We use the expression “said to be” as a polite way so saying that the government is lying. The raw data show food prices going up twice to three times as fast. Wholesale food prices are going up even faster. And every independent tally of prices at the supermarket shows much bigger increases than the government’s numbers are willing to confess.

For example, on this Memorial Day, you’ll find the price of hot dogs about 7% higher than a year ago, according to the Associated Press. Soda and potato chips are 10% higher. And hamburger buns are up 17%.

What do we have to thank for such high prices? Partly, it is a natural, cyclical trend in the food sector. But that’s not all. There is also all that cheap money that central banks are putting out. Speculators are using it to wager on oil…and food.

*** Think you’ve got it bad. El Pais sent a reporter to Cuba to see how the island was doing now that Fidel has stepped down.

It appears that bro’ Raul is trying to take the country in the direction China has taken: preserve the communists’ grip on power, but give the economy some air.

The El Pais reporter found a country desperate for some fresh air. Nothing seems to work – not even the public toilets. And thanks to bad agricultural policies (collective farming) vast tracks of what would otherwise be productive farmland have gone to seed. A nasty shrub tree, the marabu, has taken over. Crews of laborers work all day, with machetes, clearing them out.

A man can clear two “cordels” of land in a day, each measuring 400 square meters, says the reporter. For each cordel cleared in the Cuban worker’s paradise, he is paid 1 euro (about $1.57).

But if the money is bad, the satisfaction is worse.

“You can clear a whole field,” said one worker, “and then if they don’t put tractors and pesticide on it, you’ve done nothing. It [the marabu] just comes back.”

*** “When the price of oil was $25 and gold was $300, it was easy to know what to do with your money,” lamented MoneyWeek editor Merryn Somerset Webb last week. “Now, it’s not so easy.”

A friend in Paris echoed her sentiment on the weekend:

“I just don’t know what to do…I’ve got all my money in cash, because I can’t decide…and the dollar is falling. This is terrible. What should I do?”

We gave our friend the same answer Buffett gave El Pais. We don’t know.

It is not given to man to know his fate. We don’t know what will happen.
Still, you need to make decisions. So, here we offer a very little, very modest bit of advice. It is worth every penny you pay for your Daily Reckoning subscription:

First, pay attention to your business…or your earnings. This is where you get your money. Make sure you understand what you’re doing.

Then, make sure your costs are lower than your income.

If you have a house, make sure it is a place to live, not a speculation.

When you invest, there too make sure you’re really investing – not speculating. Buffett told El Pais what he always tells investors: never invest in anything you don’t understand. If you don’t understand it – that is, how the underlying business works and how you will make money from it – it’s not an investment. It’s just a speculation.

Right now, we are putting cash into three things:

1) Gold…for all the reasons you have read about in these Daily Reckonings. Is gold going up? We don’t know…we think there is a fair chance of it. But we don’t care; the gold (we hope) is for the next generation.

2) Swiss francs…because it is not the dollar

3) Emerging markets…because they are going up; it’s a trend we think will continue as the world economy regresses to the mean. We suggest an ETF of major developing markets…recognizing that some will probably fail and others will continue to grow.

What about oil? What about commodities? We don’t know enough about them to speculate. But from what we see, they look toppy.

Enjoy your Memorial Day,

Bill Bonner
The Daily Reckoning

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