With experience in international business development and a singular talent for explaining complex economic concepts in a simplified way, M.J. Loiselle offered attendees, at the Cambridge House Montreal Investment Conference, her opinion on investing and options investing. Said Loiselle, “You may think that investing is natural for human beings, but it's not. I think our brain is not necessarily wired to do it very well.”
While most investors have a working theory that on which they base their investment decisions, Loiselle indicated that “economic theories are just a justification for more government spending and intervention.” Her specialty, the option school of economics, offers the big picture to those who are interested in investing and actually making money. Said Loiselle, “The option school of economics is the only one who understands money, capital and interest. I think it is pretty important all around to understand money, but it is even more important if you are an investor.”
Traditionally, economists and investors simply go along with government actions. Those that are involved in options economics believe in a pure market-driven economy. Said Loiselle, “They don't believe in the government “fixing” the economy.”
Though the government may be attempting to fix the economy, government didn't create the monetary system. Loiselle said, “You may be surprised, but the government didn't invent money. The market did. Money is a medium of exchange.” The government's attempt to fix the economy by printing more money is not a solution. Said Loiselle, “By printing more of it, it doesn't help society at all. It actually just dilutes the purchasing power of every unit. Government controls the money production – the government has a monopoly over the money. Government interventions don't work.”
While government interventions don't work, society still does need money. Said Loiselle, “Money made division of labor possible as well as business calculations. Over many centuries, the free market has chosen gold and silver as the best money.” Loiselle believes that we don't live in a free market-driven economy at this juncture. She said, “We don't live in a free market. Money is a centrally planned operation because government controls the money production and it controls it via the banking system. There has been a slow and steady grab by the government of our money.” This “grab” has been going on since the 1970's when Nixon cut the last ties to gold in 1971. The result of the government holding control over the market has been hard on the market. Loiselle said, “The central bank can print money at will and they did. There has been a loss of purchasing power and a great deal of debt, without mentioning the welfare state, which is now in its full bloom.”
For investors, the government control of the money supply makes investing a challenge. Said Loiselle, “This has a couple of implications for investors. First, saving, in a traditional kind of way, is impossible. There is no way to protect savings from inflation without gold. There is no way for the owners of wealth to protect themselves. Because of the control of the central bank with the money production, we have the politburo setting the interest rates. Interest rates are prices and they should mean something about the supply and demand of capital.” Interest rates are just one way that the government tries to control the market. Loiselle said, “We do not have market interest rates, we have centrally planned interest rates. They set the price of capital. When you play with interest rates, the central bank many times will lower them below their natural rate to boost the economy. As soon as the central bank slows the rates of credit extensions, the house of cards comes crashing down because the savings are not there. Most people see the growth phase as a positive phase and they see the bottom as a negative. Options economics sees it the opposite way. The bull phase is actually where the mal-investments are pure – the engine of prosperity to buy cheap money. The bust is the good part. When the liquidation of the mal-investments is pure and the structure of the market is realigned to meet the real needs of the consumer.” Though every investor has been taught that stocks are meant to be held for the long term, Loiselle has a different view, “Stocks don't always go up. There are booms and busts. The unexpected moves markets. Since the Great Depression, government has not let correction happen. They burden us with their solutions which gives us more ups and downs.”
Loiselle believes that the natural corrections and market movements have been stalled by the government, “Most economists and investors think that the government can fix the economy and if they can't, they'll just print more money, so they invest accordingly. If you are an investor and you believe that, you are always surprised when there is a bust or you buy at the top of the bubble.” Currently, the biggest challenge is debt. Said Loiselle, “Everywhere you look right now, it is the [concern] of adding more debt. It is a solvency problem. There is a mis-allocation of capital. Liquidation is happening in the private sector, but not in the banking or government sector. This is where we are today.”
In terms of dealing with investments, Loiselle advises investors to “invest in hard assets that can keep up with the printing press. The new money may go to the mining stocks, but the volatility is here to stay.”
Knowing that the government interventions and control of interest rates are not a long term solution, Loiselle advises a run to hard asset-backed stocks that have more stability.
For more information on M.J. Loiselle or to read her blog, visit http://www.mj-economics.com.