SOS Wake Up!

US economy is turning from bad to worst
Europe economies is turning from worst to disaster

Both Europe and US economies contributes >60% of world GDP

Why are they not doing well in the long run?

• Over borrowing


• Over spending


• Participate significantly in derivatives


• Government interventions, protections and bailouts


• Government is broke and continue to print money (spending money from more debt, as they do not has reserves or surplus like the Asian economies)

Is the Asian economies any better?

• in the short term no, because they over invest and over produce for the Europe and US


• in the long term, they are better off because they have strong reserve and surplus to reinvest into their own countries, and sell to their populations, esp China, which still has lots of room to grow


• they are rich in resources and commodities and that is what the mass population needs, infrastructure development and better food

So, for investment for LONG TERM (more than 5 years), what is the asset class should we be investing?

• the banking system has collapse, new credits are shrinking, hence investment in mining, agriculture and other resources will be impeded, hence causing low inventories, and as the demand increases in the Asian countries esp, lack of credits will suffocate the supply, and demand will gradually increase when the Asian economies recovers, hence, causing an imbalance of demand exceeding supply for COMMODITIES. Hence, one class that is critical for LONG TERM investment is critical.


• with this crisis prolonging, and low interest rates regime, and printing of trillions of dollars without a strong reserve by Europe and US, it will cause hyper inflation, hence, the next logical asset class to invest is precious metals like GOLD, SILVER and PLATINUM.


• One more class that is hard to avoid is the EQUITIES. For LONG TERM, avoid equities in Europe and US, but there may be rebounds (25% to 50%) in a secular bear. Go for Equity in Asia or Resource rich countries like Australia or Canada. LONG TERM equity should focus on the fundamental that is not impaired by this crisis, i.e. in the LONG RUN, demand will exceed supply type of business. Some of the countries would be like China, Canada, Australia, Brazil, NZ. The equities in the resource rich countries and strong reserves will recover and do much better than their counter part in the Western countries.


• Last but not least is CURRENCIES as an asset class. This is a hard call as it very much depends on the government taking the correct actions. Some that we would like to consider is China's RMB, Canadian dollars, or Aussie dollars.


• The incentive to saving (for Asian countries) will not be advantagerous as inflation and low interest regime still in place.

SOS World GDP

GDP = consumption + gross investment+ govt. spending+ (export - import)

GDP = rent + interest + profits + wages + (corporate income tax+dividend+undistributed profits)

2007 - GDP = USD54.6 trillion

2008 - GDP = USD56.2 trillion (3% growth)

World (2007)

54,584,918[4]
—
European Union (expected to drop 6%)
16,905,620[4]
1
United States (expected to drop 6%)
13,840,000
2
Japan
4,381,576 (expected to drop 8%)
3
Germany (expected to drop 6%)
3,320,913
4
China (PRC) (expected to grow 7%)
3,280,224h
5
United Kingdom (expected to drop 6%)
2,804,437
6
France (expected to drop 6%)
2,593,779
7
Italy
2,104,666
8
Spain
1,439,983
9
Canada
1,436,086
10
Brazil
1,313,590

General calculation - World GDP drop 3% = 56.2 x 0.97 = USD54.5 trillion drop about USD1.7trillion

4th Quarter GDP for 2008

United States = - 6.2%

EU = -6%

Japan = -13%

Singapore = -17%

World Derivatives = USD600 trillion

MyView

Citigroup, Bank of America, JP Morgan and Wells Fargo off balance sheet assets is about USD5.2 trillion (based on 2008 filing).

The top 5 GDP countries need to normalise their GDP which is inflated by the US over consumption and US over gearing (and also Europe). Hence, there will be a severe adjustment in these countries.

This severe readjustment will cause volatility in currency, economy, social and political crisis. Get prepared. Learn about ETF in short selling.

