Does your portfolio resemble a yo-yo or a sine wave? If you have a portfolio of investments, then that scenario is very probable. The markets have been in such turmoil over the last couple of years, with the public being manipulated and lied to by everybody from their governments to their brokers and financial advisers. A couple of years ago, I began the small obsession of listing the daily reasons (excuses) made by Bloomberg, the Wall Street Journal, and various financial editorials from all over the world in an attempt to keep track of it all.
But to maintain my sanity, or what is left thereof, I had to quit soon. I also got tired of the standard pictures of floor traders on Wall Street looking up at the Big Board either in abject horror or orgasmic pleasure, reflecting the day’s chaos. The whole operation is one giant sham. I have a very good friend, a fund manager in charge of several billion dollars worth of client funds, and we talk on Skype occasionally. He confided to me years ago that he could care less which direction the market moves, as he makes his money on the buy/sell commissions and bonuses he earns from his firm. So even when everything started going pear shaped a couple of years ago and people lost billions of dollars to the likes of Bernie Madoff, he made money, because many very wealthy clients had to reduce their wealth management assets to cover their own assets, leading to more commission for my old school friend.
The governments of the developed nations lie to their citizens on a daily basis. This is evident in all the propaganda that has been pouring out of them all. In the US, they have been reassuring the citizenry now for a couple of years that the worst is over, and we are on the way to recovery. Meanwhile, from Europe to the Far East and of course the United States, economic uncertainty is the rule of the day, with the biggest problem being the USA, a country so far in debt in relation to its GNP, which by the way is propped up to a large degree by the service industry. Add to that calamity the so-called “leaders” in the House and Senate who are obsessed with raising funds for their next re-election campaign, being afraid that they will be voted out of office by the vocal minority. Add to that a powerless president who has broken so many promises and abandoned all common economic sense, and you have a meltdown of unprecedented proportions waiting in the wings.
Over the weekend of Aug 13th and 14th, former Fed Chairman Alan Greenspan came out on the circuit of talking heads, loudly proclaiming that the USA will never default because the government can continue to print money. He is one of the parties most responsible for the world economic collapse, and now he is suggesting we add jet fuel to the fire. The US government has been shuffling reality for so long now that I doubt anyone in power has any idea how to give out facts anymore. Under Ronald Reagan’s trickledown economics, inflation and unemployment started being referred to as having “a decreasing rate of increase,” and the nonsense has continued ever since.
In inflation terms, the most important figures are excluded from the tally, because they would reveal the true picture of inflation: Food and Energy! When un-employment figures are released, it is lie upon lie. The claim may be that 80,000 new jobs were created over last months, while the number of new unemployment applications dropped one tenth of one percent. What the statisticians will not tell you is that for the 9.7% unemployment reported, there is 1.5 times as many people who have given up looking for work or are tremendously underemployed, leading to a total of almost 1 in 4 US residents living way below the standards that they enjoyed before. As long as the US is not building things they can sell abroad, the unemployment figures are likely to stay static. Fast food is not going to help pull the country out of this crisis. Virtually every item formerly made in the USA is now made in China, allowing the US consumer to contribute to the accumulating deficit by gorging themselves on cheaper electronics and other consumer goods.
Even the best of politicians will not be able to get the economy going in the right direction again for perhaps an entire generation. The damage is done and will last. The oversupply of housing is such that the largest holders of foreclosed properties have started demolishing many of their marginal holdings to reduce inventory. The market is such shape now that the auctions on the courthouse steps have stopped attracting investors, as many of them have come to the realization that the maintenance and taxes will more than eat up any potential profit over the ever-longer term the property has to be held.
There is no knight in shining armor riding to the rescue of the USA. The Arabs are acutely aware that their petrodollars have been devalued by 30% or more over the last 2 years. They have their own problems with the Emirates sovereign wealth funds in trouble after building those ostentatious resorts in the desert, palm shaped islands, the world’s tallest building, and so forth.
This of course now automatically rules out following the old tried and true adage to buy property. That went out of the window in the US and Europe when the red hot property bubble burst, after unregulated gangsters such as Angelo Mozillo from Countrywide Finance started passing out “Liar Mortgages” to people without any qualifications to hold super mortgages. Yes those who took out the paper were stupid, really stupid. But those who directed them to “just sign here” are criminals (literally – many of them had criminal records!) who wiped out an entire class of people who thought they were finally part of the American Dream. The American Dream became a nightmare for millions of people who will never in their lifetime be able to overcome their bad credit ratings, forcing them to pay much higher insurance rates, as well as keeping them out of retail installment contracts and credit cards, thereby not just reducing consumer spending but pretty much freezing it in place.
So what are you as an individual to do with your devalued funds? Gold of course is the first thought for many. However be forewarned: It could turn out to be a bubble as well for various reasons, not the least of which is that any sovereign may dump tons of gold on the market to pay down their deficit (Portugal). Silver is hovering around $40 an ounce and traditionally outperforms gold in percentage figures. But the problem with these kinds of investments is that in most instances, all you have is a piece of paper from metals brokers, stating that you purchased it. What if it is another Bernie Madoff scam? Same goes with almost any commodity on the market. You never physically see what you bought.
That brings me to the only suggestion left. Buy land in a foreign country that has not already been overrun by foreigners building villas with walls and gates and CCTV, driving the prices way up beyond the reasonable. Finding good productive land in a foreign country is not all that difficult, with a little guidance.
Countries on my list currently include Ecuador (although kind of iffy because of their currency being tied to the US$), but absolutely Argentina, Brazil, Peru, and Bolivia in this hemisphere. While Uruguay has its share of availability, too many Argentineans sheltering capital have driven up the prices there. Chile is a possible maybe, but they may be on the edge again, where President Piñera presently has the lowest approval rating of any Chilean leader since the military dictatorship of Augusto Pinochet.
My recommendation is to buy reasonably sized tracts of land, perhaps in several different locations, but close enough together were you can keep an eye on them. Remember, you are dealing with some nations that are not very wealthy, and squatters can be a real hard to get rid of problem. I know of some properties and am soliciting anyone who wants to buy or sell to contact me for a list of properties available here in the San Rafael region. I am not selling real estate, but I am aware of a few nice homesteads with houses being offered at very reasonable prices, from former expats who have left or have the desire to relocate.
These properties are not investment properties to turn over next year or to subdivide, but they are looking for an owner who is willing to work the land to produce fruits, vegetables, lumber, and of course the wine for which the Mendoza region is famous.
Should you have any interest, I am available for consultation via Skype or email communication. Contact me at jd_mex(at)yahoo.com and I will send you my Skype contact name or USA number.
Hang on tight; it’s going to be a rough ride!