New Rules For Investors

I hosted with my friends John Fagan and Brendan Walsh a very revealing, compelling, timeless and entertaining macro strategy session with Russell Napier on Friday, January 29, 2023. Russell is issuing a serious warning to his institutional and individual clients who subscribe to his newsletter- an era of financial repression has arrived that reverses many of the characteristics of successful investing.

Here is a link to Russell's newsletter: https://russellnapier.co.uk/

Today investors face a tipping point as significant as it was in 1971 when the US exited the Bretton Woods agreement and the world began a new economic experiment- never before had a major global currency disconnected itself from gold (or any other hard asset). This (as well as some other events he describes) allowed for the steady and powerful growth of credit to it current all-time record high.

Central banks have raised rates which is threatening the global financial system with the prospects of eventual default. Russell points out how governments have resorted to currency debasement in the past, and why they will follow the same path this time.

Debasement is the act of lowering the value of a currency through inflation to pay off debts- holding rates below true inflation. Russell calls this debasement “Financial Repression” and he describes it in the interview as “Stealing money from old people slowly”; slowly, he explains, because “You mustn’t frighten the horses, you can’t afford for them to stampede.”

Russell describes how governments are doing this today, and what mechanisms they will use to get Debt:GDP levels back to more reasonable levels; a process that will take 10-15 years where markets and central banks must take a back seat to the power of governments.

Listen to get a PHD- level understanding of what Russell believes will be a difficult decade for professional investors.

Timeline:

00:00 Highlights

00:51 Introduction of Russell Napier

02:11 Debt has grown to all-time record levels and we have reached the trigger point

05:11 Japan, Europe, US Japan will be lynchpin- this test case may be unfolding this quarter, watch carefully

08:14 Bretton Woods in perspective and other contributing factors

10:50 Debt vs Debasement- What is the history?

14:17 A FEW GOOD MEN- Governments can't handle the truth

14:38 How do governments subvert central banks?

17:30 The pressures building in Europe

21:02 Significance of Draghi- "We will do whatever it takes"

22:38 Japan hedge funds have a one-sided bet, and the wrong way

27:44 The Surprise about freezing dollar assets in Russia Central Bank was not that the US did it…

29:57 Liquidity and velocity are huge issues- algorithms risk

35:25 China- its debt and its economy, the same kettle of fish

39:01 Chinese RMB vs US Dollar as reserve currency

41:51 The Chinese economy; Debt: GDP and exchange rate

44:41 Which assets should you own in the next decade?

47:54 Equities, rates, inflation- Infrastructure spending, industrial

49:48 Bitcoin, Stablecoins, Central Bank Digital Currencies

52:02 "The greatest threat to liberty in the world today"

54:10 WHY NOW? Why not many more years of more debt before it blows?

58:10 Why 400bp spread between inflation and interest rates? Don't frighten the horses.

60:05 Subscribe to Napier Research information ERIC for institutions

60:38 Take Russell's course- Advanced Valuation - Financial Markets