Wednesday 20 March 2013

(a) They'll Do Anything; (b) Bullion as Hedge

A couple of really interesting articles that illustrate powerfully some recent C@W themes.
Bargaining session
(a) They'll Do Anything.  This superb piece from Hinde Capital on the Cyprus debacle, strongly reinforces the point that politicians will do anything to keep the bicycle upright in the short term - and not just the usual slow-burning devaluations and inflationary tricks.  In the comments here we'd discussed more precipitate measures such as seizing private gold and forcibly converting savings into Consols.  Hinde stresses what a fundamental outrage is being planned for Cyprus in the expropriation of deposits, and lists a few more ghastly examples from recent years:
... the reality that the state is not in fact here for your protection as it once was and that we all need to take on self-reliance and a heightened sense of responsibility for ourselves. Some notable rule changes of late are subtle but growing in number: 
  • The ECB, holders of Athens-law and foreign law Greek debt all received different treatment 
  • The Dutch didn’t restructure SNS Reaal paper, they confiscated it 
  • The Irish banned lawsuits against the ultimate wind-down of Anglo Irish 
  • Portuguese private pensions were confiscated 
The list is long but you get the idea. Rule-changes are getting ‘regressively’ more creative and sinister ... as if the football referee has gone from being a quasi-neutral arbiter, to pulling off his black shirt to reveal a Manchester United one underneath and awarding himself a series of penalties.
Then, in comments under yesterday's post, Anon directed us to this story - our old friends Gazprom offering to bail out Cyprus !  Such a neat solution, eh ?  I have long suggested that, when the chips are finally down, we'll find ourselves delivered to the Chinese, and it looks as though we might be in for a small-scale rehearsal of this approach.  [Though in this instance, presumably the Cypriots will simply use it to get more out of the Troika - one Russian-sounding rescue package vs another ...]

(b) Bullion as Hedge:  the other day I suggested that bullion might work as a currency hedge (not an original thought, I know) and this is another theme developed in the Hinde piece - with graphs to make the point that gold has worked well for Sterling and Yen investors. Strongly recommend you take a look: if we are all being forced to take that heightened sense of responsibility for ourselves, the more perspectives the better.

ND

28 comments:

  1. Blue Eyes9:38 am

    I started watching a re-broadcast of a series called Continuum. The main characters are from 2077 and live in a world where the bankrupt governments has literally been bought by "the corporations" and the constitution had been amended accordingly.

    Timely.

    ReplyDelete
  2. We live in interesting times. I note that the way "the law" has been used in some EU countries is the bastard child of civil law nations, where the government has complete legal control of the country and the law courts merely apply the letter of the law as defined by government. So if a civil law country has a government law where 10% of the population will be thrown in gas chambers, the law courts will meekly apply the law.

    Not so in common-law countries like the UK. The law courts can (in effect) choose to ammend or strike down government laws and often have done so.

    ReplyDelete
  3. Blue Eyes9:39 am

    As regards "hedging", capital investment in my flat is the order of the day. Others might want to buy shares in Wickes.

    ReplyDelete
  4. @BE > Others might want to buy shares in Wickes.

    Try to avoid some of Wickes stuff if you can, especially their timber... I have been doing similar investment grade DIY operations on my house recently and have bought a lot at Wickes too!

    ReplyDelete
  5. Anonymous10:32 am

    It surely is the case that the nation state has disappeared(bar the trimmings and flim flam to preserve the illusion) and what has developed in it's place is an amoral corporation - perhaps one of a conglomorate like the EU -which can and will rob it's 'citizens' at will.
    There will be no escape.

    ReplyDelete
  6. Blue Eyes10:39 am

    Thanks for the advice Timbo. Mostly I am buying tiles from there. Mock anthracite is apparently where it's at!

    I know that lots of people say that investing in housing is the wrong sort of investment, but it's a double-edged investment for me. I can enjoy a nicer home and if everything goes tits up I can rent the place out to supplement my jobseeker's.

    ReplyDelete
  7. BE - Physical is the place to be as ND alludes to with gold. Gold is speculative too as is property - but it has the helpful quality of being real.

    Cyrpiots have discovered that even your bank accounts are not real.

    Which reminds me, we must chekc ont he share prices of internet bankers in the future - if people really get raided by the state they won't be so keen on the wonders of internet banking in the future....

    ReplyDelete
  8. "As regards "hedging", capital investment in my flat is the order of the day. Others might want to buy shares in Wickes."

    Wickes don't do hedging. Try your local garden center

    ReplyDelete
  9. LOL (+:

    (I think that's what they say)

    ReplyDelete
  10. Budgie1:03 pm

    Ryan, that is an excellent point about how the law works in the Roman system compared with the Common Law system.

