Maybe it’s time to Consider Some Safety.
We have talked often about where we believe the next wave of wealth is coming from. It is resources, precious metals, base metals, commodities, food, rare earths and so on.
It is different way of thought than the tried and true.
Historically Safe Investments
Historically people moved to cash in times of turbulence. Blue chip stocks were a place of safety. The US was the place to put your money in order to be safe. Perhaps the tried and true historical places of safety are not quite as safe in these times.
These times might be just a bit different. We had a chat with a Fund Manager last week, and he was bemoaning how poorly his fund had done. That fund was denominated in US dollars, and regardless of how well his picks had done, as the US dollar continued to slide in value against other currencies, the value of his fund also continued to drop.
The US Dollar is Sliding in Value and the Pace is Accelerating
The essential take-away point here, is that the US dollar is currently sliding against some other currencies, but also against commodities and in a big way. The cost of every commodity as denominated in US dollars has become dramatically more expensive.
This has been going on for some time now, and the rate of fall seems to be increasing, while the rate of the climb of commodities seems also to be escalating.
The Cost of Money is so CHEAP
The cost of money remains absurdly low as interest rates are artificially held down around the world, so money is relatively cheap to borrow, and still the pressure to raise interest rates is being resisted.
Sooner or later, this pressure cooker will have to release some steam.
The Signs of Imbalance – History is Repeating Again
In a recent blog I repeated the saying, “The Biggest Thing Coming, is the One We Don’t See”.
So it was with the tech bubble when the euphoria overcame everyone’s common senses until the crash came and so many got hurt.
So it was with real estate in most parts of the world, with massive losses now across most of the Western world.
The most outrageous example is, so it was with derivatives, until the world economy collapsed in 2008.
But there are signs now of the next big wave
Oil fell to the $40 level in 2008, and has crept up slowly but surely every since. Brent crude is now $126 per barrel. Is there much doubt that it has further to rise?
Gold continues its relentless march up. How does $1,500 per oz of gold sound, and maybe twice that in the future? We are almost there now.
Silver reached an unbelievable $40 this week, a price not seen since Bunkie Hunt attempted to corner the world’s supply many decades ago, and then went broke in his attempt. Is there any doubt it is going to rise further?
The Federal Reserve is buying more and more of its own debt. What happens when other countries refuse to take worthless dollars? The US is dangerously close to a BIG problem.
Portugal is contemplating asking for help in its financial crises.
Demonstrations by unions and workers have occurred in many parts of the world.
A number of cities and states in the US either have declared insolvency, or are teetering.
Now perhaps all of this will simply calm down, but I think not in the near future. You have the choice. Sit back and watch the US dollar continue to slide for a while, or start looking around and try to visualize what is happening.
Our Answer as to Where to Put Money
Our answer is to get on the bandwagon sooner rather than later. Junior precious metal stocks are a good place to be.
Take a look at the explosion that has gone on in the price of the shares of so many of these companies in 2011. Many have experienced massive price rises.
Silver has become more noticed than gold, which is an illustration of what is going on, because gold just hit a new historical high. Until recently, that would have been the major point of attention. Now it is being somewhat ignored as silver takes center stage.
Look at junior silver producers and explorers.
