The Journal's happy face...

 The Wall Street Journal is doing its part to put on a happy face...

This morning, one headline on the Journal's website said, "Stocks Rise on Hopes for Greece."

Another said, "Home Prices Notch Spring Bounce."

The reality seems so different…

 They're protesting in the main square in Athens.

The Greek parliament is voting on $40 billion in spending cuts and tax increases tomorrow. But Greece's two major labor unions don't want to earn less money and pay more taxes. So they've called the second general strike this month and the fourth this year.

One report says protesters overturned café umbrellas and set them on fire. Another report said they "attacked" the front window of a McDonald's. I guess they couldn't actually break it.

 Greece was bailed out to the tune of 110 billion euros in May 2010. Now, it's slated for another 28 billion euros ($40 billion) of bailout money from the European Union. But EU officials say Greece first must pass spending cuts and tax increases. The EU finance ministers will meet on July 3 to decide if Greece gets the aid.

 It's a little scary to think a country as small as Greece can cause all this havoc and require such an enormous bailout. I can't imagine our government doing the same for Mississippi. Even though Mississippi has the smallest economy in the U.S. (on a per-capita basis), it's still bigger than Greece.

The U.S. is no great example, and I doubt Mississippi is a bastion of free enterprise and fiscal responsibility. But I also doubt it's as bad as Greece.

 The Journal is too sanguine on housing prices. Housing prices didn't "bounce" in April. They fell 4% compared with April 2010. The April 2011 dip was the 10th straight month housing prices fell. That's how the Financial Times reported it.

Weird, isn't it, how the two biggest financial newspapers can disagree on a story that seems so cut-and-dry, so by-the-numbers... and so easy to get right?

 The reason housing prices fell so much the last couple of months is obvious. Last year, Komrade Obama's tax credit was in effect until April 30. So everyone who could buy a house did so before April 30. First-time homebuyers got an $8,000 credit. Other homebuyers (like yours truly) got a $6,500 credit.

Of course, all short-term government solutions fail, just as the homebuyer tax credits failed. Housing prices have continued to fall and have fallen even more sharply due to the difficult comparisons with last spring's stimulus-induced numbers.

So how did the Journal report a "bounce" in housing prices? Well, seasonally adjusted April housing numbers were 0.1% lower than in March, which was better than the expected 0.2% drop. That's a bounce.

 It seems no matter what the government does... and no matter how benign the near-term effect, the longer term (not much longer, these days) is worse than it might have been. It's as if they'd rather get polio or smallpox than suffer the brief sting of the vaccination needle.

Most people are like that, though. Most don't save enough (if any) money. Most spend today and don't think enough about tomorrow. They don't forgo future consumption. In fact, they borrow as much as they can, pulling consumption forward in time, making it that much harder to save. It's easy to criticize governments, but if you don't save money and keep your own debts under control, you shouldn't be surprised about Greece or the U.S. or any other over-indebted nation.

 As for the U.S. dollar… that cat is effectively out of the bag. The Journal isn't reporting any strong dollar headlines (at least not today). Even central bankers know it's toast. Swiss bank UBS surveyed central bankers who control about $8 trillion of U.S. dollar reserves. More than half agreed the dollar would lose its reserve currency status within 25 years.

Though it's refreshing to see central bankers (finally) acknowledging reality, this is not news to us. China, one of the biggest dollar holders, has spent about 75% of its $200 billion expansion in reserves on gold, other currencies, and... well… anything but U.S. dollars.

Central banks are buying more gold than they have in 40 years. Central banks have bought more than 5.3 million ounces of gold so far this year. They're on track to make their biggest annual purchases of gold since 1971 – the year the U.S. government finally and completely unhinged the dollar from gold. Central bankers were obviously scared then, and rightly so. Gold went from $35 to a blow-off peak of $850 back then, a 24-fold increase.

And they're scared again today. Maybe it's 1971 all over again... And gold is on its way to $6,000, a roughly 24-fold increase from the 1999 bottom of $252 an ounce. Would $6,000 gold surprise anyone at this point? Not me.

