12 Warning Signs of Hyperinflation

Saving and investing are NOT synonymous. Investing involves risk... that the venture invested in will lose money or fail entirely. Saving is merely putting capital away for future usage. In an honest money, saving involves no risk. In fact, productivity improvements dicate that saving will result in appreciation.

 

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I don't think anybody except a couple of professors locked in a closet someplace believes that the markets are perfectly efficient. It is pretty naive to believe you can participate in any market and avoid the occasional market drop - including gold. If you aren't currently invested in a manner that permits you to negotiate a 50% drop in gold prices without serious financial damage, you are not properly invested. Remember, contrarians are wrong at all times except at turning points in the market. Good luck.

 

That's when it matters. Anybody can make money blindly following a trend while it's in motion. It's at the inflection point that people lose everything. You need to be in front of the trend, not following it.

 

Well, you're wrong there. I would venture to say that more money has been lost trying to anticipate changes in direction in the market than from just about any other cause. There are basically only two reliable ways to make money in markets. (1) Buying something for less than present or future intrinsic value, which is value investing, and (2) trend following with loss controls. Everything else is guessing.

 

Inflation Actually Near 10% Using Older Measure
Published: Tuesday, 12 Apr 2011 | 5:18 PM ET

http://www.cnbc.com/id/42551209
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Inflation Not a Threat? Most Consumers Aren't So Sure
Published: Tuesday, 12 Apr 2011 | 3:37 PM ET

http://www.cnbc.com/id/42553544/
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Everyone on Wall Street Agrees with Bill Gross: Short Treasuries
Published: Monday, 11 Apr 2011 | 2:05 PM ET

http://www.cnbc.com/id/42536993

 

That's pretty funny.

 

I think the dollar is a little low right now, and would like it to stop weakening. I saw it going lower a decade ago that is why I got more international exposure, (my ancient coins I count in that exposure ). I think we are at the lower end, and would hope that it would stop the slide and hang around its current level. One aspect of this that is starting to help the US economy is that US exports are going up pretty strongly at current dollar levels. This will take some time to accelerate, but should help put a floor on the dollar in 6 months to a year.

 

Actually you're wrong, that's a myth. Almost nobody makes money over long periods of time. It's all made (or lost) at market tops and bottoms. If you buy at the wrong time, you can go decades without ever recouping your investment. Most people only identify trends when they've just about exhausted themselves, which is why almost nobody is in precious metals yet. When the "mania" hits (i.e. when the general public identifies the trend), that's when you get out, not when you get in. Warren Buffet has warned, "You pay a very high price in the stock market for a cheery consensus." You buy when there's blood in the streets, as Baron Rothschild pointed out.

The dollar is decreasing in value because of government borrowing and central bank printing, not because of imports or exports. Exports are going up because our products are on sale. Nobody makes money by increasing output at fire-sale prices! It just means our import costs are going up! And it's going to get much much worse as China stops devaluing their currency to match the Fed, which they are sure to do given their very high levels of inflation. Since virtually everything we buy was made in China, get ready for prices to skyrocket! Oh, this is good for domestic production, you say. Only marginally. Not nearly enough to offset the massive pain soon to be inflicted upon American consumers.

 

1 year chart of the U.S. Dollar ... down down down she goes.
Is it any wonder silver, gold, oil, gasoline, wheat, corn, cotton, stocks are all up.

 

You quote Buffett [it's with two t's, not one - the person, not the meal] who doesn't attempt to time the market as support for your failed strategy of timing tops and bottoms. I would suggest that you actually study Buffett before you attempt to quote him in support of your own failed viewpoints. Then maybe you will realize that pricing is more important than timing, and your posts won't read so much like nonsense.

So to repeat, there are basically two reliable ways to make money in markets. (1) Buying something for less than present or future intrinsic value, which is Warren Buffett style value investing, and (2) trend following with loss controls. If you study a bit about trend following, you will also learn something about loss control that is inherent in the strategy and prevents the situation that concerns you. It's better than your guessing tops and bottoms.

Happy studying!

 

Trying to be nice.

First, yes if you buy all of your position at once you run an extreme risk of choosing your timing poorly. Any type of time delayed process of acquisition will help minimize this specific risk though, like DCA. Second, I do not agree that US businesses getting more orders because the dollar is lower is making items at "fire sale prices". The world is not static, and if our factories can win orders because our dollar is lower it is in fact beneficial to us. We do benefit. The downside is that consumers have to pay more for imports or exportable items, but remember that a lot of your monthly expenses are not tied to international currency markets. Real Estate is local, you cannot export your condo to China. Overall, business and employment benefits by a lower currency, while fixed incomes and consumption of imports suffers. This is exactly why many countries manipulate their currency to stay more competitive in world markets.

 

Quick story from Warren Buffett. He tells a story to think of the market as a silly little man called Mr. Money. Now somedays Mr. Money is in a great mood, and he wants a lot for his stock, but will pay a lot for yours. Other days he is down, and won't pay much for yours, but will sell cheap. Go ahead and take advantage of Mr. Money when he is wrong, but the danger is ever trying to guess what mood Mr. Money will be in the future. That is how fortunes are lost.

That story, and the well known quote from Mr. Buffett that he would not be a billioinaire if he lived closer to New York I believe tells you what he thinks of financial markets and timing.

Chris

 

Check yourself, Icarus, your overinflated ego is getting awfully close to the sun.

You mean TIMING THE BOTTOM? That's what "value investing" is all about! You buy low with the expectation that it has nowhere to go but up. That is the opposite of getting into a momentum trend which means buying high and hoping to sell higher. Honestly, if you're going to try to school me, then try not to sound like a fool.

