Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19
Where is the Top for Natural Gas? - 7th Nov 19
Why Fractional Shares Don’t Make Sense - 7th Nov 19
The Fed Is Chasing Its Own Tail; It Doesn’t Care What You Think - 7th Nov 19
China’s path from World’s Factory to World Market - 7th Nov 19
Where Is That Confounded Recession? - 7th Nov 19
FREE eBook - The Investment Strategy that could change your future - 7th Nov 19
Is There a Stock Market Breakout Ahead? - 6th Nov 19
These Indicators Aren’t Putting to an Economic Resurgence - 6th Nov 19
Understanding the Different Types of Travel Insurance - 6th Nov 19
The Biggest Gold Story Of 2020 - 6th Nov 19
Best Money Saving FREE Bonfire Night Fire Works Show Sheffield 2019 - 5th Nov 19
Is the Run on the US Dollar Due to Panic or Greed? - 5th Nov 19
Reasons Why Madrid Attracts Young Professionals - 5th Nov 19
Larger Bullish Move in USD/JPY May Just Be Getting Started - 5th Nov 19
Constructive Action in Gold & Silver Stocks - 5th Nov 19
The Boring Industry That Hands +500% Gains - 5th Nov 19
Stock Market Chartology vs Fundamentals - 4th Nov 19
The Fed’s Policy Is Like Swatting Flies with Nuclear Weapons - 4th Nov 19
Stock Market Warning: US Credit Delinquencies To Skyrocket In Q4 - 4th Nov 19
Stock Market Intermediate Topping Process Continues - 4th Nov 19
Stock Market $SPY Expanded Flat, Déjà Vu All Over Again - 4th Nov 19
How To Buy Gold For $3 An Ounce - 4th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Long-term Financial Markets Investing Overview

Stock-Markets / Investing 2009 Feb 23, 2009 - 04:00 PM GMT

By: Oxbury_Research

Stock-Markets

Best Financial Markets Analysis ArticleIn Greek mythology, Sisyphus was a king punished by the gods. In the Greek equivalent of hell, named Tartarus, Sisyphus was cursed to roll a huge boulder up a hill – only to watch it roll down the hill again. Sisyphus' punishment was to repeat this task throughout eternity.

In the midst of this punishing bear market, I think that many investors who read Bourbon & Bayonets are probably feeling like Sisyphus right now. Many investors have seen their accounts, such as their 401k, back down to levels last seen a decade ago. Like Sisyphus, they have had their investment accounts “roll back down the hill”.


However, unlike Sisyphus, investors' “punishment” will not last forever. This bear market will end and a new bull market will be born. I know what you're thinking – when will it end? Unlike the so-called experts on CNBC, I am honest enough to tell you that I don't know. All I can do is hazard a guess based on my more than 25 years experience in the investment business.

As regular readers of my Bourbon & Bayonets columns may know, I approach investing from a long-term fundamental perspective. I try to find investments which will bear fruit in one year, three years, five years or longer. I could care less about short-term performance.

I also am not a technical analyst. Don't get me wrong, I do look at charts as one tool in my toolbox. However, I am not a technical analyst who makes short-term trades based solely on what the charts “say”. To me, that is merely extrapolating past and current trades into the future. Look at how well that worked in 2008.

When Will It End?

What has been happening in the financial markets for the past year and a half is the liquidation of bad investments that were made in the biggest credit bubble in history. The Fed and other central banks are calling this liquidation process “deflation”. However, this is not deflation in the classic sense where a contraction in the monetary base has led to to a fall in the general price level.

I do not care to be on the opposed to what central banks are trying to do. The central banks are trying to unleash inflation and are expanding the monetary base rapidly. St. Louis Fed president James Bullard was pretty explicit this past week, “We can be fairly certain that rapid expansion of the monetary base will be sufficient to head off any incipient deflationary threat. Rapid monetary base growth has been associated with inflation in a wide variety of times and places in economic history”.

I think that the timing of the end of the current bear market is highly reliant on actions that global governments have and will take, along with how much more of the liquidation process we have to go. This process will take a while - my best guess is 2-3 years. But with central banks going full tilt at creating money, I wouldn't be shocked if it were only 1 year.

My tendency would be to like an individual company's stock or bond if the company either has no debt or does not need to re-finance their debt in the next 2-3 years. However, I would be willing to begin to establish a position in a company in piecemeal fashion, even if they had some short-term debts, if I really loved the industry they were in and the company's business model.

