Will Fed make us rich?

Last time Fed didn’t make many people rich and particularly Chinese were not very happy when they got to know about freshly printed greenbacks. They didn’t wait for long and bought more metals and increased their gold reserves.
Today we were a kind of shocked by 6.1% GDP fall in the last quarter but the equity market is still green hoping that Fed will tell us that they see good signs in real economy and so on.

I wonder if they convince us and make us buy stocks but my guess is that S&P500 should cross 870 points and shoot up at least a few per cent. Maybe we won’t be rich soon but slowly but surely we can accumulate gains.

However I find it very risky that we buy stocks of companies that have smaller and smaller profits and we hope that recovery is coming.

My scenario is that both Fed’s statement and stress tests will help to heat up the rally and then I’ll probably cash in some of them. In a way Fed will make us rich, a bit.

Jim Rogers and his new book

Jim Rogers has written a new book and it will be available next Tuesday, on April 28. The title seems quite long “A Gift to My Children: A Father's Lessons for Life and Investing”. Almost everybody knows something about Rogers. He moved to Singapore and lives there with his family. He has two daughters aged 2 and 5 and the book is dedicated to them.

Jim Rogers is famous for his investments and travels. I love travelling but this blog is about investing so let’s focus on the main topic. However, you should always have your eyes wide open. Rogers once crossed Botswana on a motorbike, he liked the country and in this way he found a great investment opportunity.

I agree with him that if you want to compete with funds and skillful investors you need some edge. Do you think that you are better at technical or fundamental analysis than big companies with dozens of great minds? You’re probably wrong.
So what to do? Rogers said recently that you are sure to be an expert in some field, for example as a car mechanic you know which company makes good spare parts and which produces crap. In this way, you are doing a fantastic basic fundamental analysis of a company and then you can start digging to find out more about it and decide whether its stocks are worth buying or not.

Therefore, he is against diversification because if you spread your risk to many companies you don’t know, you can’t make a lot of money. I’d say he is right to some extent but I wouldn’t tell anybody to invest say 30% of their capital in one stock. For me it’s some unnecessary risk.

Rogers is a big fan of Asia and commodities. He has very bad predictions about the U.S. and I hope he is wrong but you can’t be sure about it. Instead of saving and investing American government increases debt and want people to do the same. I don’t like it as well.

I’m looking forward to his new book. Jim Rogers is always a good read.

China invests in gold and you?

China, Chinese or Asia and gold are hot topics these days. When you combine China and gold that’s really something interesting. On Friday we got to know that they officially announced that they had increased their gold reserves up to 1,054 tons from previous 600 tons.

Not long ago they asked politely to rediscover Keynesian idea of a global currency based on metals. Nobody seemed to be interested so they bought a lot of copper, nickel, zinc and so on and now we know that they keep their gold.
Yes, they don’t buy it in the market but just take it from their mines and keep in their vaults.
Anyway, gold is again above $900 mark and I’ll tell you something. I prefer a nice Krugerrand to $900. I don’t know how I can assess the value of dollars while they are being printed all the time. It’s above my simple mind.

I prefer physical metal. Do you think Chinese Central Bank, FED and other guys from banks keep ETFs or other paper or real gold? You know the answer. I’m not smarter than them and I stay with bars and coins.

I’m not a gold bug but a kilo of gold makes your life brighter and you sleep better.
It’s important to have different sizes and values not a one big bar. Why? In case of real financial collapse you might exchange a small coin for a pig or a big bag of potatoes.

Does it sound strange? Well, gold has been a hard currency for 2,700 years and dollars only for less than 230 and maybe you don’t know but in 1800’s 1 dollar represented 1.6 grams of gold. So now it’s about $46.90. Or your dollar is in fact 2 cents in comparison to good old times.

Think about your great-grandfather who could have buried a bar of gold and some paper dollars. I reckon your gold would have preserved its value but your paper money would have been doubtful to survive up to now, not mentioning representing any meaningful value.

Chinese are smart. I’m not going to move near them to Singapore like Jim Rogers did but I just copy their moves. China is a big market and they’ll do fine. They don’t print money but save and invest. They buy commodities and gold so I’m just doing the same. I have no idea of Chinese stocks so I stay away from them.

However, gold is a safe haven for your asset not a hot stock pick. You could triple your money even buying Citigroup stocks recently so financials are like casino to make money and keep some of it in gold and when I gather enough money I’ll go on my holidays to see China.

Peter Schiff is right

Peter Schiff is famous for his astonishing predictions about the current credit crunch and I love watching his video featuring Arthur Laffer. Very nice.

I suggest you should read his last interview here.
I bought some gold bars, coins and silver coins but now I started purchasing equities as well (one financial junkie and another connected with farming industry). I believe that inflation is inevitable and paper money is the worst thing to keep your assets in, especially dollars so I turned to euro – fortunately so far ECB hasn’t started printing money, as well.

I love the nature and stuff but I can’t imagine myself as a farmer. C’mon, milking cows and things like that seem kind of a nightmare for me. I’d rather buy some land with people who work there. Of course they aren’t slaves but they can stay on their sold farm and look after it but it belongs to me. Nice trick. I’ll have to figure it out how much it costs and so on.

So I guess that the notorious stress test will prove that banks are fine. Regulators are working hard on that and they’ll give you what you want to see. Inflationary bull market is possible and that’s why I follow Schiff’s advice to look for strong companies that make real profits especially connected with natural resources, mining and agriculture. However, I would add some financials for couple of weeks as a pure speculation. Schiff is right and I wouldn’t keep my deposits in dollars in banks. The government is burning them.

