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Market update from www.prudentbear.com
For the week, the Dow gained 1.9% (down 2.1% y-t-d), and the S&P500 rose 2.7% (down 2.9%). Economically-sensitive issues were strong. The Transports jumped 3.4%, increasing y-t-d gains to 17.5%. The Morgan Stanley Cyclicals surged 3.9% (up 2.0%). The Morgan Stanley Consumer index rose 2.4% (down 4.7%), and the Utilities added 1.4% (down 5.1%). The broader market enjoyed another week of strong gains. The small cap Russell 2000 gained 2.9% (down 3.2%). The S&P400 Mid-Caps rose 3.5%, putting 2008 gains at 3.0%. Technology stocks remained strong. The NASDAQ100 gained 3.6% (down 2.6%), with one-month gains of 10%. The Morgan Stanley High Tech index surged 5.3% (down 1.2%), with one-month gains of 11.4%. The Semiconductors rose 5.8% (up 3.3%); the Street.com Internet Index 3.9% (down 0.3%); and the NASDAQ Telecommunications index 5.1% (up 2.9%). The Biotechs added 0.7% (down 4.2%). The Broker/Dealers gained 2.2% (down 15.7%), while the Banks dipped 0.4% (down 8.9%). With Bullion rallying $17.60, the HUI Gold index gained 2.8% (up 6.2%).

Credits
Yes dear reader, unfortunately the bad news does not stop. That Fannie Mae and Freddy Mac are two companies I never would have invested a cent is known to some of you dear readers. A few days ago, Fannie came out with not so good news. The government sponsored mortgage buyer let us know about a multibillion dollar loss and informed us at the same time that it will cut dividends in order to raise, together with other measures, USD 6 billion in emergency capital. Shortly after Fannie it’s brother or cousin or whatever followed the same line.

Freddie posted this week a loss of USD 151 million. That is certainly much better than expected and Wall Street reacted accordingly. But dear reader, looking at the details the whole story does certainly not look that good at all. Fannie for example used an accounting standard that allows them and of course any other company too, to estimate the value of all their holdings that cannot be sold because there is actually no market for these investments. If one can decide the price according to it’s gusto and not the market, it should not be difficult to dress the whole thing nicely. Company officials said that this FAS 157 rule saved Freddie the, maybe unimportant amount of, …… I let you guess dear reader. Is your guess USD 1,3 billion? Yes it is? Congratulations you got it. That means dear reader, one can use some official accounting standards et voila a loss of more than 1,3 billion immediately turns in a loss of only a couple of millions. Nice isn’t it? Well, almost forgot to mention the fact that this particular standard is not the only one that helped them to improve their result.

Well dear reader, we know already that the Swiss Banks and the Gringo Banks had to make substantial write-downs. You certainly remember that I mentioned a few times that they will not be the only ones. A few months ago I mentioned that the Frenchies made an agreement with the government in the sense that they did not have to report the exact numbers. My understanding is that the same is true for our Spanish friends. Well dear reader now we do get bit by bit some information pieces about losses at the French banks too. The British did not want to stay behind and follow their peers doing the same.
The U.K. bank Barclays added its own level of concern to the pile today. It announced a $3.2 billion write-down and hinted that it may soon need to raise emergency capital. No one really seemed to notice,

Some more news on the following links

HSBC
http://business.timesonline.co.uk/tol/business/industry_sectors
/banking_and_finance/article3915584.ece

and Credit Agricole
http://ca.news.yahoo.com/s/afp/080513/business/france_
banking_company_creditagricole

Well dear reader some insurance companies had to face the same issues
AIG had already announced a USD 7.8 billion loss for the first quarter and has revealed plans to raise USD 12 billion in emergency capital. (These emergencies are popping up everywhere. Let’s see how long investors are willing to throw money into the game, money that so far has piled up huge losses and thus has not been invested wisely). Greenberg the former CEO and the biggest shareholder of AIG believes that the whole mess is just the beginning.

MBIA, the bond insurer, had to unveil it’s own losses of USD 2 billion. The insurer lost over USD 3.5 billion on derivative bets. At the same time they admitted that nearly a quarter of it’s asset are “level 3” and thus probably will turn into losses sometime in the future.

