I guess i am too stupid to understand why there's any argument.
Besides the self-defense part of the Right to Keep and Bear Arms, the single most important issue as most of us have conveniently ignored is ..., right, the right to keep and bear arms ensures the political power resides in the hands of firearm owners, in this case, the people, nor the politicians, nor the governors, nor the president, but the people.
As the most famous, successful and greatest "communist," Chairman Mao, eloquently and literally said:" Only gun barrels produce political power." Go figure why after he took over the whole China, he immediately banned all firearms except for his military, and since then the communist party has had full control of the military. Nobody understand the importance of guns better than Chairman Mao.
Well, nobody except for the founding fathers of the United State. The United States is a nation of the people, by the people, and for the people. The political power must always remain with its people. The only way for that to be true and stay true is to ensure that the right of the people to keep and bear arms shall not be infringed. Those great men had an ideal to build an ideal country, but sadly the followers, us, are far from being so wise.
You want to call yourself American? Go get a gun, and better yet, get an AR15 with EOTech.
Monday, July 7, 2008
Friday, April 11, 2008
Is HK416 the greatest since humanity?
A simple answer. Hell no!
HK is great in advertising and promotion. Every little thing, they can gold-plate it so well that everybody think only HK products are worth buying. No matter what they do, many would think logical mind should always prevail; however, the world is filled with emotionally charged people where reasons and logic rarely exist.
Sticking a piston into an AR15 does not make it instantly superior. Firstly, piston design is even older than the AR15's direct impingement design. Countless manufacturers have produced pistons for AR including Colt - the army rejected such design change many times, but when HK finally did it and called it HK416, it's suddenly the greatest in the world? Anybody claims so is very dishonest to say the least. Why?
1.The 416 has NOT seen any major battle - compared to M16's 40 years combats in countless wars (note the plural)
2. The 416 has NOT not been properly tested by any major military/LE agency compared to M16/AR15 which is widely tested and accepted by many major armies in the world (note the plural)
3. The 416 has NOT been produced in any meaningful number to generate much statistics on reliability and usability - compared to M16/AR15 which is made into the millions (note the plural).
A weapon is just like everything else in the world. Adding any new feature, there's always a possibility that it causes more failures. It takes time and money to work out the bugs. When one compares HK 416 with M16 (AR15), there's no comparison - one must not make such comparison. Not because HK 416 is so much better, but it's mostly because there's hardly anything that can be used to compare.
HK is great in advertising and promotion. Every little thing, they can gold-plate it so well that everybody think only HK products are worth buying. No matter what they do, many would think logical mind should always prevail; however, the world is filled with emotionally charged people where reasons and logic rarely exist.
Sticking a piston into an AR15 does not make it instantly superior. Firstly, piston design is even older than the AR15's direct impingement design. Countless manufacturers have produced pistons for AR including Colt - the army rejected such design change many times, but when HK finally did it and called it HK416, it's suddenly the greatest in the world? Anybody claims so is very dishonest to say the least. Why?
1.The 416 has NOT seen any major battle - compared to M16's 40 years combats in countless wars (note the plural)
2. The 416 has NOT not been properly tested by any major military/LE agency compared to M16/AR15 which is widely tested and accepted by many major armies in the world (note the plural)
3. The 416 has NOT been produced in any meaningful number to generate much statistics on reliability and usability - compared to M16/AR15 which is made into the millions (note the plural).
A weapon is just like everything else in the world. Adding any new feature, there's always a possibility that it causes more failures. It takes time and money to work out the bugs. When one compares HK 416 with M16 (AR15), there's no comparison - one must not make such comparison. Not because HK 416 is so much better, but it's mostly because there's hardly anything that can be used to compare.
Wednesday, March 19, 2008
Chick Little - The economic crisis?
The incoming economic crisis? I am not going to cry as Chick Little.
Now, here's what I believe, in the next 2-3 years - I am not psychic, nor can I predict the future, so it's just my stupid opinion, and the rest you can read from the Internet:
1. I believe the sky is NOT falling, nor will the world come to an end.
2. I believe there will NOT be mass chaos in the United States, but increase in crime rate, probably
3. I believe the economic crisis has just began and there's more lying ahead of us.
4. I believe the US dollar will be significantly devaluated to probably 50-75% of what is worth now.
5. I believe the housing market will continue to drop till a medium average single family house is about $160K compared to the current $218K.
