Sunday, September 30, 2012

Daily Briefing For Sunday, September 30, 2012

Why Is Gold Money?

Kendel asked me this Friday night.  She's not your average wife.  A CPA by profession, she's a vice president of a local biotech company here in Austin, tasked with helping manage the company's finances.  She reads a company's Form 10-K (a form required by the SEC - that's the Securities and Exchange Commission, not the South Eastern Conference) before she invests in it.  Before we met, I thought a 10-K was a race you ran in for charity.

We got into a discussion of grid down economics (and just so you think I do take a break from this stuff from time to time, I did take her to dinner Friday night at the restaurant of her choice.  And I paid.  And we didn't talk about this stuff, until she asked for a tour of the storage unit where I'm storing supplies.  But that's for another blog.).  She asked me why people should hold precious metals as a preparedness tool in lieu of investing in food and water.

She and I did some quick research, and she and I came up with two links we both felt answer this question fairly well.  First, here's one from National Public Radio (and not from some what some you would call a tin foil hat guy) which lays out the scientific reasons gold makes a good form of money.  Next, this piece may help fill in some gaps as well - but it does come with some Biblical overtones, so those turned off by that will likely want to skip it (although I think it's very well done.)

In the end, gold is money solely because society has said it is for thousands of years.  There could be times (and we're talking Mad Max Thunderdome stuff here, which I want to stress to all of you is highly unlikely) where other commodities like food and water would be far more in demand.  In the end, when civilizations have looked for a medium of exchange and don't want to use a fiat currency issued by a government or central bank, they have turned to things like gold and silver.

So what do you do with the gold and silver in a crisis?  First, let me stress the types of crises you'd be using this stuff in would be economic crises.  If Al Qaeda were to hit us again, we're not going to run to our local grocery store and clean them out of Pop Tarts and Robitussin using our gold and silver coins.  As Jerid has pointed out before, the metal coins would be of utility only when our currency was rapidly declining in value (a hyperinflation scenario) or when there's a shortage of currency due to regional power failures preventing us from using the ATM or local bank branches. 

In those economic emergencies, we would use metals as currency.  Most likely, we'd be using the gold coins to buy currency and the silver coins for transactions for good and services. 

I will be the first to admit I didn't buy into the whole "you need an investment in precious metals as part of your plan" concept until about two years ago.  I was rather late to the party.  Like many of you, I took the position that you can't eat gold and silver, so what's the point in having it?  These metals are a hedge against the possibility of an economic emergency, giving you another tool for acquiring what you need in the event you don't have valuable cash at your disposal.

Yes, I know - it's crazy to talk about stuff like this. I am in a bit of disbelief that I spend time thinking about these things.  But if a small investment in something will give you an edge and piece of mind, it may be worth your time to consider doing so.

Saturday, September 29, 2012

Daily Briefing for Saturday, September 29, 2012

One Reader's Story

Below, I share an email I received from a friend.  Other than to add a few paragraph breaks to make it easier to read, I have not edited any of it.

So, I have a story to share with you - to repost in your blog under anonymous language, or just to keep for personal reasons.  My brother, today, went to his main bank, Capital One - the largest branch in his area, to make a large withdrawal of cash, close to 50k.  Like us, he wants to have his personal assets close by if the SHTF, including the devalued paper currency we trade with.  You may have heard/read about similar situations, but...

The first teller he went to, with his Bank of America check for deposit ($400), was your average teller.  He told her he wanted to deposit that to his main account, and then make a withdrawal against the same account for the large amount.  She stared at him in disbelief, and then went over to another worker and mumbled something.  She then sent him over to the 'head' teller, and he waited in line again.  At first, she stated she didn't understand what all the hub-bub was about, and said she was going to the back to start the transaction.  But when she returned, she also had the wild-eyed stare, and started making suggestive comments: "You know sir, we usually don't make transactions like this due to the safety of our customers here in the bank, and in the parking lot." When did the banks get into the business of security detail with its customers?  Eventually, she sent him over to a bank manager, who, according to my brother, was acting 'squirrelly,' and basically said the same thing.  He then tried to convince my brother multiple times to take a cashier's check.  My brother respectfully declined, and said he would like cash. 
The manager then started in with the questions.  "Well, we generally need a REASON to release this much cash."  As if it is any of their freakin' business what customers do with THEIR OWN MONEY.  He went into the safety spill again, while my brother was thinking - "What if I drove up in the parking lot with a million bucks?  You would never know.  That argument is pathetic."  And then another push for another cashier's check.  Then he stated he would have to check to see if the bank would "be in balance."  That only tells us that they had to reconcile digitized cash vs. physical cash, and that more than likely they didn't even have 50k in cash on hand.  In other words, they had to account for the physical cash that was going back out into the market, undigitized. 
Then, out came the form.  The main question my brother remembered was about occupation - what that has to do with withdrawing your own money, I don't know.  He also called to other banks, including Bank of America, to check my brother's accounts there.  When it was all said and done, my brother walked out with 25% of what he asked for, and has to go back Wednesday, to 'collect' the rest. That will give the bank enough time to "ship in" the rest.  So, if that is true, who is holding the physical money?  Where is kept?  Why? A small-town bank I would understand that, but not a large Capital One bank.  No telling what may await him when he arrives.

