Kondratieff Winter Survival Guide Now that the winter is upon us, how can we best navigate this most challenging cycle phase of the Kondratieff Wave? This section is dedicated to providing guidelines and insight for that very purpose.
First and foremost, we must not allow fear to permeate our condition or our decisions because obsessing about our woes prevents us from making the most objective decisions for our prosperity.
It's no fun either.
And the central theme of the Kondratieff Wave theory is that the destruction phase is most beneficial by providing the means for the renewal of prosperity that follows.
It purges much needed excesses from the system that allow more creative progress to unfold that creates more prosperity for us all.
Because historical evidence supports this, we should embrace it rather than fear it.
Ideally, I would prefer the harshest, swiftest kick in the rear possible so we can begin anew with a better foundation sooner.
Until then, we must adapt to the reality of prevailing market conditions so we can preserve our wealth and prepare for the Kondratieff Spring around the corner.
So let's now examine these conditions to help define where we are in this winter cycle so we can better manage our financial affairs.
We have entered the period of the cycle marked by a deflationary asset bust and slowing global GDP growth.
Paper assets, including tangible assets such as homes and land, had appreciated for decades and were due to reverse course.
However debt levels had risen over the past few decades to all-time highs and drove asset prices even much higher than they would have under previous cycles.
Home prices in the US rose every year since the end of the Depression in the mid 1940's through 2006, over 60 years, and thus still may slide further until an equilibrium is found.
The debt wave that just recently peaked was fueled in great part by new financial alchemy of structured finance products that compounded the leverage even more.
Clearly, the great de-leveraging of assets will continue into the foreseeable future and thus it is prudent to avoid making any investments of securities tied to the credit process until this de-leveraging has run its course and the global banking system is on more solid ground.
It may seem tempting to bargain for cheap financial stocks and others in sectors dependent upon financing, but I maintain they are a value trap until proven otherwise.
These would include homebuilders, durable goods manufacturers, retailers, insurance, and consumer discretionary stocks among other sectors that have any meaningful exposure to the US economy.
Sectors that are more favorable would include utilities, healthcare, biotech, consumer staple companies with significant foreign exposure, and energy companies.
Companies most preferred are ones that have cash-flow positive operations or if in development stage sectors such as mining or biotech, have at least two years of cash on hand to see them through the worst of this credit cycle.
Otherwise they may fall victim to excessive dilution to existing shareholders from raising capital at levels that may damage their capital structure.
I want to review some secular trends evident that are sure to sustain for the short and intermediate future that can provide a foundation to base investment decisions upon during this winter period.
These themes have been reported on this site at length but are worth repeating here: Gold has proven to be the best performing asset class during a Kondratieff Winter Stocks, especially in the US, will suffer from contracting GDP growth and malaise Capital flows into assets classes in descending order of liquidity (see pyramid below) Hyper-inflation is possible if governments use monetary re-flation to battle deflation Preservation of wealth trumps investment return as the core strategy Investors must remain more flexible than ever due to fast changing market conditions Invest either against the trend most unsustainable or with the one most sustainable Specific ideas for your portfolio The tickers below are exchange traded funds (ETF's) that represent specific sectors: TBTNYSE Exchange traded fund (ETF) that is a bet against the 30 year long bond GLDNYSE ETF that is a direct proxy for physical gold.
Each share buys 1/10 oz gold GDXETF on blue-chip gold mining companies SLVETF equivalent to GLD in silver MOOETF in the Agri-business sector of blue chip seed, fertilizer companies DXOETF on the price of oil/barrel (double levered) UNGETF on the price of natural gas Some of the content in this section was added to make our readers aware of certain principles related to paper fiat currency and central bank activity that threaten the purchasing power of all Americans.
After all, we receive all of our wages in USD and purchase all the goods and services we receive in USD so given that we all have this much exposure to the USD, do we really want to have all or most of our assets also in USD? I would encourage our readers to seriously consider some form of hedging the USD either through gold or TBT, especially if they are dependent upon fixed incomes from SS or interest income from bonds.
If you believe like we do that the time has come for a major inversion from paper assets to hard assets, then you may want to consider the securities above.
Note: This does not represent a solicitation nor a recommendation for these securities.
The author does endorse them for his own portfolio, but they may not be right for everyone.
Please consult your financial advisor before making any changes to your portfolio.
John Exter's Inverse Pyramid of Liquidity The chart above best illustrates what to invest in during this period.
In John Exter's Inverse Pyramid of Liquidity, gold and cash are kings.
This chart shows that during the winter cycle period investors increasingly trade down return for safety, triaging to the most liquid investment class and eschewing riskier assets.
And what have we seen the past year or so? Investors dumping emerging market stocks and bonds, OTC stocks, real estate, etc and rushing into gold, cash, and US government securities, even driving the yields on all maturities lower than inflation to suggest that are willing to pay someone to hold their money.
Such is the madness of a Kondratieff Winter.
Much more is provided later in this section on Exter's pyramid.
Hopefully, the ideas above can help you preserve your wealth during these chaotic and difficult times.
I would like to offer one more idea for our readers to consider, especially those who are going through the toughest of times.
I have found that the several of the books written by Catherine Ponder are ideally suited for guiding us in these extraordinary times.
She remains the most prolific selling author of prosperity books ever and her messages are timeless.
I would suggest that anyone seeking guidance in finding their way during periods of economic hardship read Prosperity Secrets of the Ages, one of her many great works.
Others include The Dynamic Laws of Prosperity and The Millionaires of Genesis, among many others.
They all emphasize a positive mental approach and using your higher mind to attain what you richly deserve.
