Fundamentals - The Keys to Smart Investing
I'm not a great short-term technical analyst, but I know my economic and financial fundamentals pretty darn well. Cases in point - Ford and GM. I know Ford's stock ticked up slightly after they released their 2006 losses of $12.7 billion.
But I don't really care. Why? Even if you decide to make a short-term profit by 'bottom-fishing,' investing in financially-troubled companies like Ford just don't make sense. They've losing tons of money, have a mountain of debt and health-care costs, aren't making cars and trucks as good a quality as foreign automakers are, and I really question how competent their management team is.
The same reasons apply to GM, even if their stock price is about 4 times higher than Ford's. Economic fundamentals that I look at show me why commodities - namely gold and silver - are better stores of wealth than the stock market.
It boils down to this: The amount of gold and silver are pretty much finite, or limited - the amount of US Dollars that the Bernanke Fed can print are almost limitless. Monetary inflation is when you have a larger number of dollars chasing the same number of goods, and that's exactly what we're seeing today.
The Fed quit reporting M3 money supply in March 2006, now Barron's has stopped publishing increases in money supply from most Western countries. Common sense tells me that if you have nothing to hide, you shouldn't be afraid to show it. But if someone does have something to hide, then there is something that someone is worried about telling others. Namely that the Fed is inflating like crazy to try and avoid economic and financial pain in the US.
When financial experts like Robert Kiyosaki are saying that the US Dollar is in deep trouble, that carries a lot of weight with me. I'm not as apt to believe the cheerleading that comes from places like Bloomberg and CNBC. They have a vested interest in keeping Americans interested - and more importantly invested - in the stock market.
And when you invest in the US stocks, your investment is held in a currency that's declining in value. You need to look at how well your investments keep up with inflation, and not just provide a nominal return. That's why I'm very bullish on gold, silver and other commodities while the Fed keeps printing money like crazy.
But I don't really care. Why? Even if you decide to make a short-term profit by 'bottom-fishing,' investing in financially-troubled companies like Ford just don't make sense. They've losing tons of money, have a mountain of debt and health-care costs, aren't making cars and trucks as good a quality as foreign automakers are, and I really question how competent their management team is.
The same reasons apply to GM, even if their stock price is about 4 times higher than Ford's. Economic fundamentals that I look at show me why commodities - namely gold and silver - are better stores of wealth than the stock market.
It boils down to this: The amount of gold and silver are pretty much finite, or limited - the amount of US Dollars that the Bernanke Fed can print are almost limitless. Monetary inflation is when you have a larger number of dollars chasing the same number of goods, and that's exactly what we're seeing today.
The Fed quit reporting M3 money supply in March 2006, now Barron's has stopped publishing increases in money supply from most Western countries. Common sense tells me that if you have nothing to hide, you shouldn't be afraid to show it. But if someone does have something to hide, then there is something that someone is worried about telling others. Namely that the Fed is inflating like crazy to try and avoid economic and financial pain in the US.
When financial experts like Robert Kiyosaki are saying that the US Dollar is in deep trouble, that carries a lot of weight with me. I'm not as apt to believe the cheerleading that comes from places like Bloomberg and CNBC. They have a vested interest in keeping Americans interested - and more importantly invested - in the stock market.
And when you invest in the US stocks, your investment is held in a currency that's declining in value. You need to look at how well your investments keep up with inflation, and not just provide a nominal return. That's why I'm very bullish on gold, silver and other commodities while the Fed keeps printing money like crazy.
posted by Brian Ochsner | 11:13 AM
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