The Room

This insightful blog provides a unique perspective on the world that you just won't find anywhere else. The Room is an eclectic mix of geopolitical and market commentary with a personal story thrown in here and there. Never willing to take any subject too seriously, David Galland delivers a "great read" that informs and entertains.

  • The Room – 02/20/2009

    We’re going to be flying low and fast in this weekly scan of the landscape in the quest for items that are 'important,' as opposed to 'merely interesting.' At the top of the list of what we would consider important is the increasing likelihood that the wheels are about to come off the global economy. And, worse, fly through the air and wipe out any number of innocent bystanders. (By now, you and the other readers of our services should already be safely in the duck-and-cover position.) It is becoming clear that more than just our subscribers are beginning to understand the depth, severity, and nature of this crisis: as I begin writing this morning, gold has rebounded to just a few ticks away from the $1,000 mark. By the time I am finished today, we could see that mark taken out. More on that topic later, but first......
  • The Room - 01/30/2009

    Like most people, I occasionally find myself overwhelmed by the tasks involved with everyday life. This week, I have been, to use the old adage, 'working like a dog.' Though, now that I think about it, I have a hard time imagining the origin of the term. Even in his youth, my now elderly companion General Beauregard Piddle didn't seem to take on anything more rigorous than climbing up on an unattended couch for a nice nap. In any event, it's been one of 'those' weeks. And so today, as I prepared to write this weekly missive, I found myself groaning, 'Arrgh, I've got to write The Room,' to my ever patient and entirely wonderful wife. 'But,' she said, misunderstanding the nature of my apparent complaint, 'I can't see how that's a problem. There's so much to write about.' 'Exactly!' I said, 'That's the problem!' In actual fact, I almost always look forward to these weekly writings as a form of personal reflection and even entertainment... and as a usual way to keep myself in the flow of the passing parade. But some weeks – most weeks, it seems of late – the sheer volume of important news that I should comment on, at least if I were trying to be a good correspondent, is so staggering in dimension, it is a real challenge to know where to begin. So, instead, I start by writing about old dogs and wonderful wives. Go figure....
  • The Room - 01/23/09

    Like a runaway train, the crisis is heading at breakneck speed down the hill and towards the next sharp turn. Though we are reasonably sure about the ultimate destination – an inflationary wreck – we can’t be entirely sure what exactly awaits around the next corner. Is it a reasonably long straightaway that gently slopes upward for a spell, allowing the train to slow to a safer speed? Or is it a broken trestle bridge hanging over a gap a mile wide and a mile deep? Some typically random thoughts on the topic…...
  • The Room - 10/24/2008

    I have woken in the pre-dawn to find our direst predictions coming true, with global stock markets taking yet another pounding and U.S. stock futures limit down. Serving as a proxy for the mindset now gripping governments around the world, French President Sarkozy has announced that the French government will, henceforth, buy shares in important French companies in an attempt to prop them up. 'We will intervene massively whenever a strategic enterprise needs our money,' said Sarkozy, a supposed economic conservative, as he pounded the table on behalf of nationalizing industry. The New Age of big government is upon us. Armed with Harry Potter-like magical monetary wands, they are wildly conjuring a deluge of money from thin air to bind the free market and keep it from facilitating the resolution of economic and investment dislocations created over decades. Bud Conrad tells me he is having a hard time adding up all the fiat money that has been committed to the battle for economic - and, by extension, political - survival over the past couple of months. The numbers rolling off the lips of officialdumb have progressed well past the hundreds of millions, or even hundreds of billions, and have now reached the trillions. In that theme, the Fed announced this week that it would drop over half a trillion - $540 billion, to be exact - on the purchase of suspect commercial paper now clogging the portfolios of 'safe harbor' money market funds. Given that there is a total of $3.4 trillion of your money resting in those very same funds, the commitment of $540 billion - about 16% of the total - should be taken as an indicator of just how bad the problem really is....
  • The Room - 10/17/2008

