The coming recession, CRASH and GOLD

  1. 1,741 Posts.
    Agree with most of what acronym had to say. U.S GDP is being inflated artificialy, mainly by defence spending and measures taken to rebuild and secure USA. This is clearly not sustainable and eventually somebody will have to foot the bill.
    The $US is overvalued and has broken support. The Dow is breaking support. Gold is breaking out. Deja vu. Dr Greenspan once said: "we cannot continue to support a strong dollar policy. Our exporters are in drastic need of assistance. We must be prepared to let the $US dollar slide".
    Geez, imagine being a foreign owner of U.S stocks when you heard that. But wait, theres more! A week later he stunned the world by raising interest rates by 50 basis points for the second time in quick succession. Two days later the market started its massive decline. That was 1987.
    So what you say? Well we have exactly the same problems right now. US exporters are crying out for help because the dollar is too strong. Inflation is becoming a problem. Interest rates are too low and will need to rise quickly to keep the economy healthy. We are in the same boat as we were in 87.

    I do not believe for a minute that the greatest asset bubble in history can be popped and followed by the mildest recession ever.
    Quite obviously the bubble is as inflated as ever. Stocks are at record p/e's, and house prices are skyrocketing due to 30 year lows on interest rates. There is only one way forward. Interest rates have nowhere to go but up. If you have just bought your first home, I pity you. We cannot possibly build another bubble on top of this one. No economic expansion in history ever began with p/e's at 60+, or with house prices growing at record rates. Quite simply, returns on assets will be low or negative for the next few years. There is money to be made on interest rates, but so many people are up to their eyeballs in debt, they will be swearing at rate rises. Very few people are debt free. We will have rising interest rates, poor returns on investments, rising unemployment and staggering debt. And that is the reason I am trying to set up a hedge fund.
    History shows recessions are a healthy and nessesary part of economic survival. When money is abundant, people are careless with it. The economy lacks inefficiency and leaks money to places that do not help the economy grow. It takes a recession to teach the dumb people that money must not be wasted. It is the best way of correcting the excesses of the economy and promotes efficiency.
    Some may think Dr Greenspan is saving us from pain, but all he is doing is allowing the bubble to get bigger. Soon it will pop. It has to. He is not allowing the excess air to escape. The longer we go on without letting some air out of the bubble, the worse the inevitable pop will be.
    GOLD. The only store of wealth that cannot be instantly produced on mass by the government. Lets say you are an average American Joe. You worked your whole life, consumed as much fat as possible and are too lazy and weak minded to do anything about the corrupt, oppressive, facist dictators you call a government. You now own a million dollars worth of assets (at todays inflated prices). But the Fed, having the power (which you happily allow) to print money and "sustain liquidity" suddenly starts pulling billions of dollars out of its rear end to prop up the economy (the stockmarket actually). So whats the problem you say? Well your million dollars is now one of many more millions floating around the system, and therefore it doesnt buy what it used to. Its called inflation. It should bother you that you have to work your butt off for 40 years to save a million bucks, but the government can pull it out of thin air whenever and as often as it likes. Rather that let the excess air out gently, they prefer to pretend the problem will go away if we just imagine that the bubble wont pop as long as we keep adding air. But it will. So when your assets start to look like they will depreciate, what do you do? Well hopefully you sell them while they are still worth something. Hopefully you will realise debt is your enemy at this point in the economic cycle. Hopefully you are smart enough to realise you need to store your wealth in something that will not depreciate with inflation. Something that the government cannot produce out of thin air or manipulate the price of.

    The answer is GOLD.
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