Tag Archives: money

By request: financial stuff

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From a comment:

A post on financial preps would be interesting. 401(k) vs IRS vs Mutual Funds vs Whole Life Ins vs Individual Stocks vs REITs vs etc. etc. Go it alone vs use a broker, etc.

This isn’t a financial blog, and my education on finance is very limited, but someone asked me what my investment strategy is. It’s stupid simple, it’s probably wrong or inefficient, but…. this:

I buy mutual funds that have been around for at least 15-20 years (preferably longer) and have a history of average annual returns of at least 12% or greater.

Thats it.

Depending on who you read, the market averages 10-12% a year. If you just want to get that without doing any homework, go buy index funds…it’s a fire-and-forget turnkey way to get into the market. I’ve a few of them too. I’d like to beat the average because I want as much return as possible, so I buy funds that have a (long) history of beating that 12%. I don’t buy bonds, I don’t (usually) buy single stocks (except just for the fun of owning some Ruger or CocaCola), and I don’t dabble in ETF’s or REIT’s. I’m doing well on the mutual funds, they spit out some occasional dividends, there’s usually a nice LT Cap Gains distribution, and I’m in this for the long haul. I buy and hold.

How’s it worked out? Right now I’m holding nine different mutual funds. The best one has returned 72.97% on what I’ve put in so far, the worst has done 2.46%. Across all nine funds, I’ve gotten a 39.73% return. For comparison, there isn’t a savings account, CD, or money market that will return more than 1.5%. Assuming 4% for inflation, just leaving your money in the bank, in money markets, in CDs, or pretty much anything else is a losing proposition as inflation eats away your buying power.

“But Zero, what if the stock market crashes?”

Then I buy more. Because then everything is on sale. If you dumped everything back in March because you panicked, you would have missed out on the tremendous gains that followed. Ride it out. When the market crashed in 2008, if you had just ignored that and let it sit there you would have several times over your money. Ride it out.

And if the market crashes to zero never to recover? Thats where the silver, gold, and disposable handguns come in. I don’t put all my financial eggs in one basket.

No doubt someone with a lot more education than I will say “But you should….” and they might be right. And I may investigate that avenue. But for my limited understanding of the market, and my limited resources, and my rather high risk aversion, I think I’ve found a system that works for me. And, as you may have noticed, this is pretty much the Dave Ramsey school of investment: growth, growth and income, aggressive growth, and international mutual funds equally split.So far, it’s worked for me.

Whole life vs. Term? Get term.
Roth v. 401(k)? I like Roth. I like the notion of getting the taxes out of the way upfront and letting the growth be tax free.
Broker vs solo? I go solo but a broker would probably be smarter.

Learn how to use a TVM calculator. Just that one skill, and using it when you start thinking about money (saving, investing, borrowing, etc) will probably do more for you than a dozen self-help books on finance. How fast can I pay off my house if I add another $100 to each payment? TVM calculator. If the market is returning 10% on average, how much do I need to invest per month to have a million bucks in twenty years? TVM calculator. I wanna buy this $15000 truck and I need to borrow $5000 at 4%. What would my payment be to pay it off in a year? In nine months? In six months?  TVM calculator. Its five minutes to learn and it’ll be among the most valuable five minutes you’ll ever spend.

The question said ‘financial preps’. Here’s what I do: money in investments, money in cash, money in metals and guns. Pay off the house. Carry no debt. Live within your means. Budget wisely and purposefully (actually do a budget!). Always put money in the bank before you do anything else with income. Have an emergency fund of at least six months of living expenses. Use the 4S rubric on purchases or other financial activity. Have multiple sources of income (a rental, a side business, a pension, etc). That’s how I try to live my life. I’m not 100% where I want to be financially (yet) but I’m leagues ahead of many people. 2020 has been a dumpster fire for many people financially, for me it’s been barely a hiccup. Not because I’m bulletproof financially, but I’m a lot more resilient than at least half the population and I’m working towards bulletproof every day.

