The System Always Returns to Stability
-by The Mysterious Flying Miser
Everyone’s asking what’s next. In a world inured to bubbles, many are champing at the bit to multiply their cash on the next irrational boom. But is it possible that we are done with bubbles for a while? Could it be that we are entering into a period of relative stability, during which normal returns will be gotten based on actual production and good decisions? Not many are of this tack, but it could happen.
Agriculture?
From CNN Money: A Nebraska farm girl who went on to a globetrotting career as a derivatives trader for Goldman Sachs (GS, Fortune 500) and then as a hedge fund executive in London, Warner, 45, is back on the farm pursuing what she believes is a huge moneymaking opportunity. Two years ago Warner launched an investment firm, called Chess Ag Full Harvest Partners, with a fairly simple underlying strategy: Buy undervalued farmland in the U.S. and profit from the coming global agriculture boom.
Improving diets in the developing world will …help drive up prices. As per capita incomes rise in China, India, and other parts of Asia, hundreds of millions of people will be adding meat to their daily fare. …The Gulf States of Qatar, Abu Dhabi, and Saudi Arabia have already begun making deals to acquire or lease large tracts of farmland in Africa and Asia at bargain prices.
A lifelong “music nut,” (Warner) started visiting Clarksdale to hit the local blues clubs after getting divorced in 2000. In 2004, after selling her share of a hedge-fund-of-funds business in London, on a whim she bought a two-story, 19th-century brick building on Delta Avenue downtown that housed a general store, renamed the shop Miss Del’s (as in “Mississippi delta”), and added antique knickknacks and British chocolate to the inventory.
Maybe Not.
From CBS News: Owner Hyun Ku Kim started business 40 years ago in his native South Korea and moved production here in 1990 to use China’s cheaper labor, reports CBS News correspondent Barry Petersen. And Qingdao’s port makes for easy shipping to the U.S. - except these days there’s less to ship.
The numbers tell the story. In a good year they’ll sell 20,000 stirrups. This year they will be lucky to sell 8,000. And there was one month this past spring when they got no orders at all. Fewer orders means fewer workers; layoffs cut 500 workers down to 290.
Their empty chairs litter the factory
From Arabian Business: The region’s largest oil exporters (Saudi Arabia, Kuwait and the UAE) will slip into recession this year, the International Monetary Fund (IMF) said as it slashed its growth forecast for the GCC.
Gold?
Todd Tresidder, financial educator and former hedge fund manager, has a different idea of where the next bubble will form: “The next bubble to inflate will be gold. It should be the final bubble, as that bubble will only burst when we embark on a new path of stability. …It’s actually one long series of rotational asset bubbles. …Each bubble primarily result(ed) from the credit bubble …Each bubble has caused asset prices to inflate beyond a point that they can be supported by the underlying economics of the asset. …The further the economics deteriorate, the further asset prices must deflate. …The government’s unwillingness to accept this ultimate outcome is what will cause the final bubble: gold. Just as they caused all prior bubbles, they will also cause this bubble (unless, of course, they suddenly display economic wisdom that is fully unexpected). …The long-term rise in gold began in 2001-2002, and will likely accelerate at some point in the future. How long it takes to run its course I cannot say. … The system always returns to stability from instability.”
Maybe Not.
From Reuters: Gold’s upward potential is limited because of strong demand for the U.S. dollar to repay a burgeoning debt amid deflation, technical analyst Robert Prechter said on Monday.
“It seems to me the most popular opinion out there right now is hyperinflation. I think we are in an opposite environment, a deflationary (one). …Unfortunately, in this environment, what creditors …and debtors need the most are dollars, so I think the main thing that will return to substantial demand when deflation bites again is the dollar. …I think gold is a good thing to have. It would be a small amount, you should have some gold. For the most part, you want cash and cash equivalents,” he said.
Green Energy?
From Moneyweek: We’re not sure that investors have another bubble in them just yet. But with all that money floating around, it’s eventually going to go somewhere. And one area stands out as a prime candidate: alternative and renewable energy.
The sector has the heavy backing of the government. It has some great stories behind it (solar towers, wave farms, and electric cars), all linked together by smart grids, already being hyped as “the energy internet”. So the conditions are ripe in the alternative energy sector for a bubble.
Well, You Know.
But, from The New York Times: Like others before it, the latest “green bubble” was inflated during a highly polarized moment in American politics, two writers say, and now it has burst in the economic downturn. The writers say that “while utopianism has a bright side — it is a way of imagining a better world — it also has a dark side characterized by escapism and a disengagement from reality that marks all bubbles, green or financial.”
And Finally:
Michael A. Kamperman, author of “How America Can Escape the New Great Depression” and owner of Prometheus Wealth Management, says “In my opinion, there will not be another investment bubble in the near future. All of the investment bubbles in history were fueled by access to easy and affordable credit. The credit markets are broken and they have not been fixed.”
