1. Interested in Wealth Preservation? This Family Has Been Rich for 300 Years

    In the United States, the “old money” is generally about 150 years old, with fortunes dating to the mid-19th century. Families in this category include the Vanderbilts, Rockefellers and Carnegies.

    More fortunes were created about 100 years ago including the Fords and Firestones. Some U.S. family fortunes are almost 200 years old (the Astors, Girards and Biddles). Most of the great wealth today is not old at all. It comes from success in the past 30–50 years including Mark Zuckerberg, Jeff Bezos and Warren Buffett.

    What about family fortunes that are 300 years old or even older? Fortunes that old are unheard-of in the U.S. but can be found in Europe.

    I’ve written often about the Colonna family in Rome, who have preserved their wealth for 800 years. This family fortune has survived the Black Plague, the Thirty Years ‘War, the Wars of Louis XIV, the Napoleonic Wars, World War I, World War II and more.

    My interest in the Colonna family began when I was a guest in their palazzo in Rome and learned the secrets of long-term wealth preservation from a member of the extended family. My dinner companion at Palazzo Colonna told me that the secret was “a third, a third and a third.” By this, she meant that wealth should be allocated one-third to land, one-third to gold and one-third to fine art (of course, some cash needed for operating costs and some business investment is fine also).

    The latest example of this strategy at work is described in this article about the Torlonia family, also of Rome. The Torlonias followed the same strategy as the Colonnas with allocations to land, fine art and gold. The Villa Torlonia in Rome is so impressive that it was temporarily expropriated by Italian dictator Benito Mussolini as his personal residence during World War II. (One point of an allocation to property is that despite temporary occupation or expropriation, it can usually be reclaimed later if the original title was good.)

    This article describes the Torlonia’s vast wealth preserved in their collection of Greek and Roman marble statuary. The family collection is considered to rival the collections in the Louvre and British Museum.

    Of course, not everyone can afford to collect 2,300-year-old Greek statues. But museum-quality 20th-century art or valuable numismatics are well within reach for many wealthy families. The “old money” shows that true wealth preservation comes from art, gold and land rather than stocks and bonds.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  2. Recession Is a Low Probability. But Is a Depression on the Way?

    Something I point out in presentations and in writing are the differences between recession, depression and financial panic. They can arrive together (as happened in 1929 and 2008), but usually the three conditions emerge separately and for different reasons.

    A recession is a decline in output accompanied by rising unemployment. Recessions are usually short (two or three quarters, rarely longer) and mild (the recessions of 1990 and 2001 were mild although the recessions of 1974, 1980–1982 and 2008 were more severe) and are part of the business cycle.

    Depressions are more rare (we had one from 1929–1940 and arguably have been in a new depression since 2007). Depressions can be much more severe (from 1929–1933 the Dow Jones index fell over 80% and unemployment reached 20%). Depressions may begin with panics or recessions but are extended due to policy uncertainty and liquidity constraints. A depression is not a mere business cycle blip but represents a prolonged period of below-trend growth.

    Financial panics are different than both recessions and depressions. Panics are mainly psychological and represent a sudden desire for liquidity at all costs and widespread dumping of risk assets without regard to valuation metrics.

    Panics emerge seemingly from nowhere. They can be brief, but also severe in the losses produced. Panics can be truncated by private intervention (J.P. Morgan in 1907) or public intervention (Ben Bernanke in 2008) or they simply run their course like an epidemic once the victims either die or recover.

    This article features an interview with well-known analyst Mike Pento. He understands the recession-depression-panic distinction described above and argues that something like a panic followed by a depression is highly likely given stretched valuations, reduced liquidity and the inability of central banks to end a crisis as they did in 2008.

    You don’t have to agree completely with Pento in order to take heed and make at least some preparation for the worst.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  3. Here’s a Deep Dive on Slowing Global Growth and Decoupling From China

    Despite economic happy talk from Wall Street and the White House, the fact is that the global economy is slowing down. The evidence for this comes from near-recession conditions in Germany, Italy and the U.K., and from steeply falling GDP results from the U.S. and China.

