Jay, I read your posts with morbid fascination. I hope the morbity does not involve me. I continue to appreciate them and like the free financial consultancy service you provide. Many thanks for all the help over 2001.
< I am always mindful that I could easily be wrong, and Maurice (this is a test to see if Maurice actually reads my posts:0) could effortlessly be right, in which case everybody should be able to continue getting wealthy without trying, investing ad infinitum in abracadabras using ever copious amounts of printed paper, representing not so much wealth as obligations.
Maurice will be right, one day, but not likely in 2002, the year of the Global Financial Tsunami, a subject we may still be talking about 48 months from now.>
Being right and being smart and being lucky are part of an indeterminate continuum. The really stupid think that being right means they are smart. The really smart are appalled at their own almost total ignorance. We bumble along with a mixture of luck and smarts, never knowing which will matter more.
So, maybe I'll be effortlessly right. But I only need to review my Globalstar position, where I had all factors buttoned down apart from one little ornery characteristic of human nature which I did not believe so heavily infested the psyche of those whose job it was to make it succeed, to know that luck plays a demoralizingly large role in what happens to me over the next 10 years.
Be that as it may, we have no option but to apply our modicum or mind to the job of improving our chances. We might just make our own luck.
Just to join the doom and gloom chorus for a moment, I saw the D word used in conjunction with Japan today [can't remember the link]. Now in depression with banking collapse looking imminent. Runs on the bank a worry. It definitely does look icky. I suppose the outcome will be that the government prints a big bunch of yen, waits for a bank to collapse, then tells everyone that they'll make depositors' funds good, acquires the shares for nothing and is then the proud owner of the assets which the debtors are unable to finance.
A bit like Hong Kong bought big on the Hang Seng when the Great Asian Financial Panic of 1998 was rampant. They made out like bandits!! They bought at around 6,000 and if they kept them all, have stocks at around 10,000. But I expect they gradually fed them back into the system and are sitting on a big pile of profits.
New Zealand recently did much the same with Air New Zealand, buying the shares at the lows, putting more money in and getting it going again. Deep pockets give customers confidence. They have a handy paper profit in their Air New Zealand investment. Qantas has other ideas but that's another story.
A Machiavellian government in Japan might even maintain a tight money policy for the very purpose of squeezing the creditors until they beg for mercy, then, as they fold, print a bunch of money to take over vast assets at distress prices. Governments can only do that when bubbles and greed lead debtors into such traps.
I would be circumspect in attempting to profit in an opportunistic way in the Japanese mayhem. I'm sure foreigners will be the entree in any shenanigans, with the big US$ holdings being an opportunity for some games. I am not betting on a big deal Japanese collapse, though they give every appearance of staying determinedly on course to disaster.
Meanwhile, the end of 2001 is nigh and there has NOT been a financial meltdown. From 1,300, the S&P500 is down to 1,100, which is only 16%. That's the normal annual oscillation over the last umpteen decades. 20% is common as dirt. The Dow is down 700 out of 11,000 which is only about 10%, which is a total yawn!! Even the dreaded techstock Nasdaq is only down 500 from 2,500 = 20% which is not worth a column in a newspaper.
GDP and other economic indicators are all fine. A USA recession has finally been detected, which looks more like a hedgehog for scariness compared with the tyrannosaur we've been waiting for. "The bogeyman is DEFINITELY coming in 2002" quoth Jay. Hang on, you said 2002, the palindrome year [one of only two we'll enjoy in our lifetimes] is going to be "...the year of the Global Financial Tsunami". You mean we should get out our Hawaiian big surfboards and catch the wave to riches? I guess not. I suppose you mean millions will be drowned in a tsunami to compare with a 10km comet impact mid Pacific Ocean.
Yes, I think effortless wealth is continuing to flood the planet. Much of it in the way that oxygen, which is wealth, is flooding the planet. It's FREE! It's not visible in a bank book or stock report, so is not very satisfying to the beneficiaries of the wealth, the users of the products, but it's as real as the nose on your face.
We are more interested in the return on investment style of wealth in this discussion. But I thought we should recognize the fact of wealth not recorded in dollars. The investors who create that wealth will have to position themselves well for the new era which continues to burgeon madly everywhere we look. Enron, Argentina, Globalstar and Global Crossing might have looked good to many, but they were not - I guess there are plenty more where they came from.
Holding cash, gold or shares is at best is a tricky decision. Gold is least subject to sudden swoons in value. Cash, as in Argentina's case, can be suddenly converted to an empty promise. Shares reflect productive enterprise. How much one should earn is the hard part.
Gold earns no return. Cash earns a pittance now that Uncle Al has shown people that they should spend it, not hoard it. Shares earn a small amount, around 5% for the Dow at P:E 20, which isn't like the good old days of P:E of 10, but it's not all that bad in a no-inflation time with rampant money-printing which will affect share prices. Admittedly, there is only no-inflation because of the wonders of technology, which does more for less until everything is nearly free. But Uncle Al can hijack that hidden deflation and print a lot and impress everyone with no inflation while he boosts the money supply like crazy.
Something like that.
Mq |
