In this harsh economic environment it is more important than ever to make the right choices and face reality, although it may not be pleasant. Today’s reality is that the US Dollar’s life is running low, the markets are in chaos, and the government is doing their best to muck things up even more. Experienced traders know that sometimes it can be good to sit on the sideline and wait for the right opportunity. In light of the current economic situation, investors should use extreme caution while sitting on the sidelines when their wealth is tied up in fiat currency.

Investors, for the most part, tend to not buy or lend money to overvalued and nearly bankrupt companies. However, when the herd mentality gets moving they have no problem buying into or lending money to a debt ridden government. The US government’s credit worthiness is very much in question according to several honest and well respected economists. Here is what economist John Williams has to say about the situation.

“In response to the rapidly deteriorating fundamentals underlying the value of the U.S. dollar, selling of the greenback has been intense, but contained, with brief periods of stability as seen at the moment. In the near future, dollar selling should build towards an extreme, with heavy foreign investment in the dollar fleeing the U.S. currency for safety elsewhere. With the domestic financial markets and U.S. Treasuries so heavily dependent on foreign capital for liquidity, the Federal Reserve — now touted as the formal financial market stabilizer — will be forced increasingly to monetize federal debt. That process will build over time, given the federal government’s effective bankruptcy, as discussed in the section U.S. Government Cannot Cover Existing Obligations. Therein lies the ultimate basis for the pending hyperinflation.” – John Williams, economist.

Total government bailouts are now over $15 trillion, with plenty of more to come. Central banks are manipulating the markets to hold interest rates at artificially low levels.  These same banks have also officially announced they will be monetizing the debt for trillions more.  As the old saying goes (Hyperinflation Zimbabwe), a trillion here, a trillion there and pretty soon you got worthless currency.  The herd, sitting in cash on the sidelines, is not only investing in an institution with deteriorating fundamentals, but is also paying to do it.  This is not much different than a herd of cows standing in line for the slaughter house.  

Fortunately, the wise investor has a tremendous opportunity.  This opportunity is to profit from the herd’s demise.  The best way to do this is to base your positions on reality, rather than illusion or delusion.  Investors might consider bullish positions in precious metals and bearish positions in government Treasuries, government banks, government insurance companies, government real estate industry, and government auto companies.  However, investors should use caution as the government can change the rules at anytime.

If you are interested in discussing ways in which you can profit from government inefficiencies, herd mentality or financial crisis, you can reach me at 312-479-2077 or email jared.irish@archerfinancials.com .

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.