Tag Archive | "Inflation"

How Infrastructure Flub Ruins Pensions


Expect the world to get richer.   Supply, demand and resources are what wealth is all about.  We live in a world with a growing population (increased demand) and technology that increases productivity (increased supply).   Overall the wealth, more supply and more demand) grows.

gary scott

I use this saw to beat inflation.

However don’t expect that wealth to be equally or fairly distributed.  There are plenty of reasons why those on fixed incomes can become poorer.

Take for example, the US infrastructure spending over the next four years.   This can be a bad deal for those on a fixed income.

Current predictions are that this building, accompanied by tax reductions at the upper end, will add 6 trillion dollars of US debt.  Adding debt financed infrastructure is good only if the improvements adds enough productivity to pay off the debt.   If not, the spending creates inflation.  Rising costs are bad for those who depend on pensions.

The world is in a technology transition.  The demand that is growing fastest is virtual.  Spending is likely to be on bricks and mortar.  This is compared to developing more WalMarts when all the shopping growth is at Amazon.com or building new post offices just before the internet came into use.

Here is a real example.  When we first moved to Naples, Florida in the 1970s Merri and I had a powerful computer.  This was a big deal back then and it allowed us to become an official post office internet center.  The idea was that if someone wanted to send an email to someone without a computer, they would send it to us.  We would print it and the recipient would pick it up from us physically.  That system really missed the mark!

We do not know what new productivity innovations lay ahead and creating six trillion in debt on infrastructure of the past will not create more real wealth.   There will be some jobs created but the added income will be offset by higher costs because the incomes created will be paid for from debt.   This debt is ours, the public’s, as in you and me.   In the bigger picture, this spending is akin to borrowing money from the bank and treating the loans as if they are earnings.

Those who will prosper most are the wealthy, the owners of the big construction businesses who enjoy added tax breaks while the middle class, especially those on fixed income, pick up a greater share of the tax burden and higher cost of living for essential goods.

How do we gain protection?

We can have multiple ways to create extra income.  Try new things that you enjoy doing that can work in good times and bad.

Don’t worry about making huge profits.  Keep trying things that you want to do.  For example at our farm in NC, we added three sources of extra income Airbnb rentals, raising trout and creating wood products (using hand tools like the saw above).   Some will take off, others probably won’t but each contributes to the battle against inflation and most important, we enjoy the process.  Some of the skills developed would be really valuable if there is a big economic meltdown.  We hope that meltdown will never come, but because there are scenarios where the global economy could go south,  we sleep better having these enjoyable skills.

This is a way to become a Pruppie and turn passions into profit.

Gary

See more on Pruppieism below.

 

 

A Centenarian Financial Lesson


Here is an important lesson about finance from a century ago.  In 1916, a terrible war was being waged.  The Germans realizing that they had made a huge error began a peace initiative.  The British refused, and this led to an even bigger German error, open submarine warfare that brought the Americans into the war.

Another huge error was that Germany’s government had made a decision to finance that war with loans. The strategy was to pay off the loans with the repatriations and spoils of war.  That plan backfired when Germany lost the war and the new Weimar Republic was now saddled with a massive war debt that it could not afford.  The government decided to payoff the debt by printing money without the economic resources to back it up.

In 1916 five German marks were worth a US dollar.  After the Treaty of Versailles 48 paper marks  were required to buy one US dollar.  Yet Germany continued to print paper money to pay its debt.  By November 1923, one American dollar was worth 4,210,500,000,000 German marks  (that’s 4.2 trillion marks per dollar).

The lesson is when governments print too much paper money, without the economic resources to back it up, that paper loses purchasing power.  Yet the lesson has not stuck.  Governments everywhere are growing deeper and deeper in debt.

One way to overcome the consequences of this devaluation is to combine multi-dimensional businesses with writing to sell.

Merri and I aim to create multi dimensional opportunity wherever we live.

In Florida we bought a house and an orange grove next door.  Then we added a rental unit.

citrus-

(Our Florida home and grove with its heart shape.)

In North Carolina we bought a house… then added a seminar center and rental units.

little-horse-creek

Our mountain creek seminar center in North Carolina.

We have made each of our homes multi dimensional… a home AND a source of income.  This is important because multi dimensional homes help us escape governments that cannot keep their economic promises.  History is littered with stories of serious national debt and economic problems that ruined pensions and retirees.  The burdens of debt and fiscal imprudence cause governments and societies to lose their ability to keep their promises.  Multi dimensional earnings can help overcome the risks these conditions create.

A look at government, social and currency breakdowns at their worst can help us see ways to earn and invest in turbulent times.

We do not have to look back 100 years to see what excessive debt and printing of paper currency can do.  In 1992, after Ukraine declared independence from the Soviet Union, its budget deficit reached 12.2% of GDP and inflation reached 2000%.  In 1993 price growth was 10,000%.  By the time a new currency was introduced (the hryvnia) in 1996 cumulative price increases reached 100,000 times!

Inflation slowed for awhile but has skyrocketed again and Ukraine’s hryvnia lost 70 percent of its value against other currencies in just the last year.

