Home > The Economy > Is our economy ending? Don’t help it.

Is our economy ending? Don’t help it.

January 28, 2009 Leave a comment Go to comments

As I thought about our current economy and investment opportunities, I decided to take on the form of Mac Slavo’s (an author of SHTF, another blog in which I contribute http://www.shtfplan.com/) opposite; his “Luke Skywalker” fighting against the evil heaving breath of a dark outlook that is our economy. 

That being said, I think our current economy is a writhing heap of shit coming out of American’s asses.  Indefensible mortgage standards, leading to rising foreclosures, leading to credit crunches, leading to decreased spending, leading to slowed production, leading to job loss.  Yep it’s pretty shitty.  It’s impossible for me to argue what is so plainly occurring around each one of us.  But I can argue this: Don’t panic, play. 

What I have discovered in our economy is that there is never a time when one cannot take advantage of other people’s misconceptions and mistakes.  I happen to love bear markets, because essentially everything is cheap.  If you have even a small amount of cash and income, you are king.  And as long as anything you choose to buy into or invest in does not collapse completely, you are almost sure to enjoy a future gain. 

Do I consider myself to be more on the risky side? Yes, but not to the extent of a chain smoking day trader or someone who still praises credit default swaps.  I am, however, buying a new home.  Every day I am on the hunt for undervalued stocks.  I have not touched my 401k.  And the last thing I want to buy into, is gold. 

There are many strong arguments for gold.  People view it as stable, physical, everlasting, and safe.  Although I agree with these perceptions, negative realizations cause me to veer away from its potential pros. 

Number One:  Gold is still a commodity.  Just like oil, corn, steel, and orange juice, gold has its own market where its value change every second of the day.  And just like any other commodity market, countless variables effect how it will perform.  You may very well make a good buck by purchasing gold, but to say it is a stable investment is like saying oil will always be an increasing and marginally static commodity…  May heating oil futures rest in peace…

Number Two:  Gold is useless.  Look at it; just a yellow bar…sitting there.  You can’t eat it, you can’t live in it, and you can’t make it grow.  It simply has value because we say it does.  You could argue that stocks are the same thing; that a stock is only as valuable as we say it is.  But a stock is an investment into an entity that is…producing something.

Number Three:  I am not a cow.  I don’t like traveling in herds that flock to something they view as safe and valuable, only to find that very value already inflated.  Truly, gold is in high demand.  But anything with a beginning will also have an end, and I do not want to end up with overvalued yellow metal when a recovered economy begins. 

Number Four:  Gold helps no one in the end.  Although gold can be a good investment in your portfolio, it’s important to invest in it because you are confident in its future performance, not because you predict anarchy.  To turn your back on “golden” opportunities in our financial market only spurs the current climate.  Rather than help our economic demise, look for those little treasures that other people have ignored because of their own panic based fear.  We as a nation have wonderfully productive people who work for innovative and value producing companies.  These companies, however undervalued, create products that we will never not have a need.  And it is these companies that I believe we shall see enormous gains in the future. 

In the end, who knows what will happen.  In our current economic and monetary systems, many must incur losses for other people to gain.  And it is these complicated topics that I always discover can be solved simply by looking to Hollywood, and Luke Skywalker chopped that bastard’s hand off.

Love,

CAH

 

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