- 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
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.
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
[email protected] com to tell me why Bernanke et al will
abandon their Keynesian policies and why you think they’ll let deflation
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
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
[email protected] com to tell me why.
disclosure: Long gold, silver, and I own Exxon in a mutual