I am not really sure why I haven't posted anything here by Mr. Rogers prior to this.  From what I can tell he is one of the smartest people in the room.  His expertise is more in the area of commodities than equities, but that would make him an expert in commodity companies at the very least.

It would seem like common sense, but politicians and even too many economists believe the solution to too much debt is more debt.  Mr. Rogers disagrees.  He also talks about when the economic collapse will come, rather than if it will because of the snowballing debt world wide.  He states that competent people are supposed to be allowed to replace the incompetent ones who lost all their money.  Failing to do so, he says is "Absurd economics and absurd morality."  It reminds me of the author Stephen Covey who used to say we can't talk our way out of things we have (mis)behaved our way into.

Do you think Europe will survive intact?

Old Scars

Too Little; Too Late
Most people I talk to about their investment portfolios seem to have at least one thing in common.  They have an investment they purchased some time ago which is just sitting there, not contributing to their returns.  Usually, it isn't hurting them any longer, either.  That is because it sank in value, big time, a long time ago.  Now, there it sits - a reminder of that big loss, and too small and unimportant to do anything about - not even sell it.  Why bother to sell it?  Perhaps, one day, it might actually appreciate in value.

Hoarding
We can hope all we want, but it makes for a poor investment strategy.  Sure, the damage has, largely, been done, but why not put that money into something useful?  The reason is simple.  We raise money by selling the investments that are in the black, and we hold onto the ones which are in the red.  Perhaps it provides a little insight into hoarders who can't bring themselves to throw anything out after suffering a catastrophic loss in their lives.

Back To Even
We all have the same tendencies.  When we aggregate these tendencies into market-wide behaviours, trends begin to emerge.  Technical Analysts refer to certain points on the chart as "resistance", and "support".  These points exist on the charts for the very reasons I have just described.  If a large number of people bought the same investment at a level where it started to lose value, that point will later become a point of resistance, since human nature is to sell as soon as we get our money back.  Normally, we don't care how much higher it could go - we were wrong once, so better to take the money and not get greedy, thank you very much.

Depends On Your Viewpoint
When an investment drops to a level where a large number of people previously watched it reverse, they might even be inclined to buy more, this time around.  It is like the investment is now on sale.  These become areas on the chart where support for the price is established.  Once violated, support levels can turn into resistance, and resistance levels into support.

When To Buy
Technical Analysis is not just a bunch of lines on a chart.  There are good reasons to explain why things happen the way they do.  These are only two very basic examples.  Personally, I don't rely on Technical Analysis to determine what to buy - I use historical data and earnings forecasts to do that.  I use Technical Analysis to tell me when to buy once I have determined it to be on sale.  This doesn't work so well when buying commodities, but there are other ratios we can use to see, historically, if they are cheaper than normal.

Moving On
Long story short - I  ask myself, "If I didn't already own this loser, and knowing what I know today, would I still buy it?"  If the answer is no, then it is fairly obvious it has outstayed its welcome.  Time to move on and look for a better use of whatever is left.  Otherwise, it brings to mind the definition of insanity which refers to doing the same thing over and over, again, each time expecting a different result.

Any such losers in your portfolio?  Nortel, anyone?

Limits To Commodity Growth?

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Michael Casey thinks the rebound in the U.S. dollar, and the declining equity and commodity markets are all related.  He refers to a "short squeeze" which is how I described it myself, last week.  As Qualitative Easing (QE2) comes to an end, I think people are anticipating a rise in interest rates.  Rising interest rates are bad for markets and good for the dollar.

Do you see the U.S. dollar continuing to go higher?  Do you think commodity markets have peaked? 

Commodities



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Volatility
Unlike investing in the stocks of companies which we can calculate a value for, commodities are purely a technical play.  Still, because it involves the perceptions of many, many market players, trends inevitably show up.  The current volatility creates many opportunities, but ones mostly of a shorter duration. 

Inflation/Deflation
Some advisors see gold as a long term hedge against inflation.  Despite the rise in energy and food prices, I am not worried about the effects of inflation on my portfolio as long as unemployment remains higher than normal.  This combined with the baby-boomers turning into savers from spenders would suggest demand, in general, should be lower than what we have experienced over the last couple of decades.  Until governments world wide have dealt with the massive debt issues, I remain concerned about the prospect of deflation, as we just witnessed in the prices of commodities as a little deleveraging took place. 

Commodity ETF's
Many Exchange Trade Funds (ETF's) based on commodity futures contracts (as opposed to ETF's based on the shares of companies that produce the commodities) have become very popular and seem to be having an effect on commodity prices.  Do you invest in commodity ETF's?