Submitted by Simon Black of Sovereign Man
Here’s The Good News: You’re Not Bank of America
Ten years ago, Goldman Sachs’ Jim O’Neill coined the term “BRICs” to lump together a group of large, rapidly-growing economies that we all know well: Brazil, Russia, India, and China.
True to his thesis at the time, growth and development in these countries has left the rest of the world for dead over the past decade.
But all good things must come to an end… and it’s now clear that the BRICs are in for a much more difficult period.
China is slowing fast. Property prices have stalled and begun pulling back, souring a huge component of economic growth. The same goes for the country’s infrastructure spending.
Even China’s stalwart manufacturing sector is showing signs of contraction based on the most recent November numbers.
In Brazil, the economy (which is highly dependent on exporting natural resources to Asia) has ground to a halt. Further, the debt-fueled domestic consumption binge among Brazilian households is slowing as debt service burdens have reached nearly 30% of the average Brazilian paycheck (vs. 16% in the US).
India, meanwhile, is struggling with runaway inflation, a collapsing rupee, political gridlock, and a series of high profile corporate collapses– led by Kingfisher Airlines, the plaything of flamboyant tycoon Vijay Mallya, who has been forced to personally guarantee the company’s debts.
The rupee is the worst performing currency in Asia this year and has just fallen to a record low versus the US dollar. The Indian economy is really on the skids. Industrial output was 5.1% lower in October versus a year ago. Output of capital equipment, which is considered a good leading indicator of future economic activity, fell a much more drastic 25.5%.
And now, to top things off, political unrest in Russia following the recent election there has seen troops battling protestors on the streets of Moscow.
It’s clear that the BRICS cannot be the engine room of global economic growth.
Meanwhile, Europe is a complete basket case, and the euro is looking increasingly as though it will be consigned to the dustbin of history. Across the pond, the US is trying to put a brave face on its jobless recovery whilst kicking a $15 trillion debt bomb down the road.
Anyone who steps back and looks at the big picture has -got- to recognize the absurdity of this situation.
Now… here’s the good news: you and I have a huge advantage. Citi, Deutsche Bank, Unicredit, etc. are sitting on incalculable losses, unrealistic obligations, and worthless paper that will destroy their organizations. They’ve been accumulating these for years and have no way of avoiding the endgame. We do.
We, on the other hand, are little guys. If you and I want to cut our exposure to these silly pieces of paper that governments pass off as currency, we can do that easily. We can easily do that by buying gold or productive land overseas.
Bank of America, on the other hand, has to hold Tim Geithner’s dirty laundry.
These banks that are crushed under the weight of managing hundreds of billions of dollars have very few choices– government A’s worthless bonds, or government B’s worthless bonds. We have an entire universe of options.
No matter if you have one hundred dollars, one hundred thousand, or one hundred million, your choices are far, far greater than these pitiable schmucks who are desperately clinging to the fraud that is our global financial Ponzi system.
The stores of value and investment opportunities for our savings are still out there; you just have to look in nontraditional places.
As for me, I’m investing my time, money, and energy in-
a) precious metals (a traditional store of value to some, a barbarous relic to others)
b) business opportunities in exciting frontier economies like Mongolia (and perhaps soon to be North Korea!)
c) shorting the obvious financial system absurdities (like loaning the US government money for 30-years at 2.9%)
d) deeply undervalued and distressed assets (such as stocks that are trading for less than their net cash per share)
e) farmland in Chile… where no matter what happens in the world, we will have high quality organic food to eat and the possibility of obscene profits in the event of steep inflation.