Many people are saying the stock market is very high, can we buy now? I'm still bullish about the market, and I'll buy in only when the prices retarace. So my advice is you already identified the stock that you want to buy, the next thing is to rely on the technical indicator to accummulate the stock when it is oversold. As simple as that! Good Luck!
DON'T WORRY, BE HAPPY!
Monday, May 16, 2011
Saturday, May 14, 2011
Why I Like Tech Stocks
Warren Buffett never like tech stocks, he thinks that the valuation of these companies are too difficult to understand! Although Warren Buffett is my idol, but I’m afraid I’ve to disagree with him this time!
As we are entering to the 21st century – the information technology era, I see enormous potential in technology companies. I strongly think that every investor SHOULD and MUST have at least one tech stock in his or her portfolio!
A tech stock could be referring to companies providing the hardware like Dell, Acer, Apple, Sony, Nokia; it could also be software companies like Microsoft, Google, Cisco; or it could be the infrastructure supporting companies like American Tower Corp, Rackspace Hosting and so on.
There are tremendous opportunities in these stocks as technology and computers are part of our lives. Just take a look at the subscription rate of the Malaysian mobile phones, it’s a wopping 106% of our population with about 30million subscribers (slightly more than our 26m population).
Another example, iphone4 has sold more than 4 million since its launch last year. The mobile phone industry is experiencing phenomenal growth, but it is also very competitive.
How to select the best tech stock? Well, just look around what are the favourite mobile phones people are using. As simple as that! Hence, Apple and Google are analyst favourite. But these stocks are too expensive! I agree! So now I’m looking at the following stocks (I’m not recommending, because I’m in no position to recommend stocks, but I can share with you some trading ideas).
Sony (SNE)
Sony is going to launch its S1 and S2 tabs very soon. You may check it out at the following link: http://mobilerival.com/sony-s1-and-s2-tabs-appear-on-video
Appearance wise, I think it can top Apple I pad. Performance wise, its definitely more superior than i-pad because its Android based. For your information, Android has 35% of the smart phone market share as compared to Apple’s IOS 25%. If you think Sony tab is going to be a hit this Autumn, you might want to accumulating the stock now. Currently the stock is trading at PE 30, low debt equity ratio at 0.25, and price to cashflow is 4.45, free cashflow US$6.5billion.
Nokia (NOK)
Many people must be wondering: “Are you kidding me? This stock is losing its market share!” Yes I agree! But do you know that Nokia is going to launch new smart phones with Windows Phone 7? I’m sure for people who are using i-phone, don’t you wish that i-phone is Windows compatible? Precisely, we have been so comfortable using Windows for ages, if your smart phone is Windows compatible, won’t that make you work more efficiently? In my experience, I can’t use my i-pad for heavy duty work, i-pad or iphone for me is only for leisure purpose. So if my smart phone is Windows compatible I’m able to work smarter and more efficiently! FYI, if you intend to buy Nokia, its going to be a longer term perspective. Because Nokia’s new smart phone with Windows Phone 7 will only be launched in 2012. Currently the stock is trading at PE 10, with US$3billion free cashflow.
Happy investing,
Pauline Yong
As we are entering to the 21st century – the information technology era, I see enormous potential in technology companies. I strongly think that every investor SHOULD and MUST have at least one tech stock in his or her portfolio!
A tech stock could be referring to companies providing the hardware like Dell, Acer, Apple, Sony, Nokia; it could also be software companies like Microsoft, Google, Cisco; or it could be the infrastructure supporting companies like American Tower Corp, Rackspace Hosting and so on.
There are tremendous opportunities in these stocks as technology and computers are part of our lives. Just take a look at the subscription rate of the Malaysian mobile phones, it’s a wopping 106% of our population with about 30million subscribers (slightly more than our 26m population).
Another example, iphone4 has sold more than 4 million since its launch last year. The mobile phone industry is experiencing phenomenal growth, but it is also very competitive.
How to select the best tech stock? Well, just look around what are the favourite mobile phones people are using. As simple as that! Hence, Apple and Google are analyst favourite. But these stocks are too expensive! I agree! So now I’m looking at the following stocks (I’m not recommending, because I’m in no position to recommend stocks, but I can share with you some trading ideas).
Sony (SNE)
Sony is going to launch its S1 and S2 tabs very soon. You may check it out at the following link: http://mobilerival.com/sony-s1-and-s2-tabs-appear-on-video
Appearance wise, I think it can top Apple I pad. Performance wise, its definitely more superior than i-pad because its Android based. For your information, Android has 35% of the smart phone market share as compared to Apple’s IOS 25%. If you think Sony tab is going to be a hit this Autumn, you might want to accumulating the stock now. Currently the stock is trading at PE 30, low debt equity ratio at 0.25, and price to cashflow is 4.45, free cashflow US$6.5billion.
