We are getting many questions from readers on how do we as individuals survive this coming period of incredible change. It used to be that people would work hard, save their money, and then when they retire, they could live off their savings. Today, seniors can no longer simply live off their savings, with record low interest rates, and now even negative rates being implemented, there is no yield to fund their retirement.
Many semi, and unskilled workers face a very challenging future with the incredible technological gains being incorporated in virtually every industry. While these changes are already underway, they are just beginning.
But of all the changes coming, there is one underlying trend that is already starting to drive the financial markets and create social unrest. This will reshape everything… our investments, our currency, and what rights and freedoms we retain. Long before Donald Trump’s name was on the political landscape, we had warned that the loss of confidence in government would be the impetus for a dramatic Trend Change, starting in late 2015, going into 2020
We are now seeing social unrest spread through Europe, as the immigration crisis seems to have been the final straw, as the people have had it with the politicians and bureaucrats who have lined their own pockets, while bankrupting the country with their corruption and fiscal mismanagement.
Whether you approve of Donald Trump of not, he understands, and is exploiting the anger that is building up in the masses. The people have started to pull back the curtain, and realize that all politicians are the same, they are all part of a system that no longer meets the needs of the people.
The mainstream politicians and media laughed when Trump first announced he was running. Now they are doing everything they can to keep him from winning the Republican nomination. But they just don’t get that the reason Trump is so popular is that he represents change, he is the polar opposite of a mainstream politician.
The people want change, real change, not the change every politician promises during elections. They want changes where a government manages the budget so that the future is not compromised for the benefit of a few.
We are in the midst of an economic decline. Throughout the West, other than the very rich, the standard of living is declining as no matter what party is in power, government expands, handing out ”entitlements’ when there is no money to pay for them.
There are a number of key votes coming. First, we will have the UK referendum on whether or not they leave the European Union (Brexit). Then we have the US election at the end of this year, where Donald Trump could actually be the next US President. In 2017, both Germany and France hold their elections where both Hollande and Merkel will be under immense pressure.
As we predicted over two years ago, Europe is falling apart. European countries have deep, rich, and varying cultures, and the concept that 19 countries with vastly different cultures, could co-exist, sharing a single currency , but not the debt, was doomed from the beginning. It puts countries with under-performing economies at the mercy of those with robust economic performance.
As this crisis in government gains momentum, we are seeing the smart money leave the perceived area of risk, and move to perceived areas of safety. We live in Vancouver where real estate prices are rising dramatically, as buyers from Asia, Europe, and the Middle East are scooping up high end real estate here, as a safe place to park their money,
This is a key that every investor needs to understand; when there is trouble in one area, capital flows to perceived safety. European and Asian capital has poured into US Treasuries, not for the meager return, but for the perceived safety of US government bonds.
People keep calling for the demise of the US dollar due to the massive US debt, but they fail to realize that the $US is the world reserve currency, and the largest currency pool in the world. In times of trouble, smart money wants to own ‘stuff’, and for cash, they want to be in the most widely traded currency, and that’s the $US.
As this global economic crisis unfolds, we will see Europe under tremendous stress, Our models forecast that the Euro may not survive. Think about that. If you are a European, you really need to think about what would happen if the Euro collapses.
Five year German bonds are yielding -.25%. Why would anyone pay the German government to take their cash? – because they feel that if the Euro collapses, Germany will survive, while many other countries won’t.
Two years ago we forecasted that Europe will see the first Sovereign Debt Default, likely late 2016, or early 2017. Whether it starts in Greece, Hungary, Poland or wherever, it doesn’t matter, because there will be many more defaults.
When we predicted Europe’s demise, we did not know what would be the trigger. We knew that the sense of ‘entitlement’, the corruption, the fiscal mismanagement, and massive unemployment were all going to bring the matter to a head, but it may be that the mishandling of the migrant crisis will be the final nail in the coffin for Europe.
Big government is the problem, not the solution, and the masses are starting to figure it out. As investors, we need to understand that as these social and fiscal problems bubble up and finally implode, capital will flow out of the trouble areas, into areas of safety.
Europe will be the first area hit, but the massive debt crisis will not be confined to Europe, it will spread globally, moving to Japan, and ultimately hitting the largest economy in the world, the US.
If you want to survive this coming global Sovereign Debt Crisis, you need to follow the global flow of capital. A Sovereign Debt Default occurs when a country can no longer meet its debt obligations. It doesn’t mean the country defaults 100%, rather that it must “restructure” its debt, meaning a hair cut, and massive losses for bond holders.
Be clear here, the volatility is going to ramp up, and go off the charts. Social unrest and violence in Europe has been very under reported by the mass media. Each investor needs to get their head out of the sand, and pay attention to what is going on. We will continue to keep our general audience updated in these Musings articles, and will be keeping our subscribers to The Trend Letter & Trend Technical Trader services apprised of where we will be investing our money, to not just survive this coming crisis, but to prosper from it.
Typically, in times of uncertainty and trouble, capital flows out of private investments (stocks), and into public investments (gov’t bonds). But what happens when the problem lies in government? When government is the problem, the opposite occurs; capital flows out of public investments (bonds), and into private investments (stocks, commodities, precious metals etc.).
We have already seen high end real estate rise in many areas, as smart money has begun to park in perceived ‘safe’ areas. Recently, with the birth of negative rates, we saw capital move into gold. While we do not feel that this is the right time to load up on gold, we foresee gold, North American stocks, commodities, and collectibles becoming targets of global capital.
Politicians and bureaucrats have been singing from the same song books for decades, and now the jig is up – finally coming to a dramatic end. Unfortunately, most investors are going to be caught blindsided when this global debt crisis finally unfolds and we see the first Sovereign Debt Default. Once the first default happens, it will be just the first domino, there will be many more to fall.
The consequences of not being prepared for this massive Trend Change will be devastating. For those who understand what is coming, it will be an opportunity of a lifetime to dramatically increase your wealth.
Understand that this crisis is a debt crisis, and on a personal level, look to reduce your personal and family debt as much as possible. While negative rates are here now, be aware that when government bonds are no longer a ‘safe’ bet, interest rates will rise, as bond holders dump their bonds. When bond holders no longer want to hold bonds, the rates must go up to entice others to buy them. Rising bond rates mean rising interest rates.
Most of us weren’t around in 1932, and the mass media never mentions this, but back in 1932, every major European country defaulted on their Sovereign Debt. That’s right, three years after the Crash of 1929, 17 countries in Europe defaulted on their sovereign debt. And guess where those investors moved their capital to?
They certainly didn’t buy US government bonds because they were afraid that the US would also have debt problems. No, instead of buying bonds, they bought US stocks, sending the Dow Jones up 392% over the next five years.
Remember, capital has to go somewhere. When it starts to panic out of gov’t bonds, it will move to other sectors. Timing is the key.