I originally scheduled this blog for 9/17/2012. I forgot about it.
On 09/17/12, I was watching a segment of CNBC where 4 talking heads all agreed that the stock market can only go higher.
Then after that, they brought on some guy who said Dow 15,000 would happen and then Dow 17,000 in a couple of years.
So what happened between 9/17/2012 and now? Er, down. How about the last 6 months? http://ycharts.com/indicators/dow_jones_industrial_average
The talking heads are salesmen with the same theme always. Buy stocks.
So we've had trillions of bailouts and stimulus, QE1, QE2, Operation Twist, and now QE3 to eternity- and all of that money printing since 2008 has only bought us a few thousand dow points?
What do we do for an encore?
I have known for quite some time, that economically, we are dead meat. That's not an opinion- that's a statement of fact. The problem with knowing something like that is waiting for everyone else to figure it out. They haven't figured out that we have a structural problem that we cannot fix. It's called the loss of 50 million jobs. So until then...
I call it the short side dilemma. You can be 100% right that a company or even an index is sputtering, failing, or fraudulently cooking the books- but if the herd doesn't figure it out and stampede for the exits- you're put options expire worthless.
So how do you play a fraudulent market buoyed by talking heads, funny money ad infinitum, and bullshit?
Here's what I am doing. I believe Romney will win the election in a landslide. Not because I like him but because Obama is such a wretched failure. You cannot short stocks ahead of a Romney win- obviously that includes puts. Good gawd- the man is a banker.
So what happens after Romney wins? The country is going to become giddy happy that Obama is gone. Particularly business. In this scenario- business is going to go on a massive hiring and investment spree. Businesses are going to start gearing up, banks will start making loans. We have a fiscal cliff dilemma which politicians will conveniently kick down the road again. Obamacare might be suspended. The DJIA may actually shoot up and beyond 14,000.
You cannot be short for the next few months. But one thing is an absolute certainty in this scenario. Spending and lending will increase dramatically- so will inflation and so will the value of precious metals and mining stocks. I have never seen a better scenario in all of my life for this. It's like the perfect storm. Big mature miners, cash rich, will be looking for additional assets. They will be gobbling junior miners up while the underlying price of precious metals can only levitate.
So that's how I am playing this for now. Junior miners with unhedged positions, physical gold and silver, maybe some calls on various precious metals funds and etfs...while I wait for the rest of the investing public to stampede for the exits when inflation goes double digits and the Fed shits it's pants- realizing that they'll have to raise rates (as banks unleash those trillions they've been hoarding) which in turn will cause the interest on our outstanding debt service to go supernova. That is the real storm. I will be short. You can count on that.
I said this four years ago and I will say it again. I don't think we can afford a recovery.