Podcast
The entire world awaits the Fed’s pronouncements on Wednesday, September 21st. Will it announce just a little more thin-air money to be injected into the system, or a lot? Or maybe none at all?
by
charleshughsmith
Positioning Yourself for the Devolution of the Euro
Tuesday, September 20, 2011
Executive Summary
- Expect dramatic downward volatility as the crisis worsens this year, forcing new and more dramatic ‘fixes.’
- What the best options are for capital when seeking to avoid a euro devaluation.
- An interim period of stabilization is likely, as markets digest the impact of these ‘fixes.’
- Further downward movement is then anticipated if fundamental issues aren’t addressed (which they likely won’t be).
- Why timing and vigilance are everything for the attentive investor.
Part I – The Fatal Flaws in the Eurozone and What They Mean for You
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II – Positioning Yourself for the Devolution of the Euro
One of the clichés of investing is, “There is no bad investment; there is only bad timing.” While we all know there are indeed bad investments, the point about timing is still valid: In certain situations, timing is the difference between a good and bad investment.
The European crisis may well be just such a situation. Until the structural imbalances are truly resolved and not simply papered over for purposes of perception management, then investments denominated in euros will remain at risk.
If the systemic flaws are not resolved, a risky investment (i.e., assets held in euros) could become a disastrous one. If the imbalances are eventually addressed on a structural level, assets denominated in euros or the follow-on currencies may become relatively attractive.
For investors, the key characteristic of the Eurozone crisis is its unpredictability. Anyone claiming there is “zero probability” of a Eurozone breakup is indulging in false precision. Nobody knows what will happen, as the E.U. and the euro are unique experiments without easy historical precedents. All that can be said with any certainty is that toothless reforms, empty compromises, and ballooning bailouts cannot fix structural flaws, and those are essentially all that’s been offered to date.
Despite the unpredictability of the Eurozone’s debt and currency crises, we can sketch out one potential timeline which would suggest an evolving, flexible investment strategy.
Positioning Yourself for the Devolution of the Euro
PREVIEW by charleshughsmithPositioning Yourself for the Devolution of the Euro
Tuesday, September 20, 2011
Executive Summary
- Expect dramatic downward volatility as the crisis worsens this year, forcing new and more dramatic ‘fixes.’
- What the best options are for capital when seeking to avoid a euro devaluation.
- An interim period of stabilization is likely, as markets digest the impact of these ‘fixes.’
- Further downward movement is then anticipated if fundamental issues aren’t addressed (which they likely won’t be).
- Why timing and vigilance are everything for the attentive investor.
Part I – The Fatal Flaws in the Eurozone and What They Mean for You
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II – Positioning Yourself for the Devolution of the Euro
One of the clichés of investing is, “There is no bad investment; there is only bad timing.” While we all know there are indeed bad investments, the point about timing is still valid: In certain situations, timing is the difference between a good and bad investment.
The European crisis may well be just such a situation. Until the structural imbalances are truly resolved and not simply papered over for purposes of perception management, then investments denominated in euros will remain at risk.
If the systemic flaws are not resolved, a risky investment (i.e., assets held in euros) could become a disastrous one. If the imbalances are eventually addressed on a structural level, assets denominated in euros or the follow-on currencies may become relatively attractive.
For investors, the key characteristic of the Eurozone crisis is its unpredictability. Anyone claiming there is “zero probability” of a Eurozone breakup is indulging in false precision. Nobody knows what will happen, as the E.U. and the euro are unique experiments without easy historical precedents. All that can be said with any certainty is that toothless reforms, empty compromises, and ballooning bailouts cannot fix structural flaws, and those are essentially all that’s been offered to date.
Despite the unpredictability of the Eurozone’s debt and currency crises, we can sketch out one potential timeline which would suggest an evolving, flexible investment strategy.
by
charleshughsmith
[Today’s post marks the debut of our first new contributing editor, Charles Hugh Smith, as part of our recently-announced increased content initiative for the site. Our intent is to provide more frequent, more timely, and more in-depth analysis from both Chris and notable minds that we and our readership respect. — Adam]
Europe’s fiscal and debt crises have dominated the financial news for months, and with good reason. The fate of the European Union and its common currency, the euro, hang in the balance. As the world’s largest trading bloc, Europe holds sway over the global economy. If it sinks into recession or devolves, it will drag the rest of the world with it.
