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There is fear in the land. Many are asking where do we go should a deflationary repeat of 2008 be in the cards. Again the response to such an event may be an initial decline in all holdings across the board. The market roller coaster takes us down, but if we keep our eyes open at exactly the same moment we see a sudden rise directly ahead in our chosen sectors.

The drop might initially reflect a short term decline in commodity markets (NYSEARCA:DBC) which are inherently volatile. Nevertheless, the eventual payoff may be worth the ride. Global debt crisis woes may be causing the recent breakouts in hard assets such as gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV) as global speculators search for authentic safe havens.

The old game of wheeling and dealing is going on behind the scenes as the G-7 meets. The U.S. needs to have a cheap dollar (NYSEARCA:UUP) in order to pay off rising debts. The weakness in the Euro (NYSEARCA:FXE) has caused a bounce in the U.S. dollar and is only cosmetic.

The dollar long term downtrend is still apparent as it attempts to rise above the declining 200 day moving average. The rise in the greenback gives greater leeway to the Fed to institute accommodative measures. Conversely, the Chinese require a rise in the yuan (NYSEARCA:CYB) to fight inflation and need access to the West’s natural resources, which they can purchase with their hordes of cash and U.S. treasuries (NYSEARCA:TLT).

This is why we maintain our faith in our natural resource sectors. Note the emphasis repeatedly is, wealth in the ground assets are the place to be. Surely there might be other conventional safe haven plays in such venues as the dollar and treasuries. These countertrend moves are transitory in nature. The bubbles are in long term US debt and deteriorating Western paper currencies, not in hard assets and natural resources. Any short term decline in our chosen sectors should rebound violently to the upside.

As for us, we continue to be focused on our chosen areas of real wealth in the ground. This is exactly what our Chinese counterparts want to do with their paper assets in the dollar and long term debt.

Look for increased Chinese participation in acquiring the very same mining assets that appear on our selected list. Already the sovereign banks of China, Japan and South Korea have taken substantial positions in one of our major holdings. We believe this is only the beginning in the long range rise in mining resources.

To those who may be dismayed at a point loss in natural resource stocks it is a decline within a formative base rather than a blowoff top. Those who are selling now may be selling at the bottom of a consolidation which looks ready for take off. This is the nature of the markets where they attempt to deceive us into selling at exactly the wrong time.

Indeed, there may be further interventions and potential easing measures by government and politicians for a short term extension of the ongoing drama, as they dot the I’s and cross the T’s in the publication of some kind of interim bailout.

Our elected representatives will play the old game of kicking the can down the road to the 2012 election. This will serve a major purpose of deflecting blame away from the foxes who raided the hen house in the first place.

They then will be able to shift the blame to we the people who are busily paying taxes and governmental salaries. They will walk away exclaiming that the people have spoken. Little wonder that the public’s belief in politicians is at an all time low.

So where are the safe havens now? Are they treasuries, which are a promissory note by a government whose fiscal integrity is being questioned? Or are they the U.S. dollar, which is constantly being inflated? Look at your grocery bills and the rising costs throughout the economy. These sectors will surely be punished by Bernanke who was a student of the Great Depression.

My firm chooses to regard our natural resource mining sectors (GDX and SIL) as increasingly important wealth in the ground safe havens. To us they represent not only real money, but realistic, non-fiat money, of which they are not making any more. Do not be diverted or distracted from the path of sound money by band-aids, bailouts and cosmetic “touch-ups”.

As a captain who steers his ship through turbulent waters, we seek to rise above short term exogenous reactions to news driven stimuli. The casino will do whatever it can to confuse, misdirect and obscure our eventual destination.

To be right in the market, the consensus has to believe you are wrong. We rise above the swirls and riptides of the marketplace in the navigation from troubled waters to a calmer sea. Our charts furnish the eagle’s eye view of not only the nearby scene, but the much more profitable panoramic view over the long term.

Understand the present state in Washington as a three ring circus where the script has already been written and the speculator must avoid being gulled by the croupiers (politicians), who will do what they must to take us off the mark on our highway to profits.

It is important that we as private investors avoid this scam of this game of “Three Card Monte”. The elites of the major powers enjoy “the good life” and are not about to scuttle their respective ships.

We maintain our course in the long secular uptrend in the precious metal (NYSEARCA:GDX), rare earth (NYSEARCA:REMX) and uranium miners (NYSEARCA:URA). As this was being written, we observed a potential reversal occurring in these sectors and bottoming process. Panic, or at least anxiety, seems to be the order of the day as we counsel staying on course.

Avoid being swayed into hasty decisions by the mesmerists of the media. As the old spiritual puts it, “Keep your hands on the plow. Hold on.”

Disclosure: I am long GLD, SLV, GDX.

Source: Deja Vu: A Deflationary Repeat Of 2008 In 2011?