b2 gurus | business news

These days, when I look South of the border, I feel really lucky for having such a strong Loonie.

Do you know why?

It is one of the main reasons our inflation is not exploding compared to other G8 nations. All of the others in the developed world, except Japan, have seen higher rates of inflation compared to Canada.

This week, inflation in commodities, a deflating housing market, rising costs of …. everything, and a diminishing purchasing power maintains the eye on the spotlight. The largest steel maker in China - Baosteel just announced the largest increase, some 96.5%, in iron-ore contracts with their Australian supplier, Rio Tinto.

However, while petroleum related products increase in price, other non-petroleum products will become cheaper. Consumers will have less money and therefore less demand for those products. Many things in the G8 countries are shooting through the roof, from milk and cereal to cosmetics. The credit crisis has still yet to run its last sprint to home base and many traders are really unsure of what to do.

Many stocks that were once safe havens, such as beta-favourable stocks, and large-cap tech stocks are taking big hits. RIM took a big dive on Thursday, and many are predicting Google will do the same. Some traders I know are keeping their funds strictly cash, cold, hard, c-a-s-h. Well, for the moment, to wait out the storms, where risk and reward are not in-line. The head of the Federal Reserve is taking a similar approach to the interest rate, sticking to the sidelines. Buffett, on the other hand, believes this inflation will cause a drastic, long-painful, recession. But he has been wrong before, and the Fed. is hoping he is wrong now. I think the cash reserve plot utilized by many traders right now is human nature, because they think opportunities will be cheaper tomorrow, but this recessionistic ideology will only add fuel to the fire.

I read a funny comment to a financial video I saw this week, it was a random unrelated comment about how diversifying money would be great right now to look for investing opportunities, half the funds in the cookie jar, and the other half under the mattress. LOL

Anyways, I really hope our governments can turn our economies around, increase consumer spending, and patch up post-credit wounds. With Bernake on board the ship, we will have to wait and see. Maybe we will see the bottom of the ocean, or a new America, but Canada is definitely dependent on the latter.

Signing out

Zan Zhang

Hello, this is your captain speaking, flight 101 appears to be having some technical difficulties, please do not panic, and SCREW everybody else over. Well, I am not really a captain, but with all the panic and fear in the markets this week, I really hope the public can keep their pants on. McDonalds salmonella scare, the sell-off of Lehman Bros, rising energy costs - rising unemployment - Maybe Buffett’s prediction is coming true ……

A long recession? At least 5 years, ughhh! Well, maybe when I graduate from university, it will be the next Golden Age, with the sun shining bright, and the birds chirping, (you get the picture). But for all the regular folks out there, why shouldn’t they worry. Well this recession, or market adjustment, provides many opportunities. I had the honor of meeting inspiring billionaire, - Mr. Micheal Lee-Chin, aka the ROM crystal man (he provided the capital for it), anyways I remember a quote he would always say, “In crisis, there is opportunity.” So don’t panic, do some math, and find some undervalued stocks. Over the next few weeks, I will be digging deep.

So do not panic, don’t go and sell everything and then hide that money under your mattress, that is not going to help. In a recession, even when prices are deflating, we need to buy! BUY! and BUY! IF our economy wants to stay afloat. So what would be an innovative way to improve our economy? In economics, I am currently learning about the money supply, aggregate demand and all that. The soaring of energy prices in the 70s and the salvation of the microprocessor. How does this all tie together to today?

Well, when energy prices go up, your aggregate supply curve shifts left, unemployment and inflation rise. To shift it outwards positively towards the holy grail of economics, you need either technological advancements, capital manipulation (interest rates), or new discoveries of resource supplies. These are the most common three. During the 70s, the microprocessor (new technology) increased efficiency, decreased labor time, and shifted aggregate supply right. In the graph, you can see that unemployment dropped, and inflation dropped as well. What we need today, is some new technology as well, because those interest rates are just not working. Maybe one day, we will have nuclear fusion. I think that will be the answer to all of today’s problems.

Well, back to the summary, the sell-off of Lehman Bros. should have been forseen. It was one of the highest shorted stocks on the markets. So down these banks tumble, unguided, and uncentralized. Good thing up here in Canada, everything is controlled. I always thought government intervention was horrible, until I learned of the numbers of bank bankruptcies, compared between USA and Canada. Quite staggering. Maybe Obama can change that. Maybe he can turn everything around. But for now, everyone can only hope, and try not to panic, and jump off the plane, because who knows…

Meanwhile, watch this quick video about some of the places where you can put your money.

Whew, this week, it seemed for a second that the crude oil bubble was finally going to drop, due to a recent falling to $125/barrel. Just last week, it was soaring above $135 a barrel, an all-time record. This drop in oil has caused a short economic bull surge. Stocks are starting to pick-up, but the question comes back, is this drop going to STAY? I heard that in these few months, the oil prices were fluctuating due to speculative investors, and now, they have all turned negative. However, Goldman Sachs thinks otherwise, they predicted prices to go above $150 due to a shortage of supplies, and rising external demands eg, China and India.

What does this all mean for the average consumer? Well, most likely, you are going to be cutting corners. Saving as much as you can here, there, everywhere. Unless, of course, you have deep pockets, like oil-well deep. Consumer spending on a whole is going to drop, and then we are all going to go into recession. And oil prices are going to go higher, and we are going to suffer even more. For the time being, oil is going to drop, and investors are all shorting, but wait until a crisis comes, and the word “cover” rings on every trading floor, then its going to bull fast, real fast.

As for the recession, many high profile investors think it is going to come hard, and stay for a very long time.

For the time being check out this great video on the ideas for the future and what fortunes or disasters it may bring.