Marc Faber Blog: #Cyprus could burst bubbles and bubbles and bubbles

Marc Faber: we are creating bubbles and bubbles and bubbles

Marc says we got more bubbles and bubbles and bubbles, created by a fiat banking system inflating assets with more leverage, into a dangerous unsustainable territory. He's right. The burst will be caused by a spike in interest rates with a  resultant: "rate spike contagion" that could begin with the Cyprus bailout and then spreads through the rest of Europe and emerging markets, in short order.

Think about what investors, savers, and money managers have been learning in the last few weeks. First and foremost, Cyprus exposes the EU, ECB and IMF as regulators who have acted with little foresight or control over the EU banking system. These guys are running a no holds barred carnival worse than the wild, wild west. How could they not have known that Cyprus wasn't headed for financial disaster a year or more ago? Can't they read financial statements? Do they ever audit any of these national EU Banks? 

Listen, I am not sure if they can even add numbers any more. So how would you feel about investing in their bonds, buying securities, or depositing funds in countries under their jurisdiction? If you would not be scared out of your mind, then you are under a better medication than most. Realistically rates should pop by 200 to 300 basis points at the long end, if not more, over the next few weeks as stakeholders get their minds around how bad the structural issues are. The fact that these regulatory bodies have learnt little or nothing since the 2008 meltdown, creates even more fears for anyone involved with these markets or banks.

By the way, if you believe that the EU banking system is a crap shoot - then emerging markets offer even less confidence given pervasive black markets, corruption, and cronyism in such nations. Their systems of jurisprudence, finance, accounting and auditing are not as developed, while these nations are open to regime change in a moment, thus demanding much higher risk premiums than the EU. 

With all these pending interest rate increases being sparked by the EU's Cyprus crisis, then inversely correlating asset values would be pushed downwards, purely due to the triggered financial mathematics . That's not good for the bubbles in stock markets, bonds, real estate, construction and corresponding employment. The winners, by default, when the dust settles, looks to be the US dollar and Gold - for the time being. 

So sing along with Mr Faber, "bubbles, bubbles and more highly- levered bubbles" - where even a small incident like Cyprus brings the House of Bubbles tumbling towards the ground. 


Dr Peter G Kinesa
March 30, 2013

Everyone is singing along with Mr Bubbles

Marc Faber Blog - #Cyprus Next Nauru?

Marc Faber: Governments Will Take 20-30% of My Wealth

Inept governments' last measure is not taxation; it is "confiscation." Marc's concerns are well-founded, as Cyprus tells us that this Royal medieval tactic is now being considered and employed by top global governments, agents and regulatory bodies. Why? First, it is because they never really understood economics in the first place. They relied upon make-believe abstracts, then creating banking bubbles with fiat currencies they a grinded out of their printing presses 24 hours daily.  

However, amoung  many other things, they ignored the idea that wealth is created from physical inputs that could not not forever produce goods and services outputs. Add, an illogical bias towards increasing populations, through birth or immigration, and you'd further stressed this fragile equation.  Throw into the mess, the degrading of the bio-sphere and your economy and society is sure to collapse - sooner or later,  just like so many others before. The most recent case being Nauru - just another short history of progress!

Secondly, to make matters worse they levered the system to the hilt, at all levels, and then failed to even monitor the risk exposures. Third, a crony and corrupt banking system became so widely inter-connected, that the failure of one small player could bring the whole house cards tumbling down. Truth be known,  Europe's finances were severely strained by the 2008 meltdown, contributing to much of today's crisis. 

What is disappointing, beyond dumb and dumber, is that even after the 2008 meltdown; no one at the EU, EC or IMF learnt a thing about financial oversight. So is Cyprus about to become another Nauru? You bet - and there are many more trending into this devastating predicament of physical economic bankruptcy- too many people with no input resources. 

Who's next? Slovenia? Where is that?

Dr Peter G Kinesa
March 26, 2013

EU, ECB and IMF oversight sees banking crisis coming...

