The global financial, economic and social crisis is nearly at its apex point.
Apex (Latin for top, peak, summit)
How do I know this? Well, I work largely on a combination of fact and feel. This is called a HUNCH (an intuition or feeling). It’s something that regulators can’t stomach and is never found in an analyst’s report.
There have been a lot of discussions recently regarding the fickleness (**) of fiat currencies as the US deficit reached US$16 trillion. Over the last 40 years the US$ has lost around 80% of its purchasing power and with QE and other Bernanke induced liquidity injections I suspect further dilution of buying power will result. Just in the last few days good ol’ Ben has promised to inject $40 billion per month; he’ll do “whatever it takes” to kick start the US economy.
(**) –inconstancy, volatility, unpredictability, unfaithfulness, capriciousness, mutability, unsteadiness, flightiness, fitfulness the fickleness of businessmen and politicians
We’ve heard this phrase before. In the last few months the same phrase has been used by the ECB’s Mario Draghi. He said -“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” Draghi told the audience in Lancaster House, a grand building in central London, then paused for effect. “And believe me, it will be enough.”
When I hear this phrase I have a bad feeling, always. History has taught us this.
Example – In September 1942 the following event occurred;- Adolf Hitler ordered (General) Paulus to take Stalingrad whatever the cost to German forces. On the radio Hitler told the German people: “You may rest assured that nobody will ever drive us out of Stalingrad.”
Well, I think the Russian people and its armies had different ideas at the time and we all know how Stalingrad ended. (I’d recommend anyone to visit Volgograd today, it’s a dynamic City with an extraordinary monument to those who defended it).
Fast forward to the European Union and the great experiment that hardly anyone I speak to really wants. The EU has gone well beyond its original remit and has clearly mismanaged the economies, the currency itself as well as just about every facet that it encompasses.
New model regulation is a disaster and as far as the UK is concerned the FSA (soon to hydrate into FCA and others) has allowed absurd and unworkable doctrine to pass unhindered through the back door.
Economies are contracting as predicted by me at an alarming pace and GDP targetting is continuing through lower interests rates and ultimately inflationary tap turning.
Markets everywhere are now disfunctioning and the confusion amongst institutions and new age Wealth (always depreciating it seems) managers is alarming too as new suitability rules seem to follow government guidelines. Just about everyone working for the european vision is earning premium salaries with similar attractive pensions and perks.
The people are angry everywhere but so far are giving governments the benefit of doubts. However, Greece is in a no win no win situation and has to DEFAULT to move forward.
The authorities there have managed to keep a lid on the tensions so far but it is only a matter of time. Similarly Spain is in the doldrums too and recent street protests have been pretty ugly. I expect things to get a lot worse and the crisis of trust to spread to other Club Med countries. In Italy the consensus view is that the technocrat PM Mario Monti is already assured of a new term.
Who said that Italy is a democracy? Portugal has been pretty quiet but if Spain kicks off as I predict then social and markets panic could catalyse. It’s now becoming clear that Germany may well get left with a northern EuroZone and a rebranded Euro. I’m not sure where France is headed but the people are speaking of a return to a New Franc.
So there we have it. Banks in the EuroZone are on the verge of epidemic runs (see previous post on Spanish banks) and it’s only a matter of time before the cracks widen. IT WILL GET VERY UGLY INDEED. My view is that global markets could panic by as much as 30-50% and in bond markets yields across EU could exceed 20-30%. I’m sorry but I do think there is a monumental catastrophe around the corner.
So what do do?
It’s pretty clear that the fiat currencies are going to crumble hereon. I was advocating a minimum weighting in gold and gold equities of 25% till June when I left over-regulated capital markets .
My new (unregulated and personal) adjusted weightings (my ideal personal portfolio) are as follows;-
- GOLD (physical krugerrands and small bars) 25% (as high as 50%)
- GOLD EQUITIES (mostly North American and African) 25%
- New Capital Wealthy Nations Fund ( a fund focused on true CREDIT nations bonds) 25%
- A GLOBAL AGRI FUND (still looking for a suitable vehicle) 10%
- THE REST 15% (as high as 35%) — (spread it around in liquid assets, maybe certain blue chip equities, emerging & frontiers markets funds, art, etc but it really is a lottery right now)
—%’s to be adjusted to suit
DO NOT HOLD ANY FIXED INTEREST INSTRUMENTS, EUROS & DERIVATIVES (incl ETF’s) & MOST IMPORTANTLY REVIEW ANY CASH DEPOSITS WITH BUILDING SOCIETIES & BANKS. HOLD TIGHT FOR A UK PROPERTY CORRECTION OF UP TO 70% IN PLACES.
The financial system is now geared to take your money. Get wise to the events that may unfold at any moment.
NONE OF THE ABOVE COMMENTS ARE DEEMED TO BE ‘ADVICE’. THESE ARE SOLELY EXPRESSIONS, OPINIONS AND COMMENTS BASED ON WHAT I HAVE SEEN UNFOLD THE LAST 36 YEARS AND ESPECIALLY SINCE GREENSPAN WENT WILD IN 1995* WITH AN INTEREST RATE INDUCED ECONOMY DESIGNED TO INFLATE ASSET PRICES AND EXPAND CREDIT.
* –On February 23, 1995 then-Fed chairman Alan Greenspan, in his semi-annual Humphrey-Hawkins Act testimony to Congress, announced that he was ending his period of money tightening that had taken the federal funds rate up to 6% and would start letting rates decline.