The Sane Investor

February 10th, 2009

If you take a look at my Motley Fool CAPS profile (blade5adj), you’ll notice that I’ve currently placed several financial ETFs as outperform and a couple of financial shorts in underperform, and after today’s dismal affair you might wonder to yourself why anyone would even touch financials right now.

But after today’s events, and the fact that the stock market and especially financial stocks seemed to tumble over what most would consider good news, you start to wonder whether or not there was simply an issue of semantics. The biggest issue being raised seems to be Geithner’s lack clarity on the issue of how this will all go down, but moreover whether or not the “bad bank” that we’ve all been hearing so much about will happen, and if so in what form. (more…)

February 5th, 2009

For a while, it was only when the dollar was down against benchmark currencies that we’d see a pick up in the price of gold.  It would appear as though investors aren’t as concerned about that anymore.

Just look at the way gold moved today: up 1.68%,  with the dollar strengthening against the yen 1.92% and the Euro 0.48%, but down against the pound 1.03%.  If we were to rewind a month or two ago, currency movements like that probably would have resulted in either a down day for gold or essentially no change.  It would seem as though the fundamentals are changing.

I listened to a particularly interesting interview with Jim Rogers today on Bloomberg, in which he railed against almost all things besides natural resources.  His overarching point: when central banks fight the market, central banks lose.  This happened in Southeast Asia, Russia and Brazil during the 90’s, and then with Argentina in 2001.  Roger’s major point was that in saying that the Ruble will stay under 41, the Russian Central Bank is setting themselves up for disaster.  This largely comes in the form of currency shortsellers, local citizens and speculators crushing the currency and forcing the country to use up all its reserves to defend an arbitrary exchange rate that it has deemed appropriate.  If this ends up happening for Russia, it’ll raise further questions about default.

So what does that mean to me?  Go back to basics. (more…)