What to do...what to do....
So I've sold my ARU for 76.4% profit. Going to flog my ALK tomorrow for 60% profit. Thats enough for holding them for 6 or 7 weeks. Lets be realistic here, yes they could be a potential ten-bagger but its all about compounding it 70% per annum, not making one miracle ten-bagger.
But naturally this draws my thoughts to what to do with my casino winnings, longer term (bearing in mind my wish to pick the next stock to go double in a month). This then brings the argument back to the macroeconomic and what's going on in the wider financial world; I am not so naive as to believe that a bubble in rare earths will last forever nor that copper stocks which are doing so well for me right now will forever treat me perfectly, nor that either is divorced from the wider problems in the world. By the same token, I do hav e my mojo back, the animal spirit which allows me to take risks, get it right on average, and capitalise on those risks. Maybe not a Master of The universe, but certainly an apprentice.
One thing occurs to me, as the US embarks on quantitative easing again to stimulate its economy, and that is the amazingly intractable position in which the UK finds itself, and the UK is simply symptomatic of the West.
You see, the UK economy is, to now, 54% dominated by the public service. The UK economy is running at a structural governmental budget deficit of 12.5% of GDP, falling to 10.4% with the current contentious budget cuts about to decimate (in the strictest sense) the UK public sector.
Now, it is apallingly apparent that when the government accounts for at least half of the economic output in your country it is possibly too large; either taxes are prohibitive and deleterious to free enterprise, or you run a massive structural deficit. The latter is the case throughout Europe.
This can be fixed several ways, by trimming the public service and services, by raising taxes, or by growing out the influence of the public sector on the GDP. The first is under way, but is limited in its real impact on GDP growth because as you cut the public service expenditure, you also cut growth (a lesson, perhaps, for Joe Hockey). Secondly, because the economy in the best case scenario stays static and does not grow, the onus for growth falls upon the private sector which comprises 50% of the economy.
If you take the average growth rate of a growing industrialised first world Old Economy at 2.5%, its weighting in the UK of 50% of the economy means that as a whole the UK will only grow 1.25% if the private sector does its job efficiently. If you cut the 12.5% structural deficit to 10% it takes 1.25% out of the economy right there, so you are basically banking on a year of zero growth, if not a second recession already being banked by the UK government.
Or, you can inflate your way to safety, which reduces your interest bill significantly. Remember that the Uk has 160% of GDP as public sector debt; at even 5% interest this still equates to 0.75% of GDP being spent on debt servicing. A few years of 10% inflation can realistically deal with some of this debt in real terms going forward.
So. It seems we'll be stuck for at least 3-5 years with moribund growth if not a cyclic semi-recession of multiple dips going forward; we'll see quantitative easing if for no other reason than to inflat eout public sector debt.
So how does one deal with this, in investment terms? Clearly owning physicals (gold, property, metals) is one way forward. But so too may the option of buying cheap assets overseas based on the high Aussie dollar, and banking on an eventual fall back to the 60-70c range.
Either way, I'll be happy to make 10% p.a. on my shares. 70% in a year is nothing to sneeze at.
But naturally this draws my thoughts to what to do with my casino winnings, longer term (bearing in mind my wish to pick the next stock to go double in a month). This then brings the argument back to the macroeconomic and what's going on in the wider financial world; I am not so naive as to believe that a bubble in rare earths will last forever nor that copper stocks which are doing so well for me right now will forever treat me perfectly, nor that either is divorced from the wider problems in the world. By the same token, I do hav e my mojo back, the animal spirit which allows me to take risks, get it right on average, and capitalise on those risks. Maybe not a Master of The universe, but certainly an apprentice.
One thing occurs to me, as the US embarks on quantitative easing again to stimulate its economy, and that is the amazingly intractable position in which the UK finds itself, and the UK is simply symptomatic of the West.
You see, the UK economy is, to now, 54% dominated by the public service. The UK economy is running at a structural governmental budget deficit of 12.5% of GDP, falling to 10.4% with the current contentious budget cuts about to decimate (in the strictest sense) the UK public sector.
Now, it is apallingly apparent that when the government accounts for at least half of the economic output in your country it is possibly too large; either taxes are prohibitive and deleterious to free enterprise, or you run a massive structural deficit. The latter is the case throughout Europe.
This can be fixed several ways, by trimming the public service and services, by raising taxes, or by growing out the influence of the public sector on the GDP. The first is under way, but is limited in its real impact on GDP growth because as you cut the public service expenditure, you also cut growth (a lesson, perhaps, for Joe Hockey). Secondly, because the economy in the best case scenario stays static and does not grow, the onus for growth falls upon the private sector which comprises 50% of the economy.
If you take the average growth rate of a growing industrialised first world Old Economy at 2.5%, its weighting in the UK of 50% of the economy means that as a whole the UK will only grow 1.25% if the private sector does its job efficiently. If you cut the 12.5% structural deficit to 10% it takes 1.25% out of the economy right there, so you are basically banking on a year of zero growth, if not a second recession already being banked by the UK government.
Or, you can inflate your way to safety, which reduces your interest bill significantly. Remember that the Uk has 160% of GDP as public sector debt; at even 5% interest this still equates to 0.75% of GDP being spent on debt servicing. A few years of 10% inflation can realistically deal with some of this debt in real terms going forward.
So. It seems we'll be stuck for at least 3-5 years with moribund growth if not a cyclic semi-recession of multiple dips going forward; we'll see quantitative easing if for no other reason than to inflat eout public sector debt.
So how does one deal with this, in investment terms? Clearly owning physicals (gold, property, metals) is one way forward. But so too may the option of buying cheap assets overseas based on the high Aussie dollar, and banking on an eventual fall back to the 60-70c range.
Either way, I'll be happy to make 10% p.a. on my shares. 70% in a year is nothing to sneeze at.