• The national debt has achieved the incredible amount of $1100.000.000.000

• The war in Iraq swallows up $5.000 per second, that’s $300.000 per minute and $432.000.000 per day
• The climate is in danger to collapse if the world and especially the U.S. won’t come to grips with their emissions we are in danger of loosing the planet as we know it

To say nothing of the financial crisis, new conflicts with Russia, the Iran or Venezuela or just the fact that we are facing a recession which consequences can’t just be estimated right now.

So above all these points it’s hard to imagine that Mr. Obama is able to spend any money for anything at all. But the promises Barack Obama made don’t have to be mutually exclusive. For example though investments and subventions of renewable energies new jobs can be created. That has the same effect like a stimulus package. Also it’s a good alternative for searching oil in far dessert countries. So I’m sure that Barack will make affords to support renewable energies, he also promised to spend $150 billion in the next 10 years in that industry. But which companies could benefit from that?

I picked out a few companies which could theoretically benefit from his plans, but before you buy these stocks now remember, just because a stock sounds interesting it doesn’t mean that it rises. If you want to buy these watch out for the right price.

The first one is First Solar [www.firstsolar.com (NASD: FSLR)], a producer of solar panels. Solar energy will have a lion’s share at the power supply of renewable energies. So First Solar will be the first address in the U.S.

The second one is Acher Daniels Midland [www.admworld.com (ADM)], a producer of food, fertilizer but also in bio fuels. Bio fuels will be very interesting for the government under Barack Obama because they can create jobs in the farming sector as well as they can make America independent of the so called pariah states.

Other interesting companies could be Repower, Solarworld, Nordex or Evergreen Solar.

The second promise senator Obama made is to make health care affordable for many of the 47 million Americans who are currently not insured. This point will be difficult because large health insurance companies like Aetna or UnitedHealthcare fear that they might suffer under lower profits. Also I don’t know if America is ready for so a social system, yet. Perhaps that’s why Obama didn’t say something concrete about this point, yet. But if a company would benefit from that it would definitely be Community Health Systems [www.chs.net (CYH)]. Community Health Systems provides hospitals and hospitals would be the direct winners of any health care plan. But you can of course disagree with me in this point.

So I hope that Barack Obama will be able to put his plans into practice. However I think many people believe in him and faith can be the beginning for “Change” also when it seems to be very difficult.

What’s your opinion? Do you know companies, that are likely to benefit from Mr. Obama’s plans? Please write a comment and let us know!

However the only problem is that actually this really was not funny, but I think everybody with a relative sound common sense knew that the house wouldn´t rubber stamp Bush´s funny 700 billion rescue plan so easily, especially in times of election campaign. So Bush has to hurry to find a new ingenious plan, but in my opinion the house of Representatives will be hard to convince because Bush already accumulated debts worth 10,6 trillion dollars. It´s really a bad bad situation but, let´s go back to what will happen to the markets and the economy, while I´m writing this post at Monday the 29th of September the Dow-Jones is 7 % in the red which meas that the wallstreet has lost more than one trillion U.S dollar again while the representatives are still debating if 700 billion could save the economy. So if the representatives don´t agree on something more and more banks will fall under chapter 11 like I discussed in my last post “Facing a world economic crisis” yet. I think after the shock waves are finished in the banking sector they will achieve insurance companies, then hedge fonds and private equity companies and in the end the whole world economy with every participant.

But let´s imagine what happens if the U.S. government would yet again make it the force the bailout through even only in another form?

Of course the wallstreet would leap for the joy and the Dow would probably close with a plus of 5 or 6 %, but does that really solve real problems? In my opinion the the bailout would just distort competition between the banks and in the end bad banks would finally become good ratings again. Also the idea that short sales on banks are forbidden is a very bad one because they short sales are an essential component of the price formation at the wallstreet. In my opinion and remember it´s a crisis of confidence we are facing. So be aware of the rise in the market if the bailout really comes because it won´t be here to stay. In my opinion the best thing the U.S. government could do know is to nationalize or bomb the rating agencies which in my opinion are the main reason for the crisis, because if they hadn´t distributed AAA rankings for incredible bad financial derivatives we probably wouldn´t have these enormous problems now.

So in my opinion we are facing a very very deep recession but despite that I hope that I was wrong with my last post that this crisis would finally end in a world monetary reform, but at the time many things point to that. However as hard as that sounds:

“Sometimes it´s better to burn the sick forest so that new trees can grow on a rebroductive ground.”

