Afamiii

Sentiment Data Shows This Dip Is a Buying Opportunity

History shows that the no other stimulus package has been successful.

The argument being bandied about in 08 that this would be the exception because it is bigger and being applied faster has always been suspect.

The argument that will come up soon: Let have another one will be even more suspect.

I for one will be surprised if a credit induced bubble (in both asset prices and the general economy) that lasted over 24 quarter will be unwound in just seven quarters.

smartinvestorafrica.com

Diversification Can Be Everything

It takes for the tide to go out to see who's swimming naked. smartinvestorafrica.co...

Consumption, Cacophony and Clarity

How did we get here?

Mismanagement and misfortune

The money supply has been increasing too rapidly for many years.

In normal times 'inflation' as defined by CPI would have increased and central planners would have had to tighten (either via interest rates or the reserve ratio.)

The misfortune (which was mistaken as fortune by people who should know better) is that CPI has remained low due to increased trade with low wage Asia. So tightening never happened. And the printing presses/credit engines rolled on.

And instead of the excess money going into CPI, it went into assets.

US Central Planners should have know better, they have economists (some of them are economists). Historically, there has been the debate amongst economists as to what inflation is. One camp defines inflation as increase in money supply faster than increase in goods and services and the too smart by far camp (and CNBC) defines it is the economy growing faster than natural capacity.

In hindsight it is obvious that more money was created but no more goods/services (other than those bought from asia) and the excess did not go into CPI but into asset prices (real estate and shares) and that the central planners were naïve in believing that it was not distorting resource allocation and that it did not matter.

So the first red flag (tightening labour markets) was removed, the second red flag (tightening asset markets i.e. soaring prices) was ignored, we are now having to deal with the next red flag (tightening natural resource markets), some would like to ignore this too and blame the speculators. Whilst they cheer lead Ben to keep printing?

So where is the US now?

It is certainly NOT collapsing, there are real people (with real skills, knowledge and experience) doing real work, utilising real capital to produce real goods and services.

All that is happening is that the economy is trying to purge the excesses (i.e. the fake people, doing fake work, selling things at fake prices, but getting real money) through a recession (recessions are as old as history, starting from Joseph the dream reader in Pharaoh’s time), they should not be feared and certainly not fought in the way that Bernanke and Greenspan have done, they are a time of belt tightening, and elimination of the excess (people and orgs who are not really contributing.)

They come as does winter and things are better in the spring.

What prevents the US (govn) doing the same (investing in the right things)?
A broken political system, which makes it difficult for leaders to make tough calls and take unpopular decisions. That is why politics really is the master science. smartinvestorafrica.co...

Consumption, Cacophony and Clarity

Invest in real stuff.

Commodities - Precious Metals, none precious metals, agricultural produce, timber, energy (uranium, oil, natural gas and King Coal.) Either directly (if you have skill) or by buying natural resource companies. Buy companies that have 'growing reserves' rather than depleting reserves.

Things that Americans make better than anyone else (and the chinese can't make) - technology - aircraft, machine tools, computer equip, hi tech electronic compenents.

Take a look at the US trade figures and focus on the industries where exports are rising.

Buy Asia and the middle east (the money is moving east.) Vietnam, China, India, etc.

Why
i) These economies are growing fast, they are raising productivity, making signficant business capital and infrastructure investment (25% of GDP) they have significant population.

They will i) consume more real stuff, ii) buy the stuff from America that they can't make themselves and iii) appreciate their currencies against the dollar as they get rich.

Energy (particularly nuclear,solar and wind), Technology, Asia, Agric, Metals and other real stuff.