The Rule About Falling in Love
We’ve heard it before and it is said in almost every investing or personal finance book out there; don’t fall in love with a stock. This same rule goes for categories of stocks, such as the Large, Mid-Cap, or Small Companies; areas such as Europe, Latin America, and Asia; or individual countries such as the U.S., China, India, Brazil, or Russia.
Falling in Love
My readers now know that when I went to China last year, I totally fell in love. I fell in love with the culture, history, people and yes, its stock market. Now the Chinese stock market has done well, but remembering the rule about falling in love and with Chinese stock market positions up from 70% to 300%, it appears that we may need to temper our positive outlook on investments in China. In fact, we may be looking at a classic bubble event, where there is too much money chasing these stocks. Granted, I still like the economic outlook in China; it’s just that it might be getting ahead of itself. As for the U.S. markets, it also appears to have gotten ahead of itself and when I hear that people are once again getting hopeful for the stock market, I start worrying. Big time.
The Economists
53 economists interviewed by Bloomberg…and those at the Fed too, say the stimulus is working and the recession was coming to an end. The Washington Post headline: “Fed views recession as near end.” “Even with Cash for Clunkers retail sales fall,” reports The New York Times. Retail sales were expected to go up in July. Instead, they went down. Economists expected unemployment numbers to go down. Instead, they went up in July…and last week, 558,000 people filed for unemployment benefits – up from the week before. That brings the total to 6.7 million jobs lost since the downturn began in December ’07. Oh…and foreclosures hit another record high in July…making the third new record in the last five months. But that’s OK, because the recession is over. Uh, yeah right.
The National Bureau of Economic Research
So let’s turn to our National Bureau of Economic Research (NBER). Having no interest in real-time forecasting, they won’t officially call an end to this recession until it’s long past. It took until December 2008 to tell us that this whole mess started in December 2007. Heh…by the time the NBER calls an end to this one, we might have begun another.
Getting Screwed by the Credit Card Companies
This week I got notices from several credit card companies. One lowered my credit limit on my card by 60% because I’ve been good with managing my credit charges (in other words, I didn’t charge enough on the credit card). What urks me is that your credit score has a factor whereas if you have very little debt in relation to how much you can spend (your credit limit), you FICO score goes higher and you are able to borrow at better rates. By lowering my credit limit, they effectively lowered my FICO score. @#$%$#% Then I got good news that several credit card companies are eliminating late fees as well as some other fees that I never pay anyway. Then in the same breath, they revised the interest charged from a fixed rate to a variable rate based on the prime rate, effectively raising the interest rate today by 4%. In other words, they are doing people a favor by eliminating that late fee, but on the other side, they are messing with you by charging huge interest on your average daily balance. Nice guys.
Community College Fees
I believe that education is an infrastructure investment. Building for the future. So when I calculated the increase in fees at my local community college, I was floored. You see, the cost for a 4-class per week course was $6.50 (half unit) 3 years ago. What they did was they split the class in half, so now you had to pay for one unit, or $13. Then they made each class one unit, so now you had to pay for 2 units for the same course, or $26. Then this semester, they raised the fee to $26 per unit, or $52 for the same course. So, in 3 years, they went from $6.50 to $52, not counting other fees or parking, which also increased. That, my readers, is a 700% increase in fees. And you still think inflation is a benign 3%.
The Investment Markets
Waiting for market indicators to tell me whether to hold current positions or to take profits and short the markets (shorting is an investment strategy where one bets that the market will go down; an example would be selling a stock at $100, then when it goes down to $50, you buy it to cover your short, thus gaining $50). Newest buy are gold mining stocks; probable upside breakout of gold over $1,000. We have no position in bonds. Bonds have not gone anywhere in the last 4 months, and looks vulnerable.
Stay tuned.
Filed under: The Global Investor
