Monday, January 13, 2014

Crystal Ball 2014 Edition

This is the time of year where I talk about what I see coming down the pike. First I will say that I do not have a crystal ball, yadda yadda yadda; then I will immediately follow that with some predictions. Of course it is worth noting that I am not a doctor, lawyer or financial advisory and I didn't even stay at a Holiday Inn last night. Basically my thoughts are my own so if you choose to follow them all of the risk is on you; the only good part is that I don't take 5% off the top and a third of your growth plus monthly fees.

Indicators will be polarized as to whether our economy is recovering. Some indicators will keep growing because eventually folks will come out of their shells; ex people will buy homes, folks move and families reach the time where buying a house is right for them regardless of the market. The biggest single divide between them will be how easily a number can be inflated or manipulated. Example the stock market will probably do well but the number of people out of the work force will increase and the number in crap jobs (low wage, permanent part time, no bennies high turnover) will increase even more.

I fear that rule of law will continue to diminish on many fronts. Example if a young white thug punches an old black person for no reason it is a hate crime but if a poor disadvantaged urban youth does the exact same thing to a cracker it's somehow not a hate crime, barely a misdemeanor.

If a liberal breaks a firearms law it will not be prosecuted but if a conservative does they will be prosecuted to the fullest extent of the law.

Crime will generally rise but it will be kept quiet in the media and obscured in official reports. I see larger organized robberies including the home invasion type to increase as more people, some of whom have a military background, are unable to gain easy legitimate income and may even be pushed to desperate measures.

Increasingly economic winners and losers will not be decided by good business sense or keen competition but government connections deciding winners and losers.

Generally your job prospects are good in government and get better at higher levels (.gov, .state, .county, .city) with the exception of the military.

We are facing a downsizing not seen since the Clinton era. Lots of soldiers and NCO's as well as company and field grade officers, myself  and American Mercenary included, face the risk of being involuntarily separated. They may cut up to 20% of these officers, of that population probably 6% have derogatory stuff (disciplinary, really bad evaluations, etc) and will be easy pickings but the rest are going to be fully qualified Officers who are probably combat veterans. I'm not too worried largely because there isn't a huge point in worrying about it. I'll get my records strait and if they say I'm fired well I'll be sad then move along n do something else. It would be a weird/ rough/ poor year or so but we'll figure it out. It helps that we've made choices (college, saving, low debt load) that would help if need be.

I think inflation is going to keep eating away at our real purchasing power. Say we call real inflation 6% (to choose a number) well if you let that roll for 3-4 years it hurts a lot. Eventually in the next few years, or maybe sooner, it will reach a point that the government can't keep the proverbial car between the lines on the road. The best case I see is the late 70's and early 80's stagflation, the worst is pretty bad.

The whole health care mess is going to continue. I suspect the more we see of this law the worse it will be for average Americans. As it becomes clear the middle class, specifically it's younger members are subsidizing the working and not working poor to benefit the medical insurance industry many normal people are not going to be happy. This could be sadly entertaining to watch.

I don't think our "representatives" are going to get any better at working together to solve actual problems.

What could we pull from these predictions in terms of actionable ideas? (Again noting I'm just a guy with a blog, don't bet the farm on something I think.)

It would be prudent to get yourself medically squared away, especially if you currently have decent insurance. Get that surgery you've been putting off, get that knee fixed, fix that crown that is about to go, get lasic or family planning type surgeries if you want them. Simply put I do not think health care is going to get more accessible, cheaper or better in the near future so it would be prudent to catch up on whatever you need now.

Along those lines if you have been planning a major purchase such as a home or some land that will require credit I would look hard at getting that done. Rates are climbing and in the mid term (say 3-5 years) I can't see them getting better.

Replacing things large and small that are on the verge of going out while you still have an income so it is a minor inconvenience vs a major problem would be prudent. It could be the daily driver that you know is about to go out or a pair of boots from the 80's held together with shoe glue. Right now if these things break replacing them is unpleasant to some degree, on the high end you might have to put off a vacation. On the other hand if in 9 months you've been out of work for 6 months and are barely keeping a roof over your head replacement could be impossible.

Inflation both hidden (smaller servings, 10 cans in a case instead of 12, etc) and not so hidden will keep pushing food prices up. Stuff like coffee, rice and wheat , canned food or long term emergency kits are simply not going to get cheaper.You might want to reread or read The Alpha Strategy, the PDF is all over the net, for some ideas here.

If there is gun stuff on your annual list I would recommend pushing it towards the front. When we get close to the mid term elections the situation could get ugly. Maybe you want a new carry gun or Momma needs a 20 gauge, whatever. Ammo isn't exactly where I'd love it to be but with 7.62x39 in the $230/1k range and good 62 grain 5.56 in the low 40 (42) cent range it's probably time to weigh the chance of prices dropping another 5-10% with the risk of things going nuts. Personally I've been buying 7.62x39 for a couple months and am going to get some 5.56 soon. Prices on shotgun and hunting rifle (30-30, 30'06, etc ammo have stayed more or less flat so that is a no brainer to buy now. Anyway I would look to be done buying guns, ammo and mags for the year around the middle of summer at the latest.

