My long time friend Hank, smiled at my complex argument: African dictatorships are all coming unglued because of The Muslim Brotherhood and the Islamic Revolution. He smiled even more when we discussed the western press’s view about the north African people’s desire for Western style freedom of expression and self government. He actually started to chuckle as he explained his simple and elegant version of the real problem.
“Ken, you’re a chartist: get a chart of the price of grain for the last six months. Then you’ll see what the problem is.” So, I looked up the price of sorghum, an important cereal crop in Africa: it had risen 86% in the past 6 months! The price of wheat has gone up 67% in the same time! Hank pointed out that these people do not enjoy the same high income levels as we westerners. Food takes up a far larger percentage of their take-home pay. As long as they could get by in their modest lifestyles, they lived in peace. But now that the price of food has blown through the roof, they are hopping mad!
He chuckled even more as he pondered what he would do if he were an advisor to the north African dictators. He pointed out that all these countries are oil producing nations and that the price of oil has also risen in the past six month, though not as much as the price of grain. The dictators should simply use the excess profit on their oil exports to subsidize the price of food imports. Simple and elegant.
Neither of us did the math: how much grain is consumed vs. how much oil is produced. Does it add up? In these dictatorships, who controls the oil revenue and who buys the grain? I’m sure that implementing Hank’s simple and elegant solution might not be that simple. But his analysis is compelling, isn’t it?
In my investment book, Beyond the Bull, I encourage readers to try to see investing through the eyes of other participants in the investment process. That principle would also serve us well in the political arena. If we could walk in the same sandals as our north African friends, what would we learn?
Diverting state income from oil revenue to feed the people seems like good politics and good business to guys like Hank. But maybe it’s not that simple or that elegant. Maybe that oil revenue is used to pay the army and the police. Maybe oil revenue is used to prop up the bureaucracy of friends and supporters that a dictator needs to manage the various branches of government. Maybe these nations have borrowed against future oil revenue… maybe they’re seriously in debt like some European nations and need every penny of oil revenue just to repay their loans prop up the regime. Maybe this – maybe that: but who really knows?
Question: In a world that’s coming undone at the seams, what can we really do?
Answer: we can be a little more like my friend Hank: smile, live a simple and elegant life and keep your own house in order.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Tuesday, February 22, 2011
Tuesday, February 15, 2011
What Drum is she Marching to?
The US and Canadian stock markets have gained back most of what they lost in the 2008 crash. Top to bottom, the S&P TSX 60 lost almost 50% in 9 months. Now, three years later in mid-February 2011, it has regained almost 75% of the loss. Those who believe in buying and holding the stock market are breathing a huge sigh of relief: it won’t be long before they break even.
Yet, somehow, we are told, the economy is still lacklustre. Unemployment is high and the housing market is weak. There’s no real spark in the economy. In fact, the America Federal Reserve Board tried to juice up the US economy with their Quantitative Easing 2 program in autumn 2010. How can the stock market stay strong when the economy stays weak?
In my investing book, Beyond The Bull, I explain the Counter-Cyclical Model. There is a relationship between the stock market and the economy, but it’s not what most people think. The stock market leads the economy. For example, the stock market bottomed in March 2009. Six months later the economy bottomed. The stock market led the economy by six months. That’s how the counter-cyclical model works. What does this mean for stock market investors?
This week the Canadian and US stock markets hit new recovery highs: they are still going up. If the counter-cyclical model holds up again for this cycle, the economy should be stronger in August 2011 than it is now. Knowing that doesn’t help us invest in the stock market, does it? We need something that leads the stock market to help us decide whether we should invest our 2011 RRSP contributions in the stock market at these levels.
