Tuesday, May 11, 2010

Reader Question and Fannie/Freddie Absolution

The following is a question from a reader L.T. who hails from down under, the lovely country of Australia;

"I am totally in Cash (in the bank - spread around), except for a reasonable amount of physical Gold and folding cash.

My 401K accounts are in the nearest thing I can get to cash, which is (unfortunately) Money Market accounts. It is these that I am really concerned about as I am sure these funds will break the buck sooner or later.

Do you have any ideas on what/where/how to protect the monies in 401K accounts?

I am sure many of you readers would be interested if you have some thoughts on the matter."

Well L.T.,

I love the treasury only funds whereby the underlying paper is direct federal obligation paper. You can call your plan administrator to find out particulars for your account.

I also love having individual treasury securities for your account like T-bills and the like, remember short duration are the least risky, if such a phrase exists anymore.

It sounds like you are extremely defensive which I obviously agree with. You may wish to consider some of the inverse etf's which might serve as added protection for your account. By inverse etf's you can forget the 2x or 3x ones and focus on the 1:1 short etf's like proshares EFZ, EUM, and DOG. I am not an investment advisor but a hypothetical account that had 5% of its capital invested in some of these 1:1 inverse etf's could act as insurance if the buck was broken on any of the money market funds.

Remember now that I am not a licensed investment advisor and this should not be taken as investment advice. You should consult with your own personal advisor who knows your individual circumstances.

We are in a alternate universe so it would behove one to explore all options to protect against actions those in power may execute. One must guard against the unexpected as it seems to be becoming more commonplace.

This way the rank and file passengers travelling this voyage in steerage (a la the Titanic) don't remain locked down below when tragedy strikes.

As a side note I hope some of you happened to catch Paul Kanjorski on Propaganda TV (CNBC) this morning. Pathetically defending and deflecting all criticisms directed towards the taxpayer black holes government wards Fannie Mae and Freddie Mac have become and then on cue Steve Liesman is right there to tea bag Kanjorski as only a veteran CNBC tea bagger can.

Fortunately for us we have Rick Santelli there to take this dirt bag Kanjorski and Liesman with their lies and half truths to task. Fortunately some of us are not strung out on Prozac and Zoloft and are paying attention.

Sure Kanjorski, Fannie and Freddie had absolutely nothing to do with the housing bubble. Maybe if you close your eyes and keep repeating this often enough you might actually start to believe it.

Sure Fannie and Freddie had no trouble filing their financials on time either did they? What planet do you live on Paul? I am going to cut this rant off right here and spare our devoted civil servant further insult and simply suggest that Mr. Kanjorski head back to Washington and get back on the phone to do what he does best, grovel for campaign donations.

Good speculating to you all and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit Direxion Large Cap 3X Bear ticker BGZ @ $19.34
Long 2 units Direxion Small Cap 3X Bear ticker TZA @ $12.06
Long 1 unit Direxion Emerging Mkts 3X Bear ticker EDZ @ $60.50
Long 2 units Direxion Financial 3X Bear ticker FAZ @ $19.65
Long 2 units Ultrashort Xinhua China ticker FXP @ $42.45
Long 1 unit Ultrashort Real Estate ticker SRS @ $49.10
Long 2 units Direxion Tech 3X Bear ticker TYP @ $10.52
Long 1 unit US Dollar Bull ticker UUP @ $22.52 stop @ $21.97
Long 1 unit ishares Barclays 20yr Treas ticker TLT @ 92.15 stop @ $89.68

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