Contrary Me

 

I am writing this because, as the Japanese say, 'the nail that sticks out gets hammered down.'

Many people routinely stick a lot of money into their investment funds in January, next week (YES, JANUARY IS NEXT WEEK.) All that money being parachuted into Wall St causes equity prices to rise. (Yes, prices do rise when vendors are surrounded by crisp green bills.) All that activity may give the appearance of rising markets and a bullish trend. Just for that reason - how things appear - and the excess level of bull, this might be a good time to have second thoughts. Maybe shoving some more money into your broker's pockets is not a good idea. There are things to be considered.

In the long run - if any long run still exists - having a contrary attitude is best when considering investments. One might dismiss this practice, because almost every historical pattern or indicator has failed in the last few years, especially in the last year. So, it could be that contrarian investing doesn't work any more. Well, OK: but, I still think being skeptical has merit; lots of merit.

Consider Facts 1, 2, 3 and 4: there is a huge national deficit, there is a huge and growing trade deficit, there is consumer inflation and the Federal Reserve is raising rates. Consumer goods price inflation is a result of deficits. The increase in interest rates is the Feds' attempt to reduce inflation, by making spending - especially borrowing - more expensive. So, there are really only Facts 1 and 2 - our national and international indebtedness - as everything else is consequent upon those facts.

Now, if the Federal authorities were determined to bring down the deficits, perhaps my concerns would be baseless. After all, they say they will do that; but saying is not doing. What the authorities are doing is locking in the very causes of huge deficits. Spending on foreign military adventures remains high, and might get higher. The Great White Bandit promises his gang more tax reductions, or, at least, no more taxes. At the same time, the authorities are proposing to undertake an expensive program of buying out the Social Security system, so as eventually to abolish it. Taken together, all that must make Federal spending go higher, not lower, while receipts (taxes) are stagnant or declining.

Foreign investors and governments are not taken in by the propaganda; they act in their perceived self-interest. They estimate what the United States is doing by looking at what it is doing. (How totally rad!) For that reason, the dollar has been declining the last 3 years. All the while, U.S. Treasury authorities have been saying they support the strong dollar. Say one thing; sure enough, something different or the opposite happens (which is not an unusual occurrence with this Bandit government).

So, should one invest in the rapidly declining dollar, or something else? My answer is Old Europe, Asia and Energy. People can buy euros in a foreign exchange (FOREX) account. I am still considering that, but, in the meantime, I am holding selected European stocks. I am also invested in China, India and Japan. I have been indirectly investing in commodities and energy. All these have been money-makers.

My losers are mostly U.S. equities, except EBAY. Some people say gambling works.

Among the financial professionals - people who were and are gung-ho Bandit supporters (birds of a feather?) - there have already been fantastic outflows of money to Europe and Asia and elsewhere. Would you believe Australia, Brazil and Mexico, are better investments than the U.S.? Even Argentine oil has more merit than most U.S. stocks.

In this year of the Monkey, I apply the rule: Monkey See, Monkey Do. I think that will still work next year, when the Rooster crows.

Let's hope Wall St doesn't lay another egg, but why risk it?.