Hi Maurice, where are you hiding?
I will
(a) Kick-off with quotations,
(b) State, without pretense at proof, conclusions,
(c) Assuming the conclusions are correct, proscribe simplest counter-measures,
(d) Determine the consequences if my conclusions are wrong, and
(e) Then decide on proper course of action.
Kick-off with quotations: (all taken off “The Tomahawk Missile, the US Dollar, and an Ounce of Gold” written by Frederick J Sheehan of John Hancock Financial Services for the latest “The Gloom, Boom & Doom Report” distributed by Doc Doom Marc Faber)
“This is the shabby secret of the welfare statists’ tirade against gold. Deficit spending is simply a scheme (Pezz, language alert!) for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights”
Alan Greenspan 1971
“At a fundamental level, the essential contribution of information technology is the expansion of knowledge and its obverse, the reduction in uncertainty. Before this quantum jump in information availability, most business decisions were hampered by a fog of uncertainty”
Alan Greenpan 2000
“Alas technology has not allowed us to see into the future any more clearly than we could previously”
Alan Greenspan 2002
“… white-collar crime called for intellect: in every country one found bevies of top executives and leading politicians behind bars and others under indictment. They had no use for money or prestige; what they needed and found – one may surmise – was adventure and a field for the use of imagination in outwitting the system. Fraud was the sport of capable minds … who wanted to rise above commerce and make-believe. It was creativity in a rich medium; and codes of professional ethics had to be written and rewritten to cover new offenses”
“Dawn to Decadence” by Jacques Barzun
“The question you refer to will perhaps become more and more urgent. People will be obliged to acknowledge that many a new thing in which one at first thought to find progress proves in fact to be less sound than the old ones, and in consequence the need for strong men to redress things will manifest itself”
Vincent van Gogh 1882
State, without pretense at proof, conclusions:
(a) Greenspan is a man who can change his mind, thus can be wrong, sometimes terribly wrong
(b) Smart folks like to experiment, and Greenspud and Larry Summertime are smart
(c) Some of the nastier stuff contained in this post about gold price manipulation may be true …
Message 16898478
The clean up of bubble froth, the wiping off of euphoric foam, and the execution of wars have traditionally required deficit spending, financed in large part by debasement of currency, taxation (& borrowing from future generations). Full stop.
We are now well on our way to assemble the pieces to fit the jigsaw puzzle, and what is emerging from the bits of paper is not pretty:
Message 17235656
Assuming the conclusions are correct, proscribe simplest counter-measures:
(a) Counter-measures to debasement of currency includes the exchanging of fiat paper for gold and natural resource backed asset, including physical PM, cash flow positive real estate in good locations, preferably financed by fixed-rate long-term borrowings denominated in the currency likely to drop the most against these same asset. Stay away from bonds. Stay away from assets at risk from rising interest rate (real estate, common equity not backed by natural resources). Oops, real estate thus is not a sure thing, depending on yield, location and use;
(b) Counter-measure to debasement of currency also includes the holding of currencies less affected by debasement;
(c) Counter-measure to taxation includes stop working or relocation, options not on the menu for most sitting ducks, and so we do not need to concern ourselves with these drastic measures.
Determine the consequences if my conclusions are wrong:
Jay, what if the trading of bandwidth is inherently more valuable than the making and exchanging of physical goods? What happens if derivatives piled high above underlying economic justification fail to blowup? What awaits us if WAT does not happen, or happens without unintended negative consequences and uncontrolled chain reactions?
Counter-measures (a) and (b), if adopted, and wrong, will do what? The holding of stuff will maintain value in inflation, and is supported to an extent in deflation, generally holding value relative to underlying economic and demographical trends over the CNBC longer term. Translation, you gain less in capital gains relative to Lucent and the big trendy house that few can afford to rent.
There is another aspect to being wrong in the case of gold. Not about being wrong absolutely, but being wrong about what counter-counter-measures governments everywhere or somewhere can implement: simply outlaw the ownership and trading of gold, and all its derivatives, including mining shares. Tougher to do same with forests, petroleum,; no point to do same with cash flow positive real estate (incl. REITS?). No answer to this one, except to then pucker up and put on kneepads.
Then decide on proper course of action:
The answer is obvious, buy Q, a bouquet of Dow shares, borrow to the hilt on the primary and non-cash generating house, well beyond possibly to be reduced active work cash flow capacity to pay back, buy a SUV, and hope Greenspan is not wrong again.
I will (being not good at trading), on the OTOH, slowly raise physical PM holdings to beyond 6%, buy more reserve-rich oil stocks in diversified territories, buy more positive cash flow real estate using tepid same-currency leverage in places I do not mind living in, and, once more, wait, holding a basket of paper currencies, however distasteful.
I cannot help but think that we are down to the wire, with-me-or-against-me style, and the time for getting back to basics is now.
Chugs, Jay
P.S. BTW, my wife and I went to watch “The Time Machine” movie. The only thing that held constant value through the 800000 years period was the time machine itself, and a SILVER moon phase pocket watch of few complications. This bodes well for my Lexus substitute. |
