The main point is that the US has no way out of its deficit spending and federal debt load - the interest payments on the debt will become too great, thus, the liabilities will grow in such a way that the only solution is for the dollar to be devalued even further (it fell 8% in 2010). What does devalued really mean? In a nutshell: your savings will be worth less because the prices of goods and services will become much much higher in the future (see my post below on "The Frog"). Stansberry suggests we can take action to protect ourselves from such events by doing some or all of the following:
-Own physical gold (buy a gold coin or buy stock in PHYS)
-Own physical silver (buy a silver coin or buy stock in PSLV)
-Have access to a rural place (call Aunt Ida on the farm and tell her you have dibs on the extra bedroom)
-Own money in a foreign currency outside the US (this is trickier)
-Own stored food in your basement (twinkies can withstand nuclear holocaust)
-Own land
I want to focus on the last one for a second. Land. Maybe Lenny and George from Of Mice and Men had the right idea? I recently contacted a land broker because I am curious about the idea of owning land as a hedge to the aforementioned travesty that some the doomsayers are predicting. The investment properties of owning land appear to be multifaceted. First, if real assets appreciate (real assets meaning things you can touch, live on, or drop on your foot and they hurt) due to inflation, then the value of the land should rise. Second, if you are growing crops on this land and the prices of those crops rise, you stand to gain by selling those crops to the people without land (this can also be achieved by leasing parts of the land to farmers). Third, you can eat the food grown on the land so the "personal survival" box is checked as well. If you think about alternative investments, few cover all of these bases. Sure you can buy food with gold and silver but what happens when you eat all your food and spend all of your gold? Land appears to be the better hedge.
Rather than go out and borrow money to buy a massive tract of land, I think the idea of a land collective makes total sense - pool a group of people together to buy a piece of land. There really is power in numbers here. If you ever NEED this land (and I say this because clearly we all see that the grocery stores are still fully functional and our money still works), you have a group of people that will be farming it with you and protecting it with you. I will take it a step further. You want land that has access to freshwater. You need water to grow food no? If you live in Michigan you are in a great position because you are surrounded by the equivalent of a fresh water ocean.
I am not saying commit your entire life savings to an idea like this but why not spend 5% of it on a share of farmland that is within 2-3 hours drive from your house. This should not break the bank. Others are jumping on the land grab as well. George Bush just bought 100k acres in South America. John Malone (telecom magnate) bought an $83million piece of land in New Mexico at around $300/acre. Bill Gates bought a 500 acre ranch in Wyoming. Of course these are not small purchases and they have the luxury of private jet escape pods to get them to wherever they need to go, but you can see that the "smart" money is involved in this.
I am curious what people think about this topic. It is seldom talked about and is clearly not as sexy as investing in AAPL or some high yield bond fund. But if you were to commit some of the money going into your IRA or 401k (which the government may have some influence on in the near future) to something like this, I think you get closer to whatever a "well rounded investment portfolio" should look like. If anyone is interested in exploring some kind of land collective/partnership/mutual fund, please let me know. We already have a few people on board. Something to ponder for 2011.
am picturing that terrible movie we saw with the armagedon and that kid with his dad traveling "south". what's the good in owning land then? IF things get to that point, i dont think owning a piece of land in the US is a good idea - it would be nearly impossible to defend it - you'd have hungry cannibal zombies attacking you left and right. i think going somewhere EXTREMELY remote would make more sense and try to detach yourself from that scenario in the US..... but what area would be safe if the US gets that way... not sure there would be many.
ReplyDeleteI couldn’t listen to the whole thing (Stansberry), but its difficult to just believe and start adjusting for that way of life. I suppose you can’t kick yourself after the fact if you are well-prepared and have listened to people like him. To be informed is the first step. I don’t know dude. Too much to think about. I have larger immediate issues that need to be addressed before I can entertain something like this. That wasn’t negative, just the truth. Not many people are well-off like him and many other Americans such as your self that are financially trained to combat Stansberry’s “inevitable.” Americans, who are particularly married have obligations that they need to fulfill before considering something the one-hasn’t happened yet, two-have no information about, and three-probably don’t trust because it is not all over the media.
ReplyDeleteI like all this info you pass on. I think to at least be in the “know” is better than not, but at the same time the bigger picture is that “America is too big and too great to let anything bad happen to it that would threaten our current free-way of living.” I suppose it’s a bit naïve, but we are The United States of America and that’s been the attitude forever. Maybe it’s the exact recipe for disaster.