Monty Pelerin makes some interesting observations about Gary Shilling’s investment advice, saying that it works when things are normal, but the global financial situation is anything but normal today. Indeed, I believe that the signs of hyperinflation are now here, and I’m not the only one. Even some of the mainstream papers are starting to see it (e.g., the Globe & Mail). Indeed, I have virtually no fear now that my portfolio is going to plunge like it did in 2008–I have the Bernanke put to count on. If asset prices go down, he’ll just monetize more debt and it’s back to races.
So I made this comment on Monty Pelerin’s article:
I follow a blog whose author likes Gary Shilling. His portfolio was static in 2009 and he didn’t bother telling us his returns in 2010. By contrast, our own portfolio is up high double digits (See DIY 2010 summary). Whose advice am I following? Jim Rogers, Marc Faber and Peter Schiff–long commodities, esp. gold and oil. This is an anti-inflationary portfolio and it is already up handsomely. I don’t think we have to wait for high inflation or even hyperinflation. I believe that hyperinflation is already here.
Look at the international situation. (BTW, I loved the video of Jim Grant that you recommended.) The Chinese and others who hold US treasuries are scared to death of the devaluation of the dollar, but they can’t dump them all at once or their hyperinflationary fears become instantly realized. So they are buying up assets, diversifying their holdings. Billions of Asia dollars have been sunk into the Canadian resource sector, while the Chinese have essentially ended their net purchases of US treasuries. So how does the Fed react to this? Buy, buying the debt, and monetizing (pun intended).
When the bubble finally hits the commodities market–and I don’t think there is a bubble yet by any stretch of the imagination since Americans can still afford gasoline and food–I think I will dump the commodities and purchase a farm. But until them, I’m still very long on Canadian resource companies, especially junior oils. The Chinese want what Canada’s got, and they are the most liquid players in town.
See also http://www.beatingtheindex.com/weekend-edition-expect-more-energy-deals-in-2011/
The Righteous Investor 
I found your article very interesting and I share a similar outlook on the American economic meltdown. However, I do have some questions? I would like to know of any forums or publications that will allow me to do some DD on junior oil companies. I would appreciate if you could head me in the right direction. Also, I would like to know your overall opinion on the stock market. Most of my holdings are precious metal juniors (TSX.V) but I am afraid that all this zombie money into the market has inflated all markets. Do you think it will collapse with the dollar?
Most of the Canadian junior oil companies have websites which give the companies’ perspective on their holdings, projects, reserves, rate of production, debt, etc. My own strategy has been to find junior oils that have vast land positions (TOL) or low price to book ratios, preferable fractional book to price–which essentially means that you get the company for less than shareholder’s equity. This is becoming rarer than it was a year or two ago. I’m getting most of my recent ideas about junior oils from Mich at http://www.beatingtheindex.com, and I also like Devon Shire at http://valueinvestorcanada.blogspot.com/ . A couple of the best names in the business are Keith Schaeffer (http://oilandgas-investments.com/ most of his stuff is on the paysite–so I don’t use it) and Eric Nuttal who appears often on BNN and is a general know-it-all in the business and has a profound effect on share prices every time he’s on TV.
Do I think the dollar will collapse? Man, the greenback is barely worth anything as it is. But we are essentially facing hyperinflation already, it’s just that the USA has been able to export its inflation to other countries, because the greenback remains the world’s reserve currency. But I think it is probably a matter of months now before inflation, perhaps hyperinflation, really hits the US. The best blog for this subject that I follow is Monty Pelerin (see side bar), but I also find Gonzalo Lira insightful. Do you have a blog?
I don’t have very many metals: just Barrick, Gold corp. Detour Gold, Lakeshore Gold, and New Gold. But my metals trade (selling puts) is a significant part of my overall portfolio.
Cheers.
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