Bernanke, Obama Doing Their Job

By Hans Lysglimt

Misters Bernanke and Obama’s job is to inject confidence, even when none is warranted. They did their job well yesterday, very well one must say. With the Dow up 3.3%, and Nasdaq up 3.9% when it’s trend was to continue its downward trend meant that the confidence and hope – the words from the cosy man with the grey beard, being worth trillions of dollars of world wide market capitalization.

This confidence is 100% counter to our current market positions, and we registered a loss on all positions yesterday. Our positions have rallied daily since we did our Feb 17. recommendations, so we are still way ahead. We think this market is going down, but yesterday it went up. We will not change our positions.

The recession might be over in 2009 bearded Santa said, and there might be a recovery starting in 2010 he continued. So markets soared, oil rose and gold fell sharply. Investors where thinking “wow, the boom will be back again very soon – better buy with both hands”.
And he IS right you know, it MIGHT recover. But please note that he also said that it MIGHT NOT. Even we, from the comfort of our attic study overlooking a frozen over Oslo-fjord admit that it MIGHT recover this soon. Honest to goodness, we’d give the chance of that happening – say 5%, or half that, or half that again – something like that. That would mean the stimulus packets, the low interest rates, the new money and the hope from a new president changes the spirit of the times so that the most serious much needed readjusting depression since the Great Depression suddenly reverses and the music starts playing again. Yes, it might happen.

Yet, even with gold down to 950, we are not selling a single speck. We are adding gold. These few days ahead are most likely the last time in history that you can buy gold at under 1000. It’s like the 30ties when you could have a beachfront lot in southern California for USD 5000, it is something that will pass, never to come back. The downtrend in the markets will resume soon enough, no need to hurry, the DOW and gold will meet before we know it. Where will they meet? At 3500?, 5000?, 8000? – we do not know, but we are confident that they will meet soon enough.

If the markets continue up today, and tomorrow, something we doubt – consider shorting sharply with a leveraged position. The stronger the false confidence, the more the reason to short.

Remember, we do not wish for this recession to become the full blown greater depression that we have called. We would be very very happy if this turned out to be wrong, we would be happy to see the economy recover and give the world another generations worth of delusional riches. These last 40 years have at the face of it been the most prosperous ever in human history, and people have had a good time. But we do not think this will happen, we think this depression is the real deal – and than the world will need to readjust dramatically.
We hope this readjustment will be for the better, for a more free world where mankind has finally learned that government is not the solution but the problem itself. We fear and believe that mankind will arrive at the opposite conclusion and institute more big government. A bleak picture indeed.

On February 17, we gave you these recommendations. They still hold, so we will repeat them outright.

Get out of the Euro.
Get out of Swedish Krona.
Short the European markets.
Short the Swedish markets.
Short the Norwegian market.
Hold some Norwegian Krona.
Hold some Dollars and Yen.
Go more heavily into gold, despite the risk.
Consider an all in heavily leveraged position in gold – consider going all in.

The way to be in Dollars is to be in, gold, US gold stocks and Dollar denominated short funds shorting the S&P 2x or 3x. The Dollar will eventually plummet, and though our preferred US advisers are telling people to get out of the Dollars – for you dear reader assumed to be an “global” individual you might want to add some Dollars for diversification and as a flight to safety. Remember that US based investors are heavily into Dollars by their location. Being in Dollars is a sitting duck possition however that you must be prepared to get out of on short notice. Nowhere is safe right now, nowhere.

The Swedish Krona has depreciated sharply since we called this on Feb 17. It was down to 8.98 against the dollar. Hedge funds are staging a run against the Swedish Krona, and they might just succeed in bringing it further down in a collapse like fashion. The Krona regained some ground late yesterday along with the regained confidence in the markets. When confidence finally gives in totally this is going to get really ugly.

Yesterday also came news that the Swedish princess Victoria has engaged and will marry a common man, a health club owner that happened to be her personal trainer at a time when she needed comfort. We are happy for them as individuals, by all means, but for the institution of the Swedish Monarchy this is a sad day.

“All the world’s a stage, And all the men and women merely players” said Shakespeare, and whether they want it or not the Royals are handed their roles to play on the Royal stage – how depreciating for moral it is when they choose to play their roles so poorly.

So the stage is set for the Swedish Crown to depreciate along with the Swedish Krona.

Hans Lysglimt
Oslo, Norway (minus 4c, foggy) Feb 25. 2009.

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4 Comments

  1. Posted 25 February, 2009 at 12:12 pm | Permalink

    I must honestly say that I think you are wrong on dollar and yen. I think the markets is around through now. I think inflation are heating up due to what I see as growing solvency issues affecting the US. I think the reduced solvency caused by the deflation process is self correcting in the sense that the deterioration in the economy at one point affect long term interest rates to the upside like on Iceland and other insolvent states. I think a perfect bet is railroads. I think most US railroads are selling at a price that equals to buying gold at 500 dollars, due to the monetary functions of railroads (UNP 4 dollars in the 1974 peak, and 16 dollars in 1981, around 1,6 dollar in 1971).

  2. Posted 25 February, 2009 at 1:22 pm | Permalink

    I beg to differ on your advice to short on leverage. That’s just reckless. You need to be prepared to be wrong in the stock market. That’s why I NEVER trade on margin. If you short on margin, and the markets rally for two weeks, which I think is quite likely now, you may lose everything. Have the humility to admit you could be wrong and set some stops. I got out of my put options on S&P 500 Monday morning (at a nice 25% gain). That gain would have been wiped out yesterday.

    Buying more of something when it is going lower (doubling down) is also something I would not recommend. You will have your stock market crash and gold sky-rocketing, but please be patient and don’t go all in yet. A bear-market rally can still destroy you!

    Don’t waste your money, you will need it later…

  3. Posted 25 February, 2009 at 2:18 pm | Permalink

    I think Hans should prepare to become elected to some function in Norway, just as Ron Paul will become president in the US when this thing possibly goes down hard. The people will look for someone that’s not associated with the current system. It will probably be a generational shift as well.

  4. Håvard
    Posted 26 February, 2009 at 3:22 am | Permalink

    Some interesting comments on gold here.

    http://www.youtube.com/watch?v=YBtsrKtOVwo&amp