ShareGet the hell out. Get out of all paper and it’s not just the commodities markets. This is going to cascade through everything. It is going to get into the equities. It is going to get into 401ks and IRAs, it is going to get into pension plans and so on and so forth. Total systemic collapse. Get out! I don’t know how I can be anymore plain about this. I say this over and over and over again and then I get scads of emails saying, well I can’t get out of my 401k. Yes, you can. Yes, you can. Take the penalty and get the hell out of there. What would you rather do? Would you rather pay the 10% penalty or would you rather have it all go up in smoke? Because that’s what we’re staring down the barrel of.”
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OK, a question. I really believe Ann is thinking ahead of the curve.
After I cash out my IRA, 401k, and other assorted investments, what do I do with the cash?
Gold, silver, nickles, whiskey, guns, ammo, real estate, bunkers, food and water; what do I change it into?
I would like to hear your thoughts.
First of all, stuff. Durable goods that you need and would provide you a valuable service in the WSHTF world.
Example: Water pumps, guns (if you don’t have them, or don’t have enough), ammo, a tractor, tools, housing improvements, means to purify water, etc.
After that, non-perishable food and easy-to-store seeds are a pretty good investment (if you have the land available to plant seeds, of course).
If you feel you are already rather well equipped with all those things like that (no small feat), then you get into alternate currencies, I would say. Silver and gold (silver seems a bit better bet right now), perhaps other precious metals.
My two cents.
I wrote her an email this morning asking her just that. So far no answer.
My take? If the world economy tanks like she, RD, Locke, and thousands of others foresee, it won’t make much difference. Those of us who have been poor and know how to prepare and how to live poor will be okay until those who don’t have a clue, like the OWSers, come after what we have.
We who know how to raise a garden fish, defend our families will have to revert to how we lived before we earned something and put some of it away.
I think it was one of the best times Mrs.22 and I had. We did it back then and we can do it again.
I don’t see money being worth anything, either the U.S. dollar or any other currency. Metals will have their intrinsic value but gold worries me. It’s just too valuable. How could you buy a week’s food with gold?
I do not like being a doom-and-gloomer but when I see the way money is being thrown around and stolen by the truckfull and wasted on bail out schemes for corporations and other countries I can’t help but believe that eventually the money will be so diluted that it won’t be worth anything.
There’s more but that’s enough for the moment.
My two cents.
That may have real value to it perhaps.
She never mentioned getting out of coins, whether it be pennies, dimes, nickles, quarters, etc.
In a WSHTF world, could coins, because they are made out of types of metal, be worth anything, at lease in a local (neighborhood) type economy? I could see people still using money, at least for a while, even after the shit collapses…
You may be on to something, Bman. I don’t know. I’d think that a lot of things could have value in a situation like we’re talking about. Trouble is, from this side, before it happens, we don’t know what form it will take.
Some time ago I suggested that there will be items that will always have value and I suggested stocking up on .22 ammunition.
http://therealrevo.com/blog/?p=41833
I suspect each of us can come up with at least one other thing that will hold its value.
Books, especially a few really good reference books. If things go poorly, immediate access to information on the net may not be dependable. But, having a small library of information could pay off. Besides, you may end up needing to teach your children.
Knowing a trade could be the most valuable thing to own if the shit gets that bad. I sure hope stuff doesn’t get that frickin bad…
I’m thinking of the larger things first. How about your home. Where do your kids and spouse lay their head? Is the title clear and in your name? Do you have some kind of cash to pay your taxes? Most of us on this blog have been aware of the benefits of debt free living for awhile. I know how hard it is to get out of debt: I’ve been there.
If it all turns to crap, greenbacks and current coins could be good for a while. Once again, nobody has a clue.
One thing I do know, the money owed you will disappear. The money owed them will still be owed.
“One thing I do know, the money owed you will disappear. The money owed them will still be owed.”
I love it. This is the voice of experience.
I also agree with the house. If you have a mortgage and can’t pay it you will lose it. If you are unable to pay off your mortgage, then what?
