As an investor, you should always know what your objectives are. One of the biggest traps investors fall into is buying a gold position that has little or no relationship to his or her objectives. Gold is not for everyone. Buying gold is usually used as an insurance policy in case other investments such as stocks go down.

Gold is in a bull market right now because its core fundamentals are so outstanding. It is also doing well because the stock market is tanking. You see, that is the “insurance” part of gold. When stocks go down, gold often goes up. A position in gold will often offset your losses in the stock market in troubled times.

The price of gold may jump up to thousands of dollars per ounce in the current rally or it may struggle and fall lower. No one knows for sure even if they pretend to. One thing is for sure: if the stock market continues to fall, things will look good for the gold investor. Gold is the ultimate alternative investment because it is tangible.

Many people, including the die hard stock investors, often still see gold as the most undervalued asset group in a standard portfolio mix. In general, gold becomes more desirable in times of banking failures and tough economic times. Also, like all investments, gold becomes more attractive to more people the higher it goes. People don’t seem to want to miss out and that is why both gold and stocks tend to go up too high before they fall back.

Before you invest in gold, you should carefully consider what percentage of your overall portfolio you wish to risk in gold-related investments. If you are thinking about investing in gold, it is worth giving the same consideration to your purchase as you would to any other investment. When you buy gold investments, you lower risk in your investment portfolio.

As more investors realize that gold is a great way to profit in today’s uncertain climate, more fund-makers have been happy to supply the means with which to buy gold. There is a whole world of excellent alternatives out there for investors who wish to invest in gold. Just be sure you understand what your gold objectives are before you allocate too much of your portfolio towards it. Gold can be a great addition to any portfolio but only in the right amounts. Putting too much of your net worth into gold would be the same as gambling.

People are very entertaining if you just take time to listen to what they say and observe how they act. After all, that’s why reality television shows are so popular. Now you can watch people from the comfort of your living room chair.

The things they do and say are so highly entertaining because people so often react based on emotion. Often, that emotion is fear. Throw in a little laziness and a willingness to believe whatever they hear that justifies their fear and there you have them-the two most wealth-preventing myths about real estate investing that were ever conceived. And those two are the parents of the third.

Those myths are, of course, fear-based. They are also myths that would not exist if it were human nature to educate themselves about a thing before making up their minds about it.

What are those myths?

1.Real estate is a gamble.
2.Real estate is risky.
3.There is no way I can possibly invest in real estate.

Naturally, Myth No. 2 follows logically from Myth No. 1. Assuming, of course, that logic goes into the thinking at all when someone determines these things.

Robert Kiyosaki, author of the Rich Dad book series, said that there are people out there who honestly believe that real estate investing-or any type of investing at all, really-is all about luck. These types of investors throw their money at anything that looks good to them. But they haven’t taken the time to educate themselves on what is a good investment. So what “looks good” to them is based on a purely emotional reaction-or worse-a guess.

Real estate investment cannot be accurately compared with, say, Black Jack or Roulette because those games are guessing games. Real estate investment is not a guessing game. Real estate investment involves looking at financial documents and determining from them where you should spend your money. It’s not about guessing-it’s about reading.

And Myth No. 3, well…that’s the biggest myth of all. Anyone at all can invest in real estate, if they are willing to take those first important steps: Make sure you have the capital by increasing your wealth, which is generally done by building a business system, and educate yourself in the process of investing.

There’s the rub. Most people are simply not willing to take those preliminary steps. They think they are wasting time if they attempt to learn something. The extra money they have is burning a hole in their pocket and they can’t wait to throw it away. So that is exactly what they do.

There is risk, of course. Anytime someone sets out to learn a new skill-even investing-they will make a few wrong moves. But that is all part of the process. As time goes on, you will get better at it. So of course, you shouldn’t toss your life savings into the pot.

Simply start out small and work your way up, as you would with anything. Kiyosaki compares it to piloting an air plane. It’s not something you would consider doing if you had never been in the cockpit. But with time and lessons and practice, it becomes something you can do with ease and confidence-something you can do safely. But you must invest the time to learn how.

What really is a risk, Kiyosaki said, is neglecting to educate yourself. When you neglect your financial education you are losing more money than you can imagine-not only the money you invest if you choose to leap without looking, but also the money you will never make if you choose not to leap at all.

