“The only question one must ask is when it all comes unglued, how will you and/or your children and grandchildren be prepared to handle it? I’m not talking about storing up guns and ammo, dry food and digging a hole in the ground to live. There are economic, social and spiritual strategies that can be undertaken now.”

…..read Peter’s extensive Newsletter covering everything including Stocks, Bonds, Gold, US Dollar & Energy HERE

Welcome to the 2013 Annual Forecast Issue of Views from the Crowsnest. Over the last six weeks we’ve been hunkered down in quiet contemplation of what 2013 may bring. The world continues to edge closer to the second major downturn in what I believe is The Second Great Depression. 

It’s better to be out of the markets and wishing you were in, than to be in and wishing you were out of the markets…so we’ve been rather conservatively positioned for over a week now.

Our conclusion for 2013: buckle up in order to survive and profit during the volatility caused by emerging sovereign debt crises. Played correctly, 2013 could be a very profitable year for investors! The always-important traits of filtering out noise, being nimble and investing without emotional baggage will become more essential than ever.

I believe that 2012 has proven beyond any doubt that mainstream financial media has lost its way. With lots of air-time to fill, most mainstream financial pundits seem most interested in weaving tales of easy money or financial Armageddon. As long as they keep their ratings up, nothing much else seems to matter. The results are consistent and predictable: whip up investor emotions of fear and greed via sensational narratives, e.g. the fiscal cliff, and then beat them to death. Choose your information sources carefully.

With my blunt conclusions of financial punditry and ongoing experience as a Portfolio Strategist with ETF Capital Management fresh in front of me, I’ve made a conscious decision to shift my professional writing. I’m going to focus far less on narrative development (what MAY happen in the future), and much more on the practical side – dealing with what IS actually happening in the most direct fashion possible. The future arrives soon enough, so perhaps living more in the present will be helpful; it’s certainly less stressful!

Don’t get me wrong, it’s important to stay informed – it’s essential to protecting and growing your nest egg. Simply put, I’ve chosen to leave most of the narrative development in the hands of a select number of trusted sources who already do it very well – those independent thinkers who have consistently predicted major trends. In my professional capacity as both a Wealth Management Advisor and Portfolio Strategist, my job is to focus on prudent real-time integration of the wisdom of about 10 selected sources that excel at predicting the future, confirmed always by price patterns, of course.

Regardless of the individual situation, I recommend that each reader ensures that their investment decision-maker uses a practical, systematic and disciplined process for getting in and out of investment positions, with real risk controls. In my opinion, disciplined systems and humility are THE two key ingredients in the creation of excellent long-term track records, especially when it comes to risk management.

Everything in the financial world needs to be kept in context…and the most important context for each of us is our personal situation. It’s literally impossible for me to over-emphasize the importance of understanding two essential things: your personal risk threshold and the rate of return that you need to average both before and during retirement. Knowing these two things will reduce your personal stress and help you become a more patient and disciplined investor; that’s why having a comprehensive Wealth Management Plan is an essential starting place.  

Given that this is our 2013 Annual Forecast Issue, we have outlined below our sense of what we see coming next year. Our five specific investment themes are described in the next section below, but first I ask that you consider the following broader concepts:

• Convergence: Nothing in the world happens in isolation anymore, so stay alert at all times for inflection points in price patterns. We never know what the catalyst really was until afterward, and though it can be intellectually stimulating to anticipate and follow the game, it’s the asset allocation decisions that create your investment results.
• Deferred Reality will start to reassert itself: While economic pundits and political spin machines continuously insist that everything will be fine without austerity, independent thinkers know that we must eventually pay the piper for decades of financial indiscretion.
• Central planners are losing control: Their minions still sit at their trading stations and exert their influence on our financial world while the head honchos continue the public confidence game. However, there is an emerging cadre of influential independent thinkers with nimble capital; these groups will play an increasingly important role in true “price discovery.” Central planners are gradually losing their grip on the system, so be prepared.

