Moses Kim, in a post entitled Government Stupidity and Economic Crisis, describes our time as an inflection point in history. While he doesn’t explain the full implications of that (wisely, because no one can reasonably forecast where we are headed), he suggests it might be akin to Argentina dropping from one of the world’s great economic powers to its current status.
His take on the past and the immediate is more detailed. Regarding the present, he states:
The truth is our economy never got out of recession. The truth is that the unemployment rate is rising; food stamp usage is at record highs; housing has stalled; states are selling assets to stay solvent; and the mythical recovery that 90% of economists predicted is unraveling. The truth is there is much more pain ahead. The truth is the Fed is handcuffed and must devalue to prevent an unspeakable crisis. The truth is gold is going to the moon and there is nothing any of us can do to stop it.
That is a reasonably succinct and accurate assessment. Gold is a prediction while the rest is difficult to argue with.
Mr. Kim obviously favors gold and expects a blow-off at some point. In my opinion, and likely his, we are not yet at that point. However, investors should probably steer clear unless you can tolerate 10 – 20% swings in price. It is a frothy market and volatility is to be expected.
As always, investing comes back to the risk-reward trade-off. As one wag aptly put it: “Do you want to eat well or sleep well?”
Sometimes we get to periods where we neither eat nor sleep well. The next five years could easily be just such a period. Enormous amounts of money will be made and lost over this period. Conventional investing probably will not work well. These markets are not for novices or traditional investors. Volatility and danger are upon us.
There is no investing now, only speculation. That goes for all markets. Nothing is normal in this environment.
