Juggling Dynamite

Right now world central bankers are experimenting on the rest of us with a seemingly relentless series of crazy ideas. But crazy is as crazy does. How each of us chooses to respond and expose ourselves and our capital to the personal risk of crazy, is an individual decision that each adult must make for themselves.

What is rarely mentioned in the bubble-vision obsession with short-term speculation and “you gotta dance so long as the Feds are pumping” mentality, is the real and lasting harm these policies are near certain to inflict on real people and their real life savings–again. Another round of 30 to 50% losses in equity markets from here is highly probable. Pension funds that are already mortally under-capitalized from prior losses and under-funding, will fall further behind any hope of meeting promises. And this time, all the policies that have traditionally been used to soften or truncate previous downturns will have been spent fabricating the so called 2009-2013 “recovery”.

The liquidity music will falter as it always does– triggered by any combination of dozens of micro and global macro-economic issues on the horizon–and capital will implode when most least expect it. Complacency and an urge to bet along with the phantom “Algo traders” is one of the singularly most dangerous tendencies of our generation today. All at a time when an aging, under-saved and over-indebted world, can least afford it.

At moments like this, I am reminded of the personal fortitude it required to keep our capital away from the fray in 2007 as stock and commodity markets went parabolic on the credit bubble. We were one of a small group of managers who did not embrace the new paradigm beliefs in perpetual bull markets decoupled from a weakening real economy. As I look back now, I well remember periodic thoughts that “maybe it is us that’s crazy”. Turned out we weren’t.

In 2007 I wrote in Juggling Dynamite of the highly successful investment sales firm that had offices next to ours. Each day I could see the owner arrive in a different exotic car from his collection. Predictably, their risk-selling business imploded with their client capital and law suits in 2008. Today the firm is gone, the space for lease, the exotic cars auctioned off.

A few days ago in a different city, my taxi driver just happened to share that he had been the proprietor of a successful investment sales firm up until the crash of 2008. Now he drives a shuttle. I have literally met dozens of people over the years with similar life-changing stories of loss. All of them failed to understand the risk and realities of market cycles.

This crazy time too shall pass. Only those who manage to get capital through it in tact, will be able to reap the rewards that will come thereafter. As it has been truly said, “money may go where it’s wanted, but will only stay where it’s treated with respect.” We must remind ourselves of this age-old truth now more than ever.

Both businesses and consumers are likely to continue to “deleverage” themselves out of debt over the next 5 years, explains Gary Shilling, President, A. Gary Shilling & Co.  Here is a direct video link.

Starting my vegetable seeds this month, I am reminded yet again of how much we need sunlight to produce food. Fortunately, our ecosystem is one miraculous, giant solar panel.

“A recent Deutsche Bank report concludes that solar power has now reached grid parity, meaning that it costs the same as electricity from the power grid, in Italy and India (where the government’s goal is 20GW of solar by 2022), and that by next year even more countries will reach parity.

The German bank has also increased its solar demand forecast for this year by 20% because of strong demand in places like India, the U.S., China (around 7 to 10 GW), the U.K. (around 1 to 2 GW), Germany and Italy (around 2 GW).

We’ve already written about how China is expected to become the world’s biggest solar market this year (it already is the biggest producer). There’s also progress with big concentrating solar farms, even though the big drop in solar PV prices has made them relatively less attractive than they used to be: The current biggest CSP plant has started operations in the UAE, and an even bigger solar CSP farm is under construction in the Mojave desert in the US.” See: Solar has reached grid parity

Steps in the right direction… see also: after 10 years of hard work, Ontario getting ready to close its last coal power plants as the province transitions to greater natural gas use. Next step is to replace fossil fuel generation with clean power sources, but getting rid of coal is an important part of the journey.