Secession

Jim Rogers once wrote that there is no country in history that has lasted for more than 200 years with the same borders or the same government. 

Will US go down the same road?

"All 50 States Have Active Petitions To Secede From The United States"

http://www.youtube.com/watch?v=LVO6G4fvgiI&feature=g-u-u


"Ron Paul: Secession Is an American Principle"
http://www.youtube.com/watch?v=nhQ31b_dbnM&feature=g-subs-u

"700,000 Americans petition the White House to secede from the US"

http://rt.com/usa/news/petition-white-house-secede-688/

US long-term Bond Bubble

http://www.bloomberg.com/news/2012-11-13/treasuries-see-u-s-over-cliff-as-yields-converge-correct-.html

This is what you call a bubble. Investors think US is in trouble, yet they still do the knee-jerk reaction of fleeing into US bonds, just like in 2008. 

"bond investors are seeking safety from a possible downturn next year."

Well ok, maybe some expect the Fed to ease further and push bond prices up, so they speculate. They know that bonds are not worthy to hold for the long term. In this case, it is clear that they just want to 'flip' bonds, just like how they flip houses prior to the housing bust in 2007/2008.

it's coming

The US has been bankrupt for a few years now, although the general market has not recognised it. Spain, Greece, Portugal, Italy, Ireland have been bankrupt for the few years leading up to their current crisis. The general market was late to recognise it too. These nations are as indebted now (in fact, more) as they were a few years ago. But they were able to buy some time due to the low interest rates in the past. Once rates start to rise, the party is really over. The same calamity will befall the US too.

I doubt that the US can postpone the pain for much longer. The budget numbers are just too horrendous.  Although I don't like to make predictions with regards to timings, if I have to,  we should see a huge crisis hit the US in the next few years. Some other things might happen which will delay the day of reckoning (eg. the world turning its attention to Japanese debt). I think things will ultimately become really bad, and here, I attempt to list down some of the things that will happen in the US:

• A currency crisis
• A government debt crisis
• Rising interest rates
• Fed and government will do "whatever it takes" to support the dollar
• Fed or govt announcing Operation "Who's your Daddy" to support the economy
• A panel of seasoned 'economists' are formed to 'study' the crisis
• Co-ordinated effort by the Fed and financial institutions to purchase US bonds
• Banks lose big on government bonds
• Major bank bankruptcies
• Bailed out financial and auto companies in 2007/2008 fail again
• More money-printing
• More taxes
• More bailouts
• Student loan bubble burst
• Problems in the major and old colleges
• Bankrupt states, municipalities, cities
• Big rise in food and energy prices
• Government imposing price controls
• Price controls result in shortages of goods
• Riots in the streets
• More regulations and laws passed by the government
• More civil liberty lost as the government passes more laws in the name of tackling the crisis
• Gold, silver, platinum, oil, commodities prices soaring
• Wild swings in precious metal prices as speculators get on board
• Dealerships announcing a shortage of gold/silver bullions
• Even more people on food stamps and unemployment benefits
• More immigrations out of the US
• More people renouncing their US citizenship
• Politicians blaming the US crisis on the Chinese "currency manipulation" and the Eurozone crisis
• More capital controls
• More protectionist trade policies
• Possible ban on short-selling as traders get blamed
• Politicians trying to assure the market that things are under control
• World leaders announcing a 'concerted effort' to tackle the crisis
• China and Russia, and more countries hoarding more gold
• US hostilities with Iran deteriorate
• More countries trading using their own currencies, bypassing the USD
• Stock market may go up, down or sideways in terms of USD - but it will plunge in terms of gold/silver
• Stock exchanges closed to cool the market down
• More calls to use the SDR

And maybe further down the road,

• A ban on gold exports
• Issuance of a new US dollar

Warren Buffett's networth in other commodities

Ok, so some people are convinced that gold is in a bubble and therefore it is not a good measure of inflation/depreciation of currencies/networth, etc. 

Fair enough. I've compiled (it sure takes quite some time to do this) WB's networth in other commodities. The chart shows his purchasing power over the past 12 years. The number of tons of rice, barrels of oil, pounds of beef, pounds of sugar, and troy ounce of silver (I included silver just for kicks) he can buy. Again, we see that his networth has been greatly diminished in the past 12 years since the start of the commodities bull-run in 2000.

Note: This is not an attempt to bash WB. Just want to show the fact that inflation is rampant, and is going to get worse. Even a legend like him finds it hard to keep up with inflation. So, stocks generally is not a place to hide from inflation to the average investors.

P.S. maybe to make things simpler, I should just compare his networth against a commodities index.

Check out my other post on Warren Buffett's wealth in terms of gold:

http://silvernjin.blogspot.sg/2012/10/warren-buffet-wrong-on-gold-wiped-by_16.html

Warren Buffett - Wrong on Gold, Wiped by Inflation

Are the rich really getting richer, or are they being wiped out by inflation too?

I estimate the wealth of one of the most well-know figures in the investment world: 

Warren Buffett. You will see that although his wealth in terms of dollars have increased/remained constant in the past 12 yrs, the wealth in terms of gold has really been decimated. Wonder why he hates gold and still publicly bashes gold.

Year | Worth in Dollars | Worth in Gold
2000, $26b, 92m oz
2001, $32b, 119m oz
2002, $35b, 113m oz
2003, $31b, 84m oz
2004, $43b, 105m oz
2005, $44b, 99m oz
2006, $42b, 67m oz
2007, $52b, 74m oz
2008, $62b, 73m oz
2009, $37b, 38m oz
2010, $47b, 35m oz
2011, $50b, 32m oz
2012, $44b, 26m oz

If one can beat his stock-picking skills in the past 12 years, and accumulate wealth 400% faster than him (to equal gold's rise), by all means go ahead. But for most of us who can't, gold is protection. It will be even more interesting to see his wealth priced in silver.

Check out my other post on Warren Buffett's wealth in terms of other commodities:
http://silvernjin.blogspot.sg/2012/10/blog-post.html

Bailouts

What most analysts miss about bailouts. 
Bailouts:

1. Necessitate inflation and steal wealth, due to money-printing. Everyone loses purchasing power.
2. Divert resources from the more productive parts of the economy into the unproductive parts.

3. Destroy jobs that would have been created in the more productive parts of the economy, had resources not been diverted to prop up unproductive jobs.
4. Prevent prudent businesses from gaining market shares. Instead, they are taxed so that the bailed-out companies maintain their positions in the market.
5. Deny prudent businesses the chance to snap up failed companies' assets, so that the economy can restart on a sounder footing.
6. Stifle competitive growth in the bailed-out sector.
7. Force taxpayers to buy up failed companies' assets at greatly inflated prices.
8. Allow government to grow bigger, imposing more rules and regulations.

Bailouts = bad economics + bad morality

Excellent 30-mins lecture! Answering the Same Old Arguments Against Sound Money | Thomas E. Woods, Jr.