This hits home for us.  It confirms everything that needed confirming.  Our money no longer belongs to us.  It is quickly resembling China, where you have to have permission from the authorities to pull out your own money, along with the questions.  We are going to the bank tomorrow to make some sizable withdrawals, to test the system.  I'll let you know how it goes.  And then on to purchase some silver.

I'm not an expert in retail banking, although I know some of you are.  Here are a couple of my layman's observations:

  1. Why does a customer need a "reason" to withdraw a large sum of money?  It's their money.  I sense this has something to do with the Patriot Act.  This isn't the first time I've heard this IS the first time I've heard it happening to someone I know indirectly.
  2. I would think a branch bank of a large bank in a city that's not in a rural area would have sufficient physical currency to cover a $50K withdrawal.  I worked as a bank teller in a small town years ago.  People came in and asked for $10,000 on a regular basis.  We never thought to ask them why they were taking out that kind of money.  Due to the growing use of debit cards and electronic fund transfers, banks may feel the need to keep less cash on hand - just speculation on my part.  But I suspect banks should be more prepared for people to do what my friend's brother did.
  3. Why am I less safe coming out of the bank and into the parking lot with $50K on me than I am with $5 on me?  If the bank and the customer have done their jobs and completed the transaction quietly and discreetly, no one in the bank, other than the customer and the teller should know how much cash money has on them.  Again, back to my days as a bank teller - business owners of convenience stores would regularly leave the bank with large sums of cash and coins on them in order to make change and cash payroll checks.  Those people were no less safe with small amounts of money on them as they were large amounts.  This "customer safety" angle is either a complete ruse or the creation of the bank's legal department trying to justify its existence.
Are you experiencing things like this?  Are you taking steps to have less money in the bank?

Friday, September 28, 2012

Daily Briefing For Friday, September 28, 2012

One Of The Many Things I Don't Understand

So here's some good news.  The more I talk to people and read stuff on Facebook, it's clear that the population is waking up.  And by that I mean more and more people are becoming better versed in issues of the Constitution, civics, and the economy. 

These folks have very diverse views on how to fix things.  Those on the left suggest we raise taxes on businesses and high income earners, force employers to provide more health care coverage, and cap corporate profits.  Those on the right suggest we reduce taxes and let the market dictate what benefits employers offer.  Both groups seem to agree on the notions that we need to end crony capitalism and audit the Federal Reserve.

Here's what I don't understand.  With so many of these people who have definite opinions on how to fix what ails our nation, precious few of them have an opinion on what they should be doing, on a personal level, to prepare themselves and their families for the road ahead.  I know folks who will cite statistics on how many people Bush allegedly murdered and how many children died in the United States this year for malnutrition and how much tax Mitt Romney paid, and yet they have absolutely no plan for themselves to help them in the event of tougher times.  Similarly, I know folks who decry Obama's policies and the burgeoning federal debt; many of these same people have no idea on what they need to do to protect themselves from the very perils they predict Obama will bring us.

I could somewhat understand it if they actually knew what to do but procrastinated in doing so.  But I don't think most of these folks are even to that point.  Is the disconnect because:

  1. It's easier to fix someone else's problems than it is to fix our own?  Most of us are guilty of this.  We're really good at telling you why your life sucks and coming up with ways to fix it, yet we are completely unable to move the proverbial log from our own eye.
  2. The normalcy bias prevents people from dealing with reality?  If someone truly believed we should expect a government's policies will lead to their children going hungry, wouldn't we actually do something to help prevent that from happening? If you were confident there was a significant risk of a major recession looming, wouldn't you take steps to help position yourself to survive, if not thrive, under those conditions?  I read so many "what's the world coming to?" type posts on Facebook...and yet none of these folks, while well-meaning, seem to have any plan or idea on how to protect themselves from the things they supposedly fear.
  3. We're just too lazy/too tired to make the effort?  Don't underestimate this.  If you and your spouse are working full time with two or three kids running in various directions for kid events, you don't have a lot of time or energy to think about these things.  While it can be done, it requires a special commitment to do so. 
  4. We don't know how to go about it?  To me, this is the lamest one of all.  There are literally hundreds of books and countless websites devoted to this subject now.  It takes little effort to get the info you need to ready yourself.

