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GLOBAL FINANCIAL LANDSCAPE
October 9, 2008
By R. Van Hudson
Alternative Investment Strategies
This month we look at alternative investment strategies as well as how to adapt to the changing economic environment. We are not looking for large gains in today’s environment but rather preserving what we have accumulated.
1. Start your 401K but only if your company matches a portion of your contribution. Withdraw from 401K periodically and rollover into Self Directed IRA. Even after paying penalties you will still have a good return which will be safer in your keeping.
2. Open a checking/savings account in a country with a sound currency. ( Switzerland
is our choice) Do so immediately before exchange controls are in place. (The dollar will at some point resume its downward spiral, and you will have a handsome gain. The fundamentals that drove the dollar down have not changed.)
3. Invest in gold and silver. Buying the metal and taking possession is preferable. At the very least start dollar cost averaging into a silver and/or gold ETF.
4. Invest in commodities and some of the commodity infrastructure. (The demand and the prices for natural resources and food stuffs will resume when the recession is over.) Dollar cost averaging again.
5. Buy short term U.S. Treasury Bills through your local Fed Res bank. Buying directly you can avoid paying brokerage fees.
6. Stuff a few thousand dollars in a safe place. (Hint! Not in a bank safe deposit box.)
7. Start a home based business doing what you love. Take your hobby and expand it into a business. Determine your area of expertise and start a web site. Get advertising on your site as soon as possible. Have a page for a store to sell items of interest to your viewers. Become an Amazon affiliate and start getting a few dollars for every book purchased through your web site. Become a Google affiliate and begin profiting from advertising on your new site.
8. Invest in yourself. Take a few courses related to your occupation or in some new area that will improve your skill level.
Bailout
We voted no to the financial bailouts. We voted no for two reasons. First, it is misallocation of capital and Mother Nature always punishes inefficient use of capital. Second, it is an injustice to the American public. Mohammad El Erian of PIMCO had the best words. “Society can no longer underwrite the risk of a banking system that is seen to privatize the gains and socialize the losses.”
Liu Mingkang, Chairman of China’s Banking Regulatory Commission also had a few words about the bailout and the injustice to the public. He noted it was a "ridiculous" approach and added “a fish doesn’t stink from the tail.”
In hindsight Greenspan wasn’t the magician everyone thought. It was loose monetary policy during his reign that got us is in this fix. Sub-prime mortgages are only a small part of the ongoing problem in this crisis. You can put all the central bankers in the world in a room and collectively their financial acumen and wizardry would light up the entire nation, but their financial judgment and wisdom would not light a fire fly. So unfortunately our future does not look bright.
The responsibility for this mess lies with the US Congress who abdicated their role in 1913. I say it’s time, they grow a pair, exercised their constitutional right, and install a central banking and financial system that works in everyone’s best interest, not for just a select few. Don't expect a new president to change the course of the economy. It is not within his power and hasn't been for ages. Amazing how people all ways blame the presiding administration for the ills of the economy. It is the Federal Reserve that starts and ends the credit cycle as well as the interest rate cycle that drives the business cycle and the economy.
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