I would highly recommend reading this:
http://www.moneychimp.com/features/dollar_cost.htm

Foreign exchange shenanigans are never beneficial because they distort the price signals for supply and demand the same way inflationary monetary policy does. It inevitably leads to malinvestment. If it made sense for businesses to attempt to win more orders by lowering prices, then businesses should be free to simply lower their prices. If they don't believe that lowering their prices is in their best interests, then how is it in their best interests for the Fed, Treasury, and Congress to collude to lower their prices for them via monetary and trade machinations? You can certainly point to short-term benefits for some individuals because of the delayed action of inflation on different parts of the economy, but this is essentially a "broken window fallacy". Other people are hurt immediately (almost all consumers since most goods are imported) and everyone is hurt in the long run except for those few who can time their arbitrage perfectly.

The art of economics is not merely evaluating the immediate, intended consequences of any action, but the long-run implications several times removed.

 

You are exposing your lack of knowledge for all to see. Value investing is about pricing, not timing. Even rookie investors know that. Buffett used to tell the story of his purchase of Washington Post common stock. The entire company was selling for $50M at a time when just about every industry analyst said the company was worth a minimum of $200M. So Buffett bought a large chunk. What did it do? It fell another 50%. But he didn't care because he knew the value was there, so timing was irrelevant. A few years later the company was worth $800M in the stock market and it became another legendary Buffett purchase, precisely because he actually understands value investing to be all about buying below intrinsic value and not timing the bottom, and you apparently don't have a clue.

But thank you for exposing for all to see what I've been saying now for several days. Now perhaps folks will understand what I've been warning them about when it comes to your "advice."

 

That's about the stupidest thing I've ever heard... pricing is OBVIOUSLY a function of time, just as timing is a function of price. Your problem, Cloudsweeper99, is that you have a one-dimensional thought process. To prove this to yourself, grab a chart of any Buffett investment, follow his initial TIME of investment forward several years, and then ask yourself if at that TIME it is still a "value" investment. The "value" only exists at the point in TIME when you think it is at the bottom of an upward slope. When it is no longer a good "value", i.e. near the top, it's prudent to trim your position or get out entirely. The only thing that distinguishes value investing from momentum investing is the need to TIME your investment near the bottom. Momentum investing merely tries to time the top, irrespective of whether it's closer to the top or the bottom at the initial time of investment. The Buffett quote I cited before, "You pay a very high price in the stock market for a cheery consensus," is an indication that Buffett is well aware of this elementary fact, as "cheery consensuses" are a method of identifying tops in investing trends. If you want to time a bottom, i.e. discover a good "value", you look for a lack of "cheery consensus".

 

Now that you have clearly established for everyone to see that you know nothing about value investing, you squirm by trying to complicate the wording and try to convince people it is the same as market timing. But you are too late. You know nothing about Buffett and apparently don't understand what you quote. You've been outted as an investment fraud. When you spout nonsense like "The only thing that distinguishes value investing from momentum investing is the need to TIME your investment near the bottom" it becomes clear for all to see. Thanks for playing. We have a consolation prize for you on your way out.

I would advise your followers to read over your last few posts and decide for themselves.

 

You are arguing in circles, you state how there is a danger of timing, that your lump sum purchase can go down in value if you have the timing wrong. I point out a method to help that, and then you show me an article saying its better to lump sum invest. Ok, so you only believe you should lump sum invest at a bottom I guess. Yeah, that's great except that I am not as smart as you apparently since I have never been good at knowing bottoms. I think I know sometimes, and I think I can see some value plays sometimes, but I am never sure at the time. If I have great doubt I try to average into a long term position, if I think I am right, like silver in the early 90's or stocks in the spring of 08, I lump sum buy. No method is ever perfect, unless you are sure of a top or bottom, and I never am.

 

Since you've clearly established that you have zero facts or reasoning to defend your wrong-headed opinions, perhaps you should just leave the commenting to those of us with something worthwhile to say. It seems to me that you've accumulated a basket of rules-of-thumb without a shred of understanding of the basic principles involved. You add nothing to the discussion. You're just a distraction.

I'm not "arguing in circles", I simply pointed you to a resource which shows that dollar cost averaging doesn't actually produce a better outcome. Indeed value investing is all about investing a significant amount at the bottom (not exactly at the bottom, necessarily, but well below par), and then anticipating the value to be discovered at some point by the mainstream. This is what value investors do. If you're not good at identifying cheap opportunities with significant intrinsic value likely to improve their prospects, then perhaps you're just not a good value investor. Not everyone is. There's nothing wrong with that. It just means that you have to do more research and read the opinions of those who are good at it.

 

You link shows that for given cost of money using stock market history that DCA is USUALLY not the best method. You link does show if you choose the timing, (like your scenario you presented the first time, that I was responding to), that DCA does indeed produce superior results. That is all I was saying, and your link did not refute that, just made the general observation, (one I already knew), that in a generally increasing market DCA is not a preferable way to purchase securies.

I do not know where your definition of value investing come from, but the general definition is purchasing a security at a discount to its fair value. Thats all, no mention of bottoms or tops. A bottom in nominal terms is meaningless, since every day new information comes to light changing the inherent value of an enterprise. Another type of value investor tries to anticipate these changes to the firms inherent value and be ahead of market revaluations.

Passant, referring to, "If you're not good at identifying cheap opportunities with significant intrinsic value likely to improve their prospects, then perhaps you're just not a good value investor", would you please just keep the posts civil. I am doing my best to be civil here, then you make statements like this. You don't know me or my background or my portfolio. I have stated my background and education here, I have not seen your background or education, but saying something like that to impune my credibility or to simply infer you are smarter or a better investor than I does nothing except to raise blood pressures. Maybe you meant it generically, but you used "you're" not "an investor" so it reads as its directed to me.

Chris