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Getting Bullish on Safety

What is it that the experts tell us? What is the oft repeated refrain that many of us all too often ignore due to our innate greed and fear? Oh yes, buy low and sell high! Well, unless Gold's bull market is over and the world is about to head into Robert Prechter's deflationary depression, then it is time to buy. Gold kissed it's uptrend line at 410 (as expected and right on schedule). Now, nothing is ever that easy, so there may be more painful volatility directly ahead, but I am now scaling into positions.

The most sensible of which (short of physical holdings) for most people, in my opinion is CEF, or Central Fund of Canada, for reasons so well illustrated in a recent article by Eric Englund. I am looking at CEF as a vehicle for savings, to go along with money market funds and short term treasuries. I have traded it several times in the past, but now that the once onerous premium has been wrung out to modest levels, gold and silver have been hammered, and the dollar has had some room to stretch its legs, I think it is time to begin accumulating.

This view of the window so many people look through (the yield spread) when trying to determine macro financial trends, is telling us something:

It's telling us something very unsettling, and while this may mean more stock pumping, inflationary liquidity in the near future, the markets have never felt more like a casino to me. I am thinking long and hard about each and every investment or trade now. The Fed may try to push the horse with the cart once again, but the horse could deliver a hard kick and splinter the cart at any time. Real productivity is not the driver in this debt-overhung economy. Pure, inflationary liquidity is.

The normal deflationary cycle has been denied and put off for so long now and at all COSTS, that it appears the Fed is in a no-win situation. A pick your poison scenario; deflationary recession/depression or hyperinflationary round trip to depression.

Sorry for the gloomy report today. You are free to believe that the earth is flat, monkeys fly and the US stock market reflects a sound, productivity based economy. For what it's worth, I believe the stock markets may eventually rise much higher from this point, after the current correction runs its course. But what does it reflect, other than a good game? I think it is well worth your time to look at some safety options.

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