Archive for January, 2008
January 31, 2008
There are at least four economic and stock market crises that I’ve studied extensively that mirror today’s global economic conditions. Only many things today make today’s situation in many aspects much worse than the conditions that triggered past crises. That is why I say crisis is inevitable and great wealth will be destroyed in global stock markets. However, great wealth can also be built during this time as well. You don’t have to be a passive investor whose wealth will be destroyed. Here, I’ll examine just one of these crises - the 1997 Asian Financial Crisis and how the triggers for this crisis do not bode well for today’s situation.
The 1997 Asian Financial Crisis
Prior to 1997, the Asian “tigers”, in particular, South Korea, Thailand, and Indonesia attracted foreign investment in three manners: (1) The liberalization of investment policies and consequent elimination of restrictions on capital inflows; (2) the maintenance of high domestic interest rates to attract capital inflows; and (2) the pegging of domestic currencies to the U.S. dollar to allay fears of volatile currency movements.
Extremely high 8-12% GDP growth rates in South Korea, Thailand and Indonesia in the mid-1990s created rampant foreign speculation in real estate markets and created unsustainable inflated real estate prices. When the real estate bubble burst, a flight of capital ensued. As foreign currencies were withdrawn at record levels, the domestic currencies of the Asian tigers suffered great depreciation in their exchange rates against the Western denominated currencies of the investing nations. To provide stability to the economies of the Asian tigers, the IMF proposed a 3-pronged solution: (1) Cut back on government spending to reduce deficits; (2) Allow illiquid banks and financial institutions to fail, and (3) Aggressively raise interest rates to strengthen domestic currency. Read more …
January 31st, 2008
January 29, 2008-
As those of you that are familiar with my many past writings about precious metal stocks, you may find this article’s headline very curious as I’ve always preached, “Never chase stocks higher, especially precious metal stocks, as their volatility always provides opportunities in the future to buy them at better prices if they have just risen rapidly.” So am I changing my tune now? No. Just modifying my viewpoint as every smart investor never remains steadfast and unchanging in his views in light of new, compelling information.
I’m going to use a couple of charts to make my point today.
If we look at the chart for Newmont, one of the largest gold stocks by market cap, in the world, I’ve pointed out a curious development. When the underlying commodity of gold was trading at $834 an oz., NEM was trading at $56.17 a share. Now that gold has skyrocketed more than 10.67% to $923 an oz., NEM is actually trading at a lesser price, at just $54.49 a share. Read more …
January 30th, 2008
January 28, 2008 -
The most accurate oracle regarding the effects of the rapid U.S. Federal Reserve interest rate cuts is history. The Feds have taken this path before and the results have never been pretty. Not one single time. Though the sentiment on the street seems to be that the Feds may not be inclined to cut interest rates significantly in a couple of days given their emergency rate cut of 0.75% a week ago and the revelation that Societe Generale exacerbated the plunge of European stock markets by recently closing out all open positions maintained by rogue trader Jerome Kerviel. Still, given the Fed’s foolish reactions to every economic problem in recent history, I would not be surprised if they caved to Wall Street interests and cut interest rates by another .50% in a couple of days. However, even if they only cut interest rates by 0.25%, this would still produce a cumulative 200 basis point reduction in the Fed Funds rate in just the past four months. Those are huge rate cuts no matter how you slice it. But no matter the “dead cat bounce” that the Feds are attempting to manufacture right now to provide stability to the markets, their plan will ultimately fail. History tells us so.
Historically Comparable Scenario to today: 2000-2007 U.S Economic Timeline - Dot com crash, U.S. Federal Reserve manufactured real estate bull, subprime mortgage fallout….Next? Real estate bear and depression??
