You must determine what kind of path you see being laid for the economy

Asset Management is difficult in a crazy economy.  We’ve been talking about the possibilities of deflation and hyperinflation. So if difficult times are ahead, which asset classes are the ones which will best safeguard and grow what you have been giving to steward?  We don’t know!  Please understand that this blog is meant to help educate you as a first step towards better asset management.  We try to convey our best understanding of the economy and how markets react to you.  It is up to you to determine which assets are the best for you to hold depending on which environments you believe are the most likely to occur.

We’ve made it clear that we believe some measure of hyperinflation is coming to the US Dollar, but at the same time, we also concede that we might be wrong about this and that there might only be dramatic deflationary depression.  We do believe that a deflationary crash will happen soon.  But we also believe the next shoe to drop will be worse.  But what’s important for you is what you believe!  If you believe as we do (or at least want to be prepared for all circumstances), it would be wise to practice careful asset management with both of these scenarios in mind as possible outcomes.

In the next series of posts, we will be discussing different asset classes and how we believe they will respond to the environment that we foresee.  But again, you must determine what you believe is the right asset management allocation for you based on what you see happening in the markets.

For instance, if you believe that we will not see a US Dollar devaluation and will instead only see a deflationary depression, then you should hold high quality bonds.  Those would be fine in that environment, but terrible in the environment that we feel is most likely.  So read carefully as many times as you need to.  And do as much outside research as you need to to feel comfortable about your decisions.

Finally, make sure that you have a substantial mix of whole life cash value, gold, silver, and foreign currencies that provide stability so that you are not overly concerned with the performance of your risky money.  The safe money you’ve established is far more important than these risky assets.  However, there is more potential for profit in the areas we will discuss in this series of posts….along with much more risk of loss.  Therefore, make sure that you are only putting money at risk that you are comfortable risking because these will be extremely volatile times.  We won’t be giving specific recommendations here because we don’t think you should be making an investment decision based on something you read on a blog, but we will talk about many different asset classes to help you start your journey of wise asset management in a crazy economy.

We’re excited to get started tomorrow.  Please forward this blog to any friends who you think might want to know about these things.

This post is Part 1 in the series How Will Different Asset Classes Respond to this Crazy Economy?

Photo credit: Mike Carter

There's no need to be discouraged if you're prepared for what God is doing in these times

Will hyperinflation make your current financial advice worthless?  We’ve been discussing the way hyperinflation would affect stocks, bonds, and real estate. Now, we’ll look to see how it would affect your cash.  Most financial advice is built on the premise that holding cash is safe and without risk.  But most financial advice has come about over a time span of less than a century and is based upon this limited history.  Looking at history over a longer period shows that current financial advice could end up being worse than worthless.  This financial advice could lead you to doing exactly the wrong things!

Cash in the bank will be worth less and perhaps worthless. Depending on how far the US Dollar falls, your savings that you feel is so secure will be no security at all as it loses all purchasing power.

Perhaps, this section is a bit grim?  We don’t want to butter you up, but instead tell you to the best of our abilities, what we believe will happen.  But there is incredible good news and we’ll end with a note about how to handle these times.  Yes, there are ways to prepare financially.  But that won’t mean you don’t experience the difficulty of these times.  These times have been foretold for thousands of years.  It’s an incredible blessing that we get to live in these times.  (Many of the religious among you will immediately assume that we’re saying Jesus will come down from the clouds in the next few years, but we didn’t say that and we don’t believe that.)

The Lord has shown us a little about these times, but there is much more that we don’t know than there is that we do.  One thing the Lord has made clear to us is that many of the religious understandings common today are of Man’s wisdom and are wrong, just as they were 2000 years ago when Jesus showed up to a very religious society to do God’s will.  This time will be similar.  In fact, everyone who wants to live a godly life in Christ Jesus will be persecuted (2 Timothy 3:12).

And it will all be exactly as it should be. God will offer His life to those who can focus on Him and give themselves completely to Him no matter what is going on around them.  God has spoken to us about these things and still we tremble hoping and praying that it includes us.   (Not that we doubt our salvation, nor that of those Christians who don’t experience the fullness of what He is offering.  But we long for the fullness of His Kingdom; to be raised in these days as a son who knows the Father and is doing His work!)  The full manifestation of this is still to come and it is at the end of a very narrow road.

So do not be afraid of these times. God is good and what He is doing is unbelievably gracious.  We do not intend to scare anyone, but to help you prepare.  I believe that when hard things come, they are much easier to handle if we know that God is in them and He has told us beforehand that they will happen.  There is important preparation you can do both in dealing with the soul and in financial areas.

