Changed Global Economic Time: Changed Sectors
Summary
Investors following our advice would have gained about five percent primarily since November of last year - while the S&P 500 has plunged by 30%.
Today, after considerable musing, I have decided "officially" to change the global Economic Time™ and thus exit specific sectors and other instruments related to these sectors. All of these switches are very much because the credit crises have morphed into credibility crises - from the Ratings Agencies down to your local "safe" bank where you keep your money.
Topics Covered
- Deflation means ™a different stagflation
- Logical sector switches
- How to protect your money off these ideas
Background
- Deflation means a different stagflation
We called stagflation in America back in Spring of 2006, thanks to what the Economic Clock™ was beginning to chime about America's Economic Time™. We got the recession bit spot on, but not so the inflation bit.
Our changed view is that with the global Economic Time careening towards a very pronounced excess supply of goods, there is no room to raise costs (e.g. wages, commodity prices) or prices of goods. Except if you are McDonald's gorilla operating in China.
So, stagflation remains, but the the "flation" now gets preceded by "de-", not our previous "in-".
Later, later on we may see hyper-inflation raise its head, but for now and for at least a year, the Economic Time globally is/ will continue to be characterized by an
- excess demand for money, and an
- excess supply of goods
2. Logical sector switches
Against such a dismal Economic Time, it is tough to see how commodities can perform. We pointed out recently that Norilsk Nickel is plunging because less demand for homes means no need for home appliances, hence no need for stainless steel, and thus for nickel - of which Norilsk is the world's largest producer....
So our big switch is to exit any final "buy" recommendations on commodity-related stocks, currencies and on most commodities.
So we suggest that you sell
- SouthGobi Energy (SGQ:CN,
- Oil (OILB:LN), and
- the Australian dollar (FXA:US)
HOWEVER, we are sticking to and indeed adding to our own holdings of gold. Reason: safe haven. I for one do NOT believe that the dollar is fundamentally strong. Indeed, I have warned often that any superpower currency is doomed to failure - because the Empire always runs out of money and thus has to print more of it.
And with banks teetering, people will be looking to put their money into a safe harbour. Indeed, the credit crises have morphed into credibility crises, no? Gold and platinum have to be such safe harbours.
3. How to Protect Money Off These Ideas
- Always consult your financial adviser first.
- Sell those three commodity-related instruments just mentioned
- Load up on more gold, e.g. on PHAU:LN
