Monday August 13, 2007

Fun and interesting times

You might know what they say about the famous ancient Chinese curse : "may you live in interesting times". The saying may be famous but it is in fact neither ancient nor is it Chinese, but the times, they are quite interesting, aren't they? Perhaps even fun. But I guess it all depends on your definition of fun.

Subprime loan problems? Hedge fund collapses? Credit crunch? Trillion-dollar stock market wipe-outs? Hundred-billion-dollar "liquidity injections"? Fun. Quite fun. I hear that people are calling up their brokers and yelling stuff like : "Sell everything. Get me out of all my positions". For the slightly (*cough*) more volatile stocks that I follow, this can result in, for example, charts that look like this :

The company has got properties in gold and oil and gas and uranium and has an oil services division that's actually bringing in regular cash flow. Did all that suddenly go away? I guess not. So there I was :

That's the intra-day chart, and that's me, together with some other buddies I do not know, buying in at $0.65 on a fine Friday afternoon (over that side). Shrug, it was on sale at 50% off - if you consider the recent prices in the first chart, where *somebody* was doing trades at $1.30 just less than a month ago.

Okay, so this is my definition of fun : selling when people are buying, and buying when people are selling. What do you think, *somebody* had to be on the other side of the trade, right? For folks like us, as legendary contrarian Doug Casey puts it :

"... when people are desperate to sell their possessions, he appears with cash - the very thing they want most. When they change their minds and clamour to buy those things back from him during good times, he once again graciously accedes to the desires of the majority ... if he wasn't there to buy, perhaps no one would be, and sellers would be really in trouble."

Well. Most people, including many who say they swear by technical analysis (TA), would be terrified. It's a complete breakdown, they might say. It's crossed below the moving average. It's gapped down. It's a double top. The internal indicators are bearish.

Yes, I know all that. And I went in to buy. It's all part of the fun to me, and you want to know why? Because I know one thing. The ounces of gold, the barrels of oil, the pounds of uranium in the ground, that these companies own, are exploring, or drilling for - these resources do not increase their supply at 10%, 20% a year. Literally, what you drill is what you get. But the money supply that underwrites our entire economic system, can, and does, grow at 10%, 20% per year. U.S. M3 is growing at 12, 13% per year. Singapore overtakes that, with 22, 23%. China is at 20-odd%. I hear that Russia is chugging along at 50%. I don't know about Zimbabwe, last I heard their *price inflation* was doing 5000% so their monetary inflation figure is probably even higher than that.

Limited physical resources, meet unlimited money supply.

It's going to be a grand collision. It's going to be fun.

(2007-08-13 12:54:45 SGT) [Biz] Permalink

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