The Chinese thing was a joke, BTW. I wouldn't recommend any Chinese stocks.
Posted on 02/13/2008 4:27:16 PM PST by oblomov
I am not in the habit of posting vanities, but I consider this an important topic, and I have not seen any articles in the MSM or alternative media about it.
As an investor, I try to consider the probability of various outcomes happening, and plan accordingly. Rather than react when it is too late, I prefer to plan well ahead and consider contingencies.
I regard the potential change in power in DC in 2008 as a distinct threat to individual financial security, and perhaps even to individual liberty. First, although McCain, the presumptive GOP nominee, claims that he will uphold conservative economic principles, I simply don't trust him. Worse still, I think the Democratic Party will contrast the relative youthful vigor of their candidate with the rigid, stilted, angry persona of McCain. I believe that the odds are in favor of a Democratic victory.
If it is Hillary Clinton by dint of a McCain-like media-driven "comeback", then the result with regard to economic liberty may be tolerable. It will be easy for GOP leadership to paint her as strident and extreme. I think her attack on the investor class could be blunted although the Dems might in fact control both houses of Congress and the Presidency for a while.
It's a bit of a different story with Molock Obama. The warped religious aspects of his candidacy, and the slavish, cultish devotion of his followers, is chilling. It surpasses the cult of personality that surrounded Robert Kennedy. In fact, it has no precedent in American politics to my knowledge. Neither does his stew of coded identity politics and vague references to "change", "hope", and "unity". What response might the GOP mount against this brand of socialist millenarianism? Frankly, I fear that the GOP has forgotten why it ever even defended capitalism against the socialist menace. It has devolved into a flaccid, socialist lite party. And further, I believe that the GOP will hold its fire because of Obama's race, so as not to appear "mean spirited" or some other euphemism for "racist".
So, the worst case is that Obama comes to power with a margin of victory sufficient to claim a mandate for infinite socialist change, plenty of favors owed to Move On and Soros, and two houses of Congress with perhaps a filibuster-proof majority in the Senate.
My question is: What might come of this, and how might we position ourselves so that we retain enough economic resources to fight back eventually?
The economic backdrop of a recession and continued collapses in the financial sector will provide an excuse for radical, authoritarian actions such as capital and currency controls. Not to mention the fleecing of the middle class as the boomers retire and the Democratic solution to the problem is to raise payroll and income taxes to draconian levels. Also, I can forsee the attempted nationalization of entire industries such as health care and mortgage finance. I could even imagine the confiscation of gold or other hard assets if treasury bonds crash. It's happened before here.
In such an environment, what vestigial patriotism I had would be wiped out. I would want to put my family and its financial security first.
Here are some ideas I have:
1. Invest in companies that provide services to the government, particularly audit, consulting, and IT. Examples: EDS, BE, ACN.
2. Invest in the fascist (public-private partnership) economy, or the companies that service it. Examples: Freddie Mac (FRE), Fannie Mae (FNM), Aggie Mae (AGM), Sallie Mae (SLM), First Marblehead (FMD).
3. Invest in alt energy and infrastructure materials companies. Federal spending in these sectors would go way up. There would be far fewer privatizations of infrastructure, so companies like Macquarie Infrastructure (MIC) might not do so well. I'm thinking of companies that have already run up due to China, such as Chicago Bridge & Iron (CBI), and FMC.
4. Put cash in foreign currencies, particularly the Yen, Swiss Franc, and Aussie Dollar. These can be bought with low fees as ETFs (FXY, FXF and FXA, respectively). But, at some point currency profits may be taxed at exorbitant rates. So, a bank account overseas might be better for the long run. I think the USD is going to rally here for a while, so maybe currencies are a speculation to make sometime in mid-late 2009.
5. Short asset management stocks, particularly the companies that have expanded with the deregulation of the financial system over the past 27 years. Short companies like Goldman Sach or Lehman Brothers (GS, LEH).
