What Should I Do?

Starting Your Investment Plan

Monday, October 3, 2011, 8:02 PM

This post has been elevated from the enrolled forums section. It is the introductory piece of a series on 'How to construct an Investment Portfolio' authored by user Travlin (enrolled members can access the entire series here).

Investment planning should be kept as simple as possible while still meeting your needs. As a self-directed investor, it is important to me to evaluate the situation, define what I want to accomplish, and decide how to get there. I find that putting this in writing helps me organize and clarify my thoughts into a useful assessment. This does not have to follow a rigid format as long as it is coherent. From this I can begin to structure the portfolio I need, but that is a separate topic.

Below is my latest assessment. It has three parts

  1. Situation Analysis
  2. Investment Needs
  3. Investment Strategy

This is offered as a model to show you one way it can be done. There are many others. Feel free to use this model as is, or revise it to suit your views and circumstances.  There are many books on investment planning that you can easily find by searching Google or Amazon, but I have no recommendations, as I just wing it, myself.

If you are using a professional investment advisor, you can give them your assessment to read and save a lot of effort trying to explain your views. This will also save time by answering many of the questions they would have had to ask you anyway. It is much more productive for them to work with someone who is not starting from zero. Your investment needs and strategy should be negotiable, as you are paying for their expertise. But if you can’t find common ground on your situation analysis, then their views on needs and strategy will not be suitable for you.

My assessment reflects views that Chris and others have expressed often, and they have my sincere gratitude. There is not a lot of original content here. I have just restated those views in a clear and concise document for easy reference. It is helpful to review your assessment periodically and revise as needed.

I had to retire early, but we have a comfortable income. My wife continues to work. Our kids are nearly grown. Our physical preparations are progressing. We have a good cash reserve and have allocated much of our portfolio to precious metals. Our primary objective is to preserve the value of the assets that we have accumulated from a lifetime of work. They cannot be replaced.

Your investment needs and investment strategy must reflect your circumstances and risk tolerance. Your objectives might be to set a realistic budget, so that you can save money to build a cash reserve and also buy silver coins. The important thing is to apply disciplined thought to the matter and reach conclusions. This model can help you in that process. In our current situation, diverse circumstances can share a lot of common ground.

I am well aware that financial issues are just some of the bigger problems we face. But being able to support ourselves in uncertain times is critical, and becomes more so as we get older and lose the energy and stamina of youth. We are much better able to help others if we can meet our own needs and not expect anyone else to take care of us.

The key to good investing is to take emotions out of your decisions. It usually takes years of investment experience to master those emotions, and during periods of turmoil they will reassert themselves. Having a written plan – one that was created when you were calm, rational, and objective – will help you keep a cool head and guide your actions for best results.

I hope you find this helpful.

Travlin


Asset protection in a deteriorating world:

1) Situation analysis

We are experiencing an unprecedented world-wide economic crisis, comparable to a disguised Great Depression, but potentially even larger in magnitude and scope.

For thirty years the major developed nations – the USA, the European Union, and Japan – spent money and assumed obligations faster than real incomes grew. This was masked by increasing debts to unprecedented levels. Those debts are now so large they can never be repaid. The financial and economic problems since 2007 are a result of this situation. 

In an attempt to maintain the illusion, and grow out of the problem, the Federal Reserve (Fed) created over $2 trillion dollars out of thin air. It has suppressed interest rates to unprecedented lows, and committed to hold them there for two more years. It used the $600 billion of QE2 to buy US treasuries, bought large quantities before, and will continue to do so. Without the Fed the US Government (USG) can no longer find enough buyers for its debt at interest rates it can afford.

The official USG debt is currently over $14.7 trillion dollars, which is over 98% of our GDP. Credible estimates of all obligations of the USG range from $70 - $200 trillion. USG spending is about 25% of GDP. The current annual deficit is around 10% of GDP. Without that deficit spending our GDP would shrink 10%, which is a benchmark of a depression. Today 43% of all USG spending is borrowed.

