In 1991 Billy and Akaisha Kaderli retired at the age
of 38. Now, into their 3rd decade of this
financially independent lifestyle, they invite you
to take advantage of their wisdom and experience.
The Next Three, Five-to-Seven Years
How I see the scenarios for the financial
markets playing out
Billy and Akaisha Kaderli
I do not have a
crystal ball, and I am sure this will get an overflow of opinions from our
Readers, but I am going to go ahead and try to give a couple of different
scenarios/predictions of global economics.
First, I doubt any of
these are going to be pretty as the longer our “smart people” delay the
medicine, the more painful the cure will be. For example, as you know we have a
balance sheet problem with Social Security. It’s not as if this issue hasn’t
been known for the last two decades. It’s the demographics. Duh!
In fact, SS was “fixed”
before, but apparently not well enough to escape the troubles it is in once
again. Had this funding/spending problem been seriously addressed years ago, we
would not be thinking about this today. Isn't future problem solving what we
hire people in Washington for? Now we are looking at a crisis that
easily could have been avoided.
Kicking the can up
But honestly, that is
small peanuts compared to debts that global governments have been - and are
still - taking on. At some point, confidence in the system will break down. If
and when that happens, the transition won’t be graceful.
over Santa Ana, Guatemala and Volcano Agua
already starting in Europe. Greece is lost and needs to be exited from the Euro. Sure they may be able to kick the can down the road - or more like up the hill -
a while longer, but the math between assets and liabilities does not compute. That is unless, Germany, the Dutch and the Finns decide to take on Greece’s
debts and in the end, not be paid. Doubtful.
One option floating
about is to issue Euro Bonds, similar to U.S. Government Bonds. The problem with
that is the member countries would have to give up sovereignty, making Euro-land
the United Countries of Euro. That has about as much chance of happening as the
French changing their national cuisine to rye bread and sauerkraut
and the Spanish specializing in pasta and pizza.
And speaking of the
Spanish, they are the 12th largest economy in the world, and their
bank balance sheets are a mess, to be polite. How long can they simply move the
pile of cash around the board using accounting tricks and bailouts before the
investors realize the jig is up? Oh wait! With bond yields around 7.5% the bond
market is forcing Spain’s hand. It gets to a point where a government can no
longer service their debt, and Spain is near the end game. Are you hearing
Is Europe presaging
Why do you think the Fed is keeping a lid on interest rates?
Where would bond yields be if the Federal Reserve was not buying Treasuries?
And what would the added interest cost be to the Federal Government/tax payers? In one
But I am getting off
track, and the purpose of this is not to frighten you with
the-world-is-coming-to-an-end doomsday stuff. The question I have is how can
we profit from this madness?
I cannot control the
idiots in charge or the decisions they make. You may not like it that I am
calling them “idiots,” but if they are so smart, why are we in this mess?
Can the Fed save the
economy? The better question is: Can you save yourself?
I am as frustrated as
you are about what is going on and none of us can run our personal finances the
way governments do, but we can profit from their blunders.
If the Euro slides - or
worse - the funds will flow to the Dollar as has been demonstrated in the past.
One trade is to go long the Dollar and short the Euro, but currency trading has
too many risks for my tastes. If the Dollar rises, it will put pressure on U.S.
exports making them more expensive worldwide, thus affecting profits and the
U.S. equity markets will fall. So the trade for me is either get out of the way,
let the markets fall, and have a large cash position to re-enter at a later date
and/or short the Indices. Either way I profit.
This does not mean there
won’t be huge rallies that can be taken advantage of, as the leaders tout this
program or that plan and the markets react. But until the “wizards of smart”
seriously address the underlining issues of debt, this would be more of the same
rhetoric which further exasperates the problem.
Taking control of
And it’s not just Europe
where things are getting interesting. Asian economies are slowing, and
Asian millionaires are firing bankers, taking control of their own destiny,
something we have been espousing for years.
But what if I am wrong
and the global governments, the ECB and Federal Reserve leaders find a solution
where our lifestyles and entitlement programs can continue without changes, and
Santa Claus and the Easter Bunny really do exist?
Then I am wrong, I
will gladly be the first to admit it, and your next newsletter is free.
2000 - 8-2-2012
At some point in the
future this over-indebtedness will correct itself, be it 3, 5, or 7 years from
now. At that point there will be a generational buying opportunity in the
financial markets, and I want to be a part of it. My best guess is that until then,
we will have a market that moves up, down - and in the end sideways - similar
to what has happened since 2000, but probably drifting lower over time.
A sideways market
presents many opportunities for profit, and I plan on taking advantage of them.
This is my opinion and I
am sticking to it.
About the Authors
Billy and Akaisha Kaderli are
recognized retirement experts and internationally published authors on topics of
finance and world travel. With the wealth of information they share on their
they have been helping people achieve their own retirement dreams since 1991.
They wrote the popular books,
The Adventurer’s Guide to Early Retirement and
Your Retirement Dream IS Possible.
information about financial independence and travel, visit our
Billy and Akaisha continue to journal and photograph their
Retire Early Lifestyle Blog
About Billy & Akaisha