Fellow BBR threaders, Welcome to Zim holiday charters. This weekend in Hong Kong is a tough one, drenched by rain, benighted by clouds, pressurized by heavy tropical air, and made more melancholy by moody music, or at least music (Diana Kraill, Sarah Vaughan) that seem moody under the circumstances, at the intersection of perpetual doom and everlasting redemption.
The air-conditioning is off, windows and balcony doors are open, and ceiling fans are spiraling. The environmental effects aside, I have three reports on my coffee table which I hope to read during lunch down at the beach, even if it is still raining, just for the moody but clarity inducing properties of that little corner of this world.
The reports are titled “Greed and Fear” by CLSA’s Christopher Wood, “In the Twilight Zone” by Marc Faber of The Gloom, Boom, and Doom fame, and a private memo done by a private money manager for one of two top HK–based Taipan families.
The first report starts up so and sums up thus: “It is like a slow motion version of 1929”, looking a little scary, massively over sold, due for a bounce, and then we get really slaughtered.
The second report tallies up so: “I know that I do not know”, due for a technical bounce, and then we tank in earnest, because “The more the state ‘plans’ the more difficult planning becomes for the individual – F.A.Hayak in The Road to Serfdom, 1944”.
The third, a memo, starts off so: “I now believe that we are in the final stages of the current bear market”, and then examines in detail the lead up to, the interim, and end of the 34 months long 1929-32 episode, and the 1969-70 (17 mths), 1973-74 (21 mths), S&P 2000-02 (28 mths), Nasdaq 2000-02 (28 mths) chapters.
On Friday, at lunch time, my normally bullish money manager friend was unusually quiet, and we listened to the author of the memo, a normally realistic and cautious friend who had (a) called the Nasdaq 2000 kaboom, and (b) is now calling for redemption and deliverance in the USD-scape. As we talked and listened, we thought our private thoughts, organized them, and verbalize our hopes and fears.
My mom telephoned, asked me how much I am up by for the year-to-date, heard the absolute number, reflected, and said, ‘well, take care not to lose it all back to the market’. That was at this momentary point in time and so very few days ago:
Message 17792042
… when I was still up by 4%. Now, after (a) updating my MS Money via glass fiber fed stock and currency data from New York, (b) imputing a further possible decline of South African mining shares (minus 30%?), and (c) a few days, I am only up by 2.72%.
All this is from a high of 5.x% for the year. Poof! 50% of gains are gone in slightly more than 60 awful seconds, requiring a long period of active savings to fill in the void, if there are active savings to be had.
The thinning line of defense, the last 2.72% of 2002 ‘house money’ or more accurately, ‘my money’, can be easily pounded into so much wealth dust by (a) any currency wiggle, or (b) a physical gold hiccup. At this rate of loss and gold betrayal, I will have to plan bank robbery soon.
Under such desperate circumstances, I could feel nostalgic for the simpler girlfriend troubles soon. The Diana Krall tunes are starting to create a hazy hallucinogenic numbing effect on my psyche.
Jay, there must not be paralysis of the mind. Every % must be defended. You said so yourself just here:
Message 17797302
… else, fraying at the edges of the financial fortress, crumbling ramparts, bursting parapets, falling of the main gate, flooding of the escape tunnel, burning of the great hall, screaming, confusion, chaos, rout, and burning at the stake, of the stakes, and the lord.
So, where are the troops, which way is north, does this boat sail for Trinidad, what will go up in value, or is everything doomed, maybe perhaps history terminated and wealth can be printed after all? There are so many questions, so few clues, and not a lot of time to dawdle and auto-massage.
Here is the order of battle:
Message 17801684
And here is the situation:
Betrayal by officialdom …
Message 17801546
Betrayal by gold …
Message 17801551
The minefield …
Message 17801573
Gold down …
Message 17801579
Dollar up …
Message 17801582
Because folks seek redemption and deliverance …
Message 17801586
Even as financiers are walking away from obligations …
Message 17801600
And folks are seeking false safety …
Message 17801603
From possible wealth hell …
Message 17801643
The green clan has gotten slaughtered in the USD killing ground, through devaluation of equity and de-rating of currency. The red tribe is similarly being tortured in alternate universe of sudden equity reversals and sharp upward-pointing edges. Plenty of professionals are failing, a lot of amateurs are dying, and the lucky few are thankful that they survived yet again, once more, and recalibrating their star charts, navigation maps, and taking inventory of what is in the galley.
References Green Tribe and Red Clan:
Message 15953490
Message 16076853
Message 16640110
So Jay, I think we have left the lounge, flying quietly high above it all, watching, listening, thinking, and waiting.
