Kuta Beach

Kuta Beach

Wednesday, 4 August 2010

The Alpha Strategy

I have just finished reading The Alpha Strategy, which is a book that I simply downloaded off the internet (see the link earlier) and put onto my mobile phone using a free software called EBookMe. In other words, I paid nothing to read this book. I think there is no need to pay money to buy a book because ebook programs like EBookMe are free and there are virtually infinite free books out there on the internet that you can easily find.

The Alpha Strategy is a good book. It is about the problem of inflation and what individuals can do to protect themselves from inflation. This books pretty much claims that a good way to protect wealth from inflation is to stock up on goods, e.g. toilet paper, wine, honey, and so forth. The ideal is that you stock up on goods that you will need anyway so that it won't matter if the price of these goods go up. If this is not possible e.g. because it is difficult to store wine, etc, then the next best move is to stock up on raw commodities like copper. There is a whole section near the end of this book that explains how to buy copper from the futures market. This book was probably written during a time when there was no exchange traded commodities (ETCs) for sale.

I think stockpiling goods is a great idea, but the main problem is that a lot of what the author is explaining is just too difficult. It is very unrealistic for me to start stockpiling because I still live with my parents. If I were to start piling up toilet paper in my bedroom, my parents would not be happy. Because most goods deteriorate (e.g. wine may go off if exposed to too much light) then you have to be very careful about the storage conditions and you have to make sure everything is stored securely because of the threat of theft. It is all very difficult. While reading the book I got the feeling that this investment strategy of the author was just an excuse he was using to justify his love of shopping, e.g. he describes in detail different types of wine.

I think the author's stockpiling strategy is good and I definitely will think about using it, but I won't put all my wealth in stockpiled goods. I think putting, say, 10 per cent of your wealth in stockpiled goods is a good idea, e.g. I might stock up on some soap or some breath mints or tic tacs.

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