Survival Investing

It may seem like a joke for a serious survivalist to muse about investing, since survival enthusiasts are generally so pessimistic about the future. But any future, no matter how dark, is the concern of survivalists everywhere.

Basically, I'm talking about probabilities.

And the odds are, no matter how dark you think the future could be, it probably wont be the end of absolutely everything. Consider these historical examples:

-The Black Death.
This global outbreak reached Europe in the 14th century, and had killed 75 percent of the population within 50 years of the first outbreak. The Black Death sounded the death knell for the old order of the Middle Ages, with the church as the center of civilization. Even so, money (coin money) continued to be used throughout the catastrophe. The value of money fluctuated wildly, and land lost the inherent value that it had held since the fall of Rome, and was replaced by the value of labor, which was at a premium due to a shortage of workers. Rampant inflation destroyed the medieval banking system, and was replaced by the beginnings of what we consider modern banking.

-The Great Depression
From 1929 to 1935, the American economy collapsed, beginning with the farmers and the large corporations first. American farming has never really recovered. But the governement never collapsed, and although some people did starve, 95% of the population survived. In my home town, there were two prices at the grocery: one price if you were paying on credit, and a lower price, sometimes a fifth of the credit price, if you had actual US currency. I have known people who got into farming by paying the back taxes on abandoned farms. Indeed, while millions lost everything, some folks became millionaires almost overnight.

-The 1973 Oil Embargo
OPEC quit selling oil to the United States. On the coasts, gasoline was rationed according to the last digit of your license plate, even or odd. No one starved, but a lot of people wasted days sitting in lines at gas stations.

-Stagflation 1979
Keynes promised it couldn't happen; but in the last year of Jimmy Carter's term, the USA had both economic stagnation AND inflation. The prime interest rate hit 15%, and anyone insane enought to buy series EE bonds recieved 15% for the next twenty years even after the prime rate had gone down below 4% in the 1990's. But who was sitting on piles of worthless greenbacks, back in 1979, or was silly enough to put it all in government bonds, in the middle of the global standoff of the Iran hostage crisis???

My point in all of this is simple: economic calculations must be a part of any survival strategy, or all the scrimping and saving and stockpiling turns out to be a waste of time.

Obviously, diversity is the name of the game. There's just no telling what will appreciate in value in the middle of an economic earthquake.

So, what financial plans are you making??

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Is playing the market really such a wise idea when the potential exists for the market itself to crumble and disappear?

Modern investments, for the most part, are hands-off - you buy them in name only, and in order for them to have any value, the holder must be in a position to make good on their promise to pay. Investors used to buy phsyical metals, land, goods, and now they mostly just buy stocks, shares, bonds - or so it seems to me.

In place of gold bars, many people now own gold shares (either shares in metal reserves, or shares in companies mining, refining, or buying and holding/trading the gold). In place of money in the mattress, they have money market accounts. Instead of livestock and land, they have thousands of head of cattle and millions of acres on paper. :shk:

Show me the guy who actually controls the cattle, the land, the gold, the water, and so on, and I'll show you the man who is truly wealthy, not just on paper.

Basically what I'm saying is, why buy commodities on the market, when you can buy commodities at the market. Money has no intrinsic value, and the goods one can buy with money, today, in our society, are priceless in emergencies.

I'd rather have a cellar full of peanut butter, ammunition, and water, than have a strong and diverse portfolio that makes me a millionaire on paper. If people are running around spreading a pandemic, killing one another, nukes are going off, or the government is collapsing, a portfolio is worthless, and it definitely won't regain any value until stability is restored - even then the potential exists for you to lose everything.

If you invest in resources and basic necessities, like food, water, fuel, ammunition, vehicles, land, or even metals, those things not only retain their value in an emergency, they take over as the new currency and become extraordinarily valuable.