2013 promises to be a very interesting year, chock full of both risk and opportunity. Each of the themes below can bring pain or pleasure to your financial portfolio, depending on how your decision-makers allocate your assets. Here are the five areas we are observing for early trend development and investable situations:

1)      Europe’s Penultimate Descent: the Europeans are very creative re: devising new ways to delay the implosion of their banking system and rich social programs. With Greece, Spain, Italy, and Portugal constantly teetering on the brink, the EU/ECB/IMF crowd has become very adept at soothing the masses with elegant promises of solving a debt crisis with new and different debt. Brilliant! Germany should be able to back-stop the rest of the EU one last time in 2013, but the price tag for the rest of the EU will be big: much more power transferred to Berlin and Frankfurt. The final implosion of Europe will occur when Germany loses its “safe haven” status, but that might not happen for another couple years.

2)      The China Syndrome: the digital fireworks mirage over Beijing during the 2008 Summer Olympics opening ceremonies was just the warm-up act for this command and control regime. Their GDP numbers are more manipulated than Europe and the U.S. (a major achievement unto itself) and even those data are declining. Endless loans to build roads and bridges to empty cities, malls and apartment buildings while expanding their monetary base in direct proportion to European and US-bound exports do have eventual negative consequences, even for mighty China. Yes, the longer term story of the urbanization and industrialization of their massive population is still intact, but as the Shanghai Stock Exchange illustrates objectively, this journey has a few potholes along the way. Oh my, what would Chairman Mao think of this?

3)      Turning Japanese: with newly elected Prime Minister Abe and their 10th Finance Minister in six years, the Land of the Rising Sun is poised to embark on potentially unlimited Quantitative Easing to jump start their stagnant economy. Staggering. With headwinds like a crushing debt load, rapidly aging population, social norms of “full employment,” incredibly restrictive immigration policy, a virtual absence of useful natural resources, the rising cost of natural gas versus now-unpopular nuclear power, and a smoldering dispute with China over useless but symbolic islands, Japan will likely erupt with its own sovereign debt crisis. Timing is unknown, but I’d venture a guess that it starts within 12-24 months. This Kyle Bass video is excellent.

4)      The Hitching Post Emerges: Precious Metals are an excellent example of how zeal for a story can cause intelligent people to lose sight of the objective reality of price patterns. I have been a drum-beating public long term bull on gold, silver, platinum and palladium for nearly 8 years now, and I have seen no evidence yet that causes me to change that longer term view. We are gold bulls, not gold zealots, and have repeatedly warned that the road will be very bumpy; especially until we achieve some kind of escape velocity from the upside resistance that has plagued prices of both the metals themselves and the companies that find and produce them. As every major economic power continues to engage in a competitive currency devaluations, influential people are starting to understand that gold is the only currency (or backing for a paper currency) that has zero counterparty risk. James Dines refers to gold as “the hitching post in the monetary universe” and 2013 has high potential for PM’s to begin their true emergence as a solid alternative to fiat paper issued at the whim of highly-politicized central bankers. Paper gold and silver positions should be actively managed as investments, while physical PM’s should be treated as monetary insurance.

5)      Descent into Chaos: dysfunctional and violent governments take turns making global headlines. Israel, Iran and the U.S. each continue to position their armed forces for a major military conflict, while Syria’s dictator continues to slaughter his own citizens. North Korea continues to test its missile systems while China and Japan rattle sabers over mostly-barren islands between their respective mainlands. Narco-violence is surging throughout Latin America and along America’s southern border, while a handful of mental-health patients murder innocent schoolchildren and first responders in the U.S. Given the violence smouldering in isolated pockets, it wouldn’t take much for smaller conflicts to merge into a major regional war. This is extremely depressing for those directly involved, and underscores how incredibly fortunate we are to live in a relatively peaceful and prosperous country.

Whatever happens in 2013, I encourage everyone to take responsibility for making sure your financial assets are being managed in a manner that is both consistent with your worldview, and according to an objective, systematic and sustainable framework.

Please bear in mind that investing is not a game of “perfect,” it is a system of consistently high-quality decision making….one day and one position at a time. As long as downside risk is tightly controlled, one doesn’t need to be right much more than 50% of the time in order to generate investment results that will help you achieve and maintain financial independence. Whenever in doubt, watch the price patterns.

Patience and Discipline are accretive to your wealth, health and happiness; Fear and Greed are destructive.

