What to do going forward (part 1)

There's nothing confusing about this: Dave and I just made a ton of money today. Trust me, it's just the beginning. I'm not even referring to the stock market. As I said earlier, the buyers and sellers will continue to fight each other on where the exact bottom will be. Stocks will trade inside a range, albeit it a wide range, due to high volatility. Meanwhile, contrarians like he and I will be adding to our positions geared towards inflation and financial meltdown. Savvy investors will eventually see it, then CNBC viewers, and by the time the mainstream audience catches on, gold will be testing their all-time highs.

When you print money like toilet paper, something has to give. Don't just look at the $USD/gold relationship. Look at the price of gold from a foreign currency perspective. From their standpoint, the price of gold is at an all-time high already, because the $USD is temporarily gaining strength due to the flight to quality, as sovereign funds, hedge funds, mutual funds, and private equity firms face redemptions from investors selling. More banks and financial institutions will go under as a result. Companies will go bankrupt, due to lack of liquidity and lack of access to credit. If people insist on owning shares, the only ones I would trust are Wal-Mart, McDonald's, Coca-Cola, Berkshire Hathaway, Altria, ExxonMobil. Focus on dividends, cash flow, cash position, and ability to borrow. Microsoft will be able to tap into the corporate bond market at 2%....which is better than what the US government will be able to borrow at. Think about what I just said: Microsoft will be more credit-worthy than the US government.

In light of all these federal government bailouts, and solvency issues with banks, financial institutions, insurance companies, autos, airlines, etc. has anybody even thought of whether the government itself will be solvent? They continue to print money at a rate of $1 trillion extra a quarter. That devaluates the local currency. Once people wake up to this inflationary scenario (where the US Treasury will have to borrow at 8% or above), one where the $USD deteriorates, gold and silver will skyrocket. Right now, the markets are focused on deflation. That will change--it's only a matter of time. And when you have disinvestment AND inflation, you get stagflation like we experienced in the 70's, only this time, the overshoot will be even more severe.