People don't understand the real value of a gallon of water, or a breeding pair of rabbits, or a bolt of wool, until they desperately need these things. I buy goods with real value now, because I can, and I know that if something serious happens, I may not have that luxury of just taking a trip to the store. It's a buffer, and I think that's the best investment.

(When it comes to you, dr_strangecraft, I think I'm probably preaching to the choir with this spiel, but I figured I'd post it anyway. Hope you're not too offended that I just ranted all over your thread. Maybe I can find a bucket and a mop in the back room...

If I had to make an investment of the sort you're talking about, I would be inclined to invest in companies that produce concrete and large-scale water desalinization/pufication technology - especially companies that have an ability to reach into the Middle East and Asia.









[edit on 15-12-2006 by WyrdeOne]

Well this is a hard one to reply to?
Dr strangecraft,hello, you have obviously researched you post very well so i am not in a position to properly debate with you about , other than put "my own point of veiw across".

I have to agree with both you and wyrdeone to soem extent.

I will try to explain, if Sit X happens you will always have some people who think that having phycial cash is the " be all and end all"
They will always gonna be out for the qucik � or $, not thinking long term.

So in this case, yes if you had some physical cash certain items you wanted although "vastly overinflated" in price could be purchased.

On the other hand if money became worthless (in the sense) and everything went back to "bartering and swapping" tools ,trades, food etc then i would have to agree with Wyrdeone.
As there is no point having a handfull of cash if the person you are trying to get some vegtables from only wants wheat..do you understand what im trying to say?
I cant seem to explain this properly, but i hope you know what i mean.

I can see no problem with having a few quid in physical terms, but i think also that the long term value of this physical cash would be worthless.
This would be only in the Sit X scenario!

Yeah i know im sitting on the fence a bit

If we all end up bartering and swapping most of us would be assed out I think. Its not like it used to be where everyone had at least a few chickens and a couple of goats. You could always barter skillls or trades I suppose.

Personally, Ive been putting 20% of my assets behind mans ability to kill himself no matter what the economy is like. The VICE Fund has served me well over the years plus common shares of Altria have never hurt. But dont go too heavy into this stuff. Diversity is key.

WWIII, IV, V and VI could come and go but people will always buy guns, get drunk, smoke cigarettes, gamble and use porno. Its as certain as death and taxation.

Good topic, and one that is generally overlooked.

I think there are two key things anyone can do to protect themselves financially.

1. Learn how to make money in both up AND down markets. A crash is only a bad thing if you were betting on the markets going up. It's not hard. Anyone can do it, with a little learning. Given the the most powerful forces in the world rely on an intact financial system to make their wealth worth anything, I suspect total financial meltdown is unlikely... however.....

2. In the event of total financial/social meltdown, the aftermath would probably resemble Iraq right now, or any other war-torn country. People should have a plan as to what they will do in that situation. Even if regular money was worthless, those who are able to provide for the needs of others, will in turn be supported. Think farmers, taxi/rickshaw drivers, doctors, mechanics, engineers, the military, tool makers, fishermen, hunters/trappers etc etc.. If you're business is dog grooming or wedding planning, then maybe it's worth developing some other skills.

Here's a bit of my thinking:

as the first responder pointed out, public auction exchanges are the first things to close when there's a disaster: the NYSE was closed for two weeks following September 11. And yes, having something on paper may be a "bird in the bush."

It's important to remember that ANYTHING may become worthless at some point.

On the other hand, I really don't believe, unless it's Jesus coming back and gabriel blowing the horn, that EVERYTHING can be worthless at the same time.

If the NWO takes over and dollars are suddenly worthless, then US government bonds wont be. As a matter of fact, when there is a government collapse, bonds from the previous government are almost always used as a bridge to the new economic order. Not foolproof, but worth a bit of diversity in your portfoliio. More on that later.

Guns are probably the best investment period, with no downtrends.

Liquor would sure be popular, too. Not the expensive stuff--people will be too hard pressed after loosing everything to trade what they have left for a 20 year old bottle of congac. But a box of condoms a gallon of "Old Crow" might look pretty alluring, and worth some precious food and ammo.

