Monday, July 27, 2009

In the shadow of the Matterhorn

Having read the latest newsletter from Matterhorn Asset Management, I'm feeling positively lightheaded with my relative euphoric outlook on life. It is suitably gothic in tone for a venerable Swiss asset management firm (I have images of the author closeted away in a half lit vestibule that has stood since thumb screws were an acceptable negotiation tactic). It also has what must surely become the cliche for this period of history "The Dark Years" - assuming they are right that is.

For those that want the cuneiform summary - you should read it but, still, I understand there are so many hours in a day - the main thesis goes something like:

1) The US (and some good friends) are in for hyperinflation. Hyperinflation is always a currency driven event - and the USD is set to crumble.

2) The USD will collapse simply because the government will keep printing money.
  • It will print money to prop up the banks - again (when the commercial property loans go bad, followed by student loans and credit cards)
  • It will print money to support the swelling banks of the unemployed (who can't pay taxes but still need food to eat)
  • It will ultimately have to print money with which to pay the interest on the money it has previously printed.
3) All this money printing will cause government bonds to plummet in value. Investors everywhere will be looking for an exit out of the US. Interest rates will climb to double digits in the next 6 months. The stock market will bury its head in the sand - literally not metaphorically - what equity premium do you need against a double digit 10 year Treasury?

4) And all this in a world which is facing its first synchronised downturn in eons while already in a parlously fragile state. The UK, Baltic States and parts of Asia will join the US in hyperinflation land. The rest of us will just struggle. (Oh, except Europe where the EUR will fall apart - for my sins I once wrote a thesis on the EUR - and yes I'd agree with Matterhorn on this, the EUR will not survive it's first inflationary test.)

...Where to hide? They say gold - physical gold - under the bed - next to the shotgun and cans of baked beans...


  1. An interesting read (though to be honest I skipped through it pretty quickly) but considering that they are an asset management firm which specialises in precious metals, it would have been much more surprising if they were predicting gold at $50 an ounce and a 20 year equities bull market.

    A textbook example of these guys talking their book. Though my favourite for that award is always and will forever be George Soros.

  2. To be sure, to be sure...

    I do subscribe to the weak dollar view of the world though...

  3. Yeah, I just can't comprehend the USD. There's no way it should be worth anything near what it is.

  4. FWIW: Here's a chart of the effective fed funds rate 1954 to present
    You might also be interested in reading this on a fixed fiat money system