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2009 TO END ON A POSITIVE NOTE; AS FOR 2010, OFFICIAL STATS ARE VERY PROMISING. BUT ARE THEY TRUE?
I have arrived at the conviction that the neglect by economists to discuss seriously what are really the crucial problems of our time is due to a certain timidity about soiling their hands by going from purely scientific questions into value questions.
~ Friedrich August von Hayek
Dear Mountaineers,
The masses are all too willing to accept official statistics, press releases and political promises at face value. They should know better. But, it appears that they don´t want to bother. Most investors are determined to be convinced that the worst is over. Consequently, general financial markets in 2009 can be expected to end on a positive note. And, it is conceivable that 2010 will kick off with financial markets ringing in the New Year positively as well.
A number of headline indicators are looking quite positive. Or, at least, they are not as bad as expected. As has become standard procedure by now, the markets do not require ‘good news´, but only ‘less bad news´, to keep up the high spirits.
For instance, the US employment figures published at the end of last week came in far better than economists had forecasted. They were still pretty dismal, but good enough to boost stockmarkets and, more surprisingly, to give the Greenback a shot in the arm. The USD/CHF had fallen to a low of 0.9958 last week. But it recovered and, as I write this Update, stands at 1.0186.
Another not-so-bad glimmer of hope: Consumer credit in the US declined less than forecast in October. Yes, these days, credit and debt keep the wheel turning. That piece of information was gladly interpreted as a sign that the financial crisis is easing and households are gaining confidence that the economic expansion will take hold.
So, have we emerged from the recession? Will 2010 be the beginning of the next big bull market? European investors appear to believe so. Their confidence level rose to an 18-month high in December. Similar confidence was discovered in Asia. Not so much in America. Possibly, they see some issues in their daily lives that investors elsewhere don´t.
In particular, I believe Americans are (finally) starting to question the validity of government statistics. While at first sight, the official unemployment rates are ‘much better than expected´, the level of unemployment in America is MUCH WORSE and that is becoming visible for all to see.
The following chart, courtesy of www.chartoftheday.com, depicts the US development of US non-farm payrolls. It puts the US unemployment figures reported at the end of last week into perspective by comparing job losses during the current economic recession (solid red line) to that of the last recession (dashed gold line) and the average recession from 1950-2006 (dashed blue line).
As the chart illustrates, the current job market has suffered losses that are more than triple that of what occurs at the lows of the average recession/job loss cycle.
Source: www.chartoftheday.com
True, unemployment in America is very different from the official numbers reported. The charts published on John Williams´ site at www.shadowstats.com are probably much closer to reality and much more in sync with what Americans see in everyday life.
Irrespective of our doubts, the market is willing to accept official statistics as their point of reference. As long as that is the case, we may see a bear market rally further extended.
And, governments will certainly continue to do whatever it takes, no matter what it costs. I´m pretty sure 2010 will start off with that familiar sound of HARD PUMPING.
Japan just released a stimulus package at the first signs of renewed ‘recovery weakness´; the Japanese government unveiled a 7.2 trillion yen ($81 billion) economic stimulus package. After all Prime Minister Yukio Hatoyama´s popularity was waning. Now, we can´t have that. According to Mr. Bernanke, the Federal Open Market Committee will probably maintain its stance for a long period of low interest rates next week as tight credit and high unemployment weigh on the economy. Fed officials meet for the last time this year Dec. 15-16.
According to the Bank for International Settlements (BIS), China´s lending boom may erode the quality of bank balance sheets as a jump in lending was ‘unavoidably´ linked to an easing of credit standards. The BIS said that "while strong loan growth in China has fueled the current economic recovery, it is not without risks."
So, the credit expansion "raised concerns about excessively loose credit conditions" with the BIS? Hmmm, what a surprise!?!? If anything is for certain as we head into 2010, it is that you can count on more loose monetary policies. This may well extend the momentary up-trend in financial markets.
How long and how far? Nobody knows. But, I expect 2010 to be a VERY interesting year...
