Over 90% of all investment portfolios are down from where they stood at the beginning of 2008.
If you are surprised by this piece of trivia, you should not be.
Very few investment portfolio managers actually manage their funds in a way that could produce meaningful outperformance.
If you want outperformance you are going to have to be an activist for your money and do it yourself.
In addition to poor portfolio performance, here are a few other economic factors.
Retail sales continue to soften.
Home ownership levels are falling.
Personal bankruptcies are up significantly.
Unemployment is at record levels.
In reality, we are in a depression even though most economists don't want to admit it.
With the record amount of government spending and sovereign debt, our
choice are shaping up to austerity, default, or debasing of the
currency.
Investors are going to be sorry they every bought US debt (bills, notes, or bonds).
What should you do with your money as nobody cares more about your money than you do?
In order to understand what we need to do, it is worth a quick understanding of where we are headed based on where we now are.
The current administration is taking advantage of the economic crisis
to push wholesale changes in health care, taxes, financial
re-regulation, and energy.
What brings our wealth masters community together is the desire that
no matter who is in the White House, or who is running Congress, we want
to profit in the investment arena.
With respect to health care, the US has enacted a compulsory national
health care system that puts about 1/6 of the nation's economy in play.
There will be literally trillions of dollars of new federal
entitlements and spending on compulsory health care. The diversion of
this amount of funds from private spending to a politicized health care
system is not good for the overall prospects of national economic
growth.
Where will the money for this spending come from? Will it be funded
with borrowed money from China? The Chinese do not have a compulsory
national health care system. They understand that the new US health
care plan is just more consumption likely to be paid with borrowed
funds. Will the Chinese go along with lending more money to the US for
more consumption, don't count on it.
When the Chinese stop lending money to the US, they stop buying US
Treasuries. What happens when the demand for US Treasuries goes down?
... Interest Rates go up.
When the Chinese stop buying US Treasuries, what do they do with
their dollars? ... they buy gold. What happens when the demand for gold
goes up? ... the price of gold goes up.
With respect to taxes, we are about to see profound revisions in the
US tax system. Everyone has to pay something to someone for compulsory
health care or lose some or all of the deductibility of employer-paid
health care coverage. It is a massive new tax on households and
business cash flow; all over and above the myriad of new taxes on
medical equipment, from stents to wheelchairs.
There is talk of tax surcharges on high-income earners. The IRS is staffing up to audit the tar out of high-income taxpayers.
It is mathematically impossible to tax the rich enough to make a big
dent in the looming federal budget deficits. Expect to see Congress
focus on a VAT (value added tax) as the big tax revenues has to come out
of the collective hide of the American consumer.
Also, there is talk of imposing a new tax to pay for the war on
terror. Did you know in the US we are still paying a temporary tax on
long distance telephone service that Congress passed over a century ago
to pay for the Spanish-American War?
With respect to financial re-regulation, there was quite a bit of
federal intervention in the financial services industry in the waning
days of the previous administration.
As a result of previous and current government activities, the
government has intimate control of big banks, several big industrial
players including 2 of the 3 big automakers. This has required that a
pay tsar be appointed to set the pay and bonus structure for senior
executives of these companies.
The FDIC has set a record for bank takeovers in each of the past
several years. Fannie Mae and Freddie Mac, key elements of the home
lending industry in the US are essentially insolvent.
It is hard to say if the current government officials and programs
have-plugged holes in the dike and stopped a potential meltdown of the
economy or if it has taken a bad situation and made it worse. Perhaps
the best way to look at things is along the lines of question asked by
Henry Kissinger to Chinese Premier Cho En Lai about the impact of the
French Revolution. The Chinese Premier said it was too early to say,
but don't sell your gold!
With respect to energy, the current administration has approached the
field of energy more from the side of environmental protection than
from the standpoint of basic energy production.
Offshore energy development had been treading water however after the
recent yet onging crisis in the Gulf of Mexico, there may be a halt to
offshore drilling.
There is no support for drilling off the East or West coasts of the
country nor is there any support for drilling in Alaska or the Arctic.
Ironically, many other nations of the world are actively promoting
offshore development with some of them actively drilling right outside
the internationally recognized 12 mile limit of the US shore line;
totally without concern or care as to industry best practices,
regulation, environmental, or safety rules and regulation.
