Editor’s log: Agora Financial Investment Symposium, day two…
But first this from News Ltd: “The cost of banking fell 4.3 per cent, vegetable costs fell almost 7 per cent and fruit prices fell more than 7 per cent. Overseas travel and accommodation costs were more than 3 per cent lower in the June quarter.”
Your editor is clearly doing the grocery shopping in the wrong place. We long to find the magical store where the cost of food has fallen by so much recently.
Oh, but hang on, there’s a reason that our shopping bill has gone up. It’s because, prices have gone up.
In fact, based on the Reserve Bank of Australia (RBA) consumer price measures, prices have risen by either 4.2% or 3.6% depending on which figure they choose to follow.
Of course, the odds are that prices have actually gone up more than that anyway.
Just think about that for a second. The Australian and global economies are facing the toughest recession since the 1930s. Yet despite that fact, Australian businesses have been able to increase their prices by around 4% over the last year.
How so? Crazy government spending that’s how. We’re sure the $900 bribe won’t be much comfort to the thousands and tens of thousands of people that have either lost their job or faced a severe cutback in the number of hours worked.
Don’t forget, the unemployment rate only tells part of the story. It doesn’t tell you about the guy who used to work 40 hours a week but now only works 30 hours on less pay. Or the woman that used to work 20 hours per week but now only works 10 hours.
The policy makers may be cheering that they’ve defeated deflation, but they’ll soon find out there’s no turning back after building up an inflationary bonfire. The bad news is it’s already burning from the inside and will only get worse.
Now, back to the Agora Financial Investment Symposium here in Vancouver. Last night we shared a couple of drinks with a Money Morning reader that had made the trip out here.
Not surprisingly we had very little to disagree about. But it was a great way to finish off the day. A day of seven unique presentations. From Dr. Marc Faber’s “Yes, There Is A Light At The End Of This Tunnel!” to Frank Holmes’ “What’s Driving Gold?”
In between there was Rick Rule talking about resources and Chris Mayer addressing “The Coming Agricultural Break Point.”
Today things haven’t slowed down any further. As we approach 5pm local time there have been a further seven presentations in the main ballroom and another 40 in the workshop sessions.
With six more remaining in the day’s play, that will take us straight through to the “Annual Whiskey Bar and ‘Rough & Rumble’” panel discussion.
That’s one we don’t want to miss.
As the conference blurb explains, “We give our most controversial speakers and writers a few drinks… and then invite them onstage for an intellectual free-for-all. No topic is off limits, from economic policy to the latest on the War on Capitalism… With populists, anarchists and libertarians fighting to make their points, it’s sure to be a feisty, fun and informative debate.”
We’ll have more details on that tomorrow.
With so much on the plate yesterday and today there just isn’t the space to do them all justice. But we’ll try. I’ve picked out some of the best comments from various speakers.
Let’s go through them now…
Chris Mayer, from Capital & Crisis went through the dangerous degradation of the globe’s supply of arable land. According to Mayer, there are really only three major wheat exporters left: North America, Australia and New Zealand.
It’s a subject we’ve looked at in Australia Small Cap Investigator. And not surprisingly it is China that’s adding to the demand, accounting for 25% of global fertilizer demand.
Next on stage was the Martini swigging, cigarette smoking editor of the Rude Awakening newsletter, Eric Fry. One of his early comments set the tone for his outlook on the US market:
“I’m scared of US financial assets. Not all of them, just most of them.”
He’s not alone, we’re scared of them too. Fry’s answer for American investors is something he calls The New ‘Permanent Portfolio.’
What’s that involve? Well, it simply advocates a basic asset allocation portfolio strategy, incorporating the following asset classes:
- Commodities (including gold)
- Emerging Market Stocks (BIC – Brazil, India, China)
- Value Stocks Worldwide
- Liquidity – Volatility Dampener (for example, this could include bonds)
Fry’s biggest concern about the US market was the debt level. As he pointed out, “On a cash accounting basis the US debt is over $10 trillion. But on a GAAP accrual basis it is $74 trillion.”
That’s one scary number.
Rick Rule, an icon among resources investors, offered some simple advice. It’s almost not worth printing because it’s so obvious. But, do you know what, it’s simple advice which many mainstream commentators have ignored over the last year.
“When you’re confident you might consider selling. When you feel terrified, you might consider buying.”
See, I told you it wasn’t a ‘Eureka’ moment. But it’s perfectly applicable to the resources sector right now. Especially energy, which we’ve been banging on the drum about for some time.
Once yesterday’s presentations were over it was off to the evening reception with music, roast beef rolls, shrimps, pasta, and – for your editor – two slices of cheesecake!
Out of today’s presentations I’ll select just two to cover here.
First, Barry Ritholtz, CEO and Director of FusionIQ. Barry went into some detail behind the causes of the recent crash. Most of it is stuff we’ve covered here in Money Morning so I won’t go over old ground.
Perhaps of more interest was Barry’s outlook for the US economy and some of the impacts the crash has had on certain sectors. Here’s the highlights of those comments:
Asset deflation – housing will probably fall another 10-15%. Here he used a good example of the irrational bullishness of those that have already called a bottom to the US housing market.
Barry pointed out that although the recent housing permits number showed a 3% rise in applications over the previous month, the stats actually came with a margin of error of 11%.
In other words the data was statistically irrelevant. But it’s typical of the grabbing-at-straws approach of the housing bulls that they need to rely on the most inaccurate and unreliable data to press their case.
Consumer spending – December 2008 was the worst in history. Retail companies that survived are now downsizing and cutting costs.
Auto sales down 30% – Even the big Asian producers such as Toyota and Honda have seen massive drops in sales.
US debt – this will rise to $15 trillion by 2015, that’s up from over $10 trillion today. Of course, we factor in Eric Fry’s use of GAAP then the real number is likely to be 8 or 9 times larger.
But I’ll leave the last word to Patrick Cox, editor of Breakthrough Technology Alert. Patrick’s specialty is to look for ‘disruptive’ and ‘transformative’ technologies.
In other words, the type of game-changing technological advances that have the potential to turn the world as we know it, on it’s head.
In fact, the title of his presentation spelled it out, “How to Profit from the End of the World (As We Know It)”.
Take these comments from Patrick:
“Forget embryonic stem cells… they are obsolete… the future is Pluropotent stem cells.”
How so? He put it this way, “We are now looking at the imminent increase in life spans. Telomarase resets the clock.”
Is this the stuff of science fiction? Or will it really become science fact? It’s easy to write this sort of technology off as pie-in-the-sky. But many new technologies have been written off before, only to completely change our ways of life.
He finished up by saying in true bear fashion:
“You’ll soon be able to buy stem cell therapies off the shelf. And we need to invest in these technologies today to allow you to outlive the [current economic] problem.”
That’s all for today. It’s time to head to the “Rough & Rumble” Panel Discussion to see what Eric Fry, Patrick Cox, Doug Casey and Chris Mayer have to say for themselves.
Based on what we’ve heard from these guys so far, it could be appropriate that the HSBC Celebration of Light, fireworks competition is currently in town!
