12/27/2014 - BUYING MONETARY INSURANCE Before the Flood!
Ronald-Peter Stoeferle is a noted Austrian economist and money manager who believes strongly that “we should expect that financial repression as well as wealth taxes in various facets which will increasingly gain in importance in coming years”. He believes “this to be a disastrous strategy, as the redistribution will merely buy time, while the structural problems remain unsolved.”
A NEW MONETARY REGIME
Since 1971 we have had a new monetary era or regime that has directed massive debt induced growth which has been doubling every 10 years. The system presently wants and needs to deleverage but the political pressures don’t allow for central bankers and politicians to let this happen. What we have instead is policy induced inflation pressures creating monetary tectonic pressures.
Incrementum believes we presently have a “Bull market in Greed and a Bear Market in Fear” which will resolve itself with Gold being one of the big winner and moving to $2300 US/Oz. The recent weakness in Gold is due to:
- Disinflation and rising real interest rates,
- Partly declining money supply (especially in the ECB),
- Very weak commodity prices,
- Record high short positions,
- Rising opportunity cost of owning gold due to the rally in equities,
- Tightening credit standards,
- Increasingly negative analyst opinions,
- Firmer US$ based on confidence in the US Economic outlook,
- A high level of conviction in the ability of central bankers to “get it right”.
Most, if not all, of these false premises or signals will soon begin cyclically reversing.
“Financial repression is ultimately a government imposed transfer of wealth.”
AUSTRIAN INVESTING
Ronald-Peter Stoeferle and the team at Incrementum LI are developing a new approach which they refer to as Austrian Investing which combines the Macro views of the Austrian School of Economics with Asset Management. Their latest book “Austrian Investing between Inflation & Deflation (presently available in German only) shows how grasping the consequences of the interplay between inflation and deflation will be crucial for prudent investors. Investors should prepare for both scenarios – inflation and deflation.
Followers of the Austrian School have been extremely successful at anticipating major economic events like the Great Depression and the Housing Bubble.
- Monetary Policy – The Starting Point
- Macro Orientation – Most Important today
- Top-Down
- Understanding that central bankers & politicians cannot control the dynamics of inflation.
It is important to realize that radical monetary interventions will not lead to self-sustained recovery but to further turmoil in the financial markets.
AUSTRIAN INVESTING REQUIRES PROPRIETARY INFLATION INDICATORS
Understanding the Monetary Tectonic forces of Inflation and Deflation is critical to investment success. As such Incrementum LI uses their “Incrementum Inflation Signal Indicator”. Since August it has been signalling massive Disinflation / Deflation which has shifted their portfolio allocations.
Private Investors should watch the Gold-Silver Ratio closely.
