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3 Warning Signs Of A Potential Bloodbath Ahead

Asia Confidential's picture




 

The title is deliberately provocative to relay the extent of my concerns with recent market action. Regular readers will know of my bearish long-term outlook for stocks based on the view that we remain in a secular bear market which began in 2000 and extraordinary central bank policies have only delayed an eventual bottom. But the recent activity in stocks and other asset markets is sending a clear signal that dangerous bubbles are building everywhere thanks to printed money and low interest rates. And central banks are unwilling to intervene as economic recovery remains as elusive as ever. The likely endgames are obvious enough: either recovery happens and central banks move too late to quell inflation or recovery doesn't happen at all. Those forecasting a happier outcome either don't know of the long history of consistent central banking failure or, more likely, are beneficiaries of the current policies.

Many commentators have rightly pointed out the froth building in the U.S. stock market with Twitter jumping 73% on debut, margin debt at record highs and extreme bullishness among institutional and retail investors. But the bubbles developing in Asia, arguably much larger in size not just in stocks but across all asset markets, have been largely ignored. Today's post will focus on three red flags:

  1. The Indian stock market reached record highs over the past week despite all of the country's problems and a currency recently in free fall.
  2. Australians have been increasingly using their superannuation funds as collateral to buy residential property, helping reflate one of the world's biggest housing bubbles.
  3. The Japanese bond market has effectively died with the government becoming the dominant player in the market due to its massive bond buying program. This isn't just a Japanese phenomenon with central banks now owning a third of the world's bond markets. Free markets, these ain't.

I'll also explore why the excesses are developing. And a key underlying reason, little acknowledged, is that the fiat money system - paper money without an anchor to something of solid value - is becoming stretched and perhaps reaching breaking point as central bankers print endless money without constraints. Some may see this as an extreme point of view but that ignores the relatively short history of the system and subsequent sharp increase in asset price volatility.

Asia Confidential isn't so arrogant as to predict an imminent downturn in asset prices. No-one knows exactly how this will play out. But increasing asset price volatility would seem relatively assured. Given this, it would make sense to keep your assets diversified, resist taking on too much debt (asset price risk outweighs attractive rates) and, most importantly, avoid areas that investors are salivating over (such as hyped IPOs).

Red flags everywhere

If alarm bells aren't going off for investors, they should be. And it's not just the IPO of a certain social messaging company which is valued at close to US$24 billion despite never earning a dime. I saw one portfolio manager describe the IPO as a great thing and the best of capitalism in action. I'm not sure who's more stupid: this investor, the Twitter founders who under-estimated public demand and left money on the table, the investment bankers who under-priced it or the retail investors who are holding onto the shares, which will probably go the way of RIM in a few years time.

The largest signs of excess instead lay in Asia. I've mentioned the Indian stock market reaching record highs. It was only in July that the country was in turmoil with a currency in free fall. Since then, stocks have surged, out-performing all other major markets in Asia.

Below is India's Sensex index.

india-stock-market

For the record, I advocated accumulating Indian stocks during the turmoil, but the market has run extraordinarily hard since then, making it prudent to take some money off the table.

The country's problems haven't gone away. The economy is still growing at decade-lows. The current account deficit remains one of the largest in emerging markets. And politics remain uncertain ahead of a general election next year.

Now some will argue that the stock market is just forecasting a better economy ahead. Maybe. But your starting point is a market at record highs, on a not-so-cheap 16x trailing earnings, arguably distorted by low interest expenses given low rates.

More prominent warnings signs are outside of stock markets though. Everyone knows that residential property prices remain elevated in the likes of China, Hong Kong, Singapore and Australia. The latter has taken it to a whole new level, however.

The latest trend is Australians using their superannuation as collateral to buy residential property, as well as other forms of property. Residential real estate now accounts for 14% of so-called self managed super funds. That's helped drive an 8% year-on-year increase in house prices in September.

