From NFTRH9, dated November 15, 2008:Present
Deflation is everywhere. Confidence is lost. People have been scared back into the ‘safe’ paper issued by those in whom confidence has been lost. Think about that. In the short term, in the present, safety means liquidity and refuge from price destruction. This is a necessary refuge. But the same crowd that could not wait to get aboard the commodity mania now lusts after worthless paper. Are they suddenly right in the big picture? I know I am like a broken record with this theme, but you have simply got to consider a way to establish a contrary focus if you want to survive financially in the future.
Fast Forward
How many people were worried about inflation in late 2001 and 2002? Relatively few, that’s how many. Die-hard gold bugs, the Austrians http://mises.org (who understand the dynamics of money creation) and a thoughtful few others. Fast forward from 2002 to 2007 and you have manic hysteria and the ‘resources’ trade going full steam. This trade seemed more valid than the previous mania in revenue-free dot coms. In fact, many commodity companies appeared to be undervalued even at the height of the boom. But were they? No, they were not considering that the entire commodity bull train was steaming down a track that ended at a cliff. But investors did not see a cliff out on the horizon. They saw a China growth story. They saw an ascending India and developing world. They saw what they thought was an unstoppable global apparatus being constructed. But it was an illusion. The illusion was built upon a foundation that really was never there to begin with; this foundation was the idea that America could keep borrowing its way to prosperity and fueling the global system. Sober, forward-looking people knew this had to end.
But what are we here for at NFTRH? We are here to do what we have always done; look ahead once again. My personal belief is that the new unsustainable story is that people can hide, en masse, in various global paper, the only value of which is the value that respective governments say it holds. Therefore, I am an ‘inflationist’ as some people have described me because when I look forward I see a realization out on the horizon – perhaps as faint as today’s deflationary crash episode looked to most in early 2007 – that the current rush to cash will have been only a knee jerk race for short term liquidity even as global authorities did all they could to destroy the units in which this cash was denominated.
So, with the same hazy timing (it took longer than most of we doomsayers expected for the current crisis to arrive) I look forward and NFTRH assumes the stance of balancing short term needs for ‘safety’ with long term needs for a very different kind of safety; protecting oneself from the devaluation of global currencies. Understand that the stance is monetary first and foremost and while I can see a new commodity boom well out on the long term horizon, I remain focused on the producers of the monetary metals first. The great commodity boom, part II will have to wait until still declining economies experience their next upturn due to today’s policy now being carpet bombed globally, 24/7. As for the economies themselves and associated stock markets, the returns are likely to be diminishing indeed. But there could be select opportunities there as well.
Only a few are watching for this today. It is as it always has been and tomorrow’s counterparty remains secure in its conventional wisdom.
NFTRH59 out now.
