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Thursday, January 15, 2015

Boom!

The Euro dropped from 1.20 to .85 against the Swiss Franc last night. That was nearly a 30 percent move overnight! It's now down to 1.16 against the US Dollar. This is the result of the Swiss central bank giving up its attempt to peg the Franc at 1.20.

These wild currency swings are great if you can time them correctly, but it's also a good way to lose your shirt. As usual, I was too early and missed out on the big move. Be careful out there.

This kind of monetary volatility is a strong indicator that deflation is defeating the central banks. They simply can't print enough borrowers.

Labels:

93 Comments:

Anonymous FUBAR Nation Ben January 15, 2015 2:09 PM  

The euro looks set to collapse. You may want to re-enter your short position Vox. Better yet, leverage up and buy the dollar because that sucker is going to surge now.

Blogger Guitar Man January 15, 2015 2:13 PM  

What can the average American expect as a result? At minimum, cheaper vacations to Europe? At max...global economy collapse finally? Seems like these sort of grounds are uncharted.

Anonymous Peter Garstig January 15, 2015 2:20 PM  

3 days prior, they released a statement that they will keep the cap...Well, the cap caused them to accumulat halve a trillion in currency reserves (200 billionEURO), more than 3 times as much as 2011, when it was introduced.

They don't do this so sudden without a reason. Some event in the Eurozone is coming up. Some suspect a large bond acquisition by the EZB, I suspect that 1 or more countries will leave the EURO.

Anonymous bw January 15, 2015 2:22 PM  

Can't. Print. Enough. Borrowers.

"Pack up, kids! Time to see every place in Europe we haven't seen and want to see, and buy a bunch of stuff." - Swiss families



Blogger JCclimber January 15, 2015 2:24 PM  

I was about to send you a Zerohedge link as I hadn't seen any comments on this "tsunami" of carnage.

Should have known you weren't asleep at the switch and might be looking at making some Euros on the deal. Or CHF, as the case may be.

I like how one of the biggest complaints is that there was no warning.
The elites are FURIOUS that they didn't get a chance to front run this and make their usual $billions off the less connected.

I hope some of them (not the Swiss) commit harikari.

Blogger Hammer6 Actual January 15, 2015 2:24 PM  

Has the feel of the first mover has the advantage in a every-man-for-himself scenario.

Blogger Ben Cohen January 15, 2015 2:24 PM  

The depression is going to intensify. The US was the only economy holding up the world. With low oil prices destroying the only net jobs created in the last 6 years, we're looking at a serious problem of a much stronger dollar. There's a big problem now because Europeans took out debts denominated in Euros. The problem of the world taking out debts in US dollars is many times that.

Another market that is topping this year is luxury real estate. The vacancy rates are climbing considerably. Once that market pops, the entire real estate market will tank.

Anonymous Porky January 15, 2015 2:26 PM  

Vox, could you explain NIRP to me? I can't seem to grasp why or how this is supposed to work.

Anonymous onejohn512 January 15, 2015 2:27 PM  

Does this slide have Greece on it?

Blogger Danby January 15, 2015 2:38 PM  

@Guitaar Man
No-one knows what you can expect.

If deflation gets an actual foothold in, I foresee virtually every multi-national corporation taking it in the shorts. Hard. Especially those directly involved in banking and finance. But every major corporation plays leverage and equity games, if only to enhance their quarterly statement.

Deflation means prices go down, which is not good if you are the one selling things and you have bonds or loans that must be paid. The normal outcome here is either renegotiation or bankruptcy.

Deflation also means people stop borrowing and start saving for the things they want. the logic goes like this:
(Under inflation) I could borrow and buy it now, or save up and buy it later. It'll cost more to buy it later and I want it now.
(Under deflation) I could borrow and buy it now, or I could save up and buy it later. Since it'll cost less later, I might as well start saving the money now so I'll be ready.

So all the pulled forward demand for goods enabled by cheap credit collapses, you get about 6 months stagnation and then consumption resumes, but at the level of real demand. Ordinary people begin saving again, and all the financial games and Ponzi schemes and derivatives produce vast smoking craters of personal destitution among the monied class.

Last night's move in the Swiss Franc probably destroyed the wealth of thousands of currency traders. leverage in currency markets is often 1:50. Imagine if you had say a $10 million short position on the Swissy. That is now a $150,000,0000 hole in your account. "Hope you have it" says the margin clerk. Karl Denninger calls it "Having an asteroid firmly lodged in you rectum."

