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.