6. I believe gold will go over $1500/oz and stay there for a period of more than 1 year.
7. I believe stock market will fall and stay low in the next 1-2 years
8. I believe we will all pull out of this mess in about 5 years.
9. I believe most of us will be poorer after this mess and many will get their saving wiped out and must work for more years before retiring.
10. I believe Brittney Spears is getting too fat and ugly for my taste.
I actually hope I am wrong because I want to live in a peaceful time; on the other hand, i look forward to it as economy downturn is also a great opportunity for those who are prepared.
Now, here's what I believe, in the next 2-3 years - I am not psychic, nor can I predict the future, so it's just my stupid opinion, and the rest you can read from the Internet:
1. I believe the sky is NOT falling, nor will the world come to an end.
2. I believe there will NOT be mass chaos in the United States, but increase in crime rate, probably
3. I believe the economic crisis has just began and there's more lying ahead of us.
4. I believe the US dollar will be significantly devaluated to probably 50-75% of what is worth now.
5. I believe the housing market will continue to drop till a medium average single family house is about $160K compared to the current $218K.
6. I believe gold will go over $1500/oz and stay there for a period of more than 1 year.
7. I believe stock market will fall and stay low in the next 1-2 years
8. I believe we will all pull out of this mess in about 5 years.
9. I believe most of us will be poorer after this mess and many will get their saving wiped out and must work for more years before retiring.
10. I believe Brittney Spears is getting too fat and ugly for my taste.
I actually hope I am wrong because I want to live in a peaceful time; on the other hand, i look forward to it as economy downturn is also a great opportunity for those who are prepared.
Money comes from savings
The best ever book to read is "The Millionaire Next Door." Read it and it WILL change your life. Pay attention to how most millionaires accumulated enormous wealth throughout their life and how they unwisely spoiled their children (most of the time) and the wealth was gone within a generation or two.
Wealth is defined as "net worth," not "net income!" To accumulate net worth, you must have a positive number between "net income" and "net spending."
I am not going to burden anybody with all the statistics. The basic rule of wealth is that money comes from savings.
1. Be confident and secure about yourself - DO NOT TRY TO IMPRESS ANYBODY with material things!!! Actually avoid people who are easily impressed by material things because they are shallow and superficial.
2. live below your means - be frugal
3. spend your money wisely - mostly on things that hold long term value and/or generate income/dividend.
4. work hard
5. continue to educate yourself, especially on finances
6. get out of debt as soon as you can
For most people, 1 and 2 are very difficult. I am going to tell you this. Detach yourself from all the material stuff. You, firstly, need to be confident and secure. You must understand and demonstrate that you DO NOT NEED to impress anybody!!! Why do you need flashy cars, boats, fancy cloth etc.? The only thing those things can tell me is that you are unsure about yourself. You package yourself in those superficial stuff in hope that nobody would see the real you - the weak, the insecure, the boring and the empty.
Whom do we try to impress? I may be stupid, but I do not need to impress anybody. Girls? I need to judge if they are good enough for me before they judge me, and I get all the girls I want. Other people? What do I care about whether they think I am successful or not? I am successful. Period. :-)
Does it mean I am stingy? No, I am actually quite generous. I donate money to support the causes that I believe in. Does it mean I have no fun? Well, one of my hobbies cost me about $5000/year, and the other one costs even more. Go figure. Does it mean I make half million in a year? No, I am just a working class person just like many of you.
I don't drink, don't smoke, don't gamble, don't do drugs. My only vice is that I love women - the kind that is psychologically mature, knowledgeable, and beautiful. I detest shallow women who only know cloth, shoes, cosmetics, spending money, and partying. No matter how beautiful they are, if they have nothing to offer except for being pretty they do not deserve my attention!
Wealth is defined as "net worth," not "net income!" To accumulate net worth, you must have a positive number between "net income" and "net spending."
I am not going to burden anybody with all the statistics. The basic rule of wealth is that money comes from savings.