This wonderful material may be more useful than anything you may find on this site in practical terms.
First and foremost, we must not allow fear to permeate our condition or our decisions because obsessing about our woes prevents us from making the most objective decisions for our prosperity.
It's no fun either.
And the central theme of the Kondratieff Wave theory is that the destruction phase is most beneficial by providing the means for the renewal of prosperity that follows.
It purges much needed excesses from the system that allow more creative progress to unfold that creates more prosperity for us all.
Because historical evidence supports this, we should embrace it rather than fear it.
Ideally, I would prefer the harshest, swiftest kick in the rear possible so we can begin anew with a better foundation sooner.
Until then, we must adapt to the reality of prevailing market conditions so we can preserve our wealth and prepare for the Kondratieff Spring around the corner.
So let's now examine these conditions to help define where we are in this winter cycle so we can better manage our financial affairs.
We have entered the period of the cycle marked by a deflationary asset bust and slowing global GDP growth.
Paper assets, including tangible assets such as homes and land, had appreciated for decades and were due to reverse course.
However debt levels had risen over the past few decades to all-time highs and drove asset prices even much higher than they would have under previous cycles.
Home prices in the US rose every year since the end of the Depression in the mid 1940's through 2006, over 60 years, and thus still may slide further until an equilibrium is found.
The debt wave that just recently peaked was fueled in great part by new financial alchemy of structured finance products that compounded the leverage even more.
Clearly, the great de-leveraging of assets will continue into the foreseeable future and thus it is prudent to avoid making any investments of securities tied to the credit process until this de-leveraging has run its course and the global banking system is on more solid ground.
It may seem tempting to bargain for cheap financial stocks and others in sectors dependent upon financing, but I maintain they are a value trap until proven otherwise.
These would include homebuilders, durable goods manufacturers, retailers, insurance, and consumer discretionary stocks among other sectors that have any meaningful exposure to the US economy.
Sectors that are more favorable would include utilities, healthcare, biotech, consumer staple companies with significant foreign exposure, and energy companies.
Companies most preferred are ones that have cash-flow positive operations or if in development stage sectors such as mining or biotech, have at least two years of cash on hand to see them through the worst of this credit cycle.
Otherwise they may fall victim to excessive dilution to existing shareholders from raising capital at levels that may damage their capital structure.
I want to review some secular trends evident that are sure to sustain for the short and intermediate future that can provide a foundation to base investment decisions upon during this winter period.
These themes have been reported on this site at length but are worth repeating here: Gold has proven to be the best performing asset class during a Kondratieff Winter Stocks, especially in the US, will suffer from contracting GDP growth and malaise Capital flows into assets classes in descending order of liquidity (see pyramid below) Hyper-inflation is possible if governments use monetary re-flation to battle deflation Preservation of wealth trumps investment return as the core strategy Investors must remain more flexible than ever due to fast changing market conditions Invest either against the trend most unsustainable or with the one most sustainable Specific ideas for your portfolio The tickers below are exchange traded funds (ETF's) that represent specific sectors: TBTNYSE Exchange traded fund (ETF) that is a bet against the 30 year long bond GLDNYSE ETF that is a direct proxy for physical gold.
Each share buys 1/10 oz gold GDXETF on blue-chip gold mining companies SLVETF equivalent to GLD in silver MOOETF in the Agri-business sector of blue chip seed, fertilizer companies DXOETF on the price of oil/barrel (double levered) UNGETF on the price of natural gas Some of the content in this section was added to make our readers aware of certain principles related to paper fiat currency and central bank activity that threaten the purchasing power of all Americans.
After all, we receive all of our wages in USD and purchase all the goods and services we receive in USD so given that we all have this much exposure to the USD, do we really want to have all or most of our assets also in USD? I would encourage our readers to seriously consider some form of hedging the USD either through gold or TBT, especially if they are dependent upon fixed incomes from SS or interest income from bonds.
If you believe like we do that the time has come for a major inversion from paper assets to hard assets, then you may want to consider the securities above.
Note: This does not represent a solicitation nor a recommendation for these securities.
The author does endorse them for his own portfolio, but they may not be right for everyone.
Please consult your financial advisor before making any changes to your portfolio.
John Exter's Inverse Pyramid of Liquidity The chart above best illustrates what to invest in during this period.
In John Exter's Inverse Pyramid of Liquidity, gold and cash are kings.
This chart shows that during the winter cycle period investors increasingly trade down return for safety, triaging to the most liquid investment class and eschewing riskier assets.
And what have we seen the past year or so? Investors dumping emerging market stocks and bonds, OTC stocks, real estate, etc and rushing into gold, cash, and US government securities, even driving the yields on all maturities lower than inflation to suggest that are willing to pay someone to hold their money.
Such is the madness of a Kondratieff Winter.
Much more is provided later in this section on Exter's pyramid.
Hopefully, the ideas above can help you preserve your wealth during these chaotic and difficult times.
I would like to offer one more idea for our readers to consider, especially those who are going through the toughest of times.
I have found that the several of the books written by Catherine Ponder are ideally suited for guiding us in these extraordinary times.
She remains the most prolific selling author of prosperity books ever and her messages are timeless.
I would suggest that anyone seeking guidance in finding their way during periods of economic hardship read Prosperity Secrets of the Ages, one of her many great works.
Others include The Dynamic Laws of Prosperity and The Millionaires of Genesis, among many others.
They all emphasize a positive mental approach and using your higher mind to attain what you richly deserve.
This wonderful material may be more useful than anything you may find on this site in practical terms.
Source...