Onshore oil and gas drilling is happening in the US but problematic.
The coal mining sector has fallen from grace. Any recent discussion
about the coal industry is along the lines of how many permits have been
blocked or how many coal-fired power plants the US can close down and
replace with windmills, solar systems, or other alternative energy
sources. Lip service is being paid to clean coal however there have
been very few operating permits issued.
The unintended consequence of all this activity is that we will see Peak Everything.
This means all the easy stuff has been found (oil), made (products
with cheap labor), grown (food with a lot of available fertile soil),
and financed (low interest rates); going forward everything will be more
expensive because it will be harder to find oil hence more expensive;
labor costs in places like China are going up so manufactured goods will
be more expensive; as farm land becomes less fertile and there is less
of it, food will be more expensive as more fertilizer and nutrients will
be required to grow same amount of food on less available land; and as
interest rates can't stay at 1-2% much longer, financing costs will be
greater and it will be more expensive to buy things on credit.
Because everything will be more expensive, this means we have reached
the peak of the lifestyle we know, we have essentially reached the Peak
of Everything being inexpensive. Going forward everything will be more
expensive.
And, due to new government programs, taxes, financial regulation, and
changes in the energy industry, the life style we know and the cost to
live the American Dream will be higher ... much higher!
In addition, funding the government involvement in our business and
personal lives is pushing out other potential users of that capital.
The government's use of capital is to fund entitlements, other social
programs, and essentially redistribute wealth by taking money through
taxes from the wealthy and providing it for politicized use. The other
potential users of capital are medium and small businesses that would
create jobs and get the economy growing again.
Capital is essentially on strike and this strike is the primary
causes of epic levels of unemployment for record time periods of time.
Will it change any time soon ... it is too early to say but don't sell
your gold!
I favor a quote from Steve Forbes ... Forbes says that pursuing
additional financial education and the resulting increase in our
financial literacy will open our eyes to alternative wealth creating
strategies and this will be they key to resolving our global financial
crisis.
As such, it is only natural that a large number of people are quickly
undertaking efforts to become savvy with their money, like the
insiders, by obtaining sufficient financial education
To gain the necessary financial education, it is best to pursue
association with, access to, and membership in, a wealth creation
community. As a result, you will learn about alternative wealth
creating strategies, you will be able to consider investments in non
dollar denominated or non fiat currency assets, and you will learn
secrets to grow and protect your financial future by using methods and
techniques of the rich, like Bank On Yourself.
Bank On Yourself is a unique, powerful, and time-tested method that
Wall Street, Banks, and Finance Companies do not want you to know.
Being part of a wealth creation community, you will learn the secrets of
the rich and understand that certain whole life insurance contracts
with special features (not widely known) like a "paid-up additions
rider" on the policy, enable you to become the source of financing for
your home, home repairs, business equipment, college education, and
other major purchases like cars, vacations, and even vacation or
retirement homes. By using this method, you are able to pay yourself
the interest that you would have paid to banks, if you had financed
these purchases. You thereby reduce or eliminate the control these
institutions have over you.
I trust this post provides a little more insight into the financial
crisis that is upon us in terms of the empire of debt, capital being on
strike, and the lowering of our standard of living. If you take control
of your financial life you can reduce the impact of the volatile stock
market and the loss of your nest egg. You can use this insight to
increase your lifetime wealth and reach your goals and dreams as long as
you become an activist for your money.
I will continue to provide examples of things we need to learn, like
secrets of the insiders, as part of being savvy with our money, and
introduce alternative wealth creating strategies, in future articles and
updates at my blog over the next few weeks.
In addition, a great book to read would be the "Financial Reckoning Day Fallout" by Bill Bonner & Addison Wiggin.
Happy Reading and Here's to Your Success! Mike Farrell, founder,
owner, and operator of aspenIbiz and related Internet Lines of Business.
PS In closing, be sure to meet me at my website, WhoIsMikeFarrell,
read my aspenIbiz blogspot where there are more posts about my Internet
Marketing business, and obtain some tips about being No 1 on Google at
aspenIbiz My Go-To-Market Partners which is my Affiliate website.
