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Thursday, July 30, 2009

Cash is King

It has been a roller coaster these last 12 months in the stock market, quite a ride. In August 2008, best investment was riding Oil to 180 a barrel, then flipping short to catch the markets crash. At that time, I warned against gold in a deflationary spiral, and didn't own any resources or resource based stocks. Sometime in Oct, I became a gold bug, and since then I have been of the believe that resources are the safest investment over the next 2 to 5 years, with a preference on precious metals, in the event of a fiat currency collapse or panic run.

At that time, I thought China was stronger than it really was, and was of the belief resource demand may be relatively safe. While investing in resource based stocks I still think is a safer play than most other stocks over the long haul, I am now flipping my previous opinion for the next downleg of the market. (I reserve the right to flip again) :).

As previously blogged, China is an outright fiscal disaster, the US may be better off than them, which is hard to imagine, as previously blogged. And natural resources? Over the 10 year haul I still think its a winner, but I am pulling the reigns in hardcore.

Time to run for the hills and go pure cash. Invest in short term US treasuries or something as safe. Avoid corporate debt of any highly leveraged company, especially buying debt of financial companies for your life savings. I have been a gold bug since Oct 08, so this is a major change for me.

Today, I sold many gold miners, either directly or selling calls to offset my losses. I have some gold miners that I will keep as a hedge if there is a "oh shit" moment where panic arrives and gold becomes king. I would hate to be 100% out and still be right about gold. I will adjust my stock plays accordingly.

We are about to face a very deep, very long, recession/depression that may last upwards of 5 to 20 years. Everything is risk.

If/when Gold goes over 1100 an ounce, or below 650, buy buy buy all you can. Until then, the risk is too great for me to stomach in the next 1 to 6 months. However, the one thing about investing in natural resources is if there is a panic on fiat currencies. I am of the belief however that won't happen until AFTER a deflationary collapse occurs.

I leave you with a quote from a founding father of the United States, Thomas Jefferson. Keep in mind the significant USA inflation occurred under George Bush, and the US is now experiencing deflation.

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
-- Thomas Jefferson, Letter 1802 to Secretary of the Treasury, Albert Gallatin

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