Coping: Profits of Doom, A Realist’s View of Gold

As you know, UrbanSurvival was one of the original “doom” sites, and then into prepping, long before it became vogue.  And our present focus  – unlike many of the doom porn and “whip ‘em up” sites – is about making it through the present and still arriving disruptions over the next couple of years with as much common sense as possible.

This morning I had emails galore from outfits like Patriotsomething and Survivalsomething and they were assuring me that Obama has plans to fill up FEMA camps, take away our guns, and all the rest of it.  Oh, and let’s not leave out sites – selling newsletters and what-have-you – that are worked up over changes in law coming July 1 which “…will collapse the US dollar!”

Poppycock and panic sell well…so our first item of business this morning is to remind you of the Wikipedia entry on Yellow Journalism which begins…

Yellow journalism, or the yellow press, is a type of journalism that presents little or no legitimate well-researched news and instead uses eye-catching headlines to sell more newspapers.[1] Techniques may include exaggerations of news events, scandal-mongering, or sensationalism.[1] By extension, the term yellow journalism is used today as a pejorative to decry any journalism that treats news in an unprofessional or unethical fashion.

Thus, the difficulty we all face in noisy times, rumors of war, and fast market conditions is sorting out the what from the hype in order to make well-informed decisions.

Thus, whenever I get emails (like imminent dollar collapse, taking guns, or FEMA camps) I do two simple exercises.  First, I look at the manpower picture and secondly I look at “How would I handle it?”

Since UrbanSurvival is mainly about economic matters, the hype (running to typical tax-dodger pandering) about the upcoming start date of FATCA, the Foreign Account Tax Compliance Act, is a fine example.

No, it will not likely cause a collapse of the US dollar and gold going to the moon.  That’s still 2-5 years out.  The purpose of FATCA is to catch tax dodgers and, since the world is becoming awash in computer horsepowe4r, it seems like a reasonable thing to do.

As a regular taxpayer myself, not having any offshore accounts, the impact of FATCA on my life looks to be about zip. 

On the other hand, if you’re got offshore accounts, perhaps even trusts and the like, then yes, it could be a very big deal.  For people squirreling away money, looking to make you and me pay their share of the cost of government, it is a HUGE deal.

IRS has set up a FATCA discussion over here where they try, despite the doomsayer hype, to explain what the purpose of the coming law is:

FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts

  • FATCA focuses on reporting:
  • By U.S. taxpayers about certain foreign financial accounts and offshore assets
  • By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest
  • The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

There are more links to details on the IRS’ individual taxpayer page over here, but every read I’ve done makes it clear there’s no direct impact on people who have no offshore holdings.

So where does the “end of world” hype come from and why are marketers stuffing my inbox with emails telling must time is running out and I need to buy a newsletter to guide me – even though I don’t have a foreign account?

The logic seems to be that because of the reporting requirements, there may be some foreign banks (and multinationals) who will opt out of doing business with the US.  And this, in turn would cause collapse, seems to be the thinking.

Well, not hardly.

First, bankers are addicted to the US consumer like the suckerfish that swim with whales.  They need us more than we need them.

Secondly – and I keep screaming this at the top of my lungs:  We are in a period of DEFLATION which is where CASH IS KING!  Read your history.

When crap hits the fan in the markets, the Big players have to sell everything including the kitchen sink and, yes, that gold they have been dabbling in.  So it will come down with the market, methinks.

Here’s how I think it’s going to play out:

Between now and say fall of 2015 or 2016, the bonds will continue to be a fine place to park money.  Three years ago, we opted for a 1/2-gold, 1/2 bonds approach to financial assets, even realizing there is a penalty on holding gold bullion of 30% on the gains – which is why we only have (ahem…) a lone gold coin.  But bonds have been a blast, too.

But fully 60% of our net worth is tied up in something even more important:  Fee simple, paid for real estate in a rural area.  We keep the taxes current and focus on the one thing that really matters:  Keeping our break-even (“the nut”) as low as possible.

When you work with serious money for a while, it becomes clear:  You can (and should) manage both sides of the personal financial statement:  The income and the outgo.  Everyone works on the income side, but few focus on reducing costs (except the New Minimalists and some Millenials have caught on to the hype fest).  And that leaves a whole bunch of  50+ people who don’t take time to read the details to panic and make wrong decisions.

Now, as for the history:

The USA is in a longwave economic Depression.  The Fed’s plan (unlike the 1930’s event) has been to step on the gas as much as possible to keep the effects of the Depression from being widely felt.  In order to do this, they have been printing money like crazy.  M1 is going up recently (basis last three months) at an 18+ percent annual rate.  Yet prices are not going to the moon.  Up?  I didn’t say they weren’t.  I said they were being supported.

The recent increase in M1/M2 is in lieu of the quantitative easings, which the Fed is trying to roll out of.  Reason?  The Fed now has a balance sheet of better than $4-trillion dollars, which is almost 25% of a whole year’s worth of GDP.

The problem with those assets?  (Mainly bundles of loans and such…) Well, the Fed and the mortgage outfits are totally screwed if the public – en masse – decides to walk out on the paper held by the Fed.  When someone stops paying, the value of a mortgage quickly free-falls toward zero which is why it’s so important to keep loans out of the “non-performing” column.

Again, this is precisely what economics would predict in a deflationary depression.  The Fed is trying to “build a bridge” over a terrible part of history over a gaping economic valley that could (and may) swallow the whole world.  Right now, we are still a year or two out from the bottom, which will come when bond yields get down to the zero level and we’re getting close.