Sincerely,
Your "Swiss Mountain Guide"
Frank R. Suess
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MUCH TO DISCUSS IN THE BAHAMAS: REGULATORY CHANGES, CHALLENGING MARKETS AND A LOT MORE GOVERNMENT AS WE HEAD INTO 2010
For wealthy American investors with an interest in jurisdictional diversification, international asset protection and wealth management, the topics we will discuss at our BFI Inner Circle Briefing in January will be ´right on the money´. In the midst of fundamental changes in the realm of wealth management, it is worth spending the time to understand and prepare for these changes.
We recently informed our Mountaineers of the upcoming Inner Circle Briefing at the Atlantis in Paradise Island, the Bahamas. Quite a few of our readers and clients contacted us for more information on the details of the program. To save us some time, we´re providing you with a detailed program in the link below.
If you´re interested in joining us, click here. The Briefing is filling up fast and attendance is limited. Don´t miss the chance to start planning for the interesting year 2010 promises to be!
Link to IC Briefing Program |
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TEN PRINCIPLES FOR WEALTH PRESERVATION IN 2010
Financial markets have performed much better than expected in 2009. Ever since March, the direction of almost all of the asset prices in the financial markets has been up. We´ve only seen a little (and very normal) setback here and there. But then, it has gone on to rise steadily back up again. The only exception was the Dollar.
Whatever you expect for 2010, no matter how bearish or bullish you may be, there are a few recommendations we have for you that we believe will be applicable and should keep you relatively safe. In our opinion, you must apply today the following principles in order to adequately prepare and preserve your wealth:
1. Get rid of the noise - don‘t trust any of the daily market gibberish. The majority is generally wrong, so think ‘outside of the box´ and consider taking a walk off the beaten path.
2. Watch what is happening on the geo-political and international monetary front - easy money regimes always come to an end, but they don´t end without a fight. In view of the globalized nature of today´s economies and business, beware of concerted international action and surprises. Unexpected surprises lie ahead.
3. Learn from history and understand big picture fundamentals - history does not repeat, but it rhymes. Long-term trends and fundamental economic realities will ultimately reign and should therefore define your strategic decisions.
4. But, there will be times when fundamentals don‘t matter - beware of short- to medium-term scenarios that will contradict your fundamental conclusions. You may, for instance, be absolutely right about your expectations of hyper-inflation. However, the path to that scenario may take longer than you expect and could be preceded by very different developments.
5. There is no such thing as ‘too big to fail´ - no bank, no government, no nation is too big to fail. On the contrary, this very flawed assumption has been one of the key drivers for the crisis we face today. Don´t trust in the protection of big organizations, be they private or public.
6. Protect your freedom and wealth - as more regulations hit, some certainly of protectionist nature and many directed toward your tax money, you must put asset protection, risk management and jurisdictional asset diversification first.
7. Investment rules of the 90´s no longer apply - investment principles that worked in the 90´s and early years of the new millenium are best forgotten. Re-think and question every decision you make under this aspect.
8. Every crisis bears opportunity - yes, there are investment opportunities ahead. There‘s a bull market somewhere. We look forward to substantial gains in 2010 and beyond, particularly once the deflationary trend ends.
9. Look reality in the eye - perpetual optimism is dangerous, and pessimism is unpopular. But, you need to be realistic. The prudent see danger and take precaution!
10. Don‘t procrastinate! - things tend to happen rapidly and in spurts in financial markets. You can expect more of this ahead, and not only in financial markets. Substantial regulatory, fiscal and geo-political changes can be expected around the corner, and in early 2010.
Let us close here by pointing out one more aspect of planning that, strangely enough, tends to be generally forgotten - the protection of YOU.
Have you defined a contingency plan, an escape route for you and your loved ones, in case leaving your country becomes an unwelcome necessity? If not, we recommend you at least start considering this line of thought.
Many of our clients at BFI are very wealthy. They spend much time on wealth planning; in other words, on how to protect and grow their wealth. However, they generally do not consider how to protect themselves in the current environment. While protecting your wealth, you should not forget how to protect YOU. Things might not seem so bad in everyday life. Your daily routine is not affected by the bigger changes occurring around you. Therefore, it all does not seem that threatening. They never do. |
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NEWS BRIEFS
EU To Forbid Inter-state Tax Competition
A press release of December 2nd on "Economic and Financial Affairs", as discussed in EU Council Meeting 2981 (!!?), is worth a read. It may not be the most inspiring and conceptually challenging of works, but it does certainly give an interesting insight into the increasingly centralistic and socialistic brainworks of Brussels. And, it certainly confirms Switzerland´s wise decision to not join this club of somewhat dense harmonizers.
