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Keeping Capital In A Depression
The Daily Reckoning ^ | 5-13-2011 | Doug Casey

Posted on 05/13/2011 7:46:55 PM PDT by blam

Keeping Capital In A Depression

By Doug Casey
May 13. 2011

05/13/11 Nothing is cheap in today’s investment world. Because of the trillions of currency units that governments all over the world have created – and are continuing to create – financial assets are grossly overpriced. Stocks, bonds, property, commodities and cash are no bargains. Meanwhile, real wages are slipping rapidly among those who are working, and a large portion of the population is unemployed or underemployed.

The next chapter in this sad drama will include a rapid rise in consumer prices. At the beginning of this year, we saw the grains – wheat, corn, soybeans and oats – go up an average of 36% within one month. In the same time frame, hogs were up 30.7%. Copper was up 29.1%. Oil was up 14%. Cotton was up 118%. Raw commodities are the first things to move in an inflationary boom, largely because they’re essential to everything. Retail prices are generally the last to move, partly because the labor market will remain soft and keep that component down, and partly because retailers cut their margins to retain customers and market share.

We are in a financial no-man’s land. What you should do about it presents some tough alternatives. “Saving” is compromised because of depreciating currency and artificially low interest rates. “Investing” is problematical because of a deteriorating economy, unpredictable and increasing regulation, rising interest rates and wildly fluctuating prices. “Speculation” is the best answer. But it may not suit everyone as a methodology.

There are, however, several other alternatives to dealing with the question “What should I do with my money now?” – active business, entrepreneurialism, innovation, “hoarding” and agriculture. There’s obviously some degree of overlap with these things, but they are essentially different in nature.

Active Business

Few large fortunes have been made by investing. Most are made by creating, building and running a business. But the same things that make investing hard today are going to make active business even harder. Sure, there will be plenty of people out there to hire – but in today’s litigious and regulated environment, an employee is a large potential liability as much as a current asset.

Business itself is seen as a convenient milk cow by bankrupt governments – and it’s much easier to tap small business than taxpayers at large. Big business (which I’ll arbitrarily define as companies with at least several thousand employees) actually encourages regulation and taxes, because their main competition is from small business – you – and they’re much more able to absorb the cost of new regulation and can hire lobbyists to influence its direction. Only a business that’s “too big to fail” can count on government help.

It’s clearly a double-edged sword, but running an active business is increasingly problematical. Unless it’s a special situation, I’d be inclined to sell a business, take the money, and run. It’s Atlas Shrugged time.

Entrepreneurialism

An entrepreneur is “one who takes between,” to go back to the French roots of the word. Buy here for a dollar, sell there for two dollars – a good business if you can do it with a million widgets, hopefully all at once and on credit. An entrepreneur ideally needs few employees and little fixed overhead. Just as a speculator capitalizes on distortions in the financial markets, an entrepreneur does so in the business world. The more distortions there are in the market, the more bankruptcies and distress sales, the more variation in prosperity and attitudes between countries, the more opportunities there are for the entrepreneur. The years to come are going to be tough on investors and businessmen, but full of opportunity for speculators and entrepreneurs. Keep your passports current, your powder dry, and your eyes open. I suggest you reform your thinking along those lines.

Innovation

The two mainsprings of human progress are saving (producing more than you consume and setting aside the difference) and new technology (improved ways of doing things). Innovation takes a certain kind of mind and a certain skill set. Not everyone can be an Edison, a Watt, a Wright or a Ford. But with more scientists and engineers alive today than have lived in all previous history put together, you can plan on lots more in the way of innovation. What you want to do is put yourself in front of innovation; even if you aren’t the innovator, you can be a facilitator – something like Steve Ballmer is to Bill Gates. It will give you an excuse to hang out with the younger generation and play amateur venture capitalist.

This argues for two things. One, reading very broadly (but especially in science), so that you can more easily make the correct decision as to which innovations will be profitable. Two, building enough capital to liberate your time to try something new and perhaps put money into start-ups.

Hoarding

In the days when gold and silver were money, “saving” was actually identical with “hoarding.” The only difference was the connotation of the words. Today you can’t even hoard nickel and copper coins anymore because (unbeknownst to Boobus americanus) there’s very little of those metals left in either nickels or pennies – both of which will soon disappear from circulation anyway.

We’ve previously dismissed the foolish and anachronistic idea of saving with dollars in a bank – so what can you save with, other than metals? The answer is “useful things,” mainly household commodities. I’m not sure exactly how bad the Greater Depression will be or how long it will last, but it makes all the sense in the world to stockpile usable things, in lieu of monetary savings.

The things I’m talking about could be generally described as “consumer perishables.” Instead of putting $10,000 extra in the bank, go out and buy things like motor oil, ammunition, light bulbs, toilet paper, cigarettes, liquor, soap, sugar and dried beans. There are many advantages to this.