Are you one of these people who sees problems in our future?  If so, what's keeping you from protecting yourself from them?

Thursday, September 27, 2012

Daily Briefing For Thursday, September 27, 2012

Thoughts On Bugging Out

I should probably put Brian on my payroll, as he always thinks of critical discussion topics on the subject of preparedness.  Seeing how I make precisely $0.00 a year with this blog, his paychecks would probably come in the form of coupons to Chik-fil-A I got in the mail for free.

He and I recently discussed the conventional wisdom on bugging out if and when things got bad in our area.  My thoughts on this subject have evolved over the years, and I am in the minority view on this: the vast majority of us are best advised to shelter in place than to bug out. 

Below, I will make the case for this.

  1. Bugging out means you have to have a place to bug out to.  Simply saying, "I'm going to bug out to my family's place out in (insert rural part of the United States here)" greatly oversimplifies things.  Do they know you're coming?  Do they have supplies there for you and your family to use?  Or will you just be another set of mouths to feed?  Will things there actually be better than where you are now?  Do they have infrastructure on their property to make them self sufficient? 
  2. The actual "Get Out Of Dodge" (GOOD) run will be hellish.  James Rawles has written on this subject a number of times.  This will not be your typical drive to Grandma's.  Think about those scenes where people in a major coastal inland flee a hurricane.  The highways out of Houston clog up quickly - requiring the use of contraflow lanes - when just a portion of Houstonians decide to evacuate.  Imagine that happening in every major city.   The gas stations along those routes will quickly run out of fuel, and you and your family will be stuck in a vehicle or vehicles, crawling along trying to get to your destination.
  3. Setting up a bug out location that's workable can require a significant investment.  If you're heading somewhere you plan to stay for an extended period of time to hide from bad things, the place you're going to needs to be ready to provide you with basic infrastructure (electricity, water, shelter, food storage room, etc.)  You can justify much of this by calling it a real estate investment, but at the end of the day, it will require capital to make this happen.
  4. Essential services will return to the urban and suburban areas before rural areas.  If a $20M investment in a location can help thousands of people in a population dense area, while that same amount of money would only help a few people in a rural area, guess where the $20M is going?
  5. It's easier to build the requisite community in your own community rather than establishing it at your retreat location.  Going it alone in a long term crisis isn't really an option.  If you're in a neighborhood or even a city where you can network with like minded people, it will be easier to build that community than if you've got a weekend place 800 miles away.
  6. Along the lines of item number 3 above, the money you are spending on a remote location could better be spent on supplies and training you could use at home.  Unless money is not an issue, think about what it would really take to have a workable retreat...and then think about how far you could advance your efforts with just a tenth of the money if you planned on staying at home after an emergency.
Let me encourage you this weekend - if you think bugging out is the way to go, really put that line of thinking to the test.  If you enjoy being out in the country and want a weekend place a couple of hours out of town, then it probably makes sense for you to set something up.  Most of us, I would submit, are better off hunkering down where we are.

Wednesday, September 26, 2012

Daily Briefing For Wednesday, September 26, 2012

Hyperinflation For Fun And Profit

While waiting our turn during the Medicine X - EDC class last Saturday, Brian and I started talking about the risk of hyperinflation.  He asked me "what would hyperinflation look like in the U.S.?"  I thought that was a great question, and so I am going to share some thoughts here.

First, let's take a step or two back.  In order to understand hyperinflation, we need to understand just plain ol' inflationInvestopedia defines "inflation" as "the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum."

Last month's inflation rate was 1.7%.  In the last ten years or so, we've had rates as high as 5.6% back in July 2008 and as low as - 2.1% precisely a year later.

Investopedia describes "hyperinflation" below:

When associated with depressions, hyperinflation often occurs when there is a large increase in the money supply not supported by gross domestic product (GDP) growth, resulting in an imbalance in the supply and demand for the money. Left unchecked this causes prices to increase, as the currency loses its value.

When associated with wars, hyperinflation often occurs when there is a loss of confidence in a currency's ability to maintain its value in the aftermath. Because of this, sellers demand a risk
premium to accept the currency, and they do this by raising their prices.

Pay extra attention to the first sentence in that definition.  To have hyperinflation, you need a) a large growth in the money supply which is b) not supported by an increase in the GDP.

To get some perspective on this, let's peek at a couple of charts from Shadow Government Statistics.

First, take a look at the GDP annual growth numbers.  To be objective, we'll only look at the red line, as it's the official version.  The blue line is the Shadow Government Statistic's alternative calculation; according to their site, this blue line "reflects the inflation-adjusted, or real, year-to-year GDP change, adjusted for distortions in government inflation usage and methodological changes that have resulted in a built-in upside bias to official reporting."

