I try to take a longer term approach to investing and if you read my post on Kondratiev and the follow up post on K-waves, then you know that I give some credence to his theories. It only makes sense that bubbles arise out of human emotion and the bust that follows would cause those same individuals to swear off investing in that particular asset class for several years.
In fact, I read an article last night about the lack of interest in stock mutual funds following this recent “lost decade” and someone made the comment that investors were leaving the market and not coming back.
Because I believe that K-waves are real and the description of winter corresponds to the situation that is occurring now, then looking toward assets that do well in spring would seem to be the logical choice. Also because the K-waves are typically 40-60 years in length, it would seem that most of the seasons would be about 10-15 years in length as well.
The gold bull (gold does well in Kondratiev’s winter) started in 2001 so I would estimate that we are more than halfway through the gold bull at this point. I will be offering further comments about gold in a future post.
Preparing for Spring
Since it is a little late to really be thinking about winter, I think the best thing is to begin thinking about spring. So what investments do well in spring? Well, think about the bubbles that burst in the last decade. Stocks and real estate come to mind. These are the investments that should do well as the business cycle begins to spring to life and gather momentum.
Personally, I think I have about 4-7 more years before these investment classes begin to take off. So I plan to pay off as much debt as possible as quickly as possible to improve my balance sheet in order to purchase more real estate when prices are low. I already have some rental houses from the past decade and would like to own several more but credit is tight so I will need to have a pristine balance sheet when credit begins to loosen up.
In my area, there is still quite a bit of real estate supply available so I think it will take some time to work through it all. If interest rates increase, that will only make it more difficult for those who would marginally be able to afford to purchase in the first place. My market will always have renters so I don’t think it will be a big issue. I just want to make sure that the real estate I purchase will have positive cash flow.
As far as stocks go, I will continue to invest in stocks through my retirement plans since I have a long term horizon of almost 30 more years. I suppose there isn’t anything fancy of magical about my investment thesis over the next decade. My plan is to continue to save as much as possible in order to pay off some debt and add to my real estate holdings while continuing to invest in stocks through the 401(k).
I do not, however, plan on investing in bonds since interest rates have almost nowhere to go but up. Bonds have done well for 20 years so it is time for their season to end. Will it be this year or next or maybe 2013? I can’t be sure but I do know that when interest rates start to rise, bonds will fall and the $1 trillion that have flooded bond funds over the last decade will begin to leave and need a home. I believe that home will be stocks and real estate. And spring will be just warming up.
Oh my, I can’t believe how busy I have been recently. We have new puppies in the house and am trying to prepare for my eldest to head back to college. I had to work late everyday this week and how’s this for a crazy Saturday:
I got a call from a friend at 9 am to sub in for a game at their one pitch softball tournament starting at 10. Played softball and got home about 10:50, took a quick shower (cause I was full of dirt) and left the house at 11:10 to go work out with Vee at 11:40. Got home at 12:50, ate lunch, am writing this for the next 20 minutes, then I have a 2:00 tee time, cook-out at 5, and going from there to listen to a colleague playing in a band at 10 pm. Fun day, but busy.
Anyway, you aren’t going to learn anything from me today, so let’s go straight to the links (BTW we won softball 10-6).
Nickel by Nickel: Andrea is working on losing weight and has done well with the diet, but needs to pick up the activity level.
My Personal Finance Journey: Not one to procrastinate, MPFJ is thinking about saving money this winter and offers these tips.
The College Investor: Robert offers this great review on the Chaikin Power Gauge Stock Rating Widget. This is one kick-butt little widget. You have to check it out.
My Multiple Incomes: Robert also has great advice on getting more page views from your search engine visitors. I need more search visitors first, but definitely more good tips.
So Over Debt: Andrea recently changed jobs and was shocked by her first paycheck.
Fat Guy, Skinny Wallet: Fat Guy writes on a hurricane preparedness guide. Good information for any natural or man made disaster.
The Penny Hoarder: I know that I will be losing money, but I still want to try to make some money in the fantasy football league I will be joining this year. Maybe I should be the commish, eh?
InvestorzBlog: Tony summarizes the week in stocks. It was a crazy week. Love the graphics on this post.
Spruce Up Your Finances: A wonderful summary on how to report hobby income on your taxes. I will be needing this information for blogging.
The Debt Myth: I hate being in debt up to my eyeballs. Learn how to manage this type of situation.
The Saved Quarter: A wonderful post about term life insurance. I am a big believer in term life insurance and am actually worth more dead than alive.
The $60K Project: Sarah talks about cutting down on expenses for eating out. This is a potentially big area to cut.
Prairie Eco-Thrifter: Miss T. discusses 15 ways to reduce energy costs. These are great tips.
Money Talks: Ashley wonders about the housing market based upon her cul-de-sac and the number of accidental landlords. I suspect there is more housing supply than meets the eye.
