not the deep south nor Canada. But then I realized they weren’t walking close to one another like Russians do.
What does all that say? We can say too much. One answer is that Russians take friendship very seriously. They take personal relationships very seriously. That must be admitted. But it also says that Americans take individual freedom very seriously. You see, even when we get married we feel a great need to respect that our spouses have something of an individual private life that they are entitled to. Sometimes that gets in the way of a marriage commitment, but often it allows a person the freedom to bloom. But another thing can be said. Americans have gotten used to being able to walk down the street with a swaggering individualism that did not worry about someone listening in. As important as Russians take personal relationships, very import ant I observed, they also had a history of living in a land with a government prone to listen in. I wonder if the loud American with the swagger in his steps that gives a large space to the person walking with him is an endangered cultural icon representing us Americans.
I enjoyed walking closely with the Russians I met when in St. Petersburg. I had gone alone and met people I met on the internet. It was an extraordinary and wonderful trip for a guy that usually is almost a complete hermit. But I’m glad that the loud-mouthed American that swaggers is able to do that because he has never thought that anyone was listening in. But now with each of us regarded as potential Muslim, right-wing and left-wing terrorists, we are being retrained to watch our mouths and words on the internet, to travel in a submissive manner, to make sure our lawns are mowed for strange people don’t mow their lawns and need to be pointed out to the authorities just in case. We say the terrorists didn’t win because everyone on the street has raised a flag and has “support our troops” stickers. But that is such a change so much unlike Americans who always liked to humorously point out the flaws in their national leaders. Patriotism used to be taken fo r granted, now it is questioned enough that the politicians are warning us about people who show too little love of their country. I did enjoy my visit to Russia, but I also enjoy the freedoms that made Americans as loud and boisterous and individualistic as they are. Freedom makes people imagine they have the space to do anything. Repression makes people look for someone whom they can stand next to and say softly what is really on their minds. I have to go now. Someone may be checking this email, do you know what I mean?”
Oh, do we ever know what you mean! Thanks for writing.
And in response to Gary North’s article on Milton Friedman we received this letter…
Gary,
Great informative and thought-provoking article. I did not know that it was Freidman who suggested some of these things. He certainly trusted government a lot more than they deserve to be trusted.
I would like your thoughts on what the government is doing to people who take it into their own hands to fix the problem of inflation. I refer specifically to the gentleman who started a business to provide an alternative to Federal Reserve Notes and American Clad metallic coin currency. He just got convicted of counterfeiting and will likely serve a very long time in prison besides the fact that the FBI confiscated all his silver coins which was a considerable amount in the 10′s of millions possibly 100′s of millions of dollars worth.
Milton Friedman suggested that a fiat currency with a “reasonable” increase in the money supply somewhere between 2 and 5% would be best.
Some gold bugs would point out that the creation of new money means the debasement of the money that already exists. The power to create new legal money amounts to legalized counterfeiting…and legalized siphoning (i.e. theft) of purchasing power.
But gold supplies increase each year too, by about 2% and as high as 5%. So why is it so bad when the central bank increases the money supply? What makes gold more honest than government’s legal tender?
A friend asked me the same question recently in an email…
I’m curious as to why Libertarians are so interested in gold as investment/currency… Is it because it has intrinsic value (though I’m confused as to what the intrinsic value would be, aside from it being a metal…)? Is “paper money” not valued because it is a creation of the State? Am having a debate with a co-worker about monetary policy and am curious.
Gold demands honesty and prevents the surreptitious theft in which governments tend to engage. In order to get more gold, one has to put in a little effort…take a little risk. There’s no theft there; just an exchange of value for value. The gold miner gets to “spend” the new gold he finds, but he had to come by it honestly…just as did the bakers, mechanics, builders, artists, teachers, etc who worked for their gold.
The central bank, however, merely pushes a button and—presto!—there is new money. It’s great work if you can get it. And it’s a power that tends to be abused.
Not one person in a thousand understands this anymore, at least not in the U.S. They assume that the power to create new money belongs in the hands of the Federal Reserve (if they even understand that the Fed creates new money at all).