From this, we can deduce that GDP has grown since late 2009.  At its highest growth rate since the bottom in early 2009, we were seeing growth as high as 3%.

Now compare that to the money supply chart, also from Shadow Government Statistics.

Look at the blue line.  The Shadow Government Statistics calculation of M3 (the largest, most inclusive measure of the money supply) shows the money supply has tracked nearly evenly with GDP over the same time frame since 2010.  Thus, hyperinflation is not currently a risk in the short term.

However, with the recent announcement of more quantitative easing and concerns over declining GDP growth, it does raise the specter of a risk of higher inflation in the coming months. 

Could we see hyperinflation in the coming months?  Matthew O'Brien at The Atlantic argue that we cannot.  His basic premise we cannot have hyperinflation like Germany and Zimbabwe have had in the past because we are not Germany and Zimbabwe.  He then takes readers through a series of assertions that at a minimum beg for more details in order to make sense:

Second, the United States isn't really printing money. At least not like post-war Hungary. Quantitative easing is usually described as "money-printing" but it's not really. QE involves the Fed buying longer-term bonds from banks. It simply swaps one asset for another -- in this case, cash for longer-term bonds. Unlike Hungary, the Fed isn't directly paying the Treasury's bills. This is a hugely important distinction.

Whatever money the Fed "prints" is stuck in the banks. That money isn't inflationary as long as the banks don't lend it out. What if the banks do start lending at a faster clip? The Fed can still effectively pay the banks not lend by, for example, raising the interest on excess reserves or require the banks to set aside more money. It would be shocking for the Fed not to pursue one of these options.

Note UBS is apparently taking the other side of this argument, issuing a warning over the summer claiming that the U.S. and the U.K. were at risk for hyperinflation.

But do we really need to have hyperinflation in order to feel the negative effects of further rounds of quantitative easing? 

Let's look at a chart of inflation rate history over the last 100 years or so:

Historical Data Chart

While we've not seen hyperinflation in the last century, we've seen bouts of inflation well above ten percent and in some cases above fifteen percent.  These spikes in the inflation rate certainly did not help the economy or the people living and working in it.

Back to Brian's question: what would hyperinflation look like?  To be more helpful, let's simply call it high inflation instead, since we may never hit a true "hyperinflation" level.

First, we'd see spikes in prices in our every day consumables, notably food and gasoline.  Wages would likely rise, but slower than the rate of inflation.  Housing sales and sales of other big ticket items like cars and durable goods would likely drop as people could not afford the new interest rates associated with new debt.  On the flip side, those of us in long term, fixed rate loans would actually come out ahead, since we'd be paying back our loans with dollars worth less than the ones we borrowed to buy the item to begin with.  Precious metals prices would likely go up as people look to invest in assets that will preserve their money. 

I'm no investment advisor, but here are some ways you can protect yourself from escalating inflation rates:

  1. If you aren't in a fixed rate mortgage, get one now.  Rates will never be this low again.  If inflation hits us, you'll be paying off your loan with dollars worth less than they are now.  The corollary to that is if you are in an adjustable rate mortgage, get out now.  You don't want to be caught in an ARM when inflation hits.
  2. Invest in things like precious metals.  They have traditionally been safe havens for hedges against inflation.
  3. Stock investors may prefer stocks that pay dividends, as the dividend payments will likely go up with inflation. 
  4. Keep planning.  If you're into buying storable foods, do so while inflation is relatively tame. 

Tuesday, September 25, 2012

Daily Briefing For September 25, 2012


Please check your smoke detectors.  Four folks from back home died in a house fire two nights ago, including two small children.  According to the National Fire Protection Association, you can dramatically reduce the chances of dying in a house fire if your smoke detectors are working.

Spain continues to endure some difficult times.  Tonight, protesters in Madrid turned violent as they clashed with police over austerity measures.  Meanwhile, the hungry there forage through dumpsters as unemployment for young people is at 50%.

This is the story of the day, in my opinion:  More financially savvy individuals are coming forward to confirm what many have been thinking for some time now.  Hear Ray Dalio share his alarming views on the possibility of societal unrest

Finally, if you're not paying attention to what's happening in the Middle East, please do so.  The stakes are very high right now, and some of what I am reading seems to suggest the recent spat between Netanyahu and Obama is to give Obama plausible deniability should Israel attack Iran.  There's considerable military activity in Israel at the moment, which is unusual during Yom Kippur. 

Monday, September 24, 2012

Daily Briefing For Monday, September 24, 2012

Why I Rule, And Why You People Don't

So while the rest of you were spending the weekend watching football or hanging out at the lake or in a sports bar somewhere wearing a jersey of your favorite team (BTW - Adult males don't wear jerseys unless they are participating in the sport.  Ever.) or doing some other less than kick-ass activity, I spent two days running through the woods and other obstacle courses in 95 degree heat, shooting at things while the move, performing emergency first aid under fire and dragging dead bodies for hundreds of yards. 