No matter how much one earns and saves, if prices rise 100,000 times, a lifetime of thrift might not be enough for a loaf of bread.

Any fixed income, pension, Social Security or savings can become worthless.

This is why multi-dimensional micro business opportunities make sense.

One way to be multi-dimensional is by learning how to write to sell.

Writing has always been the starting point in Merri’s and my multi dimensional activity.  Whether we have been creating a seminar, a course, finding or selling real estate, or an investment or business opportunity, we have reached our clients with the written word.

When you know how to write to sell, you can live anywhere you choose and still earn.  You can choose where the sun shines best for you and still have a pinnacle career.

Many countries require work permits for certain jobs, but usually these are not required for businesses like restaurants, shops, real estate agencies, art galleries, bed-and-breakfasts and small hotels.

Self Publishing has helped Merri and me create exactly the lifestyle we desire.

Self Publishing has entered a new era as a new business art form and we want to share with you how to start your own self publishing business now at our upcoming International Club retreat.

Learn how to develop your publishing skills to turn your passion into profit!  Even if you aren’t excited about writing… you can publish.

Whatever your passion, you can immerse yourself in it AND even create a six-and even seven figure income. This could be your direct ticket to the kind of fulfillment you’ve always wanted in life.  Whether you want to travel the world or live as a recluse, work 12 hours a day or not work at all, learn more about golf or feeding the hungry… it can be yours!

Here are  three basics of success in self publishing… passion… purpose… and profit.

Passion. You have to love to write to succeed in writing. This may seem a simple point but you either need to enjoy writing or love what you are writing about.

Purpose. To remain a writer for the long haul requires more than just fun.  Writers are missionaries. Your mission may be to tell a truth… reveal a secret or simply to entertain.  You’ll know what that mission is or at least feel it.  This is the driving force of writing.  If you do not understand it to begin… after you write enough that purpose will reveal itself.

Profit.  Follow your passions yes… but also stay tuned with what the majority of buyers want. Your desires may be the bull’s eye, but the entire target is THE market.

Plus the target is always moving so you should keep testing the winds of change. If the mood of your market changes and you do not keep up, your product or marketing can become out of style.

Fortunately there is a really simple way to stay tuned to your market that I learned years ago by surprise.

A friend inadvertently taught me this trick years ago when he recommended a book entitled “How to Survive the Upcoming Crash of 1995”. That book was on the NY Times best seller list and it sacred me to death as it told about how the U.S. economy would melt down in 1995 because U.S. government debt was out of control.

The book offered no solution to this dilemma.

I wrote a marketing piece with a headline “Are we 23 Months to Disaster?” that mentioned the book, outlined this problem and gave readers a way to find solutions by ordering my course on international investing.

Over the next two years this marketing piece worked unbelievably well creating millions in sales and profits.

Yet the premise was totally wrong! There was no bankruptcy of the US economy in 1995.  Instead the greatest economic boom in the history of mankind began.

This taught a valuable and simple lesson on how to see the buying public as a whole…perhaps understanding the public persona better than the public understands itself. The trick is simply to look at the best selling book lists…especially those of large newspapers… New York Times, USA Today and the Kindle Top 100.

The profits and sales from my 23 Months to Disaster piece did not arise because the product or marketing were in tune with economic markets. The disaster marketing piece was a success because it was tuned to how investors felt!   In addition the piece was fortified because it related to a book that millions of investors had read.

That book had scared millions of investors and created a problem for them, just as it had me.  My disaster marketing piece came along at just the right time…with a solution!

We can get clues about business trends by watching what everyone reads.

Best selling book lists are windows into a nation’s or the world’s soul and studying them can help you create a profitable multi dimensional business.

Merri, David and I are always testing new ways of communicating with our readers.  We know the value of embracing change.  The evolution in our business has taught us to integrate what we learn and feel with what others say.  We want to share this continuing process with you at our upcoming retreat. Details are below.

Gary

 

Frightening Inflation


Here is a frightening thought about inflation. 

A recent article about inflation in Japan deserves some time for reflection.

The article said:  “It’s one thing if luxury items are expensive, but if cheap things aren’t cheap anymore, it’s a real problem.”

Inflation has not come much to the forefront in the last few years.  Rising costs have been low, except for the cheap things like food, beans and rice, vegetables and fruit… nuts.

Now underlying inflation in the United States has increased more than expected as rents and medical costs maintain an upward trend.  The core Consumer Price Index rose 2.3 percent in the 12 months through February 2016.  This was the highest increase in almost five years.  In 2016 food and other costs (such as new and used cars and trucks) rose even faster.   However inflation seemed low because there was a 13 percent drop in gasoline prices, which offset both the increase in core C.P.I. and food prices.

This is an inflation danger, short term volatility in commodities such as oil can obscure rising long term prices  in other essentials that were previously not worth worrying about, such as food.

This has to leave us to wonder. “It’s one thing if luxury items are expensive, but if cheap things aren’t cheap anymore, it’s a real problem.”

