Sunday, December 29, 2013

Thinking About 2014

In my article today I wanted to crystallize various themes I have been thinking about, but had not yet solidified them, they have been "half-baked", but now I want to discuss several subjects that I will be thinking about and closely observing in the New Year about to come.

Gold and Diversification

I believe that I have reached a near optimum (for me and my family) holdings of gold.  Gold (physical in your own possession) of course is the single best piece of diversification for almost anyone.  It is a "different vector" (for my math-oriented friends), that runs orthogonal to most other investments.  Anyone who has read my blog already knows that I am a big fan of gold.  I will continue to be.  But, my forward investments in gold will be considerably lower now.

I would note for everyone that platinum has had a relatively decent run lately, now selling at about a 13% premium to gold.  This is a little high by very recent standards.  But, if the world economy improves, and barring a "Freegold Scenario", platinum might be worth a look.

I have taken a very small position in "junk silver", US dimes, quarters and half dollars minted in 1964 and earlier.  These coins are likely only familiar to those who are, say, 45 years and older.  Junk silver sells (retail) for about 16 times "face", so a dime would cost about $1.60 and a quarter about $4.00.  Here is a picture of the two junk silver purchase I recently made at my LCS (Local Coin Shop):



My LCS allows me to sift through his pails of junk silver, allowing me to pluck interesting coins.  In the above photo you can see two Walking Liberty Halves at the lower left, the one showing the "tails" side (the eagle on the ground) is dated 1918, but is not in good shape.  The two coins at the lower right are Standing Liberty Quarters (both sides displayed).  Also in the pile are Mercury Dimes (I saw lots of these when I was young, from 5 - 10 years old).  I took a few in good condition...  NONE of these coins, to my knowledge, as any significant numismatic (collector) value, although a few apparently are worth a little more than their silver content.

Why would I buy junk silver if I already own Silver Eagles?  "Survival Stuff", the above would be spare change...

Bitcoin

At some point relatively soon I will likely write up "Part Six" of my Bitcoin series.  I still am interested in this complex subject that does appear to have a realistic chance of "making a real difference" in the way the economy and/or our financial system works.

I still want to make a small gold purchase from amagimetals.com to have another Bitcoin for gold source.

I will also be doing experiments with BTC as well as staying in touch with some experts who have guided me in this realm.

I must mention that Andrew Hodel's fascinating website (http://fiatleak.com/) is back under his management again (although up for sale).  To this minute I have had it up for some 20 minutes, I just saw a 186 BTC transaction go by a few minutes ago, and one for almost 139 BTC (an impressive $107,000!) just went by, here take a look, the 139 BTC transaction is just "east of Brazil", you will definitely want to click on the image if you want to see that transaction...:



Note that China (at bottom, "CNY") is at zero (now anyway) BTC traded through the exchanges there.  China must be down (or their exchanges not sending the information to his site), as normally China is exchanging a lot of BTC as well.

Energy

The USA is approaching "energy independence", a long established goal for many Administrations.  The main reason is the new technologies now being used in so many places (horizontal drilling, fracking, 3-D seismic, deep water drilling).

One important thought is that many of the "shale oil" plays deplete quickly.  So, whatever oil is produced by the many wells being drilled will deplete, and that will mean to keep production up there will have to be many more wells drilled into productive oil plays.

Note that there are big oil shale deposits in China, Russia, Argentina and even places like Poland.

Bullish on oil service companies, fishez?

"White Swans"

The Mainstream Media continues to assert that things really are getting better, even this weekend's issue of Barron's is pretty much the same (their Cover Story about housing likely to go up some 5% per year and bullish columns by most of their many writers).

I have been "bearish" for so long I almost forget what it is like to be optimistic.  Fortunately for me, I have NEVER had 100% conviction in my predictions (that is, I have held stocks, even though selling them off bit-by-bit for decades).  So I have been a little able to see some of the stock market's gains of about 26% in 2013.

I must now acknowledge the prospect that the "bulls" have been and may continue to be right.  If so, then US stocks will continue to be a good place to be.  As would be US real estate (residential perhaps more so than commercial, but, hey, what do I know?).

I think that we have, however, reached a point that US long-dated Treasuries may be a bad bet.  The 10-Year Note is at a bit over 3.00%.  The "Taper" will likely not be good for bonds.

Geopolitics

I continue to believe that our main overseas rivals (China and Russia) will be less of a problem than growling bear sources like Zero Hedge and Jim Willie posit.

China has huge problems (demographics, environmental problems, mal-investments, HUGE debts, etc.) that many are unaware of or do not discuss in depth.  A well-informed observer in and of China is Michael Pettis, whom "Mish" quotes from time-to-time at his blog (globaleconomicanalysis.blogspot.com).

Russia also (like Japan) has a declining population.  Yes, they have huge resources and are currently on a roll.  But, with the corruption and the overall tendency of Russia to be totalitarian, I do not think that Russia will "surpass the USA", no way.