Caleb ran his Med X - EDC class at KR Training this past weekend.  Friends, this is about as close to a real gun fight as you can get without having to endure one.  It was an exhausting two days, but I learned a tremendous amount from two combat veteran instructors, both of whom have extensive first responder experience with Fire/EMS/PMC duty over the years.  Karl, the boss of KR Training, has always been willing to bring in high caliber instructors to his facility to teach things outside of his expertise.  This class was no exception.

If you want to know what we did, the Med X-EDC link above will give you a lot of insight.  But this picture may give you an even better idea:

So in this pic, I am in the foreground.  Note the recoil of my gun as I've just fired a shot at the target (see below).  Brian's in the back ground.  He's found an AK-47, and he's about to open up on another bad guy down range.

Look to the right of the blue barrels.  That mannequin lying there is Randy.  Randy is a clumsy SOB.  He got shot a lot over this weekend, requiring all of us to drag his heavy ass (200 lbs +, I am guessing...Caleb would never tell us) behind cover and perform emergency first aid on him, using tourniquets, hemostatic bandages, pressure bandages, and chest seals.  And oh yeah, the bad guys are shooting at you while you do it. 

Moments before, Brian and I formulated a stategery to go get Randy.  Below, you can see we are on the move.  Communicating with each other the whole time, we'd decided that Brian would go out to get Randy and that I would shoot at bad guys while he did it.  (This is another reason I am awesome.  I made Brian go out and do the hard part.  I just stayed behind cover and shot at people.)

More action from another angle.  That picture of some dude that looked like Ice-T on crack pointing a gun at me was no match for me and my Glock 34 with Charger sights from Dawson Precision. 

So now that I've shown you all the pictures where I look cool, let me show one of several my epic fails during the two days.  Caleb told me I had been shot in the right arm (that wasn't the epic fail; being the shooter on the team means you're out front where the action is, so it's quite conceivable you are going to get hit.), and so I had to stop the bleeding.  I first tried to stop the bleeding with a bandage, but Caleb disagreed with that decision, stating I should have put on a tourniquet instead.  As a result, I passed out due to excessive blood loss and Brian had to stop what he was doing for Randy to put the tourniquet on me.

In addition to this one exercise, we had a fair amount of classroom training on the use of bandages, tourniquets, hemostatic agents and chest seals.  Having been through Caleb's Med X class last year, this class really helped get the concepts to congeal in my head.  In our last exercise, we did force on force training with airsoft guns, which is always eye opening.
Lessons learned:
1. Get off the X.  This is a popular saying in the self defense community.  The X is where you are, right now.  You need to move when bullets start flying.  We got really jammed up in one particular exercise when we didn't get off the X fast enough.
2. If you're going to run out from behind cover, have a plan of action.  See my reference to number 1 above.  You are of no help to anyone if you get shot.  Take care of yourself first, so you can help the others.
3. If you're going to have medical gear, practice putting it on.  I need to get a training tourniquet and some training pressure bandages.  In a crisis, you lose fine motor skills.  Knowing how to quickly apply them to yourself and others makes a huge difference in an environment where seconds count.
4. Wearing long sleeved shirts in the Texas heat was not as bad as I'd thought it would be.  Many of the students wore long sleeved garments and pants during the activities, despite the fact it was really hot outside.  I tried that on the second day, and I found it was an effective way to keep the sun off my skin as well as good protection for when I was rolling around on the ground or running through the woods.
5. Never let go of your gun in a gun fight.  I got hammered on this one.  I did a magazine change while shooting with my non-dominant hand (since Caleb enjoyed watching me suffer through having to shoot my gun weak handed).  I laid my gun down on the ground (since I only had one functioning hand) to get a fresh magazine.  I should have done the traditional one handed reload technique behind cover and not let go of my gun.  In my defense, I thought it was safer to put it on the deck than to do the one handed reload technique, but upon further review, Caleb was absolutely right - the technique is safe, and I should have done it.
You are far more likely to need to use first aid gear and training in your lifetime than you are your firearm and self defense training.  Learn first aid, and be ready to use it when the time comes.
I highly recommend this particular class if you are looking for the full self defense experience.

Saturday, September 22, 2012

Daily Briefing for Saturday, September 22, 2012

End of Q3 Analysis Of My January Predictions

Back in January, I offered readers my assessment on what we might expect in 2012.  On Friday, I started to think I should revisit and score myself on accuracy and precision.  Banker John, interestingly, sent me a note Friday evening to ask if I was planning to do this.  I took that as a sign that I should.  Let's see how I've done so far.  My original prediction in italics, below:

1. Unemployment numbers will remain relatively stagnant.  Even if we continue to see an improving trend, I would not expect it to be a strong enough trend to result in meaningful recovery.

