For a while now, I’ve been shifting some money around in my portfolio to try and ready myself for an extended bear market.  At this time last year, I was a little too heavily exposed to growth stocks.  Ever since the credit mess began to be exposed and we began seeing massive inflation due largely to soaring energy and food prices, I’ve been making some changes.

I’ve scaled back on some of my long-term positions that have done well, and I’ve been putting some of the profits into various bond funds that are ultra-steady performers that yield anywhere from 6-8%.  In what could turn into a prolonged bear market, I feel a lot more comfortable with a heavier emphasis on secure returns.

I’ve also been loading up on commodities lately, mostly silver and gold. The main purpose here is to protect against further weakening of the dollar.  I don’t have much confidence in the dollar’s future, for several reasons.  I think the outrageous inflation that we are seeing now is here to stay.  The ever-growing world population is going to have to fight for finite resources with essentially an infinite amount of paper money.  We are already seeing the effects of this in the runaway costs of energy and food, and the outlook doesn’t look promising at this point. 

I also believe that our country’s financial situation is dire indeed.  Our entire nation is indebted far beyond what is a healthy level, and it is becoming clear that the way we live is unsustainable.  In a macro scale, we owe a lot of money to a lot of countries around the world, namely China.  If the Chinese flooded us with all of dollars that they control, their value would plummet overnight.   In another scenario, the fed could use the printing press to attempt to solve our problems.  By printing more and more money to pay of our debtors and try to get us out of our financial mess, they could essentially cause severe inflation. 

I’m no economic expert, but I’m trying to protect myself against all these possibilities.  I think by taking these actions, I can better prepare my portfolio for whatever may lie ahead.

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