Greg's Note: The financial crisis that has been going on over the past year is beginning to flesh out some key players. There are the losers in the deal that could not see the bad times coming. Capital & Crisis' Chris Mayer is now concerned with the innovators that can take advantage of the solution process. They're not always easy to spot, but if you can, there's some money to be made. Send your comments to greg@whiskeyandgunpowder.com. Whiskey & Gunpowder
While in Vienna last month, I grabbed hold of the international edition of The Wall Street Journal. Over a classic Viennese breakfast of coffee, a boiled egg and pastry, I stumbled across an interview with Ted Forstmann, titled, "The Credit Crisis Is Going to Get Worse." I hadn't seen Forstmann's name in years. He once lorded over one of the world's most famous private equity firms, Forstmann Little. For a time, it was, as the Journal notes, "the most successful private equity firm in the world, renowned for both its outsized returns and its caution." When things got a little too crazy, Forstmann chose not to play. For two years, he sat on $2 billion of uninvested funds. That's discipline you don't find often, in any era. ~~~~~~~~~~~~Special~~~~~~~~~~~~ Finding New Energy Just Got Cheaper For the next few hours, you still have the chance to get in on the ground floor of exciting new energy creation. And you can do this for a very cheap price. It's called "Slow Volcano" energy, and your chance to become an early investor without spending too much money expires tonight at midnight. Don't miss this opportunity. Click here to discover the renewable energy process right away… ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Ted Forstmann's caution saved his firm a lot of pain when the private equity market collapsed later. As the interview made plain, old Forstmann has that bad feeling again. "Buffett once told me," he said, "there are three 'I's' in every cycle. The 'innovator,' that's the first 'I.' After the innovator comes the 'imitator.' And after the imitator in the cycle comes the 'idiot.'" We're in the idiot phase now, he says. The idiot phase is when financial disasters strike. It's when the market reveals all the mistakes of the prior boom. It's when all these supposedly smart people running billion-dollar financial firms get their heads handed to them. "The creation of much too much money caused all of this excess," he says. He would've found agreeable company in Vienna. The inaugural meeting of the Society for Austrian Economic Thought took place in the elegant salons of the Hotel Imperial. Here, a motley crew of entrepreneurs, philosophers and economists from all over the world met to discuss the world's troubles. Austrian Economics, in case you don't know, refers to a school of thought originating largely in Vienna in the late 19th and early 20th centuries. Its great thinkers include Ludwig von Mises, for instance, who was actually born in what today is Ukraine. (As an aside, this sort of thing happened a lot, as the old Austro-Hungarian Empire's borders shifted in later years. Carl Menger, another founding Austrian thinker, was actually born in what is today Poland.) One definite theme of the meeting was the sick monetary systems of the world's economies. Dr. Andre Homberg, a friend, reader and the organizer of the event, laid it out as the five "D"s:
The end result of all this? Dr. Homberg happily explained: "The prices of everything that you must have will escalate at a speed that you will not believe. The prices of energy and fuel will continue to spiral higher. Food and water prices will accelerate upward and will result in a lower standard of living for yourself, your family and your loved ones." It was a cheery afternoon, let me tell you. There's nothing quite like sitting under crystal chandeliers in a decadent 100-plus-year-old salon, spooning your weichsel-chily kaltschale mit gebratener Steingarnele — a sort of cold soup with sour cherries, chili and roasted prawn — while also matter-of-factly chatting about the end of the world as we know it. ~~~~~~~~~~~~Special~~~~~~~~~~~~ The Slow-Motion "Black Monday" Ahead Here's a picture for you: If the market today falls as fast and as far as it did in 1987, you'll see more than 3,000 points erased from the Dow alone. In a single day. Could it happen? Banks hold the same blue chip shares you'll find parked in your retirement fund. When the "level three" losses get declared, those same banks might have to start dumping those shares to raise cash. And that could send these blue chips...along with most of the rest of the stock market...into full-scale collapse. I urge you to take the seven steps outlined for you in your free Strategic Financial Survival Library. Click here to reserve yours… ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ There are plenty of reasons to feel gloomy. But even Dr. Homberg allowed that there would be great opportunities to make a lot of money. "At least for the ones that understand the forces involved," he added, "and have the courage to grab the opportunities that this process will create." Homberg is financially independent, in large part owing to his deft investing since 2000. I'm proud to count him as a loyal reader. Going forward, I think it will be important to stick with real assets during these inflationary times. I've got two very interesting ideas I'm researching now. Both of them are quirky oddball opportunities rich in tangible inflation-beating assets. Also, in thinking back to the "I" cycle, the idiots eventually make way for the innovators, the winners in the next up cycle. Among the innovators in this cycle will be those who solve or ease the high cost of oil. I'm currently reading an interesting book, Engines That Move Markets by Alasdair Nairn. It's all about the history-making shifts of various innovations — canals, railroads, telephones, etc. In particular, the book focuses on their impacts on markets and investing. One early lesson is how people misread key events and missed great investments in the process. One early quote stands out. The Quarterly Review in March 1825, noted: "What could be more palpably absurd than the prospect held of locomotives traveling twice as fast as stagecoaches?" Stagecoach and canal investors who doubted the power of the trains lost a lot of money. While the losers are easy to spot in retrospect, they're not usually so obvious to investors at the time, as The Quarterly Review comment shows. As far as identifying the winners of this process, that was also not obvious. The railroads proved poor investments for most. By the mid-1870s, 40% of American railroad bonds were in default. The real winners were the people who enjoyed the lower cost of freight — traders and merchants expanding into new markets. So, too, the winners in this crisis might not be so obvious. Regards, P.S.: Spotting one of these winners is tough. But when you do, the rewards could be great. These could be investments that pay off for years to come. This is just the kind of second income that can set you up comfortably for a long time. These are investments that won't retire just because you do. Click here to find out your best play… |
Whiskey & Gunpowder Special Reports New "Backlash" Set to Rocket Oil Past $150...and Send Gas Soaring to Over $6 per Gallon The 10 Shocking Reasons for China's Pollution Problem Geothermal Energy: Investment in the Future Here's One Coal Stock That's Set to Skyrocket Investing in Exchange Traded Funds The Real Story Behind the True Gold Bull Market If someone forwarded you this copy, please look here to start your own subscription. Wanna let us know what you thought of today's issue? Now you can... click on this link. Whiskey & Gunpowder is a free e-mail service brought to you by a team of rebellious brigands. If you have not already done so, please click here to confirm your subscription. This will help us ensure you get every Whiskey & Gunpowder without interruption. Are you having trouble receiving your Whiskey & Gunpowder? You can ensure its arrival in your mailbox here. Please note: we sent this e-mail to finan4@finanmart.com because you subscribed to this service. To end your Whiskey & Gunpowder e-mail subscription, click here. Nothing in this e-mail should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice.We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. © 2008 Agora Financial, LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the World Wide Web), in whole or in part, is strictly prohibited without the express written permission of Agora Financial, LLC. 808 Saint Paul Street, Baltimore MD 21202. |
