Fingers of Instability Series, Part IV

By: Ty Andros | Fri, Mar 30, 2007
Print Email

In this segment of the "Fingers of instability" series we will cover the vicious growing attacks on the most productive members of the Developed world (Its causes and consequences, and opportunities), and the unintended consequences (unintended does not mean unanticipated) to their economies and markets. The real currency games now afoot, worldwide. And where the next Tidal wave of money is going to come from to drive Asset prices (means of production, ie businesses, real estate, commodities) on their next leg higher. The commodity bull market is swinging into the second and most powerful leg, get on board.

Please do not mistake my writing for doom and gloom, the world will still grow and prosper as I outlined in "shift happens" (see Tedbits Archives www.traderview.com). Modern communications, education spread far more widely, transportation, international trade, computers, and the Internet will see to it that the future is bright!! All are huge positives with big momentum. There will be untold opportunities for investors, but to capture them you must have a "CLEAR VISION" of broad social trends and the markets that stand to be affected. So as to position yourself to profit from the broad trends as they unfold and roll into your properly positioned portfolios, and avoid the pitfalls of the unintended consequences. Those unintended consequences can be "anticipated" and are big opportunities, you get to decide whether it is an opportunity or a set back by doing your homework. Here is some of mine I do for my clients.

In This Issue
Attacks of the Economy killers.
All currencies sink, some just faster than others!
Here come the bidders.

Attacks of the Economy killers

After four years of Rarely seen in history global economic growth worldwide, politicians are set to strike at the hearts of this growth to fund spending that is now on a runaway path. Feeding their reelection plans rather then the seeds of their economies future growth. Nobody wastes money like a government program, they are net negatives, never a benefit to be seen by anyone except to the recipients and the politicians they elect. Wealth killers rather then generators!!! I will rundown the new plans of the recently unveiled "PROGRAMS" to detail the devastating effects to markets around the world as these misconceived plans roll into your pocketbooks and investments. As an opportunity or a setback, you get to decide; www.Traderview.com.

Governments as Gluttons, wherever you look Tax receipts are at record highs and deficits are receding. Tax Receipts have grown much faster than the economies in which they reside, on average more then 7% compounded annually in the last four years in the developed world and much faster in the emerging world. The only real laggards in income growth have been semi skilled and skilled labor as they have been forced to compete with the wages of the emerging economies huge labor surpluses. This has forced them to reduce the pace of their labor wage growth or lose their jobs to the three billion new entrants just entering the global stage. Those new entrants are just exiting poverty and are willing to work very hard for much less. In China and India 60 hour workweeks are common. And they are smart, having received fairly good educations for the first time in generations.

The majority of the Western workers/electorates do not understand the dynamics of this transition, as they have been conversely "dumbed down" for generations by their political leaders in an effort to create more easily manipulated electorates. Socialism, poor reading, writing and math skills, and Government dependent expectations are drilled into every schoolchild, "lumps of clay" to be fashioned and taught to think in a government decided fashion. And the schemes have worked as now we have majorities in the developed world who have no ability to think critically and reason for themselves. Thus, they are unprepared to meet the challenges confronting them and cannot figure out the solutions necessary to regain their previous successes. And have become lazy at the trough of the wealth they were the previous beneficiaries of.

New leaders that wish to emerge in these countries to "fix the problems" are doomed to fail at the election box as these electorates can't see the truth of their situations. They have been mentally conditioned and brainwashed. They are frightened by the emergence of Globalization, and don't understand that globalization is only part of the problem, the other being that they believe they are "victims of others" scattered somewhere else in their countries or the world. So they have banded together to strike out at them through their leaders. Leaders who failed to invest in their own constituencies' futures, for generations now.

Liberals and Socialist politicians rule the roost in the developed world. If you don't promise something for nothing you have "NO CHANCE" of being elected in the western economies. Elections are fought over who can deliver the most "goodie bags" to the electorates, and who can stop the waves of globalization from forcing them to compete on the global marketplace. Competing in the global marketplace that they have been "taught" to believe that cannot compete in, but that government can shield them from. Which, of course, both are false. They can compete and thrive (as many still do in their societies), and the government can't protect them from Globalization except through good policies that foster economic growth, wealth generation and competitiveness.

