Home > Investment tips, Predictions for 2010 > Karmaisking’s Trade of the Decade

Karmaisking’s Trade of the Decade

Having thought through Bill Bonner’s Trade of the Decade, I don’t like it.

The “market” for US debt is a controlled market.  If bond prices fall, the Fed simply buys its own issuance.  So yields can stay low indefinitely.  The market is rigged so analysing supply and demand dynamics makes no sense in this market.  The US dollar itself may tank, but I don’t see bond yields being allowed to spike up.  A doubling of interest rates any time in the next decade would spell disaster given the debt loads most corporations and individuals in the Anglo-sphere now routinely carry.

A more interesting question that Bill Bonner doesn’t seem to recognise is a demographic one.

I have to ask the question “What do Old People do?”

With a massive wave of ageing Baby Boomers retiring this coming decade, their investment decisions will still matter a great deal.

I suspect they’ll gradually get out of stocks and into annuities and other bond-like instruments for security.  They’ll also curb their spending and do what old people generally do – fuss around the supermarkets comparing the discount prices of oranges and milk and incontinence pads.

Given this, I tend to think that stocks will continue to go down, bonds will hold up with remarkable resilience, and soft commodities will continue to climb.  There will be fewer able-bodied people in the West pulling stuff out of the ground and growing food, but old people will still want to be fed.  Real estate in hotter climes will continue to go up and real estate in colder climes will continue to go down.  Old people tend to feel the cold and seem to like the heat, so they will tend to sell up and move to where their arthritis doesn’t hurt as much. 

So, my Trade of the Decade is:

Sell stocks.  Indiscriminately.  Doesn’t matter where.  Doesn’t matter what.  Just sell them or short them or get out of them.  Get ahead of the Old People in cashing in your retirement funds.

Buy commodity futures (soft commodities in particular).  Buy retirement villages in hotter coastal areas that were vacation destinations in previous years.

Hold short-term bonds and cash.  Hold (don’t accumulate) gold and silver.

I think these trends will continue well beyond 2010.  Why go against a trend when it continues to make sense?

Sell stocks.  Buy commodities (especially soft commodities).  Simple.

 

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