Seriously, here's what has worked well for me: (with TWEAKING)

I've posted about it before. It is old fashioned, and no CPA or broker will admit to knowing a thing about it, because they don't make a penny off of it, and if everyone did this, they'd be out of a job!

It used to be called the "Harvard plan," since it is how harvard has become the richest school on the planet.

Basically, you create three piles: Stocks, Government Bonds, and Cash. At the end of every period, you rebalance the value of the three piles by adding to them. For instance, if, since last quarter, the dollar has slid to half of it's value, then your stocks will have sky-rocketed, since that value improves during inflation, as people seek a "store of value" in shares of a company whose value is denominated in dollars but not dependent on the value of dollars.

Your only supposed to buy US govt bonds in this equation; corporate bonds are only worth the probability that a corporation will make it's next payment.

Now, as you cringe at the prospect of the US govt's future, let me tell you that the US is THE bond issuer on the planet, and has NEVER failed to pay on its outstanding bonds-I tihnk the best record of just about anybody. France has defaulted on its bonds FIVE TIMES since America began to issue them.

Would I risk all by owning just bonds? Of course not. But I'll put a third of my investing capital in them. I can cash them in about 10 minutes at ANY bank in the US, during banking hours. So they'd be handy if I was fleeing say, a hurricane or something. Which is much more statistically probably for most of you than, say, the collapse of civilization.

The other third is in stocks. Yes, I know that survivalists think the stock market will be the first thing to collapse, when SHTF. And I'll say you're probably right, and so I'll lose a third of my investment right off the bat. It sure looked iffy when I started this in 1987--the market had just crashed. But it hasn't DISSAPPEARED in the last 19 years. In fact, its worth 15 times what it was then.

The thing is, it may collapse all right. But if you study up on it, you'll learn that, while October 29 was a collapse, some stocks didn't go to zero. And if you confine yourself to dow 30 stocks, like I do, you'd have been buying into them in January, at the historic low of the market. Same with 1987.

The thing I tweak about the system is cash. I subdivide it into a third gold ingots of various sizes, a third in silver ingots, and a third in tweny dollar bills. (I have a separate emergency fund of cash, for personal disasters; this one is for investing.

This has worked well for me, and I have a lot today because of the Harvard plan. In fact, I got so interested in the stock market and in the gold market that I learnt about them as a hobby for my investing, and eventually went to work in the securities business. Even if it all collapsed today, I must say I've already gotten many times my investment out of it already.

One last thought. I used to take care of an old man who had been patton's jeep driver in the 3rd army in France and Germany. He told me that businesses in Germany and France were still taking Nazi currency as late as Summer 1946. And the US and Brits actually bought it from consumers, to get it out of circulation. So sometimes, a fiat currency can outlive it's government.

Survivalism depends on asking, "what can go wrong."

Likewise, the secret of investing is asking "what if I'm wrong?" For a survivalist, that means making at least SOME preparation in case the world doesn't end.

.



[edit on 15-12-2006 by dr_strangecraft]

You have voted dr_strangecraft for the Way Above Top Secret award. You have two more votes this month.

Great post Dr. S !

Regarding the Harvard plan, you talk about rebalancing the portfolio by adding to the losing positions.... would it be as valid to sell overweight positions to do this, or are you talking about new money?

Yes, that's EXACTLY the way to rebalance, I just think a lot faster than I type.

It got us out of the 2000 slump, when we sold several stocks at their peak, and moved the profits into our bonds, which were at what, 6.5%? higher than today by a full point . . .

I do both; rebalance with whatever I plan to add each quarter. Monthly is too frequent, unless you LIKE playing in the markets. I have other money for speculating. But yes, I rebalance for overweights AND add my monthly contribution.

Most of the stocks I buy are "direct investment," so I buy them directly from the corporations, and so while I don't get the best price, I also don't have a middle man who "owns" them for me. And your chances in court against the company are excellent, if they ever fail so cash you out when you tell them to.

