If The Future’s So Bright How Come I Don’t Need Shades?
been the tradition. It would be wise to prepare for shortages. Given that this is a consumer driven, credit driven economy, impairment of these two engines will have far reaching consequences in the manufacturing of goods, the production of food, and the pricing of both. I’m not suggesting that the flow of food and goods will stop. I am suggesting that it would be foolish of us, given all that was noted above, not to take precautions. It wouldn’t take actual shortages to propel folks into the stores to clean out the shelves. All it would take would be a perception that shortages may occur. Think about the rice shortage scare in 2008. Or the ammunition shortage in 2009. So now might be a really good time to stock up on food, medicine, expendables, etc. You might want to do that now, before everyone else does. Enough said? It’s all about perception you know.
How about personal finances? You of course need to rely on your licensed financial planner, but here are some strategies my research has uncovered that seem to make sense. Think in terms of the cost of money going up dramatically. Any interest rate sensitive holdings one has should be examined carefully. One would certainly do well to insure they are free of any kind of floating rate loans such as an ARM mortgage and/or floating credit card rates. Regarding investments, it’s a very, very tricky marketplace out there right now, and it’s difficult to know the best place to invest one’s money. Certainly any sort of longer term bond investment is highly suspect. Market volatility will become more pronounced as the market continually updates its perception of which version of x-flation is next, with the stock market possibly moving sideways or heading down after the current temporary uptrend runs its course (only a hyper-inflation of the currency could likely negate this statement). Remember, it’s a depression, not a recession. Many companies will be making less money, and the price of their stock will ultimately reflect that.
For the time being, a triad of cash, short term US Treasury Bills, and bullion might just be the safest places to store wealth. The cliché “cash is king” is likely to remain true unless and until we get extreme inflation (the Consumer Price Index has recently gone negative). Why? Because fewer and fewer people have cash these days. Therefore its purchasing power is mostly holding or even gaining in certain areas. Until that trend reverses, cash is a good thing. Short term Treasury Bills (not longer term T-Notes & T-Bonds) are the next best thing to cold hard cash, and may be safer than your bank. It’s now easy to directly purchase T-Bills here. And of course gold and silver coins are still a cornerstone for weathering this storm. Precious metals are a reasonable store of value in both inflationary and deflationary environments. And if you invest in gold and silver you will be in good company.
The caveat of the aforementioned safety triple play –cash, T-Bills, and gold/silver– is that even these conservative investments are subject to risk. It might surprise you to know that the greatest risk is not from the gyrations of the free market, but rather the capricious nature of the government. Although the future is indeed unpredictable, there is one eventuality that I would bet every last dime I own on. In fact, I would give you odds. It’s that the government will exercise its formidable and ever growing power to keep things ‘orderly’. In the future you can expect some very broad interpretations of the phrase “for the good of the country” as government intrudes further and further into the free market. Such intervention is the greatest uncertainty! For example, recent government sponsored changes in the way financial institutions report their earnings allow the banks to conceal massive losses. The banks are not anywhere near as solvent as they look. The next round of bubbles collapsing could easily trigger a government sponsored bank ‘holiday’ to forestall a stampede of customers attempting to redeem their accounts. Such a closure might affect not only banks, but also brokerages, and perhaps even a temporary freezing of Treasury accounts. This is why I am also suggesting ‘cash’. Not money in the bank…cash in hand. Regarding gold, the risk here is that private ownership could be made illegal again if the government gets the idea that returning to a gold standard might restore economic stability (which is why I like the idea of holding both gold and silver). Likewise, the US dollar could suddenly be devalued in order to mitigate the national debt, making all dollars suddenly worth less. We just don’t know what our government may do to ‘protect’ us, which is why one must be diversified. The best investment at this point in history might well be an investment in