In particular, page 32 should raise the hair of any free-market proponent. The EU busy-bodies are preparing yet another ‘code of conduct´ - this term is a red flag in itself for anyone conscious of other EU codes of conduct - under which member states must refrain from ‘harmful tax competition´.
As any and all Mountaineers know well, tax competition is one of the most important factors in maintaining a tidy and efficient ship in government work at all levels. No tax competition equals higher taxes and lower quality of public services. It´s that simple. And yet, socialists will never grasp the concept.
Go to Story
America Has Two Economies - One Is A Fairy Tale!
The discrepancies between the reality and the fiction of American economic and labor statistics, as they are provided by official sources and mainstream media, are becoming blatantly visible and a matter of growing contention. How much longer will Americans accept the lies?
On John Williams´ Shadow Statistics website, you can find an insightful collection of graphs and statistics that reflect these discrepancies. John Williams´ site, for instance, reports three different unemployment figures, the highest one shows U.S. unemployment at 22%. Mr. Williams is now being supported by a very prominent economist, Nouriel Roubini, who states the following:
"While the United States recently reported 3.5 per cent GDP growth in the third quarter, suggesting that the most severe recession since the Great Depression is over, the American economy is actually much weaker than official data suggests. In fact, official measures of GDP may grossly overstate growth in the economy, as they don´t capture the fact that business sentiment among small firms is abysmal and their output is still falling sharply. Properly corrected for this, third-quarter GDP may have been 2 per cent rather than 3.5 per cent".
Go to Story
USA - Congress Takes First Step Towards "Fixing" 2010 Estate Tax
This could potentially be big news, or at least a sparkle of hope, for American taxpayers. According to US Congressman Earl Pomeroy (D - SD), nearly every family, farmer and small business in America will be exempt from paying any estate tax under a bill passed by the House of Representatives on December 3.
The US Congress´s lower house, the House of Representatives, has accepted a bill to extend into 2010 the existing 45 percent death tax on estates over $3.5 million. The bill now awaits approval from the Senate, which however is still tied up with the healthcare reform debate.
The Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009 (HR 4154), authored by Pomeroy, would make permanent the 2009 estate tax exemption level of USD 3.5M for an individual (USD 7M for a married couple) and a maximum tax rate of 45%. The bill also maintains the so-called "step-up in basis" tax rules, which protect many heirs from paying additional capital gains taxes on inherited assets.
Without change, the estate tax is scheduled to enter one year of full repeal in 2010, followed by a return of the estate tax in 2011 with a much lower exemption amount (USD 1M) and a much higher maximum tax rate (55%).
Go to Story
Seven Thousand Canadian Offshore Accounts Disclosed
Nearly 7,000 Canadians voluntarily disclosed secret offshore bank accounts in the first seven months of 2009, according to Canada´s national revenue minister, Jean-Pierre Blackburn.
The number included 90 clients of Swiss bank UBS, which Canada is now threatening to sue for disclosure of all clients. The doors of UBS are wide open, it seems, for any government to come in and ask for accounts. This is no longer a Swiss bank, but a globalized gorilla of rip-off-the-client services and a self-serve data store for any interested international tax authority.
Go to Story
Why Are They All So Keen On Picking A Fight In Afghanistan?!?!
It makes you wonder: Could those ears possibly have missed the lesson on Afghan history? And, assuming the man is as smart as they all say, then why on earth is he sending more troops? Could it be that he knows something we don´t know?!?!
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| © Copyright 2009, by BFI Capital Group AG, Bahnhofstrasse 29, 6300 Zug, Switzerland, website: www.bficapital.com. The MOUNTAIN VISION UPDATE is published by BFI Capital Group (‘BFI’). Quotation is allowed if credit is given. Although every care has been taken in the preparation of Mountain Vision, BFI does not guarantee and cannot be held responsible for the accuracy of any statistic, statement or representation made. We recommend that you consult qualified professional advisors to determine the applicability of this information and opinion. The publisher is not a registered investment advisor. Readers should not view MOUNTAIN VISION as offering personalized legal or investment advice. |
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