For as long as there have been entrepreneurs, they have always used certain business principles to build multi-million companies. Then, about 12 years ago, these business principles were popularized and became known as the “Cash Flow Quadrant” by the best selling financial education author, Robert Kiyosoki in his book “Rich Dad Poor Dad”. Together with Donald Trump, they said “The only way to amass true wealth is having your own business and/or investing wisely.”

World wide, the true wealthy have mastered wealth in two ways. They own a business and are also investing their way to wealth so they don’t always have to work for their money. Obviously, the goal here is to have their money work for them so they don’t have to work as hard at the business. It is not a new paradigm, rather it’s been used by entrepreneurs forever but the great majority of the population have never caught that vision nor have most colleges and universities.

Historically, and it remains true to this day, we’ve all been taught to work for our paycheck by being employed by someone else or a big corporation or having a profession. Also, we’ve been taught to take advantage of our employer’s retirement plan and other fringe benefits and when we are old and gray, our retirement funds and medical plans will take care of us.

Well, most people are finally realizing what a crock that has been. The world is full of people who have worked their butts off for an employer; 60-80 hour weeks are not uncommon.

They’ve traveled the world without their family and never saw anything. They spend a lot of time eating with customers and gaining too much weight while encountering high blood pressure and other health issues . Their daily routines never had a sense of balance to their life and they either ended up divorced or were strangers to their children. And when the global financial meltdown hit them; financial uncertainty is staring them in the face as their homes and retirement plans went upside down.

All of this brings us back to the Cash Flow Quadrant or any business plan that is similar in nature and the greatest transfer of wealth that is presently under way that only 2% of the population is aware of. Experts predict that over the 10-15 years, household wealth will double, exceeding $100 trillion dollars, creating more millionaires than at any point in history while the middle class implodes itself with debt.

There is no doubt that more millionaires were created out of the Great Depression than at any other time in history. The same transfer of wealth will occur again as a result of the constant greed and corruption of the Wall Street, political, and regulatory elites who created and are making worse the present world wide financial debacle.

However, as the experts predict, there will be more opportunity to participate in this present transfer of wealth than ever before for those who know how to leverage globally the power of the internet with its constantly increasing billions of users.

So, bottom line, what is the most effective “Cash Flow Quadrant” for our world today? In its present day form, it appears to be a significant cash flow business from home by marketing on the internet. Potentially,from many investigations, this route is putting many people in the driver’s seat to generate cash flow and accumulate assets. As a result, people do have an alternative from being an employee or tied to a profession. Being one’s own boss has the potential to build wealth and, with it, a balanced lifestyle so you can really enjoy your success with those you love.

Normally, an existing or aspiring entrepreneur will have a successful mentor who will guide them in the uses of various resources and tools and how, with proper implementation, to create wealth not only from his own business but with the assets he accumulates as he becomes money and investment smart.

How can average-earning workers make their money work for them? This is the one question that employees should start asking themselves given the unstable economy.

Nowadays, most employees, in one way or another, are not contented with their jobs and the corresponding salaries. The possibility of getting reduced retirement packages has also worsened the situation. In most cases, there are no more golden parachutes waiting for retirees. With this, the unfolding economic reality should trigger a new mode of thinking among workers, lest they will be left hanging when retirement comes knocking.

According to Robert Kiyosaki, author of the popular “Rich Dad, Poor Dad” series, people have two options if they want their hard-earned money to work for them. The first option is to leave the security of employment and start their own business. The second option is to start pouring their money into different types of income-generating assets such as mutual funds, bonds, and stocks.

Among the most popular forms of assets held by investors are stocks. As an income-generating asset, stocks can give decent returns for its owners in the form of dividends — representing the stockholder’s share of company profit or through the upward price movement of the stock.

Of course, the owner needs to sell the stock first before one records actual profit. On the opposite end, however, its capacity to provide higher returns also means that it can lead to heavy losses for owners, a lesson that all stockholders were painfully made aware of at the height of the crisis.

The popularity of stock market investing has led to the development of two main “schools” on the subject. The first one, technical analysis, is a method that depends on the price movement of the stock and the search for the short-term trend. Users of this method are also called “chartists” since they rely on charts to spot underlying trends in order to forecast the likely future movement of the stock. Given the method’s reliance on charts and trend spotting, technical analysis is often seen as the complete opposite (in terms of strategy) of the second school of thought, fundamental (or value) analysis.