   

JIM ROGERS BLOG - #Cyprus is Doomed

Jim Rogers BLOG : Cyprus is a real threat to the U.S.

Everyone was asleep at the switch, in fact; many had a hard time finding the switch, including the US media which was more concerned about March Madness and the Easter Bunny, before they figured out that Cyprus could bring down the global financial system. Let's remember what Churchill said about Americans, give them enough time and they'll figure it out.

Jimmy's right, but he should emphasize Cyprus is a real threat to Cyprus first. Secondly, there is little doubt now that Cyprus is the trigger that will bring down the EU and ECB. Why? Where was the oversight? There was none, or else this thing would not have gotten so far out of hand. Two, it tells you not only is there no political unification in the union - there is also no unification of its financial structure. You don't have to be a rocket scientist to figure out that without these key ingredients, you cannot possible make this Euro Experiment work. Thirdly, there is a clear lack of forward thinking power at work within the troika. Cyprus indicates that they are reactionaries engaging no proactive vision or understanding of what the problems and opportunities are - equating to "thought bankruptcy"

Looking at Cyprus and the bail-out solution shows clearly they had and have no clue. First, their actions should result in 20-25% of this country's economy shutting down with loss of its international banking sector. No one in their right mind is going to invest or save money in this country for decades. This will not only lead to massive unemployment and social unrest impacting their tourist trade, but it will cause a collapse in the country's asset values due a combination of spikes in borrowing costs and a lack of liquidity. "Hey buddy, wanna buy some a condo in Cyprus? " You see what I mean?

Now all those involved should have foreseen and understood these consequences. Did they? - No! Consequently, Cyprus will fall into a depressed economic state that could last for decades - in fact, this resource poor nation may just never recover. Anyway what the EU, ECB and IMF should have done along with the bailout plan is put together an program of economic revitalization to be implemented concurrently, in order to soften the economic blows and preserve asset values - and hence cut this disease off with the economic surgery required not mere band aids. However, that would take proactive thought - it could be painful.

In the meantime, this nation faces more doom and gloom as other parts of its economy domino into collapse affecting not just Cyprus, but other EU nations as well. Then of course as Jimmy's says the US as well.

Dr Peter G Kinesa
March 25, 2013   

"What do you mean we have to think about it? That hurts."

Al Jazeera English: #Cyprus bailout talks 'at very delicate stage' - Europe -

Cyprus bailout talks 'at very delicate stage' -  Al Jazeera English

Who has been the primary beneficiary of the Euro, ECB and EU? Germany! And yet, when it comes to keeping the whole scheme together, the Germans are running for the hills. Germany's export bonanza, since the institution of the Euro is directly attributable to the lower currency value ascribed under the unified currency. This meant that German goods were priced much lower in international markets. Otherwise, using its own currency would have resulted in much lower exports and economic benefit.

But at the same time, other Union members were seeing their comparative advantages undermined, because their exports were being priced much higher in international markets. Moreover, tourism and other attractions of foreign currency were impaired as vacations to these countries would be more expensive than they needed to be. Add the inability to print your own currency, and your  monetary devices are largely eliminated. So indirect taxation through currency debasement is not possible.

The real lesson of the "European Experiment" is that without complete political unification you cannot have an economic unification that works. Would you set up a joint account with all your neighbours, who also control access to your funds? Not a chance.

There are four concerns that are now self-evident. Germany will not step up to the plate, despite having won the most and still having the most to win long-term. Europe will not undergo a matching political unification centralizing its power. The weaker countries cannot save themselves, without a lower currency to unleash their comparative export advantages. Lacking control over monetary policies, further hampers the weaker countries ability to adjust rates to the short-term economic needs; forcing them into extreme unlawful measures. Taxing bank deposits!

Conclusively, the EU is a lousy deal for the majority of its participating nations. It is a deal made worse, when those nations that have profited handsomely from the economic sufferings of the others, do not help out when needed - largely because of their national political agenda.

