Thursday, August 18, 2011


Dr. Renee Heffron of the University of Washington discovered that women who use hormone-based birth control pills or injections are more likely to spread AIDS to their non-infected husbands than women who do not receive the injections or take the pill. The study was done in seven African countries. Western charities have been trying to help Africans deal with a very large AIDS problem and a rapidly expanding population. But it looks like this one backfired. Providing women with hormone based birth control methods may solve one problem, but it causes another.
What complex beings we humans are. This tragic African problem illustrates how difficult it is to fix things that break. It’s better to prevent it from breaking in the first place. Too late for that; Africa is broken; how can we fix it? Add poverty and racial tension to the mix, and we see an even greater tragedy. How can anyone fix that?
African problems make our economic problems seem small. But the same Mr. Fix-it situation applies. In my investment book, Beyond the Bull, I point out how everything is connected to everything else. Our attempts to fix one economic thing affect the rest of the economy. For example, in 2008 and 2009 the western nations instituted a coordinated package of economic stimulus in an attempt to save a collapsing banking system and revive weak economies. And they actually did save the banking system. But the economic growth they had hoped for never materialized. Instead they got inflation. Metals, food and energy prices all went up. And now, Europeans and Americans are instituting austerity programs, cutting government spending in the hopes of balancing their budgets. Even the City of Toronto is cutting spending. Austerity is the economic fix-of-the-day now, just as stimulus was the fix- of- the- day in 2008 and 2009. We can only hope it doesn’t backfire like the African birth control fix.
What’s your personal economic fix-of-the-day? During the “Roaring ‘90s” (1991 to 2000) the Buy-and-Hold investment concept became more and more popular. By late 2008 – early 2009, people realized it no longer worked. Their ten-year stock market returns were abysmal. Some gave up and put their money in the bank. But, much to their dismay, the world banking system became quite shaky. Others gave up and put their money into treasury bills. Much to their dismay, they achieve almost no return. How can we get a reasonable return on our money without risking serious loss? What should investors do to fix their problem?
Maybe we can learn from our African neighbours. If we lived in Africa, our problem would be to not get AIDS. Seems pretty straightforward, doesn’t it? Everyone reading this article can easily figure out a plan to not get AIDS. Hint: It’s something to do with your sex life. Easy fix. We all realize it’s not 100% guaranteed, but any African can take measures to avoid AIDS and dramatically reduce their risk.
Is there some obvious way we can live our lives as investors without exposing ourselves to serious risk of loss? Yes, there is. We can own investments that are in up trends and not own investments in down trends. For example, during the dramatic August 2011 decline in the stock market, gold went up and bonds went up. Because everything in the economic world is connected to everything else, there are times when a decline in one area of finance actually causes a rise in another area. There is no need to sit idle and watch your losses mount up. You protect yourself by selling. We have to be vigilant and active, not passive. By becoming an active investor who protects against loss, we can thrive in times when others don’t.
Sex in an African country is a lot like investing in a western country: it is our responsibility to protect ourselves. In the arenas of health and wealth, we can’t save the population from its fate. But we can protect ourselves.
Ken Norquay, CMT
CastleMoore Inc,
“Buy, Hold and Know When to Sell.”

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