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XMFSinchiruna (28.01)

The Scariest Balance Sheet of All

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February 02, 2009 – Comments (22)

This article pretty much sums up my holistic position on where the U.S. economy is heading, how bailouts and stimuli will only make matters worse, what it all means for the USD, and my resulting stance on gold. I hope you enjoy it, and welcome your thoughts and responses as always. The USD is on life support, and the world stands with its finger on the switch ready to turn the machine off. Never in this country's history, in my opinion, have we faced challenges of this magnitude, and I urge Fools to consider the ramifications of a worldwide currency event that involves the termination of USD's role as reserve currency of the world. Nothing less appears to be baked into this burnt Apple Pie.

In this context, let us not forget what is important to us: life, liberty, and the pursuit of happiness. We're going to need to work together as families, communities, states, and as a nation to see our way through this, and I for one feel very fortunate to be a part of such a great community of bloggers here. Prepare, be aware, don't forget to care.

Thank you for reading my article, and for sharing your thoughts here.

22 Comments – Post Your Own

#1) On February 02, 2009 at 3:38 PM, XMFSinchiruna (28.01) wrote:

And in case abitare, Tastylunch, or TMFEldrehad are reading this post, I doled out credit for your DRYS calls in this article just out.

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#2) On February 02, 2009 at 3:48 PM, outoffocus (23.72) wrote:

I wholeheartedly agree with you and have been warning about the collapse of the US for years.  The only thing is I am not sure how a person with little means like myself can hedge what little wealth I have left in the case of a dollar collapse. The little bit of cash I have left needs to stay liquid. I feel as though I've hedged my retirement as much as possible. Now I feel like I'm just sitting in my basement waiting for "the big one" to hit.

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#3) On February 02, 2009 at 3:58 PM, XMFSinchiruna (28.01) wrote:

outoffocus

I'm sure many here share that same feeling... I happen to believe that even modest moves to prepare by having some extra food on hand, for example, can go a long way. 

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#4) On February 02, 2009 at 4:59 PM, cbwang888 (25.98) wrote:

I'm with you on the gold. However, I got out last Friday for a correction I expected. Dow is breaking down so will commodities and commodity stocks. I'll wait for DOW to retest 7500 then get back in.

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#5) On February 02, 2009 at 5:00 PM, motleyanimal (94.30) wrote:

Doesn't anyone but me remember the early 1980s? There is not much you can do, except not to borrow money during times of extreme inflation and high credit interest rates and to be the lender, buying CDs with high interest rates that can compete with inflation and devaluation.

If you must buy canned goods, buy something you really like, such as my favorite Burgundy Pearls. These are olives soaked in Burgundy wine vinegar and infused with Parmesan and garlic. They are intense with flavor. Great in salads! Even my cats eat them.

http://www.olives.com/OlivesWeb/Musco/PressRelease.aspx?ID=10007

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#6) On February 02, 2009 at 5:08 PM, RVAspeculator (32.08) wrote:

Great post as always Sinchiruna,

This is the key point that deflationists miss.   Yes, velocity of money is slowing.  Yes, people are losing their jobs and spending less.   Yes, people have less money because their house lost value and stocks dropped..   All of this is very deflationary…. 

But the 15,000 pound elephant in the room is the US balance sheet.  Inflation is really all about the US dollar and unemployment can be well north of 10% and we can still have massive inflation due to a falling dollar.  I can name countless countries with high inflation and horrible economic conditions.  The US in the late 70's and early 80's is one of the many examples.

 

 

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#7) On February 02, 2009 at 5:12 PM, XMFSinchiruna (28.01) wrote:

motleyanimal

Thanks for the tip!!  :)

cbwang888

A correction could hit... or not. Be careful not to be left high and dry when the REAL volatility sets in. I'd much rather let it ride during a correction than be left empty handed when we wake up one morning and find an overnight sale of USD oversaeas precipitated the biggest one-day decline in history... or something along those lines. For me the benefits of staying exposed to gold outweighs the potential boost from trying to play the peaks and valleys. There is too much going on... there are too many variables at play to be able to predict short-term movements with any certainty.

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#8) On February 02, 2009 at 5:31 PM, cbwang888 (25.98) wrote:

I had leveraged (like call options) that I need to get out of.

