We love to hear from readers! Please email your question or comment to Independent Living editor Lee Bellinger ([email protected]). Please include your name and home state. You may also reach us via postal mail (P.O. Box 1240; Clover, SC 29710-4240).
Dollar Continues to Sink as World Currency
Publisher’s Inner Circle member Alan S. writes: If the Dollar is no longer reserve currency and the world economy tanks, will there be any good currency investments at all, anywhere?
The U.S. dollar is in the process of losing its status as the world’s reserve currency – albeit gradually (so far). Last year, China’s Shanghai Futures Exchange announced it would price crude oil futures in Yuan instead of dollars. Other countries are increasingly bypassing the dollar and using their own currencies for bilateral trade.
The Chinese set records for gold buying in 2013 (more than 1,000 metric tons). Perhaps most tellingly, China is losing its appetite for U.S. Treasury bonds (which it had been soaking up in previous years). This is one of the untold reasons why the Federal Reserve has cranked up its bond buying to become the largest single holder of government bonds.
As for foreign currencies to own as the rest of the world slowly detaches itself from the dollar standard, it’s a tough call. The Chinese government only wants its Yuan/renimbi to appreciate at a controlled, glacial pace. The euro faces serious challenges. Some of the smaller “commodity currencies,” including the Canadian and Australian dollar, Norwegian krone, and Brazilian real, have the best prospects for significant upside. But diversification is important, including diversification into the ultimate money – gold (and silver).
Striking Gold In Water
Rob writes: I subscribed to your newsletter to try it. I looked into your recommendation for water ETF’s. I did my own study and research, and bought in, specifically CGW&FIW. Let me say, the returns were more than the cost of the original subscription and enough to resubscribe. That one article more than paid for itself.
I don’t take all your investment advice, as you advise different age people and not all advice applies to everyone. I have a longer time to invest and the water stocks are a longer term investment. So far so good. What I find reassuring is you are not a broker, you don’t have an “agenda” to promote any one stock over another. Your suggestions can be easily researched independently.
What is your opinion of CXW (Corrections Corp. of America)? It is a private company that runs prisons. Profiting off prisons may not be the most socially acceptable investment, but financially speaking over the long term do you think it’s good? Some people including you seem to forecast more social unrest into the future. This could lead to more theft or violence and ultimately more incarceration. Over the long term do you think private prisons are a sound investment? The “business” seems steady now and unfortunately may grow into the future.
I’m glad the water stock ETFs have worked out well for you!
As for prison management stocks, they’re higher risk, in part because their business models invite political controversy. In a way, investing in privately run prisons is a play on rising social chaos and higher rates of incarceration. But civil liberties groups have protested some of the conditions in privatized prisons as well as the troubling incentives of corporate management to try to keep more people incarcerated for longer periods in order to maximize profits.
They have a point. Corrections Corporation of America’s 2010 Annual Statement included this line: “The demand for our facilities and services could be adversely affected by . . . leniency in conviction or parole standards and sentencing practices.”
The movement to relax mandatory minimum sentencing guidelines for certain types of nonviolent drug offenses is gaining ground, as is the legalization of marijuana. States that are broke are learning from Colorado that taxing marijuana as a legal product can be a huge revenue boost. How this will affect prison stocks remains to be seen, but I’d be cautious in this area. There are bigger, safer sectors out there to invest in.
Answering Multiple Questions on Bitcoin
Cheri writes: How do I invest in and acquire Bitcoins? Thank you.
First of all, I wouldn’t call any holdings in Bitcoins an “investment.” The same applies to similar digital crypto-currencies backed by nothing but belief (there are now dozens of them – Litecoin, Worldcoin, BBQCoin, Dogecoin, Mooncoin, Ronpaulcoin, etc.). Unlike hard assets that have intrinsic value, virtual “coins” are pure speculations. For more on why, please review my lead story in last month’s issue.
Granted, Bitcoins have been a hugely successful speculation over the last couple years for those who got involved early. If you want to get involved now, it will cost you a lot more. You can either receive Bitcoins directly from other users or buy them off a Bitcoin exchange such as Coinbase.
Rick S. writes: This is about bitcoins. I hear the Federal Reserve is behind this, supports it all the way. Because there is no backing from precious metals and it’s all electronic. Which the Fed likes it can track everything as well as tamper with it. I don’t know about you but if the Fed wants it, a red flag goes up in my mind. What do you know about how secure this is?
To me, it just doesn’t add up. Why the relatively muted federal response to the Bitcoin craze? Senate Democrats recently held hearings on this very subject. Some brought up the potential for Bitcoin to become a favored tool of criminals and pornographers, but for the most part their response was fairly tame.
If digital currency were to become universal, the left would have a major breakthrough: The end of cash transactions as we know them, a fully trackable payment system that can be analyzed to the Nth degree. Perhaps Mr. Obama and the Treasury have calculated that in addition to ending cash hoarding, the rise of digital currency can undermine far more tangible and private forms of wealth preservation, such as precious metals.
George G. writes: Thoughts about the recent correction in the value of Bitcoin and its future if countries place restrictions on accepting it as a form of currency?
China has moved to restrict the use of Bitcoins, while Singapore has moved to tax them. Future moves by government are undoubtedly forthcoming, and they will cause, at the very least, continued volatility in the value of the pseudo-currency.
The Latest on Mandatory Vehicle Tracking Devices
Robert Q. writes: You mention acquiring an older vehicle without electronic circuits. What year OR how old a vehicle would qualify per your recommendation?
