Housing market to bottom out in 2010
3-27-10

As the economy is recovering, the demand for the housing should pick up.  However, it appears the housing recovery would not start until next year as it works itself out from too many foreclosures and short sales during 2010.  During the housing bubble, too many houses were built.  Since the supply side has been cut significantly, it may be the middle of 2011 the housing recovery may take off.

Historically, gold dips in March
3-5-10

May be this time is different, but historically gold declined in March last seven out of ten years according to Stefan Graber, a commodity analyst at Credit Suisse.  He predicts that gold will trade at $900 to $1,000 per ounce on March 31, 2010.  If this happens, it would be a great time to buy gold.

High inflation is coming
8-22-09

As we predicted below, by pumping a lot of printed money in the U.S. economy, the stock market has recovered significantly in a such short period of time.  Well, we would probably see our second prediction of the high inflation after a such questionable recovery.  Well, there can be many arguments whether of not we are really having a recovery as the unemployment is still growing and many sectors of economy are still struggling.

During 1979 to 1981, the CPI climbed at a 13% annual rate and long Treasury yielded as much as 15%.  It appears the inflation will hit hard on us within three years or maybe sooner.  In order to survive this dire situation, it will be wise to invest in the real estate, gold, commodities, equity stocks of oil and natural resources or other countries with a lot of natural resources as the value of the U.S. dollar will be decreased significantly from the printed paper money.

Different stock market
12-7-08

It is not easy to grasp what is really going on with the stock market and the world economy.  Reading many articles nowadays, it appears the stock market has moved into the undersold territory.  However, considering a change is taking place from an easy credit economy dominated by abundant leverage and cheap financing to a tight credit economy, a question arises as to how undersold the stock market is.

With an unprecedented test of market strategies by the Fed and Treasury by pumping ever more money into the U.S. economy, we would probably see a recovery of the stock market in the near future.  Nevertheless, this recovery may follow by another problem because of the ultimate effect of too much money that brings the high inflation.

As we posted on our web site that Warren Buffett published an article, "Buy America. I am" in New York Times.  Since then the stock market dropped further.  He has always said that he is not a market timer.  Therefore, he cannot tell the exactly when will be the bottom of the stock market.  He also said that he does not pay attention to the economy when he invests.  He pays attention to the business itself and the price he is paying.  Historically, he only called twice "Time to Buy" in the public, in 1974 and 1979.  Amazingly, both of those two calls proven to be exceptional entry points for long term investors: made tons of money for them.

Scary stock market and wrong moves
9-30-08

Watching the stock market nowadays really makes my head dizzy.  It has been going down almost every day with the problems of housing industry and financial institutions.

Some clients asked me what is going on and if their investments are safe.  Okay, let me walk you through what had happened.  It goes back about 7 years ago when the U.S. about to enter a recession.  In the capitalistic market, like the U.S., a recession is a part of economic cycle.  However, in order avoid the recession, the U.S. government (the Federal Reserve and President George Bush)  decided to lower the interest rates beyond necessary while the trade and budget deficits accumulating the significant negative balances due mainly to over-spending and a war with Iraq.

Artificially lowering the interest rates more than necessary has many side-effects.  First, it creates a lot of money because the borrowing costs are cheap.  People may feel rich with abundant money.  Second, since there are so much money with the same amount of goods, the inflation starts to go up (losing the value of money).  With a lot money, people start to take more risk in investments, especially financial institutions.

Right after the stock market crash, people turned to invest in real estate, especially in homes.  Home prices started to climb and people borrowed against their home, home equity loans, in order to sustain the consumer spending. Since the home prices were keep going up, banks and mortgage companies got careless in lending their money because they were generating a lot of fees (lent to even risky borrowers).  Nothing goes up forever.  When the housing bubble finally burst, just like the stock market burst in 2000; many banks, mortgage lenders and financial institutions got into big trouble holding onto the worthless mortgage and mortgage related investments.

Many smart investors know that the U.S. dollar is keep losing it value because the U.S. government is keep printing money (by lowering the interest rates).  So these investors invest in commodities (limited quantities vs. ever increasing printed "paper money) such as gold, oil, silver, corn, sugar, etc.

With this turmoil, I heard some people made a lot of money investing in the trouble financial institutions.  Folks, let me tell you something.  You must stay away from this kind of dumb and dangerous investing.  Investing is not that easy.  Most people who graduated from Ivy leagues, even with master and PhD degrees and working day and night, cannot beat the average stock market return (S&P 500 Index).  

Some people asked me if they should sell everything and get out of the stock market.  All I can say is that the stock investing is for the long term and I do not know anyone who can successfully time the market in a long run, including Warren Buffett.  If you have stocks in good companies or mutual funds that simulate the S&P 500, you should not worry too much.  Historically, the stock market return has been better than any other investments.  Generally, the stock market fluctuates and sometimes significantly.  It is dangerous to sell the stock holdings of good companies in the down market like this one.  This type of investing will guarantee to lose money in a long run.  If you had been riding the good stock market past few years, then you should ride out the down stock market, too.

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