Taxes – As these things go up in price and you consume them, you won’t have any resulting taxes, as you would for a successful investment. And you’ll beat the VAT, which we’ll surely see.

Volume Savings – When you buy a whole bunch at once, especially when Wal-Mart or Costco has them on sale, you’ll greatly reduce your cost.

Convenience – You’ll have them all now and won’t have to waste time getting them later. Especially if they’re no longer readily available.

There are hundreds of items to put on the list and much more to be said about the whole approach. This is something absolutely everybody can and should do.

Agriculture

During the last generation, mothers wanted their kids to grow up and be investment bankers. That thought will be totally banished soon, and for a long time. I suspect farmers and ranchers will become the next paradigm of success, after being viewed as backward hayseeds for generations.

Agriculture isn’t an easy business, and it has plenty of risks. But there’s always going to be a demand for its products, and I suspect the margins are going to stay high for a long time to come. Why? There’s still plenty of potential farmland around the world that’s wild or fallow, but politics is likely to keep it that way. Population won’t be growing that much (and will be falling in the developed world), but people will be wealthier and want to eat better. So you want the kind of food that people with some money eat.

I’m not crazy about commodity-type foods, like wheat, soy and corn; these are high-volume, industrial-style foods, subject to political interference. And they’re not important as foods for wealthy people, which is the profitable part of the market. Besides, grains are where everybody’s attention is directed.

But there are other reasons I’m not wild about owning any amber waves of grain. Anything you want to plant will practically require the use of a genetically modified (GM) seed from Monsanto. I’m not sure I really care if it’s GM; all foods have been genetically modified over the millennia just by virtue of cultivation. And $1 paid to Monsanto typically not only yields the farmer $5 of extra return, but produces lots of extra food – which helps everybody. But I wouldn’t be surprised if someday the giant monocultures of plants, all with totally identical purchased seeds, don’t result in some kind of catastrophic crop failure. This is a subject for another time, but it’s a thought to keep in mind.

In any event, agricultural land is no longer cheap. But I don’t suggest you look at thousands of acres to plant grain. Niche markets with niche products are the way to fly.

I suggest up-market specialty products – exotic fruits and vegetables, fish, dairy and beef. The problem is that in “advanced” countries – prominently including the US – national, state and local governments make the small commercial producers’ lives absolutely miserable. Maybe you can grow stuff, but it’s extremely costly in terms of paperwork and legal fees to sell, especially if the product is animal based – meat, milk, cheese and such. Niche foods are, however, potentially a very good business. Eternal optimist that I am, I see one of the many benefits of the impending bankruptcy of most governments as again making it feasible to grow and sell food locally.

Above all, though, this isn’t the time for business as usual. You’ll notice that “Working in a conventional job” didn’t occur on the list above. And I pity the poor fools working for some corporation, hoping things get better.


TOPICS: News/Current Events
KEYWORDS: 2ndgreatdepression; bhoeconomy; depression; economyinvesting; greatestdepression; preparedness; preppers; prepping; recession; shtf; survival; survivalping; tshtf
I like to hoard.

My buddy and I were discussing today what we'd do when FEMA (bullies) shows up to confisticate our 'supplies' for re-distribution to the needy downtown.

1 posted on 05/13/2011 7:47:01 PM PDT by blam
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To: blam

We’ll soon be using dollar bills for rolling papers...


2 posted on 05/13/2011 7:49:36 PM PDT by ponygirl
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To: blam

Bfl.


3 posted on 05/13/2011 7:50:26 PM PDT by GlockThe Vote (F U B O ! ! !)
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To: FReepers
Have You Donated Yet?

Uh Oh!

$10 makes You A Hero On FR!

4 posted on 05/13/2011 7:50:34 PM PDT by DJ MacWoW (America! The wolves are at your door! How will you answer the knock?)
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To: blam
Here's you FEMA/bullies already.

Court: No Right To Resist Illegal Cop Entry Into Home

5 posted on 05/13/2011 7:54:07 PM PDT by blam
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To: blam

My wife is ever afraid that I will be featured on an episode of “Hoarders, Buried Alive”


6 posted on 05/13/2011 7:59:16 PM PDT by stefanbatory (Insert witty tagline here)
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To: blam

“when in the course of human events ...”


7 posted on 05/13/2011 8:03:36 PM PDT by Snuph ("give me Liberty...")
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To: blam
But I wouldn’t be surprised if someday the giant monocultures of plants, all with totally identical purchased seeds, don’t result in some kind of catastrophic crop failure.

I heard a prophet several years ago say he was given a vision, that there would be some kind of disease that would affect these genetically altered plants(hybrids) and there would be a catastrophic crop failure leading to massive starvation.

