Friday, January 30, 2009

The Amazon and the Outback

Amazon rose so much in share price, to over 40x earnings at the moment.  How much are they going to grow?  People are willing to pay $25 billion dollars to get access to a revenue stream in the $600 million range with very thin profit margins (~3%).  Typical market overreaction, amplified by the fact that there is very little other good news to invest in.

On the other hand, Australia is considering a drop in interest rates, so I am taking a hit on the Australian dollar. I still think it's a good longer term currency play, even though I am losing in the short run.  Where are those Australian dollars going? The yen is still off of its high against the US dollar.

Gold keeps trawling upward as the stimulus grows and Russia and China are making a lot of noise at Davos about the insufficiency of the US dollar to serve as the world's reserve currency due to irresponsible spending and lending.  It's going to be amazing if they can avoid a serious drop in the US dollar.  I don't know if owning gold really makes logical sense, but I still feel like it's worth holding onto just because the possibility of a quick gain is worth the risk of the modest drop it might take.

Friday, January 23, 2009

Wither the Yuan?

Now that Geithner is going combative on the Yuan, will the Chinese let it float?  It's really hard to predict what effect that will have on the world. The real purchasing power of most currencies will drop pretty hard for Chinese made goods. Which is just about everything at the moment.

There are a couple of funds that track the Yuan. Currencyshares notably does not have an ETF that tracks the Yuan. The Dreyfus Wisdom Tree fund is out there (CYB). I held it for a little while in 2008 but it didn't really trade very much (note the stepwise like graphs), so I got worried about it and dropped it.  I also thought it should pay some sort of yield like the Currencyshares funds.  Anyway, the latest prospectus showed up again today and I am thinking about jumping in again. 

Wednesday, January 21, 2009

Consider the Aussie

The Australian dollar is trading about 10% over its 5 year low versus the dollar. It's had a serious drop over the last 12 months as many hedge funds have unwound their positions in the Yen carry trade (borrowing Yen at low interest rates to buy Aussies and invest those at high interest rates).

I hopped in this morning. I am hoping the kanagroos have gold in those pouches, as I dumped some of my AU to buy the AUDs. I was hoping to end with a more painful "g'day" style joke, but I just can't bring myself to do it. This is a family blog, after all.


First day that Obama's in charge and it sucks about the economy. I liked Obama especially for his foreign policy approach, aka get the heck out of Iraq. I am not such of big fan of his Keynesian madness. It may get us out of this hole, but it's a huge risk. If it doesn't work, we are going to have a crushing debt that is only going to be solved by inflation. A lot of people that don't save money don't care about inflation. I want people to save more money so that they do care about it. I don't even think this recession is a bad thing. If I were spending twice as much money as I had, and then I stopped, I think that would be a good thing. Yeah, it's less than I was spending before, but all of that spending I was doing before was deficit spending, so it was hurting my future ability to spend. People get too focused on the metrics, like the GDP, which is a total bullshit number anyway. Our job is not to protect the GDP number that counts things like me borrowing money. The government needs to be creating the climate for jobs to be created and the country to actually produce things.

I remember when Walmart became the largest company in the US. My uncle cried. He worked for Walmart (as a contractor), but he said there is something incredibly wrong with the economy when the largest company is just a distributor of stuff that isn't made here. Wealth is just flowing out of the country. Now the Keynesians want to borrow more money from overseas (where people still save money) so that all of that interest we pay (currently a huge part of the taxes we pay) will continue to float overseas. This is insane.

I hope the one thing that this recession brings is the fall of Keynesianism. People still think that massive government spending got us out of the great depression. It didn't. It made it longer, because it took longer for the market to correct itself. All Keynesianism is good for is for preventing social unrest when the economy is weak. That is a worthwhile goal, to add some buffer to the drops, so that we don't get shocked into a revolution. However, to think that it actually has some positive effect on the economy as a whole is wrong. If you want to invest in the economy, you should spend the stimulus money on things that are going to make money. Factories, research, education, etc.

The simple fact of the economy is that real wages in the US and Europe have to drop to get closer to those in the rest of the world. We can't artificially pay people here more by borrowing money from overseas to drive up asset prices. It just doesn't work. That the solution to it is somehow to borrow more money from way.

I'm wondering if I'll all be more productive after I read the new David Allen book.

I have to finish that one before "What Would Google Do?" is delivered.

I wonder how many more blogs I need to start making money? :-)

Tuesday, January 20, 2009

Portfolio Analysis

Wow, markets are being crushed today. GLD and NEM are good hedges today, even my oil holdings took a huge hit. I bought some more oil today...I think we'll make it back to $50/barrel in a year or so. The real question is when is the dollar going to drop? It's going up relative to the Euro, but I think it will ultimately suffer in comparison to commodities (inflation). That simply has to be the consequence of printing more money (aka, having the Fed buy T-bills). I plan to sell gold as it rises and buy more commodities in general (that's why the portfolio seems really gold heavy at the moment). I am not going to be buying any individual US equities for a while. For growth stocks I'd look at Amazon again if it goes back down to $35. For everything else, I am looking to see who can keep the dividends up and evaluating utilities.

Current non-retirement account holdings:
Tax free money market: 14.2% (Seven day yield at a pitiful 0.14%)
BKF (Brazil Russia India China ETF): 6.4%
DBA (Agricultural Commodity ETF): 7.7%
DBO (Oil ETF): 12.7%
EWY (SKorea ETF): 11.6%
GLD (Gold): 19.2%
NEM (Newmont Mining): 16.5%
TNP (Tsakos Energy Nav): 11.7%