If you like extreme risk and consider living on the edge to be "normal," today's column isn't for you.
Today I'm writing to the millions of investors who are completely terrified by the prospect of what's next and who simply want their faith restored - not to mention their investments.
To all of them I would say: You are not alone and you're not wrong to be apprehensive.
Our political situation is an embarrassing train wreck, our national debt looks like a one way trip to financial hell, housing remains in the dungeon, unemployment is unacceptably high and Europe...oh Europe.
It's nothing short of a gigantic wall of worry.
Plus, there have been so many attempts to "fix" things that I've lost count. Throwing good money after bad is a fool's game and one that will have very real and inevitable consequences.
So what should investors do?
Here's how I see things. The "Whitewash Ministry" has basically five options:
You can forget the double "d's" - devaluation and deflation.
Even though both would be the proper way for free markets to bleed out the excesses of the past, they are essentially political nukes and nobody has the willpower to touch either one of them.
The third, austerity, is being tried but only halfheartedly. Our leaders have no idea what this actually means. Since they remain completely unaccountable, there is no true incentive.
Besides, large numbers of people have figured out it's easier to be on the dole than it is to actually work, so this is another disincentive for meaningful cuts in spending.
As for inflation, this too is officially a non-starter as long as interest rates are held near zero. Unofficially, it's a different story. Most investors I know are feeling the heat of 12% to 15% a year in their wallets.
That leaves option number one - repression.
You can call it what you want, but repression is really a fancy way of saying that our government is conducting punitive monetary policy.
While they mouth off about how they want to create jobs and take care of the middle class, in reality they're eviscerating it.
How?
By keeping interest rates low, the Fed is forcing people to move their money into riskier assets or else watch them be inflated away.
This isn't a war on the wealthy....
It's a war on capitalism conducted by a small group of elitists in both parties who believe they know what's best for the rest of us.
Academically, this is great stuff, which is why the bailouts and stimulus programs are so popular with our leaders - almost none of whom have actual experience with real money, much less understand how the financial system actually works.
By playing with interest rates, the government hopes to effectively redistribute the wealth of prudent savers onto its balance sheets while engendering an asset inflation that ultimately bails out the profligate spending.
In reality, there is different story going on.
The average investor is being crushed by short-term market gyrations and has been essentially cut off from funding that should otherwise be moving through the system like greased lightning.
Personally, I am very troubled by the fact that my government has run up $15 trillion in debt through an irresponsible monetary policy and now dares to presume it knows how to invest my money better than I do.
I am flabbergasted that what used to be the safest securities in the world - U.S. Treasuries - are now the world's riskiest. And that the now safest securities aren't really securities at all - gold, silver, and other commodities.
But this is the hand we have been dealt, so we might as well make the most of it. Scratch that - we might as well get even. Here are five things you can do right now:
The point is, scaredy-cat investors have options in today's markets-even though that wall of worry is looking pretty high these days.
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