Are There Enough Margaret Taylors?


US debt makes the US dollar fall. The dollar’s purchasing power has fallen steadily for 40 years now. There is plenty of reason to expect the dollar to fall more.

Take for example a joke email that my son Jake sent me last week… that I regret is too prophetic for a laugh.

He wrote: Dad “For your Christmas present this year I am giving the gift of patriotism

With a donation to…  https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454

Interesting times.”

I clicked on the site and found this… all too genuine… Treasury Department form that offers to let people donate money to the government.

donation

There is a place to add your address etc. and even an easy way to pay with a credit card.

donation

I replied to Jake: Is this real or a joke?

Unfortunately I have a dreadful feeling I should not be laughing!

Jake replied back:

According to the NY Times – recent donors have included a class of Alabama sixth graders who raised $324.50 by selling cookies and Margaret E. Taylor, 98, of Findlay, Ohio, who died in 2006 and bequeathed $1.1 million to the cause.

I wondered… are there enough Margaret Taylors?

So I have did some quick research and here is the rub.

According to the Huffington Post: “The number of U.S. households with a net worth of $1 million or more — excluding wealth derived from a primary residence — grew 16 percent last year, according to a new report by the Spectrem Group, a Chicago-based consulting firm. After a 27 percent decline in the number of millionaire households in 2008, the ranks of U.S. millionaires swelled to 7.8 million last year.”

In other words, not only are there not enough Margarets. THERE Are NOT ENOUGH MILLIONAIRES to come close to paying the national debt of around 50 trillion). Even if every millionaire donated a million it would only be 7.8 trillion.

Plus we can only imagine what the government would do if they had such a windfall. Certainly last time… during the dot com boom…  when there was a budget surplus… instead of reducing debt, the government increased spending!

A trillion is a million million dollars.

What’s a trillion dollars?

A trillion dollars = $1,000,000,000,000.

That’s 12 zeroes to the left of the decimal point.

The U.S. government spends more than the entire Gross Domestic Product (GDP) of Australia, China and Spain combined. If you laid one dollar bills end to end, you could make a chain that stretched from earth to the moon and back again 200 times before you ran out of dollar bills! One trillion dollars would stretch nearly from the earth to the sun. It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollar bills.

This is a pretty sad tale… so much debt… but from this we can understand what must happen (high inflation and then a global economic restructuring) and what we can do to keep our finances sound and sane as the world grows more insane.

This is why this site is so focused on five ways to beat the upcoming inflation: invest in…

#1 Commodities.

#2: Real estate.

#3: Multi currencies.

#4: Equities.

#5: Your own micro business.

Then diversify… deflation could remain with us for some time and there are sparks that could unleash terror that will stampede any or all of the markets above.

You can see a good example of diversification from Jyske Global Asset Management.

Jyske reviewed a number of the sparks that could cause a downturn in its latest market review which said: Another distressed week in Euroland
In the US the Senate passed an 858bn USD tax-cut plan giving reductions for all income levels.

China´s policymakers announced last weekend that they will step up efforts to combat inflation next year. The recently revealed inflation figures for November rose by more than 5.1% – indicating an overheated economy.

In a report from Moody’s this week it was said that Spanish commercial banks and unlisted savings banks will “require”  17bn euro in extra capital to cope with unrealized losses. The 10-year yields have increased to 5.54% – the highest level in many years for Spain.

Friday, Moody´s downgraded Ireland’ s credit rating by five notches to Baa1. A 10-year government bond is now yielding 8.28%.

Portugal could be the next domino to fall, following Greece and Ireland in seeking an international financial bail-out. Portugal has to repay 20bn euro of debt by mid-2011. Brazil was mentioned Monday as one that would help Portugal buying their government bonds.

In Europe, the political leaders have approved an amendment to the European Union treaties. They will create a new bail-out system for the debt-laden countries. Therefore ECB will almost double the size of reserves as a response to the increasing risks. This way they will be able to support a country by actively buying their government bonds – if necessary. From 2012 the ECB will increase the capital to 10.8bn euro.

The German ZEW business expectations indicated Tuesday the second consecutive increase in December. Business expectations rose to 4.3% from 1.8% last month. This points in the direction that German economy is likely to show a solid fourth-quarter growth. Yes – it is looking good in Germany!

As in the past, December is usually a strong months for stocks. So far this month the MSCI World is up 5%.

Jyske Global Asset’s reaction to these events was to diversify further.

They continue to be underweight in fixed income (mostly bonds) investments and overweight on equities.  They took profits on the stock “Kuehne & Nagel” and placed the proceeds in soft commodities, which shifted them into an overweight position for commodities on some portfolios.

The managers think that global economic growth can continue its up-trend, especially in emerging markets, creating a growing demand for grain and other soft commodities.

The managers continue to use borrowed US dollars in their leveraged portfolios but are cautious because a new debt crisis in the eurozone could cause the greenback to rise. They see the buck as fundamentally the weakest of the two currencies (dollar vs euro) but are watching the euro-dollar price closely, ready to intervene if the dollar becomes too strong.

In fact JGAM’s currency mangers feel the euro is also stronger than the Japanese yen as well.

Here are their current last published multi currency positions.

Jyske forex positions

Here is JGAM position history since they began managing multi currency accounts for clients

Jyske forex positions

There is some new… good news at JGAM as well. Previously investors with less than $200,000 were invested in mutual funds rather than direct investments for adequate diversification. Now due to a fee restructuring… all investors can be invested in direct investments which lowers costs.

For details American investors should contact Thomas Fischer at fischer@jgam.com

Non Americans can obtain data from Rene Mathys at mathys@jbpb.dk

Gary

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