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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Protect Your Wealth Using Alternative Investment Strategies

Stock-Markets / Credit Crisis 2009 Jan 25, 2009 - 02:59 PM GMT

By: Submissions


VelShan Thani writes: Best Financial Markets Analysis ArticleThere are many arguments among the economic analysts and experts about whether we are having inflation or deflation or stagflation or depression and so on and so forth.

I was prompted to write this article by those arguments.

My question is : Does it really matter to an investor exactly which words describe the current situation correctly?

Yes, it seems if you are a player in the market which reacts in a herd mentality and reacts to news and information provided by analysts and experts. Because, as a player you have to follow the rules of the games which are defined (and changes half-way along the game) by the games controllers.

We see many people losing their shirts when suddenly the powers decide that short selling is disallowed. Whatever happened to free market?

What we should be arguing is the true definition of free market. I see may analyst argue about the rule change, whether it is right or wrong and whether it is beneficial or not to the economy.

But I have not seen anyone suggesting to the investors that they should stay away from the market altogether. Is it because, if investors stay away then all this analysts will not have any business?

The supposed job of analyst and experts is to guide investors on the best way to protect or increase their wealth. And provide advice on the risk of a particular investment venture. But we are not seeing this.

In my conclusion, good analyst should be telling investors to stay out of the market altogether because it is being manipulated. I will not even bother to analyzed exactly where the manipulation will lead to. And try to predict the wave. Because a market which is manipulated is no market at all.

This include those who advice investors to pull out of currency and buy gold. It is equally madness. This gold experts also point out that Gold is being manipulated and is artificially being suppressed by some powers. Which does not mean there will come a time when this manipulation will stop and price of Gold is ready to go up. That is nonsense. Unless these experts are insiders who know the truth. Therefore the only true conclusion for any sensible investor is to stay out of Gold market altogether.

What then is the best way to protect wealth?

Let me quote a book which is more than 2500 years old. It says,

“Those who don't operate wealth by their own hands is like watching elephant fight from a mountain”

Which basically means you cannot control your wealth by giving it to other to play with.

Another statement says “Wealth must be cared like a baby, with love and nourishment”.

This is indeed the problem today. Wealth today have been farmed out to the caring hands of experts who call themselves Investment Banks, Hedge Funds, Money Managers, Investment Advisory etc. etc.

There are thousands of such funds, experts, advisors who claim they know how to make money from money. Wealth holders should stop dealing with this experts.

The experts are not alone. They are actually driven by the Banks. The Banks provided the leveraging as a technique to attract investors. The story goes like this.

Under Banking rules, Banks are not allowed to use all their deposits in business activities such as providing loans to corporations. They should keep adequate cash in hand to handle any deposit withdrawals.

Let's assume a small 10% is enough to cover any emergency. Then 90% can be used in business activities.

BUT those who had enough wealth did not want to risk 90% of their money in the Banks. Because Banks can go into default. It happens and have happened often. Thus it left only those who did not have enough wealth. Those who needed to grow further and willing to risk their money. But once they made “enough” money they withdrew and went into retirement.

The Banks thus promoted small businesses to become Corporations. The Banks nurtured them. And further encouraged corporations to become Big Corporations to go Public, which meant, this corporations are now ruled by corporate objectives which is to make money at all costs.

These brought unsustainable practices to inflate Business. For example auto corporations invested in giant manufacturing plants instead of growing stage by stage. Many excuses were given for such big investments. They miscalculated the output as future sales. That is if production increased by 20% they assumed growth of sales also by 20%.

The reason for such action was simple. The Banks realized that to make the corporations sustainable they needed more cash to be injected into the system. They needed large funds. The exponential growth figures used to attract new wealth holders to participate in the market and perpetuate the growth.

That's when the very wealthy people came into the picture. Contrary to many conspiracy theorists, this wealth holders are as much victims of the Bankers. Let's call them Wealth Investors.

However this wealth holders only have assets such as gold or silver or other assets acceptable to Banks. For the scheme to be successful (under Banking rules) they needed at least 10% of cash. That is where this Investment Banks and Hedge Funds came into the picture.

The game was to find Businesses man whose cash-flow was substantial. The investment Banks spend large amount of money and sent out young energetic scouts with credit cards to spend their way around and go out in search of businessman with cash. The Business man were given a deal they cannot reject. “Deposit just $1 million, and we will provide you credit line worth $10 million”. Let's call these the cash investors.

The Banks kept the $1 million deposited as cash in hand, and borrowed 10 times more funds from the Federal Reserve based on the wealth deposited by wealth investors.

Wealth investors were told that they had adequate cash backing. While cash investors were baited with leveraged credit for Business expansion.

