Here are the latest news items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. And it bears mention that most of these items are from the “tangibles heavy” contrarian perspective of SurvivalBlog’s Founder and Senior Editor, JWR. Today, I’m taking an unusual traverse from the normally-posted fodder to instead post a reminder about my tangibles investing philosophy, and how it drives me to write this column three days a week:
A Reiteration of My Tangibles Investing Philosophy
My readers and consulting clients often ask me why I so strongly emphasize tangibles. This because I consider tangibles a mitigation for risks to the U.S. Dollar as a currency unit. Like all other fiat currencies, the Dollar is doomed. It has lost 98% of it purchasing power since the establishment of the Federal Reserve in 1913. The government benefits from price inflation because it is a hidden, indirect form of taxation.
Of course other countries are playing the same game with fiat Funny Money. The Forex market is a fanciful game of “My trash is better than your trash.” The ups and downs in the Forex are just extrapolations of the monetary policies of the various nations. Those that inflate without a corresponding growth in their economy and exports see the foreign exchange value of their currencies decline. All of the fiat currencies are on downhill slopes. The only difference is the relative pitch of the slopes, for each. Thus, the myth of “strong” versus “weak ” currencies has developed. There are NO truly strong fiat currencies. The fiats are all weak, albeit some of them are weaker than others. The only genuine strength is in precious metals and other barterable tangibles.
The gradual erosion of the Dollar can be offset by properly storing carefully-selected tangibles. Just look through the archives of the past few years of this column, for details on various tangible investments. In the age of inflation, it is wise to have more than half of your net worth in tangibles. The house you live in should of course be your main tangible investment. Beyond that, there is wisdom in diversity: Productive farm land, silver, gold, platinum, hand tools, guns, ammunition, fine wristwatches, and even classic cars are all viable options. What they have in common is that they are denominated in themselves–not in some artifice of a currency digit. Those digits will all inevitably decline in real terms, and some will dramatically go “poof.” But the well-guarded contents of my gun and coin vaults will never go “poof.”
The Federal Reserve banking cartel and the U.S. Treasury have conspired to have a very loose monetary policy, ever since the dot.com bubble burst, back in 2000. So we’ve thusfar had 19 years of charades, artificially low interest rates, and Quantitative Easing prestidigitation. I believe that the inflationary chickens will soon come home to roost.
In mass inflation, your best shelter will be in tangibles. The formula for success as a tangibles investor in essence: Buy low, sell high, and then replace them with other tangibles that are depressed at the time, but that are likely to see similar gains. Lather, rinse, repeat. Yes, there are lots of other investments, and many of these can outpace inflation. But you core holdings should always be tangible ones.
Tangibles are the raison d’être for penning this column, week in and week out. Granted, other investments interest me, but none of them run so close to the core of my psyche. To me, all of those paper-based investments, and the new purely conceptual investments (such as cryptocureencies) seem downright laughable in comparison to tangibles. If I cannot lay my hands on it, then it cannot be depended upon–especially when the Schumer hits the fan.
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I definitely agree with your philosophy. There are certain things that will always be trade marks for value. In about 1930, 3 eggs could be traded for a postage stamp. My mother in law said that if they needed to mail a letter, they took the letter and 3 eggs to the mail box and the mail man would take the eggs home to his wife and buy a stamp out of his own pocket, since he had money from working a government job. Today, 3 eggs are still worth about 1 stamp. A suit of clothes is still worth about what it was back then. A pair of quality shoes. The numbers have changed, but the value is about the same.
If you get your mind off of money and onto what you need, you can gain it without money. The rural area where we live has always been willing to “wheel and deal”. That is some of why Mississippi is considered the poorest state. We stretch our dollar the furthest. We very often will swap for what we need. I say that with pride.
Excellent points, Rose. And, in Tennessee as well, the “trade” sometimes denoted with “straight across” is in full use here.
“…some artifice of a currency digit” – Man, that’s priceless right there. Heh.
“…Quantitative Easing prestidigitation” Prestidigitation? Yes, and transmogrification, even.
“The house you live in should of course be your main tangible investment.” – Yes, yes, a thousand times YES and from the rooftops YES! If you have debt on your home get this paid off completely NOW. Take a second job to do it. Every extra dollar should go toward the principle on the mortgage. Get full tilt on this. Get your spouse on board and get intense together about this. Borrower is servant to the lender. Don’t be caught as a slave when your notes are called. Proverbs 22:7.
Gold is a store of value to hold until the other side of a crisis. That’s why other tangibles are important. Nobody in Venezuela is trading silver coins to buy their neighbors dog to eat. Guns/ammo/preps/etc. are important too as JWR points out.
I am with you, Fred. I bought this little home from the bank in 2013 and have been debt-free ever since. Letting go of my car and its attendant expenses allowed me to pay off this sweet stucco house and never look back.
The yard is full of edibles, with more to be planted soon. Each plant adds to my wealth. This time of year, I eat virtually free.
Carry on
I once read an article about the post WW2 economy in Japan.
The author stated that gold was virtually worthless. People were selling their jewelry for next to nothing. The best portable wealth was bar soap, cigarettes and chocolate bars.