Mansions should be cheap for the next couple of weeks.

That's why the financial elites work so very desperately hard to avoid deflation.

Blogger Guitar Man January 15, 2015 2:47 PM  

Thanks, Danby. Deflation is the boogie man of the economy for many, I suppose. I have a lot to learn, I suppose.

Blogger Joseph Dooley January 15, 2015 2:49 PM  

When they give up on doomed QE is when they'll finally surpass their target inflation rate. $10 trillion will flood out of the wealth sink and drown us all.

Blogger Hammer6 Actual January 15, 2015 2:56 PM  

ZeroHedge had a good article about states who draw a large percentage of tax revenue from energy, I'm sitting in the middle of that. The news is already covering how many rigs are going idle each week.

That isn't market isn't our focus, so we are insulated, but the next people to feel the bite will be the ones holding all the commercial paper behind all of that capital equipment sitting around idle.

Anonymous Doug Wardell January 15, 2015 3:05 PM  

I'm not nearly knowledgeable to try to time the market, so does anyone here have any opinions on the safer investments to get into now in order to protect against the coming volatility, particularly within tax-advantaged accounts in my case? TIPS or long-term bonds maybe? Metals, either paper or physical? Cash? "Quality" stocks?

Anonymous Porky January 15, 2015 3:07 PM  

I'm not nearly knowledgeable to try to time the market, so does anyone here have any opinions on the safer investments to get into now in order to protect against the coming volatility

You may want to stock up on Astroglide.

Anonymous frenchy January 15, 2015 3:09 PM  

@ Guitar Man,

"What can the average American expect as a result? At minimum, cheaper vacations to Europe? At max...global economy collapse finally? Seems like these sort of grounds are uncharted."

You can expect a cheaper vacation in the Eurozone as far as dollars go. As for Switzerland? It's parody, but the things there are so much more expensive. I just spent a week there. You will spend some money there.

OT: The funny thing someone at work pointed out today was that with the huge drop in the price of oil, how come the airline tickets haven't gotten cheaper? Now that would be a huge savings that one could put towards the better part of the vacation.

Anonymous Stg58 / Animal Mother January 15, 2015 3:09 PM  

The offshore ports here on the Gulf that service the rigs are booming. We're opening up talks with our first offshore customer and they are starting up their next rig by March.

The business offshore is totally different than on land. 3000-4000 barrels a day is not uncommon production rates for an offshore well.

Anonymous Stg58 / Animal Mother January 15, 2015 3:12 PM  

Frenchy,

If anyone drops their prices it will be Delta. They own their own oil refinery, the old Phillips 66 facility in Marcus Hook. Their raw material prices just sank like a rock.

Anonymous Doug Wardell January 15, 2015 3:12 PM  

Porky January 15, 2015 3:07 PM

You may want to stock up on Astroglide.


Probably true, but I feel like there's some move I should be making within my 401k and IRA to at least lessen the surgery I'll need afterward.

Anonymous Starbuck January 15, 2015 3:15 PM  

The offshore ports here on the Gulf that service the rigs are booming. We're opening up talks with our first offshore customer and they are starting up their next rig by March.

The business offshore is totally different than on land. 3000-4000 barrels a day is not uncommon production rates for an offshore well.


Production rates between off shore and fracking/shale oil is quite different. I think fracking and shale production rates are $75.00 to $85.00 per barrel. Or something like that. I don't know what off shore production rates are.... I am guessing less once they drill the hole.

Anonymous Huckleberry -- est. 1977 January 15, 2015 3:15 PM  

Metals, either paper or physical?

If you're holding paper, you're holding nothing.

Anonymous Doug Wardell January 15, 2015 3:20 PM  

Huckleberry -- est. 1977 January 15, 2015 3:15 PM

Metals, either paper or physical?

If you're holding paper, you're holding nothing.


In a deflationary environment, wouldn't paper be good, at least in the short term? Obviously if it goes inflationary then it would not be, but I'm under the impression that the general Ilk consensus (excluding Nate obviously) plus what I gathered from The Return of the Great Depression is that we'll probably see the former, so it seems reasonable to at least consider paper unless I'm missing something crucial.

Anonymous Doug Wardell January 15, 2015 3:21 PM  

Never mind, I misread your comment. So you think gold / mining funds will crash short term?

Blogger Brad Andrews January 15, 2015 3:21 PM  

Starbuck, I had heard a podcast a while back that indicated some fracking deals could make money even at $40 oil. Not what the prefer of course, but they all are not necessarily at the high end.