Gary

Why We Need Slow Investing


As the world speeds up, we need to slow down.  One typical lie is the promise of something so far in the future, that the liar won’t be around when the promise needs to be kept.  Governments and businesses have been lying this way for so long that they have created quite a rat race for those now stuck with keeping the promise.  The way to avoid this rat race is to get off the treadmill and take time to observe and create your own health, earning and savings strategy.

A Wall Street Journal article “Cracks Starting to Appear in Public Pensions’ Armor” (1) reminded me that we each need to find easy practical ways to care for ourselves.

This article caught my attention because my father worked for the city of Portland. He was a zoo keeper.

Portland-zoo

(Article from Oregonian about my sister and me raising a baby lion.  We loved dad’s job.  He brought many lions and tigers home for us to care for.  At ten years old, this was so cool.)

What a great occupation for your dad to have when you are a kid!  But this is now the remains at the zoo.

Portland-zoo

Old Portland Zoo after it was abandoned… picture taken February 1960.  Will state, city and county employees be abandoned as well?

Having grown up during the depression of the 1930s, “job security and benefits” were Dad’s mantra.  He was in the right time at the right place.  His job provided a steady income and his pension benefits were fantastic.   Though he passed many years ago, my mom has received great benefits for over 30 years.

I have watched the benefits be cut and the article in the Wall Street Journal shares how all types of pensions from private to public to Social Security do less than before and are likely to do even less in the years ahead.

The article says:  “First in Detroit, then in Stockton, Calif., and now in New Jersey, judges and other top officials are challenging the widespread belief that public pensions are untouchable.”

The article tells how Gov. Chris Christie of New Jersey proposed freezing that state’s public pension plans and says: The first crack came in Detroit, where a judge ruled that public pensions could, in fact, be reduced, at least in bankruptcy. Then, just a few weeks ago, an opinion by the bankruptcy judge for Stockton, which emerged from Chapter 9 on Wednesday, called California’s mighty public pension system, Calpers, a bully for insisting in court that pension cuts were wholly out of the question.

Companies can legally freeze their pension plans and now more and more states are arguing that because they are legal sovereigns, federal pension law does not apply to them.  The problem is when states, cities and other local governments reform pensions  they cannot freeze benefits for existing workers.  Statistics show that reducing benefits only for future hires does not save enough money to preserve overstretched pension plans, especially in places where retirees outnumber current workers.

This problem created by longer lifespans, swollen benefits and lowered pension earnings induces many pension managers to do exactly the wrong thing, to speed up and leverage investing and increase risk.

An article entitled “Intel Lawsuit Questions Place of Hedge Funds in Retirement Plans (2)  tells how the Intel pension places big bets on hedge funds and private equity.  The plaintiffs say that this increases risks and costs in the retirement portfolios, hurting plan participants.

A decade ago Intel had a conservative pension primarily in large-capitalization stocks in the Standard & Poor’s 500. Then the company began diversifying into small-capitalization stocks, emerging-markets securities, fixed-income and alternative investments like commodities futures, hedge funds and private equity. Recently, these investments in hedge funds and private equity have grown significantly.

The answer to increased risk of default is not to increase risk, but to resolve the underlying problem of too much demand and too little contribution.  Pensions are meant to be absolute promises that their participants can depend on.  To keep their promise, they need well founded math based on reduced promises, increased contributions and slower, more dependable, good value investing.

Times are changing at an ever increasing rate.  The way to succeed in this scenario is to step off the treadmill, slow down so you can observe and create your own strategy for natural health, earning through a pinnacle career and saving with purposeful, good value investing.

Gary

www.nytimes.com – public pensions look vulnerable

www.nytimes.com – intel lawsuit questions place of hedge funds in retirement plans

 

How to Survive Selective Inflation


The worst kinds of inflation are unreasonable rises in the costs of basics such as  food, shelter and medicine.   There are times when due to income, inequality or legal inefficiency, inflation becomes a form of extortion.  Take the case of shelter, various anti discrimination laws are used to stop landlords from abusing their power to provide  shelter (such as asking for sex to reduce or forego rent), but the practice is all too common.

We don’t have to look far to see legal extortion in medicine.  There has been an outrage about the rise in the price of a decades-old drug called Daraprim.   A new company, Turing Pharmaceuticals, bought the drug and promptly increased the price from $13.50 per tablet to $750 per tablet — a 5,000 percent jump!  However this new company is just following the example of Valeant Pharmaceutical which has a business model of buying existing drugs and raising prices aggressively, rather than trying to develop new drugs.  In essence these companies are extorting (currently in a legal way) unreasonable profits with the threat, “Pay up or die”.

Valeant Drug Prices

This image from the New York Times article on rising drug prices (1) shows how in 2015 alone, Valeant raised prices on its brand-name drugs an average of 66 percent.

Selective inflation is likely to apply to the even more basic item-food.  Here is why I think selective inflation could hurt hundreds of millions of people, especially those on a fixed income.

I recently researched inflation beyond the Consumer Price Index for my report, “The Silver Dip 2015”.   What I found is that since 1942 US median income increased 29 times.  House prices rose from 1942 until 2015 47 times. The cost of cars jumped 36 times.  Gold is up 33 times its value in 1942.  Silver rose 38 times in the same period.