    Global trade is contracting in lockstep with global growth. The most recent productivity statistics for the U.S. show an actual decline for the first time since 2015. Considering that all economic growth is simply the output of two factors — population and productivity — these new productivity figures are disturbing.

    Beneath these headline factors, there are even more troubling trends as described in this article. These underlying trends include specifics on manufacturing data, external liabilities, world trade in relation to GDP, shrinkage in the supply of “safe assets,” changes in global reserve holdings and more. Whether viewed as headline data or from down in the weeds, the combination of declining growth, increasing debt, reduced trade and liquidity stress is not reassuring.

    There’s little chance of a recession in the short run. But investors who don’t prepare now for another liquidity crisis or financial collapse may regret it sooner rather than later.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  4. Don’t Bet the Ranch on a China-U.S. Trade Deal. The Worst Is Yet to Come

    The recent rally in stock prices has had two main drivers (and no, earnings are not one of them; earnings have been OK relative to manipulated “expectations” but they are down year over year).

    The drivers have been Fed ease and good news on the China trade war issue. Fed ease will continue and act as a tailwind for stocks over the next year. But the China trade wars news is more problematic.

    The market expectation is that the U.S and China will reach a “mini-deal” (known as phase 1) in the coming weeks. This might include a delay of additional tariffs planned by the U.S. for Dec. 15 along with substantial commitments by China to purchase over $20 billion of U.S. soybeans and hogs. The tariff relief might go further to include a rollback of existing tariffs.

    The Chinese purchase commitment might be larger than $20 billion. Yet even this mini-deal is not a done deal.

    It was supposed to happen on Nov. 17 at a summit conference in Santiago, Chile. The summit was cancelled due to riots in that city and no acceptable meeting venue for presidents Trump and Xi has yet been announced.

    China is pressing for more concessions by the U.S. in the meantime. In any case, the market is priced for a done deal. Any disappointment on substance or timing will throw stocks for a loss. Beyond that, there is almost no chance of a phase 2 deal or anything that would end the trade war once and for all.

    The unresolved issues include theft of intellectual property, opening of Chinese markets to U.S. investment and cyber-espionage through Huawei and other Chinese tech giants. This article describes another deeper and more profound impediment to good relations.

    China is one of the most horrific human rights abusers since the end of the Third Reich. China is rounding up Uighurs and Christians and putting them in concentration camps. The unlucky ones have their organs removed without anesthetic to support an organ transplant industry. The victims’ bodies are then cremated, exactly as the Nazis cremated Holocaust victims.

    China has said criticisms of its abuses are not “helpful” for trade talks. China’s reaction to criticism is not “helpful” to the stock market. The bigger question is why the U.S. does business with China at all.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  5. As the Impeachment Farce Rolls on, Trump’s Chances in 2020 Improve

    Elections matter. So do impeachments, apparently.

    Impeachment of presidents is extremely rare (there have only been three impeachment proceedings in U.S. history before now, and only two actual impeachments. Both trials acquitted the president).

    Still, we’re in the thick of an impeachment proceeding today. This one bears no resemblance to the prior cases. Those impeachment proceedings (1868, 1973, 1998) reflected deep political differences, but they were guided by due process of law. Both sides could call witnesses, confront witnesses and cross-examine testimony and the proceedings were held in public.

    This time, only the Democrats can call witnesses, there is no effective cross-examination (Republican questions have been shut down and witnesses have been ordered not to answer) and the proceedings are held secretly. The witness who started the entire process (a so-called “whistleblower”) has so far not been identified by mainstream media (his name is easy to find on the web) and has refused to come forward.

    The impeachment charges related to Ukraine are not impeachable offenses. What’s wrong with a president demanding an investigation of alleged criminal behavior before U.S. taxpayer dollars are handed over?

    In short, the impeachment process today is a farce. That doesn’t mean Trump won’t be impeached (he probably will be), but the process will only enrage Trump supporters and increase 2020 turnout to his benefit.

