By Catherine Austin Fitts
This is going to be a hard year for many and an amazing year for some. Creative destruction will be growing in the economy as Global 3.0 rises and the unraveling and reorganization of the global political order continues.
Once you have had a chance to digest the insights in Parts I-V of this Wrap Up, here are some suggestions to energize your path forward.
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1. DO A BACKCASTING
A backcasting is a planning approach in which a desirable future is created and then planning works backwards from the future to identify the actions that connect it to the present. You define how you successfully achieved your goals, inspired by the assumption that you will succeed.
While a map of the world around you is invaluable, the most valuable asset you can have is a coherent picture of your purpose and how you will live the life you wish to create.
The flow of news around us is depressing. The number of people around us who are uncivil or who will waste our time is growing. The right vision attracts – and that attraction is more powerful than the negative things happening.
I found doing a backcasting this year to be invaluable, particularly when I held myself to the standard of a vision for my life that was “free and inspired.” Ultimately, it helped me refresh and reaffirm my existing purpose. To do so, I reduced my commitments so I could focus on producing the Solari Report and serving my investment advisory clients.
For some inspiration, check out Jon Rappaport’s presentation at the Secret Space Program, the audio presentations for the Free & Inspired Workshop and the Solari Report with Jon “2015: Free & Inspired” which we will publish on January 22nd.
Links
2. SCENARIO PLANNING, PLEASE!
The future emerges in an organic process. We have insufficient information about what is happening and why. In such an uncertain environment, it is essential to keep an open mind about what might happen. Expect the unexpected. Despite what goes wrong, remain willing for the positive to emerge.
For managing my time and money, I use scenarios with estimates of probabilities. (See our Building Wealth collection for more on scenario design).
Ignore gurus and “insiders” with highly specific predictions of the future. Predicting the future is prophecy. There is no more dangerous approach than getting locked into a fixed view of the future. Use planning time to explore primary trends and multiple future scenarios. Prepare emotionally and mentally for a variety of feasible scenarios to come true. If appropriate, prepare financially too. Identify the opportunities and risks in all of your reasonable scenarios.
This permits you to respond opportunistically as events in the world and markets evolve. You understand the primary trends. You understand what indicators to watch and why.
My scenarios for 2015 are as follows:
Slow Burn: In last year’s Wrap Up, I said the probability of the slow burn continuing in 2014 was 80%. That is what happened.
This year I am breaking the slow burn into two scenarios. Geopolitical tensions have increased the chances of hiccups in the financial markets. Those hiccups are more likely to provide investment opportunities than losses for investors who stick with the primary trends. However, that will require a long-term perspective – something I hope this Annual Wrap Up helps to provide.
The Volatile & Violent Slow Burn: The fights over natural resources are growing. Increased covert economic warfare is getting nastier. In this environment, powerful players are way too volatile and violent for life to feel like the slow burn of the last decade. Compounding the volatility, creative destruction is dramatically eroding the value of some companies while producing huge values on others overnight. (Uber, anyone?)
Be prepared for the US Dollar Index to rise by another 10-25%, putting numerous global dollar borrowers over a barrel. If the Fed raises interest rates, the pressures in the bond market will be extraordinary, with liquidity problems and rising defaults. (There is a reason that Bill Gross ran away from home, spewing justifications as he ditched the risks of managing the largest bond fund in the world.)
The implosion of systems, operations and people around us as the cash flows shift out of Global 2.0 have the potential to waste our time and create operational and financial risk if we are not careful. (Example: You run Target and you are hacked – now you are crisis manager rather than building a profitable company)
Events will feel scary, but will provide opportunities to shift assets into quality global equities as well as some commodities. Successfully defining quality will not be easy – because quality includes Global 3.0 skills and resources.
A lot could fall apart – starting with the European Union, the Ukraine and the US relationships with a variety of allies. US leadership will not inspire confidence at home or abroad. Americans will worry a lot about bank deposit insurance and the reliability of their pension funds and social security, but while individual corporate and municipal pension funds may experience difficulty (Examples: American Airlines and Detroit) a widespread compromise is unlikely in 2015.