So what areas do I like and dislike for the long-term? I will give readers my 2 cents worth and look at many areas and give them a rating from 5-star (Great) to 1-star (Terrible).

Star Ratings

United States – 3-star. And I think 3-star is a stretch. The US was once the greatest nation in the history of the world. But from the Greatest Generation and prior generations, we have gone on to the Baby Boom Generation and to the current Generation DUH? It seems to be getting worse with each generation. I am not optimistic on the future.

US Treasuries – 1-star. Treasuries have never been a great long-term investment. This is especially so now, with the “fear” trade pushing Treasuries to bubble-levels.

TIPs – 3-Star. This is the one exception to what I said above. The overblown deflationary fears have given investors the opportunity to purchase TIPs at reasonable prices.

US Dollar – 1-star. I do not like any fiat currency, period. I would say that the US Dollar is the worst of a bad bunch and the Chinese Yuan the best of a bad bunch.

Corporate Bonds – 3-Star. Overblown fears about defaults being greater than the Great Depression have pushed most corporate bonds to fantastic buying prices. Investors do need to do their homework if they are buying individual bonds.

Real Estate – 2-Star. This sector is really beaten down. However, there is still way too much debt in this entire sector.

Stock Sectors:

1-Star sectors would include: financial and technology. I have never owned these types of stocks and never will.

2-Star sectors would include: retail, media and consumer discretionary.

3-Star sectors would include: industrial, utilities, medical and health care.

4-Star sectors would include: consumer staples, large energy companies.

5-Star sectors would include: natural resource stocks – mining, agricultural, water, energy and alternative energy. The cash flows with many of these companies, such as BHP, is healthy which means they won't have to tap the debt markets over the next several years. I like to invest long-term in sectors that are involved with scarce resources and that have a positive supply-demand outlook in the future.

Commodities:

Gold – 5-star. I believe every investor should own some gold as an insurance policy against financial market catastrophes. Think of gold in the same way you think of insurance on your life or home or car.

Base Metals and other Precious Metals – 3-star. A bit too reliant on industrial activity. However, the long-term trends in the emerging markets is positive.

Energy – 4-star. The long-term supply-demand outlook is extremely positive – the world is running short of cheap, easily accessible energy.

Agricultural & Softs – 5-Star. This area offers huge potential. The supply-demand balance is positive in most of these commodities. Water and arable soil globally are become more and more precious. People will always need to eat.

International Markets:

Europe – 3-Star. I'm biased since I am descended from European heritage. Europe definitely has problems, but I believe the current fears over Eastern Europe are vastly overblown.

Mid-East & Africa – 3-Star. I believe this area offers incredible potential. The big question is whether this area will ever get its political act together.

Latin America – 3-Star. This area is a real mixed bag. I would rate Brazil and Chile as 5-star . Other countries I would rate lower, such as Mexico which is a 1-star . Mexico is far too dependent on the future of the US.

Canada & Australia – 4-Star. These countries are sitting on a wealth of natural resources. This wealth will help them overcome the effects of the financial crisis over the long-term.

Southeast Asia – 3-Star. These countries need to make some economic changes, as they are too dependent on exports.

Japan & Korea – 2-Star. Too dependent on exports. I don't think they will ever recover from the current economic crisis.

Russia & India – 1-star. I would never invest in either country because of their governments.

China – 5-Star. The Chinese Communist Party is the most liquid financial institution on the planet. They also seem to be the best capitalists on the planet.

Bourbon & Bayonet readers, I look forward to any and all comments.

Click Here to Comment - Don't Be Scared...

Cheers,

By Tony D'Altorio

Analyst, Oxbury Research

Tony worked for more than 20 years in the investment business. Most of those years were spent with Charles Schwab & Co., both as a broker and as a trading supervisor. As a supervisor, he oversaw, at times, dozens of employees. Tony was trading supervisor during the great crash of 1987 and was responsible for millions of dollars of customers' orders.

Oxbury Research originally formed as an underground investment club, Oxbury Publishing is comprised of a wide variety of Wall Street professionals - from equity analysts to futures floor traders – all independent thinkers and all capital market veterans.

© 2009 Copyright Oxbury Research - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Oxbury Research Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules