No, it is not like the Zimmerman Telegram.
Dad used to get the Kiplinger Letter, a weekly business and economic forecasting periodical for people in management. It was started in 1920 by a former AP economics reporter and is still around today as a closely held company managed for more than eight decades by three generations of the Kiplinger family. It came to the house on Hawthorne Street in Birmingham, MI, in a plain manila folder written in bullet format. It gave all sorts of tips for the small investor, and he used to plan his financial strategy, which as I recall was to “buy high” and wait for a while and then “sell low.”
He thought it was important, and I tried to read it without much effect. Dad even encouraged me to own a share of stock so that I would have some skin in the stock market and follow how things worked. The Kiplinger Letter recommended Continental Airlines stock, which he dutifully purchased for my twelfth birthday.
It zoomed to the heights- from thirty bucks to a hundred and twenty and then tripled, so that I suddenly had not one but three shares in the young airline. And then it collapsed and I had less than what Dad had started with.
That is pretty much the way I have handled my finances. Two key tips to security are obvious, so I will give them away free: pick your parents carefully. If you are married, stay that way.
Like Dad, I wasn’t very astute about those, but what can you say?
Unlike most other publishers, Kiplinger answers the queries of its readers as a regular feature of their subscriptions, filling requests for additional information on any subject its publications covers, by phone, mail or email. I am no broker, nor do I have any particular insight into the market, except to know that it is rigged, that the smart guys are playing with House money, and we are all going to get screwed when the artificial bubbles in real estate, stocks and bonds burst.
Those facts appear to be things that economists and market analysts across the political spectrum acknowledge, although the Keynesians insist that everything is fine, just relax and go with the flow.
My fellow middle class taxpaying citizens, many confronting retirement, are naturally suspicious. Since we know what is going to happen, we ought to prepare to cope with it. In honor of the traditions of the Kiplinger Letter, I will share what some of our readers think about how to get ready.
Mountain House says:
Vic, I have a lot of money in both stocks and bonds. Right now they’re doing great. If we hit the brick wall or slide into the ditch most or all of that money – something like a half mill- is gone. But absent more specific warning there isn’t much I can sensibly do. I’m diversified but I’m not safe. Absent knowledge of when the government bubble will pop (and what desperate measures they’ll take when that happens), here is all we can think of:
– hold some precious metals as a sort of insurance policy against currency collapse/inflation
– keep some money in cash and out of the banks
– consider keeping some money outside of the country in a foreign currency (in Canada?)
– have a full set of household stuff, replacing things that are old and on their last legs
– store basic supplies
– minimize your debt, recurring bills and tax exposure
There will be nothing you can do about your holdings in stocks and bonds (again, absent unambiguous warning).
“Unambiguous warning” is what we used to consider justification for going to a higher DEFCON and get ready to move nuclear weapons around. I will be looking for something unambiguous out there for sure- I mean where we are going is not the question, it is rather when we are going to get there.
My Coon-ass Cajun advisor contributed this:
Ever hear of a “707 account?” 707 stands for article 707 of the IRS code which authorizes these accounts. Most of the past Presidents of the last 105 years have had such an account. Many members of Congress have them and most of the big shots on Wall Street don’t invest in their own mutual funds but pack savings away in a 707.
I’m still trying to figure out exactly how they work and how you open one. I’m told you can actually start one for about $300. It is illegal for the organizations that offer these accounts to advertise them. They have consistently paid 5 to 9 % tax-free. There is no penalty for withdrawal at any time. No transactions are reportable to the IRS. If you know anything share it and I’ll do likewise as I learn more. They say these accounts are where the rich store the bulk of their wealth.
If anyone has a line on what this device may be, please let us know. The Canjun and I are also looking for large Bridges to purchase.
My associate gumshoe Marlow lit up a fine Cuban cigar and puffed pensively. In his view:
“The middle and lower middle classes (with their BS affordable care that they can’t afford) will bear the brunt of this slow gathering shit storm. The pols and talking heads will play the blame game, collect their pensions & book royalties, and sit on their board seats, while clucking away in the media.
The really smart guys in the money/currency markets for several months have started taking inexpensive intermediate term hedges just in case.
I had been fully invested in stock markets via value-oriented stocks and mutual funds since 1977. In 2007, I took more than 2/3’s of my gains out of emerging markets, small caps, etc, and redeployed the funds in large and middle cap value funds, high yield bond funds, etc.
This summer I have been thinking the unthinkable – going safe. With a cash stash and W’s ~60-70K in gold/silver under the bed, a soon to be paid off mortgage, my SS, mil and VA pensions, the SO’s business throwing off cash till she sells, we will likely dollar cost average her cash into the markets over several years until things become much clearer.
I may rearrange 50% of my 401K/IRA stuff into safer holdings in the next month or so. Better safe than sorry despite my staying fully invested in the markets through the last four crises (1987, S&L, dot.com, housing).
This time is very different. This worldwide (US, Asia, Europe)money printing bubble makes me uneasy. The markets look artificially inflated, so I may forgo a 10% uptick as a risk premium for a unexpected plunge (after which there will be quality buying opportunities).
Cash (say 5% of your net worth), a paid off mortgage, and 5% of your net worth in precious metals seem like prudent hedges.
Specifically look at energy stocks like Nextera, CVX & XOM, certain drug companies, and other S&P A quality stocks and diversified value mutual funds for the rest.
I may dump all my bond funds this fall or sooner if the idiots close the government, despite their returns after QE4ever’s extension yesterday.
If we don’t commence a better glide path to a soft economic worldwide landing, given the growing potential for an exogenous adverse event in Asia SE or SW, I may go even safer on hedges.
We are full time residents in an Idiocracy.”
I had to sigh over that one, since it appears to be the most factual assessment of the situation. We are in a speeding car and the driver isn’t paying much attention to where we are going at such great speed.
Damn. If only I had been better about picking parents. Oh well. The best advice came from one of my older friends, an academic who actually teaches economics:
“Vic. Dump stocks and get out of the Market now. Invest only in Guns and Ammo and canned food and Vodka and bottled water. And Slim Jims.”
Copyright 2013 Vic Socotra
www.vicsocotra.com
Twitter: @jayare303