IceCap Asset Management: The Invisible Zombie

IceCap Asset Management: The Invisible Zombie

Submitted by Keith Dicker of IceCap Asset Management

“I’ll show you who I am”

And with that one line – the world of invisibility was born.

The 1933 blockbuster film, “The Invisible Man” launched a genre that would span decades, producing many enjoyable and many unenjoyable movies of things and people we can’t see. Next up was “The Invisible Man Returns”, followed by “The Invisible Man’s Revenge”, “The Invisible Boy”, “The Invisible Mom”, “The Invisible Mom 2”, and let’s not forget the Chevy Chase classic “Memoirs of an Invisible Man.”

Through the humour, terror, and mystery, the one thing that was constant throughout these stories was – consistency.

The consistency was in the way the story was told, the path it took and the usual predictable ending.

Unseen and definitely unappreciated by most investors today, the global financial world is missing an important factor that is crucial to keeping the world humming along in a predictable pattern. A pattern that rewards success, punishes failure and then sets the scene to begin the cycle all over again.

This missing factor is none other than the Invisible Hand.

Unfortunately, the Invisible Hand is hard to see. It’s never discussed by the media, big banks, and certainly never discussed by the central banks – after all, they’re the ones who caused it to go missing in the first place.

As you sit back to enjoy and appreciate this latest edition of the IceCap Global Outlook, we ask you to use your vision to see and understand why today’s markets have been displaced, and what happens with the next great story – The Return of the Invisible Hand.

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The Recession

Since 1967, the United States has experienced 7 different recessions. And since 1967, the Survey of Professional Forecasters collectively, have predicted exactly zero recessions.

This 0% batting average can be interpreted two ways:

1) Collectively, this group isn’t very good at their job.

2) Forecasting or predicting recessions is next to impossible.

Yet, the beat goes on.

Recessions can be measured in different ways. The Professional Forecasters focus on a collective decline in industrial production, employment, real personal income and sales. A more common definition used by the big box banks and mainstream media is two consecutive quarters of negative GDP growth.

Meanwhile the most popular definition of a recession is when YOU lose your job.

What we do know, is that a normal economy moves in a cycle where there are highs and lows.

The highs are the good times. While the lows are the bad times.

Good times are followed by bad times

To illustrate the typical economic cycle, consider the below chart. What’s really neat about the business cycle is that over time, it flows in a logical and somewhat predictable direction.

When the good times roll, they really roll. Yet eventually, momentum runs out of the economy and the good times gradually slow to a point where good times turn into bad times. But then, slowly the bad times end, and a recovery and the beginning of the next good times begins again.

Of course, to be more technical, the global economy is simply a function of changes in money supply and demand for credit.

Yet, everyone who has ever studied economics eventually comes to the same realization – the economy absolutely moves in ebbs and flows, and eventually it is always guided by an invisible hand.