Category: Economics & Investing

Letter Re: The Pension Gamble: Cash In or Stand Pat?

Dear JWR and SurvivalBlog Faithful: Here is a dilemma that I may encounter soon and one that other Survivalblog readers may face as well. I work for the state (which is in dire fiscal condition) and face a possible layoff later this year. When and if this layoff occurs, I will have the opportunity to cash out my pension fund, which after penalties and taxes, would amount to about $50,000—a tidy sum indeed considering I have no other savings except for 4-1?2 ounces of gold and several hundred dollars (face value) in silver coins (thanks to SurvivalBlog’s admonitions and a …


The U.S. Stock Market: “Eject!, Buckaroo, Eject!”

The massive injections of liquidity from the Federal Reserve for the past five+ years–created by artificially low interest rates–have clearly come to an end. Cheap credit “fixes” are no longer available, and the credit junkie is going to experience withdrawal symptoms. Recently, news of the sub-prime debacle and teetering derivatives hedge funds have registered with investors–at least at the institutional level. Collectively, they have come to the realization that the party’s over. So it was no surprise that Wall Street prices declined 4.23 percent last week. I predict that this is just the beginning of a major bear market cycle …


Letter Re: Going Into Debt to Purchase a Retreat Property?

Jim, I read your blog nearly every day and benefit from it greatly. I am sending by “snail mail” my Ten Cent Challenge. Thanks for a great site. My wife and I both are 55 years old and have been “survivalists” for about 10 years. We have been able to create a preparedness larder of 8-to-12 months of food, water and other necessary supplies. For self-defense, we have several shotguns, two AR-15s, two SKSes, a .22 [rimfire] rifle and one handgun – plus several thousand rounds of ammo for each. We hope to take some of the Front Sight courses …


Letter Re: With Inflation Ahead, Why Be Debt Free?

Jim, I was wondering, as perhaps some other readers are, why you advocate paying off your fixed rate mortgage in preparation for inflationary bad times ahead. It would seem that, short of Zimbabwe-style economic collapse, leaving your money in investments that more or less track inflation, and using those increasingly deflated dollars to pay off a fixed rate, constant dollar mortgage that will become increasingly cheaper with time, is to your benefit (and very much not to the bank’s). What am I missing? Regards, – Lou P JWR Replies: I advocate being debt free for several reasons. The first and …


Consumer Credit in America: Winding Up The Big “No Joy” Buzzer

I recently read a piece in The New York Times, (linked at SHTF Daily) titled Somehow the Spending Doesn’t Stop. The author made some astute observations on consumer spending. But he didn’t go on to analyze some underlying phenomena. I have observed that here was a subtle yet profound shift in the psychology of indebtedness that took place in the late 1990 and early Aughts: Somehow the average American gradually stopped thinking about the total amount that he owes his creditors, and instead started focusing on his minimum monthly payment. Consequently, consumer spending soared. For more than a decade, Americans …


You Can Catch More Flies With Honey Than Vinegar, by Adam in Ohio

I started my preparedness journey a few years before Y2K. A friend of mine opened my eyes and both of our families have been adding to our preparations ever since. Unfortunately, looking back over the last 10 year, I have not been able to convince one more person to become better prepared. I am obviously not happy with the results so I have decided this year I will try something different. I think where I went wrong is being too open about my preparedness journey. I would become very excited about some new aspect of preparedness that I had discovered …


CDO PIK: Satisfaction Guaranteed or Double Your Trash Back

When I attended the U.S. Army Northern Warfare School back in 1980, I was amused to see that all of the trash dumpsters at Fort Greeley, Alaska were stenciled with “Satisfaction Guaranteed or Double Your Trash Back”. I was reminded of this slogan the other day when I was doing some reading about the unfolding derivatives fiasco. I’ll get back to the quip about trash near the end of this blog entry. Let me start with some background: Just like in the traditional bond world, with Collateralized Debt Obligations (CDOs) it is always the holder of the highest rated (“senior”) …


Press Awareness Increases on the Nascent Real Estate Market Collapse and Credit Implosion

In the past few days, I’ve had readers forward me links to several very disturbing articles on the declining real estate market and what appears to be the opening stages of a full blown global credit implosion. First, I read this: Mutually Assured Mayhem: Wall Street is on edge, scrambling to buck up Bear Stearns and avert a domino-effect debacle. Then came this very telling piece: Bear Stearns Meets Possums in Georgia as Foreclosures Increase. The key quote in the article: “No lender wants to own real estate, but at the same time you can’t just unload these properties because …


Letter Re: Why Gold and Silver Investing? Will They Have Utility for Barter?

