Sometimes Safety is its Own Reward

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What more needs to be said? The stock market has been inflated along with the unsavory likes of Junk Bonds and many other ridiculously over valued items in this phase of ‘risk ON’ speculation. 3 Amigos of ‘risk OFF’ are also shown on the chart.


Gold is not currently running as an inflation protector, although that is probably its main feature over the long term. Gold led the charge into the great post-2008 phase of inflationary rescue and its recent alignment with Treasury bonds and USD is probably a sign of something errr, non-inflationary to come.

It is in my opinion more important than ever to tune down inflation hysteria. Of course, I am fairly Prechter’ed up by taking my own advice and downloading the material per the post from a couple days ago. People can laugh all they want, Prechter has been very important to me in balancing out strong ‘inflationist’ viewpoints.

The EWI view of gold’s price remains unfavorable, pending a potential near term rally. It’s long term value however, is understood even by the man who has probably been more bearish on its price than most for many years.

“Stick with cash, T-bills and a few bags of circulated, non-numismatic (“junk”) silver coins to use when the banking system shuts down, which it will. If you have gold coins bought long ago, keep them.”

Agree or disagree with, or simply laugh at Prechter all you want, but gold is right now acting as liquidity. Along with T bonds and cash these items are down because the majority of investors have been chasing yield, chasing speculative returns and generally bathing in optimism and greed. Safe haven liquidity has not been needed, compliments of monetary policy making designed to keep speculation in play.

It’s a topping process for that kind of behavior. The things of non speculative liquidity are biding their time for when confidence cracks. When confidence cracks it is not going to do so gently. People will need liquidity.

As a side note, Prechter is extremely bearish on T bonds and even has significant doubts down the road for one of his ‘safe assets’, T-Bills. I think that when the veneer of speculation finally blows out we are going to realize that there are very few easy answers. So I ask readers of this site once again to, if you do nothing else, try to avoid casino mentality. Not everything needs to have a ‘return’ attached to it. ‘Risk’ often goes with ‘return’. Sometimes safety (relative though it may be) is its own reward and risk management is always a good idea. | Notes From the Rabbit Hole | Free eLetter | Twitter