1. Be confident and secure about yourself - DO NOT TRY TO IMPRESS ANYBODY with material things!!! Actually avoid people who are easily impressed by material things because they are shallow and superficial.
2. live below your means - be frugal
3. spend your money wisely - mostly on things that hold long term value and/or generate income/dividend.
4. work hard
5. continue to educate yourself, especially on finances
6. get out of debt as soon as you can
For most people, 1 and 2 are very difficult. I am going to tell you this. Detach yourself from all the material stuff. You, firstly, need to be confident and secure. You must understand and demonstrate that you DO NOT NEED to impress anybody!!! Why do you need flashy cars, boats, fancy cloth etc.? The only thing those things can tell me is that you are unsure about yourself. You package yourself in those superficial stuff in hope that nobody would see the real you - the weak, the insecure, the boring and the empty.
Whom do we try to impress? I may be stupid, but I do not need to impress anybody. Girls? I need to judge if they are good enough for me before they judge me, and I get all the girls I want. Other people? What do I care about whether they think I am successful or not? I am successful. Period. :-)
Does it mean I am stingy? No, I am actually quite generous. I donate money to support the causes that I believe in. Does it mean I have no fun? Well, one of my hobbies cost me about $5000/year, and the other one costs even more. Go figure. Does it mean I make half million in a year? No, I am just a working class person just like many of you.
I don't drink, don't smoke, don't gamble, don't do drugs. My only vice is that I love women - the kind that is psychologically mature, knowledgeable, and beautiful. I detest shallow women who only know cloth, shoes, cosmetics, spending money, and partying. No matter how beautiful they are, if they have nothing to offer except for being pretty they do not deserve my attention!
Tuesday, March 11, 2008
Why do I not own a house?
A house is a liability until:
1. you collect rent that covers all expenses and some extra after tax.
2. you sold it
Owning a house does not make much of a financial sense if you can rent cheaper. Buying a house is more a lifestyle change rather than a financial investment. Bear in mind that you must not buy a house and automatically assume it would appreciate - that's not investment, but wishful thinking.
On average, American live in their houses for 3-5 years. This is a very short period of time to allow the house to appreciate - if it appreciates. In fact, house does not appreciate; it actually depreciates. The land/lot/location it sits on appreciates.
Strictly speaking - financially, owning a house means the following are money-down-the-drain:
1. property tax
2. HOA fee
3. interest payment
4. insurance
5. electricity
6. water and other utilities
7. general maintenance and upkeep - garden, lawn, housekeeping, fix-up
8. commute cost
9. lost interest due to money tied into house equity
Many often miss Point 9. Let's say you put $40,000 down and build equity through monthly payment. The $40,000+ could be generating interest just sitting in your bank - hassle free. On a 5% interest, that's $2000+ a year. If you have paid off your house, say, $400,000, that would cost you $20,000/year on lost interest.
If you add up 1-9 and it equals your rent, you are better off renting - financially speaking.
The biggest problem from owning a house is it's a liability that you cannot liquidize quickly. You often hear the term "house poor," meaning people get a house but cannot afford much of anything else. After you pay off your house, you still need to pay 1-9 above. When you need money-cash, you would be like sitting on a pile of cash that you cannot use.
It only makes sense that:
1. you go in at a market low
2. you can live there for a long time, 5-10 years minimum
3. you can rent it out
4. you wouldn't need the cash any time soon
1. you collect rent that covers all expenses and some extra after tax.
2. you sold it
Owning a house does not make much of a financial sense if you can rent cheaper. Buying a house is more a lifestyle change rather than a financial investment. Bear in mind that you must not buy a house and automatically assume it would appreciate - that's not investment, but wishful thinking.
On average, American live in their houses for 3-5 years. This is a very short period of time to allow the house to appreciate - if it appreciates. In fact, house does not appreciate; it actually depreciates. The land/lot/location it sits on appreciates.
Strictly speaking - financially, owning a house means the following are money-down-the-drain:
1. property tax
2. HOA fee
3. interest payment
4. insurance
5. electricity
6. water and other utilities
7. general maintenance and upkeep - garden, lawn, housekeeping, fix-up
8. commute cost
9. lost interest due to money tied into house equity
Many often miss Point 9. Let's say you put $40,000 down and build equity through monthly payment. The $40,000+ could be generating interest just sitting in your bank - hassle free. On a 5% interest, that's $2000+ a year. If you have paid off your house, say, $400,000, that would cost you $20,000/year on lost interest.
