Successful investing is based on our ability to predict what to invest in and when to invest. We have many investment choices, including growth stocks, utility stocks, houses, real estate, Certificates of Deposit, oil futures, precious metals, and many others. Equally important is the timing of our investments. Should we have invested in growth stocks in early 2000, or gold in early 1980, or houses in 1995?
Investment money flows into one area until it is saturated, and then it withdraws and flows into some other investment area. We need to invest based on our analysis of where we are in the investment cycle. Are we anticipating inflation, deflation, weak growth, strong growth, or something else?
Inflation or Deflation: The money supply is increasing (inflationary), but much debt is likely to go bad in the near future (deflationary). Central Banks and politicians hate deflation and love moderate inflation; it is good for financial industry profits and votes for politicians.
Growth: Most “main street” investors would say economic growth is weak, at best.
Fear and Greed: Investors cycle between fear and greed. Currently, fear seems dominant.
My Analysis: Central Bankers and politicians will do everything they can to get the inflation they want and to avoid the deflation that will damage their profits and careers. Growth looks weak for the foreseeable future, and fear seems dominant. Reading the lines in the table across from inflation, weak growth, and fear, the only investment class that registers a “buy” is gold. I think that is good advice.
(Reprinted from Newsletter writer Grant Williams)
aka Deviant Investor
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