Important Themes from My 2010 Blog
Firstly I wish to thank the readers for taking the time in this busy world to read this blog. I started writing in June 2010 with the thought that people buy an inexpensive household item only after comparison shopping and due consideration, yet people invest their life savings by simply putting the responsibility on someone else’s shoulders.
I thought I would give interested readers some insight in how to invest and also how the investing world operates. To my surprise, many people are interested in this subject and the number of followers continues to rise.
If you have a particular matter you wish mentioned, please feel free to write and ask about it.
The Following Are Selected Comments from Some of my Blogs
Economies Run in Waves
Economies always have had waves of prosperity and overabundance, and then downturns and hardships. I have discussed some of the ways we should start addressing this phenomenon in previously commentary. It really is not that hard to stop this aberration, if our governments would only pay some attention. Instead they operate only on a crisis-control mode.
What the investor has to realize is that when fear rules the markets, you should step in and be a buyer.
Remember the words of Baron Rothchild – “Buy when there is blood in the streets.” Otherwise you will buy at the top of the next cycle, and as in every previous cycle, you will be a loser.
The Function of the Media – Their Business is to keep you interested
Be aware of the bias of the media. They have to fill space or time slots. That is their business. Try to ignore the hysteria of the day, and the gurus of the day. The mature economies are gradually recovering and as they do, the markets are also recovering. Buy now, rather than wait.
If you wait until everyone agrees that the markets can only go up, it is time for the next big fall – sell out.
Lord Rothchild’s Philosophy – Buy at the Sound of the Cannons and Sell at the Sound of the Trumpets
The markets are eternal. As long as there are people trading in money and goods, there will be markets. They rise and they fall – sometimes quite dramatically. If you look on a long term basis, the markets go up – generally. When you know something is good or in demand, and everyone else is running scared, buy it. You will become wealthy.
How Your Investment Advisor Gets Paid
Before you buy a stock or invest with an IA (Investment Advisor) remember that they get paid when they sell you a stock or bond. They get no reward and incur no penalty if you make money or if you lose money. Their only job is to sell you stuff.
The message here is to do your own research. The odds are that you will do just as well or better as any IA can do for you, by taking the same time researching stocks as you research buying anything else. The internet has leveled the playing field.
The Fault With Capitalism is the Lack of a Warranty
If the financial Institutions and IAs bore some responsibility for what they sell; if they only had to refund their commissions when an investment sours, it would stop the great waves of over-exuberance.
It would also make Wall Street have the same responsibilities as Walmart.
The Savant – An Amazing Skill Usually Means a Deficiency in Other Skills
We elect those that look the best, or speak the best, or have the best PR team. Precisely the people that usually (but not always) don’t have the administrative skills, or true leadership skills.
WikiLeaks founder Julian Assange
While I clearly see the validity of the arguments in support of Wikileaks, I feel Wikileaks was wrong in what it did. It prevents a level playing field among nations by disclosing only one side’s information. It makes protecting our democratic rights much more difficult.
We believe in commodities. Commodities are needed around the world. But we don’t buy commodities. We buy undervalued or unrecognized junior companies that are searching for, or producing, commodities. Six months ago, we advised readers to overcome their fears and get out of cash and into the ‘juniors’. Those that followed this advice did very well financially this past year.
Gold and silver are not overvalued. It doesn’t matter if they rise more, or if they fall a bit. There are so many junior companies that are now undervalued, it is not difficult to find some and buy them.
Oil is strong and becoming stronger. While we didn’t particularly buy those stocks this year, the section is a good one to invest in. Demand for oil continues to rise.
The Fed Chairman – Mr. Greenspan
After year 2000, the esteemed Mr. Greenspan as Fed chairman decided to try to stop these cycles, and flooded the market with money every time a collapse seemed inevitable. The result was that the market just kept expanding with easy money, making the next collapse likely to be much more violent and devastating. That is exactly what happened.
The Excess of a Current Wave Steals Demand from the Future
When a wave occurs, as it builds momentum, with the impetus of the commission based Wall St traders behind it, the wave exceeds the natural demand, and in effect, the wave creates something that really shouldn’t have been created. The level of the wave is in fact stealing money from future demand.
It can be argued, that the collapse simply is the recognition of that theft of money by the height of that wave, from the future, and the impetus (which all comes from borrowed money) is the funding that moderates the effect of that larger than reality wave.
So if one follows this reasoning, it is not the creation of money that is the problem. It is human greed and avarice that took the money that governments have to borrow to replace. Isn’t this an interesting way to look at the problem?
Silver has yet to show its dramatic increase in value.
As we have said before, it is not the price of the metal that is most important. It is the gross profit margin being made by producers and miners of the metal where the great profit lies. Buy junior companies that are in silver, but make sure that they have real merit.
