Reserve is low on options. Shots fired after so many crises.

I am delighted to share with you information from two interesting articles published by two of my favorite geopolitical and investment gurus. Do not forget, whether you like it or not. Real Estate is an investment. You do not use it and throw it away as a consumable.

Both articles clearly explain that our governments are now in “stage 5” of the cycle and are running out of the options on how to deal with future crises. The lack of the ammunition is obvious and will have serious consequences at the time of reset and start a new cycle. By reset I do not mean Justin Trudeau’s “Great Reset”. His Great Reset will only speed up the inevitable rush to the bottom and serious consequences which will all Western societies face not far in the future. Here is a quote from DAVID ROSENBERG AND ELLEN COOPER’s article published in Financial Post 2013/12/03:


The bottom line is that the Fed's incursions into every facet of the market are ongoing and have distorted price discovery and equity risk premia. It has to be remembered that crises are going to happen in the future, whether it be a homemade one like the 2008/09 financial crisis or the imported COVID-19 crisis this year. We can go back to wars or 9/11, too. One thing we know is that we are prone to crises.


The difference with this last one is that the Fed was already close to being out of bullets. Now it's not just marginally positive rates and a Us$4-trillion balance sheet; it's zero rates and a Us$7.5-trillion balance sheet loaded with interest rate risk and credit risk. Fighting the next crisis will cause the Fed to become an even greater market manipulator. Until then, the best advice in this increasingly insane financial asset world, where pricing is manipulated by the central banks, is to focus on what is real and not artificial — as in hard assets such as precious metals, real estate and infrastructure.


The second set of quotes I prepared for you is from the latest post of Chapter 9 of RAY DALIO’s Changing World Order on LinkedIn.  He believes that the US is firmly in Stage 5 (Last stage is 6 - Deleveraging, Reset of Debt with or without Wars and Revolutions).


An essential ingredient for success is that the debt and money that is created is used to produce productivity gains and favorable return on investment rather than just being given away without yielding productivity and income gains because if it is given away without yielding these gains the money will be devalued to the point that it won’t leave the government or anyone else with much buying power.


The following chart shows the estimated likelihood of a civil-war-type conflict based on the number of red flags. Based on what we have seen in the past, we estimate that when there are 60-80% of the red flags present, there is around a 1-in-6 chance of severe internal conflict. When lots of these conditions are in place (greater than 80%) there is around a 1-in-3 chance of a civil war or revolution—so still not probable but too probable for comfort. The US is in the 60-80% bucket today. In the concluding chapter of this book I will much more comprehensively pass along the indicators and what they show. Right now, I just want to convey the concept.  

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Watch populism and polarization as markers. The more populism and polarization there is, the further along the cycle a nation is in Stage 5, and the closer it is to civil war and revolution. In Stage 5, moderates become the minority. In Stage 6, they cease to exist.


A classic marker in Stage 5 that increases in Stage 6 is the demonization of those in other classes, which typically produces one or more scapegoat classes who are commonly believed to be the source of the problems, and if they are destroyed, imprisoned, or kept out, this will lead to better results. Minority ethnic, racial, rich, and poor groups are often demonized.


WHY am I blogging about this very depressing subject? Because I believe that only hard assets such as real estate and not financial assets are important  and safe to hold when the real tough times come. This is why I pivoted into Real Estate and why it is for me so important to share my strong belief with you and help you to protect yourself from real reset.


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