Fundamental analysis looks at the conditions of the company as it is situated in the real world — its balance sheet, line of business, income statement, the economy in which it operates, and cash flow statements — so as to find the intrinsic value of the company. With this information, analysts evaluate the value of the stock; the decision rule prescribed is to purchase stock if it is selling at a price lower than its estimated value. In other words, investors try to buy stocks at a “discount” since in time, stock prices tend to adjust to the level equal to its intrinsic value.

Apart from the strategies involved, there is also a crucial difference between the two when it comes to their timeframe. Technical investors typically have a shorter investment timeframe than fundamental investors. While technical investors look at the coming months, weeks, and days, fundamental investors look at the coming years. But, even though these two schools of thought seem divergent, there are still some who try and successfully combine the two frameworks together in order to come up with a style of their own.

Empirically, studies have shown that fundamental analysis and technical analysis are, on average, equally successful. As such, it is no wonder then that the question on which is better, and which is to be used, would depend on the investor’s preferences and in his confidence in a particular method. A well-known advocate of technical analysis is multi-billionaire George Soros, Chairman of Soros Fund Management, LLC; Warren Buffett may be classified as a fundamentalist.

Ultimately, an investor is free to choose which school of thought he would advocate (if not to create his own style). And with the scores tied, an investor’s main concern would be the procedures and complexities involved in each method, and the adaptability of each to his own set of preferences and constraints.

The Institute for Development and Econometric Analysis, Inc. (IDEA) is an economic think-tank based in the University of the Philippines – Diliman. For inquiries on IDEA, please contact Eduard Robleza at edjrobleza@idea.org.ph.

When people hear the state “Penny stocks” this refers to stocks of organizations that are priced at very disconsolate prices. There is large growth possibilities, and your initial fling can buy for quite small, but you stand the risk of the shooting match becoming insolvent and you dropping your money invested. The pull to these kinds of shares due to the fact that despite the risks you can see vast returns.

Obviously, when you’re attempting to pick out a penny stock to invest prominence you are activity to require to inquire about a few things about the organization. Similar to buying stocks of fraction other kind of publicly traded business, it’s necessary to understand everything about the business. That plug in understanding what the organization do, the aim they make, what products are offered, how their business vivacity functions and who augmented is involved in their industry.

It’s unlikely that the organizations that mention these types of shares think complex organizations – regularly they are basic to understand and hinge care. You entrust find many of these types of shares that are organizations involved shroud resource endeavor – their value will crack up and disconsolate based on the cost of the instrument produced.

As you may have already guessed, penny stocks are unqualified to exemplify investments mask long degrees of risk. The risks you take on with these stocks include improper of capital information, woebegone trading berth and unfortunately even fraud.

Try to sustenance in mind is that the financial reporting guidelines for penny shares aren’t always as regulated as stocks on souped up stock exchanges. One of the types of penny stocks is called a “pink sheet” and has almost no ropes when it comes to their reporting again financial accounting standards.Because there’s inordinately little or even no regulation, this makes this sort of beasts vulnerable to fraud and market manipulation.Fraudsters will use their influence to challenge spreading penny cows prices, then they’ll cash them fix also delist the stock. This is the classic con intimate due to a “pump and dump”.

However, we don’t want to scare you off these types of stocks! Penny stocks rest assured their risks but further have a large potential because a large profit. You can find plenty of real, honest start up organizations, again they have tons of potential. Tons of companies that are listed as penny shares are business to impersonate booming effect the future. If you are impressive to amass one of these companies, your profits on your investment will be hefty.

If you importance choose companies that have potential, your profit are stunt to show mungo. You may end up losing money on many trades, but the unrivaled readable selection will offer compatible a sizeable earnings that measure previous losing choices won’t be remembered.

Independent investor and author Kim Kiyosaki bought a single rental home in 1989 and has 2,000 today. Here’s how she did it.

1. Prepare well

Invest in an area you’re familiar with, where you know the market. Also, read about real estate investing so you understand the numbers and know how to perform due diligence on every property. If you use a broker, ask if they also invest. There’s a different mindset between someone just making a commission and someone who understands investing.

2. Start small

Kiyosaki started with one house in Portland, Ore., which she bought for $45,000. She rented it and had $50 at the end of each month. “That was my cash flow,” she says. “Know beforehand if you’re doing it for capital gains or cash flow. I invest for cash flow.” Often rental properties aren’t hit as hard when the market turns, but it is still best to look first for a stable or growing area.