This means that gold and silver were reasonable hedges against some forms of inflation.  Had you stored a pile of the precious metals away in 1942 to buy a car  or house today, you could do it.   This is true of going to a movie, up 33 times or renting an apartment.  Apartment rentals are up 34 times.

The metals have done even better when it comes to eating.  The price of bread has risen 21 times.  Sugar is up 10 times. Hamburger about 13 times.  Coffee  11 times.  Eggs 13 times increase.  Milk 16 times.

Ideally this means that food companies have been good about not gouging consumers.  Regretfully in the face of growing income inequity, failing corporate ethics and rising food prices we might be a bit cynical and not count on this.  The more likely fact is that food processors will see the lag as an excuse to let food prices catch up.

Last May the Labor Department indicated that Americans should be prepared for food prices to remain relatively high.

Meats have seen the steepest rise in price along with dairy products.

Rising food prices can continue to a be a source of stress worldwide as internationally traded food prices rose by a steep 4.0%. Corn and wheat, in particular, contributed to the rise.  The commodities each increased 12% and 18% worldwide this year through the middle of the year despite record grain harvests.

Living standards will suffer as more is spent on grocery store bills, leaving less for discretionary spending.

According to an article at cheatsheets.com (2) The World Bank says that already high food prices have become “the new normal,” and writes that, in less developed nations, families cope with rising prices by “pulling their children out of school and eating cheaper less nutritious food, which can have severe life-long effects… one-third of all child deaths globally are attributed to under-nutrition.”

There are numerous reasons for the increasing cost of food, climate change, drought, increased demand, rising labor costs and worker shortages all which create price pressure.

The largest price pressure comes from industry consolidation.  As processors and packagers merge, reduced competition creates higher food prices.

The best way to overcome selective inequality inflation such as rising food prices is to make sure your income and savings rise faster than prices.

The price comparisons in my research show that gold has outperformed nine of 14 inflation standards reviewed.  Silver outperformed 12 of the standards.  This suggests that gold and silver have done pretty well in maintaining value as real money.

However, this comparison also suggests that gold and silver are not necessarily badly undervalued either.  Beware of claims of $2,000 or $5,000 an ounce gold!  The price of gold and silver are likely to continue rising and falling along their medians.  If the conclusions of the inflation comparison are correct, any time silver drops much below $14, it is perhaps under valued. Gold below $1,150 is also likely a good deal.

This suggests that the price of silver and gold may not rise as fast as the price of medicine or food.  This is why I have written two reports, one on value investing in currency patterns,  “Three Currency Patterns For 50% Profits or More” and on how to use leverage with silver, “Silver Dip 2015“.

Integrating equity and currency value investing with leverage and precious metals can increase profits to help us stay abreast of selective inequality inflation.

Gary

(1)  www.nytimes.com – Valeants drug price strategy

(2) www.cheatsheet.com – Price pressures from farm to table

How to Avoid Swiss Francs During Inflation


Inflation is important.  Some parts of the cost of living have been rising much faster than statistics suggest.  Anyone who visits the grocery store quickly learns this fact.

The last time this economic phenomenon happened my investments earned extra profits so I have been preparing to react to this particular type of inflation. Intelligent investments can create extra earnings that will offset the costs.  My investment will not include many Swiss francs, if any at all.

swiss franc

In the past, inflation protection was easier because other major governments were not involved in excessive government spending.  One could get out of the US dollar and invest in German marks, Japanese yen or Swiss francs and expect to make a profit.

This tactic no longer works.  The German mark is gone, so we have to invest in euro to get a German investment.  The euro has great potential versus the dollar but nothing like a German mark would have.

The Swiss franc, was a great currency for protection for many decades, but the fundamentals no longer are so strong.

First of all, Switzerland’s economy is simply too small for the franc to be a reserve currency.   In eras past, only a small portion of the world’s wealth (held by the richest) had access to Swiss francs.  In modern times, a huge population had access to investing in the franc.  Yet Switzerland’s population at 6 million people is the size of Philadelphia or Dallas, Houston or Washington, DC.

Switzerland needs to keep its currency pegged somewhere close to the euro as Germany is its largest export country.

There is good information about Switzerland’s exports at a MIT University site. (1)

mit swiss franc data

This chart from the MIT site shows Switzerland’s main exports.

Gold                                                                     $52,519,814,522     20% of all exports
Packaged Medicaments                                   $29,809,689,115     11% of all exports
Human or Animal Blood                                 $16,366,090,711        6.2% of all exports
Watches                                                              $21,895,590,400      8.3% of all exports
Orthopedic Appliances                                    $6,274,875,494         2.4% of all exports
Jewelry                                                                $5,861,875,912          2.2% of all exports
Nitrogen Heterocyclic Compounds               $4,813,692,968.35    1.8% of all exports

Some investors make the mistake of looking at the Swiss franc as it was decades ago. I have warned against this for many years.

Years ago in a different world, Switzerland was isolated and fiercely independent. Its mountainous terrain and well-organized citizen’s army gave strength to claim and enforce neutrality.

