1st Rule of Investing: Don’t Get Wiped Out

February 15, 2013 6:38 am 13 comments

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Most people who read this blog are probably concerned about gold, so let me just start off by saying that gold is fine. I am praying for a correction in the $1400-$1500 range so I can buy and plan my retirement somewhere in Asia. Gold is the ultimate hedge against fiscal irresponsibility, and I have seen nothing change on that front. One of the millstone global currencies, the Yen, has been under pressure lately, and the Dollar is not far behind. The gold permabears are out in full force, but they clearly have never studied a gold chart before. Before the great rally in 1980, gold had a shake out period before rising about 4X in a year. Gold needs to be in every portfolio because it is robust to events that can actually wipe out your entire portfolio. It’s just the intelligent thing to do.

But anyway, I don’t view myself as a “gold expert” or gold bug, so I’m not going to talk about every little correction or gold news item. That’s just insane. I find value, period. When I bought gold before it went on a true rocketship launch, it was because it presented value , not because I thought the world was ending. When I packed up my bags and bought real estate in Las Vegas at the bottom, it was because of value, not because I fell for the propaganda that a home is always a good investment. People don’t seem to understand that you can ALWAYS learn about a new asset class; it’s not that hard. It’s not the knowledge of a particular asset class that important, it’s things like: A) having an open mind, B) being an independent thinker, C) distilling information and coming to the right conclusion, and D) having a “feel” for what’s coming. This “feel” is the only thing that I think can’t be taught; it basically separates the great traders from the average ones. But if you have everything else, you will probably outperform most people.

Gold is going to go where it needs to go, and a lot of you will profit. But always think ahead to the next big thing and stay ahead of financial analysts, economists, and CNBC, who are all great at postdicting, but have a horrible track record of predicting. The next big thing is 100% going to be Asia, and more specifically Japan and China. If North and South Korea become one nation again (never say never), I will bet everything on that succeeding. Anyway, it is one of the great ironies that the Communist nation of China is the country displaying capitalistic tendencies. Go figure. And the U.S.? Higher payroll taxes. Investigation of offshore accounts of $50,000 or more. Tracking of wire transactions below even $5,000. Proposals of raising the minimum wage and ensuring that the unemployment rate rises in a true bonehead move. Yes, I am not bullish on America right now, and once again I will put my money where my mouth is and move to Asia in all likelihood.

Don’t Get Wiped Out

Ok, so let’s take a step back and talk about who actually gets crushed by a debt crisis. Contrary to conventional wisdom, “conservative” investors get absolutely wiped out. This means people with pensions, bonds, CD’s, and savings accounts; in other words, Baby Boomers. States and Municipalities are getting demolished too. About half of American households don’t have enough savings to last a couple of months if they lose their job. I have heard from friends that there are tons of 2011 law school grads who can’t find jobs. The service sector is going to contract dramatically mostly because of the internet (not good for commercial real estate). And because the service sector has become so bloated, the contraction is going to be nasty. My advice would be learn about computers and don’t waste your money on higher education unless it is engineering or computer-related. And definitely don’t waste your money on an MBA, especially if you plan on starting your own business.

The Millennial Generation Wipe Out

I am part of the Millennial Generation, and quite honestly I think most people in my generation are morons when it comes to the economy. I read an article recently in the New York Times about the Millennial generation and how we tend to favor big government. Now I’m not one to blindly believe polls, but if this is true, you can just about turn out the lights on America.

The Millennial generation will be protesting on the streets soon enough because they have no jobs and have student debt that they are legally obligated to pay. Of course they will use the excuse that they are social crusaders who are railing against “Wall Street.” But here’s a news flash: most people who work on Wall Street don’t know what the hell is going on. This is the truth. I’m Asian, most of my friends went to good schools because they were good at taking tests, and the dream for most of them for whatever reason was to get a job on Wall Street. And trust me, they are clueless. 

So anyway, the Millennial Generation is getting wiped out. People will profit from this crisis, but they will most likely take their money abroad when all is said and done. We are going the way of Great Britain, and fast. It’s not as if we will fall off the globe as a nation, but we won’t be the lone superpower of the world anymore. I believe the Pound went from something like $4 to a little over $1 when they collapsed as an Empire. We are headed for a similar fate, but it will come after a substantial rally in the dollar when Japan collapses. This is sure going to be interesting.

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  • moark

    Gold era has finished. Investing gold is loosing money.

    • Where to invest

      Moark, where do you think gold prices will be in 2015?

  • Brian Richards

    You know, I really start to worry whenever I read someone insisting that the dollar is going to decline. No doubt, over the longer term, say the next twenty years, the dollar will not hold up well, but short term, we may all be surprised to see it back at well over 1. It still retains its’ reserve currency status and the Eurozone is ill, which are strong tailwinds. But like all asset classes, don’t put all your eggs in one basket, no matter what anyone says.

    • http://www.expectedreturnsblog.com Moses

      Yes, the dollar is leaning heavily towards a major rally.

  • Where to invest

    So, do I invest in gold which is way up? The stock market which is way way up since 2009? Hold cash that will always loses value over time, in hopes of a better investing opportunities in the near future? Who knows? These are interesting times for sure

    • http://www.expectedreturnsblog.com Moses

      Cash doesn’t always lose value. Even if you oversimplify and view gold as “real” money and anything fiat as something that gets debased, you’ll find that gold will simultaneously rise and fall according to what currency you are comparing it to. So what exactly is losing value? Gold and fiat money?

  • http://www.facebook.com/virginia.lawrence.775 Virginia Lawrence

    Thanks for posting! I was looking into somewhere to buy gold
    in Las Vegas, NV
    , but this article was really helpful and had some good advice! Thanks :)

  • Where to invest

    Gold to dropping like a rock! This might be a good opportunity to buy a few oz of physical gold.

  • Where to invest

    Gold to dropping like a rock! This might be a good opportunity to buy a few oz of physical gold.

  • moark

    Hi Moses, is dow jones increase normal ? What do you think ?

  • moark

    I am happy I got wiped out I beleive in that gold will not increase anymore, fed is printing money and booming economy so stocks etc are increasing except gold, investing in gold is loosing money.

  • moark

    Gold= The End.

  • Andrew

    Your prayer for gold price correction is granted. The April’s price correction was anticipated by market analysts and financial institutes. I’m with you on owning physical gold. Stocks and even bonds can fall flat on the ground, but gold and other precious metals will continue to hold their value.

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