My investment strategy

Is paying off big time. As you know, I posted my intention to get out of the stock market, the US dollar, and get into gold, commodities, and foreign stocks. Gold is up from 700 to 735, oil is at 82, and the dollar is spiralling downward so that the canadian dollar is beating us. All futures are trending higher as well.

I believe again that what we've seen the last two months is just the tip of the iceberg, and that while we saw one trigger (sub-prime housing market) counteracted by the fed, there are 4-5 more triggers that won't be as easily dealt with, and that the flipside of recession is far harder to fix, and far worse for America.

It's finally hitting the main stream press, as well as the President's speeches: recession with inflation. Bush hedged his bet, said he's optimistic that the economy is fine, but you'd have to talk to an economist for the real situation.

By reducing the prime lending rate, we've staved off recession immediately, but we've dug a worse hole: inflation and decline in purchasing power of the dollar.

From the WSJ front page:

"For years, economists have warned that the US can't run up endless charges on the national credit card to cover its huge appetite for imported cars, oil, electricity, and other goods. Someday they said, the bill will come due.

It looks like someday may finally have arrived.

After 16 years during which the US mainly borrowed and bought while much of the rest of the world lent and sold, the global economy appears to be undergoing a fundamental shift."

The article then goes on to show how it will be good for exporters and sellers to foreign buyers, but the reality is our standard of living is going to decline.

The big danger is that the very things that make us money will be sold to people who do have cash. Dubai will own our ports. China will own our wheat farms. Saudi Arabia will own CBS. And when we lose our land, our factories, how do we get out of debt? By scrimping and saving again, and building up to compete against the foreign factories down the street.

Bush needs to cut spending drastically, cut tax loopholes for offshore companies, subsidies for energy companies. We need to drastically cut spending on the war in Iraq. We need to get into a recession, and restore some value to the dollar and our treasury bills. The fed needs to stop printing money, and raise interest rates to double digits (Greenspan already predicted we'll have to do so).

And us? Save save save. But if you do save, better hope inflation isn't killing your savings, and argue for a conservative federal reserve policy. Because the end of the credit card is coming, and the late fees are in the trillions.