realism about investment risk and opportunity

Investment Conference

Investment Conference (Photo credit: Salmaan Taseer)

I have an update on investing. First, keep in mind that I published predictions in 2004 of the rising of fuel prices in the US and elsewhere, which I said (in 2004) would be the primary factor that would break the trend of manic speculation in real estate borrowing (and prices)- which began by mid-2005 in “energy-sensitive” places like Phoenix and Las Vegas– and that the fuel price spike and real estate crash also would bring down prices of US financial stocks in particular (and stock market speculation in general)- which happened in 2007. Did you get all that? Now… here is another update.

US stock market prices are at a critical level of risk (and opportunity). About an hour ago, I bought 9 positions at $9 that I sold a moment ago at $19 (just over a 100% gain). That was just a small portion of my account that I was trading “for fun” (expecting a nice gain, but not especially concerned about the results of that individual trade).

Dangerous Risk Adrenaline Suicide by Fear of F...

Dangerous Risk Adrenaline Suicide by Fear of Falling (Photo credit: epSos.de)

English: Phillippine stock market board

English: Phillippine stock market board (Photo credit: Wikipedia)

The big opportunity (and risk) is in the immediate future. This week, I made around 8%-10% gains overall (and I have not done the math yet and probably won’t bother). My gains in the last 4 days alone are better than I expect most investors will do this year (because I expect most investors to be more disappointed in 2013 by the results of their choices than in any prior year in any of our lives).

Most of my investments right now are in a short-term investing fund called SPXS, which I bought in to today at $13.64. I expect that at some point tomorrow the value of those positions will rise so high that I will have at least doubled the gains I already made in the previous four days, but I expect to keep holding it for many days or even a few weeks.

That fund is the kind of fund that even relatively unsophisticated investors can access (like in regular IRAs and even some 401Ks). Similar funds that are even more accessible include RYURX and PSSAX. They are shown in the attached image, producing gains of over 40% in less than 2 months (in late 2008) in the same period of time that US stocks plummeted over 30% (and gold mining stocks were down by over 50%).

funds

Note that “any competent forecaster” forecast the US stock market crash (and the real estate market crash). In other words, anyone who did not forecast what actually later happened is not competent- especially if they in fact forecast something else.

So, I say that not only as someone who published forecasts of that, but also as someone who read many other authors who, looking at the same data and using the same correlations and logic, recognized the same risks and opportunities. Most people not only do not know how to assess the risk of real estate market and stock market crashes, but apparently do not have any commitment to produce “above average” results, instead settling for having average results and then complaining along with most everyone else when the issues that people like me write about in 2004 or 2003 come to public attention in 2008 (but then only to be dismissed again in a new wave of extreme complacency/trance).

Fox News Channel

Fox News Channel (Photo credit: Wikipedia)

People who are interested in how to adapt to economic realities, to both re-assess and reduce any risk as well as to benefit from easily recognizable shifts in trend are welcome to contact me privately. Note that just because most people only recognized issues like rising gasoline prices as a major economic issue in 2007 (not in 2004 like I did), that just shows a lack of commitment on their part. It was not hard to recognize the issue years before it made headlines. I reported on those issues years before the mainstream average investors expressed any interest in re-assessing the safety and prudence of their investment choices (or lack of safety and prudence).

Public Broadcasting Service

Public Broadcasting Service (Photo credit: Wikipedia)

Those who are waiting on Fox news and PBS to report on economics are like stock market investors in AIG who only found that AIG was in serious financial trouble AFTER they filed for bankruptcy. Note that the day before they filed for bankruptcy, their finances were just as bad as the day they filed and it was reported in the media. Most investors simply lacked the commitment required to assess the realistic risks of their investment alternatives. They just bought the things that advertisers and commission-earning salespeople (realtors, insurance sales people, etc) made the most profit by selling. Indeed, the financial balance sheet of AIG actually IMPROVED when they invoked the protections available through bankruptcy courts.

English: The top portion of the American Inter...

English: The top portion of the American International Group headquarters building in New York City at dusk; see a similar image of the building sunlit. (Photo credit: Wikipedia)

Again, most investors were shocked in 2007 and 2008 by the rise of fuel prices (which I detailed in 2004), the fall of real estate prices (which I referenced as far back as early 2003), as well as declines in stock markets. The naivete and complacency of the “average investor” is what makes it so incredibly easy for “above average investors” to make 40% in under 2 months (at the expense of less committed investors, since markets are all about the redistribution of unearned gains, right?).

“Far above average” investors can make much more than 40% in a couple of good months. For those who would like for me to document the easy triple digit gains that most people missed in 2008 as they instead suffered huge losses by investing with little or no commitment to realistic assessments of risk (and opportunity), let me know.

Lehman Brothers Rockefeller centre

Lehman Brothers Rockefeller centre (Photo credit: Wikipedia)

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