It is time to undo this European experiment, and let the weaker nations have a chance to recapture their economic viability through comparative advantage and fair floating exchange rates. Otherwise, the path to economic destitution will result in these weaker countries experiencing greater social unrest, leading to extreme political changes, that will also put a end to this one-sided and misguided economic scheme that has no potential for unified political rectification.

Without this, then this is simply a BAD DEAL  



Dr Peter G Kinesa 

March 24, 2013  

The Art of the Deal

Where's Trump when you really need him?

      

FIRST FINANCIAL INSIGHTS: INVESTORS' INSIGHTS - NEWS ALERT - "Russia Rebuffs...

FIRST FINANCIAL INSIGHTS: INVESTORS' INSIGHTS - NEWS ALERT - "Russia Rebuffs...:

INVESTORS’ INSIGHTS   “NEWS ALERT ” Russia Rebuffs Cyprus Bailout Click Above for today's Globe and Mail Article   This...

Everyone should be scrambling now. The banks in Cyprus will no doubt face a major deposit run when they open, making it almost impossible to put any sort of figure on what amount is needed to save the day. The problem here apparently stems back to write-offs of Greek Bonds resulting in losses and under capitalization. So here is the first sign that the inter-connected bank borrowings in the EU could end up snow balling.

Bond markets as well as depositors should be concerned as this will no doubt put further pressure on interest rates across the EU, and perhaps even globally. Similar to the 2008 meltdown, one bad security leads to another, then that bad apple rots the whole barrel because of the complex inter-connected financial borrowings.

We are keeping an eye on the ball here - just too many unknowns.

Dr Peter G Kinesa
March 22, 2013

One bad apple

Nouriel Roubini Blog: Cyprus: Capital Controls & Deposit Freeze Is The Only way...:

Nouriel Roubini Blog: Cyprus: Capital Controls & Deposit Freeze Is The O...: 
"Capital controls & Argentine-stlye deposit freeze (Corralito/Corralon) unavoidable in Cyprus given lack of a bail in deal. Only wa...

Sorry Nouriel, but what should have happened and didn't, was that the EU and ECB should have stepped up to the plate and fixed this situation long before it reached front and centre on the global stage. Imagine if the FED decided not to bail out Nevada; for example, because of suspected nefarious activities. The Union and Central Banking functions would fall apart.

Cyprus is less than .2% of the EU's  GDP, yet they let this economic scratch turn into a flesh eating disease, that exposes the EU and ECB as "name only" institutions without functional substance. Where were the oversights in the first place? 

This is just bad management on all fronts, from start to finish. The cost could ultimately be the sinking of this whole European experiment forever. Which is startting to look like the most sensible solution to the situation with each passing crisis. 

Time to bite the bullet.


Dr Peter G Kinesa
March 21, 2013

Pick ONE!

Marc Faber Blog: Cyprus (RISK?): No large impact on Emerging Markets

Marc Faber Blog: Cyprus (RISK?) : No large impact on Emerging Markets

Wrong! Wrong! Wrong! Cyprus will have huge impact on Emerging Markets and we can analyze and determine why from two points of view. 

Emerging Markets is a sexy term crafted by promoters, mutual funds, banks, and money managers to basically dress up high risk sovereign situations. " Lipstick on a Pig Markets" would not have the same marketing or sales flair to it, so a more sanitized semantics is useful. 

But what are we dealing with really? Generally speaking, third world economies where the business, legal and ethical practises are not that well-established or developed. Moreover, the risk of political power changes is high and thereby the rules of the game. And not all countries are the same; the risks of change extremism is further heightened by theological and cultural beliefs. In short, the rules are more likely to change at any moment in these countries' economies.

The defining of financial risks has a checkered past, in fact, the definitions often result from events or fancy theory. They do not have the same certitudes of scientific discovery or observation. Systemic risk is a product of the debatable "efficient market hypothesis", while settlement and counter-party risks were discovered when related events created serious turmoil in the markets. Counter-party risk was not a major concern until the experiences of the 2008 meltdown came home to roost. You could say that it didn't exist until these events occurred - it was an Unknown, Unknown.

