Clue Jr.–Finance Edition
August 10, 2011
IVO Terminates…
September 15, 2011

Gobi Vacation

Every year, near the end of August, I go on the family canoe trip. Normally, it’s been in the Adirondacks, convenient for my parents, less convenient for me. This year, we decided to mix it up and go canoeing in Lake Baikal—or at least that was the plan. Let’s just say that the Russians take their visa process very seriously if you are an American living abroad. So, for a complete change of pace, we decided to go to the Gobi Desert instead. The barren Gobi is quite the juxtaposition from the lush Adirondacks.

I really enjoy getting away from the markets and my screens. It lets me focus my attention on the bigger picture. No one ever makes much money trading the short-term moves, the big money is made by finding the trends and making sure you don’t get shaken from them. On this trip, I had far more questions than normal—the future is murkier than last year. In no particular order, these are some of my thoughts—and some of the questions I kept asking myself as we crossed hundreds of kilometers of absolutely flat expanse in the Gobi.

Gotta get there somehow…

One of three things will happen in the heavily indebted Western World (including Japan);

1-They’ll do nothing and let things collapse, in which case, most asset classes will drop substantially in price. This is unlikely, but with political gridlock becoming the norm, I wouldn’t rule it out.

2-They’ll continue with small semi-annual doses of QE like we’ve already witnessed in the past 2 years. In this case, asset prices probably muddle along around current prices within an upper and lower band. This is the most likely scenario.

3-They’ll come to the market with a very heavy dose of QE in an attempt to inflate all asset prices and create another bubble to bail out the last two bubbles. In this scenario, everything goes up in price. This is still a low probability scenario—at least at this juncture.

Mama Kuppy asks for directions… It’s not a family vacation until you’re lost a few times….

No matter what happens, commodities will do well, and precious metals will do better. Therefore, I don’t really care which of the above happens—I’m positioned for it. I need to ignore the short term volatility—which will likely increase substantially as the various political groups around the world posture for the media and voters.

Speaking of volatility, why did I as a value investor, suddenly decide that I knew the correct price and shape of the VIX curve? Thus far, IVO has been a very expensive lesson.

Was this guy short volatility?

Energold’s business really is doing amazingly well. I’ve come as close as is prudently possible to having an all Energold portfolio. Why do I feel like I should buy even more shares?

Why do so many investors keep focusing on finding the bottom in the Western stock markets? There are so many places seeing massive economic growth. Why don’t they focus there? Even if you catch the bottom in the Western Markets, is there really enough upside to justify the effort? It’s been a while since I saw a really interesting company at a cheap price in America.

We got the car there, somehow, we got it out of there too…

Mongolia sure is an amazingly pretty country……

Since supercomputers invaded the stock exchange a few years back, there are fewer and fewer opportunities in the public markets. The real interesting stories are either in the private markets, or the obscure public markets. Is there a more intelligent way to focus on the more obscure markets of the world?

For the past year, I’ve focused so much attention on Mongolia; am I missing other really amazing growth stories?

Why does MERC trade at two times cash flow? It is one of the cheapest companies in the market. Unless the NBSK cycle turns dramatically lower soon, these shares are going considerably higher.

One of the few watering holes in the Gobi.

A herder with his goats….

What’s the next big trend? It’s out there if you look hard enough.


Your author searching in vain for a cell signal….


All photos courtesy of Mili Martinez. You’ll know it’s one of mine when my thumb covers half the lense….


Categories: Travels
Positions Mentioned: none

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