I’d suggest thinking through an alternative. Perhaps the camp trailer or motorhome. There may not be fuel but there will be a place to park it.
Like-minded people can work something out.
I like her comments on Facebook as well…. I got off the Facebook things several months ago….and believe it or not I don’t miss it.
It appears that Ann has been getting the same questions that I asked her from others. This morning I found thatshe posted her answers to the question of where to put your money after you take it out of paper. Here is the link:
http://barnhardt.biz/
The post is titled, “Various Resources”.
She has five steps. Check her out.
It certainly doesn’t hurt to prepare and silver coinage is a fine thing to have a stock of. I hope, however, people aren’t making large scale investment decisions based on her advice. I think it is a bit reckless to completely abandon paper right now.
Holy cow, has it really been weeks since MF went down? Damnit, I still haven’t gotten to write you all up an explanation of the meltdown…
Ok look, the abbreviated version is as follows.
MF Global, Corzines old haunt, was an FCM. A Futures Commodity Merchant. FCM’s have two basic purposes: to hold and guarantee funds for futures traders. They act as giant book keepers, sales offices, and investment counselors. FCM’s also allow secondary trading firms, like Annes or my old one, to ‘clear’ their trades thru their books and desks. 10′s of thousands of traders, large and small (mostly small), use FCM’s for trade execution either over the phone or online. MF global was, in terms of capitalization, one of the largest in the world. My old one, Refco, was actually the worlds largest before they crashed and burned.
All that said, FCM’s don’t make their money off small individual accounts. The REAL money in an FCM comes from the deposits on hand. See, FCM’s are really banks. Like any other bank they make money on interest rates using the capital reserves. They also occasionally have VERY large proprietary trading desks to do this. MF apparently had a doozy or two and THAT is where they got into deep trouble.
MF’s proprietary desks bought Euro debt for the higher returns. They played currency swaps, debt swaps, etc. They probab;ly did so with assurances from Corzine that Obama and Burnanke were going to make sure the Erozone held together. Considering Corzine’s cozy relationship with Obama I would assume the trading desks (and Corzine himself) got cocky as hell. Having a 75% position in ANYthing is stupid but seeing as they were exactly that into Eurozone debt, well… in my humble opinion it was orders of magnitude more than reckless. There is simply no way they could have made margin calls if everything went against them. And it did.
This is where Anne comes in. She freaked that day when Corzine and MF went down because MF couldnt make their calls and the exchange, in order to guarantee the integrity of the market, demanded they settle up. When it became clear they couldn’t, and when the sheer size of the fuckup became known, the Feds stepped in and did the unprecedented: they froze ALL positions, even small traders’, in order to guarantee the proprietary trades and the financial integrity of the exchange. Not cool. Not cool at all. Those little guys weren’t involved in the mess. Their positions and accounts weren’t related, fungible, or accountable in any way. Furthermore the small investors weren’t allowed to CLOSE thier trades which left them exposed to potentially massive losses. Simply put, they were being stolen from by the Feds in order to keep the wexchange financially stable. Thats scary stuff, but not impossible to rectify. Accounts can be made whole if they have time and sales records.
But the accounts can’t be made whole as I understand it. Apparently Corzine raided the customer accounts to cover his losses. Again, that is MASSIVE theft. So far it looks to be over a Billion dollars. Staggering really. And if it was orchestrated by, or authorized by Corzine it would amount to the single largest bank heist in the history of the world.
So why is she saying get out of ALL paper? Because damn near all trading houses have proprietary desks, not just FCMs. The Eurozone exposure isn’t just limited to futures traders, hedge funds, and the commodity exchanges. It is probably MORE extensive in the large stock brokerage houses that you all know. ZeroHedge has recently listed a few of the larger EU debt buyers and their potential percentage of assets exposed. It really is a systemic problem if they’re to be believed and yes, I believe them. I’ve known too many of these guys to not think the “connected” houses would all be players. So yes, the problem is sytemic.
