Come join me for lunch for the Mad Hedge Fund Trader’s Global Strategy Update, which I will be conducting in Chicago on Thursday, July 18, 2010. A three course lunch will be followed by a 30 minute PowerPoint presentation and a one hour question and answer period.

I’ll be giving you my up to date view on stocks, bonds, currencies commodities, precious metals, and real estate. And to keep you in suspense, I’ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $239.

I’ll be arriving an hour early and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.

The lunch will be held at a downtown Chicago venue on Monroe Street that will be emailed with your purchase confirmation.

I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.

“We know what’s coming. They told us six months ago. The high risk asset classes have ignore the potential challenges out there until a month ago, and now they’re coming to the forefront,” said Joe Balestrino of Federated Investors.

I have always been a sucker for a visiting Nobel Prize winner in economics. So when I heard that Dr. Michael Spence was passing through town, I was on the next BART train. Michael was here to promote his latest book, The Next Convergence: The Future of Economic Growth in a Multispeed World.

Michael believes that world GDP will triple over the next 40 years, and that the bulk of that growth will come from emerging markets, which will account for half of all GDP within 5-10 years. China is now moving the needle on the global economy big time.

The great challenge moving forward is that the emerging markets can no longer use proven economic models that worked in the past. Investing in aggressive export sectors that pulled their countries forward worked well for Japan, and then South Korea, Taiwan, Singapore, Malaysia, and Thailand. But China and India are now too big, and the US too small to replicate that feat.

Furthermore, the big BRICS are now pushing up against the theoretical limits to growth. China is now consuming up to 80% of some commodities, and further demand could bring dramatic price increases. While America accomplished its economic miracle with oil at $1 a barrel, today’s emerging markets are going to have to pull it off at $100 a barrel. China is now in the middle income range of $4,000-$8,000 per capita, where a lot of developing countries tend to get stuck.

These countries have also reached their environmental limits, with pollution so severe that it threatens to stifle growth. If you don’t believe him, try taking a summer afternoon stroll in Beijing sometime, and see if you can breathe afterwards. The current environmental mess in China will cost a fortune to clean up.

The answer is to accelerate technological development, eventually bring it up to western standards. Throwing coddled state protected enterprises to the wolves and allowing creative destruction to work its way will also be important. Asia already has a big advantage in that their entire infrastructure is brand new, so they don’t have to ‘obsolete” it first to move forward, as we do.

Exports become less important in this model. In fact, you can see how this works by tracking shoe maker Nike’s production base over the years, where Spence was once a board member. It started in Japan, and then migrated to South Korea, Taiwan, China, and ended up in Vietnam.

The great revelelation for Michael in doing his research, the “aha” moment, was to discover that economic growth is not an economic issue; it is a political one. Great leadership is the common ingredient among the most successful countries. Governments that are too big fall into the abyss of central planning. Those that are too small can’t adequately invest in infrastructure to prime the pump for the private sector.

Michael has identified 13 countries currently in the sweet spot, including Brazil (EWZ), South Korea (EWY), Taiwan (EWT), Singapore (EWS), Hong Kong (EWY), Thailand (TF), Indonesia (IDX), Oman, Botswana, Malaysia (EWM), China (FXI), Malta, and surprisingly, Japan (EWJ). Since I believe that emerging markets will lead the next leg up in global equity markets, this gives me a great short list to work from.

You may recall that Michael is the Harvard professor who, along with Joseph Stiglitz, won his prize in 2001 for the dynamics of information flows and market development. A Rhodes Scholar, he is also the former dean of the Stanford business school. Among his recent chores has been assisting the Chinese government to develop their upcoming 12th five year plan for economic development.

Come join me for lunch for the Mad Hedge Fund Trader’s Global Strategy Update, which I will be conducting in Los Angeles on Thursday, July 7, 2011 at 12:00 noon. A three course lunch will be followed by a 30 minute PowerPoint presentation and a 45 minute question and answer period.

I’ll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I’ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $229.

I’ll be arriving an hour early and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.

The lunch will be held at a downtown Los Angeles venue that will be emailed directly to you.

I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.

“Part of creating a global economy that is sustainable is learning how to talk to each other,” said economics Nobel Prize winner, Dr. Michael Spence

With smoke still rising from the ruins of the recent silver crash, I thought I’d touch base with a wizened and grizzled old veteran who still remembered the last time a bubble popped for the white metal. That would be Mike Robertson, who runs Robertson Wealth Management, one of the largest and most successful registered investment advisors in the country. Click here for his site.

Mike is the last surviving silver broker to the Hunt Brothers, who in 1979-80 were major players in the run up in the “poor man’s gold” from $11 to a staggering $50 an ounce in a very short time. At the peak, their aggregate position was thought to exceed 100 million ounces.

Nelson Bunker Hunt and William Herbert Hunt were the sons of the legendary HL Hunt, one of the original East Texas wildcatters, and heirs to one of the largest Texas fortunes of the day. Shortly after president Richard Nixon took the US off the gold standard in 1971, the two brothers became deeply concerned about financial viability of the United States government. To protect their assets they began accumulating silver through coins, bars, the silver refiner, Asarco, and even tea sets, and when it opened, silver contracts on the futures markets.

