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Tuesday, October 7, 2008

The game is up?

Today, I won't bother with the latest spin or news, just a brain dump of my view as we stand today. To the right is the Dow Jones Industrial average from 1995 to today. As you can see we are in a waterfall collapse.

The Fed has tried multiple announcements the last two days, it seems the market doesn't listen anymore. Apparently the market has figured out what is obvious, the economy is in a downturn, hardly a good time to pay more for company stock.
Also that the government taking "creative" measures to what in essence is give away money is NOT a fix for the root cause, and therefore does not warrent a buying spree.
In any event, I wanted to write where your money should be for next 1 to 12 months, and that is government secured bonds.
Anything else is not as secure. However the government has taken some aggressive steps to make sure "everything" is secure. The government is somewhat backing money markets, and the FDIC is increasing its upper limit on coverage.
Take away all the spin, and Federal government bonds is still the safest place to be today. As I previously blogged, be diligent to change this position as the government over-reacts and attempts to inflate our way out of a deflationary market. Bonds will someday NOT be the place to be, and will need to be flipped out of. Think of Federal Bonds as a "parking spot" for your cash in this environment, not a permanent residency.

I truly don't believe we can inflate in the near future, but in the following months or year, the US may start to have the US dollar collapse due to the incredible deficit spending and debt ownership the USA is taking on. When that happens, may need to flip over to gold, oil, food, land, or other tangibles to retain wealth. The stock market may even be good, since in an inflationary market, some stocks will gain in value to keep up with inflation.

I have said this in the past, will say it again, if you are caught in this free fall, take 25% of your assets and move them to Federal Bonds. If/when we bounce, you can move more out. If we continue to collapse, you will be happy you have some wealth locked in.
In any event, keep some cash on-hand to survive for 30 days without credit cards, as an "insurance" policy.

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