So, so these scared, poorly educated and ignorant voters have elected the least qualified politicians (a kakistocracy) to meet the demands that are required to thrive into the future. These electorates do not know histories lessons (it was never taught to them) and have no ability to sift through the political rhetoric and compare it to past history and choose leaders that can sustain and build on previous periods of wealth generation and prosperity. They instead elect Politicians who disregard histories lessons (or never learned them), cater to their ignorance and manipulate it, create huge government programs that take in a dollar of tax's and spit out a dimes worth of benefits, print money destroying were their citizens store their wealth (and spend the printed money on worthless ideas that benefit no one except the big campaign contributors and government employees, typically it never really gets to the voter, except in dime on the dollar increments), and generally try to regulate and tax everything that is a "net wealth generator" in an attempt to fund their future spending and electorate vote buying plans. Providing "Bread and Circuses" as in Ancient Rome just before the collapse of that great empire.

A continuous attack destroying the most productive elements of their respective economies, the true job and wealth generators, for present and future generations. These best and brightest people and companies are voting with their feet and moving off shore to escape the certain "slavery" being implemented in slow motion in the US and EU. These productive people and businesses are not dumb, so the politicians are passing laws trying to shackle them to their domestic shores, calling them traitors and Benedict Arnolds for trying to preserve the fruits of their own labors from the relentless TAXMAN. Most if not all of these groups are HAPPY to pay taxes, they just want to keep some of it and escape confiscationary rates.

Well, even after the last four years of "hugely expansionary" government spending the voters have not gotten enough of "Something for nothing". As the broad middle class has not shared in the wealth of this expansion except for the bubblicious appreciation of their home values (then robbed at night while their money was sitting in the bank and the Treasuries printing presses churned out dollars and credit by the trillions), all the upside went to the politically connected insiders.

Their wages are shrinking after inflation and global competition (as three billion people enter the international labor markets at all levels). Their wages are also shrinking because the education system in the united states is a wholly owned subsidiary of the Democratic party, unaccountable teachers unions (accountable only to the politicians who protect them from being accountable to the public for abominable work product) who have been dumbing down the public for several generations (for political manipulative reasons), so the people are not prepared to compete on the global stage. The manipulations have worked. So they want more and have elected a new set of leaders here and in the EU who are accelerating the fleecing of the wealth generators in their next attempt to buy the next elections.

They are really set to accelerate the demise of the developed world. The policies necessary to thrive and build wealthy economies are no longer even discussed, as everyone scrambles to get a piece of an ever-stagnant pie in relation to our competitors increasing pies in the emerging economies. (See Shift Happens, and "Sea Change" in the Tedbits archives at www.TraderView.com) The new policies on the table are recipes for the destruction of future economic health. It doesn't matter whether you are conservative or liberal you have no chance of being elected or even heard if you do not promise something for nothing and the punishing the perpetrators of the current declines in western living standards. Foreign devils, the rich, greedy corporations, Industry aka the creators of "GLOBAL WARMING", are all the boogey men of the least educated among us (they are actually the creators of jobs and opportunities for the middle classes not the government). When all we have to do is look at the political leaders among us for the perpetrators of this debacle. Public servants is an oxymoron.

The Newly Elected Democratic Majorities in the US Congress have dropped all pretenses as to their agendas. Higher taxes (2 trillion dollars worth) on investing, saving and income, more regulation (with no cost benefit analysis) and government control, mandated higher wages and benefits, universal health care, trade confrontations with our trading partners and lenders worldwide, capital controls, creating barriers to, barring and choking off of foreign direct investment into the United States (think CFIUS,). Direct regulatory attacks on domestic capital formation are at hand as well. Can you say less new factories, less new small business formation, less new jobs (except government jobs, they will explode in number), less wealth to be passed around to the middle class, less research and investment in the future, less of everything in a continuously shrinking economy.