More about MBIA
May 13 – Financial Times (Saskia Scholtes): “MBIA, Ambac Financial and other bond insurers have suffered huge losses on complex structured securities they guaranteed known as collateralized debt obligations. CDOs package other types of debt securities, such as mortgages or corporate bonds, into a portfolio against which new bonds are issued. And in some cases, such vehicles package bonds from other CDOs in a structure known as a ‘CDO-squared.’ …MBIA has projected that 55-100% of CDOs backed by mortgage assets contained within its insured CDO-squared transactions will default, and that losses resulting from these defaults will be as high as 75 to 100%

May 14 – Bloomberg (Christine Richard and Jody Shenn): “Moody’s… said deepening losses at MBIA Inc. and Ambac Financial Group Inc. may imperil their Aaa credit ratings less than three months after affirming the top grade. The two largest bond insurers recorded a total $6.7 billion of first-quarter charges for losses on home-equity loans and collateralized debt obligations, ‘elevating existing concerns about capitalization levels relative to the Aaa benchmark,’ Moody’s said…”

Well dear reader the statement from MBIA leads me to 2 comments or thoughts. First as mentioned a few times, the amount of outstanding derivatives and especially the kind of these derivatives (most to me seem more like a casino bet on black or red) is definitely a risk of mass destruction of capital (as Warren Buffet used to describe the derivatives). The sheer amount and speculation that is going on can easily turn into a mess that nobody really likes. It can turn into a crisis never seen before. The derivative bubble is certainly more dangerous than the subprime bubble. Secondly the fact that MBIA still holds an AAA rating shows me clearly again, that one cannot trust the rating agencies at all. First they have been in the bed with parties they should not have been involved in the first place, now they have to follow given guidelines in order to try to avoid market disturbances. Again their ratings simply are not the reality. One could easily say this sucks. Why you might ask dear reader. Well in my humble opinion it is outrageous that these guys con millions of honest conservative investors who trust their ratings and therefore invest in papers they believe are save. I have no problem when speculators lose their shirt, but I truly hate to see so many people been lied to (and to see the liars walking away with out having to face serious consequences). I hate to see these honest investors, whose only goal is and was capital preservation, losing money they earned hard and with a lot of sweat. All this just because some do not do their job properly and much less honestly.
Well dear reader the message is: Do not trust the rating agencies anymore. Using common sense is most probably much better than trusting these rating agencies.

Well dear reader the examples mentioned before support my guess that the whole mess is not over yet. We still might be in the first innings.

Well the FED certainly does their part to keep the party going on. Direct Fed loans to banks using of the “discount window” rose to a daily average of $14.4 billion last week. Well dear reader this is to my knowledge an all-time high.
Well that certainly does not seem to me that we are already back on save territory.
Look’s like Jim Rogers agrees with my assessment. Following what he had to say at a conference in Singapore.
“I doubt that we're halfway through the financial crisis,” Furthermore he stated: “We certainly haven't hit the bottom…
“Most of the European banks and Asian banks haven't taken a huge write-off yet. I suspect there are more write-offs to come in Europe and Asia.”

Talking about the FED, some more comments

Before the last FED rate cut, officials of the FED whispered to reporters that they will consider a pause. Some savvy market observer commented that that sounded like an alcoholic who tells his wife he will quit drinking next weekend, after one more bender. Well dear reader, now we know that the market indeed believes what they got whispered and thus believe that the FED will pause for a while. Some people believe that the FED might not only pause but sometime in the future start to increase rates slowly. That, dear reader, to me seems more wishful thinking than reality. The same people believe that the rest of the World will do the same as the FED, namely lowering rates. Well who knows maybe it will be so. Anyway I doubt it. Why? Because unlike the FED, it seems to me that Central Bankers from other countries are a bit more serious in doing their job. So far it seems that most of the Central Banks try at least to make us believe that they fight inflation. Therefore they possibly will not lower rates but rather increase them. That means that with other words, what will happen is not what the market expects. Well dear reader that is why I love to be a contrarian. Back to the FED the same savvy observer that made the remark mentioned before, made as well the following comment

“Eight months into the FED’s most recent rate-cutting spree, the evidence is overwhelming that it has been a major policy mistake. Aggressive rate cutting – taking the fed funds rate to 2% from 5.25% last September – has had little effect on the banking crisis it was supposed to ease….

Well indeed, there is definitely no point to disagree.
Stieglitz a Nobel Laureate, mentioned a few days ago that the Fed may have used up its ammunition (title of one of my musings a few month ago). He told CNBC that the Fed will be between a rock and hard place and that we are not over worrying about credit.