There really are no other BIG PLAYERS out there in the world who can challenge the stability of our country.  Malicious attacks that could cause real damage, yes.  Bring us down, no.

Only a bumbling USA that continues to lose its way can bring our country down.  Unfortunately that is a real risk, as our country is so divided into Taxpayers and the "FSA" (Free Stuff Army, using the more gentle word).

US Politics / The "Taper" / Obamacare / NSA

Continuing the theme from just above, I am pessimistic about the overall leadership (and especially the financial leadership) at the top.

Barron's columnist Jim McTague summed up my feelings rather nicely in this weekend's edition.  He predicts a LOT MORE partisan strife (with the occasional can-kicking as needed) in 2014.  Obama is a polarizing figure, not the unifier he painted himself out to be...

I have no idea what will happen in the November 2014 elections.  I *guess* that I would be happier if the R-Team scores big and takes the Senate.  That would mean less damage would be inflicted upon us by the Socialist Democrats.  But, I do not think there is much of a difference them, some, but not much...

The Obamacare juggernaught marches on...  Obama & Co. are trying to minimize some affects (most on their own suckers, err, supporters) by delaying implementation of The Personal Mandate (as, um, the healthcare.gov site continues to not work right, but I recently read that just $50 million more will fix it, they promise!), among other "fixes".

The whole NSA scandals seems to be getting bigger and badder by the day.  In a thread just today (Sunday, December 29), Zero Hedge reveals even more disturbing evidence that the NSA has devices and malware that can capture data on hard drives, you know, like in YOUR computer.  They have a 50-page catalog of devices and technologies, see article: http://www.zerohedge.com/news/2013-12-29/nsas-50-page-catalog-back-door-penetration-techniques-revealed.  This is a real problem for US technology companies now..., what foreign companies or governments are going to trust US technology products?

Peru, Korea and some observations on other Emerging Markets

Our bearing sales in Peru for 2013 will come in at some 3% or so better than our big year 2012.  This is roughly in line with Peru's economic growth.  Peru is a dangerous place to invest in, but it is diversification for my family, we have trusted people there.  And Peru continues to actually grow...

Barron's had a column about which developing markets may show the best growth in 2014.  Korea is considered "emerging" (?) even though there GNP per capita exceeds that of the UK.  Apparently Korea's stock market has underperformed lately, and the declining Japanese Yen is hurting their competitiveness...  For example, Ameru believes that at least one of our Korean suppliers will raise prices on key products that we buy (especially our 2nd best selling piece).

As I hinted at above, I am not at all excited about the BRICs.  Brazil is full of corruption, cronyism in their build-out of the World Cup and Olympic infrastructure (a huge waste of money, but not for President Dilma Rousseff's friends!) and many other problems.  India?  Now they are trying to make it hard for their own citizens to import gold.  Does India now sound like a place where you would want to invest?

"Survival Stuff"

As many of you know, we live in a condo.  We are not well set up for a SHTF, not to mention a TEOTWAWKI...

I will be making what preparations seem reasonable based on the (low I hope) probabilities of a disaster that may come.  And I will be writing further on this general topic.

"You never know."

Spiritual Fitness

Perhaps a year or so ago, I wrote about becoming fit.  Fitness would help any of us in difficult times, I specifically discussed a few types of "fitness".

I continue on my own journey towards a more spiritually fit life.  I am not going to go into any details now (at the risk of boring or angering some of you).  But, I am happy with a path or two I have been on.  I have many to thank who have helped me along this new trail...  In particular I would like to thank the below:

John M
Jay
Lewis
John R
Steve
and my wife...

for their continuing moral strength and support in helping me to become a better man.

Happy New Year to all of you!  Peace on Earth.

7 comments:

  1. Good thoughts. From a fellow ZHer

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  2. Excellent article Robert, and I share your sentiments on all of your assessments.

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  3. What this blog is now; is what Zerohedge, used to be.
    Well Done!

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  4. "The USA is approaching "energy independence", a long established goal for many Administrations. The main reason is the new technologies now being used in so many places (horizontal drilling, fracking, 3-D seismic, deep water drilling)."
    You are a fool if you believe this
    --James Howard Kunstler

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  5. Thank you all for your comments.

    @ Jim K, how fitting that I was reading Jim Willie CB on my other computer when your comment came in. My contacts are not as good as yours. But, very short-term, our oil supply picture is better than before with the new technologies. How long will this little gift last? I am with you in that camp.

    On the other hand, I have an old friend who has a PhD in geology who worked as an "Oil Finder" (much prized in the oil business) for Exxon. I wrote him an email some three years ago about Peak Oil. He wrote back and said: "There's plenty of oil."

    We will see what the future brings. As I have said at Zero Hedge many times, my track record for prediction, esp. short-term, is poor. Like many, I do the best I can.

    And WHO among us is really ready for the future? Where do each of us go after the party is over? Think about what is really important.

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  6. Someone say survival? www.gunsgrubandgold.com

    We could use a few good men...

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  7. I've been using AVG protection for many years now, I'd recommend this solution to all of you.

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