I explain in Beyond the Bull what leads the stock market: it’s the bond market. Long term interest rates lead the stock market. For example, in December 2008, three months before the March 2009 stock market bottom, the US long term bond market staged a spectacular rally. For a brief time, it looked like the counter cyclical model was heralding a stock market low and eventually, an end to the recession. But, Quantitative Easing 1 threw a monkey wrench into the works. Whenever the Fed launches an easy money program, investors worry that inflation will heat up too much: long term bonds are not a good investment in times of high inflation. And, that’s exactly what happened this time: after a short spectacular up surge in December 2008, the US bond market dropped in a series of zigzags to the same level it was when the bear market of 2007-2009 began! The bond market is not correlated to the stock market in this cycle. It’s different this time.
Quantitative Easing is what’s different. The Americans are flooding their economy with dollars: their monetary printing press is going full bore. They are desperately trying to re-kindle a small amount of inflation. The normal lead-lag relationships in the economy are not working in this cycle. The president of the USA said it in his annual address to his people last month: QE2 has kept the stock market buoyant. Some of the money the American printing press is generating has found its way into the stock market. I wonder what will happened when QE2 dries up. Will the stock market’s up trend dry up too?
When the normal relationships in an economy change, investors have to be ready to change too. For now, the stock market is in a strong up trend and investors who are participating are doing just fine. It’s a bit like the children’s game of musical chairs: be ready to find a chair when the music stops.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Yet, somehow, we are told, the economy is still lacklustre. Unemployment is high and the housing market is weak. There’s no real spark in the economy. In fact, the America Federal Reserve Board tried to juice up the US economy with their Quantitative Easing 2 program in autumn 2010. How can the stock market stay strong when the economy stays weak?
In my investing book, Beyond The Bull, I explain the Counter-Cyclical Model. There is a relationship between the stock market and the economy, but it’s not what most people think. The stock market leads the economy. For example, the stock market bottomed in March 2009. Six months later the economy bottomed. The stock market led the economy by six months. That’s how the counter-cyclical model works. What does this mean for stock market investors?
This week the Canadian and US stock markets hit new recovery highs: they are still going up. If the counter-cyclical model holds up again for this cycle, the economy should be stronger in August 2011 than it is now. Knowing that doesn’t help us invest in the stock market, does it? We need something that leads the stock market to help us decide whether we should invest our 2011 RRSP contributions in the stock market at these levels.
I explain in Beyond the Bull what leads the stock market: it’s the bond market. Long term interest rates lead the stock market. For example, in December 2008, three months before the March 2009 stock market bottom, the US long term bond market staged a spectacular rally. For a brief time, it looked like the counter cyclical model was heralding a stock market low and eventually, an end to the recession. But, Quantitative Easing 1 threw a monkey wrench into the works. Whenever the Fed launches an easy money program, investors worry that inflation will heat up too much: long term bonds are not a good investment in times of high inflation. And, that’s exactly what happened this time: after a short spectacular up surge in December 2008, the US bond market dropped in a series of zigzags to the same level it was when the bear market of 2007-2009 began! The bond market is not correlated to the stock market in this cycle. It’s different this time.
Quantitative Easing is what’s different. The Americans are flooding their economy with dollars: their monetary printing press is going full bore. They are desperately trying to re-kindle a small amount of inflation. The normal lead-lag relationships in the economy are not working in this cycle. The president of the USA said it in his annual address to his people last month: QE2 has kept the stock market buoyant. Some of the money the American printing press is generating has found its way into the stock market. I wonder what will happened when QE2 dries up. Will the stock market’s up trend dry up too?
When the normal relationships in an economy change, investors have to be ready to change too. For now, the stock market is in a strong up trend and investors who are participating are doing just fine. It’s a bit like the children’s game of musical chairs: be ready to find a chair when the music stops.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Monday, February 7, 2011
Cheap Chinese Junk Backlash
Have you noticed the latest social movement? A whole new industry is being formed. I call it The Cheap Chinese Junk Backlash. And it’s at the cottage industry stage now.
Dozens of new business’s are starting up: their goal is to help people simplify their lives. Some of these entrepreneurs call themselves “Organizing Experts.” They help people organize their living space by cleaning out old junk, installing shelves, filing and putting things in boxes; turning chaos into order. Others call themselves “stagers.” They reorganize your house when you are trying to sell it. They clean up the clutter, reorganize the furniture and engage in minor redecorating. It’s not a complete make-over like the television shows; it’s just a tweak here and a twiddle there to make a home simpler and more presentable.