So..there you go. You ask, I answered. Thats what I’m doing for me, and for me it’s working. YMMV.

Goal hitting

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As I’ve mentioned a time or twenty, as of late I’ve adopted a three-pronged approach towards money – Some goes into cash, some goes into metals, and some goes into the market.

Cash, obviously, does absolutely nothing but slowly erode in value against inflation. But…thats the price I pay for the security of having actual cash on hand. I’m okay with that. A fat envelope of cash sitting in the safe is the hot asphalt that fills in the occasional pothole on the road of life.

The metals have been doing okay, but I’ve slowed down on them a tad because I think there’s a slump or drop in the pricing coming up. Frankly, despite what everyone pontificates about gold:silver ratios and whatnot, I think silver is a bit high and will come down to the low twenties or lower. It occurs to me I need to start setting goals for how much physical metal I want to keep around. I need to get that in the spreadsheet.

And, finally, the market…which has pretty much recovered, for me anyway, to it’s pre Wuhan Flu levels. Actually, it’s gone way past that thanks to my decision to buy like crazy back in March and April when things were, basically, on sale. How’d that work out? Really well. In fact, I hit my 2020 goals (you do make goals, right?) for my Roth yesterday after the market closed.

Mind you, this is what I do with the money that’s left after all the usual stuff like bills, emergency funds, savings, groceries, and that sort of thing. This year was a mad dash to fill some holes in the Preponomicom but once that’s (mostly) done I can focus on the other stuff like putting away the universe’s ultimate multi-tool – money.

What’s that got to do with preparedness? Being prepared means also being prepared for the world not to end. Or, being prepared for the years (or decades) that come before the end of the world. The world could end tomorrow or it could end in 2040…and if it ends in 2040 you have twenty years ahead of you of bills, car repairs, mortgages, taxes, and retirement.

Planning for the end of the world should also include planning for the continuance of the world.

Metal

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I guess you have to kinda be living under a rock to not notice that gold hit an all-time  high the other day. I don’t really keep more than a passing glance on gold prices, but I watch silver pretty closely. You know, it was only a few months ago that silver crapped the bed at around $12. Today its more than twice that. In other words, silver doubled within four months. I can’t think of the last time that happened. Maybe back when the Hunt brothers were working their mojo?

Where does it go from here? Beats me. But, to my uneducated way of thinking, people flocking to metals and driving up the prices is indicative of a belief that perhaps the economic outlook is not that great. If that’s true, I think you’d do well to spend some of that precious metals money on getting your debt knocked out, some food and ammo in the basement, and whatever else you need. If you’re so uncertain of the future that you’re buying precious metals, than that future is uncertain enough that you may wanna backstop with ammo and canned goods. Just sayin’.

But…if the market tanks, people are gong to need to raise cash in a hurry to cover their market losses. And that means selling their metals. And that means a big dump into the market which, as I understand it, depresses prices. Or does it? Seems like all the rules are off these days.

As I’ve said, whatever disposable income I have gets split into three different areas: silver in case things go really, really wrong; my Roth in case things go really, really well; and cash savings in case I’m not sure which way to go. That way I’m not totally caught flat-footed if the economy tanks or if it booms.

As much as I enjoy the sexy parts of survivalism, like guns and gun bunnies, the fact is that you’ll  need fifty-dollar bills far more than you’ll need fifty BMG in most emergencies. I can’t recall the last time I had a personal-level TEOTWAWKI that was resolved by the judicious application of M193, but I can rattle off a half dozen where a pile o’ greenbacks turned out to be the multitool that fixed things.

By all means, buy some precious metals when you have the money…but not before you’ve got the really unsexy-but-more-likely-to-be-needed things taken care of.

