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Tag Archives: Stock Market

ET EXTRA: Investing (Gambling) in Drug-Replacing Natural Supplements

It’s often remarked that the stock market is the world’s biggest casino, but actually it’s worse than a casino. When you walk into a casino you can readily predict the odds of success. For example, a roulette wheel has 38 slots but only pays 35-to-1 for a bet on a given number, so over time you will lose, albeit slowly. When you invest in a stock, however, the odds are not that predictable, although billions of dollars are made by financial “advisers” who have convinced folks otherwise.

As pointed out in The Fortune Sellers, the way to improve your odds in the market is to ignore all those charts and stick to fundamentals: Is the company financially healthy? Does it have proven management? Does it serve a growing or in-favor market segment? Etc. Therefore, if you want to gamble in the stock market, throw away all that charting software and instead invest a lot of time doing fundamental research. Plus, invest in market areas in which you have some deeper knowledge.

Although the intent of this blog is not (and will never be) to offer specific investment advice, an example of a stock gamble that this conservative and science-minded engineer will make is ChromaDex, a small company that’s at the forefront of providing natural-food-based alternatives to standard drugs that all too often have horrible side effects. I’ve followed the natural foods/supplements industry for decades, and believe that the ChromaDex business model makes good sense.

(If you’re curious, please see “Near-Term Catalyst Could Drive ChromaDex Shares Higher.“)

p.s. I’m prepared to lose all of my “investment” on my educated gamble.

-Ed Walker

 

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The Government’s Policies And Our Economic Crisis

Engineers review past evidence and build from there; they try not to reinvent the wheel. As mentioned previously, there is ample historical evidence that indicates recessions/depressions — although they can be severe — typically last no longer than about a year, provided the government does not implement anti-business legislation and regulations.

Image: Dali’s “The Average Bureaucrat”

This last statement above is considered by some to be controversial, but to the best of my knowledge it really isn’t: the data are there for everyone to review. The doubters point to the Great Depression (the last one, not this one) and claim that President Roosevelt helped guide the country through the extraordinarily long 10-year downturn. The evidence, however, says that President Roosevelt’s “New Deal” was actually the villain in the story, because his anti-business policies helped extend what would have been a typical downturn of a year or so into ten long years of economic agony.

For an example of this thesis, see “FDR’s policies prolonged Depression by 7 years, UCLA economists calculate,” by Meg Sullivan, 10 Aug 2004. Excerpt: “The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes,” Cole said. “Ironically, our work shows that the recovery would have been very rapid had the government not intervened.”

So what’s the prognosis? Based on the historical record — and also on analysis that strongly indicates that governmental attempts to manage the economy are destined to be highly ineffective or even counterproductive — we can expect a lousy economy (high unemployment, sluggish or no growth, an erratic stock market) until the Obama administration reverses its anti-business policies, or until we have a new pro-business administration in 2012, whichever comes first.

The good news is that, once new policies are in place, the economy can recover quickly. If we persist with the present policies, however, be prepared for many more years of economic turmoil.

-Ed Walker

 

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