The newspapers are certainly filling up on euro-misery. The business sheets follow the arguments between central bankers and politicians. And the front pages concentrate on riots, strikes and general malaise.
Greece and Portugal are in a terrible predicament. Unemployment in both are around the 25% mark. Youth unemployment is over 50%. With stats like that, trouble was always set to intensify. And now it’s more of the same for Spain.
Inevitable as it all seems, barely anyone cares to look at the root cause. But that’s what we’ll do today. Don’t worry, today’s article will be short and sweet.
All I want to do today is reveal one simple conceit that lies behind the European trauma. And I’ll show you why here in the UK, we’re not going to get away with it unscathed.
You’re going to need to be very careful in the months and years ahead if you want to hold on to your money and stand any chance of growing it. You’ll need to invest wisely. You’ll need to put defensive, wealth preservation tactics in place. And you’ll need to think smarter than the average investor.
At The Right Side, I’ll help you do this. And I’ll hook you up with the smartest money men I know. Between us, we’ll give you the kind of investment ideas you need. The kind you won’t find in ordinary, mainstream media.
Now, let me explain why you’ll need this kind of expertise in the years ahead…
This is no natural disaster
National economic debacles come down to two simple numbers. Both of them deficits:
• Trade deficits – how much you import over what you export.
• Budget deficits – how much government spends over what it taxes.
Now here’s a simple way of considering deficits: it is the extent to which you bet against the market and got it wrong. It’s every bit the same as the trading loss I may make at my broker’s account. In that sense, deficits are a man-made phenomenon.
Yes, the authorities would love you to believe that deficits are in some way a natural occurrence. They’d like you to think it’s just the way it is. BUT, it is not!
Governments, and by implication voters, make a conscious decision to spend more than they bring in, in revenues. They see the losses mounting up at the brokerage. Yet they carry on. It’s usually batted away by some nonsense like “We’re investing for the future. In the fullness of the economic cycle we will reap the rewards. The future is bright and we will balance the books at that time.”
And so they continue to bet against the market. The losses mount.
When it comes to trade imbalances it’s just the same. It’s logical that nobody can continue buying (importing) more than they sell (export) indefinitely. And yet in the case of the southern European states, that’s exactly what they did. Again, the extent of the losses are the extent to which the ideologues bet against the market and got it wrong.
But it’s not just those countries you’re reading about in your daily newspaper…
An exclusive report from The Right Side
The show could be coming to a cinema near you
After the US presidential election, you’ll be hearing a lot more about the new blockbuster fiscal cliff. The US has a massive budget deficit problem. Bigger than most in Europe. In desperation, the authorities set up the Joint Select Committee on Deficit Reduction last year. The aim: to find a trillion dollars-worth of savings. Suffice to say that they’ve got nowhere.
After the election this issue is coming back – big style. You’ll see it play out on the news.
Then there’s the UK. Yes, I know the government says they’re keen to balance the books. But they don’t have it within them to find the right policies to do so.
Here’s what we need to do...
The mounting losses are simply bad bets. Deficits are the extent to which the authorities were/are wrong when trying to fight the market.
When you’ve got a bad trading system, you find a new one. Either that, or you get out of the market altogether. You can’t just continue fighting the market.
Nobody is willing to ‘fess-up to the conceit that’s put most Western democracies in the awful position they’re in. I mean, crikey... it may not be pushing it too far to consider military rule in some European states before too long.
This is not a political newsletter. I don’t want to suggest policy responses. Not that it matters... I can’t see any of the current batch of politicians coming up with a response to these deficit losses.
The Right Side is a financial newsletter. And my policy response is to keep my finances defensive and to help you do the same. I’ll bring you the ideas as I find them. Keep reading in the weeks ahead.
And if you have people you care about (friends, family, colleagues) who you want to protect themselves, feel free to invite them to sign up to The Right Side for free.
I don’t mean to be such a doom-monger. I just wanted to get across the idea that budget and trade deficits are nothing more than trading losses. They show the extent to which your trading system is bad. And things are bad – you know that already. And it’s going to affect us all.
• This article is taken from the free investment email The Right side. Sign up to The Right Side here.
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