    The EZ elite will do absolutely anything to preserve the euro, as I said a couple of years ago. So "laws" get made to suit their whim, and broken too.

    Mind you, statists in this country wanted to shave your savings like the EZ elite. It appears that individual liberty is only possible (but not guaranteed if we go down the statist route) in a Common Law society, and just not available in the EU (amongst others).

    ReplyDelete
  11. If you were watching, Millipede just made a total fool of himself in the house. IMHO :)

    ReplyDelete
  12. Blue Eyes1:55 pm

    Oh, have I missed the budget while looking at bath taps?

    ReplyDelete
  13. 1
    Interesting to read Timbo on Timber
    2
    Physical stuff that is easily transportable
    ... stamps?

    ReplyDelete
  14. Cyprus savers get support from the Guardian and Independent newspapers.

    Everyone wants a mansion tax until they realise its their mansion the tax is due on.

    ReplyDelete
  15. Caronte3:00 pm

    It might be too late for a gold cover, see http://www.thefinancialist.com/investors-lose-interest-in-gold/

    ReplyDelete
  16. @andrew. Small details are important when investing, timber or whatever, but is especially true with stamps!

    ReplyDelete
  17. Anonymous4:57 pm

    Re: The budget "boost" for housing.

    Seems that letting inflation go is still not addressing the problem of (potential) negative equity. Now they are feeding the beast directly. Just how bad were these bank loans?

    I think housing may have edged it over gold.

    ReplyDelete
  18. Caronte - thanks for link: butnot sure that article is wholly bearish

    "But Kendall also notes that the yellow metal remains highly valued compared to hard assets such as real estate or base metals. Gold prices could rise again, he cautions, if confidence dips over the strength of the U.S. economy and concerned investors clamor again for the safe haven the precious metal provides"

    ... he cautions !

    all just our various humble opinions, eh ?

    ReplyDelete
  19. How can you have a danger of negative equity when you are still importing people from overseas at the rate of 150,000 per year and telling them the only way they can get a house here is to get pregnant? Then the only way the government can provide said house is to rent it from the middle-class Tory voters via the housing benefit system. Frankly the government has set up a means of investment with high returns and no risk, a situation that will clearly last as long as this government and the next.

    ReplyDelete
  20. Ryan - When all the clever young people have quit Britain because they cannot afford decent housing then you'll get your negative equity.

    'round 'ere big 'ouses 'ave li'l old ladies on their own in 'em. The next ten years will see a flood of property donated to the Donkey Sanctuary.

    ReplyDelete
  21. so, timbo moves from timber to stamps - perhaps foreign ones - if they were French they would be timbres

    I'll get my coat

    ReplyDelete
  22. I strongly recommend The Moneymaker by Janet Gleeson, the story of the man who first tried to substitute coin with paper in Europe, and for good measure founded the Mississippi company which was as big a fiasco as the South Sea Company which followed it almost immediately in Britain.

    ReplyDelete
  23. andrew - no, stick around, we need comments like that

    ReplyDelete
  24. There's a set of Dr Who stamps coming out next week.

    You'll make more money buying them and then, selling to the Yanks on ebay the same week, than if you hang on to them for thirty years hoping they'll be a limited collectible edition.

    ReplyDelete
  25. @Electro-Kevin:

    "Ryan - When all the clever young people have quit Britain because they cannot afford decent housing then you'll get your negative equity."

    Well good point, but I don't think it will cause negative equity, because the government will just use it as an excuse to import yet more people from overseas. But what will happen in the end is that the people paying all the serious tax money will have moved to Australia or taken early retirement and the government will realise that the people they have imported are working as car valets getting paid sweet f.a. and not paying any tax at all.

    At that point the welfare state, that has encouraged foreigners to move here to take full advantage of the benefits system because you can work as a car valet but live like a lawyer here - will collapse. THEN you will get negative equity and a whole let else besides.

    Unless British people stop voting for tweedle-dum and tweedle-dummer and we get off this nightmare
    train to an inevitable hell.

    ReplyDelete
  26. O/T @idle: Yes, its an intersting book; at least John Law had a rakish and intersting side to him unlike the current crop of morons who lead us to hell.

    ReplyDelete
  27. @ND you seem you have missed the on-line subtlety of "I'll get my coat" - normally a self deprecating acknowledgement that the foregoing was a pretty awful attempt at a joke/pun...

    ReplyDelete
  28. errr ...

    not really, Timbr-o

    the point is, we like "pretty awful attempts at a joke/pun" around here

    enough of the over-analysis already !

    ReplyDelete