 

Those Five Recession-Proof Businesses vs The Plague

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I’ve mentioned that this Current Situation is an excellent chance to observe and learn. This is a dress rehearsal for whatever bigger things come down the pike next. If you’ve been watching the news lately, which is rather tough to avoid, we’ve been told that unemployment is rocketing through the roof as people are laid of, furloughed, fired, downsized, or otherwise off the payroll. Makes sense…if a business is closed then there’s no way to pay the employees.

But…some people are not only still getting paid, they’re getting paid more. They are in a position that allows them to continue to have employment in this situation. Let’s examine that.

I read somewhere that people who made it through the tumult of World War Two noted that no matter how bad the situation in the civilian population, certain trades or businesses were able to stay afloat. Broadly, there were five: food, medical, sex, weapons, and entertainment. If you were in a business that was in one of these categories, the odds were better in your favor during recessions, depressions, etc. With various states on lockdowns, people holding onto their money (if they’re smart), and social distancing the order of the day…who is still in business?

Well, the gun and ammo businesses are doing well. Weapons always make people feel, right or wrong, that they have some control over their lives. If you’re in the ammo business or the gun business right now, and you have some inventory, you’re probably doing pretty well. So…thats 1/5th that seems accurate.

Grocers are always going to see people buying from them. Folks have to eat. And, again, as long as they have inventory there will be no supermarket that has sales flatline. Pandemic or no, people wanna eat. (Also folding booze and smokes into this group.) 2/5ths.

Nurses and doctors are probably not short of work right now unless youre something a little more pedestrian and a lot less ER. For example, I don’t think there’s a lot of dentists or podiatrists doing business right now. But you’re an ER, ICU, or flight nurse? Bet you’re getting all the work you want. So, yeah, 3/5ths.

Entertainment? Thats tricky. Mass gatherings are kinda frowned upon right now..concerts, movies, etc, are not doing well. Even if your venue isn’t closed down by .gov edict, no one wants to sit elbow-to-elbow with coughing strangers. So, no, this fifth doesn’t work in this situation.

Sex? Well, with everyone staying at home there’s a rise (ahem) in online porn, toy purchases, cam shows, etc, etc. And, I suppose that for those who make house calls…there might be a consistent demand. 4/5ths.

So out of those five businesses, it looks like four of them will weather this pandemic. Others I’ve noticed: the local gold/silver shop is doing crazy business.

If you work for government, you’re probably also somewhat bulletproof in all this. Certainly if youre a cop or fireman you can expect to keep working.

All in all, this is an interesting subject to watch play out in the real world. If you’re looking for a career or sideline to give you an extra income in all sorts of situations, you might want to look around your neighorhood and see who is open, and how much business theyre doing. If they can make money during a crisis like this, then perhaps its a business worth looking into.

First National Bank of ….me

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This post is either going to be a gentle reminder to people or it’s going to cause a bank run.

Surely I cannot be the only one who is thinking that keeping some cash on hand might not be a bad idea. I use debit cards for most of my I-don’t-care-about-privacy transactions, and I pretty much just use cash for guns and the like. I can’t envision too many scenarios where Im not going to be able to continue to pay for things in that manner….but…being a survivalist means taking nothing for granted. So, off to the bank for some cash to stuff in an envelope and bury in the bottom of the gun safe. Outta sight, outta mind…and outta Palmetto’s website.

If there’s a situation where bank cards aren’t being taken because the economy is tanking, power is out, and there’s bodies in the street……well….cash won’t really be terribly helpful at that point anyway. But, my neighbor across the street doesn’t have a point-of-sale card reader in his kitchen and if I want to conduct business with him, cash would be nice to have. When the bodies stack up at the curb, then we’ll switch to other currencies.

How much? For me, not a lot…most everything I need that can be bought with cash is already here. For you….well, thats up to you to decide. As an aside, I’m still keeping most of the money in the bank except for what I’m allocating to limit orders at my brokerage since everything is on sale. Banks are just one more collection point for crowds and sick people…and whatever funk is oozing on the keys of an ATM keypad would give you the heebiejeebies if you thought about it. So…cash on hand.

