MarketWatch columnist Bill Farrell writes Warning, bear market 2010: 11 ‘sells.’ Only 6 ‘buys’, detailing the current buy and sell recommendations ofÂ well known economist and Forbes writer Gary Schilling. We’ve summarized Schilling’s 17 strategies below:
Warning: More bad news ahead. Welcome to a bleak second half 2010, worse for 2011.
First, Shilling’s 6 “buys,” then the 11 “sells,” 17 strategies for 2010. He admits some mixed results, but he’s “sticking with them for the second half” and on into the coming dark days of 2011.
1. Buy Treasury Bonds
2. Buy Income-Producing Securities
3. Buy Consumer Staples and Foods
4. Buy Small Luxuries
5. Buy The Dollar
6. Buy Eurodollar Futures
7. Sell U.S. Stocks in General
8. Sell Homebuilder & Selected Related Stocks
9. Sell Selected Big-Ticket Consumer
10. Sell Banks and Other Financial Institutions
11. Sell Consumer Lenders’ Stocks
12. Sell Low & Old Tech Capital Equipment Producers
13. If You Plan to Sell Your House, Second Home or Investment Houses Any Time Soon, Do So Yesterday
14. Sell Junk Bonds
15. Sell Commercial Real Estate
16. Sell Most Commodities
17. Sell Developing Country Stocks, Bonds
If you read SHTF Plan with any regularity, you probably went through this list and then wondered: what about the gold?
Mr. Schilling’s advice isn’t a surprise, as it is much like what your financial adviser may recommend you do with your portfolio (probably because he or she read Mr. Schilling’s recommendations).
Like your financial adviser, Mr. Schilling seems to be avoiding the question of how to manage and preserve wealth during times of domestic and global economic distress.
This isn’t your typical market, and limiting one’s investments to standard strategies and asset classes of the buy-and-hold generations may not do enough to prepare you and your family for serious economic, political, or social doom.
Though it’s not necessarily imminent, it is possible that we may see an event that actually collapses stock market prices, hyperinflates the US currency, bankrupts local governments and sends commodities through the roof. In this case, if you take the buy and sell advice above, you could potentially be wiped out (unless a majority of your portfolio is holding Euros, and only if the Euro survives such a global catastrophe). In some cases, depending on your portfolio allocation, even if you take the opposite of Mr. Schilling’s advice, you could stand to lose a significant portion of your portfolio if the right events materialize.
The point is, there are lots of monetary and financial games afoot, and looking at traditional methods for investing all of your wealth may leave you holding worthless paper at exactly the time you need to have something of worth, something physical, in your possession.
We’re not telling you not to follow Mr. Schilling’s advice, because some of his strategies, namely the “buys”, like offsetting your dollar holdings with Euros, might not be a bad idea.
What we’re suggesting is that there are other options, in addition to traditional stock, ETF and bond investments.
We live in a complex and unpredictable world and there are many of us out here that don’t look at the current state affairs in the world as a typical boom-bust cycle, say like the crash, recession and recovery of the early 2000’s.
There are some of us out here that think there’s a chance, albeit a small probability, that things could get a whole lot worse before we enter any sort of recovery phase. When it comes to our wealth and well being, we think in terms of worst-case scenarios, as opposed to hope for best case outcomes. We ask the what-ifs:
- What if the world’s economy completely collapses and the reserve currency wiped out along with it in a hyperinflationary meltdown?
- What if a conflict originating in the Middle East sends energy prices to the stratosphere? What if the conflict turns to global war?
- What if there is political and/or social unrest domestically that affects the normal flow of commerce?
- What if drought or other calamities affect our food supply? (i.e. the USDA overestimated our food reserves)
- What if my local and state government goes bankrupt and has to cut essential services like police officers?
- What if a mass casualty terrorist attack strikes my city and there are biological, chemical or radioactive agents in the air?
- What if I lose my job?
