Crash Opportunities: Part II

In part one of this series, we addressed a few speculative investments that might rise over the next few years. We would like to stress that most assets will fall in a deflationary environment. We have therefore focused on preserving portfolios with U.S. Treasury Bills held at more secure financial institutions. 

 

Preserve what you have, because when the housing market lands with a thud, the bargains will be there. For instance, one quarter of the land in Mississippi went to auction in one day during the Great Depression according to Ken Burns. We now turn to markets that we see as compelling at the bottom. 

The Yellow Brick Road

As we mentioned in January,

During the period from 1980-2000, Gold experienced a bear market. As you can see from the chart below, after the parabolic rise that ended in 1980, the gold price fell for 20 years.

Markets that have been completely ignored for two decades interest us. After a 20 year bear market, gold has recently done very well.

If you look at the chart below, the Taiwan stock market has been in a correction since 1990. The Japanese stock market has also experienced the same fate. We expect both of these markets to bounce in 2009 but sell-off again with the global markets into late 2010. From this twenty year bottom, we expect these two markets to perform very well.

To be considered ‘buys,’ we would like to see a torrent of horrible news coming from these countries. We would also like to see investors finally giving up on their stocks (i.e. 1979’s major news publications declaring the death of equities or 1988’s individual investors avoiding stocks as if they are poison, etc.). While the mood is currently sour, investors are not selling. When investors finally give up at the bottom and sell, we will recommend buying.

Jim Rogers and Marc Faber

We couldn’t discuss investing in Asia without mentioning the ‘Statler and Waldorf’ of the investment world. Jim Rogers recently stated: "We'll see if it's an overlooked trade or not. I haven't heard many people talking about Taiwan in 15 to 18 years." Dr. Faber also relates in a recent Bloomberg video that he is looking at Japan as well. We hope these two curmudgeons retire soon.

Comments

[whidbey:]

You have a long ways to go, and I'll take Jim and Marc over your wanderings just any day.

2008 Sep 29 02:36 PM

[leopold:]

whinebey, go grab your websters and look up the definition of sarcasm

2008 Sep 29 10:59 PM

[Wealth for ...:]

There is a way to go yet... now even with the 700 billion rejected!

2008 Sep 30 02:41 AM

[MSmailbox:]

Your graph of gold prices, caused me to think back... The last time gold spiked to these levels, was approx. 1980. Gold is not the only safe-haven, so are CD's... In 1982 or so, I bought a CD, which payed 11.5%. Now, I have one paying 3.3%. Obviously, the price of gold and the interest payed on CD's, must have absolutely no relationship, or something is very different, this time around.

2008 Sep 30 11:24 AM