What to do with money these days is a fun question. If you are smart you save, period. The old saying that if you always save 10% you'll never be broke has a lot of merit. Personally I think the stock market is inflated, dependent on continual federal government crap bond purchases and generally a bad place to put your money. Savings accounts are paying interest that is effectively (when you count inflation) negative. Sure you need at least some of the Emergency Fund in the bank in case you get munsoned in the Philadelphia Airport for 4 days or drop the transmission from the family hauler 2 states away but beyond that it's a bad place to park cash. So what to do with it. Here are a combination of my thoughts and things we are actually doing.

Pay down debt. The conventional wisdom is that paying down debt in an inflationary situation is foolish because you can pay it off later with cheaper dollars. The problems with that idea are 1) it presumes you are making more money to keep up with inflation. If paying off the debt is unpleasant now imagine when the grocery and fuel bills double but you make the same amount? Also 2) Looking at ways to make money or at least save money if you put cash towards a loan with a 5% interest rate you are saving and in effect making back 5%. Also 3) the pay it back in cheaper dollars plan presumes you keep your job/ income. High inflation makes for ruinous economic circumstances. Even if the $1,000 mortgage paying is worth $600 in real dollars it's hard to pay when you are unemployed.

For goodness sakes pay off any adjustable rate debts. Look, rates are going to rise, I cannot say when but they will. To people whose vehicles or homes are dependent on paying a loan whose interest rate will likely increase significantly it will be ruinous.  If you listen to nothing else I say get those debts paid off or turn them into fixed rate loans. The only exception I see is a loan/ card/ line of credit that is at an advantageous rate WHICH YOU CAN PAY OFF AT THE END OF THIS MONTH OR ANY GIVEN ONE IF NEEDED.

-Buy food and ammo. Get all you may possibly need (obviously considering the shelf life of food) and maybe some more. During firearmagedon a guy with a case of 5.56 and a case of 9mm set aside to sell could have done really well for himself. In coming potential events a guy with a couple hundred new in the package PMAGs could double, triple or even quadrupole his money.

-Put money into yourself. Take a class to learn to use a combat rifle by a pro like Max Velocity, get a certification to prove to a stranger you know how to do something like weld, work on engines or whatever. Get a degree or a second degree to improve your competitiveness at the current job or get a better one. Remember nobody can take away what is in your head.

-Put money into things that will let you earn money/ barter. If you are a welder get a genny and a setup to do small jobs on your own. If you are a mechanic buy tools and spare parts. If you are a carpenter buy tools, nails, hardware and lumber. If you can reload any type of ammo stock deep in powder, primers, lead and all manner of casings. If you can garden stock seeds deep for your own use and trade.

-If you have big money there are some bargains out there in real estate. A person could buy a couple duplexes or 3 small houses that are in reasonable shape in decent neighborhoods and get a modest reliable income out of them. When said person eventually sold those homes they would also benefit from appreciation of the property.

Along the big money lines I would look at relatively low upkeep businesses: trailer parks, storage facilities and stuff like that with a proven track record of earning money. In this situation do consider the necessity to have the time to do it yourself or cost to have a competent manager in place. If you don't have managerial desires consider the possibility of buying a share of an existing business. Say Bob's storage is a productive profit earning business but they can use a cash influx to buy 5 acres next door that are for sale and expand, you put up the cash and Bob gives you 25% of the business, win/ win.

-Put money into things that will improve your situation. Build a chicken coup and get chickens, put up a fence you need to use part of your land that has been fallow, buy a milk cow, build some raised beds to grow a bigger garden, put in a good road on the back 40, etc. You get the idea.

-Purchase bargains on useful items. If Joe 6 pack is going to sell Daddy's .357 mag, his mall ninja AR, a good generator or a toy 4 wheel drive truck that screams Bug Out Vehicle fast to make bills somebody is going to show up on short notice with cash offering 70 cents on the dollar, it might as well be you. Either you can flip the stuff to make a quick buck (since you can wait 30 days for a buyer willing to pay 95 cents on the dollar) or you use the stuff for awhile and keep it to sell on a rainy broke day.

-Put money into things you are going to need at some point. Maybe your kids will need AR's to go play with Dad on the weekends or sooner or later your farm/ business is going to grow and you will need a larger generator, another vehicle, a piece of equipment or something. Maybe you've been putting off buying a .338 Lapua for awhile. I don't know what applies to your situation. The point is to look towards future purchases and make them with today's available dollars ideally hiding them from inflation and thus saving money over the future cost of said item(s).

Anyway those are my thoughts on that. What do you think is coming in 2014?

7 comments:

Anonymous said...

