Why most investors are mostly wrong, most of the time (page 3 of 3)

With few exception stocks declined practically everywhere. But the CRB Index is up by almost 25% in the last 12 months, government bonds have performed superbly, energy and coffee prices are up by more than 100%, and gold is up by more than 40% since its low in April 2001.

Very clearly, there were plenty of terrific money making opportunities around - it is just that investors were not positioned in these well performing assets, but were stuck in money losing high tech and telecommunication shares. In this respect I remember well how, in early 2000 after a TV interview in Switzerland, a lady called me and asked what she should do with her money.

I told her to buy Swiss Franc government bonds upon which she told me 'that bonds were boring'. Since then Swiss government bonds have returned in US dollars about 50% whereas her portfolio will have declined by at least 50%. But it would almost seem that for the excitement, some investors are prepared to lose a lot of money!

A final consideration: It has been my observation that whenever a mania comes to an end (the bubble bursts), a new leadership will emerge. The gold and silver boom in the 1970s was not followed by a new bull market for precious metals but by a bull market in financial assets. Equally, when, in 1989, the bubble years came to an end in Japan, they were not followed by renewed strength in Japanese equities and real estate, but by a strong performance of US equities.

Therefore, I very much doubt that in the years to come the stock market leadership will be found in the US. Rather, it is my belief that Asian equities are inexpensive and that resource stocks will once again attract a lot of investors funds at the expense of America's financial stocks, which seem to be vulnerable because of rising bad loans and their derivative positions.

So what should an investor do now? I am sorry if my crystal bowl is muddy, but it would seem to me that the poor performance of the US stock market over the last three years should - sharp bear market rallies aside - continue for quite some time.

Continental European markets, which have declined in percentage terms more than the US seem to offer some strong near term rebound potential. Commodities may be near term overbought, and gold and gold shares are still correcting (I would not rule out a decline of gold to below $300), but this is where I see the 'new' leadership for the next five to ten years. Lastly, if commodity prices do strengthen, it will be very beneficial for resource rich countries around the world including Argentina, Brazil, Russia, Malaysia, Indonesia, and to some extent Thailand.