.

[edit on 15-12-2006 by dr_strangecraft]

Originally posted by dr_strangecraft

Yes, that's EXACTLY the way to rebalance, I just think a lot faster than I type.

It got us out of the 2000 slump, when we sold several stocks at their peak, and moved the profits into our bonds, which were at what, 6.5%? higher than today by a full point . . .

Nice move there. I was very new to the market back then.. utterly clueless really, and it was mere good fortune and jumpiness that made me get out, late feb, just days before the damn broke..

On rebalancing, how often do you do it? at regular intervals, or at technical highs/lows?

what I'm advocating is mindless rebalancing at a regular interval. I go with quarterly. Do it too often and you'll blow all your money in transfer fees, and waste your time.

Some people I advise only do it annually.

If you start doing it on technical turnpoints, you are not investing any more, you're speculating.

Not that I'm against speculating, I just don't do it with my investment money.

But yes, after a few years with the harvard plan, you'll get a feel for the financial tides, and can start speculating like the most fiendish capitalist imaginable. But always with the play money, never the investments.

.

there is one currency that has never lost value in modern history: gold. it is the one form of currency that is pretty much guaranteed to still be worth something....unless of course we are reduced to a purely bartering economy, but if that is going to be the case, you should be able to see it coming, and be able to buy as many goods as possible with the gold you are holding in the first couple of days before it gets really bad.

Originally posted by snafu7700
there is one currency that has never lost value in modern history: gold. it is the one form of currency that is pretty much guaranteed to still be worth something....unless of course we are reduced to a purely bartering economy, but if that is going to be the case, you should be able to see it coming, and be able to buy as many goods as possible with the gold you are holding in the first couple of days before it gets really bad.

I have to disagree with you there, snafu.

Gold, like everything else, is ultimately merely a commodity. It's price rises and dips every business day. From a philosophical standpoint, I believe in the "greater fool theory."

Basically, nothing has any value, except what you can trade it to some fool for. A lot of gold bugs think gold has inherent value--it doesn't. If you are trapped in a cabin in a snow storm, it has no value at all. you'll freeze to death with gold in your pocket.

now, don't get me wrong, I own gold. But nothing in this life is guaranteed. It is one more vehicle for long term speculation (which is what investment really is).

Originally posted by dr_strangecraft

what I'm advocating is mindless rebalancing at a regular interval. I go with quarterly. Do it too often and you'll blow all your money in transfer fees, and waste your time.

Sounds like great advice. Actually I'm working on my 2007 plan right now, and I like that idea... a lot.

If you start doing it on technical turnpoints, you are not investing any more, you're speculating.

Speculate? Moi? Ok you got me. Actually i day trade for a living.. well some daytrading and some options writing for income, but yes, I do agree that my "investment" funds should be separate really...

Originally posted by dr_strangecraft

Basically, nothing has any value, except what you can trade it to some fool for. A lot of gold bugs think gold has inherent value--it doesn't. If you are trapped in a cabin in a snow storm, it has no value at all. you'll freeze to death with gold in your pocket.

maybe i didnt get my point across well enough, because we basically agree. i'm saying that gold will most likely still be taken after other forms of currency go by the wayside you just have to know when to use it to stock up on items to be used for barter (ie, when to dump it on some poor sucker).........because eventually in an EOTWAWKI scenario, barter will be the only economy.

[edit on 15-12-2006 by snafu7700]

Someone emailed me from the UK and asked about some of my advice; I think some terms in the US are different from other countries.

Real quick:

A bond is a promise to repay with interest after a set interval. They are issued by companies, local govts, and the federal one in washington. You get a certificate with the date you bought it, and the rate is permanent from that date. every spring and fall, the value of the bond is recalculated to include its interest. The value at maturity is printed on the face, and you pay half the value when you buy it. After 20 years, it's supposed to be fully worth the face value, but can be quicker or slower depending on the rate you got. Banks sell them for the govt, and will cash them out, too. You lose all interest that should have accrued since the last interest payment.

