This was an interesting read in Marketwatch about Harry Schultz, who is a famous trader and has a newsletter (don’t just run out and buy it, that doesn’t mean some smart guy will simply make you rich by reading his stuff.)
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.
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 you 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 …”
In case you’re wondering, Schultz is up 21.42% over the past 12 months according to the Hulbert Financial Digest, vs. 7.51% for the dividend-reinvested Dow Jones Wilshire 5000. Over the past five years, Schultz is up a remarkable 34.38% annualized vs. 12.85% annualized for the DJW.
Now, don’t necessarily tun out and scoop up gold, dump dollars, and move to Mars because we’re dooooomed! This is one guy’s opinion. A very popular opinion, and interesting how he puts things. We trade what we see on the chart, according to our signals, right?
And hey, if you’re 80 and up 35% a year over the past 5 years … well, your just a stud. And if you’re 70 and reading this, get to work learning to trade in the flower of your youth!!
I am inclinded to agree with the thoughts of Schultz….whch are pretty scary when you think about it!
Invest wisely
Tony