Wednesday, April 28, 2010
I wish to comment only briefly on this topic.
The US Securities and Exchange Commission (SEC) is charged with regulatory oversight of the US financial system.
For the entire 1982-2007 bull run in US stocks, the SEC did essentially nothing to safeguard investors, who have been massively exploited throughout the entire period. Among its more notable failings, the SEC failed to blow the whistle on the lax and indulgent practices of the ratings agencies (Moody's, Standard and Poors, etc.). "Tape painting" (buying stocks in your mutual fund or other portfolio at end of month and end of quarter closing to run up performance numbers) was never touched.
The only real action taken by the SEC was to target short sellers, who have a critical role in balancing the financial system. Let's be honest, the US market was far more justifiably sold short than long, particularly during the latter years of the 26-year over-hyped bull market. So the SEC tried to take down the only honest guys on Wall Street while acting as cheerleaders for the so-called bull market.
So long as fraud and mismanagement resulted in stocks going up, the SEC did nothing.
In fact, the SEC is one of the primary culprits - along with the Federal Reserve and US elected representatives - in indulging the 26-year feeding frenzy on Wall Street which was conducted at the expense of hapless and unwary mainstream investors.
As an enforcer of the law, is not the SEC utilizing tactics more familiar to the KGB in its assault on Goldman Sachs?
Others have analyzed the issues better than I, but suffice it to say that Goldman Sachs had far less to do with causing the financial meltdown than did the SEC itself. In essence, by tackling Goldman Sachs as its "fall guy," the SEC has trained its sights on the last man standing, in order to divert attention from its own culpability!
I would be better persuaded as to the sincerity of the SEC's mission if it first of all addressed its own regulatory missteps and outright complicity during one of the greatest and most irresponsible multi-bubble periods in human financial history.
Imagine this... if the tables were turned, and the largely quite competent managers at Goldman were instead grilling the members of the SEC, then far more truth would be told than will ever be revealed through the current diversion.
My call, in brief: SEC = felony, Goldman Sachs = misdemeanour (at worst).
Let's keep the story in perspective as the media circus unfolds... down at the Coliseum!
And, if you want to invest where the sharks won't eat you alive, consider the gold and precious metals sector rather than the still overvalued stock and bond markets. Most everything else is potentially hazardous to your financial health, in large part because of agencies such as the SEC, who did not do their job when action was needed, and are failing to do it now, by targeting their action against the shrewd financial managers at Goldman Sachs - the individuals who were best able to game the system that the SEC itself had helped to rig!
Not only is gold the best investment category in today's world of Alice in Wonderland finance, it is presently in a renewed positive phase, so those who buy now will very likely be rewarded sooner rather than later:
The above chart is available for subscribers to The Aden Forecast. I strongly recommend that you subscribe, and will add that their (annual) rates are quite reasonable!
And from Mark Lundeen - a little more of what is actually going on:
Due to policies promulgated by US elected representatives and the Federal Reserve, and fostered by the SEC, debt and money printing have grown out of hand - like Topsy!
So let's all focus on Goldman while the charts above (of US debt expansion and the correlated US dollar gold price) climb to the sky....
Once again, by the way, David Shvartsman at Finance Trends Matter has covered this topic as thoroughly as can be imagined, with links to comments by such as Peter Schiff and Marc Faber. Suffice it to say that the contrarian community has comments on the topic which coincide well with my own perspective on the matter.
15 May 2010: Here's a nice (brief) critique of the SEC decision from The Business Insider. It is reported that one SEC commissioner stated, "I have serious doubts about the evidence of fraud." Two of five SEC commissioners voted in opposition to the obviously politically-motivated decision to proceed against Goldman. You might want to consider the SEC a "perpetrator protection" agency. This story also links to more detailed coverage in the WSJ (you must be a subscriber to view this story).
Friday, April 16, 2010
Read carefully. The title of this piece is NOT "Reaganomics," but "Renegonomics."
I came across this interesting snippet from Bill Fleckenstein today, who refers to "the hidden benefits of debt repudiation and forbearance by the banking system, all of which have been created by the government's easy money and bank bailouts."
What are we talking about here?
