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Image | A Technical Analysis of Where the Gold Price is Likely to Go Next
A Technical Analysis of Where the Gold Price is Likely to Go Next
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Executive Summary

  • Sentiment measurement is proving to be an unreliable indicator
  • Classic technical analysis is inconclusive but hints there is still weakness that needs to be flushed from the system
  • The current era is feeling like 2007/2008 – gold could rebound strongly this year if enough weak economic data makes it out into the public
  • The factors to look for that will indicate a price reversal is imminent

If you have not yet read Part I: Charting Gold, available free to all readers, please click here to read it first.

A Technical Analysis of Where the Gold Price is Likely to Go Next
 PREVIEW

Executive Summary

  • Sentiment measurement is proving to be an unreliable indicator
  • Classic technical analysis is inconclusive but hints there is still weakness that needs to be flushed from the system
  • The current era is feeling like 2007/2008 – gold could rebound strongly this year if enough weak economic data makes it out into the public
  • The factors to look for that will indicate a price reversal is imminent

If you have not yet read Part I: Charting Gold, available free to all readers, please click here to read it first.

Image | Charting Gold
Charting Gold

Few investment/finance topics spark as many strong emotions as gold, for its adherents and detractors are equally committed to their views, and equally unlikely to switch camps.

Adherents view gold as the only real money in a world of constant currency debasements, while detractors don’t see gold as an investment, as it lacks a yield and price-earnings ratio.
Charting Gold

Few investment/finance topics spark as many strong emotions as gold, for its adherents and detractors are equally committed to their views, and equally unlikely to switch camps.

Adherents view gold as the only real money in a world of constant currency debasements, while detractors don’t see gold as an investment, as it lacks a yield and price-earnings ratio.
Image | Positioning Yourself to Prosper in the Post-Capitalist Economy
Positioning Yourself to Prosper in the Post-Capitalist Economy
 PREVIEW

Executive Summary

  • The importance of "ownership" of specialized & skills
  • Why decentralization of work (vs the traditional hierarchical organization) is the future
  • Why disruption and fluidity will be the norm for most sectors of the economy
  • Why flexibility, innovation and self-reliance will be the hallmarks of the successful post-capitlaist worker

If you have not yet read Part I: We're Living Through a Rare Economic Transformation, available free to all readers, please click here to read it first.

In Part I, we reviewed the basic structure of what author Peter Drucker termed the post-capitalist society, a knowledge economy based on a model of decentralized, perpetually innovating organizations.

In Part II, we ask: How do we turn these structural insights to our own advantage?

Structural Inequality

I want to start with the social-political-economic divide that is endemic to the knowledge economy: the widening gap between the class of knowledge workers, which Drucker understood would be the smaller of the two classes, and service workers.

In broad brush, those workers and enterprises engaged in sectors that generate most of the wealth creation will do much better financially than those engaged in low-margin sectors.  In the knowledge economy, those with high-level, specialized skills will create more value and thus be better compensated than those with generalized knowledge and/or lower-level skills.

A fast-food worker, for example, is the modern-day assembly-line worker.  The entire process of assembling and serving fast food is highly organized for speed and efficiency.  But since the product is not high-value, the workers cannot be highly compensated for this work.

As Drucker recognized, all work requires management, and all organizations need to learn to innovate.  This creates opportunities for highly trained, specialized workers and managers, but it doesn’t do away with service jobs, which will remain more numerous than knowledge-intensive jobs.

This leads to a sobering conclusion:  Just producing more highly educated workers does not create a demand for those workers’ skills…

Positioning Yourself to Prosper in the Post-Capitalist Economy
 PREVIEW

Executive Summary

  • The importance of "ownership" of specialized & skills
  • Why decentralization of work (vs the traditional hierarchical organization) is the future
  • Why disruption and fluidity will be the norm for most sectors of the economy
  • Why flexibility, innovation and self-reliance will be the hallmarks of the successful post-capitlaist worker

If you have not yet read Part I: We're Living Through a Rare Economic Transformation, available free to all readers, please click here to read it first.

In Part I, we reviewed the basic structure of what author Peter Drucker termed the post-capitalist society, a knowledge economy based on a model of decentralized, perpetually innovating organizations.

In Part II, we ask: How do we turn these structural insights to our own advantage?

