Guest Post: Time To Choose

Tyler Durden's picture

Via Adam Taggart of Peak Prosperity,

Whether you're aware of it or not, a great battle is being waged around us.

It is a war of two opposing narratives: the future of our economy and our standard of living.

The dominant story, championed by flotillas of press releases and parading talking heads, tells an inspiring tale of recovery and return to growth. 

The other side, less visible but with a full armament of high-caliber data, tells a very different story. One of growing instability, downside risk, and inequality.

As different as they are in substance, they both share one fundamental prediction and this is why you should care: This battle is about to break. And when it does, one side will turn out to be much more 'right' than the other. The time for action has arrived. To position yourself in the direction of the break you think is most likely to happen.

It's time to choose a side.

The Case for Playing Offense

The past several months have seen a surge in positive stories celebrating the U.S. emergence out of recession and back to solid economic health.

1) Tapping into shale oil and gas deposits is ushering in a new energy boom. Domestic energy production is on the rise, creating jobs and increasing exports, while reducing our dependency on foreign suppliers:

U.S. close to energy independence by 2030 (UPI)

The United States may be close to self-sufficiency in energy by 2030 because of a "shale revolution" in the country, said BP's chief executive officer.

2) The stock market is thriving, with several indices at record highs. Corporate earnings and investor confidence are booming, and the expectation of a Great Rotation of massive amounts of capital from low-yielding bonds into the stock market is high:

BofA Declares: The Great Rotation Is Here (BusinessInsider)

The big theme of 2013 – according to investment strategists at shops across Wall Street – will be the "Great Rotation," a massive move out of bonds and into stocks.

Economic growth in the U.S. is expected to accelerate, facilitating the shift.

3) The global economy has made it out of the woods and is increasingly robust. In the US, the unemployment rate is down several percent from its recession high. The fiscal cliff was averted. The 2013 deficit has been reduced below $1 trillion for the first time in five years. The crisis in Europe has been successfully managed.

Groupthink in Davos: The Financial Crisis Is Over (BusinessWeek)

There is no official declaration, or even a formal survey. But the chatter at the World Economic Forum in Davos, Switzerland, is about the end of the financial crisis that began in 2008 and dragged on through last summer’s spike in Spanish and Italian government bond yields. “There’s a crystallization of thought that the financial crisis is over,” says Scott Minerd, managing partner and chief investment officer of Guggenheim Partners, a Santa Monica (Calif.) firm with about $160 billion under management.

4) Housing, the engine of consumer wealth, is in recovery. Home prices are on the rise after years of punishing declines. And a rebound in consumer spending is visible across a wide spectrum of home-related services:

Housing Packs Punch for U.S. Growth in 2013 and Beyond (Bloomberg)

The housing rebound is broadening to other parts of the U.S. economy and will likely lend impetus to growth through 2013 and beyond.

Climbing home prices are lifting household wealth and boosting the purchasing power of consumers. Declining mortgage delinquencies and foreclosures are buttressing bank balance sheets, giving them greater leeway to lend. And rising property- tax revenue is fortifying the finances of state and local governments, alleviating pressure on them to cut budgets.

“The housing recovery will kick into a higher gear as the year progresses,” said Mark Zandi, chief economist in West Chester, Pennsylvania, for Moody’s Analytics Inc. “We’re going to get a lot of juice from the channels” through which it affects other parts of the economy.

5) Jobs are being created and consumer income is on the rise. U.S. personal income recently experienced its biggest increase in eight years. Non-farm payrolls have increased every month for the past two years. There are increasing examples of local job markets experiencing a true employment "boom":

Silicon Valley job growth has reached dot-com boom levels, report says (Mercury News)

"Employment growth in Silicon Valley is impressive, very impressive," said Russell Hancock, president of Joint Venture Silicon Valley. "Some might even say the job growth is cause for euphoria."

Last year, the nine-county Bay Area added about 92,000 jobs, according to the study. Of that total, Silicon Valley -- defined as Santa Clara and San Mateo counties -- accounted for 46 percent, or 42,000 jobs.

"This is prodigious job creation," Hancock said. "The growth is crazy and it's getting crazier."

