So, how bout that that economy?
I wish I wasn’t right, but all of the indicators seem to be pointing in some direction. We need to prepare ourselves for what is clearly coming.
One thing we can look at is where we want to invest. As the market develops, the law that people will only be able to consume as much as they produce will take hold. The question is, where are these producers? The developing world holds these producers. They are going to drive a lot of future buying. The question is, what do they want? They are manufacturers, so what they really need is the natural resources required to make whatever they are making. The feedstock for almost all processes is oil, for both plastics and energy. Copper is also very important, for infrastructure and also for everyday electronics.
As the world tries to get more energy efficient, we are going to move to more and more electrical devices, whether it is hybrid or plug in cars, or more power generation capabilities. These will continue to consume raw resources like copper. Also, as we try to wean ourselves form fossil fuels using biofuels, we will be pulling food off the market to use to convert to energy. Commodities will continue to be strong over the near future. Gold and silver are surging, supported by people fleeing the dollar.
One big problem coming down the pike is that this is a self fulfilling prophecy. As the dollar drops, it will lose its status as the world’s currency. People will flee the dollar, causing even more pronounced drops.
How can we reduce our exposure to the dollar? I think some of the best choices are foreign stocks. A friend at work mentioned investing in the Australian dollar. If you are going to do that, why not improve it? Why not invest in quality Australian companies, many of whom are heavily involved in commodities, and very close to the hungry Asian markets. Canada also has a healthy economy that is based on producing real goods that people in the world are hungry for. Although FCX is headquartered in the US, it is truly worldwide, and is involved in commodities. I still love FCX.
I have been talking about the approaching grinder of recession and inflation over the past few months(here, here, here, here). In order to lessen the impact, we needed to face it squarely and work through it. The average citizen doesn’t have enough forethought not to live paycheck to paycheck. How can we expect them to plan years (gasp) into the future? Savings rates are poor on both the macroscopic and microscopic scales. Government policy is based on short sighted placating of the masses. People are getting more and more lazy. I can sometimes feel myself getting infected with a sense of entitlement. It is pushed into us from so many different directions. The idea that we should be able consume resources based on are ability to produce is going by the wayside. At work, they are astonished that I just don’t fly out and buy everything.
People in Washington could really help by stopping all their help. Just get out of the way. Seeing politicians can’t stand to do this, lets just try to isolate ourselves from the problem so that amidst the ocean of hubris we can still have a few ships floating along. I would rather be on one of those ships.
Good luck all.
Normalized Paranoia 
