(Minor edit: 2001 was changed to 2011!)
The more things change, the more they stay the same. I'll start out my musings this week by admitting that I'm back to my old habits. I said I was going to write a part two and then didn't have the time. Oh well. This week I'll try and squeeze everything in.

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A great book
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I have been trying to make sense of the financial markets here in North America. Initially I turned to the people
who try to predict the future and while they have had some interesting ideas, I haven't been too comfortable following their suggestions (with the exceptions of owning some bullion). The most fruitful approach so far has been to step away from the business section and into history.

Recently I just finished a book called "The Great Depression... A Diary" by Benjamin Roth (ellipsis added by me).
The basic idea here is this... a young lawyer the town of Youngstown Pennsylvania started to keep a diary throughout the great depression. He has an interest in, and thus talks about, the stock market, monetary policy and politics. In fact, it's a bit like an old-fashioned SH blog.

The thing that drew me in wasn't just the topic, but just how similar that depression was to today. Yes of course it is common to have people rattle on about how we're in a 'Great Depression', but it is uncanny how many things that happened back then are happening now. This would be of mere academic interest except for the fact that by my estimation our current situation is only half way through the book which makes the second half a little more prognostic. I won't ruin things by saying too much more, but I will suggest that if you're the sort who reads a lot of business books and are looking for what to do in our current situation, this in my opinion, is an essential read.

There is even some humor when viewed through the lens of history. At one point in 1938 the author poses the question... "Just how long can deficit financing go on?!!" (Exclamations added.) Evidently, much longer than his wildest dreams. 

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On doing your own thinking.
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With one exception, I try to be well behaved on the BB's. However, even I can appear a little acerbic. There was a poster who keeps asking long in depth questions to the board and I suppose expects posters to answer them. After doing this for a few rounds, the questions just kept coming. Assuming that this poster is a real small investor with an interest in a particular stock I made a simple comment... "Do you own thinking.".

This wasn't meant to be mean, but to suggest that doing lazy DD by asking BB posters every question you can think of is dangerous.

If you don't think for yourself, you'll find that you make the same mistakes over and over and never learn anything. Stockhouse is a great service to people, but I don't make any serious decisions by it. It's a tool for me that gives me leads and lets me test out ideas. I even get to practice my writing. But do I pile money into something just because some anonymous poster says I should? Of course not. That's why I usually say at the end of most posts that you shouldn't even trust me (I think I'm trustworthy but hey... you don't know me... for that matter, how many squid do you know?).

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An update on the (in/de)flation trade.
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In my last post (http://www.stockhouse.com/Blogs/ViewDetailedPost.aspx?p=118178), I outlined a trade that allows me to invest in a way that protects me against inflation and deflation. The gist of the idea involves putting high quality dividend paying stocks into a margin account and using small amounts of margin to buy bullion ETFs. In a cash account one would keep small cap mining companies and those in the materials sector in addition to enough cash to cover the margin debt. For the reasoning behind this, see the post I referenced above.

This last week, I started using margin to purchase some higher yield oil producers. The amount of margin for the moment is only around 5% of principal. The dividends from the margined stocks more than covers the margin interest, and the dividends from the rest of the portfolio make the principal payments. This week I may start to purchase physical bullion ETFs. As each month goes by, more and more shares get purchased as dividends pay off my balance. I would have bought gold this week but I think there will be a pull back after the immediate US debt situation is resolved. (Don't get me wrong, long term they are in trouble but short term things will resolve.)

The cash just sits there in the other non-margin account waiting for some black swan to sink the mining juniors. The juniors I hold are all shorter term stories and are OK for me to hold in this situation. Just remember that quality counts here. Buy the best of the best of your ideas only.
 
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Some great weekend listening
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The case for QE3...

By far the best weekend financial radio.

http://www.financialsense.com/financial-sense-newshour

If you know of anything better... just comment below.

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A quick note...
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I love getting legitimate questions and comments about almost anything. If I think the question is sincere, I will answer 100% of the time.

If your the sort of poster who spams blogs with off topic posts pumping stocks... I've just discovered that I can erase comments. Thus... if you want me to comment about a specific stock... ask a question, keep it short, and for the moment keep it to junior and small cap miners, oil and gas stocks, and stocks I have talked about on my blog.

If it trades at $.10 and has 500 000 000 shares out I don't care if it will be profitable in two years I'll probably take a dim view.

If it's a stock that "everyone" seems to be talking about on blog posts, BB's, and inboxes it could be a P and D scheme. Likely I'll give it thumbs down.

Use these as a guide.

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Closing and Disclosure
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Anyhow... I think I've said enough so good luck and happy hunting.

A.

Do your own DD from reliable third party sources. Don't trust my words as if they were Gospel... while I like to think I am an honest Cephalopod, I am not a fiduciary (relative to you the dear reader) and thus you should not act solely on my advice. Take anything I say 'with a grain of salt'.