Equity markets
Well dear reader, you know already my position regarding investments in equities. Yes we are actually getting through the sweet filling of the Oreo cookie, at least it seems so (thanks to the PPT). However I still believe that we are in a secular bear market and that what we actually see is only a bear market rally. What does that mean to me? Well it means that I certainly will wait with new investments in equities. It means as well that in the case I would hold substantial holdings in equity I would try to go out step by step. The rallies we see are excellent opportunities to reduce positions or to get out completely. Financials who rallied lately are certainly such an opportunity. Even Morgan Stanley told their investors recently to “sell the rally” in financial stocks and warned that the current credit crunch is only just beginning.

Some more news
May 15 – Financial Times (Bertrand Benoit and James Wilson): “Global financial markets have become ‘a monster’ that ‘must be put back in its place’, the German president has said, comparing bankers with alchemists who were responsible for ‘massive destruction of assets’. In some of the toughest comments by a leading European politician since the start of the subprime crisis, Horst Köhler - a former head of the International Monetary Fund - called for tougher regulations and the reconstruction of a ‘continental European banking culture’… ‘The complexity of financial products and the possibility to carry out huge leveraged trades with little own capital have allowed the monster to grow . . . also responsible [is] the grotesquely high compensation of individual finance managers…’ Bankers ‘have made huge mistakes’, Mr Köhler told Stern magazine

Consumer credit
Some thoughts from Peter Schiff
It should be painfully obvious that expanded consumer credit is not evidence of improvement, but simply, deterioration. Unfortunately, when it comes to understanding the economy, there is little common sense on display. By going even deeper into debt just to make ends meet, American consumers are digging themselves, and our entire economy, into an even greater economic hole and laying the foundation for the next major credit debacle. It’s fitting that just as both Treasury Secretary Paulson and JP Morgan CEO Jamie Dimon declared that the worst of the crisis has past, we are on the verge of kicking the whole thing into a much higher gear!
My guess is that many Americas continue to run up massive credit card debt because they have little intention of every paying it off. Since many who are underwater on the home loans, and behind on the auto and student loans see bankruptcy as a foregone conclusion, they see no downside to pilling on as much debt as possible while the taps remain open.
Those choking on credit card debt may also be taking cheer from the gathering government campaign to bail out over-leveraged homeowners. The sheer numbers of who are afflicted with spiraling monthly payments will make credit card relief a potent political issue for crusading Congressman and Presidential candidates. After all, there are few fundamental differences between those who borrowed too much to buy houses and those who made the same mistake with consumer goods. If the government bails out the former why not the latter? In fact, one reason some homeowners have such large mortgages is that they consolidated their credit card debts into their mortgages each time they refinanced. Why should renters be forced to pay off their credit card debts while homeowners have theirs forgiven?
Soon, as credit card delinquencies rise and losses on pools of securitized credit card debt mount, those supplying the credit will finally get wise to the fact they will never get their money back. As a result the market for such debt will dry up even more quickly than did the market for subprime mortgages. Cards will therefore be much harder to come by and will have much lower limits then they do today. Limited to only the cash in their wallets, Americans will finally be forced to dramatically curtail their spending, and the recession will finally gather serious momentum.


Fixed Income Investments
Dear reader you might remember that I mentioned a few times that I believe that long term interest rates for the USD will start to go up considerably soon. A reader who knows my opinion about this topic has sent me the following link.
http://www.kitco.com/ind/VanEeden/may122008.html
(please copy, paste and read the article)
I couldn’t agree more on what Paul van Eden describes. Although from my heart I am not really a person that likes shorting (because it is putting his money on something negative) I truly think the idea of shorting the Treasury is an excellent idea and is worth considering doing it. I might, against my feelings, invest in this idea.

Safer Than Yahoo, Much Safer Than Enron 
By Jim Rogers
One time at a party in Manhattan, I mentioned that I had been talking to various groups in the United States and Europe about investment opportunities in the commodities market. Before I could get out one more word, a woman interrupted me. "Commodities!" she exclaimed, with the kind of incredulity in her voice that Manhattanites usually reserve for people moving to Los Angeles. "But my brother invested in pork bellies and lost his shirt. And he's an economist!"

Everyone seems to have a relative who took a beating in the commodities market, and this fact (or fiction) is considered sufficient reason that no sane person would ever risk playing around with such dangerous things. That this particular victim was also a professional economist made the warning seem even more ominous. I, however, couldn't help laughing.