Now I'm not sure if the practice of using superannuation or pensions as collateral to purchase property is used in any other country but the dangers are pretty obvious. Particularly when many developed countries, including Spain, are raiding pension funds to finance their QE programs.

Australia has added risks given the extent of its housing bubble. Demographia says the Australian housing market is the most expensive in the developed world, with property prices at 5.6x annual income, with 3x or below considered affordable. Meanwhile, The Economist magazine suggests Australia is the world's fourth most expensive housing market, with prices 44% overvalued versus rents and 24% versus wages (which are undoubtedly grossly inflated).

The risks to Australia from the inflated housing market are systemic also. Housing assets of A$4.9 trillion are 3.3x larger than Australia's GDP. Moreover, residential property represents more than 60% of the big four Australian banks total loan books. Given these banks have an average leverage of 20x (assets/equity), it would take less than a 10% fall in residential property prices for equity in these banks to be wiped out.

One word comes to mind: bail-outs!

Australian housing assets to GDPAustralian banks residential property exposure

Lastly, there's been unsurprising news over the past week that the Japanese bond market has become dysfunctional. I've previously talked about how the massive bond buying program of the Japanese central bank, equivalent to 70% of new bond issuance, would crowd out private investors and thereby significantly increase volatility.

Now one of Japan's larger brokers, Mizuho, has come out to declare that the sovereign bond market is effectively dead. The firm's chief bond strategist Tetsuya Miura told Bloomberg:

"The JGB [Japanese government bond] market is dead with only the BoJ [Bank of Japan] driving bond prices.

These low yields are responsible for the lack of fiscal reform in the face of Japan's worsening finances. Policymakers think they can keep borrowing without problems."

Recall that Japan is attempting U.S.-style stimulus on steroids to lift the country out of 20 years of deflation. It hopes to increase inflation without a rise in bond yields and interest rates. Rising rates would kill Japan given that interest rates of just 2.8% would mean interest expenses on government debt equaling all of current government revenues. An unsustainable situation.

Japanese government bond yields have behaved so far, though there was a huge spike in volatility earlier this year. Given the central bank has now effectively swallowed the bond market, you can expect to see increased volatility hitting headlines again very soon.

Below is a chart of 10-year Japanese government bond yields.

japan-government-bond-yield

By the way, this isn't just a Japanese issue. Central banks now own a third of the world's bond markets. That number could substantially rise given plans for further QE. And it makes an eventual bond market revolt more likely at some stage.

The system reaching breaking point?

It would be easy to blame the above excesses simply on money printing and low interest rates. But that would ignore some of the key underlying causes. A few weeks ago, I highlighted how the significant trade imbalances between the U.S. and China played a major role in the financial crisis and subsequent policy.

But reading through the former publisher of highly-regarded Bank Credit Analyst Tony Boeckh's book, The Great Reflation, has reminded me of a larger issue at play. Namely, the central role of the paper money system in increasing asset price volatility:

"The Great Reflation now underway should be seen as another chapter extending the long-running saga of inflation - excess money and credit expansion - that began in 1914. A hundred years of financial background may seem a little esoteric to some, but it is important to understand that we have been living for a very long time in a monetary world that is without an anchor. When there is no anchor, the monetary system has no discipline. And it is this lack of discipline that is fundamental to where we are now and where we may be going. The Age of Inflation is deep-rooted and enduring but it is not sustainable forever. Anything that is not sustainable has an end point. When that time comes, it will not be pretty."

Boeckh goes onto explain the traditional anchor to prevent excesses was gold, and to a less extent, silver. In other words, central banks couldn't print money without additional metallic reserves, prior to 1914.

The big change came in 1913 with the formation of the U.S. central bank, the Federal Reserve. The anchor with gold was gradually wound back until the seminal event in 1971 when the U.S. broke the link to gold and floated the dollar. This allowed central banks to print money without any constraints.