Only now many people understand how serious the crisis is and the wishful thinking that governments could´t rescue every bank like they did in the case of Bear Stearns, Fanny Mae or Freddie Mac slowly disappears. But what are the consequences when the once fourth biggest investment bank of the U.S. files under chapter 11? First of all the stock quotation falls and many bank employees who believed their company are loosing everything their savings and later their jobs. That sounds bad but the real problem is another one, for example Lehman Brothers has a value of nearly 700 billion Dollars on the passive side securities, bonds, mortgages all these things are on the active side of other bank, funds or insurance companies. So if one bank falls under chapter 11 it´s logical that others will follow, but others could also be insurance companies like AIG although I´m not sure at this moment if the FED really has the nerve to let the biggest insurance company of the U.S crash. Sure this goes on so long till the market has adjusted all overratings and bad credits. That´s also why the governments won´t help the banks anymore, because they wouldn´t solve the problem and unless they help the faster the “crisis” or adjustment will be over, so we could say the crisis has just begun.

However let´s get back to the world economic crisis because a world financial crisis doesn´t absolutely have to be a world economic one, it´s just an actuator. The problem is that the people have forgotten that the international money supply has achieved absurd high worth, during the world industrial production stayed relative constant. So what did we do with all that money hadn´t that inevitably lead into an super inflation ? The answer is no because we always found ways to invest our money and funny bubbles like the Asia, DotCom or commodity-bubble arise which always burst again. By the way one reason for the incredible high money supply is also the fact that the issue banks always pumped more money into the system when a bubble burst so that the investors aren´t so gloomy. However these bubbles weren´t a big problem but the people have disregarded that since more than 10 years there accrued a new bubble, a super bubble, the housing bubble, founded on weak mortgages worth 9000 trillion U.S. dollar. This bubble burst now and what we are facing is the situation that the people have to find a new thing to invest in, before they realise that there is actually too much money in the system and this brings us to a very big danger because in my opinion the new investment target will be gold. But when the gold price will achieves to 2000-3000$ per unce the issue banks won´t be able anymore to cover the banknotes they printed. Finally the people will loose their trust in money and a super inflation coupled with a deep recession would lead into a financial failure.

If you don’t know how the US election system works, check out this educational video.

Compound interest is the greatest mathematical discovery of all time.”
Albert Einstein

Compound interest can be explained as the adding of accumulated interest back to the principal. Interest is earned on interest. Compounding depends on three factors: percentage, basis and time.
Example: You have a bank account with $10000 in it and get 4% interest per year. After the first year you have $10400, but ten years later you already have $14802.44. Sounds great, doesn’t it?

Even 0.5% make a difference

Let’s take the example from above and modify the percentage to 4.5%. After ten years you have $15529.69. That means that you get 10.77% more than with a percentage of 4%. Amazing. Always seek for that extra 0.1% to 0.5% when searching for a good investment. Over time it changes a lot and you will see the difference.

The more you have, the more you will get

It’s true, rich people get richer. We earn $400 in our first example, but with a basis of $20000 we would have earned $800. The higher the basis, the higher the profits. Don’t forget to make regular payments into your savings account, so your basis gets bigger. Ideally you save money for a reason, for example your retirement. Then you need the endurance letting the money where it is for let’s say 20 years. But trust me, the motivation is great to pay in every month, because you will see amazing results and retire completely without financial problems.

Time is on your side

How long you let your money earn money is up to you, but the longer the better.
Remember, you earn money by doing nothing. And the money you earned by letting it earn more money will earn you even more money. You just put money in your account and watch it grow over time. If you don’t need the money, let it multiply. Be disciplined and patient enough and don’t touch this money.

The three factors have to work together

The whole concept of compound interest sounds great, but it is dependent on the three factors. They have to work together well, or you will get poor results. Basically, it is up to you how long you can do without the money you put in your account. It is also your choice how much you put in,dependent on how much money you have, of course. To get the max, the basis and time should be relative high, because the third factor “percentage” is aligned with risk. You get a small percentage with little to no risk but every percentage point more goes hand in hand with more risk. It is essential to find the right balance.

Sometimes it is magic

To conclude this article, here is a amazing example on compound interest at work:
“If the Native American tribe that accepted goods worth 60 guilders for the sale of Manhattan in 1626 had invested the money in a Dutch bank at 6.5% interest, compounded annually, then in 2005 their investment would be worth over €700 billion (around USD $1,000 billion), more than the assessed value of the real estate in all five boroughs of New York City. With a 6.0% interest however, the value of their investment today would have been €100 billion (7 times less!).”

