As I’ve stated previously, something’s gonna crack in 2010.
Will it be CRE?
Will it be the US dollar, US bonds?
Will it be the stockmarket?
Will it be gold?
Will it be Europe?
Will it be oil?
I’m still thinking “Japan” myself. But that US budget deficit is something to behold. It’s bigger than King Kong and just as destructive.
But something’s gonna crack. I can feel it.
“Snowmageddon” will be the poor excuse bankrupt families will use to explain their low-spending Christmas. Whether they could have made it to the shopping malls or not is immaterial. It’s a reasonable excuse to stay at home and insolvent families will take any excuse they can to explain to their friends why they didn’t spend big this Christmas.
Most spending at Christmas is to show off. People still do it even if they’re neck high in debt for the reason they’re neck high in debt in the first place – to keep up with the Kleins and the Steins and the Shleins.
Short major U.S. retailers and REITs with a high proportion of shopping malls in their portfolios. Now.
First, everyone was so confident, even sub-prime wasn’t beneath them. Then fear set in. Everyone raced to T-bonds. Yields even went negative on T-bills periodically. Gold shot up.
Then bankers realised the US budget deficit would flood the market with bonds. They started moving away from the US dollar, into Euros and the Aussie and other assets. Then Greece and Dubai look shaky.
They race back to the US dollar.
What are they going to do next? Where can they run to? Eventually, they’ll end up in farmland and gold. Some in cash.
Frightened little things. You’ve got to feel for them.
For decades I would watch on in disbelief as Professors and then quant analysts would try to ram the normal distribution down my throat, as though it applied to every situation.
Those who were criticising Peter Schiff in 2006 for being a pessimist were themselves insanely unrealistic about the prospects of the US economy. See how Peter Schiff was ridiculed by the “optimists” here:
Similarly, the Economist (a mere shadow of the publication it once was) speculates on the benefits and costs of pessimism.
Again, who says someone is pessimistic or just realistic? Who decides?
I can be happy if circumstances justify it. If I’m raped in jail by five men, I know I will be unhappy. I’d be surprised if anyone would be happy after such an event occurring, no matter what positive-thinking feel good course was taken the day after.
If I’m making love to the woman of my dreams I know I will be happy. No one is going to convince me any different. I know it will be good. No amount of preaching about the sins of the flesh would stop me being happy the day after.
Being sad in one instance does not make me a suicidal depressive and being happy in the other doesn’t make me a naive fool.
It depends on the circumstances.
I deal with reality as it is, not as I want it to be. I don’t shirk from reality – no matter what it gives me. I take the emotional responses to that reality as well – I do not shirk the emotional consequences of looking squarely at reality as I see it. Every post on this blog is supported by facts and contains multiple links supporting my assertions which any fool can click on and verify for themselves.
I’m depressed today because I see how badly screwed up all our futures will be. If this was different, if I was living in a different time, if govts were smaller (and fairer), if gold was money, I guarantee you I would be “happy” because I would be looking forward to the future.
As an investor, look at the facts as they are. Forget your preconceptions. Respect those who base their conclusions on facts, not fantasy, not last year’s trends. Ignore “authority figures” when it comes to investing. As can be seen from the clip above, they are almost invariably wrong because they are talking their own book.
The best investment strategy when in doubt is actually to invest in last year’s worst performing asset class. Why? Because markets overbuy and oversell. And because idiots like Laffer and Stein exist.
By the way, this year’s two worst peforming asset classes in Australia were foreign stocks and commercial real estate funds and commercial real estate trusts.
We’ll see how they go in 2010 (I’m actually predicting another down year, but we’ll see!).
Greenspan warns the US to rein in spending. Two decades too late.
Based on Greenspan’s appalling record of prediction, this means that US bond yields will remain low throughout 2010 (at least) and that demand for US bonds will remain high.
We already know it’s going to be hyperinflation or deflationary depression.
The Makian Distribution predicts this: unprecedented public and private debt means unprecedented volatility. The one absolute certainty is that you will no longer get steady 4% returns year-by-year in any asset class. You will either double your money in a year or be wiped out completely. Government bonds will have insanely low (even negative) yields – and then suddenly be worthless within weeks.
Now, David Calderwood imagines the deflationary scenario as vividly as anyone has this year. As a deflationist, I’m visualising something very similar to happen, short of Bennie Boy dropping toilet paper fiat from helicopters – which ironically is unlikely given he speculated he’d do it if he had to. Once an academic speculates on something so stupid in an academic paper, he’s highly unlikely to follow through in reality.
The only question I have for David Calderwood is the same one I have for Steve Keen: WHEN?