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Taleb: Global Crisis "Vastly Worse" Than 1930s, Buy Gold and Copper

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May 07, 2009 – Comments (17) | RELATED TICKERS: GLD

Taleb: Global Crisis "Vastly Worse" Than 1930s, Buy Gold and Copper

Investment advisor, risk expert and "Black Swan" author Nassim Nicholas Taleb said today:

The current global crisis is “vastly worse” than the 1930s because financial systems and economies worldwide have become more interdependent ...

The global economy is facing “big deflation,” though the risks of inflation are also increasing as governments print more money...Gold and copper may “rally massively” as a result...

“We’re going to get to the point where recovery is just not soaring and they’re going to do the same again. We’re going to have a very slow recovery from here.”...

Gold, copper and other assets “that China will like” are the best investment bets as currencies including the dollar and euro face pressures...

Note: Numerous other experts agree with Taleb that this is worse than the Great Depression.

I am not an investment advisor and this should not be taken as investment advice.

17 Comments – Post Your Own

#1) On May 07, 2009 at 4:42 PM, portefeuille (99.56) wrote:

the link

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#2) On May 07, 2009 at 5:05 PM, alstry (35.03) wrote:

The Institute of Alstrynomics may nominate Nassim for the first Annual Institute of Alstrynomics "Big Al" Award for to be given for honesty, integrity, character, intelligence and analytical skills with a keen ability to sift through the noise and hear the music to make sound projections based on the facts.

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#3) On May 07, 2009 at 5:18 PM, buildgreen (< 20) wrote:

I must admit it is odd to hear Taleb giving such predictinos considering his books theme. There is indeed no lack of psudo experts dispensing advice. 

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#4) On May 07, 2009 at 5:23 PM, MikeMark (29.89) wrote:

buildgreen:

predictino? is that like a neutrino? A really small particle of prediction? ;)

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#5) On May 07, 2009 at 5:43 PM, abitare (58.10) wrote:

Sorry, the hyperlinks did not work. Post was from George Washington's blog post here:

http://www.washingtonsblog.com/2009/05/taleb-global-crisis-vastly-worse-than.html 

Full story was from Bloomberg.

Thank you , portefeuille, for the link help 

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#6) On May 07, 2009 at 6:29 PM, JFund (40.40) wrote:

Since when was Taleb a credible source of investment information?  He's more of a philosopher than investor.

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#7) On May 07, 2009 at 6:36 PM, jester112358 (29.01) wrote:

Actually, Nissim was one of the best traders on wall street, making so much he was able to permanently "retire" like Soros and engage on philosphy.

 Soros has also indicated this crisis is worse than the previous depression.  And he has one of the few hedge funds to make money last year.

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#8) On May 07, 2009 at 7:03 PM, ozzfan1317 (81.83) wrote:

While I respect your opinion and your experience and success as well. I disagree with the buy commodities and get out philosophy. If your under 40 now is an excellent time to back up the truck and start buying great companys on the cheap. At least imho.

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#9) On May 07, 2009 at 9:13 PM, rofgile (99.33) wrote:

Wasn't his stuff all about randomness and black swans that lead to inabilities to predict trends?

 And he's making predictions?  That's great.

  I wonder if anyone will buy his books two years from now when we are back to things as usual bull markets, china booms, hedge funds and CEO games..?

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#10) On May 07, 2009 at 9:19 PM, StopLaughing (< 20) wrote:

A few notes.

Soros indicated that the bottom is in and the recovery is a reverse inverse sign (a V bottom then a flat plateau).

Further, you can have positive "Black Swans".

Thirdly, even the normal tech analysis is not working all that well. This market is not random. Obama and allies control much of the news and the timing of the news. 

I am long Gold and have been for a while. Copper has bottomed but Silver may be better as it is 40% monetary and 60% industrial. I like the low cost miners.  They tend to go up with the market and also up with the spot price.

Some aspects of this down turn are worse than the depression, but most are much better so far. There is no reason to panic at this point. However, we could easily get a W bottom or a reverse head and shoulders. We could just as easily get a V with stagflation with in 1-3 years.

I suspect Soros is right but where do we plateau?

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#11) On May 07, 2009 at 9:30 PM, JFund (40.40) wrote:

I believe buying commodities is an inferior investment when compared to buying companies since commodities do not generate income while companies do.  Further, as Buffett has said in the past, in a period of high inflation, people will be willing to pay an inflation-adjusted price for a superior product that provides value to one's life.  Thus, good companies are natural inflation hedges whereas commodity prices will collapse if inflation does not materialize.

