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Welcome new reader, my name is Mike Murphy, Software Architect and arm chair global financial watcher.

Back in August 2006, while talking to my friend John Chinnock, came to realize that the entire financial markets where based on a ponzi-scheme of subprime mortgages and off-balance sheet derivatives.   Since then I was obsessed with reading ever aspect of the global economic forces at work, up until about 2013, as you can see by looking at my posting activity.

One of the reasons I have posted less is in my minds eye, I grasp enough to personally satisfy my own curiosity of the pressures on the global economic system.   I hope to someday boil down all the information into a concise summary.  For now, here is my short-sweet version.

**UPDATE** Skip all the summary below and read future of employment Post (click).  While below are all important and factors, the reality that affects you most is your ability to be employed.

The world faces unprecedented challenges today, the most critical being peak oil.  Fossil fuels are the reason why we have the lifestyle we have today in the west.  Fossil fuels took about 400 million years of sunshine on plant life to create, and mankind will take about 200 years to burn.  That release of stored energy has created the incredible world we live in today.  Peak Oil basically means that the era of cheap fuel is over.  I urge you to watch the 58 minute video below to indoctrinate you on the many resource challenges we face today.

The world is facing epic deflationary forces driven by technology, except monetary policy which is helping hide the financial strain. As of this writing I believe stock market valuations are precarious at best, partially inflated due to monetary policy.  However, after living through the last few years I have come to realize that investing depends on laws, or lack of laws to determine valuations.   Given reasonable expectations of maintaining sane law enforcement in the USA,  a reversion to the mean is historically likely.   For an ample discussion on this, please see the third video below, starting at 50 minutes in.   An independent indicator for longer term investing that you can read more about here, I do apply this to other stocks and ETF's as an indicator.  The jump the shark moment will be if US Treasuries break the downtrend of last 40 years.

If you think China is somehow going to pull the global economy, I for one don't believe it.  I have posted much about the China ponzi scheme, and with Jim Chanos providing an excellent job in his 2013 synopsis below on China's troubles.  Even if somehow China is wildly successful it would result is substantial cuts to western lifestyles due to resource redistribution.

I do believe in crypto-currencies, a great place to start is my series on money, and what I wrote back in 2011 the ideal form of money.  I think crytpo-currencies are a manifest-ion of what I described back in 2011, and I am lightly following bitcoin and 100 other crypto currencies as they develop.  And I have great hope for the new economy that is brewing with latest manufacturing revolution. But for the old generation I see deflation for decades as robotics and technology sheds millions of more jobs.  Its a generational shift, bad for the older employees, good for latest smart students out of college.

As of June 2014 I do think Gold Miners are a good buy, however due to all the issues above I am nervous about them as a longer term play.  ( GDX at 24 dollars)

For more information, if you care to research, my old new reader post is here.  If you browse my old posts keep this in mind,  the world is changing as I am, which affects viewpoints over time.  Posts in 2008 are likely to be significantly different than my current view.

I highly recommend the first two videos as a must watch.

Headwinds ahead

China is NOT the answer

Market Investing June 2014

Jim Chanos China vs USA

Mr. Chanos I find always worth watching, his insight and what appears to be honesty is refreshing.

Well worth the watch, and he is actually bullish on USA compared to China and Europe.  Slightly dated, from December 2012

Comments on HP and services companies

Jim Chanos on Cheating

I have been fairly critical of the law, and lawlessness that is very widespread to the tune of trillions of dollars.

Mish pointed me to a great interview of Jim Chanos on Salon titled "We’re incentivized to cheat".
I highly recommend reading, Mr. Chanos I find very balanced and truthful in his discussions.

A nice short interview below on regulation

Jim Chanos and China Economics

This video is a few weeks old, but great to watch.
Jim Chanos talks frankly about China and how their miracle growth isn't there.

I recommend a watch, click here.

Jim Crammer spars with Chanos on china

China Financial Ponzi Schemes

Mish over at Global Economic Analysis reports on China's shadow banking collapse.
This was easy to see by anyone paying attention years ago as China ramped up mal-investment on a scale never seen before.  I have reports some of it, click here for past items.

Recommend reading Mish's article titled "China's Shadow Banking System Collapses Exposing Numerous Ponzi Schemes; Implosion Reaches Critical Mass" and all the sub-articles.