The recent agreement raising the US debt limit is a complete farce. At best it will cut spending by $2.4 trillion over ten years, which averages only $240 billion per year. Our current deficit for this year alone is over $1.3 trillion. The cuts for 2012 are only $25 billion with bigger amounts pushed off to the future. These are not real cuts based on current spending. They are merely decreases in the projected growth of future budgets.

Policymakers are clearly incapable of dealing effectively with the fundamental issues above.

There is only one way to avoid outright default. USG debts will be paid because the Fed will just print the money. The results will be a severe devaluation of the US dollar, compared to present purchasing power. This was evident with the initiation of QE2 and the resulting currency war. All major currencies are now seeking to devalue, to avoid pricing their goods out of the market in world trade. This is literally a race to the bottom. The US dollar is starting to lose its status as the world’s reserve currency, but is temporarily the least ugly nag at the glue factory.

The probable results of these issues will be financial and economic turmoil that increases in frequency and severity. The traditional rules of investing no longer work. Preserving the value of assets will become increasingly difficult, and requires an understanding of the macro forces that are reshaping our world. There are no conservative financial investments in the traditional sense that will preserve value. Our assessments of risk and reward must be adjusted accordingly. This situation forces us to carefully consider unconventional strategies.

There are strong data to support the argument that vital global resources are approaching a tipping point. The most important of these is Peak Oil. Official sources are beginning to confirm that we appear to be on an irrevocable course of annually diminishing oil supplies. This would wreak havoc financially and economically, and severely impair the ability of industrial nations to support their populations at anything like current levels of consumption. Peak oil would finish off any chance of an economic recovery. Some official government reports now project oil shortages as early as 2012. The timing of peak oil may be uncertain, but sustained financial crisis is a reality today. 

2) Investment needs

“The next 20 years will be completely different from the last 20 years” – Chris Martenson

We must be realistic about the situation we face and prepared to do unconventional things in response. If we follow conventional wisdom we could lose everything we have accumulated over our lifetimes.

  • Primary objective – Preservation of asset values. Under present conditions, this most conservative of objectives requires consideration of ideas that would seem risky in ordinary times. Cash is a deteriorating asset that could lose value dramatically.
  • Secondary objective – Increase investment gains and assets while it is still possible. This is needed to offset declines in assets that will probably be unavoidable, even with the best protection we can devise today.
Potential financial threats
  • Pension reduction or loss
  • Social Security reduction or loss
  • Confiscation or punitive taxation of assets - 401k, IRA, pension, gold, silver
  • Currency controls to prevent money leaving the US or returning (the recent HIRE act)
  • Currency devaluation becoming more severe
  • High inflation
  • A global credit crisis that could cause unprecedented disruptions in the banking system and securities markets
  • Hyperinflation and currency collapse
3) Investment strategy
Themes
  • The world’s financial situation grows increasingly precarious, and economic and political institutions less effective and trustworthy.
  • World oil production has been at a plateau since 2005 despite increasing demand lead by China and India. There is good evidence the future will see steadily declining supply. This would have severe effects on the global economy, personal consumption, and political affairs.
  • The quality and quantity of basic resources are under increasing strain due to growing world population and increasing wealth in developing countries.
  • As a class, financial investments like stocks and bonds require sustained economic growth to do well, but this is unlikely to happen.
  • Hard assets are likely to see a long term rise in value. 
Particular concerns
  • We want diversification among currencies and countries. We are positioned to move selected funds out of the US, and US dollars, very quickly.

  • We are open to limited exposure in US investments, but favor having the majority elsewhere, particularly Canada.
  • We are open to carefully selected stocks, but not bonds as interest rates can only rise.
  • We think world stock markets are likely to fall drastically, driven by a credit crisis, and we are willing to wait for a good buying opportunity.
Strategy

In my judgment the best prospects for preserving value are hard assets – productive land, gold, and silver. These core holdings will form the basis of the portfolio.