For 2015, I am assuming a 50% likelihood of a Volatile & Violent Slow Burn.
North American Renaissance Slow Burn: In this scenario, energy self-sufficiency and rebuilding the industrial base in combination with its many geographic advantages permit the United States to allow the global unraveling to work to its financial and economic advantage.
Violent covert operations may be engineering events around the world (Killing journalists in Paris, downing airplanes leaving Malaysia, Ebola outbreaks in Africa) but these actions will be limited in North America.
Many consumers benefit from deflationary forces – low cost imports, lower energy prices and continued low commodity prices which delay more price increases of essential goods and services. New technology will add enormous productivity – although the benefits will accrue to shareholders and labor will experience continued unemployment. Immigration will addresses shortages of skilled labor, replenish intellectual capital and keep the “demographic winter” at bay.
Divergence in the domestic economy will continue. The economy will be strong in areas enjoying Global 3.0 reinvestment and technology and weak elsewhere. The areas left behind will continue to live in an economic depression kept afloat by government subsidies.
US weaponry and military standing will make it possible for the US to manage the Treasury and the derivatives markets without serious public incident. Where possible, the US government will use its relative financial security to ease up on the domestic and international lawlessness that has so seriously compromised its authority and image.
Financial repression will continue to ensure successful management of retirement liabilities. It will be offset by an endless series of media stories regarding:
- continued strength in the US stock markets (corporate profits will be protected despite the impact of a rising dollar on exports and reporting of foreign income),
- the accomplishments of American technology, and
- the success of young people and immigrants.
There will be no renaissance for the boomer generation and low income Americans. The squeeze will be relentless for those who do not adjust to the new environment. The targeting of low-income people will continue to support a shift of government subsidies and housing to support immigrants and to ensure continued Republican success at the polls.
One of the tensions in this scenario will be between, on one hand, the breakaway civilization and the hidden facilities and governmental operations financed with the black budget and, on the other hand, the overt economy. How will Congress reengineer the federal budget in the face of the secrecy? This is one of the reasons that the long-term continuation of the United States as a unified political entity will continue to be questioned during 2015, renaissance or no renaissance.
Finally, the economies of the US, Mexico and Canada will continue to integrate rapidly, financed in part by expanding access to US street drug markets by the Mexican drug cartels.
For 2015, I give the North American Renaissance scenario a 40% chance. While this scenario may feel safer to some, it presents fewer global investment opportunities than the volatile and violent slow burn – which is one of the reasons that volatile and violent is more likely to happen for now.
Don’t be surprised if the areas in North America receiving 3.0 investments are in the North American Renaissance Slow Burn while everyone else feels that they are in the Volatile and Violent Slow Burn.
2008 Redux: The financial coup is over and the majority of the civil and criminal liabilities have been extinguished. This has left a variety of investment interests in a very strong position. There is no reason why we would face a near collapse or collapse unless it is desired or the economic warfare gets out of hand. However, in that case, war is the likely scenario.
Figure a 1% chance of a repeat of the last financial crisis.
World War III or Environmental Disaster: A globally devastating war is not in anyone’s interest. Neither is an environmental disaster that could destroy the viability of a large part of the planet. However, the proliferation of weaponry and the tensions in a world where markets increasingly adjust through violence (banker deaths) rather than price means that a nuclear war or significant EMP attack could happen as unraveling accelerates. While I have no idea what the risks of devastating solar flares, space weather or weird weather are, the fact that there has been a trillion dollar global spraying program since the mid-90’s has me concerned.
I give this scenario an 8% probability.
The significant investment in finding viable planets and colonizing Mars indicates that the G-7 leadership appreciates that an 8% chance over a sufficient number of years can grow into an unacceptable risk.
While the probabilities of war or global disaster are not high in 2015, the chances of an interruption in services in local areas is high (power outages, weird weather). So, don’t laugh at the prepper’s. You want to have resiliency in your personal arrangements and disaster recovery plans for your home and business. Whether addressing disaster recovery, Cyber hacking, fire and theft or increased regulatory enforcement, please keep excellent, multiple copies of your financial records.
