Archive for February, 2008
February, 20, 2008
“This is your last chance. After this, there is no turning back. You take the blue pill, the story ends, you awake in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland, and I show you how deep the rabbit-hole goes. Remember: all I’m offering is the truth, nothing more.” - Morpheus, from the film “The Matrix”
Simply put, we are at the tipping point of a major investment crisis today and the opportunity to radically reallocate our portfolios to make a fortune is quickly evaporating. Though I offer investors the opportunity to see how deep the rabbit-hole goes, most investors will shy away, gladly ingest the blue pill and remain firmly grounded in Kansas. Why? The secret of building wealth from this coming crisis is not knowledge itself, but rather an understanding of how your brain processes information that is granted to you. Once we understand that we have been programmed to believe certain investment falsehoods, this will clear our path to truly “see” the current investment crisis that is unfolding.
Most of us have no understanding of the triggers that drive our investment behavior. We are like the people that live in the fantasy computer generated world of the Matrix, constrained by the delusional statistics and reports produced by the commercial investment industry and governments that eventually filter down to us through the media. The great majority of us have come to blindly accept certain investment “soundbites” as truth without having questioned the validity of these truths even once. So today, I encourage you to challenge these beliefs if you have never before done so. Read more …
February 20th, 2008
February 13, 2008
In January of 2007, I wrote an article called “Ten Reasons Why Dollar Denominated Bonds Aren’t as Safe as You Think.” Here, I’m updating that same article, taking into account what has happened in the past year. Many people think of any type of dollar denominated bonds, whether they are U.S. corporate bonds or U.S. Treasury bonds as a safe place to park your money for reliable sources of income stream. In fact, the U.S. Treasury Department on their own website, even tout U.S. Treasury Securities as a “great way to invest and save for the future.” Many people believe this rubbish because they are advised of this by a horde of financial consultants that provide poor advice. Even today, I still read articles of money being moving into U.S. bonds as a “safe haven” given the continuing volatility in global markets. Many people think of U.S. Treasury bonds as safe because of the “federal guarantee”. The ten reasons below render that federal guarantee irrelevant.
(1) The often repeated financial consultant statement that bonds are a “safe place” to park your money, especially if you are older, is a myth.
Think of the losses of the U.S. dollar versus other major global currencies in the past two years. A greater than 8% decline against the yen (which is amazing given that the Bank of Japan had set interest rates between 0% and 0.50% during this time), an 11% decline versus the Pound Sterling; a whopping 19% decline against the Euro. If we look at emerging market currencies, the losses are just as pronounced. In just the past two years, the dollar has lost an incredulous 19% against the Thai Baht and almost 23% against the New Zealand dollar (I mention the New Zealand dollar and Thai baht because these currencies are commonly held currencies in Asian currency baskets offered by major banks as a hedge against the falling dollar). Read more …
February 13th, 2008
February 6, 2008
The other week, a friend of mine sent me an article from a financial advisor in the U.S. asking me for my opinion. In the article, the advisor stated two things that stood out to me like a two-ton boulder falling out of a clear blue sky. They were the following. In response to the short rally that U.S., European and Asian markets were experiencing at the end of January, he stated, “I see this time as a BUYING and repositioning opportunity with great potential gains soon to come”, further clarifying that statement with the exclamation of “It is hard to imagine any time in history when such rampant pessimism about the economy has existed with so little evidence of serious trouble.” When I read those statements, I had to read them again to make sure that I was reading them correctly. I thought to myself, What is this advisor smoking? His comment of there is “so little evidence of serious trouble” must have been drawn after scouring the pages of mainstream newspapers and financial websites that merely spit back what the commercial investment industry wants them to say and after studying government statistics that grossly distort the true picture of economic health. Yes, I know that there are certain asset classes that will rise even in bad, terrible markets. In fact there are those that will rise through the roof in terrible markets. But it was clear from the context of this message that this advisor was speaking of mainstream S&P 500 and Dow 30 type of stocks.
A quick perusal of the last six months of my archives here will tell you exactly why government statistics and mainstream financial media never tell the truth about the health of the global economy. Remember, Jim Cramer, a former Goldman Sachs broker, the founder of the Street.com, and host of CNBC’s Mad Money TV show, said, “What’s important when you are in hedge fund mode is to not do anything remotely truthful, because the truth is so against your view”. He claimed that it was easy to plant rumors in newspapers and the medias to drive the prices of stocks down when he had bets on the Read more …
February 6th, 2008
February 5, 2008
Yesterday a 370-point sell off in the Dow triggered monumental sell offs in Asian markets this morning on fears that the U.S. could be entering a recession. Here’s an unofficial official news bulletin. The U.S. is already in one. Yes, I know that the official definition of recession is marked by a decline in GDP for two or more consecutive quarters, and that this hasn’t happened yet as the 4th quarter U.S. GDP was 0.6%. Yeah right. Like I believe that or any other politically manufactured key economic indicator. First of all, the 0.6% is an annualized figure so the 4th quarter GDP growth rate was 0.15%. Anyone out there really think that changing a few numbers here and there won’t change a negative GDP rate into a barely positive one fairly easily? But we need two quarters of negative growth rate for an “official” recession don’t we? Ok, then wait until next June, counting on a bull market to arise from the ashes, and see if this belief won’t cost your stock portfolio dearly.
For anyone that does not know that the U.S. government consistently massages the reporting of key economic indicators, just study the formula used to determine “core” inflation and every other inflation statistic that they report. Did you know that the formula used to calculate inflation today doesn’t even remotely resemble the formula that was used to calculate inflation just fifteen years ago? Under President Clinton, Alan Greenspan, and the Boskin Commission recommendations, the government made many changes to the formula used to calculate the core price index.
Read more …
February 6th, 2008
February 4, 2008
Last week, I wrote an article called “Even After a Strong Run, Gold Stocks Still a Bargain.” In that article, I wrote that gold stocks, both the majors and especially the junior resource stocks, were highly undervalued given historical ratios of gold stocks to the price of their underlying commodity. In fact, as of last week, I wrote that many majors were trading at the same share prices they were at when gold was only $830 an ounce. So I concluded that either the price of gold was going to have to come way down or the shares were going to have to go way up. I concluded that the shares would have to go way up, and I’m still concluding that, but with a slight modification.
Technically, gold futures contracts are showing a bearish rising wedge pattern so there is the imminent risk of a minor correction now. I say minor and not major, because I just can’t see gold retreating all the way back to $800 an ounce. I just think that such a significant retreat, given the vast problems in the global economy, and particularly in the U.S., has a very small probability. My downside projections for a correction are somewhere within the $850-$860 range if we see a correction, but should gold retreat to this range, I believe that this retreat will be very short lived as savvy investors will definitely view such a correction as a buying opportunity and jump into the market at this point to drive the price of gold higher again. As far as the “gold is too high” believers, even if gold doesn’t retreat by $40 or $50 an ounce, I believe that even at $900 an ounce, long term buyers of gold and those that have already been buying for years will be just fine adding to their current gold bullion positions at this price. At every step of the way during this current gold bull run, gold has been “too expensive”. It’s been “too expensive” at $400 an ounce, at $500 an ounce, at $600 an ounce, at $700 an ounce, at $800 an ounce, and now at $900 an ounce. The fact is that this gold bull run has a long long way to run. Read more …
February 4th, 2008
