Everything depends on where you are. Are you wealthy? Super wealthy? Affluent? Middle Class? or "Other"? (Let us use Morgan Stanley's definitions : Super wealthy = $30 million + net worth; wealthy = $3 million + net worth; affluent $500k - $3 million net worth; middle class $200k - $500k net worth. Ok, I took some liberties as they only define wealthy and super wealthy... since that does not describe most folks I had to throw in a few more definitions.)
You see, and I know this is just going to break some hearts... I think the problem is going to be for the Middle Class through Super Wealthy, and the wealthier you are, the harder this is going to be for you.
Let's start with the bottom of the ladder. If you are on government assistance you are in deep trouble. This includes old people utterly dependent on Social Security, folks on Disability, and Food Stamps... Good luck, and get moving making, as James H. Kuntsler is want to say, "other arrangements".
If you are already working poor, don't sweat it. Things really are not going to get that much worse for you, I hope. Worse, there is little to nothing you can do about it, speaking in the Macro sense. Food could cost more, housing could cost more, and you will make adjustments. You may not like them, but your life really won't change that much with the exception that any hope to move up the economic ladder will be in short supply. The Mad Scientist has told me some stories of his experience growing up in India - 9 people in a single room apartment, etc... Given the square footage of structures versus the population, that ain't gonna happen here. Of course in India, they do not need heat in most of the country in order to survive... I remember growing up on peanut butter and jelly sandwich lunches, spam and velveeta was a treat for breakfast with our eggs, spaghetti for dinner more often than not... and I thought we were rich. We were over crowded, but I did not know it - heck, I felt bad for my friends at school that had nobody to sleep with... they must have been very lonely, I thought...
Its all about expectations.
If you are middle class... lower your overhead and your expectations, you are about to enter the working poor. You do not have the resources to relocate, buy land, etc... so don't stress about what you don't have. Beer will still be cold, sex will still be fun, the surf will still roll in. Read Sharon Astyk's stuff on how to make adjustments where you are. The lady is a genius and can really, really turn a phrase... so at least she is pleasant to read.
Affluent? If you are at the bottom end... See middle class above. If you are a middle-class- millionaire... this is the time to reallocate your portfolio into arable land, equipment, debt free shelter, lower over head, and hard assets - from gold and silver to Oil and Ag futures. You have enough money to be a "prepper". That is, PREPARED. So this is the time to do so. If you are smart enough to have navigated the past 20 years and still managed to accumulate a million or two, then you are smart enough to buy a couple of books and put pen to paper on what is worth having and doing.
Wealthy and Super Wealthy? It is all about motivation, and lack of denial, for you folks. You have the resources, at this time, to do what needs to be done. My bet is that that will change very drastically in the near future. You folks are on the other side of the debt bomb. You "own" the bonds that nobody is going to pay on. I feel your pain, because I live on my dividends and interest. Blogging pays terribly, and the healthcare benefits are entirely psychological... I firmly believe that my dividends and interest payments are not going to be what they once were, if I may employ the use of understatement... and accordingly I have certain amount of bullion and farmland. I put my money where my mouth, or some other orifice, is.
Soooooo.......
When? When what? That's the problem. I don't know "when", exactly, and I don't know "what", exactly, and BOY would I be rich if I did! I do know that our political and financial leaders are panicked about our circumstances, I "know" our debt problem will go Ka-BOOM eventually, I "know" that Oil imports into the U.S. will cease eventually, I "know" that our banking system is insolvent, and I "know" that something else will happen, pick your "Black Swan" or boogey man, because that's the problem with Life - it is enigmatic at best. What is truly amazing is how great a run we have had in the post WWII era, but all things pass. Our system is straining on all sides; picking out the pin that pops the balloon, or gauging the rate of air flow out of said balloon is an effort in futility. The U.S. economy is very sick, and it needs to purge. The contents and volume of that purge are beyond my abilities.
No matter where you fall in the economic spectrum, I think everybody that is responsible should take a page from the Mormons. Search the web. Listen to what they have to say about preparation. Then make a decision.
11 comments:
It may be very hard to work out what your 'assets' are worth when nobody wants them!
House? Stocks? Bonds? Dollars? Futures? Bank deposits? Bullion?
Did I miss something out?
Oh well, that's a relief, there is really nothing much I can do then. Haha.
At least I am mentally prepared and relatively fit/Young.
In all seriousness, I have a decent ammount of savings, a relatively good car paid for with cash recently (6 year old Audi like new), Zero debts, but few other assets, so dont quite make it into the middle class category. ALthough, being British, Class isnt directly linked to money in my opinion, but thats beside the point.
I still have enough savings to need to secure them somehow, not quite enough for land (except in some far out place I could never get my wife to move to) but enough to put some of it into gold. The price does seem mega high right now though but I guess its all relative.
