China heading for a bust, the rich are running

"Over half the nation's monied Elites have either left the nation or plan to leave and transfer their financial wealth overseas."
Another fascinating post from Charles Hugh Smith.


READER: PLEASE CLICK THE REACTION BELOW - THANKS!

All original material is copyright of its author. Fair use permitted. Contact via comment. Unless indicated otherwise, all internet links accessed at time of writing. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Abandon success!

Successful people can't be successfully imitated, and successful fund managers are merely a statistical blip. That's Charles Hugh Smith's latest message, and though he is prolific and always thought-provoking, I think this is possibly his most important, because it bears on the happiness of the largest number of people.

CHS quotes Aaron Krowne:

The average man cannot ever hope to win with "investments"(or the world of finance in general), but must be content with savings. Unfortunately, in the absence of sound money, we don't really have "savings" anymore, which is why the whole world has effectively been converted to economic sheep for the slaughter, a kind of "superadvantage" of those who run our economic system.

Speaking as someone who was an IFA for 20 years, I completely agree that the majority of people should and would be satisfied with sound money, expecting no more than what they are willing to save, and no less than that it should preserve its purchasing power. It is one of the outstanding failures (or crimes, even) of the current British Government that one of its first acts was to shut up shop on NS&I Index-Linked Savings Certificates.

But turning to the wider implications of CSH's post, how many people's lives are wasted chasing what DH Lawrence called "the bitch-goddess Success"? Or, not even chasing Her, but being forced to put their immediate happiness and their personal and familial relationships to one side because of the demands of "the job". All those dreams of ultimate glory and happy retirement ruptured by divorce, ill-health etc. We get guff about "work-life balance", but who is allowed to achieve it in any significant sense? What happened to working the 9 to 5, hanging up your hat when you get home and being contented?

I think we should rebel in two ways: personally, by not falling for the con and as my dearest friend used to say, "Always have as much fun as you possibly can"; and collectively, by pressing for economic arrangements that are geared to making it worthwhile to save money, and possible to have time and energy to enjoy our daily lives, now.

All original material is copyright of its author. Fair use permitted. Contact via comment. Unless indicated otherwise, all internet links accessed at time of writing. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

... and down we go-ooo

I've written recently about cash being boring, but safe until inflation gets going. Now, Charles Hugh Smith thinks the tipping point may be very close:

Fears of a stockmarket correction

My trader's intuition is flashing warnings that the stock market might drop off a waterfall starting this week. - Charles Hugh Smith

But Marc Faber (htp: Jesse) thinks not - as the dollar weakens, the market adjusts upward. And he is convinced of the "Bernanke put", i.e. money will be thrown into the system to maintain the illusion that all is well. Longer-term, Faber (in that smiling way of his) gives it around 10 years before the dollar simply collapses as public finances run completely out of control.

Two to note

1. Charles Hugh Smith reflects on something that's been nagging me for quite a long time, namely, the seeming impossibility of measuring "real" prices. Everything is relative to something else.

2. The Contrarian Investor's Journal fairly succinctly shows that the USA is fast approaching a debt level so high that Uncle Sam won't be able to service the payments. However, I think it may be time to separate actual here-and-now debt from notional debt in the form of medical and social security undertakings. Surely the latter will be revised radically, voluntarily or perforce.

How much does education matter?

Greg Mankiw thinks that correlating SATS scores and subsequent earned income misses the point that inherited intelligence are a factor in both. This appears to be supported by the graph in Alex Tabarrok's blog that shows "higher parental income predicts higher child income but only for biological children and not for adoptees."

David Davis points out that the £45,000 true cost of a university education is not always recouped by graduate earnings. (See also Charles Hugh Smith's piece, "Is Higher Education Worth a Lifetime of Debt?")

I have read that there is a positive correlation between shoe size and IQ. Public policy is to buy big shoes for everybody so they get smarter.

Housing (and the stockmarket) bear rally

For more, see Smith's redoubtable blog.

Forget the teepee

Green, not hippie, is Tim Smit's view (htp: Brian Gongol)

Perhaps more practical is the Transition Towns initiative, which has already recruited Totnes and Monmouth, for example.

And an even wider perspective is offered by Charles Hugh Smith's thoughtful "Of Two Minds" blog, which is founded on the principle that individual survival is necessarily a collective issue. He believes in this so firmly that he is making his book* available for download free of charge. * "Survival+: Structuring Prosperity for Yourself and the Nation"

Return of the spiv

Schiff's on a roll - read him. It's long, but worthwhile, epecially the predictive part at the end. An Eastern credit strike, a collapsing dollar, rapid inflation, price controls and the development of a black market.

Unless we bite the bullet and accept high interest rates and a further, bigger crash in house and share prices.

Charles Hugh Smith agrees.

It's not going to be over by Christmas

Charles Hugh Smith thinks the current crisis will turn into a worse depression that the one of the Thirties. Citing Galbraith's study of the latter, he thinks inequality is a driving factor:

...the proximate cause was a vast income disparity which placed much of the prosperous era's profits in the hands of a small wealthy class, who then mal-invested the profits...

- in the "non-real" economy:

The financial Plutocracy, observing that actually producing goods is not very profitable unless you can fix prices [...] sinks its capital into the FIRE economy (finance, insurance and real estate), eschewing real-world investments as comparatively unprofitable.

Though rarely noted, this is a longstanding trait of capitalism stretching back to 1400-era Venice. When trade became less profitable than mainland farmimg, the Venetian Elite stopped funding trading and bought farms on the mainland. As a side effect, Venice ceased to be a military and trading power. But the Elite remained immensely wealthy.

Watch that Gini coefficient rise.

Gold, and theft by inflation

A killer graph here from Charles Hugh Smith. Interestingly, the steady real decline of average incomes begins at almost exactly the same time as Nixon shut the "gold window".

Smith's take is that "the speculative mania in housing was fundamentally a tragic last-gasp effort to make up lost ground via speculation in housing". And if housing reverts to mean, it has a long, long way to go yet.

The market is going to tank

How do I know? I don't.

But I read this piece in the Grumbler.

Picture it. You are a rich broker - floated your company in May 2007 (how's that for timing?). Predicting good times ahead, you... sell £47m of your shares.

You say it's for "private projects", and throw the Mail journalist a tidbit about your beloved foopball club. The Mail journalist writing down your copy at least thinks to ask you how much of this cash will go towards the new stadium. You "decline to say".

Meanwhile, Charles Hugh Smith describes (April 18) the thinking that has led him to punt on a financial bear fund.

Straws in the wind, I'm thinking.

Barefoot businesses

Many years ago, China pioneered the idea of "barefoot doctors": cheap physicians with a bagful of the most commonly prescribed medicines, providing a low-cost service to the many. This blog thinks the days of glitzy steel-and chrome offices and hot and cold running secretaries are numbered; the model of the future is the pavement stall and the home garage.

(htp: Jesse)