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This is part 10 of a 12 part interview with Dennis Crawford.

Dennis Crawford InterviewNational Debt

Dennis: I think 2014 is I think we’re in a period of global transition right now that’s going to have tremendous opportunities and tremendous pitfalls. And you know tying it back to some of the economic discussion we had earlier in our chat here today, there’s some significant structural problems. If you step back 100 miles from it and look at it, you can see it. And I think so many analysts and traders have their face so close to the tree that they can’t see the forest to use a cliché. And the structural problem with massive, massive government deficit would be a problem of that.

So we can turn on CNN or BNN and hear the talking heads talk about the job report numbers or the current GDP rating and extrapolate very near term ideas for trends in that regard but in the last few years there’s been a few years that woke me up to this but in the last few years I found it beneficial to step back from all of that a little bit, kind of look at the big picture so to speak. I know that sounds a little cliché but when you do that you realize that some of the fundamental problems we have in our economy and our fiscal situation are directly tied to some of the concepts we are talking about who or what they are or why they’re here.

So we see these things manifest in certain ways and we talked about the US debt for example, it was 17 trillion dollar national debt. If you build debt at the state level, and the municipal level, and you add all the unfunded liabilities to that like federal employee pensions that are promised and all those things under it, I mean that number rolls through 100 trillion dollars very quickly. Now 100 trillion dollars is just a mind-blowing number, even divided by a big population like the United States, it’s still a showstopper it’s a complete showstopper. And I’ve been waking up to the moral dysfunction, I sort of align that up to like.. to use a party analogy it feels like it’s 2 in the morning, we’re all gorged, we’re full, ‘we’re half drunk. We’ve been partying for 6 hours and we’re pushing a 100 trillion dollar check across the table to the kids and we say “You figure this out” you know what I mean because I just got to get through this security system in my retirement era and that really agitates me, that bothers me.

So I think from that level we have some significant structural issues that we need to get through as a society, as a people. Now whether that continues to unwind at what pace in 2014 is yet to be seen, without getting to technical in the economical jargon.. we live in an environment where we’ve amazed this massive amount of debt and we’re running zero percent interest rate policies with massive amounts of qualitative easing, that means printing money from nothing and shoving it into the system. To try and keep this thing afloat and try to generate a one and a half GDP number.

So when you step back from that and ignore that the GDP might have just slipped from 1.5 to 1.7 which could be micro-viewed as a positive thing, when you step back from that and look at the big picture you kind of see that the ridiculousness of getting too caught in that micro-trend. It’s almost like we’re ignoring the elephant in the room to a certain degree.

So my medium term outlook for traditional assets like Canadian real estate, stocks, bonds and so forth, I would say it’s negative but it’s certainly tempered by observing the reality in which we find ourselves. As far as a single asset class right now, the one thing that’s served as money since before the roman empire about 7th century BC and continues to serve as money is precious metals and assets. Now we’re in an economic environment where the stock market is pushing through very, very high multiples, the stock is more expensive by any measure against the backdrop of very weak fundamentals. I’m actively advising clients repositioning some of their wealth, some of their assets, to a more base position. It’s a protectionist move, it’s a defensive move, but if you look at from what it is an ounce of gold would buy you a new toga, a new leather belt, and a nice set of sandals.

Today at 1,245 dollars an ounce, if I go down to my buddy’s men wear store on downtown Calgary, if I shop the sales rack I can probably get a new suit, a nice pair of Italian leather shoes and a nice belt for about the same thing. If you look at one dollar, since incepted by the federal reserve 100 years ago.. Federal Reserve is 100 years old since 2013, it’s 100 years old. The purchasing power has been eroded by around 97 percent. So in an age of massive quantitative easing, massive printing of money from nothing because there’s nothing behind our money the gold standard was removed by Nixon is 1971. Since then we’ve been a true fiat currency, currency by degree. And it’s been shored up because of the petrol dollar angle, meaning all the oil and gas in the world trades in US dollars.

And that’s kind of what’s kept this charade alive a little bit longer but when you look at the system being abused the way it is against the backdrop of the baby boomers starting to retire.. I forget the number off the top of my head, tens of thousands of baby boomers retiring every single month. The big social system promises that were completely un-fundable especially against the backdrop where we already owe a hundred trillion dollars.. there’s still capacity to pay for all this stuff. so in that context I don’t want to say I’m negative, but I’m trying to be a realist.

So how do we navigate our way through that from an investment perspective or with a portfolio? My best answer for anybody is.. you need to be very, very well diversified. You need to be very, very spread out among the asset classes, where somebody might run offense with just straight stocks or hyper conservative with just straight bonds, I don’t think that’s enough anymore. We need real assets to some degree in our portfolios as this resets.

Now that could be a section of agricultural farm land outside of Calgary. It could be gold, precious metal obviously or silver. Silver dynamics are even more compelling than gold actually in some ways. It could be food based assets, hard assets like oil. There’s only one direction for the price of oil long term. We can’t make oil out of seawater.. so these types of things are tempering my conversations with people right now.