What to do in 2009? Part 1

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Saturday, December 27, 2008

What to do in 2009? Part 1

Gold should be the life vest of your portfolio. As we enter a year in a Financial mess, some things are certain. Jobs being lost will not be replaced for many years, many, many more business failures and job losses will occur in the first quarter of 2009 and by mid year as desperation becomes the huge headline throughout the latter part of 2009. Dollars, yen, pounds etc. are being mass created. Mass creation leads to losing value. Welcome to worldwide Zimbabwe economics. Ultimately financial strife leads to wars.

#1 Deflation or inflation -- it does not matter. Over flooding the world with ANYTHING will cause its value to erode. It is that simple. The governments of the world have flooded the world with their fiat currencies and this process has just begun. Watch how in the U.S. almost every day someone jumps from under the rock and is made a part of the bailout. Obama's plan which will be emulated worldwide will cause a MASSIVE currency flood driving value south.

#2 The governments of the world are following the U.S. and will imitate our policies and actions. It is strange how the U.S. started this crisis is now the chosen leader to lead the world out of the crisis! Talk about the blind leading the blind! There ultimately can not be deflation, it should turn on a dime. The governments of the world will do everything within their power and succeed in combating deflation. Inflation is the only likely scenario. You may not be seeing it now but watch the commodities closely. The rapid massacre in commodity prices due to hedge fund liquidations have caused production and supply lines to be effectively shut down and now we are beginning to see shortages! Watch closely how in the next few months commodities prices will start running up and leading the way will be its strongest performer, Gold.

#3 There are two key points for strife in our world today. One is Iran/Israel and the sceond is Pakistan/India. One of them or both of them will likely erupt anyday now. Even if they don't this simmering tension points along with an un predictable Russia flexing its muscles will continue to create heightened uncertainty which will make Gold shine as the "safe haven" investment it has always been.

#4 Any sector that has momentum now will gain additional momentum after the transition of power in the U.S. when all the money sitting in the treasuries will try find a safe investment that has some returns. Gold is that position and offers both safety as well as momentum. Even a minor allocation of the massive amount of money sitting on the sideline moving into Gold, which is in short supply, will cause a massive runup in its price due to horrendously low supplies. The second part of the run, later in the year will come from a public seeking any positive returns. The panic to chase higher risk in order to get higher returns will come into play driving Gold's price even higher. I expect Gold to close exit 2009 in excess of $1600 per ounce.

More to come later...

JMC

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