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Minyan Mailbag: Any Safe Places to Hide?

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With inflation, the rich get richer. In deflation, everyone loses... even the wealthy.

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Toddo,

With the Fed seemingly cutting rates more and the government embarking on a huge stimulus package, it seems that they are going to fight a recession tooth and nail by making US dollars more and more available. This is what the bearish cult has been predicting for years and now it is here. Do you feel that this is priced into FX markets and precious metals?

You were right on the metals/energy theme, how do you feel now about it? There is becoming a shortage of places to put money that are safe. Yields are very low now on CD's and treasuries. Is it possible that the precious metals could be the next bubble about to inflate, with people parking money there as a safe haven?

-Minyan Frank



Hey brother,

Great question. I suppose the issue is one of timing. If this plays out how I foresee it--and there's no guarantee that it will--the dollar will rally and asset classes will deflate. I don't believe that's priced into crude or metals (or commodities in general) but they could well outperform on a relative basis (as opposed to absolute gains).

I've been trading from the long side the last few sessions--making to take 'em, so to say--but I believe we're in for a long, hard road. That doesn't mean straight down, it just means that we need to be conscious of the environment and not get caught up in the hype when the inevitable rallies arrive.

To your last point, I can't imagine there will be alotta places to hide if (when) this scenario arrives. That's sorta why the Fed (and global central banks) has been trying to inflate/reflate. With (hyper) inflation, the rich get richer. In deflation, everyone loses... even the wealthy.

And so it goes, the battle drum beats on...

Good luck, my friend.

-Toddo


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