John, it is not really sending scared money our way as you suggest and we are not getting richer for it either. The dollar strengthening like it did in conjunction with a major asset sell-off means investors all over the world are in a flight to cash (in this case USD) and that is decidedly deflationary.

Dollar strength is not the same as wealth coming home because you need to realize the dollar is a globally traded currency. It is not therefore a local instrument except by virtue of the fact you take your salary in that money.

We all just got a lot poorer.

What we saw last week was an incredibly deflationary event. Cash rose in buying power significantly and assets of all other classes, including every single commodity, declined. You would therefore be well advised to take profits as quickly as possible in whatever you own because money itself just became the one and only thing that can keep you afloat.

The term “raise cash” has never been so urgent since the Global Financial Crisis in my opinion but even then you remain at risk. There is a distinct possibility that we will see major bank failures in Europe, Asia, and North America fairly simultaneously and another serious financial event will occur before this year is out.

So even cash is not safe if you have it in the wrong place!

And God love all the folks living on credit or mired deeply in debt when this massive credit screw gets tightened. They are all going up in smoke together with no salvation other than what generosity the government hands out because I also think unemployment is about to rocket ahead as an outcome of what transpires in the financial markets.

You bet, Mario. For every circumstance and situation there seems to be something on offer to hedge risk but of course many instruments are completely unknown to most. Few people truly expect the unexpected either and so don’t want to spin their wheels buying things to defend against events that cannot be predicted with accuracy.

I actually had a nasty shudder last week when it first dawned on me just how much damage could transpire in a single day. I should say “potential” carnage to be more precise because the real impact was more psychological than real.

You know how Rick is often talking about the “Mother of all selloffs” that nobody will escape from intact? Some people doubt him when he talks like that because it is just assumed by most there will always be enough time and an opportunity to take evasive action…….but maybe he is right and we could see a complete market meltdown in our faces and be helpless to do anything about it.

So anyway, I was watching my screens and absolutely everything went RED last week including bonds and I thought “Holy Mackerel”, this edifice really could all come down so fast that it would leave almost no exit for anyone but those who bet against the market in advance.

What we saw was a near epic move in breadth changes across the globe even though it was not severe in depth. I was a little stunned because I knew in one second flat that everyone was trying to raise cash and get into dollars all at once.

But what might happen if we see a continuation Monday morning? Obviously everyone cannot sell assets simultaneously. This is what happens when you have Bots and Algos running the system though. A rush for the exits can indeed happen that could create the circumstances for a plunge into a deflationary abyss almost literally overnight.

Think for a second what it really means when everything from gold to corn to Rupees and even municipals are forsaken in an environment of no bids and meanwhile the whole lot are trying to park cash in dollars which drive the buck up like a rocket.

Well that in a nutshell is what just happened.

I don’t know about anyone else but I had the very faint glimpse of panic selling even though I knew it was machines at the helm. It is because people write the code though that makes it dangerous and it is the assumptions written into the programs that are pumping out the sell orders.

So just like the last big gold decline where selling begat selling that triggered stop losses, in this case we were able to get a glimpse of how that same drama might play out across the entire commodity sector and end up including…..well…pretty much everything on the planet!

And who knows……maybe that will be the outcome as the vast global interventions in all markets finally give way to a combination of machine speed and human fears. You can be sure the weaker banks would collapse within weeks on the tail of an event like that.

Very few of them have enough reserves to cope with a real market meltdown in todays world anyway. We are truly living in a very unstable situation financially and perhaps what struck me most was just how vulnerable we really are when virtually no safe harbor could be found for those few hours when the markets decided to sell it all.

I took some physical cash out of the bank as a precaution. What else was there to do?