SOS Fear

Fearful & Desperate = Bush + Media + Iraq War = Genocide

Fearful & Desperate = Obama + Media + Stimulus Package = Economy Collapse

When people are fearful and desperate they will hang on to HOPE, CHANGE & BELIEVE because they do not know what to do, they lose CONTROL.

The US economy is like a patient who are already brain dead, and the patient's relative HOPING, BELIEVING there would be a miracle to happen or hopes that there are "CHANGES" and "NEW DEVELOPMENT" in science that could save the patient. This is exactly what happen in the US and Europe.

MyView

If we look back to 911 and how George Bush and 90% American supporting the Iraq War, you will realised that 90% of the American being used and manipulated because they are fearful & desperate.

Similarly this round of mortgage & financial crisis 915 in 2008, 90% of American are fearful and desperate and will support whatever stimulus plan the US Government is providing because they are fearful & desperate.

It is ashame that so many Americans get sucked into this "mentality" that AIG or Citigroup is too big to fail. According to Jim Rogers, in the thousand years of history, big banks had failed before, big companies had failed before and there is nothing new to it, this is called capitalism, when during a crisis, the competent will take over the incompetent people. In this case, the incompetent are being bailout or helped, and the competent will be worst off because they are disadvantaged.

I suppose we cannot blame the American since they lose their control because they are fearful & desperate, hence, they have to go through a time called "DENIAL". If they sit down, with a calm mind, and find out all the facts and figures about the crisis, they will come to accept that the patient is "brain dead", the only way is to let it be and move on.

The stimulus plan or "bailout" does not make economic sense. Like what Jim Rogers said, our mother or farther never thought us to throw money into a rat hole.

SOS US Currency

Eventually US Dollar will look like this. Copy from turtleinvestor's blog. Hopefully, it can buy a McDonald.

Facts and figures to ponder;

World GDP = USD60T
World Derivatives = USD600T (1000% of world GDP)
US GDP = USD14T (2008)
US Earnings = USD1.2T
US Debt = US50 T
US Market Capitalisation is about USD10T (end of 2008 or 71% of GDP)
US Earnings mainly contributed by over gearing (3.6 times of GDP) & over consumption (USD10T or 71% of GDP ). The long term gearing of US is 2 times of GDP.
US in the last few years, contributed mainly by the financial institutions i.e. investment banks like Lehman, Bear Stearn, Goldman Sach, JP Morgan, BoA etc, mortgate institutions like AIG, Fannie Mae and Freddie Mac.
World Toxic Asset = US3.6T (by Roubini, about USD2.0T from US)
Roubini predicted earnings will drop to USD50 to USD60 x PE of say 10 = S&P 500 = 500 - 600 points

Since the US Earnings are inflated by Gearing & Over Consumption, if we reduce the gearing to say 200% from 360% in order to go back to NORMACY, loan is expected to drop say 44%.

USD50T debt = US Earnings of USD1.2T
USD28T debt (dropped 44%) = USD Earnings = should dropped 44%x1.2T = USD0.5T

Consumption USD10T = US Earnings of USD1.2T
Reasonable consumption USD7T = US Earnings should dropped 30% x 1.2T = USD0.4T

Hence, a reasonable or NORMACY kind of earnings after adjustment of GEARING and CONSUMPTION

USD1.2T - USD0.5T - USD0.4T = USD0.3T x PE of 8.3 times = GDP of USD2.5T

Hence, the Normal GDP of USD is USD2.5T from the over inflated GDP of USD14.0T.

MyView

Just assumed the US as a Corporation making USD1.2 T with debt of USD50T and derivatives of USD300T, and a over inflated GDP of USD14T of which 71% or USD10T is consumption, what do we get?

Just use simple arithmatic calculation and you will soon realise the Corporation is a BANKRUPT.

SOS One Trillion

Fed Reserve is printing about USD1.1 trillion to bailout the financial and mortgage institutions.

Do we see the logic here?