    Keeping up with the complex drama now flashing across the global screen is becoming more challenging with each passing day. In lazier days, a scene might be allowed to unfold at a measured pace, the interactions between major characters developed through subtle nuance and lingering shots and close-ups of, perhaps, the furrowing of a brow or the sly upturning of the corner of a mouth. These are not those days. Instead, we are living in the world of 30-second commercials, directed by a speed-addicted music video director, strung together in a nonstop explosion of two-second jump cuts. One minute stock markets are soaring, the next crashing. Gold jumps $20, then falls $40. Banks fail, banks get bailed out. Politicians elbow each other out of the way to throw billions, trillions even, into deep, dark holes. Oil tumbles, then bounces, then tumbles again. While the volatility has allowed me to make some fun money through the all-terrain investment vehicles of futures and options, it has also made the task of trying to keep current on the news and, more importantly, on what's important, daunting indeed....
  • The Room - 10/10/2008

    In last week's edition of this meandering missive, I mused as follows... "What, I wonder, will the government do when next week, or the week after maybe, the U.S. stock market takes another header for 500 points? Stay tuned. Meanwhile, gold is at $826, down considerably over the past week. Like when a tsunami sucks the water away from the shore just before hitting, we're in a transition period. I'm not worried about where gold is going next. I wish I could say the same about the world." According to the number crunchers, the U.S. stock market is on track to have its worst week since 1937. Which, as you can see from the DJIA chart here, is an acceleration of the broader trend that has held sway for some time now. While we can't yet say what action the U.S. Government will take next, glancing over the horizon, we see a growing number of countries implementing a euphemistically named "market holiday." In Iceland, all banks and markets are now enjoying a day off. And Kevin Brekke, our Switzerland-based researcher, just wrote that there is a rising call to halt trading in Germany. It would not surprise me in the slightest if the same were to occur in the U.S....
  • The Room - 10/03/2008

    We're no longer in Kansas, Dorothy. At this point, the world's financial markets are in the firm grasp of a massive tornado. Our vision is blurred with fast-moving images of abandoned houses, crumbling banks, pontificating politicians, alien-looking Treasury secretaries on one knee, and suicide stock and commodities charts. When the whole mess crashes back on terra firma, the landscape will look considerably different. But, what? We remain convinced that the result, with the unavoidable time lag, will be inflation on an epic, global scale. But if history provides one lesson in rich abundance, it is that the future is unpredictable. Who is to say that the government of these United States -- and of similarly indebted and in-trouble countries "over there" -- aren't too late to the game? Or that even $700 billion, or a trillion... or...?... will not prove to be too little, too late?...
  • The Room - 09/26/2008

    What a world I have returned to from my cloistered retreat at the beautiful Vivenda Miranda, scenically situated on a cliff outside of the quaint port town of Lagos, Portugal. Everything has changed. Everything is changing. The storm we have so long tried to help you prepare for is upon us. At this point, I can only hope you have your sails rigged for the storm now breaking, because time is running out. The violent volatility I warned of when last I wrote has arrived, with towering waves now rising up and smashing into the economy - and as an unavoidable consequence, our personal portfolios -- from all sides. Overnight the holders of my mortgage, WaMu, failed, the largest bank failure in history. This week, the golf course that I usually play on was taken over by the government... last week it belonged to AIG. As you don't need me to tell you, that same government now wants to spend over a trillion dollars to bail out Wall Street and to shore up the money market mutual funds - which have so far flown under the radar screen despite portfolios stuffed to the brim with bad paper. While no one was paying attention, U.S. automakers used their election year leverage to win approval for $25 billion in low-interest loans....
  • The Room 09/19/2008

    Hi, I am Olivier Garret, this week’s editor of The Room. What a rough week out there. My mind wanders as I drive at a crawl (I am not known to be a patient driver) behind a car full of “leaf peepers,” as Vermonters affectionately call the tourists who invade our state every autumn. I wonder how my friend David Galland is doing in Portugal, sipping the local wines with no access to his emails? It may be the worst week to be without market news -- or perhaps not… Hopefully David is enjoying himself while celebrating an old friend’s birthday with a group of other newsletter editors and industry peers. Meanwhile, Treasury Secretary Paulson and Fed Chairman Bernanke are not exactly having a day at the beach as they try to solve our nation’s problems. By the way, this past week, it seemed to me that Lehman drew the wrong lottery number while AIG appears to have hit the jackpot. I wonder how many other “private enterprises” will be lucky enough to get bailed out at taxpayers’ expense in the next few months: WaMu, Wachovia, and hundreds of other financial institutions, GM, Ford, Delta, United?...
  • The Room 09/12/2008

