Volatility is here to stay. We must have the discipline to keep our eyes off the daily news and on the long run line while considering the daily dramas as nothing but an opportunity to buy if they force share prices below your average price per share or currency.   For example, this week´s fright around the euro won´t last forever.   Talk about a currency that is too big to fail!.  There are too many stakeholders and it is still the world´s second most important currency after the USD.  Germany is playing brinksmanship now because they are tired of always picking up the bill.  Nevertheless, they have too.  If the euro falls below 1.30 vs USD then it means our USD´s have more “buying power” against the euro and other currencies. Then, we use that buying power to lower our average price of currencies. We believe the long run trend is that the dollar will devalue but remember, we do not advocate currency trading or speculating. Currency is the mechanism to store value that is waiting to be invested in equity. We recommend hedging them against eachother (this is especially true if hard currencies continue to experience significant volatility against eachother) in order to protect your ability to buy equity over the years.  The gravitation should eventually be towards the currency that emerges with the momentum as the dominant global central bank reserve currency.

If Gazprom shares fall because the news is chatting about how shale gas could transform the European natural gas markets assuming nobody cares about the environmental consequences and they believe the politicians are going to agree, then we buy on the scare in order to lower our average price per share. If Denway Motors gets slammed down 15% because they made an unexpected charitable donation this quarter and profits slipped compared to their Chinese rivals SAIC Motor Corp. and FAW Car Co…..great! Buy. We are building positions in companies that are here to stay and have excellent long term stories. Denway (a Honda partner who makes Chinese Accord, Fit and City models), for example, is a long term play on the inevitable expansion of the Chinese automotive industry.  If the Brazilian banks drop 25% because the fainthearted easy money in Brazil goes home…Buy!  Banco Itau and Banco Bradesco could be the savviest long term bet on earth.  If the price of oil drops to 75 dollars a barrel because China´s imports from Saudi Arabia are only growing by 700,000 barrels a day instead of the expected 900,000 barrels a day as PetroChina stalls for 6 months.  So what?  If the price is below 20% of your average price we´ll recommend you pick up 100 shares a month.

Market price is not your wealth.  Market price is a mood, much like an emotion that passes.  Your wealth is the basket of cash hard currencies and the number of shares you own in hallmark companies with excellent long term stories.  We predicted 2010 was going to be an awkard year full all kinds of surprises and it isn´t disappointing.  Investors, your portfolios are heavily weighted in cash and you own excellent companies.  We´ll be calling you and saying, “Denway is getting beaten up and is off 20% from your purchase price.  We recommend that you double down and this time we will take a position in the Denway Hong Kong shares for further diversification.”  We´ll be calling if the Euro keeps falling and recommending that you gradually buy $40,000 tranches until the storm passes.  We´ll be calling if there is a 40% accross the board market correction in June because nobody believes that the world economy can get off the drug of government money and saying “you are 15% invested and 85% cash.  We recommend that you enter another 15% in equity and dramatically lower your average price per share.

On the other hand,  the market winds could be boring or happy as they move sideways or slightly up for the rest of this year.  Then, we will quietly wait while expanding your equity presence with micromovements when they appear.  Whatever happens, hold the line.  Let other folks experience dismay as they ride the hamster cage wheel of fear and greed and fail by catching the last breath of a news story or fad.  Your goal is to patiently grow your wealth.

www.crinvestmentadvisors.com