Blogger Guitar Man January 15, 2015 3:21 PM  

Stg58, being that you're in the industry, what will be the impact on domestic oil/gas? Is a state like ND screwed? I have a cousin who works for Schlumberger and has made some decent bucks over the years.

Anonymous p-dawg January 15, 2015 3:22 PM  

Guns and ammo are the best investments. They're about the only ones you can directly use to acquire whatever it is that you need at any given point in time.

Blogger Danby January 15, 2015 3:28 PM  

I'm not nearly knowledgeable to try to time the market, so does anyone here have any opinions on the safer investments to get into now in order to protect against the coming volatility, particularly within tax-advantaged accounts in my case? TIPS or long-term bonds maybe? Metals, either paper or physical?

Here's the 3 best investments for troubled times and dislocations.

Metals:
Brass and lead. Rifles in 5.56, 223, 30-06, 7.62x39, or 7.62x54R, handguns in .45ACP, 9mm or .357Magnum. Maybe .380 for the young and the ladies.
Land:
out of the way, not visible from a road, with enough space and water to grow a large garden.
Yourself:
toughen up, lose the extra weight, learn how to do physical labor again. Learn some physically useful skills; smithing, machine work, brewing, distilling. For me, it works best when I undertake a project. right now I am building a loom of my own design for my wife, so she can weave the alpaca wool we have produced. I find that doing my own design work helps me to understand the project better, adn i find the design work to be the most interesting part.

And depending on circumstances:
children, friends, community. none of them are a bad investment if handled correctly.

Anonymous Viidad January 15, 2015 3:30 PM  

Huckleberry -- est. 1977:

"If you're holding paper, you're holding nothing."

True, though I wouldn't mind a pile of Francs.

Anonymous Viidad January 15, 2015 3:31 PM  

Guns, ammo, metals, tools, tobacco seed, gardens, a still, fruit and nut trees, family and your own two hands.

Blogger Nate January 15, 2015 3:33 PM  

" Be careful out there."

amen.

Anonymous Doug Wardell January 15, 2015 3:33 PM  

@p-dawg and Danby:

Good suggestions and I'm already pursuing these to various extents, but that doesn't seem to preclude exploring what's possible to protect accounts from which I cannot remove all assets without substantial tax penalties.

Blogger JCclimber January 15, 2015 3:43 PM  

The newscasters on the radio yesterday were quite puzzled about why retail sales were down 1% for November/December, when everyone had all this extra money from the cheaper gas prices.....

Hello? Maybe people have less money than you idiots in the media think! If the richest 0.1% are making huge money and the middle class is getting dumped, then the averages look good, but most people are going to have much less money for Christmas purchases.

Anonymous Roundtine January 15, 2015 3:45 PM  

Just wait until the dollar debts start blowing up. This is still early in the game. If the U.S. dollar sticks to it's historical pattern, the dollar is in the same spot as early 1997. The next two years were a total disaster for emerging markets.

Blogger Danby January 15, 2015 3:49 PM  

@Doug W
you can't protect them.
They are paper and in the event of dislocation will be worth nothing. What investment would you suggest to a German in 1927, knowing that everything they had accumulated would be reduced to pocket change by hyperinflation?

I learned this lesson the hard way when I was laid off from a job 4 days before my 401K vested, immediately losing almost $40,000 in putative wealth. Unless you have it, it doesn't exist.

Not that you shouldn't contribute to the retirement account. Because sometimes life is weird and the worst doesn't happen. But you should just write that "money" off in the event of a serious collapse. The best bet in terms of security is wither government bonds, or small cap equities, depending on who you trust. in my experience, small cap equities give a much higher rate of return, but there is always the risk of loss.

I would never put my retirement accounts into paper "gold" accounts. I've had to work with metals dealers, and they are some of the most ruthless and amoral pieces of work I've ever run across. Simply, they are not trustworthy.

Anonymous Noah B. January 15, 2015 3:58 PM  

"Vox, could you explain NIRP to me? I can't seem to grasp why or how this is supposed to work."

On its face, the idea is that if banks are being charged to keep deposits with the central bank, the banks will somehow find creditworthy customers to lend to instead of holding excess cash.

Anonymous Doug Wardell January 15, 2015 4:01 PM  

Danby January 15, 2015 3:49 PM

@Doug W
you can't protect them.
They are paper and in the event of dislocation will be worth nothing. What investment would you suggest to a German in 1927, knowing that everything they had accumulated would be reduced to pocket change by hyperinflation?