If you add up 1-9 and it equals your rent, you are better off renting - financially speaking.
The biggest problem from owning a house is it's a liability that you cannot liquidize quickly. You often hear the term "house poor," meaning people get a house but cannot afford much of anything else. After you pay off your house, you still need to pay 1-9 above. When you need money-cash, you would be like sitting on a pile of cash that you cannot use.
It only makes sense that:
1. you go in at a market low
2. you can live there for a long time, 5-10 years minimum
3. you can rent it out
4. you wouldn't need the cash any time soon
Thursday, February 28, 2008
the dollar is going nowhere but down
We are small time investors (if that), we cannot see or do much manipulation or speculation – only institutional investors can do that. What we can see is that, at macroeconomic level, the dollar is going nowhere but down.
The rest is just noise.
What we must remember it that It is not fundamental (industrial needs) but monetary demand that drives silver and gold prices. Keep that point in mind and never forget it. It is monetary (or investment) demand that ultimately drives both silver and gold, not fundamental.
At the macroeconomic level, there are 3 main factors affecting the value of our currency
1. Inflation
You can read what inflation is here in detail. In a short sentence, inflation is that too much paper currency has been printed/created causing the value of the currency to decrease and lose its purchasing power. The monetary demand, a desire to hold real money, is created when the fiat currency (paper) inflates to a point when it starts to affect our day to day life. For example, a loaf of bread jumps from $1 to $2 or $3. Once regular consumers feel this, it will trigger a much greater fled from paper to gold, creating a tremendous push for the gold price.
a.
a. National debtb. government deficit
c. trade deficit
d. war
All of the above 4 factors force the government to create more paper currency. They are essentially money-drains.
2. Key interest rate
Lower interest rate will cause that less people would like to hold their savings in this currency, especially those creditors around world. On the other hand, the economy and the sumprime mess are forcing the Fed to keep lowering the interest rate. What are the choices do they have? Lowering the interest rate seems to be the only logical solution to save both economy and foreclosures, of course at the expense of the dollar, meaning at the expense of our life saving.
3. The economy
Do I need to say more?
It is monetary (or investment) demand that ultimately drives both silver and gold, not fundamental.
Monday, February 25, 2008
Which gold or silver? And why?
Since this is just my stupid opinion...
There are many ways investing in gold and silver, all precious metals, actually. Things have never been easier to buy gold/silver in all forms - physical, paper or electronic. They often carry very little premium - dealers typically sell them with percentage above current gold/silver market price. 1-3% should be what you aim for.
Most time, when you buy and sell physical gold/silver (bar, bullion etc), payment is done through credit card, wire transfer, check or money order. In today's world, easier than buying a pair shoes from Walmart.
1. Physical bar
2. Physical bullion coin
3. Holding account
4. Pool account
5. ETF
6. Precious metal stock
7. Certificate
I'll ONLY explain the technical pros and cons as I see it, but let you make the decision on what to do. Read the 10 Commendment of Buying Gold and Silver if you haven't.
Place to sell
The companies and websites I list below all buy precious metals. You can sell your holding (physical or electronic gold/silver) back to these dealers with ease. Should you wish, you could just sell to some local gold dealer. Try not to sell them to pawn shops though.
Sales Tax
Many states California, Texas, PA, and many other states do not charge sales tax on bullions trade over $1000
Check with your state law.
Physical bars
These things go from 1 oz to 100 oz. In gold term, 100 oz means a lot of money, $100,000; in silver, it's about $2000 market rate.
The problem i can see is that they are not very liquid, especially not dividable. In time you need the money, it can be difficult to sell as who would pay $100,000 at a time? Probably, not even $2000.
They are good in terms of being recognized by international banks. In America, you would have no problem selling them as long as they are made by reputable mints such as Johnson & Matthey, A-mark, Wall Street Mint or Englehardt, even Sunshine.
The Tulving Company
Kitco
BullionDirect
Physical bullion coin
These are typically 1 oz gold or silver coins. They do have smaller oz in gold.