With the Cyprus deposit tax (theft) proposal another such "Unknown, Unknown Risk " is now known and self-evident  -  Cyprus Risk. What is Cyprus Risk? It is basically the possibility that a sovereign nation will confiscate the assets of savers or investors arbitrarily without notice or due process of law. This risk applies not just to deposits, but all types of financial assets; including, reality, stocks, gold, bonds and insurance instruments. It is a risk that must now be imputed into the ambiguities of risk management algorithms.

Emerging markets, because there is a greater likelihood of game-changing rules, should now be expected to pay a higher premium on capital to compensate for this additional risk. This premium may also be calculated into capital costs of EU countries. The premium will, hence, add restrictions to liquidity flows and raise earnings expectations of investors and savers. Both will act to depress the value of assets, such as stocks, bonds and real property in these higher risk markets. 

It is still too early to tell what exact economic outcomes will be of Cyprus Risk, but bringing this heretofore, unknown, unknown risk out from under the covers cannot be a positive discovery for neither Emerging Markets nor the EU.   

Dr Peter G Kinesa
March 20, 2013

Cyprus Risk

"Folks Are You Ignoring Me?" 

       

FIRST FINANCIAL INSIGHTS: INVESTORS" INSIGHTS - "NEWS ALERT MARKET WARNING'...

FIRST FINANCIAL INSIGHTS: INVESTORS" INSIGHTS - "NEWS ALERT MARKET WARNING'...:

INVESTORS’ INSIGHTS “NEWS ALERT MARKET WARNING” Cyprus Rejects Deposit Tax Click Above for today's Wall Street Journal Article ...

Thank God! They came to their senses at the last moment. However, the idea of even pushing the button that could have caused a nuclear financial collapse is disturbing. Who will invest or save money in Cyprus ever again? How will their Banks retain current deposits? What will be the implications on EU bond markets  and banks? There is little doubt many reconsiderations are underway relative to the EU - and there will be an impact on capital flows and borrowing costs. A price will be paid at the worst of possible times.

Yet we need to look beyond the "Cyprus Crisis" and underscore the bigger issues here. First, how many more EU nations could possibly consider these most desperate financial tactics. Let's count them; Spain, Italy, Portugal, Greece,and Ireland could be readily added to the pool, bringing the total to six. In percentage terms that calculates to over 35% of the EU. So far! Trending has not been good and the fact that these countries do not have their own currencies and thus monetary policy control is not helping matters. \

Yep, they cannot pull the FED's famous "invisible deposit tax trick" and debase their currencies by printing more money.  People don't notice it and rarely turn to social unrest when it is applied. People don't understand it and some probably even believe that it is a good thing. So governments will continue to use this quieter confiscation of wealth because the direct tax approach makes the theft so much more obvious and really gets people upset.

For a moment let's turn back to what the real problem is here - Neo-Classical Economic Theory, or better described as the positive-sum abstract game. Whereas, what these countries are truly confronting is the physical algebra and negative-sum game of Meta-Economics;  meaning their populations have over shot the resource capacities of their geographic jurisdictions. Moreover, with each passing day the matter is made worse as more people are added while resources dwindle. So when we ignore all the typical abstracts and concepts of economists, it is really easy to see what the problem is here. With fewer inputs per capita - you produce fewer outputs - that cannot be increased by imaginary economic devices of any sort.

What is also clear, is the direction that each of these nations is heading, particularly if they continue to adhere to the Wizard of Oz's positive-sum economic theories. They are returning to a post-industrial society that will not be able to sustain the same numbers and outputs as in the past. That is, if social and political upheavals do not interrupt a smooth transition. Historic probabilities suggest the transition will not be so smooth.