Again, to quote Mr. Fleckenstein (literally no one could say it better): "People who aren't making home payments; or those who are participating in short sales on homes they can actually afford -- in other words, the folks who in essence reneged on mortgages that were under water and did so because they could -- have extra money to spend that they wouldn't have if they'd been making payments."
How much money are we talking about?
According to Mr. Fleckenstein, "I've seen recent estimates as high as $2 trillion being available, which is a lot of extra juice for the economy, especially with that extra juice hitting the skinnied-down state that the world came to in the wake of the (2008) financial crisis."
What was that again?
The US economy is booming because people who don't pay their mortgages have experienced a windfall.... In essence, rather than paying their mortgages, these underwater homeowners are directing their extra cash on hand into the marketplace, providing an unlikely boost to the consumer economy!
Those who renege on their mortgage payments - with the full blessings of the state - have a lot of free cash on their hands - as much as $2 trillion in unpaid mortgages - and it is feeding the US economy (while US government bail-out programs soak up the damage to the lenders who aren't getting paid by the deadbeat mortgage holders).
Mr. Fleckenstein explains it as follows: "Think about the entire U.S. economy as, in essence, a company. While the balance sheet has become astronomically worse -- in the form of current (though postponed) debts, as well as future obligations -- the income statement has been boosted recently: Those folks who are upside-down in real estate have been given a reprieve, and the real-estate market itself has been given a shot in the arm by tax credits (think: extend and pretend). So, the income statement for now looks okay, as does the economy. In sum, company USA is 'worth' a lot less than it used to be, but for the moment its operations are okay, at least on the surface."
So, you may ask, what's the problem? Sounds pretty good. The folks underwater on their mortgages are powering the economy, and the US government is rescuing the unpaid lenders. Should we not applaud the mortgage non-payers (and the US government that is enabling them) as the source of our current salvation?
According to Mr. Fleckenstein, here is the conundrum: "The prudent have been asked to bail out the reckless -- and it won't work over time. The 'do-over' that the world was given during the financial crisis, courtesy of the printing press (read: government bailouts), will be 'paid for' with higher inflation and ultimately higher interest rates. But that's getting ahead of ourselves. The only people more upset than those handful of prudent types are liable to be the deflationists, who haven't yet realized that their best chance of victory has come and gone, at least until the printing press is taken away."
That is, we are setting ourselves up for runaway inflation. So far, the collapse of the real estate bubble has masked the rampant inflation brewing beneath the surface (check out the annual increases in the cost of a can of beans at Wal-Mart over the past 5 years if you doubt me).
2005 - 52 cents
2006 - 58 cents
2007 - 62 cents
2008 - 68 cents
2009 - 78 cents
2010 - 82 cents
Pamela and Mary Ann Aden report that the yield on the 30-year US government treasury bond has now broken out to the upside for the first time in 29 years. This signals big-time inflation and long-time inflation - perhaps decades of gradually escalating, increasingly pervasive, and eventually, possibly runaway cost increases.
In other words, the US economy is now literally at the last ditch - running on fumes if you will - or rather, "renegonomics." When the economic boost provided by mortgage non-payment works its way through the system - there will not be another rescue package.
If you like, this is the wall, and we have seen it. Renegonomics is fuelling the present economic fires. And let me tell you, we won't have much more to burn after this fire goes out!
For more information on the topic of "strategic default" (that is, not paying your mortgage even if you can) on mortgage payments, click here for Dr. Housing Bubble's commentary.
Or check Karl Denninger's April 14, 2010 post: "Oh, So the Recovery Is About Delinquency?" He summarizes the core issues as follows: "The essential conundrum is this: Eventually, one way or another, these families will have to start making payments toward housing again. They may make those payments via their mortgage or they may be evicted and become renters but the money currently being blown on frivolities that is "propping up the economy" and leading to "strong consumer sales" is showing up there only because people are literally getting a free ride on their shelter costs. The perversions at play here are outrageous - not only are these "homeowners" living effectively for free (and since most mortgages have escrow accounts for property taxes, those aren't being paid either!) but in addition the banks, by not foreclosing, are holding defaulted loan paper on their books at dramatically above recovery value, thereby presenting a false view of their financial health."