But here’s the absolute key thing to remember:  America’s dollar will NOT go to zero any time soon.  But, if it does, the price of paid for real estate (*if you could find a buyer) would go to the moon, Jupiter, or the stars.  The government has a vested interest in making sure that doesn’t happen.

If the US dollar DIDN’T FAIL in the last hellatious depression (1930’s) then I keep asking myself, why would it now?

To be sure, at each turn of the great cyclical economy of the whole world, things tend to move “next country west” and so, this time around Asia looks like a decent hangout for people with money and we note that folks like commodity legend Jim Rogers aren’t in the US doing their trading.

Even so, the British pound didn’t fail in the last Depression, and so the US – even if losing its grip as the reserve currency – will likely follow the path of the UK in the last depression. 

Not that buying gold won’t be a good idea in time…. a year and maybe three or four. 

It’s just why would you buy gold when the long term chart has only recently begun to move up – and only a bit?

image

From the really long-term perspective, gold looks to me like it has done a major peak (back at the $1850’ish level) and has done a wave 1 down, a wave 2A, wave 2B, and we are in wave 3 now with a target of $1,400.

Unfortunately, however, after that, $1,000 or less comes into view.

The problem most people have is that they don’t see relative values in a long enough time scale.  A quick look at the ultra-long chart of the 10 or 30- year treasury ought to bring you to your senses.

The perfect time to buy a home (for new families) will be when the long term rate bottom is just in and that doesn’t seem to be right now. 

So we sit back, calmly watching the worrywarts and the hype festival in the inbox, an realize (as we point out to Peoplenomics readers twice weekly) the long game is what matters and the ultra long game matters above all.  People have a hard time with that, but a “Foo and his goo are soon poo…” to Shakespeare it.

THIS IS NOT TRADING ADVICE. 

Since making money is so much like golf, this is how I’ve teed up and it’s my shot for the green.  We can make adjustments when comes down to putter time.  For now, hand me a 7-iron, would you?  The chip shots are for our Peoplenomics.com subscribers (who make UrbanSurvival possible, by the way).  But occasionally we’ll review the Tee shots here…

The Future Close At Hand

All of which doesn’t get us past grabbing at the Tums or taking a swig on the Kaopectate/kay-0oh-poop-straight as things look likely to head into major conflict conflict window.  As I wrote in one of my rare Sunday Strategic notes on March 16:

While you go dust under the bed, for the Spring Scary Season, the smart money around here has circled April 23rd, or thereabout, for the full-on military moves to begin in eastern Europe. 

And just to toss in a dash of Pickapeppa sauc (4pack), here comes a note from G.A. Stewart, author of the Age of Desolation and a/the leader in modern thinking on Nostradamus:

George,
A reader sent me this video clip on March 9th, after things with Russia began heating up.  Father Malachi Martin: Vatican insider.
Listen at 11:55

Question: Does Russia still play a roll in the Miracle of Fatima even though the Iron Curtain has come down…
Father Malachi Martin: It does, it does… Russia will be converted by my Immaculate Heart…
… So, Russia is still within the plan.
…That would take me too far afield into Papal Secrets.
…Why Russia and Kiev are involved in the final solution to this problem, but they are.

The plan is in man… Father Malachi Martin proves it. This is why Obama’s recent meeting with Pope Francis is so important. See the stuff about the January 15th firing of the Cardinals at the Vatican Bank. Notice the French Cardinal was the only one who kept his job.
France… The coming of Henri V, the Great Catholic Monarch.

I could write another book on this stuff.

So we sit out here in the outback, finishing up our totally sealed rooms and wondering how long before we’ll be calling up Shane Connor over at www.ki4u.com and checking into another radiation meter…

Monday At the WoWW

Reader Dan has one hell of a story to share:

George,

I’ve been reading your columns, US and Peoplenomics, for a number of years now so am well acquainted with the concept of WoWW experiences. I just never expected to experience it myself (still waiting to see a UFO)!

This happened to me a little over a year ago – very simple – but very clearly a discontinuity.

Usually on my way out of work, I stuff my employee badge into a specific pocket of my backpack. This day I initially forgot to take it off, and on my way out of the building I grabbed a latte and stuffed a napkin in my coat pocket. A few minutes later I noticed the badge, took it off, and stuffed it into the same pocket. And made a clear mental note to remember that’s where I put it.

Next morning walking into work, I reach into that pocket to get my badge and the pocket is empty – no badge and no napkin. I checked my backpack – nope. I must have rechecked my coat pocket a dozen times as I just could not believe it wasn’t there. Perhaps it found a hole in my pocket and slipped into the lining? Nope. Got moved to a different pocket? Nope. I searched and searched but finally concluded it must have fallen out somewhere, somewhen.

I wore a temp badge that day. When the day was over, I slipped my coat on and as I walked out the door, I stuffed my hands into my pockets and what do you know… There’s the badge and there’s the napkin – right where I had put them the day before!

Simple, even silly, but absolutely clear. The badge and napkin were there, then they weren’t, then they were!

I’d say The Adjustment Bureau dropped by.  Like our friend nears the PowersThatBe keep telling us…”the movie IS the message.”

As long as the episodes are just abductions and time discontinuities like Dan’s report, I suppose we can live with things.  But if the “other” start bringing in cases of BBQ sauce, well then it will be time to worry.  But the global thermo nuclear war shouldn’t be here until 2018-2019…but ask me in a year how badly Putin wants to “own Europe” before fighting China…we’ll all have a better answer by then…

Write when you break-even…

George  george@ure.net

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