So again keeping an eye on events is essential. What is interesting to note, is that many of the high profile trouble spots are island nations; Cyprus, Iceland and Ireland, that became Banking Center (Abstract) Economies when their underlying real physical economies overshot the populations they could support. So arguably are Japan and the UK. So were Nauru and Easter Island; of course, largely minus comptemporary banking and economists' abstracts. 

Sort of makes you wonder if there is a pattern here?

Dr Peter G Kinesa
March 19, 2013  

The Fate of Island Nations

  

FIRST FINANCIAL INSIGHTS: INVESTORS' INSIGHTS - "MARKET WARNING" - Cyprus ...

FIRST FINANCIAL INSIGHTS: INVESTORS' INSIGHTS - "MARKET WARNING" - Cyprus ...: 

INVESTORS’ INSIGHTS “MARKET WARNING” What if your bank shut down, then gave 10% of your (and everyone’s) money to the government?...

There is no doubt that this policy action; which appears to have been carried out under EU and/or ECB, guidance could be disastrous, if remedial measures are not taken immediately. The seizure of deposits undermines the integrity of the whole banking system causing unneeded fears that can exacerbate an already sensitive situation.  Those responsible - should be fired. (What the heck were they thinking?)

Consequently, investors, depositors and institutions face a new unprecedented form of risk, that if not contained,puts all forms of international dealings in jeopardy. This  "Market Warning" is fully justified; everyone will need to be extra careful in the days ahead.

Dr Peter G Kinesa
March 17, 2013  

Cyprus Banking Bonanza

Marc Faber BLOG: The Market will push Interest Rates Higher

Marc Faber Blog : The Market will push Interest Rates Higher

In this video interview with Marc he suggests that markets could push rates higher regardless of what the FED does. So far, the FED has been winning the war with the markets as it throws liquidity into the banking system. And as Marc observes, little has trickled into the real economy. Raising the question as to whether the bank bail-outs are still on-going?

Are Bonds in a bubble? Let's try some simple calculations assuming that in ten years rates will normalize back to 6.4% and inflation averages a modest 4.2% over this period. We will use 30 year treasuries that are currently yielding 3.2% on a simple interest basis.

Cash yield from $10,000 Bond @ 3.2% =    $320
Inflationary cost of holding @ 4.2%       =    $420   
Principal loss due rate mean reversion =    $500 

EXPECTED LOSS HOLDING IN 10yrs =  $600?

Wow! This means on a simple interest basis, the bonds pay a negative 6% a year, assuming a modest inflation rate and a return of interest rates to normal levels. This may be a best case calculation, as higher inflation rates are more likely to occur, with the pundits expected shortages in key raw industrial materials along with the climatic impacts on food and water costs. 

Anyway, something to think about along with using shorts on Bonds as an inflation hedge. Hmm.

Dr Peter G Kinesa
March 15, 2013

When will it Burst?

JIM ROGERS BLOG: The World's Savers Are Being Wiped Out, And History Says That Leads To Very Bad Things

JIM ROGERS BLOG: The World's Savers Are Being Wiped Out, And History Says That Leads To Very Bad Things

When it comes to social phenomena you cannot apply the disciplines, logic, devices, rules and observations of science - these are concrete constructs. Social phenomena deals with abstract constructs but uses scientific methods to create stories (a.k.a. Theories) about what reality is - whereby, those who are most persuasive will form the accepted consensus of a perception that is the social reality. But, it has nothing to do with what reality actually is.

So Jimmy is right, the US dollar wins by default until the social perception changes and we move to a more persuasive perception of what reality is - and that change in perception can happen at any moment. 

So, its always far better to be lucky than to be smart. A dose of reality?

Dr Peter G Kinesa
March 11, 2013

P.S. You see what us smart guys know is that all currencies eventually gravitate to a debasement of zero, as their underlying geographical resources and infrastructures expire. That is deterministic physics. However, quantum physics now overrides this theory, with its random coexisting realities - so it is again; logically, still all about luck. Science? PK.  

How many coexisting realities are there? 

We are not sure...