They believe that rising prices are a natural outcome of economic growth. They figure that it’s okay that bread, milk, insurance, electricity and gas all get more expensive over time. After all, incomes rise just as quickly or even more quickly…right?
But now with everything getting so damned expensive…amidst stagnant and falling incomes…people are starting to wonder about that.
So many have lost their jobs and seen their income go to zero. Those lucky enough to still be employed have not seen raises in years…yet the food and energy they rely on to live continue to go up in price. What gives?
Meanwhile gold and silver are soaring. But supposed experts like John Melloy of CNBC’s Fast Money are calling gold a “rejection of the capitalist system” and “the world’s most respected Ponzi scheme.”
Good citizens are supposed to maintain their faith in the dollar and the dollar standard. They are to view the gold standard with suspicion. Those who propose a gold standard are to be met with scorn, mockery, consigned to the figurative loony bin.
Thank goodness no amount of scorn has ever bothered Congressman Ron Paul.
The last time the country was this close to the brink of currency collapse back in the late ’70s, Ron Paul assembled a Gold Bible in an effort to explain the history and necessity of the gold standard in the U.S. economy.
Of course, it was ignored by Congress then. But we’re back at the brink now. And this time it looks like we’re going over..
Ho, and don’t talk about eminent domain! Why not just call it droit de signeur and be done with it! Recently a neighboring town confiscated a family farm — after a long legal battle — that had been a working farm for over a century. Evidently a working farm is a “distressed property” when it’s encroached upon by suburban development. And the kicker — they condemned it for the purpose of preserving “open space”.
Evil and stupid — gotta love it.
Publish if you will, but don’t use my name as I am (justifiably) paranoid.
And another…
Hello Gary:
I found the article American fear interesting. A little more than a decade ago, I visited Russia. I went to the beautiful city of St. Petersburg. It was the first time I had really been in a different culture. I had read about some of the differences between Americans and Russians, but one of them seems so little until you think about it. Russians walk very close together. When I was walking with an attractive tour guide of the opposite gender I really liked that. Russians walk shoulder to shoulder with each other. When they speak, the person who speaks, standing shoulder to shoulder, has his mouth barely inches from the other person’s ears. They speak softly. The American on the other hand stands with a space between them and the other person. An American man on a date with his girlfriend will often stand further apart than two Russian friends simply walking to a store. This note is going somewhere, don’t worry. Well, I remember after being only with Russian s for two weeks, falling into the habit of speaking softly and rubbing shoulders with my tour guide. Then I heard these people speaking loudly. I hadn’t even paid attention to their speaking. I said to my tour guide, “those people are speaking so loud.” She replied, “They are speaking English, they must be British or American.” I listened and said, “They are Americans. She wondered how I knew. Of course, I knew even more. I had every reason to believe they were girls from the northern United States and not the deep south nor Canada. But then I realized they weren’t walking close to one another like Russians do.
What does all that say? We can say too much. One answer is that Russians take friendship very seriously. They take personal relationships very seriously. That must be admitted. But it also says that Americans take individual freedom very seriously. You see, even when we get married we feel a great need to respect that our spouses have something of an individual private life that they are entitled to. Sometimes that gets in the way of a marriage commitment, but often it allows a person the freedom to bloom. But another thing can be said. Americans have gotten used to being able to walk down the street with a swaggering individualism that did not worry about someone listening in. As important as Russians take personal relationships, very import ant I observed, they also had a history of living in a land with a government prone to listen in. I wonder if the loud American with the swagger in his steps that gives a large space to the person walking with him is an endangered cultural icon representing us Americans.