Popular brands are:
Gold: Krugerrand, American Eagle, Mexico 50 Peso, Canadian Maple (24K), China Panda (24K)
Silver: American Eagle (SAE), Canadian Maple, Sunshine Eagle
Bullion coin is the awesome way to invest. Not only they are internationally recognizable, but they are really easy to store, transport and sell (dividable).
If you are in for investment, stick to the popular brands. Do not ever buy any no name or memorial coin. I am not even into the Sunshine Eagle or China Panda.
The Tulving Company
Kitco
BullionDirect
Many also recommend US 90% Junk Silver bag sold at $1000 face value/bag. These are US dollar coins minted before 1965 in the denomination of 10c, 25c, 50c, and 1 dollar. All of them contain 90% of silver. This is highly recommended in 10 Commendment of Buying Gold and Silver
My reasoning behind this is:
a. it's a lot of coins to sort through (more than 1000 per bag)
b. it's a lot of weight to store (each bag weighs more than 50 lbs)
c. it takes a lot of room
d. less chance to sell, majority of the people know what Silver American Eagle is, but junk coins?
Holding Account
The most popular holding account is www.goldmoney.com. BullionDirect also allow you to hold the metal till you tell them to deliver.
If you like electronic gold/silver, Goldmoney is probably the best way to go; they are very popular and very international. . Another choice is Kitco's pool account explained below.
Goldmoney sells you allocation of their gold storage and charge you a monthly fee. From what they tell us, it seems they actually have the gold.
Their monthly fee is kind of OK, but their prices of metals are kind of high. What you can do is buy gold through Kitco, who is a reseller of Goldmoney. You will get a break that way.
Pool Account
Pool account is something offered by Kitco, a Canadian based company. It's interesting concept that you can put your money and buy precious metal in a pool. Whenever you want to get delivery, either metal or paper, you just sell all your holding to Kitco and ask them to mail you a check or a bunch of gold.
ETF
ETF (exchange-traded fund) is actually a kind of stock. There are currently two ETFs available, Gold (GLD) and Silver (SLV).
You can open a stock trading account with TDameritrade or Etrade etc. to buy and sell these ETFs
There are a lot of benefits buying these ETFs, especially you are a day trader. You can set up all kinds of fancy stock trading methods to trade them as much as you like.
Precious Stock
I am not familiar with any gold stocks, nor do I want to pour more money into stock market.
Still unsure what to do? Remember what we said in other posts?
1. Go international
2. Diversify
3. Educate yourself
4. Be prepared
Used the same principle in investing in precious metals.
Please note I use the word "precious metals," plural. Don't limit yourself just in gold and silver. Try Platinum and Palladium too.
Read the 10 Commendment of Buying Gold and Silver if you haven't. Read all articles on that website too.
There are many ways investing in gold and silver, all precious metals, actually. Things have never been easier to buy gold/silver in all forms - physical, paper or electronic. They often carry very little premium - dealers typically sell them with percentage above current gold/silver market price. 1-3% should be what you aim for.
Most time, when you buy and sell physical gold/silver (bar, bullion etc), payment is done through credit card, wire transfer, check or money order. In today's world, easier than buying a pair shoes from Walmart.
1. Physical bar
2. Physical bullion coin
3. Holding account
4. Pool account
5. ETF
6. Precious metal stock
7. Certificate
I'll ONLY explain the technical pros and cons as I see it, but let you make the decision on what to do. Read the 10 Commendment of Buying Gold and Silver if you haven't.
Place to sell
The companies and websites I list below all buy precious metals. You can sell your holding (physical or electronic gold/silver) back to these dealers with ease. Should you wish, you could just sell to some local gold dealer. Try not to sell them to pawn shops though.
Sales Tax
Many states California, Texas, PA, and many other states do not charge sales tax on bullions trade over $1000
Check with your state law.
Physical bars
These things go from 1 oz to 100 oz. In gold term, 100 oz means a lot of money, $100,000; in silver, it's about $2000 market rate.
The problem i can see is that they are not very liquid, especially not dividable. In time you need the money, it can be difficult to sell as who would pay $100,000 at a time? Probably, not even $2000.
