Trading Strategies for the Apocalypse

Apocalypse Now 300x225 Trading Strategies for the Apocalypse

Writing “A Hard Rain (is gonna fall)” Bob Dylan said that the ideas came flooding in – there was no time to think each one through – each line could have been a title of a whole new song. Trying to finalize this issue of T&B, we can only sympathise; someone appears to have hit the fast-forward switch – the past six weeks have brought enough market-moving news to fill a reasonably exciting year, or, for that matter, a dull decade…

As we go to press, after a catastrophic earthquake and tsunami, Japan is now faced with a meltdown – not in the figurative, but in a very literal sense; the Middle East is once again proving flammable in the extreme, as the decades of neglect of festering political sores play out in the only way they could have. Meanwhile, the US offers the tragically funny spectacle of a would-be national debate on an impending fiscal crisis with existential implications deteriorating into a political bun-fight, which abandoned any remaining pretence of relevance months ago, and now defies all attempts at parody. Europe is back in crisis mode (the only mode in which the European Union actually gets anything done) with yet another concerted attempt to deal with the peripheral debt crisis. We continue to believe that, having systematically exhausted all of the alternatives, the Northern Europeans will ultimately do the right thing, and the Euro will survive, indeed prosper. But that is a statement of hope… And we long ago learned to avoid laying large bets on the rational behaviour of horses or electorates.

Amidst all the ambient madness, Russia is increasingly assuming the mantle of the Switzerland of the Emerging Markets – boring, predictable, stable. For us old Russia hands, this takes some getting used to!

Economic growth is trundling along in the mid-single digits, the budget deficit is likely to become a 1.5% surplus thanks to surging oil prices, the Central Bank is increasingly targeting inflation, which is clearly not yet under control, and the foreign investors are once again voting with their feet. Russia is the only one of the BRICs seeing substantial inflows this year. We remain long the equity market, and increase rouble exposure.

The ruling duumvirate is gradually cleaning out the Aegean stables – Mr. Luzkhov particularly will not be missed. This begs the question of why he was not done in a decade ago, before he could permanently scar the face of Moscow, but politics in Russia – as elsewhere – is the art of the possible. Despite the fierce campaigns of disinformation run by the shills for Khodorkovsky and the deeply vindictive and manipulative Browder, our predicted rapprochement between Russia and the West is finally eventuating – largely on Russia’s terms. Certainly, the fireworks in the Middle East, and the fear of a true cyclone should anything untoward happen in Saudi Arabia, are focussing minds wondrously on the key role of Russia in global energy markets.

The key factor to watch will be the growing relationship between China and Russia. We have long warned that, by poking and prodding at the Bear, the stupidly misinformed and ideologically misguided Western powers would push Russia into the welcoming embrace of her large Eastern neighbour – what should be their greatest nightmare. This is eventuating as Russia increasingly prioritises the Asian market for her energy, commodity and, soon, agricultural exports. Perhaps the Atlantic States are coming to realise the depth of their folly – Mr Biden’s pilgrimage to Russia suggests that some hint of reality is finally creeping in. That said, we very much doubt that Washington is possessed of the political realism necessary to accept the fact that American views on domestic Russian politics are a total irrelevance; Russia no longer craves the approval of her Western neighbours, and is now an independent power with global interests and alliances, some of which will be inimical to the interests of the West. An interesting example will be the incipient Russo-Chinese alliance to block UN action in Libya. Before accusing the two of cynicism, one should consider the unstinting US support for a Saudi regime no more democratic than that of Colonel Gaddafi, or the mid-century British pillage of Iran and Egypt.

T&B

For the latest newsletter – in FULL (the above was just the entrée) – click on the link below:

T&B – Trading Strategies for the Apocalypse

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5 Responses to Trading Strategies for the Apocalypse

  1. Robert D says:

    Excellent analyses, at a time of immense uncertainties and risk. Thanks!

  2. George Sidney says:

    I have to say I disagree with you that ‘benevolent global governance’ is the best
    political outcome for humanity.

    Under this proposed global government what will happen to people who disagree with
    rule by a single central government?
    Are dissenters to be put down or sent to concentration camps as has been the outcome
    of every grandiose centralised utopian governance vision? If it is to be a
    democracy what will happen if the democratically elected outcome is the separation
    of various dissenting groups from the global dictatorship? If it is to be a
    ‘benevolent’ autocracy who are the rulers going to be – an enlightened
    self-appointed Fabian elite whose views only concord with your own? What if power
    ends up being concentrated in the hands of a few thugs like the Stalinist regime or
    worse still in the hands if a psychopath like Pol Pot? Don’t you see any danger that
    such a concentration of central power over the whole of humanity is likely to be
    highly dangerous, corrupt and tyrannical? Would you be in favour of a global
    government that suppressed you? Is it not the existence of competing divergent
    jurisdictions (Russia in opposition to the US) that protects you and makes your
    views distinctive? How long would your views be tolerated if the US had no
    competitors in the international arena?

    Personally I regard ideas of ‘global government’ as a dystopian nightmare – a
    nightmare outlined wonderfully by Aldous Huxley and by Orwell.

    I am a little surprised to find you advocating this sort of thing. I would have
    expected instead to find you a supporter of plurality and diversity. The space for
    divergent views is a prerequisite for discovering the truth. I cannot imagine a
    global government would have any truck for any diverging views and would constantly
    strive to end all diversity in all aspects of human lives. This has been our
    permanent and constant experience of totalitarian regimes.

    In any event we already have a global government (the USA). And we have witnessed
    their astonishing stupidity and arrogance at work across the world. Ohio is the same
    as Iraq. We are bringing freedom and democracy. We are freeing women from
    oppression. We saunter up and down the Middle east and the rest of the world secure
    in our utter contempt for anything unAmerican.

