THE OBAMA-PROOF PORTFOLIO

In the wake of Zero’s election last November (the DOW was above 9,000 on 11/04), TTP predicted the DOW was headed to below 7,000 (The Word That Can Save America, 11/21).  Wait ‘till you see where we think it’s headed now (see below).

By now, it should be clear to anyone with a desire for self-preservation that Zero’s economic policies are indistinguishable from those skillfully designed to destroy the American economy on purpose.

Thus the urgent need for strategies to preserve one’s savings and assets under attack by Zero’s malicious economic masochism.  We all need to develop an "Obama-Proof Portfolio."

Two caveats.  To avoid being persecuted by the regulatory Gestapo, it needs to be made quite clear that TTP is not an investment publication dispensing financial advice.  What we’re going to do here is let you know what certain high net-worth friends of ours are doing, what’s working for them. 

And further, this is work in progress.  We’ll tell you about some strategies we know about now, but more will be forthcoming.  We’ll be adding to, taking away, and adjusting the Obama-Proof Portfolio as time goes on.

Now on to certain basic assumptions.  The first is that the dollar’s goose is cooked.  This means get out of dollar-denominated assets.  Get your investments out of Dodge, get them offshore.

Another is that the other main currencies are toast as well:  the euro, the pound, and the yen.  Don’t have your assets denominated in them either.  The best, for many folks, is the Swiss franc.

A third is that US Treasuries are a bubble.  Whether it pops next week or some months from now, no one can tell.  When you see something coming and can’t judge its speed, get out of its way.  Trying to time when it will arrive can get you run over.

The current race to the dollar is also a massive bubble.  Add up Zero’s unending bailouts and multi-trillion dollar deficits coupled to trillion dollar tax increases, government tax receipts falling off a cliff, foreign governments selling their dollars and treasurys to prop up their own currencies (e.g., Russia, Saudi and the Gulf, India, Japan), and the Fed "monetizing" (creating make-believe money out of thin air) to prop up treasurys – and hyper-inflation is inevitable.

When?  Again, don’t try to time it.  One guess would be within six to ten months.  But it could come much sooner.

So – what asset classes does this leave us with?

The first is obvious.  TTP’s favorite four-letter word, gold.  What’s not obvious is just how to invest in gold. 

Gold is the classic inflation hedge, and thus hated by central bankers (unless they’re Swiss).  Much of the world’s bullion is in government vaults, which the central banks will sell just enough of to smack the price down when they feel it’s getting uppity.

Note that when gold hit over $1000 an ounce on February 20, it promptly proceeded to slide every day afterward to $906 yesterday (3/04) – and in the face of Zero announcing trillion dollar deficits in perpetuity. (It went back up to above $934 today, 3/05.)

In spite of this, gold has steadily marched upward, and if it breaches the $1000-ounce threshold and stays there, then the dam may burst.  One heavy hitter TTP friend has 25% of his assets already in gold, and plans to substantially increase that proportion should it stay above $1000 for long.

He buys and stores his gold at BullionVault.  This is a London-based (not US) company through whom you can buy grams of "good delivery" bars stored in a professional vault in Zurich, Switzerland (you can also store it in New York or London, but forget that).

Further, at BullionVault you get a direct gold exchange price, with minimal buy-sell spreads.

Another option is a gold exchange traded fund or Gold ETF.  The most popular is the SPDR Gold Shares GLD.  A number of TTP investor friends are invested in GLD.

One advantage is that GLD is a "long" ETF.  Most ETFs are "short" which makes them very tricky and dangerous.  "Very bad things can happen whenever you hold short ETFs longer than their indicated compounding period," warns one friend.

He also suggests avoiding leveraging yourself with a "double-long" GLD.  Which brings up the dangers of leveraging as a whole.

The natural tendency of folks convinced hyper-inflation is on the way is to borrow to the total hilt to buy or invest.  What do they care how leveraged they are?  They’re going to pay everything off for pennies on the dollar. 

