Collapsitalism: What I’d Keep in My Collapse Portfolio
September 18th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
NOTE: I am a BullionVault client and affiliate. I have no relationship with Everbank. I have no relationship with Powershares. I hold gold, U.S. dollars and New Zealand dollars.
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Becky and I don’t have much money to worry about, but some Cryptogon readers do. This is an email I wrote to one of Cryptogon’s most generous supporters in response to her question about asset preservation during a financial crisis. I’m posting this because it might help others of you who have significant assets and are looking for ideas. If Becky and I had substantial financial assets that weren’t allocated to property or preparations, this is what we would do.
I don’t include allocation percentages because those will vary widely according to each individual’s risk tolerance.
This is a slightly edited version of my email message:
Of course, any decision is up to you, and only you are responsible for the outcomes, good or bad, but I would be very careful with the foreign currencies. It has to be done right, with diversification kept in mind at all times. Currencies are considered “speculation” meaning maximum risk.
Diversification. Diversification. Diversification.
I would get an Everbank (Everbank WorldCurrency CDs) professional involved. Consider a basket of currencies that provide you with a mix of security and yield.
Currencies to consider for security and strategic cash hedges:
Swiss Franc
Euro
U.S. Dollar
To understand this in greater detail, see: Making Sense Of The Euro/Swiss Franc Relationship. In summary, by holding these three currencies, you’re pretty much going to go… nowhere! Which is the point of trying to hold onto what you have.
Since you’re going mostly nowhere on your U.S. dollar, Euro and Swiss franc holdings, consider adding high yielding / higher risk currencies:
Icelandic krona — Pure gamble for highest yield
New Zealand dollar — Commodity based gamble
South African rand — Commodity based gamble
Consider the unlikely event that the U.S. dollar will rally (rise) sharply. Because it seems impossible, you should assume it will happen. This is why you keep one foot in the stinky, filthy USD pool, just in case. Even with the U.S. Dollar Index under 80 and the wheels coming off the cart. YOU NEVER KNOW WHAT WILL HAPPEN. That thing could gap right back up. That’s ok, you’re covered with your plain-jane FDIC insured CDs.
Now, what’s the problem with each and every currency out there?
That’s right, they’re all fiat, based-on-nothing ponzi schemes.
Consider positions in gold and food.
I like BullionVault for my gold needs, but if you are confident with your security situation, take personal, physical possession of your metal. If taking personal physical possession, pay cash at a dealer who doesn’t want to know your name. American Eagles are, by far, the standard for Americans. Canadian Maples are good too.
Keep in mind, the U.S. has outlawed gold possession before. That’s right, diversification again, in terms of geography this time. Maybe take personal, physical possession of some and keep some in Switzerland with BullionVault.
Now, food. Check out the PowerShares DB Agriculture ETF:
This is a simple way of betting that prices of corn, soy beans, sugar and wheat will rise. If you think prices of these staples is going to rise, this might be worth considering. This isn’t heavily leveraged like buying the underlying futures contracts. It moves much slower because of the lower leverage on the ETF.
If the crash is hard (grid down, no Internet, total collapse, mad max, etc) none of the above matters. In a hard crash, it’s the same old same old:
Shelter, water, food, and security/community.
Ok, that’s the best information I have to offer, and how I’d do it if it was me.
Best,
Kevin
Kevin, this site is the most valuable source of information on the web right now, i almost stopped reading msm-websites!
I can get my hands on a cheap students loan, which pays me a fixed amount every month for up to 5 years. The rate is variable but _capped_ at 8,9%(6,25 now) for 15 years. The payback starts 6 months afterwards, i am completely free with the plan, i can even pay the complete sum at one piece. I could use this money for some good stuff which could become useful in the transitional period. Should i take it?
What happens with loans during a quick inflation?
@shephurt:
In rapid inflation (hyper-inflation), loans become worthless (easy to pay back), assuming that interest rates cannot keep up with inflation and that your income (wages/salary etc) is also inflating. This may be a mixed blessing however because prices of food etc will probably be growing beyond your reach. It might be OK if you used your loan to stockpile tools/food/weapons…
In the short term it would be wise not to make a one-way bet on massive inflation. Looks like we might be heading towards some bank failures. If these dont get bailed out completely, we could see deflation…. not to mention if some of the $400+ TRILLION in outstanding derivatives bets unwind. (That figure still boggles the crap out of my mind – who the hell has all those bets?)
I would have your friend read Ted Butler’s comments here: http://www.investmentrarities.com/09-18-07.html concerning silver.
Memory does not serve, missed it by a week http://www.investmentrarities.com/09/11/07.html