All of these are questions that should be asked when allocating personal investment portfolios. If you feel comfortable doing what your financial adviser recommends, then by all means invest accordingly. But be sure to ask yourself the what-ifs. And if you think that there is a possibility that one or some of them may come to pass, consider allocating some of your wealth to preparing for far from equilibrium events.
- If the world’s reserve currency (USD) were to collapse, do you have another currency with which you can transact? Do you have Euros, or Canadian dollars (in physical form)? Do you have silver or gold to make ends meet for several weeks or months in the event of a system shock like this? Ask yourself, what is money when the system collapses?
- Have you invested any money into personal security? Do you have a firearm for each adult member in your family? How about ammunition? Have you invested any of your wealth into professional training on how to use your firearm during high stress situations? Have you invested any money or time into learning a martial art to protect yourself and family if a firearm isn’t accessible during an emergency? Bad things can happen even in suburbia – imagine what will happen to the crime rate if your city has to eliminate law enforcement personnel. If You Havenâ€™t Acquired Self Defense Capabilities, the Time to Do So Was Yesterday
- If you lose your job, do you have a back up plan for generating income? Do you have reserve cash or precious metals to keep you on your feet for several months? Do you have dry goods in the pantry like rice, beans, and flour that you can dip into if you can’t afford to buy food at the grocery store? It sounds funny, but food banks across the country are reporting shortages due to fewer donations and more demand. If you lose your job and have no source of income, how will you eat? Think about income survival if the worst happens.
- Do you have any reserve foods? (We touched on this above in case you lose your job, but this is a different case) We realize that food reserves may sound crazy and that you may generally tow the government line and not believe anything could happen to our food supply. So, don’t take our word for it. Visit the FEMA Are You Ready Guide and you’ll see that like us, they recommend at least a 3 day food reserve. That’s the most basic preparedness. If you’re thinking realistically about potential disaster events, you’ll realize that two weeks is the bare minimum.
- In the event of an emergency in your city, do you have somewhere to go? And do you have supplies waiting for you there? Do you have any security measures in place? If you have to bug-out to a backup location, then it means something really bad has happened. Take some advice from Marc Faber and consider securing your property.
- Do you have a hedge against domestic or global uncertainty? Even if you don’t think food, a tent, or a firearm are worthy investments, you may want to consider the last hedge against government instability. Most of the strategies outlined by Mr. Schilling are based on his theory of deflation. The general inflation vs. deflation debate is a distraction. If we want to hedge against deflation or inflation we can buy stocks or bonds, or whatever other traditional asset class works in that particular environment. The one thing that mainstream financial advisers rarely hedge against is government instability and economic uncertainty – most don’t understand history and have the belief that far from equilibrium occurrences from the past cannot be repeated in our modern world. Thus, they really don’t know what to do if the Shit Hits the Fan. We’ve got an idea for you, though. There’s one asset class that has been used as a hedge against uncertainty for the last 5000 years – precious metals. Don’t put all your eggs in one basket, but definitely consider this as an option, especially if you have all of your wealth invested in either stocks or bonds (or both). Why not put 5% – 15% of your wealth into gold or silver – just in case? Not doing so in an environment like this, in our view, is shortsighted, to put it mildly.
In today’s day and age, these are all considerations that should be made. Being fully prepared for emergencies requires an investment, just like buying stocks, bonds or insurance. In this case the dividends will pay out when you absolutely need them the most.
So, if you’re trying to decide how to allocate your portfolio, think about what percentage you might want to dedicate to emergency planning.
Related: Wealth Preservation, Investing, and Prepping in 2010
be sure to vote for the democrat and republican candidates in the upcoming election. they will continue to supportÂ the privately owned amalekite ownedÂ federal reserve banking system and, therefore, they will make sure the coming financial tsunami will happen soon and that it will be severe enough to destroy all your wealth and destroy the future for your children and grandchildren.
(so where’s the third party?)