Follow the Trend – The Market has Decided we are in a Recovery
As we have remarked previously, the economic world is gradually recovering and normalizing. Crises come and go but the trend is recovery and the market long ago decided that we are in a recovery.
Understanding What is Happening
On a long term basis, the more money the Fed prints, the more it devalues the US dollar (the world’s reserve currency). It’s a predictable attempt to increase economic output but only seems to make commodities trade higher. We see it week in and week out.
A Complete Lack of Social Conscience
The world suffered a tremendous shock in October 2008 and in March 2009. Greedy and unconscionable financial industry executives did what they always do. They stole as much money from the unsuspecting as they could, and they paid zero attention to the effect of this theft on the societies that allowed them to achieve their great wealth. Their only motivation was greed and a lack of social conscience.
The Price of Oil
All of which brings me to the price of oil. Oil is measured in US dollars. As I mentioned in my last blog, the fact that over the long term, in spite of supposedly brimming tanks of oil in inventory, the price of oil rises, rather than falls.
The Attraction of Gold and Silver
Very often we look at gold and use it as our main object of attention. Yet historically there has been a continuing relationship between gold and silver. The two metals are together regarded as alternatives to paper currency. Silver is often referred to as gold’s poor cousin.
Understanding the World’s Currency Wars – The Objective for the Value of the US Dollar
In my last blog, I mentioned the relationship between gold and currencies. A lot of the artificial rise in the value of gold, is directly related to US Fed announcements and policies.
The Price of Gold
What a period it has been. Last week the price of gold rose dramatically and this week it moderated. Last week the price of the commodity reacted to the Fed announcements rising dramatically, and this week some common sense actually occurred and the price fell.
Canada Stands Tall
By David Warren, The Ottawa Citizen October 17, 2010
There was a moment this week in which I felt very proud to be Canadian. There could be moments like that in any week, but this one was unusual for its cause. It was something done by the government, that invoked principle, and required courage. That made it something rare, to be savored. The exposing by the Canadian Prime Minister of the Arab hypocrisy towards Israel.
The Human Need to Believe
Humans have a basic need. It is part of our need to be part of a group, to not be alone. We want to think that others have more knowledge than ourselves. We want to look at someone else, or read what they have said or written, and follow their thoughts and leadership as if “they know”.
It is the very ability of public figures to sound as if they know, to radiate confidence, to appear to be ‘in the know’, that makes us want to watch them, to listen to them, to hear others interpret what they say. It is all because ‘THEY KNOW’.
The Wisdom of the Crowd
There is a theory that has gained acceptance. It is the theory that if you wish to get the right answer to a question or dilemma, you should let a large number of people ignorant of the facts and without special expertise examine the question and more often than not, the consensus of that crowd will be more accurate than any so-called experts.
The major gold producers also realize this. There is a continuing and escalating demand by the major companies to find and acquire junior companies with excellent reserves. The latest, but by no means the only, example is the pending $3.6 billion dollar buy-out of the gold junior Andean Resources (TSX: AND). Expansion-minded major mining companies are poised to gobble up more asset-rich gold explorers.
How Many Crises Have We Seen?
All the talk about double dip, inflation, deflation, currency crises, mounting debt, and so on, is just that – talk. The USA, and the world has been buffeted by the succeeding crises – the oil crisis, the tech crisis, the debt crisis and many more minor crises in between. Yet, the world continues. New fashion items are snapped up. New cars that address the environmental issues are selling well. Some retailers are suffering, but not surprisingly, the innovative ones, the ones that are nimble are surviving and are thriving.
Money Travels Fast
What a lot of people forget, is that money is traveling around the globe faster than ever in history. An economy with a surplus means that capital – read “CASH” – is accumulating somewhere, and it has to find a home. If an economy is building, it calls on worldwide resources, both technical and material, to build. The cash surplus accumulated somewhere gets rapidly shifted elsewhere to buy goods, services and resources. This is what happens to the cash produced by the US printing presses.
Read this to include China, Brazil and others buying up everything from oil sands deposits in Canada to copper in the Congo, and so many other places. Capital is moving.
The Banks are Purchasing Gold
It was a gold rush – but in reverse. For a few decades now, central bankers worldwide have been hustling to sell their once prized gold bars. But now, the world seemed to have changed. There is a mad rush recently to reacquire bullion by central bankers.
The Ridiculous Use of Benchmarks, Alpha, and Comparisons
Mutual fund managers get paid based on the amount of money they manage. They don’t get paid on performance, or record, or anything else that is based on how well they are doing. They get paid on how much money they manage.
That is why ‘Buy and Hold’ advertisements are intended to allow mutual funds to keep your money. A very good marketing strategy. A very bad investing idea.
These are just a few of the concepts and opinions expressed in this blog over the last six months. I encourage the reader to review much much more by reading previously published opinions.
To all of you, I wish you a healthy and a prosperous 2011.