The wealth investors were given Bank guaranteed certificates of payout under what were known as “High Yield Programs”. The more smarter wealth holders were given good real guaranteed certificates while the less smarter ones got unclear certificates which still had some risks in built.

But the Banks got more business. Economy was “growing”. However nobody was thinking if the growth included consumer's ability to buy what was being produced. For example the salary.

Any increase in real salary was considered inflation. However increase in credit was not considered inflation. Thus more credit was given to consumers by credit cards and as mortgage credit on value of homes. Since the price of homes were increasing due to increase in credit, The value of homes were used to issue even more credit.

This situation latter created an opportunity for Banks to create more “High Yield programs”. By building houses whose development costs are moving down (since real salary has not been rising) while sales prices of houses (and thus “value”) were going up (since credit has been increasing).

Thus when I read predictions by many analysts that say, soon there will be inflation, I am amused. The inflation already arrived long time ago when all these analyst were sleeping on their computers.

Prices of food & oil may not have increased. But prices of Information Technology company shares were increasing at alarming rate. This is sign of inflation. The ratio of Price against earning ration of all shares were increasing. That is clearly due to inflation. More money chasing fewer opportunities.

More and more luxury goods were being produced. That is also sign of inflation. More and more easy money is now in hands of consumers searching anything of “value”.

I would say, every bubble is nothing but a controlled inflation. If all money went into Information Technology it is because someone is guiding the herd mentality towards that. Media, experts, Government all contribute towards that. But again the main culprit is the Banks.

Let's get back to the Housing opportunity. The Banks needed to divert investment into the Housing sector, because it is where they can use leveraged money for High yield. Cheaply build houses sold for high profits.

To achieve their targets for controlled inflation, the Banks became investment advisors to most cash investors. And of course the Banks did not want these cash investors running around with leveraged cash in any markets. But only in particular markets which the Banks themselves control.

For example an Indonesian Business man placed some US$1.7 million into a western Bank which had a branch in Singapore. He received a credit line of $17 million. He immediately went onto buy some shares in the Indonesian stock market in support of a friendly listed company with that $17 million in credit. And even employed the same Bank to purchase the shares on his behalf.

However, the Bank refused and said that the credit line was indeed for purchasing shares but not Indonesian shares. The Business man is now in court suing the Bank. This is but one example of investment control.

Thus the cash investors were “guided” to invest in certain sectors. Such as securities. Securities that were created by the same investment Banks with AAA ratings but without any clear information on value and background to value. You were supposed to trust the Banks and the complicit rating agencies.

For example Russian cash from Oil exports and Chinese cash from various other exports were also guided into such leveraging. Thus for example Russia was issued foreign exchange of $300 Billion US dollars from an actual base of $100 Billion. However the Russians were guided away from investment inside Russia and was forced by various means to invest into the same toxic securities.

It was logical though. Russians own the original $100 Billion and can invest it in any way they wanted. But once it was used to leverage, the $300 Billion is credit which has to be used according to regulations by the credit provider.

The above stories will tell you exactly what the Banks were getting into. They have become liable to many cash investors and wealth investors. They have taken on themselves almost all risks.

The Banks have created a giant Communist System. What I mean is a centrally planned economy. Everything is decided by the Banks. Of course it is bound to fail.

This is not some story or economic theory. These are facts.

In that same 2500 years old books, I learned something which guided my actions. It said, if you need the truth don't just listen to what people say, but look at what people do. And if you need to know truth beyond that then don't just look at the actions but wait till you observe the results.

Today we have lost these simple rules. We simply follow like herd without knowing what people are actually doing and what are the results of the actions.

We invest in “hope” based on predictions of so called experts. Would an intelligent person invest because an oracle said the year of Pigs is good for those born in the year of Donkey? (I made up that donkey year).

We today buy and use herbal medicines only to find out after years of consumption that it contains chemicals and are not fully herbal.

We today use milk products from faraway land based on trust of corporations who now look around for scapegoats and point to Chinese when it was found to contain melamine. The truth is that these corporations pay for milk based on chemical test equipment readout which shows increased milk content when melamine is added. That faulty test mechanism is the real cause of milk contamination. The corporations has to be sued and put into bankruptcy for such practices.

And the real culprits are the Banks which provided the funds to these corporations to open factories in China without adequate production controls.

And now back to the question of how to protect your wealth.

Forget those money managers and funds. You have to start managing your own money.

Start travelling, learn about the world and identify the real wealth. Or stay where you are look around and buy real assets of real value.

For example, do you know how much you can gain by placing funds in an Indonesian Bank? You do not have to put your money in Indonesian Rupiah. You can place the money in US Dollars Accounts which will be protected by Government owned Banks.

