Marketwatch reports that a leading newsletter paints a grim picture of the future.
(emphasis mine) [my comment]
Jun 24, 2009, 1:35 a.m. EST
Latest Schultz Shock: a 'bank holiday'
Commentary: A leading newsletter paints a grim picture of the future
By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) -- The top-performing letter that predicted the Crash of 2008 now predicts a confiscatory Franklin D. Roosevelt-style "bank holiday." But it's surprisingly sanguine about stocks -- in the (very) short term.
The Harry Schultz Letter (HSL) was my pick for Letter of the Year in 2008 because it really did predict what it rightly called a coming "financial tsunami." But its performance in 2008 was still terrible, albeit arguably for technical reasons. ( See Dec. 28, 2008, column.)
Now HSL has bounced back big-time. ( See April 13 column.) Over the year to date through May, it's up a remarkable 81.7% by Hulbert Financial Digest count, compared to 4.1% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.
Of course, simple arithmetic dictates that doesn't make up for 2008 -- over the past 12 months, HSL is still down 48.19% versus negative 32.63% for the total return Wilshire 5000. In fact, the damage inflicted by 2008 was so great that HSL is also under water over the past three years, down an annualized 14.89% against a drop of 8.18% annualized for the total return Wilshire 5000.
Still, over the past five years, the letter has achieved an annualized gain of 9.19%, compared to negative 1.26% annualized for the total return Wilshire 5000. This reflects its success in catching the post-millennium hard-asset bull market that caused me to name it Letter of the Year, for more conventional reasons, in 2005. ( See Dec. 29, 2005, column.)
And over the past 10 years, the letter still shows an annualized gain of 3.65%, against negative 0.86% annualized for the total return Wilshire.
In its current issue, HSL reports rumors that "Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."
Yes, yes, it's paranoid. But paranoids have enemies -- and the Crash of 2008 really did happen.
My reaction: Some scary, realistic rumors are going around.
1) Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. These embassies are being sent enormous amounts of US cash to quietly purchase local currencies.
2) Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."
3) The top-performing letter that predicted the Crash of 2008 now predicts a confiscatory Franklin D. Roosevelt-style "bank holiday."
Conclusion: One thing to keep in mind: just because “embassies worldwide are being advised to purchase massive amounts of local currencies” doesn’t mean that anything definite has been planned in the way of a bank holiday or the dollar. The US state department has some very intelligent analysts who have access to a lot more info than I do. It is probable that “embassies are being sent enormous amounts of US cash to purchase currencies” for the same reason I am moving to Russia to start a fund investing in agriculture. We both see the writing on the wall.
email
Eric,
Now I know you are hard up!
MarketWatch is the worst of the worst for economic news man.
MarketWatch never verifies its facts, case in point the story it ran on the 16th (two days ago) about how Nouriel Roubini states that recession is over and that America would see growth by the end of the year.
MarketWatch, like every other economic news source, followed CNBC and stated ultimately that the reason why the dow shot past 100 points and almost closed at 200 points on the 16th was because of the positive statements by Roubini.
However, this turned out to be a false rumor as people can see: Roubini Statement on the U.S. Economic Outlook
MarketWatch is a dark, opinionated, non-fact checking shit hole and I cannot believe, Eric, that you would use them as a source.
Just when I thought I'd seen every thing...
We live in a culture now where facts don't seem to matter to people, just the ability to manipulate.
Even Bloomberg is starting to show that they care not about facts, but about how the story will cover up the manipulation of the market, or get clueless investors to start investing in junk stocks.
But you Eric, to use such a shitty source... it just reeks of conformation bias.
I'm telling you Eric you're going to become a laughing stock, or even worse become the hunted if you keep going down this road.
Anonymous I think it is iuteresting to hear about rumors. Eric states this is a rumor. Bloomberg states when it is a rumor. There are conpiracy theories all the time and it is good to know what people are thinking.
Spreading rumors are for children, or people that want to illicit a reaction.
Regardless of this, the fact that rumors lead to nothing of value (kinda like China dropping the dollar, but they are still buying them) makes them inherently worthless when trying to convey a message of action or understanding to help others on the road to self-determination.
Rumors obscure one's understanding and fragment one's ability to act!
Talking Heads: Crosseyed & Painless
Lost my shape-trying to act casual!
