The World's a Mess, It's In My...Portfolio?

Members present: Brian, Bickford, Danak

 ENZL: New Zealand is not looking so good as a buy right now. We should wait and see. 

EWZ: Oh my goodness. What a nasty, nasty disaster. Wait and see, hold on hope, recoup losses?

SPY: Doing okay.

AT&T: Hooray telecom.

We talked about two philosophies of buying during a crap economy. 

1. Buy something that is down, because hopefully it will swing back when things recover (assuming the business still exists in the long-term). 

2. Buy something that hasn't crashed, because you think it will remain stable. (See: low-end candy, the dollar store, etc. These are things that do well in a booming economy, but people still need, regardless.)

Granted, all of this is a gamble, but that is the nature of the exercise.

Brian found this daunting article from Random Roger about what the a yield curve is, and what it may say about the health of the economy.

Basically, yield curve is a plot of debts issued for different time scales. For example, a hypothetical 2 year CD might yield 2% interest, a 5 year might yield 4% interest, and a 10 year might yield 5% interest. This yield curve would be increasing and leveling off over time. This would tell us that the debt issuer is doing well. You give somebody money for a longer amount of time, so you should expect more payoff for the added risk of more time.

Here's a nifty graphic explaining the geometry of various yield curve curves.

If you have an inverted yield curve, that means that the longer you carry debt, the less you can expect to get from it. That is a problem. The yield curve is another macro indicator of the economy as a whole.
This is a big concept, and it might require some revisiting in order to fully understand its implications. However, it is useful to try to wrestle with these sorts of things in order to maybe try to be slightly more informed about what is going on.

For next week, we should be getting closer to a buy, but what always is the question.
We should try to take Bickford's idea to find something that still does well in a crap economy. Also, we should take a look at what will make our portfolio more diverse.

Profit!