Nokia (NOK)
Many people must be wondering: “Are you kidding me? This stock is losing its market share!” Yes I agree! But do you know that Nokia is going to launch new smart phones with Windows Phone 7? I’m sure for people who are using i-phone, don’t you wish that i-phone is Windows compatible? Precisely, we have been so comfortable using Windows for ages, if your smart phone is Windows compatible, won’t that make you work more efficiently? In my experience, I can’t use my i-pad for heavy duty work, i-pad or iphone for me is only for leisure purpose. So if my smart phone is Windows compatible I’m able to work smarter and more efficiently! FYI, if you intend to buy Nokia, its going to be a longer term perspective. Because Nokia’s new smart phone with Windows Phone 7 will only be launched in 2012. Currently the stock is trading at PE 10, with US$3billion free cashflow.
Happy investing,
Pauline Yong
Tuesday, May 3, 2011
Are People Rational?
Economists argue that people are rational. Rational people make decisions or judgement using reasoned thinking, based on facts, applying rules; and those decisions are consistent over time. How far is this true? Do you spend time in analysing mundane simple task such as what to eat, where to shop or what to wear? Very often we make these simple decisions based on intuition or “gut feeling”. But when it comes to investment or children’s education, we will spend more time to gather information, do some analysis and then make a decision. Hence, decision making is a complex process, involving both analysis and intuition: analysis involves computation and more “rational” thought, but is slower; intuition, by contrast, is much faster, less accurate, and relying on intuitions or “gut feeling”.
A study conducted in United Kingdom shows that people with autism related disorders are less likely to make irrational decisions, and are less influenced by gut instincts. This is because of the tiny brain tissue called “amygdala” which is involved in processing human emotions. And according to research, people with autism-related disorders have a different density of amygdale in their brains than others.
Further research done by a Nobel Prize winner, Professor Kahneman, the founder of behavioural finance found that this “amygdale” trigger the fear factor in our brain causing us to feel “risk”, which can gets in the way of successful investing.
What is amygdale?
Deep in the center of your brain, level with the top of your two ears, lie two small, almond-shaped knobs of tissue called the amygdala (ah-mig-dah-lah). When you confront a potential risk, you will trigger this hot button of the brain that acts as an alarm system – shooting signals up to the reflective brain like warning flares. Because the amygdale is so attuned to big changes, a sudden crash of the stock market tends to be more upsetting than longer, slower decline, even if it is greater in total.
On October 19th, 1987, the U.S. stock market plunged 23%, so sparking the amygdala and disrupting the behaviour of millions of people for years. Anyone who has ever been a teenager knows that peer pressure can make you do things as part of a group that you might never do on your own. When the fear factor strikes, people tend to follow the herd; not because you want to but because it hurts not to. Neuroscientist Gregory Berns says: “Social isolation activates some of the same areas in the brain that are triggered by physical pain”. Hence, being part of a large group of investors can make you feel safer and less painful.
Neuroscientists discovered that amygdala is responsible for our fear, emotional responses, and social behaviour. As a result, during the event of a stock market crash, our bio-instinct will tell us to be part of the larger community by following the crowd’s action.
In Professor Kahneman’s research, he got together a group of people whose brains had been damaged due to tumour removal or accident, and let them play a little game with the other group of normal people. Starting with $20, each one flipped a coin and called it: heads or tails. If the participant called it correctly, he won $2.50. If he called it incorrectly, he would lose only $1. If he was feeling unlucky, he could pass.
Given the odds of winning were tilted to participants favour, any player who wanted to maximise his or her returns would never pass. But the result showed that the “normal” group passed more than the “damaged head” group. Does that mean the best investors are mental defective? No, the conclusion was that emotions get in the way of successful investing. Emotions cause participants to react to “illogical” ways by refusing to bet, even when the odds were clearly in their favour. The un-emotional players, by contrast, did the “rational” thing more often and won more money.
However, another study published recently claims the opposite view. It says “adding emotions to decision-making process can enhance creativity, engagement and decision efficiency”. This is contrary to the popular belief that level headed people are more rational and make better decisions.
No matter whether we are cool headed or hot headed, rationality depends on how we see things and in whose perspective. If we apply our own reasoning to the event, we can come up with different results. I believe most people are rational in their own minds, even if we may think otherwise. Some investors would rather feel ‘safe’ than ‘risky’. Others enjoy playing for short term gains even though it costs them more time and money. Some do not even realise they have made the wrong decision simply because they have made the wrong assumptions or are given the wrong information.
By Pauline Yong
Pls click "like" on my facebook Thanks!
