Dear client,

 

Everyone is in shock.  The speed and depth of the worldwide market decline is rewriting economic theory.  The level of fear has never been higher and the level of public confidence has reciprocally never been lower.  Right now the market is acting as if Capitalism has only an even chance of succeeding.  However, there is little alternative, we salvage what is left of public confidence and restore a new and improved version of Capitalism or begin the descent into anarchy.  I believe we will recover but if confidence is not restored and everyone wants cash, the system will fail.

 

As this calamity has unfolded I have tried to keep my head as the world has lost its.  I have created a defensive portfolio for you to weather and even prosper in what should have been a sane deflationary process.  It is not sane and this once-in-a-century event is far from resolved.  The continuing panic has accelerated the deflationary process and it has been particularly severe in foreign markets.  

 

What is clear to me now is that we “manufacture” financing more than anything else.  When we export our financing overseas, it picks up speed and acts like a steroid to the foreign recipient’s growth.  Now, when that credit is withdrawn, it acts like the vacuum of a nuclear explosion; everything gets sucked up.  Domestically many age-old, foundational American companies are gone or on the verge.  They are symptoms of the global delusion that credit growth equaled real, organic growth.  GM, once the prized feather in our national cap, will not survive in its present state.  There are no more Investment banks in America and they provided the financing to build this country!  A new day is dawning in history.

 

Although the drama unfolding is mortifying, signs of a complete breakdown remain absent.  I am fixed on   1) US dollars continue to rise reflecting the domestic deflation as well as the flight to the quality of our currency.  2) US Treasury obligations have gone so high that their yield is almost 0%.  Again, if there was going to be a complete collapse, everyone would flee everything including US Treasuries and their interest rates would be rising.  3)  Gold is the only vehicle of true value on an Earth that has not broken down to chaos.  Gold hit a peak of $1,000 per ounce and reflected the tremendous expansion of credit that occurred during the housing bubble.  Now that the bubble is deflating, gold is also falling.  In a legitimate crisis, one that threatened a complete global meltdown, gold would now be measured by the thousands of dollars per ounce.  Although the market is pricing in a 50:50 chance of Capitalism’s failure, it is not showing up where it would make the most sense.

 

Therefore, although this is the ugliest financial climate of our lives, we will survive.  In the midst of a crisis we are all emotional and anxious.  This is a Modern Depression that is progressing at light speed.  The outrageous moves and the depths of this descent have as much to do with just how out of control regulators are, as with a financial system being reformed right before our eyes.  The manipulation of oil this year; tripling and then collapsing, is ample evidence of the virtually unregulated horseplay.  It works because we are all subject to the emotions which are easy enough to manipulate by wildly swinging market prices.  Behind the scenes, the fundamentals are reflecting a more orderly deflation.

 

Thank you for calling me and attending my recent presentations as I am here to explain the situation and my analysis.  My hand is on the wheel and will remain so.  

 

Thank you for your continuing confidence.

 

 

 

David Roskoph

Capatalism, deflation, modern depression

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David Roskoph
Investment Adviser
Certified Financial Planner
Total Asset Performance
Total Asset Blog