The world financial system today is in enormous trouble. Greece is just the tip of the iceberg. Next: Italy, Ireland, Portugal and Spain (not necessarily in that order). The Greek train wreck will be the first domino to fall in what will become a worldwide crisis that has the potential to make 2008 look like the common cold when compared to the Ebola virus. Time to cover your asses, dudes.
I didn’t want to give investment advice but Charlie talked me into it. You might as well get it here if you aren’t going to get it somewhere else. I imagine that many of our readers are not much into the heavy duty reading required for dealing with financial and economic blogs, but Charlie and I personally find Zero Hedge to be immensely entertaining, educational and often filled with practical advice. The regular mainstream “investment advisers”? They don’t give a shit about you unless you’re worth millions and even then they’ve been known to fuck over some of their best clients. Like when Goldman Sold a bunch of shitty CDO’s and MBS’s to their clients and then secretly bet against them making a fortune. You are just a sucker for these people, “slow and steady, invest in mutual funds mirroring the broad market” advice will be particularly disastrous for you when the world market tanks thanks to the unbelievably dishonest, greedy, scumbag behavior of the big bankers who run today’s financial markets. Those asshats at Goldman Sachs are not on your side. They’re not on America’s side. They are on their own side and that’s all. You need to protect your assets from them before it’s too late and you end up like the dudes down in Greece. So, how do you do it? Let’s get started.
I hope you took the time to read my article “Now is the time to move abroad” as well as most or all of the supplementary recommended reading. Nevertheless, assuming you did none of that the first thing you need to understand is that all of the world’s largest economies (Read: US, EU, Japan, etc.) are run by the equivalent of retarded children with Fisher Price printing presses and an unlimited supply of ink and paper. The whole world is printing money like crazy and is currently engaged in a race to the bottom in terms of currency value. The money that they are printing is known as “fiat currency” – what this means in plain English is “dirty paper backed by nothing”. The only thing that separates Monopoly money from Dollars, Euros or Yen is the word of the government or to put it another way “because they say so”.
All of this is clouded and convoluted by complicated economic jargon which really just describes very simple concepts such as “quantitative easing” which actually means “printing money” or “fiscal stimulus” which means “spending money” (or even more accurately “wasting money” or “throwing good money after bad”). Baudelaire once wrote, “The greatest trick the devil ever pulled was convincing the world he didn’t exist.” I find that quote very analogous to the greatest trick today’s scumbag bankers, politicians, economists and academics have pulled… namely that they have convinced the general populace that economics is a field too difficult for the common man to understand and that it is best left to PhD eggheads who know how to properly utilize fancy yet misleading language. Furthermore they have also convinced the common man that the economics of a country is vastly different from that of an individual or a corporation. It’s not. Only through the use of fiat currency is “the man behind the curtain” able to create the illusion, for a finite period of time, that a country (or shall we say a sovereign state) obeys a different set of economic laws than an individual or a corporation. It is nothing more than a trick, something like the slight of hand a magician uses to make you believe that he can make objects disappear. Unfortunately for the scum bags and anyone else who isn’t in the know, the game will be up soon, and it could be up a lot sooner than you imagine.
The economic magic trick of fiat money always ends in disaster, usually a hyper-inflationary disaster. There are tens of examples of hyperinflation even in just the last 30 years. One of them comes from Bulgaria where I sit at the moment writing this article. Most people are of the opinion that “This can’t happen here, this is [insert powerful, respectable Western country].” But they can’t really verbalize an even remotely logical argument why it can’t. Most people seem blind to the fact that hyperinflation is a relatively common occurrence in the modern world. Quite simply it is the result of printing too much money too quickly. You need only to take a look around you to recognize that many of the worlds largest economies, especially the United States are: 1.) effectively bankrupt, 2.) printing money like fucking crazy, and 3.) taking on additional debt at an alarming rate and/or monetizing their debt. The few that are still solvent, such as Germany, are hurling themselves toward insolvency at breakneck speed by trying to bail out all the losers. Bail outs and “fiscal stimulus” do not work, they only kick the proverbial can down the road.
