Hey, I’m Glen Bradford and I could be on your team. I specialize in questioning everything, taking nothing for granted, valuing thousands of different opportunities, and picking the best ones to put my money into. I guess I must be pretty good at this, cause it’s paid my college from scratch, allowed me to write for TheStreet.com, and other people are giving me their money to invest. I rarely talk about what’s popular, because I’m usually talking about things before they happen — and in terms of popularity, I would be a lot more ‘cool’ if I talked about things that everyone else was talking about. Keynes puts it best, “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” So, what should you avoid?
1. Don’t buy US Treasuries. Inflation, likely through monetizing the deficit, is going to surprise anyone who thought these were a store of value. The only people that should be buying these are foreign central banks to give their local economies a stronger export advantage. At some point in the future, you may want to short them by buying TBT (ProShares UltraShort 20+ Year Treasuries).
2. Don’t only invest in the USA. The long term outlook for the dollar is quite bearish. In fact, over the next decade, emerging economies will outperform developed economies on a relative basis. Buy US Listed Chinese Microcaps. The valuations here are ridiculous. Across the board a monkey can throw darts and hit 5-year 5-baggers. Most of them are priced to go bankrupt and are stick it to the man with double digit growth rates. I’ll let the rest of the clueless investors fight over fractions of a percent in annual returns.
3. Don’t short oil. There are two leading scenarios: Oil will double in the next 5 years or global economies will slump due to higher energy prices or both. When supply drops and demand is relatively inelastic at the current prices, the price rises to regulate the demand. Also note that it is likely that the US shifts to natural gas, probably starting with fleets for starters, but eventually moving more mainstream.
4. Don’t bet nominal housing prices will decrease. A lot of the stabilization has come from higher home prices. If home prices, regardless of the huge oncoming invisibly foggy wave of foreclosures, start to slide, the FED will combat this by printing more money to increase their nominal values. Interest rates are nil right now and can only go higher if housing stabilizes, but higher interest rates squeeze housing. Good luck raising rates, FED.
5. Don’t buy and hold. Historically, in periods where inflation rises above what it was forecasted to be, prices are more unstable and markets become more volatile. Be ready to trade or have someone who is ready to trade for you. Mutual funds are going to suffer as suckers sell bottoms and buy tops — just like they always do.
6. Don’t expect perpetual growth. The growth that we’ve experienced since the 1960’s in my opinion results from cheap energy sources. Fact. The ones we use the most are set to get more expensive, fairly rapidly.
7. Don’t bet on the European Union staying together. It’s likely that the irresponsible constituents will get kicked out after they are systematically deleveraged. That is, unless George Soros and others like him step in and profit from forcing them to panic.
Well, if you can avoid making those mistakes or at least have an awareness of them, you’ll likely come out ahead of where you would be otherwise. Blind diversification protects you against ignorance, but it’s not going to make you money like it has in the past. The best form of protection for the individual investor is going to be their understanding of the extent to which they don’t know what is going to happen. Overconfidence reigns supreme and people love making deals, even if they are foolish ones. Don’t be a fool. Avoid losing. That said, I can only help you if you can help yourself.
Disclosure: No positions.