Creating wealth is punished at an ever increasing rate, and those evil rich people and corporations steal the hard earned money from the electorate. Economic growth in the US and the European Union is actually NEGATIVE, if you factor in the real inflation numbers. (See the last edition of Tedbits "Shift happens" at www.traderview.com, look closely at the FT charts as they show the real rate of growth after inflation, it is steadily declining after inflation since 1960), politicians love the doctored inflation statistics as it allows them to present a face of a growing economy when it actually is sinking, fooling their constituents into believing they are doing a good job (so much the better for their reelection). And how about the stocks, bonds and the dollar, can you say LOWER, LOWER, LOWER as the returns on these assets are eviscerated and attacked. In Fiat currency terms these markets may be rising, creating another illusion of growth, while the paper currencies they are denominated in crumble in purchasing power at a far greater rate then the assets can rise!!! Who in the world wants to hold something that is going Down? NO ONE!

The United States has no savings, no reserves in the bank; if we can't fund future investment or entitlements, we need foreign direct investment to provide the seeds for future economic growth and tomorrows new industries. I guess the US Congress and the European Union just believe they can print the money using their powerful printing presses at the treasury. Attempting to do what man has tried since ancient Alchemists tried to turn lead into gold. It has never worked in history and it won't work now, you can't print prosperity, there is no such thing as a free lunch, somebody always pays and in this case it will be the very same citizens who elected these power mad idiots!!

In an attempt to transfer wealth from the creators of it to their constituents it is a disaster in the making. And of course their "stupid" constituents really don't realize that the sources of their own jobs and futures (and that of their children) are the same ones that are under attack. They are "POOPING" where they eat. What a fine buffet table they are creating for their own futures. OUCH.

Globally, Western Politicians are set to "CAPITALIZE" on the canard of Global warming. Driving more nails into the future economic growth prospects of these economies. Here and in Europe industry is under attack to "save the children and the future". Fear spread wide (FEAR is an acronym: False evidence appearing real) providing the cover for the politicians' "dream come true" power and money grab by these ill prepared and short sighted leaders. As if we really know what is causing global warming, I DON"T, YOU DON"T, THEY DON"T, "WE DON"T". We just invented the automobile, and computers, how can we believe we can understand the complexities of our global environments. WHAT HUBRIS! Confucius once said "A wise man knows what he does not know", these are not wise men. It will be hundreds of years before we really understand the complexities of what's going on in the environment. Humans are part of nature, not a virus to it.

Watch this video from the BBC: www.youtube.com/watch?v=XttV2C6B8pU. The title is "The Great global warming swindle". For the BBC, a group that's never been known for anything but socialism and misinformation to the mob, it is a refreshingly insightful and accurate rebuttal of global warming. Fair and balanced rebuttals to the mob that is the global warming crowd such as Al Gore, the United Nations, socialist and would be dictators in the EU and US, and "on the dole" politicians and scientists the world over.

(Authors note: Looking for assistance in creating portfolio diversification that can survive and thrive in what I am outlining in "Fingers of Instability" ? If so contact me through www.TraderView.com. Subscriptions to this newsletter are also free at this address; send it to a friend, Thank you)

The most ridiculous item of the last week was Al Gore in testimony to congress providing them the sensational headlines and fear mongering needed to drop this HUGE new tax on the American economy. They greedily supported his ideas as visions of sugar plums danced through their minds, and to think they would reap these revenues "saving the children". All the while America's future economic prospects and those same children they claim to want to protect, future jobs and prospects are under withering attacks of the aforementioned new congressional majority. More taxes on business "big and small", risk taking, investment, hard work and wealth generation mean less of all of them, for all of us. What a wonderful idea they said aloud!!! To the thought of saving the future environment for the children. Thinking of the windfall of revenues to fund their future spending and vote buying plans on the near horizon. Not a dime of it will go to combating global warming, developing really viable alternative fuels, or safe and clean nuclear energy. This tells you the real agenda is the money, not the environment!!!! Just like the Tobacco company attacks before this.

Understand this: the globe has been warming up since the "ICE AGE", and man has burnt fossil fuels for the last 100 years and the ICE age ended 10,000 years ago. Environments in the west have improved continuously over the last 200 years as its economies have prospered under capitalism. Wealthy societies have the money to address improving their homes, fields and environments. So they are set to improve in the developing world as the funds necessary to improve the environments are generated by the growing wealth of their emerging economies; China has set major goals for environmental improvement using the massive foreign reserves their growing economy has generated. India is doing the same as is Russia. They can afford to in ever increasing amounts.