I wonder how many people are doing the same and if there’s going to be any…behaviours…by the banks to slow the exodus of cash that may-or-may-not be in the works as people start going into panic mode. Either way, always good to be ahead of that sort of thing, Anytime anyone tries to ration something the obvious thing happens – demand and price goes up. If you told people they were limited to withdrawls no larger than, say, a billion dollars in cash…people would still line up at the banks to pull out money even though none of them have a billion dollars. When we hear that there’s a line at the bank and they’re limiting cash the natural reaction is to get all of yours out of there. Bank runs are self-fulfilling prophecies.

Here’s an interesting flip side to this coin, though….because cash is a wonderful distribution method for spreading disease it might come to businesses refusing to take cash and going to plastic only. Hmmm. Do I pull out the cash and keep it on hand or do I keep it in the bank on the chance that I need it there to back my debit card because no one will take diseased cash? Decisions decisions.

Hurricane Katrina was a lesson in disaster response and preparedness that defined planning for the last fifteen years. This coronavirus looks like its going to be a graduate level course. Emergency management departments, programs, and strategies are going to be wildly changed after all this settles out. The health care industry, despite its institutional inertia, should be pretty interesting to watch change as well.

Leaking money

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You know how sometimes when your car is acting up and you take it to the mechanic you consider yourself ‘lucky’ if you get out of there without spending $xxx? Yeah. Another adventure in plumbing today.

I was going down to the basement to put away some ammo and right off the bat I knew something was wrong. I could smell water. Sure enough, theres a puddle on the floor. I hate plumbing problems. Hate them. An ancient gate valve had decided now was a good time to go ahead and give up the ghost. Trouble is, it could never be in an easy-to-access area. Nope. There’s ductwork hanging from the ceiling and, of course, the valve in question is right behind the duct. And, not just any duct. A duct that has another duct coming into it form the side. So thats a three-point F.U. to deal with.

Now, it wasn’t all bad. I managed to find a plumber who could show up today, rather than next Tuesday (looking at you Garden City Plumbing & Heating), and the kid did the job pretty well it appears, and so far everythign seems to be holding together. Replaced the ancient valve with a nice new ball valve (why, oh why, would anyone use anything else???) and now life can go on. I was expecting to drop between $500-$1000 because there’s always something that keeps it from being a straightforward and simple fix. But, knock on wood, it looks like escaped with only $175 left behind.

Fortunately, part of my preps include an emergency fund. So, it was just a matter of paying the man and life goes back to somewhat normal. Except…I have to try and put the ductwork back together.

The emergency fund, however, turned a potential Big Deal into an inconvenience. I deprive myself of some luxuries in life… new car, fancy clothes, latest electronics, basic medical care…just so I can have something in the bank for when these sorts of events happen. For those keeping track, this was another case where the crisis required greenbacks and not an AR and plates. Oh, someday the crisis will happen that does require M855 and that sort of thing, but by the time that happens there will have been a hundred crises that required the greenbacks.

So…prepare for The End Of The World, but also prepare for the smaller, more mundane and localized end-of-the-worlds…and that is almost always remedied with cash.

ETA: I was right. Complications. :::sigh::: Plumber is on his way back.

Strange bedfellows

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There’s that old expression about the ‘enemy of my enemy is my friend’. It sounds nice, but in practice the enemy of your enemy is your friend up until your enemy is defeated…then the odds are pretty good that new friend will be your next enemy. (cough*WW2 and the Soviets*cough).

Here’s an article about how the trend towards being a ‘cashless society’ will be racist, classist, and a host of other -ists because poor people and people of color somehow are unable to get a debit card. (“Retailers want to go cashless. But opponents say that’s discriminatory“) So, what these self-appointed guardians of equality are proposing is that it be legislatively mandated that a business must take cash.

