So, What's the Hedge?

[BiscayneSunrise]

Many of us have been anticipating the devaluation of the dollar by investing in commodities and resource stocks, specifically in non US resource stocks.

With US stock markets on the run and an impending credit crisis in the US, where has the money been flowing in a flight to safety? To Treasuries!!

Gold was supposed to be the standard hitching post to value. Some say it is actually oil. Both are down in sympathy with stock market dips. I thought commodity related plays were supposed to be safe havens during just such times, not US treasuries.

I have always though the ultimate storehouse of value was the human mind, and now I am beginning to think the best way to hedge against market uncertainty are companies that fully leverage human talent. i.e multi nationals and tech innovators.

If gold, oil, commodities and other hedge vehicles aren't working right now, what IS the hedge?

Thoughts?

[Jim Nickerson]

Many of us have been anticipating the devaluation of the dollar by investing in commodities and resource stocks, specifically in non US resource stocks.

With US stock markets on the run and an impending credit crisis in the US, where has the money been flowing in a flight to safety? To Treasuries!!

Gold was supposed to be the standard hitching post to value. Some say it is actually oil. Both are down in sympathy with stock market dips. I thought commodity related plays were supposed to be safe havens during just such times, not US treasuries.

I have always though the ultimate storehouse of value was the human mind, and now I am beginning to think the best way to hedge against market uncertainty are companies that fully leverage human talent. i.e multi nationals and tech innovators.

If gold, oil, commodities and other hedge vehicles aren't working right now, what IS the hedge?

Thoughts?

It's early in the day, so who knows what'll happen by closing and then there is the next day?

The bonar and yen seem to be two hedges today, plus any shorts against US equities are good today, the latter have been killed for 3 days running.

[Uncle Jack]

If gold, oil, commodities and other hedge vehicles aren't working right now, what IS the hedge?

To borrow a tired and way-overused cliche' from those morons on the television - it's cash on the sidelines. If more people want out than want in, or the greater desire is to sell than to buy, cash is king.

This is especially true during the "Ka" phase of Ka-poom as EJ has described it. Initially, as more and more marines hit the fan (pardon the old Navy joke), people are going to want cash during the deflation of assets.

Then...

Gold and oil will rock during the following hyper-inflation.

[BiscayneSunrise]

I understand that part. The economic realities will always trump the short term emotions.

A few days ago, the WSJ reported that many good assets are being sold to cover margin calls on highly leveraged bad assets, dragging everything down. The jist of the article was that all assets classes now are very highly correlated due to the above mentioned leveraging; hence there is no place to hide anymore.

Pardon the pessimistic provocation, but perhaps if it is hyperinflations' job to destroy the middle class, the "Ka" phase will first wipe out those who thought they were smart enough to hedge early.

Greg

[Jim Nickerson]

I understand that part. The economic realities will always trump the short term emotions.

A few days ago, the WSJ reported that many good assets are being sold to cover margin calls on highly leveraged bad assets, dragging everything down. The jist of the article was that all assets classes now are very highly correlated due to the above mentioned leveraging; hence there is no place to hide anymore.

Pardon the pessimistic provocation, but perhaps if it is hyperinflations' job to destroy the middle class, the "Ka" phase will first wipe out those who thought they were smart enough to hedge early.

Greg

If one believes Ka-Poom will playout, and if one has been in those assets that should do well during high inflation, then even though hurt by the Ka-, unless one liquidates rather than riding out the Ka-, perhaps over the longer time one would do well, not perfectly well, but well enough. No one I know is capable of perfectly timing significant changes in market direction or asset class direction.

[BiscayneSunrise]

Thanks Jim,

Fair enough.

I agree, if one is making bets placed on very big, macro trends, selling on pullbacks contradicts the very reason why those bets were made in the first place. Greg

[c1ue]

Look through the older posts - especially on the bottom right of the landing page for iTulip.

There are lists which I do agree with if you have enough money.

In general - if inflationary then go straight for everything closest to the basic level of hierarchy of needs: food (subsistence, not restaurants), transportation, water. Maslow says security and protection is next, but I think that cards is being over-played already.

My strategy is and continues to be to invest in new businesses in countries where the currency is backed by real economic growth.

It is a cash play - because while the cash I have is small relative to many in the US, it is large relative to where I am investing. The currency is a 2nd opportunity as many of the growing countries have currencies depressed for mercantilism reasons.