All of this is really quite simple if you just break it down into simple examples and analogies using layman’s terms. Let me give you some examples:
1.) If I gave everyone in your town $1,000,000 tomorrow, would you expect many of the prices around town to suddenly rise? Of course you would. Wouldn’t you expect the same to happen when the US Government pumps $2+ trillion into the economy as a whole?
2.) Assume you are unemployed and completely broke. Can you resolve your problems by “stimulating” yourself by building an addition on your home or purchasing a fancy new sports car? Of course not! What do you think is happening when the US attempts to solve the problems of high unemployment, a slow economy and a terminally bankrupt federal government by spending more money it doesn’t have to “create jobs”. Will that work? NO! Just as you cannot spend your way out of debt neither can a government, a government can only create that illusion for a period of time because a government has a printing press. The government has only two sources of income, extorting money from its citizens through direct taxation… or printing money and stealing it via an inflation tax. When they can’t tax directly anymore they tax with the printing press. This charade inevitably ends in hyperinflation and/or a government default.
3.) Your town has hit hard times and your local government has decided to help the little guy by enacting price controls (watch out, that’s coming next, governments always try to fix their inflationary fuckups with price controls). Let’s say that they decide it would be better for everyone if a 2 liter of Coke cost only 99 cents instead of $1.99. However, the government, in its infinite wisdom, is continuing to print money because that is the only option left for paying their debts. This pushes the inflationary price spiral to ever growing heights. Of course the citizens of your town will be delighted at the new low price of their cola, however what will happen when the grocer runs out of stock and tries to reorder? His local Coke sales rep will tell him to go fuck himself because at this point it actually costs $2.39 just to make a bottle. You guessed it – shortages come next!
As I’ve said before nothing is a complicated. Unless you are a complete retard, you should be able to understand the basic concepts of even the most complicated topics. I don’t care if you’re talking about nuclear physics – if a so called expert can not get the basic idea across in layman’s terms they either don’t know what they’re talking about or they are bullshitting. Few fields are more chock full of bullshit than finance and economics today.
If you’re still with me let’s get on to the investment advice portion of this article. It is still true that nobody can predict the future, but absent a radical shift in the current trend it is quite obvious what you should invest in.
1.) Precious metals, especially gold: Precious metals have been used as real, sound money pretty much since the beginning of civilization. Gold is particularly good because it is very valuable per unit of weight and volume making it easily portable Also, being a noble metal, it will never corrode or otherwise degrade in any way.
2.) Agricultural commodities: The world needs to eat, hyper-inflationary crisis or not. If you have food, you (or at least your assets) will be in demand.
3.) Base commodities: We hope that we aren’t going to be living in a Mad Max type world in the near future and as long as that doesn’t happen people will still be building things. To build you need the basic commodities and energy: iron, steel, copper, oil, gas, coal, uranium (for better or for worse I don’t think nuclear is going away any time soon), etc.
4.) Dividend bearing commodity producing stocks in resource rich countries (Canada, Asutralia and Norway are good examples): It depends on your appetite for risk whether or not you want to play in this category. However, all else being equal, the stock of a company that produces a given commodity moves in the same direction as the price commodity but much more significantly. If you want an example watch what happens to the price of junior gold mining stocks (some of the most volatile) in response to changes in the price of gold and you’ll get the idea.
5.) Currencies: Generally I would rather hold hard assets than any currency but that isn’t practical. Everybody needs money to spend for day to day expenses (at least for the moment). You will need to keep some amount of money in your local currency. But other than that there are four currencies which I think are safer than the EUR and the USD: Norwegian Kroner (NOK), Canadian Dollar (CAD), Australian Dollar (AUD) and the Swiss Franc (CHF). The first three because these countries are backed by valuable natural resources, the Swiss Franc simply because the Swiss are slightly more responsible with their Fisher Price printing press than most of the others.