Another factor in this picture is rental rates. I'm writing as a Canadian commenting on the US housing market, and I'm short on direct experience. However, my understanding is that US rental rates are also dropping in many markets (though also rising in some). Tenants whose rents are falling also have more free cash flow, and thus more money to spend. So perhaps declining rents are also helping to fuel the US economic recovery, this time at the expense of landlords - many of whom, of course, may also be mortgage holders.
As of October 11, 2009, the Real Estate Bloggers website published the following:
"The U.S. vacancy rate reached 7.8%, a 23-year high, according to Reis Inc., a New York real-estate research firm that tracks vacancies and rents in the top 79 U.S. markets. The rate is expected to climb further in the fall and winter, when rental demand is weaker, pushing vacancies to the highest levels since Reis began its count in 1980. Meanwhile, the air leaving the market is driving rents down, most sharply in markets that had been chugging along until a year ago, when unemployment accelerated, including Tacoma; San Jose, California; and Orange County, California."
Though I have used the term in this article, those who don't pay mortgages because they are "under water" are not necessarily "deadbeats."
Why? They are not in violation of contract law, as the mortgagee (the entity who provides the funds for the mortgage) has in most cases asked for a minimal down-payment if any at all, requiring only the house (now typically worth hundreds of thousands of dollars less than its originally appraised value) as collateral. This is neither predatory lending by the bank (or the "synthetic entity" making the loan available) nor unethical behaviour on the part of the mortgagor (the homebuyer), as the contract clearly stipulates that a loan is being exchanged for a home as collateral.
The cause was clearly the housing bubble itself, which in turn was a consequence of "excess liquidity" (that is, the central bank throwing money around - with the permission of elected representatives - trying to prevent the economy from following its normal though unpleasant up-and-down business cycle). An anonymous contributor on Mr. Fleckenstein's site seems to have clarified the issue of "deadbeat borrowers" almost perfectly, as follows:
"I did credit analysis and have been a senior financial executive for several years, so I have quite a bit of experience with lending, borrowing and contract law. I also spent way more time than I like studying MBS/CDO pricing. People need to make a distinction between those who committed fraud on a mortgage application and people who did not, and consider embedded options.
"Options to walk away from or prepay a mortgage are freely granted by lenders. It's part of what borrowers pay for in the interest rate and fees. Whether or not lenders properly priced those options is their responsibility. It appears that they placed ZERO probability (therefore ZERO value) on the walk-away option.
"GENERALLY, no fraud is committed when a borrower exercises those options, any more than if a stock put option holder exercises it when it's in-the-money.
"Lenders agreed to accept these exposures on the basis of credit evaluation AND their own business decision. If someone lies about their credit on loan docs, the lender can and should say, 'I would not have made this loan but for your lie(s).' That's fraud. Those people are crooks.
"However, many lenders threw credit analysis out the window or sold mortgages too cheaply, too easily to get business during the bubble. For them to cry wolf now - or to call those borrowers 'deadbeats' who profited from this (without fraud) - is disingenuous. Everyone was a big boy (or girl) here.
"Regular folks who DID NOT lie have every right to exercise the option they paid for and the lender has absolutely NO RIGHT to expect otherwise. This is a sound business decision akin to a trade. Perhaps they made poor buying decisions in the first place, but they are no more 'reckless' or 'deadbeat' than people who lose money on a bad trade or business venture.
"The rightful rage at being asked to bail out all comers (that I share - the whopping tax bill doesn't help) is more properly directed at the party forcing the bailout - Big Government."
What to do in the case of such an inflationary scenario? No surprise. You've heard it here before. Exchange your currencies for gold as a store of value in inflationary times.
And... thanks to David Shvartsman for linking this post here (at Finance Trends Matter).
5 May 2010: Dr. Housing Bubble has done it again, by compiling the ultimate analysis of strategic default. Read here for a scrupulous analysis of the issue I have just touched on here.
10 May 2010: This just in. Last night, the US television program 60 Minutes apparently ran a feature on strategic defaults. The CBS website states: "It's estimated that one million Americans walked away from homes 'underwater' or worth less than their mortgages even though they could afford the payments. Morley Safer reports on this trend, called strategic default, that threatens the economic recovery."