In the USA, stock means a share of a company. It may or may not pay a dividend, a little chunk of the profit it makes in a year. Usually, you have to have a broker, and an account with several thousand, to buy stock. But in the US, the government encourages big corporations to sell their stock directly to the public, which is how I buy them. You can give them orders to re-invest the dividends.

In the US, you can buy gold or silver at most coin dealers. you pay a premium over the "spot" price in NY or chicago, but you can shop around for the best deal. A coin dealer will try to sell you collectors coins, which are basically just art in my book. I don't invest in art. If you push him for some "one ounce rounds" he will reluctantly bring out some silver or gold slug-like coins, that aren't money, but weigh an ounce a piece. In certain circles in the US, they can be used as currency in their own right. Gun shows, flea markets and less savory places . . . The coin dealer is supposed to record all gold sales. But if you pull out cash, and tell him you're not interested in paperwork, he'll put his reciept-book away. They always have, and I've been buyin gold this way since about 1990.

Originally posted by snafu7700

Originally posted by dr_strangecraft

Basically, nothing has any value, except what you can trade it to some fool for. A lot of gold bugs think gold has inherent value--it doesn't. If you are trapped in a cabin in a snow storm, it has no value at all. you'll freeze to death with gold in your pocket.

maybe i didnt get my point across well enough, because we basically agree. i'm saying that gold will most likely still be taken after other forms of currency go by the wayside you just have to know when to use it to stock up on items to be used for barter (ie, when to dump it on some poor sucker).........because eventually in an EOTWAWKI scenario, barter will be the only economy.

[edit on 15-12-2006 by snafu7700]

I agree with everything in that post. I talk about some of these issues for a living, and so I use particular language. You probably were thinking the same type of thoughts when you posted. Sorry if I seem like a stickler; It comes from having lots of people tell me I'm an idiot when I give them advice they are paying for, but don't want to hear.

all the best.

.

I have a little invested in cashable stocks. Payout is near immediate with little or no penalty.

I agree that cash or liquidable stocks will be less likely to be worthless.

I have a smaller investment in longer term items that I'll likely lose in the event of an upheaval.

Needless to say, financially I'll be among the destitute many once the world get's back on it's feet. Anything I have in remaining stock will possibly no longer be mine for the taking?

How likely is it that should your stocks survive...that you'll be allowed to access them and any rewards owed?

Methinks that if the Gov can find a way to comandeer all assets...they most certainly will.

never really thought about it as survival investing. My investments are pretty diversified, I'm a stockpiler/hoarder when it comes to basic and durable goods, so if it hits the fan, I will have a small supply to trade/barter for whatever it is I might need. Living in a hurricane zone, you tend to stockpile certain things, but someone once told me that alcohol is and would be a good bartering tool, so I have a few cases on hand along with the regular essentials.

I own gold, silver and jewels in the form of jewelry as well as a few coins but I tend to look at those things as family heirlooms. As for market investing, I have a few stocks, a few bonds, a mutual fund or two, and then the rest of my "investing" money is in the forex where I usually hedge my bets, but if there was a major dollar collapse, I'd probably be a loser like the rest of the world. what I probably need to do is to get into the options market as well.

oh and I like forex because of the liquidity that is available and the fact that it is a 24 hour market.

good thread btw



[edit on 12-15-2006 by worldwatcher]

Just thought I'd mention that despite what I said in my earlier post, I see the market has some resiliency. The Iraqi stock exchange was back up an running about five minutes after the cessation of widespread bombing.

The market is resilient, so it's possible that a paper investment could pay off, even if the country stumbles.

If we are talking about probabilities, then the basis of the stock market is to just find the stock(s) and mutual funds that go up more than they go down. I like investments because you put money in, and for the most part, they make money for me with out me doing much work but doing the initial research.