6.) Property / Real Estate: For the most part I’m against real estate as an investment at this time. Overall I think real estate is just going to get cheaper and cheaper. Sure some places it wont but you’re going to need a crystal ball to know where. The reason the vast majority of real estate has nowhere to go but down is that, contrary to popular belief, a roof over your head is not a necessity in the way that most westerners think it is. If you’ve ever traveled to poorer countries you will be shocked and amazed by how many people can live together in harmony in a tiny space. For a western example think about a frat house… 30 or 40 people living in a converted single family home (albeit it a large one). When the value of your dollar is evaporating into thin air by the minute you are not going to be thinking about buying a house or paying rent. You are going to be shacking up with buddies and looking to trade a bite of the bread you have for a sip of the wine they might have or whatever. You might even be camping out. Hell, there are already tent cities in the US. Anyway, there is one case where I would advocate real estate purchase right now: If you are relatively well off, you have the rest of your ship in order and the purchase will help you to establish a second permanent residency or passport. Then and only then would I say go for it. But don’t buy your place in a populace area. I’m talking about a mountain cabin or something. Some place where you can chop wood to heat the place and kill small animals for food just in case the shit really hits the fan. It may or may not get that bad but it is certainly possible given the way things are going. This is a cheap hedge, for example in Bulgaria you can buy a house in a village somewhere in the mountains for $5,000 – $10,000. At any rate, today’s real estate markets are buyer’s markets so make sure you negotiate hard and get a really good deal from a desperate seller.
The advice given above is about as solid as I think you can get given the current circumstances. There are a few things you need to be aware of though. Depending on how much shit hits how many fans how hard, the stock and commodity exchanges could all collapse. You need to keep a vigilant eye and take your investments out of the markets and put it in physical precious metals if and when the time comes. Make sure when you buy gold and other precious metals you take physical delivery. I can’t stress this enough. A paper investment in gold, like an ETF or any kind of certificate is nothing more than a promise from the same scheisters (Read: scumbag piece of shit Wall St. bankers that got us into this mess in the first place) that they have your gold in a vault somewhere and will give it to you when you need it. No thanks. Take that gold physical and hide it in your mattress, put it in a safety deposit box, stash it abroad, bury it in the backyard or whatever. And don’t forget, the US Government made it illegal to own gold once before – nothing says it can’t happen again.
As I said above the only thing that would invalidate my advice is a major, major change in the current trend. It will be really easy to spot. It would involve things like President Obama (or whoever might be POTUS at the time) going on TV and saying things like “My fellow Americans, The United States of America is bankrupt. We have made many mistakes in the past and now we must pay for them. We will all need to accept drastically reduced standards of living, longer working hours and generally one of the hardest and most painful eras in American history.” But come on, we all know that isn’t going to happen. They are just going to print some more money, it is so much easier than facing reality. Like a junky offered just one more hit, they will not refuse it. They will continue to print because, just like getting high again instead of facing the withdrawal, that is the easy way out.
I know this is lengthy and serious article which is definitely not in the tone nor the subject matter typical for SingleDudeTravel.com yet I think it is important for Single Dudes everywhere. I want to leave you with a few final thoughts because should you choose to adopt a similar mindset and investment strategy to mine you will be confronted by naysayers. You will be accused of being crazy, stupid and wearing a tin foil hat. You will also probably told that the investments I have advised above are bubbles. They’re not. It might be a bumpy ride but the rise in prices in these investments is driven by money printing and the resultant inflation, not wild speculation. How can you tell when you’re nearing the end of a bubble? Just look to past bubbles like the dot.com mania and the housing bubble. Remember when maids and janitors were turning into overnight millionaires because they bought $1000 of AOL stock? That’s a bubble. How many janitors do you know that are gold or commodities millionaires. Remember the housing bubble? Remember when that Mexican fruit picker that couldn’t speak English and earned $14 an hour got a $750,000 mortgage in California (props to anyone that can send in the link to that article, couldn’t find it)? That’s a bubble! Until your taxi driver, your barber and the guy at work that is always the last one to get the memo are all trying to pitch gold investments to you at the same time don’t worry about bubbles. Any drops in price are a buying opportunities absent the above stated major shifts in US and world economic policy. One last way you can tell gold is still a safe buy, at least relative to the dollar: Compare what an ounce of gold could buy you over the last hundred years versus a dollar. As they say an ounce will always buy you a nice suit and it’s still true. That’s not all, the same amount of gold that would buy you the first* Model T way back when will buy you a Corvette today. And with that I rest my case.
Disclaimer: I am not a professional, I’m not a licensed broker and I own all of the shit I listed above. This article is for entertainment. Fuck you regulators, where were you when Goldman Sucks was blowing up the world? I hope you die.
*Clarification specifically for GoldBug.