  • Productive land is highly illiquid, and generates low income compared to capital, but it is the ultimate store of value. They are not making any more of it and everyone has to eat. The recent run up in farm prices was driven by the ethanol boom and financial speculation. Nearly 40% of US corn is now burned as fuel. The recent cutback in federal ethanol subsidies could bring farm prices down, but wealthy people are interested in this market as a safe haven so they may not move much.
  • Gold is an alternate currency. As world paper currencies devalue together the relative differences among them may not be large, but the absolute decline is visible compared to hard goods, like commodities and consumer purchases. I expect gold prices to continue to increase over the long term as awareness of currency problems grows, and people make a flight to safety. Demand should remain strong as long as the Fed continues to create large amounts of money out of thin air, and interest rates are held artificially low. Gold is not a sure thing, but the fundamentals may make it the least unsure thing.
  • Silver has some appeal as a currency but less than gold. However, at about $40 per ounce it is much more affordable for purchase, and for over a year demand for coins has been straining supply. The real story is that silver has a vital role in industry, and for years has been consumed faster than it is produced. It is primarily produced as a by product of mining other metals, so no significant supply increase is likely. 

Two other asset classes deserve consideration for diversification.

  • Commodities are hard assets and could do well long term due to excessive printing of fiat currencies, and rising demand from the BRICs (Brazil, Russia, India, and China), while resources diminish. With the exception of precious metals, it is generally not practical to hold commodities directly. The futures markets for commodities are risky and require expertise. Research is needed to identify investment vehicles that allow indirect participation in this market with acceptable risk.

  • Stocks in general will fair poorly in a constrained world economy. With very careful selection it may be possible to indentify companies in industries that are strategically positioned to do relatively well in a world of declining energy. Examples include oil exploration and development, natural gas production, coal production, and manufactures of solar power and wind power equipment. Railroads are the most fuel efficient land transportation and vital to commerce. These ideas need to be researched to select specific stocks now, which could be purchased later when market conditions are favorable. Ideal timing would be after a major stock market rout, but before peak oil is recognized. Averaging purchases over time should also be considered.

- Travlin


This What Should I Do? blog series is intended to surface knowledge and perspective useful to preparing for a future defined by Peak Oil.  The content is written by PeakProsperity.com readers and is based in their own experiences in putting into practice many of the ideas exchanged on this site.  If there are topics you'd like to see featured here, or if you have interest in contributing a post in a relevant area of your expertise, please indicate so in our What Should I Do? series feedback forum.

If you have not yet seen the other articles in this series, you can find them here:

This series is a companion to this site's free What Should I Do? Guide, which provides guidance from Chris and the PeakProsperity.com staff on specific strategies, products, and services that individuals should consider in their preparations. 

Related content

23 Comments

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1840
Excellent Synopsis!

Excellent synopsis, Travlin!

I think we are in the midst of a deleveraging a la the 2008 crisis, when commodities and stocks both fell. This may be a good opportunity to selectively invest. I should also reminder folks of Charles Hugh Smith's prediction that this downturn may last unti 2015, so be ware of catching falling knives.

Poet

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 2381
Food for thought.

Limits to Growth says that wealth will have to be diverted from Industry to Agriculture.

An investment  long term in something essential to the production of food might be a winner.

mobius's picture
mobius
Status: Silver Member (Offline)
Joined: May 18 2009
Posts: 152
Dear Travlin, Terrific post,

Dear Travlin,

Terrific post, thanks for that.  I've been trying to formulate my/our personal retiement regime, but I'm harrowed by one question.  How much money and/or wealth equivalent will a need per (retirement) year?

I follow ERE and the link below provides some insight:

http://earlyretirementextreme.com/can-i-retire-on-x-dollars.html

However, in a world where the purchasing power of the USD, or CND or EUR are declining, how can make reasonable assumptions of what my basic needs will cost at some point in the future? 

Also, another problem that I encounter is when I am analysing my "portfolio" (holdings in the most meager sense of the word) I use the current spot price of a given PM or do I use its value at the time of purchase.  I've been using easy numbers like AU= 1,000 USD & AG = 20 USD to give me an indication of real future purchasing power, since my becoming "aware" round about mid-2009. 