The small population (about 6 million) believed in personal and hence banking privacy. The people were incredibly conservative and highly efficient. They did not believe in government debt and demanded that their national bank keep a large amount of gold as a reserve for their currency.  This made Switzerland an ideal banking center in those days plus made Switzerland a refuge in times of turmoil. Swiss francs in a Swiss bank account were considered one of the ultimate forms of financial safety.

This all changed. The computer, new tactics in war and the global economic community turned everything upside down. The computer was like the Colt .45, a great equalizer, making bankers in England, Italy or Spain, etc. as efficient as the Swiss. New instruments of war, intercontinental and cruise missiles, nuclear weapons, etc. dramatically reduced Switzerland’s natural defences.

Most of all, the global economic community forced Swiss banks to deal in US dollars, British
pounds, Japanese yen and German marks. Swiss banks had to open centers abroad and hence became vulnerable to other country’s laws. They lost much of their independence!

Today Swiss banks are affected by what happens in the US and other countries.  More importantly, the Swiss franc can no longer be allowed to be the reserve currency of last resort. Switzerland is a poor country in terms of natural resources lacking oil, minerals and the ability to feed itself.

Switzerland is a trading nation and must have its currency at parity with other nations which allows them to export goods.  It must export to survive. A large segment of its exports go to Germany. When the Swiss franc becomes too strong, especially against the euro, the Swiss react quickly to force its parity down.

During the 1970s recession when investors began flocking to the franc, the Swiss National Bank imposed a 12% per quarter negative tax on Swiss franc accounts over 100,000 SFR held by overseas investors.

In the last five years, the Swiss franc appears to have really strengthened versus the Euro as this chart (2) from Xe.com shows.

swiss franc chart

Click on image to enlarge.

This chart shows a special risk in the Swiss franc. The Swiss National Bank protects the SFR and has a nasty habit (see 2011 and 2015) of manipulating the SFR exchange rate. The sharp drop of the franc earlier this year is like a spring ready to push the parity of the Swiss franc back down versus the euro.

This also gives a distorted view of the Swiss franc Euro relationship.  The Swiss franc has simply switched its parity with the US dollar and as the chart (3) shows.  The franc has maintained its value with the dollar now for five years.  I believe this is because someone at the Swiss National Bank is smart enoughj to know that the dollar is too strong and when it corrects, the francs parity will move back closer to the euro.

This was really bad for speculators who were long in Swiss francs, a brilliant move on the part of the Swiss National Bank.  Investors will think twice about jumping into the Swiss franc thinking they can make an automatic profit.

swiss franc chart

Since the US dollar is seriously overbought, the suggestion is that when the greenback corrects versus the euro, so too will the Swiss franc.

Switzerland is a good banking center, yes.  The Swiss franc may be a strong, stable currency, yes, but the Swiss cannot afford to let the franc rise too high and the profit potential on Swiss franc investments is extremely low.  The Swiss SNI Stock Market index has risen 33% in the last five years, compared to a rise of over 60% in the Dow Jones Index.  Since the currency parities have remained equal, investors in the SNI have earned half the profits as investors in the Dow.

Why choose a currency that is not likely to go anywhere when you are not getting paid a handsome income return?

I have shared this information for at least fifteen years warning not to invest too much in Swiss francs, especially when it is strong and overall this has been correct.  I have not changed my opinion on this.  If you find a good value investment denominated in Swiss francs, go for it, but overweighting a portfolio in this currency runs the risk of muddled returns at best.

Gary

Learn how to master inflation.

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mastery

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(1) https://atlas.media.mit.edu/en/profile/country/che/

(2) http://www.xe.com/currencycharts/?from=EUR&to=CHF&view=5Y

(3) http://www.xe.com/currencycharts/?from=USD&to=CHF&view=5Y

How to Prosper in the Worst Times


Many readers send me notes about our political system that sounds like sour grapes (frustrated).  Other notes I receive are more like the grapes of wrath (angry).   Many readers are angry, many are frustrated and most are a little afraid.

Let’s remind ourselves of some basics and remember even rotten grapes can be turned into sweet wine.  See below a way to earn extra profit with a falling US dollar.

grape pie

Concord grapes from our little vineyard at Merrily Farms.

A reader sent this note:  Hi Gary,  If the USD is replaced as the world’s “go to” currency, we’ll have a major crash in this country.  I believe it’s inevitable.  So what references can you offer to help us prepare for the worst?  Your input will be greatly appreciated.  Please tell Merri hello and give her our best.

My reply:  First, a weak dollar is not a bad thing for Americans.  Imports cost more but the US still has the largest domestic economy in the world by far.  Here are the stats from the IMF for 2014 (1).

Rank   Country                 GDP   $ Millions

1          United States           17,418,925
2         China                         10,380,380
3         Japan                          4,616,335
4         Germany                    3,859,547
5         United Kingdom      2,945,146
6         France                        2,846,889
7         Brazil                          2,353,025

Right now there is a very good case for diversifying out of the US dollar into the Euro.  This ten year chart of the Euro shows how it has been dropping in waves versus the US dollar since 2008.  The dollar’s strength since late 2013 suggests that the green back is very overbought.  The Euro zone has lower debt as a percent of GDP, a smaller deficit and a much better trade balance.  All of these fundamental strengths give the euro a good reason to surge.

