Posts tagged Investing
The Dollar is Crashing!!
Feb 23rd
What was this stuff I kept hearing last year about the dollar crashing? In December 2009 this talk reached a fevered pitch. Here’s the dollar index over the last year and you can see how much it’s recovered since the dark days of December 2009:
You can track the US Dollar index at this link.
Since this time the Euro has taken a pounding due to the issues with Greece possibly going into sovereign default. This drove the Euro down and the Dollar was the beneficiary. I’m not a dollar bull necessarily, but I post this just to show (yet again) that reacting to news that everyone else already knows is rarely a good way to invest. The markets are random and things we think must happen may not happen for a very long time (if at all).
Best to ignore all of the financial news and just stick to a simple diversified portfolio that can take care of you whether the dollar is sinking or flying.
Be a Skeptical Investor
Jun 22nd
If you’re in the investing world long enough, you’ll eventually get tempted to put your money into some new investment or try to tweak your portfolio to outperform the market. It’s easy to get lulled into an idea that you can beat the markets if you just do enough research, just make enough trades, just own the right funds, just follow the right market prognosticator, etc. But what you’re really doing when you try to beat the markets is moving from the realm of investing to speculating. And when you speculate, you take the chance you may beat the markets, but you also take the chance that you may not.
So in this vein, I went back and found a short segment of what I feel is one of the core ideas behind the Permanent Portfolio from Harry Browne himself. I think this little two minute clip captures a fundamental truth in the investing world about why you need to be skeptical and why you should understand the differences between investing and speculating:
Harry Browne the Skeptical Investor
This clip was taken from Harry Browne’s radio show on October 31, 2004.
The Permanent Portfolio Allocation
Dec 18th
Harry Browne and Terry Coxon formally introduced the Permanent Portfolio in their 1981 book entitled: Inflation Proofing Your Investments. Like most great ideas, the Permanent Portfolio was simple, but was not simplistic.
The Permanent Portfolio investment strategy is the first one I’ve seen that developed an allocation based on economic cycle analysis. The Permanent Portfolio idea separated these economic cycles into four basic categories:
- Prosperity
- Inflation
- Deflation
- Recession
A Permanent Portfolio?
Dec 13th
The investing world is full of advice. Some good. Most bad. Stocks, bonds, cash, 401(k), IRA, etc. Up is down. Left is right. And if you only follow the right sage advice you can become an instant millionaire. It’s all too complicated isn’t it? Well, the fact is that investing can be easy and profitable if you avoid the major pitfalls that stalk every investor.
When I first started investing I was drawn into the circus of the stock markets. Educated analysts, sophisticated computer models and wise money managers were advertised as the keys to success. The brochures showed retired couples walking on a sunny beach into the sunset (presumably after they just got off their yacht). Marketers trumped up the past returns of their funds and how much money you would have made if you were smart enough to have invested back then. Yet, the results just weren’t there. Sure, there were some mutual funds that did fine from time to time but it was never consistent. Money would be made, and then unmade, just as fast.
Like many, I invested through the tech boom of the late 90’s only to see much of what I earned evaporate. Remember those days of analysts hocking the IPO of companies like furniture.com? How could that fail! When you want a sofa everyone knows the best way to get it is to order it off the web and have UPS drop it off on your doorstep, right?
Can high inflation save the economy?
Dec 11th
An article in Forbes magazine tries to make the case for devaluing the dollar by 40% to help out the economy:
Why not attack the situation in a manner that will benefit most everyone, an approach that has been successful before and, when compared to the current course, has little downside? Here it is. Stand back. World currencies should be devalued overnight.
The Forbes article is riddled with errors about inflation and the gold standard that I won’t address in this post. The short of it is that devaluing the dollar by 40% won’t do anything at all except force the prices of everything else in the market up by 40% overnight as businesses move to protect themselves. It would also drive interest rates on loans through the roof, put many companies into bankruptcy, wipe out huge portions of savings of the average American and make a bad economy much, much worse.
So what if? After all, this is Forbes Magazine discussing the idea so someone thinks it’s good. How would you want to position your finances if the threat of a massive inflation to solve our problems came to pass?