Cheers,

Andrew H. Ruhland, CFP, CPCA

President of Integrated Wealth Management Inc, and Portfolio Strategist with ETF Capital Management

\North American equity indices and most sectors found resistance on December 18^th and will struggle until the Fiscal Cliff issue is resolved. Significant gains prior to resolution of the “Grand Plan” are unlikely. Thereafter, upside prospects are significant. However, significant capital is unlikely to be employed in the U.S. economy until Fiscal Cliff issues are resolved. A short term resolution prior to a “Grand Plan” could set the stage to take profits in a wide variety of seasonal trades that are at or near expiry.

The VIX Index responded to greater uncertainty about the Fiscal Cliff. It jumped 4.88 (27.35%) last week. The Index remains above its 20, 50 and 200 day moving average. Its intermediate uptrend was confirmed when the Index decisively broke resistance at 19.65

…..45 more charts & valuable comments HERE

Two interesting infographics were published recently that make it so easy to see the decline of the West, even a caveman can do it.

The first is from the Brookings Institute, which has released an interactive map showing economic growth data for the largest 300 metropolitan areas in the world– from New York and London to Okayama, Japan and Wulumuqi, China.

The Brookings map ranks each of these cities based on economic performance over three distinct periods, measuring both GDP growth and employment trends.

The first time period is the last full year of data, 2011-2012. The second time period is that particular city’s economic low point since the global recession began in 2007. And the third period of time is a long-term view between 1993-2007.

The map then color codes each city by quintile. Dark blue represents the strongest economic growth over the three periods, orange and red represents the weakest.

(click HERE or on the image for an expandable & interactive version)

Until tomorrow, 
 
Simon Black 
Senior Editor, SovereignMan.com 

 

Ed Note: Sign up for Simon’s Fascinating Free Daily E-Letter HERE

 

About Simon Black

 

Hi. I’m Simon Black– international investor, entrepreneur, permanent traveler, free man. This free daily e-letter is about using the experiences from my life and travels to help youachieve more freedom.

In the last 3 months I’ve traveled to over 20 countries, met with a President and several diplomats, briefed sovereign fund managers, flown an aerobatic stunt plane, started several companies, hitchhiked in Bogota, taken a train across the orient, lectured on entrepreneurship in Eastern Europe, and personally provided venture capital to new start-ups.

I’m a student of the world, and I believe that travel is the greatest teacher. My knowledge is practical, and hopefully of significant use to you. Off the top of my head I could quote you the price of beachfront property in Croatia, where to bank in Dubai, the best place to store gold in Singapore, which cities in Mexico are the safest, which hospitals in Asia are the most cost effective, and how to find condo foreclosure listings in Panama.

I believe that in order to achieve true freedom, you have to be able to make money,control your time, and eliminate the mindset that you are subject to a corrupt government that is bent on degrading your personal liberty.

This blog is dedicated to those principles, and I provide concise, actionable informationeach day to help you achieve those ends. After all, it’s 2012… which means that it’s time to expand our horizons and consider, quite literally, the world of possibilities out there… all the things that the system told us were impossible, or not for “ordinary” people are, in fact, very much a reality:

• You don’t have to be a slave to geography anymore; live where you want, how you want.
• You can take control of your time and spend it how you want, not how others tell you
• You can live a luxurious and worry-free lifestyle overseas that would be unaffordable elsewhere
• You can make money anywhere, whether it’s China, Panama, New Zealand, or online
• You can mix and mingle with the absolute elite

 

 

 INSTITUTIONAL ADVISORS

THURSDAY, DECEMBER 27, 2012

BOB HOYE

 PUBLISHED BY INSTITUTIONAL ADVISORS

The following is part of Pivotal Events that was

published for our subscribers December 20, 2012.

SIGNS OF THE TIMES

“FOMC is probably the most academically driven in history.” – Dallas Fed President, Richard Fisher, Dec 14

He was, again, commenting on Fed policy and if you think it is Fed-Speak for “dangerously impractical”, you’re right. He continued with:

“We’re going to have an engorged balance sheet and we may never be able to leave this position. We are at risk of what I call a ‘Hotel California’ monetary policy, going back to the Eagles song which is, you can check-out any time you want, but you can’t leave.”

