In the current environment we are all being forced to take more risks than most of us are confortable with. I try to mitigate that by holding a good portion of cash for when these forced take downs create opportunities. I have also addopted a part investor part trader mentality. This is what helps me to cope with the increased volitility. I am sure others have adapted other strategies.

A famous trader once said, "cash is a position." You can see this clearly in the case of Greece. It's all one currency, but people are pulling their Euros out of Greek banks and putting them in German banks, so what we call "cash" is not only relative to what it will buy, but to where it is held.

That's why you don't see the dollar collapse that so many are predicting. As the global reserve currency, people flee TO the dollar, not AWAY from it when things go sideways. Same principle applies to currencies with strong balance sheets and/or good resource bases such as Canada and Australia. That said, in a general collapse you should own some gold, preferably in fungible form such as eagles or maple leafs, but again, there's really no guarrantee they won't be taken from you, one way or another. The hoards of Roman coins people keep finding speaks to that. Those Romans had every intention of reclaiming their gold at some point, but that occasion just never arrived. Is that what we're facing today? Who knows? The future is always uncertain so all you can do is protect yourself as best you can.

As for strategies, I've taken the same approach Naseem Taleb recommends. Keep the bulk of your savings as safe as possible, and take larger risks with the lesser part you invest. The idea is to get greater returns with less overall risk, but active management is essential. Buy and hold just doesn't cut it any more, so as Casey points out, you have to adopt a trader mentality. Now I don't know any trader that puts all his capital at risk. The first rule of trading is don't lose money, so you need the discipline of getting out when your bet goes wrong. No doubling down, no hesitation or rationalization, just get out, book the loss and move on. That's the best advice I've ever received - Your first loss is your best loss - and I got it from Cramer, of all people!

ebear