"I am terribly conflicted. This is the most uncertain time that I can remember. Things are violating the laws that I learned. The whole world is experiencing an upsurge but I don´t know what to make of it."
– Robert Shiller, Yale professor and co-creator of the S&P Case-Shiller Home Price Index, in an interview with Fox Business a few weeks ago
I have to admit that I find a certain degree of solace in the fact that a man of Mr. Shiller´s caliber, these days, appears to be just as puzzled with current economic developments and financial markets as I am. Yes, indeed, we live in VERY uncertain times.
Uncertainty, to some degree, always has been and always will be a constant in the realm of wealth management. However, as we proceed further along this path of ‘Easy Money´ and the growing power of central government that, per default, goes with it, we are progressively moving into uncharted territory. The more you study and reflect, the more you get the pervasive sense of living in a giant global experiment, possibly the grandest science project in the history of man, and certainly in the history of money.
It is in times like these that you must stand back and look at the bigger patterns, the larger truth. These are times to stand back and think outside the box. We tend to get lost in detail and, as a result, end up missing the forest for the trees.
In the midst of uncertainty, it is worthwhile considering a few big picture realities — a few nuggets of certainty so to speak — so that you can then form your conclusions and strategic decisions accordingly:
– Governments and central banks around the world will continue to do whatever they can to stave off another bout of steep deflation. It could send the world head-over-heels into the very visible and very obvious territory of depression. That will be avoided at any cost. Thus, you can expect MORE MONETARY INFLATION.
– More Easy Money needs to be financed. Taxpayers will foot the bill. As socialism moves forward, you can be sure of MORE PROTECTIONISM, MORE REGULATION, MORE TAXES.
– Timing the markets is difficult…always has been. With the high degree of government intervention we face today, it is even more difficult, if not impossible. The game is rigged. However, while timing is difficult, and while you may have not regained the wealth you had prior to sub-prime, you can still protect what you have by the means of proper INTERNATIONAL AND JURISDICTIONAL DIVERSIFICATION. It is STILL the only way you can effectively protect your wealth long-term.
– Historically, monetary crises do not pass without substantial social unrest, geo-political tension and regulatory changes that become increasingly suppressive. Over the next decade, you can expect A LOT LESS FREEDOM AND A LOT LESS PRIVACY.
If anything is a ‘sure thing´ today, it is that our governments will continue to actively ‘manage´ the markets. They may well manage to completely eliminate free market principles, and they will manage to transfer more and more wealth from those few that are still productive to those who prefer living off the benevolence of others.
Government measures are set in one direction, with no way out and no means of turning back. The measures of loose monetary policy are a fact of life. These very measures will spell trouble for those unprepared.