Protect yourself against inflation

Yes, dear reader that is your #1 priority in the coming years. Protect yourself against inflation. Right now we have deflation, in asset prices and in consumer goods. But this will end soon enough. Governments are ramping up the printing presses; their default solution is to print money – print money to solve their problems. Emphasis on “their” problems, not yours, mine or ours – no “their” problems is the right way to view it. In a modern democracy a handful of corrupt gangsters take control of government, and will do anything to keep the system stable – to not rock the boat. That is why they can not allow this depression to just sort itself out, liquidate assets and build anew. That process would take a painful year or two, but now they will instead prolong the misery by propping up banks and industries that should have failed. Economically we should allow the depression to sort out fast, but it is politically impossible to do so. Temporary unemployment and losses are politically unacceptable.

So, protecting yourself against the coming tsunami of money is #1.
You need inflation protected assets, our favorite is physical gold in hand, you can also speculate in gold by owning gold in leveraged positions or good mining shares. However as we have personally been involved and watched the gold mining business since 15 years back we can not overstate the risk.
You need to focus on your own productive efforts, done right this has a built in inflation hedge in its own right. The rate for plumbers will go up as inflation goes up.
You want to position yourself close to the new money, the new money will be spent by governments, and it will be lent to government favored industries. Move close.
You want to have debt in depreciating currency, so taking on debt with fixed long term interest rates is a good idea as long as you invest it into something productive. Lend to buy a company, educate yourself, buy some gold and silver, invest in some shares and buy rental properties. If you are debt free you might want to take on some debt and invest in a diversified portfolio of such assets.

In Farmann we have recommended staying mainly in cash since November 2007, but this is now coming to an end. Gold reached USD 947 yesterday and is posed to go above 1000 any time now. When it does we do not expect it to drop below 1000 again (it could but we do not expect it), rather this could be the start of gold’s big run up to 1500-2000-3500 and beyond. It could take off spectacularly once people understand what is going on.

The dollar will eventually plummet. And this time I do not believe gold will hold, I believe gold will rise as the dollar plummets, it could be spectacular. Remember that US investors have been shielded by the strong dollar; they could panic once they see the dollar fall and inflation poised for double digit growth. This mental change could happen within days and we could see gold shot up by 100+ dollars per day.

From our desk here in Oslo we have to admit to be contemplating and “all in” strategy for gold. To call the gold bull run and go into gold in a highly leveraged position. We have not decided yet, but we are thinking hard about it. You are hereby warned to make preparations.
This is extremely risky however, and has produced losses for numerous people in the past. However we strongly feel this time is different, very different. This crash is unlike what we have seen in the past, possibly closer to the hyperinflation and the fall Weimar republic than the recessions in living memory.
Leveraged gold positions can be taken in numerous ways. Easy-forex.com will even allow you to go 200* times your equity – though this is madness. A leveraged position of 2* or 4* is more in line with what we are thinking. You can do that on most online brokerage accounts by buying gold through the ticker “GLD”.

http://www.google.com/finance?client=ob&q=NYSE:GLD

Hans Lysglimt
Oslo, Norway. Feb 13. 2009

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3 Comments

  1. Håvard
    Posted 14 February, 2009 at 1:23 am | Permalink

    Ja, da har jeg begynt å investere i gull. Meget forsiktig da, men dog.:)

    Følger litt med på nettet og ser at Ron Paul er noe irritert på Ben Bernanke som tydeligvis har så viktige ting å foreta seg i Basel (Sveits) at han ikke har tid til å møte på høringer i senatet. Han (Ron Paul) krever å få vite hva Bernanke og hans følge driver med I Basel, noe han selvsagt ikke får. Men han konkluderer jo med at de driver og rotter seg sammen med IMF, World Bank og andre mektige sentralbanker for å komme opp med en ny Bretton Woods II. Her lukter det ny monetær standard for Europa og Nord Amerika. Og når man ser på diverse nyheter som popper opp om tilstanden i Europeisk bankvesen (over 16 milliarder pund søppel lån) sammen med Obamas diffuse “vent litt mens jeg tenker” stimulus pakke tror jeg faktisk han er inne på noe. Kan det være at USA nå bare haler ut tiden for at den allmektige bankmafiaen skal komme opp med “the next big thing”? Hva med en felles Europeisk og Nordamerikansk valutta som backes med sikkerhet fra IMF? Noen synspunkter?

  2. Rik
    Posted 14 February, 2009 at 1:48 pm | Permalink

    Very good, so other than hard assets like gold or real estate, what kind of financial assets such as bond do well or are protected when inflation rises so dramatically?

  3. Farmann
    Posted 16 February, 2009 at 11:59 am | Permalink

    Rik,
    That IS the question.
    How to preserve value.
    Go for REAL assets.
    Gold, agriculture, real estate.
    /Hans