Cant stop-i might end up in the hospital
Im changing my shape-i feel like an accident
Theyre back!-to explain their experience
Isnt it weird/looks too obscure to me
Wasting away/and that was their policy
I'm ready to leave-i push the fact in front of me
Facts lost-facts are never what they seem to be
Nothing there!-no information left of any kind
Lifting my head-looking for danger signs
There was a line/there was a formula
Sharp as a knife/facts cut a hole in us
There was a line/there was a formula
Sharp as a knife/facts cut a hole in us
I'm still waiting...
The feeling returns/whenever [I] close [my] eyes
Lifting my head/looking around inside
The island of doubt-its like the taste of medicine
Working by hindsight-got the message from the oxygen
Making a list-find the cost of opportunity
Doing it right-facts are useless in emergencies
The feeling returns/whenever [I] close [my] eyes
Lifting my head/looking around inside.
Facts are simple and facts are straight
Facts are lazy and facts are late
Facts all come with points of view
Facts don't do what I want them to
Facts just twist the truth around
Facts are living turned inside out
Facts are getting the best of them
Facts are nothing on the face of things
Facts don't stain the furniture
Facts go out and slam the door
Facts are written all over your face
Facts continue to change their shape
I'm still waiting...
The burden of proof still lies on you Eric, but peddling rumors won't help you any.
Hi,
I see that El Nino is on the way .... food production needs sun & rain ... reckon this will be the catalyst for a scrap for food ... China will tweek the dollar peg to ensure it gets it a fair share at a fair price ..... thing is as we all know you cannot print food ....
There are always readers who don't do enough due diligence of their own to understand when a 'rumor' has more substance behind it than mere gossip. Given that the greater mass of the financial world is entirely hidden from public view, one must deduce the likely course of events from a wide spectrum of informational sources that also offer pieces of the puzzle that fit "even" with a Marketwatch article.
As an example, there are the emails from 1997 by "Another" (see: http://www.usagold.com/goldtrail/archives/another1.html) that FOFOA references (http://fofoa.blogspot.com/2009/07/call-me-contrarian.html) --which presciently predict a great many of the circumstances we see unfolding today --as well as the rationale behind them.
You have to pay attention people. The 'credit crises' isn't going to slowly unwind over a period of years. The physics surrounding the global weight of $1,200,000,000,000,000 worth of credit- and interest- swap derivatives simply won't allow it, and behind the scenes, the U.S. and the U.K. are debtor nations in extreme distress. They really aren't calling the shots anymore, and how things unfold from now on aren't up to them.
Don't you think it's interesting that 13 nations showed up for the G8 summit, and everyone who attended received a gold coin? These things aren't done just to generate commemorative coins, you know.
Besides, only sheep listen to Roubini or Warren Buffet anyway, and the 'stock market' has become a manipulative joke...
Well . you now i disagree with a few things that you stated, For example:
...the U.S. and the U.K. are debtor nations in extreme distress. They really aren't calling the shots anymore, and how things unfold from now on aren't up to them.
There is something here that you fail to miss on this one and that is that the US has the most advanced military in the world. And if you were to look back at the military operations that America has done since WWII you would note just how far America used its military power to build, sustain and protect the dollar hegemony.
Second is this statement:
Don't you think it's interesting that 13 nations showed up for the G8 summit, and everyone who attended received a gold coin? These things aren't done just to generate commemorative coins, you know.
I have no doubt in my mind that the BRIC nations would love to drop from the dollar peg immediately, and are currently moving that way.
But as it stands right now, and even in the for foreseeable future, there is nothing that can match the liquidity of the dollar. Nor is there a system in place that can replace the dollar this very, or again the the foreseeable future, instant.
Realize this ., I don't disagree with Eric just his timing of events and how they will unfold.
And until Eric, or anyone of you who believe as Eric, proves with substantial evidence that the dollar collapse is imminent all this talk is useless chatter.
Because why?
It's elementary... the longer that things go on the more likely things will change, and change in a way we least expect.
Anonymous said...
"But as it stands right now, and even in the for foreseeable future, there is nothing that can match the liquidity of the dollar. Nor is there a system in place that can replace the dollar this very, or again the the foreseeable future, instant."
Aren't dollar debt/bonds defaulting more than any other bonds right now? How can someone say the dollar is liquid? The credit contraction goes against that. If the dollar was liquid we wouldn't be having a credit contraction. China's currency is more liquid than the dollar. It's having no problem expanding it's credit. I would say the dollar is the most ill-liquid currency right now because of the enormous debt deleveraging going on.