We use only heirloom seeds and prayer ;) We've done this for the past several years. It's probably the best way to go. The heirloom plants seem to do as well as the hybrids and personally I think the veggies taste better. But, maybe it's just my imagination.

8 posted on 05/13/2011 8:06:29 PM PDT by MsLady (Be the kind of woman that when you get up in the morning, the devil says, "Oh crap, she's UP !!")
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To: blam

we are really into liquor....not that we drink much...hubby likes the 12 Macallens...but AFAIK, it doesn’t go bad...


9 posted on 05/13/2011 8:19:18 PM PDT by cherry
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To: MsLady
Inside Norway's ''Doomsday'' Seed Vault

December 27, 2007

Coloful houses lie near the mountains in Longyearbyen, a village on the island of Spitsbergen, part of Norway's Svalbard archipelago.

A mountainside near the town was chosen as the home for the Svalbard Global Seed Vault, a "doomsday" seed bank that will store backup copies of as many as three million different crop varieties in case of a worldwide catastrophe.

The high-tech vault, which will open for storage in February 2008, is going to "put an end to extinction [of] agricultural crops," said Cary Fowler, executive director of the Global Crop Diversity Trust in Rome, Italy, which is the leading force behind the project.

The mission is crucial, Fowler noted, because the stored seeds provide researchers with the raw genetic materials needed to adapt the global food supply to survive climate change as well as water and energy shortages.

10 posted on 05/13/2011 8:23:46 PM PDT by blam
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To: blam

Thanks for the heads up on this, very interesting!!!!


11 posted on 05/13/2011 8:27:50 PM PDT by MsLady (Be the kind of woman that when you get up in the morning, the devil says, "Oh crap, she's UP !!")
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To: blam

BUMP to re-read later. Several times...


12 posted on 05/13/2011 8:40:10 PM PDT by Always A Marine
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To: MsLady

That disease is just as likely to attack heirloom seeds, in fact, more likely. Hybrids are bred to resist the most common diseases like fusarium and verticilium wilt and while hybrids are unpredictable when the seed is saved, you would still get some form of what you planted.

Hybrids are also heavier yielders. If everyone had to plant heirloom seeds we would very soon have famines by the same scenario as the hybrid and GM seeds getting some dread disease.

For the same reason if all farmers were forced to go organic there would be widespread famine.

I too, have my stash of seeds and it contains open pollinated and hybrids.


13 posted on 05/13/2011 10:04:36 PM PDT by tiki
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To: MsLady

Oh yeah, hybrids aren’t what you call genetically modified. They are cross bred with like type plants in an effort to take advantage of the best features of both parents.

GM plants have totally unrelated genes spliced into them.


14 posted on 05/13/2011 10:11:55 PM PDT by tiki
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To: blam

Dry beans and rice, canned goods and a side of beef in the freezer. Just keep rotating, and hope the power stays on, or there will be a big bbq, with a barter system set up for a beef meal.


15 posted on 05/13/2011 11:26:27 PM PDT by runninglips (Republicans = 99 lb weaklings of politics.)
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To: runninglips

Get salt, you can dry the beef. I just use soy sauce, or smoke sauce, some just with salt and pepper and some with red or green chile powder. I rarely do beef just elk and deer. I even have a thingamajig that my son bought that squirts out ground meat for jerky.

You can also plant some of those dry beans. You can eat them green if you string them or raise them to maturity.


16 posted on 05/13/2011 11:31:35 PM PDT by tiki
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To: tiki

You can make jerky from ground meat? I have the grinder, sausage maker, but never figured out how to make jerky out of it. What kind of salt, and how much is recommended? It is also a good barter item, along with quality bar soap.


17 posted on 05/13/2011 11:47:15 PM PDT by runninglips (Republicans = 99 lb weaklings of politics.)
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To: runninglips

I don’t have recipes, I just judge it by my own standards and I use regular salt. We just experiment.

The thing that does the ground meat is like a big syringe with different shaped ends and I think he got it from one of the large sportsmen’s stores.


18 posted on 05/13/2011 11:56:49 PM PDT by tiki
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To: tiki

Now that’s scary. I don’t buy the hybrids cause you can’t take the seeds from the veggie, like tomato and such and grow another plant. Wouldn’t that be kinda the same thing though? I mean if they get a diseases and there is a mass whip out of hybrid veggie plants, that’s it.


19 posted on 05/14/2011 6:34:56 AM PDT by MsLady (Be the kind of woman that when you get up in the morning, the devil says, "Oh crap, she's UP !!")
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To: tiki

Ok, but, I can save the seeds of a heirloom plant and replant later. Like you said about hybrids could you save the seeds and replant and get anything? And even if you could, would you get something the next year, or the next? Probably not. With heirlooms you can save the seeds and replant for decades. At least my grandmother did.


20 posted on 05/14/2011 6:37:28 AM PDT by MsLady (Be the kind of woman that when you get up in the morning, the devil says, "Oh crap, she's UP !!")
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To: tiki
Hybrids are also heavier yielders.