What that's meant is that at the sign of any downturn, central banks have opted for the easy, most painless, solution: inflation. Which has resulted in increasing asset price volatility:

"The Great Reflation experiment now underway, while critical in avoiding a 1930s debt deflation spiral, ensures that we are a long way from writing the last chapter on the post-1914 Age of Inflation. The managed paper money system has been a huge failure, and lies at the root of the persistent tendency to inflation, instability, and debt upheavals. There are obvious political advantages to inflation in the short run, and a paper system with no brakes is a great temptation to politicians with one eye always on the next election."

It's important to understand that Boeckh doesn't necessarily predict inflation ahead. He views, as I do, inflation and deflation being two sides of the same coin as inflation always begets deflation and vice versa. Right now, you're seeming asset inflation, but disinflation (declining inflation) in the price of goods (reflected in CPI numbers). Whether we get asset deflation or inflation flowing through to CPI remains to be seen.

And it's imperative to realise that inflation doesn't aid economic growth. This is contrary to the views of just about every economist on the planet. But the fact is that the U.S., for instance, experienced superior economic growth in the 19th century when there was practically zero inflation. And during that time, there were fewer economic downturns than has occurred over the past century.

The warped belief that economies need inflation for growth was aptly on display in a recent New York Times article entitled "In Fed and Out, Many Now Think Inflation Helps". A more silly and misinformed article you won't find readily, but it certainly furthers the agenda of the new Fed chief to keep on printing money in the hope of reviving the economy.

Getting back to Beockh and what he does suggest, and I totally agree with, is that the current paper money system is being stretched to breaking point. Consequently, you should expect heightened volatility in future:

"The fragile state of the economy and financial system will continue to require inflation of money and credit, heavy government intrusion into the private sector, and frequent resorting to subsidies and support programs. This will continue to distort relative prices of labor, goods, services, and assets. It will sustain the economy in an artificial state and will compound instability and make it impossible to understand what is real and what is not."

If this is right, the question then becomes how best to protect your assets in what is likely to be a treacherous environment going forward. Let's turn to some specific recommendations.

How best to preserve your capital

Given no-one, including your author, knows exactly how events will unfold, diversification of your assets should be a key priority. A traditional stock and bond portfolio is fraught with danger given the significant distortions in these markets. Real estate, cash and precious metals should all be considered.

Under different scenarios, you want to protect your capital. If excessive inflation occurs, as happened in the 1970s, then stocks and bonds will get slaughtered. Real estate and gold are better inflation hedges. If there's mild inflation, stocks will do well, as might gold, while bonds and cash should under-perform. If there's mild or extreme deflation, bonds and cash should outperform. Gold could also do ok if faith is lost in the paper money system.

For stock exposure, the U.S. looks pricey, while parts of Asia and Europe offer opportunities. In my neighbourhood of Asia, banks in Singapore and Thailand offer reasonable value, beaten down energy and gold stocks are worth a look, and inepensive gaming stocks such as Genting Berhad (KLSE:GENT) and Crown Ltd (ASX:CWN) should prove resilient.

For bonds, try to avoid sovereign bonds, barring perhaps prudently run countries such as Singapore. Corporate bonds are worth considering, but remember that these bonds have quasi-equity type qualities. Which means if stocks tank, corporate bonds will suffer too.

For property exposure, residential property in many countries looks elevated. That's particularly the case in Asia. Office real estate offers better value but is at risk if economies don't recover. Meanwhile retail property is largely unattractive given the continuing loss of retail market share to the internet. Industrial real estate is probably the most defensive property exposure. Historically this sub-segment has proven less cyclical as significant oversupply is rare given the quick time that it takes to build industrial versus office and retail.

Cash is the world's most hated asset right now and that's part of the reason why you should have some in reserve. Central banks want you out of cash and into risk assets, so having some cash is akin to flipping the bird at the Fed. More seriously, you'll need cash in reserve to take advantage of any opportunities should there be a major shake-out in markets.