The "France"sification of the west is unfolding before our very eyes. Look no further than France to see the ghost of Christmas in the future. Where meaningful reform is all but impossible, and government spending and economic dictatorship is an everyday occurrence as the government swallows up over 50% of the GDP of the whole economy. The current French presidential election is a prime example of the inability to address economic destruction, all three candidates promise more benefits and rail against the global marketplace realities. The mob constantly in the streets striking, demanding jobs, free benefits, guaranteed employment for life regardless of whether the business makes money, and confiscationary tax rates on anyone who makes over 4000 euros a month. As I said misery spread wide.

I meet successful Frenchmen all the time, but they no longer live in France they live in Switzerland, or Ireland, they got tired of pulling the wagon of freeloaders. So they voted with their feet. Leaving only the freeloaders to fight among themselves for the few scraps left of the ever-shrinking economic pie. Ditto Germans and Italians. Mediocrity is the order of the day, new business formation and national champion. Wealth creation, personal initiative, risk taking, entrepreneurial endeavors have left these countries as it no longer pays to make any extra effort and take the risks to create these things. The second wealth is created it will immediately be taken from them to share with their countrymen, such altruism in government (LOL, do you think it might get them some votes in the next election? Ask Segolene Royal or Angel Merkel). Even if these businessmen and entrepreneurs tried they would be punished for it for their selfishness in not sharing their success with the wagon riders. They were chased out of the country by these mobs of freeloaders. Leaving only the government to create and guarantee jobs, with national champions such as Airbus, and nationalized utility industries. What winners!

Why do you think capital spending and investment in the United States is plummeting for the second time in 6 years? They saw which way the wind was blowing in the last congressional election, and they knew what would be the result for their business prospects, 5 out of the last 6 months capital investment has plummeted. Orders for capital goods as reflected in the durable goods numbers is falling at an 18% annualized rate for the 1st quarter 2007. Because there is no upside, only higher taxes, mandates and more regulations as far as you can see into the future, which make them unprofitable business decisions. So, no capital investments are being planned, these executives aren't dumb. The only capital investments really being done is foreign corporations that want access to US markets without the political backlash such as Toyota, Honda, Mitsubishi, etc. US companies and multinationals simply by the existing companies in takeovers, new plant and equipment is not considered as the future is too murky with Washington's political climate. Take a look at this chart of France industrial exports since 1990, and then look at America's exports to the EU:

This is the US future; manufacturing has been declining in the US for 20 years, and will continue to decline I remember two weeks ago in congressional testimony the UAW with the big three auto makers telling congress they couldn't compete because of currency manipulation by the Japanese and others, and they did this with a straight face as they asked congress to intervene on their behalf. Unbelievable, how do they think the Japanese employ and profitably run US plants? And don't think those Japanese employees are unhappy or underpaid; they have rejected union organizing efforts on a number of occasions. If they were victims in their minds they would embrace these efforts.

The OLD EU is right behind the French in destroying their manufacturing infrastructure, with the exception of Germany which has held wages low and regained a little competitive edge (but very few new plants are even considered), and bringing up the rear is the United States. But the US is doing overtime to catch up to this economic suicide. As its politicians move like a sledgehammer to destroy the economy, all the while we are facing a tsunami of spending requirements on the near horizon as out of control spending and new entitlements obligations really accelerate as the baby boomers near retirement and the Social security and Medicare trust funds have been stolen to fund the general budget. These are the seeds of the coming pauperization of the American and European middle class, just like France now, we soon will all be on the MOON. They believe they can print, borrow and spend their way out of as they have always done and because of that.....

(Authors note: Looking for assistance in creating portfolio diversification that can survive and thrive in what I am outlining in "Fingers of Instability" ? If so contact me through www.TraderView.com. Subscriptions to this newsletter are also free at this address; send it to a friend, Thank you)

All currencies sink, some just do it faster than others!

