April 19, 2007

Got Cash? Get ready for The Great Unwinding

You heard it here second.

First place you should have heard it was your college economics textbook.

It hath been foretold.


Anonymous said...

The only problem with the cash thesis is the beatdown the greenback is taking. Peter Schiff said on CNBC Monday that a savings account in New Zealand returned 30% last year for a U.S. investor.

Anonymous said...

Half this board thinks massive inflation is coming - and BUY GOLD. Another half of this board thinks a depression is coming - HOARD CASH.

Maybe something in the middle :-)

Marky Mark

eternitus said...

I can't wait to see how the NAR spins its disastrous March housing report on April 24. Could touch off a panic. Maybe they'll just quit reporting the numbers for a while...

Or Maybe their new "adjusted median" will magically rise.

keith said...

For the last time folks, try to understand this.


Got it?

Concerned said...

I think it's time for the US Dollar to rise again ........I don't think it's gonna get much lower....

People who talk about the USD crashing, are the same who are talking about Peak Oil.....I simply don't buy it.

Anyway......deflation is what is coming. The thing is when. 1 years ...2 years .....

Cash up......asap.

anonymous wimp said...

So what DOES cash mean, then, Keith?

SPECTRE of Deflation said...

At the end of today, the INDU will be green. Gold is getting hit, but silver is taking it on the chin this AM. Anyone who thinks that the world won't pile back into greenbacks when the shit hits the fan needs the Brooklyn Bridge for a condo conversion.

keith said...



canadian dollar

hell, even some pesos!

you should have your savings in a marketbasket of other currencies. there are etfs and foreign bonds that can do this for you or go direct via everbank etc

foreign stocks are also relatively smart, even though short term they'll get caught up in the US downdraft, you can at least get the benefit of the exchange rate. I particularly like germany right now who's getting their ship in order

but do your own research. just don't put your trust in the US$. it's in a heap of trouble

Anonymous said...

oh keith why are you censoring me again...what are you afraid of? big man you are, dish it out but can't handle any critique

Anonymous said...

I want whatever you don't and I will sell you whatever you do.

Sold Techs
bought gold 250
bought investment RE Sept 11 01
sold 06

Now it looks like you want Gold but dont want cash. I can help you with that too.

SPECTRE of Deflation said...

don't look now but the greenback just went neutral for the day on a day when China's GDP numbers came in hot which will make their central bank raise rates. Why would the dollar strengthen into what's sure to be a rising Yuan when they raise rates and require more reserves? Charles Hughs Smith does an excellent job of explaining China's many serious problems.

Anonymous said...


Canadian dollar has had a huge runup in the past two years. So you say divest of stocks because they've had a huge runup and are likely to fall some. Then take that $$ and invest in $CAD which has also had a huge runup because it should keep going up.

Care to explain...

unomyname said...

Anyone remember the discussion a few years back about a "synthetic short" on the dollar. By which was meant that the massive amount of USD denominated debt represented a short against the dollar. Once that debt was unwound the demand for dollars, and therefore their value, would increase.

unomyname said...

Keith - Can you name the ETF's you mentioned?

Concerned said...

Keith if the US dollar goes down......then all currencies are going down.....

So if the US dollar goes down, the best thing to have is gold/silver.

I still don't buy it. Bernanke has been bluffing for a while now.

ManicDepressive said...

The problem with the USD crash argument is that people think somehow the economic problems we are enjoying are isolated to the US. One, the rest of the world played follow the leader and had as big property bubbles (and as big central bank easing, and ...) Second, the belief that somehow the dollar can crash and the rest of the world will go it's merry way. Open up any issue of The Economist and turn to the back page. Look at the global trade balance table. Notice something? The world is importing their excess goods to the US. Certainly the first thing FCB's will do is support the dollar every way they can. And if they can't, it'll bring them down too. On balance the US should be the best of a bad lot, and relative the dollar should still hold up. Ultimately the recycling of trade dollars means that USD's have to come back home to roost.

