The Great Depression was a horrible economic event that tore through America and the modern world. I doubt, however, that
a small village in El Salvador or anyone living in Siberia really noticed.
The percentage of the global population that was agrarian-based was still high. In general, more people around the world could
take care of themselves with little or no dependency on the rest of the world.
That is definitely not the case today. Two years ago, I took a surfing trip to some back islands of Indonesia, and I noticed
that if the supply boats missed a few trips out to this desolate place, the few locals would have a hard time getting by.
Farmland all over the planet has been converted from widely producing resources to specialized profit centers. Those islands
where I surfed are all dedicated to coconut farming. Residents’ diets would get pretty boring pretty fast without those supply
This new globalization can take some credit for the bull market from 2003 until 2007. Cost-cutting advantages were rampant,
and so were the opportunities. Millions of people in Asia were moving out of poverty and into the middle class, and becoming
investors in the process. Unfortunately, most of these people are experiencing their first bear market, and many of them will
be turned off to investing for a generation.
The stories of the Asian growth engine are powerful and convincing. It makes perfect sense to me, but I am not buying it until
I see signs of improvement in the U.S. stock market. If we truly are going to wash up on the rocks, we are going to take the
rest of the world with us.
It seems as if every country in the world is making the same policy mistakes that may offer some short-term relief, but will
ultimately prove fatal. China is just as guilty of lowering interest rates and borrowing and printing more money as England
and the United States. Cash is still the best place to hide until we see signs of spring.
Our stock market experienced a decent rally from the middle of March until late May. Investors were a little emboldened by
the $150 billion in stimulus checks sent out by the government. Talk around Washington today is another stimulus bill will
be passed, this one to the tune of at least $600 billion.
And we aren’t alone this time. China, Japan and every major European country are taking similar action. This may have a similar
effect on the stock market. I wouldn’t be surprised if a rally develops in the near term that lasts for a few weeks or months.
But it will be nothing more than another counter-trend move. This rally, if it develops, will best be used by long-term investors
to sell into strength.
Hauke is the CEO of Samex Capital Advisors, a locally based money manager. Views expressed
here are the writer’s. Hauke can
be reached at 203-3365 or at [email protected]