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It’s clear now that a global bank run is starting

The closest parallel to what’s unraveling now is the 1998 Asian currency crisis, culminating in Russian default and the collapse of Long Term Capital.  This is probably a multiple of 3-10 x worse than this as it could end with the collapse of the euro currency, several sovereign defaults.  It’s really hard to play anything here from the long side.  We have spent the last several days lightening up on perfectly healthy companies with high dividend yields and increasing our short exposure.

You would think that gold would act as a buffer against the massive amount of money printing ahead but it isn’t right now.  It’s acting just like another risk asset.  That will change, eventually.  Gold’s had a good run this year and we would be looking to buy near $1500 or sooner.

For now, the right word is not content, but resigned to add to our short bets  when markets rally and trim them as they fall and pick at great bargains on the way down.  This is not fun because you never know when a scud missile from Europe lands.

It’s hard to say when this will end, but I’ve got the filling it could be with a bang and not a whimper.  When the pain threshold reaches the point of global meltdown, let’s hope the leaders of the world arrange some massive infusion into the IMF to support the European nations as they deleverage in a more orderly way.

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