As investors, we are not just observers; we are participants in the global economy, and what transpires in Europe will present risks and opportunities for investors around the world.
The issue boils down to this: Is the European Union and the euro salvageable, or is it doomed for structural reasons? The flaws are now painfully apparent, but not necessarily well-understood.
The fear gripping Status Quo analysts and leaders is so strong that even discussing the euro’s demise is taboo, as if even acknowledging the possibility might spark a global loss of faith. As a result, few analysts are willing to acknowledge the fatal weaknesses built into the European Union and its single currency, the euro.
In the first part of this series, we’ll examine the structural flaws built into the euro, and in the second part, we’ll consider the investment consequences of its demise.
The Fatal Flaws in the Eurozone and What They Mean for You
by charleshughsmith[Today’s post marks the debut of our first new contributing editor, Charles Hugh Smith, as part of our recently-announced increased content initiative for the site. Our intent is to provide more frequent, more timely, and more in-depth analysis from both Chris and notable minds that we and our readership respect. — Adam]
Europe’s fiscal and debt crises have dominated the financial news for months, and with good reason. The fate of the European Union and its common currency, the euro, hang in the balance. As the world’s largest trading bloc, Europe holds sway over the global economy. If it sinks into recession or devolves, it will drag the rest of the world with it.
As investors, we are not just observers; we are participants in the global economy, and what transpires in Europe will present risks and opportunities for investors around the world.
The issue boils down to this: Is the European Union and the euro salvageable, or is it doomed for structural reasons? The flaws are now painfully apparent, but not necessarily well-understood.
The fear gripping Status Quo analysts and leaders is so strong that even discussing the euro’s demise is taboo, as if even acknowledging the possibility might spark a global loss of faith. As a result, few analysts are willing to acknowledge the fatal weaknesses built into the European Union and its single currency, the euro.
In the first part of this series, we’ll examine the structural flaws built into the euro, and in the second part, we’ll consider the investment consequences of its demise.
EuroBonds: All eyes continue to be on Europe. What are the odds of the proposal to issue Eruobonds passing? If passed, do these have a snowball’s chance of helping the situation? 
Europe: Where to from here? 
by
Chris Martenson
Why Commodities are the New Safe Haven
Wednesday, September 7, 2011
Executive Summary
- Prices have already risen dramatically with the money supply.
- An increase in money velocity will ratchet up the trajectory in prices dramatically.
- Are we likely to see more or less moneyprinting from the Fed?
- Why commodities, beyond the precious metals, are becoming the next safe haven.
Part I – Commodities Seem Set to Rocket Higher
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II – Why Commodities are the New Safe Haven
Condition #3: Preference To Hold Money Persists
What does one do with Money of Zero Maturity (MZM)? Well, you can save it in a money market fund, keep it at your bank, or you can spend it. The rate at which it is being spent, relative to the economy, is measured in terms of its velocity.
The faster people are spending the same money chasing a relatively fixed amount of goods and services, the higher the rate of inflation goes. The mental image you should have here is someone in Germany in the 1920’s being paid with a wheelbarrow full of cash that they push as quickly as they can to the nearest store (literal veloicty of money, as it were).
Right now, the velocity of MZM is near its historic lows (only recently set in 2009), keeping inflationary pressures relatively low — for the time being.
Why Commodities are the New Safe Haven
PREVIEW by Chris MartensonWhy Commodities are the New Safe Haven
Wednesday, September 7, 2011
Executive Summary
- Prices have already risen dramatically with the money supply.
- An increase in money velocity will ratchet up the trajectory in prices dramatically.
- Are we likely to see more or less moneyprinting from the Fed?
- Why commodities, beyond the precious metals, are becoming the next safe haven.
Part I – Commodities Seem Set to Rocket Higher
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II – Why Commodities are the New Safe Haven
Condition #3: Preference To Hold Money Persists
What does one do with Money of Zero Maturity (MZM)? Well, you can save it in a money market fund, keep it at your bank, or you can spend it. The rate at which it is being spent, relative to the economy, is measured in terms of its velocity.
