Before I begin this post, I need to clarify two things. First, I am not a stock broker, I am an information broker, and there is a huge difference. Stock brokers deal with trade-able certificates of shares in public companies, Information Brokers deal with data, research and the like, often hired primarily to find information and translate it into layman’s terms. I am not offering financial advise here, but rather how to get it. Second, my purpose is to inform the average survivalist on certain limited aspects of money, investments, and getting the information you need to make informed decisions to keep the buying power of your dollar rather then make more. In other words, if you want to learn how to make money off of investments your reading the wrong blog, if however you want to be able to buy a roll of toilet paper for the same amount of effort in the future as it costs you in labor today, keep reading. Read more…
Money and Wealth:
Most of the Preppers that I know are aware of the fact that money isn’t real. It’s an idea, a representation of something else. That two dollars in your pocket is the idea of a cup of coffee after work on Monday. What people fail to realize is that it goes beyond that. The current system of currency we use today is called fiat money. Fiat, in this case, means something declared by the government to be legal tender. There really isn’t anything more to it then that. Some claim that Fiat Money is based on debt, or the Gross Domestic Product, or some other factor. Which is only technically true, the real truth is that fiat money is nothing more then the government saying it is money, nothing more, period.
If I came to you and claimed that I was born on an alien planet, your first response would be that I was completely nuts. Your second would be that I would have to prove it. If I showed you a fancy piece of paper, with bar codes, computer generated graphics, a hologram, and strange characters, claiming it was my off-world birth certificate as proof, the only thing you have to go on that it is real, is my word on it.
Incredible claims require incredible proof. The government claims that with this piece of paper, you can buy anything you want if you have enough pieces of paper. Those who translate this to mean that each piece of paper is a small representation of the Gross Domestic Product, are saying the same thing as each piece of paper represents a small portion of ownership of every product in the country. Which brings a question to the forefront of my mind, since when did you give me a small portion of the house you live in?
Anything which claims to be something it is not is a lie. Fiat money is a lie. The real value of fiat money comes from taxation.
“Chartalism is a monetary theory that states the initial demand for a fiat currency is generated by its unique ability to extinguish tax liabilities. Goods and services are traded for fiat money due to the need to pay taxes in the money.” - Wikipedia
Real wealth has nothing to do with money. This isn’t some moral stance, it’s a fact. Money looses value every year, on average by 2%, so therefore can not be a method of storing wealth either. Real wealth is stuff. It is the bread you eat, the car you drive, the house you live in.
As an example of this, if you placed $1,000 in a non-interest paying bank account in 1965, today there would be $1,000 in that same account (no interest). On the other hand, in 1965 you could have bought four thousand seven hundred and sixty-two loaves of bread for a thousand dollars , or seven thousand one hundred and forty three pounds of zinc . Today that same zinc would be valued at over $7,300 which would get you close to over four thousand seven hundred loaves of bread. In other words, for readers of The Alpha Strategy, buying metals is a perfect way to maintain the buying power of your dollar, but does nothing to making you money.
You might pay a hidden Corporate tax, which is 19.5%, federal income tax is 29%, and provincial income tax at 24%, force payments to a pension fund is 4.95% (another form of tax), sales taxes 15%, for a total of 92.45%! (Tax rates Canadian) Getting interest on financial investments is subjected to taxes, and placing the order for those investments is subjected to broker fees (0.7%).
And don’t forget that planned inflation rate of 2%.
The planned inflation rate of 2% appears to be never met. It gets close when looking at it from a month to month view, but the reality is far more evil. Since 1965, the average yearly cost of living has been increasing just over 13%. To translate this into layman’s terms, your screwed before you even start.
There is only one real way to make wealth, and that is to produce/acquire real goods. In 1965 a dozen eggs would have cost you about 55 cents, since then the cost has gone up four times as much, but the chickens which produce the eggs did not start eating four times the amount of grains to produce the same number of eggs. By the same token, it might take a carpenter almost 200 hours to build a kayak, those hours might come down to half that with greater skill, but it will never reach zero, neither will the amount of wood in the actual craft change much. The finished product, will in fact, still bring in the same trade value for eggs or bread.
Invest in Yourself:
The first real investment any Prepper should make is in themselves. The skills required in the future, any future, will be useful for trade. “Know-how” goes a lot further then a devalued dollar.
There are two things I look for when I think about what I should learn next. The first is usefulness by average people of the final product. Coffee cups are used by most folks, so I learned how to build a ceramic kiln, wedge terra cotta clay, make glass glazes, and throw clay on a potter’s wheel. A coffee cup is a useful product used by the common people that I can produce, it is a trade-able good that does not spoil, is easy to transport, and is recognized by everyone.
