Why Your Mattress Could Be a Better Bet than Stocks in the Months Ahead

FRANKFURT - The markets suffered a heart attack in late 2008 and an arrhythmia has reappeared. If the blood stops flowing again, then US dollars put under your mattress will gain in value as equity markets and commodities get poleaxed by deflation. Expect the debate of deflation versus inflation to return because debt is hungrier than ever and leverage will be forced to unwind once again. World leaders are already holding crisis talks after the global market bloodbath on Thursday, with China and Japan calling for global cooperation to find a solution. Problem is, the route taken by world leaders and central banks around the globe after the blow up in 2008 have led us to where we are today. Late last evening, I was talking to an American wealth manager who said that we were indeed in a liquidity crisis. "There will be no liquidity till the end of the month," he said, "and then a little break, followed by another drop in liquidity until October." He bases his forecast on his studies of the behavior of the euro and the US dollar. Another liquidity trap could send the markets crashing lower similar to what happened in late 2008 through early April 2009, when the S&P 500 hit the intraday low of the 666. An investor who cashed out early in 2008 was able to buy the world in April 2009. This is what an investor has to weigh now. Cash could once again be king. Do you get out of the market and save your US dollars that will gain value, or do you stay in stocks because we are still in a bull market? And yes, even gold got crushed in 2008. There's something else to think about if you are a gold bug. A hat tip to FDRALLOVERAGAIN, who named a skyrocketing dollar Cashzilla. If Cashzilla has returned, investors beware. ACTION ITEMS:

Bullish:
Traders who believe that this is only a blip and we are still in a bull market, might want to consider the following trades:

• SPDR S&P 500 SPY

• For leverage, try Rydex 2x S&P 500 ETF RSU which seeks to replicate twice (200%) the daily performance of the S&P 500 Index

Bearish:
Traders who believe Cashzilla is on the loose may consider these alternate positions:

• ProShares Ultra Short Dow 30 DXD, which seeks to correspond to twice (200%) the inverse of the daily performance of the Dow Jones Industrial Average Index

• Investors wishing to go long the U.S. dollar can buy PowerShares DB USD Index Bullish UUP

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