3. Repeat what works

“I just keep buying more and more,” Kiyosaki says. “Now the cash flow pays for the house I live in, my vacation house in Hawaii and all my luxuries.”

4. Trust yourself

“The biggest investing mistake I’ve made was when I didn’t trust myself,” Kiyosaki says. “One investment was bigger than I had done before, and my fear made me look at everything wrong with it. I am risk averse and one of the killers was having negative people around saying, ‘Oh, this is risky.’” Surround yourself with like-minded people and make clear agreements with any partners.

5. Self-management

When you’re starting, manage it yourself. Management fees can make the difference between monthly profit and loss. You’ll also understand the property and learn about it – like how to spend money most effectively to increase the value and manage the expenses.

We strongly believe value investing has an edge over other approaches in this kind of market, where hysterical market plunges open up unprecedented opportunities for deep-value investors. With the seesaw motions of the last few weeks, adopting the tenets of value investing is more important than ever.

Last year we conducted a survey on value investing. We compiled, categorized and ranked almost 2,000 responses from readers like you, and we’re happy to present you with four of the most frequently asked questions about value investing…along with our answers.

1. What is “value investing,” anyway?
Value investing is simply buying stocks that trade for less than they are really worth, i.e., their intrinsic value. Value investors look for stocks that they believe the market has undervalued. Since the market overreacts to bad news, a company’s stock price can stray far from what the fundamentals would dictate. This gives value investors an opportunity to profit by buying when the price is deflated.

Keep in mind that the very definition of value investing is subjective. Some value investors only look at present assets/earnings and place no value on future growth. Other value investors include estimates of future growth and cash flows to come up with a number that a stock is “really” worth. Despite the different methodologies, it all comes back to trying to buy something for less than its true value.

Ben Graham is widely recognized as the father of value investing. Graham and Dodd’s 1934 Securities Analysis was the ground-breaking work on buying companies based on intrinsic value of the business rather than price momentum, charting, or other technical analysis.

Graham produced annualized returns of better than +17% between 1934 and 1956 — delivering a whopping 27-fold gain for his investors. And Warren Buffett, a student and former employee of Graham, has scored average annualized gains of more than +15% over the course of the last 40 years — almost double the return delivered by the S&P 500.

Value investing is a contrarian approach that requires a strong understanding of balance sheets and other financial data. You have to be willing to crunch the numbers and make predictions that you are willing to risk money on. It isn’t for the weak of heart. That being said, value investors who pick up cheap shares in bear markets can see massive triple-digit gains.

2. How does value investing stack up to other styles in terms of performance?
No other approach has proven to be more effective or reliable than value investing over the long haul.

A classic study by Ibbotson found that value stocks generated average annual returns of +11% over a 34-year period vs. just +6.5% for the S&P 500. Ten-thousand dollars invested in value stocks during this period would have grown to $347,521 vs. only $85,091 for the S&P 500 — making the value stock investor more than four times richer than an investor who put his money in the S&P 500.

While momentum investors come and go, value investing has shown incredible staying power over the decades. Just run down any list of the most successful investors of all time. Virtually all of the names are value investors: Warren Buffett, Benjamin Graham, Peter Lynch, John Templeton, etc. While all these men certainly hit cold streaks, no other investment approach has proven to be more effective over the long haul than value investing.

By investing in companies selling below their fair market value, Buffett’s Berkshire Hathaway portfolio produced an annualized return of about +15% from 1965 to 2009. That was enough to turn a $10,000 investment in the mid-1960s into more than $45 million!

3. I’m a retiree, so capital preservation is important to me. Are value stocks safe?
By their very nature as deeply discounted “on sale” securities, value stocks are safer than most other equities.

If you have a statistical bent, you can predict the volatility of your value stocks down to the decimal point. All you have to do is look up its beta or standard deviation (both measures of volatility) to see how stable it is before you buy it. You will almost always find that value stocks score better on these risk measures.

Value investing has its risks, but it’s not roulette. If you pick the wrong stock, you don’t lose as much as other investors because the stock is already scraping bottom.

If you follow the concepts of value investing and seek companies that have a strong financial footing but a depressed stock price, then your downside risk is mitigated and the risk of losing everything is tiny.

