RSS Output
French    German    Spain    Italian    Arabic    Chinese Simplified    Russian

Letters by a modern St. Ferdinand III about cults

Gab@StFerdinandIII - https://unstabbinated.substack.com/

Plenty of cults exist - every cult has its 'religious dogma', its idols, its 'prophets', its 'science', its 'proof' and its intolerant liturgy of demands.  Cults everywhere:  Corona, 'The Science' or Scientism, Islam, the State, the cult of Gender Fascism, Marxism, Darwin and Evolution, Globaloneywarming, Changing Climate, Abortion...

Tempus Fugit Memento Mori - Time Flies Remember Death 

Back     Printer Friendly Version  

Tuesday, September 29, 2009

The current market run up is a fantasy-world.

Get into cash, and commodities.

by StFerdIII




You lose money when some or all of the following are apparent: the 'experts' agree; forecasts for rising and positive economic growth stretch on forever; geo-political events are ignored; and economic reality – especially fiscal reality - is ignored. Across the industrialized world we have: massive debts, guaranteed higher future inflation; and inevitably far higher future tax rates. Add to this the coming war in the Middle East and the wise man will very soon be into cash, and out of the markets. Life is not grey – it is usually pretty black and white. Such are facts.

Being negative is never fun. But neither is losing money. It is impossible that a 50% run up in major markets over 6 months will last. There has to be a sharp correction. But beyond this easily predictable occurrence lies some far deeper problems with the entire structure of our economy and the banking system. Add to this the inevitable Near East war, initiated by Iran's production of nuclear weapons and markets are destined to decline not just in the short term, but in the medium term as well.

America made a huge mistake electing the neo-phyte and ignoramus, the 'great' Prophet Obamed. One consequence of this silliness will be a nuclear armed Iran. When Iran owns a nuke the following will happen: the Persian Gulf will be sealed off; oil will rise to $300 or more a barrel; and Israel will be forced to launch attacks precipitating a wider conflict as Russia, China, the US and Europe by necessity become involved. As this conflict unfolds, markets will crater; business investment will stop; and we will have widespread economic stagnation. Even if there is no war, a nuclear armed Iran will control Iraq, the Persian Gulf and have a huge influence over Saudi Arabia. The consequence will in any event be far higher oil prices than even the $170 speculation spike of 2007.

And Iran is only one factor -albeit an important one. The US fiscal reality is almost entirely negative. Irregardless of pollyannish forecasts the following are simple facts about the US economic situation which mandates against a market rise in the near term:

-A doubling of US national debt.

-US governments will own 45% of GDP which is not healthy for markets or stocks.

-Taxes must go up to close national deficits.

-Inflation is forecasted by many to be at 5-8% at some point during the coming 2 years meaning that interest rates must go up to at least 8 %. As rates go from 0 to 8% debt failures will multiply across all sectors of the economy totalling trillions including yet again, another housing meltdown as many homeowners default on mortgage payments. 

-The money supply has tripled in the past 2 years which has to ensure future inflation and the destruction of the US dollar and by extension the purchasing power and asset values of all Americans.

-GDP growth estimates of 3-4% in the coming 2 years are extraordinarily optimistic and sure to disappoint as reality gets in the way of fantasy. With more government, slower economic growth and capital lending restrictions it is hard to see why anyone would be so happy as to forecast GDP growth of 3% or better.

-Over-regulation of US business which always means a dramatic fall off in hiring and business investment.

Simply put in 2 years time the US will look a lot like Europe. And Europe is not a dynamic profit making entity. The EU is a political project whose design militates against market forces and the creation of wealth and profit. By following the EU the US will impoverish itself, deny the forces which create profits and assure that its currency will weaken further increasing inflation and further eroding confidence in US based assets.

The smart investor should soon be into cash. The only reasonable near term play is to buy oil and gold and wait for the inevitable doubling of these assets prices. It will happen. No one knows when but commodities due to a sinking dollar; high inflation; high future interest rates; are a surety. Reality is not grey – oftentimes it is pretty clear what is up and what is down. When all the 'experts' agree that the markets are going to go up; or that 'markets are priced very fairly'; or that 'things will be fine for the next year'; you know that the time to sell has come.

As Churchill said, “However beautiful the strategy, you should occasionally look at the results” As times change so should strategies and results.

 


Article Comments:

Related Articles:

Trade&Globalisation vs Marxism

5/5/2012:  Changing Geo-Economic reality

1/12/2012:  Offshoring, Inshoring and the Government-Union nexus

8/9/2011:  Rosenberg right on the state of affairs.

12/31/2010:  An immoderate economic stimulus plan.

12/6/2010:  Free Trade – not as free as we think.

7/11/2010:  Yield Curves are forecasting another Recession or worse.

6/27/2010:  G20 – expensive posturing. A $1 billion waste of time.

12/22/2009:  The stock market crash of 1929 – caused by liquidity and government.

9/29/2009:  The current market run up is a fantasy-world.

9/25/2009:  The Consumer is NOT 70% of the economy.

7/28/2009:  Governments caused this mess - don't reward them.

7/19/2009:  Once you start to socialise some markets why bother stopping ?

6/3/2009:  Governments caused this 'crisis'.

3/16/2009:  Herbert Meyer: The Cure for Poverty is Capitalism

2/19/2009:  Why there will be a 'second' recession

11/28/2008:  The Auto-Union working elite! Annointed workers united.

11/25/2008:  Governments caused the current economic mess.

7/22/2008:  Falling Bear Markets are sending some important messages.

6/25/2008:  Why We Outsource in Technology

4/30/2008:  Globalisation – not as 'globalised' as it would appear

4/26/2008:  Food prices: governmental morons and the eco-cult causing food price and supply problems.

3/20/2008:  Markets work – even in downturns

3/6/2008:  Destroying the US$ is not good policy

3/2/2008:  Free Trade is simply the only solution to help the poor.

2/8/2008:  The consumer is NOT 70% of the total economy.

11/7/2007:  Why $100 per barrel oil, won't kill the economy

9/4/2007:  Anglo-Saxon market dynamics simply work

9/2/2007:  Forms of Capitalism and their benefits

8/30/2007:  Innovation and Wealth Equals Inequality

5/28/2007:  Technology, Technology, Technology

5/24/2007:  Income ‘inequality’ and Trade – even smart people can be dumb

5/23/2007:  Forget Laissez-Faire we have ‘Lazy–Fair’!

5/9/2007:  Mommy, there are scary Trade monsters in my bedroom!

5/8/2007:  Trade benefits all of society

3/9/2007:  End subsidies and protectionism

3/5/2007:  The benefits of tax competition and offshore banking

3/4/2007:  Markets limit unaccountable government power.

3/1/2007:  The failure of Unions and Big Government

2/10/2007:  New debates, on old ideas, using old rhetoric

1/4/2007:  Innovation and the market

11/20/2006:  Lessons from the past: lower tax levels increase wealth and jobs

9/22/2006:  Oil pricing - absurd marxian analysis on the rise and fall of prices

5/17/2006:  Tax cuts are mandatory to create wealth for all

1/17/2006:  Manly countries lower taxes and increase wealth

9/30/2005:  Tax Cuts Increase Revenues, Jobs and decrease poverty

9/18/2005:  Human Progress: Technology, Capital and freedom

7/11/2005:  Note to Bono and Rich Do-Gooders - Please shut the hell up

2/25/2005:  Globalization

2/25/2005:  Tax and Trade

2/25/2005:  Productivity

2/25/2005:  Regionalism

2/25/2005:  Environment

2/25/2005:  Currency

1/5/2005:  Canada and USA need a Flat Tax