Market Comments Jan 22 2009

S&P down 5% Tuesday.
S&P up 5% Wednesday.
This is why we stay in cash.
Diversification is the name of the game right now, in order to not get totally slammed.
And waiting for clear buys.
If gold falls down below 700 – buy.
If oil falls under USD 20 – buy.
If there is a major S&P rally, get ready to short it again.
But right now, it is still to volatile to do much.

Seems like Norwegian banks might be liable to refund losses on structured products to the tune of USD 2 billion. Great! Well deserved on them. Lets hope they all go bust and the people in them with them.
Let’s get all new people into the banking sector – unfortunately this will not happen, a few will get slammed with the blame and the rest go free. The ones who always go free yet they are really to blame.

What should you do?
Distance yourself from the political and monetary madness. It is the only way to keep sane.
Create real value.
Cut peoples hair, bake bread, physical therapy, paint houses – get cash and buy gold for the cash.
Own real estate outright.
When real estate has plunged another 20-40%, buy something you like and finance it with a loan.
When gold soars to USD 3000 per ounce, pay off the loan.
The madness is going to get worse, much worse.

People try to compare this crisis to previous crisis.
But this crisis is not like the great depression.
It is not like the 1973-1976 recession.
We are in unchrated waters – this is different, truly different.
What this is on a grander scale is the first step in the breakdown of the 1971 Bretton Woods system to abandon the gold standard.
At the end of this is a total breakdown of paper money – and something new to rise out of that.
The big question is if the current modern democratic model can survive the monetary breakdown.
Modern democracies all went to fiat money during the 20th century, they all followed the same path.
Now, all modern democracies are all bankrupt by pension promises they can not possibly pay.
Bankrupt – take in what that means.
The modern democracies are bankrupt and they will all go bust in our lifetime.
They will either find a painful way to remake themselves, go into hyperinflation or sweep towards destruction by a cataclysmic event like the French Revolution to totally destroy and reemerge as something new.
Unfortunately surveillance technology will continue to improve, so it is more likely that society reemerges as a Orwellian 1984 than a free and happy utopia.

“Every man must therefore, in his own interest, thrust himself into the intellectual battle. The interest of everyone hangs on the results. No one can stand aside with unconcern, and no man can find a safe way out for himself if society is sweeping towards destruction.”
Ludwig von Mises

We remain yours truly.

Hans Lysglimt, Oslo Norway January 22. 2009

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