I'm also concerned that as the "price discovery mechanisms" are completely out of whack with Supply & Demand, and centrally dictated that perhaps PM holders will never get a fair price.

A lot to munch on here, but I have to attack project head-on.  Appreciate your time for comments.

Toodles, Joanne.

joesxm2011's picture
joesxm2011
Status: Silver Member (Offline)
Joined: Mar 16 2011
Posts: 247
how to value PM when calculating portfolio

Mobius,

For the more common PM types APMEX lists a price that they will buy them from you on their web site.

It seems to me that if you are doing a monthly tally of the value of your portfolio the price that you could sell each PM item to APMEX is a good way to come up with a dollar amount for the portfolio value calculation.

This is basically marking your PM holdings to market.  I think that this is the most honest way of looking at things.

Joe

joesxm2011's picture
joesxm2011
Status: Silver Member (Offline)
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Posts: 247
Early Retirement Forum

Another forum that I used to follow a lot is http://www.early-retirement.org/forums/.

They have a lot of people that have successfully retired early, although a lot of them seem to have government pensions.

The net worth of most of the better posters is over a million dollars.  They seem to have been successful investors and they espouse the Live Below Your Means mentality.

The thing that worries me about them at the current time is that they do not seem to have much use for gold and they continue to follow the plan that has worked for them.

It worries me that either they are missing the point or I am being led into another "this time it is different" train wreck.  What we discuss here seems to make a lot of sense, but so did the idea the fiber optic communication was going to change the way the entire economy worked.

In any case, they have done a lot of work quantifying the various strategies for drawing down your portfolio during retirement and calculating the likelihood of any particular strategy being successful.

I don't go there much any more because I am starting to feel that things are much to unsettled to give up injecting money into the savings by working.

Joe

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Good questions

mobius wrote:

[Edited by Travlin]

1 - How much money and/or wealth equivalent will a need per (retirement) year?

2 - I follow ERE and the link below provides some insight:

http://earlyretirementextreme.com/can-i-retire-on-x-dollars.html

3 - However, in a world where the purchasing power of the USD, or CND or EUR are declining, how can make reasonable assumptions of what my basic needs will cost at some point in the future? 

4 - Also, another problem that I encounter is when I am analysing my "portfolio" (holdings in the most meager sense of the word) I use the current spot price of a given PM or do I use its value at the time of purchase.  I've been using easy numbers like AU= 1,000 USD & AG = 20 USD to give me an indication of real future purchasing power, since my becoming "aware" round about mid-2009. 

5 - 'm also concerned that as the "price discovery mechanisms" are completely out of whack with Supply & Demand, and centrally dictated that perhaps PM holders will never get a fair price.

Hi Mobius

Please bear in mind that I am not an investment expert. By study and experience I gained some useful knowledge over the years. Unfortunately, much of what I learned no longer applies, and has become counter productive in the present and foreseeable world. That is why I started this investment plan from scratch. I welcome challenges to improve it and hope this process helps others formulate a plan for their particular needs. All my comments are my personal opinion and everyone must decide what is right for them. Our future is very uncertain. We have to make informed choices and hope they work out favorably.

1 – There is no way to calculate this. Gaining what you can now is important.

2 – Guides like this were useful when the economic and financial worlds had reasonable stability and predictability. That is all gone now. Conventional thinking will lead you astray.

3 – You can’t. The future has too many unknowns.  There is no basis for a reasonable assumption.

4 – Subtract the cost (purchase price) from the value (current price). This shows your gain or loss. Your "portfoio" is the current value.  I think the price of gold is an indicator of the declining value of currencies, not an absolute gain. One day $100,000 in gold could be equivalent to $10,000 cash today. You would not be 10 times richer, just breaking even. To add insult to injury, for “US persons” who sell gold the IRS will want 28% of your gain as tax, unless you had it in a Roth IRA.

5 – I’m sure you are correct. It still beats most alternatives.

Do you see a theme here? We no longer have enough stability to predict outcomes we can plan on. We can only plan how we approach foreseeable events and hope the results are adequate.