Which currencies to own? Ah, that's the difficult part. The Singapore dollar remains a stand-out. Other than that, there's not a lot else to like. A basket of Canadian loonie, Thai baht, Malaysian ringgit, U.S. dollar (at least in the short-term), New Zealand dollar and Norwegian krone should be considered.

Now to precious metals. You own gold if you believe there's even a small chance of a breakdown in the current financial system. It's disaster insurance. It's why China is buying as much gold as it can get its hands on. Not because it wants to become the world's leading currency, as many suggest, but because it doesn't trust the U.S. dollar or current paper money system (more on that topic at a later date). It foresees the possibility of a new monetary system with the partial or full backing of gold. You might be wise to follow the Chinese when it comes to gold.

This post was originally published at Asia Confidential: http://asiaconf.com/2013/11/09/3-signs-of-bloodbath-ahead/

 

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Mon, 11/11/2013 - 01:48 | 4142149 bigprofitbuzz
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Sun, 11/10/2013 - 18:32 | 4141289 Bear
Bear's picture

After reading this I am happy to see that my hoouse is going to triple in value

Sun, 11/10/2013 - 13:41 | 4140617 lakecity55
lakecity55's picture

The perfect solution is to own a small camper truck. You would have to outfit it with some compartments for special stuff.

Have a couple of PO Boxes. Own no land. Park your camper in different camp grounds.

Sun, 11/10/2013 - 11:52 | 4140369 theeseer
theeseer's picture

Deflation is good it allows price discovery and allows the democratic will of the people to be heard. Its as simple as that.

Sun, 11/10/2013 - 16:28 | 4141023 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Deflation is good if you are free of debt.

If you are in debt up to your eyeballs, well...

Sun, 11/10/2013 - 10:44 | 4140232 Hedgetard55
Hedgetard55's picture

So, are Bernanke and his type not smart enough to understand this? Or do they understand, but are proceeding anyways? If so, why?

Sun, 11/10/2013 - 08:12 | 4140040 new game
new game's picture

the only thing i pick is my nose and that was easy to add.

thanks above as that is one of the best summations to this ultimate ponzi scheme of man systems that is trying to run around the naturals laws. time always corrects these systems.  the natural systems are balanced over time and will return to balance less many, many humans. the earth will heal when most of the humans are gone. who will move to the top on the chain? wolves, the next banker type...laugh it off, you are just a floater ready to go down, and be a part on the nutriant cycle...

Sun, 11/10/2013 - 09:48 | 4140145 czardas
czardas's picture

Great summary BUT I wish those who issue dire warnings would stress that this is not tomorrow's news - nor next week, month or year.  The problem with contrarian prophets is that they're wrong 99% of the time and if lucky, get an "ah ha" moment once.  More to the point, their advice is alwaysfor extreme times - not the everyday savings and investment advice folks need.  I've concluded that there is no safe currency, metal or securities and that nothing out there is going to replace the dollar anytime soon - too much infrastructure, history and inertia.

I'm also taking profits on long runs (just took $70k yesterday), dividing it between cash, PM and land. I truly believe we are becoming aware, learning to conserve and resue even as we grow more efficient and technologically savvy.  What if they gave an Apocalypse and nobody came - they just shrugged it off?

Sun, 11/10/2013 - 10:52 | 4140250 flacon
flacon's picture

The problems will surface when people run out of food and toilet paper. 

Sun, 11/10/2013 - 14:41 | 4140811 TJW
TJW's picture

Meh. If you run out of food, you won't need toilet paper.

Sun, 11/10/2013 - 04:04 | 4139919 World of Debt
World of Debt's picture

Wow, tough to add anything after that serious post--by honestann!

