We have often commented that the economy is gradually recovering. The North American and European societies are simply too strong to lay dormant. There will be a lot of bumps in the road, and a lot of bad news along the way, but gradually and surely, this cycle will become a memory, just like every other cycle in the past.
Continual Fear Stories
Those that listen to the continual fear stories published in the media are taking too narrow a view of the economic world. Think about the recent jolts to our economy and the media frenzy to report them. There was the Iceland crisis, the US foreclosure rates, the failure of China to raise rates, or to lower rates, or to whatever, (or to lower imports, or to raise imports – whichever one believes), the recent US Fed creation of more debt, the warning from the Bank of Canada that Canadians have too much debt, and so on.
In each case, the media screamed out the doom and gloom and the impending possible collapse.
Let us start today with some recent headlines, that may counter some of the negativism. I have thrown in some negative headlines to show you what I am referring to. These are just headlines that I picked at random. There are so many headlines every day from so many sources that it would take a great deal of effort to list them all.
Dec 6, 2010 WALL STREET JOURNAL Hiring Plans Pick Up Across Globe
Dec 9, 2010 Scott J. Brown, Ph.D., Raymond James – Revised 2011 Economic Outlook
Gradual Recovery To Continue, Picking Up Over Time. The good news is that the economic recovery is expected to continue in 2011, as positive momentum in consumer spending and business fixed investment battles continued headwinds.
Dec 9 2010 By Steve Goldstein, MarketWatch WASHINGTON — Wall Street economists were tapping into their spreadsheets Tuesday, ready to ratchet up their economic growth forecasts for next year in light of the tax deal struck by President Barack Obama and congressional Republicans, particularly the surprise one-year reduction in payroll taxes.
Dec 10, 2010 Shobhana Chandra, Bloomberg – Trade Gap in U.S. Narrows More Than Estimated as Exports Hit Two-Year High Lost in the shuffle of the European debt woes, a second round of quantitative easing and gold’s record run has been the resurgence in global demand for oil. Global oil demand is strong; in fact, it has never been stronger. Oil demand during the third quarter of this year was up 3.7%, the fourth-straight quarter of growth.
Dec 13/10 Industry Week – Better Economy – 49% of Manufacturers Plan to Hire in Next Six Months
Dec 14/10 Sydney Morning Herald – Business conditions remain soft as confidence wanes. Business conditions remain soft and confidence has fallen despite a slight improvement in November, a survey says
Pick the Headline That you Believe In
It is a strange but normal human emotion. A bad news headline grabs a lot more attention than a good news headline. Those that are suffering a bit more, notice the bad news more. Those that are feeling good, pretty well ignore the bad news headline.
The point to understand is that the economy still has weaknesses and indeed those particular weaknesses may last a very long time. For people that have been hurt and continue to be hurt by a particular segment of the economy, it is time to sit up straight and understand that it is time to move on. What happened, happened. It is history. Perhaps painful, but still history.
Those that are keeping their eyes open and their attitudes positive, have for a large part found new ways to work and to succeed. In our section of the economy, things are booming. The financial industry, with notable exceptions, is again doing very well. Executive bonuses are increasing, and profits are returning.
Commodities
We believe in commodities. Commodities are needed around the world. 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 did, have done very well. Those that stayed in cash or equivalent, have made a couple of percent, maybe.
We have had a really excellent year and our positions have done very well indeed.
It is not too late.
Our Beliefs
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.
Cautions
Stay in politically secure areas. It matters not how rich a deposit is, if bureaucrats, politicians, and dictators can determine your future.
Stay away from the hottest stock. Promotions often fail.
Stay away from the rarest of commodities, or the most unusual, even if the deposit is phenomenal. Unless you know for sure just how irreplaceable that commodity is, be afraid that some other industrial process, or some other commodity can replace it.
Don’t be fooled by green. Supporting green initiatives is a good thing. But investing in green initiatives that are foolish or depend only the current elected party, can be very disappointing when the current government is replaced by the next government.
Conclusion – get invested, and get invested smartly.
Next – We return to How to Easily Fix Capitalism
