by Gary DeMar

“I remember I was very sad for many days when I discovered that in the world there were poor people and rich people; and the strange thing is that the existence of the poor didn’t cause me as much pain as the knowledge that at the same time there were people who were rich.”

—Eva “Evita” Perón, La Razón de Mi Vida (The Reason for My Life)

The rich often get a bum rap. Liberals are incensed when it is suggested that “the rich” get any type of tax reduction even though the top 50% of wage earners pay 96% of all income taxes. Since they spend more money, the rich also pay a disproportionate amount in sales, property, entertainment, and excise taxes. Without the rich, most people would not have jobs.

The first computer American Vision purchased cost $7500. It was huge and could only perform a few simple tasks, mostly word processing. The floppy disks were the size of dinner plates and held very little data (360K). Almost overnight, computer prices dropped and performance levels increased dramatically.

The first portable computer built by Compaq was the size of a sewing machine, but it was a vast improvement over what was then available. The hard disk capacity was 10 megabytes. Today’s laptops have multi-gigabyte drives, super thin monitors, built-in modems, CD/DVD drives that can play music and movies, and much more, all in a 2 to 4 pound package.

The first cell phones were the size of a small suitcase. You needed a shoulder strap to carry it. Now they are smaller than a half-pack of cigarettes. They are so cheap to own and operate that many people have given up using conventional (land-line) phone service. 

What made these performance gains and price reductions possible? People with lots of money purchased the first high-priced machines. They had the financial ability to lay out “excess” capital for what most people would consider luxury items.

The research and development costs of any new technology are enormous. That’s why the initial entry of new products into the market is expensive. But over time, when costs are recouped and production increases, costs and prices fall. The first CD players cost hundreds of dollars. They now sell for under $10. DVD players sell for under $50. This price reduction has led to the end of higher priced and mechanically inferior VHS players and tapes. The spending by rich people fuels the market for future goods at lower prices which benefits everybody.

Slamming the rich by contending that they should pay more in taxes to equalize income is the sin of envy. Envy is not the same as jealousy or covetousness. The covetous person says, “I wish I had what he has, and I’m miserable that I don’t have it.” Envy is quantitatively different. “I’d like to have what he has, but I know I can never get it. Nobody should be allowed to have it or at least that much of it. I’ll work to destroy it. Maybe I can get the government to make it illegal to own or too expensive to keep.” This is why the Bible describes envy as “rottenness of the bones” (Prov. 14:30).

Societies that struggle to exist economically are infected with envy. Prosperity in others infuriates the envier and moves him to destroy what he does not have and will not work to get. Western enviers are more sophisticated. We don’t burn a villager’s crops or sabotage his wells. We run for political office or vote for those who do so we can stick it to the rich in the name of “tax fairness.” The long-term result is the destruction of the prosperous man’s ability and incentive to create wealth. In the end, the destroyed crops, the poisoned well, the high taxes hurt all of us. With no “excess” capital, there is no one to buy those initially expensive goods that make life easier for all of us. So, instead of envying the rich man, thank him and work to be like him.

Cain was the first envier. He could have offered a sacrifice equal to that of Abel or offered a sacrifice that was from a pure heart. Instead, he murdered his brother for his success. It didn’t make Cain any more successful, but I suppose, for the moment, the act gave him satisfaction. Envy appears again in Genesis when the Philistines envied the prosperity of Isaac: 

Now Isaac sowed in that land, and reaped in the same year a hundredfold. And the Lord blessed him, and the man became rich, and continued to grow richer until he became very wealthy; for he had possessions of flocks and herds and a great household, so that the Philistines envied him. Now all the wells which his father’s servants had dug in the days of Abraham his father, the Philistines stopped up by filling them with earth (Gen. 26:12–15).

The Philistines could have dug their own wells and inquired of Isaac to learn the methods of success. Instead, they destroyed his property to bring him down to their standard of living. Of course, with Isaac’s wells sabotaged, a drought would affect Isaac and the Philistines. But enviers don’t think ahead. They only care about dragging the successful down to their level of incompetence.