But, see KARL DENNINGER'S STOCK PICKS BELOW--MUST SEE!!!

https://www.youtube.com/watch?v=XqWIS0O2gIk

Sat, 11/09/2013 - 19:15 | 4139276 AngelEyes00
AngelEyes00's picture

I recognize the 3 warning signs:

1.  My wife's having control issues for who knows why.

2.  Our cat has food and water but keeps meowing.

3.  I tried to get high but it didn't take.

Sat, 11/09/2013 - 19:05 | 4139263 AngelEyes00
AngelEyes00's picture

3 signs:  My wife is having control issues, the cat won't eat it's food but keeps meowing, and I can't taste my food.

Sat, 11/09/2013 - 18:02 | 4139169 honestann
honestann's picture

Reasonable, balanced and prudent article.

About predicting what will happen and when.

I suspect that many of us, even the best of us, have found predicting exactly what will happen and when to be very difficult for several years.  The following are some of the reasons why (feel free to add other reasons in your replies).

First and foremost, similar analysis and predictions in earlier history were made in a fundamentally different situation.  Or to say this backwards, never before in history has the entire world economy operated in essentially the same manner.

Throughout history, economies were extremely diverse, in both the specifics and in their means of operation.  Some were based on fiat, others based on fiat backed to various extents by precious metals, others fundamentally based upon precious metals (people exchange gold and silver coins for goods).

The most important point is, the diversity of systems in the world always provided "release valves" to compensate for economic and financial imbalances.  So if one country got too crazy or artificial or corrupt in one way or other, people could and would switch suppliers, customers and even operations to other countries.

In effect, this diversity of systems provided a natural feedback mechanism to prevent systems from getting too far out of whack.  Well, sometimes systems still got fairly far out of whack, but there were strong feedback consequences for doing so, which either tended to limit how far defective systems could get out of whack, or imposed such extreme consequences that the better, brighter, braver, more independent people just left for greener pastures (where the grass really was greener on the other side).

Today that diversity is virtually gone.  Every country on earth has now adopted a completely fiat monetary and financial system in virtually every respect.  Furthermore, the extent and speed things can get out of whack has increased enormously due to ever increasing dimensions of fiat mechanisms, re-re-re-re-re-re-re-re-hypothication and computerization.

Essentially, the predators-DBA-governments and predators-DBA-banksters all over the world now utterly control the means by which every system functions (even though the physically productive systems themselves still remain largely physical, since most goods remain physical).

The point is, the feedback mechanism is gone.  The predators-that-be have virtually complete control of the means by which their system operates, which is the means by which transactions occur (fiat, fake, fraud, fiction, fantasy, fractional-reserve), and the rules by which those transactions occur (statism, tyranny, authoritarianism).

Many of us have marveled at how long the predators-that-be can prevent natural feedback mechanisms from acting, and how far out of whack the predators-that-be can push phenomenon from their natural state.  But we should not be so surprised, because they can manipulate virtually every domain that could act to restore natural balance.

The consequences of this is... horrific.  The predators are thus able to delay natural balances from being restored for so long, that the imbalances get grotesquely far out of whack.  As those of us with half a brain for complex systems watch what happens, and observe the distortions reach unbelievable extents of deformation, we assume, and sometimes yell in warning, "it's about to blow!!!".

So we're pretty good at recognizing distortions, but the predators-that-be control such extraordinary, [almost] all-encompassing tools, they almost always manage to squeeze the protrusion that are about to explode back in.  To be sure, all this unnatural manipulation creates more and bigger distortions elsewhere and/or later, but they stand ready to squeeze those back into place too, no matter how horrific the long term consequences may be.

Of course all of us with half a brain understand full well that the overall extent of distortion constantly increases, even as each specific individual distortion increases and decreases chaotically.  We know that when the artificial controls the predators-that-be manipulate can no longer contain the system, the extent of carnage will be extraordinary.  And we know they cannot permanently control the system, because they only control the arbitrary, artificial part of the system, not the physically productive part of the system.  Already the smartest, bravest, most independent producers have stopped producing, or have limited their production to what they need to survive (and often engage only in cash business if they can).  Many have moved to small, obscure, out-of-the-way places on the globe where goods they need to survive are produced locally, and governments have little ability to milk the population.