What happened next? Google was flooded with search requests, presumably by viewers of the program, who want to know how to do it! This story was picked up by the Business Insider here. And there is a guide for how to default, which the Business Insider published in January 2010: click here. (In fact, it was the surge in visits to the guide which caused the Business Insider to become alerted to the phenomenon.)
10 June 2010: Not all economists agree that strategic defaults could have this large an impact on the consumer economy. In a dissenting view, Bill Conerly has argued that tax cuts may play a greater role in boosting consumer spending than mortgage defaults. Bill's recent post can be found here.
This is a legacy article from 2005 which I though might be interesting to update and republish. Here, for your interest, is the original text, followed by today's update at the end:
I was reading the most recent issue of Fortune Magazine last night, and what should be on the cover but bars of gold bullion? As you might imagine, Gold is now on Fortune’s top 25 list of recommended investments for 2006.
There is presently much discussion among precious metals analysts as to whether we have entered “stage two” of gold’s bull market, which is expected to be marked by increased mainstream interest in gold investment. I will attempt to show here, in accord with one of my mentors, Ed Bugos (http://www.goldenbar.com/), that despite increasing public interest, we remain in “stage one” of the gold bull market, though I believe stage two is fast approaching.
Bull markets are generally presumed to evolve through three stages. In the first stage, astute individuals who are alert to emerging trends often experience considerable gains while their area of investment interest remains "under the radar."
In stage two, the general public and the professional investment community develop increasing interest in the emerging opportunities in a particular field of investment. In my understanding, stage two is typically characterized by increased risk, as a later stage pullback can erase the gains of new investors, and restore investment values to levels somewhere between the peak and the (typically lower) close of stage one. This is significant, as some early investors may sell out to new investors at or near the stage two peak, and new investors tend to become discouraged with the new bull market after a dramatic pullback has erased their gains.
Strikingly, just at the point where the general public and the broader investment community (including the majority of professional advisors) become most disillusioned with the now maturing bull market, stage three typically begins. Once again, the early investors, who have a clearly thought-through rationale for their investment preferences, are those most likely to benefit by the third, and most dramatic bull market stage, which is one of parabolic growth over a relatively short period of time.
I can think of two excellent illustrations of these three bull market stages. The first is the gold bull market of the 1970’s, which ended in a dramatic 1980 peak with gold values over $800 per ounce.
NOTE: All three charts originated by Mary Ann and Pamela Aden (http://www.adenforecast.com/). Readers are advised to visit their excellent website for fuller understanding.
In stage one, gold values began drifting up from $35 per ounce, where they had been fixed by international accord through 1968. In 1971, President Nixon removed the US dollar from the gold standard, thereby fully opening up the value of gold to market pricing, which saw gold’s advance to about $120 per ounce in 1973. Stage one closed when gold pulled back modestly to about $100 later that year.
Stage two of the gold bull market was associated with the return of private ownership of gold to US citizens in 1974. The gold price moved up rapidly, almost to $200 by 1975, drawing in increasing public interest. But, as is characteristic of bull markets in their second stage, gold’s price then pulled back to the $100 per ounce range, thereby erasing the gains of new investors, but preserving the gains of the early investors.
As is typically the case in bull markets, this second stage collapse actually set the stage for the stage three parabolic move upwards in gold’s value to over $800 per ounce.
By 1980, with gold nearing its peak values, market fundamentals changed, and the wisest of investors sold their holdings of gold in recognition of the changed fundamental situation. (The best known of these is Jim Sinclair: http://www.jsmineset.com/).
The particular development in 1980 was that Paul Volcker was appointed to chair the US Federal Reserve Board. Volcker steadily raised interest rates to wrestle inflation to the floor, ushering in a 21-year secular bear market in gold. Oblivious to these fundamental changes, many members of the public were by this point anticipating near-infinite gains in the value of gold, and steadily lost their gains (or their invested capital) due to holding their investments as the gold bull market at first precipitously, and then gradually, unwound in a 21-year downtrend, ending in 2001.
My second example of a three stage bull market is the recently concluded “technology bubble.” The three stages are well-illustrated in a study of the shares of Dell Computer. Dell’s stage one accumulative phase continued through the end of 1992, at which point the price (in contemporary post-split terms) had risen from mere pennies to 78 cents a share, creating dramatic gains for early holders. However, stage one concluded with a pullback to 22 cents per share in 1993.
