April Rant

EDIT: For anyone who is interested, this article is an excellent discussion of inflation.

It has been quite a while since my last post. In part, this is because I'm lazy, but it is also because I don't like writing for the sake of writing; I prefer to have an idea first.

I'm still light on ideas these days, but I'll give this a shot:

The market is still incredibly overbought (14,000 on the TSX has been like kryptonite). Earnings multiples are huge, and there is no sign of any continuance of QE in the USA beyond QE2's completion in June. We stand a good chance of the ol' "sell in May and go away" quite soon, though I don't see Mr. Bernanke being able to pull any more rabbits out of his hat in August to have the sellers come back (though, in honesty, I didn't anticipate QE2 either).

Aside from that, silver has performed spectacularly (those who bought even just 2 months ago are up 30+%), though caution is becoming necessary. There is no good reason to go way overweight on precious metals. Discipline is simultaneously the easiest thing to understand in investing and the hardest to apply. Emotional decisions tend to cost money. Try to form a set of baseline rules and stick to them. I've always been a fan of the rule of thumb that precious metals should form, at most, 10% of one's portfolio. The only way I can add to my position, in absolute terms, is to inject capital into my entire portfolio.

Oil has also done well, but not for the reasons our overlords state. The fact is, the US has tripled its monetary base since 2008, and as such, prices of commodities denominated in that currency will eventually have to triple. It's a shitty situation, really, because true inflation is running well above 7% (annually) right now, so anyone who has made typical gains in equities has essentially been pacing inflation, at best. Of course, this means that anyone who has been saving money in GICs or a savings account is quickly losing purchasing power (indexed government pensioners aside, I'd hate to be years into my retirement right now).

From March of 2010 to March of 2011, gasoline has risen in price 19%, and fresh produce is up 19% as well. Coffee is up 10%, sugar is up 8%. Electricity is up 4%. There are lots more.

The government conveniently strips out anything that jumps in value (so, you know, food and gas) to come up with something called "core inflation", which lets them convince Joe Public that everything is OK. The fact is, people need to buy gasoline and food more than anything else. It's safe to say that wages haven't increased 18% year over year. The continuing practice of manipulating the way inflation is measured to justify an unnecessary low-interest rate policy is only going to delay the inevitable and make things worse.

Going forward, I still think silver has some considerable upside, though we can very easily get into bubble territory if the public starts buying in a major way. At a 30:1 ratio with the gold price, we are still far below the, albeit long-term, historical average.

There are still some good plays out there in oil, as well, though as I said, these positions will essentially follow inflation in the near term.

Achieving returns that surpass true inflation is going to be a considerable task going forward.

For the future, I'm starting to consider a shift toward defensive stocks, in anticipation of a summer decline.

April has been a busy month for us. We've have travelled to Edmonton twice, Vancouver, and I'm off to Cranbrook this weekend. I'll be off to Vancouver again in May for work, and once summer is in full swing (if that ever happens) we'll be gallivanting all over Western Canada, as per usual.

One thing that won't be taking up any of my time in May, though, is voting.

Call me what you will, but my argument for abstaining is the following.

1) I want no shred of responsibility for any one of these idiots getting into power.
2) There is no candidate that represents my values (and I don't want to run...yet).

The first candidate to come out and say "I will lay off public sector employees until the budget is balanced" would have my vote. This won't happen.

The first candidate to say "Government spending will be less than tax receipts for the next 25 years so we can pay down the national debt" would have my vote. This won't happen either.

The first candidate to say "All MP's will be paid a salary equivalent to the average Canadian's annual earnings (less than $46,000 a year) so that their decisions are in line with the plight of the average Canadian." would have my vote. Again, this won't happen; how can we trust important economic decisions to politicians who pull in a salary that puts them in a completely different class of people?

It doesn't matter who wins next week, the result will be the same. Continuing necessity goods inflation and debt-financed asset deflation (on the way).

The one thing that would get me to the polls, other than a smart candidate, would be a box on the ballot that said "None of the above".

In addition, if the majority of the public voted this option, then all the candidates would be thrown out and new ones would be nominated, and another election held, until somebody won.

Seems pretty simple to me.

This ended up being a lot longer than I thought.

Peace out, bitches.