We hope and pray that you are about them.  But even if you ignore all this, no matter how difficult things get compared to the life that you are used to living, God will bring you through all things.  And if you seek Him whole-heartedly and lay down your fear so that you can take up His life, this time will be a wonder and better in the most important ways than any you have known.  This will not be easy for most to do.  Most will discover that their lives are not truly sacrificed to Christ at all.  But if this is what we need to discover this fact, it is good to find out now so that we can experience the true life that He calls us to!  Financial advice is important, but what hyperinflation will really reveal is that God’s provision is what is truly important.  Better to live that reality sooner than later.

Next, we’ll begin digging deeper into specific asset classes and analyzing how each should do in the coming economic environment.

This is Part 11 of the series Hyperinflation and the Dollar. To use this as a growth tool to better understand your own calling, please read Pt 1, Pt 2, Pt 3, Pt 4, Pt 5, Pt 6, Pt 7, Pt 8, Pt 9 and Pt 10.

This video on the economy and the stock market  is part of a series which follows The Coming Storm that we filmed in November which describes in detail how and why we will see not only a market crash, but far worse in our economy.  If you have not seen this video, please go immediately and watch it for free so that you understand what you are facing.

This video on the economy and the stock market  is part of a series which follows The Coming Storm that we filmed in November which describes in detail how and why we will see not only a market crash, but far worse in our economy.  If you have not seen this video, please go immediately and watch it for free so that you understand what you are facing.

This video on the Financial Reform Bill  is part of a series which follows The Coming Storm that we filmed in November which describes in detail how and why we will see not only a market crash, but far worse in our economy.  If you have not seen this video, please go immediately and watch it for free so that you understand what you are facing.

This video on government outrage  is part of a series which follows The Coming Storm that we filmed in November which describes in detail how and why we will see not only a market crash, but far worse in our economy.  If you have not seen this video, please go immediately and watch it for free so that you understand what you are facing.

This video on hyperinflation signs and gold is part of a series which follows The Coming Storm that we filmed in November which describes in detail how and why we will see not only a market crash, but far worse in our economy.  If you have not seen this video, please go immediately and watch it for free so that you understand what you are facing.

This video on hyperinflation signs and gold is part of a series which follows The Coming Storm that we filmed in November which describes in detail how and why we will see not only a market crash, but far worse in our economy.  If you have not seen this video, please go immediately and watch it for free so that you understand what you are facing.

Your assets will be in for quite the rollercoaster ride in the near future

As a matter of fact, if hyperinflation happens (we’ve been discussing the reasons why it might here), most everyone will be totally starting over financially when we come out of it.  We’re going to spend a couple posts showing you the big picture of what the effects would be and then we will dig deeper and look at many specific asset classes.  Pay attention to each one because most people believe they are safe by doing exactly the sort of things which will be hurt the worst.

What are the financial affects of this kind of hyperinflation?

Generally, most investments will be crushed in an environment like this.  We’ll run through a few examples of what we think will happen to different asset classes if we do experience hyperinflation to some degree or another so that you can check these realities with the financial advice you might be getting elsewhere.

Most people think bonds are safe. This is common financial advice.  That’s because it’s been a long time since we’ve experienced any significant inflation and we’ve never experienced hyperinflation in this country.  A promise of a future stream of a certain number of US Dollars becomes worth less and less the more severe inflation is.  Bondholders will lose most everything.

Stocks will be a wild ride! We’ve already said we expect stock prices to go down considerably.  You will lose a lot of money in stocks.  Wall Street has taught most people to think that they’re in it for the long haul, so they don’t care about the short term fluctuations.  Most of these people will end up selling their stock holdings at the bottom of the market because they are so desperate for cash.  Stock prices will probably get extremely low.  After that, at some point, the prices of the best company’s stocks will rise dramatically.  If it’s a good quality business that has staying power, they will be able to sell their goods and earn a profit at whatever the new going rate is and thus will be a good hedge against inflation.

Many other companies will go out of business and their stocks go to zero.  Some companies will do very well in this environment because their businesses thrive in that environment so you should keep your stock holdings dedicated to this type.  We’ll cover the types of stocks we believe will do well in this environment below.

Real Estate will fall further and eventually rise dramatically. As people are broke and desperate, real estate prices will suffer for lack of buyers.  However, real estate is a real asset and so it will weather the storm and in the end be a great hedge against inflation to protect the value of your money.  But the time in between now and then will be difficult and many will be unable to pay their mortgages and lose their properties which they had expected to grow well.

