A Slow Recovery, With Ever Greater Profits

Those Prophesying Another Great Collapse

Recently a famed money manager predicted that gold would rise this year to record levels. The theory goes on to say that world debt continues to increase at record levels, that money continues to be printed, and so on. You have all heard the theories before.

In reality, the world has rather a unique ability to cure its ills, and mankind, in spite of its follies, manages to stumble from one great crisis to the next. This is a cycle, like all previous cycles. Cymorfund has predicted these cycles for years,

The Reality

In fact, the world is recovering from the latest greatest fiasco. Whether it be an idiotic war which kills people for prejudice, or temporary territorial gain, or the excesses of greed such as phony grade AAA investments, after each of these man-made disasters, the economy of the world slowly returns to normal. It has always been so and always will be so.

There will be large sectors of the world that will lose a great deal in every cycle crash, but out of the ashes will rise the next great boom. There is a good article under “Sprott’s Thoughts – Why Are Corporate Profits at All-time Highs? – Alex Green” that mirrors much of our thinking. In essence it can be summarized by saying that the USA remains the premier economic engine of the world and that corporate profits are at record highs, corporate efficiency is dramatically improving, and that the world is slowly recovering.

The Real Issues

 In reality, we face some rather dramatic seemingly irresolvable issues:

  • the largest economic booms come from the growth of population. It seems that as countries economies grow and the populations have more access to goods and services, the rate of childbirth decreases
  • there remains a disconnect between public debt and responsibility

 

Population Growth

As China proved in its great economic move of the last decade, there are sufficient people throughout the world that remain shockingly poor, and with the right incentives, the demand worldwide for goods and services should continue to grow. The world effort at reducing poverty and human suffering, is actually an economic goal of increasing the worldwide demand for goods and services. Perhaps this seems a bit esoteric, but on a more localized level, the great prosperity of  ‘the new world’ (America) was in fact fueled over the last century by the migration of people to America bringing skills, effort and the desire for a better life. 

There is now greater mobility than ever and people wanting a better life will flock in increasing numbers to places that seemingly allow that opportunity. Currently the USA is a little myopic in that it is restricting immigration, rather than encouraging it. This too shall change. As the US economy gradually improves, the great fears that foreigners will steal American jobs will fade, and reason will prevail. The American economic engine will continue to grow in strength.

Public Debt

Politicians are politicians everywhere. Whether they be rightist or leftist, or of whatever political stripe, politicians find it almost impossible to pay down debt. Instead there always seems to be a greater need to borrow more for this or that. Electing governments that promise to reduce debt seems a futile exercise.

Yet, there is hope. Politicians generally do what the population wants them to do. Their prime goal is to get re-elected, regardless of all the fancy words to the contrary. As the mood of the people gradually changes and comes to the realization that ever increasing debt in not always good, the politicians will start shouting this reality from the rooftops – it will be the reason that they claim they should be re-elected.

The solution is not to cut debt, not to pay back debt, not to inflict pain on the population. The solution is shockingly simple. Simply stop increasing the debt. As each country slowly comes to the realization that it shouldn’t spend more money than it did in the previous year, the problem will gradually reduce in severity. A debt incurred in years past, reduces of its own accord. Inflation of even 1% /year, means that the debt is 1% less serious than it was last year. With the compounding effect, over a decade, the debt starts to look manageable and no-one has done anything to pay down the debt.

The second obvious factor, is that as the economy grows, the deb becomes lesser and lesser significant in relation to the overall economy. If the economy grows, even at a small amount, and if inflation continues as it always has, even at a small amount, the combination of these 2 factors will make the debt significantly less onerous.

DO NOTHING and the problem goes away.

What To Do

Just understand that the world will continue, and that the thing to fear, is fear itself. 

 

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By Larry Cyna

Mr. Cyna is an accomplished investor in the Canadian public markets for over 20 years, and has managed significant portfolios. He is a financing specialist for private and public companies, and has expertise in real estate and debt obligations. He has assisted private companies accessing the public markets, has been a founding director of public companies and continues as a strategic consultant to selected clientele. He is and has been a director, a senior officer and on the Advisory Board of a number of TSX and TSXV public companies in the mining, resource, technology and telecommunications sectors, and the Founding Director of two CPC’s with qualifying transactions in mining and minerals. He was an honorary director of the Rotman School of Management MBA IMC program, has completed the Canadian Securities Institute Canadian Securities Course & Institute Conduct and Practices Handbook Course, was a former Manager under contract to an Investment Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory Mediation Program, Toronto, a member of the Institute of Corporate Directors of Ontario, a member of the Upper Canada Dispute Resolution Group, and the Ontario Bar Association, Alternate Dispute Resolution section. He obtained his designation as a Chartered Accountant in Ontario in 1971 and was the recipient of the Founder’s Prize for academic achievement together with a cash reward. He became a CPA in the State of Illinois, USA in 1999 under IQEX with a grade of 92%. He is a Member of the Institute of Chartered Accountants of Ontario and the Canadian Institute of Chartered Accountants. He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty of Law, University of Windsor, certificate in Dispute Resolution from the Ontario Institute of Chartered Accountants. Previous accomplishments are Manager of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO of Cyna & Associates specializing in mediation and ADR; Founder & Senior Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited public accountancy firm with international affiliations; and was a partner in a large public accountancy firm. Mr. Cyna is well known in the Canadian Investing community. He is invited to, and attends presentations given by public companies usually 3 or 4 times each week. These presentations are intended by the various hosting companies to present their inside story to sophisticated parties and Investment Managers for the purpose of attracting funding, or of making parties more interested in acquiring shares of those companies. Being a part of this keeps Mr. Cyna deeply involved in the current market and leads to numerous investment opportunities.