The brother’s interest in silver was well known for years, and prices gradually rose. But when inflation soared into double digits, a giant spotlight was thrown upon them, and the race was on. Mike was then a junior broker at the Houston office of Bache & Co., in which the Hunts held a minority stake, and handled a large part of their business. The turnover in silver contracts exploded. Mike confesses to waking up some mornings, turning on the radio to hear silver limit up, and then not bothering to go to work because knew there would be no trades.

The price of silver ran up so high that it became a political problem. Several officials at the CFTC were rumored to be getting killed on their silver shorts. Eastman Kodak (EK), whose black and white film made them one of the largest silver consumers in the country, was thought to be borrowing silver from the Treasury to stay in business.

The Carter administration took a dim view of the Hunt Brothers’ activities, especially considering their funding of the ultra-conservative John Birch Society. The Feds viewed it as an attempt to undermine the US government. The proverbial sushi hit the fan.

The CFTC raised margin rates to 100%. The Hunts were accused of market manipulation and ordered to unwind their position. They were subpoenaed by Congress to testify about their motives. After a decade of litigation, Bunker received a lifetime ban from the commodities markets, a $10 million fine, and was forced into a Chapter 11 bankruptcy.

Mike saw commissions worth $14 million in today’s money go unpaid. In the end he was only left with a Rolex watch, his broker’s license, and a silver Mercedes. He still ardently believes today that the Hunts got a raw deal, and that their only crime was to be right about the long term attractiveness of silver as an inflation hedge. Nelson made one of the great asset allocation calls of all time and was punished severely for it. There never was any intention to manipulate markets. As far as he knew, the Hunts never paid more than the $20 handle for silver, and that all of the buying that took it up to $50 was nothing more than retail froth.

Through the lens of 20/20 hindsight, Mike views the entire experience as a morality tale, a warning of what happens when you step on the toes of the wrong people.

And what does the old silver trader think of prices today? Mike saw the current collapse coming from a mile off. He thinks silver is showing all the signs of a broken market, and doesn’t want to touch it until it hits the $20’s. But the white metal’s inflation fighting qualities are still as true as ever, and it is only a matter of time before prices once again take another run to the upside.

Silver is Still a Great Inflation Hedge

“It is not the decrease in earnings that causes most of the stock collapse in a long term downturn, but instead it is a collapse in stock valuations from the cessation of future earnings growth,” said independent researcher, Harry S. Dent.

Hedge fund titan, Jim Chanos, is well known for his extremely bearish views on China. He says that the cracks are spreading on the façade, real estate sales are falling, and that the economic engine is starting to sputter.

This will be bad news for the rest of us, as China imports 50%-80% of the world’s commodities. Commodity exporting countries will be especially hard hit, like Canada, Australia, and parts of the US. Modern China has only seen a bull market, and he doubts their ability to manage a true crisis.

There is a widespread misperception that the government will step in and provide any bailouts that will be needed. The domestic Chinese banking system has in fact already been bailed out two times. The harsh reality is that while Chinese companies are selling billions of dollars’ worth of new stock issues in the US through IPO’s, a privileged elite is getting their money out of the country as rapidly as they can. Jim says that he already has short positions in the Middle Kingdom that are profitable. There is no way that even a wrinkle in a market of this size is without global implications, and on that point Jim is right.

However, I think that Jim, who confesses to having never visited China, is missing the broader long term picture here. China has literally been building a Rome a day, the ancient kind, and the modern size every two weeks. In a year, it builds the equivalent of the entire housing stock of Spain, and in 15 years the equivalent for all of Europe.

While a lot of apartment buildings have been built, the country is rapidly creating the middle class to fill them. Even allowing for a pull back from its current blistering 10% per annum GDP growth rate, urban disposable income per person is expected to grow by 2.5 times to $7,500 by 2020. Over the same time frame, some 160 million are expected to move from the hinterlands to urban areas. Rising standard of livings mean that residential floor space per person will jump from 270 square feet to 369 square feet, still tiny by Western standards. That is a lot of housing demand.

China has already taken steps to head off a housing crisis, unlike the US. The People’s Bank of China has raised bank reserve requirements five times this year, now close to 20%, taking them to among the most stringent levels in the world. That is almost Canadian in its conservatism. Many banks are now demanding cash deposits of 40%, well over the official requirement of 30%. The government is in effect forcing the banks to deleverage before hard times hit. Too bad they didn’t think of that here.

I think China still has several good years ahead of it, and I am going to pile into the stock ETF (FXI) and the Yuan ETF (CYB) as soon as the current bout of “RISK OFF” selling exhausts itself. The Country’s real challenge arises when its demographic pyramid starts to invert in about five years, the result of a then 35 year old “one child” policy, when too many single children have to start supporting two retiring parents.

China: Not Enough Demand?