If Raoul Pal was some doomsday spouting windbag, writing in all caps, arbitrarily pasting together disparate charts to create 200 page slideshows, it would be easy to ignore him. He isn't. The founder of Global Macro Investor "previously co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe... Raoul Pal retired from managing client money in 2004 at the age of 36 and now lives on the Valencian coast of Spain, from where he writes." It is his writing we are concerned about, and specifically his latest presentation, which is, for lack of a better word, the most disturbing and scary forecast of the future of the world we have ever seen....
And we see a lot of those.
- We are here...
- We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first major bank…
- With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.
- There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.
- The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…
- Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations
- From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.
- And then do you think Japan and China would not be next?
- And then do you think the US would survive unscathed?
- That is the end of the fractional reserve banking system and of fiat money.
and then there is this...Stock market investors continue to hold on to their stocks in the hope that we will again see bull markets like in the 1980s and 1990s. But looking at the very long term Dow/Gold ratio chart this optimism seems unfounded. The chart shows a major “megaphone” pattern that has a target of 1. This would mean that gold and the Dow would be equal in value. It would also mean another 90% fall of the Dow against gold. In my view the pattern will probably overshoot and we will go well below a one to one ratio.
Even if we “only” go to a Dow/Gold one for one ratio, at what level would that be? For many years I have forecast gold at $10,000 dollars, and that would mean the Dow would be at the same level. But remember this means that gold would go up 6 times from here and the Dow would be down 16%. With hyperinflation gold could go considerably higher. So investors who want to preserve their wealth in the next few years are likely to do much better by owning physical gold than stocks.
Egon von Greyerz
Matterhorn Asset Management AG
May 31, 2012
Now back to my charts...these are NOT for the faint of heart.....but very possible....if the charts with the descending wedges hit their targets then that is the bottom imo.......