Holy cow, what a week!
Will the market ever stop going up? Well, if it doesn't, we need to be prepared - just like we were at the beginning of the year with our "Secret Santa Inflation Hedges" it is once again time to put a little thought into more strategies that can make us 300-1,000% gains on cash so we can make small commitments that will do a lot to protect our sidelined cash from yet another 10% drop in the dollar.
That's the stop on these trades, it is still very much my thought that the market will tank hard should the dollar recover but we already have that covered with disaster hedges against our longs - now it's time to hedge our cash against devaluing simply because we were dumb enough not to spend it. The above chart is of the indexes priced in Euros with a view of the stunning fall in the dollar as it dropped 5% in 2 months. That means the money we left on the sideline buys 5% less stuff than it did just 2 months ago - this is how FEAR of inflation drives money into equities and commodities.
Fortunately, we can stay well ahead of that. As I mentioned, our Secret Santa hedges were good for up to 1,000% in just 4 months so committing just a few percent of our cash to a hedge can keep us well ahead. On Monday I was worried that this week would go the way it did (up and up) and I suggested the GLD Jan $140/165 bull call spread at $790 (one contract) as a superior bet to physical gold ounces and the suggestion was to layer into the Jan $145/165 spread on a cross over $1,550 and here we are already.
