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DarthMaul09 (29.63)

Deja vous - all over again.

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September 26, 2009 – Comments (17) | RELATED TICKERS: FCX , PHO , GRO

Are we experiencing again the fall of 2008?  Like some groundhog movie are we going to have to endure the same commodity sell off, equity collapse and bankruptcies that we saw last year, or will it be different this time?

Don’t you just love that phrase:  But it’s different this time!?  Yea, the dot come bubble was different than the housing bubble, which is again different from the debt bubble.  Yet, all bubbles have a tendency to pop so the end result may not be much different – a mess.

Back to the main idea:

Since 2008, we have managed to add on enormous amount of government debt, raise the unemployment rate about 5%, and eliminate 2 of the three US car companies as well as a boatload of banks.  The states haven’t done much better, but most have not declared bankruptcy yet.

For some good news, the war in Iraq appears to be winding down, we have more free time as a consequence of higher unemployment and of course we still have our health.

But will the fall of 2009 be the same as 2008?  We did see that gold, metals, mining and the market in general sell off steadily over this last week.  But was this normal profit taking and market consolidation prior to a rise up toward the end of the year.  I don’t know but Monday may give us a clue.

The dollar index has bounced off its bottom at 76, but not much off its bottom.  There is a growing belief that the US dollar will rebound up like the market did in March, based purely on the belief that the dollar was over sold.   Although this may be correct in the short-term, there is not much hope that the US dollar will hold it value in the long run with all the QE that the government has embarked on.  Although it is possible that the government may reverse this action in the future, it is very unlikely given the actions of our government in the recent past.  We have not seen real leadership since John Kennedy and Abraham Lincoln, which imply that the course we are on now, will not change for the better.  It may change for the worse as political solutions to problems do have a tendency to make matters worse.

If the belief in the US dollars real strength is a short-term illusion, then the US dollar index will likely be volatile over the next few months as investors move quickly in and out of the dollar to other asset classes, which they would view as a safer store of real value.  The dollar becomes the hot potato in the market, which investor need to hold temporarily, but only out of necessity.

Gold speculation versus the Treasury bond trap, pick your poison.

There appears to be gold speculation by individuals and probable market manipulation in the short term by the IMF and other deep pockets, but this may be less of a problem in the future as China becomes a bigger player, buffering the volatility of gold prices and stabilizing demand.

The US government bond market is a trap, ready to snap.  Like the Hayward fault near the San Francisco bay area, there is certainty that major destruction will eventually happen the question is when.  The bond market’s trap is that the government is artificially keeping bond rates low, so any current buyers of these bonds will suffer major losses when the government can no longer control this rate.  Unfortunately for the US government and its bondholders, the real power lies in the foreign governments, which continue to buy our debt, since without them we couldn’t fund our government expansion without seeing a dramatic rise in interest rates.

So if the fall in the market continues, then will the flight to safety be to US dollars and Treasuries or will gold and commodities rebound?  What may be a little different than last year is that investors probably still remember the losses from 2008 and are hedging their bets.  We probably do not have as much leverage in the market and there is still some money on the sidelines looking for a pull back to invest.  So the current correction that began last week is likely real, but with buyers looking for a deal there may be some buying on way down, making the slide less steep.  The more interesting question is how long will the slide last?  Even a dripping faucet can flood a house, so a steady decline in the market for over a year will likely erase the gains since March.  The real economic news, unemployment, debt, real estate and profits make the possibility for a steady decline real.

Since we live a world economy, there may be opportunities in food commodities plus metals, mining, energy and technology, which have real value unlike banking and finance.  Another potentially new area of investment may come from investments in water, which may eventually become a food equivalent commodity.  As noted in a recent Marc Faber's Gloom Doom and Boom report, there is already a water equivalent table measuring the amount of water it takes to produce a meat or agricultural product like rice.  Instead of worrying about CO2, maybe the US and the world might want to consider H2O.  We need water to live and CO2 is just not that important.

So I believe that the market will repeat the fall of 2008, in that retail, airlines, real estate and financial may get hurt again, but like last year there may be buying opportunities in commodity stocks and energy, which may get sold off with the rest of the market.  It appears wise to have some cash now to take advantage of the potential buys in the next few months, but holding US Treasuries long term is like living in San Francisco without an escape plan.  I suspect that one day there will be far more value in water than the US Dollar.  Just ask the residents of the central valley of California, without water there is not much economy and the wealth of the community is quickly evaporating away.

 

17 Comments – Post Your Own

#1) On September 26, 2009 at 6:46 PM, dragonLZ (99.55) wrote:

I believe you are very wrong...

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#2) On September 26, 2009 at 6:59 PM, prose976 (< 20) wrote:

I agree with dragonLZ.  I do believe that there is an artificial foundation being put in, and that the eventual degredation of the dollar will erode that foundation.  The hope (by the financial self-proclaimed wizards at the Fed and elsewhere), is that the actual economy will catch up and shore up the eroding foundation before it completely collapses.  It's anyone's guess if this plan will successfully execute, but there is still a while before we'll know either way.  During that time, there is plenty of opportunity to capitalize on the markets, reposition and make contingency plans.

Fool on!

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#3) On September 26, 2009 at 8:31 PM, DarthMaul09 (29.63) wrote:

I’m not sure what part you think is wrong.  I doubt that you deny the existence of the Hayward fault or the drought in California.  I am fairly sure we need water to live, so I suspect you refer to the near term movement in the market.  Well that is anyone’s guess.  What I am interested in is the safe path to prosperity in a market, which has been anything but safe.  I look for sources of information from people who have invested well and have made accurate predictions about the economy and investments.  These include mostly bearish names like Schiff, Faber, and Jim Rogers, but they were able to see what other could not.

