OUZILLY, France – The farther you get from the big city, or the international press… the closer you get to reality.

The myth and claptrap disappears as distance shortens. Imagination gives way to fact.

The War on Moles

Gone is global warming, for instance.

Instead, you find – as we did when we drove to Nova Scotia for a summer holiday in the 1990s – that it will be “…75 degrees in Halifax again today… No relief in sight.”

The local papers forget that there is a War on Terror, too.

Instead, there is a War on Moles, which have been making a mess of lawns and gardens. Or there is a War on Roadside Trash… or a War on Loud Music and Late-Night Parties.

We are sitting at our farm in the French countryside, reading the local newspaper.

The pond in summer

We find that: Fifteen kilos of cannabis were seized in Poitiers. A couple from Italy are enjoying a vacation in the Poitou area. The annual donkey race took place in Moncontour.

But the big news was in the headline: “The state says yes to 1,200 calves.”  

Yes, we are following up on our anecdotes on farming… with real news from the local papers.

But first, let’s turn to the financial news.

Party Like It’s 1999

Not since 1999 did all three major U.S. stock market indexes – the Dow, the S&P 500, and the Nasdaq – hit record levels, as they did yesterday.

Of course, 1999 proved to be the worst time to buy stocks in 30 years. After a few more months of lollygagging around, the Nasdaq crashed and the Dow and the S&P 500 sold off hard.

Nasdaq investors didn’t get back to breakeven for another 15 years.

Just sayin’…

By our rough calculations, the stock market is about twice as high as it “ought” to be.

We put “ought” in quotations as a nod to readers who will hit the reply button mere seconds after reading it.

Of course, we have no idea where the stock market ought to be. Or where it will be. We only know where it has been. And it has been at these levels only rarely.

Major market movements take time. It takes many years to form a proper bubble… and many years more to forget it.

Take Nobel prize winner Robert Shiller’s CAPE ratio – a valuation measure designed to smooth out the effects of yearly swings in corporate earnings.

By this measure, the S&P 500 has only been more expensive in 2007, 1999, and 1929.

Each time, prices reached a peak. And investors celebrated with a big party. Then they suffered a hangover for years later.

After 1929, for example, investors waited until 1953 to recover.

Bourbon and Branch Water

Lately, the recovery times have been foreshortened.

Each time the market turned down, the feds arrived on the scene in minutes, with aspirin and a Bloody Mary. Then it was vodka tonics.

Months after the dot-com plunge in 2000, stocks (outside of the flaky, tech-heavy Nasdaq) rebounded. Same thing in 2009.

And now… bourbon and branch water in hand… investors celebrate new record highs, confident that no matter how great the hangover, the quacks at the Fed will have a remedy.

But watch out. By our calculations, stocks are selling for nearly twice as much as they “ought” to.

Come the next big plunge, we could see prices sawed in half… with no recovery until 2036.

Meanwhile, back in the dirt of the real world…

Au Revoir, Free Market

“They are CAFOs,” explained one of our sons, who is still visiting. Of all the family and friends who were here last week, only two sons remain.

“Concentrated animal-feeding operations,” he went on, “that’s what the article in the local paper is talking about. They’re all over in the U.S.”

The article informed us that a local farmer, Pierre Liot, had braved the fury of animal rights groups, environmentalists, and his fellow animal husbandmen to try something different.

In three large barns, he will house and feed 1,200 four-legged critters, far more than the typical farm in the area.

Some of our fat, happy Limousin cattle

The reason for this innovation was explained, unintentionally, on page 5 of the article. “Farmers are on the edge of an implosion,” said the headline.

“Dominique Marchand, president of the [state farmers’ group] has not slept well since the catastrophic harvest on his land,” we are told. “I’m going to lose €100,000,” he says.

Mr. Marchand quickly gets down to brass tacks: “We need an income protection system.”

Everybody loves capitalism when he is making a profit. But as we showed yesterday, farm prices have been falling for five years.

And after a year of disastrous weather, there is hardly a free-market guy left in France’s agricultural sector.




Market Insight


U.S. stocks aren’t the only ones hitting new highs.

Today we compare the S&P 500 to the iShares MSCI ACWI ex U.S. ETF (ACWX), which tracks the performance of global stocks outside of the U.S.

The chart below shows each one’s percentage change since the start of the year.

As you can see, ACWX is also hitting new highs.

In Case You Missed It…

Legendary gold investor – and Bill’s old friend – Doug Casey is finally sharing the secret of his investing success. He calls it the “Casey Method,” and it’s the private strategy he’s used to amass a fortune over the last 40 years… including a staggering 86,900% gain on just one investment.

To get the details straight from Doug himself, listen here. But don’t wait too long… he’s taking this message down in two days.

Featured Reads

Don’t Let Clinton-Trump Anxiety Derail Your Portfolio
If you believe the rhetoric you’re hearing from the 2016 U.S. presidential campaigns, you may be nervous about your portfolio. But it’s critically important to stick to your plan… no matter what the politicians say.

Why Hillary Is More Likely to Start World War III…
In a private interview, Bill Clinton’s former classmate talks U.S. politics, his personal encounters with the Clintons, and why he thinks Hillary is more likely to start World War III than Donald Trump…

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Today, some great responses to yesterday’s Diary about the decline of farming communities

I manage a farm in central Pennsylvania that has been in our family since 1920. Your story reminds me what one of our farmers told me: What is the difference between a puppy and a farmer? When a puppy grows up, it stops whining.

– Dennis L.

You write: “‘The whole area is changing,’ added another. ‘These family-owned farms are practically a relic of an earlier age.’”

That’s true here in Wisconsin, too. Almost no family farms anymore like there were 70 years ago when I was a kid on a small Wisconsin dairy farm.

But that’s how things change! But life goes on, and on, and on. All of us could take a lesson from the weather. It pays no attention to criticism.

– Oscar H.

Regarding farming and small communities, the same thing is happening in rural USA. Four of us farmers in my generation, none of us has kids who want to farm.

Can’t blame them. There are other employment opportunities that don’t require 24/7 commitment, and hundreds of thousands (if not millions) in capital at risk to the vagaries of weather, monetary policies, and politics.

In my youth, there were four tractor dealers/repair shops in our village of 1,500 people. Now we have to drive 30 miles to get parts. Two feed grinding mills – now none. Economies of scale require getting big or getting out.

– Dan S.

Liked your message about farming, but made me sad too, because you are right. In my little area of Nova Scotia in Canada the rural way of life has largely disappeared. The demands from Costco, Walmart, and the big supermarket chains for huge volumes of exactly consistent products have destroyed local production.

One day when the trucks don’t work, the store shelves will run dry, and we will discover we have lost the ability to feed ourselves locally.

– George E.

You and your team have wonderful info on finances. Have you done any research on the possible of a pole shift and how this may have an effect on the different weather patterns countries are getting?

Keep up the great work that you do. Thank you

– Eunice G.

Thank you for writing “Farming is no Picnic.” The article reminds me of my own experiences. Also, thank you for sharing your French holiday with your family.

– James L.

Your newsletters always put a smile on my face. But having suffered through many home renovations and construction projects your bon mots about the tile setter made me laugh out loud: “Mr. Goupil, for example, worked by the hour and was agonizingly slow. He set floor tile as though he were assembling a bomb.”

Keep ’em coming!

– Kent D.