The problem Anne really has with this whole mess is the utter disregard for small customer accounts. I don’t blame her. It isn’t so much that the EU could crash investment house balance sheets but that the investment houses would then take YOUR MONEY to cover their positions in their margin calls. This is EXTREMELY unlikely. And yet its possible. if the whole system collapses rapidly they probably would freeze everything. Chaos gets ugly when money managers panic. The government has already shown their regard for smaller accounts in the MF case as those accounts still haven’t been made good. Does that mean they won’t be? No, but considering the trouble they’re having even tracking down all the losses and raided non-fungible small accounts.. I suppose anything is possible. In that scenario the Feds would be stealing from you, just like Corzine.
Now, ALL THAT SAID, clearing out of all your paper would accomplish exactly the same thing as an EU collapse. The system would crater, trust would be irrevocably destroyed, and all the banks in the western world would come to a screeching halt. Its an avoidable armageddon. I would suggest however that exposure to speculative positions with firms heavily into the european market should be reined in. That wouldn’t in any way be inconsistent with what I’ve been saying all along, namely that the EU is going to crater sooner or later unles we print up a few trillion to backstop the whole damned thing.
Panic and bail? No. But you might consider what the banks are doing with their money…nothing. Our banks are awash in cash but can’t invest it without incurring negative returns or risking losses in what are now speculaltive grade bonds. As I’ve said many times over the years, this is a velocity problem we face in our banking system, not really a liquidity problem. The feds, now thats another matter entirely.
Good summary. When you say “get out of paper” you mean get out of equities and so forth. I think she is making the far more radical argument of getting out of cash too. Going to all silver coinage and gold.
Well then she HAS gone off the deep end. Even in an armageddon scenario people need a symbol to represent their savings, a fiat or proxy. I would guess moeny would still serve a purpose if only as a regional fiat for regional or town reserves. Not that I expect artmageddon anytime soon. hyper inflation, yes.
Even then, would anyone really want to trade ALL cash for metals or other barterables? Hell if I would without being able to see the future. No flux capacitor yet, bummer.
I wouldn’t mind being at 15% though.
Its really a backwards calculation. Assume an inflation rate and then what you’d have to earn on the metals to offset it. than take THAT as a percentage of the cash you wish to insure and buy your hedge.
Thanks LNL. That helped a lot. Ann seems on top of the issues but has a hard time explaining the nuts and bolts. I am pretty sure I understand this scenario now. Its basically a grade 3 legal ponzi scheme where bets are backed by the deposits of the masses.
Something bigger is at risk in all of this of course. It bothers the hell out of me.
People are on the verge of losing trust in the idea of markets in general. its such a Plebe argument but I hear it all the time: those damned speculators are to blame for everything!
Sorry, no.
A bit about speculation is in order.
Markets like the CBOT, CME, NYMEX, et al exist for ONE PURPOSE; price discovery. And price discovery through the bid-ask process is best executed with volume, lots of it. Think about it. If only 2 people are arguing over price, the spread can be huge. the more people you add the the bid-ask, the closer the spreads get. Now assuming there is a real end user in the game…does he want to set a price in a large spread scenario and wait to see if the seller comes down? or would he rather have a tighter spread and more accurate, fluid price to get his order executed? Both producer and consumer benefit from tighter spreads and they only account for <1% of all settled trades. EVERYONE ELSE in the market is a 'speculator'. Having speculators in the market willing to take risks and play the middle doesn't bugger the process, it AIDS it. That is, assuming there are position limits in place to deter 'cornering the market' nonsense.
Actually Tn, yer close but not quite. In a ponzi all funds are pooled. In futures accounts they aren’t. A broker needs legal authority to trade or maneuver a clients cash, period. Furthermore, Power of Atty is only granted under very particular conditions. What MF did was unheard of and unabashedly evil. Instead of covering their own losses with company reserves, they apparently had BET the company reserves and when the SHTF raided individual accounts. Imagine if BofA went tits up. Can you even imagine them taking money out of YOUR personal checking account to cover their losses? Of course not. that would be theft, right? And thats exactly what Corzine appears to have done.
I say skin the bastard alive then toss him in a salt pit.