From my Nov and Dec 2009 article USD: Shape of things to Come:
And off we go...
In the big scheme of things, time is short. As usual, I recommend a one year (minimum) cash reserve under your own roof, enough to pay all bills and essentials. Keep the rest in a US Treasury account--no longer term than the end of your hard cash and ladder the rest. Simple enough.
For over a year and a half, I've been out of the market. There have been times of doubt, but there really has not been anything to change my mind. I listened to you, I listened to me. I have the cash, some gold,no debt, except for property taxes year to year.
ReplyDeleteI have no problem holding cash, I hope, down the road, it's still good. I'm not talking about inflation.
FDR
ReplyDeleteThe bottom chart is exchange rate. I thought you said that is not the same thing as dollar buying power of Cashzilla, assets etc. I cant zoom in to see what the top chart is. They look about the same except to the far right.
Thanks
Hi FDR,
ReplyDeleteFrom the variety of treasury direct's products which one would you recommend the most?
http://www.treasurydirect.gov/indiv/products/products.htm
It depends on your liquidity needs. If you want 100% liquid savings with unlimited U.S. government insurance (as opposed to a small amount of private insurance from the stone-broke FDICorporation) you can hold all of your money in a Treasury C of I account.
ReplyDeleteThe key is to GET YOUR MONEY THROUGH THE TREASURY WINDOW! Then decide.
The U.S. Treasury does something very clever (on purpose). They force you to buy an instrument (any product) in order to fund a C of I account. Otherwise, your C of I direct transfer (bank-to-Treasury) limit is only $1,000.
Why?
Because they want you to compete in the long, long, long, long, LONG line that is forming at the Treasury window (proven by years of 0% short term Treasury yields--meaning, people are draining their commercial bank accounts) in order to protect money.
As soon as a big bank pops, that means you are going to have to pay the U.S. gov a historically negative yield to protect only a portion of any cash you manage to funnel to them.
So, don't worry about which instrument--
Buy ANY short term T Bill and make sure you select "C of I" as the de-funding target, not a bank account. Once your cash is safely thorough the Treasury window, then you can start buy any longer term T instrument you choose from your Treasury C of I account. Then, de-fund those purchases right back into your C of I Treasury account, avoiding commercial banks altogether and for as long as you wish.
The Treasury provides unlimited insurance.
The private FDIC is as broke as broke can be.
The first rule of all (valuable) insurance is "you can't buy it when you need it."
You do the math.
strong volume here, now you see the light FDR. This is how you trade if you want to make money. Steel keeps screaming with high beta. We have some more real big days ahead with earnings blowing out of the water. Watch the dollar roll over and propel the market to 11500 in the next 2 weeks. The volume will skyrocket in coming days and then you can start to nibble short for a selloff in the fall. I like your thoughts but your trading is awful
ReplyDeleteI am perusing my 401k and see that merrill lynch has got me up 30% over the 2007 highs. This is crazy, the market is still down but the stocks in my portfolio are up so much that my overall portfolio is up 30% since 2006 when I started it. Would you recommend selling something here? I read your stuff and have passed it on to my broker but he tells me that this is tin foil hat stuff, profits are skyrocketing. I am just nervous making this much money on paper because I realize it could vanish quickly. Merrill has been spot on though and convinced me to buy when nobody wanted to. The strong dollar seems to be really helping the equity market in here.
ReplyDeleteDear FDRAOA,
ReplyDeleteThe S&P 500 index is closing in on 1200. Why did you miss this? When the decline that you keep predicting finally takes place, how do you know that it won't just be a 15-20% correction? And what about B of A, whose stock keeps going up? What, specifically, shows you that they are going to be crushed and when will this takedown happen?
Now that I finally understand your position on Treasuries; that of a 'better' insurance policy, as opposed to the FDIC. Exactly how do you see the Federal Government explaining to the citizens, why they will fail to fund the FDIC to any extent necessary, given wave of high profile failures? It being similar to the other GSEs that have been given a blank check in recent years.