 Greece melting down... housing prices plummeting due to ill-conceived government solutions... central banks chiming in on the dollar and gold... pension plans set to blow up...

Is this what we've come to? Are we doomed to spend the rest of our careers writing about how the government is alternately ruining our economy and setting up a few astute investors to make a big profit?

Apparently so. I can't imagine being such a doctrinaire bottom-up investor today that you could possibly ignore the current macro environment.

Lots of folks who do value-oriented, bottom-up research and investing for a living feel the same way. I was recently discussing a stock idea with one of my favorite hedge-fund managers. He wrote back that he's only interested in natural resources and stocks to short due to the Greek meltdown and the negative effects of the debt-ceiling controversy.

This guy runs a focused portfolio. He's usually the largest shareholder in the companies he invests in. He takes large stakes, usually 15% or more, of his target companies. And he plays an active role in trying to improve each business.

And all this focused, bottom-up value investor can think about is how he'll protect himself from a falling dollar (natural resources) and mitigate the effects of government wrangling over our economic fate (the debt ceiling).

I guess we're all top-down macro investors now.

 A quick note from world traveler, raconteur, and Atlas 400 chief Sean Goldsmith, who would like you to join him in Argentina for a good meal, stimulating conversation, and maybe a business idea. I know Sean. The food and drink alone will be worth showing up for...

If this sounds like you… send Sean an e-mail at feedback@stansberryresearch.com with the subject line: "Buenos Aires."

 New 52-week highs (as of 6/27/11): None.

 Are we in the midst of a crisis? Or is all the bad news just the usual chatter? Tell us what you think at feedback@stansberryresearch.com.

 "After several months of being a subscriber, I have been struggling trying to figure out how to come up with the money to begin my journey down the road of my own financial freedom. This morning it struck me. I have been contributing nearly the fully allowable amount into my 401K for years. My company matches 'cap out' after I have contributed 6%. So I think I will cut my 401K contributions down to 6% or 7% to still take advantage of the company match, and I will simply set up an automatic account contribution from my checking into my Roth IRA that equals the balance of what I have stopped contributing to my 401K. (Remembering that there is a max amount that can go into the Roth.) This way I'm still saving, but now I will have control over 50% of my future savings deposits via the Roth.

"I realize there are tax implications going with the Roth, but they are minimal considering the potential benefits of being able to manage my own money and its' growth. You probably can't specifically comment on this idea, but I thought I would throw it out for other subscribers to consider." – Paid-up Subscriber, T.D.

 "Would you please write about your opinion of what would be in store for the USA if the debt ceiling is not advanced. My personal thoughts are positive, for it would force the Administration to live within its means, basically creating an amendment to the Constitution that we must have a balanced budget. Ramifications to start would be cutting spending for agriculture subsidies, end of foreign aid, ending of money printing by the Fed, and the serious and necessary debate in Congress over entitlement cuts.

"Other ramifications would be in my opinion the conclusion by foreign governments that the US Government is willing to solve their debt problems, ergo boosting the US Dollar in foreign exchange and the creditworthyness of the USA would stay at AAA. After a short break perhaps in the stock market, investors would be pleased that the USA is getting onto the right track, which would benefit stock prices and investing in this country. And one of the facets holding back the economic growth in this country would be solved, the great debt obligations of the country forcing new taxation on businesses and start-ups. Of course, the overreaching regulations of this Administration on businesses of all types can only be solved by an election in 2012." – Paid-up Subscriber A.P.

Ferris comment: I can't see Congress or Komrade Obama trying to do any of the cutting you describe. But we should certainly do all that and more right away. Whether we raise the debt ceiling or not, getting itself out of the economy's way ought to be the government's No. 1 priority. Problem is, not enough folks are interested in doing that. We need less government, a lot less, and right now. But we're not creating less. We're creating more. I disagree with you about the 2012 elections. No one who can get elected will try to do the right thing.

Regards,

Dan Ferris and Sean Goldsmith

Medford, Oregon and Baltimore, Maryland

June 28, 2011

The Journal's happy face... Greek riots... Home prices: bouncing down... Dollar out, gold in... Steve's new offer: Last Day... The end of bottom-up?...