Where Have All The Good Times Gone?

I read an article recently about Mr Satyajit Das. Mr Satyajit Das predicted a credit crash in a series of speeches last year, thus correctly predicting the global credit mess sparked by the subprime market meltdown we find ourselves affected by. According to Das, “a diet of cheap and excessive debt has created a bloated financial system.” He now predicts that a slow burn will take place, similar to the 70s, where inflation halved portfolio values over a period of 5 to 7 years.

According to Mr. Das, inflation is going to go way up. Thus, commodities and blue-chips is where your money should be. “Owning debt of a bank or sovereign debt like U.S. Treasuries – in other words, assets with fixed returns – may not be very bright.”

Again, stocks in companies with real cash flows and sustainable business are good in high-inflation environments because they maintain relative value, as opposed to fixed securities.

Inflation or not, conservative is definitely the key word. This has been a tenet of Inspector Stock’s investment strategy from the beginning. It just so happens the market turmoil right now is ever more relevant to my strategy.

For all you Canadians, right now is a great time to pick up US blue-chips such as GE. Canadian dollar is strong and thus buying units in US dollars is to your advantage. I have profiled GE in the past, and I love them “long-time”, as the saying goes.

In general, the idea here is modesty. Too many investors are blinded by the prospect of quick money, and in the process lose their shirts. Don’t think of this as gambling, but as gardening. You need to plant the seeds, tend to the garden, and care for your money plants as they grow. Keep on top of the geo-political weather patterns. And be prepared to cut and run, which kind of breaks the gardening analogy, but none-the-less – be prepared for the worst. As the kung-fu master would say, patience, young grasshopper, patience.

And patience is a whole lot easier to swallow when you are confident in the sectors you are invested in and the specific companies within that sector. As well, when your portfolio is sufficiently diversified.

For example, oil, gold and agriculture – I feel damn confident in all three. A day to day dip, sell-off and rise, does not alarm me. I expect it and believe long-term I’m golden (black gold, golden crops, bling bling). In fact, buying on dips can be part of your strategy. Or, if you are a gambling person with disposable income, you could chose to trade on the volatility. I do the former.

So, keep up the good fight – there is always money to be made, even in the tough times.

DISCLOSURE: I own shares in GE. Always do your homework. Don't believe the hype. Be good. Be bad. Don't get caught!

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