A study conducted in United Kingdom shows that people with autism related disorders are less likely to make irrational decisions, and are less influenced by gut instincts. This is because of the tiny brain tissue called “amygdala” which is involved in processing human emotions. And according to research, people with autism-related disorders have a different density of amygdale in their brains than others.
Further research done by a Nobel Prize winner, Professor Kahneman, the founder of behavioural finance found that this “amygdale” trigger the fear factor in our brain causing us to feel “risk”, which can gets in the way of successful investing.
What is amygdale?
Deep in the center of your brain, level with the top of your two ears, lie two small, almond-shaped knobs of tissue called the amygdala (ah-mig-dah-lah). When you confront a potential risk, you will trigger this hot button of the brain that acts as an alarm system – shooting signals up to the reflective brain like warning flares. Because the amygdale is so attuned to big changes, a sudden crash of the stock market tends to be more upsetting than longer, slower decline, even if it is greater in total.
On October 19th, 1987, the U.S. stock market plunged 23%, so sparking the amygdala and disrupting the behaviour of millions of people for years. Anyone who has ever been a teenager knows that peer pressure can make you do things as part of a group that you might never do on your own. When the fear factor strikes, people tend to follow the herd; not because you want to but because it hurts not to. Neuroscientist Gregory Berns says: “Social isolation activates some of the same areas in the brain that are triggered by physical pain”. Hence, being part of a large group of investors can make you feel safer and less painful.
Neuroscientists discovered that amygdala is responsible for our fear, emotional responses, and social behaviour. As a result, during the event of a stock market crash, our bio-instinct will tell us to be part of the larger community by following the crowd’s action.
In Professor Kahneman’s research, he got together a group of people whose brains had been damaged due to tumour removal or accident, and let them play a little game with the other group of normal people. Starting with $20, each one flipped a coin and called it: heads or tails. If the participant called it correctly, he won $2.50. If he called it incorrectly, he would lose only $1. If he was feeling unlucky, he could pass.
Given the odds of winning were tilted to participants favour, any player who wanted to maximise his or her returns would never pass. But the result showed that the “normal” group passed more than the “damaged head” group. Does that mean the best investors are mental defective? No, the conclusion was that emotions get in the way of successful investing. Emotions cause participants to react to “illogical” ways by refusing to bet, even when the odds were clearly in their favour. The un-emotional players, by contrast, did the “rational” thing more often and won more money.
However, another study published recently claims the opposite view. It says “adding emotions to decision-making process can enhance creativity, engagement and decision efficiency”. This is contrary to the popular belief that level headed people are more rational and make better decisions.
No matter whether we are cool headed or hot headed, rationality depends on how we see things and in whose perspective. If we apply our own reasoning to the event, we can come up with different results. I believe most people are rational in their own minds, even if we may think otherwise. Some investors would rather feel ‘safe’ than ‘risky’. Others enjoy playing for short term gains even though it costs them more time and money. Some do not even realise they have made the wrong decision simply because they have made the wrong assumptions or are given the wrong information.
By Pauline Yong
Pls click "like" on my facebook Thanks!
Wednesday, April 20, 2011
Another Financial Crisis?
In 2006 I wrote an article titled “Another Financial Crisis ?” illustrating the possibility of one in the US, and it happened 2 years later. Now I’m writing for the same title but this time the target is CHINA!
In my recent talk in KL, one participant from China came to me and told me that in China there are more real estate investors than stock investors. Indeed the Chinese investors have seen real estate as the best investment because of its spectacular yields in the recent years.
Due to the Chinese government’s capital control, investors must pay a price to invest overseas, which compels them to invest domestically. In addition, the bank deposits and bonds have low to negative real yields, coupled with volatility in the China stock market, many have turn to real estate instead. In fact, China’s increasing inflation rate has helped housing price bubble growing even larger. More and more millionaires and billionaires are created in China every year. Recently The China Daily reported that there are close to one million millionaires in China with a personal wealth of US$1.5 million or more. Of them, 60,000 are considered super rich with 100 million yuan or more. Hence, no doubt they have all the money to drive the property prices in China and the rest of the world!
On the other hand, can this rising property prices be sustainable? According to Time magazine, many gigantic malls in China are virtually empty. One such example is the Kangbashi in Mongolia which is dubbed as the “Ghost Town” with 95% vacancy rate!
Usually the real estate price bubble comes from the artificially made difference between the price and value of housing. Capital competitions bid up prices that in turn induce builders to build more housing. Eventually, prices differ excessively from values of housing and an apparent overproduction will exist. Overproduction of housing relative to the affordable demand forces prices to fall into line with values. The debt-sustained buying would cause precipitous fall in prices and the loan default would make the bubble burst.
