This arrived this morning. I apologise for its length.
Ooops...
Sorry...it exceeds ASF length constraints.
Summary of the email from van tharp...impossible, but here goes:
cash is king until it's worthless
the king is dead (maybe soon?, but when/if it is)
long live the king...
gold
this, of course, is written for the US market.
(Oh, and I get the impression he doesn't like the bailout)
one man's opinion...please don't shoot this messenger!
A sample from the email:
What you should do?
• Obama has suggesting raising the amount of FDIC insurance. You need to make sure that you have no more cash in banks than the amount of insurance you have. To date, as far as I know, bank failures have not cost any depositors money. The FDIC has not had to pay out any money to depositors, but that’s why banks disappear overnight as they absorb into another bank. However, the change in rules that allows banks to use depositors’ money to secure their investments could mean that some bond holders could have first priority over your money.
• Money market funds, although not insured, are generally safe. There are a few instances where because of runs, they could only pay depositors 97 cents on the dollar. But that’s not a huge loss.
• Watch the stock price of your bank. Wachovia’s price looked awful. However, it was taken over by Citigroup whose price looked much worse until recently.
• If you are a value player, be very careful. Classic contrarian, David Dreman, had a huge play in Freddie Mac and Fannie Mae and wiped out about 30% of his fund when the Fed took over 79% of them. And how many people had stock in Wachovia and Washington Mutual and watched their values disappear overnight?
• Develop a game plan and a worst-case contingency plan to help you get through this safely, just as we teach in our Blueprint workshop. I cannot stress the importance of having a worst-case contingency plan under these conditions. The worst thing you can do is listen to CNBC, CNN, or any other news channel for information about what to do. These people do not know and the “talking heads” are full of misinformation.
• As I’ve been saying since I wrote Safe Strategies for Financial Freedom, we’re in a secular bear market. Phase II is now waking up from hibernation. This one could last a while. There will be many, many opportunities for those who survive it, but the word now is survival. And expect the entire bear to last at least another 10 years. Remember that we still haven’t seen the effect of the baby boomers getting well into retirement and needing to withdraw their retirement money from the stock market yet.
• Long-term, I would expect the government to default on many of its future contractual obligations. How can it honor over $100 trillion in unfunded future obligations? This is just my opinion, but do you really trust the government? Remember what I said earlier””the government can change the rules any time it wants.
Last month I said that we were experiencing a deflationary credit contraction. September has been disaster after disaster. Let’s hope that next month is much, much better. Until October’s update, this is Van Tharp.