Marc Faber - "EVERYONE SHOULD OWN A PIEROGI FARM"

Marc Faber - "EVERYONE SHOULD OWN A PIEROGI FARM" 

You can probably tell by now that we have a little bit of a sense of humour around here. It was Churchill who once said, "a joke is a very serious matter" so we take his thought to heart and use it to uncover perspective and a sense of sanity. Anyway, we are having a little fun with  this story as we received over one thousand email enquiries from folks wanting to contact our realtor in South Kiev for his farm listings.

What 's more revealing is the breakdown of the top five countries we received enquiries from:

Greece -  23.4%

Newfoundland (Canada) -  17.4%

Italy - 12.6 %

America - 8.6%

Japan - 6.9%   

Next week we are going to start selling global retail franchises - "Faber's Farm Fresh Pierogies" - billions served. 

Have a great day!

Dr Peter G Kinesa
March 8, 2013

Marc selling, and Me (inside cooking) at Pilot Mobile Outlet

Marc Faber - "SELL EVERYTHING" - A Correction Could Start Any Day

Worth watching Marc dodge Maria's skeptical questions in this CNBC interview. We are not  being as analytical as Dr Kinesa's in his post today about the mathematics and logic of everything. In fact, we go along with Faber and Kinesa  foreseeing stormy markets ahead as we plow through this  "Ice Age " in valuations trapped by rates being too low, for too long - with no easy way out of the trap. 

When you listen to Dr Doom and the best bets he can put forward are the Ukraine and Viet Nam; you get a real sense that things are pretty tough. He does like the resource sector, but does not point to any specifics. Technology stocks are also on his watch list  - have consumer gadgets and applications peaked?

Who knows as consumers, according to recent studies, certainly do not seem to be as concerned about the environment anymore - that puts a damper on green tech as well.

Oh well, who has a retail pierogi farm or franchise for sale? 

First Financial Insights
March 4, 2013

Pierogi Farms Cheap!  - Exceptional South Kiev Investment Properties

$50,000 US - 10 Acres

Contact Ivan Jureychuck

Cabbage Roll Farms Realtors 

The New York Times - Euro Zone Reports Record Joblessness Rates and Low Inflation

The New York Times - Euro Zone Reports Record Joblessness Rates and Low inflation

click here

Place your bets! For some reason I think that both numbers are much higher - particularly when you talk to anyone who shops regularly for groceries. Governments everywhere are fixing the CPI number in order to keep interest rates low and manage a "silent bail-out of the Banks" and to keep the Rich and Bankers solvent.

These high jobless numbers will have very serious political implications shortly. Expect a European Spring or Summer with massive protests, strikes and mayhem. Take Portugal, where unemployment for those under 25, now approaches an UNBELIEVABLE - 40 percent. 

This is another powder keg country,suffering from years of bad growth economics, that platformed overpopulation, climate chaos, and rapid resource depletion and misuses. The last time this happened, some funny looking short guy with a big mouth came to power when all seemed so hopeless. People get desperate.

The Euro Zone, like the Middle East, is also starting to transform itself into one big Nauru Paradigm - and you can't draw blood from stones, like these. Visit Nauru - see for yourself. What a mess.




Dr Peter G Kinesa
March 7, 2013    

When times are desperate...people change...never forget!

BTW: They are not voting for a new Pope 

INVESTORS' INSIGHTS - Eric Sprott Canada has no Gold

INVESTORS' INSIGHTS - March 5, 2013

Oh Canada!

TRUE CANADIAN GOLD 

When my boss gets up on his stump and expouses his reasonings on matters, he reminds me of Teddy Kenedy's concession speech at the 1980 Democratic National Convention. Brings a tear to the eye, a lump to the throat and a pocket full of dreams with unyeiding inspirations. Here's the full text, from today's Investors' Insights.

For good measure, I have linked in Ted's speech so you can catch the tone and cadence here. What's amazing about the content of the speech too, is how little has changed over the past thirty plus years. That's sad.


Passing the torch...