You can even buy a Government Banks seeking privatization for less than $20 million. You can create your own retail Bank programs if needed. Or simply place your money in a Government Fund which never have ever defaulted even during their worst currency crisis in 1998.

But wait, I am not suggesting you do. Let's not trust any Fund even if it is a Government Fund.

Let's understand Wealth.

Wealth is the ability to live happily. If possible for generations.

Which means Wealth is not directly Money or Gold. But Gold and money can hold potential wealth.

You exchange Money and Gold to wealth when needed. That is what economic experts call liquid assets. Both Money and Gold and short term Treasury Papers are very liquid assets.

But all these assets have one big problem. They change in value.

If for example you keep wealth in Gold. And gold price moves up it would seem you have more wealth. But wait. The price of Gold went up because there is more money in the hands of consumers. That means these people who hold money can also buy food at higher prices. That means you are actually losing wealth.

Some analyst try to calculate the real value of money and gold. They refer to real inflation, real salary, real this and that. What they are trying to do is find out what exactly you can do with these money and gold.

There is no theory in the world today that can actually calculate the true value of money and gold in the long run. That is exactly why pseudo-experts are thriving in this market. They all are predicting the value of assets, such as Shares, Currency, Treasury Papers, Securities, based on a selected group of data. Every expert seems right based on the data that he has decided to select. Nobody uses all data probably because it is not even available.

For example Federal Reserve does not want to release information about the collateral used to print a few extra trillion of US Dollars. Or exactly who were issued those Trillions of Dollars. Which means we will never know exactly where the next bubble is being planned.

Thus buying any asset which seems to suddenly attractive will most likely end up and wealth buster rather than wealth creator.

If even money and Gold and any form of wealth holder is unsafe. Than what is safe?

The answer in my opinion is the following:


I am not joking. I will give you my own observations.

After reading those 2500 years old books, I went in search of the people who wrote that book. I arrived at the airport and found beggars everywhere. Filthy roads and overcrowded infrastructure.

I went further into the rural areas which were once big cities as described in the books. And then I found the wonderful people.

Each family had a house with a minimum of at 5 different trees. A few mango tree, each providing a very different type of mango. One delicious another more sour but still tasty. They also had a big tamarind tree, and a few coconut trees. I saw a few banana tree which also had different taste from our standard big yellow banana. Each banana was different taste and color.

They had each about 5000 square meter of land on which they planted various spice plants

I observed each house had a storage facility to store dried chilli, pepper and various other spices.

They also stored at least a few different seeds including rice and wheat. They showed me a rice variety that grows in areas without water. It grows to more than 2 meters high.

Each house had a few pigs. A few chickens and water was available from wells that were not more than 15 meters deep.

Their wealth is their trees and animals. Trees grow themselves. Animals gives birth to more animals. These people learn to live among nature. They use Banana leaves as food plates. And banana tree trunks also as food. I saw No plastic plates or spoons. Everything was bio-degradable.

I saw one family manufacturing their own coconut oil simply by grinding and squeezing rather than in refineries. They have been doing that and using coconut oil for thousands of years.

They had no real reason for money but had plenty of gold. They accumulate Gold and keep them with their women. But they sell it when in need.

That stability of live that they have lived for generations is real wealth that needs not much money.

Maybe that's why Bill Gates have started collecting all kinds of seeds and created a Agro Vault to hold them. Only in a big way.

This is my conclusion, if you have really want to secure wealth, Buy real assets such as ranches, farms, fishing boats, Plantations, BUT DON'T employ workers.

Instead of workers get families to live in your farms, or ranches. Build new friends. Give life to families in need. Find people whose live will be dependent on the assets that you have. Build your own empire.

As an example, You can own an entire island in Malukku, Indonesia simply by supplying boats to the skillful fisherman who today catch big tuna fish in small wooden boats. The island is the size of Taiwan but only with a population of about a few hundred thousand people.

Stop trusting the Big Banks and their corrupted system. Start securing your wealth in things that really matter. Be a part of real growth with real people. Stop accumulating money or gold and start using real assets that are real wealth.

My name is VelShan Thani, I am a Business Consultant for private investors seeking to maximize profits from special deals that are available in exotic countries such as Indonesia, Russia and CIS countries. I started this 4 years ago after realizing that most investors were getting into very risky programs (in my assessment) by trusting the Banks and their related fund managers too much. I have build various businesses by linking people from different countries and providing investment solutions that are sustainable for long term.

My solutions are based on certain principles such as avoiding currency conversion or purchasing Banks instruments such as Letter of credits or any other Bank instruments. I advocate the idea of Wealth as accumulation of "productive assets". And provide legal and practical solutions to OWN such assets

© 2009 Copyright VelShan Thani - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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