CONFIDENCE AND EUPHORIA WILL TURN TO FEAR AND DESPAIR

Sunday, July 21, 2019
By Paul Martin

BY EGON VON GREYERZ
THEDAILYCOIN.ORG
JULY 21, 2019

Investors today have Hobson’s Choice. But they still don’t understand the options open to them.

Thomas Hobson had a livery stable of 40 horses in Cambridge in the 16th-17th centuries. But customers only had a choice of one horse. They could either take the one nearest the door or none at all.

So Hobson’s choice in simple terms means “take it or leave it”.

Below is the choice of asset classes investors have today and where 99% or more of global liquidity is invested in. The problem is that these assets are massive bubbles as a result of unlimited credit creation and money printing in the last few decades.

If we assume that the horses in the stable represent the asset classes below, they will all be a very poor choice regardless of which one is nearest the door:

Stocks will decline by 75-95% in real terms as the stock market bubble implodes
Bonds will lose 90-100% of their value as sovereign and private borrowers default
Property values will implode by 75-95% with rates at 15%+ and no credit available
Private Equity investments will lose 70-100% slaughtered by high leverage and rates
Cash will either be bailed in or lost in bankruptcy of banks or totally debased by governments

EVERYONE WILL TAKE IT AND NO ONE LEAVE IT
The problem is that no investor will “leave it” as they all have been conditioned to putting all their funds into one or several of the asset classes above and that is their Hobson’s choice. Very few will be overly concerned about the risks before them today and nobody can believe that all the horses in their investment stable can be lame or unfit. Thus, everyone will “take it” as they will continue to believe that these assets will go up for ever.

CASH WILL BE WORTH-LESS
Some investors might reallocate part of their assets to cash as market volatility increases.. But they can’t earn any return on their cash with rates anywhere from negative to just positive. And then they have the bail-in risk as banks incur major losses. Then, as all currencies finish their run to ZERO, the complete debasement of money will have completed its course. Remember that they have already all lost 97-99% since the Fed was founded in 1913.

Decades of investment gains, which are virtually all due to credit expansion, have led investors to believe that markets always go up in the long run and also that they have magical money making skills. Little do they understand that virtually no skills have been required to make money in markets in the last 70 odd years. See my article about Alfred, a stock market winner with zero talent.

STOCK MARKETS IN FINAL INNINGS
What few realise is that we are now in the very final innings of an investment game that will end badly. Major stock markets in many countries, including the Dow and S&P, are now finishing their bull market moves, both short term and long term. The fundamental position has been indicating high risk for a while and the technical picture is now confirming that we are ending a major secular bull market that will turn into a catastrophic secular bear market which will be devastating for the world.

The Rest…HERE

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