Posted on 11/25/2009 10:40:44 AM PST by blam
Another Crisis Looms Right Around The Corner
by: The Housing Time Bomb
November 24, 2009
Folks, I consider this to be one of my most important posts. I am going to offer a warning and some advice.
I am extremely concerned about the things that I am seeing in the markets. The US dollar carry trade, soaring gold, and the apparent imminent passing of health care reform are the last straws that are going to eventually break this market's back.
As a result, I have tweaked my investment strategy. I will explain my concerns in further detail later on in this post.
Here is my advice: Raise Cash!
If you are looking for a number, I would have enough physical cash at home to pay one month's worth of bills. I would also advise having 6 months' worth of available cash in a safe conservative bank or credit union.
If you do not have the money to do this and live paycheck to paycheck, I would suggest cutting back your 401k contributions to the minimum amount at which your company matches.
For example, if you contribute 10% to your 401k and your company matches dollar for dollar up to 4% then you should drop your contributions back to 4% until you raise enough cash.
I did this in my own 401k within the past month. 401ks are great because they cannot be touched if you go bankrupt. However, I'll be honest folks, if it wasn't for that, I would probably advise you to liquidate the whole damn thing.
I say this because taxes are going to soar down the road as a result of our bulging deficits. You would probably be better off taking the 50% hit on your 401k now because at the rate we are currently spending, the tax rate might be 70% or higher when you are retiring and getting ready to use it.
Remember, when we paid off our war debts in the 40s, the tax rates for the wealthy were as high as 90% as seen below:
"During the Great Depression and World War II, the top income tax rate rose from pre-war levels. In 1939, the top rate was 75% applied to incomes above $5,000,000 ($75 million 2007 dollars). During 1944 and 1945, the top rate was its all-time high at 94% applied to income above $200,000."
There is no reason why we won't see the same thing happen all over again if we ever plan to pay off our trillions in debts.
Our debt vs. GDP is completely out of control. It's beginning to make The Great Depression look like a walk in the park:
[snip]
Related
http://www.businessinsider.com/how-the-home-buyer-tax-credit-is-bankrupting-the-fha-2009-11
http://www.businessinsider.com/henry-blodget-house-prices-are-still-too-high-2009-11
The problem with the high tax theory is it does not take into account this governments amazing ability to print money, and to continue to borrow.
I think more likely the dollar will spiral down in value, bringing up the value of p. metals and stocks and bonds(because there will be bargins to the holders of foriegn currency).
Having a months cash on hand is not a bad idea. I am thinking along those lines myself in case of a Bank Holiday.
I have a better idea. Hoarde as much cash as you canbuy as much food, water, medical supplies, guns, ammunition, non-hybrid seeds, and land outside of populated areas. Become a farmer and rancher. Food will be scarce and expensive. I believe riots and martial law will grip the population centers. I am an insurance agent and some of the finance experts believe collapse is imminent. Whether they pass healthcare or not it doesn’t matter. The economic collapse is underway and there is nothing to stop it. All the actions being taken by the government are designed to collapse the system and institute control.
GET OUT OF POPULATED AREAS. I PLAN TO LEAVE WITHIN 12 MONTHS.
TheArizona
And I'm not sure if even two years worth of cash, and a six month supply of nonperishables, is going to be enough.
Bad idea. Instead, I would recommend "withdrawing" from your 401(k) plan through a loan to yourself (up to 50% of the current account value), and leave the rest in riskier investments. My rationale is as follows:
1. The interest rate will be very low (around 4%-4.5% these days).
2. You're paying yourself back.
3. If the stuff hits the fan, you lose your job, and the remaining funds in your 401(k) account really tank . . . then you just walk away and don't repay the loan.
With regard to Item #3 . . . The purpose of the "50% rule" for 401(k) loans is to ensure that you have enough money in the account to repay the loan in the event of a default. But if everything tanks and your investments lose a lot of their value, the outstanding balance on your line may exceed the remaining value of your 401(k) by a wide margin. If that's the case, then YOU have a lot of leverage over: (1) the institution that holds your 401(k) investment account, and (2) Uncle Sam (since your loan balance is for a loan drawn from untaxed savings).
I agree. But when the shtf, and there is no clean water pumping through the pipes, no one manning the electric and gas companies or it’s diverted to the cities and not the rural areas....I think we should also plan on backup heat, water supplies and disinfecting etc...
Read for later bookmark
I am talking about no electricity or running water. I mean get off the grid. I mean having a self sustianed lifestyle not burdened by the tyranny of goverment. There will be none of lifes conveniences but you will still be free. No electricity will soon be on its way. Remember, Obama said he intends to put coal power out of business ie Cap and Tax?
TheArizona
If the dollar goes down it doesn't affect the "value" of precious metals and equities, only the cost.
Also, be sure to check for any additives (scents, etc) that might be in anything you would use to disinfect water.
Finally, of course, one should have a good water filter. The name I keep hearing bandied about is "Berkey" FWIW.
That's too much cash. It could be worth a tenth of what it is now by the end of two years. Convert it into something of inherent value.
I tend to agree with you.
When I say cash I don't mean all American dollars and I don't mean all paper.
I probably have about 4 months worth in American paper dollars.
http://samvak.tripod.com/nm049.html
The Fabric of Economic Trust
Once the ‘trust’ is gone, catastrophe follows, everytime.
You hit the nail on the head, put money into things that will hold value in challenging times, food, fuel and firearms are a good start.
I could care less about value (although, I see your point) I am only interested in survival for years.
I have stores of food water seeds fertilizer suture kits medical supplies tools so on.
I might suggest to freepers to find a way to communicate after the collapse and martial law in order to survive by strength in numbers.
TheArizona
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