Shortly after publishing our article, “What Happens When All Our Wealth Is Gone?” I received a heartfelt letter from subscriber Bill C. He speaks for many concerned, hard-working people:
“First, I want to THANK YOU for writing a top notch and informative newsletter. It is one of the few emails that I get that I read immediately upon receipt.
…. During the last little while, I have been concerned about my (our) financial future given all the nonstop spending by the Washington elite. …. I fear there is no possibility of pain free retirement.
Here is my dilemma and maybe you could use this as fodder for some future writings and “advice”. My wife and I have been good at saving for retirement (not great but good) and I’m concerned with how to best “protect” that resource going forward. I’d like to think that others are asking the same question: “What can I do to first “protect” what we have saved, and then what could we do to “grow it” just in case we end up living forever (ha! ha!).
I realize there are several investment techniques such as dividend investing, covered calls, etc. but, and a really big “BUT”; we are exposed to the inevitable whims of the market and always the possibility of a catastrophic hit to the portfolio. The biggest unknown is the government. They can change the rules at any time.
When I think about this kind of stuff, I realize that there really isn’t anyone that you could have a conversation with, that is a current financial professional, who can or will really be able to provide good, sane advice other than invest in the market, with many pushing you into their fee-based products.
For instance, would it be smarter, at this point in time, to invest in real estate versus stocks, bonds etc.? My thinking is besides having something tangible; it would be a way to “protect” my money from the government tax hounds because I’m sure that as we go further down the rabbit hole of spending and giving everyone everything, the rules of what we have been able keep will be taken away.
Anyway. I hope this triggers some thoughts/subjects for future missives.
Good luck and good health.”
Bill voices what I hear regularly. We grew up believing you work hard, play by the rules, save your money and eventually you can retire. The goal is to enjoy your few remaining “golden years” as you see fit – without having to constantly worry about money.
Reflections
I want to address some of Bill’s comments.
A recent item, passing as a joke, caught my attention; We can all agree that in 2015 not a single person got the answer correct to, “Where do you see yourself 5 years from now?”
Reflecting back, in 2008; no one would have correctly answered, “Where do you see yourself 12 years from now?”
There is nothing funny about a deadly lab created virus, or the government bailing out corrupt banks while destroying the retirement plans of millions. Baby boomers were entering their retirement years. Bill was right, we must play by the rules, yet the government changed the rules – big time!
Right after the bailout, I attended a ROMEO (Retired Old Men Eating Out) club breakfast. We were all scared. I was fortunate. Our CDs were called in, our interest income was cut by 2/3; but we didn’t lose any money. Many retired friends, heavily invested in the market, saw their 401k balances drop in half. Some had to sell at the worst possible time, to pay their bills.
The friends who were unaffected had government pensions, including medical care. One friend, a cruise ship “frequent traveler”, reports a huge percentage of people they now meet are retired government workers. The rest of us are doing what we can to adjust to the new reality.
Since the bailout, interest rates have plummeted, with much of the world offering NEGATIVE rates. In mid-2019, QZ.com reports:
“More than $13 trillion worth of debt is paying a negative interest rate. Bloomberg’s Joe Wiesenthal caused a stir…when he tweeted that negative rates are in fact the natural order of things, arguing that assets are a store of value that provide a service. According to this thinking, it makes sense for investors to pay someone to hold their money.
| In economics, “natural” is the market price that reflects risk, risk tolerance, supply, and demand. An unnatural rate suggests a distortion either from the government or a market failure. |
…. Negative rates could be natural if the world has changed, and it may have.”
Natural, my butt! The government absolutely distorts free market interest rates.
Investors historically relied on interest from CDs and quality bonds to pay their bills, without worrying about losing money
Chuck Butler recently updated the score card:
“There’s something like $19 Trillion in Gov’t bonds with negative yields on the global markets…. What’s a few Trillion more? And if they counted “real yield”, where you subtract inflation…then the U.S.’s stable full of Treasures would be added to the mix…. And people buy these negative yielding bonds? Instead of getting paid for safety, you’re paying for it! What on earth are these people thinking?”
Yes Bill, the government keeps changing the rules. If you want reasonable interest income, you run the risk of default.
Low interest rates may be the new order, but there is nothing natural about it. Why is the stock market high, despite a sluggish economy? Where else can investors go to protect their wealth?
Challenging? Yes. Helpless? No.
One positive note, people are waking up. One ROMEO member remarked, “Regardless of how we made our money, we are all money managers now.” Turns out he was a prophet. We can’t afford to be passive.
Here is a good place to start:
“You have power over your mind – not outside events. Realize this, and you will find strength.” — Marcus Aurelius, Meditations
We demand our government reinstate Glass-Steagall, return to the gold standard, reign in spending and stop bailing out the banks. We then complain when nothing happens, regardless of which political party is in current favor.
That ship has sailed. The government is hell-bent on free stuff for everyone, no matter what the cost! Print and pretend it is real money….
Once we accept that we have no power over these events, but we still have power over our minds and nest egg, we can move forward.
Opinions are like noses; we all have one!
Here’s my opinion. While we can look at history; a lot of financial professionals’ tout computer generated trading and investment allocations; we must be cautious. They are based on history.
Since the bank bailouts, interest rates have hit historic lows, the political class is going nuts, government deficit spending worldwide is astronomical and lab created viruses have weakened us all medically and economically, while no one trusts the media.
| These are unprecedented times; no historical model factored in these events in 2008 & 2015; we have no clue about what is coming next. |
Some (myself included) believe hyperinflation will come (eventually) followed by a currency collapse. Who knows what else? Collapse of the economy, government, war or civil war? Like the old cliché, expect the unexpected.
You mentioned taxation. Our article about Modern Monetary Theory (MMT) outlines the political agenda. True advocates of MMT wouldn’t raise taxes, they would lavish free money for everyone. Tax increases would just be political window dressing.
I feel the real threat to our wealth is inflation. While the government may think they can keep it under control, they can’t…or the Weimar Republic, Argentina, Zimbabwe and other countries would have done so.
While current events have been of historic proportions, history suggests these type events usually end badly.
A little advice
Play by the rules, don’t play games. When it comes to the government, and your money, you can run but you can’t hide – even outside of the US. There are rules for reporting and I recommend compliance with the law. It’s a matter of practicality, let the IRS catch you misbehaving and there will be hell to pay. (Ask Martha Stewart.)
Bill asked about where to invest “real estate versus stocks, bonds etc.?” Diversification is important, avoid guaranteed money losers, and include assets that protect against inflation. I see Bill Gates is buying farm land.
Jim Rickards opines:
“…. Once it becomes apparent to markets that you are monetizing all the new debt, confidence will erode, rates will climb and this pyramid scheme will collapse.
And once confidence is lost, citizens can turn to land, gold, silver, natural resources and other hard assets as dollar alternatives.”
A dear mentor, Charlie, was from rural Alabama. He was very successful. He told me, “Miller, when my daddy died, I inherited 40 acres and a mule. No matter what, I ain’t selling! I can go back to my roots if I have to.”
Our nation, our culture and our people will survive. Despite what has happened, I’m sure old Charlie passed on the 40 acres to his children with the knowledge of what to do if need be.
Bill, I’m encouraged by my readers, most are independent and will do whatever it takes to survive and thrive through tough times. Stay on top of things, be flexible, and stay close to your family.