Billions of dollars are invested in the commodities market every day. Without the commodity futures markets, many of the things that you depend on in life, from that first cup of coffee in the morning to the aluminum in your storm door to the wool in your new suit, would be either scarce or nonexistent, and certainly more expensive.

There are several other bromides out there for why "ordinary people" should not invest in commodities, and I want to lay these myths to rest, once and for all, so that we can get on with the more interesting business of how you can begin to make some money investing in the next-generation asset class.

About That Relative of Yours Who Got Wiped Out — He was inexperienced. You can learn. Most likely, he was buying on thin margin — the minimum deposit a broker requires to take a position in a particular commodity — and when the market went against him he lost big-time.

Here's how it happens: Like stocks, commodities can be bought on margin. Unlike stocks, however, where by law you have to put up at least 50 percent of the price of the shares, the margins on commodities can be even lower than 5 percent: You can buy $100 worth of soybeans for $5. If soybeans go up to $105, you've doubled your money. Beautiful. But if soybeans go down $5, you're wiped out. Not so beautiful.

Experienced, smart speculators can make tons of money buying on margin. They also know that they can lose tons, too. But they can usually afford it. Your relative was in over his head. If he had bought $100 worth of soybeans in the same way that he can buy IBM — for $100 (or maybe even $50) — he would be happy when it goes up $5, but not wiped out when it goes down $5.

Whenever I mention commodities in public, someone always points out that we now live in a high-tech world where natural resources will never be as valuable as they were when we had a smokestack economy. But if you read your history, you'll discover that technological advances are as old as history itself: The introduction of the sleek and beautiful Yankee clipper ship dazzled the world in the mid-nineteenth century, loaded with cargo, sailing down the trade winds at 20 knots and more, averaging more than 400 miles in 24 hours and able to make it from U.S. ports around Cape Horn to Hong Kong in 80 days; within a decade, the clippers had been replaced by the steamship, no faster but not dependent on wind power; and before long the next big thing in transport had taken over, the railroad, which, of course, was the original Internet — and prices in the commodities market still went up.

In the twentieth century came electricity, the telephone, and radio (three more Internets) and then television (a fourth Internet). There was also the automobile, the airplane, the semiconductor — and in the midst of all of these truly revolutionary technological breakthroughs came periodic, multiyear commodity bull markets.

When the supply and demand in raw materials is seriously out of whack, the emergence of new technology will not necessarily restore the balance quickly. To be sure, changes in technology, for example, have made the economy less dependent on oil. But we still use plenty of it, and whenever there isn't enough, prices will rise. Computers or robots may do amazing things, but they cannot find oil or copper where there is none or make sugar, cotton, coffee, or livestock grow faster than nature allows. We can put in orders all day long on our computers for lead, but all that Internet technology will be in vain if there are no new lead mines. Technology can neither feed us nor keep us warm, and the demand for commodities will never disappear.

Tell me again about all those Cisco shares you owned back in 2000. Or JDS Uniphase, or Global Crossing? So many risky stocks made the turning of the new millennium a not-so-happy time for many, who watched their portfolios evaporate.
If you do your homework and remain rational and responsible, you can invest in commodities with perhaps less risk than playing the stock market. Let me point out something that you might not have realized: There has been more volatility in the NASDAQ in recent years than in any commodities index. Cisco, Yahoo! and even Microsoft have been much more volatile than soybeans, sugar, or metals. Compared with the risk record of most tech stocks, commodities look safe enough to be part of any organization's "widows and orphans fund."

And let me remind you of one more important difference between commodities and stocks: Commodities cannot go to zero, while shares in Enron can (and did).

More on commodities
Natural Gas.
Well dear reader natural gas has broken out of its down drift and since a few weeks is moving up nicely and steadily.
Well dear reader North America and Europe are becoming increasingly desperate in their search for new natural gas deposits. More competition is in the books. This can lead to an excellent investment opportunity which might already be going on. Why? Well because although Spring normally is the time when natural gas prices drop as heating demand eases and air conditioners are not yet in use, this year it has been different. Unlike past years, natural gas in fact has spiked during the traditional soft period. Is that the start from of the bull market I have expected some time? Maybe. Maybe it is time to build a position in Natural gas. I certainly will hold on with my position and will add to it in case we would have a correction.

Oil
Oil holds well above the 120 USD per barrell. There are some corrections however to me it seems that we will move toward the 150 USD per barrell soon. I hold my positions and will increase in the case of major corrections.

