(snip)"Casey Files:
Your Cash is Trash
and So Are Most of Your Investments
Doug Casey
The International Speculator
Jun 15, 2007
Almost everyone, probably including yourself, gets held back by inertia at one time or another. It can happen with anything, including investments.
Inertia weighs on an investor, trapping him in a state of paralysis and freezing his portfolio, almost forcing him to hold on to whatever he already owns - for no better reason than that he already owns it. He hopes that every one of his old shoes will go up, even if the reason for the purchase is long forgotten or the environment in which the investment might have prospered has vanished. People who substitute hope for cold-blooded analysis almost inevitably wind up losing money.
So, for the sake of argument, let's look at where you might best put your money for the rest of the year 2007. To keep things simple, let's assume you start by liquidating all the cats and dogs populating your portfolio, so that you have just a pile of cash. No, let's not phrase it that way... because then you're going to start wondering which of the securities you own really are cats and dogs. You might get bogged down. And then inertia will creep back in, and you'll throw your hands up and do nothing. So let's assume you sell everything, in true going-out-of-business style.
Now, what's the smartest place to put that money? Let's look at the alternatives.
Bonds? A disastrous sucker bet. Bonds, at the moment, are a triple threat to your capital. First, you have a huge risk with interest rates, which are still near historic lows; as they go up, the market value of your bonds drops proportionately. Second, no matter which of the fiat currencies you choose, you have a big currency risk; while the US dollar is on the fast train to zero, virtually every other currency in the world is being inflated along with it and is heading toward eventual oblivion. Third, you have credit risk; General Motors isn't the only large company whose bonds may go into default.
Stocks? The general market is yielding less than 2% in dividends, less than 1/3 of what you typically see at major market bottoms. And selling for more than 18 times earnings-more than 25% higher than its norm. Worse, for those who might be buyers, the bull market of the century started in 1982 and, in inflation-adjusted terms, ended in 2000. You might not want to hear it, but stocks are almost certainly early into a bear market that could last another 5 or 10 years. By all traditional measures, chances are much better that stocks will drop 50% from here than gain 50%.
Cash? You could always just stay in T-bills. But they currently yield only 5%, before taxes. And inflation (notwithstanding the highly imaginary official figures) is probably running around 6% and likely to head higher.
Real Estate? At the present, at least in the U.S., this is probably the worst choice of all. The speculative boom crested last year, and the market, burdened by an immense amount of debt and overleveraged speculation, is likely to head down for years to come. Of course, there are places in the world, two of our favorites being Argentina and Uruguay, where there isn't much of a mortgage market, so the properties aren't overleveraged and values are still available. But unless you are looking to pick up cheap land in undeveloped, exotic countries that have avoided the credit-driven bubble, real estate should be last on your list of investments.
Mutual funds? Any mutual fund you're likely to pick is just a way of buying one of the investments we've already dismissed. And paying all those fees and expenses that come with a mutual fund just makes the bet that much worse."(snip)



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