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Registered User
Joined: 11/3/2007
Posts: 15
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IS BEING EARLY EQUIVALENT TO BEING WRONG??
I have gotten a lot of emails/comments telling me that I am way early on my inflation thesis and that means that I AM WRONG. That is simply not true. Being early means being wrong when you are TRADING. Being early when investing means you admit THAT YOU CAN'T CALL THE EXACT BOTTOM. I both trade and invest. I have gotten my butt hammered investing lately. Buy and hold has had a rough year---even been considered DEAD. But as a 40 year old, I have plenty of time to let my investing and inflation theory to play out.
I am invested in natural gas and have an investment position in Freeport McMoran (FCX) which I also trade around. We are hearing a lot of talking heads (most notably Dennis Gartman) saying that the gold bugs have had everything they wanted this year and gold is still making lower highs and lower lows. In the short run, I do not disagree that gold may see some downside. However over the long haul, I cannot see how we are going to see anything but inflation and I think this is a great time to position myself (with money that can afford to wait). It may be the best opportunity of my lifetime and I am hoping to cash in.
Many are arguing that we are heading for a great depression. I can't argue that things don't look bad from an economic standpoint, but we are seeing the world's governments stand ready to take unprecedented actions to get global growth going again. Why am I so convinced that natural gas is getting close to the bottom? Because it is getting close to the price where it is selling for less than the cost of extracting it from the ground. I understand the counter arguments---that these companies must have the cash flows to continue operations so they will sell at a loss. I agree---again over the short term. Production will slow and exploration will dry up. When global growth gets going again, we will see demand outpace supply. It is much quicker to take supply offline than it is to put it back online.
Many keep arguing that we are seeing a vast amount of wealth evaporate and that will keep inflation at bay for a very long time. Madoff didn't help things as this most recent scandal will further the "less wealth" idea. Many are also arguing that the dollar is still the world's reserve currency and the Euro is going to get hit hard in the near future. My focus is on China. China is going to keep growing has more power than ever to cause inflation. I did an interview this summer with Dr. Reed Holden author of the book PRICING WITH CONFIDENCE. Dr. Holden talked about how "Amercian Goods" are really perceived as having "value" abroad. When our high quality products become cheaper---those abroad will consume more of them. It sounds really simple, but we saw Europe help our economy when the dollar initially fell against the Euro. Many referred to that as the last "leg" holding up our earnings here at home. How does all of this tie back to my China focus? I think that we will see China buy more of our goods than ever before as the dollar falls. That will give our economy a bigger kick start than most are expecting.
I have a new theory about trading and investing. I am calling it my BUM TRADING THEORY. Quite simply we know that our economy is driven 70% by the consumer. We have been overwhelmed by information from the mainstream media talking about the "bums". The bums that aren't paying their mortgages, the bums that aren't out buying all of their consumer goods on credit, the bums that can't finance their new car before they pay off the old one. The message that the mainstream media would have you believe is that we are all bums. All of us are going belly up and deflation is going to consume us all!!!!!!! IT IS JUST NOT SO!! There are many that have lived within their means and are still paying their mortgages, still buying Christmas gifts for their friends and family, still dining out and much more. So while we have seen the "bums" definitely impact the economy on the downside recently, the productive are still out there and will benefit when the tide turns. So I may TRADE THE BUMS--AND INVEST WITH THE PRODUCTIVE. I am investing in natural gas because I believe that the productive are going to keep heating their homes and using electricity. I don't believe that the productive will allow us to be consumed by deflation. This theory may sound very silly, but it is why I believe that oil, natural gas, and gold are good plays for the long term. I am INVESTING THAT THESIS.
MORE LATER
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Registered User
Joined: 7/1/2008
Posts: 889
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I don't think there's any real difference between "trading" "investing" and "speculating", except that people who claim to "invest" seem to think that there's something more legitimate or romantic about the notion of "investing" versus "speculating".
At the end of the day, you invest to grow $. If you are buying an asset in hopes of having it appreciate in price, I have news for you...you're speculating. if you want to call it investing to give yourself a bigger margin for error or longer time span, sure...go for it.
being early is being wrong...because even a broken clock is right twice a day...eventually, over a long enough period you'll probably be proven right. most importantly though, being early is inefficient. your money is tied up in something that is losing you money, versus something that is making your money.
This is the whole point of technical analysis...to confirm the trend of your fundamental outlook or assumption. I learned a while ago that just because something makes sense, doesn't mean it's time to invest in it. You wait until the market figures it out and starts driving it up before you jump on,otherwise you could be sitting in a losing investment for a long time while a ton of other opportunities pass you by. And like I said, isn't the point of investing to make $$$? Not to be proven right about a fundamental thesis.
Just my humble opinion.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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I think being early is wrong.
We have to profit from something now.