Good luck.

Travlin

mobius's picture
mobius
Status: Silver Member (Offline)
Joined: May 18 2009
Posts: 152
Thanks Travlin!

I think what you said "Gaining what you can now " makes the most sense to me.  I suppose the time has passed with fancy calculations based on assumptions that don't hold any water.

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 2745
net net

Travlin and Joesxm

I agree with Mobius that "getting what you can now" is a key lesson and with the source joe quoted: "live below your means"

Living by these two dictates is our best chance to "live long and prosper."

Thanks for the post, Travlin, and for the link, Joe.

Doug

dps's picture
dps
Status: Martenson Brigade Member (Offline)
Joined: Jun 27 2008
Posts: 442
some very unconventional thinking about investments

Here's a few thoughts from a very financially constrained point of veiw.  People that don't own a house may be able to relate to this.

Investments I've made since I've become aware of Chris' message in 2008:

1.  Community Garden on Main Street ... 14 permaculture sheetmulched beds with drip irrigation system (less than $1000)

2.  Community Garden at Crescent Grange ... 36 permaculture sheetmulched beds with drip irrigation system (about $1000)

3.  A new shovel and rake from Ace Hardware ... a locally owned and operated vendor (slow money) ... leather working gloves too.

4.  Bee Hives and bees.  Enough equipment now for 7 Langstroth hives and two top-bar hives.  Currently 5 liviing colonies.  Continuing to build beekeeping relationships with local farmers and with local city / county government with the hope of using open space for hives.  Oh, yes, a beekeeping suit too.

6.  Pulled 50% of my IRA and bought a very small amount of gold at BullionVault ... which I now worry about being taxed at exceedingly high rates.  I now own some silver there too.

7.  Silver bars kept in a very secure place away from my home.

This is not intended as advice.  This is just to point out that there are some very "out of the box" ways to think of "investing" ... many of them can be good for my community as well as good for me.

Hugs ... dons

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Thanks for the comments

joesxm2011 wrote:

[Edited by Travlin]

1 - They seem to have been successful investors and they espouse the Live Below Your Means mentality.

2 - It worries me that either they are missing the point or I am being led into another "this time it is different" train wreck.

3 - I don't go there much any more because I am starting to feel that things are much to unsettled to give up injecting money into the savings by working.

Joesxm

1 – Living below your means to build capital that you invest carefully has been called “getting rich slowly”. Some diligent people with modest incomes have done very well with this method. The days of easy investment returns are over, but living below your means is still an important principle. Your savings can be invested in training and physical preparations if that is higher in your priorities as Dps has shown by his example.

Analyzing the situation, identifying your needs, and creating a strategy are helpful, however you define assets and wealth

2 – I think they are staying with what has worked in the past, and don’t see or ignore new threats.

3 – I think you are wise to keep working. You win two ways. You will not drain your capital for living expenses, and you will be adding more for the future. The trick will be to hold on to it.

Doug – Did you know Leonard Nimoy is 80?

Dps – You can own precious metals via a Roth IRA and sell them tax free. There are ETFs (Exchange Traded Funds) that make this easy. It looks like you can have an IRA at BullionVault. You certainly can at GoldMoney. If you are 59-1/2 you can withdraw it all with no tax or penalty. By your avatar that looks like a long way off for you though.

Travlin

patrickhenry's picture
patrickhenry
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Joined: Mar 12 2009
Posts: 76
Protecting Income Streams ?

Thanks Travlin !

I seem to spending more of my time lately trying to protect my income than making it.

Do you have any thoughts on which income streams are most protected from

1) Increasing federal/state/local government taxation and fees, and

2) Price inflation

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Some thoughts

patrickhenry wrote:

Thanks Travlin !

I seem to spending more of my time lately trying to protect my income than making it.

Do you have any thoughts on which income streams are most protected from

1) Increasing federal/state/local government taxation and fees, and

2) Price inflation

Hi Patrick

I am not knowledgeable on this topic, but I’ll give you some thoughts.