Hello Rawles Family, First off let me say thanks for all the work y’all have put into sharing the knowledge you have. It has opened many eyes and caused may to be saved in the event something really does happen, I’m sure. I have recently started preparing for several types of emergencies and one of them is the collapse of the American dollar. I have seen several times that you suggest pre-1965 [silver] coins, and gold coins. They are a good item to have in this situations but I continually find myself asking “Why?”. My position on this is, people …


Letter Re: The BIS Issues a Global Economic Depression Warning, Points to China as Potential Trigger

James: UK’s Daily Telegraph has a warning from Bank of International Settlements (BIS) about danger of global economic depression. [JWR Adds: This was also featured by NewsMax in the US.] Here are some excerpts from the Daily Telegraph article: [begin quote] “The Bank for International Settlements [BIS], the world’s most prestigious financial body, has warned that years of loose monetary policy has fueled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood… …The BIS said China may have repeated the disastrous errors made by Japan in the 1980s when Tokyo let rip …


Prudent Precious Metals Investing: Its All in the Timing

You may have noticed that on Tuesday the spot price of gold fell to a three-month low, and silver fell to a six-month low. Rather than shaking my confidence in the metals, I look at this as a buying opportunity. I am still fully confident that the metals are in a primary bull market cycle that is likely to extend for another decade. It is difficult to “time” investing in fluctuating markets, especially the metals, which tend to be volatile. However, there is a time-honored tradition of buying on dips. Tuesday’s sell-off represents a big dip in what is an …


The Bear Stearns Bears–The Near Collapse of Two Real Estate Hedge Funds Sends Economic Shock Waves Around the World

Last week’s big economic news was that two Bear Stearns hedge funds worth $20 billion are teetering near collapse. These two Collateralized Debt Obligation (CDO) funds–ironically named the “Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund” and the “High Grade Structured Credit Strategies Fund”–are in trouble because of their heavy exposure to sub-prime mortgages. A well-publicized rescue plan involving Merrill Lynch fell apart. At one point Merrill Lynch–one of Bear’s credit backers–said that they planned to seize about $850 million worth of collateral assets from Bear Stearns and sell them on the open market. Reuters reported Bear Stearns injected …


Two Letters Re: U.S. Treasury Bonds

James Wesley: I recently inherited several U.S. Savings Bonds, Series EE. Do you recommend that I keep them, or cash them in so I can get better prepared? (We only have about two months of storage food here at our house.) How do I find out if the bonds are still earning interest, and what they are currently worth? Thank you, – C.C. JWR Replies: You are right about recognizing priorities. You can’t eat bonds. If the bonds have fully matured, then by all means cash them in. You can check of the status of most bonds at the Treasury …


Letter Re: Request for Investing Advice from a U.S. Reader

Mr. Rawles: I’ve seen you mention precious metals, and silver in particular, pretty often in your blog. I’m new at this. What is your guidance on a safe (conservative) way to invest? What percentage in precious metals? Thanks, – TZK in Central Kentucky JWR Replies: I recommend that SurvivalBlog readers should put at least 25% of their portfolios into gold, silver, and barter goods, and roughly 50% into productive farm ground–a retreat to occupy year-round–in a lightly populated region that is well-removed major metropolitan areas. The exact ratio of investments will vary, depending on your age, indebtedness, risk aversion, and …


Letter from FerFAL in Argentina Re: Greenspan, Gold, and the Safe Store of Value

Dear James, Regarding the letter “Letter Re: Greenspan, Gold, and the Safe Store of Value” I can assure you that gold is just as valuable before, during and after a crisis. Gold has always been valuable, its safe to say that it always will be, it’s our alma mater currency, since the beginnings of mankind. Unless you are stranded on an island, or in a plane wreck in the middle of the Andes, gold is always a cherished form of currency, and no one is going to trade you an ounce of gold for a piece of bread. Generally speaking …