Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

 

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George Zachar

10/09/05
Definitive Doom-and-Gloom

01/09/05
Definitive Doom-and-Gloom Piece, forwarded by George Zachar

In light of earlier references to Roachian Chicken Littleism, I thought I'd post the following by item penned by Bill Gross lieutenant Chris Dialynas.  It's really a classic of its kind, and touches all the bases, albeit in turgid prose, of the "upcoming financial cataclysm" school of analysis.  I am mindful of admonitions on posting such dire investment-damaging items, but thought the comprehensive scope of this piece could serve as a checklist of sorts going forward. George Zachar

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Today, the global economy is on the threshold of upheaval. The U.S. has borne the majority of the costs associated with the substantial structural change in the global economic architecture of the past ten years. Severe trade and financial imbalances pose grave risks to international stability. Keynesian spending policies and monetary stimulus predicated upon by Adam Smith's free trade dogma and the importance of global growth have produced the vulgar externalities of unsustainable indebtedness in the U.S. and Japan and excessive reliance on foreign capital in the U.S. As shown in Charts I and II below, domestic, non-financial business debt outstanding in the U.S. roughly doubled from approximately $3.8 trillion in 1994 to approximately $7.6 trillion today. Over the same period, the U.S. current account deficit soared from approximately 2 percent of U.S. GDP to nearly 6 percent, or by about $3 trillion, accounting for 75 percent of the increase in U.S. debt formation. Absent a long overdue global restructuring, status quo policies yield to these imbalances. The U.S. current account deficit is forecast to grow to 8 percent of GDP in a few years. Read the entire Definitive Doom-and-Gloom piece!

A reader writes: I will point out that one should not walk in the woods he does not know: the right way to write the sentence is "STATU QUO" as it is "ablativo" and not "soggettivo". Given the outstanding scholarship achieved by the author I'm sure it must be a typing error. -- ANDREA RAVANO, SENIOR VP, CITCO FINANCE, 7 Boulevard Des Moulins, Monaco

George Zachar is principal of Greensward Capital, a money management and trading firm in New York. He focuses on U.S. and European debt futures and options thereon.  "I try to integrate market directional and volatility trades, with "living to fight another day" my central guiding philosophy," Zachar says. "When I was a child, I remember watching a cheesy spy movie, where one spook says to his opposite number, "The object of the game is to stay in the game."