The second is how the skills of the a final product can be used to create something else and how it relates to these key words: Food, Clothing, Shelter, Entertainment/Education. If I find a set of skills or a trade that can fit into all the above, I have found a gold mine for the future. A carpenter can frame a house (shelter), fence in cows (food), build a loom (clothing), and make marionettes (entertainment) or bookshelves (education) he is far ahead of the game of surviving and starting to thrive. A ceramic artist can make a brick (shelter), produce coffee cups (food), make trauma plates (body armor clothing), kiln fire chess pieces (entertainment/education), he would be in just as far ahead being able to thrive as the carpenter.
Invest in Time:
The second type of investment has to do with time. Anything that saves time, is worth it’s weight in gold. A dishwasher is far more likely to be a better investment for the average Joe then the same amount of money being invested into IBM stocks. Think about how much money you are worth in your current job, if for example you are working for only $10 an hour, an hour of washing dishes each day is worth over $3,650 per year to you, a dishwasher is a lot less then that. Any tool that can get the job done better and faster saves you time, and time is literally money, spend it well.
Invest in Energy:
The third consideration about real investments has to do with energy. Energy is ultimately the real currency we all trade in, your labor. The labor the work horse or John Deer tracker does, even the energy that the welding torch does compared to a black smith is what we all really trade each other with. Stored energy is the bank system we use everyday. Oil, that black gold we are currently running out of, is the Earth’s trust fun, it equals about the same as each of us having 50 slaves each in the Western World. Getting off the grid has more to do with producing my own wealth then with saving the planet from “Global Warming” (note I said wealth, not money). But producing energy, and storing are two separate things. More important then storing energy is collecting the free energy all around us (No, the kind that breaks the law of thermal dynamics, free as in beer).
I’m going to take a little author privilege in the following terms to help make a point …
Static Energy is any source of energy which does not vary by a large degree, it’s constant. Geothermal is a source of constant energy in this category. It doesn’t really change even in winter. Using this source to maintain the temperature in your home is likely the most common first thought in your head. But the reverse is true, since the same principals are in play when one makes a root cellar to store food.
Dynamic Energy is some form of energy that comes and goes, if you don’t live in Squeamish, British Columbia, this means the wind or any other form of energy that is not constant. A good example of storing wind energy is to make it do work now, that can be used later, such as filling a raised water storage tank. Solar Energy actually falls into this category, because clouds might get in the way the sun even though the Sun gives off the same constant source of energy. There is no further effort required by you to use dynamic energy then setting up a system to use it or store it. Growing sunflowers can be a method of collecting solar energy since the oil of sunflowers can be used with making Biodiesel.
Kinetic energy is the result of stealing work from one thing and transferring it to another. A mini-hydro dam to generate electricity is a big political hot bed right now in British Columbia, but using that same stream can be used to irrigate your garden, it is still a form of work since the flow itself can aid in the process of watering your plants.
I’ve used the above terms to do one thing only, and that is to get you to think differently. The most common thing people think of when you mention Solar Energy is Solar Cells, not Sunflowers. Thinking outside the box is essential to being successful in any project. Energy is not the same thing as electricity, if all you try to do on your little homestead is create electricity you will miss great investments of your time and money.
Invest in Transportation:
Humans on this planet have survived for over forty thousand year without the advantages of the automobile. But the investment that man put into the creation and development of the modern car has provided man with several survival advantages. There are several reasons why transportation is an important investment, one of the key ones is emergencies. You may need to get from point A to point B in a hurry in order to save a life. Every survivalist dreams of the ultimate G.O.O.D. Truck, myself included, but a more practical approach is usually the result of finances and common sense. Depending on your budget, any method of transportation from a bicycle to a personal tank is an advantage you should seek, but when given the option you may want to consider some, if not all, of the following:
More is better. In this case, I mean more options. When I play the game of chess, one of the main tenants of strategy is to make moves on the chess board that opens up more options for future moves. When planning for future needs of transportation more options is always an advantage, for example, if you have limited funds, buying two cheaper cars instead of just one is a better choice, or perhaps a car and a boat. Having the engines run off of more then one type of fuel is also an advantage, hybrid electric cars, diesel vehicles which can run off of used cooking oil, or a boat with a sail are better choices.
Simple is usually the answer. The more complex a thing is, the easier it is to break. An engine with all kinds of computer software, electronics, and gadgets is far more likely to be a pain for the home mechanic then a standard diesel truck that is 20 years old.
Being Rich is not the same as being wealthy. Having that H1 collector hummer maybe a sweet thing to own for the armchair survivalist, but a good old fashion Jeep or Land Rover is far more likely to be useful in the long run.
Don’t forget Peak Oil. Ultimately you may decide that one of the options that is best for you is to own a horse, but remember that a horse in today’s modern world is still eating Oil like the rest of us. Unless you have the means to feed the horse yourself by growing your own grains, keep in mind that one of the reasons the horse and buggy went by the way side is because the Ford model T was more efficient then the western camel.
