Tradewinds - David Iben’s March 2010 Commentary: Avatar

Thanks to Mike G. for passing this along.

The current investment environment is complex and challenging to say the least. Capitalism as we've known it is dead. The financial system is broken and the currencies are being debased. Should investors prefer common stocks, many of which that appear to be overpriced relative to fundamentals, cash—which is very expensive, yielding approximately zero and having lost 97% of its purchasing power over the past century, or bonds—which appear horribly overpriced. Bonds are, after all, an exchange of cash currently for the right to get that cash back sometime in the future when it arguably will have lost much of its purchasing power. In consideration of this risk, bonds pay a coupon. Current coupons are grossly insufficient compensation for the magnitude of this risk (in our humble opinion).

Amazingly, there is a silver lining in this otherwise bleak environment. It is still possible to exchange intrinsically depreciating currencies into goods that are much in demand and can be expected to become increasingly so. While history is littered with the battlefields resulting from mankind's efforts to secure food, water, gold and other metals, and energy; we currently need shed no blood. People will hand over these necessities of life in exchange for dollar bills! In exchange for bearing the business risk of owning common stocks, we can secure many of these same goods for a steep discount to their adjusted market value. Rather than complain about Chinese efforts to secure resources, we suggest that investors do the same. Tradewinds' team of investment professionals is scouring the globe looking for companies that own, process or transport scarce and valuable resources. Additionally, we still gravitate toward the stocks of the strong global franchises highlighted in the last Commentary.