Great advice Mac. For me the most important aspect of prepping is that one year minimum supply of food. And least one year. If/when that economic collapse SHTF scenario occurs it will become very difficult to purchase food. And you’ll be putting yourself at great risk if you try to acquire food during the initial chaos. A ‘ non-electric ‘ means to cook and store food would be prudent as electric power outages and brown-outs are likely ( government might cut the power to quell civil unrest and riots ). The ability to filter and store clean drinking water, along with some measure of protection, round out the ‘ top of the list ‘ items to allow you to sit tight during the initial crisis. It could take weeks, even months, for violence to settle down. Gold ?Â Silver ?Â It’s the last thing on my list. But having some might provide you with the means to trade for what you need later down the road. I’m leaning toward that “100 items that disappear first” list that you can search on line.
“…we may see an event that actually collapses stock market prices, hyperinflates the US currency, bankrupts local governments and sends commodities through the roof. ”
I’ve been seeing things like this and others that say virtually the same thing. my question is, What could this ‘trigger event’ be?
1. Collapses Stock market
2. Hyperinflates the US dollarÂ (if the $ is inflated, wouldn’t the stock market go UP??)
3. bankrupts local governments
4. sends commodities through the roof
aren’t these ‘symptoms’ working AGAINST each other?? what could possibly cause ALL of this?
what could possibly cause ALL of this?Â Â Our F*cked up government is causing this…….Â Â It’s a race to see what the trigger is.Â Â I believe it’s already been pulled.Â Â What will historians say in a couple hundred years?
What will historians say in a couple hundred years?
God knows what one academic will say about another academic?
In the last 10 years have you..
lost 50% of 401k/IRA, investments in .com bust? 2000-2002
lost 50% in those same investments? 2007-2008
lost 50% in your home value? 2007-2009
believe that a “FAT FINGER” could drop the stock market by 1000 point?
Have you lost any wealth due to inflation?
you or your spouseÂ received a pay cut, or lost one of your jobs?
just read an interesting book “web of debt” by california attorney ellen brown. she shows how if the federal reserve and the irs were eliminated americans wouldn’t have to pay federal income tax.
Sketch, great question and I admit that it is 1) A very confusing scenario and 2) perhaps not as likely as say a flat out deflation or a flat out inflation scenario…
Here are my thoughts on how all four of these things can happen:
First, the local government debt was mentioned because of Schilling’s advice on municipal bonds. My view on muni’s, of which I know little about, is that they will likely get slaughtered as local governments go bankrupt… This event in itself is happening now and really doesn’t require any of the other three to take place. City and state governments simply overspent on all fronts and they are going to go bankrupt.. Instead of getting actual money for your bonds you may wind up with IOU’s similar to California.
Ok, on to the other three things… I’ll mention that the failure of local/state governments, in my opinion, will only exacerbate the problems with the dollar, because at some point the Federal government WILL step in to bail out failing states (gov jobs, pensions, health care programs, etc.)… This is going to put us further into debt.
Eventually, as we know, this debt will become un-servicable (in real terms) and no further credit will be allotted from foreigners. It will also get to the point that the American people will no longer be able to fund the deficit (via treasury purchases, forced 401K/IRA treasury purchases, taxes, etc.).
Once this happens, the US Dollar basically begins to fall apart because in order to pay off our outstanding debts to foreigners (and citizens) the Fed is going to have to monetize… We ain’t seen nothin’ yet… We’re talking about trillions upon trillions of dollars of debt being monetized by the Fed in order for the US govt to be able to continue to “service” this debt, albeit with ever depreciating dollars.
Ok, so now that we have the reasons for the dollar collapsing out of the way, let’s assume the dollar really does collapse.
