Hi Iso, re: allocation
My basic question is this: where is the exit?
If the dollar stays high, American industry gets driven into the dirt. If the dollar falls, foreigners will probably pull assets out of the USA, and cause all sorts of problems for the American consumer, not to mention others, such as the Japanese, who need a low yen to create a market for their products.
Seems to me that the most politically viable solution is inflation. Maybe this realization is behind the considerable injections of liquidity that Alan Greenspan has been pouring into the system.
Greenspan’s strategy in fact seems to be to try to keep everything stable, until the manufacturing sector recovers, & consumers get their personal balance sheets back in order. But the status quo looks hard to maintain. Just this morning it was reported that personal income rose by an amount less than personal spending.
But, for the sake of argument, assume Greenspan keeps us on the knife-edge between inflation & deflation, a rising & falling dollar. Even so, we are still going to need economic growth. But then, once growth resumes, we run into energy constraints -- making the prospect of growth another blind alley -- another callejon sin salida.
Anyway, I’m a little more than one-half cash, one-fourth precious metals, the rest in stuff held forever -- e.g., Exxon stock held since 1980, which if I sell could comfortably put my son though a good private college, except that the belt-way mafia would make off with a third of it (or more in a good year).
I’m nervous as heck about my position in precious metals -- fully prepared to admit being a fool. But as I say, I don’t see the exit. I sense that we are in a frame of mind (more exactly: in a political impasse) such that we are going to drift along, and let events resolve economic difficulties.
With respect to precious metals, for me it comes down to risk / reward. If dead wrong, I lose 10 percent, maybe even 20. On the other hand, if we are going to let events solve our problems, we might need gold ------ i.e., insurance , i.e. a seatbelt-- which isn't needed ‘til it's needed, then it's needed real bad. |