Gold
Following a remark from Ned Schmidt
Market participants have convinced themselves that the U.S. dollar's bear market should pause. That pause, while they trade paper oil, has contributed to Gold's correction. But a nation's money is really no more than a claim on the net assets, or equity, of a country. As past and present policy errors at the Federal Reserve continue to push the value of U.S.'s equity ever lower, dollar's bear market will renew. $1,500+ Gold is not a dream, but rather it seems a policy goal of the Federal Reserve.
Following some links with info about gold

http://www.youtube.com/watch?v=k7DHz6O1xPo

http://www.youtube.com/watch?v=mb_6pruXOU0

http://www.youtube.com/watch?v=PBw56tE-0gw

Well dear reader Gold and Silver seem to have bottomed. Gold in the 840 range and Silver at 15.80. Gold already broke through a strong resistance of 888.30 and Silver will follow soon. My guess is that we will see Gold prices move above the USD 1,000 quickly. We might see from there a correction back to 950. However I expect to see a price well above USD 1,200 per ounce by the end of the year. Silver could possibly be close to 25 USD per ounce. Maybe it is the time to HURRY UP and increase positions or to buy if you do not hold a position yet. I will change my conservative gold positions into a more agressive (leveraged position).

Agricultural commodities
Dear reader the following piece written by Niels Jensen is excellent. Although there are some items I do not agree, I would say it covers almost entirely what I believe. Please read
http://www.safehaven.com/showarticle.cfm?id=10253&pv=1

General Information
Some more reading I invite you to.
This time Ambrose Evans-Pritchard with his excellent information pieces

http://www.telegraph.co.uk/money/main.jhtml?xml
=/money/2008/05/14/bcnoecd.xml

and
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/12/ccambrose112.xml

Statistics from the Orwellian ministry of fantasy
Well dear reader as usual a substantial number of statistics were made public over the past days. John Williams as always gave it’s subscribers the real picture. Following one of his comments;

Adjusted to pre-Clinton (1990) methodology, annual CPI growth held at 7.3% in April, while the SGS-Alternate Consumer Inflation Measure, which reverses gimmicked changes to official CPI reporting methodologies back to 1980, was roughly 11.5%, versus 11.6% in March. The alternate numbers are not adjusted for any near-term manipulations of the data.
Well dear reader the ruthless way the department of fantasy delivers their statistics is so out of touch with reality that not only John Williams with his profound research is aware of but more and more market observers too. On of those mentioned a few days earlier the following.

The Orwellians (my form to say it) created a GDP Price Index of only 2.6% while 3% was expected. This absurdity boosted GDP 0.4 percentage points more than expected.

How many analysts or pundits protested or noted that the US government inflation gauge for Q1, at 2.6% is unrealistic because even the hokey CPI is +4% y/y? If the BEA used 4% inflation instead of the absurd 2.6% Price Index, GDP would be negative 0.8% - and this would still greatly overstated ‘real’ GDP.

Well dear reader according to John Williams calculations, the real GDP in fact has been negative for quite some years now. Welcome to the real world.

Well dear reader in my last musing I informed you that I would like to start with some provoking comments regarding business in general terms.

Of course I am very well aware that you, my dear readers have been and are very successful business people yourselves. So it might be a bit farfetched that somebody without your track record comes up with some food for though. On one side having gone successfully through 2 start ups and on the other side believing that out of the box ideas should always be listen to and in many cases are even worth to muse about, made me think that I should go ahead with my intended exercise.
As mentioned all your comments and remarks or ideas are more than welcomed.
So what are my thoughts?

Please take note that the order of my thoughts has nothing to do with the importance.