Reference Flight:
Message 15303142
Below us, the killing of investors and maiming of speculators carry on as before, inexorably completing the Collapse Script that we often theorized. The sharpened shrapnel is punching occasional holes in our flying machine, missing the fuel tank so far.
Watch closely, see what you managed to miss by at least a little, so far, because you were so occupied there on the Airport Lounge Thread.
Maurice, you have a question? We are waiting for the global economic deflation and monetary inflation to complete the cleansing of the investment-scape.
We will drop a bundle of cash here, there, occasional, just to see if the bundles explode on impact, or sink below the waves otherwise.
We are carrying enough fuel, food and drinks. The first class passengers will have enough to drink, always, perhaps; the rest, progressively less. We will have to jettison the unfortunates as we go, until we ourselves go, because we do not have quite as much food. Eventually, unless we land by choice and circumstance, we will be empty of fuel, together.
Yes, there are some vantage gold and new-age platinum colored parachutes hidden on board, but, as is usually the case, not enough for everyone, and not certain in working order.
Situation report:
(a) J6P, either still not giving up hope or not quite ready to capitulate, are not redeeming what remains of their equity nightmare from mutual funds and such managed accounts;
(b) Officialdom are sticking to their story of fabled productivity increases and the alphabet V, even as they ready the paperwork for insulting tax increases, and continue to create unnecessary and not needed fiat cash;
(c) Media, void of thoughts, drained of sound bites, are looking everywhere for the elusive bottom, having utterly failed to sense the top not so long ago;
(d) International ROW investor electorates, having just taken a US refresher course on the consequences of easy money, high debt, frivolous consumption, war and adventure, are mesmerized, traumatized, and going for a nightcap, rest, and recovery, but at home;
(e) The Japanese are waiting, cameras ready and speeches prepared, to see if the remainder of the Universal Script of Bubble Collapse plays out: repeated interventions, beaten down hopes, adjusted expectations, tepid animal spirit, and eternally long night.
The biggest differences between Japan 1990 and USA 2000 are as follows:
(a) Japan's smaller concurrent real estate and equity bubble implosions directly damaged few S2B, but splattered the banks, and
(b) Japanese S2B had huge savings to tide them over the long dark night, and had plenty of US consumers to provide 12 years worth of midnight snack food,
Whereas, in the case of the US ... Well, you know better than I of the facts, involving these words and phrases:
(a) ... Huge sequential ... bubble implosions directly damaged many, and then splattered the banks, insurance companies, and international creditors ...
(b) ... No savings ... No buyer of last resort
Additional two bits of details that completes our report of collapse and doom:
(a) There are rule-less folks loose on the geo-scape who are well financed, tremendously motivated, and willing to die; and
(b) Prices of paper derivatives of wealth are still very high.
We have some choices to make, and the outcome will determine whether we emerge as a Taipan, a pauper, or as yet another who failed to seize the psychologically critical moment of the deluge.
We can believe the chant of the Green Tribe, and buy expensive assets of all kinds, hoping earnings gain will be realized, or inflationary capital gain will come true.
We can trust the war cry of the Red Clan, and sell assets of various sorts, waiting for the cataclysm that is seemingly choreographed by John Woo, slowly spinning into position of maximum doom.
We can also wait, either because of paralysis or by rational choice, and decide not to participate in the spinning of the crooked wheel and the throw of the loaded dice.
I am undecided whether the total package as described is more or less enjoyable than (a) romantic tribulations of high school, (b) medical troubles of old age, or (c) financial perturbations of all ages.
One cyber friend asked a rhetorical question to which I gave a home-spun answer:
“the market place is like a ball, with punch, music, crowds, secrets, and dancing.
Just as in dancing, we need a rest at times, to head over to the bar and have a quiet drink.
At other times we step out of beat on the dance floor; at such times, we can do one of two things, fancy step back in beat, or retreat to the side lines, tap our toes for a while. I prefer to retreat to the sidelines.
SI is a gathering place, to tap our toes or get a drink. The broker's URL is the dance floor. Getting off the dance floor does not necessarily involve getting out of the building.”
Another cyber pal sent a fine painting, of a pair of colorfully attired (Bermuda shorts) legs and tanned feet dangled over the two sides of a dingy, with a lap top PC in lap, and a beautiful island in view, straight over the bow, with coconut trees and stilted house taking shape on the enticing beach, backed by solid mountain, fronted by calm water, and framed by friendly sky.
My Shanghai-based English Chinese metal trading nephew just sold his apartment in London, and e-mailed to ask if his uncle can agree to take care of his proceeds of around 200k sterling, thinking that his uncle knows what to do;0/
So much to think about, and in any case, have a nice weekend:0)
Chugs, Jay |