I learned this lesson the hard way when I was laid off from a job 4 days before my 401K vested, immediately losing almost $40,000 in putative wealth. Unless you have it, it doesn't exist.



I'm preparing for this eventuality as well. However, as you state:

Not that you shouldn't contribute to the retirement account. Because sometimes life is weird and the worst doesn't happen. But you should just write that "money" off in the event of a serious collapse.

Exactly. It seems like a terrible plan to withdraw all 401k and IRA money / take loans against them to buy a house in the woods and (more) guns / ammo at this particular moment. It seems better to plan for the eventuality that investments don't 100% collapse rather than stake everything on the idea that they will.

The best bet in terms of security is wither government bonds, or small cap equities, depending on who you trust. in my experience, small cap equities give a much higher rate of return, but there is always the risk of loss.

I've currently got a rather aggressive stock / bond split through low-cost index funds. I'm just wondering if that's going to be really bad short-term when the crash comes and if I should be prepared for that.

I would never put my retirement accounts into paper "gold" accounts. I've had to work with metals dealers, and they are some of the most ruthless and amoral pieces of work I've ever run across. Simply, they are not trustworthy.

What about exchange-traded funds, like those for marketing companies? I'm thinking something like VGPMX: "The investment seeks long-term capital appreciation. The fund invests at least 80% of its assets in the stocks of foreign and U.S. companies principally engaged in the exploration, mining, development, fabrication, processing, marketing, or distribution of metals or minerals. The majority of these companies will be principally engaged in activities related to gold, silver, platinum, diamonds, or other precious and rare metals or minerals. Up to 100% of the fund's assets may be invested in foreign securities. It may also invest up to 20% of its assets directly in gold, silver, or other precious metal bullion and coins. The fund is non-diversified."

Anonymous Doug Wardell January 15, 2015 4:04 PM  

*Mining companies, not marketing

Anonymous Porky January 15, 2015 4:04 PM  

So why did the Swiss drop interest rates to -.75?

Anonymous Salt January 15, 2015 4:08 PM  

I'm not nearly knowledgeable to try to time the market, so does anyone here have any opinions on the safer investments to get into now in order to protect against the coming volatility, particularly within tax-advantaged accounts in my case?

Some people act as if it will be the end of the world. It won't, but there will be repurcussions to what's going to happen. Markets will take a hammering. With that said, I see foreign currencies as a place to store some funds. Yes, some will go down, others up relative to the USD. No matter, as all will move. Remember, if it's deflationary then holding Dollars, a good bit as Cash, is not a bad thing. Not in the least. Other currencies, seeing as the situation is global, could hold relative position to the Dollar overall.

Stocks. Historically, stocks with a P/E of ~11-15 have held on quite well especially where there interests are in non-luxury production. Items people want and need. Think soap and toilet paper. Nothing wrong with a P/E of 5-6 either. This is a way of storing wealth, even generating some income if only pennies on the share. With stock come owership, something which can be passed along. Look at where prospective buys are diversified into. Let prudence be your guide. Go foreign even for some stocks.

Bonds are riskier as they can be defaulted on, and many Corporations have taken on risky debt. Bonds have no ownership. Like stocks, it's prudent to stay with those whos debt(s) can be serviced, even in a major slump. People always need to eat, be clothed, etc. One thing every depression's been good at providing customers for, liquor/beer/wine sales and entertainment.

What's majorily risky are the ~banks. I'd stay away from their stocks.

Putting all one's assets into metals and guns/ammo is, imo, imprudent. Having land is never imprudent, especially if one can farm some of it.

Anonymous Porky January 15, 2015 4:11 PM  

Having land is never imprudent, especially if one can farm some of it.

Unless your government has Marxist aspirations.

Anonymous Salt January 15, 2015 4:15 PM  

There's risk in everything, Porky. Get over it.

Anonymous RedJack January 15, 2015 4:22 PM  

Danby January 15, 2015 2:38 PM
@Guitaar Man
No-one knows what you can expect.

If deflation gets an actual foothold in, I foresee virtually every multi-national corporation taking it in the shorts. Hard. Especially those directly involved in banking and finance. But every major corporation plays leverage and equity games, if only to enhance their quarterly statement.

The company I work for is in panic mode right now. Not because we suddenly stopped making products, we haven't (and we are doing ok on that front). But the issue is the stuff valued in Euros just took a hit. So the real "worth" to the contracts just dropped.

