The Dark Side of Investing … for Those Who Don’t Understand

by Nigel Bolton-Shaw on October 20, 2012

Over at the Wall Street Journal we find an article entitled, “The Dark Side of QE3 for Investors.”

It explains that the “Federal Reserve’s latest round of mortgage-bond purchases is lowering borrowing rates … Banks, for example, are seeing net-interest margins—the difference, or profit, they make from borrowing and lending money—come under increasing pressure. Fears on that front have taken a toll on shares of Wells Fargo and BB&T, among others.”

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REITs have suffered as well. The Journal uses the example of Annaly Capital Management, “the largest mortgage REIT based on market value,” that has seen its value fall 7%.

Annaly’s dividend yield could fall significantly. Meanwhile, mortgage-refinancing activity gives investors their funds back sooner than expected. They will reinvest at lower rates.

And yet … if people really focused on what’s going on, the market might not seem so “dark.” The Federal Reserve and other central banks have printed trillions, and so much money is sloshing around in the system that new investment opportunities are developing daily.

There are many opportunities within this artificial – and difficult – business cycle. Now that central banks have printed so much money, price inflation will be a constant factor, with its attendant investment benefits.

Precious metals, commodities, real estate and certain stocks (both long and short) are viable options for those who wish to capitalize on central banking induced volatility.

One needs to understand about monetary economics to figure out what’s going on today. There are plenty of investment options but one needs to know where to look.

It is ignorance that is not an option. If one simply subscribes to the common (mainstream) investment wisdom, one may see his or her portfolio and pension decimated.

But for those who understood the business cycle, and bought gold and silver back in the early 2000s, the 21st century has been a kind and even beneficial era.

Ignorance and lack of financial literacy stands in the way of wealth creation. Seek out education and people who are in the business of providing realistic investment advice. Avoid cable TV financial pornography. Read the alternative Internet investment media.

Visit Global Speculations on a regular basis!

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