Terrible Twos: If You Can't Figure Out What's Real When Investing, Here's a Starting Point

Those who know me personally will find I often conduct monetary transactions with crisp $2s. There are a few reasons though some more indicative of my personality than others. Something unique always fascinates me, the scarcity of an item is what provides the highest value in the eyes of the beholder even if that item is practically worthless. A smile; this KPI when achieved proves I have done something of value such as purchasing a soda pop at a liquor store and having the clerk tell me, "Wow, I haven't seen one of these since I was kid. My grandpa used to give 'em to me. Now I can give it to one of my daughters, they'll be so happy." Of course, the conversation usually entails making impulsive counter-top purchases for the clerk's other two kids after getting to know someone on a personal level in only a few seconds.

I have thousands of stories where the use of two, one dollar bills would never have transpired. However, I wanted to take this moment to share another passion of mine: investing. I spend all seconds I can to research whether it be economics, corporate financials, or historical changes and the implications in developing strategies to see things other people may not see. I would like to present what I have learned over the years and attempt to summarize it in a few paragraphs, though this is not an article providing tax, legal, or financial/investing advice. I believe we are approaching a troubling period within the next 18 months and there will be few opportunities to come out ahead.

We are at a time where there simply is no way for the common investor to thrive. The key in the next two years is to focus on capital preservation. A few things trouble me when I hear a family member say they aren't concerned about their money because they have a financial advisor. Though this may be the greater of two evils (not all CFPs are bad), it was Warren Buffett who proved there was no hedge fund manager in the world willing to take on the returns of the S&P 500 for ten years starting in 2008 (well one company did but you can research the outcome). I, for one, will never listen to the advice of Buffett since he is usually reporting on concepts half way through his strategy; there is a reason he has your money.

Another troubling aspect of investing is purchased media. Most of the time I read an article about a company or the economy, especially when it comes to monetary policy, and I can guarantee the author doesn't even understand what is being written. It took a few years of gambling for me to understand the actual strategies that explain why penny stocks are so risky. Most of the marketing budget is spent on "pumpers" who use psychology and automated programs to skew and entice new investors into moving a certain direction. However that is only a small aspect of the story. Somehow what I am about to tell you is legal. As you begin to trade often, you will begin to notice a large group of individuals who have designed a perfect, extremely unethical process where a company undergoes publicly traded shares, conducts reverse splits on an ongoing basis to make the stock appear sustainable, and use those funds to pay salaries and develop products that are then licensed or sold to partners unaffiliated with the shareholders of the original company. So in essence you never win, even if you predict the product will work you still end up with a few worthless shares regardless of how many you owned to begin with.

So where are we? We are not facing the events of 2008 and Ray Dalio, Bill Gross, Jeffrey Gundlach are a few who may tell it better than I. Globally, we are seeing recessionary behavior in most countries outside the US, particularly in Europe and East Asia. Russia and China, through the use of AI, are developing ways to separate currencies from the US dollar and purchasing gold is only one small strategy. Since the US economy is driven by imports far more than exports, when a foreign country has a weak currency it allows those countries to compete globally offering lower priced goods than the US. Human labor is another aspect of strategic advantage due to the acceptability of lower standards of living & what one may consider unethical regulations protecting the abuse of labor.

So what are we doing? All the talk about rates being low and US debt going up is important. Our federal reserve (the fed) is lowering rates and doing quantitative easing prior to recessionary behavior in the market. The banking system is what drives everything (another reason digital currency is simply snake oil in vape pens @ a time of viral digital communication/sales algorithms). I could write a book on shadow banking and how trades within trades within bets of trades is secretly and unexpectedly a precursor to the reason few people may foresee the timing of a crash, however there are many videos and articles already published. The point I wish to make is banks should be doing really bad, because low rates are not good. Bonds do well when rates go down, so if rates go up you may expect two things: bonds won't be the "fixed asset solution" in all your parents retirement accounts and banks will finally be a good buy seeing that you can choose the ones that survive the headwinds.

When the fed pumps currency into the economy it "gives" the money to banks (taking away some risky investments of the past) so banks can continue loaning and people/businesses can continue to get credit beyond their means. Usually this causes inflation and defaults. Equities (company stocks as an example), US treasuries (usually but not always), and things like commodities (such as oil or gold) may be hedged bets against inflation. Think about it: if currency is inflating and currency is used in purchasing, then companies and things purchased will go up at an equal rate (that doesn't mean you'll profit). The US has sustained inflation around 2% and a logical reason for this may be that we are in a deflationary period being countered by inflationary behavior. That leaves us without equities, bonds, or commodities if all things go wrong.

I would love to go into detail about why the economy is predicted to do bad such as companies using loaned money to inflate stocks through stock buy-backs (which is a dying game at this time) and inorganic growth through M&A and those bonds being sold as lower risk than actual risk, but you may find plenty of articles on that as well. I would like to do something most articles won't do because usually the intent of giving away one's knowledge is to entice purchase of more knowledge but as you know I am rich with $2s and don't need your money. My strategy, and I am not suggesting you follow my lead without doing your own homework, is to get out of equities in the next couple months.

I have already sold my bond positions, but I feel I did it too early because I think we're going to 0% interest like we did in the 40s. I'm considering buying some long-term treasuries for a short-term play (ETFs) because I read a paper from a reputable source using predictive models that lead to the fed buying more than usual (with high demand comes high price, but the move is quick), and I really like the prospect of metals, specifically gold or silver (silver is at a good level compared to average bottoms, though it's hard to know if the ETFs will hold weight in hard times and you lose so much purchasing & selling physical stacks (and do you want to pay to protect it in hard times either fees paying people to guard your treasures or you staying awake all hours of the night for months on end???)) but I also like what's happening with oil and I think there are companies worth taking a hit for their dividends then benefit from the upswing reinvesting along the way (averaging down). I know I cannot stay in cash long because eventually the rubber band will snap and make my $2s worthless (which we all know will still hold value in smiles). The alternatives is going outside the US and dealing with that mess, but I do not recommend currency trading to the average investor and expect dilutes wins and emphasized loses due to secondary trading on foreign exchanges.

I hope you enjoyed my rant and would love your comments. I could talk hours about the specific charts, history, money...there are thousands of things I wanted to mention but readers only give their attention in brief spurts. Again, this is not advice, I am not licensed to give advice, I'm not even a very good writer, I too take take advice from people who are wrong often and never admit it, and I reiterate again and again: my predictions change often so if you are reading this today I might shift my strategy tomorrow.