Interestingly its the Americans who call for dollar Armageddon, not foreigners. In fact overseas money continues to happily comes to the US in droves. What do foreign investors know that US investors don't, or vice-versa? Hint, US culture can be grossly described as manic-depressive.

Anonymous said...

Here's an interesting video that suggests gold won't run thru the roof, as some might think, as a hedge against inflation:


Michael Darda, chief economist at MKM Partners, discusses burgeoning commodity price inflation and explains how hawkish actions by the Fed could spark a plunge ...

Be aware of "all asset classes that are sensitive to liquidity crises"

Anonymous said...

from themlsonline.com, there are 53,328 home listings of Twin Cities and Minnesota Real Estate.

keith said...

Some of you are beyond my help on currency trading - just do some research on your own

for people holding or earning US$ what matters for you is how the US$ does against other currencies if you're looking to protect your wealth or maintain your buying power. Get it?

Others please join in.

ETFs to consider would be fxe, fxy, fxb, fxa, ewc, ewj, ewg, fxi

Anonymous said...

Keith's right - those are good currncy ETF's . Also consider a foreign currency account at Everback.com - it's recommended by Forbes - great products. Also buy oil via USO or DBO.

michael said...

casey serin posted a few days ago that he wished he had cash to buy/speculate in precious metals.

based on this simple conclusion from such a donkey, i have absolute faith that the fed will defend the dollar with interest rate hikes (probably after the index drops below 80) and cash will be king.

sinis said...

Two good articles:



SPECTRE of Deflation said...

"keith said...
Some of you are beyond my help on currency trading - just do some research on your own"

As someone has already pointed out to you, we are not alone in growth of money supply or the credit bubble/housing bubble debacle.

In crisis, the dollar will be king of the hill even if the hill happens to be a shitpile.

The Thinker said...

Keith, how can you honestly suggest that money in the bank in US dollars is not cash but buying an EFT is?

Anonymous said...

"Got it? "

Got it! physical gold IS money.

Nuff said.

Anonymous said...

Keith censors me too. He is a pig boy, but will never be a pig man. Try pork bellies keefer.

Anonymous said...

U.S. cash is nothin' but trash.

Anonymous said...

keith said...
For the last time folks, try to understand this.


Got it?

So you're recommending they exchange USD for what currency, Keith?

Warren Buffett and Bill Gates got burned on BIG currency plays a couple of years ago.

What do you know that they don't???

Anonymous said...

The smart way to make $$$ on currencies to play currency fluctuations against each other.

You need to be very savvy to do this.

Amateurs like Keith have no idea how to help you do it.

Anonymous said...


Canadian dollar has had a huge runup in the past two years. So you say divest of stocks because they've had a huge runup and are likely to fall some. Then take that $$ and invest in $CAD which has also had a huge runup because it should keep going up.

Care to explain...

April 19, 2007 2:52 PM

If I may....Keith has no clue what he's talking about. All he knows is America evil, therefore dollar bad. How about investing in Venezuelan Bolivars, to show support for your communist brethren.

keith said...

Currencies are not stocks.

Ask yourself why the American dollar is falling in comparison to other currencies.

FlyingMonkeyWarrior said...

Japan Mulls Moving Reserves from Dollar

Thursday, April 19, 2007

ABU DHABI -- Japan is cautious about shifting its foreign exchange reserves away from the dollar for fear of triggering a slide in the U.S. currency, Tokyo's top financial diplomat, Hiroshi Watanabe, said on Thursday.

At around $900 billion, Japan's reserves, held predominantly in dollars, are the world's second largest after China's and were built up mainly in 2003 and 2004 as the Bank of Japan bought dollars to check the Japanese currency's rise.

The dollar's slide against other currencies over the past three years has prompted central banks around the world to consider reducing their exposure to U.S. assets. The dollar tumbled to a two-year low against the euro this month.