This laid the foundation for the stage two rise to $1.54 per share in late 1995, essentially doubling the gains of early stage one investors, and increasing the holdings of early stage two investors sixfold.
However, Dell’s share value then collapsed dramatically by over 50% to 72 cents per share that same year, essentially erasing all of the share value gains from the 1992 peak through to 1995 – a discouraging three-year period of non-performance.
This wrenching late stage two pullback, once again, set the stage for a dramatic stage three bull market move for Dell. From its 1995 low of 72 cents, Dell never looked back until 2000, at which point it had attained a value of $59.69 per share, confirming the wisdom of the longer term investors who had correctly perceived (or luckily discovered) that Dell had entered its stage three bull market phase.
Note that the shares of Dell are now unwinding, as did the value of gold after 1980, and that, in my opinion, Dell’s shares have much more to lose before its “secular” bear market is done. Dell had collapsed to the $16 range shortly after its 2000 bull market peak. It since recovered to a $42.57 high in late 2004, but in my view will be facing a long downward slope for many years to come as the investment community gradually recognizes that computer hardware has become a “commodity” in an emerging globalized economy (that is, fundamental factors have again brought an end to a dramatic and exciting bull market).
Looking back to the 1970’s gold bull market, and its subsequent 1980-2001 bear market decline, it strikes me that bear markets may be characterized by three stages as well. The bear market pullback may appear less dramatic in terms of the currency value of shares, due to the persistent eroding background interference of monetary inflation, which, by matter of government policy, steadily undermines the purchasing power of all money.
In my view, the 1980-82 gold market decline would constitute stage one of the bear market, pulling the price back inside the long-term channel of gold’s appreciating value in terms of a steadily inflating currency; then 1982-93 constituted stage two, returning the price to the middle of the channel defining gold’s value in terms of an inflating currency; and 1993-2001 constitutes stage three of the bear market, bringing the price of gold to a 21 year channel bottom, and preparing the stage for the present gold bull market.
Given that the length of gold’s recent (1980-2001) bear market was almost twice as long as its 12-year 1968-1980 bull market, I now suspect that we may be seeing a much longer and more gradual, but ultimately more powerful gold bull market than in the 1970’s.
Chart analysis shows that we have not yet attained even gold’s long-term mid-channel values (presently in the $600 per ounce range), and there is still the move to the top of the channel to anticipate (stage two), as well as a possible parabolic move above the channel to culminate stage three of the present gold bull market.
The background to my speculation that the present gold bull market will be lengthier and more powerful than the 1970’s bull market is due in large part to the fact that the value of gold mining company shares steadily weakened against the value of gold from the date of the initial free market trading of gold (1968) through 1980.
In the present gold bull market, gold mining company shares have appreciated strongly relative to the value of gold, obviously due to the fact that their relative value remains, even now, in a 36-year downtrend.
I find it difficult to countenance that the value of gold shares relative to gold will not break out of their present 36-year downtrend channel during the present gold bull market
Any breakout in share values above this channel top (we are now very near this point) will almost certainly see an end-of-stage-one pullback to the upper line of the (gold share relative value) downtrend channel, possibly on a strong move in gold, though possibly also due to short-term renewed weakness in the gold mining shares due to a range of very real fundamental issues, including inflating production costs, political risk, and questions about demand for gold at higher prices (by the way, don't worry about this latter issue – if any currency were climbing in value, would people wish to own more or less of it?).
On the upside, resistance to gold shares’ continued upward movement will be set by their 1993, 1973 and 1969 highs, respectively.) The time to sell gold shares and diversify into other investments would be at the time that the 1969 ratio high is reattained, very likely a decade or two in the future, if not longer. By then, equities, bonds or some other class of investment (perhaps real estate) would likely have returned to attractive values.
As I am working with a conceptual model which indicates that the present bull market in gold and gold shares could last much longer than the 1970’s “flash in the pan” gold bull market, I suggest that we could anticipate 20 or even 30 more years of strength in gold mining shares relative to gold. Bear in mind that only 4 years have been logged so far. Of course, there will be many surges up and down along the way. But a 20 to 30-year buy and hold strategy in gold mining shares would seem to be a workable choice in this market, even allowing for the likelihood that there will be a substantial correction at the end of stage one (if it has not already concluded), and an even greater, perhaps 50% correction, at the close of stage two.
