Title: What to Invest In Now?
Author: Andrew M Molchan
Date: Thu August 2nd, 2012
August 2nd 2012. ANYD'S UNPOPULAR INSIGHTS. What to Invest In Right Now?
Most of the usual "investment rules" of the last 40 years, 100 years, and even 1,000 years are OUT THE WINDOW.
The next 40 years in America are NOT going to be like the last 40 years.
The US economy is now a Queer Economy that's powered by the FED's Queer Money. Billions of dollars change hands, in a few hours, on Wall Street based on Bernanke going to the bathroom five minutes soon, or later, than usual.
The Gordon Gekkos of Wall Street ARE making tons of money with Arbitraging. Gordon borrows from the FED at 1/10th of 1%, and Buys 10 year T-Bonds that pay 2%. That's a 1,900% profit margin.
The FED will give the Gordon Gekkos 10 basis point loans, but will NOT give the same loans to you or me. It's called fair and equal ala Ben Bernanke.
Gordon is also making money by Pyramiding. Gordon borrows a 100 Million from the FED at 1/10th of 1%. Buys a $100 Million of 2% T-Bonds. Uses those T-Bonds as collateral to borrow $95 Million, buys $95 Million of T-Bonds. Uses those as collateral to borrow $90 million, buys $90 Million of T-Bonds and uses those as collateral to borrow $85 million, etc., etc., and so forth. Gordon ends up with a BILLION dollars of T-Bonds paying MORE than the cost of his loans. Thank you Ben. Thank you for creating the "Boom" of 2007 all over again.
All of the above Hundreds of Billions of dollar Arbitrage "Paper" is Unsecured and/or Pyramided. Just like "Sub-Prime" was Unsecured and/or Pyramided. The Arbitrage Paper WILL explode just like Sub-Prime. The only question is "When?"
Bernanke and the morons at the FED have created a "Recovery" in America. They have a "Recovery in America" BACK to where America was in 2007. Next stop - 2008 all over again.
As interest rates on T-Bonds have gone Down, the FED, and the Stupid Kramers of TV say, "Hey, look, the interest rates are going down on T-Bonds because so many people are buying Bonds. This PROVES that everything is getting better!" Honk Honk. Maybe it "Proves" that everything is getting worse?
SO WHERE CAN LITTLE PEOPLE LIKE YOU AND ME INVEST?
The first step is to realize that there are new rules, for a new Queer American economy that NEVER EXISTED up to this time. I believe the safest investment strategy is the ABCD Plan. That stands for, Anything Bernanke Cannot Destroy. That means putting your money into: guns, ammo, canned food, a power generator, bottled water, a cabin in the woods, food you grow on your own land, and so forth.
If you own your own business, and can create control over your local sales area. Your own business is probably the best place to invest. For the last ten years the gun retailers who asked me where to invest, I said, "Put your money into your own business. Build a range, expand your store, take in used guns, and build up your inventory." History proved it to be good advice.
Questions: People ask, "What about high interest paying stocks?" When the DOW crashes again, the Principle of your 4% paying stock will be whipped out.
Questions: "What about T-Bonds?" I think interest rates will go even lower, so bond face values will go higher. But at 2% how much lower can interest go? I think the 30 year "Bond Run" is about over.
Questions: A lot of people ask about Gold. What we know is that America is bankrupt and living off of queer money. Gold does NOT fit the ABCD Plan. A desperate for money USA Government will restrict Gold sales to only licensed Gold dealers, and the dealers will collect a 40% withholding tax on the sale of all Gold.
OVERVIEW: The old markets are now ALL FIXED and Insane. The Old Rules of Capitalist Markets are DEAD because free Capitalism in the markets is DEAD. The old markets of: Stocks, Bonds, Real Estate, Etc., have been REPALCED with FED Freak Fascism. The DOW today is ALL based on reading the Tea Leafs of the FED, and it's all CRAZY. If Bernanke came out and said, "The economy really sucks;" the DOW would UP by 500 points in ten minutes.
Andy's Read on the Future. The main reason why I've been cool to Gold is that I DO NOT believe that America will have hyperinflation. I believe there will be a rolling series of financial dislocations and most assets will see painful re-pricing.
As I've been saying since 2007, the US Stock market will follow the Japanese Stock Market pattern, and in 2020 the DOW will be where it was in 2003.
Real Estate in non-inflated dollars will continued DOWNWARD for another ten years. Then flatten out for fifteen more years. People who are DEEPLY underwater with their real estate had better plan to live a long time.
America will go through a long and painful 20+ year period of Down Sizing. For 30 years America has INCREASINGLY been living off of borrowed money. Now with the FED Freaks since 2008 we have had a blow-off orgy of Queer Money Debt that's FAILED. Exactly like I predicted it would fail back in 2008. The FED has INCREASED America's DEBTS by TRILLIONS OF DOLLARS and succeed in "Recovering" America back to 2007.
Some people will still make a LOT of money, but most of them will do it by following the ABCD Plan. Most will do it by building and/or expanding businesses where they, through hard work and talent, can maintain control over their markets.