This is really not smart, unless you don’t mind going bankrupt if the future doesn’t work as planned – as it has a habit of doing.  Governments can do crazy things, especially when they are going broke.

One thing that seems clear on the horizon is the emergence of new currencies to compete with the dollar and euro. Not as a "world reserve currency," but as a regional reserve currency.

For the Middle East and perhaps the entire Moslem world, that would be the khaleeji, the coming GCC gold-backed currency of Saudi and the Gulf states. 

Since "khaleeji" means "of the gulf," the symbol is to be a "G" with a vertical line through it – mimicking the $ sign, saying the G stands for Gulf with a wink, as everyone knows it will stand for Gold.

Backing by gold enables, so say the folks behind this, "sharia-compliant loans" without riba, interest which the Koran proscribes as usury.

Look for the Chicoms, on the other hand, to supplant the dollar with the Chinese yuan as the reserve currency of Asia.  It will need to be convertible and backed by either gold or a basket of commodities.

You can expect them to make a play for their yuan to target the dollar once gold starts to rocket – which means soon.  Don’t be in the least surprised if gold isn’t $2,000 an ounce in six months or less.  It could be two months.

As a matter of fact – and hold on to your hats here – one of the most savvy guys TTP knows believes that gold and the DOW will cross each other at 3,000.

Where the DOW bottoms out he can’t say, but he thinks gold is headed for 5K.

Now, what assets to have here in the US?  Physical gold, coins buried in your backyard?  Maybe, but we all know what FDR did with gold ownership – and he’s Zero’s model.  

Plus, there are plenty of other things more easily negotiable.  Junk silver, for example, pre-1965 silver dimes.  Ammo – bullets of popular calibers that can bought in bulk, such as 9mm, .38Special or .357Magnum.  A great suggestion of TTPer "Brant" :  20 cases of whiskey in your basement.

Booze is very negotiable, a true liquid asset!

But this is survival stuff.  For any appreciable assets you have – get them out of dollars and out of the US now! 

Yesterday (3/04), British Prime Minister Gordon Brown told a joint session of Congress that all tax havens around the world should be dismantled. 

Treasury Secretary Timothy Geithner announced that the US is "going to have a much more ambitious effort to deal with offshore tax havens."

Senator Carl Levin (D-MI) has introduced the Stop Tax Haven Abuse Act that will make it "difficult if not impossible" for Americans to open accounts in offshore financial centers."

The last strategy for an Obama-Proof Portfolio that we’ll mention this week is "Going Galt."

Congressman John Campbell described the phenomenon, named after John Galt, the hero of Ayn Rand’s novel, Atlas Shrugged:

"People are starting to feel like we’re living through the scenario that happened in ‘Atlas Shrugged.’ The achievers, the people who create all the things that benefit rest of us, are going on strike. I’m seeing, at a small level, a kind of protest from the people who create jobs, the people who create wealth, who are pulling back from their ambitions because they see how they’ll be punished for them."

Another way of expressing this is the poetic advice given by TTPer "awashinoil" on the Forum:

Invest in your health, your knowledge, your family, your friends and all forms of intangible wealth.
Work less, enjoy spending time for you instead of spending dollars.
Take less responsibilities.
Don’t hire problems.
Intangible wealth is worth more than money.
It can not be taxed , seized or stolen.
It does not depreciate.
It will follow you wherever you will be.
It will help you building a better future.

So that is how we start building our Obama-Proof Portfolio:  Buy gold and go Galt.

That and get your assets out of dollars and out of the US if you can.

Remember, this is work in progress, we’re not advising, just passing on what friends of TTP are doing themselves.  We’re all in this together, and we’ll get out of it together.  In the meantime, here’s the wisdom of the day:

Recession is when your neighbor loses his job.

Depression is when you lose yours.

Recovery is when Obama loses his.