What if We’re Wrong?

Let’s say we’re wrong. The bull market in
commodities is about to come to an end. Congress and the White House will
somehow arrive at a sane plan to end the cycle of inflationary
spending.

We’ll completely avert the fallout of decades of too much fiscal and
monetary infidelity.

Also, there will be more than enough, oil, coal, gold, silver, iron,
copper, wheat, corn and other commodities, so prices will reverse their
upward climb.

With commodity prices falling and the American financial house in order,
we’ll see a huge sustained bull market in stocks. Unemployment will fall.
Housing will thrive.

All of that sounds pretty good – except you and I will probably take a
significant hit on our commodity investments.

I don’t expect that they’d go to zero – after all commodities like, gold,
silver, oil, etc. have never gone to zero – so it wouldn’t be a total loss
by any means. I think we could reasonably expect to lose 50% or a bit more
on gold investments. Oil investments would be fine. Commodities like
agriculture stocks could falter a little.

But all-in-all, the downside is really not bad – especially considering
that all of the other metrics in the economy would more than make up for
our losses. Our regular stock holdings would boom, and the dollar’s
purchasing power would ascend – allowing us to buy more goods and services
than now.

We might even be able to get a decent return on Treasuries and CDs.

Never before has the prospect of being wrong seemed so attractive.

Unfortunately, I think the wages of being right will be difficult to live
with. Even as we profit and prosper from our specific commodity
investments, it’s going to be nearly impossible to completely duck the
consequences of higher-priced everything, currency crisis, bond default and
financial meltdown.

I’ve encountered people who see my somewhat gloomy outlook as some kind of
right-wing fear mongering tactic. The things I say about this country’s
finance simply can’t be true.

But if you take one look at this country’s debt levels, and then you take a
quick glance at the folks running the place, I don’t see how you can come
to the conclusion that all will be well.

If it seems as though I’m being forcefully certain about such a big and
bold commodities prediction – it’s not because I’m 100% certain about what
will happen. Nobody can be.

It’s because the fallout of betting the farm that all will be well is
simply too great a risk. I’m more amazed at the average person’s certitude
that all is well, and all will be well. That takes real chutzpah and
certitude. I commend them for their bravado in the face of overwhelming
evidence to the contrary.

Furthermore, we’ve been right about commodities so far. I hope you’ve made
significant gains buying the stocks and commodities I recommend in this
free letter.

But it’s my strong belief that things will get much worse for our sovereign
debt concerns and for the economy before they get better. And in the
meantime the only real way to profit and protect yourself is to deleverage
out of the dollar and into commodities.

I could be wrong. But that wouldn’t be so bad.