A Rosy Picture

Taken collectively, it's hard not to feel optimistic even strongly so about our future prospects. With these messages constantly being delivered and reinforced, it's little wonder that the status quo is not under attack. That the energy behind the Occupy movement has dissipated. Because a better tomorrow lies ahead, right?


The Case for Defense

As alluring as the offensive narrative sounds, it contradicts starkly with the preponderance of underlying data. Data that requires some but not too much digging beneath the headlines.

In counterpoint to the above narrative, a sampling of this data reveals the following:

1) Expensive oil is here to stay and will handicap economic growth for decades to come. Peak Oil is alive and well, despite the "shale miracle". The four major global oil producers, including BP, continue to report declining total production numbers despite more than doubling well drilling activity since 2007. Gas prices this February are the highest they've been in history:

Consumers Taking Financial Hit From Rising Fuel Prices (CNBC)

Consumers have been spending more on gasoline than they have in nearly three decades. 

With pump prices at their highest level on record for this time of year, the stage is set for an even greater climb in gasoline prices and expenditures than in 2012. Retail gasoline prices have surged 17 cents in a week to top $3.50 a gallon on average, posting the highest prices on record for the beginning of February

Meanwhile, the U.S. Energy Information Administration reported Monday that gasoline expenditures in 2012 for the average U.S. household reached $2,912, or just under 4 percent of income before taxes. This was the highest estimated percentage of household income spent on gasoline in nearly three decades, with the exception of 2008, when the average household spent a similar amount.

2) Financial security valuations are dislocated from the fundamentals of the underlying companies. The trillions of dollars of liquidity pumped into the market by the Fed is, yet again, blowing asset bubbles in stocks and bonds. Respectable veteran investors from Bill Gross, to Jeremy Grantham, to Jim Rogers, to Bob Janjuah, to John Hussman are warning of a coming calamitous correction. Corporate insiders, despite their proclamations of record profitability, are voting with their feet and selling over 9 times more of their company stock than they are buying:

Sucker Alert? Insider Selling Surges After Dow 14,000 (CNBC)

Insiders have been pulling out of stocks just as small investors are getting in.

There have been more than nine insider sales for every one buy over the past week among NYSE stocks, according to Vickers. The last time executives sold their company's stock this aggressively was in early 2012, just before the S&P 500 went on to correct by 10 percent to its low for the year.

"Insiders know more than the vast majority of market participants," said Enis Taner, global macro editor for "And they're usually right over a long period of time."

3) The economic "recovery" is anemic at best, and skewed heavily to the top few percent. December saw negative GDP growth and last week saw the persistently-high unemployment rate creep back up. December's reported personal income increases was primarily a one-time event, as companies sought to pay out excess income and dividends in advance of anticipated 2013 income tax increases. Payroll taxes will rise on all employees, but carried interest and capital gains rates (how the wealthy earn their income) remain unchanged at historically low levels. Nearly two-thirds of Americans now expect anemic economic growth to define our "new normal" way of life:

Bad Economy Is New Normal, More Americans Say (Huffington Post)

More Americans believe today than they did two years ago that their country will never fully recover from the Great Recession.

Fifty-six percent of Americans surveyed by the John J. Heldrich Center for Workforce Development at Rutgers University in August 2010 said they believed the Great Recession would permanently change the economy. In a January follow-up survey, 60 percent of respondents agreed with that sentiment.

"Five years of economic misery have profoundly diminished Americans' confidence in the economy and their outlook for the next generation," Rutgers professor and survey co-author Carl Van Horn said in a statement.

Most survey respondents -- 73 percent -- had either lost their jobs or knew somebody who had. More than half said they have less money than they did before the recession, and 61 percent believe they will never fully recover.

4) The housing market will not return to its former glory. With no real wage growth and further de-leveraging still needed, the consumer is not driving the modest price growth seen in many housing markets; instead, hedge funds are they are buying up huge tracts of foreclosed homes, renting them out, and securitizing those rental streams. This will not result in the competitive bidding by multiple parties that drove the appreciation pre-bubble collapse. In fact, the entire concept of looking at a house as a financial investment is eschewed by the founder of the Case-Shiller Housing Index:

Shiller Sees No Major Rally in U.S. Housing Market (Bloomberg)

"Housing traditionally is not viewed as a great investment. It takes maintenance, it depreciates, it goes out of style. All of those are problems. And there's technical progress in housing. So, new ones are better."

