A Few Thoughts…

It’s been some time and I’m in Australia. Needless to say, I haven’t been thoroughly following the markets. Notice I use the word thoroughly. See, that’s one of the beauties of being a long term investor. You can sleep at night and enjoy your days without a worry in the world where your next internet hub may be or what the time difference between markets are.

So here are some of the things that I’ve been pondering recently

It’s not about the money! The best things in life can’t be bought with a Mastercard. It can get you to the time and place that may be most enjoyed with those people you enjoy most, but it does s**t for providing happiness! Go learn how to play a new instrument! Learn a foreign language! Travel to a place you never thought you’d ever go! Offer someone something without anything expected in return! Do something crazy without thinking at all what someone else may think of you! (a shot of some Tequila may be necessary for the latter ). Happiness is something that you express, not something you acquire.

Become an investor! Many people associate the word with financial gain, but I feel that it’s much more than that. Invest in a future, in your family, in your friends, in a meaningful life. The real entrepreneur is one who not only sees his initiative as a personal gain but also a global gain as well!

You are who you are and nobody is like you. (Even though they say that in China if you’re one-in-a-million there are 1,000 people just like you!). In short: Be different! It’s what investors do best!

Why this slowdown will probably be worse than all other recessions: In terms of severity it would seem that from an historical perspective people have no clue what they’re in for. Let’s go back in time. 2000: sure people remember it but no one truly believed it would happen. For stocks to lose 99.9% of their values? For the largest energy company to go completely bankrupt? 1991: The last real real estate downturn. 1987: People confused “bull” with “bubble” and missed the best opportunity in years. 1982: high interest rates nearly shut down commerce. 1973: businesses took the hardest hit since the depression. Now consider that all those factors may come into play over the next 10 years.

This business cycle is unprecedented. It won’t be the 70s, or the Japanese 80s, or the 30s or even Zimbabwean hyperinflation. It will be something entirely new. It will be mostly demographic: Those who own and those who owe. The highest price inflation is possible due to incredible demand, and an equally incredible shortage of supply. Likewise, a much weaker economy is possible due to excessive speculation and promissory mindset by the “splurgers”, and equally excessive speculation and interests by the “frugal”. Nevertheless, the world will learn another lesson (and have another fiasco-name to add to the history books) and the world will once again emerge greater and wealthier than it was prior.

Some analysts say that the silver shorts are naked, some say they are hedged. However, it seems plausible to even the most conservative of long term thinkers that higher monetary prices (calculated by basis or otherwise) of commodities is in order (notice how the Dollar rally has stalled, oil is at new highs and the DBA has bounced back).

It also seems that all agree that interest rates are bound to rise sooner than later. Now although this will slow the economy it is the last resort of the Fed to prevent hyperinflation. It will not necessarily support the Dollar under the circumstance. The Dollar has become subject to far more than monetary policy. It is now a paper promise, traded like any other liability, and a sudden lack in its ability to fulfill those promises may prove detrimental.

Higher rates are better for precious metals, as they have always been in the past. During monetary expansion (as was the past few months) investors find opportunities in a random list of alternatives. Yet when credit contracts the real credit crunch begins and few investors are safe from that (except for hoarders of real value: physical goods).

Oil surged from $122 to $139 last week. This was a simple result of no sellers. This may become prevalent in markets as there may soon be no buyers. Many analysts are expecting increased volatility over the coming months. How many are hedge for a full on crash? Not probable, but definitely possible, and that’s the only thing the prudent speculator cares for.

I had a laugh early yesterday morning when a friend of mine (who happens to think I’m way to involved in markets, which is interesting now that I’ve really toned it down), asks me, “Coffee?”. So with a smirk across my face and without missing a beat I reply “Buying or Selling?”.

Good times!



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