I just don't know if there will be yet another credit crunch since the whole global economy is tanking (not just housing). If that happens, we might see yet another run of liqudation of everything, including precious metals from the western side of the world.

For BIC (no R - russia) and many Asian countries, the demand for gold will keep on rising for the long term, which I agree with you.

 

 

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#9) On February 02, 2009 at 5:31 PM, Tastylunch (29.54) wrote:

Hah thanks sinchi, but I don't think I belong in with abitare and Eldrehad. They nailed long DRYS before I took any sort of bold stand on it, those guys did all the heavy lifting :-)

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#10) On February 02, 2009 at 5:35 PM, XMFSinchiruna (28.01) wrote:

Tastylunch

You broke the news in what seemed like minutes after the filing was made public, alterted me to the development, and I'm sure helped a lot of Fools that may have been long to enact a quick sale the following morning. Props were well deserved. :)

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#11) On February 02, 2009 at 6:08 PM, Jimmy2008 (< 20) wrote:

I am extremely heavily invested in physical gold/silver and corresponding miner stocks. I am going to buy USO and some natural gas ETF (I have the name somewhere else).

What could happen to Canada when we have hyperinflation in US? Maybe can we immigrate there, if things are good there?

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#12) On February 02, 2009 at 7:37 PM, abitare (74.16) wrote:

TMFSinchiruna,

Great reports. I have hated drybulk shipping for awhile. I like gold, but they are pumping it heavy on TV it reminds me of the real estate, tech and oils bubbles from the past. Gold is becoming crowded and popular, just be careful.

I own and buy physical gold as insurance, but I hope I never have to sell it. 

I think you might consider some currencies as a hedge to a gold bubble. I like yen, swiss francs and cannidian dollars to consider. Everbank allows conversion or you can buy the ETFs.

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#13) On February 02, 2009 at 7:52 PM, XMFSinchiruna (28.01) wrote:

abitare

No thanks. :) I'll be sticking with my gold until at least $2,000. We're already 10 months into a massive correction, so the prospect of smaller peaks and valleys within this larger correction don't worry me one bit. I view downside risk limited to $800, while the sky remains the limit with respect to upside risk.

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#14) On February 02, 2009 at 9:55 PM, supreed (< 20) wrote:

Gold until $2000?  My friend, you'll be jumping off way too soon.  The massive correction is already over.

 Take care people.  Just wanted to see whom was reference my jsminset.com charts on this blog.

 Interesting blog.  Keep it up.

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#15) On February 02, 2009 at 10:20 PM, Jimmy2008 (< 20) wrote:

TMFSinchiruna

I'll be sticking with my gold until at least $2,000.

Once USD starts depreciation, gold would go to the moon. In this regard, I am with Sinchiruna.

abitare

I think you might consider some currencies as a hedge to a gold bubble. I like yen, swiss francs and cannidian dollars to consider. Everbank allows conversion or you can buy the ETFs.

I would not touch ETFs for credit risk AND tax consequences. I buy some gold or silver in pooled accounts (pay in USD), wait some time for them to appreciate and sell them for a profit (tax free) and at the same time get another currency (paid in CAD).

Remember, most bullion dealers do not report transactions to IRS. However, all brokerages do report all transactions.

 

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#16) On February 02, 2009 at 11:05 PM, XMFSinchiruna (28.01) wrote:

supreed

Trader Dan? 

You da man!  :)

 

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#17) On February 02, 2009 at 11:31 PM, supreed (< 20) wrote:

Nope.  But I will certainly forward the accolades to Dan for you.  An associate of mine forwarded this blog after stumbling on a few of my jsmineset and homepage (home.rr.com/supreed) charts.  …Probably a previous blog posting.  It is nice to see a lively discussion about the repercussions of undisciplined fiat money.  I urge those participating here to become CIGA members.  Take care.  Again, $2000 gold should not be your minimum expectation.

