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February 26, 2012

James Rickards is the Bomb

Anyone who wants to hear a rational discussion of our current debt problems needs to listen to James Rickards. 

Short versions here - http://www.chrismartenson.com/blog/james-rickards-paper-gold-or-chaos/71504 and here http://www.youtube.com/watch?v=mAjYSq9tn4w&feature=youtube_gdata_player

Long version in 8 parts here:










National Debt Burn Rate

Interestingly, someone finally took the time to actually calculate the burn rate of our national debt in terms of debt to GDP ratio.  It is a whopping 21 days per 1%.  http://www.zerohedge.com/news/us-debt-gdp-passes-101-global-debt-ponzi-enters-its-final-stages

At this rate we will actually "Cross the Rubicon" (so many people are talking about this but few understand that it means reaching a point of no return) by next summer.  That's the summer of 2013 I'm talking about.  Next summer we will reach a point where our debt to GDP ratio exceeds 120%, a place we have never been before in the history of the United States.

What happens then?  Well, in preparation for it, the Chinese and the Russians are no longer buying out treasury instruments.  They can't simply dump them, it takes time, but when the instruments they have mature they are looking elsewhere for places to invest their surpluses.  http://www.fool.com/investing/general/2012/02/17/what-happens-when-china-stops-buying-our-debt-.aspx?source=ihpdspmra0000001&lidx=1

Right now the slack from China and Russia is being picked up by France, Japan, and of course, the Fed and the banks.  But the government is printing treasury debt at a far faster rate than Bernanke is printing dollars so the Fed simply isn't keeping up.  The maturities keep getting shorter and shorter because short term treasuries are what the banks will buy with customer deposits.




February 19, 2012

Why Plan? Kyle Bass Knows



The above is a recent panel discussion that features Kyle Bass of Hayman Capital.  Check it out.  Kyle is not an alarmist, he's simply a realist.

Here's his November, 2011 investor letter:


February 09, 2012


Ya know, I've been away for awhile listening and gathering information for you.  I've heard it all - from fringe thinkers like Alex Jones to main stream opinion people like the ones you see on CNBC.  The thing I noticed across the board is that there are very few long-term strategists.  A bitch-fest here, a short-term trade there, but sheesh!  No real strategists in the bunch.  Buy gold or buy treasuries, this stock or that, that's about all you get.

The point of wealth shift, for anyone who really wants to get it, is that the BIG BOYS are PLANNERS while Average Joes simply stumble their way through.

Day One at Trammell Crow, it amazed me - really amazed me - to learn that when a guy got made a partner (and therefore shared in all the deals good or bad) he got a HUGE distribution with which to buy a house free and clear.  Why?  Because Crow knows what everyone in the real estate industry knows.  Real estate is cyclical.  You need to survive busts and live to see a better day.  In order to do that you have to have wealth that is "over the fence" (in other words, bankruptcy proof).  Crow tended to operate in states with very debtor-friendly bankruptcy rules like Texas and Florida.  This was not by accident!  This was PLANNED.

Most people want to just sit around and bitch about the system.  They occupy this and that and become VICTIMS.  Heads up, people.  The police and the military are stronger than you.  Heads up people, the DISCRETIONARY wealth of the 99% has virtually no impact on corporate earnings anymore.  The average person drives a car that is 11 years old.  The average person is stuck in food, clothing and shelter land and only escapes playing Words With Friends and Tiny Tower. 

Here's the bottom line: 

If you are among the 40% of Americans who are penniless and living on government transfer payments (ie. can't survive without government handouts) and have no intention of becoming self-reliant, go ahead and occupy whatever you want to occupy.  Bitch, moan and groan.  Scream at the top of your lungs.  Get arrested.  I assure you it will ultimately be ineffectual but it will make you feel like you are at least doing something.  But don't doubt the day is coming where you will not be able to make ends meet.  The way the government calculates inflation, and by extension your handout, virtually assures that you will end up either as a ward of your family contributing your meager dole to make their ends meet, in an economically viable government living facility, or dead.  By 2020, the poor in America will be living like the poor in all the other countries in the world - multiple generations in one household, on the street, in facilities, or dead.  Don't think we are not on the path to Greece.  From an accounting standpoint, we are fewer than 5 years away. 

If you are not living on government transfer payments but living paycheck to paycheck you are currently anesthetizing yourself with food, drugs/alcohol, and electronic forms of entertainment.  You get up, scramble around to get out the door, work, come home, eat, entertain yourself, scream at others, and go to sleep only to do it all again the following day.  Weekends are used to catch up on chores.  There is no planning and you feel like a victim of the system.  Each year it gets harder to make it, you get older, tireder, and more passive.  Slowly but surely your debts creep up but they creep up haphazardly, with no planning on your part.  You know eventually you will have to default but as long as you can keep on making those minimum payments.... You may think it's too late but it isn't.  It's time to make a PLAN.

If you are not living paycheck to paycheck good for you!  You are in the top 5% of people in the world today and, if you PLAN, you will not only survive, you will beat the system.

In my upcoming blogs I will talk about ACTIONABLE planning ideas.  These do not involve moving to another country.  I've always found the flight scenario rather pathetic and highly illogical.  If you do not speak the language of the place you want to go, forget it.  If you cannot "pass" as a native of the place you want to go, forget it.  If you do not spent significant amounts of time already in the place you plan to "bug out to" forget it.  When the global currency reset happens, and it will, America will bear the brunt of the blame.  Trust me.  You do not want to be the pith-helmut-wearing guy in the pot of boiling water.  America has clean water, excess food production, the capacity for energy independence and balanced demographics ex-baby boomers.  If we had to shut our borders and become totally self-reliant we could do so with much less pain than most.

I will not talk about joining the occupy movement or any other "rage against the machine" ideas.  Peaceful protesting will be controlled or ignored, and non-peaceful protesting will be handled quickly and efficiently by the military and the police.  Eventually it will burn out, be stamped out, or be starved out.

I will blog about planning and strategy WITHIN THE SYSTEM.  Since I wrote Wealth Shift, and particularly in the past couple of years of working with TPTB, I have come to realize that they have no intention of making things more equitable.  Those of you who learn how to PLAN within the context of the coming change will survive.  The rest of you wont. 

What is the coming change?  I think most people know but I'll spell it out.  For the past thirty years we have been given unsecured lines of credit in the trillions of dollars.  We have spent them to exhaustion and made promises to our elderly and indigent that we can't possibly keep.  The promises of the past (debt) is converging with the promises of the future (entitlements).  They will collide and break into tons of little pieces.  In the aftermath, best-case scenario is that nations, companies, and people will be able to borrow only if they put up collateral.  So your task is to plan to have collateral.  To have assets that don't get wiped out through default, inflation or poor custodianship by others.

Your goal is to use the system to help you get those things....just like the BIG BOYS are doing.