"So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000's. And I don't expect it to come back. Not with the same force. So people might just decide, "Yeah, I'll diversify my portfolio. I'll live in a rental." That is a very sensible thing for many people to do."

5) Our trading partners are as bad off, or worse, than we are. Global markets have rallied in recent months as the news from Europe grew quiet despite no real resolution to the core problems occurring. And in recent days, fresh concerns about forex rates hurting competitiveness, crushing unemployment, and excessive debt have erupted. Meanwhile, Japan is everyone's leading candidate for the first developed nation of the 21st century to implode under its debts. And China, whether it is able to avoid a hard landing or not in the short term, is staring at a mid-term food and water crisis that it has no solution to.

Europe's Crisis Not Over Say Bankers, Policymakers (Reuters)

International bankers and finance ministers warned on Saturday that Europe's crisis was not over even though the euro currency is now stabilized, it will take years to overcome economic malaise and mass unemployment in Europe.

After a private meeting of leading commercial bankers, government officials, central bankers and trade union officials, Swedish Finance Minister Anders Borg told Reuters: "There is a clear divide between the financial markets, who think a lot of this is fixed, and the people in the real economy and particularly from our side as the governments."

6) The risk of external shocks is under-appreciated and unplanned for. Currently financial markets and our just-in-time national distribution systems are geared for clear sailing ahead. Unexpected developments like superstorm Sandy, a Fukushima-like event, or an oil price spike could easily send prices and availability of goods swiftly awry. For instance, the global drought continues, engulfing nearly 100% of Kansas, Colorado, Nebraska, and Oklahoma in extremely dry conditions. The UN warns that prices worldwide could easily spike this year, as world grain stocks are near historic lows:

World food prices stable, low stocks pose risk of spikes: U.N. (Reuters)

World food prices stabilized in January after falling in the previous three months, the United Nations food agency said on Thursday, but it warned that adverse crop weather could cause violent price spikes due to tight grains stocks.

Global food prices surged in mid-2012 following the worst U.S. drought in more than half a century and dry weather in other key grains exporters, raising fears of a food crisis similar to the one in 2008.

"The weather could turn negative, and because we are in a tight situation, prices could react violently and rise," FAO senior economist Abdolreza Abbassian said.

FAO raised its estimate for world cereal use in 2012/13 by 0.6 percent to 2.326 billion metric tons, up nearly 13 million metric tons from the 2011/12 season.

A weaker dollar is boosting demand for dollar-denominated commodities, Abbassian said, and rising oil prices will underpin food prices in coming months, he said. Higher energy prices increase transport costs which farmers pass on to consumers.

Sobering Thoughts

Sadly, this list could stretch longer if I didn't feel the need to end it here to avoid overloading the reader. But suffice it to say that there is certainly enough evidence to at least dispel a material amount of the sanguine outlook of those cheerleading for an offensive stance at this time.

Picking Your Side


Those taking the optimistic view here argue that our economic engine has been running hard to pull us out of the hole we've been in for the past five years. And now that we're back on level track, the engine's built-up head of steam is going to move us forward quickly.

Expect better GDP growth, lower unemployment, higher income, high stock prices, higher housing prices, more innovation, and lower energy prices.

If this future comes to pass, you won't want to be left in the dust as the party roars past. Get on the train go long, perhaps with some leverage, and bet on America's grit and ingenuity.

To be frank, this has been the winning side for the past year and a half. Those who have sided with the bulls have been rewarded with sizable stock gains and stabilized (or growing) housing prices.


But if, on the other hand, you like me find enough reason in the data for doubting the optimistic case, you need to determine what your defensive plan should be.

The degree of defense you adopt should be based upon your own exploration of the data. Dig further than the samples I could only cursorily provide above. Come up with your own personal assessment of the probability and severity of the downside risks.