Anonymous Porky January 15, 2015 4:24 PM  

There's risk in everything, Porky. Get over it.

That's exactly what Bernie Madoff told me.

Anonymous Hood January 15, 2015 4:31 PM  

Vox does this remind you of the Pound Sterling ERM break in '92?

Anonymous Doug Wardell January 15, 2015 4:33 PM  

Thanks, Salt. That's exactly the sort of thing I was looking for.

Anonymous Doug Wardell January 15, 2015 4:40 PM  

The blog appears to have eaten this comment when I previously posted it so apologies if you see it twice:

Thanks, Salt. That's exactly the sort of thing I was looking for.

Blogger Danby January 15, 2015 4:51 PM  

@Doug
Keep in mind that mining stocks frequently go to zero when the metal value drops. It's almost an axiom. My mother-in-law lost lots of money invested in silver mines when the Hunt brothers silver bubble collapsed.
Mining stocks are great when the prices of metals keep rising. They are terrible when the prices drop. And drop they eventually will. As far as I'm concerned we are in a metals bubble right now. I'm not sure when it will collapse, but like oil it eventually will. 6 months ago, everyone thought $100 was the lowest crude oil could ever go.

Anonymous A Visitor January 15, 2015 5:12 PM  

So the Euros I have left over from Spain from 7 years back are actually worth less now than they were when I had gotten back (Euro was pegged to an all time high against the dollar, $1.53:1€. Ah, how times change. I wish I had been following this so I could've made some money. Ah, whatever.

Blogger Salt January 15, 2015 5:20 PM  

Remember, as Vox has discussed the deflationary aspects of what coming, and Yes I know Nate, it's all relative. Only in a hyper-inflationary situation are all bets off. I do not see that on the horizon given the digital debt levels and subsequent wipe out. It's CASH that's king, not the digital value of trillions of ~derivatives.

Anonymous patrick kelly January 15, 2015 5:23 PM  

@Porky:"Unless your government has Marxist aspirations."

How is having land more imprudent than any other property/wealth under those conditions?

What do you consider prudent to own or possess when the commies come to town?

Anonymous frenchy January 15, 2015 5:25 PM  

Sorry,

I meant "parity". Oh boy. That was bad.

Anonymous Porky January 15, 2015 5:27 PM  

What do you consider prudent to own or possess when the commies come to town?

A boat?

OpenID cailcorishev January 15, 2015 5:27 PM  

With low oil prices destroying the only net jobs created in the last 6 years

I was wondering why gas prices are down. So they're killing Ellis Wyatt?

Anonymous patrick kelly January 15, 2015 5:35 PM  

@Porky: "A boat? "

What if you're land locked?

And if you can run away in your boat, what is prudent to take with you?

Or do you just sail away naked into the horizon on an empty boat?

Anonymous NorthernHamlet January 15, 2015 5:38 PM  

What else is capped in euros in the same way that the swiss were holding theirs at 1.20?

Blogger JCclimber January 15, 2015 5:49 PM  

Solomon gave good advice just under 3,000 years ago.
Eccl 11: 1 Cast your bread upon the waters,
For you will find it after many days.
2 Give a serving to seven, and also to eight,
For you do not know what evil will be on the earth.

Diversification of your assets is ALWAYS excellent advice. And we're not talking about owning 8 different stocks and bond funds. Complete diversification.
Precious metals
Bonds
Stocks
Guns AND ammo
Training and skills in vital areas
Friendships and solid alliances
Food
Land
Children
Cash

Blogger njartist January 15, 2015 5:51 PM  

@ cailcorishev January 15, 2015 5:27 PM
So they're killing Ellis Wyatt?
Bingo!
Two birds with one stone: Russian petroleum industry and the U.S. shale oil/fracking industry.

Blogger Bard January 15, 2015 6:01 PM  

"Can't print enough borrowers" ...got a chuckle out of that

Blogger Bard January 15, 2015 6:05 PM  

Climber. I like that list. I would only add that if possible, have income producing land: rent it for cattle, bail hay, or own rental property. That way your wealth is producing a monthly check.

Blogger Bard January 15, 2015 6:10 PM  

$10K cash in fireproof safe, 1/3 of net worth in physical precious metals, pay off home, stay out of long term government tax shelter investments (will eventually be nationalized) and you can't touch your own money without huge penalties, 1 years food in basement, 1000 rounds for each weapon you own, make sure your kids can shoot and clean the weapons, bow hunt for deer and turkey, teach your kids to skin a deer, have some chickens, grow a hobby garden, OWN RENTAL property. Few kids coming out of college over the next 20 years will be able to qualify for a home loan due to student loan debt and they will be forced to rent.

