Building on the previous two posts, we present further information on the rapidity of economic contraction in the world. As we've been harping on for quite some time, the severity of the 2007 Depression is not to be underestimated. At the same time, many Government and other official statistics appear to be 'cooked,' to say the least.
The IMF has recently predicted that the Republic of Ireland's economy is going to contract by 13.5%... between 2008 and 2010. This is hopeful, in our opinion. The Irish Republic has had quite a binge on easy-credit-leveraged growth, via the Euro. The time, we posit, has come to pay the bills, and we aren't exactly confident that the Irish economy has any depth of resiliency to draw upon in this situation. We frankly expect that the IMF's drop of 13.5% in the Republic's economy could be realised - even exceeded - in just this year alone.
The most realistic data we've seen so far is from the UN Office for Drugs and Crime. According to this BBC article, in 2008 opium production fell 16% world-wide, and cocaine production in Colombia has dropped 28%. We suspect that these drops occurred in the second half of 2008, as the onset of the Depression neared. In all honesty, we're not sure how drug production and economic activity are correlated... but we suspect that the collapse in opium and cocaine will be mirrored by collapse in the greater world economy.
Showing posts with label euro. Show all posts
Showing posts with label euro. Show all posts
Thursday, June 25, 2009
Tuesday, March 3, 2009
Diversification
We had a conversation with a friend the other day, about how to diversify one's portfolio properly. Despite how we may sound on occasion, we don't believe that having all one's wealth in anything -- even precious metals -- is a good thing. We're bullish, but we're not that bullish; when we start hearing 'sure things,' we get nervous... and we don't want to sound like the pushers for Bernard Madoff. The Uncle Bernie Affair is a good example of, shall we say, over-bullishness.
However, there is more to diversification than simply investing in multiple sectors of an economy. The likelihood of any one scammer, like Mr. Madoff, making off with one's life savings is decreased if one keeps any one investment to an acceptable percentage of one's total assets. We remember the stories of the people who gave everything to Mr. Madoff, only to lose everything... and we can't really feel sympathy for them. Greed got the better of them, and lo, the price of such greed was revealed.
We are often worried that, despite our best efforts, our investments may be in the loving arms of someone similar to Mr. Madoff. In the era of Peak Scam, one cannot be too careful. So, we are looking at more than just diversification within one economy: we are looking at multinational diversification, albeit on a small scale.
Why, you ask? Well, having all one's money is U.S. Dollars, or euros, or pound sterling, or Japanese yen, is effectively the same as giving all one's money to Uncle Bernie. It's betting the farm on that particular nation's ability to hold together and defend its national currency and economy. We are not at all confident enough in any one nation to have all our assets valued in its currency... and subject to its political caprices.
It's a question of scale, to be sure; one needn't have a ranch in Argentina, a fishery in Iceland, and a factory in Russia. However, we feel it is a prudent idea to at least have some assets outside of one's nation of legal residence. International diversification will be increasingly important in the years ahead, and, as we mentioned, it can be done on a small scale, even for the average individual.
However, there is more to diversification than simply investing in multiple sectors of an economy. The likelihood of any one scammer, like Mr. Madoff, making off with one's life savings is decreased if one keeps any one investment to an acceptable percentage of one's total assets. We remember the stories of the people who gave everything to Mr. Madoff, only to lose everything... and we can't really feel sympathy for them. Greed got the better of them, and lo, the price of such greed was revealed.
We are often worried that, despite our best efforts, our investments may be in the loving arms of someone similar to Mr. Madoff. In the era of Peak Scam, one cannot be too careful. So, we are looking at more than just diversification within one economy: we are looking at multinational diversification, albeit on a small scale.
Why, you ask? Well, having all one's money is U.S. Dollars, or euros, or pound sterling, or Japanese yen, is effectively the same as giving all one's money to Uncle Bernie. It's betting the farm on that particular nation's ability to hold together and defend its national currency and economy. We are not at all confident enough in any one nation to have all our assets valued in its currency... and subject to its political caprices.
It's a question of scale, to be sure; one needn't have a ranch in Argentina, a fishery in Iceland, and a factory in Russia. However, we feel it is a prudent idea to at least have some assets outside of one's nation of legal residence. International diversification will be increasingly important in the years ahead, and, as we mentioned, it can be done on a small scale, even for the average individual.
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