Where were all of the analysts seeing and forecasting doom and systemic collapse in 2007? Where was the crowd participating in the housing boom? How wrong was everyone? That said, the crowd is usually wrong about the future. And in this case, the crowd is forecasting doom and depression. The crowd is only good at telling you what has happened, not what will. Everyone thinks the most recent trend will continue -- that is what analysts and businessmen do. How foolish on a certain level GM or countless other companies must look in 'speculating' on high price of oil (even though even I believe it is a good bet on the very long term) ... causing shutdown of light truck and SUV manufacturing or hedging high oil prices only to see their bets backfire in a period of 3 months?! Guys like John Thain and the rest calling for a dismal 2009... Again, this is the crowd. That said, I'm not making a stocktrad3r call of Dow to 15000 next year, but I am saying the future will be filled with many other black swans that make what we expect to happen probably never to occur. That is the only thing certain.
I am not normally a doom & gloomer, but there is something happening today that is going to be pretty big. It is possible we could see hyperinflation in the next few years. Maybe not on the scale of what other countries have experienced, but I dont think it unreasonable that in a year or two, we would all be paying 10 dollars per gallon for milk. Or 6 dollars for a loaf of bread. Believe me when i say i WANT to be wrong about this. I saw the housing bubble and sold all my property in mid 2005 and started renting. I was actually scared that housing prices were going to fall before the end of 2005 as i thought it would happen quicker than it did, but it took longer. This is the same thing. People are buying up commodities quietly, not only that but there is a waiting period to get yoru commodities now which indicated a short supply. If you go to a gold or silver dealer, you will find they are asking at least a minimum of 9 dollars over spot rate, but it wont be uncommon to see them selling an american eagle for 25-40 dollars for 1 ounce of silver. Dont believe me? Go to your nearest silver dealer and ask them how much to buy 1 oz of silver and see if they even have it in stock!
I like to compare all this to the dotcom hype. I remember how everybody said that we had some kind of new economy, how the old economic rules didn't apply anymore and why it was justifiable to pay $1000 for some dotcom stock from a company which was only making losses. At one point, everybody started to believe it. It's pretty much the same now again, we're tanking and tanking and more and more people are predicting 'the end of our economies'. I don't know if they're right. They might be, they might be not. All we, as investors, can do is keep an open mind and consider several scenario's and don't put all our money on 1 horse.
Wanna talk about being early? I bought property (a condo) in San Diego in April 2003 and called it a bubble then, and *assumed* the condo would lose 25% of its value in the near term since I thought it was a bubble then. (I put 60% down) Why? Because I didn't want to rent and figured the dividend on homeownership was substantial enough to offset my risk over the longterm. I was properly capitalized and carried minimal debt. Then the bubble really took off ... By end of 2004, we needed to move simply because we outgrew the condo. We found a house, and moved to a cheaper neighborhood and sold the condo. I was contemplating keeping the condo as a rental, but the rent ratios were lousy and it just presented too much 'real estate risk'. Again, I considered the gains on the condo 'paper' even when realized since I then just rolled over my 'property money' into a bigger spread. In the end, I'm happy I bought, even if it resulted in financial loss, since having the house has actually increased my lifestyle. Of course, I bought something I could afford. Now when the real nasty parts of the crisis hit (meaning this August and onward), I reacted to buy some foreclosures (as rentals) that were at pre-1998 price levels. Think of it as 12% bonds purchased with avg 4.5% money backed by substantial physical collateral. Hopefully over the long term that'll pay for trading losses !! / Maybe timing will be better this go at an attempt to profit, versus my previous disastrous positions of shorting housing stocks in 2006, buying perpetual natural gas bears (and missing the only 2 bull runs of the last 4 or so years), etc etc... This time leverage is much lower, there is great cash flow, and my horizon of time is much longer. That should increase my probability of success (what I'd call a real high probability trade...) I'm with you on gold and silver and all commodities. From a policy perspective, we need to inflate our way out of this mess since we have so much debt and can not afford seriously declining tax revenues that result from a depression. Even though the money supply story is deflationary now (even with the money pump), it won't be for long. It is a matter of survival and solvency for the United States to re-inflate. There is no reason to think they will mop up this liquidity, since a mop up will merely cause another recession and declining tax base (the predicament they need to run away from). Anyone who doubts the fed's ability to cause inflation is foolish and does not have a basic understanding of money. Proof: What would happen if the fed printed $20T right now, used half to pay off the national debt, and another half as a 'consumption check' to be divided amongst the masses? I doubt we'd be still worrying about deflation.
There's one thing I know is true. As many people as can possibly be screwed will be. In other words, while all of our seniors are preparing for secular deflation (because that is the most recent trend), selling all of their assets/etc... Then the inflation boom will hit and they will miss yet another train. Something like murphy's law. (trend following without stops for dummies)