The dot com bubble collapse caused the U.S. NASDAQ index to plummet from a peak of 5,038 in March, 2000 to 1,114 in October, 2002– a decline of 78% in less than three years. Runaway valuations and frenzied buying of a hot sector caused the tech market to collapse as investors and venture capitalists threw money at tech companies, inflating the value of companies that had never declared a single dollar in revenue or profit. Even though revenues, earnings and cash flow were all absent, this didn’t seem to make a difference as a rapidly rising index provided a rising tide that lifted all boats regardless of the missing components of quality or fundamental soundness. Read more …
January 28th, 2008
January 25, 2008
We have received many inquiries recently regarding the difference between our premium subscription services and the free information we deliver through many various forums. Quite honestly, the difference is enormous as we provide very specific information only to our subscription members. In response, we’ve decided to offer a sneak peak into our subscription only information, available here.
Technorati Tags: crisis investing, global economic crisis, smartknowledgeu
January 24th, 2008
January 25, 2008-
Here are some links to take a sneak peak at the valuable information we’ve provided on the SmartKnowledgeU™ Facebook Group, “Crisis Investing”. All of these articles were posted several months ago in October of 2007. Some recent articles at this forum include the following: “To Make Money From this Crisis, You Must be Courageous”, “Remain Forward Thinking” and more.
October 21, 2007 - Are We at the Tipping Point?
“Let’s take a look at some of the points I discussed during my discussion of the coming investment crisis at the Pan Pacific in Asia on September 6th, 2007. Back then, these were my exact quotes.
I stated that the effects of the subprime fallout were far from over though all the touts in the media were trying to convince people that it was now time to buy. I stated that “increased volatility [in U.S. markets would happen] as $370 billion in subprime mortgages re-set to higher rates with $50 billion in September…and $30 billion every month thereafter”. OUTCOME: The Dow shed 370 points October 19, 2007.
I stated that “a deepening correction in global stock markets was likely to occur”. OUTCOME: Tokyo this morning is tumbling big time, down 2.9%, Australia is down 1.3% and South Korea is plummeting 4.7% in very early trading.
If you don’t listen to the talking heads in the investment media that tell you every dip in the market is a buying opportunity, then you can understand how certain fundamental conditions of the global economy will lead to inevitable circumstances and outcomes.” Read the entire article by joining this group at Facebook.
October 16, 2007 - Hot Air Can Make a Lot of Things Rise, Even Stock Markets
“In the last forum post, I mentioned that the U.S. stock market can APPEAR healthy even when the underlying economy is in worse shape than an alcoholic on a kidney dialysis machine. As markets continue to climb higher in the face of manufactured, political-agenda serving government statistics and interest rate cuts, I guarantee you the same rally cries will appear from all the bulls (aka sales people, I mean company men and women) that this is bull run of historical proportions and that you better come along for the ride. ” Read the entire article by joining this forum at Facebook.
October 8, 2007 - How to Build a Fortune From the Coming Crisis
“Those of you that have been reading my blog and newsletters for a while know that I view the vast majority of government released economic reports as nothing but manufactured, cooked reports designed to generate whatever confidence governments need from their citizens to hide the instabilities inherent in the economy yet keep stock markets growing. In the U.S., the reported numbers about inflation, housing starts, and so forth are so distorted and distant from reality that they are virtually meaningless. I’ve always said the same about the statements made by the most powerful Central Bank in the world, the U.S. Federal Reserve. Yet at times, their Chairmen have been exceedingly honest in their comments, though the masses seem to ignore them.” Read the entire article by joining this forum at Facebook.
This is a closed group and not available to everyone. However, you can request access to all the bulletins at this group, including ALL RECENT postings, as well as future postings, by joining Facebook (a free service), performing a group search for “Crisis Investing” on Facebook, and requesting to be added. Please DO NOT send any requests directly to J.S. Kim requesting to be added to this group. If you do, you will NOT be added to this investment forum. Thanks.
Technorati Tags: crisis investing, recession, global economic crisis, gold
January 24th, 2008
January 24, 2008-
At first glance, most investors might read the headline of this article with great confusion. After all, with a 600 point turnaround in the DJIA and significant rallies in Asian and European markets triggered by the cut, isn’t this exactly what the markets needed? My answer is definitively no, and let me explain why. Let’s take a look back at history to learn how the markets will behave going forward. On September 19th, I wrote a blog entry titled, “Why the U.S. Fed’s 0.50% Rate Cut Won’t Save the U.S. Markets”. In the article, I outlined several reasons why the 0.50% wouldn’t save the U.S. markets.
