Future is bleak for conventional investing

February 3rd, 2009

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Around 24 months ago, the global financial market was an investors’ paradise. Any asset class that you dump your money in goes up in value. As we described in Epic, unprecedented inflation in June 2007,

Today, the world is experiencing an unparalleled inflation of asset prices. This is the first time ever that the world is experiencing asset price inflation in all asset classes (e.g. property, bonds, commodities, stocks and even art!) and in all major nations (e.g. US, China, Japan, Australia, UK, Russia, etc). We will repeat this point again: never before had such a universal scale of asset price inflation ever happened in the entire history of humanity! Today, even artwork is also in a ?bull? market (if you consider artwork as an asset class)!

Back then, we even receive solicitations from investing spruikers about investing in wine! Even useless artwork was considered an investment class. In such a climate, judging from the quantity of seminars, software, talks, books, network marketing schemes, conferences, investment products and so on, it was a dream of many to achieve financial freedom. Consequently, the financial and investment industry boomed by providing the masses the shovels to achieve their dream. During the gold rush, the ones who really got rich were the ones providing the shovels for the gold prospectors.

Fast forward to today, the opposite is true- we are now in investors’ hell. Every asset class is in decline in all the major nations, with the exception of US Treasury bonds. Businesses all over the world are failing. People are losing their jobs. The entire world is facing a synchronised recession. Some people who thought they could retire soon suddenly found out that their retirement have to be postponed (which is opposite to achieving financial freedom). The return on investments has become secondary concern to the return of investments. The use and abuse of credit to consume and invest has flipped to the shunning of credit and repayment of debts. In this climate, the financial and investment industry finds that selling shovels is a lot tougher than before.

In other words, as we said before in Fading glory of the financial services and ?wealth? management industry,

As far as we can see, the bull market (in real terms) on financial assets is over. What comes next is either deflation or stagflation. The implication is that peak glory (2001-2007) of the financial service and wealth management industry will be history.

Therefore, in this investor-unfriendly environment, tomorrow’s investors have to re-think their philosophy of what it means to invest. For some, it may mean that not investing is the wisest course of action. For others, it may mean investing outside the financial system. For some people, they may no longer see it appropriate to call it “investing.”

For us, it means that we are gradually shifting our focus in our writings to better reflect the new climate of tomorrow…

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  • Steve Netwriter

    Oooh, I get a chance to disagree for a change πŸ™‚

    “Every asset class is in decline in all the major nations, with the exception of US Treasury bonds.”

    It depends upon your point of reference. Anyone who opted out of the bubbles in mid 2007, and opted for Yen & Gold, will have seen anything from good to extremely good results.

    Those in the UK, NZ & Australia, would have been very happy with that portfolio.

  • Steve Netwriter

    Oooh, I get a chance to disagree for a change πŸ™‚

    “Every asset class is in decline in all the major nations, with the exception of US Treasury bonds.”

    It depends upon your point of reference. Anyone who opted out of the bubbles in mid 2007, and opted for Yen & Gold, will have seen anything from good to extremely good results.

    Those in the UK, NZ & Australia, would have been very happy with that portfolio.

  • Pete

    Yeah Steve my gold ETF (ASX:GOLD) I bought in ’07 is rockin along

  • Pete

    Yeah Steve my gold ETF (ASX:GOLD) I bought in ’07 is rockin along

  • Steve Netwriter

    Pete,
    I hope you have some of the real stuff too πŸ™‚

    I realise, I forgot….. Iceland !!!!!!!
    Duh !

  • Steve Netwriter

    Pete,
    I hope you have some of the real stuff too πŸ™‚

    I realise, I forgot….. Iceland !!!!!!!
    Duh !

  • Sergey Stadnik

    Mr Contrarian, you’re stating to sound like mainstream press.
    It may soon be time to turn contrarian on the Contrarian Investor.

    As Warren Buffet pointed out: “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.”

  • Sergey Stadnik

    Mr Contrarian, you’re stating to sound like mainstream press.
    It may soon be time to turn contrarian on the Contrarian Investor.

    As Warren Buffet pointed out: “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.”

  • Hi Sergey!

    As Marc Faber said, “Warren Buffett way is dead for 10 years already and will be dead for another 10 years.”

  • Hi Sergey!

    As Marc Faber said, “Warren Buffett way is dead for 10 years already and will be dead for another 10 years.”

  • Pete

    No real stuff unfortunately, but not too worried about it at this stage. Future moneys will go into the real stuff though.

    I’m with you on this one Ed, future investment (indeed the future in general) is looking bleak πŸ™ Especially in Australia as our Gov muddles things up terribly – its worse than I thought it would be.

    I find that it is all quite depressing actually…knowing that hard times are coming and seeing all the lies and misinformation swarming in politics, the media, financial advice, social discussions – its horrific.

  • Pete

    No real stuff unfortunately, but not too worried about it at this stage. Future moneys will go into the real stuff though.

    I’m with you on this one Ed, future investment (indeed the future in general) is looking bleak πŸ™ Especially in Australia as our Gov muddles things up terribly – its worse than I thought it would be.

    I find that it is all quite depressing actually…knowing that hard times are coming and seeing all the lies and misinformation swarming in politics, the media, financial advice, social discussions – its horrific.