Structural Inequality

I want to start with the social-political-economic divide that is endemic to the knowledge economy: the widening gap between the class of knowledge workers, which Drucker understood would be the smaller of the two classes, and service workers.

In broad brush, those workers and enterprises engaged in sectors that generate most of the wealth creation will do much better financially than those engaged in low-margin sectors.  In the knowledge economy, those with high-level, specialized skills will create more value and thus be better compensated than those with generalized knowledge and/or lower-level skills.

A fast-food worker, for example, is the modern-day assembly-line worker.  The entire process of assembling and serving fast food is highly organized for speed and efficiency.  But since the product is not high-value, the workers cannot be highly compensated for this work.

As Drucker recognized, all work requires management, and all organizations need to learn to innovate.  This creates opportunities for highly trained, specialized workers and managers, but it doesn’t do away with service jobs, which will remain more numerous than knowledge-intensive jobs.

This leads to a sobering conclusion:  Just producing more highly educated workers does not create a demand for those workers’ skills…

Image | We’re Living Through a Rare Economic Transformation
We’re Living Through a Rare Economic Transformation

In 1993, management guru Peter Drucker published a short book entitled Post-Capitalist Society.  Despite the fact that the Internet was still in its pre-browser infancy, Drucker identified the developed-world economies as knowledge-based – as opposed to from industrial economies, which were were from the agrarian societies they superseded.

Drucker used the term post-capitalist not to suggest the emergence of a new “ism” beyond the free market, but to describe a new economic order that was no longer defined by the adversarial classes of labor and the owners of capital.  Now that knowledge has trumped financial capital and labor alike, the new classes are knowledge workers and service workers.

We’re Living Through a Rare Economic Transformation

In 1993, management guru Peter Drucker published a short book entitled Post-Capitalist Society.  Despite the fact that the Internet was still in its pre-browser infancy, Drucker identified the developed-world economies as knowledge-based – as opposed to from industrial economies, which were were from the agrarian societies they superseded.

Drucker used the term post-capitalist not to suggest the emergence of a new “ism” beyond the free market, but to describe a new economic order that was no longer defined by the adversarial classes of labor and the owners of capital.  Now that knowledge has trumped financial capital and labor alike, the new classes are knowledge workers and service workers.

Image | The Forces That Will Reverse Housing’s Recent Gains
The Forces That Will Reverse Housing’s Recent Gains
 PREVIEW

Executive Summary

  • Intervention in the housing market by central planners is experiencing diminishing returns
  • The four major trend reversals most likely to depress housing prices in the coming future
  • The power deflationary force of reversion to (or perhaps below?) the mean
  • Why demographics do not support rising prices

If you have not yet read Part I: The Unsafe Foundation of Our Housing 'Recovery', available free to all readers, please click here to read it first.

In Part I, we sketched out the larger context of the housing market: the dramatic rise of mortgage debt, the stagnation of income for 90% of households and the unprecedented scope of Central Planning intervention in the housing and mortgage markets.

In Part II, examine what will likely cause this nascent rise in housing prices to reverse, and to resume the decline Central Planning halted in 2009.

Intervention Has Only One Way to Go: Diminishing Returns

As noted in Part I, every Central Planning support of the mortgage and housing markets has already been pushed to the maximum, so there is nowhere left to go. Interest rates are already negative, over 90% of the mortgage market is backed by Federal agencies, the Fed has already pledged to buy trillions of dollars in mortgages, etc.

Four years of this massive intervention has stripped the mortgage and housing markets of the ability to price risk, capital, and assets. This has created a culture of supreme complacency, as participants have come to believe interest rates will stay near-zero for the foreseeable future and Central Planning intervention is permanent.

But nothing is permanent in life. And the current extremes of intervention and complacency have set the stage for some important reversals:

The Forces That Will Reverse Housing’s Recent Gains
 PREVIEW

Executive Summary

  • Intervention in the housing market by central planners is experiencing diminishing returns
  • The four major trend reversals most likely to depress housing prices in the coming future
  • The power deflationary force of reversion to (or perhaps below?) the mean
  • Why demographics do not support rising prices

If you have not yet read Part I: The Unsafe Foundation of Our Housing 'Recovery', available free to all readers, please click here to read it first.

In Part I, we sketched out the larger context of the housing market: the dramatic rise of mortgage debt, the stagnation of income for 90% of households and the unprecedented scope of Central Planning intervention in the housing and mortgage markets.