The aggregate distortions are already so extreme, the planet is sure to suffer a horrific depression and many deadly wars --- at the absolute minimum (the best case scenario).  But there is also a very significant possibility that most or all of mankind will perish given the many very nasty technologies the predators-that-be now control.  The distortions are so severe, that may now be the most likely outcome.

Sat, 11/09/2013 - 20:01 | 4139364 TrustWho
TrustWho's picture

Good overview sister of Abe. The fox population expands until the rabbit population declines. The fox population collapses quickly. Farmers have always complained about commodity futures being corrupt, but appreciated the ability to hedge and reduce market risk. I can not properly describe the farmers' hatred at the money people when they work all year for $0.10 a bushel and the money people make $1.00 per bushel by trading. (Since the Jews were basically forced into the trader role by Christian and Islam usury laws, also the basis of the Jewish hatred over time....very interesting shit)

Financial instruments role has always been the same...to make production, distribution and consumption of goods more efficient...since  barter market was first transformed; UNTIL, the ivy league boys of JP Morgan heritage created financial derivative of derivatives for the purpose of making money. Remember, Jesus threw the money changers from the Temple prior to his crucifixion. Religious history is fascinating!...but

Sun, 11/10/2013 - 05:59 | 4139974 thisandthat
thisandthat's picture

Ironically enough, Jews also have anti-usury laws (it's in the old testament, somewhere).

The history of religions is even more interesting than religious history...

Symbols of an Alien Sky | Official Movie

Thunderbolts of the Gods | Official Movie

http://www.varchive.org/itb/index.htm

http://saturndeathcult.com/

 

 

Sun, 11/10/2013 - 18:24 | 4141268 TrustWho
TrustWho's picture

Jews accepted the role of middleman in society and dominated the Banking industry. Did you realize Hitler paid for over 30% of WW II expenses from the wealth he confiscated from the Jews he killed? Hitler killed the Jews for their wealth and he was just pissed that he was a poor Jew. (I added the last phrase because Hitler was not a blond haired blue eyed man and I find this funny.)

All religions try to explain why I am aware of you and me. This self-awareness is our blessing and our curse. How can all these survival-driven self-aware beings coexist? The answer is we can't. Therefore, our forefathers--over many generations-- wrote their Book Of Life. The Book of Life also explains the rules of society that all citizens should follow to maximize the moments of joy this life can provide--a beautiful flower, sunrise.... When self-aware beings forget their community responsibilities and try to maximize their moments of joy at the expense of others, the community starts falling apart. 

If you add human nature part of the survival gene that religions naturally incorporated, one can understand why war is just a natural state of the ecosystem. All religions have merit and the wisdom they try to impart is surprisingly similar, because all religions have been abused by our leaders so they can maximize THEIR moments of joy.

Sat, 11/09/2013 - 18:32 | 4139222 DanDaley
DanDaley's picture

Damn, Ann, that was good!

Sun, 11/10/2013 - 08:28 | 4140057 new game
new game's picture

wow, so here it is, all systems of mankind eventually self destruct. hehe.

and women are obviously smarter than the males that dominate these systems that will fail.

in my clan i want u in charge! and that is coming from a man. s/ of course.

lighten the f up. all humans are basically stupid xcept a few...

Sat, 11/09/2013 - 17:06 | 4139052 Haager
Haager's picture

Sensex longtermchart says little to nothing about what will happen with all those red-flags actually. We can only notice that it will breach 25000 in the not so distant future. And other stocks? More than 2.33% downside on a single day would surprise me a lot.

Sat, 11/09/2013 - 16:04 | 4138907 OutLookingIn
OutLookingIn's picture

There is no means of avoiding the final collapse brought about by fiat currency expansion. The alternative is only whether the crisis should come sooner, as the result of a voluntary abandonment of further printing, or later as a final and total catastrophe of the currency system involved.

- basic form from Ludwig von Mises.