Blogger Bard January 15, 2015 6:16 PM  

Community is huge. Some of these things are expensive. Own land with trusted friends that has a secure water source (pond, lake, streams, well, ect).

Anonymous LLC January 15, 2015 6:20 PM  

Wonder if this had anything to do with the cattle future drop.

Blogger Tommy Hass January 15, 2015 6:32 PM  

"I was wondering why gas prices are down. So they're killing Ellis Wyatt?"

Did the oil sector grow without subsidies?

OpenID simplytimothy January 15, 2015 6:39 PM  

adjö BTFD.

David Stockman that a central bank has just done what it swore it would never do and crashed the "trust" that replaced markets pricing money.

Assuming it holds, and we are back to normal, any ideas on the implications for the U.S. Fedgov?

Anonymous daddynichol January 15, 2015 6:44 PM  

I wonder how George Soros fared in all this since he's the big money manipulator.

Land is not as secure as one would like to believe since government always taxes land and if you can't afford to pay the tax, there goes the land even if you paid for it. Taxes are always the final financial crowbar to pry ownership from the owner!

Anonymous Indy January 15, 2015 6:52 PM  

Starbuck - the folks who aren't leveraged out the wazoo are continuing to work and produce. It's the highly leveraged frackers that are shutting down as soon as they go underwater on their production margin.

The Rockies are due for a little winnowing of the herd and the get-rich-quick folks.

It is pleasure to meet multi-generational ranchers in the bar when they come to town - many of them run family spreads going back 100+ years.

Porky - when we first came to town, was talking to an Army vet (82nd), and asked how local vets would respond if the Feds rolled in.

He pointed out the tallest church steeples and the few multi-story buildings in town, and said he expected the Feds would be allowed to walk out of town after they dismounted and disarmed. No love for the federalles in these parts.

Blogger Eric Wilson January 15, 2015 7:21 PM  

Hey, are there any new developments in getting a pdf of The Great Inflation/Deflation Debate out? That's what got me started on this blog.

Blogger Laguna Beach Fogey January 15, 2015 7:29 PM  

Great for mortgage rates.

Blogger Eric Wilson January 15, 2015 7:42 PM  

Great for mortgage rates.

Yeah. And this is my dilemma. I'm sitting on cash, wondering whether or not I should buy a rental home. The super low interest rates make it attractive, but while I was on Team Whiskey Zulu in the debate, I'm beginning to think I might have been wrong. Pay cash is the obvious choice, but with interest rates so low, it feel like free money.

Anonymous Steveo January 15, 2015 7:53 PM  

Jim Rickards - in The Death of Money speaks of a reflation scenario when the banks begin to tumble w/ uncontrolled deflation. His example scenario is gold fixed to $7,000 / oz gold with the Fed/.gov protecting the price by buying at $6,800/oz & selling at $7,200/oz. Let those numbers sort out in the pricing of everyday goods & services and you've just inflated like b****. He points out that this scenario is exactly what FDR did with gold confiscation & repricing - with the reflation being 41% w/ the stroke of a pen. If you have not considered this avenue as a possibility, think about it & make sure - as many have said here to have precious metals in hand.

Anonymous Anon January 15, 2015 9:36 PM  

The USD looks good especially with gas prices tanking. Easy money

Anonymous Viidad January 15, 2015 10:02 PM  

Doug Wardell: "It seems like a terrible plan to withdraw all 401k and IRA money / take loans against them to buy a house in the woods and (more) guns / ammo at this particular moment. It seems better to plan for the eventuality that investments don't 100% collapse rather than stake everything on the idea that they will."

Dunno, Doug. I did it and feel pretty danged secure. The market is a rigged game.

Anonymous zen0 economist0 January 15, 2015 10:45 PM  

Eat, drink, and make merry, for tomorrow you shall die!

You know, within reasonable limits, eh.

OR:

Lay up your treasures in Heaven, where moth and rust do not corrupt.

Blogger James Dixon January 15, 2015 11:30 PM  

> Bonds are riskier as they can be defaulted on, and many Corporations have taken on risky debt.

Exactly. And while a stock can recover from anything short of bankruptcy, your only hope in the event of a bond default is the court system. Ask the Chrysler bond holders how well that worked.