They are good in terms of being recognized by international banks. In America, you would have no problem selling them as long as they are made by reputable mints such as Johnson & Matthey, A-mark, Wall Street Mint or Englehardt, even Sunshine.
The Tulving Company
Kitco
BullionDirect
Physical bullion coin
These are typically 1 oz gold or silver coins. They do have smaller oz in gold.
Popular brands are:
Gold: Krugerrand, American Eagle, Mexico 50 Peso, Canadian Maple (24K), China Panda (24K)
Silver: American Eagle (SAE), Canadian Maple, Sunshine Eagle
Bullion coin is the awesome way to invest. Not only they are internationally recognizable, but they are really easy to store, transport and sell (dividable).
If you are in for investment, stick to the popular brands. Do not ever buy any no name or memorial coin. I am not even into the Sunshine Eagle or China Panda.
The Tulving Company
Kitco
BullionDirect
Many also recommend US 90% Junk Silver bag sold at $1000 face value/bag. These are US dollar coins minted before 1965 in the denomination of 10c, 25c, 50c, and 1 dollar. All of them contain 90% of silver. This is highly recommended in 10 Commendment of Buying Gold and Silver
My reasoning behind this is:
a. it's a lot of coins to sort through (more than 1000 per bag)
b. it's a lot of weight to store (each bag weighs more than 50 lbs)
c. it takes a lot of room
d. less chance to sell, majority of the people know what Silver American Eagle is, but junk coins?
Holding Account
The most popular holding account is www.goldmoney.com. BullionDirect also allow you to hold the metal till you tell them to deliver.
If you like electronic gold/silver, Goldmoney is probably the best way to go; they are very popular and very international. . Another choice is Kitco's pool account explained below.
Goldmoney sells you allocation of their gold storage and charge you a monthly fee. From what they tell us, it seems they actually have the gold.
Their monthly fee is kind of OK, but their prices of metals are kind of high. What you can do is buy gold through Kitco, who is a reseller of Goldmoney. You will get a break that way.
Pool Account
Pool account is something offered by Kitco, a Canadian based company. It's interesting concept that you can put your money and buy precious metal in a pool. Whenever you want to get delivery, either metal or paper, you just sell all your holding to Kitco and ask them to mail you a check or a bunch of gold.
ETF
ETF (exchange-traded fund) is actually a kind of stock. There are currently two ETFs available, Gold (GLD) and Silver (SLV).
You can open a stock trading account with TDameritrade or Etrade etc. to buy and sell these ETFs
There are a lot of benefits buying these ETFs, especially you are a day trader. You can set up all kinds of fancy stock trading methods to trade them as much as you like.
Precious Stock
I am not familiar with any gold stocks, nor do I want to pour more money into stock market.
Still unsure what to do? Remember what we said in other posts?
1. Go international
2. Diversify
3. Educate yourself
4. Be prepared
Used the same principle in investing in precious metals.
Please note I use the word "precious metals," plural. Don't limit yourself just in gold and silver. Try Platinum and Palladium too.
Read the 10 Commendment of Buying Gold and Silver if you haven't. Read all articles on that website too.
The biggest mistake in my life...
I got married.
OK, it's a joke. I am actually talking about financial life. Until very recently, I discovered, after reading the amazing story wrote by FerFAL about surviving the Argentina Financial Crisis, how dangerous my financial situation was.
OK, it's a joke. I am actually talking about financial life. Until very recently, I discovered, after reading the amazing story wrote by FerFAL about surviving the Argentina Financial Crisis, how dangerous my financial situation was.
To put things in perspective, we live in America, where average American has $10,000 credit card debt. Like many frugal people, especially after reading The Millionaire Next Door, (read it, if you haven't) we have been living way below our means - not to starve ourselves of course, we each healthy food, we are comfortable and we travel worldly - I'll talk about it in a different post.
We thought we were well off.
I was dead wrong.
The problem is that all our saving, literally, all of them were in US dollars!!! They spread in between stock and cash/cash equivalent. We do not own any house or hard asset - that's another topic.
What's wrong with US dollars backed by “the full faith and credit of The United States government”?