If you like my articles, please click "like" at my facebook
Happy investing,
Pauline Yong
In my recent talk in KL, one participant from China came to me and told me that in China there are more real estate investors than stock investors. Indeed the Chinese investors have seen real estate as the best investment because of its spectacular yields in the recent years.
Due to the Chinese government’s capital control, investors must pay a price to invest overseas, which compels them to invest domestically. In addition, the bank deposits and bonds have low to negative real yields, coupled with volatility in the China stock market, many have turn to real estate instead. In fact, China’s increasing inflation rate has helped housing price bubble growing even larger. More and more millionaires and billionaires are created in China every year. Recently The China Daily reported that there are close to one million millionaires in China with a personal wealth of US$1.5 million or more. Of them, 60,000 are considered super rich with 100 million yuan or more. Hence, no doubt they have all the money to drive the property prices in China and the rest of the world!
On the other hand, can this rising property prices be sustainable? According to Time magazine, many gigantic malls in China are virtually empty. One such example is the Kangbashi in Mongolia which is dubbed as the “Ghost Town” with 95% vacancy rate!
Usually the real estate price bubble comes from the artificially made difference between the price and value of housing. Capital competitions bid up prices that in turn induce builders to build more housing. Eventually, prices differ excessively from values of housing and an apparent overproduction will exist. Overproduction of housing relative to the affordable demand forces prices to fall into line with values. The debt-sustained buying would cause precipitous fall in prices and the loan default would make the bubble burst.
If you like my articles, please click "like" at my facebook
Happy investing,
Pauline Yong
Tuesday, April 19, 2011
Investment Talk @ CIMB Penang
Hi,
My next investment talk will be in Penang, the details are as follows:
Venue: CIMB Level 24, Menara BHL, 51 Jalan Sultan Ahmad Shah, 10050 Penang
Time: 10:30am - 12:30pm
Topic: The Basics of Stock Investing
Please bring along your calculators, thanks!
See you there!
Happy investing,
Pauline Yong
My next investment talk will be in Penang, the details are as follows:
Venue: CIMB Level 24, Menara BHL, 51 Jalan Sultan Ahmad Shah, 10050 Penang
Time: 10:30am - 12:30pm
Topic: The Basics of Stock Investing
Please bring along your calculators, thanks!
See you there!
Happy investing,
Pauline Yong
Tuesday, April 12, 2011
Experts' Views on US Dollar and Gold
The US dollar ended 2010 about where it started; does it resume its downtrend in 2011, or are fears about its demise overblown?
Jim Rogers: No, but further down the road.
Bill Bonner: No opinion. But there is more risk in the dollar than potential reward.
John Williams: There remains high risk of a dollar selling panic unfolding in the year ahead, as the US economy tanks anew, as the Fed continuously expands its easing, and as dollar holders dump the US currency and dollar-denominated paper assets. Such would be a precursor to the inflation problem.
Steve Henningsen: Similar to my thoughts last year, I still believe the dollar is headed down long-term, but it could bounce around over the next year. If sovereign debts become a problem again, like I think they will later this year, then everyone will go running back to "Mother Dollar" once again for one last hug before she lies back down on her sickbed.
Frank Trotter: As the economy waffles and the global investing community's attention is drawn from one crisis to the next, I expect the US dollar to bounce up and down in the current range. After that, however, my analysis suggests that measured by the key factors of fiscal and monetary policy, combined with a significant trade deficit, the US does not look as good as our major trading partners, and I thus expect the dollar to decline, perhaps significantly, in the intermediate term. Big geopolitical events may accelerate this or create a flight to US dollar quality, so hold on to your hats.
Krassimir Petrov: I think the dollar resumes lower. I expect QE3 and QE4 - a dollar-printing fest that will eventually sink the dollar. Sure, all fiat currencies are in deep trouble and prone to overprinting, but the reserve status of the dollar actually makes it more vulnerable now. Whether the dollar sinks against other currencies is a fool's game not worth playing. It is like being in the hospital, where all patients are suffering from cancer, and trying to guess who will feel best at the end of next year, or trying to guess who will succumb first. That's why it is so much safer to play the dollar against gold.
What to watch in 2011: stay focused on the sovereign debt crisis and bond yields. Spiking yields will trigger the next stage of the crisis.
Gold has risen 10 years in a row, so some are calling it a bubble, yet it's roughly $1,000 below its inflation-adjusted high. What's your outlook for the metal in 2011?
Jim Rogers: It is hardly a "bubble" when very few own it still. Who knows? Overdue for a correction, but who knows?
