Simon Hunt November/December Economic Report
John Mauldin
November 21, 2011
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I have been reading
and talking with Simon Hunt for a long time. He is a very thoughtful Brit who
spends a lot of time in China and thinks about copper and commodities and
cycles. He has enough seasoning to have seen a few cycles himself. This piece
summarizes rather well the view that he has expressed for some time. And while
I am generally skeptical of relying too much on cycles for specifics (they work
until they don't), I think Simon has some very powerful conclusions. From his
summary:
"The world is in a
balance sheet depression which will make a second and perhaps more dangerous
credit crisis almost inevitable. That should break out next year or in 2013.
"The three global pillars of the world
economy, the USA, Europe and China, each have their own problems, but their
impact is global because of the feedback loops from the financial sector to the
economy.
"The USA has a debt and deficit profile
which is unsustainable; the Euro Zone has to decide whether it can forge a
fully fiscal union or whether the costs are too great, in which event
membership will be restructured; and China is trying to put its economy on a
more sustainable growth path at a time of leadership change.
"Debt and demographics will be the
determining forces to global growth. Markets will no longer countenance
indecision and pushing debt problems under the table by lending more funds to
indebted governments. Politicians want to postpone what they know is
inevitable: debts must be repaid."
This is a very interesting Outside the Box
and one I suggest you put some thought into, as to how its conclusions may
affect you.
I write this from Dr. Mike Roizen's office
in Cleveland, where I will be at the Wellness Clinic tomorrow to do a general
physical and to find out specifically what is wrong with my right arm. Nothing
life-threatening here, as I told my daughters last night. Just life-annoying.
I get back to Dallas in time to go shopping
for Thanksgiving dinner and start the cooking. Some things just have to be done
overnight. I love this week! 40-plus people coming to dinner. And I hope you
have a great holiday as well. And if you are not in the US and don't celebrate
Thanksgiving, then make up an excuse and get your family and friends together
and have a great meal, emphasis on together. We should do things like this more
often!
Your enjoying life more and more (even with the damn
arm) analyst,
John Mauldin, Editor
Outside the Box
JohnMauldin@2000wave.com
Simon Hunt Strategic Services
Economic and Copper Advisory Services
November/December Economic Report
"Four years into the crisis it is surely time to accept that the underlying problem is one of solvency not liquidity – solvency of banks and solvency of countries. Of course, the provision of additional liquidity support to countries and institutions in trouble can buy valuable time. But that time will prove valuable only if it is used to tackle the underlying problem.......But the...
Comments
Jake Berzon
Nov. 25, 2011, 12:37 p.m.
Great overview piece, but it would really help and make for easier reading, if Simon was more careful about the way he uses terms and had the piece properly edited.
Andrew Patterson
Nov. 24, 2011, 5:14 a.m.
Isn’t debt ultimately a zero-sum game? For every $1 of credit there must be a $1 of debit? Given that most of the world is over-leveraged, who is on the other side? I understand that the banks are merely intermediaries, but will still likely get wiped out on the way thru as they benefit from their own leverage (and ultimately this is why they get bankrupted if there are mass defaults). But who are the folks that will ultimately have to write off the bad debts?
Is it: Middle East? Chinese govt? Our own pension/superannuation funds? Household savings?
GRAHAM CHISHOLM
Nov. 23, 2011, 12:42 p.m.
Graham A Chisholm -Abbotsford Canada- I’m having difficultly in believing the BIS figures on Chart 1 re OECD govt, corporate & household debt as % of nominal GDP 2010 as they relate to Canada. According to this chart Canada’s govt debt is 113% of GDP??! I don’t think so or I shouldn’t believe current Cdn govt stats that govt debt is in the region of 30 to 40% of GDP. Otherwise great article !
Roger Gonzalez
Nov. 23, 2011, 8:14 a.m.
...and the positive side of the story is for Latam. Good fundamental economics ( after a hard lesson during the 80s), good demographics ( still much to do on the education side), good resources, great potential to increase middle class. Having US companies moving from offshoring to nearshoring of manufacturing and services should also benefit both the US and Latam.
Andrew Purdy
Nov. 22, 2011, 10:09 p.m.
Anyone who thinks the deleveraging will be over by 2018 is in dreamland. If you look at a graph of long term US Treasury rates since 1789, each of the 3 major dips is deeper and longer than the previous one. I expect long term US Treasuries to go below 1% and to stay there for 30-40 years.
Ben Burford
Nov. 22, 2011, 5:34 a.m.
John Great article. Now to look next at what opportunities this throws up.
scott grider
Nov. 22, 2011, 4:27 a.m.
apreciate the newsletter always, john.
i know you are all over biotech, but after the doctors run you thru 2 or 3 nerve operations or a rotater cuff surgery that only a pitcher for our Rangers would need, like they did me, ....find yourself a good 5-element acupuncturist and dispense with the problem like i did.
signed, a big fan
Edward Klatt
Nov. 21, 2011, 10:52 p.m.
As always, your analysis is always spot on. I find it very helpful in bringing to bear the strategic insight that as a trader, I must have. Keep up the great work.
Rgrds,
EK
Clearwater, FL. USA
Werner Glass
Nov. 21, 2011, 9:20 p.m.
Chart 9 is in error. The dependency ratio for USA is 3.0 and shows a DECREASE of over 40%, not an INCREASE of 45%.