Modern-day economic theory feeds off the sin of envy. The first step is to promise the citizenry that they will get some of the largess of the rich. When that only goes so far, legislators will make it more difficult for the prosperous to remain prosperous. Obstacles will be put up to stifle their success, all in the name of equality. We’ve seen it happen before. The Communists had to build a wall around East Berlin to keep the industrious from fleeing the politics of envy.

This article is also found at:

http://www.americanvision.org/article/why-we-need-rich-people/

The link below will take you to the current “Money and Markets” newsletter by Martin Weiss.  He is an investment advisor that I have been aware of for many years.  I think he is a good and wise investment advisor.  This newsletter was published yesterday February 23, 2009.  It is entitled “Red Alert: Major Meltdown Imminent - Your Escape.”  Every newsletter from anyone is also an advertisement for their newsletter.  Don’t let that bother you.  Over the years I have learned a lot from advertisements that contained a lot of good information.  You don’t need to subscribe to his newsletter.  I trust him because virtually all the information in this newsletter is free.  Even if he would normally charge for the information (like the Banking Survival Guide mentioned below) he is not asking for any money for this information now.  Dr. Weiss tells you what to do with your bank accounts and investments to preserve them for the future. His advice is free and his recommendations are extremely conservative and he won’t make a dime on any of it.

http://www.moneyandmarkets.com/red-alert-major-meltdown-imminent-your-escape-29835

Some of you may bravely think, this is just another “the sky is falling” prediction and you don’t read or worry about sky is falling predictions.  Normally I have had a similar kind of reaction to gloom and doom forecasters.  However, I now believe the sky is falling (at least our economic sky is falling) and now would not be a good time to think you are going to be immune to it.

There is a saying “Knowledge is Power.”  There is another statement in scripture, “If ye are prepared ye shall not fear.”  I think now would be a good time to combine those two statements.  I don’t think, with today’s economy, now is a good time to think that “ignorance is bliss.”  Today ignorance may harm you a great deal.  I think you should arm yourself with as much good Knowledge of the current economic situation as you can get so you can have as much power over your situation as possible.  Then I think you should take appropriate steps to be as prepared as possible so you will not fear.  The linked newsletter will help you do that if you are able to follow the recommendations.

There is a lot of good knowledge in the linked newsletter with some specific steps that you should take to protect your investments and bank accounts from the current and coming economic difficulties.  I recommend that you take the recommended steps.  They are not radical or weird investment schemes. 

Here is basically what he recommends for our current economic situation:

Dr Weiss recommends that you have all of your liquid money in FDIC insured bank accounts under the FDIC insurance limit in strong financial institutions.  Larger amounts of money and investments should be in short term Treasury securities (less than one year maturity).  You can invest in Treasury securities directly through the Treasury, but the easiest way is through money market mutual funds that are invested 100% in Short Term Treasury Securities backed by the full faith and credit of the U.S. government. Whether you buy Treasury securities directly or through mutual funds you realize the same full faith and credit backing of the government.  You can have easier access to your Treasury Security investments in a money market mutual fund than invested directly with the Treasury. There is a $250,000 limit on an FDIC insured bank account.  There is no limit to the amount you can put in Treasury securities including through money market mutual funds.  So, up to $250,000 should go in an FDIC insured bank account.  Anything over that amount should go in a short term Treasury security investment.  401K’s usually have Treasury Security money market mutual funds as part of the 401K.  He doesn’t recommend any stock market investments at the current time.  This kind of philosophy will protect you from any banking problems in the future.  This is Safe Haven investing.  Talk to your investment advisor, if you have one, about Dr Weiss’s recommendations.  If you ask my advice it is included in this paragraph.

There are many other links in this newsletter so you can study out the current situation as deeply as you want to from other sources.  There is even a link to Part II at the bottom.  I recommend that you read the entire newsletter including Part II.  Then you will be armed with as much power as you can muster for our current economic situation.

