Reality Bats Last
I’m quoting here from Don Surber’s morning update of the news. It’s not a news story, though. It’s a missive he received from a reader. Look, I’m not competent to say much of anything about our economic mess—still less about investing—but I know a mess when I see one. However, for people of a certain age—about my age—what Don’s reader says should really hit home. It stirs up the gut feeling that what can’t continue ultimately won’t. There’s always a reckoning. In the end this time won’t be different, because reality bats last:
ITEM 8: Reality bats last. Stocks are tanking and bonds died a long time ago.
A reader wrote, "I was in the investment business for 45 years. I remember the 10-year Treasury bond yielding 14.30% (1982). What we have today are ignorant and stupid fools trying to guess which lump of sugar the fly will land on. Most of them probably have MBAs. What to do with money? I am clueless. I own some resource stocks and some pipelines -- for yield. And a lot of depreciating CASH.
:We are painted into so many corners now. As Chevalier sang: I'm glad I'm not young anymore.
"Thanks to 'education' most people under 50 are too dumb to worry. They will learn."
I remember 7% (or more) CDs in the 1980s. My last statement from the bank included 9 cents interest and a $9 fee for existing. This is why I put most of my money in the stock market.
What happens when it tanks?
Count on it, Don is hardly the only one in this situation. True, those 1982 yields weren’t a sign of economic health, but then today’s situation isn’t healthy, either.
Great topic, mark. One we all need to study up on because it affects us all at a survival level. I read charles hugh smith, Catherine Austin Fitts, Brandon Smith at Alt-market.us, and the sampling of zero hedge. James Howard Kunstler too.
My take based on all tje different sources and competing ideas is that you have to decide what scenario is the most threatening to your situation *and* is most likely to actually happen. So, for example, i don't waste resources preparing for world ending scenarios that are possible but unlikely, ie, EMP, nuclear war, etc... And by same token, i dont worry too much about swings in the market that don't pose a big threat to me.
So what is a likely threat worth preparing for? As far as i can figure it is a wholesale collapse of the dollar and some variation of Argentina, Venzuela, and Great Depression. The twist here is the idea of the Central Bank Digital Currency that will attempt to digitize all transactions in a totalitarian control system. This is on the drawing board right now and imho is a matter of when not if. How do you prepare for that??
Best i can come up so far is 2 strategies: 1) get local. If you don't live somewhere with sufficient local food sources (farming, dairy, cattle, fishing), youre in need of relocation asap. Be prepared to grow at least a few basic crops to supplement your food supply and serve as barter. Potatoes are my personal choice. Develop relationships w neighbors now to figure out food and basic needs. 2) Stock up on real money and items that can be traded for food and necessities. This would be junk silver, some gold coins, cheap gold jewelry (read Ferfal and his tips on surviving the Argentina collapse...great practical advice).It also means ammunition which will always be in demand and tradable especially common calibers. Do not invest in gold or other metals that you don't have in your personal possession. If you dont control it now, it will likely be gone in the kind of crisis where you'll need it. In a digital currency environment, people won't take your paper dollars but i guarantee they will take silver, gold, or ammo, at least locally. Again, the perspective is a collapse of the economy where people are panicked and desperate. If we're merely seeing higher inflation and a stock market crash but otherwise no currency disruption, no banking closures, then fine. We prepare for what can't be survived on our normal existing template.
Assume that your 401k will be appropriated by the feds. Assume your bank accounts will be frozen and then converted by the feds into digital currency at a rate favorable to the feds. We have to assume that the nice, comfy retirement fueled by retirement plans and pensions and savings isn't going to be there. We may have to rethink living in extended families to pool resources and manpower etc...
Again, we would all much prefer that we weren't living in these desperate times. Frodo said the same thing. Too bad. Denial is for victims and slaves. Bad look. We placed our faith in all the wrong people for the last 80 years. We can continue doing that and see how it works out now. Personally, in my 50s, my job now is to prepare so i can help my kids and their kids to survive. If I'm wrong then great! I'll happily find something to do with the excess gear and coin.
Welcome to the decades of the TINA (There Is No Alternative) trade. To stay long the market for the past twenty years you had to accept that the Fed was going to do whatever it needed to do to prop up the asset markets--and to blindly trust the Fed Chair "Put." You had to ignore that given virtually every market metric said that the long term returns were going to be flat--and that the odds of a 50-60% repricing of the markets was likely. After 30 year careers, we could not afford to take that kind of risk with our retirement assets.
So, for the last three years of my working life, I also took position trades on the Russell 2000 futures market out of a self-directed IRA account. After watching the insane market manipulation during those years--we went to 100% cash except for a trading account. The markets were clearly not normal. While nearly every penny of our 401k / IRA savings for our 30 year working careers sat in cash, I day traded to make "interest" on our crappy Vanguard money market accounts. I never risked more than 1% of my account value on any given trade and was happy to make several thousand a month. After nine years, the trading bots destroyed my method and profitability, with slippage taxing both sides of every trade until I was wasting my time.
What does any sane person do with their investments now? Get completely out of debt. Move to a red state. Live off your income only. Could you recover from another 2000-2002 market crash? 2008-2009? There is no good answer anymore. Investing for growth right now is picking up nickels in front of the steamroller.