Perspectives on economics and finances with GFD

Break on through to the other side


In the above chart which shows the Dow Jones Industrial Average from 1885-present adjusted for inflation, you’ll see that the composite has yet to reach all-time highs in terms of real money. Even with the rally still in full-effect, it is tough to imagine a peak breaking though the triple-top resistance we are seeing (market technicians may argue anyway).
When recessionary periods are introduced into the chart, the picture painted looks even bleaker. Will the fallout from this rally mirror the bear markets of yesteryear? Note the peaks of 1929, 1937, 2000 and 2007 and more importantly, what followed. The Great Depression, The Tech bubble, the Housing bubble…maybe months from now we’ll be talking about the “Great QE bubble of 2013”. -Kevin

The Greatest Stock Market Loser of All Time

The stock for China Logistics Group, Inc. (CHLO on the OTCQB) can lay claim to being the greatest destroy of equity of all time as a result of the multiple reverse splits its stock has suffered and the decline in the value of the stock that followed these splits. The stock for China Logistics Group, Inc. itself has never had a reverse split, but the companies that preceded it had multiple reverse splits which, if added together, created a cumulative one-to-two hundred quadrillion (million billion) split (in numbers, that is 1:200,000,000,000,000,000)! In the OTC markets where penny stocks (a term which gives the company the benefit of the doubt) like this reside, as the stock plunges in price, the company will do a reverse split to raise the price of the stock back to more normal levels. When the company is close to bankruptcy, rather than declaring bankruptcy, the stock gets turned over to new owners who begin the process of equity destruction all over again. China Logistics Group, Inc. was originally known as Vector Aeromotive Corp. back in 1990. Vector Aeromotive Corp. recapitalized as Vector Holding Corp. on August 15, 2000, changed its name to NCI Holdings on June 17, 2003, to Dark Dynamite, Inc. on May 7, 2004, to China International Tourism Holdings Ltd. on October 26, 2007, and to China Logistics Group, Inc. on August 10, 2009. The different companies had little if anything to do with their predecessors. Since 1990, the following reverse splits have occurred: July 9, 1990: 1:50 December 26, 1998: 1:5 July 10, 2000: 1:100 January 18, 2002: 1:25 May 7, 2003: 1:200 November 17, 2004: 1:2000 March 28, 2005 1:1000 November 3, 2005: 1:4 April 3, 2009: 1:200 Multiply this out and you get a cumulative 1:200 quadrillion reverse split. As of June 24, 2013, China Logistics Group, Inc. traded at $0.013, which means that if you had invested $2.6 quadrillion in Vector Aeromotive Corp. back in 1990, your wealth would have shrunk to $0.013. So next time someone encourages you to invest in a penny stock, just remember, there is a reason they have that name.

Gold Takes a Hit

After trading to new yearly lows and then falling below $1,320, gold on Thursday reached its lowest level since September 2010. The strong rally in the US Dollar after the Fed meeting earlier this week have wreaked havoc on the all the commodity markets.


The Famous Whiskey Dividend

Successful companies pay dividends to their shareholders. Sometimes they share their profits by issuing a cash dividend. Sometimes they give extra shares of stock through a stock dividend or stock split. Sometime they provide dividends in kind, such as coupons for free bowling or sticks of gum. My favorite in-kind dividend was given to shareholders in National Distillers Products Corp. (later Quantum Chemical Corp.) on October 15, 1933. And what did each shareholder receive? Nothing less than a Warehouse Receipt for one case of twenty-four pints of sixteen-year old whiskey for each five shares of stock they owned. So if you owned 100 shares of stock, you got twenty cases of sixteen-year old whiskey. The Eighteenth Amendment to the U.S. Constitution passed on January 16, 1919, introduced Prohibition, and the Volstead Act, passed on October 28, 1919 attempted to enforce Prohibition, though not very successfully. Prohibition was repealed by the Twenty-First Amendment to the U.S. Constitution on December 5, 1933. In between that period of time, a company such as National Distillers Products Corp. could not make any alcohol for consumption, but had to concentrate on the production of industrial alcohol and other chemicals. This meant that any whiskey they had already produced could not be sold, so they put it all in a warehouse and waited. For the record, National Distillers Products Corp. stock went from 19 at the beginning of 1933 to 111.25 by September. The stock split three-for-one, and after that, the shareholders only had cash dividends to look forward to, but I’m sure there were some shareholders who remembered the famous whisky dividend until their dying day.

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