About a third of the way down the newsletter are five steps to take.  The third step has a link to a pdf file.  I recommend that you download the file at that link and read it and follow its recommendations.  Here is the link to the downloaded file if you would like to go there directly. The file is called “The Safe Money Banking Survival Guide.”

www.martinweiss.com/images/pdf/SMR0250_BankingSurvivalGuide.pdf

Here is the link again to the article by Martin Weiss.

http://www.moneyandmarkets.com/red-alert-major-meltdown-imminent-your-escape-29835

If you have not followed the counsel of spiritual leaders to obtain your emergency preparedness supplies, and a supply of food and other commodities, I strongly recommend that you follow that counsel now. You never know when we will need it.

Here is a link to counsel that I recommend everyone take for home storage.  This short document is entitled  - All is Safely Gathered In – Family Home Storage

www.providentliving.org/channel/0,11677,1706-1,00.html

Here is a link to counsel that I recommend everyone take for family financial management.  This short document is entitled – All is Safely Gathered In – Family Finances.

www.providentliving.org/channel/0,11677,1709-1,00.html

Here is a novel idea.  The U.S. government should nationalize the big banks in the United States like Citibank and Bank of America.  Supposedly this would provide confidence to the American consumer and the rest of the world.

 Is this a trial balloon by Katie Couric and her network to see how people react?

 Why not just nationalize all the banks in the country?  Then the government could force the banks to start lending again.  Such a move would surely give confidence to the rest of the world economies.  It would probably do wonders for the stock market also.

This news report video of today, February 20, is only one minute long but it is amazing to say the least.  Maybe our new Socialistic ways haven’t seen nutin yet.

 Click here-

http://townhall.com/blog/g/ddab72f0-5646-45eb-a3c8-17a0057c3368

Someone asked the question: What will the stock market do this year?  The answer:  It will fluctuate. 

When the stock market is low or going down it is good to keep “Dollar Cost Averaging” in mind.  The concept of “Dollar Cost Averaging” is that you keep investing the same amount every month (e.g. $100) regardless of whether the stock market is going up or down.  When the stock market is down you buy more shares for the $100 than you buy when the market is up.  The dollar cost averaging investor always does better than the average over time.  The average value will be greater than the average price.

Most people do the opposite.  When stocks go down they stop buying stock.  Dollar Cost Averaging investors keep putting investment money into the market every month and pay no attention to where the stock market is at the moment.  This concept takes advantage of the commonly accepted practice of buying more of an item when it is on sale and less when it is more expensive.  It does make sense.  Most people realize that this is a good idea for every other item they buy except stock.  This doesn’t make sense because when the market goes down  all the stocks are less expensive i.e. they are on sale.  Normal behavior says buy more when something you want is on sale.  Buy less when it is expensive.  Dollar Cost Averaging automatically does this. 

It is like the stock market stopped its rise October 9, 2007 and said,  ”you know, we have been going up for many years now and there are a lot of people out there who did not take advantage of this big rise so let’s take a break from rising for a while, go back down to the level it was several years ago to let all the people who didn’t get in when it was low several years ago time to get in, then we’ll start going back up again.”  How much better does it get than that?  As the stock market goes up to 14,000 (on the Dow) people say, “gee I wish I had invested years ago when the market was at 8000.”  Well the market has now gone to 8000.  People have short memories.

The stock market will go up over time unless the world as we know it is going to come to an end.  If society and the economy come to an end then it won’t matter what you did with your money.  We will all be in the same catastrophe boat together.  If society and the economy are not ready to come to an end then eventually the stock market will recover and come back up like it has always done.  Everyone who bought stock when the price was low, really low and on sale, will make a lot of money.  This is why Warren Buffet invested a lot of money in Goldman Sachs and other companies recently.  Everything is on sale.  The only difference between Warren Buffet and us is he invested $100 million (or was it a billion?), and we invest $100.  But, he was following the same thinking.