You also need to factor in a margin of safety for every stock you consider. This means buying at a big enough discount to allow some room for error in your estimation of value.

A value investment could make a substantial profit in a few weeks or it could languish for years before popping back. Value investing takes patience.

One of the best assets a value investor can have is a long memory. If you can remember a time when the business conditions were similar to this one, then you can go back and determine what happened to stock prices. For instance, when oil rises or falls, what usually happens to oilfield service providers? When recessions hit, what happens to food companies? Value investing is a rigorous intellectual pursuit: You’ve got to merge the data with the news and decide the degree to which you’re willing to bet the outcome will be the same.

Because it’s so rigorous, value investing is mentally and emotionally satisfying — and a constant source of intellectual enrichment. What’s more, everything value investors must learn can be applied to other methods of investing. Value investors, for instance, must do real research. They study. They play devil’s advocate. They fiddle around with spreadsheets. All of this gives them an edge over investors who simply bought a stock they heard about on the news but really knew nothing about.

Most value investors learn that the first time one of their picks goes down. The fellow who bought because he heard about it on the news is upset because he moved into the losing column, but the value investor finds himself very pleased that the company’s shares are on sale. That works in this environment and all others.


4. What are the keys to finding the best undervalued stocks?
There are many ways to find bargain stocks, and no single approach can be called “correct.” Two investors can take the same information and come up with significantly different values on a company.

That said, here are five key factors we tend to use when evaluating cheap value stocks:

Discount pricing — the stock must be selling at a -20% to -50% discount to the company’s fair market value, giving us price appreciation potential as high as +100% . . . and we also like a stock to be selling substantially below its 52-week high.

Free cash flow (FCF) — the companies should generate truckloads of cash flow. Their future cash flow-to-sales ratios should be above sector norms.

Return on invested capital (ROIC) — ROIC should exceed the company’s cost of capital to ensure that shareholder value is being created and not destroyed.

Return on equity (ROE) — A high ROE indicates that management allocates its capital efficiently and does not spend recklessly to obtain growth.

Wide economic moats — An “economic moat” is a market factor that helps defend the business from its competitors — for instance, a pharmaceutical company with key patents on a particular class of drugs.

One thing is for sure: value investing requires work. You’ve got to roll up your sleeves and put on your reading glasses. The only way to make a sensible determination on a stock’s “real” value is to read every bit of information you can get your hands on — from the daily business papers to the weekly magazines. You need to keep your eyes on economic data and corporate trends and try to put what you hear and read into context with what you see in the pricing of equities.

Following on to the 20 Investing Quotes to lead you through any market, here another 20 investing quotes:

1. If I’d only followed CNBC’s advice, I’d have a million dollars today. Provided I’d started with a hundred million dollars.   -Jon Stewart

2. So you think that money is the root of all evil. Have you ever asked what is the root of all money?   -Ayn Rand

3. Put not your trust in money, but put your money in trust.   -Oliver Wendell Holmes

4. When I was young I thought that money was the most important thing in life; now that I am old I know that it is.   -Oscar Wilde

5. Money is better than poverty, if only for financial reasons.   -Woody Allen

6. If all the economists were laid end to end, they’d never reach a conclusion.   -George Bernard Shaw

7. When an investor focuses on short-term investments, he or she is observing the variability of the portfolio, not the returns – in short, being fooled by randomness.   -Nassim Nicholas Taleb

8. Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.   -Peter Lynch

9. Most investors want to do today what they should have done yesterday.   -Larry Summers

10. Cash is a fact, profit is an opinion.   -Alfred Rappaport

11. Money is like manure. You have to spread it around or it smells.   -J. Paul Getty

12. I don’t like money, actually, but it quiets my nerves.   -Joe Louis

13. Budget: a mathematical confirmation of your suspicions.   -A.A. Latimer

14. Stock price movements actually begin to reflect new developments before it is generally recognized that they have taken place.   -Arthur Zeikel

15. A collapse in U.S. stock prices certainly would cause a lot of white knuckles on Wall Street. But what effect would it have on the broader U.S. economy? If Wall Street crashes, does Main Street follow? Not necessarily.   -Ben Bernanke

16. I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.   -Alan Greenspan

17. The United States in particular and the West in general should be feeling a little embarrassed about all that lecturing we did to the Third World.   -Paul Krugman