They seem to have certain principles:
1. Go through all your stuff. If it isn’t useful, beautiful or sentimental, throw it out.
2. Go through your stuff again. Repeat #1… you still have too much stuff!
3. Every time you buy one new thing, you have to throw away two old things.
4. Clothes: if it doesn’t fit, donate it to a charity.
5. Clothes again: if you haven’t worn it for a year, donate it too.
Apparently there is big demand for these simplifying services. It started in Europe centuries ago. They called it “minimalism.” The minimalist’s goal is to live a simpler, more meaningful life, without stuff. They value learning and spirituality more than they value owning things. It reminds me of the ancient Greek city states: the Athenians lived a rich colourful life, with lots of stuff. The Spartans were the minimalists, living a simpler, more militaristic life style. Minimalists appeared in Christian Europe when St Francis of Assisi’s monks dressed in sack cloth and lived in materialistic poverty. And now we’re seeing the beginnings of this movement in North America. Today’s home office organizers and stagers herald the beginning of a wave of simplification that is swelling up in today’s over stocked society.
What’s causing this backlash? Is it a reaction to American advertising, where we were all told we should envy our neighbour's stuff? Is the same thing happening to the US consumer goods industry as happened to the US housing industry? Too much excess: they pushed it too far…
In my investment book Beyond the Bull, I suggest investors examine the actions of other people to help them decide how they themselves should behave. Maybe we should use the organizers’ and stagers’ principles to re-organize our portfolios. Let’s ponder these principles:
1. If the price of your investment is lower now than when you bought it, sell it. If it’s lower than it was a year ago, sell it. Two years ago? Sell that too? Investing is about making money, not hoping to make money.
2. What is the rate of return on a given investment over the past 10 years? Why am I keeping this investment?
3. Does this investment still fit? Does it still have a place in my overall financial plan? If I need 8% return and I’m only getting 3%, should I get rid of my portfolio and re-write my financial plan.
4. Who has made more money on my investment portfolio over the past 10 years: me or my financial planner? If it’s your financial planner, fire him. If you are your own financial planner and you are not making money, fire yourself.
5. What is higher – my mortgage rate or the rate of return on my mutual funds. If it’s the mortgage, sell the mutual funds and pay off the mortgage.
It’s time to simplify your investment life. Invest in fewer things and keep only the ones that make money for you.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Dozens of new business’s are starting up: their goal is to help people simplify their lives. Some of these entrepreneurs call themselves “Organizing Experts.” They help people organize their living space by cleaning out old junk, installing shelves, filing and putting things in boxes; turning chaos into order. Others call themselves “stagers.” They reorganize your house when you are trying to sell it. They clean up the clutter, reorganize the furniture and engage in minor redecorating. It’s not a complete make-over like the television shows; it’s just a tweak here and a twiddle there to make a home simpler and more presentable.
They seem to have certain principles:
1. Go through all your stuff. If it isn’t useful, beautiful or sentimental, throw it out.
2. Go through your stuff again. Repeat #1… you still have too much stuff!
3. Every time you buy one new thing, you have to throw away two old things.
4. Clothes: if it doesn’t fit, donate it to a charity.
5. Clothes again: if you haven’t worn it for a year, donate it too.
Apparently there is big demand for these simplifying services. It started in Europe centuries ago. They called it “minimalism.” The minimalist’s goal is to live a simpler, more meaningful life, without stuff. They value learning and spirituality more than they value owning things. It reminds me of the ancient Greek city states: the Athenians lived a rich colourful life, with lots of stuff. The Spartans were the minimalists, living a simpler, more militaristic life style. Minimalists appeared in Christian Europe when St Francis of Assisi’s monks dressed in sack cloth and lived in materialistic poverty. And now we’re seeing the beginnings of this movement in North America. Today’s home office organizers and stagers herald the beginning of a wave of simplification that is swelling up in today’s over stocked society.
