|Posted some time in 2008
1. Muddling and high volatibility
of most financial markets until the end of December 2008. The indication
of the first changes will probably be visibly end of the month: change in
Dollar trend, stock market trend, Gold trend, etc.
(hyper)-inflationary depression will be evident before or by the end of
de-leveraging by huge financial entities which are selling off everything
from stocks to commodities to accrue cash and stave off bankruptcy is what
Talking Heads and Politicians are incorrectly defining as the current
“deflationary” economic environment
As the trillions of
dollars and Euros flood into the economy, that condition will change.
If they report the statistics properly, then we will see a contracting
economy or a depression (measured by GDP) coupled with rising prices or
(hyper)inflation. The odds are that the inflation rate will be at
least 20% by the end of 2010.
A good example of
this is Venezuela where the economy is struggling while their inflation
rate is currently over 36% (as of October 2008). Another extreme example
of disastrous economic conditions and a hyperinflation is Zimbabwe.
During this coming
depression, the price level of HOCG (High Order Capital Goods – as
Real Estate) will continue to fall in nominal but also in
real terms. At the same time, nominal inflation figures will pick up like
never seen before. This will happen as soon as the Velocity of
money picks up and the savings rate falls again.
As the inflation
rate rises, so will interest rates. Because of the depression, the
dollar will come down as the American authorities try to improve the
Exports and squeeze the imports.
incentive for a lower dollar is that the Chinese have started to push down
the Renmimbi in an effort to reflate their economy. (We classify
China as a HOCG country – and for this reason it will – like India -
suffer more under the depression than the Western World). Last but not
least, as a result of the depression, China (and Japan) will buy less and
could even be forced to sell US Treasuries, Bonds, Dollars; this
action will increase the pressure both on US and the US dollar.
What we expect:
A weaker Dollar.
Rising and higher
prices (incl. Treasury lower Bonds). If wrong they will default or
Authorities will put a moratorium on them. In other words, Bonds are a
A recession becoming
prices and lower prices for all HOCG.
Higher inflation and
possibly hyperinflation. Hyperinflation can unfold in in a week’s
Higher prices for
LOCG and many commodities (food)
Commodities will be in the next leg of their long-term bull
market starting in 2009. Commodities such as oil, grains, precious
metals, etc. had a great upleg in early 2008 and then had a brutal
correction during the second half.
Mixed stock markets with
new leadership. However NO NEW HIGHS in REAL TERMS and probably
NEW HIGHS in NOMINAL TERMS.
beginning of a Zimbabwe effect on the Stock markets. This implies
that although Earnings will come down but equities will trend up as the
result of the huge creation of additional Fiat Money, the intervention
of the Authorities in the stock markets (PPT
and similar) and the flight out of Fiat Paper money into Real
Higher prices for
Gold and Silver
We have peak oil and
this will become more evident next year. Oil will bounce back to
$ 145 and higher.
A reversal of
Globalism because of expensive energy and government intervention to
push up local employment. Your hamburger will be made locally instead of
(HOCG = high order
capital goods; LOCG = low order consumer goods)
we do advice:
Buy physical gold and silver bullion and coins.
Store them away in a safe place out of reach of the Authorities.
Keep a limited amount of cash on hand.
Change the horses of your portfolio towards LOCG (food, energy,..)
and away from HOCG (financials, banks, real estate, car
manufacturers, cyclical,…) and high ticket items.
This list however does not range out certain Real Estate
opportunities, especially Agricultural objects.
Make sure part of your assets are stored with a
financial institution out of reach of the authorities and your
shares are registered in your name and not in the name of a financial
have together with the banks adjusted the legislation so that all
Securities must be kept electronically with a financial institution.
Don’t count on the fact that by pushing ‘Enter’ on your computer, your
portfolio will be transferred from one financials to another financial
institution without any problems. Authorities also are aware of this and
will stop it]
Because of High Inflation, Bonds and similar instruments will be
the surest way to loose your savings.
Avoid all Money market, Hedge and Common funds.
Certainly all those which are not transparent and you don’t understand.
Stop trusting your banker. If you didn't get it yet, he hasn't got a
clue of what is happening.
Be extremely careful with insurance policies. Make sure you fully
understand them. Read the small caps.
Be extremely careful with Pension plans. Authorities can (They
did in Argentina: a bill transferring $23 billion in private pension
funds to the state has been published in Argentina's official gazette,
meaning the nationalization is now law.
) seize them.
If you want to invest money in real estate, make sure it is out
of reach of the authorities and only buy ‘special
opportunities’ and know Rents can and will be blocked and
Real Estate taxes increased.
Start to make your arrangements right NOW.
Don’t wait. Don’t gamble and don’t believe what the authorities, banks
and Talking heads are telling you. The odds you will be notified a
week before government blocks some of your assets, are ZERO.
Politically and socially:..click
here to read what Ambrose writes (see
how the HOCG-countries are affected)
In the EU, The
deficits in Greece, Spain, Italy, Portugal
and Ireland are just too much for the lending markets to bear
when it comes to rolling over sovereign debt and certainly too much for
Germany to step in. The only way out is for these countries to leave
the euro and let their own sovereign currencies float to its true market
in Europe will lead to violent street riots. Once you see the security
forces shooting people dead in the street then you know that things are
seriously headed downhill. This already happened end of 2008 in Greece.
is a HOCG country and employment is highly leveraged, more
factories will close, more people will move out of the cities back to
the farms. The frequency of riots will increase. We have a potential
economic and political war on hand as the Chinese start to be unhappy
about The West closing down their Chinese factories hereby creating huge
India and Afghanistan will become more and more unstable and
we could see a political clash.
A similar risk exists
in the Middle-East (Israel/Iran). Today Oil is what Coal
and Steel was prior WW II.
Countries with little
or no manufacturing facilities left (i.e. the UK) will suffer
most. Remember, real wealth comes from manufacturing and not from the
Russia braced for unrest.
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Goldonomic, Florida, USA -