A simple question

All these bankers and investment houses jumping up and down on the bed until (inevitably it seems, one day) the springs break... where do they invest their own personal money? How do they hope not to share in the debacle, when it comes? Or is the strategy to become so obscenely rich that they can afford to lose 90% and still be rich?

Turning point; hiatus

Reading around in the wisdom of others, I predicted Dow 9,000 here, here and here. Now it's happened. Good for you day-traders, but a fraidy-cat like me is staying away.

Since Marc Faber and others have been saying for some considerable time that they can't see anything worth getting into, and now the dollar is getting closer to having the carpet yanked out from under its feet, and the British pound may follow suit thanks to the miserable state of the British economy, and China is busy blowing an inflationary bubble to maintain its vampire trading relationship with the West, and the gold-bugs are chirruping ever louder (though the US Government might not only seize gold as it did in 1933, but for those smarties who invest in overseas gold stores the bad news may be that Uncle Sam will also seize US citizens' title to those stores), the question is... where to hide your stash?

For the private investor, maybe part of the answer is to look at the currency market, for a country that isn't over-dependent on international trade, has enough natural resources to survive if the world system goes down, and is reasonably stable by second or third world standards. Sadly, I have even less expertise here than elsewhere, but any thoughts on e.g. the Thai baht?

HIATUS

We're going on holiday now, to a place where cellphones don't work (and it's in the UK) and our place has no broadband. Best wishes to you all, hope to be back in touch soon.

Out of their depth

The first serious, sensible, important piece I've seen from Toby Young, and it's a corker. He reflects on the well-heeled but louche and rackety Bullingdon Club, of which David Cameron and Boris Johnson were members:

... the theatrical element of Oxford's secret clubs and societies, the fact that so much of their activity seemed designed to dazzle and mystify bemused onlookers, is precisely what makes them such ideal training grounds for British public life.

... you don't have to be to the manor born to become a member of Britain's ruling class - or even particularly clever. You don't need charisma or sexual confidence or a sense of entitlement. All you need is the wherewithal to pretend to be someone who has these qualities. Provided you can do a reasonable impression of a person with the right stuff - and provided you wear the right uniform - that's enough to propel you to the top.

... The discovery that all these young pretenders make when they take their seats at the Cabinet table, or become QCs, or pocket £100million on a complicated land deal, is that the people at the very pinnacle of British society - the people pulling the levers of power - are exactly like them.

There is no such thing as the real McCoy, just a bunch of schoolboys parading around in the contents of the dressing-up box. They don't feel like frauds, because everyone else in this elite little club is as fraudulent as they are.

And when all is well, they get away with it. But when it comes to an emergency, a crisis needing skill, grit and sacrifice?

My father served his 25 in the British Army, and my mother used to say, "Thank God for civilians," i.e. the experienced people that would come in on callup when war broke out. Doubtless it's different now, with our much reduced and far more battle-experienced Armed Services, but in my father's career he met more than a few "educated idiots." Does the current crop of politicians and bankers have what it takes, including the moral fibre, to get us out of this mess? Or when it gets too tough, will they jump, like "Lord Jim" Blair, leaving us to our fate?

We're going to find out sooner than we'd like, if Denninger is right. He's looking at new Treasury debt issuance of $235 billion in the next week alone, and is busily folding his kitchen foil into a helmet:

Folks, this is how you get detonation of a nation's monetary and political system. Timing the "event" it is not easy, but the certainty of outcome given this sort of outrageously irresponsible activity is not in doubt.

I'm increasing my stock of things that "will never go to zero" and keeping my ear to the ground. The "short the phone book but make sure you get out fast before you get trampled" moment approaches - mark my words.

Mutter

In support of Man In A Shed's "Silly Week" campaign, may I suggest the libertarian blogger's alternative to Twitter: Mutter.

Up to 140 characters of mutinous grumbling in the comments, please. After a time, all will collated and republished in a new "feast o' bitchin' "post.

Think of of it as a kind of haiku for the disenchanted.

Doomsday scenario

Marc Faber is now using the phrase "total collapse". A commenter on this post says he's joking, because he's smiling, but I don't think the commenter understands European schadenfreude. The Dance of Death illustration on Dr Faber's website should warn you that he is in a very long tradition that sees death and disaster as the spice of our transitory existence.

Faber lives in Chiang Mai, northern Thailand, a country whose King is a proponent of national economic self-sufficiency. It's also worth noting that Chiang Mai is a fairly short air-hop from Burma, Laos and China; and that Dr Faber collects Mao memorabilia and has business interests in Vietnam. I see him as a long-term planner who covers all possible options.

As Dr Doom notes, "...a major crisis like we had should clean the system but nothing has been cleaned," so why should all be well again? But you could choose to side with Faber's co-interviewee Giles Keating of Credit Suisse; very nice accent, nice bearing - just the sort of thing the clients like.

However, witness also Karl Denninger today, commenting on a report that US Federal Government support for the economy could reach almost $24 trillion:

A couple of market technicians have noted certain "patterns" in the market that have potential downside targets of zero. That sort of thing normally results in a loud guffaw from me - even though I'm bearish I'm not that bearish - I couldn't imagine anything short of global thermonuclear war, ala "Joshua", that could lead to such an outcome.

Well I think I just found something purely economic that could lead to that outcome, and it's right here.

Be prepared. As the Greek saying goes, "There is no borrowing a sword in time of war." I'm going to go back to doing what I started to do a few months ago: draw extra cash and stash it in a locker. And some other things (though not weapons - the tiger is the endangered species, not the rabbit).

House prices to sink further

Barry Ritholtz gives his reasons why house prices will continue to drop - 15% to the mean, probably more - say 20%? (htp: Michael Panzner)

But the market is segmented. Maybe it'd be more useful to discuss the projected impact on different regions and price brackets.

Step by step - how the dollar is recycled via China

A propos China and monetary inflation, please see two very useful and enlightening articles by The Contrarian Investor - this explaining why the money supply is growing there, and this detailing the steps by which money from the US goes on a round trip to China and back.