1. China or Japan are no longer interested to buy out debt created by US Government, so the Fed replace them by taking up the USD1.1 trillion debt, issued by treasuries and buying up the mortgage backed securities.


2. Fed is bankrupted, and is still able to create USD1.1 trillion, anyone care to audit Fed Reserve? Under the law, they are not auditable. What do they have to hide?


3. Fed is creating or reflating the phony bubble, i.e. putting good money into bad investment, which is economically unproductive, and morally and ethically wrong.


4. The reason is to devalue the US dollar, so that when they pay back the lender, it only worth half the value. Is like example, US owe China about USD600 billion which is converted today (6.9) to RMB4.1 trillion, in the future, when US is devalued to (USD1=RMB3.45), when the Chinese sell their US Bonds in the future, they can only get back about RMB2.05 trillion, which is half the early value when US bought their imports from China.


5. Fed is also bailing out their elite cronies in the Wall Street.


6. By printing so much money, do we think it can solve the problems of a over geared and over consumed country, then wouldn't it be easy for BNM to purchase all the bonds issued by government and raised RM1 trillion, and the RM won't suffer as the consequence, and everyone will be rich in Malaysia.

SOS Politician

This is what Marc Faber said on his interviewed on 20th March 2009:

The American politicians are worst than mafia, steal the money from the average American and gave it to the elites, which in turn sponsor their campaign to win the election.

They are worst than scumbag, enriching the elites and poverised the average American.

The average American will soon realised that they are being con by the politician when their money is devalued, i.e. the cost of living will increased drastically as a result of the printing of money and it will cause civil unrest.

The Fact (what Jim Rogers said)

• it is not only economically insane to throw good money at bad investment, it is also morally and ethically wrong to do that.
• it is immoral to take the money from the average American and subsidise the incompetent elites in the Wall Street.
• no average American will benefits from the bailouts, other than a few elites.

MyView

• The average Americans are doomed in a few years time
• Never in history that printing of money can resolve the recession, espeacially when one is already broke
• This is not only the American problem, it was exported to the Europeans as well, if not worst, making it a syncronized global depression
• some of the good ideas after listening to Marc Faber, Peter Schiff and Jim Rogers, any spare money should be invested into

1. high dividend yield stocks in economically sound countries like Canada, Australia, HK, NZ, Singapore and/or China (Peter Schiff)
2. invest in commodities index, ETFs which comprises Metals, Energy and Agriculture (Jim Rogers)
3. invest in agricultural stocks in China (via HK 'H' shares) and water treatment plants , which are not affected by the crisis
4. invest in GOLD (recommended by Peter Schiff, Jim Rogers and Marc Faber) to protect against inflation or if gold mining stocks (Marc Faber)

SOS Depresssion

Depression 1930 vs 2008

Hoover vs Bush
Rosevelt vs Obama

The 1930s
US Depression in 1930s mainly due to easy credit from early 20s to late 20s causing the stock bubble.
Hoover try to fixed the economy by government intervention to control the interest rate, protectionism, price control etc which make it worst.
Similarly, when Rosevelt came in, continue to intervent until the world war 2, when American spent lots of money in the war and cause inflation.

The 2008s
Bush junior became President in 2000, during his presidency, Alan Greenspan increase the interest rate during the Tech Bubble, and the equity dropped drastically, to prevent the economy to go further down, the Bush administration loosen the credit, and Greenspan starts reducing interest rate and encourages housing loan. Soon another bubble is created, now the housing bubble. Easy loan was given on the pretext that house price will never fall. Those who bought in the early 2001 makes tonnes of money in the early year of the housing bubble until it was burst in late 2007. On top of this, derivatives are created from the housing mortgage as well as other structured products, which does not has a fundamental underlying assets.

So, there is not much differences between 30s and 2008, only now the situation is worst because of high gearing and federal deficit, making the recession harder to fix. The printing of moneywill prolong the recession and cause a worst depression than the 30s.

MyView

So, be prepared.