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Dear Bill,

How are you? The blog has been really great lately. I've been off doing my Greek military service, so I've been out of the loop. Unfortunately, my timing couldn't be worse with the dollar going down. I was wondering if you had any suggestions on how I could hedge myself against the euro. Of course I fully understand all disclaimers about investment advice, but I would really love to know your opinion since I fear I'm going to take a beating on the dollar/euro exchange. Maybe I should just move to the Bahamas... ;)

Thanks for the help and for the excellent blog. I thought of you often while I was doing my military service and the importance of speaking truth to power. Not so easy in the military or on Wall Street. Thanks for being an important example in a world that lately looks FUBAR.

Have a great weekend.
Dean

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As a 16-year old I tried the Canadian armed services militia for a summer. It was only for a few weeks, and my true objective was to figure out whether I would bend or break under strict discipline.

It didn't go well.

Although I was told my aptitude testing scored very highly on mathematics, they didn't put me into military intelligence service like code breaking or anything. I ended up with a heavy rifle, heavy boots and a heavy uniform. And we did a lot of heavy marching.

I brought with me to the parade square something that I ought to have left in the barracks " chewing gum. And I was caught chewing it while on parade.

Subsequently, I was ordered to stick that gum on the end of my nose, and the entire troop was ordered to raise their (heavy) rifles over their heads in full arm extension and to shout my name repeatedly as we had to run at full pace around a quarter mile track. I got the message.

I am a free thinker. Thank goodness there is no conscription into the armed services of Canada. I would not have been the most ideal candidate.

But I did stick it out that summer (punny and not so punny) because I am no quitter, and I did learn a ton, including the grossest language. And I shudder to think how proud my parents were that I had even chosen to do such a thing.

I think anybody who has ever spent time in a strict chain of command has cause to question some of those commands, but we obey them because those are the circumstances.

Circumstances in free markets today are such that ‘borrow and spend' has gone overboard, and the world is afloat in paper money seeking an economic return.

But the two people in the world who have the most money (and by definition the most opportunities and research and management resources) have each decided that things are too FUBAR to sensibly put that money at risk.

Yes, Bill Gates and Warren Buffett have decided that holding cash is the prudent thing to do until the world gets its act together.

My reader Dean also has concerns. He agrees that the Euro (and the GBP) is starting to strengthen, which means that rate increases are unlikely in Europe, and he wants to position himself accordingly.

He has no further to look than a silver bullet. The bullet thing he ought to understand. Silver has been rallying, and some people are saying that it has had its day. I disagree. In fact I think that ultimately the $SILVER index is going to run to $18 or higher.

First the speculative demand for precious metals is unabated. Traders continue to buy the dips. Money supply in the world is continuing to grow. The $USD index has broken down. Today the SLV starts to trade as an ETF, which means that the metal has been securitized, which will attract many new buyers.

In the next few years, the G-20 will figure out how to rebalance currencies to effectively optimize global trade, and then you'll see the industrial demand for silver really take off. Shrewd traders get in early.

I'd think that Dean and others ought to do well in silver for several months at least, and probably several years if they manage their positions effectively.

Rather than just holding the SLV, the big gains will be made in the silver miners who are bringing new production on stream.

And perhaps the wisest play of all is with Silver Wheaton (AMEX: SLW), which holds royalty interests in many silver miners.

Just remember that the more things are FUBAR or Foobar, the better off you will be long SLV and SLW. But to be practical, there will also be times when things change for the better economically, and broad equity market prices (stocks and bonds) will out-perform.

30-Minute Data Interactive chart of the silver complex:
Silver & Other Precious Metals

Daily Data Interactive chart of the silver complex:
Silver & Other Precious Metals

Weekly Data Interactive chart of the silver complex:
Silver & Other Precious Metals