Hold that thought a minute, and go read this article. (“New York Times Wants To Have Credit Card Companies Monitor Sales of Guns and Ammo. What Could Ever Go Wrong?“) Here, the NY Times, a bastion of journalistic…uhm…well, something…, feels that consumer credit companies (and I would imagine, by extension, bank debit card holders) flag transactions for ‘the authorities” when a customer purchases certain quantities of guns/ammo.

Many credit card companies already have positions on what sort of transactions they will not partake in. It’s not hard to imagine that with the ‘do it for the children’ crowd leaning on them , that they’d cave and prohibit the use of their services on ‘forbidden’ services/transactions.

So, it isn’t a stretch to imagine the day when many stores are cashless and your only recourse for payment is to use your debit/credit card. Except that when you try to buy a rifle or magazine or ammo….-DECLINED-. And since the vendor is cashless, you’re choices are now pretty severely limited. It’s a tidy end run around that pesky right to bear arms thing. There’s no right to purchase arms…so they’ll simply make the transaction as onerous and difficult as possible: make it so you can only pay with a card, and make the terms of the card such that you can’t buy guns.

Thus, strangely, I’m in the camp of those folks saying that businesses should take cash (although I disagree about forcing them to). Not because I care about some meth tweaker or welfare queen who can’t get a checking account, but because cash gives me a degree of anonymity and privacy that I demand. Politics does indeed make strange bedfellows.

As a businessman, I recognize that cash presents a bunch of challenges…miscounting, theft, attractive nuisance, disease vector, time sink,  etc, etc. And people paying by card are far more likely to spend more money and do it more often than those who use greenbacks. (Which is why Vegas gives you chips to bet with instead of real money.) But as a survivalist and lover of liberty and privacy, cash possesses some very handy qualities that I desire, not the least of which are privacy.

Its interesting how seemingly unrelated ideas or events – ‘going cashless’ and turning credit card companies into watchdogs of the public welfare – can combine to present such hazards to folks like you and I.

 

Money v. goods

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I ran out of dish detergent yesterday night an thought “No big deal, I’ll trot downstairs and grab another jug of the stuff.” To my chagrin, that was the last one. Bad survivalist! Sure, the end of the world is not going to be made worse by a lack of dish soap, but it’s the principle of the thing: shoulda had it, didnt.

So, that got me to thinking that January (or, really, late December) should be my evaluation period for purchasing “a years supply” for the coming year. I’ve made a list of a few things I’m just going to go ‘heavy’ on and see if they do indeed last me the year. This should make for some interesting looks from the guys running the registers at CostCo when I pick up a dozen drums of detergent.

And as I said, the end of the world experience will not be greatly affected by a lack of dish soap. But a ‘localized’ end of the world..such as a job loss or similar, ‘personal’, disaster will be somewhat eased if I can reduce the number of things I have to buy until I”m back on my feet.

Think about it. Pretend you lost your job and its going to take you three months to get another paycheck coming into the household. Every dollar is going to count, right? So the less money you’re spending on toilet paper, paper towels, soap, food, clothes, etc, is more money you have to stretch for other necessities. This is why I try to keep as much long-term-storage-friendly consumables on hand as possible.

I have the storage space (mostly) to go deep on stuff like that, and even if the world doesn’t come to an end I’m still ahead, inflationwise. There is an opportunity cost, I suppose, to tying up that money when it could be doing other things. That brings up a much bigger quandary: cash or goods?

Let’s say I spend $100 on toilet paper to store for the year. Assuming inflation runs around 4%, that means it would take $104 to buy that same toilet paper at the end of the year. By buying it upfront, I ‘made’ 4% on my money. But what if I simply took the $100 and put it in an envelope in my desk? At the end of the year it only buys me $96 worth of toilet paper. BUT…it can also buy me a host of other goods, whereas if I had spent the $100 on TP all I’d have is TP. In other words, $100 worth of TP vs. $100 cash. $100 of TP is just TP…but $100 cash can become $100 of TP, food, fuel, ammo, shoes, etc. So, it might make more sense to store the cash, rather than the TP.

