MegaEurope, and possibly MegaAsia, really nailed me on my last post. How embarrassing! Well, he's (she's; they're) probably right about shorting Treasuries being the way to play the ridiculously low Treasury yield opportunity. Here's the reason to buy precious metals:
The U.S. federal government's debt is ballooning every year. Neither Republicans nor Democrats have the political will nor the mandate to cut spending. The only way to service the debt will be to print money to pour into it, because more and more Treasury buyers will stop buying them (watch China and OPEC, not to mention fewer workers paying Social Security taxes, which is the primary source of buying for UST's). That means debt monetizing by the Fed.
Given the inflation inherent in such an event, and the economic trouble of the next few years, stagflation is a good bet. Gold is the stagflation investment, while bonds and stocks are falling, but perhaps not falling enough to outpace inflation by shorting them. Gold and silver both hanily outperformed all other investments, and outpaced inflation, while the term “stagflation” was being coined in the 1970’s.
Disclaimer: yes, I own gold, but if you think that’s why I’m saying this, you don’t understand my investment mindset at all. If you all ignore me, and JPM manipulation drives gold down 50% over the rest of 2010, I’ll be overjoyed to buy more at those prices. The reason I’m telling you all this is primarily for bragging rights, and secondarily so that my CAPS brethren will be better prepared for the future than the great mass of Americans blindly going about their careless lives.