BNN: Top Picks

David Cockfield, portfolio manager, MacNicol & Associates, shares his top picks.

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Hedging Chaos with Gold

…what if history is not cyclical and slow-moving but arhythmic, at times almost stationary, but also capable of accelerating suddenly, like a sports car? What if collapse does not arrive over a number of centuries but comes suddenly, like a thief in the night… dramas lie ahead as the nasty fiscal arithmetic of imperial decline drives yet another great power over the edge of chaos.

Niall Ferguson, July 28, 2010

The nasty fiscal arithmetic of imperial decline that Harvard professor Niall Ferguson refers to is America’s unsustainable debt. Growing levels of debt according to Ferguson are now about to drive the US, like other great powers before it, over the edge of chaos; an event Ferguson believes will come sooner rather than later.

…most imperial falls are associated with fiscal crises…empires behave like all complex adaptive systems. They function in apparent equilibrium for some unknowable period. And then, quite abruptly, they collapse.

In 2010 the U.S. government is expected to issue almost as much new debt as all other governments, around the world, combined

The resemblance between the above chart and the following is obvious—except, of course, to those in denial. (more)

Fannie Mae: Home Prices To Decline Into Next Year

Home prices will decline into next year, Fannie Mae said Thursday, reversing earlier projections that the housing market would stabilize this year.

Former Federal Reserve Chairman Alan Greenspan said Sunday on NBC's "Meet the Press" that a so-called double-dip recession was possible "if home prices go down."

Fannie's forecast, disclosed in its latest quarterly report filed with the Securities and Exchange Commission, shows that the government-owned mortgage giant has turned bearish on the housing market. Fannie Mae, the federal mortgage association, along with its sister entity, Freddie Mac, own or guarantee about half of all U.S. mortgages.

"We expect that home prices on a national basis will decline slightly in 2010 and into 2011 before stabilizing, and that the peak-to-trough home price decline on a national basis will range between 18 percent and 25 percent," the bailed-out behemoth said in its filing.

Some housing market analysts, notably John Burns, Mark Hanson, and Dean Baker, have been expecting price declines for some time, but a review of Fannie's recent regulatory filings show that the firm's expectations at the start of the year were more positive but have grown grim as time has passed. (more)

Economy Heading for a Systemic Collapse into Hyperinflationary Great Depression

The Energy Report: A few months back, John, you said, "if you strangle liquidity you always contract an economy and deliberately or not, liquidity is being strangled, resulting in sharp declines in consumer credit, commercial and industrial loans." Does this mean it would spur more economic growth if banks actually started lending?

John Williams: It sure wouldn't hurt. We're still seeing contractions in liquidity, and that's adjusted for inflation. In real terms, M3 money supply is down almost 8% year-over-year. It's the sharpest fall in the post -World War II era. It's not so much the depth of the decline in the liquidity or the duration, but the fact that the liquidity turns negative year-over-year that signals the economy turning down.

We had the signal in December of 2009 indicating intensification of the downturn, in this case, within six to nine months. We're in that timeframe now and see softening numbers. People are talking about a weaker economy. Even Mr. Bernanke has described the economy as "unusually uncertain" in terms of its outlook. Wording like that from the Fed is a pretty good indication that something's afoot. (more)

5 Yrs Before West Consumers Will Spend Again

The Telegrpah,

Paul Polman, Unilever's chief executive, says anyone counting on consumers to spend those markets out of their torpor will have a long wait – it could be five years before any significant growth returns.

Mr Polman does not regard himself as a pessimist, but a "realistic optimist". And with more than 50pc of the company's revenue in emerging markets, where sales volumes grew at 10pc and above in the first half of 2011, he has plenty of reasons to be cheerful.

Unilever's emerging markets of Asia, Africa and Latin America have become "decoupled" from the developed economies, he said.

It's the same picture painted by Reckitt Benckiser, the maker of Dettol and Vanish, and Procter & Gamble (P&G) which is aggressively chasing growth in Asia as American shoppers turn to supermarket own-label products. (more)

Bloomberg Businessweek - 09 August - 15 August 2010

Each issue of BusinessWeek features in-depth perspectives on the financial markets, industries, trends, technology and people guiding the economy. Draw upon Business Weeks timely incisive analysis to help you make better decisions about your career, your business, and your personal investments.


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Disaster in progress

By The Mogambo Guru

Hossein Askari is a professor of international business and international affairs at George Washington University, and Noureddine Krichene is an economist with a PhD from UCLA, which I mention to establish their credentials, since some bozo from the Federal Reserve

created a stir when he said, with a sniff of condescension and smugness, that nobody should comment about economics unless they have a PhD in economics from a "proper" university, because we unwashed huddled masses are "dangerous" and a "threat to society".

He says this because, see, we drooling lay persons are all too, too stupid to comprehend something that is actually simplicity itself: when the supply of money

grows faster than the stock of goods and services, the money will diffuse through the stock of goods and services with the result of higher prices for goods and services. (more)