US dollar

Chart from www.xe.com (1)

Our reports  “3 Economic Conditions for 50% Profits or More” and  “Silver Dip 2015”  both show how to to profit when the US dollar falls.

The loss of purchasing power of all currencies are a growing global problem.  The US dollar has been losing purchasing power since I began traveling and investing in the late 1960s.  Today almost every currency is under pressure because almost every government has used the same overspending tactics as has the US.

Winston Churchill outlined the crux of the problem when he said: “If the Almighty were to rebuild the world and asked me for advice, I would have English Channels round every country.  And the atmosphere would be such that anything which attempted to fly would be set on fire.

The opposite has evolved.  Modern communications and technology have allowed a growing population that is increasingly connected.

Technology creates greater wealth.  Communications allow even the poorest to know about (and desire) this wealth.  As always, the extra wealth is not distributed equally or fairly but in the modern world technology allows the poor to express their frustration in deadly ways, if they don’t get enough of the added affluence.

This is why no one is isolated from the Syrian problem.  This is why a very small number of people at ISIS can affect most of us wherever we are in the world.  This is why no one country can (or should) be allowed to crash.

Inflation is one way of creating soft landings to these equality distribution problems.

Here are some of the steps we have taken to reduce the effects of inflation and gain from currency fluctuations..

First, we have expanded our investments in rental real estate.   We reduced our equity position, almost totally eliminated bonds and added rental income property.  Rental property is a lot more work than investments in CDS or bonds (not enough return) or buying US shares (hard to find value).

We aimed for a sweet spot, two and three bedroom houses that rent for about $1000 a month.  Our renters are mostly working professionals, teachers, police, foremen and retired couples.  The reasoning is that these are stable renters and rents will rise with inflation and provide a sufficient income.

In stock investing we are investing in value markets outside the USA  (explained in the report “3 Economic Conditions for 50% Profits or More” and  and speculating in precious metals as in our report “Silver Dip 2015”.

Second, we have moved to remote places away from the madding crowd and more out of harms way from traffic jams, noise, pollution, riots and such.  I want to point out that this decision was not made because we think the world or the US dollar is coming to an end.  Life is just better out here in nowhere for us.  If we loved shopping and concerts, theater, socializing, dining in restaurants. etc. our decision might be different, but we do not. We love land, fresh air, lots of water and space and we like to stay at home or with our children and grandchildren.

Third, we stay away form the US medical system as much as we can and work at maintaining good natural health.  Fortunately, we really like to garden so I get good exercise growing some of our own food.  This provides a double benefit, the exercise and truly ripe, organic food picked right off the vine eaten with fish from the creek or lake.

grape pie

Finally, I am very picky about reading the news, never at night and only looking at specific items that might relate to what we are doing.  So much of the global medias is aimed at instilling and/or enhancing fear.  What a shame to live in more fear than is required!

The world, governments and the currencies they issue have changed a lot in the last 45 years that I have been multi currency investing.  The almighty may not have listened to Winston Churchill for evolutionary planning, but we have been given two key economic essentials, that are the very basics of all economics, more demand, (a growing population) and  more supply (increased productivity).

There are plenty of distortions and displacements caused by unequal distribution of wealth.  These errors remain and will remain cause of concern and of inflation.  The overall trend however is of greater wealth. When we achieve mastery at selecting currencies and live in a peaceful healthy way, we can increase our share of this wealth.

grape pie

Grape pie we recently baked from grapes off our vines at the farm.  It was not sour. Nor was there any wrath involved!

To help you gain mastery over all your important goals in life, this week only Amazon.com has a countdown special on the Kindle edition of Bob Gandt and my new book MASTERY for only $2.99.   The print list price $13.99, the Kindle regular price $6.99.  Download it directly to your Kindle reader or onto your PC, Mac or tablet on an app from the Amazon page.

mastery

Order MASTERY (this week only) at Amazon.com for $2.99

Gary

(1) IMF GDP Stats

(2)  Euro Dollar Chart at www.xe.com

Beat Inflation – Reduce Tax


A micro business in writing can create income that beats inflation as it reduces tax.

Money does not guarantee happiness but up to about $75,000 a year of income, money does help.  If you are turning your passion into profit, then it is even easier to be content with your labors.   The value of labor rises with inflation.  That $75,000 threshold will be worth $38,126 in ten years if inflation is 7%.  $75,000 of today’s purchasing power will require $147,536.

Good labor is not drudgery and does not have to be work.

The beauty of learning to serve in a fulfilling way is the process of earning can be fun.

Take the example of Denis Malloy’s new book  “Eat Local Anywhere”.   Our  course “Self Fulfilled How to be a Self Publisher” helped Denis write this book.

eat local anywhere

Denis’s guide is for local restaurants in different parts of the world that are not specifically designed to attract tourists.  They are restaurants featuring authentic, local cuisine for local residents.  The moderate prices on their menus and the authentic representation make these great places to eat as you travel.

Learn more about Denis Malloy’s “Eat Local Anywhere” at Amazon.com

To research this book, here are a few of the places Denis had to travel so eat in many of the restaurants there.