Ever since today's currencies were torn from their gold and silver underpinnings you knew one thing at the beginning of each year. As Clyde Harrison of Brookshire raw materials fund puts it "you have to make 3% a year just to break even on inflation". Well Clyde that number has now changed as the Developed and Emerging world alike now churn out funny "faith based" money in any amount that fits their ambitious goals. In the era of WORLDWIDE Fiat Money and credit creation the number is probably double that rate. For instance we know that globally the increase in currencies in circulation worldwide increased over 14% FOR THE WHOLE WORLD COMBINED. Gold has broken out against every major currency in the world and it is appreciating at double digit rates against every peace of sovereign paper in the world, which is the true inflation rate. (see Tedbit archives at www.traderview.com)

The exchange rate difference in between any two currencies is also a reflection of the many other factors such as: investment potentials in local currency terms, interest rates between countries, relative inflation statistics, comparative government policies, current and future growth rates, central bank policies, tax policies. Managed exchange rates through currency market intervention also plays a role, which is a purely political attempt to manipulate competitiveness against ones trading partners and tilt the playing field to overcome the reflections of government's bad policy choices. To the detriment or benefit of the local Mandarins in whichever Capital they may reside.

The United States had 20 years of prosperity in no small measure because the dollar was rising and the government was able to print its way to prosperity for much of that time. And because taxes were low for foreign investors (what an incentive for foreign dollar holders, this too is now ending as well) in the US. The US and credit and currency in circulation grew exponentially during the great bull market in dollars. As near as I can tell it (the numbers are fuzzy) dollars in circulation grew almost 600% in Greenspan's tenure as the dollar became the reserve currency of the world. Central Banks and Savers relied on the full faith, fiduciarily responsible, and reliability of the US government to meet its obligations and to keep the straight and narrow.

So we gave them what they asked for Trillions and Trillions of dollars to store their wealth in and shield them from their irresponsible local governments. Those dollars then took the place of the gold and silver they used to hold in their reserve vaults to underpin their currencies. They sold the metals and other reserve assets and spent the money. Exchanging assets which have no credit claims against them (gold and silver are no one else's liability) and exchanging them for ones that do (the dollar is a claim against the US government). Britain sold their gold at the bottom of the market in 2002 at 250 to 300 dollars an ounce, the big central banks of Europe continue to do so to this day, moving their currency backing into further and further towards Mickey Mouse land Is there any major central bank whose US dollar reserve holdings are not more than 50% of the total reserves? I don't think so. Now those dollars are quickly doing the reverse of what ancient Alchemist tried to do (they tried to change lead into gold). They are turning from gold into Lead. And they are the elephant in the room, impossible to ignore and impossible to hide. US politicians and central bankers are now cheating the very people who placed their trust in them, their constituents and dollar holders everywhere.

The United States has built such a gargantuan pile of obligations, current and future that it guarantees the destruction of any of the any intrinsic value that may still be embedded in dollars. The current US budget spends $9,666 on every man woman and child in the United States, and this number has grown 60% in the last six years. And that doesn't include the Social Security and Medicare trust funds they" BORROWED", which is 100s of billions more in unchecked spending. They say Social Security and Medicare are not bankrupt and there are trust funds, but they are gone, stolen from the cookie jar, a funding crisis that was not to be a problem for twenty years is now on the close horizon.

On balance sheet obligations of the US government have grown during the Bush administration from 20 trillion to over 47 trillion in less than 6 years. Non-recognized future obligations are at least another 20 trillion. State, municipal, corporate and individual debts are not included in this number, and they are enormous, but that is another story. Regulations and the size of government have increased almost 60% over this period as a further impediment to future growth prospects. The new Democratic majority is set to ratchet all of this up, in all of the mentioned areas. These are calls on the future earnings of an economy whose GDP is approximately 12 trillion dollars. Obligations of the same children they say they want to protect from global warming. There is no way we can grow our way into paying these unpayable obligations. These promises to pay by the government will only be met through the printing presses.

The guaranteed monetization of these obligations mean the reserves in central banks around the world (they are up to 70% of the backing in central banks for Euros, Yen, British Pounds, Yuan, British pounds, Russian Rubles, etc. depending on the reserve holding of the respective central banks) are about to begin a decline in value that could be 60 to 80% of their present purchasing power. So we now we know and can understand that a falling dollar will bring down the value of every currency in the world, as the dollar is the reserve holding in their central banks, reducing the currency values of the currency they back in an equivalent manner. Does anyone understand what this means for gold in terms of every currency in the world? It is time to buy every pullback...