If you find you assess the risks at or above the 'moderate' level (which I do), then consider strongly the following guidance:

  • Exchange paper assets for tangible ones. Acquire exposure to the precious metals; we recommend having at least 10% of your net worth in gold and silver (for those new to owning precious metals, you may want to read our buyer's guide). Above that, if possible, invest in productive hard assets. Holdings like farmland, timberland, energy deposits, and mineral/water rights are assets that will produce units that will generate an income for you.
  • Find a sympatico adviser to manage any remaining paper wealth. For many reasons, most of us will still keep a percentage of our wealth in the stock and bond markets (in retirement/pension accounts, 529 plans, etc). If you're in the defensive camp, make sure the adviser managing your money is, too. There are several we endorse, but we're impartial about whether you work with them or not. The important point here is to work with the adviser whose outlook is most closely aligned with yours.
  • Cultivate resiliency. Most Peak Prosperity readers are well-aware of our recommendations here. Start at the individual level to prepare both physically and emotionally so that whatever the future brings, your quality of life is as least impacted as possible.
  • Cultivate community. Whatever your plans, a support network will help you achieve them better, and likely faster, too. Plus, it gives you the added insurance of assistance should your best-laid plans not play out as you expect them to (which happens frequently). Invest in fostering collaborative relationships in your neighborhood, or join existing communities relevant to your location or interests.
  • Defend your income stream(s). Assess your employment situation – how vulnerable is your income? Explore ways to make yourself more valuable to your employer, add additional source(s) of income, and/or create your own business. Steady income makes challenging times much easier to bear by giving you the flexibility to explore different approaches that may work better for the new reality. Without that ability to absorb failure, your options are often much more limited.

If you take the above steps, regardless of what happens, you'll be able to sleep at night knowing that you've acted conscientiously according to your convictions. And in the event the bulls turn out to be 'right', few of these steps will serve you poorly. In a secular bull market, hard assets should still appreciate measurably. And personal and community resiliency is always a net positive, regardless of the economic environment.

But if the bulls turn out to be the ones in error, the value of these actions could be priceless.

So get to it. Do your own personal calculus of the risks. Determine where you need to be positioned. And take the necessary steps to get well-situated where you assess you need to be.

It's time to choose a side.

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Go Tribe's picture

ZH should ban these posts. Until you see gold and silver moving one way or the other, just don't bother reading these posts.

BoNeSxxx's picture

See BigSlick above... I can't say it better so I won't.

You will be too late if you wait for the signs to be clear enough for the EBT bunch to read.

Kreditanstalt's picture

"Make yourself more valuable to your employer"?

What "employer"?  What "income stream"?  I AM in a recession you know...

hannah's picture

grovel to your financial masters. beg for their what you are told. be a good citizen.

The Heart's picture

"grovel to your financial masters. beg for their what you are told. be a good citizen."

Or, plant a great Victory Garden and wait until they come to you with gold and silver etc in droves, while indicating you might trade with them. It's called farmers market and bartering in a supportive community. Heck, you could even start a food for guns program with the storm troopers.

ronaldawg's picture

And let your Boss control your life MORE - for less and less pay because of inflation.  (E.g. be a wage slave). 

Get on with the reset.

DosZap's picture

What "employer"? What "income stream"? I AM in a recession you know...


No in that case, your in a Depression.

A Recession is when your neighbor is out of a job,a Depression is when YOU ARE......................LOL

Seasmoke's picture

i made my decision a long time ago........i am on the SPECIAL TEAM

OutLookingIn's picture

Try to buy a gun or ammo lately?


Looks like those who are already armed and ammo'ed up - have decided.

The weak (unarmed) shall perish and the strong (armed) shall thrive. First law of nature.

Within 'group think' the majority opinion will prevail. The minority will fail.

zapdude's picture

There's line of people waiting at the door opening every Wednesday morning 9AM at Gander Mountain here in town to buy .223 / 5.56 x 45 MM ammo.  Inside, the shelves are COMPLETELY out of this caliber, and almost all .22 ammo is gone too.  Glad I bought mine in September.

ronaldawg's picture

People with the guns and ammo have to go to sleep at some time....

trav777's picture

I have no fucking clue what the fuck they envision doing with all those guns and all that ammo.  If they have to hit The Road or madmax, how much of that shit do they HONESTLY think they can carry?

This isn't COD where you can pack missile launchers and hit R1 or is it triangle and just switch to a barret .50 and you have 200 rounds in everything.  then you can hit it again and switch to yet another gun with 200 rounds or more.

nobody ever gets tired in video games...I think real life rambo wannabes buying all this ammo and silver out to try to do a bugout rehearsal with all this shit.  fuckin morons

BoNeSxxx's picture

Directionally I agree Trav.  The prepping with guns and ammo etc. will only be helpful during the brief period of civil unrest very early in the collapse -- the time when the angry mob is hungry and in the looting phase -- probably focused on electronics and booze for some odd reason I fail to understand but old habits die hard.

