Economic Showdown Part IV

by | Jan 7, 2004 | Archives

There is a combination of disappointment and anger moving the masses, especially in emerging countries, right now.  After decades of struggle, workers are poorer than they have been in many years.    Their cultures have been changed and they have been given dreams of greater material wealth.   Now these dreams are dashed.   This causes unrest.

The system lures the poor from their cultural traditions with promises of western goods and then fails to deliver.   I have seen this happening on my travels in South America where the poor were demonstrating because the rise in price of cooking oil.   When the rich take away the ability of the poor to even have adequate food, clothing and shelter (when they expect TVs), we can anticipate great economic turmoil and chaos.

The investment conclusion we can derive from this is that though the world has a bright future we must survive the immediate chaos and turmoil during this current transition.   We should keep at least a portion of our assets in the safest possible investments and prepare ourselves to earn a living even if the entire economic system shuts down.

This is one of the biggest forces that is creating havoc in the global economy right now.

This should be a time when everything that has to do with the global market becomes easier.   Yet the opposite is taking place. Travel is becoming harder.   We have seen how recent flight cancellations, added security and such makes trips by plane more and more expensive and difficult.   Communication is slowed down.   Travel from country to country becomes harder.

All this and the many factors we have viewed in the last five messages should lead us to exercise caution now.  

Yet if and when a crunch comes, the disaster will (as they always do) create distortions.   If you allow yourself to stand back and act rationally when others do not, you can add value to your portfolio buying what others oversell and selling what others overbuy in their panic.

Over the next week we will look at are seven steps we can take to be sure we survive and get ahead.   Until we look at the first strategy in tomorrow’s message, good investing.