I like this picture so much I am borrowing it from this excellent article. Be warned, though, don’t read it unless you have a strong stomach. I have added The Market Oracle to the blogroll. Thanks to Katarina.
It seems to me inevitable that the US Treasury will eventually formally take ownership of the dodgy derivatives-laced unpriceable mortgage bonds. This is going to be RTC on more ‘roids than a billion Barry Bonds.
Look for legislation in the next congress to ban the adulteration of securities with derivatives. Yes, of course, that’s crazy, but that’s never stopped Congress before.
I’m watching Jim Rogers on Bloomberg right now. This is the guy we all derided as Mr. Bowtie in the 90s. He was right, but he was early, way too early. I think he turned bearish in the early 90s and missed the whole party.
He says the Fed should have let Bear go down, should have stood on the sidelines and let the dominos fall where they may. He might be right about this. But Bernanke doesn’t have the stomach for this, just as Volcker’s predecessor didn’t have the stomach to boost the short rate to 15% to drive a stake through inflation’s heart. Who is going to succeed Bernanke, who is going to give the economy the tough medicine needed to restore the dollar and force the unwinding?
Enrico is holding and looking to buy the following:
- euros-denominated money market ETF, symbol FXE
- yen-denominated money market ETF, symbol FXY
- gold bullion ETF, symbol GLD
- silver bullion ETF, symbol SLV
- private equity stakes in start-ups with the potential to yield oodles of cash
Some of Enrico’s friends are buying agricultural and industrial commodities. I looked at an ag ETF, symbol DBA, but decided not to get involved with that because it is 100% derivatives (options and futures), and derivative-based portfolio insurance has an uncanny knack of failing just when you need it the most. In the event of a secular disaster, liquidity for derivatives has a tendency to go to hell.
Another of Enrico’s friends, a very smart friend, holds and is buying Potash Corp of Saskatchewan, symbol POT. This company produces fertilizers, and related industrial and feed products. I haven’t done this yet because it has appreciated so much recently (see how smart she is?), and I am trying to develop a better understanding of this commodity.
If Enrico knew of a way to buy producing domestic farmland through a financial instrument, he would look very favorably on that.
Enrico is dabbling in buying oil and gas reserves by buying oil companies, but Enrico does not yet recommend this, it is unclear whether these reserves will ever be priced at replacement cost by the market, as long as the conpanies are depleting them faster than they are replacing them.
Enrico is dumping equities, but he is dumping US equities first.
What are you buying, holding, and looking to buy?