"We have to rethink our world just about from scratch. Or else. We’ve lived chasing the recovery carrot for years now, but the economy won’t recover; it can’t. There hasn’t been any real growth since at least the 1980s, the only thing there’s been is increasing debt levels that we mistook for growth." We need to do a lot more thinking, and take a far more critical look at ourselves, than we do at present. We’re not even playing it safe, we’re only playing it easy. And that’s just not enough.
"This is why Putin is Public Enemy Number 1. It’s because he’s blocking the US pivot to Asia, strengthening anti-Washington coalitions, sabotaging US foreign policy objectives in the Middle East, creating institutions that rival the IMF and World Bank, transacting massive energy deals with critical US allies, increasing membership in an integrated, single-market Eurasian Economic Union, and attacking the structural foundation upon which the entire US empire rests, the dollar." Up to now, of course, Russia, Iran and Venezuela have taken the biggest hit from low oil prices; but what the Obama administration should be worried about is the second-order effects that will eventually show up...
2014 is in the bag and there's something for everyone to celebrate. Here are the narratives that painted the past year - what’s real about them versus what we’re being told they are about.
How did the investment ideas we discussed throughout the year play out
With Greek CDS surging to near post-bailout highs (and short-end bond yields back above 11%), it appears the market is anxious of the endgame as tomorrow's 3rd and final 'snap-election'-saving vote looms. Following Samaras fearmongering yesterday, it appears Germany is starting to fear the worst (and play down its effect), as Merkel's bloc states "the prospect of a Greek sovereign default is no longer a concern for euro member countries and financial markets," adding "hope that Greece’s international partners would pay if the country’s policymakers refuse to carry out necessary reforms is misplaced." However, as Bruno de Landevoisin notes, "what is at stake is none other than the prosperity of the common man pitted against the privilege of concentrated power."
On the old continent, this December 29th, a succinct political showdown is scheduled to take place which may well become a defining moment for our entirely unsettled new millenium.
"I find it so disturbingly illogical that we Americans are willing to die so that our political class can enjoy ill gotten riches and power yet we cower when it comes to defending our great nation against the political class, something our founding fathers pleaded for us to do. The truth, which the political class legislates so hard for us to overlook, is that they are powerless without us. It is us that fight their fights, fund their wars and enforce their laws that enslave us yet we bow down and call them Mr. President and Madame Secretary. And so I ask each and everyone of you, when will we wake up and recognize that we are the power and the wealth and that the political class has only managed, through deception, to harness our strengths and pass them off as their own? For until that day of awakening, we will continue to live as an oppressed people ruled by others for others."
"Most investors go about their job trying to identify ‘winners’. But more often than not, investing is about avoiding losers. Like successful gamblers at the racing track, an investor’s starting point should be to eliminate the assets that do not stand a chance, and then spread the rest of one’s capital amongst the remainder." So as the year draws to a close, it may be helpful if we recap the main questions confronting investors and the themes we strongly believe in, region by region.
The 40%-plus drop in oil prices over the past 6 months has garnered a lot of attention recently, most of it focused on the economic stimulus lower oil prices should provide the global economy, the impact on currency and fixed-income markets, and the increase in economic pain suffered by exporters such as Iran and Russia. However, based on historical data, the potential increase in geopolitical tail risk that lower oil prices may represent is an overlooked consequence that, while low probability, would have an outsize impact on the global economy.
This is it, folks; this is the endgame right in front of our faces. The year of 2014 is the new 2007, with all the negative potential but 100 times more explosive going into 2015. Our nation has wallowed in slowly degrading financial conditions for years, hidden by fake economic statistics and manipulated stock prices. All of it has been a prelude to a much more frenetic and shocking event. We expect a hailstorm of geopolitical crises over the next year to provide cover for the shift away from the dollar. Ultimately, the death of the dollar will be hailed in the mainstream as a “good and necessary thing.” They will call it “karma.” They will call it “progress.” They will even call it “decentralization” and a success for the free market. But it will not feel like a positive development for the American public, who will suffer greatly as the dollar crumbles.
"Distinguished Economist Willem Buiter Joins CFR as Senior Fellow
Willem H. Buiter, a renowned macroeconomist and global chief economist at Citigroup, has joined the Council on Foreign Relations (CFR) as an adjunct senior fellow. His work will focus on geoeconomics, deglobalization, international financial institutions, and global economic governance. “We are thrilled to have someone of Willem Buiter’s experience and reputation joining CFR,” said CFR President Richard N. Haass. “His presence will make an already strong economics program that much stronger.” Buiter is the newest addition to CFR’s Maurice R. Greenberg Center for Geoeconomic Studies, which provides analysis on how economic and geopolitical forces interact to influence world affairs."
"This small group of horrible people are willing to put the world on the line so their lineage can continue to rule the world while the rest of us struggle to simply stop the financial bleeding that has become a 15 year epidemic. This all sounds like the stuff of fiction novels but unfortunately the facts tell us this is all too real. What is hard for me to believe is that we so readily ignore and deny the most essential lessons of history. Perhaps the foremost being that the political class will always be willing to sacrifice the working class in order to retain its power."
It has been centuries since the Portuguese last dominated the world's seaways, but in glancing over recent headlines one would be forgiven for thinking that their pirates are still running around. With the economy still reeling from the effects of the devastating financial crisis in 2010-11, Portugal has been rocked by a series of corruption scandals which go to the very core of the political and financial establishments. Portugal's economic divergence relative to Europe’s core is striking; it has even been overtaken by an average of the newcomers that joined the European Union in 2004, many of which are former communist countries. This in spite of Portugal receiving billions in structural reform funds from Brussels for almost three decades now – a process which is still ongoing. So how did this significant underperformance come about?
- Fall of the Bond King: How Gross Lost Empire as Pimco Cracked (BBG)
- Hong Kong 'Occupy' leaders surrender as pro-democracy protests appear to wither (Reuters)
- Ashton Carter, Ex-Pentagon No. 2, Emerges as Obama Favorite for Defense Secretary (WSJ)
- Oil, the Ruble and Putin Are All Headed for 63. A Russian Joke -- for the Moment (BBG)
- New U.S. oil and gas well November permits tumble nearly 40 percent (Reuters)
- Swedish government on brink of collapse (AJ)
- China says Britain has no moral responsibility for Hong Kong (Reuters)
- Indian Labs Deleted Test Results for U.S. Drugs, Documents Show (BBG)
The topic of ‘currency war’ has been bantered about in financial circles since at least the term was first used by Brazilian Finance Minister Guido Mantega in September 2010. Recently, the currency war has escalated, and a ‘sanctions war’ against Russia has broken out. History suggests that financial assets are highly unlikely to preserve investors’ real purchasing power in this inhospitable international environment, due in part to the associated currency crises, which will catalyse at least a partial international remonetisation of gold. Vladimir Putin, under pressure from economic sanctions, may calculate that now is the time to play his ‘gold card’.