It’s very hard to reduce taxes on the “earned” income you get from working. Personally, I find the tax code so convoluted and baffling that it’s just not worth my while. I respect people who can do this on their own, but as you say you can spend more time protecting you income than earning it. For people with very high incomes it pays to hire a professional.

For investment income one classic choice is tax free municipal bonds. However, the tax advantage is largely offset by a lower interest payment, so again you probably need a very high income to make this attractive. Given the current poor financial position of local governments I wouldn’t touch them with a ten foot pole for fear of default. In addition, all interest rates are at historic lows, which means they can only go up from here. When they do, all bonds will lose value, so you lose capital if you sell before maturity. If you hold until maturity you are getting a below market interest rate for the remaining term.

A Roth IRA is a great tool because all income and capital gains can be withdrawn entirely free of taxes and penalties if you are over 59-1/2 years old. There are provisions that allow tax free withdrawals for younger people in specific circumstances.  It is a good place to park assets producing income or capital gains. http://en.wikipedia.org/wiki/Roth_IRA

I expect a lot of price inflation as the US government borrows and the Fed prints. I like owning gold and silver as I think their values will rise as a consequence. The potential nominal increase is very high as it is proportional to the devaluation of the US dollar. However, there may be no absolute increase.  Gold you buy for $10,000 today could sell for $100,000 in the future, but if the dollar is worth 1/10 as much you would just be breaking even. To add insult to injury, for “US persons” the IRS would want 28% of that as tax, unless you had it in a Roth IRA.”

I hope this helps.

Travlin 

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Other views are welcome

I would like to hear from anyone with a different investment perspective or specific criticism of my investment plan. I do not claim to be an expert, I’m just applying my experience to the knowledge I’ve gained from this site. I’d like your help in discovering any flaws or oversights, so don’t be shy. A good discussion leads to learning.

Travlin

Phil Williams's picture
Phil Williams
Status: Silver Member (Offline)
Joined: Oct 14 2009
Posts: 222
Investment Plan

Travlin,

Great topic, thank you. As much as people like to talk investing around here, I am surprised there hasn't been more comments. My investment plan is very similar to what you outlined, although I am constantly trying to challenge my thinking, as I am certainly an amateur. My approach is like when you are filling up an ice tray. Water doesn't get to the farther cubes until the near cubes are filled. So my funds go in the following direction.

1. All funds to debt repayment, until completely debt free.

2. All funds to lowering operating expenses, until as low as possible. (This would include owning a home free and clear to avoid rent, making the home efficient to cut or preferably eliminate utility bills, efficient low cost vehicles etc..)

3. All funds to improving self sufficiency to a reasonable degree. This would be the basics (Storable food, garden, home protection, stored non-perishable items)

4. After my first three priorities are taken care of, it gets much more difficult for me. I would love to have productive land, but where I live, land is overpriced, and I don't like the idea of owning land that is far away from me, not to mention the property taxes. I have 6 acres which is plenty for me. I have yet to find a local alternative investment that makes sense for me. So at this point the remaining funds I have go towards cash, equities, and precious metals.

Cash 16% (50% CAD, 50% USD)

Precious Metals (I like bullion vault and gold money, although I do have some sprott gold. I'm not a fan of metal in my home, or a safe deposit box) 20% Gold 17% Silver

Gold and Silver mining equities 16%

Energy, Ag, Mining, Rare earth equities 31%

***I am doubting the equities that I currently own, especially after CM's last report on the impending crash. In theory, I like the companies I am invested in, as they own large deposits of strategic resources. What scares me is that a lot of the value of stocks have a growth premium built into them. What happens when it becomes common knowledge that growth will be difficult at best, and impossible at worst. Even if commodity prices stay elevated because of scarcity, some of the value of the companies I am invested in is in their ability to find new deposits at economically viable levels. This is clearly getting more difficult. The other issue, is even if these companies find a way to be successful, will cash strapped governments windfall tax them to death or nationalize resources. I am afraid to go all in precious metals, or cash, as these assets also have potential issues. If anyone has any thoughts, I welcome comments.