In Part II, examine what will likely cause this nascent rise in housing prices to reverse, and to resume the decline Central Planning halted in 2009.

Intervention Has Only One Way to Go: Diminishing Returns

As noted in Part I, every Central Planning support of the mortgage and housing markets has already been pushed to the maximum, so there is nowhere left to go. Interest rates are already negative, over 90% of the mortgage market is backed by Federal agencies, the Fed has already pledged to buy trillions of dollars in mortgages, etc.

Four years of this massive intervention has stripped the mortgage and housing markets of the ability to price risk, capital, and assets. This has created a culture of supreme complacency, as participants have come to believe interest rates will stay near-zero for the foreseeable future and Central Planning intervention is permanent.

But nothing is permanent in life. And the current extremes of intervention and complacency have set the stage for some important reversals:

Image | The Unsafe Foundation of Our Housing ‘Recovery’
The Unsafe Foundation of Our Housing ‘Recovery’

What could go wrong with the housing 'recovery' in 2013?

To answer this question, we need to understand that housing is the key component in household wealth. And, that Central Planning policies are aimed at creating a resurgent “wealth effect,” as follows: When people perceive their wealth as rising, they tend to borrow and spend more freely. This is a major goal of U.S. Central Planning.

Another key goal of Central Planning is to strengthen the balance sheets of banks and households. And the broadest way to accomplish this is to boost the value of housing. This then adds collateral to banks holding mortgages and increases the equity of homeowners.

Some analysts have noted that housing construction and renovation has declined to a modest percentage of the gross domestic product (GDP). This perspective understates the importance of the family house as the largest asset for most households and housing’s critical role as collateral in the banking system.
The Unsafe Foundation of Our Housing ‘Recovery’

What could go wrong with the housing 'recovery' in 2013?

To answer this question, we need to understand that housing is the key component in household wealth. And, that Central Planning policies are aimed at creating a resurgent “wealth effect,” as follows: When people perceive their wealth as rising, they tend to borrow and spend more freely. This is a major goal of U.S. Central Planning.

Another key goal of Central Planning is to strengthen the balance sheets of banks and households. And the broadest way to accomplish this is to boost the value of housing. This then adds collateral to banks holding mortgages and increases the equity of homeowners.

Some analysts have noted that housing construction and renovation has declined to a modest percentage of the gross domestic product (GDP). This perspective understates the importance of the family house as the largest asset for most households and housing’s critical role as collateral in the banking system.
Image | How to Increase Your Financial Resilience
How to Increase Your Financial Resilience
 PREVIEW

Executive Summary

  • Treat your household as a business enterprise; the rules for financial resilience are the same
  • The 5 Rules of Financial Resilience
  • Eliminating vulnerabilities
  • Focusing on value creating and income diversification
  • The number of options for increasing your financial resilience is much larger than you likely expect. Your challenge is first truly understanding this, and then having the courage to see a few of them through.

If you have not yet read Don’t Worry, Be Resilient available free to all readers, please click here to read it first.

In Part I, we sought to understand what financial resilience means, and found that reliance on debt for consumption and on speculation for collateral, and an inflexible, high cost basis were the characteristics of fragile finances for households, enterprises, and nations.

In Part II, we ask the question, what are the characteristics of a financially resilient household? What strategies can we pursue to increase the resilience of our own households?

How to Increase Your Financial Resilience
 PREVIEW

Executive Summary

  • Treat your household as a business enterprise; the rules for financial resilience are the same
  • The 5 Rules of Financial Resilience
  • Eliminating vulnerabilities
  • Focusing on value creating and income diversification
  • The number of options for increasing your financial resilience is much larger than you likely expect. Your challenge is first truly understanding this, and then having the courage to see a few of them through.

If you have not yet read Don’t Worry, Be Resilient available free to all readers, please click here to read it first.

In Part I, we sought to understand what financial resilience means, and found that reliance on debt for consumption and on speculation for collateral, and an inflexible, high cost basis were the characteristics of fragile finances for households, enterprises, and nations.

In Part II, we ask the question, what are the characteristics of a financially resilient household? What strategies can we pursue to increase the resilience of our own households?