What’s causing this backlash? Is it a reaction to American advertising, where we were all told we should envy our neighbour's stuff? Is the same thing happening to the US consumer goods industry as happened to the US housing industry? Too much excess: they pushed it too far…
In my investment book Beyond the Bull, I suggest investors examine the actions of other people to help them decide how they themselves should behave. Maybe we should use the organizers’ and stagers’ principles to re-organize our portfolios. Let’s ponder these principles:
1. If the price of your investment is lower now than when you bought it, sell it. If it’s lower than it was a year ago, sell it. Two years ago? Sell that too? Investing is about making money, not hoping to make money.
2. What is the rate of return on a given investment over the past 10 years? Why am I keeping this investment?
3. Does this investment still fit? Does it still have a place in my overall financial plan? If I need 8% return and I’m only getting 3%, should I get rid of my portfolio and re-write my financial plan.
4. Who has made more money on my investment portfolio over the past 10 years: me or my financial planner? If it’s your financial planner, fire him. If you are your own financial planner and you are not making money, fire yourself.
5. What is higher – my mortgage rate or the rate of return on my mutual funds. If it’s the mortgage, sell the mutual funds and pay off the mortgage.
It’s time to simplify your investment life. Invest in fewer things and keep only the ones that make money for you.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Wednesday, February 2, 2011
Egyptian Guerrilla
The Russian Communists embarked on their revolution in the aftermath of WWI, when their country was in chaos. That’s how modern revolutionaries work. The Chinese Communists revolted in the aftermath of WWII, when their country was in chaos. Mao Tse Tung wrote the definitive book on how guerrilla warfare works: they create chaos, then present themselves to the population as the best ones to restore peace. That’s how twentieth century revolutionaries worked. They were well organized, well equipped and intentional. And in the last century the world’s biggest monarchies fell; Russia and China.
There are extremist factions in the Islamic world who follow this same pattern: they too, have read Mao Tse Tung’s book. The first nation to fall to the Islamic Revolution was Iran in 1979, when the Shah of Iran was deposed and Ayatollah Khomeini took control. He and his successors have been in control of Iran ever since.
Chaos is erupting in Egypt, Tunisia and Yemen. Protesters are demanding the downfall of the dictators who rule those countries. Who knows how many nations will be involved when the chaos finally stops spreading? Will it spread to Libya? Lebanon? Jordan? Saudi Arabia? Will it eventually spread to the Islamic states of southern Russia? What about Pakistan? Are these current upheavals something that just started in December or are they part of the Islamic Revolution that started in the 1970s?
This is a strange concept for our western minds to follow. Our understanding of hostilities flows from European traditions of war. In Northern Europe two thousand years ago, war was tribe-against-tribe. It evolved to city state-against-city state. Then country against country. Modern wars are fought between armies; country against country, army against army. It’s our way of thinking about war. For western minds to understand the Communist revolutions or the Islamic revolution, we must think differently. These are wars of insurrection: the soldiers fight from among the people. And the combatants are citizens of the same country. The Islamic Revolution is a religious concept, not a national or political concept. They fight by different rules. That’s why it is so difficult for the west to defeat these persistent soldiers: they are hard to find until it’s too late.
How will we westerners react to a threat to our oil life line? What would America do if Arabian oil stops flowing? We have observed that the Americans can bring a country to its knees by destroying it’s infrastructure. We’ve all seen the tapes of American bombs destroying bridges, buildings and power plants. But that kind of activity seems out of place in the Islamic Revolution scenario. It simply creates even more chaos and helps the extremists.
In the last century, almost no one predicted the devastation that followed the Nazi’s ascent to power in Germany. But history has accurately recorded the unification of Germany and Hitler’s story. And history is currently recording the methodical and chaotic spread of the Islamic Revolutions.
