The quest started with our Casey Research Recovery Reality Check Summit, April 27-29, in Weston, Florida. We took our mandate of getting to the bottom of this matter of recovery seriously, including faculty members with a variety of perspectives to see if an overarching conclusion about the recovery could be ascertained.
In addition to our own team of Doug Casey, Bud Conrad, Terry Coxon, Louis James, Marin Katusa and Jeff Clark, included in the faculty were: Lacy Hunt, former economist with the Dallas Fed and the world’s most successful bond manager; Jim Rickards, money manager and author of Currency Crisis; John Mauldin, best-selling author of Endgame and the just-released The Little Book of Bull’s Eye Investing; John Williams of ShadowStats fame; Porter Stansberry, founder of Stansberry Research; Michael Lewitt, editor of The Credit Strategist; Gordon Chang, China analyst; Harry Dent, author of The Great Crash Ahead (who also debated James Rickards on the question of inflation or deflation); Andy Miller on real estate; Greg Weldon of the Weldon Report; John Hathaway of the Tocqueville Funds; resource market guru Rick Rule of Sprott Asset Management; Caesar Bryan, a senior portfolio manager for the Gabelli Fund group; and David Stockman, the head of the Office of Management and Budget during the Reagan administration.
(Plus, on the taking-action front, there was a special panel on international diversification as well as panels where a dozen or so experts on everything from gold stocks to uranium, to rare earths, to graphite, to technology, to energy gave their best picks.)
In other words, a full program.
Then, immediately following the conclusion of our summit, Olivier Garret, Casey Research CEO and partner, and I climbed on a plane for California and John Mauldin’s Strategic Investment Conference.
John’s event was geared more for hedge fund and very-high-net-worth investors and, as such, included a more mainstream slate of speakers, but what a slate it was.
For the better part of three days, Olivier and I hunkered down to hear presentations and meet with the likes of: David Rosenberg, the star analyst of Gluskin Sheff; H. “Woody” Brock, an economist with some of the deepest credentials in the business (you can Google any of these guys for bio info); economic historian and best-selling author Niall Ferguson; Marc Faber of the Gloom, Doom and Boom Report; David McWilliams, the popular and very erudite Irish economist; David Harding of Winton Capital Management; Jeffrey Gundlach of DoubleLine Capital; Lacy Hunt again… and my favorite for this conference, Mohamed El-Erian of PIMCO fame.
In other words, for the better part of two weeks, I was immersed in presentations and one-on-one discussions with truly some of the smartest, best-studied people in the world today on economics and investment markets – with the primary topic being whether the so-called recovery is real, and the consequences if it falters.
While the speakers used a variety of methodologies to approach the topic, when all was said, the only conclusion that could be reached was that the world is headed for a very challenging period.
That conclusion was for the most part derived from three aspects of the many presentations:
- Hard data. Tallying up all the charts and tables I viewed and heard discussed over the last couple of weeks, if such a thing were possible, would produce a number well in excess of 1,000. While there were some that dealt in forward-looking projections, the vast majority dealt with the here and now, as well as the historical context of how we got here.
- What wasn’t said. For business reasons, many of the big-name money managers couldn’t come right out and say that we were heading for a crash, but they all took pains to communicate in not so subtle ways that this was a likely outcome. Tellingly, not a single speaker over the entire two-week period – at either event – came out and said that we could expect a normal business-cycle recovery to continue.
- The complete lack of practical discussion about how the world can avoid hitting the wall. While the pessimism was palpable, even among the usually perma-bull Wall Street types, at no point did anyone espouse a politically feasible solution to avoid the coming crash. The few who even attempted to point to a solution, at best, mumbled platitudes about the politicians finding the spine to adopt fiscal-austerity measures. One of the speakers – something of a gas bag, it must be admitted – pronounced in all seriousness that the only solution to the economic malaise was for everyone in America to rush out and read his book.As an aside, over the course of lunch with that same gas bag, we had a discussion that went something like this:
[Me] “All of the speakers, you included, point to the current trend of higher debts and deficits and say they are untenable, and so the big economies will hit a wall in the not-too-distant future. Yet hardly anyone actually then defines what hitting the wall will look like.”
[Him] “Yes, well, things will likely get a bit messy if the politicians can’t pull together to address the structural problems in the economy.”
“But wouldn’t you agree that, given the nature of our democracy, the odds of the politicians taking action before we hit the wall are almost nil?”
“Not at all. If everyone in this country would read my new book, they would understand the situation and rise up to force their elected representatives to take the right action.”
“Seriously? The only way to avoid the next leg down is if everyone in the US reads your book? That’s it?”
At which point – I kid you not – he picked up his plate and changed tables. (There’s a reason I am only rarely allowed out in public.)
But the fact remains that other than perhaps Doug Casey and a small handful of other presenters at our conference, almost no one even attempted to anticipate just what happens when the crisis swells up to its full height and then comes crashing down.
Or, specifically, what the consequences are likely to be when the world’s largest economies all hit the wall at more or less the same time. For the record, I have compiled a list of the ten largest economies in the world, and a reasonable assessment of their current situation follows in descending order by size of GDP:
United States – screwed
China – really screwed
Japan – massively screwed
Germany – pretty screwed, especially in that export economies take a big hit in a crisis
France – le screwed!
Brazil – somewhat screwed
United Kingdom – blimey, screwed too
Italy – properly screwed
Russia – hardly screwed at all (lots of resources and next to no government debt)
Canada – pretty screwed, eh?
As concerning as it is to see how many of the world’s largest economies are in trouble, the biggest problem of all is that the central bank reserves of virtually every country in the world are stuffed with US government IOUs masquerading as tangible assets.
So, what happens when the world’s reserve currency enters collapse and the dollar turns into a hot potato? Don’t know, but I’m pretty sure we’ll find out in the not-so-distant future.
[If you want your portfolio to be prepared for what’s ahead in the not-so-distant future, you’ll want to have the insights –including specific stock recommendations – the 31 speakers at the Casey Research Recovery Reality Check Summit gave. And you can have them: the Summit Audio Collection is available in either instantly downloadable MP3 format or CDs.]