I'm not so sure about that. We use to plant nothing but, hybrids, now we use almost all heirloom seeds. Personally, I couldn't tell the difference in the yield.

21 posted on 05/14/2011 6:39:36 AM PDT by MsLady (Be the kind of woman that when you get up in the morning, the devil says, "Oh crap, she's UP !!")
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To: MsLady

The long and short of it is heirloom seeds are more susceptable to disease than hybrids.

Hybrids would be like breeding people or animals to get the best result.

GM would be like taking the offspring and putting in a gene that made them all have blue eyes.

Hybrid seeds can regrow but you will not get the parent plant, you will get one of the grandparent plants. Whatever strengths you got from the hybridization would be lost.

Genetically Modified seeds also grow and they retain the traits that were modified. Which is why Monsanto is so strict because they charge so much for the seed and they sure don’t want you saving any of it.


22 posted on 05/14/2011 6:57:51 AM PDT by tiki
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To: tiki
I've heard that about Monsanto. I find it very creepy. I can't believe they can't see the dangers in doing what they are doing.

I have gotten volunteer tomato plants from my hybrids. Also from my potatoes. The potatoes were not hybrids though.

How long will hybrid seeds keep? The heirlooms, they say will only keep for a couple of years or so.

23 posted on 05/14/2011 7:12:16 AM PDT by MsLady (Be the kind of woman that when you get up in the morning, the devil says, "Oh crap, she's UP !!")
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To: MsLady

You might not be able to tell in a gardening setting because in a decent year they are all good and a decent garden will supply a lot of produce, no matter what seed you choose and seed choice won’t matter much at all. You only have a small number of plants and but a lot of different varieties. You don’t weigh each veggie and keep records.

In a farm setting you would have 30K plants to the acre and 3 million plants in 10 acres. You have years of records and you know when a hybrid or a GM plant makes a difference. Believe me, no farmer would pay the price for GM seed if it didn’t pay for itself several times over.

If, for instance, you lost all your pepper plants to phytophera, you’d just live without the peppers and rely on tomatoes and squash. But if you have 100 acres of peppers and they get Verticillium and die, it is a real economic disaster. So you would be looking for seed stock that had a resistance to Verticillium.

Even in a SHTF situation, there are still people who know how to hybridize, my husband’s grandfather did it back in the 1920’s, it really isn’t rocket science.

Even the fruit and nut trees are manipulated, the hardy, native root stock is used and then the desirable fruit or nut is grafted to them. You get vigor and hardiness of the root stock and the traits and yields of another variety.

Mankind has been manipulating seed and plants since they realized they could grow them on their own to have a steady source of food. They chose their seed from the plants that did the best until they developed hardier stock.


24 posted on 05/14/2011 7:25:36 AM PDT by tiki
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To: MsLady; tiki
2,000-Year-Old Judean Date Seed Growing Successfully
25 posted on 05/14/2011 8:05:28 AM PDT by blam
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To: blam

Thanks for the link. I thought I had read about this before but, couldn’t remember exactly what I had read. I suppose the dryness of that area would contribute to the seeds still being good?


26 posted on 05/14/2011 8:09:58 AM PDT by MsLady (Be the kind of woman that when you get up in the morning, the devil says, "Oh crap, she's UP !!")
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To: MsLady

Here’s a clue, they have grown corn and beans found in Anasazi ruins.

Of course, germination rates will suffer as they get older but kept in optimum conditions they last for centuries.

For best results keep more every year.

We live in the desert so you notice plants if it rains things sometimes there will be a 10 year lapse in propagation of different weeds, the most glaring is the California poppies. In a good wet winter and early spring they will cover the mountains in yellow.

Nature is hardy.


27 posted on 05/14/2011 8:12:01 AM PDT by tiki
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To: blam

Burn your stuff and run. You can’t win the fight, and if they kill you and take your stuff, they win. Leave them nothing and escape. You DO have more than one cache, right?


28 posted on 05/14/2011 9:23:09 AM PDT by Mountain Troll (My investment plan - Canned food and shotguns)
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To: Mountain Troll
" You DO have more than one cache, right?"

That was part of the discussion yesterday. I will now...a number of them strategically placed some distance apart.

29 posted on 05/14/2011 9:53:58 AM PDT by blam
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To: tiki
What Are Anasazi Beans?
30 posted on 05/14/2011 9:57:46 AM PDT by blam
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To: blam
What Are Anasazi Beans?

I found some a few years back in a health food store. Bought a half pound and planted them in the garden. Made a beautiful red and white mottled colored shell bean very good to eat.

31 posted on 05/16/2011 8:25:19 AM PDT by OB1kNOb (The stench of dependency is a sickening smell. Strive to become an asset, not a liability.)
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