Last Friday there were some mildly worried news reports about the stock market dropping. Now, I take news reports, particularly panicky ones, with a copious amount of salt; the news media these days have only two jobs, namely causing panic and pushing the Republican party line. But now and then the facts are discernable through the varnish, and I'm as risable as the next man, so when they said that the Dow was already in negative territory for the year I hopped on over to my broker and checked my investments.
They were up. 25% over last year, at this point, which goes to show that you can't go wrong betting against an economy in the hands of doctrinaire conservatives. One day, future economists will look at the concept of "supply side economics" and shake their heads, filing the idea with "smoking is good for you" and other obviously stupid ideas pushed hard by greedy people.
Anyway. So I advised you in December to get your money out of dollars. Did you? We, um, didn't, because we were extra busy, and none of our investments were in dollars anyway. But if you had, you'd be wealthier now; the Euro bought a buck eighteen at the start of the year. Today it will buy you one twenty two. Not bad for three weeks.
Like I said, we sort of missed the boat. We had put several thousand aside to put into Euros, and then got really busy changing diapers. So we lost, or at least did not gain, a couple of hundred bucks thus far this month.
It's not too late, though. That dollar is going to keep sinking; I don't feel at all crazy in predicting a Euro to dollar rate of 1.50 or more by July. Of course, a pure currency play is not as good as an investment in something that pays interest and/or dividends; pick up some Euro-denominated bonds and you won't be sorry.
What are we doing? Actually, we're investing domestic. Yeah, yeah, that flies precisely in the face of what I've been saying - or does it? I wouldnt touch American bonds or 95% of American stocks with a ten foot pole.
But.
As China keeps growing, their demand for raw materials keeps growing. Particularly copper - at a long-term high price right now, with no sign of abatement - and other metals. And, of course, oil, but we're already holding lots of oil stocks.
You will recall that the one bright spot I identified for the American economy, given a tanking dollar, was exports. As the dollar gets cheaper so do American exports. Which means that American copper and other minerals gets cheaper. So American mining companies can sell more of it.
So I'm bucking the trend and sinking a few thousand into American extraction companies. Haven't yet decided whether to get a fund consisting of a grab bag of stocks or whether to buy a specific company or two, but I anticipate notably increased sales (and profits) in American mining. And since diversification is always a good strategy (because you can't tell when some disaster will make hash out of your rational predictions), I want to have at least something here in America.
Besides, of course, our house. Which represents the vast majority of our assets. But we put another five grand into Euros yesterday anyway. Time for some diversity.
Note that this is for us. We already have substantial overseas positions. I still advise you, if you haven't already, to do the same. The dollar will keep sinking. Pick up some Euro-denominated bonds. The interest rate is crappy but the currency appreciation makes them a lot nicer, and they are ultra low risk. If you prefer higher risk and return, look at some foreign index funds or even stocks.
We're only in up to our ankles, folks. It's going to get a lot deeper.
- Sun Ra