Thanks

Phil

Nate's picture
Nate
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Joined: May 6 2009
Posts: 461
Travlin, I agree with your

Travlin,

I agree with your investment plan.  My approximate breakdown as follows:

cash - 50%

farmland - 25%

PM's - 10%

equity - 15%

Equity holdings heavily in energy / energy service - also a general market short

Heavy cash holdings waiting for local farmland.   Placed 1 bid on a farm foreclosure last year and (barely) lost it.  

We purchased our current ranch in November of 1987 - the crash the previous month paved the way.  Hoping for a repeat of history.

Nate

Travlin's picture
Travlin
Status: Diamond Member (Offline)
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Posts: 1322
Thanks for your comment

Zeroenergy21

zeroenergy21 wrote:

As much as people like to talk investing around here, I am surprised there hasn't been more comments.

I’m surprised too, since it’s had over 2,000 “reads”, but then I am preaching to the choir. Most of this plan is a restatement of what Chris has said repeatedly. I was surprised at the effort it took to organize and distill it into a concise document though. It makes you appreciate what it takes to work at Chris’ level. Another factor could be the big declines in stocks and precious metals have left people dazed and confused. That’s precisely why you need to go through this exercise, so you can keep a clear head. It’s more fun to pile on to a rising market, but that can be dangerous if you don’t have a plan. Occupy Wall Street is getting a lot of attention too. It’s even possible people are tired of hearing from me and wish I’d just shut up!

By the way, I am personally convinced of the Peak Oil story, but I deliberately downplayed it in this plan since it is designed so it can be used with a professional investment advisor. They will be challenged enough with the economic argument, even though it is factually supported. There’s no need to give them an excuse to write you off as a wacko.

It looks like you have worked out a good plan for yourself. You have defined your goals to meet your needs and set you priorities accordingly. Each plan has to be tailored to our personal circumstances. The important thing is to make one. I think having money in two currencies is an excellent idea.

I am confused about applying your ice tray analogy though. It sounds like you are saying all debts were repaid, including your mortgage, before you did anything with subsequent steps. Personally I’d rather build a cash reserve and acquire essential preps first. Having no debts is good, but not if you can’t take care of yourself in an emergency. Are you saying you already accumulated assets so all current income is going towards debts?

For precious metals I’m going 3 to 1 on gold to silver, and I’m waiting for the market to crash before buying stocks. I hope you have stop orders in place. The doubts you expressed in your last paragraph are well founded.

Travlin

Phil Williams's picture
Phil Williams
Status: Silver Member (Offline)
Joined: Oct 14 2009
Posts: 222
Investment Plan

Travlin,

Thank you for the feedback. It's a really important topic, I appreciate your time and effort.

My debts and some preps did actually get done together, but for any new funds I have, I would pay debt first. Thankfully, my wife and I are debt free. So, then I am looking for ways to reduce operating expenses. For example, I had a little extra money from a job I just finished, so I purchased a heat pump water heater that will save me 2500 KWH per year. We are actually producing more energy than we use, so it will just add to the money we get back from the utility. I figured that it will actually return 20% per year on the investment, and I have an extra water heater just in case. I am also thinking about getting more batteries for my backup, so I can have a few more comforts in a power outage. No return there but additional self sufficiency is nice.   

The big concern for me as I said are the equities. I am a big peak oil believer are well, so the equities are tailored to that theme, but I am a terrible trader. I could certainly go heavier into cash and gold, and/ or go short. My fear of going short is that you could be right in the trade but still lose nominally. A really big cash position is scary with banks going under, inflation, and countries everywhere trying to print their way out of this excessive debt. I like gold, but I already have a decent position in gold.

I don't have any stops in place. I know it is risky, but with the volatility, flash crashes, HFT's, I worry about being stopped out just by market swings, only to watch my positions leave me behind. At this point, I am considering the following:

1. Sell all equities, and use money to add to cash and bullion vault positions

2. Leave it alone, and ride out any downturns, not try to trade at all or buy the panic.

3. Raise cash, and buy positions back if and when panic occurs (Much easier said then done)

Anyway, still working on this.

