Sunday, January 10, 2010

New College Alumni Investment Forum

10 January 2010

I am an alumnus of New College of Florida. In brief, this was and still is an awesome school.

It just occurred to me to start an investment forum on our alumni website. (Sorry, you have to be an alumnus to go there, but perhaps some of you are, so here is the link.)

This is what I had to say:

As the 50th anniversary of my own admission to New College approaches, I have begun to think increasingly of retirement (and I note that many of my peers are already there). For most of us, retirement means either that we have simplified our lives to a level that would make Helen and Scott Nearing and Ivan Illich smile down on us from wherever they are now, or that we have saved enough to keep paying the bills.

My own plan is perhaps midway between, as I live off the grid in Canada, use solar power, and have dreams of greenhouse-building and extensive reading and writing in my retirement years. However, I also have bills to pay, like to travel and prefer to drive a BMW (OK, perhaps you may find some contradictions in that, but obviously we each have our own choices to make).

It occurred to me that Sam Sapp is the only alumnus with whom I have discussed investment ideas. So why not look at investment in a New College kind of way (that is unimaginably diverse and unexpected)?

My own philosophy is to examine secular (over-riding multi-decade) trends (here I am informed by Marc Faber's book, "Tomorrow's Gold") and to try to position my investments to benefit by these powerful forces. Just to get started, I view the following as the significant investment-related trends of our time:

1. This has been an era of investor exploitation. Investors are being ripped off to compensate greedy executives, avaricious board members and in many cases short-sighted employees. That is, it is an ugly time to be an investor, at least in North America. You are likely to be taken to the cleaners by most blue chip companies. Then government agents will feed on your entrails.

2. Government spending and money creation has now levitated beyond realistic limits. Even our great grandchildren won't be able to pay down current government deficits. Thus, central banks around the world are going crazy printing money (now primarily a digital phenomenon), and giving no thought to the morrow. We are punishing savers with the instrument of ultra-low interest rates and bailing out the reckless and the avaricious with the tax contributions of the prudent. This is unsettling if not terrifying.

3. Other parts of the world are now smarter than we about matters of money. Asian leaders are making better decisions that our own leaders, and their economies are benefiting as a consequence. If the US doesn't cause the entire global economy to crash and burn, it will be because of the superior long-term view of Asian government leaders and economic planners.

4. Sustainability of the conditions necessary to the life and health of all the flora and fauna of our planet has become an increasing concern. Perhaps we are more interested in this issue than the Asians, and this could prove to be to our long-term benefit.

5. No matter what the trend(s), investors can benefit by observing where productive capital investment is in decline, and where it is in ascendancy. I have some of my own thoughts on the matter, which I will share here. Further, I often write about these questions on my blog, which is here.

I am particularly interested in the thoughts of Novo Collegians on this topic, as no matter what I presently believe, I'm sure I will be startled and enlightened by the insights of my fellow alums!

Here is my first post on the forum:

Why Precious Metals?

I actually believe that precious metals are the only safe investment sector at this very moment in history.

Why?There has been an explosion of deficit spending and debt creation all around the globe. Governments everywhere are funding the madness through increases in the money supply of their respective countries. We last saw this at such times and places as Argentina 2-3 decades ago, our own country in the 1970s, Weimar Germany, the South Sea Bubble, and the Tulip Mania. Based on the fundamental economic principle of supply and demand, if there is too much money in circulation, it will lose its value.

In such circumstances, things that are real preserve value best, and the precious metals (gold, silver, etc.) are the most efficient means of investing in such tangible assets (you get a lot of value in a small amount of volume due to the physical principle of mass and to the economic principle of scarcity).

In Canada, we cannot hold gold or silver in a registered retirement savings account, so I invest in companies that explore for and mine gold and silver.

I wish I could say my investment strategy is more complicated than this, but it isn't. I do watch market trends and cycles, and make some effort to buy when prices are low, and to take some profits when prices are high (though of course just about everybody else is doing that too, which makes it complicated enough for a room full of MIT math professors).

For example, in the gold market, cyclical lows tend to occur about every 8 years. Guess what? The last cyclical low in gold was in October-November 2008. So in my view, now is a good time to buy gold, despite its dramatic recent run! I will probably take some short-term profits this spring, though I'm going to wait and see what is actually happening at that time before I decide.

Curious about these ideas? Then visit my blog here.

More later....
_

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