Transformation: A transformation in global spiritual and cultural consciousness could shift our entire outlook.
I give this scenario a 1% probability in 2015 but its likelihood will rise as the global unraveling of the current order continues.
Keep praying!
I encourage you to invent your own scenarios and welcome you to post at the blog.
How do these scenarios translate into expectations for the financial markets?
US Stock Market: There is a good chance that the US stock market will continue to be strong, but it is unlikely to match the 2013-4 performance. Corporate profits are stretched thin, and P/Es have received significant support from buybacks and balance sheet engineering’s. If the Fed raises interest rates this year, the US equity markets should not have a problem digesting them as long as the rise is gradual. A 10-25% correction is long overdue, so don’t be surprised if it appears in 2015.
International Equity Markets: Opportunities in the other G-7 and emerging markets will likely be spotty until the dollars reaches a top.
Bank Deposits: As a practical matter, I am not concerned about the viability of the FDIC system. I think the chances of interest rates rising sufficiently to give savers a reasonable return are still remote in 2015.
Housing: In areas enjoying foreign investment or Global 3.0 investment, housing prices are going to continue to rise. Make sure you do not get shut out of the market by waiting if you want to own a home.
Precious Metals: My comments are going to sound just like last years January Precious Metals Report
Articles
If the dollar rises, gold and silver will continue to be under pressure. If the gold price breaks below the $1,100 line it could drop as low as $700. That probably will not happen as physical demand in Asia has the gold pricing hugging a $1,200 floor. Physical demand is the reason why I believe the primary trend will reassert – but that could take a while. In the meantime, hold your core position but the chances of attractive investments in this area in 2015 are small.
3. ADDRESS THE RISKS
For those who live in the United States, we face are managing serious risks that need to be addressed now on an ongoing basis. Each person’s circumstance is different, so adjust accordingly. Some of these risks will translate to the other G-7 nations.
Health Care
The health care system is diverging in quality and subject to increased regulatory controls that result in the promotion of therapies that may not be cost effective or ideal. You are going to need to be proactive to assume responsibility for your own health, invest in building up your immune system and removing toxicity and ensure that you have relationships with medical providers that you can trust. I continue to research medical tourism for options abroad.
Solari Reports
• Education
The US K-12 public education system is not preparing your children to compete in a global marketplace. You need to make alternative arrangements for children and grandchildren or aggressively protect them from what you believe to be unnecessary vaccine and other programs while ensuring they receive a real education at night or on weekends. Whenever possible, arrange opportunities for them to travel and live abroad and learn other languages. Also make sure they learn practical skills: how to fix a car, household repairs, how to make and build things, not to mention financial literacy.
Do whatever it takes to avoid student loans. From the time a child is born organize christmas and birthday presents to be contributed to a 529 plan or a savings vehicle. Have children live at home or work part time. Teach them to save and invest.
• Software and Hardware
Trying to create privacy in this world is next to impossible. Nevertheless appreciate that many information and communication systems are deeply compromised and do the best you can to protect your information and financial account access from identify theft and other forms of compromise.
• Mobile Payment Systems
Ditto mobile payment systems. Be very careful. It is ok if they steal your Starbuck’s card, but now if they get access to your bank account.
• Fresh Food & Water
Check out my list under stories and trends. Get radical about ensuring your access to fresh food and quality at affordable prices. This is the most important aspect of your health care.
• Environmental Pollution
My two cents is that I am on a detox program that never ends.
• Wildcards: 1-3 Months without Mr. Global
Have provision and a plan for living for 1-3 months without power or well stocked grocery stories and redundant copies of financial records in safe places. Katrina can happen.
• There is No Away
Your problems are not likely to be solved by going far away to a new place where you are a stranger. Yes, there are thousands of lovely places in the world, including ones where you can live at low cost. But be very careful about assuming foreign lands can solve the problem. The aspects of Mr. Globals plans that we do not like are, in fact, global and as tensions rise, Americans may not always be welcome.
• Filter, Filter, Filter
Take greater care with your associations: people, vendor, partners as wall as your sources of information. The times require greater discernment in all things.