But i wouldn't suggest moving in to China's currency because it too will suffer devaluation even after the dollar defaults on all it's debt. It will suffer devaluation because even though other currencies will be defaulting, China's economy even after the stimulus' will still be in shambles and more stimulus and importing will be needed to stimulate and save domestic demand. Problem is the rest of the worlds manufacturing sector is poor and what China needs, the rest of the world doesn't have. So China will be trying to import enough to satisfy it's domestic demand but it will fail because there won't be enough in the rest of the world to do that. And with all those Chinese dollars chasing not enough products, the value of the Yuan will devalue.
And I don't know what this talk is of Central Banks taking in gold. To me gold and banks are like oil and water, they don't mix. A bank can't go far with gold because gold can't be printed up like the paper currency they've been using. A bank works best with things that are easy to produce, otherwise the inevitable defaults show up allot sooner. Not to mention, what makes you think that after all the massive defaults around the world that people are going to continue to let other people hold their money for them? That's like standing in the middle of the street, seeing all the houses on the block explode one by one and then deciding to run in to one of the houses that hasn't exploded yet.
I think the reason some people are having a hard time trying to figure out what is going to be the next reserve currency is because there will be no reserve currency. Reserves(banks) will no longer exist after the massive defaults and hoarding will be practiced by each individual on earth.
So get out your head that we'll have a new reserve currency. Paper money and the banking system will be destroyed from both ends. The West with all it's defaults will destroy the banking system and the East with it's expansion of credit with not enough goods to absorb the easy credit will devalue the last remaining paper money and both the banking system and paper money will be destroyed.
I don't think China will sell US debt(it will get defaulted on) but it will be forced to stop buying it because the money China uses to buy our debt is the money it gets from Exports and as our economy slows down and stops buying as much, China won't be able to get the dollars from us to buy our debt.
Even if China sells our debt, it's not going to save China's currency. To assume that China can contract it's credit as soon as it sees signs of high inflation is to assume that China's economy will be at a level of growth where it has room to contract it's credit expansion but I know that China will see high inflation well before it's plan to expand it's credit has reached it's goal of bringing growth to China. China will in a way be in the same situation we(America) are in now. We can't stop printing or raise Funds Rate or we'll see rapid massive defaults and in the same way China will be in a situation where more stimulus will still be needed but inflation will be high. China will be faced with trying to stop inflation and at the same time trying to stimulate it's economy, just like we(America) will. But either way high inflation will be inescapable. In America there will be massive supply destruction either through massive defaults(causing massive companies to close down and inventories to dwindle) or massively large bills floating around the economy. China will be faced with not being able to find enough goods to grow it's economy(trying to go from major producer/exporter to major consumer/importer) and the massive amounts of Yuan chasing those shortage of goods will devalue the Yuan. It's the shortage of goods not just the peg to the dollar that will devalue the Yuan. Prices rise when the shortage is exposed. So by the time prices rise high enough, China will have already imported all that was available from the rest of the world and even at that time there will still be major poverty in China as the world doesn't have enough to export to China(due to it's poor manufacturing sector) and the world will not be exporting any where near as much as China needs it to. The world will be more focused on keeping enough of the goods it has for survival. Because these goods will be for survival, the prices on them will rise and China will be forced to pay more for them which will devalue it's currency. It's currency will not be able to appreciate because the shortage of goods will not allow it.
Gold and silver will be appreciating as those things are more rare than most other things especially the paper currency. The shortage of goods and the appreciation in the value of gold/silver will encourage more production of both goods and gold/silver. Goods will be produced more than gold/silver as it will be easier and gold/silver will continue to appreciate which will encourage more production of goods as those goods will be sold for silver/gold. Because gold/silver will be appreciating more people will be producing so that they can sell what they produce for this appreciating gold/silver. The rising value of gold/silver will encourage more production of goods to be exchanged for this appreciating metal and will bring the world out of poverty. Gold and silver will be appreciating not only because of it's rarity but because of it's industrial properties that will make producing goods easier and more efficient. Without the industrial properties of gold and silver I would say it will be allot harder and almost impossible for us to grow out of poverty. The good news is that with the worlds massive population and the majority of it being transformed from major consumers to major producers, we will not only grow out of poverty but will be producing enough to be richer than we were during the years of massive consumption/credit. In fact i'm sure that's what happened before we went on this credit/consumption binge. Before we were coming off of a world of mass production and I guess the world just wanted to reap the fruits of it's labor so it went on a credit/consumption binge, we'll probably go through the same thing after this era of massive production is over. But if you want to make it through this era of massive production you should be holding physical gold/silver.
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