1. Credit crisis. The credit crisis does not only mean that there will be strong losses due to bad credits, it means as well that banks are already and will be a lot more restrictive with their credit policy and therefore will lend out a lot less. That means that it will be more difficult and more expensive to get credits. So how do you get needed funds? Would you provide your company with funds from your own savings? Maybe it makes sense but maybe not. It certainly would make sense if you feel that without putting your money into the company the company would get broke within a short time. Furthermore it makes sense if you have excess savings. What do I mean with excess savings? With excess savings I mean all the funds you would not need to keep up your live style in case your direct investments in the operating companies would get bust. However, I would never use ALL my bankable assets to invest in operating companies. At the same time I would certainly not put my savings into a company that already shows nice revenues. Of course dear reader, I do perfectly well understand that there are always exceptions. However I truly believe that holding cash is of up most importance and therefore I would use my savings only if there is no other way. What do I want to say with these remarks? I want to say that maybe at this point in time, injecting money into an operating company is not such a good idea. Let the company go out to the market and get their funds itself. It does, in my opinion not matter if cost will be higher than getting funds from their shareholder(s), which might be you my dear reader. An excellent company does not need your funds in order to have a funding at lower cost. Of course it might seem to be a great business opportunity for both, the company and the shareholder if the company get cheap funds from the shareholder. Why, well the company can lower costs and the shareholder might get a bit more than he gets on normal time deposit investments. Again, that is OK if we talk about excess savings. But if that is not the case the good deal might end up not that good sometime in the future. This of course is based on my clear opinion that we will have to navigate through some though times and that we are still at the beginning of Kontratieff cycle (dear reader if you have joined the group of readers lately and did not have the chance to read the information I posted about Kontratieff cycle, I recommend to go back to my post with the respective title and read it)

2. Consumption. Well dear reader it really looks like the consumption of any luxury items (well in fact any item that is not a must consume item) will slow down considerably. As prices for the needed items, such as food, energy and so on are constantly going up, there will be less money to spend on items that are not a must. That means to me, as a pseudo entrepreneur, that I have to be very careful if I would own a company that produces any goods that are not needed for survival. Why? Because my company most probably will sell less in the not so far future. That would mean to me that I have to evaluate very well any new investment in new machines or infrastructure. If the investment has to be done so that the company can survive long-term, I might do the investments. If not I certainly would wait. How about not investing and loosing market share? Well again it depends. Why? Well it might be that your competitor is spending loads of money and because of doing so might get broke. If that is the case you can even win market share without investing. Well in fact you still will have liquid funds while your competitor might be out of business. So what do I want to say with the before mentioned? It might be the time to add some more risk factors to any evaluation regarding new investments.

3. Sell an existing business: Well dear reader I do know that this is always a very difficult decision. Why? Because normally there is the heart involved. In many cases you are the person who has built up the company from scratch. Letting go your baby will be hard no doubt. However, and again, if you are owner of a company that mainly sells items that are not needed, evaluating a possible sell is not necessarily that bad an idea. As long as consumers do spend and thus your earnings are great you should be able to find a willing buyer. However when consumption slows down and your sales and net earnings too, finding a willing buyer will be more difficult. By the way selling is not always a bad thing. There are many entrepreneurs who sold their babies when the markets were excellent and bought their previous companies back at bargains sometime later. Due to dramatically changed market conditions the buyers did lose money and were not anymore interested in holding alive the company. In most cases they were happy with the possibility to sell back to the precious owner although at bargain prices. Of course for all having sold at excellent prices and having had the chance to buy the company back for almost nothing it has been a great business.

4. Worsening economic situation in many countries. Well dear reader the countries where the economic situation is worsening are basically the countries that did well before. As they did well they were of course immigration targets. Now as the situations changes the immigrants are possibly the first ones to feel the heat. That means they might loose their jobs. If they are able to keep the jobs they will have to face the fact that they have to spend more for food, energy and services anyway. That means that there will be fewer funds to be send back home to their families. A slow down of the “remesas” has been felt in several countries already. That means dear reader, that although you do not live in a country that has to face difficulties (US, Spain etc) you possibly will feel it as well due to less money sent from the immigrants. As less money is coming in there will be less money to be spent on the product your company is producing. Once again, to me it seems important to know if you produce something that is a must consumer item or not.

5. Holding cash is important. Yes dear reader, I believe that it is an excellent idea to hold cash. However I would not hold this cash in USD or any other FIAT currency, but I would hold the majority in the only true currency that is not a liability of anybody, namely Gold or to a lesser extend Silver. For normal cash flows I would hold some of the FIAT currencies.

6. Housing: There seem to be many housing bubbles. The bubble of the US is not the only one. Therefore please be careful.

7. Commercial Real Estate: Check if your holdings are safe. Will the company or person that pays the rent be one of the survivors of a severe market downturn? If they will be out of business soon your rental income will not flow in as usual. Well dear reader holding a long term rental contract might not be of help in such a situation. Shall one sell such a property? Maybe yes, maybe no. However I think one should at least muse about it. As for any investment, past performance is no guarantee for future performance, meaning that past stable income streams in the form of rental is not guaranteed to be stable for all the time.

Some more thoughts will follow soon