Bill Bonner: The smart money is in gold. It will stay in gold until the bull market that began 10 years ago finally reaches its peak. It is extremely unlikely that the top will come in 2011; it's probably years in the future. In the meantime, gold is bound to have a losing year or two. Don't worry about it. Buy gold. Be happy.
John Williams: As the US dollar increasingly is debased, and where gold tends to preserve the purchasing power of the dollars invested in it, the upside to gold in the year ahead is open-ended, restricted only by any limits to the massive downside potential for the US dollar. Any intermittent gold price volatility, extreme or otherwise, will be short-lived. There is no bubble - only increasing weakness in the US dollar - with the gold price fundamentally headed much higher in the years ahead.
Steve Henningsen: I believe gold will once again prove the bubble-boys wrong and end the year positive (I have no idea by how much and don't really care). However, I think this year will be more volatile and that Gold Bugs better remain seated on the precious metals express or they might get squished.
Frank Trotter: I still think that with price inflation on the rise and big political events occurring, there may be room to continue to rise. If stock markets take off, then there will be a reduction in appreciation or even a significant decline, but based on the factors I mentioned above, I don't see that as highly likely.
Krassimir Petrov: Gold still has outstanding fundamentals. I believe that over the course of 2010, the fundamentals have strengthened significantly: (1) "No Exit [Strategy] for Ben" as he unleashed QE2, and will likely unleash QE3, QE4, etc., (2) no more central bank selling of gold, (3) more central banks become buyers of gold, and (4) trial balloons for a global gold-backed currency.
I have no idea how people could even claim that gold is in a bubble - barely 1 out of 100 people have any idea about investing in gold. During the real estate bubble, every second person was involved in it. Maria "Money Honey" Bartiromo has yet to report from the COMEX gold pits; gold fund managers and analysts have yet to obtain rock-star status; and glamorous models are not yet dating the gold guys. Who is the Henry Blodget [co-host of Tech Ticker] of the gold sector, do we have one yet?
Yes, gold will eventually become a bubble, but that feels 5-8 years away.
What's your best investment advice for 2011?
Jim Rogers: Buy the rmb [renminbi, the Chinese currency].
Bill Bonner: We are in a period much like the period following WWI, in which the great debts and losses of the war had to be reckoned with. It is an era of great risk. The US faces many of the same challenges faced by Germany and England after WWI. Like England, it has huge debts. It is a waning imperial power. And it has the world's reserve currency. And like Germany, it is attempting to fix its problems by printing more money. This is not a good time to be long either US stocks or US bonds.
John Williams: As an economist, I look for the US dollar ultimately to lose virtually all of its current purchasing power. Accordingly, for those living in a US dollar-denominated world, it would make sense to move to preserve wealth and assets over the long-term. Physical gold is a primary hedge (as is silver). Holding some stronger currencies outside the US dollar, as well as having some assets outside the United States, also may make sense.
Steve Henningsen: Dramamine (for volatile markets), a stash of cash (for potential investment opportunities), and move some of your assets offshore if you haven't already.
Frank Trotter: My advice is first to look at the other side of your balance sheet - the liability and risk equation - before seeking out absolute gains. What are your goals, what resources do you already have to meet those goals, and what events (health, income stream, upheavals) might impact these risks? Place some assets to hedge these risks directly, then look to diversify globally into markets with higher growth potential than we see here at home, and that may balance your global purchasing power risk. Almost like a religion, we have had the phrase, "Stocks are the only legitimate hedge against inflation" beaten into our heads. I say, look at assets that define inflation like commodities and currencies and evaluate where these fit into your risk portfolio.
Krassimir Petrov: Last year I recommended silver, and I would stick to silver again, despite its phenomenal run. Then it gets tricky. I usually don't recommend diversification, but now I would again recommend a broad portfolio of commodities. Investing during the rest of 2011 should be easy: stay out of real estate, out of bonds, out of fiat currencies, and out of stocks; stay fully invested in commodities, overweight gold and silver.
Jim Rogers: No, but further down the road.
Bill Bonner: No opinion. But there is more risk in the dollar than potential reward.
John Williams: There remains high risk of a dollar selling panic unfolding in the year ahead, as the US economy tanks anew, as the Fed continuously expands its easing, and as dollar holders dump the US currency and dollar-denominated paper assets. Such would be a precursor to the inflation problem.
Steve Henningsen: Similar to my thoughts last year, I still believe the dollar is headed down long-term, but it could bounce around over the next year. If sovereign debts become a problem again, like I think they will later this year, then everyone will go running back to "Mother Dollar" once again for one last hug before she lies back down on her sickbed.