6. Stay away from any investment that purports to be "insured" or "government backed". First, the monoline insurance market is drying up as the insurers head into bankruptcy. Second, securities such as muni bonds are backed by property taxes, which will go into arrears as the housing bust persists.
7. Buy precious metals (gold, silver, platinum, palladium). Be careful, though, since I do put a small but significant probability (maybe 30%) on the government "asking" citizens to turn in their holdings. This leads to my last idea:
8. Open an account at Bullion Vault or GoldMoney. These institutions allow one to hold gold in Zurich, London, or the Channel Islands.
Please note that I do not advocate breaking the law in any way. Overseas accounts held by US citizens are liable for income tax, just like domestic accounts. But I do think that it might be valuable to have an account overseas, if only because it allows one to be more mobile. I also think there may come a time when it is much less easy to move money out of the country.
I little about me: I have no agenda. I'm not an alarmist. I've done well with my investments. I owned tech in the late 90s, and sold near the top in early 2000. I bought value stocks like RJR and CLF in 2000. I bought commodity stocks like BG and CME in 2001 and 2002, and gold miner stocks like ASA in 1999-2000. I was early to the subprime blowup party. I shorted FRE very successfully in 2003, but stopped out & lost money trying to short MBIA and Ambac in 2005, only to watch them collapse spectacularly in 2007. I try to be ahead of the curve.
I like 4 and 6 best. I have been curious about this topic, also. I have only been working three years, but have invested heavily in my 457. Between my husband and I, we have quite a nest egg. Because we are young we can take a hit, but I would rather not.
Shift all your money into Chinese tech. /s
I have to wonder if all Chinese investments will take a plunge with all of the bad Chinese imports. I just read today that major supermarket chains are no longer importing food from China. I know that it has nothing to do with tech, but I have to wonder. What do you think?
Buy gold. It’s better than money when the system devolves to barter.
Dimensional Funds.....income average in, hold, except to rebalance annually.....anything else is just gaming, and individuals really do not do well over time in “gaming.” Sure, some make bundles in the short run, but then, they usually lose bundles in the next short run. Take it from the experienced.....go here for more info...(and NO I do not work for them, but I do invest with them.
http://www.fundadvice.com/mcm.html
Heh heh..or Chinese banks...The China bubble will blow once the Dems try to put their stupid protectionist schemes or currency controls in place. “International bankers” will be blamed for the blow-up and its repercussions here.
Heh heh..or Chinese banks...The China bubble will blow once the Dems try to put their stupid protectionist schemes or currency controls in place. “International bankers” will be blamed for the blow-up and its repercussions here.
One strategy that I preach is the Roth IRA instead of the traditional. yes you lose a chunk of tax deferred growth, but when the Rats take power God knows what our income tax rates will be. Pay your taxes now! Get free money and don’t buy the advise that you will be in a lower bracket during your retirement.
The Chinese thing was a joke, BTW. I wouldn't recommend any Chinese stocks.
I’ve been giving this some thought for a while now. I’m not sure what I’ll do yet. I’ll wait for the outcome of the election. Depending on that outcome, I’ll have a few months to make a final decision.
Heh heh..or Chinese banks...The China bubble will blow once the Dems try to put their stupid protectionist schemes or currency controls in place. “International bankers” will be blamed for the blow-up and its repercussions here.
Sorry I didn’t get that. I have been arguing with a homeschool mom who is offended that I typed “i m a publik scewl teechur.” She thinks that I actually write like that. I am a bit frazzled! I am glad to know that my reaction to Chinese investments jives with others!
Your profits will still be taxed by Obama if you stay legal. Even if you leave the US, assuming you are a US citizen.
*in the form of "ammo"
Good point. Take your capital gains before Obama puts those rates up.
Yes, but if you don’t sell the other currency, a taxable event has not happened, and you won’t be taxed.
The growth of your personal fortune will end when your purchase of gold begins.
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