I'm sitting here trying to figure out the impact the likely demise of AIG is going to have on the world economy. I can't even imagine what is going to happen when AIG goes. And it's going to go because its survival is unsustainable.
They traded in a thing called credit default swaps, or in other words, insurance for stupid investments. And their leverage was almost infinite, and its survival depended solely on REAL ESTATE GOING UP. Heck it hasn't even stabilized.
At GFI, we are planning for hyperinflation and I am exploring an option of indexing prices daily. If inflation takes off, we're going to have to adjust our USD pricing to match the drop of the value of the dollar in order to keep current with supplier costs, etc.
AIG is going to collapse, and honestly - I can't even imagine what mayhem this will bring. But it will be far greater and far deeper and far longer in duration than the Great Depression.
9 comments:
Thank you Gary for your doomsday outlook. No, really. Like you say- expect THIS, and then anything better than this automatically becomes a "phew, this ain't so bad..."
=Matt=
Gary I would suggest you read this blog by a guy named Gary Fong. He has infinite knowledge about the economy and in fact has never been wrong about a prediction regarding the economy. He has said that very shortly, prob today even, or a few Monday's ago, the US is doomed, and that they are all idiots and they are not even going to have food and they are more or less going to end up in martial law killing each other for food. And please do not try to find any optimism about innovation as he is the only one with any innovation so they country is doomed and will be doomed for a good 45-90 years if not more. He also has figured out what he would do to save the economy however he is not sharing that so don't ask.
So forget indexing it. The end is coming ask him for advice how bad he thinks it will get and just price it according to that. Save printing costs on packages. You are absolutely crazy to price it in dollars, as in the matter of most likely minutes the dollar as we know it is gone. I would put the price of a $20 product to at least 2 million US dollars.
What would be really smart would be to put the MSRP in gold, however that soon is going to be worth a hundred times what it is now, so you since that is happening overnight as well, you will have to put a very small amount. You can ask Gary for that info to.
So sorry for the long answer to a easy question, but the short answer is it is over for the US and the US dollar, so don't bother even trying to sell to the US or even kick around the idea of putting the price in US dollars. Since not everyone has gold yet, and the price will soon be astronomical that the people who need to buy your product will not have any, maybe you can put the price in fish, since the people who survive martial law will most likely need to fish to stay alive, so carp might be the currency of choice. So yeah I would price it in carp.
Here is the link to the blog and don't be nervous he has never been wrong once
garyfong1.blogspot.com/
on a somewhat serious side, since you are or very soon to be a proud Canadian, why would you not price your product in the looney. Assuming you believe what you write here, why even bother with the dollar since you think it is going away or at the very least becoming worthless and soon if not today. You say Canada is going to be fine since it is resource rich, so the looney should be fine when the US vaporizes. And since the US is headed to martial law and basic survival skills why even bother trying to sell it here. I would just stick to Canada and selling it to China. Stick to the two C's
So for the USD price it in either the looney or the yuan
Gary, if there were to be hyperinflation people would not be buying your products. Plastic thingies for your flash can be homemade out of plastic bottles or people can use business cards on their flash. You know that.
http://www.nytimes.com/2009/03/09/business/09dollar.html?_r=1&ref=todayspaper
The dollar is fine.
Here is an article from CNBC today which talks about the dollar and my favorite line
"Troubled U.S. insurer American International Group was again in the spotlight and helped bolster demand for the dollar."
http://www.cnbc.com/id/29587053
You do realize that the majority of AIG problems are because of European Banks and not American banks right?
It looks like another right on the money prediction from Mr. Fong.
Gary is what they call a Perm bear which is short for a permanent bear. For those who don't know a bear is a person who has a negative view of the economy and the stock market. The opposite of a bear is a bull. I believe Gary is right about many of his predictions about the future of the United States. Gary seems to define recovery as reaching the point where the economy and stock market were in October 2007. At this time the Dow Jones Industrial Average was over 14,000. The average is now at 7,000.
The United States needs a renaissance in alternative energy to avoid a depression. Credit/debt is an illusion of wealth and using too much of it has always been unwise. The United States will come out of this but the recovery will be slow and it will be years from now.
Well, all I can say is that I visited Gary's blog off and on for a couple of years. Let’s see, what has her got right. He predicted a crash in housing, he predicted a crash of the stock market, he preached buying gold at $650, He predicted the fall of WaMu, and I'm sure I missed a few. Let’s see what he got wrong, Gold hasn't reach $2000 yet, gas isn't $6/gal yet, we haven’t had hyper inflation yet, and we don't have mass murder in the streets yet. I was fortunate that last spring I had the opportunity to cash out my entire portfolio in the stock market, and I sold my house for $40k more than it would go for today, and I bought gold at $700. So far, I am doing just find through this. I don't think anyone can know all there is to know about what is happening in our economy. Every day I am amazed at how such intelligent, educated, and experienced people could be so wrong about what are markets were doing or going to do. As for Gary's predictions, what should I buy now? I have already stocked up and guns and ammo because they hold their value and if things get as bad as I believe they might, I will need them and they will be very valuable. As for gold, what good is it if our economy collapses? I won't be able to buy food with it or pay an energy bill. Gold could go to $5000 but if I can't spend the money I get for it, what is the point?
I do believe we are about to see a social economic condition that nobody has ever seen before. I don't think it will be like the great depression. We have an infinitely larger government with resources that can keep confidence high enough that people don't run on the banks and take out all their money before it's simply too late. People are conditioned to believe that the FDIC will save all their money. By the time panic sets it, the economic situation will have completely imploded. In 1929 unemployment only got to 20%. That means 80% of people still had jobs, were still getting paid, and had money to spend. I think they money will collapse and then who will work for a paycheck they can't cash.
I certainly hope things don't get this bad but I remember just 6 months ago, nobody on the news were say we could face a depression, now it's just about a common phrase.
Cheers, William
We are moving from asset bubble to asset bubble because of beliefs, not true value but phantom value. My outlook is really simple and it is based on only two indicators: 1) sustainability and 2) value. Is a trend sustainable? Does an asset have true value or just perceived value? If not, then eventually the emporer has no clothes. I am not a permabear at all. If I was, I wouldn't have been bullish on real estate in Canada way when it was dirt cheap. I've been bullish on gold, and one ounce of gold right now will be you about 1,000 shares of Citibank. In July of 2008 one ounce of gold would have bought you about ten shares. Compared to buying citibank, Gold performed 100 TIMES BETTER.
This is how you figure out where investments are going to go. TWO BASICS - Sustainability? Value? THAT'S IT. Questions any fourth grader can answer.
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