Lesson:

Take your medicine early and quickly work through the recovery process - or -

Expire upon total currency collapse with attendant serious societal upheaval, leading to chaos.   

Sat, 11/09/2013 - 15:29 | 4138820 Lordflin
Lordflin's picture

When I read the header thought this was a reference to an actual bloodbath... no doubt one is coming. Alas, just another comment on a over bought market... understatement... the market has been on life support for the past three years. PMs, food, and ammo... the rest is an illusion...

Sat, 11/09/2013 - 15:27 | 4138815 no more banksters
no more banksters's picture

Breaking - Greece: tension outside the ERT building between the police forces and people - MPs of the Opposition

http://failedevolution.blogspot.gr/2013/11/breaking-greece-tension-outsi...

Sat, 11/09/2013 - 15:21 | 4138791 moneybots
moneybots's picture

"Many commentators have rightly pointed out the froth building in the U.S. stock market with Twitter jumping 73% on debut, margin debt at record highs and extreme bullishness among institutional and retail investors."

 

TWTR closed below the open.  No one who bought the stock on Thursday, after the open, made 70%.  People who bought the stock on Thursday and still hold it, have lost money so far.

Sun, 11/10/2013 - 10:14 | 4140189 czardas
czardas's picture

Do we only adjust for inflation when it's convenient?  In 1998, gas was $1,06 /gal and the S&P hit 1175.  A comparable increase today would be an S&P over 5,000.  It's like comparing movie hits.  In 1980 tickets averaged $2.75; in 2013 - $9. Current revenues are much greater ONLY because of ticket price.  The actual number of movie goers has decreased. The market only high when not adjusted for inflation, something noted several times on CNBC to the dismay and chagrin of the "expert" hosts who persist in telling us we are entering new territory.  Ron Paul has stated the same thing, the killing power of inflation.

Sat, 11/09/2013 - 16:58 | 4139027 Haager
Haager's picture

My bet is: Most individuals didn't bought the hype, (hedge)fundmanagers did. Alas, it's the individuals money that is used...

Sat, 11/09/2013 - 15:30 | 4138827 moneybots
moneybots's picture

And i read that the owners of Twitter are supposedly 1.5 billion richer.  A nice redistribution of wealth upward.

Sat, 11/09/2013 - 15:12 | 4138768 Burticus
Burticus's picture

"Real estate, cash and precious metals should all be considered."

Consider that real estate always comes with a parasite attached, you can't move or hide it, rents must be extracted from an unemployed population, and prices are in a fluctuating bubble caused by loose credit driven by central banks creating trillions of currency units out of thin air.

Modern-day currencies (a/k/a "cash") may serve as a medium of exchange, but are certainly no longer a stable store of value.  Plus, for the first time in history, all currencies worldwide are backed by nothing but faith & gubbermint fiat, with huge amounts being created daily by central banks in a race to the bottom.  As Voltaire said, they will all eventually return to their intrinsic value - zero.

This leaves silver & gold in your physical possession, protected by "the other precious metals" steel and lead, and stored in overseas vaults outside the criminal banking system.  Repeat - silver & gold, NOT...PAPER...

Sat, 11/09/2013 - 19:02 | 4139257 joego1
joego1's picture

The parasites can come for whatever they want . Don't fool yourself.

Fri, 11/15/2013 - 03:42 | 4156950 squexx
squexx's picture

We all know what evil, Satanic tribe is the most parasitic now, don't we?!?

Fri, 11/15/2013 - 03:36 | 4156945 squexx
squexx's picture

We all know what evil, Satanic tribe is the most parasitic now, don't we?!?

Sat, 11/09/2013 - 16:16 | 4138939 Freddie
Freddie's picture

The only way real estate works is if you are out in the boonies and in a rural conservative state that does not tax your property to the moon.   You don't own shit with real estate.  The county owns it.

Agreed about paper gold or gold stocks.

