What I'm doing with my money today

• Unfortunately, I still hold cash
• Why inflation is the end-game
• I don't worry about deflation

I remain super bullish on gold - I just bought some more last week. Yesterday I talked about how to buy gold and silver, and how to make sure you don't get ripped off.

I also remain totally engrossed with the price movement of several major commodities, the most important being oil. I've talked recently about the all-encompassing importance of oil with regard to every single investment and asset class. If you don't know how oil supply and price affects every single one of your investments, then you might not be in a good position.

Unfortunately, I also have a good amount of cash on hand. I say 'unfortunately' because like many investors, I feel like I've fallen into the trap of being fearfully inactive. I have little faith in the broad stock market, but I do like some companies in the commodity sector. I've talked at length about owning Exxon (NYSE: XOM), Archer Daniels Midland (NYSE: ADM), and a handful of others. I like companies like Exxon and ADM because they will survive a currency crisis. They have pricing power, they have international reach, and they have products that everyone needs.

In the meantime I want to have cash on hand for opportunities in the stock market, but I've been gradually exchanging more and more of that cash for gold and silver.

Owning dollars at this point is putting myself and my wife in the direct path of an unstoppable government spending machine that would sooner make the paper worthless than do otherwise. I'm not so much worried about daily dollar fluctuations or Treasury movements; I'm more interested in the end-game for the currency.

The end-game, as we know it, that's been talked about at length by Ben Bernanke, Tim Geithner and now President Obama, is that they have no plans to slow the printing press, and that they want to avoid deflation at any cost. That's not a good partnership. I can end this partnership, or at least lessen it, by exchanging dollars for precious metals.

If you see the end-game any differently, I'd like to hear your reasoning. Write to me at editorial@resourceprospector. com to tell me why Bernanke et al will abandon their Keynesian policies and why you think they'll let deflation reign.

I actually don't really think that deflation is an end-game concern, but I could be wrong. Either way, I legitimately believe in the strong possibility of a currency crisis. That crisis could be a deflationary, hyperinflationary, or just plain old inflationary - but the common denominator in a currency crisis is that people buy gold and silver.

In the event of a currency crisis, you'd want to be holding very little cash, and have most of your net worth in gold, silver, fossil fuels, and agriculture. If the currency crisis got serious, it wouldn't do you much good to have a significant portion of your net worth in stocks. Paper money, including paper assets like a stock certificate, or a brokerage account on a computer screen won't do you much good when they're denominated in dollars.

I fully acknowledge the possibility that I could be completely wrong. Maybe everything turns out for the best. If that's the case, I will get burned on my gold and silver purchases, and I'll probably take a 50%-75% loss on those positions.

But if I'm right, then everyone currently holding Treasuries, stocks, bonds, and currency will take a near 100% loss. So the choice is clear for me: I'd rather lose half my net worth than all of it, so I'm buying a small amount of specific commodity companies and I'm bolstering it with physical precious metal.

That's what I'm doing with my money - if you're doing something substantially different, please drop me a line at editorial@resourceprospector. com to tell me why.

Good investing,

Kevin McElroy

Editor

Resource Prospector

disclosure: Long gold, silver, and I own Exxon in a mutual fund