U6 unemployment in 2012 has ranged from 14.5% to 15.1%.  U3 unemployment (the official unemployment figures) ranged from 8.1% to 8.3% in 2012.  Both U6 and U3 in 2012 are better than in 2011, but not in a meaningful way.  I got this one right.

2.  I tend to agree with Jim Rogers on the inflation issue.  The sheer amount of money the Federal Reserve has injected into the economy cannot have a deflationary effect.  Note well – we may not see inflation outside of food and energy prices in the coming months.  But as people in lower income brackets spend a disproportionate amount of their income on food and gasoline, they will clearly feel the effects of this. 

Inflation is clearly in a downtrend, starting at 2.9% in January, dipping as low as 1.4% in July and ticking back up to 1.7% in August.  Food inflation is also on a downtrend, from near 5% in January to near 3% now. 

Thus, on its face, I missed this one.  I'm still predicting more inflation, however.  I suspect my call on this was a bit premature.  But this was a forecast for 2012. not 2013.  As John reminded me today, yards are great, but points on the board are what matters.  Grade: Fail.

3. And by energy, don’t forget to pay attention to your electric bills.  We should anticipate the risk of further blackouts this summer, especially in Texas, due to new EPA regulations.  The above average temperatures forecasted for Texas and the southwestern United States this summer will exacerbate this problem.

I'm scratching my head on this one.  This summer was hot, no doubt, but we heard little about blackouts or brownouts this summer.  According to the U.S. Energy Information Administration,
"EIA expects the nominal U.S. residential electricity price will rise by 1.0 percent during 2012 to an average of 11.91 cents per kilowatthour. During 2013, U.S. residential retail electricity prices increase 0.9 percent over the average 2012 price. When measured in real terms, the U.S. residential electricity price declines by an annual average of 0.8 percent in both 2012 and 2013." 

Not sure how to score this one.  My prediction was based in large part on other's predictions and creating an amalgamation.  Grade: Fail, but with mitigating circumstances.
4. Interest rates will remain relatively low, despite inflation. As people tire of stock market volatility, they will put their money in bonds, CDs, and other cash equivalents.  This will, theoretically, generate significant cash reserves for banks to lend money. 

Nailed it.  Grade: Pass.

5.  In stating this position in item four above, I am necessarily ruling out the risk of a “bank holiday” other shock to the banking system.  While you may think it odd that I need to even mention such a possibility, I suggest you watch this two minute video of Joe Biden discussing the risk of a bank holiday.  (The fact Biden is on stage with Jon Corzine when making these comments about bank holidays is an added bonus.)  Given this is an election year, I would be quite surprised if we had a bank holiday in 2012.  My only caveat to this would be if systemic use of leverage by major investment firms caused them to become insolvent – like MF Global.  If this were to happen to other major investment firms, all bets are off.

Nailed this one, too.  Grade: Pass.
6. The equity markets will remain in a state of malaise.  I suspect there is a good risk of yet another correction (i.e., a drop) in the stock markets.  I say that because of the growing lack of confidence investors have in the stock market, coupled with lower trading volumes and growing unease over the EU debt crisis.

I know the numbers on their face don't support my position on this, but here me out.  I'm thinking I'm still right on this one.  I readily concede the major U.S. equity markets are up significantly - 14% since the first of the year.  This is remarkable.

But as I indicated in my January letter, I continue to be concerned about the lack of volume of shares traded.  The number of shares traded daily has continued to drop - down 21% since the first of the year.  The EU financial crisis is no where near being over.  The only thing helping stocks right now is the Fed's recent announcement of another round of quantitative easing.  I think I'm early to the party on this one.  I'm emboldended on my call given Friday's stock volume - the largest volume in a single trading day, with the market closing down.  High volume on a down day isn't somethign we'd want to see.  Grade: will review at the end of the year.

7. Meaningful financial reforms at the state and federal level will remain elusive.  Simply put, politicians won’t agree to reduce spending fast enough to provide substantial relief to the growing debt and unfunded liabilities situation.  I continue to believe things will have to get much worse before there is the political will to do the things necessary to make things better.

I think I'm safe on this one.  Pass.

8. Food prices will remain on an uptrend.  We will continue to need maximum yields to feed a growing global population.  Should we experience adverse weather in key growing areas, expect further price increases and possible food shortages. 

I give myself full credit for this one.  Here's why.

9. We should expect continued erosion of civil liberties.  Both political parties continue to push for more government involvement in our private lives as well as in our communities, all under the auspices of keeping America safe. 
President Obama signed the National Defense Authorization Act on December 31, 2011.  Many Democrats and Republicans decried the decision to do, as the bill "would allow the military to indefinitely detain terror suspects, including American citizens arrested in the United States, without charge,"  according to ABC News.