Dr Peter G Kinesa
March 5, 2013

One Great Speech - Who Listened?

Eric Sprott Blog: Canada Has NO Gold:

Eric Sprott discussing the complete lack of gold reserves that the Canadian government has. Start stacking Canada! End of the Road: H...

That's a good thing. Eric clearly needs a few lessons in Meta and Macro Economics, including an understanding of the Nauru Paradigm Cycle. First, what type of countries require large Gold reserves? Well, of course, countries on the verge of physical bankruptcy - meaning they have virtually exhausted all their non-renewable and renewable resources - hence, they are entering the last stages of the Nauru Paradigm. Gold is the last stand for these desperate countries, providing one remaining lifeline to deferring the inevitable collapse of their economic, political and social complexes. But, Gold can only relieves such symptoms temporarily - it does not fix or cure the underlying economic malady. 

By the way, most countries entering this final phase of the Nauru Cycle can expect two outcomes: increasing social unrest and growing external hostilities. This is a historical fact, but it is also reflected on today's geo-political stage. Consider Syria, Egypt, Iran, Greece, France, Japan and many others (China?) - all are nations entering the final stages of the Nauru cycle - where physical resources per capita are in rapid decline.  Expect More Wars.

Canada, on the other hand,  is invariably the richest country in the world given the vastness of its resources and infrastructure complexes. Its per capita resource/currency ratio is second to none, given its relatively low population.The last thing Canada needs is more Gold - it has enough in the ground in the event of need. Yet, there's more...

More reasons why Canada doesn't need Gold reserves? 

First; in a few short years, Canadians will be able to pick it up tonnes of Gold on the cheap, as last stage countries in the Nauru survival mode are dumping their reserves to finance wars; stay social unrest or ensure departing dictators have their retirement assets available in the right places, after political life. (Dictator's Survival Guide: Zurich Gnomes 101) .

Second, for the reasons mentioned, Canada's currency is trending upwards under immense long-term pressures, so the last thing it needs are measures that could be perceived to strengthen this sleeping giant of global currencies. It would not surprise us to see the Canadian dollar rise to $1.50 US in five years, and climb further to $2.00 in ten or less years - particularly when the FED's exponential, on-going debasement of the greenback is taken into account. This the price to be paid by the US for running its fiat currency presses 24/ 7. Meanwhile, these fiat currency presses, allow the US  o tpay debts with paper IOU's, knowing that any debt repayment in physical currency forms is impossible (not enough OIL in the world?) - this paper chase cannot; however, last forever.  People figure it out, sooner or later.

A patient Canada is sure to be a BIG Winner in the Gold game down the road; albeit, a meaningless win when critical global resources are practically depleted or unusable. Mr Sprott needs to revisit his Meta-Economic books and refresh his understanding of the deep implications of the "Nauru Paradigm Cycle."

It goes without saying, that the Canadian dollar is a great surrogate  play on hard and soft commodities (including fresh water), both of which have more real upside in the coming years. Rogers, Soros and Faber think these commodities are too. Gold is a more speculative strategy - we prefer the elements offering real economic utilities - not golden abstractions from OZ. 

From Behind the Wizard's Curtain,

First Financial Insights

March 5, 2013 

Nauru Paradigm - when there is nothing left!

"Hey guys, that's not Nauru ??? Oh, I see?"

Marc Faber - A Correction Could Start Any Day

Marc Faber - A Correction Could Start Any Day

But remember, no one rings a bell at bottom nor blows a horn at the top. So what's likely to trigger a real sell off of in the markets? Our best guess is: Bonds, Bonds, Bonds - so how goes the bond market should bring the equities along with them. However, equities appear to be discounting earnings at a 5-6% cap rate with overall PEs hovering near multiples of 18 . Whereas, if the bond markets were expected to hold rates at 2-3%, then PE multiples should be approaching 35 to 40 times earnings. Hmm...

This is an interesting case where the equities are pricing in real inflation and telling us the bond market isn't, and thereby as everyone pretty much knows - overprices the Bonds. The downside on equities should therefore not be as gruesome, unless a much more dramatic move in rates occurs. 

