This Is Not Capitalism

I remember a story from my philosophy professor in college. He mentioned one of his socialist professors who refused to call the Soviet Union a socialist nation. His reasoning was that he disagreed with the Soviet Union, therefore it could not be socialist. This is a form of the no true Scotsman fallacy.

While I want to avoid this error, I hope you can agree with me that this is not capitalism.

In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan, holder of the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last year while the Swiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves

If one cannot trust the government measures of GDP or inflation or economic growth how can one invest? In this case if the government is buying stocks, how can you trust the stock prices? If the government is buying bonds and house mortgages then you can't trust their price either. All market prices are of little value as signals for investment. In this situation investment is impossible. One can only be forced to speculate. But first, get out of debt. I am personally in this stage. The current sucker's rally gives us all a little breathing room. Use that time wisely.

Comments

[Eddie H. Nessul]

All one can do is "Trend Follow" and not fight the tide. Fundamental investing , as you stated,
will be increasingly difficult.

Use of Moving Averages to time markets is useful here.

Another approach that makes sense is to only invest in the simplest and most basic of companies. Lets say like water companies. Water will always be used, is a necessity, and is fairly constant in its use. It has pricing power, no competition, and has its profits protected by rating agencies. Truly a good times, bad times investment.

Another interesting segment is storage facility companies. In bad times , when people get thrown out of their houses, they put a lot of their junk in storage units. In good times, they buy more junk and put it into storage facilities. Consistent yield, nice low tech business, and they are available in publicly traded REITS.

Eddie H. Nessul
Amboy, CA

(Read Names Backwards!)