I suspect similar things would happen today. In a functional but high inflation economy, precious metals and perhaps big high end luxury items (paintings, rugs, good art work, etc.) are likely good hedges. In a non-functional economy I believe those items will become close to worthless and basic necessities and simple luxuries (more like small treats) will become quite valuable.
I do not believe cars or antiques are good investments on the whole anymore. It could of course change with a whim but the younger generation just does not appear as interested in old things as prior generations. The very high end stuff seems to retain value but the stuff most common people could afford are devaluing rather fast. Depression glass and moderate antique furniture can be had for a song. I have read this stated by antique dealers and I have observed this watching car auctions on TV and talking to hot rodders I know. That 60s vintage Camaro is valuable right now to the 50-60 year old and above crowd because that was cool when they were young. It does not do much for many in the 30 and below crowd. Increasing numbers of them do not even care about cars at all. There are of course exceptions but I feel that is the current trend.
Trends can of course reverse and perhaps at some future date young people will become interested again much like when the back to nature/farm/old school everything interest surged in the 70s and 80s when for instance old barn wood suddenly became valuable. I currently observe a limited interest developing among young people in blacksmithing/armor making/weapon making/primitive metal work associated with fantasy literature and movies. I see some limited interest in small scale agriculture. But it is unclear to me if this is any kind of a broad trend or not.
JWR for those of us not around productive farmland,what are your thoughts on cash-flowing rental properties?
Buying rentals (to rent out, and eventually re-sell) only makes sense ins RISING real estate market. We are presently in the wrong phase of the real estate market cycle for that. (Prices peaked, and are now going through a correction.) So I recommend that you WAIT until the bottom, and then start buying rentals.
Pay cash. No debt. That happened to a lot to wheeler dealer types on ’08, they got caught millions in debt on levered rentals and flips.
I agree with being tangible heavy with investments. But should also consider cryptos. The world is going to need something to transact in, and if all the fiat keeps going downhill that’s the solution. Kind of hard to ship 100M of gold overseas to settle a transaction but can do 100M of bitcoin within a few minutes.
Medicines and antibiotics are perishable, however their shelf life is far greater than generally understood. Dr. Alton in his books, both Alton’s Antibiotic and Infectious Diseases, and the 600+ page Survival Medicine Hand Book, explain that chemical compounds in dry form, medicines of various types, have been found to be stable and remain 90%+ potent for decades. If looking to diversify, medicines, medical supplies and instruments, these could worth more than their weight in gold, especially if it is family that needs them. Techniques for the long term storage of antibiotics is also possible and discussed.
With war, famine and all the rest headed our way, cholera, Guardia, and the long list imported diseases inbound with hordes of illegals, antibiotics should be high on our list. As there are few hard core survivalist-patriots with a long term plan for survival. Keeping these highly motivated and trained individuals functioning at their full capacity, will be critically important to the survival of families and groups. Sadly many are ill prepared to handle even relatively simple injuries and infections that become not only debilitating, but quickly life threatening. Silver is sexier, but medicine can save lives.
BTW, as an old car-guy, I also see that collectible cars would not be as good store of wealth as other forms of tangibles.
vacuum seal those meds if possible for prolonged storage life
Re: Medicines
SOG said: vacuum seal those meds if possible for prolonged storage life
And find a dry, cool, and dark place, as well as reducing the exposure to oxygen and moisture with additional packaging that would likely improve the self life. Those additional layers of protection can also help insure the investment will survive, austere and changing environments. Sealed in mylar in the original containers, in a ammo can, or paint can, and stored in a 5 gallon bucket would not be excessive in my book. Freezing chemical compounds runs the risk of changing the compound from it’s original and intended form. What is the ideal temperature? I surmise from the literature that around 40F would be good enough. Not too hot, and not to cold that freezing might occur if unmonitored. Root cellar conditions, low stable temperatures are good, but as some root cellars lack, low humidity is a must, hence additional package with at least mylar is great idea. Ya never know where it might have to go…. And a buyer might be impressed with the care taken.
TB is digging in….
I have heard many stories of gold being worthless, but I have never seen a single documented case. Certainly possible in isolated areas of poor people.
I do not expect gold to ever be widely used as money or barter, because most people are poor to start and have few if any useful skills. Even when gold was in circulation, it was not widely used by common people.
I clearly remember my great uncle showing me (over and over) his tiny hoard of one dollar gold coins. I have certainly benefited by knowing real value from perceived value.
Antiques and collectibles is a knowledge game. There is no shortage of collectors with deep pockets, for truly rare and desirable small antiques. At the same time, most of the junk people collected over the last fifty years is falling out of favor. Just like gold, it is for people with the knowledge and wealth to understand the market.
No one questions the value of good land as an asset, but it is nothing more than vacant land until someone has the knowledge, time, and resources to put it into production. It takes more than an empty belly and happy thoughts.
Like it or not, it is wealth that build this country and rebuilt it after our wars and depressions. Ditto for the future.
JWR Do REIT’s “qualify” as a ‘tangible’, as they are an investment vehicle where, as I understand it, someone else “manages” the physical properties that are owed by the Trust, using our investment money moneys??
Technically, no. Whenever you are investing in paper with land as an underlying asset, the land itself is the tangible, and the mortgage is the first layer of abstraction, and then the REIT is the second layer of abstraction. And there are even REIT funds, which are a third layer.
But a REIT sure beats an unsecured loan!