I enjoyed walking closely with the Russians I met when in St. Petersburg. I had gone alone and met people I met on the internet. It was an extraordinary and wonderful trip for a guy that usually is almost a complete hermit. But I’m glad that the loud-mouthed American that swaggers is able to do that because he has never thought that anyone was listening in. But now with each of us regarded as potential Muslim, right-wing and left-wing terrorists, we are being retrained to watch our mouths and words on the internet, to travel in a submissive manner, to make sure our lawns are mowed for strange people don’t mow their lawns and need to be pointed out to the authorities just in case. We say the terrorists didn’t win because everyone on the street has raised a flag and has “support our troops” stickers. But that is such a change so much unlike Americans who always liked to humorously point out the flaws in their national leaders. Patriotism used to be taken fo r granted, now it is questioned enough that the politicians are warning us about people who show too little love of their country. I did enjoy my visit to Russia, but I also enjoy the freedoms that made Americans as loud and boisterous and individualistic as they are. Freedom makes people imagine they have the space to do anything. Repression makes people look for someone whom they can stand next to and say softly what is really on their minds. I have to go now. Someone may be checking this email, do you know what I mean?”
Oh, do we ever know what you mean! Thanks for writing.
And in response to Gary North’s article on Milton Friedman we received this letter…
Gary,
Great informative and thought-provoking article. I did not know that it was Freidman who suggested some of these things. He certainly trusted government a lot more than they deserve to be trusted.
I would like your thoughts on what the government is doing to people who take it into their own hands to fix the problem of inflation. I refer specifically to the gentleman who started a business to provide an alternative to Federal Reserve Notes and American Clad metallic coin currency. He just got convicted of counterfeiting and will likely serve a very long time in prison besides the fact that the FBI confiscated all his silver coins which was a considerable amount in the 10′s of millions possibly 100′s of millions of dollars worth.
Milton Friedman suggested that a fiat currency with a “reasonable” increase in the money supply somewhere between 2 and 5% would be best.
Some gold bugs would point out that the creation of new money means the debasement of the money that already exists. The power to create new legal money amounts to legalized counterfeiting…and legalized siphoning (i.e. theft) of purchasing power.
But gold supplies increase each year too, by about 2% and as high as 5%. So why is it so bad when the central bank increases the money supply? What makes gold more honest than government’s legal tender?
A friend asked me the same question recently in an email…
I’m curious as to why Libertarians are so interested in gold as investment/currency… Is it because it has intrinsic value (though I’m confused as to what the intrinsic value would be, aside from it being a metal…)? Is “paper money” not valued because it is a creation of the State? Am having a debate with a co-worker about monetary policy and am curious.
Gold demands honesty and prevents the surreptitious theft in which governments tend to engage. In order to get more gold, one has to put in a little effort…take a little risk. There’s no theft there; just an exchange of value for value. The gold miner gets to “spend” the new gold he finds, but he had to come by it honestly…just as did the bakers, mechanics, builders, artists, teachers, etc who worked for their gold.
The central bank, however, merely pushes a button and—presto!—there is new money. It’s great work if you can get it. And it’s a power that tends to be abused.
Not one person in a thousand understands this anymore, at least not in the U.S. They assume that the power to create new money belongs in the hands of the Federal Reserve (if they even understand that the Fed creates new money at all).
They believe that rising prices are a natural outcome of economic growth. They figure that it’s okay that bread, milk, insurance, electricity and gas all get more expensive over time. After all, incomes rise just as quickly or even more quickly…right?
But now with everything getting so damned expensive…amidst stagnant and falling incomes…people are starting to wonder about that.
So many have lost their jobs and seen their income go to zero. Those lucky enough to still be employed have not seen raises in years…yet the food and energy they rely on to live continue to go up in price. What gives?
Meanwhile gold and silver are soaring. But supposed experts like John Melloy of CNBC’s Fast Money are calling gold a “rejection of the capitalist system” and “the world’s most respected Ponzi scheme.”
Good citizens are supposed to maintain their faith in the dollar and the dollar standard. They are to view the gold standard with suspicion. Those who propose a gold standard are to be met with scorn, mockery, consigned to the figurative loony bin.
Thank goodness no amount of scorn has ever bothered Congressman Ron Paul.
The last time the country was this close to the brink of currency collapse back in the late ’70s, Ron Paul assembled a Gold Bible in an effort to explain the history and necessity of the gold standard in the U.S. economy.
Of course, it was ignored by Congress then. But we’re back at the brink now. And this time it looks like we’re going over..
Subscribe to:
Posts (Atom)