Our Current Market Perspective
Western Economies/Dollar Perspective
For the last 10 years, the national economy and many of the economies of the Westernized world have been stagnant. The rising costs of providing social benefits and comforts are quickly depleting the economic resources of the U.S., U.K., Greece, Spain, Italy, France and Portugal. They are the nations of consumers, net importers and debtors. Contrast this to the nations of producers such as China, India, the Philippines, Bangladesh, and on some level, nations that have resources – Canada, Australia, Russia and the oil-rich parts of the Middle East.
Quite simply, what we have is a world of consumers and producers. The problem is that the consuming countries increasingly don’t have anything to trade other than paper. This paper is not backed by anything of value, and is merely created by decree by central bankers and their printing presses. A rational person would look at this as being a bad deal for the producer. The producer works and the producer delivers a material item. What does this productive global trader get in return? Paper.
This illusion cannot go on forever. During the last 30 years, the U.S. dollar has lost some 97% of its value. As the U.S. progresses, the state gets increasingly entrenched in the daily lives of its citizens and their wallets. Meanwhile, the population makes more demands and the government makes more of its own demands. However, no one really has any desire to be fiscally responsible – and so they print.
During the last 10 years, the U.S. economy ran out of momentum. We saw the 2000 peak and then the collapse into 2003. The Federal Reserve did everything they could to prop up and reflate the economy. Their resulting efforts created the real estate bubble that lasted up to 2007-2008, and has since popped with such devastating force that it nearly destabilized the world economy. Since then, the Federal Reserve, Ben Bernanke, Paulson, Geithner, George W. Bush and now Barack Obama are desperately trying to keep the U.S. afloat. Printing more money is akin to actually throwing water on to the sinking boat, however.
We feel that the continued policies of the U.S. Government may ultimately lead to the insolvency of our once mighty nation. We feel that harder assets, such as gold, may represent a good hedge against the laissez-faire fiscal policies of Westernized governments. We also feel that the world may be moving towards some type of an event where there may be a currency crisis—the depth of which could lead to a global replacement currency.
This currency may be the opening gesture towards a one-world government. We also feel that farmland may be one of the most precious resources that the world possesses. The simple ability to feed one’s family may be of paramount importance, as a dollar implosion would astronomically drive up the costs of all goods and services.
We are political atheists. We believe the two and four-year cycles of our political dramas are nothing more than a collective fantasy. This year, choose red; that year, choose blue. We praise our politicians as heroes one year and damn them as villains the next. In the end, individuals must be responsible and cannot look to the government for the answers. This applies to healthcare, personal debt and the rational treatment of our domestic and global resources. This also applies to a litany of other issues that politicians claim to be able to solve if elected this next round.
If the U.S. Government and the governments of the Westernized economies continue along the same path of fiscal insanity and the ever-increasing tax loads, we may see in our lifetime the birth of a new global government as a direct answer. This will be a direct answer to, and a revolt against, a government that was supposed to be by the people and for the people. The principles under which the U.S. was founded are sound, but our modern society is saddled with a corrupt and malignant political process. That is why we respond with wholesale rejection of the false and vacuous offerings of the American political game.
As investment managers, we believe our job is to do our best to survive, thrive and adapt in whatever political or economic environment in which we find ourselves. To that end, we shall seek to keep our minds fluid and alert to the changes taking place.