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Money & Company: 'Black Swan' author Taleb sees government debt as 'pure Ponzi scheme'
In any case, Taleb doesn't offer any novel advice to investors who fear a government-debt crisis. He recommends keeping cash in short-term Treasury bills.
If government debt is "pure ponzi" but he still recommends government debt, then everything else must be pure ponzi too!
“Because governments can print more of their own currency, the risk comes from a rise in interest rates rather than a government default,” he notes. “When you have hyperinflation, deficits, or debt problems, with short-term bills you can catch higher interest rates to compensate you for the inflation or whatever return you've missed.”
I'm not sure it is the safe haven he thinks it is though. Note the 1970s in the following chart.
Real Interest Rates After Taxes
And yet, what are you going to do if the pain continues?
Pick your favorite ponzi poison?
Stocks aren't cheap.
Real estate isn't cheap.
Bonds aren't cheap.
Oil isn't cheap.
Precious metals aren't cheap.
So where exactly is the value? I'd say canned goods and toilet paper, but there's only so much we can buy. That said, when all investments seem expensive, perhaps cash isn't all that bad. Perhaps that's why I'm still deflationary. Put another way, if everyone felt cash was the place to be, then perhaps all the other options would be cheap.
The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. - Alan Greenspan, 1966
Herding behavior is not your friend in a welfare state it would seem.
Friday: No Major Economic Releases
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[image: Mortgage Rates] Note: Mortgage rates are from MortgageNewsDaily.com
and are for top tier scenarios.
Friday:
• At 10:00 AM ET, *University of Michig...
5 hours ago
12 comments:
"Stocks aren't cheap.
Real estate isn't cheap.
Bonds aren't cheap.
Oil isn't cheap.
Precious metals aren't cheap."
You know what is cheap?
Plane ticket to Vegas baby, about $100 one way from here in the Midwest.
The odds are looking better and better : )
watchtower,
Hahaha!
Vegas!
There's a place where anything goes, where the excitement never ends, and the party never dies.
Resident(ial) Evil!
Well, stocks, bonds, real estate, oil, and precious metals will all be cheap soon enough. The only thing I'd invest in now is guns and ammo.
I think we most likely have a Japan scenario of boring non-growth for some time, until serious pro-growth reforms are made (don't hold your breath.) And those might not help either.
Now, I am not sure why any investment should be "cheap" - sometimes there are no bargains, but I would suggest looking at the following:
Chinese RMB currency. If you follow the export tigers historically they have revalued their currency higher - there is only so long you can play mercantilist. Is the RMB already done with its big bang a few years ago from 8.3 to 6.85? Maybe, maybe not. At least I get paid some interest while I wait. Only worry might be real estate collapse, but they had one before, just a few years ago, and nothing changed on the currency aspect because most of the collapse is just domestic. And this play is actually based on the fact that China did over invest in housing and factories...less houses in the future = less imports, too many factories now = too many exports until finally the currency appreciates and culls the weakest ones.
I also assume the Chinese hold their currency artificially down. That assumption could be wrong, but I doubt it. Its like betting that American pols will keep using deficit spending for as long as humanly possible. Solid bet on that.
I would guess there may be other currencies that are cheap in the emerging markets as well. I have not looked in a while.
My dividend play still found tons of Canadian companies that pay above 7.5% (my minimum requirement) annually, and have long historical records of doing so. Even through 2008-2009. Not all of these are oil and gas, either.
Also, is there any sectors now that people think are boring, going nowhere, or toxic? It might right to look at them again...fine art? antiques?
Guns and ammo - I am looking to buying my first shotgun - Remington or Mossberg?
Coba
"Guns and ammo - I am looking to buying my first shotgun - Remington or Mossberg?"
The Remington 870 pump has a steel receiver, where as the Mossberg is aluminum, but you can't go wrong with either.
You can get a submachine-gun version of a shotgun, you know.
Well, if I were going to invest in a gun, I'd go here.
http://www.springfield-armory.com/armory.php?model=19
The M1-A Scout. Of course you'd need bullets to go with it.
Finding ammo often a long shot
He said much of the demand is due to the country's economic problems and people getting worried, thinking one day they'll have to protect themselves if civilized society comes undone. And the country's economic woes aren't going to go away anytime soon, so neither will people's desire for weapons and ammo.
Your sort of article.
http://www.thisismoney.co.uk/news/article.html?in_article_id=511086&in_page_id=2
dearieme,
Thanks for the link. I saw that wheat prices spiked higher. I had not been watching cotton though.
I also watched the yield on the 5-year TIPS turn negative this week. We saw similarly low yields in March 2008.
So do we brace for stagflation again or should we expect another deflationary panic?
For what it is worth, I have plenty of hoarded wheat (spaghetti), a LOT of hoarded cotton (decades of socks, t-shirts, sweaters, and bed sheets stored away), TIPS, I-Bonds, and more than the usual amount of cash (since I think we merely postponed some of the deflation and I'm not a believer in the China commodity story).
Did you see that China is doing banking system stress tests based on a hypothetical 60% drop in prices? I find that fascinating. That's about how far their stock market fell once the euphoria wore off.
Shanghai Composite
Stag,
What's tastier than property, more pungent than gold, and rising in value faster than either?
http://www.guardian.co.uk/world/2010/jul/30/garlic-chinese-commodity-bubble
Don't people understand you can grow this stuff yourself?
I blame it all on a mismanaged "credit" system.
mab,
Heavily leveraged garlic in a rising garlic market can be grown with a negative cost. That means you can make more money off of garlic than its actual selling price. Woohoo! That's the beauty of garlic! You simply can't lose!!
Garlic History
The word garlic comes from Old English garleac, meaning "spear leek." Dating back over 6,000 years, it is native to Central Asia, and has long been a staple in the Mediterranean region, as well as a frequent seasoning in Asia, Africa, and Europe.
Egyptians worshiped garlic and placed clay models of garlic bulbs in the tomb of Tutankhamen. Garlic was so highly-prized, it was even used as currency.
Oh my God!!! Don't you see what this means?
* 6,000 years of history!
* Worshiped by garlic bugs!
* Garlic is money!!
I'm thinking of starting my own late night TV commercial. I could sell garlic bulb reproductions. Picture tulip bulbs enclosed in 31mg shells of pure garlic. What do you think?
Maybe I should just start off slow though. A "Cash for Garlic" sign in my front yard would certainly be less work. ;)
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