"Most countries are diversifying their investments to non-U.S. dollar assets. But in the case of Japan, we are still cautious about shifting from the dollar to other currencies," Watanabe said in Abu Dhabi, capital of the United Arab Emirates.

"If we do that it goes towards the depreciation of the dollar. So why should we trigger such a stupid action?" Watanabe, vice finance minister for international affairs, said.

Story Continues Below

Watanbe said it was important to resolve global trade imbalances - a reference to the trade surpluses built up by Asian exporters and, more recently, energy producers and the U.S. trade deficit, which hit a record $765.3 billion in 2006.

Investment flowing to the United States help finance some of the trade deficit, although Watanabe said growing U.S. protectionism could impede the recycling of cash from countries with surpluses into the global economy.

"The U.S. has shown signs of protectionism not only for trade but increasingly for investment. It is a hazard for the good recycling of money and decreases productivity of investment," he said.

Concerns about U.S. protectionism have been growing since China's state-controlled CNOOC Ltd. dropped an $18.5 billion bid for American oil company Unocal Corp. in 2005 after U.S. lawmakers threatened to block the takeover.

Last year a political storm in Washington forced Dubai Ports World, a state-owned firm based in the oil-exporting UAE federation, to relinquish control of American assets acquired when it took over British rival P&O.

© Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters.

Anonymous said...

If I am an FB I would not want to borrow more money or even refi a recently purchased up-side-down house. That is just throwing good money after bad.

More aid planned for sinking borrowers
By Tom Petruno and Jonathan Peterson, Times Staff Writers
April 19, 2007

Two big lenders stepped up Wednesday with plans to help some strapped mortgage borrowers, while a Capitol Hill summit on rising foreclosures put pressure on other industry players to work with troubled homeowners.

Freddie Mac, a government-chartered company that buys mortgages from lenders, said that it wanted to encourage lenders to make "consumer-friendly" sub-prime loans and that it agreed to buy $20 billion of such new adjustable- or fixed-rate mortgages.

Separately, Washington Mutual Inc., a major sub-prime lender, committed as much as $2 billion to refinance customers' sub-prime loans at what the bank said would be discounted interest rates.

Sub-prime loans typically are made to people with poor credit histories. Defaults on these mortgages have soared in recent months as more borrowers have found they were in over their heads. Falling housing prices have left many of them unable to sell their homes for more than their loan amounts and unable to refinance.

Although housing industry experts said the programs announced Wednesday were small compared with the number of homeowners nationwide who might face foreclosure because of loans they couldn't afford, the plans raised hopes that other lenders would come forward with similar programs.

The money committed "is not going to solve the problem, but it's a start," said Eric Halperin, director of the Washington office of the Center for Responsible Lending. "You need everyone to do a piece of it," he said of the mortgage industry.

That also was the theme of the Capitol Hill summit convened by Sen. Christopher J. Dodd (D-Conn.), who called in government regulators, consumer advocates and executives of major lending firms to discuss the mortgage crisis.

After the summit, Dodd said the participants agreed that "concerted efforts" should be made to prevent foreclosure, including loan workouts and refinancings that reduce borrowers' loan payments.

Some Democrats in the Senate have raised the possibility of direct government intervention to help sinking borrowers. Dodd, who is chairman of the Senate Banking Committee, has backed away from the idea.

"I'm not overly anxious to legislate," he said Wednesday.

Some analysts have estimated that more than 2 million people nationwide, including 460,000 in California, could lose their homes because they can't make their payments.

There are more than $1 trillion in sub-prime loans outstanding. More than 13% of the loans were behind on payments at the end of last year, according to the Mortgage Bankers Assn.

Many housing experts say that for a large number of struggling homeowners, the only real hope they have of staying in their houses is to try to cut a deal with their lender.

