Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

The Big Nowhere

|Includes: UDN, PowerShares DB USD Bull ETF (UUP)

Along with being a leading economic journalist, J. Irving Weiss amassed a fortune in The Great Depression of the 1930's. Following in his father's footsteps, Martin Weiss is also an economic journalist and the New York Times bestselling author of The Ultimate Depression Survival Guide. The depression Martin Weiss writes about is not from 80 years ago, but what he believes is happening all over again here today in the United States. Published in April of 2009, The Ultimate Depression Survival Guide could almost be co-authored by J. Irving Weiss because the book is peppered with his writings from almost a century ago. As is demonstrated in the book, there are many similarities in the two eras: "After the crash, the stock market rallied for almost six months, and nearly everyone on Wall Street thought the crisis was over...From its peak, the Dow Jones Industrial Average fell 89 percent. Compared to the Dow's peak in 2007, that would be tantamount to a plunge of more than 12,600 points - to a low of approximately 1,500.". And that's what Martin Weiss thinks is going to happen because the speculative bubble in U.S. homes was as extreme as the Dutch Tulip Mania, the South Sea Bubble, the Crash of 1929 and the Tech Wreck of 2000-2002.

Mr. Weiss cautions the reader that: "...history shows that, no matter how many companies may be going bankrupt or how gloomy the news may be, the stock market can often stage vigorous, but temporary, rallies...These rallies can be explosive. They can last for months. And they can give traders the opportunity to make money on the way up and even more money on the way back down.". I believe we are currently in one of these rallies that is giving investors a false sense of security because market valuations are on the threshold of the absurd. I also believe like the author that there is plenty of opportunity to make money on the downside and I have invested accordingly albeit a few months early. The Ultimate Depression Survival Guide devotes an entire chapter to shorting the market with ETFs and in that chapter lists numerous holdings offered by ProShares, Rydex and Direxion. However, he does caution that using these ETFs is a double edged sword in that if you invest too early as I have, you can get burned in the short term.

In combating the coming or current depression, the author's ace in the hole are short-term U.S. Treasury Securities, commonly referred to as Treasury bills or money market funds that own exclusively short-term Treasury securities. Reason being that in a depression it's not enough just to avoid losing money and preserving your savings, you must also have liquidity. "Even in the 1930's, when a record number of Americans were unemployed and when we had a head spinning wave of bank failures, owners of Treasury bills never lost a penny. Even in the Civil War, Treasuries were safe". Mr. Weiss provides a comprehensive list of short-term Treasury only mutual funds which I found helpful. The reason that you want liquid assets is to take advantage of blue chip stocks that will be selling for pennies on the dollar once the bottom is reached. You can buy them for a song.

Besides shorting the market with ETFs and buying Treasury bills, another strategy to make money in a depression as advocated by Mr. Weiss is to invest in the U.S. dollar: "During periods dominated by deflation, which is expected to prevail during America's Second Great Depression, concentrate on betting on a rising dollar. Use primarily PowerShares BD US Dollar Index Bullish Fund (NYSEARCA:UUP)...During perioids dominated by inflation, concentrate on betting on a falling dollar. Use primarily PowerShares DB US Dollar Index Bearish Fund (NYSEARCA:UDN).". The author states many times throughout the book that he is leaning on the deflationary scenario. Will the 'Great Recession' morph into 'Depression 2.0'? That outcome is yet to be determined, but I'm still of the belief we will retest the lows of March 2009, if not go lower. If you are familiar with Harry Dent's research, then The Ultimate Depression Survival Guide will be old news. But if you are not, this is a good starting place to find out how to protect and increase your assets in what will be a very volatile marketplace in the next few years.

Disclosure: No Positions