I read two very interesting news reports today. One was about the spread of global inflation.
Last week came word that the Gulf States were piling up $1.5 billion net per day in oil revenues. In China, not an oil exporter, the rate of growth of foreign currency reserves has slowed down recently, but the country still nets about $1 billion per day. Overseas central banks accumulate Everests of these dollars, and lend many of them back to the United States – by buying U.S. Treasury bonds. To give you an idea of how fast this mountain of money is growing, foreign central bank holdings of U.S. treasury bonds, held in custody at the Fed, are increasing at a 37% annual rate.
Legendary investor Jim Rogers has been bullish on commodities since 1999. He started out bullish on oil and metals and to a certain extent on soft commodities like orange juice, coffee and grains.
Here’s a great 10 minute video on his current economic views and what he’s investing in right now.
As always, he calls Ben Bernanke a clueless moron and has a great explanation for why lowering the interest rates is bad for the US economy. That’s always entertaining.
He thinks we might fall into the same trap as Japan and see 17 years of stagnant GDP. That’s downright depressing.
According to Bloomberg, Jim Rogers is in the process of getting all his assets out of the dollar.
“I’m in the process of, I hope in the next few months, getting all of my assets out of the dollar. I’m that pessimistic about what’s happening in the U.S.” Rogers said.
“The yuan is the best currency to buy right now, I don’t see how one can really lose on the renminbi in the next decade or so. It’s gotta go. It’s gotta triple. It’s gotta quadruple.”
In Part I, I discussed the various options available to stash my savings to get the maximum rate of return, while preserving liquidity.
I decided to split my savings into 3. The first half while be kept with Bank of America in their flexible 5 month CD currently paying 5.1%. After 7 days, I can withdraw the money without penalty. Not a bad option, since it balances liquidity with return.
However, one of my main concerns is the devaluing of the US Dollar. Its currently lower than its ever been in history. No one knows where the bottom is, and because Ben Bernanke has hinted that he’s going to continue to lower the interest rates, I feel the bottom is still far away.
On Tuesday, Ben Bernanke cut the Federal Funds rate by 50 basis points (or 0.5%) to 4.75%. While most people may not have expected a cut of this magnitude, they definitely were expecting some sort of rate cut. There’s been too much bad news regarding the economy to think otherwise.
Comedian George Carlin talks about consumerism, education, politics, slave/wage labour, wall-street, critical thinking and the american dream, all in under 5 minutes. His assessment of these topics is pretty accurate too.
[Profanity Alert: The language in this video is NOT PG-13].
NPR had an interesting section on increasing economic anxiety in the middle class. Even though the economy is thriving, 7 out of 10 Americans report living paycheck to paycheck, meaning there never seems to be enough left over for savings.
I definitely don’t agree that the economy is thriving. I think the economy is actually in recession but it won’t be announced for another 6 months, meaning it’ll be March before the Fed actually admits to it. (Thats one reason why I think Ben Bernanke will reduce the Fed Funds rate 50 basis points this week, but I digress).
The following hilarious spoof is courtesy of David Fuller’s Fullermoney newsletter (with thanks to Investment Postcards too):
Dear investor, we’d like to take this opportunity to update you on the recent performance of our hedge fund, Short-Term Capital Mismanagement LLP.
As you know, market selection for the entire fund is guided by a proprietary investing tool we like to call “a dartboard”. Once the asset classes are decided, individual security selections are generated by digitizing our unique hexagonal cuboid models. Unfortunately, it transpires that our hexagonal cuboids are not as unique as we thought. Hundreds of other hedge funds possess identical dice. The technical term for this is a “crowded trade”. You may also see it referred to as “climbing on a bandwagon already headed for the wall”.
I dislike paying taxes as much as the next guy. But instead of complaining I’ve put my money in investments that give me tax breaks like real estate and oil drilling programs.
However, some people hate paying so much that they’re willing to live below the poverty level just to avoid “qualifying” for taxes. Here’s a war protester that refuses to pay for the Iraq war and has decided to live on less than $12,000 a year.
Here’s a parody from Saturday Night Live which explains why so many of us have trouble staying out of debt.
Seriously, most people get into debt because they buy stuff they can’t afford and most likely don’t need. According to The Millionaire Next Door, most millionaires live within their means without getting sucked into the consumer-lifestyle trap. And they pay for most of their purchases with cash too (or they pay off their credit cards in full every month).
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