Nouriel Roubini Megathreats

[GeoffF100]

“We are in a debt trap” - Nouriel Roubini on 10 ‘megathreats’ to our world and how to stop them

Channel 4 News

Nouriel Roubini is an economist, a professor in New York, a global economic consultant and an author who, amongst many distinguishing things, was one of those who foresaw the 2008 credit crunch and financial crisis.

His latest work is called ‘Megathreats’, and it details 10 trends that make it more likely than not that we are heading for a global economic crash of stagnant growth, debt crises and high inflation that will cause decades of dystopian suffering and injustice. No wonder they call him Dr. Doom.

https://www.youtube.com/watch?v=ADh6QTp8798

Not the usual doom and gloom stuff. Well worth watching. Dr Realist is more accurate than Dr Doom.

[Steveam]

Thanks Geoff. He’s very bright and the interview is very interesting (worrying). Some of the “threats” are incontrovertible, others more questionable, but timing and government actions are much more speculative. I like the fact that he acknowledges that solutions have costs and consequences.

I very much liked his comparison with the end of the first wave of globalisation (just pre WW1) and his assertion (pretty obvious) that high inflation is a “tax” on wealth.

Thx again for the link - much to think about.

Best wishes,

Steve

[scrumpyjack]

Thanks Geoff. He’s very bright and the interview is very interesting (worrying). Some of the “threats” are incontrovertible, others more questionable, but timing and government actions are much more speculative. I like the fact that he acknowledges that solutions have costs and consequences.

I very much liked his comparison with the end of the first wave of globalisation (just pre WW1) and his assertion (pretty obvious) that high inflation is a “tax” on wealth.

Thx again for the link - much to think about.

Best wishes,

Steve

Yes high inflation is a tax on wealth but it also enables those that understand it to use it to their advantage by borrowing our depreciating currency and using the money to buy assets likely to maintain their real value. Unfortunately it means that the best brains tend to go into finance rather than making things. That has been the story in this country for many decades. My generation were huge beneficiaries of this by buying houses on mortgages in the 70s.

[Nimrod103]

My generation were huge beneficiaries of this by buying houses on mortgages in the 70s.

True to a certain extent, but you could have bought nearly as cheap a house as recently as 1995/6:
https://www.housepricecrash.co.uk/indic ... inflation/

The massive rise in real house prices in the last 35 years was an achievement of the last Labour govt.

[vand]

On the one had I am tempted to say that it's a great interview, and I do agree with many of the points about inflation being taxation in disguise.

However I think its just too easy to fall into the trap of being perma bearish. Pointing out problems is relatively easy, but acknowledging that there are forces at work every day that life us all is more boring, but also the path that human history has trodden in the face of ceaseless problems that seemed insurmountable at the time.

When markets are at all time highs and everyone is saying how wonderful things are and the next 10 years are going to be the best ever... that's when you need to be most careful.

[GeoffF100]

The main investment take away for me is the reinforcement of my suspicion that the BoE will not raise interest rates enough to bring inflation down as fast as the markets are assuming. The markets do not have a good record here.

[Nimrod103]

His current pessimism seems to be driven primarily by a big fear of bad impacts from climate change and another epidemic, yet those are two areas where he has no expertise and is merely parroting the views of pessimistic campaigners. Raising the World's temperature by a couple of degrees may have some interesting implications which are not necessarily negative. Higher crop yields being one of them. If he had mentioned the ever climbing World population, I muight have agreed with him, but he didn't.

He claims to have predicted the GFC, but AIUI since then he has been wrong about several World trends. He predicted the US would be at war with Iran (and he should know a lot about Iran), but that hasn't happened.

I am still not convinced about inflation being high for years to come, in spite of the reluctant central banks and crazy Chinese Covid policies. World deflationary trends are still pretty strong.

[scrumpyjack]

My generation were huge beneficiaries of this by buying houses on mortgages in the 70s.

True to a certain extent, but you could have bought nearly as cheap a house as recently as 1995/6:
https://www.housepricecrash.co.uk/indic ... inflation/

The massive rise in real house prices in the last 35 years was an achievement of the last Labour govt.

Your chart is in real terms whereas if you borrow to buy you do much better when inflation is high. I bought a house in Notting Hill Gate in 1971. I thought the price outrageously high at the time (£19,500), but I borrowed the money to buy it and in those days, whilst interest rates were very high, the interest was tax deductible. According to Zoopla that house would now go for about £5m

[newguy]

Thanks for providing this link. It was very interesting and got me thinking about my own position.