Sources: Wikipedia

I want to introduce you to this post with a law of the famous computer scientist Gordon Moore which says that computer systems are doubling their performance every 18 months, so if we keep on doubling our computer performance at this rate we could theoretically be able to create humanoid artificial intelligence within the coming 30 - 50 years. That’s philosophically speaking - but it’s a fact that there are already dozens of wise folks in many universities and companies today who are doing research on artificial intelligence and new robotic technologies.

But what happens if the artificial intelligence of the machines is developed so far that it could replace the humans? A famous economist once called this situation a paradox and explained this way: if somebody in a cinema stands up he has an advantage because he sees better; but if everybody stands up everybody sees worse. So if one businessman replaces his workers by machines, he will surely have an advantage, but if everybody does it, everybody will have a disadvantage because the businessmen can’t sell their products anymore or rather the people don’t have the money to buy the products because they’re unemployed. The shear between the poor and the rich people would separate enormously and our economic system would not work anymore.

That would be the worst case. But as the old Chinese philosophy yin yang once told us that every shadow also has a sun, there is an enormous potential in this technology, a potential which could not just change our economy but could change the way we live on this earth and how we treat each other and our planet. Theoretically, we got the chance to create a world where everybody has access to all tangible values. A world without poverty, ecological destruction and wars. A world where people are free to decide what to do with their lives. But that’s just a dream, fact is that we have to find a new economic system, a system which is based on brain work and intellectual property.

Also we should not ignore this process because there are already thousands of industrial robots worldwide working in factories at the same assembly lines where the industrial revolution began 200 years ago and where humans worked 50 years ago. So in my opinion the robotalisation has already started by now. After the assembly line workers many jobs of the service sector will follow geriatric nurses, cashiers, charwoman… - all jobs which could possibly be replaced by robots within the next decades.

Wrong: Low price stocks are better than high price stocks

A widespread misconception is that a low price stock should be preferred to a high price stock, for example a $100 stock vs. a $10 stock. This is wrong. The value of a company is expressed by its market capitalisation (stock price * number of stocks), whereby the real value of a company differs from this value. It must be calculated by analyzing the company. So, the assumption that low price stocks are better is wrong because every company has a different number of stocks on the market. The price of the stock is the effect, not the cause.

Wrong: Stocks that have fallen will rise again

We see the traders attitude here, because when a stock falls e.g. 25% on a single day, some will speculate that there will be an up rise of e.g. 5% the next day. This effect has been observed many times, but we discuss long-term investing here, so it is clearly a misconception. Stocks usually fall for a reason, even if it is not clear for everyone. But fallen stocks will rise only when the factors which led to the fall are corrected. For example, if a stock fell, because the company announced that it will suffer from a recession for the next years and earnings are down, then it won’t rise before those factors change to normal again.

Wrong: The stock market is a place where you can get rich quickly

By investing intelligent you can for sure get rich on the stock market, but this is not supposed to happen quickly. Many people behave like gamblers on the market by making quick, impulsive and blindfold decisions. They lose money and again behave like being at the casino by increasing the amount of money in the game in the intention to wipe out their loses. Logic is dominated by emotion and the game is soon over.
However this misconception can be changed into a perfectly true advise: “The stock market is a place where you can get rich as quickly as possible”. This does not mean “Get rich slowly”, it means that you can get rich as quickly as possible. With the assumption of a historical return of 10% a year and a few years of your time, you get pretty good results. Never forget that the most important thing in investing is not to lose your money.

All in all, there are always intelligent people with experience, who know what they are talking about. Do not follow the loudest voice in the crowd, search for the smart ones.
But most of all, always check thoroughly every advice which is given to you, because in the end it is your hard-earned money which is at risk.

So the question is how long will the dollar fall in price? Sure thing is that the dollar will come back, so don´t worry. The question is when it will happen, which is not easy to answer. However, in my opinion the dollar will come back either in the next month or at the latest just after the U.S. elections.

Here´s why:

The first and most important reason for my theory is fact that the FED can´t relax the monetary policy anymore and the FED wouldn´t do that neither. On tuesday the third of Juli, for example, even Ben Bernanke the chief of the FED did something which is extremely rare for the FED he spoke about the exchange rate of the US-Dollar and claimed the U.S. Dollar is sharply underrated. And even though also the EZB, the European central bank, has announced to rise the bank lending rates again in my opinion the comeback will come.