What is going to happen is that, in a true collapse, say 80% devaluation (maybe more?), commerce as we know it in the US is going to come to a standstill… People will not be buying anything because the currency will be worth nothing in terms of buying power and may be actively depreciating as time passes…. Thus, no goods will be exchanging hands, at least not for dollars…
While an inflationary environment should lead to higher stock markets for obvious reasons, a hyperinflationary panic may have the opposite effect…People will not know what to do, so they very well may sell in panic.. Really, THIS EVENT is going to depend on a number of factors… James Rawles had an overview of how this might happen in the book Patriots, which dealt with hyperinflationary collapse, that led to a market crash and subsequent closing of the markets. The question I ask in this scenario is, if commerce were to stop, what value would IBM have? or Google? Or AT&T?
Two likely scenarios during hyperinflation in terms of stock markets (based on Zimbabwe):
1) The markets remain open and stocks soar, but not necessarily in real terms.
2) Things get so crazy, they just shut the markets down until they can peg them to something else. In Zimbabwe’s case the stock market shut down in Jan of 2009 because making valuations got impossible.
I admit, however, that in 2007, Zimbabwe had the highest performing stock market, which saw massive gains in percentage terms, in some cases outweighing the rise in inflation itself. But this was only temporary, as it eventually shut down.
I am not saying we go the way of Zimbabwe, but it’s a possibility for sure if the SHTF with the US Dollar.
While all this other stuff is playing out, paper currency valued against commodities will see commodities rise exponentially, including things like food and precious metals.
Though it’s a rough example here, hopefully this demonstrates on some level how something like this can happen all at the same time. I’m not saying it will, I’m just saying it can….
Gee,I wonder if the reason that financial advisers don’t talk about gold is because they make no commissions on its ascent?.
At this stage of the economic collapse,I would not listen to a single talking head on the televison.
Gold is up almostÂ 500% in the last decade,if it were a stock it would be hyped no end.
The silence regarding it speaks volumes
Holding physical gold/silver, is the only way to store any “wealth” outside our $$/fed system. Â The system is broken.
If the financial system, of the world (it is all paper based) does collapse, Â then it will be gold/silver, Â that Â is left standing.
97+% Â of Americans, have no concept, of how valuable gold/silver, really is. Â Â Up until the 1930s, America was the largest economy ever, to use gold/silver, as money (real money).
A whole generation and more , have been brainwashed, Â into believing Â colored pieces of paper, with presidents faces on them, are a storehouses, Â for wealth.
Anyone prepping for when the SHTF, Â should not over look how important it is to have some “REAL MONEY”….just saying.
Read the web bot reports
We are going to have deflation in everything but: food, energy, precious metals
There is some kind of important thing supposed to go down next week
The reports are only $10
Yes I agree, get the 100 things most likely to disappear, but also protect what money you don’t spend on those on silver (it will raise higher proportionately to gold)
Made another weekly trip to the coin shop this morning and came home to find this on the site. Â Can’t really say how thankful I am that this sunk into my head (due to the efforts of Mac, Zukadu, and others), and now I’m on my way to having a good store of silver rounds and junk coins. Â I scrapped the idea of opening an IRA account after learning from all you guys. Â Having good fun at it too.
ALL of the major central banks have been buying gold. TONS of gold. Even Iran just bought 34 tons of gold. India bought 400 tons of gold from the IMF earlier this year. Russia buys ALL of its own production. China buys all of its own production.
When the central banksters buy MASSIVE amounts of gold, you know they are planning to stick YOU with massive amounts of worthless paper.
Charmin, Mr Whipple?
Sketch: The Next War Is Now is an event that could trigger hyperinflation; WILL trigger hyperinflation. Its just a matter of time. Â Or the BIG One in So Cal. These events would trigger massive FED printing and push US over the threshold to hyperinflation.
The banksters want US on the edge so that it doesn’t take much to push US over the edge when the time is right for them. China is moving to make the R fungible on the Int’l markets. The banksters will move their assets into this currency soon enough to catch the run up in value.Â China may eventually back it with gold since they are the number one producer of gold in the world and buy ALL of their own production.
The banksters then, will have a new nation to plunder and the cycle for the banksters will begin again, while We The People are pissing into the wind.