Responsible government is now impossible in the United States, its all politics all the time. Republicans are Borrow and spenders and democrats are Tax and spenders, the one thing they agree upon is the spending, ie future new obligations. Now we are seeing the entry of a newly enlarged and insidious element to the spending plans of these politicians, which know nothing else. It is PRINT and Spend. And it is accelerating; just last week we saw a 24 billion dollar pop in M2, that is approximately a 36 billion dollar pop in the now deceased M3 measurement. I promise you it went into propping up the stock markets, supporting the dollar (as it was very close to a MAJOR chart breakdown) and smoothing out losses in the subprime arena. Removing balance sheet bombshells and propping up asset values. It is the Fed in action as the buyer/lender of last resort, and it is set to continue "ad infinitum" forever. There is no purpose, for which they will not support a quick printing to solve. It is now second nature to them, it is the answer to every problem for them, "throw money at it". Never looking at the negative consequences of their actions, or even giving it a second thought.

Now the Laws of unintended consequences (but they can be anticipated and these are big investment opportunities) are kicking in for our foreign dollar holders and lenders, and they are faced with a conundrum of epic proportions. They are holding the proverbial ICE cube in their hands and bank accounts. It is slated to melt, slowly now but it will gather steam as each holder forces the other to speed up their diversification plans or lose out. And there is nowhere to run as the dollars in circulation dwarfs the local currencies in size. A conversion into another script will quickly turn ugly for the receiving currency as it skyrockets in price and the holder of the dollar as it plummets. It must primarily flow into assets, not currencies.

As predicted in the opening of the fingers of instability series (see archives at www.Traderview.com) the government of China is setting up a global investment corporation to dump them, and its central bank is signaling it won't accumulate more. Many foreign exchange professionals doubted the magnitude of their intentions in the statement. This may or may not have been an overstatement or a Freudian slip about their future plans. The governments of Iran and Malaysia no longer accept dollars, and Russia has outlawed the speaking of assets in dollar terms. Can you say WAR?

This is only the beginning as there is really nowhere to run, the positions they hold are too big to swap into other currencies without destroying the value of their dollar holdings on the offer and distorting the value of the receiving currency by putting too much of them on the bidding side. And then there is the US congress, which does not quite understand the cows are already out of the barn, it's too late, and their parties are over. The one redeeming aspect to the problems for the politicians in Washington is that foreign holders of dollars don't vote in elections. Foreign holders can run on the edges but not leave en masse, so it will be a long bleeding process "death by a thousand cuts" as other repositories of wealth are developed and moved into slowly. It's a game of hot potato as foreign holder search the world over for another greater fool to take these dollars off their hands in exchange for things that can't be printed!! Because of this....

(Authors note: Looking for assistance in creating portfolio diversification that can survive and thrive in what I am outlining in "Fingers of Instability" ? If so contact me through www.TraderView.com. Subscriptions to this newsletter are also free at this address; send it to a friend, Thank you)

Here come the bidders.

We all live in an Asset dependent world where economies depend on the value of their financial and real assets to underpin the financial systems in which they reside. Those assets are set to soar as dollar holder's worldwide attempt to exit. This is in addition to the purchasing power of the emerging economies as their citizen's incomes have leapt higher. There are now over 750,000,000 Chinese who make more than 5000 dollars a year. Doesn't sound like much but you can live like a king for $50,000 dollars a year in China. I know this as my wife is mainland Chinese (her brothers and fathers incomes are up over 100% in the last three years, she was making over 10,000 dollars a year in Shenzhen before she left).

Their incomes have quadrupled in 15 years. Russian, Indian and other emerging economies citizens are all doing the same to different degrees. Billions of people emerging from poverty, how wonderful, and they want cars, homes, dishwashers, roads, sewers, better education, more meat and poultry and all the things they see on TV and the internet in the developed world. Why do you think raw materials prices are near highs, even Dr. Copper is signaling global economic strength. Buyers of things from by the little guy (meat, poultry, grain, cars, homes, etc.) and buildings, businesses and raw materials by their governments. Inflation written globally.

They are thirsty and they want to drink the fruits of their labors. They earned it. But they are now beginning to realize they were slipped a banana peel (the dollar) for their products and labor. And if anyone has seen a banana peel they know it goes bad fast. They want to redeem these IOU's from the US government, and of course the government doesn't want to keep its promises (it never does, and wishes to renege) and will resist this (think Unocal, Dubai ports world, and Hillary's latest thoughts on restricting foreign purchase of US debt, etc. totally insanity in the position we now find ourselves in).

