nico61

The Merits of Staying in Cash

I think there is a great contradiction in your article and misleading to non-expert or naive readers.

Staying in cash and precious metals only means to allow your money deteriorate with the high inflation we are seing after the artificial increase in commodities prices, particularly oil and metals.

When I mean artificial, it is just a combination of intended actions to recover the price of gold after Sep 11, and also, happened to impact the reduction in oil production installed capacity in the world to attend the emerging markets demand increase, which happened to reduce the world´s extra capacity. Both situations added to soar prices of key commodities including food.

Everything is consequence of a bubble started many +10 years ago. Metals and oil have been driven higher owed to the long period during the 90´s and early 2000´s they were considered as simple commodities. Evidently, there are historic cycles where these commodities tend to increase and even act as a hedge, but a personally think those times where you had gold coins under your mattress are long gone.

Excess capacity due to demand reduction and rationalization will end affecting the incresing trend of commodities. It is as simple as when you go to the supermaket: there is one point you can´t purchase an overpriced item...

I also disagree on the doomsday predition about the stock market. Not every stock or sector is the same. Even talking about banks. I believe solid long term value banks will survive and will even outperform other sectors.

Regarding housing, I believe there values will return to their true value... the error from all who were involved in creating an artificial buble was to allow extremely low rates so that destroyed the currency and therefore destroy american people equity.

The grass is not also green in the coutries that export commodities. They will also feel the pain of the higher external inflation that soon will tend to devaluate there economies and also will lead to demand deterioration.

In conclusion, something positive in nowaday´s world is that we are all like business parterns and every action is linke to a reaction. Basic economic rules still apply and when you tend to abuse from a priviledged position it will surely end affecting your business in the long run.