Currently as I try to save for an early retirement in about 12 years, all of my retirement savings are in equities. To stand any chance of reaching my goal and retiring at 55 I need good growth over the next 12 years.

I'll be honest I think this guy is way too persmistic but in my field, I work in IT, I am already seeing major strides in AI like ChatGPT.

My one standout from this podcast was that i did wonder if I should be looking at somehow having a bit of a hedge with gold / precious metals. Does anybody have any recommendations about how to do this. Is there an investment trust that specialises in this area? I am not sure whether i would actually like to own actual gold bars

Thanks.
Newguy

[yieldhog]

Not specifically gold, but, in my opinion, BRWM and BERI are good natural resource funds.

Y

[MrFoolish]

Raising the World's temperature by a couple of degrees may have some interesting implications which are not necessarily negative. Higher crop yields being one of them.

There won't be higher crop yields if the higher temperatures are accompanied by droughts.

[newguy]

Not specifically gold, but, in my opinion, BRWM and BERI are good natural resource funds.

Y

many thanks . I'll take a look at these.

[Midsmartin]

Climate change is forecast to drastically cut yields of the crops which provide most of our calories.

https://www.pnas.org/doi/10.1073/pnas.1701762114

"each degree-Celsius increase in global mean temperature would, on average, reduce global yields of wheat by 6.0%, rice by 3.2%, maize by 7.4%, and soybean by 3.1%."

Though that can be hopefully be mitigated to a degree with breeding programs or other changes.

[Nimrod103]

Climate change is forecast to drastically cut yields of the crops which provide most of our calories.

https://www.pnas.org/doi/10.1073/pnas.1701762114

"each degree-Celsius increase in global mean temperature would, on average, reduce global yields of wheat by 6.0%, rice by 3.2%, maize by 7.4%, and soybean by 3.1%."

Though that can be hopefully be mitigated to a degree with breeding programs or other changes.

The other change being of course that opening up of vast areas for cultivation, which at the present time are too cold. During the medieval warm period arable cultivation in Britain was carried on much more extensively than at present, and up to higher altitudes. So with more warming we can replace cattle and sheep with wheat, and our vinyards will be famous.

And not just in the UK, AIUI there has been a significant greening of the edges of the Sahara desert as well in recent years.

[TUK020]

Thanks for providing this link. It was very interesting and got me thinking about my own position.

Currently as I try to save for an early retirement in about 12 years, all of my retirement savings are in equities. To stand any chance of reaching my goal and retiring at 55 I need good growth over the next 12 years.

I'll be honest I think this guy is way too persmistic but in my field, I work in IT, I am already seeing major strides in AI like ChatGPT.

My one standout from this podcast was that i did wonder if I should be looking at somehow having a bit of a hedge with gold / precious metals. Does anybody have any recommendations about how to do this. Is there an investment trust that specialises in this area? I am not sure whether i would actually like to own actual gold bars

Thanks.
Newguy

One way of providing some portfolio insurance on gold is to use a stake in an ETF of gold miners. This acts as a leveraged bet on the price of gold.
I have a small (<5%) part of my portfolio split between a physical gold ETF https://markets.ft.com/data/etfs/tearsh ... AU:LSE:USD, and a gold miners ETF https://markets.ft.com/data/etfs/tearsh ... GP:LSE:GBX
I keep this stake not in expectation of making a return on it, but as insurance against something catastrophic that tanks all markets (Kyiv getting nuked?).
Last time I traded this was to unload part of it at the height (or should I say 'trough') of the initial COVID market scare, to buy some shares, and then rebuild the stake in the following months. Worked well then, but unclear how much of this was just lucky timing.

[newguy]

Thanks for your suggestion. Greatly appreciated.

Thanks for providing this link. It was very interesting and got me thinking about my own position.

Currently as I try to save for an early retirement in about 12 years, all of my retirement savings are in equities. To stand any chance of reaching my goal and retiring at 55 I need good growth over the next 12 years.

I'll be honest I think this guy is way too persmistic but in my field, I work in IT, I am already seeing major strides in AI like ChatGPT.