Quote from Bloomberg Article that I found interesting, give a snapshot of the deflationary forces they face:


Only 3 percent of those companies are able to get bank loans, according to Citic Securities Co. (6030), the nation’s biggest publicly traded brokerage, with underground lending by family, friends and acquaintances largely funding the rest.
As growth from low-cost labor and productivity gains from adapting technologies developed abroad lose steam, China’s future expansion must rely more on an efficient distribution of capital, as well as on increased innovation and the development of service industries, the World Bank wrote in “China 2030,” a report published in February.
Tamping down underground lending as the economy cools poses risks, said Fred Hu, a Beijing-based economist and former greater China chairman at Goldman Sachs Group Inc.
“Shadow banking is much vilified, but without it the Chinese economy would have had a hard landing long ago,” Hu said. “The issue here is how to legitimize the sector and make it more transparent to reduce some of the potential downside risks, but not to shut it down. If the government were to try, that would do terrible damage to the economy.”

A recent video of Jim Chanos, my favorite investor deflationist.

How bad off is China?

Jim Chanos, my favorite investor, spoke of a statistic I cannot correlate.
He stated that if you look at the "implicit" debt obligation  is 200% of China's GDP.
Notice Chanos did not provide the same analogy for the US.

Both videos a great watch.

China is imploding

As I have posted before, China's near term over-extension of credit makes them NOT the saviour of the world economy.  Building cities that no one lives in does not lead to a solid foundation for an economy.

I have featured Jim Chanos before.  He is back in the news, some good clips to watch.

At the end, Jim throws down the true issue, are we a fair, capitalist system or a broken financial system that rewards the money risk takers and punishes the average person.  Jim, its the latter.

More Jim Chanos and China

Out of all the experts talking about world finance, I am finding Jim Chanos one of the exceptional investors of our day. To date, I have agreed with everything Mr. Chanos has said. I find his disposition to be rather impassion-ate about the specific financial events, but passionate about uncovering the reality he sees.

I bring you two Chanos videos, both well worth the watch. Believe it or not, he sees good things for the USA in 2011 relative to the rest of the world. I agree. But that doesn't mean the markets roar to all time highs, it just means that US on a whole fares better than others. And as always, Chanos holds a negative view of China in the nearer term.

Further, Chanos gives great reasons why people should not heavily invest in natural resources. So well worth a listen. Disturbs me, but I agree with a sharp pullback is likely before the march forward in resources resumes in my lifetime.

More Chanos videos

I like Chanos interviews, he shoots straight and is direct about reality.
I posted a video on Friday, and on the same day he gave another interview.

Mish's blog has a nice article on this video Chanos video.

The most staggering thing is China's GDP is comprised of 60% of real estate, which is a HUGE bubble. I have posted videos quite a few times, about China's massive Real Estate problems. Only 5% of China's GDP is exports. That should tell you how precarious China's economy really is. Once that real estate boom busts, which it will, it will get interesting.

China false real estate boom

CNN Money interviewed Jim Chanos recently about China's economy. (click)

I agree with Chanos in the next 5 year term, but over the longer term I am not so sure.

China has great population and that population is on the economic upswing. Another CNN link focusing just on the real estate bubble.

When watching the video, the fog you see is pollution. I was in Hong Kong and saw it first hand.

There is a much longer video I posted back in Feb 2010 that is well worth the watch, and is on my new reader list. Click to watch that video.

China is NOT the savior of the world...yet

America may have lead the world in ficticious financial "innovation, with many other countries following American's lead. But China doesn't want to be outclassed, to me they are going for the gold on economic malfeasance. China is a world success story,but the standard thinking it will be a growth story is in jeopardy. For example, in 2015 the Chinese demographics will start to shift, driven by China's "one child per couple" policy.

But for now, it looks like China has been doing everything possible to ensure their on-paper economic numbers are met. But reality may be a tad bit different. But this video is a MUST watch if you want to know about the state of China. A great quote "China has built a 5x5 office space for every man, woman, and child in china'. Now if that isn't a sign of overbuilding, I don't know what is.



Also see Mish on Nonperforming Loans in China Rise to "Trillions of Renminbi"