In late 2010 and early 2011 the spread of chaos has re-emerged in Northern Africa. And it’s still spreading. What kind of risk does the continuing progress of the Islamic Revolution have for the Canadian people? What should an ordinary Canadian do?
First we have to wake up to the danger. Whenever you buy an airline ticket, you encounter the Islamic Revolution: these are the guys who refined hijacking in the 1970s. And they took it to a whole new level on September 11, 2001. We know that active cells of revolutionaries have been caught in Toronto, Madrid, London, the USA, India, The Philippines and Germany. We know that there are particularly strong Islamic revolutionaries operating in southern Russia. And now we are seeing instability in North Africa. Because it’s a religion, not a country, we westerners have difficulty identifying the source of the violence. We are used to hostile countries (Japan in WW2) or hostile political parties (Nazis in WW2, Communists in The Cold War). But the Islamic Revolutionaries are religious. We have been taught not to be prejudiced against people because of their religion. Nevertheless, we do have to wake up to the danger. It would have been better for the world to have woken up to the Nazi threat long before 1938.
Secondly, we have to look for patterns. An old university friend introduced me to Chairman Mao’s works in the 1960s. Now, instead of viewing the news of hijacked airplanes, car bombs, honour killings, subway attacks, suicide bombers and violent demonstrations as individual unrelated news stories, I see them as part of a pattern. I see the underlying theme. Slowly and intentionally the Muslim extremists are taking political power. First it was Iran – then Afghanistan (the American invasion has reversed that one for now), then Palestine… and now we have unrest in Tunisia, Egypt, Yemen and Jordan.
Canadian note: Remember the old FLQ kidnappings in Quebec in the early 1970s? Bombs in mail boxes? The murder of Pierre La Point and kidnapping of James Cross? That was the beginning of a Mao Tse Tung style guerrilla operation. Fortunately for Canada, Prime Minister Trudeau had also read Chairman Mao’s famous book; he invoked The War Measures Act and snuffed out the FLQ before the movement took root in Quebec. Trudeau saw the pattern early and acted decisively. Unfortunately, the Islamic Revolution has evolved way beyond the early stage. It is firmly rooted in Muslim communities, both in the Arab world and Canada, Spain, England, USA, India, The Philippines and Germany.
Thirdly? Once enough people take steps one and two, we will know what to do. Until we wake up to the danger and see the pattern, we will view the Islamic Revolution as if it were a hockey game on Saturday night. Entertaining, lots of fights, but if our team loses, who really cares.
In my investing book, Beyond the Bull, I encourage investors to develop their own personal investment techniques. An investment technique involves two steps: Step 1 – observe the investment world. Step 2 – react to what you see in a pre-planned way. That’s how we improve our lot as investors. This same notion will work well in the much larger arena of international politics.
There are long term patterns in human history and human economics. Empires have risen and fallen. We Canadians are both observers of history and economics and a participants in history and economics. As individuals, let is observe our world and react to it. Let us be vigilant and remember the words in our national anthem: “we stand on guard…”
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
There are extremist factions in the Islamic world who follow this same pattern: they too, have read Mao Tse Tung’s book. The first nation to fall to the Islamic Revolution was Iran in 1979, when the Shah of Iran was deposed and Ayatollah Khomeini took control. He and his successors have been in control of Iran ever since.
Chaos is erupting in Egypt, Tunisia and Yemen. Protesters are demanding the downfall of the dictators who rule those countries. Who knows how many nations will be involved when the chaos finally stops spreading? Will it spread to Libya? Lebanon? Jordan? Saudi Arabia? Will it eventually spread to the Islamic states of southern Russia? What about Pakistan? Are these current upheavals something that just started in December or are they part of the Islamic Revolution that started in the 1970s?