There are many articles about this. Here's a brief summary:
1. The United States is one of the MOST irresponsible governments in the world, financially! 9.3 Trillion in debt. $30,000 per American citizen. Try to play this at home and see if the wife and kids let the hubby manage finance anymore when he runs $30,000 debt per person. Sadly, we elect one president after another playing with OUR money!!!
2. The US dollar is the world currency (note the word "currency") and the only internationally accepted currency. For example, oil must be traded in US dollars. Because of this, the United States is free to and has been printing as much paper currency as "deemed necessary". When there's too much paper, the currency will inevitably inflate, losing its purchasing power. By the way, the currency, backed by “the full faith and credit of the United States”, is printing at an annual rate of 8% as of 2006 - oh, the government stopped publish that information since 2006 - HINT HINT.
3. The world's largest creditors, Japan, China and Mid easterners, all hold US government debt in US dollars. They also run significant trade deficit to the United States, meaning, they export goods and services to US far more than they import goods from the United States, causing more US dollars flowing out and into those countries.
Nice work!!! While the people in those countries work till their backs break, we just pay them some paper at a cost of $0.03/page. By the way, mostly American companies help greatly on increasing the trade deficit by outsourcing.
4. No people in the world have access to "credit" so freely like American. Everybody has got more than one credit cards, and everybody has got a nice house - on mortgage.
So what's the problem? The problem is how much longer countries like Japan, China and Saudis would like to send the United States real goods and services in exchange of some paper which is being printed by an financially irresponsible country and is rapidly depreciating?
One day, those countries will say: "Enough is enough. I am switching from US dollars to Euros." China already signaled that they would do that, and my suspicion is that this has already been on the way. The Arabs already started to talk about an Arabic currency. The Persians already forced all their oil trade to be done in currencies other than US dollars.
At the macro level, should any major event happens, the US dollar would take a roller coaster ride, going down, hard!
Now come back to myself, because of the fact that I had no hard asset, no house, etc., the only thing left for me would be a bunch of paper, which would worth significantly LESS, should the US dollar go down.
Even for those who own their houses - majority of the American people only have their savings in retirement fund (401K, IRA etc.) and in their house. A joke said that should the dollar go down anywhere else, there would be bank runs - people running to their banks to withdraw their money. In America, there would NOT be bank runs, average American's deposit in their banks is negative. There would be actually house runs - banks recall their loans - house mortgage to be paid in full NOW!!!
Now this is my mistake #1, relying on one single currency while holding no tangible asset.
The question is not if the US dollar will go down or not, the question is how soon and how hard?
As soon as I realized this, I couldn't sleep well. With all the things are going on, tax cut, the war, more society benefits, etc, etc, etc, does even one single presidential candidate - front runners - DARES to answer this question, without some political mumble jumble, a clear and solid answer:
WHERE THE MONEY IS COMING FROM TO PAY FOR ALL THESE???
Nada!
Well, I don't want to end up with nada!!!
There are awesome advices offered by FerFAL. I'll elaborate in a different post. The following are a few key points:
1. Go international (ever thought why I list this as No. 1?)
2. Diversify
3. Educate yourself
4. Be prepared
Cash is trash and gold/silver is money. The only way to preserve wealth is to hold something tangible such as properties (land and house) - great speculation risk and precious metals. History has proven again and again and again, any currency not backed by tangible asset fails sooner or later, and more importantly, by the end of the day, gold/silver is the king of the world - we are just blinded to see the king.
Now, I am not advocating the end of the world scenario, but I do believe that we are going through a series of currency devaluation due to mismanagement of our government and banking system and the life style majority of us are choosing to live. How bad is it going to be? I think the dollar will be worth 50% of what it is now in 1-2 years, and oil will be over $5/gallon. It will not be the end of the world because many countries will join force to save each other and USA. Most of us will lose our shirts and pants - our life savings, those who don't save would fall below poverty, causing higher crime rate; however, some of us will profit heavily from it.
Most people see economical down turn as a disaster; there are a few who believe it's an opportunity!
The year 2008 is going to be very interesting!Learn from the mistakes 1/3
I am breaking down this part into 3 sections. You can skip to the section that you find interesting:
1. financial
2. physical
Financial
Remember FerFAL? Read his blog if you haven't
1. financial
2. physical
Financial
Remember FerFAL? Read his blog if you haven't
I, by no means, claim to be an expert or anything. I just put down my thoughts on how to secure my savings. I welcome all of the readers post comments.
