Welcome
Here you can find information about finance (see Commentary) from Jim Bradley
or read some information about Jim (See What's Different? or Professional Bio).
The kids (Autumn and Matthew) enjoy almost all the above ... plus swim competitions, soccer and ice cream.
News
February 5, 2009.
WHAT'S COMING (EVEN IF WE GET A SHORT ECONOMIC RECOVERY) ... WHY ... WHAT TO DO
Our main character is living out of his Mercedes and barely making it. He wishes it weren't so, but that is a fact that can't be changed.
When the government was passing out tickets (expanding money), a lot of people, like our hero felt OK locking up their savings into less productive assets. They believed there were more goods because there were more tickets. It was not true.
The government arrives with a solution: bail out Mercedes. Do the whole thing over again. The bill goes to our main character ... only later. That way he again thinks he is better off than he really is. You can read how it is done here.
Depressions are caused by destruction of capital. Only an increase in genuine capital, which represents the accumulation of know-how, machines, and ability to produce will make a recovery. An "accounting entry" representing nothing real but allowing some people to consume will destroy the capital others have accumulated.
Taxes destroy capital. Boosting consumption destroys capital. "Bailing out Mercedes" destroys capital ... Doing it all at once is nearly a sure-fire way to depression and national decline.
WHAT TO DO FIRST
Consider those less fortunate if you happen to be fortunate. Give money to the poor which are almost always victims of poor government since they've fewer options. A large portion of the world lives in terrible poverty from refusal of the government to defend property rights of it's citizens. There are some charities listed on the left I've found to be honest and helpful.
WHAT TO DO ABOUT INVESTMENTS
1 - Hold some savings in physical cash. While the time to hold lots of cash may be ending (see commentary), a tax on capital by the current administration may create a depression and holding cash will again be essential. Be aware the authorities may intentionally devalue cash or issue new currency.
2 - Hold some savings in physical gold. It hedges against payment collapse and devaluation. Be aware it may be confiscated or intentionally manipulated - like many other assets.
3 - Hold some savings in commodities. Now that they've sold off, they are safer over the long run. Oil supply over the long run is still getting smaller, despite the temporary forced liquidation which has reduced today's prices. Future supply of other essentials is also running low and future supply will be hurt more by recent forced liquidation. The future for those assets is very good.
4 - Buy stocks only at great value ( a new low in 2009 ? ). Buy stock of companies that have near zero debt which provide non-luxury products needed in a depression. Whether we have price inflation or price deflation, it is likely the credit markets will be in frequent turmoil. If our experience tracks the Japanese, we will not hit bottom for some time. The government's fiscal imbalance also hangs over our head.
5 - Continue to reduce expenses relentlessly.
6 - If you want financial assets or real estate, buy positive cashflow investments with a wide (huge) margin of safety. Be very careful of relying on capital gains except for hard goods.
7 - Have essentials on hand to carry through for a month (water, food, fuel, self-defense) in case of payment collapse caused by sudden failure of banking institutions. Especially terrible would be sudden insolvency of the U.S. government (ability only to finance by selling bonds to the Federal Reserve), but that may be where we are headed in a few years. Buy only at a large discount to already discounted value.
8 - Stay out of the target zone by paying attention to how government spending is financed. Example: selling 500B of debt on the foreign markets is likely to absorb huge amounts of money that would otherwise go to buying exports or private investments; financing the debt by "printing money" represents a decline in real yields for savers.
9 - Do what you can to stop government manipulation of the economy. Write your congressman. Give to liberty minded organizations like Mises.org. Repeated intervention is a cause of dictatorships, mass poverty, and war. It would be terrible to see America continue down that road.