The Great Repression

What an enthralling day we had yesterday at The Great Repression investment symposium up here at Port Douglas.  650 people packed the venue for the first of 2 days and it didn’t disappoint.   As you know we are big fans of the writings of The Daily Reckoning guys and it was Vern Gowdie who spoke first.

Vern started by pointing out the irony of this being held at The Mirage which was a symbol of the excesses of the last credit bubble of the 80’s through the Skases.  This time however that bubble is far bigger and far more global in its reach.  Again Vern pointed out that since then, from 1990 to now we have increased our national debt by $5 trillion but achieved only $1.27 trillion of GDP.  Like the Skases there are no new ways to go broke, it is always too much debt. Vern went on to outline all the debt accumulated throughout the world and the same lacklustre growth achieved.  He then pointed out how overvalued all markets are across many metrics and the inevitability of a very large crash.

Dan Denning pointed out the many geopolitical black swans circling at present and the need to prepare for the eventuality of financial market repression.  For him 3 of the bigger immediate threats are the US election, the Italian referendum, but more critically the French and German elections next year.  He believes the French election is maybe the most critical as it presents the clearest outcome of a Frexit and that could be catastrophic for markets.

Satyajit Das was fascinating.  He debunked the China saviour theory saying they present the biggest threat to the world economy on the back of a credit expansion (debt) that dwarfs all others and must come home to bite.  Satyajit methodically and factually outlined how this house of cards must fall and how they resemble almost exactly the Japan story.

Jim Rogers begged to differ.  Whilst yes they are likely to crash, and Jim’s account of how bad this next crash will be almost left you feeling sick, he maintains China will rebound to be to the 21st century what the US was to the 20th.  All markets crash, and the US felt the Great Depression more than most, but it rallied to now just as he expects China to from now as the US implodes.  Jim repeatedly said, buy gold and silver (and have your kids learn Manadarin!).

Greg Canavan gave a very honest and insightful talk on how we should be investing, and that is by understanding we simply don’t know what will happen.  It was one of the clearest presentations for the need for balance and removal of emotions in investing you will see.

Kim Iskyan reinforced this by firstly outlining a large study that illustrated the simply awful track record of analysts in calling Buys and Sells in shares where, over the period, shares the subject of Buy recommendations returned almost nil, the Sells actually went up 20% and this all in the context of the market rising 3% as a whole.  He stressed the need for uncorrelated assets in your portfolio and illustrated how correlated financial assets are in what many think is a ‘balanced’  or diversified portfolio.  He said every portfolio needs gold and silver as they are one of the very few uncorrelated assets.

Port Phillip publishing are selling the dvd of the conference.  Click here for info.

Unfortunately due to technical difficulties up here we won’t have a Weekly Wrap podcast available this week.