Empire of Dunces

Neoreaction

Fertilizer, meet ventilator….

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On Zero Hedge recently, Tyler Durden, I believe, coined the term ‘clusterflock of black swans’, which is just an absolutely lovely way to put this particular period right now. Revolutions, war, earthquakes, tsunamis, meltdowns, sovereign debt crises, spiking inflation, etc. And yet, through it all, the markets in most countries have been remarkably resilient. How come? In a word, liquidity.

Why has the stock market been rising so steadily? I have said this before, but it bears repeating – one of the best performing stock markets of the last few years was Zimbabwe. Anybody would like to have been invested there? This is the normal course of an economy and stock market on the road to hyperinflation. There is a boatload of money floating around right now, and it has to go somewhere. Wages will also be rising quite nicely. Just as they did in Zimbabwe. Only, it did not help then. Because the wage increases never did keep up with the price increases. And it will not help now either.

The Continuous Commodity Index CCI has tripled since 2002 and doubled since 2009. This index is comprised mostly of food. And these increases are what revolutions are made of. What is going on in North Africa and the Middle East right now is only the beginning. And it has in fact little to do with a desire for democracy, as our MSM are trying to tell us. This is about the desire to EAT. In the western world we will feel this as somewhat unpleasant cutting back on going out maybe. Maybe a bit more purchasing from wholesale supermarkets, instead of buying Argentinean steaks and South African ostrich. But in the poorer parts of the world, where food costs already make up more than half of all monthly income, increases like this mean starvation. What most people do not realize, is that those pitiful pictures of starving children in Ethiopia during the 80s, where not on account of a lack of food. There was more than enough food produced even within the country itself during that time. The problem was one of distribution and pricing interference by the government. Today now, we still have enough food, at least internationally speaking, and despite this insane, tree-hugger driven push to convert much of our food production capacity into biofuels. Already, the majority of the corn fields of the United States has been converted to biofuel production. Because the government subsidizes that. Now add onto that the fact that Bernanke has been going completely insane with money creation, and you have a situation where things can only get worse. Prices are going up GLOBALLY. Not just in the US. You can thank the continuing reserve status of the US Dollar for that. As well as the fact that most governments in the world are following the same policy recipes as Bernanke and Obama. Deficit spending, bank bailouts, no accountability, and no choice in actually getting a different government. The faces may change, but the policies remain the same. At least until economic reality sets in. It already has in the Middle East. And it is busy setting in, in the rest of the world.

Things are coming to a head right now. At least it feels like it. The USD seems to me to be at a breaking point. It simply cannot keep going like this for much longer. Remember that I have been investing for you in gold and silver and oil for a while now. But you should still buy physical gold and silver as well. And not to keep in a bank vault, but to bury in your back garden, or to keep it on your private yacht or something along those lines. These personally held precious metals are not so much an investment,as an alternative currency, for use when things get really bad. As far as trading the precious metals goes, this is a rather complicated and dangerous time. Commodities have historically declined between May and October, almost like clockwork. Additionally, QE2 is scheduled to run out in June, which would draw a lot of liquidity from the markets. Especially the price increases in silver lately, have been fueled to a very large degree by quantitative easing. The combination of those two factors might very well add up to a difficult period for gold and silver over the summer. If you are speculating there, be careful. The stock markets are also going to take a major hit, if Bernanke actually stops QE for a while. He will of course start it up again, all the way to QE infinity. There will be some trading opportunities here, but this is something that could literally change from one minute to the next.

Is Japan a worthwhile place for investments now? In a word – NO. I harbor great admiration for the Japanese people in general. And the way in which they have comported themselves during this latest trial, only strengthens my admiration. But the fact is that, first of all, the catastrophe has not been priced in fully at all yet. And that secondly, the structural problems of the country were already insurmountable, before this latest crisis. Having to finance the reconstruction now, on top of the highest budget deficit in the developed world, all amid severe economic contraction, is going to break the system. Now add in the fact that the population is aging rapidly, without being replaced by anything even remotely approaching proper population replacement growth, or actual immigration (which is severely restricted), and you have a situation that spells doom for the country. There are going to be opportunities for profit there of course. But as far as foreign direct investment goes, I would very much advise against it.

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Written by gloege

March 25, 2011 at 15:16

Posted in Uncategorized

Portfolio Update

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The markets are moving exactly as we have been predicting for quite a while now. And the development of our portfolios reflect that. Our recently established high-risk portfolio alone, has since the beginning of trading on October 4, increased in value by over 40%. Congratulations to all who participated. Since I have been asked about that – this particular portfolio will be re-open to additional inflows shortly.