Set aside an extra oz of silver so you can chip in when the People put a bounty on the heads of theÂ fricking banksters! and that will give us the cash to buy cement to seal all of the underground bunkers the PTB will be hiding in.
What they haven’t figured out is who is going to be in charge when the top dems and reps are buried alive together in their bunkers under the Denver Aiport! Just imagine THAT for a moment it will do your heart good!Â Â Thats what I call a living hell and a worthy sentence for them all!Â Â Â lol
“…buy cement to seal all of the underground bunkers the PTB will be hiding in…”
who wants to be Jim Brown?
The collapse of BP would have caused the beginning of hyperinflation.Â Â Pause about that….
Tom: don’t see how the bankcruptcy of an Oil company would trigger hyperinflation. Our government is spending wildly, and will continue to do so to prop up state and local governments. That alone is probably enough to push US over the edge. But it must take something extraordinary I think to do that now, and that would be premature, because the banksters haven’t sucked US totally dry yet.
Fortunately with elections in November Obama might come to his senses when he wakes up and finds himself surrounded by republicans, and conservative republicans at that. He will have to leave domestic issues to Congress and try to do something internationally to make his admin a success. (Not likely)
Unfortunately war may come in the Persian Gulf before that, and those cruise missiles cost about 1.2 million each. Even if that war is short, say 90 days, the cost will be enormous. There’s your hyperinflation.
DK:Â Good read.Â http://usawatchdog.com/why-is-the-u-s-government-protecting-bp/
Obama, the Fed, and Wall Street are a criminal enterprise that will legislate, inflate, and steal every last dollar from the American middle class.Â Â You people need to wake up, Obama is a lying prick with his goal being the total destruction of the middle class in this country.Â Â Let the revolution start with you.Â Cash out of your 401K.Â Â Buy used, pay cash, don’t pay taxes. Don’t buy stocks.Â FuckÂ Obama, fuck the FederalÂ government, fuck the Fed, fuck the bankers on Wall Street.Â Â
Good articles Tom, and I agree that BP is being protected, but not to save the financial markets from collapse: its to save the portfolio’s of the very, very wealthy who considered BPÂ as stable as EXXON. And it WAS.
Lets remember, Lehman collapsed because it had no underlying value in the mortgages, cmo’sÂ and derivatives it held. It had little orÂ NO intrinsic value. On the contrary, BP has LOTS of very valuable real and tangible assts that could easily be sold to meet the real damages thatÂ BP caused. It would be broke, its stock worthless, and destined for the dust bin of history, but the very real wealth would be transfered to others. And rightfully so.
Fuck the Queeen! She has other assets. Every stockÂ can’t be a winner in the real world. After OBAMA Â is voted out in 2012 she will invite him to London to make him a knight: the Black Knight!
BPÂ isn’t about good economic policy. BPÂ is about bad political decisions.
Here is my investment strategy. It follows mostly the advice of Dr. Marc Faber:
1. You absolutely need some cash in your home, period. I don’t care how doomed you think the dollar is. If they close the banks for any amount of time you will be thankful you did it.
2. Keep some physical gold andÂ silver in your home (10% of your portfolio minimum).
3. Keep 3 months worth of food in your home MINIMUM.
4. Keep 5 gallons of gas in your possession MINIMUM. Buy a plastic 5 gallon tank and fill it up and keep it in your garage. Put “sta-bil” fuel stabilizer in there – you can buy this at Wal-Mart. Your gas can sit there for a few years like that.
I am trying to keep this simple. With the conflicting reports we get about deflation and inflation, there is mass confusion on this subject so this is the easiest thing to do.
Put half of your stock portfolio into a short non-leveraged ETF like SH for example, and put the other half into a long non-leveraged ETF like QQQQ for example. The 2 funds simply hedge each other and your wealth is protected. Once again, I am keeping it simple. If you are “convinced” the market is going one way or the other and you think you can get rich then go ahead and gamble, but you better pray you didn’t guess wrong.Â
As for your gold and silver and other physical wealth you have stored, look at it this way: If the market crashes and we are in deflation then your cash will have soared in value and you can live well without having toÂ sell your metals. If hyperinflation happens, then your cash becomes worthless but your metals hedge everything back into shape.