Frank Trotter: As the economy waffles and the global investing community's attention is drawn from one crisis to the next, I expect the US dollar to bounce up and down in the current range. After that, however, my analysis suggests that measured by the key factors of fiscal and monetary policy, combined with a significant trade deficit, the US does not look as good as our major trading partners, and I thus expect the dollar to decline, perhaps significantly, in the intermediate term. Big geopolitical events may accelerate this or create a flight to US dollar quality, so hold on to your hats.
Krassimir Petrov: I think the dollar resumes lower. I expect QE3 and QE4 - a dollar-printing fest that will eventually sink the dollar. Sure, all fiat currencies are in deep trouble and prone to overprinting, but the reserve status of the dollar actually makes it more vulnerable now. Whether the dollar sinks against other currencies is a fool's game not worth playing. It is like being in the hospital, where all patients are suffering from cancer, and trying to guess who will feel best at the end of next year, or trying to guess who will succumb first. That's why it is so much safer to play the dollar against gold.
What to watch in 2011: stay focused on the sovereign debt crisis and bond yields. Spiking yields will trigger the next stage of the crisis.
Gold has risen 10 years in a row, so some are calling it a bubble, yet it's roughly $1,000 below its inflation-adjusted high. What's your outlook for the metal in 2011?
Jim Rogers: It is hardly a "bubble" when very few own it still. Who knows? Overdue for a correction, but who knows?
Bill Bonner: The smart money is in gold. It will stay in gold until the bull market that began 10 years ago finally reaches its peak. It is extremely unlikely that the top will come in 2011; it's probably years in the future. In the meantime, gold is bound to have a losing year or two. Don't worry about it. Buy gold. Be happy.
John Williams: As the US dollar increasingly is debased, and where gold tends to preserve the purchasing power of the dollars invested in it, the upside to gold in the year ahead is open-ended, restricted only by any limits to the massive downside potential for the US dollar. Any intermittent gold price volatility, extreme or otherwise, will be short-lived. There is no bubble - only increasing weakness in the US dollar - with the gold price fundamentally headed much higher in the years ahead.
Steve Henningsen: I believe gold will once again prove the bubble-boys wrong and end the year positive (I have no idea by how much and don't really care). However, I think this year will be more volatile and that Gold Bugs better remain seated on the precious metals express or they might get squished.
Frank Trotter: I still think that with price inflation on the rise and big political events occurring, there may be room to continue to rise. If stock markets take off, then there will be a reduction in appreciation or even a significant decline, but based on the factors I mentioned above, I don't see that as highly likely.
Krassimir Petrov: Gold still has outstanding fundamentals. I believe that over the course of 2010, the fundamentals have strengthened significantly: (1) "No Exit [Strategy] for Ben" as he unleashed QE2, and will likely unleash QE3, QE4, etc., (2) no more central bank selling of gold, (3) more central banks become buyers of gold, and (4) trial balloons for a global gold-backed currency.
I have no idea how people could even claim that gold is in a bubble - barely 1 out of 100 people have any idea about investing in gold. During the real estate bubble, every second person was involved in it. Maria "Money Honey" Bartiromo has yet to report from the COMEX gold pits; gold fund managers and analysts have yet to obtain rock-star status; and glamorous models are not yet dating the gold guys. Who is the Henry Blodget [co-host of Tech Ticker] of the gold sector, do we have one yet?
Yes, gold will eventually become a bubble, but that feels 5-8 years away.
What's your best investment advice for 2011?
Jim Rogers: Buy the rmb [renminbi, the Chinese currency].
Bill Bonner: We are in a period much like the period following WWI, in which the great debts and losses of the war had to be reckoned with. It is an era of great risk. The US faces many of the same challenges faced by Germany and England after WWI. Like England, it has huge debts. It is a waning imperial power. And it has the world's reserve currency. And like Germany, it is attempting to fix its problems by printing more money. This is not a good time to be long either US stocks or US bonds.
John Williams: As an economist, I look for the US dollar ultimately to lose virtually all of its current purchasing power. Accordingly, for those living in a US dollar-denominated world, it would make sense to move to preserve wealth and assets over the long-term. Physical gold is a primary hedge (as is silver). Holding some stronger currencies outside the US dollar, as well as having some assets outside the United States, also may make sense.
Steve Henningsen: Dramamine (for volatile markets), a stash of cash (for potential investment opportunities), and move some of your assets offshore if you haven't already.
Frank Trotter: My advice is first to look at the other side of your balance sheet - the liability and risk equation - before seeking out absolute gains. What are your goals, what resources do you already have to meet those goals, and what events (health, income stream, upheavals) might impact these risks? Place some assets to hedge these risks directly, then look to diversify globally into markets with higher growth potential than we see here at home, and that may balance your global purchasing power risk. Almost like a religion, we have had the phrase, "Stocks are the only legitimate hedge against inflation" beaten into our heads. I say, look at assets that define inflation like commodities and currencies and evaluate where these fit into your risk portfolio.