Brussels, Belgium

Buenos Aires, Argentina

Quito, Ecuador

Punta Del Este, Uruguay

Santiago, Chile

Montevideo, Uruguay

Paris, France

Sait Jean de Luz, Pyrenees-Atlantiques,  France

Sheboygan, Wisconsin

Del Ray Beach, Florida

Do you think his research was drudgery?  Look at the service he provided, a valuable guide to good restaurants offering great food and low prices. here is a bigger social element here.  By helping promote local restaurants that serve good local food, Denis is helping short circuit big agri business and  chains that increasingly dominate commerce and pollute our bodies and the environment.

In addition Denis gained enormous tax advantages.

Fight inflation, reduce tax, help the world, be fulfilled.  Never give up the ability to serve.

Our upcoming Value Investing Seminar features many cash savings ideas via tax reduction.

Gary

Medical Inflation


What has the worst potential to ruin quality of life?   I believe it is medical inflation.  This problem of rising cost and lowered quality goes beyond just destroying our health.  The horrifying statistics below show why.

chicago tribune

Chicago Tribune 1942.

I came across this information while researching my latest report, The Silver Dip 2015.  I wanted to answer the question, “What is the real value of  silver?”

There are so many pros and cons about whether precious metals will rise or fall, that I wanted to keep the process simple.  I figured the easiest way to see real value is by comparing purchasing power.  I wanted to see how many ounces of silver it took to buy certain basics in the past compared to now.  If a hundred ounces of silver would buy a car or a tenth of a house 75 years ago, what would it buy now?  If it bought more then, it is likely undervalued.   If it bought less, then the price of silver would be too high.

My research had me looking at the cost of everything over many time periods. The goal was to get a handle on real inflation so this one article in the March 31, 1942 issue of the Chicago tribune (1) intrigued me.

The article says:  Randolph Paul, tax adviser to Secretary of the Treasury Henry Morganthau suggested that deductions be permitted for extraordinary medical excesses.  He mentioned that 5 percent of net income as a normal medical outlay .

Normal health care costs were 5% of an American family’s outlay at that time.  Today this percentage is stated to be between 18% and rising.  How could this be?

A US Bureau of Labor Statistics report entitled  “100 years of price change” (2) shows that after WWII health care was the fastest rising annualized increase of selected components in the cost of living from 1951–1968:

Food, 1.3 percent
Rent, 2.0 percent
Apparel, 1.2 percent
Medical care, 3.8 percent
Transportation, 2.1 percent
Services, 3.2 percent
Commodities, 1.1 percent
Gasoline, 1.9 percent

Medical care continued to have one of the highest rates of inflation in 1968-1983:

Food, 7.1 percent
Energy, 9.9 percent
All items less food and energy, 7.0 percent
Rent, 5.7 percent
Apparel, 4.2 percent
Medical care, 8.4 percent
Transportation, 7.3 percent
Services, 8.2 percent
Commodities, 6.6 percent
Gasoline, 9.1 percent

Then medical care costs really took off.   Here are some overall numbers from justfacts.com (3)

Between 1960 and 2009, healthcare spending in the United States increased:

• from a yearly average of $147 per person to $8,086 (by 55 times).

• from a yearly average of $1,082 per person in inflation-adjusted 2010 dollars to $8,218 (by 7.6 times).

• from 5.2% of the nation’s gross domestic product (GDP) to 17.8% (by 3.4 times).

Let’s think about this.  In 1942, the price for a maternity room averaged around $7.00 per day or about $100 a day if adjusted for inflation.  Today, the price for a maternity room can zoom up to $1,500 per day.

This appears to be getting worse!

A recent Finance.yahoo article shows that in 2015 there was “An eyebrow-raising jump in the prices of medical care that helped boost the Consumer Price Index” (4).   The jump was so high it surprised economists and health-care experts, who could not figure out what’s driving the large increase.

One expert told CNBC that after looking at a decade’s worth of data, and after speaking to half a dozen economists and health-care analysts about the medical care cost increase in April 2015, a major cause appeared to be hikes in the prices of hospital services.

The medical care index rose 0.7 percent in April compared to the overall Consumer Price Index rising just 0.1 percent for the month.  Hospital services rose 1.9 percent for the month which equals a nearly 24 percent annual rate of hospital services inflation.

However, rising unacceptable costs in US medical services have not brought us better medical care.  According to the Commonwealth Fund survey, US healthcare ranks dead last compared to 10 other developed countries. (5)   Americans pay more and get less.  This fact is growing worse.  This is why learning how to avoid the health care system and maintain natural good health grows in importance for a good quality of life.

Gary

Good health is a vital component in everlasting wealth.  This is why our Value Investing Seminar has one session on how to have good natural health.

(1)  archives.chicagotribune.com 1942 tax credit for unusual medical costs

(2) www.bls.gov One hundred years of price change

(3)  www.justfacts.com healthcare costs

(4) Finance.yahoo.com medical cost inflation hits 8 year high

(5)  www.forbes.com us healthcare ranked dead last

Two Most Important Financial Tips


The two most important financial tips have nothing to do with investing at all.   These tips have to do with a part of our lives that has serious inflation.  Starting last April, (2015)  there was an eyebrow-raising jump in the prices of medical care. This jump was so high it surprised economists and health-care experts, who can’t figure out what’s driving the large increase.  The first monthly blip up 1.9% in one month, is an annual rate of 24% per annum.