Did you see the legislation which is saying that military veterans should be barred from legally owning firearms, due to possible PTSD issues ? What a load of crap!

riverrider said...

you hit it pretty well. add the current stream of cutting vet benefits to the list. it will only get worse, been thru this before. toss in the country growing even more polarized and osama making arbitrary executive orders until somebody takes a shot at him. word on the street is hillary will take him out late in the election cycleherself if she needs a boost to ride in on. the 2014 elections may flip everything, for good or bad. if i had extra cash which i won't thanks to my nurse wife losing her job to obamacare, i'd by deep into ammo,mags,and ar15 receivers and then kits. i could have tripled my money on every bit that i had, but i sat on it too long. good luck on the rif. max out the pt,schools, and online courses,then pray.

Aesop said...

I wouldn't plan on saving unless it's to get to a point where you can convert paper assets into real ones, ideally ones that will hold value or even appreciate.

Inflation turns savers into suckers if all they're holding is paper currency or digital 1s and 0s when prices spike.

Buy commodities in bulk that don't decay or decay slowly, whether it's land, lead, gold, and silver, or long-storage diesel fuel and unground grain. Probably a little of each, and more. You can't eat gold or silver, ut you can grind grain, or plant it, you can burn diesel, and farm land. But it's hard to go to the store with a pocketful of fuel.

Also, whenever possible, buy as much of stuff in advance as you can manage if freshness isn't an issue. Stored properly, toilet paper, laundry detergent, and canned goods (among a host of things) don't go bad, and you'll always be living at last month's or last year's prices if you buy two or five of something you're going to use either way, instead of just for this week.

I would also add "learn and practice barter" to Ryan's list.
It's a valuable skill, and as an added benefit, there's no sales tax at this point to either party. This includes trading skills for something tangible, or swapping services.

And I'd start thinking like it's 1930, or 1830, and make sure to have things like a decent sewing machine and such to make and repair old clothes, and good sturdy hand and power tools, to make and repair everything else, including potentially more tools. (It boggles my mind to see how many homes have neither nowadays.)

Depression-era mantra:
"Use it up, wear it out.
Make it do, or do without.
"

Think about what you'd do to make do if Wal-Mart, Target, and Home Depot were gone, because if the day comes you can't afford to shop there, for you they are gone.

And become a familiar face in the local second-hand and thrift stores. If you can find a gently used wool sweater or a couple of sets of clothes for the kids there for $5 instead of $95, you just paid yourself $90 which, once again, is a savings that isn't taxable.

Best case, you save some money and acquire better skills; worst case you save your own life and keep on keeping on.

2014 is better in that the wheels are coming off the wagon for Team HopeyDopey, so midterms could be a wonder. But we're still stuck with the mental midget administration for another three years, and no matter what happens, it's going to be a bumpy ride, with the possibility of catastrophic always just out beyond visual range in the fog.

Meister said...

There's one major commodity that they can't make more of- Land. Purchase as much as you can right now. It can feed you if it's tillable, feed you if it's rugged and feed you if it's covered in water.

With the True Inflation rate at 11%, it takes little time to watch you spread your wealth around to make ends meet. The only way to combat inflation is to be able to set your own wages. Start your own business like was mentioned. In 2002 I started my business as a side job, in 2008 I went full time and now I get to pass the inflation on to the consumer, just like everyone else does.

My father always told me "The only person willing to pay you what you're really worth is you"

Quit being a lemming and buying staple you can produce yourself. Detergents and cleaners are cheap when made at home and much safer for the family. Sure it's easy to grab a bottle of windex off a shelf, but what if you can't afford it?

Buy what you can't make. Fuel, grains, medical supplies, antibiotics, books on critical skills. Invest, don't just spend money on things with zero return on investment. Solar panels, fuel containers, food prep equipment, farm equipment and many other things can and will make living even today easier and cheaper.

Make every dollar scream for mercy.

Prairie Patriot said...

Good post and great comments. All are on point.

Ryan, you recommend buying up rental properties. Just a little personal story, my parents own 3 duplexes and they haven't made any money on them. After the wear and tear of the tenants, plus vacancies, it really has been a headache for them. Not only do they not make any money, but the time investment to manage them is also a type of "cost". They said if they could have done it over that they would not have bought rentals and just have bought farmland instead. They have had better success with that (i.e. land value has gone up, farmer gives them a percentage profit from each year's crop, etc). I would caution others that rentals are not a guaranteed money maker.

Of course, there's always risk in investing, but their situation came to mind when I read your suggestion.

Theother Ryan said...

PP, I like the farm land idea! Obviously buying (relatively) local farm land is more practical in some places than others but it's an excellent idea none the less.

Anonymous said...

Two points, stay away from rental properties. More headache than they are worth and you always loose money. In this economy the most solid renter can become a deadbeat overnight (Job loss, health problems, divorce etc) and you end up trying to evict them. BTDT, never again!

Got Riffed after Viet Nam, at the time it was depressing but the .mil does provide readjustment pay and did ship my goods to my Home of Record. I was in Germany, being in CONUS is easier on the family. Was contacted by reserve units soon as I got home so had some PT income while I readjusted to my new life. At least it is better than getting fired on friday with no notice, know several folks who went through that. One buddy worked his way into a full time recruiting job for the Reserves, think outside the box.

Maybe hook up with Mosby or Max and become a trainer.


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