ELECTION YEAR EMERGENCY SURVIVAL KIT

The Daily Reckoning Weekend Edition
October 2-3, 2004
Baltimore, Maryland
By Addison Wiggin and Tom Dyson

In the subject line it read: "The most intelligent thing I have read
in a long time."

The email continued: "I know I've sent a couple of 'must read' items
already today, but this one has to join them... "

It turns out Bill Gross and Steve Roach were swapping notes on the
global economy. The candid exchange took place over email during late
August and early September and was posted at Morgan Stanley's
website. A reader forwarded us the thread...

"Bill, I don't know about you, but I've lost confidence in the
world's fiscal authorities." Roach is almost desperate. "[B]y
fuelling the debt-driven super-liquidity cycle of the past several
years, they, too, have now become part of the problem, I fear."

The bond man's response: "While I would concur that monetary
authorities have been drinking with reckless abandon without turning
over the keys to a designated driver, there's only so much I can do.
What? Sell my bonds and accept their penal yield of 1.5% in
short-term paper?"

"Central bankers used to be the tough guys," retorts Roach, "and you
used to be one of the world's leading bond market vigilantes who held
them accountable for doing the right thing. Where are the vigilantes
now that we really need them?"

"So the world's on my shoulders now?" retorts Gross, in an email back
to Morgan Stanley's chief economist. "My first obligation is to my
clients."

1.5% may look pretty decent to some folks, we'd wager, even to some
of Gross' clients. But drunken monetary authorities? We certainly
wouldn't be lending them any of our disposable earnings.

The market currently offers 4.95% for anyone who buys a 30-year
Treasury bond and 4.19% for a 10-year bond. The market may soon have
to offer even higher yields... bonds turned sharply lower last week.
10-year yield rose 16 basis points, while the long end of the curve
climbed 15 points.

$100 lent to the U.S. government, interest compounded, will be worth
$374.53 in 2034.

Meanwhile, the goons in power make the monetary authorities look
tightfisted with their spending plans.

The Congressional Budget Office shows Bush's people have transformed
a 10-year projected surplus of $5.6 trillion to a deficit of $4.4
trillion in roughly 32 months: a turnaround of $10 trillion. "This is
the sort of level one associates with a Third World kleptocracy,"
comments William Bryk in a piece titled: the conservative case
against George W. Bush. Readers can find a link to the article in the
P.S. to today's edition.

And what about this projection: government debt will rise from 37
percent of the economy today to 69% percent in 2020 and 250% in 2040.
This isn't some half-baked prediction overheard at the horse track
either... Charles Kolb - who served under Reagan and George H.W. Bush
- presented these figures to Congress in a sworn testimony earlier
this year.

If you cut taxes and increase spending, at some point, someone has to
pay. Payment is reached in two ways: by stoking inflation and
destroying the currency or by raising taxes. The former is
politically viable in the short-term but ultimately destructive,
while the latter is repugnant but ultimately healthy.

Bush and Kerry will argue about all kinds of things, but neither man
can suggest a solution to America's debt. They'll both just make the
problem worse. [Ed. Note: This problem is your problem. Neither
candidate is going to be able to prevent the certain monetary mayhem
that ensues when the debt mountain erupts. But you can take steps to
protect yourself. We've prepared this special guide. We call it the:

The markets felt twitchy last week, and we saw big moves in many
sectors. The commodity arena stole the limelight. Not only did crude
oil pass $50 for the first time, industrial metals also made sharp
moves higher. Aluminium prices hit a fresh 9-year high. Lead hit its
highest price since the contract converted from a sterling
denomination into a U.S. dollar denomination in 1993. Copper passed
$3000 a tonne and nickel prices have risen 25% in the past two weeks.

Are commodity markets anticipating another growth spurt from the
world's economy? Equity investors think so. They pushed the Nasdaq up
2.4% on Friday alone. And for the week, the Nasdaq was up 62 points,
or 3%, closing at 1,942. The Dow ended at 10,193, a weekly gain of
205 points.

Gold forged a new 6-month high, closing the week at just less than
$420 an ounce.

It's raining. There's 70,000 people crowding one of Baltimore's
outlying barrios for the Fell's Point festival. We must join them.

P.S. "The Conservative case against George W. Bush," the article we
referenced above, by William Bryk, is an excellent and well thought
out piece of writing and an article we think readers will enjoy. The
complete work is posted at our website, follow this link...