The first first tip is “avoid medical expenses.”

medical cost inflation

Portion of income spent on health care chart from justfacts.com (1).  [Click on chart to enlarge.]

Recently I was combing through some old papers of my mom’s and found a receipt from the Providence Hospital in Portland, Oregon for my birth.  $65.  I recall paying for my first daughter’s birth, a C-section, $630.

According to justfacts.com, “In 1942, the price for a maternity room at Christ Hospital in Jersey City, NJ was $7.00 per day.  Adjusting for inflation, this amounts to $97.29 in 2011 dollars.  In 2011, the price for a maternity room at the same hospital was $1,360 per day.”

According to whattoexpect.com (2) “A 2014 study by the University of California, San Francisco found that hospital charges for an uncomplicated delivery ranged from $3,296 to $37,227, depending on the hospital.  For a C-section, costs ranged from $8,312 to nearly $71,000.”

Medical expenses have more potential to ruin your wealth than any other cost.

The second tip is “Have good health”.   One of our most powerful financial assets is good health, energy and a calm excitement  that starts every day. 

One of the best ways to create this positive mood is a morning self massage with essential oils.  Research confirms that self-massage produces oxytocin.  This Nona peptide produced by the hypothalamus linked to feelings of well being and release of stress.

A self massage balances the immune system, modulates hormones, makes the skin look and feel good as it improves our mood.  Using essential oils enhance these effects, because we can go one step further and target the mood we want to balance.

Many health sciences look at good health as being the correct interaction between three elements of the body viewed as (1) air, (2) fire and (3) water.   These elements represent motion (air), digestion (fire), and the solid form in which we exist (water).  When any of these three elements are out of balance, the imbalance creates dis – ease.

The two fastest and most powerful ways to shift these elements is through the skin or the lungs.

The Indian science of life, Ayurved, suggests a 20 minute self massage of the head, face and ears, neck, arms, hands, fingers, back and spine, legs and feet.

If you are like me, you rarely have time for that!

I already do 35 minutes of meditation, 15 minutes of exercise and a 15 minute sauna.  By that time I am ready to get going.  So I hit the important points, the face, neck, ears especially,  joints, knees, elbows and lastly the feet.   The feet and ears are considered especially important.

During the massage, I focus my thoughts on gratitude, love and am as aware and focused on each  stroke.  We are what we think and science produces evidence that the more attention we give each stroke, the more oxytocin is produced.

Four ways to avoid higher health costs.

There is a simple way to decide which oil to use because our emotions give us clues about any imbalance.  If we feel angry, the imbalance is fire, anxious is air and depressed is water.

There are four essential oil blends that Merri and I use all created by our friends, Candace and John Newman.  For years Candace traveled with Merri and me to Ecuador and visited us at our North Carolina farm to study shamans and their use of these oils… known as aqua flora.

We purchase all our oils from her because her pure essential oils are gathered from around the world and are of the highest quality to insure their medicinal properties.

She uses no synthetic fragrances.  Her blends are of the highest quality ingredients and her formulas include base ingredients such as Organic Golden Jojoba, aloe and coconut oil.  The four balancing blends are:

Soother Blend:    Cedarwood, Geranium, Patchouli, Orange, Ylang YlangThe Soother Blend pacifies an air imbalance when feeling anxious or jittery.  This blend has the grounding oils of Cedarwood, Patchouli; balancing nerves with deep sweet Geranium combined with the sweet, uplifting touch of Orange and Ylang Ylang.

Balancer Blend:    Lavender, Orange, Peppermint, Roman Chamomile.  The Balancer Blend eases fire when feeling anger or resentment.

Stimulator Blend:  Eucalyptus, Cypress, Lemon, Lavender, Rosemary.  The Stimulator Blend shakes up water, gets the rivers moving and clears with Eucalyptus, Lemon, Cypress, Rosemary. A touch of Lavender adds balance to the whole mix.

Comforter Blend:  Lavender, Rose Otto, Frankincense.  When the need for feeling just fine, the Comforter Blend keeps the balance.

Each of these four blends is available individually in a healing cobalt glass bottle with pump top for home or office.

essential oil

Learn more about these blends at Candace and John’s website.

Soother 4 oz

Balancer 4 oz

Stimulator 4 oz

Comforter 4 oz

essential oil

This chart shows how to use these essential oil blends to maintain a good natural health balance.

Hidden high inflation, especially medical costs and low interest rates create great threats to our wealth and health.  Avoid high medical costs and have good health by balancing the body with essential oils.

Gary

(1)  https://www.justfacts.com/healthcare.asp

(2)  http://www.whattoexpect.com/pregnancy/pregnancy-costs/

Learn Seven Ways to Reduce Health Care Costs at our Value Investing Seminar.  One session of the seminar covers shamanic health secrets that can help maintain good natural health.