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#4) On September 26, 2009 at 9:22 PM, DarthMaul09 (29.63) wrote:

The Water Footprint

What are new or little known investment ideas for the next 5 years?  Gold and copper are easy to invest in, either by holding the metals themselves or buying the mining stocks.  Investing in water can be done by buying an ETF (PHO) or a relatively few small companies.  Water’s value becomes apparent only when its absence causes problems like in California.  China also has a water problem, since their fresh water supply is relatively small and what they have has been polluted by their industrial expansion.  Fortunately for them they can buy whatever they need with all the US dollars that they are holding.  Other places with a water problem include Kuwait and the rest of the Middle East as well as Africa.  Just like FTEK is a play on China moving to clean coal power plants, maybe looking for companies which can improve water transportation or reclamation would lead to profitable long-term investments.  Since China and the Middle East have money but little water, the basis for a trade exists.  China understands the importance of scarcity, since it has chosen to limit the exportation of rare earth metals.  Once they become aware of the importance of fresh water, the value of these water technology investments will rise dramatically.  For an example of what happens to a company’s stock when China begins to invest, look no further than TCK.  I’m doing my due diligence now, but I suspect that a relatively small investment today could be quite valuable in 5 years.

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#5) On September 26, 2009 at 10:17 PM, uclayoda87 (29.16) wrote:

Morningstar rates PHO at 4 stars.  It has been up over the last few months.  It sold many of its top 25 stocks at a profit.  I am not sure what it's buying now.  It may have moved partly into cash.  It invests mostly in the US and a little in Europe.  I don't know if it would benefit by an increased demand from China or the Middle East.  The ETF price fell on Friday to $16.54, 52 week range 10.10 - 20.48 

Looks interesting, but I think I would wait until the market starts going up again before buying into this idea.  Why risk catching a falling knife?  I do think that this ETF is better bet than trying to figure out which one of these small stocks will be the next TCK.

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#6) On September 26, 2009 at 10:45 PM, russiangambit (29.21) wrote:

Should be "vu" (saw), not "vous" (you), that part is wrong. The rest are good points.

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#7) On September 26, 2009 at 11:01 PM, DarthMaul09 (29.63) wrote:

I was never very good with language.  I was always better at math and science.

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#8) On September 26, 2009 at 11:05 PM, DarthMaul09 (29.63) wrote:

I made a CAPS bet on PHO, my only green thumb so far, but I haven't actually invested any real money yet.  When I do, I'll light up the green dollar sign.

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#9) On September 26, 2009 at 11:07 PM, ozzfan1317 (81.07) wrote:

Solid arguments and an interesting point but I disagree. We have already had signs of moderate improvement in the economy. We will have a small correction and then continue marching higher imo.

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#10) On September 26, 2009 at 11:23 PM, DarthMaul09 (29.63) wrote:

ozzfan1317

I hope you are right about the small (brief) correction.  Pulling off the bandage quickly is a lot nicer than ripping out one hair foliicle at a time.

The implications of a small brief correction is that the US dollar index will continue to fall, without much of a bounce up, which means the buying window will be very brief. 

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#11) On September 27, 2009 at 1:05 PM, uclayoda87 (29.16) wrote:

  DarthMaul09

Is GRO just an example of an agricultural bet or is their something about GRO that you find appealing?

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#12) On September 27, 2009 at 1:41 PM, DarthMaul09 (29.63) wrote:

 uclayoda87

GRO is a play on China’s water and agricultural problems.  Their government will likely want to support local businesses that advance their food production.  This company may eventually become their equivalent to ADM, MON, or GIM.  Once they make a real commitment to expanding an efficient domestic food production, I would expect, based on their government’s previous behavior, that they would spend a substantial amount of money on land and water reclamation for the purpose of expanding agricultural production.  They will likely want to have their own companies benefit from this project.  I am betting that GRO will be one of those companies.  I have not put a green thumb on this company yet, since it has been quite volatile recently and I am looking for a buy in price of less than $1.90 if possible to maximize my CAPS score.  It is hard to say what this company is really worth, but if this scenario comes true, then it will be worth a lot more than $1.90, maybe 10 times more, similar to the rise in TCK.

 

 

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#13) On September 27, 2009 at 1:44 PM, uclayoda87 (29.16) wrote:

Thanks, I'll add it to my watch list.

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#14) On October 05, 2009 at 1:10 AM, DarthMaul09 (29.63) wrote:

It will be interesting to see how GoodVibe’s bearish technical prediction for gold and mining stocks competes with the still poor fundamental factors in the economy, such as unemployment and extensive QE.  He has made his argument in the blog post below. 

GoodVibe Market Vibes - Dude, gold is prepared to break out big time!

October 04, 2009 – Comments (6) | RELATED TICKERS: GLD , SLV

 

A brief fall in commodity and gold prices appears to be developing, but the idea that the fiat currency of a government that is actively debasing this own money can somehow maintain long-term strength is magic beyond even the most powerful technical wizards.

 

Some mathematical solutions can only be achieved with the use of imaginary numbers, where no real number solution exists.  If you look closely on one of GoodVibes charts you might see a little “i”= square root of minus 1.

 

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#15) On October 14, 2009 at 4:21 PM, Marshal82 (89.53) wrote:

I believe you are too full of yourself to properly judge what is going on.

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#16) On November 05, 2009 at 12:18 PM, zzlangerhans (99.70) wrote:

Why do you rec all your own pitches multiple times?

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#17) On October 12, 2010 at 10:55 AM, Matt2h (< 20) wrote:

deja vu

 

(deja vous would mean something like already you).

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