At some point, they will see 'your lights are on' or 'you have a fire' or 'you are eating real food' and that's when the guns will come in handy.

In the next and final phase, they will be completely worthless.  When the gubbmint turns it's war machine inward, the civilian armamnents will be no more useful than pea shooters.  Think that bug-out cave is safe against a drone with thermal sights?  Or a C130 gunship with night vision?  Puhlease... if/when the war machine is unleashed inward, it's mass liquidation and FEMA camps for the resistance.

Is there hope?  Sure.  The Oathekeepers give me hope.  And those crafty enough to make it through give me hope.  But this prepping nonsense that an AK or AR is going to keep a government at bay against their unfettered determination to retain power is sheer nonsense.

nofluer's picture

But dude! You gotta admit that those Doomsday Prepper shows where the people practice bugging out and they're packing the frickin' dog and dog food and everything but the bath tub are funny as hell!!! Saw one where they started out in an SUV (over-loaded) and then switched to a couple of inflatable rafts (with paddles) and it was only when standing there looking back and forth between at the rafts and all the crap they'd brought that they figured out that it wouldn't all FIT in the rafts - that the real world intruded on their fantasy world!!! I thought I was gonna die laughing!!!

Bad Attitude's picture

A team of two or more can manage sleeping in shifts. Or, get a couple of watchdogs, and make sure the dogs can wake you up.

Besides, there is caffeine.

Rearranging Deckchairs's picture

I am popping blue pills until I need to pop the red pills. I stocked up on both pills, my particular circumstances require this stratergy if it was different I would give up the blue pills and only pop red pills. 

All markets can act irrationally longer than you can stay solvent!  Hedge accordingly.

From Germany With Love's picture

Nonsense. It's a chickie run instead:

Everybody knows it's going south, they all just think they're the ones to jump ship just in time. That's all there is to it.

RockyRacoon's picture




The moth don't care when he sees the flame
He might get burned but he's in the game
And once he's in he can't go back, and
Beat his wings 'til he burns them black....


The moth don't care if the flame burns low
'cause moth believes in an afterglow
And flames are never douzed completely
All you really need is a love of heat


— Aimee Mann

Itch's picture

Moth's dont believe in an afterglow, what a crock of shit.

toady's picture

Moths don't believe in anything. They're nihilists.

TheMerryPrankster's picture

A rolling stone gathers no moths.

RockyRacoon's picture

I won't ask which orifice is itchin'.

It's poetry (lyrics in this case), arsehole, but maybe that's a bit too highbrow for ya.

Maybe some quotes from Jeff Foxworthy would have been more up yer alley.

You may be a redneck if... you have spent more on your pickup truck than on your education.

The Heart's picture

"Everybody knows it's going south"

Everybody has known for years.:

So you know the train is going off the cliff. You are seatbelted in and can not stop it by yourself. What to do? Chaos is coming to you? Everybody knows.


Yen Cross's picture

 Time to choose/ Indentured servitude? 

Zigs's picture

Damn the torpedoes!  Don't shoot until you see the whites of their eyes! War is hell! What, me worry?

shovelhead's picture

I'm optimistic.

I'm fully invested in the white slave trade.

Itch's picture

1) But where are they digging?
2) Mundane P/E ratios, and thats being dramatic.
3) Since when was being normal ever a problem?
4) Housing does not need to rally to be stable.
5) How long is a peice of string, balancing on the head of a pin, lost in a haystack?
6) Since when did markets plan for external shocks? If a market took every potential extenal shock seriously, the S&P would be at 5.

My only point being, you can talk something down until you are blue in the chops, but when the time is right, the time is right. ZH will play a part in that, because when the folks on ZH start turing bullish...

Banksters's picture

There is a  good reason people are buying guns and ammo hand over fist.    Our govt is a monster.



Kickaha's picture

And you don't have to buy into any sort of conspiracy theory to suppport that "monster" conclusion.  

It has simply become too large.  Whether good men or evil men are in charge, it is too large for anybody to change its course.  It must eat to survive, and it feeds on money.  It will go wherever it finds good grazing.  There remains no way to peacefully restrain it.