Here is an example of why dollar cost averaging makes you money:  You decide to start investing $100 every month.  The price of stock XYZ is $15.  So you invest your $100 and buy 6.666 shares of stock XYZ at $15.  Next month the price goes down to $10 and you invest your $100 again and buy 10 shares of XYZ stock at $10.  The next month the price goes up to $20 and you invest your $100 again and buy 5 shares of XYZ stock at $20.  The next month the price of the stock goes back down to $15.  Have you made any money on your investment?  It is the same price it started at 3 months ago and you bought stock at $20 and at $10 both of which are $5 more or $5 less than the average of $15.  The average value of the stock over the four months is $15 per share.  So apparently you have not made any money or lost any money.

Actually you made 8.3 % on your investment even though the price of the stock is the same as it started out.  He’s how you made 8.3%. 

You invested $300.  You bought 21.666 shares.  Your average cost was $13.85 per share ($300/21.666 shares = $13.8465 per share).  But the average value is $15 per share over the four months (15+10+20+15=60 / 4 = 15). So  15 / 13.85 = 1.083 or 8.3%.

Here is another way to calculate your increase.  You invested $300 ($100 x 3 = $300).  Your investment is now worth $324.99 (21.666 x $15 current value per share = $324.99)    $324.99 / 300 = 1.0833 or 8.3%.

The reason you made money is because you bought more shares when the price was low (10 shares) than you bought when the price was high (5 shares).  You bought more shares when the stock was on sale at $10 per share than you bought when the stock was expensive at $20 per share.  You made a smart decision to keep investing your $100 per month even though the price was going down.  When the price came back up to $15 per share you made more money on the 10 shares you bought at $10 per share (10 x $5 profit per share = $50 profit), than the money you lost on the 5 shares you bought at $20 per share (5 x $5 loss per share = $25 loss).  So your investment of $300 is now worth $324.99 and you made 8.3% on your money.

Mutual Funds are a good way to invest using Dollar Cost Averaging.  By investing in Mutual Funds you are automatically diversified.  You automatically invest in a portfolio of stocks so the risk is spread over many stocks.  You are never invested in one stock.  If you had invested all of your funds in one stock, e.g. Lehman Brothers or Bear Sterns, your investment may have no value now.  Right now is a good demonstration project of why you should not put all of your eggs in one basket.  Mutual Funds automatically take care of this for you.

A fluctuating market is good to the Dollar Cost Averaging investor.  Right now we are in the trough of the cycle.  The Dollar Cost Averaging investor likes troughs.  It gives him/her the opportunity to buy more shares at a lower price.  When the market comes back up all those shares you bought now during the screaming sale, when the Dow was at 8000 or even less, will be worth a lot.

Those of you who have a strong stomach for seriously bad predictions about the economy and the United States should click on the link below.  This link takes you to an interview with Gerald Celente the CEO of Trends Research Institute and the publisher of The Trends Journal.  He is predicting the worst economic collapse ever beginning in 2009.  I don’t know anything about the interviewer Russia Today.  The interview is interesting to say the least.  I have never heard of Gerald Celente but he has apparently been forecasting since 1980 so he is not a new guy off the street.

Click on this link.

http://www.russiatoday.com/guests/video/2114

If you don’t like Russia Today then how about an interview with Fox Business News in November 2008 right after the election.  Here he is being interviewed by a Fox Business correspondent.

http://www.dvorak.org/blog/2008/11/13/gerald-celente-of-the-trends-research-institute-predicts-doom-gloom-and-revolution-under-obama-rule/

This guy is not a crackpot.  Here is a list of major newspapers and other media in the U.S. and how they value Gerald Celente’s forecasting.

http://georgewashington2.blogspot.com/2008/11/top-trend-forecaster-says-were-going-to.html

Here is the web site of the Trends Research Institute, Gerald Celente’s own web site.

http://www.trendsresearch.com/

How is your emergency preparedness?  Even if this guy is only partially correct now would be a good time to check on your food storage.  Even if he is not correct at all now would be a good time to check on your food storage.  We have had plenty of warnings over the years.