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#18) On February 03, 2009 at 8:10 AM, XMFSinchiruna (28.01) wrote:

supreed

Thanks for stopping by. Now I remember which of your charts I posted here. They were very well done... keep them coming, 

I too suspect that I'll be moving my gold target well northward as the global financial condition deteriorates further, but for now I find $2,000 to close enough on the horizon to keep my aim fixed upon. The shorter-term channel traders will no doubt be fixated on the interim resistance we might encounter around $1,250, etc., so I will use the $2,000 conservative target to navigate readers through what will undoubtedly be a barrage of noise and contention that gold will have then reached its peak if we again falter for a period around $1,250. :) 

If we shoot right up through $2,000 on some cataclismic currency event... which is also plausible... then the time will have come to issue fresh guidance. I appreciate the irony of Jim Sinclair's reminder that his $1,650 target -- once ridiculed as being obscenely high -- is now looking almost laughably conservative. For now, I'll continue to use $2,000 as an interim target, and try to remember to remind Fools that even that number could easily prove abundantly conservative.

Thanks again for posting, and we encourage you to join the discussions here at the Fool, just as I reiterate your recommendation for Fools to become CIGAs over at jsmineset.com. You won't find the same homogeneity of positions on gold here as you would there, but perhaps that's why the discussion can be so fascinating over here. :) We have some among us who are calling for $500 gold and even encouraging readers to short gold and gold miners... so if anything we could really use the insights of more CIGAs over here in this community. :) 

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#19) On February 03, 2009 at 10:25 AM, supreed (< 20) wrote:

Is it Chris?I am often forwarded blog/chat sites that discuss my charts and analysis.  A quick review of your blog warranted a congratulatory comment.  It takes a lot of work to educate the public.I have no affiliation with jsmineset.com other than friendship.  Jim, Dan, and I are friends.  For those unfamiliar with jsmineset.com, I suggest getting familiar right now.Honestly, it will save your ass.  The choice, however, is yours.  Makes no nevermind to me.  Unfortunately, investors that must be taught lessons by the market in real-time usually pay in terms of financial flesh.  It has been and will always be this way.You are welcome to use my charts.  If you have any questions, please contact me via my homepage.  I will eventually migrate or coexist on facebook soon.  When that happens, you are welcome to join/lead the discussions.As for your comments on gold:* The gold correction is already over.  We are current in the A-wave advance that should last at least another month, possibly more.  For more details on A-B-C-D wave analysis, please dig around my homepage.  It’s there somewhere.  Unfortunately, I do not update or write commentary as frequently as it needs to be done, but the information is there.* $2000 will prove to be only an intermediate term time horizon for you.  In other words, we will all be faced with it sooner rather than later.* I recall when Jim made the $1650 target.  This was never the true target, and he knew it.  At the time, that was as high as a target that the public would accept without classifying him as nut job.  Of course, I cannot speak for him, but I suspect that if you contacted him privately he would say something of that effect.  The real target price is much, much higher.* Let them short gold and the miners.  If real money is in play, the market will extract a pound of financial flesh.Best Regards,CIGA Eric

 

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#20) On February 03, 2009 at 2:33 PM, RonChapmanJr (97.07) wrote:

Be prepared for anything.  Have enough food, water and supplies to last you a while. 

Check out my site - http://www.survival-information.com and make sure you can handle anything that nature or the government throws at you.

ron

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#21) On February 05, 2009 at 9:47 AM, EHoyle80 (< 20) wrote:

Eleven months ago, Toronto asset manager Eric Sprott correctly predicted a global “systemic financial meltdown.” Now he is predicting that America will fall into a depression and that gold might double in price as a result. According to an article at seeking alpha, “Gold Could Double in the Next Few Years,” Sprott, chairman of Sprott Asset Management Inc., told Bloomberg News that a series of financial disasters in the United States could result in the Doomsday Scenario—the failure of a U.S. Treasury auction. This, he says, will culminate in investors fleeing to gold, with the price of the metal topping $2,000 an ounce—and beyond.

Via Stock Research Portal

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#22) On February 06, 2009 at 5:32 AM, drummnutt (< 20) wrote:

This post gives anecdotal evidence as to my thought that America has a problem with fear. The world is not waiting to fick the switch on "America's life support machine", we want America to succeed, But we also want the rest of the free world to succeed. Let's work together, not against each other. (I am not American).

BTW, the discussion on my "fear and greed" blog turned into a gun debate - I should have left that one alone!! Never argue against citizen's arming themselves to USA.

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