    That’s not the only effect. According to this article, the backlash will extend down ticket to help win back Republican seats lost in 2018 and regain control of the House of Representatives for Republicans.

    The most vulnerable Democrats are those who won in districts that Trump won by 10 points or more in 2016. Voters in those districts elected Democrats in 2018 to deal with health care and prescription drug costs. They were not elected to impeach the president on bogus charges.

    The damage to Democrats may go even deeper than just these vulnerable seats. We’ll see what happens in 2020, but as of now, impeachment will be a boomerang that hits Democrats hard in the end.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  6. James Rickards: ‘The FED may cause the next recession by trying to get ready for the next one’

    In a recent interview conducted at the Nasdaq stock exchange headquarters in New York, macro analyst and financial commentator James Rickards warned of a potential upcoming financial panic in the run-up to the release of his latest and final book in a series of four called “Aftermath“.

    The bestselling author thinks that the US Federal Reserve (FED) raising the interest rate from zero all the way to the current 2.25% to 2.5% over the last couple of years may be a ploy from the central bank to give it the opportunity to then cut rates in the event of another potential economic downturn.

    To read the rest of this article, click here.

  7. Why Are We Doing Any Business With China at All?

    The trade war debate with China misses a much larger and more brutal reality. We can discuss tariffs, intellectual property and direct foreign investment all day long.

    What about the murder of Catholics, Falun Gong members and Muslim Uighurs? What about the burning and destruction of churches and temples? What about millions locked into concentration camps undergoing brainwashing (at best) or torture (at worse)? What’s going on in China today is as bad as or worse than the Soviet Gulag system that resulted in the deaths of millions of dissenters against the Soviet dictatorship.

    China is seeking nothing less than totalitarian thought control, total censorship of the internet and hegemonic control first of the Western Pacific and eventually the entire world. This article details some of China’s most horrific abuses — the involuntary removal of organs from still-living religious minorities without the use of anesthetic to supply a multibillion-dollar transplant industry.

    This horror is not just a matter of speculation. It has been documented by the International Coalition to End Transplant Abuse in China chaired by Queen’s Counsel Sir Geoffrey Nice. So why are we doing business with China at all?

    The U.S. did almost no business with the Soviet Union during the Cold War (1946–1991). Not until after the fall of the Berlin Wall (1989) and the dissolution of the Soviet Union (1991) did a significant amount of direct foreign investment flow from the U.S. to Russia. U.S. companies should pull out of China now.

    New investment in China should be prohibited. Chinese investment in the U.S. should be banned. Trade should be limited to basic commodities such as wheat and soybeans.

    This economic wall should stay in place until China ends the abuse and recognizes basic human rights even if they are less than a full-fledged liberal democracy. Investors would be wise to trim Chinese investments from their portfolios before a coming flood as disinvestment becomes mandatory.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

     

  8. A Funny Thing Happened on the Way to the Cashless Society

    We’ve written frequently on the advent of a cashless society. Our articles and links include references to central banks and academics calling for an end to cash. We’ve also highlighted retail stores with “No Cash” signs on the door.

    Cashless payment channels including direct deposit to credit cards, debit cards, PayPal, Apple Pay and chip payments are ubiquitous. In an extreme example, citizens in Sweden are now getting “chipped” (a small radio frequency transmitter is implanted into their hands) so they can make payments with the wave of a hand. (This also subjects you to 24/7 police surveillance, but that’s another story.)

    The reasons for moving to cashless systems are ostensibly to fight crime and tax evasion. The real reasons are to impose negative interest rates (a kind of tax on savings). It’s critical to make all cash digital to prevent citizens from withdrawing physical cash to avoid negative interest rates.

    Yet a funny thing is happening in the world of cash as reported in this article. Cash is making a comeback!

    This article states that in the United States, cash in circulation has increased to nearly the highest level in 36 years and is up 5.6% since before the 2008 financial crisis. There are more $100 bills in circulation today than $1 bills.

