Richard Russell (Dow Theory Letters) writes the following in the February 3, 2009 issue of his invaluable daily letter. He also makes some specific calls on AIG debt, PIMCO`s high yield fund (PHK), CDs (GICs), and gold ETFs and coins:
“Don’t be married to any specific scenario. Anything may happen in response to the current situation. Follow the market - the market will know what’s happening before anyone else.
“The best survival plan is to be diversified. Nobody knows who or what will be ‘the last investment standing’. Will it be Treasury paper, high-grade bonds, real estate, diamonds, T-bills, cash, top-grade corporate stocks or gold?
“T-bills are the choice of many sophisticated investors. But T-bills are denominated in dollars, and dollars are vulnerable as are bonds or any other items denominated in Federal Reserve notes (‘dollars’).
“Real estate and diamonds represent intrinsic wealth, although they are not instantly liquid, meaning that they cannot be instantly turned into cash.
“Gold has been accepted as wealth for thousands of years. When all other forms of supposed wealth crashes (deflates) or becomes suspect, the last wealth asset to stand will be gold. Gold has no counter-party nor has it any debt aligned against it. Gold needs no central bank to ensure its acceptance. Gold is accepted everywhere and in any quantity as a form of indestructible, eternal wealth.
“Today, investment money is so suspicious of the viability of any given asset that they are placing their money in an item that bears the full faith and credit of the US government - I’m referring to Treasury paper. Actually, one major worry with T-bills is a possible collapse of the dollar.
“The following are my suggestions as to where an investor might place his money.
“AIG bonds (the government has bought the preferred stock of AIG, and the bonds should rate higher). Invest with the government.
“PHK - the high-yield fund run by PIMCO - speculative, but an interesting fund that’s 60% in investment-grade bonds.
“CD’s that are backed by the FDIC up to $250,000.
“Gold (GLD or CEF) or actual gold coins if possible.”
Source: Richard Russell, Dow Theory Letters, February 3, 2009.