ReplyDeleteIsn't given money to the fed the same as giving ammo to your enemy?
ReplyDeleteThen fed lends it to the big banks / brokerages at 0%. Then, they drive up asset prices with your dollars.
Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television.
ReplyDeleteDon't higher yields mean that peoples demand to borrow is growing and thus the economy is about to actually recover strongly. People were selling X yesterday and I piled in on the higher yields and whalla, steel is screaming today. Everything seems pretty logical to be buying the dips in equities. I don't know why people are confused
GLD has been a good long today. The DXY should continue to get whacked backed to 80 on a retrace, so 110 on GLD looks good in the short term
ReplyDeleteShould there be concerns about shorting metals with Korea incident today?
ReplyDelete"Should there be concerns about shorting metals with Korea incident today?"
ReplyDeleteMetals typically fall during a crises. The dollar typically strengthens.
from a poster on ZH:
ReplyDeleteTo quote Doug Noland:.
"U.S. financial assets – hence the dollar – are perceived to benefit from a relative advantage versus other major currencies based upon:
a) the virtual unlimited capacity for the Treasury to run massive deficits and,
b) the Fed’s seemingly endless capacity to
i) purchase (monetize) U.S. debt instruments and
ii) essentially peg interest-rates
This extraordinary capacity and willingness by U.S. fiscal and monetary policymakers to inflate Credit and meddle (in the markets and economy) today:
a) bolsters marketplace confidence in the sustainability of economic recovery, and
b) cements the view that the soundness of Credit instruments throughout the entire system – Treasuries, mortgages, financial sector debt, corporates, munis, etc. – is underpinned by current and prospective reflationary policymaking.
Ergo, the markets’ perception of “too big to fail” has inflated U.S. securities pricing – reduced risk premiums - throughout the entire system."
...........................
The more money printed, the more schemes and scams perpetrated by the Fed to backstop asset prices,
- The higher the U.S. dollar goes
- The lower the CRB index falls
- And dip buyers in junk bonds and high risk stocks show up with renewed vigor
The rising dollar and collapsing commodity prices removes any possibility of the Fed hiking interest rates in the near future, thereby ensuring that easy money will continue indefinitely.
Upon the arrival of any type of mishap, convulsion, default, forced liquidation, margin call, financial failure, or other assorted bull market "interruptions"....
Investors temporarily dump stocks and immediately flee towards U.S. Dollars, U.S. Treasuries, and interest rates immediately crash down to "Animal Spirit" levels which entice even more "bargain hunting" and "garbage can diving" among the speculators. This, of course, creates the "instant rebound" in stocks.
When Bloomberg and CNBC are overrun by the likes of Meredith Whitney, Nouriel Roubini, Robert Prechter, and other "gloom and doom" types, upon the first whiff of a stock market correction, the short interest in cyclical, retail, and financial names starts skyrocketing at a record pace. Eventually, Goldman Sachs trots out the addition of these names to the "Conviction Buy" list and incites epic squeezes, which are invariably hopped upon by the momentum funds.
Spectacular gains in high risk stocks encourages fund managers to dump old fashion blue chip names like Exxon, AT & T, Verizon, etc. and continue chasing the screamers, or otherwise go back to the garbage can and search for beaten down junkers which haven't moved yet.
Its all part of the Perpetual Motion Machine, deftly choreographed by Bernanke, Geithner, LLP, to create the psychological boost to risk takers worldwide, and ultimately, creating a self-reinforcing feedback loop which spurs more economic activity, which in turn drives earnings higher, which in turn guns stock prices even higher.
All done while spending trillions, running gargantuan deficits, yet enjoying 40-year low interest rates, a "King Dollar" currency, and little or no inflation.
interesting comment over on ZH, echoing your position, except that the USG is about to go down too. http://www.zerohedge.com/article/bank-england-estimates-global-output-losses-financial-meltdown-200-trillion#comment-282207
ReplyDelete