It is too large to be nimble.  It trample millions of its citizens without even trying, without even noticing.  It is a mindless behemoth seeking only to feed, to live and  to grow larger.

It is a shapeless, formless construct created from a limitless plethora of laws and regulations, too many for even an army of lawyers to comprehend, making each and every one of us criminals for one unknown reason or another, awaiting only the decision of some powerful man to condemn us.

It slouches, ever growing, towards a certain future,the arrival of which is the only great unknown.


BoNeSxxx's picture

+1 and a cut-and-paste for later reference... I'll try not to plagiarize but I AM getting forgetful in my old age.

100pcDredge's picture


I would like to have a yellow one, I think;) NO - GREEN! :D

hannah's picture

"To be frank, this has been the winning side for the past year and a half. Those who have sided with the bulls have been rewarded with sizable stock gains and stabilized (or growing) housing prices."


i dont want to be be frank, i'll be shirley.

Son of Loki's picture

The housing market is still in its Bubble Glory from what I can see when you compare it to wage stagnation and joblessness. When it corrects another 40% down....then we can say, "the RE market has lost its former glory."

IridiumRebel's picture

See! Prepping is good. This things hits, that Kocksukker Krugman will get his financial recovery GDP boost fantasy at the expense of millions of lives!

Manipuflation's picture

I hope the fucking thing HITS krugman! 

Sixdeuce062's picture

translation    offence= maximium unicorn everything is as real as the the unicorn and will be just as magicial. defence keep stacking in your bunker and watch out for drones and sheeple coming to take your stuff

blindman's picture

Bread & Milk
try not to lose your sense of humor whatever
your choice might be, or is it too late for that?

FecundaGoat's picture

I'm fully invested and my net worth is screaming upward!!  God Bless America!!

I guess that means I'm "Drinking the Kool-Aid"??

Clowns on Acid's picture

Yes, you are concentrating on a single data point. Today, given the defensive poinbts of the author, indicates that 

LooseLee's picture

If you drink the kool-aid, you have a bullseye on your back. From the intelligent warrior, take my word for it....

harami's picture

Why does half of the list on the "Defensive Team" assume I have any fucking money?  Burn into a poor family that thought they were rich later in life and now swim in debt and despite my every precaution to avoid that same fate the system keeps pushing me towards it.

Clearly this list is for old rich white men that aren't in the good 'ol boy club.  I wonder if Adam Taggart is a veteran that has seen combat or has ever visited a truly destitute nation to realize people can get by on a helluva lot less, much less broken bread with any of those people. 

Guess I'll just give some money to Rachel Fox and ask her nicely to invest it for me.

Boondocker's picture

diversify....lead, brass, antibiotics, medical supplies, water filters, seeds, alcohol.....

q99x2's picture

What if you are too poor to choose? Then march on to the Hamptons and force the scum out.

I always thought about spending a few years sailing around the world until I heard of pirates. Maybe settle down in PA to take a few years off college to finish writing my book.

The Heart's picture

"What if you are too poor to choose? Then march on to the Hamptons and force the scum out." not loveless.


lynnybee's picture

Oh, god ... my stress level is going off the charts, especially since we turned over into 2013.   i know it's gonna be bad.  & this collapse is a deliberate event.  TPTB are using the bankruptcy for profit business model on the whole country with complicit, treasonous politicians.   those bullets are for us.  those drones are for us.   i've read that this time in history will be spoken about for centuries to come.  i knew something wasn't right for years, i wondered how people could afford all this stuff.    a few years ago when i started figuring out what the heck was going on & started reading, studying & researching i made my choice......... i bought gold & silver & a gun.    the gov't has to shrink dramatically, pre-1900 style in order to free the rest of us.  BRING IT ON YOU TREASONOUS TRAITORS!!   I MADE MY CHOICE.

falak pema's picture

too little too late; the saud oil tap one day will not belong to the west or its reserve $. 

That is the key event of the current Pax Americana construct. China and India will one day deprive West of that tap.

You can't push water up the hill forever; our hi cost hi consume economies are unsustainable without access to cheap oil/energy.

What has made PAx American will break it. Fiat money/no cheap energy and end of Euro/american world domination; good bye Columbus.