So if we are not yet in stage two in this bull market, where are we? I suggest that we probably are moving quite near to the end of stage one, which I expect to conclude with gold values in the $600 per ounce range.
However, stage one is also likely to conclude with a greater correction in the price of gold than we have seen so far (that is, closer to a 20% - or greater - correction than to a 10% correction). The associated correction in gold shares may be more modest, and is more likely to follow the gold shares’ breakout from their 36-year downtrend than to precede that breakout move.
Psychologically, while Fortune Magazine’s cover certainly signals awakening public interest in the gold market, there remain several missing pieces to that puzzle as well. To begin, while gold itself has qualified as a recommended investment for 2006, no gold or precious metal mining companies have yet been named. Secondly, the analysis offered by Andy Serwer really neglects the primary driver of gold’s appreciation, which is ongoing inflation in the quantity of money in all of the world’s major currencies. I believe that a fundamental grasp of gold’s role as a hedge against deterioration in the value of money will need to be more clearly understood during stage two of the gold bull market.
I invite readers to share their thoughts and comments about gold’s three-stage bull market with me.
10 August 2008: Also - be sure to read my more recent posts on the topics of precious metals and secular trends, starting here: "Gold's 1980 High – Think $5000 - No $6000 - per Ounce."
16 April 2010: I thought this topic was important enough to revisit 5 years later. Though some details may be off to some degree (particularly my prediction that stage one would run no higher than $600 or so), the scenario I painted in 2005 has more or less come to pass. In my view, the 34% pullback in the gold price in October 2008 (from $1033.90 to $681.00) constituted the end of stage one in the present 3-stage gold bull market. The recovery in the gold price from this level since that time appears to constitute the early era of stage two, and that is where we are now.
Where then will stage two end? Pamela and Mary Anne Aden have recently proposed that the gold price is likely to see a level over $2000, perhaps as high as $3000, by February 2012 or so.
This prediction is based on a pattern of gold prices reaching peaks 11 years following major lows. The assumption is that a large pullback would follow that interim high - and then the fabled stage three would launch from the second primary pullback low.
Gold analysts generally expect stage three to be a "bubble" stage, during which the gold price will rise to unprecedented levels in an atmosphere of general panic. I have blogged earlier that the gold price can easily run to a level of $6000 or higher, depending on what happens with inflation, which of course now appears to be picking up steam.
As the chart above shows (comparing gold to previous well-established investment bubbles), there is no detectable "bubble" action in the price of gold at all so far, so it is not difficult to envision how the gold bull market could easily extend for an additional decade or so from here.
Speaking in broad brush terms, if stage two wraps up with a primary correction (that is, a major pullback) in say 2012 or 2013, then the stage three bubble high will occur some years after that. We are now of course speaking very speculatively. But if the Adens are correct in describing an 11-year pattern in gold price highs, then the bubble peak might possibly occur 11 years following the October 2008 low, that is, somewhere near the year 2019. This speculation thus projects that the present gold bull market will run approximately 18 years from 2001 through 2019 or so.
Interestingly, drawing on a separate source, Jim Rogers has recently reminded his followers that "previous commodity bull markets averaged about 17 to 18 years in length and experienced very large percentage increases." That is, the speculation that stage three of the present gold bull market might run approximately to the year 2019 is well-grounded in history.
If I have been wrong anywhere so far in my original 2005 speculations about the 3-stage gold bull market, it has been in my original assumption that gold stocks would begin to leverage the gold price early in the process.
In fact, gold stocks well outperformed gold from 2001-2003, and since that time (now almost 7 years), have dramatically underperformed gold itself, as can be seen in the chart above (and the HUI index is the best-performing of the alternative gold stock indices!).
If gold stock investors (I am one) can take any solace, then it is in the current positive trend in the price of gold stocks relative to gold since October 2008, as can be seen in the same chart. Should gold stocks continue their more recent pattern, then it is possible that we could see a new high in the HUI:Gold ratio by February 2012 or so. Given that gold exploration and mining companies (1) own gold in the ground at a substantial discount to the market price of gold itself, and (2) have established their ability to get it out of the ground efficiently, that would in fact be a rational outcome, though as all investors know, markets are under no requirement whatsoever to perform in a rational manner at any time!