That said, I think I'd still take corporate bonds overall over government bonds. Most corporations aren't anywhere near as far in debt as federal, state, and local governments. And while the government can always count on tax revenues to pay their debts, you can't tax money people don't have. There are limits, and we've long ago past them. Each government entity is different, and there may be some that have kept their debts in check, but I personally don't know of any.

> Pay cash is the obvious choice, but with interest rates so low, it feel like free money.

If you have the cash, and the interest rates are low enough, there's nothing wrong with taking on the debt (that's why I have a car loan instead of paying cash for the car). But remember, cash in the bank doesn't do you any good if you can't get it when you need it. Make sure your bank is sound and trustworthy before going that route.

Blogger James Dixon January 15, 2015 11:35 PM  

> The market is a rigged game.

Any market can be rigged in the short term. It's another matter over the long term. Markets tend to figure out rigged systems and react accordingly. The stock market may be in a short term bubble due to Fed activities. That won't always be true.

Anonymous Anubis January 16, 2015 12:18 AM  

January 15, 2015 5:27 PM
What do you consider prudent to own or possess when the commies come to town?

No one recommended body armor or night vision yet? Actually I would like to recommend planting Caragana Arborescens, the Siberian Pea Shrub, which is hardy to planting zones from 2 through 7 and thrives in cold climates, even surviving winters where temperatures drop to 40 below! The flowers are also edible and can be added to salads or other dishes. Its doubt tolerant nitrogen fixing and seeds have been shown to contain 12.4% fatty oils and up to 36% protein (Meng et al., 2009). Goji berry shrubs for Zones 5-9 for high antioxidant berries most wont be able to recognize. Incase of a complete collapse mushroom logs for vitamin D, shitake are the highest vit D shroom but others are ok. http://survivalblog.com/letter-re-vitamins-in-a-grid-down-situation/

Anonymous Anubis January 16, 2015 12:20 AM  

Make Caragana Arborescens drought tolerant

Anonymous Idle Spectator January 16, 2015 12:56 AM  

I keep reading all the comments on all the threads, but I never really post anymore. I'm about to, then it is... nooooo... The View is on again.

It's like my intestines have sucked up my scrotum lately. Instead of angle of the dangle it is the Hardy Boy's Christmas Special where their raging ornaments stay in the box.

Blogger praetorian January 16, 2015 1:02 AM  

Dread Ilk super-heros, with booby-trapped fortresses sitting astride natural virgin springs, surrounded by verdant, abundant forest, posting while they machine custom 1911's from steel they produce on-site, may have some intriguing suggestions, but implementation is always tricky for us average joes.

So, yeah. USD, cash money.

Anonymous Idle Spectator January 16, 2015 1:06 AM  

Dread Ilk super-heros, with booby-trapped fortresses sitting astride natural virgin springs, surrounded by verdant, abundant forest, posting while they machine custom 1911's from steel they produce on-site, may have some intriguing suggestions, but implementation is always tricky for us average joes.

I call that Tuesday. Except my 1911 is gold plated, bitch.

Blogger James Dixon January 16, 2015 3:11 AM  

> Dread Ilk super-heros, with booby-trapped fortresses sitting astride natural virgin springs, surrounded by verdant, abundant forest, posting while they machine custom 1911's from steel they produce on-site...

The funny thing is, I'm sitting in my upstairs bedroom with our almost frozen over brook just a short ways outside my window, in the middle of 40+ acres of trees, (though they're somewhat lacking in the verdant department this time of year).

I'm missing the machine shop and steel manufacturing though.. :( I'll guess I'll just have to qualify as an Ilk sidekick. Just call me Rick Jones, I guess.

OpenID cailcorishev January 16, 2015 9:08 AM  

It seems like a terrible plan to withdraw all 401k and IRA money / take loans against them to buy a house in the woods and (more) guns / ammo at this particular moment. It seems better to plan for the eventuality that investments don't 100% collapse rather than stake everything on the idea that they will.

If you buy land and protection and learn to produce much of your own food and goods, and the market doesn't collapse, you still have land and food and skills. You've lost nothing except things you never had. If you stick with the market and it does collapse, you have nothing.

Blogger Geoff January 16, 2015 10:06 AM  

"They simply can't print enough borrowers" is exactly right. Given that the US monetary system is credit based, the money supply is driven mainly by lenders/borrowers. Banks are generally always willing to lend. It's their business, afterall. However, borrowers are not always willing or able to borrow.