    In today's "special" edition of the Room, I want to go somewhat beyond the latest news and observations on same. Instead, I want to discuss the big picture as it relates to the U.S. and global economy. I do so because it is growing more important with each passing day to get a solid fix on where things stand and, more importantly, where they are going next and how you can protect yourself. It's hard to overstate just how unpredictable and dangerous the economic and investment environment has become. While these are topics we'll be covering in today's online event, Casey's Crisis & Opportunity Update, the situation at this point is moving so fast, and is so highly charged, that it is time to pay very, very close attention to things. As you should expect, we have been furiously fingering the tea leaves in an attempt to make actionable sense out of the big moves now in motion. While there is much that we know about the unfolding events, there is also much that is unknowable – for instance, how much longer the long-suffering foreign holders of U.S. dollars will be patient....
  • The World as We See It

    4 reasons why this may be the worst crisis since the 1930s - and 4 projections for what's going to happen... I identify the foundational forces now driving our economy to establish a basis for the investment recommendations you'll read in this advisory in the months to come. The role of the U.S. as the world's dominant economic superpower is now challenged by an out-of-control growth in debt and a deterioration in its reputation as a financial haven. The dollar is losing its special status as the global "reserve currency," is leading, in turn, to higher inflation, higher interest rates, weakening financial assets (stocks and bonds) and runaway prices for commodities. Let the data and let them speak for themselves, with some interpretation along the way....
  • The Room 8/22/08

    Summer weather, at least that of the preferable sort, has finally returned to the corner of the globe where your correspondent sits listening, too loudly, to Michael Franti's Yell Fire!. For those of you unfamiliar with Franti and his band Spearhead, his genre is what might be termed "Revolution Rock"... as in taking it to "the man." While I don't agree with many of his lyrics, which skew far left, I do like the music and his thematic focus on peace and, paradoxically, burning things down. Regrettably, in his view the rebuilding would be of a socialist paradise. It is, of course, deeply ingrained in human nature to want everything wrapped up in a nice utopian package. Problems arise, however, because one person's idea of utopia is another's idea of hell. And, inevitably, even utopia's champions awaken one morning in full agreement that their vision was hell... just ask Robespierre or Trotsky. In the end, no one gets their utopia because the entire notion is merely a dangerous fiction that, in the attempt, leads only to the disenfranchisement of one group or groups in favor of another. And, in time, of everyone....
  • Where Is the Economy Going in the Next Six Months?

    As investors, the question we have to focus most of our attention on just now is what impact the credit crisis, the bursting housing bubble and the actions of the U.S. government will have on the economy and investment markets in the next six months. We have seen the Fed and the federal government move to panic mode as they try to keep the system afloat. As expected, they have cut rates, as well as having given away checks and rearranged the Federal Reserve's entire balance sheet. The underlying problems have not been fixed with this massive bailout. There are still many credit pot holes out there and new lending remains highly constrained. Even the government tax rebate checks, rather than boosting the domestic economy, were largely absorbed by higher oil prices. The resulting cut-back in consumer spending, coupled with ongoing constrictions in lending, will cause a severe slowing of the economy....
  • The Bursting Commodities Bubble

    A steadily growing drumbeat is sounding throughout financial mediadom; a major commodities blowout is in the cards. The most widely quoted reason is a U.S. recession that will sympathetically pop the commodity bubble. It seems to me that these views are intertwined with a changed perception of how the economy works. A new paradigm if you will. People used to pay homage to the notion of a business cycle, a somewhat predictable and even stately progression of economic growth leading to excess, followed by a corrective recession. After which the cycle would begin anew....
  • Views from Vancouver

    By David Galland, Casey Research With the downturn in the precious metals markets making even the most stalwart investors question their instincts; it's good to have some advice from the field about what is really going on out there. Here today David...