Karl Denninger comments today on Greece's alleged failure to roll-over her debt, Germany's weakness and the fatal over-extension of debt in the American economy.
I respect Karl's expertise and information, but am often put off by his (to me) excessive use of bold type, underlining and capitalised words, dramatic language etc. Nevertheless, he's making a couple of radical predictions.
One is a very severe US stockmarket drop ("half -- or more", "try a 90% loss on for size"). Another is the consequent failure of insurance-based guarantees, including (a) annuities and (b) the FDIC.
Unlike here in the UK, where bank deposits are guaranteed by the Government, in the USA depositors are protected by a company, the Federal Deposit Insurance Corporation, so the value of the guarantee depends on the value of the assets held by the FDIC.
Yet there are others, including Charles Hugh Smith, who contrariwise expect the dollar to strengthen as the world trading system unravels, or at least to survive because its collapse would properly collapse the system.
We do live in uncertain times. My instinct would be to hedge my bets, but the conventional methods employed by investors - insurance-type hedging - may not work in a very unstable situation. Consider counterparty risk.
INVESTMENT DISCLOSURE: None. Still in cash (and index-linked National Savings Certificates), and missing all those day-trading opportunities.
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