I didn’t plan to do any writing on “predictions” for 2013 as there were more opinions than one could possibly read but I see one trade as the most important and timely of all. Short the currency markets, ALL currency markets! This is really an easy call now as central bankers are collectively going “all in.” Draghi from Europe used the term “as much as necessary,” the Fed’s QE is now “open ended” and in Japan the people clamored in the last election for Mr. Abe. Premier Abe vowed to put the accelerator to the floor both fiscally and monetarily.
Normally I would tell you to fade anything that central bankers say and rather watch what they do. But now because the global economies are so stuck in the mud, they are all boxed into the same room. Every central bank has the same problem caused by the same conditions. Namely over-leveraged economies (and sovereign balance sheets) that each fight for “market share” of a global trade “pie” that is not expanding. The solution? Torpedo your own currency to allow your export sector a bigger slice of the pie. A global currency war will be the result.
In my opinion 2013 will go down as the year that “money died.” A global currency war has all of the necessary conditions of breaking out and the central bankers have already publicly and collectively told us that this is coming. It does make total sense because no matter where you look, balance sheets are about to blow. The “debt ceiling” is not just a U.S. problem, Europe, Britain and Japan have the same problem but not from a “statutory” standpoint. No, from the Mother Nature standpoint they know that they must either grow their economies rapidly or devalue their currencies greatly.
Let me explain this, the West as you know full well simply has too much debt than can be serviced by the revenues being generated currently and they also know that the situation is now critical. This is why the decision to go all in. From their viewpoint this will either work (it won’t) …or it won’t and “oh well” we get the collapse that would have happened it they hadn’t gone “all in.” The problem is not that there is not enough money, the problem is that the money has all gone to the banks to protect them and their derivative structures. The “money” is not on the streets so to speak which is why the economies are stagnant. Had TARP and the other programs put money in the hands of the populace the final result would not be any better but at least it would “feel better.”
2013 in my opinion will be remembered as “the year of stuff”. This will be the year (because of the decision to go all in) that “stuff” becomes more valuable. It will become more valuable because the central banks will finally get their wish for inflation. This will be the year where their steady debasement which is now a full court press takes hold. The only question is whether or not we get any “bump” out of the economy or whether an immediate panic out of paper takes place.
“Stuff” can be anything. It can be collections of stamps, coins or art, it can be vintage cars, guns or whatever. “Stuff” would include silos filled with grain, the farmland to grow it or even the machines to work the field. Once the “money” that has been and is promised to be created starts to “bleed” from the system the movement (just as a dam breaking) will start moving faster and faster as investors figure out what’s happening.
The flip side to “stuff” are what once upon a time were conservative investments. Anything that is fixed income (bonds of all sorts, fixed pensions and annuities) will suffer. When we go into the panic phase (I believe it will be this year) they will ultimately suffer 90% losses at a minimum when all is said and done. Rice will still be rice, land and tractors will still be land and tractors but it will take many more Dollars, Yen, Pounds and Euros to buy them. You don’t even have to believe me, just listen to what the bankers are telling you. By hook or by crook, one way or the other we will get “inflation.” The only problem is that as much money and credit that has already (and now promised “all in”) been created, it is already enough to make a cup of coffee $20 or more. All it will take is the banksters getting their wishes of a “little” inflation. Remember, there can be no “exit plan” and there never was one!