To earn profits, buy low and sell high.
When dollar assets are strong, that's the time to use them to buy non-dollar assets, such as raw materials (or commodities, natural resources, whatever you choose to call them), fine art, antiques, real estate, Swiss francs, gold, silver and platinum.
In other words, when non-dollar assets are low, buy them with your dollars, which are high. That's where we are now.
But, we want to get the most for our money, so we don't want to buy while the non-dollar assets are still falling.
How close are we to the bottom?
It's impossible to know for sure, except years after the fact.
One piece of evidence that makes me think the turn in raw materials, including gold, silver and platinum, may be close, is in the October 18th ECONOMIST magazine, page 71.
The ECONOMIST reports that mines and other raw materials production facilities are shutting down. In some cases, the operators cannot get the loans they need to continue operating. In others, they are afraid their customers can't get loans, or will simply go broke, and the producers will not get paid.
Piles of unsold ore are piling up on docks around the world.
The Baltic Dry Index (
BDI), which traces prices for shipping raw materials such as iron and copper, has plunged 86% since its record high five months ago.
So, with production facilities shutting down, a shortage of raw materials seems likely once the quantities in the supply pipelines run out.
Is this the bottom? Again, we won't know for sure except years later, with the clarity of hindsight. But I think I can say with confidence that prices of raw materials are down so much that if you are buying for the long term, say three years or more, you won't regret buying now.
This assumes, of course, that if prices fall further you won't get so scared you bail out before the long term arrives.
Why am I so sure raw materials will recover at all? See the October 28th bulletin titled "The Coiled Spring," on the
Subscriber Access part of our web site.
[SIZE=+1]--Richard Maybury[/SIZE]
P.S. Here is my guess about what's coming.
By this time next year, millions under age 45 who have lost their homes will have also lost their jobs. They've never experienced hard times, and to them, the future will appear much darker than anything they ever imagined.
Each week when they go to the grocery to buy food for their children, they will find the meager amount of money they have left will buy less. Desperate, they will be looking for scapegoats, and thanks to a century of leftist propaganda, many will blame "the rich."
In the government-controlled schools and colleges, they were taught that the way rich people get rich is by making others poor.
If they notice you and believe you are well-off, they will see your affluence as an assault on their families.
If you live in an area where violence is likely, be ready to take precautions. Be prepared to buy a scratched and dented jalopy that is in good mechanical shape. Save your old, tattered clothing. When you go out in public, you will be able to look poor, and won't be noticed.
On the bright side, there's the old and sage advice for investors, buy when there is blood in the streets.
During times of maximum pessimism, investments are priced very low, and that's the time to buy. It's when the next batch of new multi-millionaires will be minted. Hold some cash back for investing during those violent times. I hope you don't get to use that cash, but I'm afraid you probably will.