I assume you’re referring to data-recording “black boxes.” (Finding a road-worthy, street-legal vehicle that comes without electronic circuitry will be next to impossible!)
Starting September 1st, the Obama administration will mandate that all new vehicles contain such devices. More than 90% of the vehicles currently on the road already have them. Event data recorders have gradually been introduced into more and more makes and models by manufacturers over the past three decades. In general, the older the vehicle, the less likely it is to have a black box; and if it does, the black box probably won’t be able to record as many data points as the newer, “smarter” devices.
Also, if you’re concerned about being tracked, then do not drive a vehicle equipped with its own GPS navigation system (such as OnStar). From The Detroit News (January 7, 2014): “A government report finds that major automakers are keeping information about where drivers have been — collected from onboard navigation systems — for varying lengths of time. Owners of those cars can’t demand that the information be destroyed.”
Gold’s Bad 2013
Bert P. writes: For two years everybody was recommending to invest in gold. The financial loss for 2013 has been a major disaster. They say in five years it will be $5000.00 per ounce. I will never live to see that day. The investing advice from many of the well-knowns was not really that good for 2013.
I became interested in gold as a safe-haven asset after 9/11. I began recommending that my readers buttress their personal finances with gold (and other hard assets) at prices much lower that today’s!
Unfortunately, a lot of Johnny-come-latelys started piling into precious metals in 2011 at elevated prices. At the 2011 top, we did suggest that readers consider taking some profits on silver, which had run up to nearly $50 per ounce in a near-vertical move.
So the correction in precious metals prices that extended into 2012 wasn’t surprising. The violent down moves in the first half of 2013 did catch us a bit off guard, but we never ruled out a pullback of the severity we’ve seen so far. In fact, the February 2012 issue (“A Best-Case and Worst-Case Scenario for Gold”) stated, “In a worst-case scenario, gold could in the months ahead retest the major trendline dating back to 2001, which would project a price low somewhere around $1,000 – a decline of 45%+ from the 2011 peak of $1,900.”
The cyclical downturn in gold since 2011 has nearly fulfilled our worst-case scenario. I think that once gold establishes a firm bottom (if it hasn’t already), its next major move will be toward new all-time highs. A price of $5,000 per ounce in the years ahead is attainable, but its near-term direction is very difficult to predict.
Separating Your Home from the Power Grid
Gerald L. writes: If you have a grid-tie system (most are), should there be a utility power outage, the homeowner’s solar system won’t work. The utility says that the regulations (the ones they lobbied for) require homeowner’s units to automatically be shut down so that feed from a home would not shock a worker downline. While that may sound reasonable on the surface, it is entirely possible to have a safety switch at the homeowner’s panel which would not allow feed from their solar panels to enter the grid during an outage and still provide power for the home as one would expect. They are blowing smoke! We have the technology today, but the utilities and the politicians put a stop to any rules change using scare tactics. They don’t want anyone breaking free from their monopoly, even when they cannot provide power.
I have a solar installation of 6.3 kw capacity, but the investment is worthless in an outage! This is maddening! Do you or any readers have a suggestion other than a whole host of expensive batteries on how to beat this?
Unfortunately, even when you install an expensive solar power-generating system, it may not be functional as a backup system during a power outage if it’s connected to the grid. You can try to “hack” a potentially illegal fix (not recommended). Or you can totally detach from the grid by installing additional sources of electricity (may not be practical). What you may have to do is invest in a separate emergency backup system that includes portable solar panels and conventional fuel generators.
Stockpile These Foods
Chelia T. writes: Your latest newsletter states “nearby is a list of 18 items to stockpile” but I couldn’t find a list. Please help.
The list was mistakenly left out of the newsletter as we were doing some last-minute editorial rearranging before going to print. I apologize for the oversight.
Here’s the list of long-shelf-life foods that you were looking for (please note that for shelf-life durations indicated, items must be kept in cool, dry storage away from direct sunlight):
2. Beans (dried): 7 years
3. Carrots (dried): 7 years
4. Cocoa: 20 years
5. Cornmeal: 5 years
6. Freeze-dried fruits and vegetables: 8 years
8. Milk (dried): 20 years
9. Pasta: 7 years
10. Potatoes (instant): 20 years
11. Rice: 7 years
12. Rolled Oats: 25 years
14. Soup mix: 5 years
15. Sugar: 7 years
16. Wheat: 25 years
17. Most canned foods: 3 years
18. Meals Ready-to-Eat (MREs): 4 years
About Martial Law Scenarios
Dale E. writes: What part of this country will be less likely to be subject to control under Martial law?
In general, parts of the country that are more rural, have less crime, and have higher rates of individual gun ownership will be more resistant to tyrannical encroachments. However, it’s also likelier that those very areas of the country will engage in defiance of state or federal government. Such defiance could be spectacularly successful, or it could provoke an overwhelming, authoritarian response from the government.
For example, grassroots activists in northern California and southern Oregon are attempting to form their own state, called the State of Jefferson. Similar movements are underway in Michigan’s upper peninsula, northern Colorado, and western Maryland. A new Texas independence movement now also exists. And regardless of what you think of marijuana legalization as public policy, voters in states including Washington and Colorado, and some localities in other parts of the country, are effectively at nullifying the federal prohibition.
The Tenth Amendment Center (213-935-0553; http://tenthamendmentcenter.com) is leading efforts to return political power back to states, localities, and individuals via nullification. In some parts of the country, there could be quite a showdown between the people and the federal government in the near future!