Friday, 28 October 2011 00:00

Investing: The Market Runs out of Pavement

Remember those mid summer rantings about conservative investments as opposed to high growth stocks? The sane advice is for you to put your money where they can earn you a more stable and consistent value over a longer period of time. A slow gowth is not to be feared, given it is based on financially sound stocks. Industries at the base of the foodchain constitute a point of interest here. Raw materials, including crude oil and natural gas, along with coal and nuclear fuel, are the primary pillars of the global economy. Take out the energy created by these industries and the ecosystem above will suddenly cease to exist. 

"Investing gurus tell you to put some of your money into "high growth stocks" (read not a hair's breath chance in hell of ever making as much as a rusty dime). Part of it should be in "conservative stocks" (read stocks with familiar names priced about equal to a custom Bentley). Some in "bonds" (read an investment whose price doesn't fluctuate so they'll feel safe, but grows in value about as fast as a seventy-five-year-old midget). To recommend spreading money out in this manner, the guru has to believe that some of these "investments" are better than others. So why not put everything in that one? More "irrational money thinking." And also he can't have much knowledge about what he's doing if he can't tell a client which area is the right one to be in." ( Avoid the "Herd Mentality" When Investing Your Money  )

Makes sense, on the long run, to act like a wise tortoise rather than a loose rabbit. But how long is the long run after all? 

Some think that the surge in the market is the catalyst of a new bull market.   The fallacy here is trusting the “accommodations being made” in Europe hence yet another crisis averted... as it always has been.
"For two weeks this past August, we saw the powerful downside of fear, as a year-and-a-half of gains were completely wiped out.  Now, after the recovery, the markets are waffling between nearly positive and negative returns."  
"One day they’re down 200, the next day up 200, it all depends upon the last thirty minutes of the trading day."
"The reality of Europe, the BRICs, and even the U.S. itself is they’re all running out of time. Contraction, recession, and outright collapse is on the horizon."  
"The proverbial “kicking the can down the road” has unfortunately run out of pavement.  As decisions are made and actions are implemented, someone has to lose."  

( comments and excerpts from Christmas or Coal? - by Bill Tatro, on  ) 

Unfortunately, and expectedly, it looks like we're about to face a new paradigm in the near future. The markets, even the conservative stocks area, became more volatile. There's a set of factors, other than the market, or supply and demand, that contribute to this process of instability. What if you exit the investing game now, before you lose everything, and stay happy with the cash (which, as said, is anyway a loser)? Remember that Obama, and Sarkozy of France, are fond to print even more euros and dollars. Inflation is the cutest short-time solution for politicians around the pond. Gold and silver went way up then drastically plunged. It will be interesting to see which investment will do good through the regular market storms.   

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