    This current global government is breaking down. Similar to the Roman Empire before
    it – the last global governance system. Thank goodness: I look forward to dancing
    on the grave of these monolithic governance blocs and the fiat money system. I
    hope the replacement is 500-1000 small diverse pluralistic culturally particular
    countries none of whom is powerful enough or large enough to impose its will on any
    other.

    George Sidney, Vancouver, Canada

    • Ursa Major says:

      George,

      Thank you for your robust and passionate note!

      Let us first establish the parameters for debate: considering that the likelihood of a global government coming into existence before the entire ecosystem collapses is precisely nil, we are here engaged in an exercise of what the French call
      Politique fiction (by refernce to Science fiction) – a pure intellectual exercise with no real-world implications.

      I disagree with you entirely!
      First of all, I see no reason why a global government would be more malevolent than a national one. I do not think that the European Union is any more “evil” than the governments of Belgium, Germany or Italy…
      And the dystopian concentration camp universe you speak of can be readily enough applied on a small scale – and I think that a larger multinational entity would tend to dilute out ideological and nationalistic tendencies.
      But this is all neither here nor there.

      The point is that, time is running very short – the physical/biological system which allows the fineries of competing currency systems and parliamentary government is being rapidly destabiliized to the point that one has to be wilfully blind to imagine more than another couple of decades of meta-stability. The system is breaking down NOW…climate, energy, agricultural production – the destruction of the oceans, upon which I spend a large part of my life, defies description. In 30 years, we have gone a good way towards destroying what took many hundreds of millions of years to develop. No, I do not exaggerate.

      If there is a single recurrent theme to my writing, it is the danger of ideology, which like the sorcerer Circe turns men to swine.
      Also, the deterioration of intellectual life to the mouthing of empty phrases and buzz-words. My un-favourite is “democracy” Apparently, it cures all ills everywhere and always. And when it doesn’t….well, we must reinterpret the results – just like a doctrinaire Marxist would do with any data which tended to disprove the ultimate truth of the dialectic.
      A second buzz-word is “Freedom. ” It is taken as the ultimate good – free people will be good people, will be honest and productive people, will builid stable and sustainable societies… and…for Chrissakes, George, you accuse ME of being Fabian!
      In fact, people will freely opt to drive large cars, clear-cut forests, to consume as much as physically possible, to destroy the environment for short-term gain, to assert their power over their weaker neighbours, and to happily engage in unsustainable lifestyles without concern for the consequences elsewhere. We all do – you and I and everyone else we know!

      Individuals and famliies and countries may choose to produce children at a disastrous rate – for the individual in question it is nothing more than an exercise of free will. For the world, it is nothing short of a catastrophe.
      Indeed, among the developing countries, the Chinese example of population control has been overwhelmingly successful – one of the only bits of good news I can think of as we toboggan into self-made obliviion.
      The results of the “free–market” approach adopted by India defy description – population growth totally out of control.
      The consequences of this model are there for all to see in Egypt, and across the Middle-East. And that’s just the starter…the problem is that, in the good old days, these countries, having made the wrong choices from themselves, would be left to suffer the consequences. Given globalization, they will export these problems – emigration “of biblical proportions” being just one consequence

      The problem with the ideologically–based Ayn Randish system you seem to advocate is that it takes no account of the externalities of our acts.
      Great – so we have small, self-enclosed communities – democratic as you may wish – who happily dump their toxic waste on their neighbours. Who deplete the oceans, who build nukes along fault-lines, who pump C02 into the atmosphere and ignore the obvious consequences, while in the “developing world,” other small, democratic societies aspire to nothing more than the lifestyles you and I enjoy – despite the obvious fact that they cannot conceivably attain them without irreparable damage to the planet.

      It is unfortunate that we live in a finite environment. It would be so much easier if it were non-finite, and we could simply focus upon enhancing growth. In fact, like bacteria depleting their milieu, that growth will prove our undoing.

      Yes, the victories of the multinational approach are modest and few. The United Nations has a few victories to its credit (obviously, I do not refer to the Security Council, corrupted by the interests of a few preponderant countries).
      The whales have, amazingly, been saved – for now. Perhaps so will a couple more species – the survival of the photogenic. The release of ozone-destroying gases has been halted (that wasn’t too difficult).
      Were our brains configured differently, we would be desperately thrashing around for solutions – however uncomfortable in the near term – to keep the system working. In fact, our brain evolved for a vastly different environment, one very similar to the one you advocate (tribal) – they are manifestly maladaptive for the world we now inhabit.

      Après moi – le deluge!

  3. Joanna Bujes says:

    Darling Eric, you do not understand. Somewhere in Colorado, George and his ilk have discovered a great deep secret machine that creates an infinite and non-polluting amount of energy thanks to which they will be able to take care of their own needs while the rest of humanity perishes on their own petard. You see. It’s so very simple, it’s a wonder no one has thought of it before. We do not need workers or coal or wind or sun or water; just the infinite energy machine. It is also necessary to have titanic sex when the spirit moves you. Then you can go to Colorado. You doubt me? If you read “Atlas Shrugged,” it will all become very clear.

    Yes, alas, we are apes in airplanes. Ca doit etre triste de voyager dans un monde qui s’effondre. Man is in love,and loves what vanishes. What more is there to say? I would have wished for a better ending.

    Only when the last fish has swum and the last bird has flown, will the white man learn that you can’t eat money.

    Joanna

  4. Karl says:

    Interesting discussion, but you all have too little faith in technological progress, the invisible hand (including that of Mother nature) and man’s ingenuity – when you put a gun to his head!

    When will we have the pleasure of reading your next newsletter ?

    Best wishes and kind regards

    Karl

    Sent from my iPhone

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