Still remember too, that interest rate increases pose a double hazard to stocks as they attack earnings and cap rates, concurrently. Such are the perils of "Valuation Traps" and explain why countries look to debase their currencies in order to hold notional asset values domestically while retaining global trade advantages. Be sure to keep a eye on Japan as they have been trying to find an escape hatch from the trap for more than a decade. 

Dr Peter G Kinesa
March 4, 2013 

So who has the horns?  

Marc Faber - US is in 50-100 trillion worth of Debt!

Marc Faber - US is in 50-100 trillion worth of Debt!

(Click Above)

This is exactly what I said two days ago - is Marc reading our posts? - You betcha he is. 

Anyway whether its Faber, Gross or Kinesa making this somewhat obvious statement of fact, the main point I believe that needs to be emphasized, is the value of the liability in physical terms. Using OIL as a surrogate for dollars, there is 1.200 trillion known barrels of reserves, globally. Using $90 a barrel as the unit value, then the  total reserves equates to nearly $108 trillion. Meaning to repay all the US'$s debts today, would require the use of nearly all physical global oil reserves,;this does not include provisions for any interest carrying charges,increased demand or new debt. 

Now you can see the big problem we got  here. What's left over to run the economy now and tomorrow, once all this US debt is repaid. NOTHING. Moving to another planet is not a solution, nor should we expect a Santa Claus magic invention to save the day. This is not a movie. Thus, we can either make drastic cuts in demand -even 2% a year compounded could get us there - or we face a future, where global hostilities and unrest will dominate every waking moment.

Sleep and anti-depressent drugs offer  counter market opportunities.

Dr Peter G Kinesa
March 3, 2013  

US Debt Repayment - A Staggering Physical Need

It’s not like the Republicans are much better, Dems complain of “Debt Clock” in Congressional hearing room

It’s not like the Republicans are much better, Dems complain of “Debt Clock” in Congressional hearing room

This number is much worse, and getting worse.

Many times we have mentioned that the actual debt number exceeds over $100 trillion.That number comes from Bill Gross; PIMCO, who also includes contingent and off-balance sheet liabilities in the total. If this number doesn't scare you, maybe the trend chart  in the linked article will - shooting straight upwards? What you don't see is the other side - that is the resource assets required to repay this debt running in the inverse direction.

So here's a question for those high IQ types - how do you repay all this debt when the resource side is depleted? Realistically, major problems will start to occur long before complete resource exhaustion occurs.

Sleep well, while you can.

Dr Peter G  Kinesa

February 28, 2013

INVESTORS' INSIGHTS - Marc Faber - 2013 Gold Price Prediction

INVESTORS' INSIGHTS - March 1, 2013

When the staffers over at First Financial Insights sent me this post before its release earlier today, I almost died from the laughing. I don't know what is funnier: seeing ole Bernie in his new digs or the idea that Mr Faber has painted himself into a golden corner. We now expect regular updates on his holdings, along with an audit report from one of the Big Firms, this time.

Anyway, I got such a big kick out of it - I wanted to be fair by sharing it with my fellow "Kinesanites."

Dr Peter G Kinesa
March 1, 2013

P.S.  Thanks to the staffers over at  FFI for the laugh - keep it coming. Pete.

Laughing Kinesanite.

Marc Faber - 2013 Gold Price Prediction

Now this video gives us a little insight into why he is carrying so much Gold in his own portfolio -25%. So now, you can see why he is so eager to have us buy more and protect his position. Otherwise, if we do the opposite and sell all our holdings - then our poor Mr. Faber faces unkind losses and embarrassment. All this could also lead to a career change for our dearest unbiased advisor.

By the way, will you tell us Marc when you decide to sell or reduce this position before you actually do? Hmm...

Madoff get back in the cage -

First Financial Insights
March 1, 2013 

"Believe me, I told you 25% is in Gold"

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