Trends of 2011 – Great Video

Check out the trends of 2011. I do like: wearable tech, toddlers games. And yes, we'll see deviance becoming somewhat fashionable. This will just end you in jail if you follow the suggestions. And after a while (say 5 years), we'll see the reverse trend coming since the no limit paradigm will only make people more insecure and crazy in their heads. That's why law was invented. To keep the people somewhat safe and guarantee private property. Two things that deviance can be labeled as being against.

How to keep the value of your earned assets in 2011?

There are several trends that will have a huge impact on markets in 2011. Most of them will have a damaging effect on cash when such cash is EUR or USD.

Why is it so?

First of all, the US is printing money and buying back debt with it, basically printing out its way out of debt. Through QE and QE2, the US devalued the purchasing power of the dollar. The USD is still the reserve currency of the world, but trusting the US is really not a good idea in my view. So, moving away from the dollar is a winning strategy for 2011.
Next, looking at the Eurozone side of the equation, the approach of no default preferred by it is not helping the Eurozone debt at all. What happens is that perfectly good economies are hurt by periphery countries that succumbed to bubbles. Instead of letting investors take a haircut on such economies, bailouts were the choice taken. And now, the EURO pluges vs the dollar.
All in all, this means that the EUR and the USD are spiraling down towards the ground and run a huge risk of losing a hell of a lot of their purchasing power. Governments have no issue with that since it will reduce the burden of their debt, but at the expense of the standard of living of their populations.
Investors also do not see this very positively since the returns they expected become meaningless since the monetary basis is massively expanded, lowering the true value of their positions.
And a quick look at commodities show us that oil, gold, silver, palm oil, and so on are on a bullish trend in a lot of currencies. When commodities are up in a lot of currencies, this is an important sign: the sign that fiat currencies are worth less than they used to be.

What to do then?

For the beginning of 2011, commodities will be a great hedge against inflation. Even if interest rates are going up to "fight inflation", the mere fact of printing more money at central banks (Fed or ECB) defies the intent.
Also, taking positions in the forex by being long on the AUS$ will pay off. At least in the first months.
There is also a significant move out of Gold ETFs towards physical bullion. That's a trend that indicates that there is trouble coming. So, getting some gold or silver bullion is definitely looking like a good idea.

What's the horizon looking like?

In a word, it will look like very unstable. The financial crisis is not over at all. It just morphed into a sovereign debt problem. The issue is that sovereign debt is never paid off. Corporations that do not pay their debts are going under. Not so with sovereign countries. Their citizens end up broke, but the country stays there. So, investing in assets that do not depend on governments is the best bet in my view.

The free fall of the Euro vs the Dollar

somewhat in free fall

somewhat in free fall

The EURO continues it fall against the US Dollar. Not really a great thing since the USD itself is falling in value due to Ben Bernanke's heavy usage of the printing presses. QE and QE2 increased the amount of money, leading to a disguised devaluation of the dollar. The Eurozone having its own issues now, and the dollar being still viewed as the reserve (albeit fiat) currency of the world, lead to this weird movement for the Euro. Meaning that we are looking at both currencies spiraling down in purchasing power. This may be good for the governement since the debt is diminished but not good for its lenders and the citizens who have saved some. What to do to improve your situation given these facts? My take is that gold, maybe silver, oil, telecom, and food - especially when considering emerging markets - will skyrocket in 2011. Don't be fooled by increases in stocks labeled in USD. They go up because the currency goes down. Of course a weaker EUR is good there but not that much due to the death spiral unfolding. Australian dollar could be a good bet because they are near Asia and that big island is full of real resources (ore, ...) 2010 is closing and we'll be glad it is behind us but 2011 will make 2010 like a walk in the park.

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