So they are about to embark on a buying spree of epic proportions, to buy something from some other poor sucker before the banana peel goes bad (the faster the government monetizes the liabilities the faster the banana peel aka "the dollar" goes bad). Get a hold of the asset and let the next guy worry about collecting the dough from the US government. And it is a theme written worldwide. They will attempt to identify undervalued assets and buy them.

You can expect them to be arriving soon in a town near you and buy the homes and condos that are about to be spit out from the housing and mortgage bubbles. 800,000 defaults are expected in towns across the country, including such place as Torrey pines in San Diego and other upscale areas in bubble communities near you. At what else? Fire sale prices. Who will the government look to take these assets? Their campaign contributors on Wall Street and the financial industry or the foreign holders of dollars, my bet is on the former. Let those foreign devils look elsewhere, and they don't vote or make campaign contributions. LOL. This will be quite a bomb on those foreign holders of dollars when it happens, and of course it will for the constituents of these shortsighted politicians as interest rates skyrocket and their dollars buy nothing from their foreign suppliers. Inflation writ large as the manufacturing industry is all off shore. It will hit the pocketbooks of everyone who shops anywhere, especially those who frequent Walmart. And of course who elected these guys? The people who shop at Walmart.

Look to Japan as a primary destination of these dollar holders as they take advantage of the low value of the yen to go on a buying spree of Japanese assets, Japanese assets that have gone through a 15 year deflation. They are CHEAP in dollar terms. You can kiss the yen carry trade goodbye at some point soon. Just think about what this bombshell will do to other assets as it comes off the books. WOW. Opportunities will abound for the astute investor when these speculators have to liquidate the high yield side of the equation. In fact these dollar holders may force the issue in a slow motion way with money at the ready to buy the high yield side as it moves lower in crash like fashion.

Wherever assets are cheap in dollar terms you can expect them to show up soon. Small armies of investment professionals will soon be employed to identify and seek out these opportunities in the global market place. Initially this will be the Morgan Stanley's and Goldman Sachs of the world but they will rip off the Chinese and emerging market buyers, forcing them to build their teams from independents who will not play the Company lines. And when the financial assets crash (ala NASDAQ, housing, etc.) from getting ahead of themselves these buyers will be there to cushion the blows as they take the assets from the weak hands. Global plunge protection teams courtesy of the Chinese, Russians, Indians, and other foreign governments. What delicious irony.

As Warren Buffet once said we were building a "sharecropper society" with the deficits we were running; now we will see the meaning of his words as foreign dollar holders buy the means of production and tangible assets with their mountains of money. To put this in perspective I will use the bidding battle between the Chicago mercantile exchange and the ICE (International commodity exchange) for the CBOT (Chicago Board of Trade) they are bidding respectively 8.3 and 9.7 billion dollars respectively. Chump change for this jewel of the commodities and derivative industry. Chump change when you have 1 trillion dollars in the bank and are building your reserves at a 23 billion dollar MONTHLY rate. Or the forty some billion recently paid for Sam Zell's equity office REIT (real estate investment trust). This is the largest commercial real estate holding firm in the United States, once again chump change in context to their enormous dollar holdings.

Now let's think of the enormous reserves India, Russia, Japan, and the Middle East have accumulated, and who will soon join the bidding. And they want to spend them soon to preserve the value of those reserves, as the dollars demise is now on the near horizon as we look at the train wreck of liabilities slated for the next ten years in the United States. Obligations, which can only be met through the printing press. They are going to move out of dollars and move into non-paper tangible holdings with far greater income and capital preservation potential then the dollars they now possess. It will be done in slow motion unless the Congress does something stupid like trying to stop them from spending their holdings.

Creating Berkshire Hathaway type holding companies to purchase and harness the productive capacities of their previous customers, current borrowers, and future employees. The bidding wars for these "productive" assets will become fierce, driving those assets far higher in dollar terms. Look at how Russia is now looking to buy the pipeline and distribution businesses in Western Europe, it is only the beginning. Just as a saver puts part of his income into the bank every month, these countries will be embarking on a buying programs in much the same vein. Putting aside part of their current and future incomes into regular buying programs. Constantly on the bidding side for things and productive assets everywhere. They have a lot of buying to do....