    The share of the $100 bill as a percentage of all currency in circulation has increased from 73% in 2008 to 80% as of last year. The reasons for this have to do with a loss of trust in the banking system after 2008 and preparation for an even worse crisis to come. Of course, gold is another way to hold assets in nondigital form and without reliance on banks or banking.

    Still, a healthy dose of cash will serve you well in a natural disaster such as the wildfires raging in California today. The power is out in much of California, so credit cards, ATMs and gas pumps don’t work. But a Benjamin Franklin $100 bill will still get you food or water when the opportunity presents.

    The elites will still push for a cashless society, but everyday Americans seem prepared to push back.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

     

  9. National Polls Are Meaningless. What Matter Are State Polls

    This may sound funny, but there are no “national elections” in the United States. We elect officials to national office including president and vice president, but these elections are conducted state by state (and in the District of Columbia) and are not truly national.

    In fact, when you vote for “president,” you don’t actually vote for president — you vote for a group of “electors” chosen by the political parties and they will vote in the Electoral College for him or her about a month after Election Day.

    The point is not to nitpick the process or dredge up a long-forgotten civics lesson from the sixth grade. The point is to help investors understand how to read polls and other preelection data.

    Between now and Election Day 2020, you will be bombarded by “national polls” that predict one outcome or another (mostly negative to Trump). You can safely ignore these because a national poll will typically overweight the number of respondents from New York, California and a small number of other high-population states.

    Yes, the Democratic candidate will win in New York, California, Illinois and a few other big states. But they can only win them once, not twice or three times. The “extra” votes (above what’s needed to win once) go to waste.

    That’s just how the Electoral College works. So those poll respondents do count in the polls, but they do not count in the Electoral College because their home states are already in one column or the other.

    Meanwhile, Trump can win Electoral College votes in groups of two, three or four from states with small populations that don’t impact the polls much. Trump can also win big states (Michigan, Florida and Texas) by small margins that look close in the polls but are actually huge in the Electoral College because electoral votes are allocated on an all-or-none basis.

    To do election forecasting accurately, you need to focus on state polls. This article is a good example. It shows that only 43% of the voters in six key swing states favor impeachment, compared with slight majorities that favor impeachment in “national” polls.

    That’s good news for Trump because it opens a path to reelection even if he is impeached. There’s more to the science of interpreting polls, but keeping the distinction between national and state polls in mind is a good place to start.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  10. The Year of the Riots. It’s Only Getting Worse

    Those who follow foreign affairs are certainly well acquainted with recent demonstrations in Hong Kong against infringement of local citizens’ rights by the Communist Party of China based in Beijing. These demonstrations have persisted for months and have escalated both in violence and in the scope of the protesters’ demands.

    The Communists are using water cannons, tear gas, rubber bullets (and some have been shot with real bullets), truncheons, arrests and even murder (dismembered bodies of protesters have turned up in the waters around Hong Kong). But how many have noticed this is not a local phenomenon? Protests bordering on riots with violence on both sides are occurring in Barcelona, Paris, Santiago, Baghdad and Caracas.

    Meanwhile, Mexico’s army is losing pitched battles with cartel troops and South African farmers are being murdered by squatters even as the power goes out in the major cities there. Argentina is also suffering acute financial distress bordering on social unrest. The U.K., Israel, Italy and the U.S. all have governments that are divided to the point of paralysis.

    This article offers a closer look at the situation in Santiago. The larger point is that we are witnessing a global surge in urban protests by students, homemakers and lower-paid workers against elites and governments that deny human rights or block paths to economic progress — or both.

    Such scenes in a single city are not uncommon. But when 10 or so cities on five continents erupt in violence at the same time and major governments cannot achieve consensus on the legitimacy of government itself (think Brexit and impeachment), it is reasonable to ask if we are watching the beginning of the end of civilization, not unlike what happened at the end of the Bronze Age (1100 B.C.) and again with the fall of the Roman Empire (A.D. 476).

    We can’t answer that question (yet) but we can be prepared in case the answer is the one many fear. Investors with gold, silver, land, hard assets, fine art and other tangibles are in the best position to survive the worst.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.