Tuesday, July 26, 2011

Be wisely stupid, keep cash

So I found someone who could serve as a mirror for me. I think it is prudent to be wisely stupid at this time by hoarding cash. The world is changing in ways where not enough people understand what is really going on to matter. If you are not positioned to stay cash, e.g., large institutions and SWFs, they do whatever it takes to stay alive because at that time, that is the only thing which matters.

In the worst case scenaro, the euro suffers the ultimate crisis of confience; at the same time the USA defaults on its debts. Then like the end of the great age of the dinosaurs, only the small creatures were able to find hiding places to survive. I don't think it is going to get that financially and economically cataclysmic, but roughly that is the picture. If it turns out to be a real Armaggedon, then nothing truly matters isn't it? I can even forget about getting properly cremated. We will be talking about food, water and perhaps a rifle. The smart thing to do now would be to own farmlands. I understand Mike Burry is invested that way. The ex boss of my ex boss suggested the same in his book, "Wealth, War and Wisdom" - good to have a distant relationship, but no relationship isn't so good.

Those  who try to beat inflation do not know that they are taking on larger than usual risk like never before in the last hundred years. If Uncle Sam is determined to steal from you, it is really hard to avoid him. For now, and let's hope not for too long, minimize your losses. The uber rich with their many investing options think they are safe. I sincerely hope they are right. These are really interesting times when you see perfect asset correlation and liquidity vanishing suddenly. This is more meaningful than just saying CRASH!

The stories all market signals give today are misleading because they do not have their usual meaning as the default risk of America is no longer zero as usual.

Just got this video and I think this is just crazy. Responding to the video, why the market hasn't crashed is because it has no exit to run out of in order to crash. There is no alternative to the breadth and depth of the US treasury market. Guys will just have to hope for the best and stick it out like sitting ducks. That is why this is so surreal and precedents offer no usable lessons.

Who knows, may be Obama would be forced to pull a make believe rabbit from his hat if there is no deal. He will achieve this by stretching the interpretation of the 14th Amendment and ordering Geithner to borrow money anyway, daring Congress to impeach him afterward. But you know, it is a really terrible idea to sail into uncharted waters. The money might be found this way, but the damage would be hard to repair. How would the ratings agencies respond?

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