Image | Don’t Worry; Be Resilient
Don’t Worry; Be Resilient

At some point, absorbing more information about the unsustainability of the Status Quo yields diminishing returns; it becomes emotionally draining and thus counterproductive.  Part of this exhaustion results from recognizing our powerlessness within the Status Quo, where independent thinking and structural innovation are winnowed out as threats to existing institutions and industries.
Don’t Worry; Be Resilient

At some point, absorbing more information about the unsustainability of the Status Quo yields diminishing returns; it becomes emotionally draining and thus counterproductive.  Part of this exhaustion results from recognizing our powerlessness within the Status Quo, where independent thinking and structural innovation are winnowed out as threats to existing institutions and industries.
Image | Understanding the Outcomes that Will Matter Most
Understanding the Outcomes that Will Matter Most
 PREVIEW

Executive Summary

  • Paper wealth will revert to its intrinsic value
  • Risk will continue to be transferred onto the taxpaying public
  • Moral hazard and fraud will by the norm, not the exception
  • Complexity will be used to mask failure
  • Individuals will increasingly opt out of the system through means both covert and overt

If you have not yet read The Trends to Watch in 2013, available free to all readers, please click here to read it first.

In Part I, we examined eight dynamics which will likely influence society, politics, and finance in the next few years. In Part II, we examine different manifestations of the one dynamic that counts: the inability of the Status Quo to make meaningful structural reforms. This inability has many facets, but only one root: political sclerosis caused by entrenched, vested interests seeking to protect their perquisites and power.

An economy that is controlled by the government is one in which political power, not the market, controls the distribution of national income. A government in which political power is for sale to the highest bidder puts the wealthy at an extreme advantage, as they have the means to buy political power to protect and expand their share of the national income.

In order to do the bidding of the financial Elite, the political Elite redistributes enough national income to the bottom 50% and retirees to buy their complicity in the arrangement.

A nation in which political power is for sale is one in which the rule of law is bent to serve those with power.

This is the U.S. in a nutshell.

Among the many manifestations of this arrangement, I have selected these as prominent examples of systemic financial and political rot:

Understanding the Outcomes that Will Matter Most
 PREVIEW

Executive Summary

  • Paper wealth will revert to its intrinsic value
  • Risk will continue to be transferred onto the taxpaying public
  • Moral hazard and fraud will by the norm, not the exception
  • Complexity will be used to mask failure
  • Individuals will increasingly opt out of the system through means both covert and overt

If you have not yet read The Trends to Watch in 2013, available free to all readers, please click here to read it first.

In Part I, we examined eight dynamics which will likely influence society, politics, and finance in the next few years. In Part II, we examine different manifestations of the one dynamic that counts: the inability of the Status Quo to make meaningful structural reforms. This inability has many facets, but only one root: political sclerosis caused by entrenched, vested interests seeking to protect their perquisites and power.

An economy that is controlled by the government is one in which political power, not the market, controls the distribution of national income. A government in which political power is for sale to the highest bidder puts the wealthy at an extreme advantage, as they have the means to buy political power to protect and expand their share of the national income.

In order to do the bidding of the financial Elite, the political Elite redistributes enough national income to the bottom 50% and retirees to buy their complicity in the arrangement.

A nation in which political power is for sale is one in which the rule of law is bent to serve those with power.

This is the U.S. in a nutshell.

Among the many manifestations of this arrangement, I have selected these as prominent examples of systemic financial and political rot:

Image | The Trends to Watch in 2013
The Trends to Watch in 2013

 

Rather than attempt to predict the unpredictable – that is, specific events and price levels – let’s look instead for key dynamics that will play out over the next two to three years. Though the specific timelines of crises are inherently unpredictable, it is still useful to understand the eventual consequences of influential trends.

In other words: policies that appear to have been successful for the past four years may continue to appear successful for a year or two longer. But that very success comes at a steep, and as yet unpaid, price in suppressed systemic risk, cost, and consequence.
The Trends to Watch in 2013

 

Rather than attempt to predict the unpredictable – that is, specific events and price levels – let’s look instead for key dynamics that will play out over the next two to three years. Though the specific timelines of crises are inherently unpredictable, it is still useful to understand the eventual consequences of influential trends.

In other words: policies that appear to have been successful for the past four years may continue to appear successful for a year or two longer. But that very success comes at a steep, and as yet unpaid, price in suppressed systemic risk, cost, and consequence.
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