In response to those who let themselves be panicked by the supposed experts on CNBC and the various other MSM organs – this is not the high of the market for either gold, silver or oil. I understand that there is always a temptation to take profits. And you are all free to do so at your own discretion. But within the funds under my management, that will not happen, because this particular bull still has a long way to go. Yes, there will be continued trading, and there will be ups and downs. Such is the nature of the market. Today alone, the market has once again first exploded upwards and then crashed downwards in silver. This is merely to shake out the weak hands. There is also a sense of panic at the long-term manipulators at JPM and HSBC, who have grown accustomed to letting the price of silver dance according to their tune. But those days are over. Not even the interference of the central banks is going to change that. But they will continue to try.

Trust me, and continue to follow our long-term advice. This is merely the beginning…

Written by gloege

December 7, 2010 at 19:45

Posted in Uncategorized

Volatility

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There is no need to get nervous about the latest price swings of gold and silver right now. There is considerable volatility in the markets, and we will experience such swings for some time to come. The fact of the matter is that prices do not move up (or down) in a straight line. With silver and gold there is the additional problem of massive manipulations by central banks, and institutional investors such as JP Morgan and HSBC in particular, both of which have been holding substantial short positions on silver for decades already. But one cannot fight the market forever. Especially Asian investors are greedily gobbling up the precious metals, like there is no tomorrow. The price ratio of silver to gold has historically (and by that I mean since Biblical times(!), since we have extensive historical price documentation) been about 12-1. In the nineteenth century up to 15-1. Currently, it is closer to 54-1. That is not only unprecedented, but also not maintainable. One of the two has to give. Either gold has to fall, or silver has to rise. Drastically. Knowing the way I think, you can probably figure out which of the two I am going with here…

Written by gloege

November 17, 2010 at 18:54

Posted in Uncategorized

Portfolio update

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Our newly formed high-risk portfolio is off to a good start so far. Currently, we are focused on silver, oil, and the financials. A wager on falling prices in the financial sector is certainly a contrarian investment right now, since first of all, everybody believes that the “too big to fail” insurance policy will work in perpetuity, and secondly, because QE2 is pumping an obscene amount of money into the markets. Both of these are wrong. The Obama administration will not be able to once again persuade the public of the need for a bank bailout, and they know that now already. These banks will be allowed to fail now. They simply do not have a choice anymore. As far as QE2 goes… primary dealers are obviously profiting from this, but in the grand scheme, this has been priced into the market a long while ago already. And long term of course, quantitative easing a catastrophe anyhow, as I have explained at length before.

Written by gloege

November 17, 2010 at 02:24

Posted in Uncategorized

Stock Market indicator?

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Why am I so down on the economy, when at the same time the stock market is doing so well? A common question. And as a reader at the Economic Collapse Blog reminded me as well just now – if the stock market were a good indicator of actual economic performance, then the best performing economy by a wide margin over the last decade, should have been Zimbabwe’s. Still think the stock market is a good indicator for economic performance?

Written by gloege

October 15, 2010 at 14:02

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Zero Hedge Guest Post: How Hyperinflation Will Happen | Continuing Our Discussion With Regards To Deflation/Inflation

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Written by gloege

August 24, 2010 at 13:44

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It Looks Like U.S. Government Bonds Aren’t Supported By China Anymore Via Vincent Fernando At Business Insider

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It Looks Like U.S. Government Bonds Aren’t Supported By China Anymore: ” Login With Facebook | Login With Twitter | Login | Register

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It Looks Like U.S. Government Bonds Aren’t Supported By China Anymore
Vincent Fernando, CFA | Aug. 20, 2010, 3:45 AM | 6,538 | 31
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Earlier this week we highlighted how cut its holdings of U.S. government bonds by the largest ever monthly amount in June. Expanding this thread, it should be noted that China’s U.S. debt ownership has fallen to $843.7 billion in June from $938.3 billion in September 200,9 according to U.S. Treasury Department released Monday. This equates to nearly an 11% reduction by China.

Yet interestingly, the 10-year U.S. treasury yield has fallen over the same period, despite the meme that China’s voracious U.S. debt buying supports keeps America’s bond yields l”

(Via .)

Written by gloege

August 24, 2010 at 13:40

Posted in Uncategorized