Some Economic Facts and Investment Themes We're Watching
Here are some economic facts we've noted and investment themes we're watching with great interest.
The world economy continues to slow. Yes, I realize you can find others who keep talking it up, but, really, that's a stretch. Take China for instance. Not only has the Chinese government encouraged the piling up of mountains of debt, but the private economy - the part of the economy that's not directly run by the government - have been and continues to be in a rather severe recession. There's not sign that's letting up, never mind reversing. A slowing economy with massive debt weighing it down makes for a toxic combination. As for the part of the economy the government directly runs, if you believe their statistics, the economy's still growing. That's, to put it mildly, doubtful.
In any case, there's no way to know with certainty, since a communist government makes that virtually impossible. They lie and you really can't check what they say. There's no one or no institution that can independently verify or dispute what the government says. In fact, the communists are clamping down one everyone, on every institution, including their media, and the internet itself, to prevent any independent voice being heard. Yes, our government lies too. But we have others with whom we can check, if interested, to verify or dispute what they say. There's still some checks and balances out there - at least for the time being. As for the future, that's up for grabs, the way things have been going. But that's a story for another time.
So with China in the dumps, that drags down the rest of Asia. The #1 customer for most Asian economies is China. No more explanation needed.
Europe's a mess. It's #3 economy, Italy, looks like it needs oxygen, or at least it's banks need the equivalent. They're in a state of turmoil, with the bank Monte dei Paschi ready to keel over. The latest fix proposed for this dying bank (the oldest in the world), is the issuance of $5 billion in bonds to inject cash into it - the third time in the last few years it's needed emergency cash. The investment banks of the world have committed to underwriting those bonds, but their generosity is tempered by the condition that the bank raise something on the order of $9.2 billion in a stock offering. Who will buy the stock of this bank? We have no idea. Maybe "someone" will ride to the rescue here, especially if it's required to prevent the failure of this bank.
So with China, the rest of Asia, and Europe on the ropes, what's left? Russia and it's Euro-Asian economic circle? Forget it. South America? When has South America ever shown economic promise? Oh, right, forgot about Brazil, which, if you forgot, is the "B" in the famous BRICs (Brazil, Russia, India, China) that were going to be the economic engines of the future. Need we say more? The Middle East has never been worth discussing when it comes to economic promise, so we won't start now. That leaves the North America, most importantly, of course, the U.S.
Setting aside the constant dispute over whether the U.S. economy is growing or slowing (and it's endless), the big "ace in the hole" for the U.S. appears to be the fact that every place else is such a disaster or impending disaster that there's only one place for money to go: the U.S. So even if you argue that the shocking 1% GDP growth recently reported demonstrates a continuing slow down, the rejoinder will be: Just you wait and see how everyone flees to the U.S. We'll be saved by our being the least messed up of the world's economies.
Somehow the argument sounds less than inspiring.
With those economic facts in mind, the investment themes that we're watching don't include U.S. or any other stocks. They do include U.S. Treasuries, which actually may continue to benefit (as they have since mid-2014) from big, smart money fleeing the rest of the world. And as economies choke, their currencies also have trouble breathing. But while the US dollar has gained some advantage, the rise in the price of gold, silver, and now even platinum argues for the precious metals being seen more as currencies (their traditional historic role) rather than commodities. If that holds true, they should see a continued rise in price.
Anything else of interest out there? Well, a few stock sectors continue looking reasonably decent, but one wonders what will happen to them in the event of that long-overdue correction that keeps beginning, but never follows through.
Anyway, that's the way the economic and financial world looks from this perspective, this week.
The world economy continues to slow. Yes, I realize you can find others who keep talking it up, but, really, that's a stretch. Take China for instance. Not only has the Chinese government encouraged the piling up of mountains of debt, but the private economy - the part of the economy that's not directly run by the government - have been and continues to be in a rather severe recession. There's not sign that's letting up, never mind reversing. A slowing economy with massive debt weighing it down makes for a toxic combination. As for the part of the economy the government directly runs, if you believe their statistics, the economy's still growing. That's, to put it mildly, doubtful.
In any case, there's no way to know with certainty, since a communist government makes that virtually impossible. They lie and you really can't check what they say. There's no one or no institution that can independently verify or dispute what the government says. In fact, the communists are clamping down one everyone, on every institution, including their media, and the internet itself, to prevent any independent voice being heard. Yes, our government lies too. But we have others with whom we can check, if interested, to verify or dispute what they say. There's still some checks and balances out there - at least for the time being. As for the future, that's up for grabs, the way things have been going. But that's a story for another time.
So with China in the dumps, that drags down the rest of Asia. The #1 customer for most Asian economies is China. No more explanation needed.
Europe's a mess. It's #3 economy, Italy, looks like it needs oxygen, or at least it's banks need the equivalent. They're in a state of turmoil, with the bank Monte dei Paschi ready to keel over. The latest fix proposed for this dying bank (the oldest in the world), is the issuance of $5 billion in bonds to inject cash into it - the third time in the last few years it's needed emergency cash. The investment banks of the world have committed to underwriting those bonds, but their generosity is tempered by the condition that the bank raise something on the order of $9.2 billion in a stock offering. Who will buy the stock of this bank? We have no idea. Maybe "someone" will ride to the rescue here, especially if it's required to prevent the failure of this bank.
So with China, the rest of Asia, and Europe on the ropes, what's left? Russia and it's Euro-Asian economic circle? Forget it. South America? When has South America ever shown economic promise? Oh, right, forgot about Brazil, which, if you forgot, is the "B" in the famous BRICs (Brazil, Russia, India, China) that were going to be the economic engines of the future. Need we say more? The Middle East has never been worth discussing when it comes to economic promise, so we won't start now. That leaves the North America, most importantly, of course, the U.S.
Setting aside the constant dispute over whether the U.S. economy is growing or slowing (and it's endless), the big "ace in the hole" for the U.S. appears to be the fact that every place else is such a disaster or impending disaster that there's only one place for money to go: the U.S. So even if you argue that the shocking 1% GDP growth recently reported demonstrates a continuing slow down, the rejoinder will be: Just you wait and see how everyone flees to the U.S. We'll be saved by our being the least messed up of the world's economies.
Somehow the argument sounds less than inspiring.
With those economic facts in mind, the investment themes that we're watching don't include U.S. or any other stocks. They do include U.S. Treasuries, which actually may continue to benefit (as they have since mid-2014) from big, smart money fleeing the rest of the world. And as economies choke, their currencies also have trouble breathing. But while the US dollar has gained some advantage, the rise in the price of gold, silver, and now even platinum argues for the precious metals being seen more as currencies (their traditional historic role) rather than commodities. If that holds true, they should see a continued rise in price.
Anything else of interest out there? Well, a few stock sectors continue looking reasonably decent, but one wonders what will happen to them in the event of that long-overdue correction that keeps beginning, but never follows through.
Anyway, that's the way the economic and financial world looks from this perspective, this week.
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