Google stocks are too expensive now

Google is a great company and I would like to buy its stocks but I think they are a way too expensive now. I don’t believe that in recession revenues and earnings will catch up with the price. P/E 27? Are we in the middle of bull market in expanding economy or what? Buying Google stocks now is a kind of gambling that printing money will heal America. I don’t agree.

Google managed to cut costs significantly and produce a nice profit last quarter but even they admitted it would be hard to keep costs low in the following months.
They had 17% more clicks on AdSense. Great but still the economy will be slow so what revenues do you expect in the future? It’s more important how much money you make than how many clicks you record.

To sum up I can tell you that I would like to buy Google but not at the current price. $250-275 is a good opportunity for me. If it doesn’t go so low, I’d just skip it.

I will be rich sooner or later

I will be rich soon. At least I hope. I started again in 2007 and now I’m doing pretty good.
First of all, I should explain what it means to be rich for me.

To be rich is not only a state of mind but my bank statement as well. I tried to work out how much money I need to stop working. Everybody should try the same trick.

How to calculate it?

I can tell you that there’s no one easy straightforward answer but everything depends on how much you spend a year or to be more precise how much your family spends to live a happy life.

That varies a lot.

I don’t need a fast sports car or go on luxury Caribbean cruises but you shouldn’t limit yourself because to be rich means also to be happy.

The portfolio you see on the right is a bit misleading because those are not my full investments or assets but just my Polish project “from zero to 1 mln dollars” (roughly speaking) which I’ve been pursuing for 19 months. I’m going to finish it as well. So there’s a lot to do there.

Coming back to the point, I saw some kind of teenager stuff on the net claiming that if you have assets that they cover all your monthly expenses it means you’re rich.

Is that really so?

Look at the stock market what’s been going on recently. Can you say “ I’ve got very good Citigroup stocks which I bought at 40$ and I’m not worried because I’ll get a hefty dividend”? I doubt.

The same is with your bank deposits. Now you see many of banks just going under water. Of course, you’ve got FDIC protection and so on but still no one can say that they feel comfortable. What’s more, look at the inflation rate. It’s eating your cash very fast. No mercy for greenbacks.

So we’re living in really extreme times and you just need more money to feel safe.
Look at those crazy bankers printing more and more dollars or British pounds. Do you think your dollars are worth more? I don’t think so.

Then I would try to figure out my or my family’s expenses and multiply them 25 times and get more or less what I need now. 25 years ahead would be enough because I would be too bored to do nothing after a couple of years. I’m sure I would start thinking how to make some money.

Actually, there’s no magic formula but 20 years is minimum, I’d say. For example, you spend $50 000 a year, it means you need $1 mln to quit your job tomorrow.
However, now in turbulent times you also need to defend your assets from evaporating so buying gold (5-10% of your money), some cheap farming land (10%) and some foreign assets (Asian stocks, maybe euros) are also necessary. I’d try to do more research on that.

So I’m sure I will be rich as soon as the credit crunch is gone and wish you good luck, too.

Google stocks could be a good pick

Google is the company that should do quite well even in the times of recession. Yes, advertising is hit hard but hold on, isn’t Google AdSense much cheaper for advertisers than tv commercials or those bombastic ads in glossy magazines? I guess the potential of AdSense isn’t well appreciated by the markets right now and in my humble opinion Google stock should be definitely watched by any kind of investor.
However, I don’t think it’s a good time to buy right now because I don’t trust the rally which is based on false assumptions. I wouldn’t buy any bank stocks but there should be some peak next week around April 16 or April 19 (read Martin Armstrong or look for Carolan).

To cut it short, if I were American I’d rather keep 4 Google stocks instead of $1,000. Right, 250 is fair price for me and I’d wait to buy at the bottom. Of course, we’re in bear market so there should be some stop loss order 10-20% below entry price.

I don’t know how long the credit crunch will last but I’d prefer to keep some of Google stocks.

Think of Microsoft. Yes, it was a great investment and they offered good products. But it’s the past. The future belongs to the Mountain View based company. Definitely.
Before any purchase remember that this is only my private opinion and you should do your own research and take the right decision according to your risk profile.
Remember that you will never get rich keeping money in the bank. Of course, we should keep some deposits there but interest is really low and you need a lot of money to see any difference in your account.

I don’t envy Americans that you can buy Citigrup or Morgan Stanley stocks, but I must tell you that I really think of opening an account in one of your stockbrokers just to buy a few Google stocks (5-10) to diversify my portfolio.

I would take a credit

If I were an American, I'd borrow dollars from my bank and buy some real assets now.
It's hard to predict what exactly will bring the highest rate of return but you don't have to do it.
Just think of those piles of green paper being printed every second. Do you think they really have some intrinsic value? I doubt.
Therefore, I haven't got even a single dollar in my bank account. I can afford because I don't live in the USA.

If you have some deposits in banks you are just simply burning your savings. Look at the inflation rate. The whole financial system is very shaky so I'd buy different things: gold, commodities, real estate, Asian stocks.

However, you should invest only in the assets that you understand. Remember that.

I would be now agressive and take advantage of those ridiculously low interest rates. The inflation is coming and you need some protection in real assets not paper.

The dollar is doomed

If I were American, I'd get rid of most of my greenbacks and buy gold, Asian stocks, commodities, foreign currencies, any real assets, whatever.

Printing money means that the dollar is finally doomed and worthless. I wonder why so many governments and big institutions still keep them. I don't have a penny and I'm quite comfortable.

There could be some movements up or down but for me the dollar is highly overpricesd to all imaginable assets, and that means a really huge inflation is coming soon.

Good luck, America.