My one standout from this podcast was that i did wonder if I should be looking at somehow having a bit of a hedge with gold / precious metals. Does anybody have any recommendations about how to do this. Is there an investment trust that specialises in this area? I am not sure whether i would actually like to own actual gold bars

Thanks.
Newguy

One way of providing some portfolio insurance on gold is to use a stake in an ETF of gold miners. This acts as a leveraged bet on the price of gold.
I have a small (<5%) part of my portfolio split between a physical gold ETF https://markets.ft.com/data/etfs/tearsh ... AU:LSE:USD, and a gold miners ETF https://markets.ft.com/data/etfs/tearsh ... GP:LSE:GBX
I keep this stake not in expectation of making a return on it, but as insurance against something catastrophic that tanks all markets (Kyiv getting nuked?).
Last time I traded this was to unload part of it at the height (or should I say 'trough') of the initial COVID market scare, to buy some shares, and then rebuild the stake in the following months. Worked well then, but unclear how much of this was just lucky timing.

[vand]

Thanks for providing this link. It was very interesting and got me thinking about my own position.

Currently as I try to save for an early retirement in about 12 years, all of my retirement savings are in equities. To stand any chance of reaching my goal and retiring at 55 I need good growth over the next 12 years.

I'll be honest I think this guy is way too persmistic but in my field, I work in IT, I am already seeing major strides in AI like ChatGPT.

My one standout from this podcast was that i did wonder if I should be looking at somehow having a bit of a hedge with gold / precious metals. Does anybody have any recommendations about how to do this. Is there an investment trust that specialises in this area? I am not sure whether i would actually like to own actual gold bars

Thanks.
Newguy

One way of providing some portfolio insurance on gold is to use a stake in an ETF of gold miners. This acts as a leveraged bet on the price of gold.
I have a small (<5%) part of my portfolio split between a physical gold ETF https://markets.ft.com/data/etfs/tearsh ... AU:LSE:USD, and a gold miners ETF https://markets.ft.com/data/etfs/tearsh ... GP:LSE:GBX
I keep this stake not in expectation of making a return on it, but as insurance against something catastrophic that tanks all markets (Kyiv getting nuked?).
Last time I traded this was to unload part of it at the height (or should I say 'trough') of the initial COVID market scare, to buy some shares, and then rebuild the stake in the following months. Worked well then, but unclear how much of this was just lucky timing.

Uh as a fully paid up member of the gold bug club, I will also say that miners so do not fulfill the same role as gold in an investment portfolio - nowhere near, I'm afraid. While they can act as a leveraged playon gold, they have no long term record of outperforming the metal, and they also tend to get absolutely slammed during gold bear markets.

Even Mike Maloney says that you should consider miners as a part of your equity allocation, not your gold allocation and I agree with him.

A lot of miners, it has to be said, are very poorly run and ultimately destroy shareholder capital.

[TUK020]

Thanks for providing this link. It was very interesting and got me thinking about my own position.

Currently as I try to save for an early retirement in about 12 years, all of my retirement savings are in equities. To stand any chance of reaching my goal and retiring at 55 I need good growth over the next 12 years.

I'll be honest I think this guy is way too persmistic but in my field, I work in IT, I am already seeing major strides in AI like ChatGPT.

My one standout from this podcast was that i did wonder if I should be looking at somehow having a bit of a hedge with gold / precious metals. Does anybody have any recommendations about how to do this. Is there an investment trust that specialises in this area? I am not sure whether i would actually like to own actual gold bars

Thanks.
Newguy

One way of providing some portfolio insurance on gold is to use a stake in an ETF of gold miners. This acts as a leveraged bet on the price of gold.
I have a small (<5%) part of my portfolio split between a physical gold ETF https://markets.ft.com/data/etfs/tearsh ... AU:LSE:USD, and a gold miners ETF https://markets.ft.com/data/etfs/tearsh ... GP:LSE:GBX
I keep this stake not in expectation of making a return on it, but as insurance against something catastrophic that tanks all markets (Kyiv getting nuked?).
Last time I traded this was to unload part of it at the height (or should I say 'trough') of the initial COVID market scare, to buy some shares, and then rebuild the stake in the following months. Worked well then, but unclear how much of this was just lucky timing.

Uh as a fully paid up member of the gold bug club, I will also say that miners so do not fulfill the same role as gold in an investment portfolio - nowhere near, I'm afraid. While they can act as a leveraged playon gold, they have no long term record of outperforming the metal, and they also tend to get absolutely slammed during gold bear markets.

Even Mike Maloney says that you should consider miners as a part of your equity allocation, not your gold allocation and I agree with him.

A lot of miners, it has to be said, are very poorly run and ultimately destroy shareholder capital.

Vand,
wonder if I could ask your opinion on this piece on the Schroders site:
https://www.schroders.com/en/insights/e ... -equities/
"Gold tends to do well in absolute and relative terms during US recessions; gold equities have done even better."
tuk020