Schultz: “A Financial Tsunami Is Upon Us”
December 14th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
If you liked my Portfolio Ideas post, take a look at what the International Harry Schultz Letter just advised their readers to do.
Via: MarketWatch:
Systemic financial fears, dollar doubts, gold gains, seeping stagflation – a word Schultz claims he coined – all eerily replicate the 1970s, which he began as a derided crank and ended victorious over the financial establishment. (After which, significantly, he was notably quick to say the storm had passed).
Shultz’s latest letter, just in, is absolutely apocalyptical: “A financial tsunami is upon us,” he says, caused by lax credit and complications introduced by Wall Street’s derivatives craze.
Among other interesting ideas raised by Schultz in his intense, somewhat terrifying introduction: recession, possibly depression; bank failures; exchange controls; housing prices down by 50%; credit card company failures; money market fund dangers; tripling of U.S. jobless numbers; federal bail-outs for Fannie Mae and Freddie Mac.
His advice, translated out of his shorthand style: “If you have not already done so, take immediate measures to safeguard your assets against the global derivative crisis … Most urgent is close out time deposits, buy non-U.S. government bonds.”
In other words, Schultz is saying the U.S. banking system is threatened. How’s that for a Christmas greeting?
Schultz says “the second biggest danger is owning U.S. dollars in any form, (it) has crashed and going much lower … use dollar rallies to exit dollars or sell short … This is not a time to seek profits, but to protect what U have … Portfolio diversification is essential in troubled times.”
Schultz’s favored currencies: “In order of preference: Swiss Franc, Australian dollar, Euro, Canadian dollar.”
Schultz is a trader and his specific market advice is nuanced. He writes: “Direction of global stock markets uncertain. Balance stock holdings between long and shorts to counterbalance draw-down risks, and/or hedge exposure via puts, futures, or bear funds … Exposure to gold shares and bullion should be a minimum of 35-45% of your total portfolio, with at least 10% in physical gold bullion and coins, and/or very rare coins … ”
On gold, he writes: “The public is still not in the gold market. They will be in 2008 as the derivatives and credit crises bring down more financial institutions (amid recession) and eyes will be opened, via pain. While Rome burns, gold will smash through its old unadjusted-for-inflation $850 high on the way to $1,600, & who knows how far beyond …”
