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comment by mk
mk  ·  4790 days ago  ·  link  ·    ·  parent  ·  post: D is for deflation
I can't bring myself to buy gold. I just can't.




cgod  ·  4789 days ago  ·  link  ·  
I keep part of my reserve in gold and silver, it's not terribly liquid, but my father suggested that it can always get you on a boat to leave the country. I guess it's the terribly paranoid part of my reserve. Gold might shit the bed, but it will always be worth something almost anywhere, that isn't necessarily true for many other forms of money.
kleinbl00  ·  4790 days ago  ·  link  ·  
Most economists worth their salt would argue that gold is in a speculative bubble right now anyway.
d_e_solomon  ·  4789 days ago  ·  link  ·  
I've been short on gold for the past nine months and lost a big chunk of that investment. I suppose it's good that I only bet a little bit. I'm hoping that in the next year or so that I recover that.
mk  ·  4789 days ago  ·  link  ·  
I don't think it was a crazy move to make, but too soon it seems. I'm not putting too much anywhere either. But we like to put something away month to month, and it's always interesting to guess where the best place is.

Maybe short Europe-serving airlines, or buy snow-blower makers that sell in the US? ;) http://hubski.com/pub?id=6467

d_e_solomon  ·  4789 days ago  ·  link  ·  
Yes, I definitely shorted gold too early. I've also been playing with shorting China real estate, but again, it becomes an issue of timing. Barclays is forecasting a hard landing and BoA http://www.scribd.com/doc/66681591/China-the-Systematic-Risk... is suggesting a correction in financial sector and real estate, on the other hand, some of the China equity firms are saying that no hard landing is in the cards.

That's interesting about the icelandic volcano - I'm not sure I have the expertise or fortitude to invest based on geological phenomenon.

mk  ·  4789 days ago  ·  link  ·  
My wife is Chinese, and we go there about once a year. Mostly to Beijing and Dalian, but last time we went to Shanghai, Sanya, Beihai and Huzhou.

IMHO the real-estate bubble is of astronomical proportions. There have not only been cranes everywhere for the past 7 years or so, but the prices of housing have climbed and climbed much faster than wages. College grads can hardly afford to live in the cities they work in, and wealthy folk often own several apartments, but don't rent them all. Driving in Shanghai, you can see a lot of dark apartments at night. I was in Beihai, and toured an apartment site that was basically being built in a field. Many new complexes have very low occupancy rates.

I've had a sense that this was building for a while, however, there are three things that I found different this time: 1) People were complaining about it. Friends and taxi drivers were complaining about the outrageous cost of housing and other goods. 2) There were phone numbers everywhere in windows and on walls like graffitti advertising to sell new apartments. Tons of phone numbers everwhere. 3) There is a very large number of outfits, little store fronts that are filled with a handful of people, some blueprints, and computers. They all sell property, much of which that has not been completed. There were tons of these little shops. I didn't see nearly so many of these a couple of years before.

My hypothesis is that local governments keep lending for building because they get kickbacks, and because the construction increases GDP. Of course, they haven't done this by borrowing, but by speculation. When China moves, they all move. It's just a way things go there.

That said, I don't understand China enough to think I can call the timing on this correction, or even know what it will look like. (I am guessing that the one-party system won't survive). I do know that what goes up must come down, and real estate in China has climbed sky high. I won't short China, but there is no way that I would invest there either.

kleinbl00  ·  4789 days ago  ·  link  ·  
It's never a good idea to short a commodity controlled by a central power with absolute authority. Any attempts to make money in China are going to be beholden to China's ability to manipulate the value of the yuan with impunity; it's my opinion that consumer goods are going to be less influenced than durable goods, but then, I have exactly zero training in trading.

The problem is any shift in Chinese attitudes will be passing through the filter of the Chinese state, so any attempts to think of it in a fully Western way is going to be peril-fraught.

d_e_solomon  ·  4789 days ago  ·  link  ·  
I could avoid some of the currency exposure by shorting an ADR or ETF, but even that would leave me exposed to the underlying currency. The problem from my perspective is the ability and willingness for the central government to intervene in the real estate market to sop up excess supply and/or inject capital into the banks to paper over the issue.
kleinbl00  ·  4789 days ago  ·  link  ·  
I'm not going to call your strategy unwise. I'm not even going to question it. I don't know enough to question anyone on anything and won't pretend to. What I will say is that my risk point in investments is directly related to their vulnerability to external influence.

