Letter 2008 12 30 - part 4
Where Will We Go From Here
We remain true to our premise that we are witnessing the onset of planetary asset re-pricing as action-ed through
(i) Systemic and relative re-weighting of the larger economies of America, Japan, EU, and China,
(ii) Absolutely downward moves of nominal asset prices, and
(iii) Re-balance of forex exchange rates.
For 2009, we believe
(i) The global share markets’ lows will be lower than in 2008
(ii) American commercial real estate will fall, and hard
(iii) All debt in general, American debt in particular, and the US$ (also a debt), will go lower than imaginable, and
(iv) All paper currencies will be lower against gold.
A repeat of 1929 to 1934 stock market experience would be merciful.
A planet-wide repeat of the Japanese stock market’s 19-years-and-it-is-still-not-over ailment would be worse.
A Zimbabwe experience (inflation rate that doubles nominal living cost every 1.3 days) would be the absolute worst case, is certainly possible, given that the American Empire’s fate is at the burning stake.
In such a solution the share market would go high and then higher, but not in genuine purchasing power terms, and only in the number of additional zeros attached to each new iteration of paper money. Then, one fine day after a terrible night, a good old fashioned nominal share market crash will happen, in all cases, leading to the Argentine Resolution – systemic and full-spectrum default, i.e. game over.
The positively sorry road-markers we watch for on this toll way to the future will be:
(i) Accelerated debt monetization
(ii) Artificially low official interest rates and credit constriction between private parties
(iii) Japanese financing American bridges to nowhere at ZIRP zero rate
(iv) American building bridges to nowhere using Chinese steel
(v) Earthly officialdom defaults of progressively more periphery nations squashed like so many de-mineralized egg shells
(vi) Planet-wide nationalizations
(vii) Global tax hikes
(viii) Galaxy-wide redistribution due to riots, civil unrest, insurrection precursors
(ix) Universal asset price re-balance
(x) More clueless mouth-breathing sorts mouthing, “the worst is over and all is well again”
We believe at the end of this sorry episode, perhaps over the course of the next 7-10 years if we are fortunate, there will be a global zero-state monetary reset, complicated at the sad end with a rare, a once in so many centuries demographic tsunami still requiring the sell down of many worth-less assets to fund what could have been the golden age that will have turned to ink smudge on pulp fiction.
We will be fortunate if real global wars do not come to pass in the mean nasty time. We look to anticipate the more usual and likely experience of currency and trade conflicts, when the Americans stop construction bridges using Chinese steel made from Australian iron and Canadian coal, all paid for with Japanese paper ripped from the forever LV bag-holders, Mr. and Ms. Watannabe.
The deadly noise we can be sure to hear will be:
(i) “there is not enough money at affordable rate”
(ii) “deflation is worse than inflation”
(iii) “we have hit bottom”
(iv) “recovery will commence within 6 months”
So, in alignment with our above premise, so far proving to be too true, we will do the following:
(i) Remain debt-free
(ii) Remain at least 25% in cash, until it is time to add Hong Kong (where freedom reigns, laws work, taxes are low, BS is laughed at, and markets are markets) real estate at SARS-level (or globalized air-borne Ebola) bargain basement to sub-basement prices and very positive yields
(iii) Continue to accumulate physical gold and solid platinum, because we are supposed to do more of what has been working
(iv) Continue to hold energy, because it is vital and cannot yet be printed
(v) Over-weight gold mining shares given the discrepancy between gold pricing, cost of extraction, and gold mine valuations; we will do so by adding to finance.yahoo.com
(vi) Gradually over-weight negative stance against American commercial real estate, which has hardly fallen at all, historically speaking, but must fall, biblically speaking, or else gold will go higher than our already high expectations; we will do so by adding to SRS finance.yahoo.com
(vii) Gradually over-weight negative stance against American Treasury bills, as its faithless bid-yield goes ever lower and lower to the point of senselessness, waiting only for sudden and nasty snap back of ask-interest; we will do so by adding to finance.yahoo.com
(viii) Add to solar energy ETF finance.yahoo.com to be in alignment with what energy solution must be, and what all governments must do
In executive summary, three place names, Japan, Zimbabwe, and Argentina:
(i) Paper money, yielding a Japan ZIRP (zero rate interest policy) zero, trends to zero,
(ii) Real estate will go to global airborne Ebola bargain levels, and
(iii) General equities will go lower than even we can imagine, otherwise
(iv) Zimbabwe hyper stag-de-in-flation solution will rule supreme, accelerating towards
(v) Argentina systemic full-spectrum default outcome of both nominal and real defaults, but globally
(vi) During the coming Darkest of Interregnum, there will be no rules that would remain unbroken, against us, and at the most inconvenient times. There is no escape and no opt-outs. All must play, most must perish, few will gain, and very few will be allowed to keep the gains at the onset of GRSMR, to be followed by the TeoTwawKi Dawn, when the new monetary sovereign reigns supreme.
Our Unreal Tournament Last Man Standing Death Match stance has been described in broad outline above. We shall remain diligent, watch and brief often, and exercise agility in looting and scampering, for the times, sadly, require nothing more.
Cheers,
J |