The faster people are spending the same money chasing a relatively fixed amount of goods and services, the higher the rate of inflation goes. The mental image you should have here is someone in Germany in the 1920’s being paid with a wheelbarrow full of cash that they push as quickly as they can to the nearest store (literal veloicty of money, as it were).
Right now, the velocity of MZM is near its historic lows (only recently set in 2009), keeping inflationary pressures relatively low — for the time being.
I’ve been asked to comment on the work of a few noted deflationists who are calling for a top in commodity prices here. Their argument is pretty clear cut: Because inflation is a function of available money plus credit (their definition), and because credit has fallen, deflation is what comes next. When looking about for things to deflate in price, commodities are an obvious candidate for attention because they have risen so much over the past decade.
by
Chris Martenson
One of the key tenets around here at PeakProsperity.com is that you need to trust yourself. The ‘advice’ we receive from Wall Street and its financially captive press about what we should do with our money is really not advice; it’s marketing.
Wall Street makes money by selling stocks and bonds to whomever: pensions, retirees, moms, pops, young workers, endowments…it doesn’t really matter. The name of the game is for you to buy and then hold onto those purchases.
So when the markets hit the skids, you see endless ‘articles’ offering this very (un)helpful ‘advice’:
With the recent headlines and stock market volatility, you may be wondering if we are seeing a repeat of the market activity of 2008. This is one of the hardest parts of being a long-term investor. It’s easy to stay the course when markets are rising. It’s harder to stay the course during declines and view them as potential investing opportunities. But that’s what being a long-term investor is all about.
Remember: Stay invested – A diversified portfolio of quality investments is a sensible strategy during volatile markets.
(Source – AG Edwards client letter)
Actions Speak Louder Than Words
PREVIEW by Chris MartensonOne of the key tenets around here at PeakProsperity.com is that you need to trust yourself. The ‘advice’ we receive from Wall Street and its financially captive press about what we should do with our money is really not advice; it’s marketing.
Wall Street makes money by selling stocks and bonds to whomever: pensions, retirees, moms, pops, young workers, endowments…it doesn’t really matter. The name of the game is for you to buy and then hold onto those purchases.
So when the markets hit the skids, you see endless ‘articles’ offering this very (un)helpful ‘advice’:
With the recent headlines and stock market volatility, you may be wondering if we are seeing a repeat of the market activity of 2008. This is one of the hardest parts of being a long-term investor. It’s easy to stay the course when markets are rising. It’s harder to stay the course during declines and view them as potential investing opportunities. But that’s what being a long-term investor is all about.
Remember: Stay invested – A diversified portfolio of quality investments is a sensible strategy during volatile markets.
(Source – AG Edwards client letter)
by
Chris Martenson
Joel Salatin, proprietor of Polyface Farms and highly-visible champion of sustainable farming, thinks modern humans have become so far removed from a natural connection to the food they eat that we no longer have a true understanding of what "normal" food is.
The rise of Big Ag and factory farming over the past century has conditioned us to treat food mechanically (as something to be recoded and retooled) vs. biologically. And we don't realize that for all our industrialization and optimization, we're actually getting less yield and less nutrition than natural-based processes can offer.
Whether we like it or not, the arrival of Peak Oil is going to force us to realize that our heavily-energy intensive practices can't continue at their current scale. And with world population still increasing exponentially, we'll need to find other, more sustainable ways of growing our food.
Joel Salatin: How to Prepare for A Future Increasingly Defined By Localized Food & Energy
by Chris MartensonJoel Salatin, proprietor of Polyface Farms and highly-visible champion of sustainable farming, thinks modern humans have become so far removed from a natural connection to the food they eat that we no longer have a true understanding of what "normal" food is.
The rise of Big Ag and factory farming over the past century has conditioned us to treat food mechanically (as something to be recoded and retooled) vs. biologically. And we don't realize that for all our industrialization and optimization, we're actually getting less yield and less nutrition than natural-based processes can offer.
Whether we like it or not, the arrival of Peak Oil is going to force us to realize that our heavily-energy intensive practices can't continue at their current scale. And with world population still increasing exponentially, we'll need to find other, more sustainable ways of growing our food.
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