Invest in Security:
You are responsible for your own health and welfare. It is not the purpose of government to hand you food, clothing and shelter. The purpose of government is to maintain liberty and freedom. Everything else is your own success or fault. (Side Note: I do believe we all have a social responsibility to those who are limited to provide for themselves at no fault of their own however.) What is the point of providing your own food, clothing and shelter to only have it stolen from you in the future? There will always be people who think that life some how owes them something for nothing, and if you have it they may choose to take it from you by sleuth, violence, or theft. A strong active security set up can reduce or eliminate that risk, and is always a good investment. I know of several extremely rich people who live in North Vancouver who do not even have a simple home security system, if there was ever a massive earthquake I would not want to be in their shoes.
Security comes in many forms. An alarm system isn’t a security system, it’s a warning system. Bells going off in the middle of the night do not prevent a home invasion, what prevents a home invasion is a shotgun, a vicious dog, and a strong steal door. But humans are not the only threat to your livelihood. Security against fire, flood, and other aspects of threats to your real wealth can help prevent loss. Placing some time into setting up a smoke detector and learning CPR can go a long way to preventing wealth loss.
There are other things I could go on about concerning real wealth before I start with some really simple investment ideas for the actual stock market, such as investing in your own freedom by acquiring a second passport, or spending time with your family since children are the best investment of any kind. But such posts are going to be in the future.
The reality is that you are going to need money. At the very least you are going to need it for the things you can not produce yourself or trade for, pay your property taxes, and maybe get some term life insurance. At the foremost you wouldn’t mind having a modern microwave oven that fit the style of the dream wood-stove in your kitchen. Making investments in the stock market seems to some to be an easy way to make a few bucks, and to even a fewer fools an easy way to get rich. But there area merits to investing in the stock market, one of which is that those reports you get from the companies you invest in can give you a head up on some thing in your storage you should stock up on.
So when it comes to investing in the stock market I need to repeat what I said at the being, this post is not about making money so much as it meant to help you maintain the buying power of your dollar. Therefore I offer you a few ideas, but with this warning, these are just ideas…
Invest for replacement. Let say you want to maintain your current lifestyle come what may, and in that lifestyle you include the convenience of a microwave oven made by John Doe Manufacturing Ltd. You like the product because you already own one, and are aware of how long it will last, the amount of maintenance it requires, and what it’s current replacement value is. Let me fill in a few of those blanks for example. Let’s say that the model “A” microwave oven cost today about $100 for easy figuring. Now let’s say that the current asking price for dividend paying shares in John Doe’s Manufacturing Ltd is $10 and the payout per minimum investment of $100 is on average $1. Let us also assume that the microwave in question that you currently own and like is most likely to last you ten years. That means that you would need to invest about $1000 in order have enough invested into the company so that the returns on your money will get you a new microwave model “C” in ten years, give or take.
The advantages to this system is that it takes the guess work out of what to invest in. If during the ten years your waiting for ship to come in with your new microwave you discover something impractical about the model “A”, you may want to switch your investment to another company which has already altered it’s design to accommodate the issue. Nothing beats investment research then first hand knowledge. The other advantage to this system is that you see your own retirement forming around you, literally and it is directly related to real wealth, in this case a microwave oven.
Invest for a living retirement. The only real reason people want to invest in the stock market is to be able to have a day when they no longer have to go to work. Read that last sentence again. There are two ways to read it, at first glance most people assume that I am talking about retirement at age 65, which is true since that is the primary reason people invest, for retirement. But there is another way to read that same sentence, investment for a day off.
If you invested in an income based mutual fund enough so that the dividends returned to you equaled your average income for one day’s work, you would be retired at least one day a month for the rest of your life, or until this fiat system of money collapses, in which case you won’t need the money to pay property taxes anyway. Repeat this 30 times, and your done with working for the man, and the advantage is, it gets easier to do as you go along.
Invest against theft. I have always been against primary residential property tax, I believe there are other options which can supply our neighborhoods with the essential services other then the theft of wealth via property tax. Government savings bonds the idealist answer to this problem, since it is the government which demands that you re-pay your private property over and over at a rate of 1% per year it seems only fair to get them to pay for it themselves. A one thousand dollar property tax bill is a huge debt to have to come up with in a limited budget, having the same amount owed to you by the government is just ironic revenge.
None of the systems above will make you more then a dime. That has to be understood, it’s not a get rich quick scheme, in fact it is a how not to get rich scheme if you really think about it. The point of the above examples is that we are currently stuck with this dammed system of fiat money and taxes, and I don’t see why we should play the game not with the intention of winning, that’s impossible, but for a tie.