This is a strange concept for our western minds to follow. Our understanding of hostilities flows from European traditions of war. In Northern Europe two thousand years ago, war was tribe-against-tribe. It evolved to city state-against-city state. Then country against country. Modern wars are fought between armies; country against country, army against army. It’s our way of thinking about war. For western minds to understand the Communist revolutions or the Islamic revolution, we must think differently. These are wars of insurrection: the soldiers fight from among the people. And the combatants are citizens of the same country. The Islamic Revolution is a religious concept, not a national or political concept. They fight by different rules. That’s why it is so difficult for the west to defeat these persistent soldiers: they are hard to find until it’s too late.
How will we westerners react to a threat to our oil life line? What would America do if Arabian oil stops flowing? We have observed that the Americans can bring a country to its knees by destroying it’s infrastructure. We’ve all seen the tapes of American bombs destroying bridges, buildings and power plants. But that kind of activity seems out of place in the Islamic Revolution scenario. It simply creates even more chaos and helps the extremists.
In the last century, almost no one predicted the devastation that followed the Nazi’s ascent to power in Germany. But history has accurately recorded the unification of Germany and Hitler’s story. And history is currently recording the methodical and chaotic spread of the Islamic Revolutions.
In late 2010 and early 2011 the spread of chaos has re-emerged in Northern Africa. And it’s still spreading. What kind of risk does the continuing progress of the Islamic Revolution have for the Canadian people? What should an ordinary Canadian do?
First we have to wake up to the danger. Whenever you buy an airline ticket, you encounter the Islamic Revolution: these are the guys who refined hijacking in the 1970s. And they took it to a whole new level on September 11, 2001. We know that active cells of revolutionaries have been caught in Toronto, Madrid, London, the USA, India, The Philippines and Germany. We know that there are particularly strong Islamic revolutionaries operating in southern Russia. And now we are seeing instability in North Africa. Because it’s a religion, not a country, we westerners have difficulty identifying the source of the violence. We are used to hostile countries (Japan in WW2) or hostile political parties (Nazis in WW2, Communists in The Cold War). But the Islamic Revolutionaries are religious. We have been taught not to be prejudiced against people because of their religion. Nevertheless, we do have to wake up to the danger. It would have been better for the world to have woken up to the Nazi threat long before 1938.
Secondly, we have to look for patterns. An old university friend introduced me to Chairman Mao’s works in the 1960s. Now, instead of viewing the news of hijacked airplanes, car bombs, honour killings, subway attacks, suicide bombers and violent demonstrations as individual unrelated news stories, I see them as part of a pattern. I see the underlying theme. Slowly and intentionally the Muslim extremists are taking political power. First it was Iran – then Afghanistan (the American invasion has reversed that one for now), then Palestine… and now we have unrest in Tunisia, Egypt, Yemen and Jordan.
Canadian note: Remember the old FLQ kidnappings in Quebec in the early 1970s? Bombs in mail boxes? The murder of Pierre La Point and kidnapping of James Cross? That was the beginning of a Mao Tse Tung style guerrilla operation. Fortunately for Canada, Prime Minister Trudeau had also read Chairman Mao’s famous book; he invoked The War Measures Act and snuffed out the FLQ before the movement took root in Quebec. Trudeau saw the pattern early and acted decisively. Unfortunately, the Islamic Revolution has evolved way beyond the early stage. It is firmly rooted in Muslim communities, both in the Arab world and Canada, Spain, England, USA, India, The Philippines and Germany.
Thirdly? Once enough people take steps one and two, we will know what to do. Until we wake up to the danger and see the pattern, we will view the Islamic Revolution as if it were a hockey game on Saturday night. Entertaining, lots of fights, but if our team loses, who really cares.
In my investing book, Beyond the Bull, I encourage investors to develop their own personal investment techniques. An investment technique involves two steps: Step 1 – observe the investment world. Step 2 – react to what you see in a pre-planned way. That’s how we improve our lot as investors. This same notion will work well in the much larger arena of international politics.
There are long term patterns in human history and human economics. Empires have risen and fallen. We Canadians are both observers of history and economics and a participants in history and economics. As individuals, let is observe our world and react to it. Let us be vigilant and remember the words in our national anthem: “we stand on guard…”
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
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