Before you all go running out to liquidate your near-zero expense Vanguard funds, and start paying 1-10% fees on some of these "alternative" investments (commodities, gold, shorting bonds, buying bonds, etc.) like I am doing, remember you're very often going to need a broker, who will take money right off the top. Does running away from a good deal at Vanguard just because an awful thing MAY happen (sure hasn't happened yet) make sense? Just keep in mind that fleeing to alternatives can be costly.
I'll also point out that the only two things that matter -- food stores and gasoline stations -- are OVERFLOWING with food and oil products/gasoline. And in a deflation, like we have now, demand drops and so do prices (they just reduced my Blockbuster membership from $30 to $20/mth for the same 3 DVDs mailed at a time). Business owners need cash to come thru the front door, and will discount accordingly.
Maybe British "OOOOOOOO" can tell us what happened to the wealthy of Europe, who pay an average 40% of their income in taxes versus American taxpayers paying an average 25%. Did the European wealthy become less wealthy when their taxes rose? I doubt it. And they got near-free health care in the bargain. :)
Moderation and calm heads, please. If you are going to "adjust," be smart about it. As Kunstler named his book, this is a LOOOOONNNNNNNGGGGGGGGG emergency." :)
oOOo:
In Pound terms, Gold ain't that expensive... IMHO.
BTW, I have a few assets... I would be happy to trade them all for your age (I am 49 and in very good shape). You'd be nuts to take it...
Donal: Assets will at some point revert to the utility value... remember "utils" from eco 101?
A house will be worth shelter. Futures will be worth something as I believe if they are not, we will be deeeeeeeeeeep into anarchy. Commodities markets do not work well without futures; no commodities markets = Armageddon.
There will always be some form of "cash", but it can easily be cut in value...
Land and Livestock are decent bets, especially if they provide for you...
And I think you do have to think of what your "assets" are worth when nobody wants them... that's why I write this blog!
Bonds? uh-oh, and I have most of my money in Treasuries...
Bur:
I disagree with your analysis of food and oil overflowing. The MS and I have spend WEEKS reading through the f&*^&&!!! USDA web site... I gotta tell you, King Solomon would have been stumped.
Ergo, I am just connecting the dots. I have been blogging since 2006... go back and read my early stuff about Lehman, Bear Stearns, Fannie Mae, housing, banking, etc... I think my analysis has at least some merit...
Lots of food and oil for sale hardly matter if it is rationed by price and it matters not if said price is rock bottom. If you aren't working, it's too much for you. The truth lies, as always, in the numbers. If we had a magic elexir fix all of the financial problems we would still be in trouble. We have more people than we need for the jobs we have to have done. Service industry jobs are not productive labor. Government jobs are not productive labor. Selling stuff made elsewhere is not productive labor.
Honestly, I dont even think about the tax, dont even count it, when negotiating salary its all about take home pay. The tax money is gone before I even see it, paid direct by my employer.
You mention relocating as too hard to worry about for the middle class, but I have lived and worked in 4 different Mainland European countries in the last 9 years and its actually easier to move when you dont have any money or assets to deal with.
My savings are in Euros, not pounds though, and GOld just hit an alltime high versus the Euro so that doesnt seems like a good time to buy, despite all of the southern European troubles.
thanks you for this column! It answers the when question I asked you the other day.
peace to all,
Shamba
My investments in Frontier Short/Long, DBA, DBC, RYAQX, TPINX, Rogers Fund, Rogers TRAKRS, 10-year bond yield savings investments, gold, silver and my house are all depending on your *$%@*&!! merit as well. :)
Well, not depending ... paralleling I mean. :)
Things can drag out a lot longer than seem possible. Take for instance France in the 18th Century...it was about 70 years between the time John Law destroyed the failing French economy with the Mississippi Bubble in 1720 and Louis and Marie paid the final price in 1793. The energy descent will most likely speed things along.
And thank you, Greg, for your very civil expression in your last post and thanks to Donal for the reminder of civility from 'old Europe' to the colonials squabbling in their culture wars.
I am not a vegan, tho that is an aspiration. I eat and use animal products, so I am merely vegetarian. I am pro choice but find abortion extremely sad and unfortunate...along with the death penalty, war, hungry uncared for children and ignorance in general.
I have had extreme good fortune in my life starting with growing up on a small working farm and having access to excellent liberal education.
Many of these benefits have come from the community. I have benefited only modestly from my own efforts compared to what I have received from the commons. Because of that, I was taught that 'giving back' is an important and good thing. Everyone is obligated to do so according to their abilities.
So just as Louis and Marie forgot their 'noblesse oblige' and had to suffer, so I fear, have many Americans. America has been given a lot...starting with the richest continent on the planet.
The Christians can go to Luke 12:48 and the pagans should think about 'what goes around comes around'
So when you're preparing for Apocalypse, it might be a good idea to put aside some for the stranger who come your way.
Cheers, Pro Choice Vegetarian
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