Because whereas Europe and the rest of the world are slipping in a recession the weak dollar is helping the U.S. economy to get better through the crisis. Companies like IKEA, Toyota or BMW are investing huge amounts of money in in the U.S. now, the U.S export will grow while the imports will decrease. That all will help the dollar to recover. There is only the impulse from the FED missing but that surely will come right after the elections or even earlier.

But nobody can exactly know how the markets will behave so don´t take my words at face value, it´s just an opinion…

1. Buy the boring not the pompous ones.

Invest your money in companies and business models you understand and which are needed by the world. Warren Buffett for example buys confectionery manufacturers, drink producers, producers of clay-bricks or if he really wants to have something exciting, assurances.

The Reason: Because these companies are always needed they will always grow just like the population of world does so actually you can´t do wrong really much.

2. Beware a cool head and have patience.

If you think Warren Buffett would sell one of his stocks just because it falls in price you are definitely wrong. Because actually he does exactly the opposite he buys new ones.

The Reason: Warren Buffett always buys his stocks to a very cheap price if you want to know how he does that read the chapter margin of safety. So when these cheap companies get even more cheap he is the happiest man in the world because he can buy more share of fools to an even better price.

3. Watch out for fortresses.

Mr. Buffett says you should buy castles with a big castle moat. Translated that means Warren Buffett buys companies with a very good business model which can´t be copied so easily. His companies should be something like a monopole just like Coka Cola, Gilette or Microsoft.

The Reason: The main problem of the capitalism is the profit margin when the margin is too high it attracts others who also want to participate in it and the margin falls. In order to circumvent that Warren buys companies which can´t be copied so easily.

4. Concentration instead of diversification.

Many people say you should diversify and spread the risk on at least ten different stocks. Warren Buffett says diversification is something for people who don´t know what they do.

The Reason: If you know that a stock is really cheap and you make a snap why should you also buy other stocks?

5. Don´t hit every ball !

Take your time by finding good stocks and wait until they get even more cheap. Sometimes Warren Buffett even waits 2 or 3 years before he buys a stock.

The Reason: Finding a good company isn´t that difficult much more difficult is to find a good company to a good price. So Warren Buffett looks for an interesting company and waits, waits and waits until he can buy the company for the price he want´s to pay.

In 2007 more than 850 million people worldwide went hungry, everyday 25.000 of them died of the direct consequences of undernourishment. As if that wouldn´t be bad enough it´s alarming to hear that the number of hungry people has increased dramatically as a result of the enormous increase of the prices for basic foods.

But what´s the reason for the recent price explosion? According to the governments of the industrialised countries also in this case the main inflater is the unstoppable demand of the Asian region and the other emerging markets. On the other side environmental organisations blame bio fuel for the boost.

However in my opinion the problem originated elsewhere and started long before china was trendy and bio fuel a problem. The only thing is that through bio fuel and China the problem came to light. But to explain what i mean let´s go back to the year 1970 when new machines, fertilizers and new kinds of seeds revolutionized the whole agriculture. And as you know when the supply of a commodity grows but the demand stays constant it falls in price and that’s exactly what the agrarian commodities did. Well actually falling prices for food aren´t a bad thing wouldn´t there be the side effect that now thousands of farmers earn nothing anymore. So the governments of the industrialised countries had a fantastic idea, they just paid subsides for all agrarian products of the farmers so that the farmers could survive. The plan worked out the people had food in abundance and the farmers became money for producing too much, there was only one thing the politicians overlooked. Because instead of trowing the overproduces food away the farmers began to sell their commodities to developing countries. It sounds strange but it´s cheaper to carry potatoes from Europe to Africa than growing them there and so the clever industrialised counties began to sell their overproduced food there. After a certain time these governments even liked the idea of selling our goods on the markets of the third world and I guess that´s why the developing countries were not allowed to impose protective duties against this foods. The consequences for the farmers of the developing countries has been disastrous not that they just lost their existence they also lost their farming land because when you don´t use it for a longer period of time it it gets lost. So everything was fine the poor people worked to buy our food and we could use them the win other commodities we needed.

But then during the turn of millennium everything changed china climbed up to a net importer of food and just like China many other emerging market countries built cities on their reproductive land. Also the industrialised countries discovered bio fuel and how higher the oil price gets the more agrarian commodities will be used for that

What is sure is that we have to find a way that every county has the chance to produce its own food only this would solve the problem.