This alone earns me full credit for this prediction.

Pass: 6
Fail: 2
Incomplete: 1
As for my two fails, I think my timing is off on the inflation call.  I think it's coming...but perhaps not in 2012.  As for my call on energy prices, my reliance on the long term summer temperature forcast from back last January, and the regulatory war on coal, let me to be more bearish than I should have been.  I take full responsibility for both, nonetheless.



Friday, September 21, 2012

Daily Briefing for Friday, September 21, 2012

First Day Of Fall

Fall begins tomorrow.  Suggested activities include:

  • replacing batteries in smoke detectors and other battery dependent devices.
  • checking to see your fireplace is ready for the season.
  • checking and restocking propane for your grill/side burner.
  • putting in a fall garden.
  • taking a training class.  Here's what I am doing this weekend.
  • beginning a food storage plan.

Long Range Weather Forecast For The United States

See below.  This forecast is for Q1 of next year.  Texans take note - wetter and cooler than average is what we should expect.

Wednesday, September 19, 2012

Daily Briefing for Wednesday, September 19, 2012

Light Ops

I learned a very good lesson last night.  Actually, let me rephrase that - I experienced why one should follow the conventional wisdom.

I was out on my walk last night.  Normally, I walk the dogs for 20 minutes, drop them back off at the house, and then continue on for another 45 minutes or so.  Before we take the dogs out, we have to harness them up.  This isn't difficult.  What is difficult is listening to Foxy bark her fool head off in excitement during the harnessing process.  She loves to go on walks and expresses it by barking incessantly until you're well into the front yard.  During these barking bouts,  you will do almost anything to get her out the door.  And last night, I was in such a rush to end the barking (having been gone from home for two nights and driven over three hours to come home that afternoon, I was exhausted) that I left the house without my gun.

The dog walk went fine.  But on my solitary portion of the walk, two large dogs - boxers of some sort - were out in one man's front yard.  He was with them.  Despite his admonitions, the dogs immediately came at me in an aggressive fashion when they realized someone was walking on the sidewalk in front of their house. 

I wasn't too scared - not because I'm some tough guy (I'm not), but because the owner didn't seem too overly worried about them coming up to me.  Nonetheless, I had my Fenix flashlight in hand, and when the closer dog got within five feet of me, I lit him up, directly in the face with a bunch of lumens from an LED light.

Amazingly, the dog stopped in his tracks, as did his or her brother/sister as soon as I blinded them with the flashlight.  They hadn't a clue what to do.  Their owner came and secured them, apologizing for their behavior. 

Lessons learned here:

  • A reliable flashlight makes a fantastic less than lethal defensive tool.  Get one small enough that you will actually carry it.  With that particular light, I have located a dropped iPhone in a theater, provided light for a bridesmaid to repair a bride's dress in a dark reception hall, hailed a cab in Rome, and now stopped two lunatic dogs from harassing me.
  • I continue to be impressed with LED flashlights.  They are awesome.
  • I should have had my gun.  Now in this instance, I wouldn't have shot either dog, as they didn't threaten me.  But what if they had?  What if one had attacked me?  What if they both attacked me?  It's not that far fetched - a number of people let their dog run leash free in their front yard.  If one of those dogs turned out to be a "bad" dog, how would I be feeling today with dog bites on my arms?  My face? 
"Being prepared for a crisis – whether it’s a devastating hurricane, crumbling infrastructure or political upheaval – is vital to the growth, operation and resiliency of your business."

This CNBC article linked above is great reading in a short amount of time.  Have a plan to get your business back on line after a disaster.  Note the story in the article about how Seagate reclaimed its market position from Toshiba since Seagate was ready for devastating floods - and Toshiba wasn't.

Reminder No. 245 To Execute The Basics Well

Most of us will never need to know how to build a fire with a car battery or perform a C-section in a ditch.  Statistically, we're more likely to need to know basic CPR and other first aid measures.

Watch this excellent two minute video.  Watch it all the way through; the important stuff is at the end.  Thanks to Caleb for sharing.

Friday, September 14, 2012

Daily Briefing for Saturday, September 15, 2012

Standing Corrected

Today, I met some former co-workers for lunch.  We got into a discussion of the economy, and one of them pointed out that our national debt has exceeded our GDP in years past - namely, right after World War II.  This was news to me, as I read a while back that we'd never been to this point in our country's history.

So I got home and researched it myself.  Turns out my friend was absolutely correct, as you can see in the various charts found here.  And I didn't choose that link just to dump on Paul Krugman.  I did choose it because the second graph in that link is most alarming, showing all private and public debt compared to our GDP.