(The photo above is of the new headframe at the Goldcorp Red Lake Gold Mine, in which my wife and I are investors.)
Thursday, April 01, 2010
A few thoughts on April Fool's Day, taken from Doug Casey's daily newsletter. Sign up here.
Mr. Casey was wondering about the origins of April Fool's Day after friends rearranged the keys on his computer keyboard. He writes today:
The most plausible explanation I could find was that in 1582, Pope Gregory XIII ordered a new calendar (the Gregorian calendar) to replace the old Julian calendar. The new calendar called for New Year’s Day to be celebrated January 1. That year, France adopted the reformed calendar and shifted New Year’s Day to January 1. According to a popular explanation, many people either refused to accept the new date, or did not learn about it, and continued to celebrate New Year’s Day on April 1. Others began to make fun of these traditionalists, sending them on “fool’s errands” or trying to trick them into believing something false. Eventually, the practice spread throughout Europe.
According to an article I found on www.infoplease.com, however, there are at least two difficulties with this explanation. The first is that it doesn’t fully account for the spread of April Fools’ Day to other European countries. The Gregorian calendar was not adopted by England until 1752, for example, but April Fools’ Day was already well established there by that point. The second is that we have no direct historical evidence for this explanation, only conjecture, and that conjecture appears to have been made more recently.
So, maybe we’ll never know the day’s true origins. I’d still like to share a few famous April Fools’ pranks from around the world before we move on. (Note: These pranks were pulled from The Museum of Hoaxes website.)
The Swiss Spaghetti Harvest, 1957: The respected BBC news show Panorama announced that thanks to a very mild winter and the virtual elimination of the dreaded spaghetti weevil, Swiss farmers were enjoying a bumper spaghetti crop. It accompanied this announcement with footage of Swiss peasants pulling strands of spaghetti down from trees. Huge numbers of viewers were taken in. Many called the BBC wanting to know how they could grow their own spaghetti tree. To this the BBC diplomatically replied, "Place a sprig of spaghetti in a tin of tomato sauce and hope for the best."
Planetary Alignment Decreases Gravity, 1976: The British astronomer Patrick Moore announced on BBC Radio 2 that at 9:47 AM a once-in-a-lifetime astronomical event was going to occur that listeners could experience in their very own homes. The planet Pluto would pass behind Jupiter, temporarily causing a gravitational alignment that would counteract and lessen the Earth's own gravity. Moore told his listeners that if they jumped in the air at the exact moment that this planetary alignment occurred, they would experience a strange floating sensation. When 9:47 AM arrived, BBC2 began to receive hundreds of phone calls from listeners claiming to have felt the sensation. One woman even reported that she and her eleven friends had risen from their chairs and floated around the room.
Sidd Finch, 1985: Sports Illustrated published a story about a new rookie pitcher who planned to play for the Mets. His name was Sidd Finch, and he could reportedly throw a baseball at 168 mph with pinpoint accuracy. This was 65 mph faster than the previous record. Surprisingly, Sidd Finch had never even played the game before. Instead, he had mastered the "art of the pitch" in a Tibetan monastery under the guidance of the "great poet-saint Lama Milaraspa." Mets fans celebrated their teams' amazing luck at having found such a gifted player, and Sports Illustrated was flooded with requests for more information. In reality this legendary player only existed in the imagination of the author of the article, George Plimpton.
Hotheaded Naked Ice Borers, 1995: Discover Magazine reported that the highly respected wildlife biologist Dr. Aprile Pazzo had found a new species in Antarctica: the hotheaded naked ice borer. These fascinating creatures had bony plates on their heads that, fed by numerous blood vessels, could become burning hot, allowing the animals to bore through ice at high speeds. They used this ability to hunt penguins, melting the ice beneath the penguins and causing them to sink downwards into the resulting slush where the hotheads consumed them. After much research, Dr. Pazzo theorized that the hotheads might have been responsible for the mysterious disappearance of noted Antarctic explorer Philippe Poisson in 1837. "To the ice borers, he would have looked like a penguin," the article quoted her as saying. Discover received more mail in response to this article than they had received for any other article in their history._