George Gilder is best known to the public as a mouthpiece for the
tech revolution and a symbol of catastrophic investor stock losses.

But readers of the Daily Reckoning will be more familiar with George
Gilder as the man who stood up and heckled Bill Bonner at the Las
Vegas MoneyShow. Bill was giving a speech to over a thousand people
when Gilder repeatedly raised his arm and interrupted.

Regardless of Gilder's abrasive approach, Telecosm is an excellent
book focusing on the telecom revolution and Gilder's view of the
future, written with commanding knowledge and in lyrical prose...

Above all, Telecosm - and Gilder - will help you understand and avoid
the next speculative bubble, without even intending to do so!

Exposed! America’s Own Axis of Ruin

Their sneaky plots and dangerous schemes are THREATENING your income, your
investments, your wealth, and your financial security. It could cost you everything.

Finally -- these plots and schemes have been revealed in this shocking report.
Protect yourself and find out how you could profit.Click here:

"... More and more, we see columnists, pundits, military strategists,
politicians and even friends of ours refer to America's purported
enemies as "the bad guys." No one knows who the bad guys actually are
or why they are so bad, but we all know the difference between a "bad
guy" and a "good" one... "

THROUGH THE ROOF AND TO THE MOON 9/30/04
By Doug Casey

"... That's the good news. The bad news is that something called the
business cycle still exists, which evidences itself in periodic booms
and busts. We've had a tremendous boom from 1982 on. Must it result
in a serious bust? In a word, yes... "

"... How did Forepaugh do it? Easy. He faked it. His animal trainers
and handlers scrubbed an ordinary gray elephant with white plaster
and used peach-colored tint around the animal's ears, trunk and
feet... "

"... Pretending to be a doomsayer would be too easy. Pretending to
know when gold will reach that next magical plateau of $500, if ever,
would be crazy. I am a pragmatist. What I do know is that the value
of my currency, the dollar, is being eroded daily with no end in
sight... "

"... And furthermore, I am afraid that this 20-something woman,
despite her obvious genius, confuses the anomaly of the last 54 years
with the last 5,000 years. And when one examines that historical
record, one finds there has never been an economy that has proven to
be sufficiently 'robust' to permanently withstand the kind of
economic, death-by-debt stupidity that we are exhibiting... "

"The market is not a school-crossing officer or social worker. It
does not wait to make sure every last person keeps up. In other
words, China's transition is likely be volatile and awfully difficult
to muddle through"
http://www.dailyreckoning.com/body_headline.cfm?id=4143

"Gold coins offer the best opportunity to do this in the investment
world right now. If the last few coin bull markets are any
indication, you could literally make hundreds of percent in the next
few years. It's happened before... ."
http://www.dailyreckoning.com/body_headline.cfm?id=4139

"... Some Europeans believe that the alliance should pull out of
Iraq. My conclusion is that there is no safe exit. If the United
States and Britain withdraw, the consequences will be terrible.
Islamic terrorism will have won its great victory and will be
reinforced in every way... "
http://www.dailyreckoning.com/body_headline.cfm?id=4136

"Forty years ago, when Lyndon Johnson believed the United States
could afford both Great Society and the Vietnam War, conservatives
attacked his fiscal policies as extravagant and reckless. Ten years
ago, the Republican Party regained control of Congress with the
Contract with America, which included a balanced-budget amendment to
restore fiscal responsibility. But today, thanks to tax cuts and
massively increased military spending, the Bush administration has
transformed, according to the Congressional Budget Office, a ten-year
projected surplus of $5.6 trillion to a deficit of $4.4 trillion: a
turnaround of $10 trillion in roughly 32 months."

"The Bush Administration can't even pretend to keep an arm's length
from Halliburton, the master of the no-bid government contract.
Sugar, grain, cotton, oil, gas and coal: These industries enjoy
increased subsidies and targeted tax breaks not enjoyed by
less-connected industries. The conservative Heritage Foundation
blasts the administration's agricultural subsidies as the nation's
most wasteful corporate welfare program."

"The libertarian Cato Institute called the administration's energy
plan 'three parts corporate welfare and one part cynical politics...
a smorgasbord of handouts and subsidies for virtually every energy
lobby in Washington' that 'does little but transfer wealth from
taxpayers to well-connected energy lobbies.' And the Republican
Party's Medicare drug benefit, the largest single expansion of the
welfare state since Lyndon Johnson's Great Society, was designed to
appeal to senior citizens who, as any competent politician knows,
show up at the polls... "

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