The best money I've ever made, and the most comfort I've ever had, was "betting against the USA." In December 2004 I took my retirement fund out of bonds and threw it all at emerging markets funds, FOREX funds and every other aggregate measure I could find that basically said "foreign economies are going to grow faster than the US economy." It was partly luck (my knowledge of the world is imperfect) and partly skill (my knowledge of geopolitic is greater than my knowledge of individual companies' performance) and it paid off about 70% over three years. In September 2007 I took my retirement funds out of emerging markets and forex because I no longer felt that anyone could predict the general direction of the market; the research I had been doing predicted the collapse of the housing bubble but not much else. I responded by putting my money in a ratcheting index fund, so when the S&P dropped a month later I didn't lose a dime.

It's still there. It's safe to say that I'm much more interested in "not losing money" than I am in "making money" which I recognize as an excessively-conservative policy for a 37-year-old. However, I just don't trust any system in which public opinion trumps data.

thenewgreen  ·  4789 days ago  ·  link  ·  
Nicely played. We have done well investing in some Canadian emerging markets. When we were married we received some money from friends and family. We didn't touch any of it except to invest it in these markets. 7 years later we were able to put over 20% down on our first home. The lions share of the money we used came from this funds performance. "oh canada, my home...."
d_e_solomon  ·  4789 days ago  ·  link  ·  
It's tough to invest and beat the market unless one can spend a significant portion of their day doing research - and I don't have that type of time. I'm generally invested in index funds and shift the balance between them depending on the prevailing winds as best as I can determine. Your shift away from US bonds probably saved quite a bit. I tend to only shift the distribution a bit - I don't have much faith in my investing choices to try a larger move.

I do enjoy making small investments like my aforementioned short on gold -but even that was only 1k which is really just a way to put my money where my mouth is. I suspect I'll make a similar bet on china, but we'll see.

Most of my non-401k assets are still sitting in interest bearing accounts, but I've been nervous to actually invest them - it's hard to gauge which way the market is right now.

kleinbl00  ·  4789 days ago  ·  link  ·  
Me? I'm looking at farmland. My ancestors survived the fall of the czar by getting out of jewelry just in time to open a greengrocer's. Now all I gotta do is find that "permaculture for dummies" book...
mk  ·  4789 days ago  ·  link  ·  
That permaculture comment led me to this: http://en.wikipedia.org/wiki/Chicken_tractor

Now I want to build a chicken tractor that has very slow solar powered wheels. It would be fantastic if you could program it to drive, back and forth, back and forth, over a large stretch of lawn. Maybe moving a couple of feet per day.

kleinbl00  ·  4789 days ago  ·  link  ·  
Chicken tractors are out of favor. Most permies will tell you to go with the paddock system: http://www.richsoil.com/raising-chickens.jsp
d_e_solomon  ·  4789 days ago  ·  link  ·  
I just read way more than I wanted to about raising chickens....
mk  ·  4789 days ago  ·  link  ·  
Total agreement.
mk  ·  4789 days ago  ·  link  ·  
Yeah, with so few other places to put your money for such an extended period, how could it not be? If the EU unveils this mega plan, and everyone feels better for a bit, I might get some US treasury bonds.
kleinbl00  ·  4789 days ago  ·  link  ·  
Greece will fall. Spain will follow. I'm not sure you'll have enough window to profit on treasuries.

Mauldin is all CHINA CHINA CHINA. I get his point. I think he's a little blindered but he does have some concise arguments.

Rosenberg is basically on a war footing and has been for a year. I dunno. I've had the entirety of my retirement fun in a ratcheting index policy and that has yet to worry me.

mk  ·  4776 days ago  ·  link  ·  
mk  ·  4785 days ago  ·  link  ·  
mk  ·  4789 days ago  ·  link  ·  
I agree on Greece. If Spain does, then I think it's over for the Euro. Your probably right about that window, but it will probably be closed for a long time after that.

As for my thoughts on China see above: http://hubski.com/pub?id=6475