Wednesday, 14 January 2009

Learn to invest: Your source for investment or investments, stock, stock market, and stocks info

The 5 Asset Classes: (1) Stocks, (2) Bonds, (3) Commodities, (4) Currencies, and (5) Real Estate. That's it. These are the only 5 places to invest your money. There is nothing else. Anything else is just a derivative of one of the 5. So, with that being said, where to invest my money in 2009. Stocks? Nah, man. You are not going to get anything there except more of the same in 2009. Why? Because we are experiencing asset deflation not seen since the early 1930s, and it should continue for awhile longer. If you want to get involved in stocks, it should be on the short side. Many of these companies will go to zero, or close to it. When we get there it might be a good decision, but for now it is not to be touched. Bonds? Only if you want to become part of the sheeple stampede, going into treasuries thinking that the government will save them. People are actually paying the government to hold their money for them because they are scared of every other investment class. Wrong move again. Treasuries have been a super bull market since 1982. The return now is less than zero. So you lose again. You will also lose due to the massive money printing not just in the U.S. but worldwide. U.S. treasuries are going to be a massive short when everybody comes out of them. Maybe not this year or the next, because I expect treasuries to be artificially high because the Fed is propping the market up to keep U.S. interest rates low. How long can they do this? I can guarantee you it is not infinite; so when they stop and the sheeple do too, say hello to much higher interest rates, and bond market turmoil, in which case being short them will make you money. Commodities? These are interesting. They are not a buy now, but they will be before the end of the economic downturn. So far we are in the 13th month of this recession. Only 3 recessions have lasted longer than the current one, and my bet is that this one will either be 2nd or 1st all time (beating the contraction from 1929-1933). And if you look at history, commodities go up 200 to 300 percent after they hit bottom. Why? Because demand gets pent-up and supplies dwindle. In this current economic cycle (which is extraordinary, this time period will be written about for centuries. The fallout from the biggest credit bubble in the history of the world), commodities are getting crushed. But the commodity cycle which started in 1998 or 2000, which ever time period you choose, is not over. Commodity bull markets tend to last 16-18 years. So, if anything we are halfway. Oil is going to be a monster bull market, the fact that people are bearish on oil now; saying that the economic downturn will cut demand is only true in the short term. The long term fundamentals don't support oil staying below $40 forever. The entire developing world depends on oil for economic growth. So if any country wants to grow after the New Millennium Depression, they are going to need oil. You might have to wait another year or two, but I think oil is going to make a multi-year low very soon. Currencies? Wow, don't even get me started on this one. How is it that the US government is $11 trillion in debt (actually $53 trillion, if you add in other liabilities) and the dollar goes up? That's because this deflationary bust is so great that dollars actually gain purchasing power from all the deleveraging and liquidation going on. Hold onto your U.S. dollars for a little while, but after that get rid of them. The currency is going to be toilet paper. The Euro, Pound, Swiss Franc aren't any good either. They are all fiat money backed by nothing. And there is nothing to stop these government's from printing money to pay their obligations. So forget them, you will just have to keep switching from one currency to another to preserve your purchasing power. (i.e. wealth) Real Estate? I don't even need to say anything about it. NO. So there you have it. The 5 asset classes to invest in and all of them are horrific investments right now. This has only happened a few times in history, and we are living in it now. The best thing is to let this deflationary bust play out, and buy all of these asset classes of your choosing when they hit rock bottom. I think the DOW is going to 3,000 and the S&P 500 is going to 300, so stock won't be long term buys until then. Oil will hit a major low pretty soon after all this dumping. It will be a screaming buy. The only currency I like is NONE of them. But if I had to choose one, it would probably be one of the Asian currencies, because they are the only ones with money (i.e. actually wealth, natural resources, labor, trade surplus). Bonds are a horrific investment if you want to put your money with governments. The only bonds to buy are corporate bonds, and only if you are an expert in this field, which I am not. Why? This is based on the premise that not every company in the world will go bankrupt. Maybe some will survive, and they will be able to pay attractive interest rates. Especially because rates are going up. Real Estate has already come down a lot, and will come down even more. There are a lot of people saying it is time to buy real estate, they are wrong. Go look at a chart of real estate prices. The chart is plummeting straight down. Wait until you start to see prices make a long, sustainable base before buying real estate.

No comments:

Labels