In Search of the Perfect Investment

One bright spot yesterday: Gold was up strongly.

GLD should be on this chart. It was up $3.40. But my charting program has a “glitch.” (For real.)

I’m going to reverse this. Start with my recommendations and then try to explain them.  My recommendations:

1. This stuff is too hard to predict. The scene has switched from a “simple” U.S. with a will to act and act fast to Europe run by a committee 16 countries with a reluctant will to react. Dithering is the name of the European game. The frugal Germans wonder why they should bail out the spendthrift Greeks.

2. You don’t want to be in this unpredictable market with any money you’ll need in the next five years. (I agree with Cramer on this.)

3. Take today’s predicted upswing to take money out.

4. Gold makes huge sense. Gold is what the world flees to when everything else looks awful — as it does now. Interestingly, gold rose 275% over the ten years from December 31, 1999 to December 31, 2009. During those ten years, the S&P 500 fell 9%.

5. Diversification in your remaining equity portfolio should focus on big, multi-national solid, market leaders. Sadly they won’t skyrocket, but they should do better than having your money in a miserable earning CD at your local bank.

6. Bonds make some sense. But you have to be ultra-careful since many municipalities are broke, are likely to default and are not likely to be bailed out by the Federal Government.

In short, cash and gold are king. This mantra  sounds like the coward’s way out.

“Harry, I should read this column to hear you tell me to do nothing, except buy a little gold?”

Yes.

What’s going on is not difficult to understand. The world has been on a huge spending binge. That binge has been financed with by debt. Now we have too much debt and not enough earnings (and/or assets to sell) to pay off the debt. When this happens to individuals or companies, they declare bankruptcy, pay their creditors 20 cents on the dollar and start all over again. When this happens to countries they essentially do the same thing; they default on their debts, drop the value of their currency and start all over again. Zillions of countries have gone through this. Think south of the border.

Now Europe is going through this. But Europe is different. Greece can’t go broke because it’s part of Europe. Its currency is the Euro, not the Drachma. Greece can’t do what Argentina and others did. It has to be bailed out, or it has to pull out of the Eurozone. It looks like it will be bailed out. That will bring some temporary peace to world stockmarkets. But following in its heels are Spain, Portugal, Italy,  Ireland, England and ultimately the U.S. The next one is Spain, with its 20% unemployment (more than twice as high as the U.S) and its housing bust (similar to ours).

In the face of all this, stockmarkets occasionally freak — as they did yesterday. They’ll be more yesterdays. Many will be caused by programmed trading — computers that sell and buy stocks based on yesterday’s rules.

You can read about all those programmed trading problems in the Wall Street Journal and the New York Times.

When will this end? It won’t is the simple answer. Governments have to cut back on binge spending. That’s called an austerity program. The local populace won’t t like that, viz rioting in Greece. Populist politicians will get elected, who’ll promote more spending. And the cycle continues. It’s not inconceivable that the EU may break apart. My German friends would love to go back to the Mark. They call it having control over their own destiny. Amen.

Yesterday, Richard Russell wrote  “Fiat money is the greatest fraud ever inflicted on an innocent, passive, and ignorant population.”

You want to know my secret view of the future? writes  Russell. Watch this gripping, wonderful video of Edie Brickell singing Bob Dylan’s “Hard Rain.”

The camera you and I really want. But we can’t afford. B&H sells the body alone (i.e. no lenses) for $5,200 — when they’re in stock. The camera is  that popular.

The camera is bulky and heavy. But boy does it have specs. More than I can ever explain. Two I like: An ISO that goes as high as 104,400. That means you can photograph in the lowest of light. If you can see it, you can photograph it. And get image quality you won’t get with any other camera. Second, its viewfinder shows 100% of the image. You’ll learn more at dpreview. What’s best to read are the amazing user reviews on B&HPhoto. If you love me, buy me this camera. Dan Good, are you listening?

There is hope. We are creative. We’ll always muddle through.

I can see doing this to my wife’s troublesome Mercedes. The wipers have been the only thing that hasn’t busted, so far.

Harry Newton, Harry Newton, who has been stuck in  inaction for several weeks now — berating himself for his lack of imagination. That means he’s stuck with cash. After the last few days, he now feels like a genius.