"One of the things that was a big focus at the summit was, what can the [loan] servicers do" to reduce mortgage payments, said Halperin of the Center for Responsible Lending, who took part in the meeting.

Richard Syron, chief executive of Freddie Mac, said his company's pledge to buy $20 billion in loans was an attempt to encourage sub-prime lenders to refinance borrowers who were in trouble.

Syron said Freddie Mac wanted to work with lenders to develop sub-prime loans that were less likely to lead to defaults. One idea is a 40-year loan that would stay fixed for 10 years before adjusting to changes in market interest rates. Many current sub-prime loans have rates that adjust sharply higher after one or two years.

Freddie Mac said it expected to have new loans available through lenders by mid-summer.

Fannie Mae, another government-chartered mortgage financier, also has pledged to develop loans to help some sub-prime borrowers avoid foreclosure.

Seattle-based Washington Mutual said its refinancing program was aimed at bringing customers to the table to discuss a loan workout before they begin having problems making payments — for example, in advance of an interest rate change on an adjustable loan.

"We are hoping that consumers call us early" if they expect to have difficulty with their loan, said David Schneider, the head of Washington Mutual's home loans group.

He said customers who qualify to refinance under the program would get below-market rates on their new loans. A sub-prime customer who qualifies for a 9% loan, for example, might instead get a rate of 8.5%, Schneider said.

Still, experts warn that many borrowers who have had sub-prime loans at temporarily low "teaser" rates, and who don't have the income to qualify for market-rate or near-market-rate loans, may find that no lender will be willing to refinance them.


Apple Pie said...

the slide in the US dollar value is nothing more then a blip in current history.
buying Euros is probably the dumbest investment advise you've ever given.
The Euro is high now because of this whole new optimism that the EU countries behind the currency are now a peaceful and productive bunch,
however, its not really so.. its a facade that's hiding what's truly going on for the average European citizen on the street, real inflation is higher today in most European states
then it has been for a very very long. the average person in Europe would be considered way below the poverty line here in the US.
The US dollar on the other hand is backed by Americans who have a hunger and drive to be successful.
Europe will never have the attitude it takes to be a 'go-getter' mostly because of its Nationalistic obstacles.
2 years down the road Europe will likely be in an internal bloody war, while the US will probably be busy saving the remaining Jews from that rat hole.
so, all the Fancy Euro talk is no match to the American individual drive. Betting against the dollar now is like buying a Mcmansion in June 06.

Anonymous said...

So wait a minute. Hyoerinflation is coming so sayeth the mensa minds of HP. If that is so, isn't the best thing I can do get a $500K mortgage (or any loan for that matter) that will be worth $100K in a few years?

And geniuses, what do you think happens to rent in times of rapid inflation? Hmmm I dunno, go up? While a fixed 30 year mortgage does what clas....that's right stays fixed.

Only fools would want to hold cash and rent if they believe hyperinflation is coming.

Anonymous said...

So what DOES cash mean, then, Keith?


DO NOT TAKE US DIMES! You get only 25% of its face value.

WHY ALL THESE PENNY TALK INVESTMENT? You may want to remember that when the German Mark collapsed in 1923, in order to buy a newspaper Der Spiegel you needed a FULL WHEEL BARREL WITH GERMAN MARKS PAPERS! But if you were to buy the same newspaper and pay with COINS AT THEIR INTRINSIC VALUE OR SCRAP METAL VALUE you did not need more coins than what it was necessary at the time the German mark was healthy!

AS THE WESTERN FINANCIAL SCAM SYSTEM COLLAPSES, and no matter where you live in the world, your piggy bank will get you more food on the table based on their intrinsic value than their face value as all commodity prices are going UP AND UP. It is the fiat paper money that HAS NO INTRINSIC VALUE AND THAT IS NOT CONVERTIBLE TO ANY TANGIBLE ASSETS YOUR BIGGEST RISK!! No one knows how far down the US dollar will go!