Sun, 11/10/2013 - 10:17 | 4140194 czardas
czardas's picture

The market would collapse if folks knew about the potentials for real estate.  Not only do you get depreciation for 26 years (the real bonus is the tens of thousands in savings off of income tax) you get a source of income much more dependable than stocks or bonds. 

Sat, 11/09/2013 - 14:28 | 4138689 SolarSystem1932
SolarSystem1932's picture

"beaten down energy and gold socks are worth a look"

I'm done lookin' at my 'gold socks'.

Now focusing on 'gold tie'.

Sat, 11/09/2013 - 17:12 | 4139067 Asia Confidential
Asia Confidential's picture

Ha, I've got the gold tie to hang around my neck, given the error. Corrected now.

Sat, 11/09/2013 - 15:00 | 4138750 Truthseeker2
Truthseeker2's picture

It's going to be a bloodbath to end all bloodbaths ! ! !

 

"GLOBAL MONEY MATRIX SELF DESTRUCTS"

^^^

http://cosmicconvergence.org/?p=2009

.

Sat, 11/09/2013 - 14:10 | 4138636 Midas
Midas's picture

I just scanned the article so I may have missed it, but am I supposed to buy Twitter?

Sun, 11/10/2013 - 00:10 | 4139699 Wahooo
Wahooo's picture

Yes, Twitter and bitcoins.

Sat, 11/09/2013 - 15:30 | 4138825 Dick Buttkiss
Dick Buttkiss's picture

I'm waiting for Twatter, hoping to get in early.

Sun, 11/10/2013 - 02:24 | 4139857 el Gallinazo
el Gallinazo's picture

I am waiting for a public offering of Twerker myself.  With Miley Cyrus carrying the CIA / MK Ultra package who needs Zuckerberg anymore?

Sat, 11/09/2013 - 15:45 | 4138854 akak
akak's picture

I am eagerly awaiting their initial pubic offering as well.

Sat, 11/09/2013 - 17:35 | 4139111 Theosebes Goodfellow
Theosebes Goodfellow's picture

I just don't get what the big flaps are over Twatter. I'll labia it to someone smarter than me to explain it.

Sat, 11/09/2013 - 17:44 | 4139122 akak
akak's picture

It sounds like a promising opening, and a great place to insert some hard money (even to inject some liquidity), but in reality I suspect that its performance will be rather soft and squishy. 

There's definitely something fishy about the hole thing.

Sun, 11/10/2013 - 10:15 | 4140190 Uncle Remus
Uncle Remus's picture

Clap.

Sat, 11/09/2013 - 14:44 | 4138725 akak
akak's picture

Only if you are a twit.

So for the average investor, that means an unqualified "yes".

Sat, 11/09/2013 - 14:19 | 4138662 Kassandra
Kassandra's picture

No.

Sat, 11/09/2013 - 17:34 | 4139102 mjcOH1
mjcOH1's picture

"

  1. The Indian stock market reached record highs over the past week despite all of the country's problems and a currency recently in free fall.
  2. Australians have been increasingly using their superannuation funds as collateral to buy residential property, helping reflate one of the world's biggest housing bubbles.
  3. The Japanese bond market has effectively died with the government becoming the dominant player in the market due to its massive bond buying program. This isn't just a Japanese phenomenon with central banks now owning a third of the world's bond markets. Free markets, these ain't."

Luckily, there is no inflation. 

Get to work, Mr Chairman!

Sun, 11/10/2013 - 08:15 | 4140042 King_of_simpletons
King_of_simpletons's picture

There is no inflation, HERE. We have deflation - Recession. No one wants to acknowledge it. The thinking is that if we don't acknowledge a problem it will go away. Policy makers have turned into a bunch of fools. Media living in its own elite realm devoid of all reality and People are zombies.

Sun, 11/10/2013 - 10:19 | 4140200 czardas
czardas's picture

If we have deflation then why is food stiil skyrocketing (I am a cook).  Why are house prices zooming upwards with deflation? 

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