Originally appears on Encouraging Angels. -NCS
Over 20 years ago, before my daughter began to show the effects of a catastrophic childhood disease, I was a Board Certified Financial Planner with Morgan Stanley. I helped people construct a balanced portfolio that could hopefully take them through the thick and thin of life and what the markets would throw at us. At the time that I had a ‘mutually agreed upon termination’ as my wife and I choose taking care of my daughter over my career in early 2004, I had -no- negative letters in my file against me. I had done a very good job in guiding my clients the right way.
In retrospect, it is very interesting that I probably learned as much or more about what it would take to survive what is coming -after- separating my employ to care for my daughter. For instance, I learned why Wall Street did not want its representatives (and at that time did not allow) to sell physical precious metals. It is because the US Dollar is the currency of Wall Street-not Gold or Silver as is portrayed as ‘real’ money in our constitution. Wall Street couldn’t let dollars purchase physical representations of people’s wealth like a Gold or Silver Coin. Oh no. Only a derivative of the physical representation would do as Wall Street could use the ‘paper’ Precious Metals market (derivatives funded by the assets of their customers) to control the realm of the physical asserted through the spot price of the metal. Only after I read the book, Patriots by James Wesley Rawles were my eyes opened as to the importance of tangibles in the life of someone who wanted to survive the economic and physical collapse of a nation.
At this point, everyone remembers just how close the world came to collapse during the financial collapse of 2008. The bankruptcy of Lehman Brothers was the fiscal blood sacrifice to appease the monetary titans of New York Banking and Brokerage. The other sacrifice, of course, was the asset values of the portfolios of most Americans. Some never recovered from that ‘Lehman moment’.
In 2021, we have the potential appearance of another ‘Lehman’ moment. Except it is not New York this time, but China. It is a company called Evergrande. According to Jim Clare at Reuters as published at nasdaq.com: ‘Evergrande, whose debt has swelled to 1.95 trillion yuan ($301 billion), more than the gross domestic product (GDP) of Finland, is also set to accelerate asset sales to raise cash, company sources and analysts said.’…’industry watchers say clear signs are now emerging that authorities at various levels are stepping in to avoid a hard landing for China Evergrande Group 3333.HK, amid worries about the “social impact” of a possible collapse that could cascade through the country’s financial system.’…
Lehman’s tentacles were deep into the real estate and financial system when it fell. According to ‘Lehman proposes converting Archstone debt to equity’ …’Lehman Brothers asked a U.S. bankruptcy court to approve restructuring the debt of real estate investment trust Archstone-Smith Trust so it can stabilize the REIT’s balance sheet’… and therein would have helped to stabilize Lehman’s own position (Lehman owned 47 percent of Archstone). Things didn’t turn out so well for Lehman.
According to Forbes …’If not its beating heart, China Evergrande Group, with its countless development subsidiaries, is at least the distended central vein of the Chinese financial system. A voluminous channel through which flows so much of the capital with which the central government force-feeds the economy, the heavily indebted group is now seeing its shares slide and its assets frozen by regulators.’…
Did you catch the phrase: ‘countless development subsidiaries’? Kind of like Lehman’s ‘Archstone-Smith Trust’ but more profuse. More like contagion. More like legion.
In 2008 Hank Paulson asked Congress for a 700 billion dollar bailout that in reality turned into at least 9 trillion. There is only a fuzzy picture of the true magnitude of the actual problem in China. Even if they bailout Evergrande how much will the Central Bank there have to pour into the rest of the players in the system to keep it solvent? -If- it can keep the financial system solvent. What impact will that have in the US and more importantly what impact will it have on your money?
The US Stock market is just a few percent off of its all time high. The bond market is basically at a 300 year high (‘Bonds Look Dangerous At 300 Year High, Charteris Says’ www.bloomberg.com January 7, 2015). The historical modes of stock and bond valuation no longer apply. Price/Earnings ratios, EPS and duration have no meaning when the only thing that matters in keeping the market levitated is whether the Central Bank is printing this week or not. In fact, a time is soon coming that no matter how much they print they will not get the effect that they desire.
Smart people have gotten the message. El Salvador this week just made Bitcoin legal tender. If the dollar could be depended on it would have been depended on.
Supplies of Gold and Silver are tight getting tighter. Gold and Silver have been money for 5,000 years. John Maynard Keynes may have said that the gold standard was a ‘barbarous relic’; but other nations have been buying Gold because ‘they can read the writing on the wall’.
And the United States feigns prosperity by spending money that it doesn’t have in a 3.5 trillion dollar infrastructure bill while at the same time the same government runs out of money in October without more heinous money printing. By the way, the -only- way that the fiat money system works is that it started printing money out of thin air at the beginning. Please watch Mike Maloney’s ‘The Hidden Secrets of Money’ series on YouTube. You will receive an education.
The recent news of the horribly handled exit from Afghanistan shows the lack of skills that Uncle Sam has when it comes to being fiscally responsible as they just leave 85 billion dollars of us taxpayer funded weapons with the enemy they fought for 20 years.
So what can you do? The asset class that Walk Street does not profit on directly is tangibles (actual physical assets). You will do well to have what you can touch. Canned goods. Grains. Water. Gas/solar generator. Shelter. Security.
Fiscally, get physical gold and silver if you have the aforementioned tangibles. If the US dollar becomes worth less before it becomes worthless, perhaps you might consider converting some portion of your ‘fiat’ assets to a -physical- form of gold and silver (this is not financial advice-please consult your financial advisor). The US dollar devalued during the Great Depression. It devalued when it took silver out of the coin money after 1964. It devalued when the US went off of the gold standard. Gold and Silver have advanced in value during all these devaluations over the long term and has never been worth zero. Gold and Silver fluctuate and may be worth more or less than you purchased it for when you sell.
“I am more concerned about the return of my money than the return on my money,” said Mark Twain. The statement you get from an investment house are just numbers on a page until you convert them into something else. You can’t eat them, or heat with them or satisfy your thirst with them. Tangibles fill that role. God knows that there is less and less tangibles available every day now. Physical Gold and Silver, in your possession , are the statement that lets you never worry about the return of your money-it’s right there in your hand.
Stan Szymanski (or Encouraging Angels) is not a medical doctor. This is not medical advice. In all matters pertaining to the health and care of a human being consult a medical doctor. This is not legal, financial or personal advice. Consult appropriate professionals in those fields for that type of advice.