The fact that a PESO or a KOPECK anywhere in the world weight 3.11 grams and is made of 97.5% copper means that today INTRINSIC VALUE IS TWO USA PENNIES WITH COPPER AT $ 3.5025 A POUND and regardless if the paper currency exchange is 1 to a million US dollar!!! Now, if the face value of the currency of this country collapses due to chronic inflation like Third World economies, THE INTRINSIC VALUE OF THEIR COINS WILL KEEP GOING UP REGARDLESS OF ITS FACE VALUE COLLAPSES.

Anh said...

Alternative currencies (in these ETFs) would have to appreciate by at least 6% to beat the current return on CDs.

How can anyone be sure that will sustain?

Am I missing something?

Anonymous said...

okay...so I am new to all this...
I am just a newbie trying to catch on....so pardon the ignorance.

What do you recommend we put our funds in?
What are your top tips for us to look at?

Finally: What stocks or funds?

Thanks Keith!

Anonymous said...

Housing will go down and plateau for awhile. It will take awhile for the second leg down. The sky isn't and won't fall like you are all dreaming

cmsugar in NH

Anonymous said...

PRPFX is a good fund. Has swiss franks, metals, nat rec. stocks. Very good for inflation and it has crushed the dow this decade. Its Permanant Portfolio and its relatively conservative

Anonymous said...

It's better to sell (Dow, S+P, etc) 6 months too soon than one day too late. Sell now, sleep well.!

Anonymous said...

I trade currency short term with a 66-75% probability for profit on every trade. I would never bet completely against the dollar though, at least not long term. The greenback always bounces back, sometimes with a vengeance. Trading currency is fun and can be very rewarding, but also a b@ll buster if you get caught with your pants down. But Keith is not off the mark. If you are bearish on the dollar, buying currency pairs short the dollar, will work wonderfully in the case the dollar does becomes one notch above worthless. I guess ETF's would work the same, but I have not traded those, so I can't comment.

Rupert Pupkin said...

anon said

"Warren Buffett and Bill Gates got burned on BIG currency plays a couple of years ago."


Umm....from the 2006 Berkshire annual report:

"We've come close to eliminating our direct foreign exchange position, from which we realized about $186 million in pre-tax profits in 2006...that brought our TOTAL GAIN since inception of this position in 2002 to $2.2 BILLION."

[CAPS emphasis mine]

If making $2.2 billion is getting "burned on BIG currency plays" then I'm sure Berkshire shareholders hope Warren does some more...

Anonymous said...


Stuff is going to be costing more in all currencies.

Have a look at a 5-year chart of LEAD (against USD).


Do you think it's not rising against all currencies?

Have you bothered to investigate WHY something as mundane as lead is rising like this?

Still gonna chant this "cash is king" mantra?


Hey Robert Poopykins, last thing I read had Buffett lamenting his loss in currencies, but if their report says they gained, they must've gained, eh?

Anonymous said...

Anonymous said...
okay...so I am new to all this...
I am just a newbie trying to catch on....so pardon the ignorance.

What do you recommend we put our funds in?
What are your top tips for us to look at?

Good lord, do NOT look for investing advice on this blog! Huge mistake!

Dear Christ, it's the blind leading the blind.

Anonymous said...

I wish I'd been buying LEAD and lots of it!


stuckinthecity said...

Michael Darda, chief economist at MKM Partners, discusses burgeoning commodity price inflation and explains how hawkish actions by the Fed could spark a plunge ...

Be aware of "all asset classes that are sensitive to liquidity crises"

April 19, 2007 3:33 PM

I would consider the source.

I like how TD has an ad infront of this "news" piece.

The Street.com is focused on stocks. They do not want to see people dumping stocks and running for the gold mine.

Same with Darda, who couldn't even shave for the piece. MKM Partners LLC is headquartered in Greenwich, Connecticut, and is a member of the National Association of Securities Dealers. They too have a stake in stocks.

