“It’s the end of the world as we know it, and I feel fine…” — R.E.M.
Happy New Year! It’s 2012, so far the world’s still here (hooray! apparently it’s not supposed to end until December 21st…) and I hope you had a wonderful vacation.
I had a fantastic break—Kung Fu Grandma was here (my favorite person in just about the whole world), Santa was wonderful to my 5-year-old and 3-year-old, and Kung Fu Guy and I even got to pretend we were 20-something again, dancing for 8 hours straight at an awesome deep house party on New Year’s Day, the same party we originally “got together” at over twelve years ago. (We only go out dancing like this now about once per year, as we are actually old and decrepit and not 20-something anymore, but when we do, we tend to make it count!)
And that’s what today’s article is about…making it count! What are you going to do in 2012 to “make it count” for you? I have three specific steps I’d encourage you to take below.
2012 Economic Predictions
But first, I’m sure you’re wondering about our economy and my predictions for 2012. What’s going to happen in the world? Will the euro implode after all, or will the politicians and central bankers somehow Houdini themselves out of their colossal sovereign debt mess and/or kick the can down the road yet again? And what about the U.S. dollar? Will it finally lose is vaunted “reserve status” and become just another worthless piece of paper? Or will countries around the world continue to flock to our U.S. Treasury bills and bonds because we are seen as “less” messy than the rest of the world? Will the DOW end the year at 7,000 or 17,000? Will gold be $500 or $5000?
Enquiring minds want to know!
I am positive you would love for me to tell you exactly what the markets or specific investments will do in 2012 (and believe me, I will certainly tell you what I think will happen throughout the rest of this week), but unfortunately, no one (not even yours truly) has a crystal ball and there are no guarantees in this crazy world we live in.
And I have to tell you, it really doesn’t matter what anyone else thinks is going to happen…as an investor, the only thing that matters is what you think. Do you believe the guy shouting “Gold $800!” or the guy shouting “Gold $8,000”? Because when gold finishes the year at whatever it finishes at, the only one whose money has either multiplied or evaporated is yours.
So let’s first talk about you. What do you think? And just how do you go about making these predictions and assumptions so that you can make the most money?
Three Steps to More Money in 2012
I’m glad you asked! Here are the three things you need to do:
1. Determine your own world view,
2. Place your “bets”, and
3. Figure out what you will do if you are (gasp!) wrong (hedge those bets!)
Believe it or not, Step #1 is the most important and also the most difficult of the three steps. In order to determine your world view, you need to examine your deeply held beliefs, summon the courage to go against the grain and what “everyone” says is “true”, and study history to help you decide on possible future outcomes given what’s happened in the past.
For example, taking the gold market, you can find an equal number of people (smart people by the way…Warren Buffett is one who comes to mind immediately) who proclaim that gold is just a rock, earns you no interest, is currently a bubble popping (it’s undergone a correction lately), and serves no useful purpose in society other than jewelry use in India. They therefore conclude that gold will be $1000 or less by the end of 2012.
However, an equal number of intelligent, educated people (Jim Rogers, Doug Casey, and others, to name a few) believe that gold is true “sound money”, that governments the world over are racing each other to weaken and print their fiat currencies into oblivion and that there is no politically palatable solution to our current global sovereign debt crisis other than to print, print, print, thus proclaiming gold will rise significantly in 2012 (or at least over the coming years).
What Do You Think?
Whom do you believe? Whom do you trust? I happen to side with Doug Casey and Jim Rogers, after having done extensive research on my own on this issue, but that really doesn’t matter…what matters to you and your wallet is what you believe. If Doug Casey, Jim Rogers, and I are all wrong and yet you side with us having done no research of your own, you will be the one with the empty pockets, and you won’t care one bit if ours are also empty—that will be no consolation whatsoever! You must do your own research (and of course I will help you to the best of my ability!) and come up with your own conclusions…that is the only way you will be able to confidently tackle steps 2 and 3.
Once you’ve determined your own world view, it’s time to place your “bets”. I jokingly say “bets” here, but you’re really not gambling at this point (unless you skip Step 1!). Instead you are making a “speculation” or an “investment”—an educated, informed decision about what you think is most likely to happen in the future, given what’s happened in the past (hence the importance of history).
Once you decide, you choose the best vehicle for your speculation (e.g. physical gold, “paper” gold, gold stocks, etc.) and commit your money.
Equally important to Step 1 is Step 3, which is where many investors fall by the wayside. You absolutely have to consider what you will do if you are (gasp) wrong. If you believe that gold will end the year at $5000, but instead it ends at $500, what will you do? Are you convinced enough in your worldview that you will buy more at $500 and kick up your heels with glee at such a steal of a price? Or will you panic and sell at the first sign of a correction? Will you have planned and saved enough money in things other than gold (e.g. cash or bonds) so that if gold does drop in price you can be disciplined and buy more? Or will you go “all in” on gold because you are so convinced in the correctness of your worldview that you simply cannot conceive of being wrong? (I hope not!)
These are the steps I have taken over the past ten years to become a more successful, informed, sophisticated investor, and I guarantee that if you follow these “Three Steps to More Money” too, you will do better with your investing than you ever have done before. You will have the confidence to make the right choices and to sleep well at night if your “choice” undergoes a temporary correction. And that, as they say, is priceless!
I hope the Mayans have it wrong and that the world doesn’t in fact end in December, but just in case, I plan to make 2012 count. I hope you join me!
To your financial success,
—Kung Fu Girl