Back then, on September 19th, 2007, I stated: “Alan Greenspan made this statement in 1966, 20 years before he would serve as Chairman of the U.S. Federal Reserve for almost two decades: “Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights”. One only need to understand the truth in that comment to understand where your money should be invested and why this mini-rally in global markets spurred by the Fed’s decision to cut the Federal Funds rate by 0.50%, even if it should extend into a larger rally, should cause you to be scared, and very scared at that.”
Today: What happened after I made that comment? The DJIA rallied to about 14,000 and then proceeded to plummet more than 1,700 points in a matter of weeks. The same problems that existed on September 19th, still exist today. That is an indisputable fact. Remember, just several months ago, U.S. Secretary of Treasury Hank Paulson urged Congress to raise the national debt ceiling, stating that the U.S. would reach the current national debt ceiling by October 1st. The decision to raise the ceiling from $8.965 trillion to $9.82 trillion, besides preventing the U.S. Government from defaulting on U.S. Treasury bonds, was necessary to retain international confidence in the “full faith and credit” of the U.S. government. This deficit hasn’t disappeared, and nor has the liquidity-soon-to-become-insolvency problems of banks, so there is no reason to believe that a more severe 0.75% rate cut is going to save the U.S. markets or prevent a continued global fallout at some point in the near future. Read more …
January 24th, 2008
January 21, 2008
In six weeks, my book Confessions of a Wall Street Insider, A Zen approach to making a fortune from the coming global crisis will be available at Amazon.com and barnesandnoble.com. However, if you wish to purchase it before it is available on those two sites, you may do so right now at http://www.lulu.com/content/1844087. In fact, you can even preview the first 10 pages for free at that website.
In the meantime, here’s a brief description of the book’s contents below:
Disenchanted with the sales oriented environment of Wall Street firms, J.S. Kim left the corporate world to launch his own companies, SmartKnowledgeU™, an investment research & education firm, and Blue Ocean Investing™, an investment consulting firm. Before leaving the corporate world, J.S.’s diverse work experiences included managing money for some of the richest people in the world at Fortune 500 companies and developing healthcare programs for some of the poorest Americans at a community healthcare corporation.
Since leaving the corporate world and no longer clouded with the deception of Wall Street firms, J.S. Kim’s proprietary investment strategies have led to amazingly accurate calls including calling for gold to hit $850 by the end of 2008 in September of 2007 (gold reached $850 an ounce on January 3rd, 2008, only three days off of J.S.’s prediction!). In October, J.S. predicted that a recession would hit the United States. Furthermore, in November of 2007, at a Crisis Investment workshop at the Pan Pacific in Asia, J.S. called for triple-digit down days in the U.S. Dow Jones Industrial Read more …
January 21st, 2008
January 21, 2008
Recently I’ve posted quite infrequently on this blog as I’ve been busy putting the finishing touches on my book “Confessions of a Wall Street Insider: A Zen Approach to Making a Fortune from the Coming Crisis”. However, I wanted to write a brief entry today regarding the proper psychology that is necessary to build, and not lose, a fortune from this coming crisis. Within the past two weeks, I noticed that the requests to join my Facebook Group, “Crisis Investing” (just go to Facebook and perform a group search to find it) have spiked and that the number of visits to this blog have more than tripled. I imagine that this is so because many people have lost great sums of money at the beginning of this year as stock markets in Asia, the U.S. and Europe have all plunged. For months I’ve been telling people that the stock markets were going to plunge. In fact my exact words at a Crisis Investment seminar I gave in September of 2007 was that “triple digit down days in the Dow would become commonplace.” Of course, if you couldn’t attend any of the seminars I gave in the U.S. or Asia, then you could have found the same guidance on my facebook forum, here at this blog or my subscription services available on this website. Yet most investors took no action until my predictions actually started becoming a reality. And this is the important psychology 101 lesson to be learned here. To make a fortune from this coming crisis, you have to be proactive, and not reactionary. Read more …
January 20th, 2008