Thanks

Phil

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Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Thanks for your post

Nate wrote:

Travlin,

I agree with your investment plan.  My approximate breakdown as follows:

cash - 50%

farmland - 25%

PM's - 10%

equity - 15%

Equity holdings heavily in energy / energy service - also a general market short

Heavy cash holdings waiting for local farmland.   Placed 1 bid on a farm foreclosure last year and (barely) lost it.  

We purchased our current ranch in November of 1987 - the crash the previous month paved the way.  Hoping for a repeat of history.

Nate

Nate

Having productive land is very good. Buying more sounds like a good strategy. I will be researching that angle myself. I will also be researching stocks in the energy sector. Do you have any recommendations?

Travlin

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Nate
Status: Gold Member (Offline)
Joined: May 6 2009
Posts: 461
recommendations

Travlin wrote:

Having productive land is very good. Buying more sounds like a good strategy. I will be researching that angle myself. I will also be researching stocks in the energy sector. Do you have any recommendations?

Travlin

Travlin,

First I'd like to thank you for this investment post.  I am not a professional investor in either agriculture or energy, but have put alot of thought into it.

Regarding agriculture, I initially thought good farmland that requires no irrigation (Iowa) is the route to go.  Although I have some money invested there, I recently turned down more.  My thinking was that the bulk of what grows there (now) is animal feed (corn, beans, and alfalfa).  I know that can (and will) change, but large parcels require too many energy and fertilizer inputs for the future I envision.  A key point is that growing food that humans eat directly (walnuts) rather than indirectly (corn) should make more sense in an energy starved future.

My current favorite is California land.  Small plots are already in place locally and are capable of growing many different crops.  Our county lists about 100 agricultural crops that are produced and have developed markets in place.  The irrigation requirement has both upside and downside - during droughts we can supplement irrigation water with groundwater (redundant system).  Long term droughts are problematic.  I am currently reading a book about our local irrigation system and 2 items are relavent to this discussion.  First, the land went from dry land wheat farming that required thousands of acres (pre-irrigation) to 10 to 40 acre plots of high-value crops (with irrigation).  Small plots are perfect for the family farm that uses human energy rather that large parcels that require fossil fuel.  Second (and this shocked me) is that the wheat mined out the minerals in 2 decades.  Wake up call for me.  Another important factor is that I am more comfortable investing in property I am close to.  I personally think it is senseless to invest in Brazil farmland because it is cheap.  I want to eat produce from my land.

In the energy investment arena, the fly in the ointment is nationalization or heavy taxation of energy producing companies.  The bulk of my energy investments are in the oil service area, which should bypass this and also provide a way to profit from higher prices.  Operative work here is should - just an educated guess.  I personally avoid large cap companies, since many have chemical operations which I don't care for.  I am waiting for another leg down to purchase Canadian energy trusts (or what were trusts) and US royalty trusts.  I like the fact that many pay monthly dividends (rather than expensive management).  Roger Conrad has a monthly newsletter (Canadian Edge) to cover the trusts.  He is a poor timer but provides reserve and cost data which I use.  A free energy website is McDep.  He has been a guest on Puplava and is another sourse of information.

Sorry about the long post.  Feel free to contact me direct if you want me to expand on this.

Nate

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dps
Status: Martenson Brigade Member (Offline)
Joined: Jun 27 2008
Posts: 442
a very different investment perspective

A man in Jefferson County, near Golden Colorado, has a very different perspective about "investment."  It's a notion called:  Community Sufficiency Technologies.  I know the name sounds disconnected from this topic, however, if you will read about it, you will see the connection.

You can find more information here:

http://www.organiclandscapedesign.org/

and

http://www.organiclandscapedesign.org/content/community-sufficiency-technologies

Another very different perspective is the Slow Money movement.

You can find more information here:

http://www.slowmoney.org/

Hoping this is of value to you all.  ... dons

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