As I said before, most people see economic downturn is something inevitable and they must ride it through while some others believe it's an opportunity that they have been waiting for and they can profit from. In reality, well managed wealthy people don't fear the downturn, they often come back even stronger.
Now let's look at the three key points I mentioned before:
1. Go international
2. Diversify
3. Educate yourself
4. Be prepared
Go International
The only economic downturn that can affect the whole world is the fall of USA, China or Japan. Even then there are parts of the world that would not be affected.
Wealthy people often have their asset spread around the world. Now I don't mean we must reach the level of Warren Buffet or Bill Gates to be called "wealthy." Wealth is a relative term. To many, actually probably 80% of the world, everyone of us who can read this post is fabulously wealthy!
More importantly, "go international" is NOT about money. It's about mentality!!! The mentality that you can work and live comfortably in more than one country. If you don't speak anything but American, hey, many countries speak English. In fact, once you step outside of the United States, you will definitely find a brave new world. Opportunities, people, money, culture, and food. There are more than just football, fried chicken, freedom fries, and steak hamburgers.
In my culture, we have a saying: a shrewd rabbit has three rabbit holes. You don't necessarily need three, two would do just fine.
In fact, more and more American go to South America and buy properties there (do it while you still can - before the $ falls), they rent them out to collect monthly income. Should anything go south, they go south too, but for vacation :-) Again, those are not Bill Gates, they are regular American just like you and me.
Now, some may ask, where does the money come from? I'll answer it in another post.
Diversify
Here's something I cannot really find in any general "investment" book unless it's specific about this topic.
When talking about "diversify," most often talk about the classic allocating money in between bond, security, stock, mutual fund, CD, cash and properties. There's one problem, all of them are in one "currency".
Note the word "currency." Currency is not money; money has real value while currency is what people call "fiat money", meaning the government says it's "money" and we trust our government. They say $1 can buy one loaf of bread, then that's how the life is.
What happens when the government betrays our trust? (note I used the word "when," not "if") Never happened? Every government in the world history betrays its people's trust. Would never happen in America? Google "gold confiscation" by the beloved FDR or here
When the government prints too much money to support its deficit and debt, now you need $3 to buy 1 loaf of bread even though the government still says it must be $1. Your "diversified" net worth just takes a hit of 66% depreciation.
I don't think anybody would appreciate this very well.
Look at what happened in Argentina, all the sudden, their peso:dollar dropped from 1:1 to 1:3. No credit card was accepted anywhere. Period! Banks closed their doors and set a limit of daily withdrawal of 10 pesos, with which you must pay for bread, bills, and transportation. Unemployment rate skyrocketed.
Yeah, you, like me, may be sitting on a pile of cash, stock, house, etc, but none of them can be converted to money to pay for stuff, not even the basic food.
Now this was my mistake, relying on one single currency while holding no tangible asset - all my savings were in cash/cash equivalent, stock, bond and mutual funds since I don't own any properties.
To avoid this, and in a long term to make a profit (5-10-20 years), it is my stupid opinion that all of us must invest a significant portion of our savings (1/4-1/2) in:
a. precious metals - gold, silver, platinum, palladium
b. properties - buy them at housing market bottom (however, when every Joe Blow talks about investing in real estate is a great idea, it's about the time to sell)
Go international!!! Buy them and store them in another country!!! I cannot stress this point more!!!
Why gold?
Gold is and has been the only REAL MONEY of the world since there's human. Actually, silver is, such as the Great China had been on silver standard for 5000 years and only broke off in 19xx, but that's another story.
Gold, the precious metal, cannot be mined as much as we want. Every year, whatever we do, we can only get 3-4% of increase of production. It's also very inert, meaning it does not decay or rust, and it is used a lot in industry and jewelry business.
Why is gold so important? Gold backed dollar was the real money. Since breaking off the link between the dollar and gold in 1971, special thanks to the great President Nixon, our beloved government can finally print as much paper currency as they want!!!
What a lovely world!!!
We, most of us, have forgot gold is the money.
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