I posted item to this blog since 2005 and didn't get any feedback for a year and a half at all. The insanity that 80% of the increases in the West's spending this century was driven by home equity withdrawl and the monitisation of what will prove to be have been largely illusionary appreciation of nominal asset values in everything from homes, commercial real estate and stocks escaped most people. It screamed bubble.
Anyway, its demise has made the blog more popular, but I not a complete gloom and doomer. I very much think that both hard and commodities, gold, silver, oil and alternate energy are very undervalued.
Commodity producers, energy and alternate energy services will the the cash rich core around which many economy's will rebuild and this will be reflected in the popular culture.
I agree with Jim Rogers.
"The commodities guru predicted two years ago that the credit bubble would devastate Wall Street.
We are in a period of forced liquidation, which has happened only eight or nine times in the past 150 years. The fact that it's historic doesn't make it any more fun, of course. But it is a pretty interesting time when there is forced selling of everything with no regard for facts or fundamentals at all. Historically, the way you make money in times like these is that you find things where the fundamentals are unimpaired. The fundamentals of GM are impaired. The fundamentals of Citigroup are impaired.
Virtually the only asset class I know where the fundamentals are not impaired - in fact, where they are actually improving - is commodities. Farmers cannot get a loan to buy fertilizer right now. Nobody's going to get a loan to open a zinc or a lead mine. Meanwhile, every day the supply of commodities shrinks more and more. Nobody can invest in productive capacity, even if he wants to. You're going to see gigantic shortages developing over the next few years. The inventories of food worldwide are already at the lowest levels they've been in 50 years. This may turn into the Great Depression II. But if and when we come out of this, commodities are going to lead the way, just as they did in the 1970s when everything was a disaster and commodities went through the roof.
What I've been buying recently is agricultural commodities. I've also been buying more Chinese stocks. And I'm buying stocks in Taiwan for the first time in my life. It looks as if there's finally going to be peace in Taiwan after 60 years, and Taiwanese companies are going to benefit from the long-term growth of China.
I have covered most of my short positions in U.S. stocks, and I'm now selling long-term U.S. government bonds short. That's the last bubble I can find in the U.S. I cannot imagine why anybody would give money to the U.S. government for 30 years for less than a 4% yield. I certainly wouldn't. There are going to be gigantic amounts of bonds coming to the market, and inflation will be coming back.
In my view, U.S. stocks are still not attractive. Historically, you buy stocks when they're yielding 6% and selling at eight times earnings. You sell them when they're at 22 times earnings and yielding 2%. Right now U.S. stocks are down a lot, but they're still very expensive by that historical valuation method. The U.S. market is yielding 3% today. For stocks to go to a 6% yield without big dividend increases, the Dow will need to go below 4000. I'm not saying it will fall that far, but it could very well happen. And if it gets that low and I'm still solvent, I hope I'm smart enough to buy a lot. The key in times like these is to stay solvent so you can load up when opportunity comes."
So please, feel free, ask and comment away and lets define together what we face and what individuals should do about it.
We're facing the fundamental limitation of a massive multiplayer game called fiat money, made possible by a mechanic called fractional reserve banking. Government is completely owned by the operators of the game, who under this model have been acting in the interest of maintaining thier lifestyles, maybe clinical immortality if they can get it, and post-Peak Everything that means repressing almost everyone else on the planet.
So there is no free market, and there is no government of, by, and for the people, what mechanisms can we use to both stabilize the global economy and encourage further growth (which probably requires nanotechnology and is another subject depth altogether, so we'll focus on the prior quality)? Of primary importance is food, then energy, then credit/credit, though these move in a cycle.
Starting that cycle requires high quality seeds, which are probably the best performing security that has ever existed, I'm currently thinking alot about how to encourage proliferation of a seed economy to strengthen a decentralized food economy. I've pretty much solved the energy issue, which I sent you an email about. Tom Greco has a good solution regarding credit, it's just a matter of having a strong commodity backing of that credit. So that's where I am in this journey.
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