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The market will rally 30%
After a bull market, the market will sell-off 25%
Oil will be back up to $100 a barrel.
Gold will be over $1100 an ounce.
Interest rates will rise to levels much higher.
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All these calls are early. A lot of good they do me today.
It is only those who are wrong, who call it early.
If we are gonna have rip-roaring inflation it will be in the
charts. No reason to buy it now.
Thanks
diceman
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Registered User
Joined: 9/25/2007
Posts: 1,506
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In the end ... it all comes down to the same old thing ... thinking that you're smarter than the largest collective of the greatest financial minds on the planet ...
That just hasn't worked out all that well for me ... as it seems that there's some pretty smart folks out there ...
I don't pay much attention to "talking heads" .... as I have found that there is much more "truth" in a person's actions ... than in their words ...
When the train starts moving ... I'll see it ... and I'll jump on ...
I may not be there for the first few feet of travel ... and I may not hang around for the last few ...
But .. I won't be spending my life sitting on a parked train waiting for it to move either ...
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Registered User
Joined: 6/14/2005
Posts: 628
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IMO, one can see now that future inflation is inevitable.
However, it was also possible to see several years ago that the sub-prime implosion was inevitable.
Those who made good money on the sub-prime implosion might be in a good position to advise on how to make money on the inevitable future inflation!
When the aforementioned 30% rally comes, I believe most will miss it, or pile in at the end and be left holding the bag.
If you believe you have a good idea what cheap is, then buy when cheap is available. If things of interest to you are on the path of getting cheaper, then use the TA you know to stay out until the drop seems over.
Having a long horizon strategy as part of your mix can be a really good thing - much better than putting the money under your matress.
You only have to be "right" on the timeframe you are playing for - but if that is a long one, be prepared to wait a long time to find out if you were right or not!
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Registered User
Joined: 10/7/2004
Posts: 319
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Since the 4th quarter of 2007 we have been seeing deflation in all commodities, housing, corporate equities etc.
Deflationary spirals are very difficult to stop......hence the huge efforts recently by the Fed and Treasury.
The question is will it work to stem the deflation.
If they are successful, we will then face inflation as noted above.
However, I recently came across some government information that puts the deflationary damage to our economy to be over $7.7 Trillion through the 3rd quarter of 2008. Wait until the 4th quarter numbers get added to this. That is a huge amount of wealth destruction over the past year. So the Fed and Treasures efforts of infusing a "measely" 700 Billion dollars may not be very efffective will it in comparison to what has already occurred?
Right now I'm just trying to keep the dollars I have. I do not see investing in gold, oil etc as the right move now. Although it clearly will be IF we can break the deflationary cycle we are in.
I know today is a lot different than the 30's, but Roosevelt tried a number of stimulous packages none of which worked. It took a world war to do that. Sure hope this isn't the general scenario we will face today. But I do suspect we are in for a number of years of a very sluggish economy and stock market.
Hope I am wrong.
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Registered User
Joined: 6/8/2007
Posts: 31
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Interesting
At the end "Who is the one loses less than others is winner "at the end of the Game.
Do not loose some thing you cannot afford.
Money is part of life, not Life itself.
Honesty, Truth always wins, may take time, but will.
world has enough resources for everyone--not for greedy ones.
They are the ones destroyed world economy hurting innocent people
They are not sleeping anyhow????
Life goes on??????
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Registered User
Joined: 5/1/2007
Posts: 158
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We could go the way of 1930-1939 and have deflation - or the way of Germany 1923 and Zimbabwe 2008 - inflation. The governments of the world are riding a bicycle and the economy has stopped pedaling - it will fall one way or another - depending on the velocity of money, which is slowing in the U.S., and frenetic in Zimbabwe.
But it doesn't matter whether hamberger is 50 cents per pound or $50 per pound - as long as you have $55, and there is enough hamburger.
Every 200-500 years, the people get bread and circuses for a while, untile the bread is gone. In 1789-1793, we had Washington, and France had the Terror.
The 20th century, for all its wars, was a great century. The 21st? Get your popcorn - it's beginning to get ugly.
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Registered User
Joined: 5/1/2007
Posts: 158
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My best guess? Inflation, in the end, as the Federal Reserve and Congress throw Federal Reserve notes at whoever has enough political pull. The UAW is in union territory, while Honda, Toyota and Kia are in non-union areas. Honda is tricky, as Ohio just went Dem in a big way, and might object when things seem unfair.
The guy who loses billions never misses a meal. It's the guy who's short half a buck goes hungry. It will be at least 3 more years before people (in the U.S.) get seriously angry, as we have lots of food. But Africa and Asia things will come to crisis sooner. In wave terms, we just finished wave 1 before Thanksgiving, but don't count on wave 2 lasting until summer 2009 - it probably will, but no guarantees.
Happ New Year!
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