Enjoy the links. I didn’t get this finished before the cook-out so I am writing at 11pm. It has been a long day. Good night.
I hope I am not too sore tomorrow to get started on another post.
I am honored to say the least that I have been nominated to participate in the Seven Links Project. This is where I have to identify those posts that I have written which fall into 7 different categories. I would like to thank Beating the Index and The Passive Income Earner for thinking of me even though my blog is less than 3 months old. Little House in the Valley also thought of me, but asked if I had already been picked.
The Seven Links Project
1. Your Most Beautiful Post
I hadn’t really thought of judging my posts as most beautiful but I think I would have to pick Four Ways to Make Money in Real Estate. With the real estate bubble in the process of exploding, I think it is worthwhile to remember that it is possible to make money in real estate in other ways besides capital appreciation. Positive cash flow is always a good way to make money.
2. Your Most Popular Post
This was pretty easy since all I had to do was go to Google Analytics and find that since I started Cash Flow Mantra, My Apologies to the Economy has gathered a full 2.9% of all the views on my site. The interesting thing about this post is that it didn’t require any research and was written in about 15 minutes while I was in an interesting mood.
3. Your Most Controversial Post
First, I try not to stir up controversy. I don’t think the post itself was all that controversial nor was the reaction to it, but it does touch on a somewhat controversial topic in personal finance. New Car vs Used Car-Throwing My Hat into the Ring brings my personal point of view to the topic in what I would think is a non-confrontational manner.
4. Your Most Helpful Post
I think the most helpful post has been How a Dead Russian Guides My Investment Philosophy. I know that several comments were made indicating that the reader learned something new. I hope that they can take some of the information away that led me to purchase gold and silver in the mid-2000′s. These purchases have been my most successful. I think identifying the longer term trends is the most important part of investing, and I would hope this post helps other do just that.
5. A Post Whose Success Surprised You
That would have to be My Mom Thinks Hedonics are Crap. I have been on an inflation kick recently since I am seeing the cost of gasoline and food (especially Velveeta) go through the roof. Everyone knows that the budget is getting squeezed but the government continues to report minimal levels of inflation. I guess it just hits close to home.
6. A Post You Feel Didn’t Get the Attention it Deserved
This one is easy. Saving Money is Good for the Environment was my fifth post and got absolutely no comments at all. I think part of it was the fact that it was so early and I had so few readers at the time. I am sure that many of the frugal bloggers feel the same way. About 3 weeks ago, I took my aluminum cans in for recycling and got $59. Yippee!
7. The Post that You are Most Proud Of
I am particularly partial to How to Turbo Charge Dividend Income with Call Options. I feel this way for several reasons. First of all, there are a lot of dividend investors so I think this information is incredibly useful. Second, I am actually doing this in my retirement account with my recent purchase of Intel stock. I plan on writing another post to detail those transactions in the future, but I think that the ideas are something that could used to generate more cash flow out of a stock in addition to the dividends.
I think this was a fun project. I enjoyed looking back through what I had written. Hopefully, some of my new readers will get a chance to look back and see what they might have missed. I think it would be fun to do this annually, so maybe next summer, I could do it again.
Finally, the last part of the project is to nominate 5 other bloggers and keep the “chain” going. It seems like most of the financial bloggers that I read have already participated so I will jump genres and move to nominate some of the bloggers that I read who work to make money online.
Felicia at No Job for Mom. She is incredibly professional, driven, inspiring and successful. I have learned a lot from Felicia.
Master Dayton at Master Dayton. He has been very encouraging to me over the past few years as I struggle online.
Lis Sowerbutts has a funny name and a great writing style. She is living the dream of making money online building up from nothing to thousands per month.
Ruth from Web Career Girl has been very supportive during my time writing. She is a faithful reader and has developed her own method of making money online. She wants to travel while making passive income. I bet she will be able to do it.
Finally (but not because I think any less of her) is Deanna from Write Moms. She is another supportive individual who is a professional author and has published print books. She is writing online and enjoying the experience. I always enjoy her comments at my other blog.
I am sure that some of them read this blog since they are supportive of my online efforts. I might have to contact some as well. I would certainly look forward to seeing what they all have to say about the Seven Links Project. I know that I would enjoy learning a little bit more from each of them.
I haven’t been able to post as much recently since I spent the past few days working on a new site with my daughter. We have some Cockapoo puppies that are not quite 3 weeks old, and my wife wanted a site to advertise and show the puppies. So, I have been helping with that. I am sure that some of you will want to see the puppies, so I am including a link to AvonCockapoos.com.
I hope to be able to get back to posting on a more regular basis and get my investment philosophy for Kondratiev winter up soon.
Feel free to comment on the puppies (especially if you would like one) or the site.