As I said, my buying power is reduced by inflation…Assume TP was $1 a roll, just for round numbers. $100 gets me 100 rolls in January, but in December it gets me 96. But if I invested that $100 at something that made more than 4%, that would mean I could buy at least 100 rolls in December. The stock market, yearly, returns upwards of 10% on average, right? So, in theory, I park $100 in January and in December I buy 110 rolls of TP.

But…risk, scarcity, and self-discipline come into play. The investments may go down and my $100 may get cut to $75. So..75 rolls of TP in December. Or scarcity may come into play..the TP crop could get TP weevils and the price shoots up. Now my $100 can only buy 50 rolls in December as the price doubled. Or inflation may go past 4%. And, finally, self-discipline – can I stare at $100 sitting on my desk for a year and not touch it? Mmmm…

And often the bird in the hand is worth the two in the bush, y’know?

So…goods. This isn’t to say I don’t keep money stored away. I just keep it where I can’t see it or get to it without a conscious, purposeful effort.

All this to say that next payday I’m going to pick one item off my list of ‘Go Heavy’ and stock up for the year. At the end of the year I’ll review if the amount purchased was indeed a years supply. That’ll give me a good metric of what a years supply constitutes around this house.

This mental exercise in frugality, preparedness, and cost/benefit has been brought to you buy writers block, an empty soap container, and un upcoming sense of dread.

Direction

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I was having a little exchange in email with someone and was describing how the direction of my own prepping (and I really hate that word..it sounds so cutesy and trendy) has changed as of late and why. Maybe it’s worth a post or two.

I’m fairly satisfied with where I’m sitting in terms of food, fuel, materiel, etc, etc. It’s not necessarily gilding the lily to continue on the current path, but this current economic clime is one that makes me think now is the optimal time to shift directions for me.

As I mentioned earlier, we’re in a somewhat better-than-usual economic period. Jobs and markets are at record numbers. I’m not going to say that money is out there falling from the sky, but for someone with a brain, work ethic, and ambition, now might be a good time to work on getting the financial side of preparedness buffed up…take the extra job, invest the extra cash, sell the unused items, etc.

What does the financial side of preparedness look like?  For the ‘casuals’ that may look like the classic six-month-emergency fund in the bank, pay off the credit cards, and beef up the Roth. For us lifestylers it may look like that plus cash in the safe, cash equivalents like gold and silver, trade goods, and other assets (like land).

I’m pretty sure I will be just fine if I don’t buy another gun, freezedried, or backpack for the next five years. And, as I’ve said over and over, the times in my life where I urgently needed money far outnumber the times in my life where I urgently needed a Barrett 82A1. Doesn’t mean that moment won’t happen, just saying that so far I’ve need $50 bills more than I’ve need .50 API.

Trying to avoid this

So, for the last few months I’ve cut back on my spending on things like storage food, ammo, guns (sorta), and the like, and have instead been moving more resources into savings, investments, cash, hard currency, and that sort of thing.

The economy is doing well at the moment but nothing lasts forever. If this good economy affords me the opportunity to get my ducks in a row for when it inevitably starts to decline…well, wouldn’t that be the smart thing to do?

So..for now, my focus is mostly on getting the money stuff squared away. If the zombies/war/Depression/invasion/flu/volcano/collapse occurs tomorrow I think I’ll be just fine with what I have on hand…but I don’t share that same level of confidence if some of the more mundane life disasters (transmission, broken leg, water heater, job loss, unexpected critical expense, etc.) occur. This change in direction will hopefully change that.

As I read that last paragraph it seem that could be interpreted as the direction of the blog changing, rather than personal direction. Nope…the blog will continue to strive to mediocrity with no change in its usual aimless topical wanderings. But personally, yeah, I think I’m going to be working on the really, really unsexy parts of preparedness. But…it’s gotta be done.

Piggy Goals.