If you have real money on hand during this time, there will be incredible opportunities to buy cheap stocks and real estate!

We’ll discuss other holdings (such as cash in the bank) tomorrow.

This is Part 10 of the series Hyperinflation and the Dollar. To use this as a growth tool to better understand your own calling, please read Pt 1, Pt 2, Pt 3, Pt 4, Pt 5, Pt 6, Pt 7, Pt 8 and Pt 9.

Photo credit: taranoel

There Are Only Four Possible Outcomes

1)      The US Government tightens its belt and balances the budget. Neither political party has done this, is calling for this, or has the willpower to do this.  It would mean drastic government worker (and whole department) layoffs and cuts to social security and Medicare that are politically unpopular and would push us into a much worse economy.

2)      The people & governments of the world decide they will sell off other more productive assets in order to support our insatiable need for debt. It is true that the US Dollar falling will be hard on the rest of the world and so there is reason for them to not want it to fall, but do you really think they are going to sacrifice everything that they have so that our Dollar will stay strong?

3)      Much higher interest rates. The more grotesque the US Debt becomes… the higher interest rate people will demand in order to lend us more money.  This means waves of inflation.  Think about credit card offers.  If you are a good credit risk, companies will offer you low interest rate credit cards.  If you are overloaded with debt, if you get any offers at all, they will be for extremely high interest credit cards.

4)      The US Government will print lots more currency to buy its own debt! They have already printed over a TRILLION new Dollars in the last couple years that didn’t exist before.  This is fiat currency that is only valuable if the rest of the world agrees it’s worth something.  The more we print, the more the world will decide that holding their wealth in US Dollars is like playing Russian Roulette.  Eventually the chamber with the bullet will come up and they will get their heads blown off.  (Sorry for the graphic illustration, but the stakes are this high!)

As stated above, the first two are incredibly unlikely to happen.  They simply won’t happen.  The rest of the world is not going to sacrifice themselves so that the US can live in luxury.  And although politicians will eventually be forced to make hard choices, they will not do this until the market forces them to do so and by then it will be far too late.

The last two options are likely to both happen. Either of these options causes a chain reaction which will be devastating to the purchasing power of the US Dollar as inflation kicks in.  Remember, we have this huge deficit of $1.5T each year with historically tiny interest rates.  Our government is assuming that rates which haven’t been this low since the 1950’s are going to stay this low for the foreseeable future.  This thinking is absurdly Pollyanna.  As interest rates rise the US Government deficit will balloon.  This will lower the value of the Dollar.  Instead of having to borrow $1.5T each year, we will have to borrow $2T, or $3T.  Again, this is money that simply does not exist in the world.  Where’s it going to come from?

Because others will not be buying the debt at low enough interest rates, our government will feel the need to print more currency to buy its own debt.  This will scare people around the world and cause them to sell the Dollar.  Again, this will lower the value of the Dollar and mean serious inflation.

This becomes a vicious downward spiral as higher interest rates cause more currency printing, which leads to higher interest rates…well you get the idea.

What this means to you is that your Dollars will not be able to buy what they used to.  What used to be cheap and easy to afford will soon cost you many of your hard earned Dollars.  Your bills to live a simple life could cost more than your paycheck!  This isn’t the Government’s problem, this is YOUR PROBLEM!  The economy will be in a tailspin and panic will be in the air.  Many, many people will be desperate and hungry.

But this can also be the greatest opportunity of your life!

If you place your savings in real money that has inherent value, these things will increase as the Dollar decreases in value.  While the price of everything else around you falls in value, your savings will increase in value!  You will have money to help others when they are the most desperate for help.  You will have money to buy real assets that others are desperate to sell.  You will have money to pay off the debt that has been a weight around your neck.  There is the potential for someone of fairly average means to become quite wealthy as the Dollar drops in value and real assets go on sale.  Your neighbors will only own Dollars which will be worth little.  If you have understanding of the times we are in, you can invest in assets which appreciate even while most fall drastically in value.

We’ll next look at the effects to you of this kind of inflation (but hopefully we’ll get some economic outlook videos made by then since it’s been a while.)

This is Part 9 of the series Hyperinflation and the Dollar. To continue with this series, click on Pt 10. To use this as a growth tool to better understand your own calling, please read Pt 1, Pt 2, Pt 3, Pt 4, Pt 5, Pt 6, Pt 7 and Pt 8.

Photo credit: evilsigntist