Darda's claim that if interest rates go up then gold goes down counters history. Furthermore, his expertise is in question in my mind that he even thinks the Fed will crank up the rates. Too many problems.

burn baby burn said...

Buy bottled water, MRE's, and Ammo they are the only things that are going to matter. Gold will always good any full-bodied currency will be good. International trade is going to go away and a local barter system is going to take its place.

stuckinthecity said...

Let us think about this for a minute: The housing disaster is just starting and already the pols want help for their voters. The Fed CANNOT raise rates, bec that will only speed up the housing demise. The pols will not let that happen. The flat or lowered rates will drag the dollar down more. The Euro cent bankers seem like they might raise their rates, draggin down the dollar more in comparison to the Euro. The US pols will quickly learn that they will not be able to raise taxes to save the lying, cheating, gambling loanowners. The pols will still need $$$ to try to fix the housing panic, so they will go to the Fed and have them print more FRN's. That also will drag the dollar down more. This is only going in one direction.

FlyingMonkeyWarrior said...

Dollar Dumping in Dubai.

Qatar gold reserves soaring

DUBAI: Qatar Central Bank (QCB) gold holdings rose more than fivefold during January and February, central bank data showed, even though gold prices only climbed 4.5 per cent during the same period.

Qatar, which said last year it wanted to diversify its foreign exchange reserves away from the dollar, held 240 million riyals ($65.97m) of gold on February 28, compared with 44.3m riyals at the end of December, the data on the central bank website showed.

Qatar pegs its currency to the dollar, which declined about 10pc against the euro last year.

That helped spur Qatari inflation to 11.83pc last year, the highest rate on record.

"The gold purchases are part of a diversification strategy designed to reduce exposure to the dollar, the weakness of which is a concern to the QCB and others in the region," said Middle East economist for HSBC Simon Williams.

"But the increase in gold holdings needs to be kept in perspective. Gold still only represents a tiny element of the central bank's reserve portfolio which continues to be dominated by foreign securities," Williams said.

Gold rose to a six-week high on Friday on a drop in the dollar against the euro.

A weaker dollar gives buyers more purchasing power in dollar-denominated gold, which is also often seen as a hedge against inflation.


Anonymous said...

The foreign currency ETF's pay a dividend. The FXA pays 5.75%

Anonymous said...

"Buy bottled water, MRE's, and Ammo they are the only things that are going to matter. Gold will always good any full-bodied currency will be good. International trade is going to go away and a local barter system is going to take its place."

ammo is flying off the shelves in most stores and being sold at a brisk pace by internet dealers as well......

most people don't know what is happening but it would appear that many, think that ammo, food and water are important for some reason, even though they do not understand why. amazing phenomenon .....

i have read in some places that 1/3 of your assets should be in gold and silver with the percentages in the area of 25/75....it is a good hedge and you never know....

Ben Franklin said...

Thar she blows!



Anonymous said...

Too much money in everything, nothing seems safe long term- it's all dominoes where the only thing remaining is the person who set them up.

Anonymous said...

30 percent interest rates in New Zealand is a new world order scam to issolate all the money in a low population, low area zone for easy control and keep the NWO people with access to self sufficient, no money living, but all powerfull

bozonian said...

No matter how bad it gets, the Fed won't do anything.

Why not? Because whatever it does will crash something and then Big Ben will get the blame for the next Great Depression, version 2.0

So, not action by the Fed is my guess.

Anonymous said...

If the dollar tanks we can revert to Doug Stanhope's new world currency which is a system based on blow jobs and cheese burgers:

"Hey I like that car, want a cheeseburger".

"Na, I just ate, how about ..."

Anonymous said...

sounds realy, realy expensive, duh, did you expect it to be cheap?????/

Be Part Of The Solution said...

Please use ony "one square" of tissue at a time when wiping your orfice... (unless of course you just learned your home lost $14,326 in value over night).

Sheryl C.