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Winter Is Coming

Perilous Markets

As of August 2017, red flags are everywhere:

  • In Japan, the US and much of Europe, government debt relative to GDP is at levels that have nearly always led to default. For example, if the Japanese government’s borrowing cost increases a modest 500bps, interest expense alone will exceed government revenue. Yet government borrowing costs, including Japan’s, remain near all-time lows. 

  • China, the world’s second largest economy, almost certainly faces a “triple bubble” in debt, construction and real estate.  China has used more cement in the last two years than the US did in the entire 20th century. Further, it is issuing $7 of debt per dollar of GDP growth – more than twice the US’ ratio during its housing bubble. 

  • US equities’ cyclically-adjusted price earnings ratio and market capitalization to GDP ratio are higher than at anytime other than the dot-com bubble.  US equities would need to fall ~50% to return the ratios to their long-term average.

A collapse of any of the bubbles in bonds, China or US equities dramatically increases the odds that they all collapse, resulting in global stagflation and widespread financial pain.

Profitable Protection

If the bubbles collapse, I expect the Hirschmann Partnership (the “Fund”) to appreciate more than 500% on the strength of its gold-linked securities (GLS) holdings. Gold is below its long-term average valuation, using my proprietary method, and tends to benefit from greater concern about default, inflation and equity risk.
More importantly, since the GLS seem extremely undervalued, they are also likely to appreciate over the long-term even if gold falls. In fact, the Fund has performed extraordinarily well to date despite negligible movements in gold prices.

Only accredited investors and qualified clients will be admitted as limited partners to the Hirschmann Partnership (the “Fund”). For natural persons, investors must meet SEC requirements including minimum annual income or net worth thresholds. The Fund is being offered in reliance on an exemption from the registration requirements of the Securities Act of 1933 and is not required to comply with specific disclosure requirements that apply to registration under the Securities Act. The SEC has not given its approval to the Fund, the offering terms or the accuracy or completeness of any offering materials. A registration statement has not been filed for the Fund with the SEC. Limited partner interests in the Fund are subject to legal restrictions on transfer and resale. Investors should not assume they will be able to resell their securities. Investing in securities involves risk. Investors should be able to bear the loss of their investment. Investments in the Fund are not subject to the protections of the Investment Company Act of 1940. Performance data represents past performance, and past performance does not guarantee future results. Performance data is subject to revision following each monthly reconciliation and annual audit. Current performance may be lower or higher than the performance data presented. The Fund is not required by law to follow any standard methodology when calculating and representing performance data. The performance of the Fund may not be directly comparable to the performance of other private or registered funds. Investors may obtain the most current performance data and confidential offering memorandum for the Fund by sending a request via email to See the confidential offering memorandum for the Fund for complete information and risk factors.

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