Krassimir Petrov: Last year I recommended silver, and I would stick to silver again, despite its phenomenal run. Then it gets tricky. I usually don't recommend diversification, but now I would again recommend a broad portfolio of commodities. Investing during the rest of 2011 should be easy: stay out of real estate, out of bonds, out of fiat currencies, and out of stocks; stay fully invested in commodities, overweight gold and silver.
Monday, April 11, 2011
What Do The Experts Say!
Let's take a look at what some experts say about the economic outlook:
A lot of economists, including the government, believe the worst is behind us economically. Do you agree? If not, what should we be on the lookout for in 2011?
Jim Rogers: It is better for those getting all the government largesse, but the overall situation is worse. More currency turmoil. State and local problems, plus pension problems.
Bill Bonner: None of the problems that caused the crises in Europe and America have been resolved. They have been delayed and expanded by more debt and more money printing and will lead to more and worse crises. Deleveraging takes time. 2011 will, most likely, be a transition year...not unlike 2010. But the risk is that one of these latent crises will become an active crisis.
John Williams: An intensifying economic downturn – what formally will be viewed as the second dip of a double-dip depression – already has started to unfold. The problem with the economy remains structural, where household income is not growing fast enough to beat inflation, and where debt expansion – encouraged for many years by the Fed as a way to get around the economic growth problems inherent from a lack of income growth – generally is not available, as a result of the systemic solvency crisis. Accordingly, individual consumers, who account for more than 70% GDP, do not have the ability, and increasingly lack the willingness, to fuel the needed growth in consumption on which the US economy is so dependent.
Steve Henningsen: The governments worldwide (I don't pay much attention to economists) want us to believe that the worst is behind us because the financial system is built upon the foundation of trust and confidence. Both of these were battered badly when it was shown that much of the world's prosperity over the past few decades was simply a mirage that, once dispersed, left behind only debt with no means of future production. Now they want us to believe that they fixed the problem via more debt.
What I will be watching for this year is sovereign and US municipal debt corpses floating to the surface sometime in the months ahead.
Frank Trotter: Right now I have a somewhat dark but not dismal outlook. I think that over 2011, we will continue to experience a Jimmy Carter- style malaise that combines continuing high unemployment, tentative business investment, rising prices, low housing numbers when looked at on an absolute basis, and creeping interest rates.
As a very large mortgage servicer, we are not seeing significant improvements in payment patterns that would indicate the worst is fully behind us, and with mortgage rates moving upward, we see less ability for current mortgage holders to refinance and reduce payments.
Krassimir Petrov: No, the worst is yet to come. No structural changes have been made, no problems have been fixed. Printing money, a.k.a. Quantitative Easing, is a quick fix that has postponed the problem, yet also made it a lot worse. I would say that we are still in the early stages of the crisis and have another 4-8 years to go.
Price inflation is creeping up, but the enormous amount of money printing hasn't really hit the system yet. Does that happen in 2011, further down the road, or not at all?
Jim Rogers: It is happening. The US and CNBC lie about it. Most other countries do not lie and acknowledge it is worsening.
Bill Bonner: Most likely, substantial consumer price inflation will not show up in 2011. The explosion of money printing is being contained by the bomb squad of deleveraging. That will probably continue in 2011. But not forever.
John Williams: The problems of the money creation will become increasingly obvious in exchange-rate weakness of the US dollar. Related upside pricing pressure already is being seen on dollar- denominated commodities such as oil. There is high risk of consumer prices rising rapidly before year-end 2011, setting the stage for a hyperinflation. The outside date for the onset of a US hyperinflation is 2014.
Steve Henningsen: My guess is further down the road, as the deleveraging cycle continues with deflationary-housing winds in our face and the banks still hoarding money like my 9-year-old daughter stockpiles American Girl doll paraphernalia. I still expect inflation to continue in areas such as energy, bread, circuses, and whatever else provides sustenance to the Romans – I mean people.
Frank Trotter: Most research has shown that over time the increase in money supply is not a short-term economic stimulus, but rather has a moderate effect in the 18- to 36-month range. In addition, this theory contends that a growth in the monetary base – which is what has happened so far – only increases economic activity when accompanied by a decent multiplier; this is not occurring. The real risk is that with rising rates and continued soft economy, the Fed will feel obliged to continue to QE3, QE4, and so on, all of which may have a significant inflationary impact.
I am more concerned about general price inflation here in the US and the potential it has to reduce global growth.