But the charts aren't the message here.  The message here is that I was wrong, and my friend was right.  While nobody likes to be wrong, I appreciated the opportunity to learn something today about our economy's history.  As I told my lunch crowd over email later on in the day, it's not about having an opinion at the end of the day - it's about finding the truth.  It's my hope for you and myself that we never stop questioning our own understanding and knowledge of things, always evolving, always thinking, always learning something new. 

It's not always a pleasant process.  But to be prepared for the future, it is a necessary one.

I Hope You Are Making The Most Of The Month Of Preptember.

September is National Preparedness Month - or as some are calling it, "Preptember."

Here's a fantastic suggested action list you can do this weekend if you're new to this.  Even your kids could pull this one off, while having fun in the process.

Girls And Guns

Miranda shared with me some really great links on YouTube on handgun selection and concealed carry from a woman's perspective.  In addition, the same presenter talks about the M&P compact as a good choice for her.  There's a lot of good info here.   

Thursday, September 13, 2012

Daily Briefing for Thursday, September 13, 2012


Thanks to all of you who have recently told me you've learned a thing or two from my blog posts.  I'm really glad to hear that it's been of some help to you.

Until Further Notice, The Printing Press Knob Will Be Turned Up To 11.

Remember that awesome scene in Spinal Tap where the guy has a custom amp made where all the control knobs go up to 11 rather than 10?  That's what came to mind when I heard the Fed was going to initiate QE 3.  To be more precise, it's what I thought when I read that the Fed's new policy will be unique for three reasons.  Chief among them, per the article:

In the past, when the Fed announced a Large Scale Asset Purchase program—LSAP, in Fed speak—it indicated its maximum size and duration. Sometimes it revisited the duration or size, expanding the programs as necessary.
But this time, the Fed has explicitly declared that the LSAPs will continue until economic conditions improve. What’s more, the Fed said it would undertake additional LSAPs and employ “other policy tools” so long as the economy is underperforming. There are no definite size or time limits on QE3—prompting some to call it QE-Infinity.
The Fed will keep printing money until it gets the results it wants.  Period.
You can draw whatever conclusion you wish from this.  The crew over at ZeroHedge pulls together a number of sound bites from Ron Paul predictably decrying the decision.  The money shot (no pun intended): "I think the country should have panicked over what the Fed is saying that we have lost control and the only thing we have left is massively creating new money out of thin air, which has not worked before, and is not going to work this time.” (emphasis original).
Others seem to share this concern.  UBS issued a warning back in July of this year for the US and the UK about the risk of hyperinflation for those economies.  QEternity won't help those fears.
So, what's a brother to do?  Jason posted a note on my Facebook page this morning, indicating this might be a good time to buy a house.  In an unrelated move, Mike shared this link whereby we learn it's cheaper to own than rent in most major U.S. cities.
Let's think about that for a minute.  While I don't question the logic of their premise - historically low interest rates make financing a home purchase very attractive now -  what happens if we begin to experience periods of higher inflation?  Home prices necessarily suffer, as fewer people will be able to afford higher mortgage payments - and thus cannot afford to own a home.  If you're going to buy a home in this market, (and this is the former realtor in me speaking, so bear with me), I think you need to be looking for:
  • A distressed property.  A foreclosure, a short sale, a desperate seller looking to unload their home. 
  • A home you plan to stay in for a long, long time.  When inflation shows up, your home price may suffer.  Can you stay in the home long term in order to (hopefully) recoup your payment way down the road?
  • An investment where you can put a significant amount down.  Lenders are requiring more down these days than they were.  A good sized down payment will help keep you out of trouble should the property's value drop - you'll still have positive equity.
  • A property conducive to sheltering in place if need be.  And by that I mean, are the roofs and gutters conducive to rainwater collection?  Do you have an ample sized back yard in which to raise vegetables?  Are you in a part of town that you'd expect to be stable if public services are reduced?  (And that's already happening....just ask San Bernardino.)  I know this sounds loopy, folks....but my challenge to anyone to explain to me why we won't see much more difficult times ahead remains open. 

Meanwhile, What Am I Doing?

I have placed an order for a substantial amount of storable foods - much of which will be kept at an off site location for operational security purposes.  Now that cooler temps are here in Texas, my next goal is to destroy some perfectly good batteries as I learn to use my solar power system (I'm convinced I will fry a battery or six in the learning process.)  Getting those things squared away will help me sleep better at night.

Do I have a time frame?  No.  And I'm always leery of people who say they do.  We need not know the exact time, however.  As the author of the book of Proverbs wrote in chapter 22, verse 3: "A prudent person foresees danger and takes precautions.  The simpleton goes blindly on and suffers the consequences."  It's time to be prudent.