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The New Paranoia: Hedge-Funders Are Bullish on Gold, Guns, and Inflatable Lifeboats

January 15, 2009 – Comments (7)

What was crazy talk is now normal and what was normal now seems like crazy talk...

All this something for nothing Financial ponzi schemes unwinding in a short period. Baby Boomer (BB) approaching retirement are learning they were parts of several giant ponzi schemes: Social Security, real estate bubble, stock bubble, commodity bubble, Tech bubble, treasury bubble and last but not least, the fiat dollar bubble. The last bubble holding is still the dollar, thankfully, the US dollar is still the reserve currency. But there are cracks in the armor as the EU, ME and Asia are tiring of US treasuries, US debt, arrogance etc....

China entered into the Korean war against the US in order to convince Russia to give it military production capabilities.  It got the production.

China and Japan held their currencies low in order to attract production. Now Asia has captured most of the US production capabilities.

The US has evolved into a nation of consumers, which produce almost nothing and consume 40% of the worlds oil with 2% of the worlds population and 40%++ percent of Americans are obese from over eating etc....  not sustainable, IMO.

So Baby Boomers are looking at their current assets, at their current values and planning retirement.  But what the BB does not realize is their sons, daughters and grand kids are not going to have the earnings power to buy all that stock, real estate etc... at the current valuations, plus much of the current valuation is based on other BB bidding for these assets - a sort of BB ponzi scheme.

Not to mention, the US used to be a leading exporter of oil. For those that do not know oil = quality of life. More oil = higher quality of life. The Average American uses 26 barrels of oil a year. The rest of the world gets by with an average of 2-4 BPY. (You can call me on this stat if I am wrong; numbers are from some Peak Oil film)

In case you did not know it. A house is worth - free with out employment. Yes, fools, the real estate model the US falls under is bogus and has been artificially run up by BB, banking and government sponsored agencies. If you do not believe it go to Hud.gov and look at Detroit. No jobs = free housing.  (Recognize own a home is anything but FREE as taxes and up keep require cabbage.)

Gen X and below are now trying to compete in a global economy, where everyone is under a competitive capitalist model.  When BB grew up, most of the world was under Communism and socialism, the US had oil, capitalism, the Breton woods agreement and production. Going forward that is no longer true. China and India produce more engineers, English speakers, CPAs, MBAs then the US X3. (Ref World is Flat)

Do you know the salary of a Chinese Engineer or an Indian CPA?

My WAG $500-1800 a month. (Ref World is Flat)

Well, that is the earnings/pricing power your children are competing against. 

So that McMansion, the $100k of stock XXX you expect Gen - X to buy so you can retire... well you have to realize, Gen-X earning power will not be what yours WAS, back when the US had oil, production and the reserve currency status.

Social security…are you dumb enough to think 2 Gen –Xers competing on a global environment can support 1 BB?

No there Fools Social Security is the biggest ponzi scheme ever.

I just thought you should know. For those stuck in a ponzi scheme the first to get out typically survive in tact. 

For the Gen-Xers and younger, it will be a far different world for you. Not necessarily worse, just different.  For those that compete and work hard, the world is now wide open. Never before have so many people have access to information and education at reasonable prices.  You can learn/read almost anything you need or want to know by logging onto the internet.  Just amazing really.

I digress, here is the story:

The New Paranoia: Hedge-Funders Are Bullish on Gold, Guns, and Inflatable Lifeboats

From the NYTimes:

During the final months of 2008, as the financial markets imploded, talk on trading desks turned to food and water stockpiles, generators, guns, and high-speed inflatable boats. “The system really was about six hours from failing,” says Gene Lange, a manager at a midtown hedge fund, referring to the week in September when Lehman went bust and AIG had to be bailed out. “When you think about how close we were to the precipice, I don’t think it necessarily makes a guy crazy to prepare for the potential worst-case scenario.”

Preparations, in Lange’s case, include a storeroom in his basement in New Jersey stacked high with enough food, water, diapers, and other necessities to last his family six months; a biometric safe to hold his guns; and a 1985 ex-military Chevy K5 Blazer that runs on diesel and is currently being retrofitted for off-road travel. He has also entertained the idea of putting an inflatable speedboat in a storage unit on the West Side, so he could get off the island quickly, and is currently considering purchasing a remote farm where he could hunker down. “If there’s a financial-system breakdown, it could take a year to reset the system, and in that time, what’s going to happen?” asks Lange. If New York turns into a scene out of I Am Legend, he wants to be ready.

He’s not the only one. In his book Wealth, War, published last year, former Morgan Stanley chief global strategist Barton Biggs advised people to prepare for the possibility of a total breakdown of civil society. A senior analyst whose reports are read at hedge funds all over the city wrote just before Christmas that some of his clients are “so bearish they’ve purchased firearms and safes and are stocking their pantries with soups and canned foods.” This fear is very much reflected in the market—prices of corporate bonds have been so beaten down at various points that they suggest a higher default rate than during the Great Depression. Meanwhile, while the overall gold market has fluctuated, the premium for quarter-ounce gold coins—meaning the difference between the price for gold you can hold in your hand and that for “paper gold,” such as exchange-traded funds—rose to an all-time high of 20 percent. “Gold is transportable, it’s 100 percent liquid, and it’s perfectly divisible in the context of ounces, bars, or coins,” says the head of a California research firm who keeps a supply of it, along with food, water, and guns, on hand. “And most important, there’s no counterparty”—i.e., it’s an investment beholden to no one, and perhaps one of the few assets that will retain value if the financial system collapses.

The rest is here:

http://nymag.com/news/features/all-new/53372/