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I’m a big fan and longtime student of precious metals as a SINGLE DIGIT percentage of one’s portfolio.

That said: physical gold and silver are hardly reacting as one would expect during these times. They are are not only NOT acting as “inflation insurance”, they are in many cases being liquidated. I won’t even mention the losses that have been suffered of late by the commodity stocks, the steels, the coals, the PM stocks, just jaw dropping 70-75% drops. OF COURSE we must realize that this effect is seriously exacerbated by the idea that many many hedge funds had loaded up on these and had good profits in them. In fact, many hedgies were short banks and long commods, and as we have seen since the recent days of $147 oil, not only have the Fed actions gouged the eyeballs out of these guys (generating mass forced liquidation) but further dumping these sectors as the anticipation of a global slowdown takes root. (gee, do we think that GS knows the positions of lots of hedge funds and knows how to squeeze their livers and reports same to Hanky Panky so he can act...to GS’ benefit, since they can front run the attack? Naaaah, too tinfoil) Regardless of the theory, the markets are so chock full of weird distortions that the unwinding of same is generating tremendous upheaval. Evel Kneivel upheavel.

I realized what I am trying to say the other day when some gold/silver weasel called me to sell me some bullion (already own all I want) but we had a lengthy conversation about this and that.

During a depression or a serious recession, there is an excellent investment to own, and that is GREEN CASH. Why? Because with cash-cash, you can buy assets at distressed prices. With cash, you have a “currency” that is in scarcity. One easy to picture example is, you can buy beaten down stocks. But I am thinking other stuff too. For example, we imagine there is a 8% long term gain to be had investing in the stock market provided you collect dividends. Well, suppose you can buy....a rare car that you crave...or a piece of real estate that MAKES SENSE to you...at 20% discount because YOU have cash and few others do. Doesn’t that amount to a 2.5 year run rate at 8%.

This is my point. All the stories you heard about sharks swooping in and buying price-distressed assets from holders who could not hold on...yeah, those guys/gals were sharp. But THEY HAD TO HAVE HAD THE CASH to swoop. They had to have “dry powder”. They must NOT have been in a similary distressed condition themselves. Think about it. And that is why I think building up cash in a “depression” is an absolutely valid “investment”. And let’s not forget, if you have been bottom fishing stocks during the past few weeks, you are already down a couple of years right here right now. Yeah, sure, stocks could recover, they probably will. In the meantime, they are CANCELING dividends and being repriced lower. Bonds? Longer term bonds will return their miserable coupon, well behind purchasing power inflation, but are IMO likely to lose value because we are alreadyseeing the bond market forcing HIGHER, yes HIGHER rates due to heightened perceived risks, both in coupon AND inflation. So what’s wrong with owning cash? Doesn’t earn interest? How about losing 10% in the past few days? Pick your poison.