Prepare now for the next phase

Prepare now for the next phase
By: Hans Lysglimt

This time is different. Since 1971 the political class have been able to reinflate and then reinflate again the long bubble, but now this has come to and end. George Soros says the fall of Lehman was a game changing event. So was and is the massive expansion of the monetary base by the FED. This is not your ordinary run of the mill recession, this is the real thing – this is a readjustment of the economy, a readjustment of the capital structure. This process is just started; it will take years to play out. “This too shall pass” however, of course it will. The economy will eventually stabilize, new technology will mature and a new boom phase will begin. It is still not possible to say how long the readjustment phase will take. We however still see massive losses ahead and massive inflation from the power elite in an attempt to stay in power. Stabilization will not occur in this environment. The readjustment will take time, years. And there really is no solid base to build new growth upon until this has been allowed to play out. People will hold back buying new cars for years, people will be more careful about investing in the stock market for years, and so on – we will not see the economy we had in 2007 for a very long time.
Thus this rally we are now seeing is a bear market rally. We have yet to see the lows. Investors will eventually capitulate and sell all shares, we are a long way from that. What we are seeing now is a lot of window dressing, the initial shock is over. Now people, corporations, politicians are gathering at what they perceive as the bottom for an enormous session of financial cosmetics. Goldman Sachs moved their reporting year one month, from December to January and conveniently put all the losses in the December month – nice trick. Banks are avoiding selling their real estate at foreclosure rates, so natural variations actually resemble an improvement. Accounting rules are bent for US banks to avoid marking assets to market.
The bag of tricks will eventually empty, and reality will catch up. The economy is perverted, to the extreme. Too many cars, car factories, banks, mortgages, houses, restaurants, malls, fashion stores, smucks, credit cards, bureaucrats. Too few entrepreneurs, new technology start ups, gold promoters, used stores. The shift will come, it can not be stopped.

If you still own shares – sell now.

Prepare your portfolio for a transition into a long time of a totally different market than you have been used to. Prepare to put your portfolio into a defensive position, in order to hold on to it, for years, possibly for decades.

In the short run watch the markets carefully for the opportunity to short it. We have not yet entered into more aggressive short positions, we are watching the markets. We are holding mostly cash, gold and gold miners.

But, perhaps the shorting opportunity won’t present itself. Perhaps we won’t ever find the right moment to go short again, the thought has struck us. Perhaps we’ll just have to consolidate where we are. Use the cash for expenses and to start some defensive business, keep the gold and speculate by holding on to the gold mining shares. It could very well be.

Stocks, money, finance, retirement finance, Wall Street, The Wall Street Journal, CNBC – all this will become less important in the years to come. It was all pumped up to absolute importance by the global fiat money bubble since 1971.

Family, friends, relationships, fresh food, health, good argumentation, philosophy, history, great literature, great music, traditions – will become more important, relatively speaking. The things that truly matter, anyway. The things that has truly mattered for thousands of years. This all is for the better.

You might as well prepare for this transition now.

April 16. 2009. Oslo, Norway
Hans Lysglimt

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