The old saying is “Never fight the Fed”, but what do you do when the Fed is fighting itself?

“The biggest year for debt backed by leveraged loans since the peak in 2007 will be eclipsed in 2013.” – Bloomberg, December 12

“Spanish regional governments have accumulated EU13 billion of unpaid supplier bills in the first nine months of the year.” – Bloomberg, December 12

“Mohammad Safi, a graduate of a medical school in Afghanistan, began working as psychologist at a California mental hospital, making $90,680 in his first six months. Last year, he took home $822,302, all of it paid by taxpayers. A court forced the state to improve inmate care, forcing a bidding war.” – Bloomberg, December 12

PERSPECTIVE

It seems to be time to recall some comments on financial manias by Ludwig von Mises:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of  voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

It is a valid assessment, but the last line should end with catastrophe of the credit system. That would be the next step in our post-bubble contraction. Essentially, Richard Fisher is boldly making sense in a world of wild policymakers. Benjamin Anderson was an economist who wrote a monthly comment when he was with Chase National Bank during the “Roaring Twenties”. While many were not fully aware of what was going on, Anderson got it right. Will the next liquidity crisis arrive “sooner….or later”? Will it be triggered by central bank decision, or by market forces?

CREDIT MARKETS

As the saying goes, “Credit is money of the mind”. In the early 1900s, J.P. Morgan said that he would make a loan to a man, based solely on strength of character. Showing less discrimination, the Fed has been able to “create it out of thin air”. More lately, Bernanke has the ability to “throw it out of helicopters”. 

However, another old saying may apply “Credit is suspicion asleep”. 

Essentially, the two older observations represent generations of financial wisdom – learned the hard way. As the term implies, credit markets are market driven. And we have noting that the no matter how intense the current central bank experiment has become it will not be successful. The harder the push now, the more severe the pushback.

In the meantime, while we’ve been complacent about corporate bonds there has been a couple of reversals. After reaching an exceptional oversold, the Ted-Spread has taken a turn to widening. We don’t know how significant this is. With T-bill rates at almost zero a few ticks one way or the other can change the yield ratio between bill and the euro rates by an impressive amount. Especially when the Libor rate shows little change.

We’re not sure if it really means anything, but the trend has changed.

It could have something to do with the latest Fed folly. The policy of selling bills to buy bonds (a ploy called Operation Twist) was changed in favor of buying bonds and not selling bills. Just buy everything, other than bills!

Fiduciary responsibility has been displaced by academic theories.

Over in the municipals, the MUB soared up to the most overbought since September 2010 – just before that mini-panic. The price plunged from 99.4 to 90. This time around the plunge from the end of November was fast and amounted to only five points.

A December 12 news report of a downgrade for Illinois from stable to negative might have helped the slide. Oversold now, stability should follow.

Credit markets will remain fascinating until the bubble bursts. The usual technical tools have anticipated modest moves when bigger ones seem possible.

COMMODITIES

Last week, we noted that the stair-step decline in agricultural commodities was approaching an oversold condition. The GKX has continued its decline from 470 last week to 450. At the high of 533 in the July drought concerns, the daily RSI topped at 75, it is now at 28.

Stability is just around the corner.

The interesting thing is that this sector is indicating that, so far as inflation goes, the Fed just can’t the some old “bang for the buck” that they could in the 1970s. Much of the inflationary stimulus has been going into the bond markets.

Coming out of the early November low, base metals enjoyed a decent rally. Last week we reviewed out position for a rally into January. The conclusion was that while the RSI was approaching an overbought, it was time to “declare a victory” and have some Christmas Punch.

Last week’s high was 397 and now it is at 382. There is support at the 375 to 380 level.

Overall, the CRB and crude are at neutral momentum and could trade in a range over the next six weeks.

Link to December 21 ‘Bob and Phil Show’ on TalkDigitalNetwork.com:

http://talkdigitalnetwork.com/2012/12/uh-oh-cliff-hits-the-fan/

BOB HOYE, INSTITUTIONAL ADVISORS

E-MAIL bhoye.institutionaladvisors@telus.net

WEBSITE: www.institutionaladvisors.com