I am sure that many of you have heard this 'Cash is King' phrase in the past couple months. Nothing could be further from the truth!

I agree that if an investor or company, fund or whatever entity went into cash or had a lot of cash a few months ago and stayed into cash was a smart move. 'Cash was King' is the appropriate phrase now with emphasis on 'was'.

Everyone, or should I say a lot of people are sitting on cash because they are afraid. When fear is rampant and cash levels are high it is time to invest and buy. This is what smart money has been doing in the past month or so.

Cash levels are so high, the latest figures I seen, they were at 1/3 the total value of the S&P 500. Money market assets in the U.S. are close to $4 trillion.

Cash is just paper and the Fed is more determined then ever to de-value it. They are creating cash like no tomorrow, in fact that is exactly what they are worried about, tomorrow and whether tomorrow we are in deflation. According to a Nov. 24th Bloomberg article The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt that week. The pledges, amounting to half the value of everything produced in the nation last year.

It is 'The Fed gone Wild'!


If you have read any of the past pieces of the Fed Chairman you will know that Bernanke's long term plan involves devaluing the dollar against gold. He has overtly stated his intentions toward gold, many
times, in various articles, speeches written before he became Fed Chairman. He often extols the virtues of F. D. Roosevelt's gold revaluation/dollar devaluation back in 1934, and credits it with
saving the nation from the Great Depression. According to Bernanke, devaluation of the dollar against gold was so effective in stimulating economic activity that the stock market rose sharply in 1934,
immediately thereafter.

There is no doubt that a dollar devaluation is something that the Fed wants to see happen again and they are well on their way in doing it. It will not only be devalued against gold, but most every other hard asset as well.


We are looking at a federal deficit of $1.3 trillion for fiscal 2009. Some already believe it will go over $2 trillion. Why would anyone want to be long US Treasuries or the US dollar? (US$ cash)

Like the famous board game 'chess' if you hold cash your playing with the Fed, but they have one big advantage. You see the Fed can keep creating Kings, Queens and all the pieces they want. No matter how good you are, you will eventually end in checkmate, because you do not have the duplicating machine to create all the extra pieces and way more than you would ever need.


'Cash is Trash'!

This will soon be the new phrase you hear much more of

U.S. interest rates are effectively at zero and the rest of the world is not far behind. Investors will soon realize that they have to pay the banks and funds to keep their cash. This is foolish but many will end up doing it before they realize that they are in checkmate.

For the first time since 1940, and briefly during the Great Depression, US T-Bills went negative. Just over a week ago, three-month T-Bills traded at a negative yield… The US sold $30B of 3-month T-Bills for 0%, another first!

Yields in money market mutual funds are going to low to cover expenses!!

Record-low yields on government debt have already led money-market funds to waive fees to keep returns positive. If the Federal Open Markets Committee, as expected, cuts its target rate, some reasury funds may allow returns to turn negative, said Peter Crane, president of Crane Data LLC, a money-fund research firm in Westborough, Massachusetts.

"No one has ever paid above and beyond their interest income to be in a fund," Crane said. "But if we see another cut, we'll likely see negative yields." And we have seen the 0.75% cut last week

Before last weeks Fed cut, of the 500 largest U.S. money-market funds, 41 have daily annualized yields at or less than 0.05 percent, including four funds with zero yield. The 41 funds are probably
waiving all or part of their regular fees to keep from taking money out of principle. Many funds no longer want your cash, they are refusing it because 'Cash is Trash'

Falling yields on Treasuries led some Treasury-only funds, including those run by JPMorgan Chase & Co. in New York and Boston's Evergreen Investments, to turn away new investors. Barring new customers protects returns for investors already in the funds because managers don't have to buy as many new Treasuries with yields lower than current holdings.

Since then more funds are refusing cash.

Yes that is right, refusing cash - because 'Cash is Trash'

The Fed just keeps going on creating one bubble after another. Right now they are creating a giant debt bubble and the end result of this will be the implosion of the bond market, a plunging US$ and soaring inflation and gold. Some call it 'The Great Monetarism Experiment.'

The Fed is frantically signaling that it wants asset prices to inflate and will engage in any and all activities that will force asset prices higher. The Fed announced that it will monetize the entire debt market if necessary. You could say that the Fed has bet the entire ranch. Will it work is the question. The Great Monetarism Experiment is on! One thing you can bet on - the Fed will overplay its ‘bet the
ranch' monetization because it cannot afford to abort the process too early. The Fed must wait until significant inflation or dollar destruction appears.

There has never been a more clear signal or more certain economic outcome than we have been presented with now. It is screaming to own precious metals and precious metal stocks. If you do not, all you worked for will perish in debt collapse and hyper inflation!