In Conclusion, All of these things I speak of are going to roll through your portfolio and markets near and dear to you IN ONE WAY OR ANOTHER. Are you prepared to CAPITALIZE on them or be victims to them? Just by reading this "Big picture" you are preparing yourself to be on the positive side of the ledger, good thinking and careful portfolio preparation are all important, careful planning and diversification in asset classes is of critical importance. If you wish to have assistance in this, contact me through www.TraderView.com. The final installment of Fingers of Instability will be a barnburner. As we outlined in the last Tedbits we are evolving, we will be doing more regular distributions, with new features (in development).

If you enjoyed this edition of Tedbits then subscribe - it's free, and we ask you to send it to a friend and visit our archives for additional insights from previous editions, lively thoughts, and our guest commentaries. Tedbits is a weekly publication that comes out on Thursdays or Fridays.

 


 

Ty Andros

Author: Ty Andros

Theodore "Ty" Andros
info@TraderView.com
www.TraderView.com

7800 Southland Blvd. #110 Orlando, FL 32809
PH: 800.253.7689 // +1.407.855.4433

Tedbits is authored by Theodore "Ty" Andros, and is registered with TraderView, a registered CTA (Commodity Trading Advisor) and TraderVest Clearing LLC a GIB (Guaranteed Introducing Broker). He currently is the principle of TraderView, a managed futures and alternative investment boutique. Mr. Andros began his commodity career in the early 1980's and became a managed futures specialist beginning in 1985. Mr. Andros duties include marketing, sales, and portfolio selection and monitoring, customer relations and all aspects required in building a successful managed futures and alternative investment brokerage service. Mr. Andros attended the University of San Diego, and the University of Miami, majoring in Marketing, Economics and Business Administration. He began his career as a broker in 1983, and has worked his way to the creation of TraderView of which he is the sole owner. Mr. Andros is active in Economic analysis and brings this information and analysis to his clients on a regular basis. Ty prides himself on his personal preparation for the markets as they unfold. Developing a loyal clientele.

For greater insight into the philosophy behind Tedbits, have a look at the Tedbits Overview - To help understand our mission in serving you, the TedBits Overview gives a broad description of what's unfolding globally and what you can expect from Tedbits as a regular reader.

DISCLAIMER AND TERMS OF USE: While TedBits strives to present accurate and useful information, we make no guarantee of accuracy or completeness. All information and opinion expressed herein is subject to change without notice. Opinions and recommendations contained herein should not be construed as investment advice. Under no circumstances does the information in this column represent a recommendation to buy or sell any securities or commodities. Do not assume that any recommendations, insights, charts, theories or philosophies will ensure profitable investment. The information contained herein is for personal use only.

Gold and silver backed means that various commodity options strategies in gold and/or silver may be used. When buying options, you may lose all of the money paid for the option. When selling options, you may lose more than the funds received for selling the option. Strategies using combinations of positions, such as spreads or straddles, may be as risky as taking a simple long or short position. A high degree of leverage is used to buy or sell a sufficient quantity of options and/or underlying futures contracts equal to the value of the entire portfolio. The high degree of leverage can work against you as well as for you and lead to large losses as well as large gains. Absolute-return is not meant to imply that a positive return can or will be achieved. Absolute-return describes investment strategies which are designed to have the potential to succeed in rising, market-neutral and falling market conditions. Gold and silver backed and absolute return investments do not mean the investor will take actual physical possessions of any precious metal. Nor should any promise or guarantee be implied that such investments will perform better than any other investment in any possible future scenario described herein nor that such investments can or will preserve or protect in such possible future scenarios.

TedBits may include information obtained from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made to ensure its accuracy or completeness. Many of the statements and views made are the opinions of the author. Opinions expressed are subject to change without notice. This report is not a request to engage in any transaction involving the purchase or sale of futures contracts or options on futures. There is a substantial risk of loss associated with trading futures, foreign exchange and options on futures. This letter is not intended as investment advice, and its use in any respect is entirely the responsibility of the user. Past performance in never a guarantee of future results.

Copyright © 2006-2014 Theodore "Ty" Andros

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/