So, yes the basic moral of the story is toÂ diversify, but not in the traditional way. If you ask a stock broker what a diversified portfolio is they will give you Jim Cramer’s advice which is to be long a bunch of different sectors like: energy, retail, technology, financials, etc. That sounds great, unless the stock market implodes and your whole nestegg becomes one big diversified piece of dogsh*t. Nowadays, you have to be diversified vertically instead of horizontally… get it?
Reviewing this guys list of buys and sells a little closer, it looks like there’s some bad advice here for investors. Buy US Dollars and Euro futures? What a laugh! Both of these currencies have to depreciate at leastÂ 200% for the US and Europe to become competitive againÂ against third world manufacturers.
Buy US Bonds? Does he think interest rates are going to rise? For interest rates to rise, consumer demand must rise. Ain’t gonna happen! The unber rich are starting to dump their McMansions.
Sell developing countries stocks and bonds? No way! BUY select ETF’s in the third world because that’s where the unfettered capitalists will be putting THEIR money!
And then he says sell commodities! He’s an imbecil from Lame Stream Media! Commodities are where its at in a resource short world. Buy them long and keep them!
Finally, NO direct mention of precious metals or silver, when the central banksters are buying gold by the 100’s of tons! This guy should be tarred and feathered for leading sheeple astray and banned from BarterTown!
One more point. Oil storage inventories are at a 27 year high do ya think the banksters are expecting some action in the Gulf? Obviously if they are paying storage for this amount of oil.
I believe that companies like BP holdÂ VAST wealth/investments in assets for this time period unlike large banks that have been propped up to “keep the system (host) going” while bleeding the nation & the public.Â Â The cost ofÂ military & human assetsÂ is factored inÂ and has a immediate trickle up & down and grin appeal by the politicians.Â Where as the cost of a bundle of weapons is mute.Â PuttingÂ share croppers back to work is easy for the war lords.Â The share croppers pay to work.Â The warriors pay also.Â Some gain glory, some gain wisdom, some get broken, some do not pass go.Â When real war comes along, power is made.Â Oil is a tangible asset that can be stored by the ruling elite only.Â Where as the only long term tangible asset you & I can store is precious metal to have a chip in the game.Â But even they control the exchange rate.Â It’s all a chess game and were not playing.Â We are the ones being played.Â Welcome to the game, come on down, spin the wheel.Â Remember what is important.
I can’t believe this website is posting an article suggesting people buy bonds. WTF?
FABER: DONâ€™T TOUCH U.S. GOVERNMENT BONDS
Clark: in my defense, it was Gary Schilling who suggested people buy bonds.
Thought I didn’t directly indicate my opposition to this idea, i did mention the hyperinflation scenario which would prettyÂ much wipe out bond holders.
I agree with you regarding bonds. Those using these as a long-term hedge are going to get pummeled.
I bought gold in 2006 and it has more thanÂ doubled.
I sleep like a baby knowing that the new federel law that’s being proposed which willÂ try to grab my long since cashed in 401K cannot be forced upon me.
Seriously people,how much longer will you wait?
If the economy goes tits up the government will outlaw gold and probably silver too.Â You will be forced to sell it to them at a price they set not what you think it is worth.Â You surely must be aware they did this during the depression.Â If I had any gold at this point I would be selling it and not buying it.Â
GONEWITHTHWIND,gold was outlawed,but only about 5% complied with the order to turn it in,gold was then revalued up by 70% overnight.
By the way,we were still on a gold standard back then in1933,so the government truly needed it to back the dollar,but today we are not and all of the gold in existence held in all countriesÂ now is only about 350 billion dollars in value,so it’s not as if the government would put a dent in the debt by collecting all privately held gold(even if it could)