Home » Economy, Headline, International, Investing

Unforeseen Events

14 March 2011 15 Comments

If you were to go back to the start of the year and were asked to give what you thought would be the biggest sources of uncertainty that was possible for this year, you probably would have not have named Egypt, Libya and Japan.  While I’ve been saying for years that there is plenty of global uncertainty, identifying ahead of time the actual form of it and what it will actually look like is very difficult.

Now, calling for a natural disaster similar to what just happened in Japan is of course impossible to predict, but middle east riots that were caused at least to some degree by food inflation was a little more logical to see coming – although nobody predicted Egypt to be the start of it.

The point here is that there are massive events that will always occur from time to time that you cannot predict or see coming.  It’s important to stay focused on your long-term financial strategy before, during and after such events.  If anything these events can provide some volatility that might bring buying opportunities.

The problem is that most people’s long-term financial plans are just to buy stocks on a regular basis indefinitely.  As you know, this isn’t the plan I believe is correct.  Now, there are some stocks that I do buy on a regular basis – they are my DRIP stocks that I put money into every month and have dividends reinvest over time.  But I don’t buy the general market on a regular basis – which is what most people do via massively diversified portfolios.

I’m somewhat more selective on my overall positions that are adjusted based on some of the macro trends that I believe are in place.  What are these trends?  Well there is a global re-balancing that needs to take place between developed and developing countries.  The US has an unsustainable debt, currency and standard of living where countries like China have the opposite.  There will be a shift and re-balancing.  As such, I want more exposure outside the US, and I want to diversify into non-dollars.

I make my living in dollars, so diversifying some savings and assets into non-dollars – whether it is foreign currencies or precious metals – isn’t exactly crazy although most financial advisers would tell you it is.  I wonder why?

Furthermore, I see the U.S. as an economy with major structural issues that aren’t solved by cyclical solutions (namely liquidity and Fed easing).  Growth will be hard to come by in America, and our policies are pushing us towards inflation.  Stagflation is a very obvious result in my opinion.

Oh the whole, I want to be in defensive stocks, I want cash available to buy assets when volatility hits, I want to have exposure to commodities and precious metals to be hedged against inflation, and I want some exposure to resource-heavy countries and developing countries in Asia.  Asia will have massive volatility, but long-term, their standard of living is going up (while ours is going down).  Also, having some exposure to energy names is a good idea for both an inflation hedge and because energy demand is increasing in parts of the world like Asia.

A Japanese earthquake changes none of what I just said.


  • localtimezone said:

    "Don't complain about what you have, some people have it worst off, and since life rather unpredictable, you might be worst off soon enough"?

    In other words, if you think you're having a bad day, think about the folks in Japan and how they're feeling about their day…

  • exchangerates said:

    Do Not use your safety net for shallow irresponsible purchase you will regret it later I guarantee it.

  • xfiltrate said:

    Kevin, your statement:

    "middle east riots that were caused at least to some degree by food inflation was a little more logical to see coming"

    I agree! The quantitative easing 1 , 2, and most probably 3 will continue to lower the purchasing power of each dollar, not just at home (United States) but for the world at large.

    Therefore, more and more money (dollars/etc) are needed, but unavailable, to buy food, gas, shelter, and the basics of survival. This is often a cause for what you have termed "riots."

    While those who created the need for quantitative easing continue to enjoy and profit from the fruits of their labor, because of quantitative easing and a fiat currency, the millions of families represented by those who riot suffer and will eventually starve.

    Imagine trying to survive , with no credit available, even for food, when you are hungry, have no money. and no "nanny state" to feed you and your family, in a country with double digit unemployment !!! Try it…. Then you will understand. Then you will have the right to judge those who riot – riot against those who for their own profit have devalued the dollar, or stolen the wealth rightfully belonging to others.

    The challenge of survival is great for those who "riot" in Africa and elsewhere, while the derivative, credit swap, bail out, bubble beneficiaries are buying luxurious toys and whatever else they want….

    I am repulsed and sickened by the recent increase ($$$) in high level white collar crime that continues with no one being held accountable…. OH WAIT, they did scapegoat Madoff …., What a laugh, when the regulators / government and several banks/investments houses knew exactly what he was doing.

    White collar and other crime, is probably enabled of caused by the out of control consumption of mind altering legal and illegal drugs. This in large part thanks to the big drug companies and our own governments documented importation and sale or trade of illegal drugs.

    There , I feel better now , thanks for listening.

  • fxgeorges said:

    Events happen. We know that God only gives us those things which are good. The key word here is "good" for what is "good" in the eyes of God may seem "bad" to us at the time – just as enforced rest and inactivity and bad tasting medicine might seem "bad" to a child who is ill but which is "good" from the point of a parent or physician. Everything that comes to us is "good" (or more precisely "good for our salvation" which is God's measure of "good") if we receive it with humility and faith. In each situation it is not the event that is "good" or "bad" but rather our response to that situation that makes it so.

  • pandora said:

    Its the existing that will grow for the reason that with the phone. They will enjoy in addition to prize this desirable in addition to individualized spend back again for years forward asPandora jewelry Corporation includes a special name in addition to special merchandise.

  • wp core conversion said:

    That’s some inspirational stuff. Didn’t know that opinions could possibly be this varied. Thanks for all the enthusiasm to provide such helpful tips here.

  • Ash Sand said:

    This is really important to watch events which are going to happen and affect the economy.

    Ash Sand

  • visit website said:

    I agree with your point. I find a really good bloich is informatig, whve and also interesting. I really enjoyed reading through your blog.

  • uk best essays said:

    Incredible! Thank you! Data such as the one particular an individual described here will likely be very useful to my opinion!. I really like guides as well as used to go to bookshops on a regular basis. I simply go to your blog. The particular articles or blog posts can be beneficial as well as I have already used to go to this website on a regular basis. A good one particular………………!!!!!!

  • wedding dress said:

    Donna will hold on her wedding tomorrow, and now she is trying her wedding dress. Her wedding dress is very fitting, and the quality is good. Donna said this wedding dress is customized at IOIOM online shop, and the price is cheap.

  • D3 Gold Game said:

    Friends, do you want to buy Diablo 3 gold? The gold on the D3 Gold Game is very cheap and safe. My friend always bought Diablo 3 gold from this website. He said that the gold on this website is cheaper than other suppliers.

  • idateasia reviews said:

    Thanks a lot for sharing the article on cash. That's a awesome article. I enjoyed the article a lot while reading.

  • buy an essay paper said:

    That's really a marvelous post. This post contains useful information which helps us a lot. I have never seen such a great post. your wonderful post can inspire a lot and helps us. I visit your website often and share with my friend.. Good job !!!!!

    buy an essay paper

  • writing publishing said:

    thank's for this article. I see that you have big knowledge about this subject. I also see that that is difficult to understand for many people how great it is. We have to know that bigger learning gives us many chances for fine life.

    writing and publishing
    I am confident that you will enjoy the contest published here. I hope you will visit………….:)

  • essayontie opinion said:

    The site usage is very easy. What you have to do is to place your order and you will get your assignment very soon. When you click the order button, then a form opens. You have to fill the form according to the site requirements. Similarly all the things are very cleared and mentioned on the website. You feel no inconvenience when you visit the website. This website is serving the students who are facing difficulties in writing essays and research papers. The website is providing the best writers who can do your work according to your requirements.
    essayontie opinion