'Take us from darkness to light'; from ignorance to awareness; from incompleteness to totality ... Let that be our instinct... But let us not forget the self... the omnipresent'
The above is for the unsung heroes who protected, defended and some who gave up their lives so that we could live to see another tomorrow
Yes I know that it’s been a long time since I wrote a small piece but personally was not up to it and intellectually did not know what to write since events predicted earlier were overtaking me faster than I could say I told you so. To quote the and from the Alchemist, when he appears to Santiago in the form of an old king "when you really want something to happen, the whole universe conspires so that your wish comes true" – well all that I can say is that somebody conspired but personally this is not what I deserved, maybe professionally I did – does that make sense – to me it does
A bird does not sing because it has an answer -- it sings because it has a song. No point wasting precious time writing and you reading unless there is something to say / read. Well let me start my birdie song on the current state of the bewildered investor: How did he get there!!!!
Then:
You found yourself behind the wheel of a large automobile
And you found yourself in a beautiful house, with a beautiful wife
And you never asked yourself-Well...How did I get here?
& Now:
And you may ask yourself
Where is that large automobile? (it’s the bank’s stupid)
And you may tell yourself
This is not my beautiful house! (it’s the bank’s stupid)
And you may tell yourself
Where is my beautiful wife! (you’re broke have you forgotten that!!!)
And you may ask yourself-Well...How did I get here?-Inspired By “Talking Heads, David Byrne lyrics to Once in a Lifetime”
As the economic crisis continues to unfold, a sense of uncertainty has begun to pervade the market. Even dyed-in-the-wool risk takers admit that they don’t know what to think anymore. Inflation, deflation, recession or depression – there are so many vagaries that it appears to be anyone’s guess what will happen next.
Despite the current, volatile environment, though, I maintain my core prediction that there will be continuous deflation in asset prices i.e. real estate (30-40%), share prices (20-25%) and even in currency, I also maintain my stand that a highly inflationary cycle in real commodities is not far off and that my dear friends should be the start of the bottom for our markets.
The way I see it, the swift, far-reaching and mostly ill-conceived reactions from most of the world’s governments under the leadership of two apprentice sorcerers (Bernanke and Paulson) have until now resulted in a widespread run for an exit to nowhere, a deep credit freeze, and total and indiscriminate mistrust in the market and all of its players.
It is wholly rational and necessary that the end leads to a great deleveraging and economic recession. It is unavoidable that institutions withdraw from the market holding tightly to their “paid for” assets.
Investors, who played the carry trade both in USD and the YEN, are being forced to sell foreign assets for local currency and buy dollars/yen to repay their debts. Even major corporations are repatriating funds from abroad to meet the domestic dollar/yen cash demands.
However, when the deleveraging subsides, the inflationary effects of massive developed nations stimuli, will take effect and show through rampant inflation. The dollar is then likely to stall and even plummet. Indeed, it is possible that facing depression, President elect Obama may devalue the U.S. dollar drastically against gold, just as his 'mentor' President Roosevelt did in 1934 (only after confiscating all privately held gold from American citizens).
The over-valuation of the dollar has been of the global economy's most serious problems for the last decade. The high dollar led to an unsustainable trade deficit that peaked at almost 6 percent of GDP in 2006. By definition, a trade deficit means that domestic savings is less than domestic investment. This means that (barring an investment boom, which we have not seen) there must be a large government deficit, low private savings, or a combination of the two. None of these situations are desirable or sustainable, at least over the long-term. While the trade deficit has consistently been far larger than the budget deficit over the last decade, it has received far less attention from the media. The only plausible way to bring the size of the deficit down to a manageable level is by reducing the value of the dollar. A lower dollar is especially important in the wake of the collapse of the housing bubble. Without a continued improvement in the trade balance, spurred by a falling dollar, there is little hope that the U.S. economy will escape a prolonged downturn.
The governments are now, thanks to the fiat money system creating liquidity out of thin air, all it takes is a few approvals and pen strokes. At last count the developed countries (read as rich and broke, ironical isn’t it) had created close to $ 15 trillion of bailout packages and we are not even through Phase ONE of this crisis. The IMF and the World bank under the eagle eye of the US of A insist that emerging economies increase spending domestically to bail themselves out of this crisis which will put paid to their ambition of becoming a developed nation and ensure that the emerging economies get poorer rather than richer .The cost will then be passed on to the taxpayer via higher taxes (that is provided they can tax losses), so the alternative - diluting the purchasing power of their money. It's not as though there's going to be a revolution over it. It's 2008, not 1870 when if the government tried to rip off the public in this manner, they would have found themselves hanging from lamp posts outside their offices. (It’s time we did it don’t you think)
“When the facts change, I change my mind. What do you do, sir?” -(John Maynard Keynes ).
Have the facts changed ... do I change my mind... is the crisis over. The last 120 days has found me with my head buried under a heap of statistical data, lots of reading and meeting people who are by far more intelligent than an analyst like me and am yet to see some light at the end of the tunnel
There is a good chance that this is the play that advisors like us wait a lifetime for, but after the fact will bemoan their inaction due to fear. But the public and its policy leaders who all kept their heads buried deep in the sand during the cyclical bull market have now done the predictable 180, worshipping fear much as they worshipped greed just a short while ago in what now seems like a different life. Mania is mania and it works both ways. Smart people will fade mania.
I suppose it is up to the people who rightly saw this mess as overvalued and/or a disaster in waiting to move in and pick up the pieces. While we, along with several external experts, continuously review our assumptions and conclusions and encourage dissenting opinions and analysis to avoid biased conclusions, so far we keep returning to our views about what’s coming. That said, the hardest thing to predict is not what will happen, but when.
If there is ever been a time to think independently, it is now. I will end by quoting Friedrich Nietzsche (1844 – 1900) "The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. But no price is too high to pay for the privilege of owning yourself." “Happy Birthday” Dinesh
