Wednesday, January 14, 2009

Gold or dollars?

I am certainly no expert, but I am concerned about navigating the coming months financially. What follows is my strategy for the immediate future.

Confidence that a new administration will be more effective at turning the US economy around is keeping people and governments from dumping dollars. Official dollar/US security dumping by governments would chafe at relations with the US so we won't see much of that in the coming few months. But if confidence in the Obama administration wavers fear will take over and there will be a run on the dollar. I'm betting 60% with the dollar and a 40% hedge against. The value of no asset, income or currency is exempt from this bet--everyone is betting 100% on something or another. In my humble opinion the risk of a dollar panic is greatest now through the spring, if the Obama administration or their remedies look weak in the first three to six months I'll dump dollars for gold right down to my current month's living expenses. Absent external shocks or a big Obama stumble I expect the value of my gold and silver holdings to drift downward for a while. The rather large possibility of external shocks or the smaller likelihood of a serious Obama stumble keep me from selling/shorting silver and gold. A very difficult 2009 looms in any case.

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