Anonymous Doug Wardell January 16, 2015 11:02 AM  

cailcorishev January 16, 2015 9:08 AM

It seems like a terrible plan to withdraw all 401k and IRA money / take loans against them to buy a house in the woods and (more) guns / ammo at this particular moment. It seems better to plan for the eventuality that investments don't 100% collapse rather than stake everything on the idea that they will.

If you buy land and protection and learn to produce much of your own food and goods, and the market doesn't collapse, you still have land and food and skills. You've lost nothing except things you never had. If you stick with the market and it does collapse, you have nothing.


I have a cache of freeze-dried food, weapons, ammunition, survival gear, US Army experience and training, hunting experience, and while I don't personally own land which could be used for farming, I have family members who do, including actual farmers and farmland. Furthermore, my entire immediate family and most of my extended family has military training, guns, ammo, hunting experience, survival gear, etc.

Given the above, I see no reason to completely abandon market investments and bank everything on a zombie apocalypse scenario, but that's being repeatedly suggested. Am I missing something, or is there just a lot of binary thinking here?

OpenID cailcorishev January 16, 2015 11:29 AM  

Doug, my apologies, I misinterpreted that part of your comment out of the context above to mean that you saw it as one or the other.

If you can afford to have land and be self-sufficient and still have some money left over to put in the market in case it does well after all, by all means do that if you're not convinced the market is doomed. A big part of sensible survivalism is not putting all your eggs in one basket, after all. But many people won't be able to afford that, and will have to go pretty much one way or the other.

Anonymous Doug Wardell January 16, 2015 11:46 AM  

No worries, cailcorishev. Thanks for clarifying.

Blogger James Dixon January 16, 2015 12:32 PM  

> Given the above, I see no reason to completely abandon market investments and bank everything on a zombie apocalypse scenario, but that's being repeatedly suggested. Am I missing something, or is there just a lot of binary thinking here?

Everybody's situation is different. Don't take any single opinion given here as gospel. Look at all of them and evaluate them against your situation.

Remember, while the people here might be experts in their own fields, none of them are offering financial advice for a fee (at least not in this forum). The opinions here are worth exactly what you paid for them.

Blogger JCclimber January 16, 2015 12:50 PM  

Most Amerikans need to be reminded not to put all their eggs into one basket.
Houses
or Stock Market

The housing market is still in a bubble, far beyond the historical affordability index. However, land is always a good asset. It's just that most Americans have a home sitting on very little land, or unfarmable land, or land which is useless for many other reasons (lack of reliable and independent water supply).

As for the markets, if you haven't been paying attention to the HFT, the facts that they investment banks can use your money as theirs, lose it, and you get nothing, that the P/E ratios are horrible, and that almost every aspect of the markets are tainted.....then there is not much hope for you.

Diversification for the win.

Anonymous Doug Wardell January 16, 2015 1:08 PM  

James Dixon January 16, 2015 12:32 PM

Everybody's situation is different. Don't take any single opinion given here as gospel. Look at all of them and evaluate them against your situation.

Remember, while the people here might be experts in their own fields, none of them are offering financial advice for a fee (at least not in this forum). The opinions here are worth exactly what you paid for them.


This is good advice on any topic. The main reason I asked here is because I don't have to explain why I think we're heading for a crash and deflation and I figured there must be people with much more knowledge than I who are thinking the same. I was just a little puzzled by the persistence of the responses I was getting.

Anonymous Dan in Tx January 16, 2015 1:12 PM  

All I know is silver is continuing to rise, which is good. Just wonder how deflation will effect silver since it has industrial applications as well as a store of value.

Anonymous FUBAR Nation Ben January 16, 2015 2:11 PM  

As trust is lost in the governments of the world, silver and gold will rise. It doesn't have anything to do with inflation or deflation.

Anonymous Mung Bean January 16, 2015 3:40 PM  

Remember, while the people here might be experts in their own fields, none of them are offering financial advice for a fee (at least not in this forum). The opinions here are worth exactly what you paid for them. - James Dixon

Paying for an opinion doesn't make it correct either. Plenty of examples of financial professional's failures. At least failures for their clients

Blogger James Dixon January 16, 2015 6:48 PM  

> Paying for an opinion doesn't make it correct either. Plenty of examples of financial professional's failures. At least failures for their clients.

No, but it entails a fiduciary duty. Which opens up other avenues when things go wrong. Those avenues might not be reliable either, but at least they're available. With relatively anonymous advice on the Internet, you're on your own when it goes wrong.

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