Krassimir Petrov: This is a tough one. I would have thought that price inflation would have been raging by now, but this is obviously not the case. I have the feeling that 2011 will be a repeat of early 2008, with commodity prices (CRB) making new all-time highs. A falling dollar will trigger a rush into commodities as a hedge against inflation. I am really tempted to make a totally outrageous forecast that oil could make a run for $200 as QE3 unleashes another dollar scare, or maybe even a dollar crisis.
A lot of economists, including the government, believe the worst is behind us economically. Do you agree? If not, what should we be on the lookout for in 2011?
Jim Rogers: It is better for those getting all the government largesse, but the overall situation is worse. More currency turmoil. State and local problems, plus pension problems.
Bill Bonner: None of the problems that caused the crises in Europe and America have been resolved. They have been delayed and expanded by more debt and more money printing and will lead to more and worse crises. Deleveraging takes time. 2011 will, most likely, be a transition year...not unlike 2010. But the risk is that one of these latent crises will become an active crisis.
John Williams: An intensifying economic downturn – what formally will be viewed as the second dip of a double-dip depression – already has started to unfold. The problem with the economy remains structural, where household income is not growing fast enough to beat inflation, and where debt expansion – encouraged for many years by the Fed as a way to get around the economic growth problems inherent from a lack of income growth – generally is not available, as a result of the systemic solvency crisis. Accordingly, individual consumers, who account for more than 70% GDP, do not have the ability, and increasingly lack the willingness, to fuel the needed growth in consumption on which the US economy is so dependent.
Steve Henningsen: The governments worldwide (I don't pay much attention to economists) want us to believe that the worst is behind us because the financial system is built upon the foundation of trust and confidence. Both of these were battered badly when it was shown that much of the world's prosperity over the past few decades was simply a mirage that, once dispersed, left behind only debt with no means of future production. Now they want us to believe that they fixed the problem via more debt.
What I will be watching for this year is sovereign and US municipal debt corpses floating to the surface sometime in the months ahead.
Frank Trotter: Right now I have a somewhat dark but not dismal outlook. I think that over 2011, we will continue to experience a Jimmy Carter- style malaise that combines continuing high unemployment, tentative business investment, rising prices, low housing numbers when looked at on an absolute basis, and creeping interest rates.
As a very large mortgage servicer, we are not seeing significant improvements in payment patterns that would indicate the worst is fully behind us, and with mortgage rates moving upward, we see less ability for current mortgage holders to refinance and reduce payments.
Krassimir Petrov: No, the worst is yet to come. No structural changes have been made, no problems have been fixed. Printing money, a.k.a. Quantitative Easing, is a quick fix that has postponed the problem, yet also made it a lot worse. I would say that we are still in the early stages of the crisis and have another 4-8 years to go.
Price inflation is creeping up, but the enormous amount of money printing hasn't really hit the system yet. Does that happen in 2011, further down the road, or not at all?
Jim Rogers: It is happening. The US and CNBC lie about it. Most other countries do not lie and acknowledge it is worsening.
Bill Bonner: Most likely, substantial consumer price inflation will not show up in 2011. The explosion of money printing is being contained by the bomb squad of deleveraging. That will probably continue in 2011. But not forever.
John Williams: The problems of the money creation will become increasingly obvious in exchange-rate weakness of the US dollar. Related upside pricing pressure already is being seen on dollar- denominated commodities such as oil. There is high risk of consumer prices rising rapidly before year-end 2011, setting the stage for a hyperinflation. The outside date for the onset of a US hyperinflation is 2014.
Steve Henningsen: My guess is further down the road, as the deleveraging cycle continues with deflationary-housing winds in our face and the banks still hoarding money like my 9-year-old daughter stockpiles American Girl doll paraphernalia. I still expect inflation to continue in areas such as energy, bread, circuses, and whatever else provides sustenance to the Romans – I mean people.
Frank Trotter: Most research has shown that over time the increase in money supply is not a short-term economic stimulus, but rather has a moderate effect in the 18- to 36-month range. In addition, this theory contends that a growth in the monetary base – which is what has happened so far – only increases economic activity when accompanied by a decent multiplier; this is not occurring. The real risk is that with rising rates and continued soft economy, the Fed will feel obliged to continue to QE3, QE4, and so on, all of which may have a significant inflationary impact.
I am more concerned about general price inflation here in the US and the potential it has to reduce global growth.
Krassimir Petrov: This is a tough one. I would have thought that price inflation would have been raging by now, but this is obviously not the case. I have the feeling that 2011 will be a repeat of early 2008, with commodity prices (CRB) making new all-time highs. A falling dollar will trigger a rush into commodities as a hedge against inflation. I am really tempted to make a totally outrageous forecast that oil could make a run for $200 as QE3 unleashes another dollar scare, or maybe even a dollar crisis.
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