18. Just as a cautious businessman avoids investing all his capital in one concern, so wisdom would probably admonish us also not to anticipate all our happiness from one quarter alone.   -Sigmund Freud

19. People don’t like the idea of thinking long term. Many are desperately seeking short term answers because they have money problems to be solved today.   -Robert Kiyosaki

20. Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.   -Dave Ramsey

1. Those with the enterprise lack the money and those with the money lack the enterprise to buy stocks when they are cheap.   -Benjamin Graham

2. A business that makes nothing but money is a poor business.   -Henry Ford

3. Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you’re generally better off sticking with what you know. And the third is that sometimes your best investments are the ones you don’t make.   -Donald Trump

4. After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world.   -Calvin Coolidge

5. “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.   -Paul Samuelson

6. If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.   -George Soros

7. I believe that thrift is essential to well-ordered living and that economy is a prime request of a sound financial structure, whether in government, business or personal affairs.   -John D. Rockefeller, Jr.

8. I’d like to live as a poor man with lots of money.   -Pablo Picasso

9. And finally, no matter how good the science gets, there are problems that inevitably depend on judgment, on art, on a feel for financial markets.   -Martin Feldstein

10. As financial markets continue to broaden and deepen, the behavior of asset prices will play an important role in the formulation of monetary policy going forward, perhaps a more important role than in the past.   -Timothy Geithner

11. Being on a movie set is like one long financial crisis.   -John Cusack

12. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.   -Warren Buffett

13. Columbus did not seek a new route to the Indies in response to a majority directive.   -Milton Friedman

14. Markets can remain irrational longer than you can remain solvent.   -John Maynard Keynes

15. October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.   -Mark Twain

16. The four most dangerous words in investing are “This time it’s different.”   -John Templeton

17. If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.   -John Bogle

18. Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.   -Larry Summers

19. Derivatives are financial weapons of mass destruction.   -Warren Buffett

20. We’ve used derivatives for many, many years. I don’t think derivatives are evil, per se, I think they are dangerous. …So we use lots of things daily that are dangerous, but we generally pay some attention to how they’re used.  We tell the cars how fast they can go.   -Warren Buffett

The bears, it seems, are now queueing up to warn that the remarkable rises in nearly all assets in 2009 is likely to end in another crash.

Today The Economist stepped forward. It says low interest rates have persuaded investors to seek out better returns, buying ‘risky assets’.

On shares…

It warned that the US market is still ‘nearly 50% overvalued on the best long-term measure, which adjusts profits to allow for the economic cycle, and is on a par with two of the four great valuation peaks in the 20th century, in 1901 and 1966.’

On house prices…

The Economist says American homes are priced at around fair value on the basis of rental yields, but that British homes are overvalued by almost 30% – and by 50% in Australia, Hong Kong and Spain.But not a bubble yet…

Today’s leader column also points out: ‘Two classic symptoms of a bubble are rapid growth in private-sector credit and an outbreak of public enthusiasm for particular assets’ [when a cab driver is giving you share tips or telling you about the gold bullion under his bed] ‘There’s no sign of either of those. But the longer the world keeps its interest rates close to zero, the greater the danger that bubbles will appear.’

It suggests emerging markets and commodities are the most likely candidates for bubbles. That will be resisted by believers of the commodities ’super-cycle’, such as legendary speculator Jim Rogers, a former investment partner with billionaire George Soros. [Jim Rogers on why Britain's economy is doomed]. He expects the price of gold to nearly double in the next decade, despite already rising four-fold in the past decade.

Interest rates threat

The biggest threat to the elevated levels of assets such as shares and property is a rise in interest rates. But The Economist observes that if world economic growth is slow and then rates won’t need to rise – but profits (and wages) won’t rise fast enough to justify inflated shares prices (and house prices).

If, on the other hand, economic growth, bounces back then rates would have to rise sharply.

‘It doesn’t add up’ – and that’s before you even get on to the issue of the colossal debt problems facing Western nations.

The Economist concludes:

‘Investors tempted to take comfort from the fact that asset prices are still below their peaks would do well to remember that they may yet fall back a very long way. The Japanese stock market still trades at a quarter of the high it reached 20 years ago. The NASDAQ trades at half the level it reached during dotcom mania. Today the prices of many assets are being held up by unsustainable fiscal and monetary stimulus. Something has to give.’

Chilling stuff. This blog and others have made similar warnings. The correction may not be tomorrow, but it will come…