Inflate-or-Die NOW

May you live in interesting times…

Klippt från Göran Högbergs finanskrönika den 3 maj

”If You Can’t Stomach 50% Declines In Your Investment You Will Get The Mediocre Returns You Deserve” - Charlie Munger, Warren Buffets partner 

Here’s how I define the Day of Reckoning…

It’s the day the Federal Reserve has to print so much fake money to re-inflate the collapsing debt bubble, the world’s central bankers no longer want to put their sovereign reserves in Treasury bonds. Instead, they turn to gold (or something else that’s not dollars).

Over the last 10 years, the Americans, the Europeans, the Japanese, and the Chinese have blown a gargantuan debt bubble.

The bubble burst last month – pricked by Coronavirus and then compounded by the Russians and Saudis’ decision to deflate oil.

Now the world economy is facing a margin call for anywhere from $10 billion (per Doug Noland)… to $12 trillion (per JPMorgan)… to $45 trillion.

In other words, the Fed must print at least $10 trillion… or let the world economy hard-default on its debts.

I’m betting on the $10 trillion soft default. Why? Because I think central bankers have a “God Complex”… and history has taught them they can “fix” any problem by printing money and stimulating credit.

Coronavirus gives them the perfect political cover. “It was an act of God,” they’ll say. “What choice did we have?”

“Sell the rumor, buy the news” is the trading wisdom I’d invoke here.

For example, when a war is coming, you’ll see the stock market fall in the months and weeks before the war starts. But as soon as the bombs start falling, the market rises.

If my hunch is right, the market should be forming a bottom in these next couple of weeks and beginning a rally. We’ll see.

As the nation-states take the brunt of their economic collapses on the chin, they will begin to realise that the EU superstate is little more than an obstructive and costly irrelevance.

The Fed created the economic crisis with its more than a decade-long campaign of ultralow interest rates and quantitative easing policy that injected massive liquidity into financial markets. The coronavirus is simply the match that lit the fuse.

Socialism is not the pioneer of a better and finer world, but the spoiler of what thousands of years of civilization have created. It does not build; it destroys.

As we’ve said many times in these Postcards, the biggest bubble of all is the bubble in central bank hubris. They think they can fix any problem or crisis that comes along in the economy. Let’s call it a “God Complex.”

The government is already spending more than a trillion a year ABOVE what it receives in tax revenue, but as we’ve warned over and over again in these Postcards, during a recession, the pressure on government finances gets much worse.

Could we see the annual budget deficit balloon to $2 trillion? Or $3 trillion? These numbers sound crazy now, but I think they’re possible…

Inflate-or-Die begins NOW. As in this weekend. As in “right now.” There is a huge market intervention in the works as I write these words.

The stock market is about to stage a big rally, the type of rally that traders say “will rip your face off.” It may have even started today. We’ll see.

Either way, whatever rally we're about to get in the stock market will be a bear market rally. A bear market rally is a temporary bounce higher in the stock market during a longer-term bear market. These rallies are often violent and shocking and completely normal to see during a longer-term market decline.

So we’d rather be in the sidelines in gold right now. It may not jump as fast as the stock market initially, but over time it will rise. The next big milestone is $1,911 an ounce, which is the all time high it set in 2011.

Gold mining stocks and gold royalty streaming companies are also presenting excellent buying opportunities right now, if you’re so inclined.

For starters, let's have California secede and limit Bernie-style socialism to the new republic. If my predictions ended up being wrong and the state became a paradise, then the rest of the country could quickly follow suit.

How about the fact that it's capitalism itself that's made it seem normal and unremarkable that everybody you know readily purchases and uses soap, disinfectants, and sanitizers?

Which European king had all of these?

The market economy, with its price system, accomplishes this seemingly impossible task -- or at least approaches it as closely as mankind is capable of -- without coercion or central direction.

It does it so well that people consider it automatic, like a spontaneously occurring feature of human existence.

Instead of marveling at it, they complain -- and risk destroying the very thing that in all likelihood makes their own existences possible.

“May you live in interesting times…”

“Fara = Möjlighet”

Inflationskyddad förmögenhetsförvaltning
Möjligheten finns att ansluta sin depå enligt en modell för förmögenhetsförvaltning som fokuserar mer på att bevara kapitalet och skydda sig mot inflation än att generera absolut avkastning.

Basen för denna modell står vår makroexpert Göran Högberg för. Kontakta oss för mer information om en alternativ förmöghenhestförvaltning som inte följer index!

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