Saturday, April 30, 2011

Religion And Investments Don't Mix

Zealotry may have a place in religion or social causes, but I prefer my beliefs to be rooted more in logic. Reason should triumph over dogma, but it won't faze the fanatic.

Investing should be driven by reason, not any other discipline. Obtaining good, consistent investment results is difficult and, over the long haul, impossible if clear thinking isn't the main driver of financial decisions. There's no place for religious zealotry in investing. Blind Faith leads to the poorhouse.

I intend on never visiting the poorhouse. That doesn't mean that bad investment decisions aren't in my future. I make them regularly, but they won't be mistakes of a major magnitude. Logic, financial analysis, and fear will keep losses to a minimum. I try hard to not turn any investment thesis into religion. I'm open to different opinions and criticism and if my thinking is proven to be flawed I'll exit. Not so for many investors.

I run across religious fervor daily for various investments. Irrational fervor and devotion for their positions. It's generally present in niche investments that have done extremely well and that performance has a missionary's impact on the converted. Nothing fazed the high-tech devotee during the bubble, the sub-prime/housing guru several years ago, the rare earth minerals fanatic, and the all-in commodities speculator of today. Logic is of little value when weighed against a continuing uptrend. Belief in continued success is paramount and that thesis is to be defended, no matter how weak the argument.

Miracles happen in connection with organized religion and they can happen also in investing. Timing is unpredictable and an irrational investment trend can go on for much longer than it should. But, investing results shouldn't be dependent on miracles and that is what is required if logic is taken out of the process.

Sell a security short, write an article detailing the reasoning, and wait for the attacks. The faithful respond with vitriol and very few facts supporting their position. They are in the investment because it has gone up, they have become converts, and they believe it will always go up. It won't and they will be in the poorhouse. Investing, long term, is about making analytical decisions, not miracles. There's no place for religion in investments.

Monday, April 4, 2011

Today I will Experience Anti-Inflation

The mid-to-late 1960s were a colorful era, to say the least. Dayglo concert posters and strobe lighting symbolize that period of acid rock music. LSD was a mind expanding [per Timothy Leary], intensely color laden experience. I grew the hair, liked the music, but preferred the tamer indulgences.

My Macbook has been treating me to a late in life hallucinogenic show as it slowly dies. I've always been annoyed before as PCs crash and die after a few years. Vastly slowed performance, then a bunch of white numbers, letters, and symbols set against a black backdrop. Then I need to go to the electronics store for a replacement. Not the Mac.

My original Macbook, purchased when they came out in 1996, has been a work horse. It's been dropped twice onto hard flooring and the edges were held together by tape. But it always continued to work perfectly. The cursed colorwheel didn't even spin too often. Truly a good product and well worth the money spent.

But it now seems to be on it's last legs. Each morning it has been putting on a psychedelic light show of flickering, pastel lines. The show is so pretty that I don't even mind the inconvenience. After the performance, it lasts about 5 minutes, the Mac takes a bow and functions admirably the remainder of the day. I thought today might be the overdose as the performance lasted longer than usual, but I'm typing!

If it quits this afternoon, or the next day, I'll experience anti-inflation. We a regularly told that the USA has inflation well in check and the cost of living remains low in spite of galloping food and energy prices. In fact, since those two components are volatile, we should remove them from our core inflation calculation. How can this be? I'm about to actually benefit from anti-inflation and reduce my cost of living.

The Fed tells me that my new Macbook will have much more memory, speed, and features that its predecessor so that equates to a falling price. It won't feel like a lower cost when I write the check, but I will be able to take some solace in knowing that my personal rate of inflation isn't charging upward as it will have been tempered by all of the new Mac features. When I fill my tank I'll know that due to my buying a new computer my gas isn't really impacting me as much as it did at my last fill-up.

I'm rooting for the Macbook to survive even if it means I continue to be ravaged by food and energy costs without my electronics cost of living offset.

Saturday, April 2, 2011

I Stands Corrected

Some wag just informed me that my cartoon memory is faulty. Popeye used to say I can't stands no more rather than stans. Sounds plausible, but I always thought he slurred stans.

It's a good thing I'm a critically acclaimed financial blogger rather than a critically aclaimed linguist with a specialty in cartoon speech because I stands corrected after checking wikipedia.

I Can't Stans No More

Popeye had it right when he used to say " I can't stans no more" and then light into Bluto. He'd be pushed to the brink and then explode. Crusty has been pushed to the brink by the stupid financial press.

I can't stans no more talk about needing a rebound in housing and new home construction. It's idiotic to hope for or expect that they work together. They pull at opposite directions. The last thing America needs is a rebound in new home construction. Now, contractors and construction workers may need a rebound in new construction, but underwater homeowners sure don't. They need a reduction in supply and you don't achieve that by building new homes [the same rant applies to strip malls and commercial flex space].

Years of over building, over speculating, and over leveraging got us into our present situation and the sooner we stop adding to supply the better. We may stop adding to supply sooner if the financial media begins to understand the situation and ceases lamenting the poor new home statistics. What's good for Lennar and Dr Horton isn't good for American home owners.

Home prices aren't going to rise, in over built parts of the country, until those parts are no longer over built. Simple! At present, in process foreclosures, vacancies, and shadow inventory remain excessive. A better economy and population growth will help. So will better reporting and conservative lending.

Since government's pump priming hasn't helped and builders continue to build, what else may be a possible solution to static home prices? It's not an original thought, but the following makes sense. We currently give green cards to immigrants that follow the rules and come to American with substantial cash to open a business. The concept isn't new. If we want to jump start home pricing we need to stimulate purchasing from new buyers. Let's expand our current program that accelerates green card ownership if the immigrant not only opens the business, but also buys a home. Greatly expand the requirements for cash invested in the country and value of the home; and most of all, the number of new, qualifying immigrants we will allow. Our housing overhang and price problems will start to mend as supply contracts.

If we can stans no more we need to quit lamenting poor new home construction until supply recedes and we should consider expanding our immigration pool as a means of reducing supply.

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