May 3, 2010
35,000 feet over the Sonora desert
You’ll have to forgive me for taking the day off yesterday. This past weekend’s Casey Research Summit was simultaneously exhilarating and exhausting… but after standing on my feet all weekend taking rapid-fire questions from hundreds of subscribers, I really needed some time to myself.
As I’m presently en route to see my family for a few days (Wi-Fi on airplanes is a convenient curse), I now have the opportunity to digest everything that happened this weekend and share my observations.
First, I learned that we absolutely need to have our own SovereignMan conference dedicated to internationalization solutions.
The demand for information from this past weekend’s conference attendees was frankly a bit overwhelming, and I recognize now that we need to put together a high quality, comprehensive offshore conference.
This is not a question of “if”, but rather “when”. These things take time to plan and organize, so I’m thinking about sometime this autumn. I don’t commit to anything unless I can make it the absolute BEST, and I promise that our own conference will set the standard for the offshore industry.
In the coming weeks and months, I will have much more to discuss with you about our conference, so stay tuned for that.
I also got a lot of great investment insights from this weekend’s speakers that I’d like to share.
Andy Miller, one of the country’s premier institutional real estate investors, gave a very sobering assessment of commercial property.
In his very informed and experienced opinion, it’s only a matter of time before commercial real estate crashes. The entire industry is using pie-in-the-sky valuations for properties, yet rents and occupancy rates are all falling.
Meanwhile, delinquency rates on commercial property mortgages are rising, and Andy expects this to start having a major impact on the financial sector later this year.
Bill Bonner, the founder and chairman of Agora publishing, also gave some rather interesting remarks. In Bonner’s own words, “things that are very out-of-whack tend to get back into whack,” which means that, in the longer-term, today’s bubbles will have to revert to the mean.
There’s no good reason, for example, why US Treasuries have been rising since 1983. The rest of the world is now loaning money to the world’s biggest debtor at very low interest rates. This is out of whack and needs to be corrected.
Bonner recommended shorting US and Japanese Treasuries (the Japanese bond market is even more out of whack) and going long Japanese small cap companies, which have been in decline since 1989.
You can read excerpts from his speech here.
Finally, Bud Conrad gave what I thought was the best speech of the weekend. Bud has a best-selling book out right now, and his speeches are always full of very interesting data and analysis.
According to Bud, right now the economy is caught in the eye of a hurricane. The first wave of the storm already passed us by from late 2008 through mid 2009. It was devastating, but it blew through.
Now the eye of the storm is upon us. It’s calm, and people think that the storm is over. The second wave, however, is charging towards us, and it could have an equally devastating effect.
As you’re undoubtedly aware, world government are trying to paper over the issue by borrowing and printing enormous amounts of money to drop into their respective economies. This is an absolutely terrible idea, and if you look at the numbers you can see why.
In the United States, for example, the federal government has ‘stimulated’ its economy with $385 billion that it never had to begin with. This doesn’t count the trillions in additional deficit spending, or other entitlements / bailouts / guarantees.
You’d think that if the government invests $385 billion in the economy, there should be at least $385 billion in economic growth… and hopefully more.
Not the case. We’ve recently seen a mere $116.8 billion in US economic growth. This means that the federal government has managed to lose nearly $270 billion in money that it had to borrow from the Chinese.
Not only can politicians not generate a positive ROI, but they manage to lose 70% of their investors’ capital. If Uncle Sam were an institutional money manager, he would be charged with criminal negligence and hauled off to jail.
Bud believes that buying gold is one of the best ways to preserve wealth and mitigate looming economic disaster. As for speculative recommendations, Bud also has some really fantastic picks.
His past track record is stellar, including a 93% gain on shorting MBIA on 10-months, and a quick double on wheat futures. In fact, his recommendations have personally put a lot of money in my pocket… so if you want to follow Bud and his monthly insights, I definitely recommend giving his Casey Report a try.
As for my own predictions… well, I’m much more optimistic than most of the other speakers were. I think that there are clearly major challenges that the world has to deal with, or is at least forcing itself to deal with– climate change, resource shortages, overpopulation, economics, etc.
When you think about it, though, these challenges are nothing new. History has never seen a time when there haven’t been wars, genocide, government failures, and general calamity. And yet, humanity manages to limp along just fine despite the consistent corruption and incompetence of its political leadership.
For the sharp, patient, and well-prepared, these challenges provide substantial opportunities to make a lot of money… so rather than be fearful and gloomy, I suggest adopting a more upbeat perspective.
And if you’re not prepared, i.e. your livelihood depends on the very fragile system that is in danger of breaking again, I strongly urge you to focus on making preparations– planting multiple flags; safeguarding yourself, your family, and your assets; and seeking alternate forms of income.