Unless you're George Soros, it is dangerous to make speculations based on market movements that no one really understands. 

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#12) On May 07, 2009 at 9:36 PM, SuperPicks (29.31) wrote:

I don't know, gold is vastly manipulated no?

Silver is significantly controlled by the Chinese, no?

Copper pricing is determined by industrial / infrastructure demand, no?  Therefore any fools betting on a more quick worldwide turnaround, pour money into copper, possibly inflating prices moreso than needed.

These metals may rise or be more stable than currencies, but either way, in either direction, it is still speculative. 

I'd rather place my bets on general commodity plays such as GCC (which has exposure to a diverse array of commodites, precious metals, industrial metals, agriculture, and energy).  But keep in mind, I am an odd guy. 

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#13) On May 07, 2009 at 9:41 PM, StopLaughing (< 20) wrote:

The following is in response to the reported snippets in the Bloomberg article by Taleb and others.

There is a big diffference between NO control and the illusion of control. The US Gov has some control and tries to project more control that it has. It does not have the power by itself to control the global economy.

Taleb is wrong Governments do have some control but not as much as they project. Since Governments have some control there is danger from them doing the wrong things. They are not irrelevant, they can be helpful or dangerous. 

The only reason you would invest in copper is because you expect recovery. Copper has no monetary value. It has industrial value.  There are much better inflation hedges. However, he is right Copper will go up from here.

Taleb is wrong on Roosevelt. Some of his programs helped and others caused the W depression pattern. Government can be useful or harmful. However, monetarist theory is stronger than fiscal policy (particularly Keynes).

So far almost all of these gains are from money theory. Almost none (the $8000 new home owner subsidy may be helping a little) of it is from anything Obama has done. That stuff will kick in later. For better or worse I credit the TARP to Bush/Paulsen. Obama just continued to implement.

I tend to agree with Taleb on preferring stocks over bonds, unless you are a nimble experienced bond trader.

 

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#14) On May 07, 2009 at 10:48 PM, portefeuille (99.56) wrote:

Soros indicated that the bottom is in and the recovery is a reverse inverse sign (a V bottom then a flat plateau).

That should read "an inverted square root sign":

The recovery will look like "an inverted square root sign," Soros said: "You hit bottom and you automatically rebound some, but then you don't come out of it in a V-shape recovery or anything like that. You settle down -- step down."

(taken from here)

By inverted he means reflected about the y-axis ("exchanging left and right").

The x-axis is the time axis, the y-axis is the "index-axis".

 

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#15) On May 07, 2009 at 10:53 PM, NOTvuffett (< 20) wrote:

How can we avoid inflation in 2 years or so?  I like the commodities, especially copper.  There is no substitute for it.  Hard to think of a more fundamental barometer of the economy than that.  As a comodity, it is guaranteed to hold value despite the dollar's gyrations and gold is a byproduct of the refining process typically.

There has been speculation that the Chinese may slow the demand for copper for a quarter or two- if that happens could depress copper prices and the copper mining stocks for a time.  Might be a buying opportunity.  Two big players that come to mind are FCX and PCU.  

The gold bugs scare me with their apocolyptic prognostications.  Every gold miner I look at has some kind of wart. Does anyone have a suggestion in this sector?

 

  

 

 

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#16) On May 08, 2009 at 10:34 AM, MikeMark (29.89) wrote:

Suggestion in the gold sector: own physical gold and silver with smaller amounts or invest in commodity futures with larger amounts. Try goldmoney.com.

Also, get your mind out of the market and into your own local investments and business. Do something that helps people in your area. Make a profit from it. Become part of the local economy. Begin true recovery.

Then, if you still want to be a distant shareholder, take your time to invest in companies that continue and make a good profit showing in the coming months and years. 

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#17) On May 09, 2009 at 9:01 AM, TMFBabo (100.00) wrote:

I like copper more than gold because I think it's cheaper relative to value.  However, I think specifically picked equities can do quite well, even in a sideways market.  I wouldn't touch the entire market with a 10 foot pole, but I would touch a small basket of carefully handpicked stocks.  Even if you think the market's overvalued, there are still bound to be a few bargains out there as long as it's not Dow 14,000 overvalued.

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