Tarkblog The personal writings of Caleb and Annie Tennis

Investments

I want to share my take on investing in this interesting time.

First, I think it’s pretty clear that the normal market is experiencing a very unusual bit of turbulence and free fall. And I think it’s clear that this could continue well into next year, and perhaps beyond.

There are a lot of different people sprouting wisdom as to where to put your money, what’s safe, etc. I can tell you, the one thing nearest to my heart is finding some conventional non-BS wisdom.

If you listen to professional advisors on television, they’ll all come across with various picks and plays. But you know what? A lot of them are advisors to much larger chunks of change than yourself. And they are going to give beneficial advice to those folks, because their income is much more highly derived from those larger pots.

Are they giving both the big guys and the small guys equal advice? I certainly doubt it.

Why? Because the fundamentals of the market is that to buy, someone has to be willing to sell, and to sell, someone has to be willing to buy.

If they are telling you to buy X, why would they also be telling a larger entity to buy X? It seems to me like they’d be telling their larger entity to sell X, because they have now just created a natural buyer. And visa versa.

But all of that aside, I think the fundamental issue that will plague the US over the next few years is inflation. It’s hard to think about that in the midst of a recession, especially as prices are dropping. But it’s clear that the Feds are pumping a large amount of money into the market - it just hasn’t reached consumers yet. The banks are retooling their sheets and haven’t really started the lending stimulus that was expected, though it’s coming.

In the meantime, jobs are being lost, demand is lowering, and as a result, prices are going to get lower. There’s a lot of supply still in the system. I think that part is easily understood and fundamental.

But in the medium term, supply is going to start getting lower, as producers cut back. This is natural. However, the money supply is going up…way up. And that my friends, will lead to inflation.

So, I think a hedge against inflation is a good play right now. The most obvious time tested investment is gold (or perhaps silver). Gold is fairly volatile right now, as I think people are starting to buy it up. It was in the mid 700’s just a week ago, and is now above 800. It may go up, and down, but I think that it will be a good medium/long term investment to protect against some inflation.

I’ve put some money into GLD, the Spider gold trust ETF. It’s basically an ETF that has a reserve amount of gold based on investor purchase (it is backed by hard gold bullion). That makes it a much more fundamental monetary investment over something like “trust”, which is what most other investments are made on.

If you want to follow hard gold, check out Kitco. You can buy hard bullion from them as well. One interesting thing about this is that your purchase/sell of gold isn’t tracked. They report nothing to the IRS. This seems like a huge loophole to me, but makes for a very interesting investment.

Other plays I think might be good are foreign currencies. In particular, the Swiss Franc or the Euro could be good investments also against US inflation, and especially against a falling dollar index. There are ETFs for these as well, like FXE and FXF.

In addition, I recommend spending some time listening to Peter Schiff of Euro Pacific Capital. He’s got a weekly radio/podcast that’s pretty good, but check out a few Youtube videos.

First, the compilation that’s been going around called “Peter Schiff was right”. This is a collection of videos of him from 2006-2007 predicting what’s going on today. Note especially how everyone else thinks he’s crazy, and especially where they tell you to put your money.

Now, a more recent video:

I think Peter’s views are dead-on. This injection of money is only going to make things worse, not better.