Where to go? We are in a strong (50%) cash position at the moment, own our home, land, vehicles, clothes, bikes and don’t plan to buy a damn thing in the near future. Rural midUSA, so we don’t earn a lot, but cost of living is low.
I put our position out as an example, not to make a statement, but would like to toss this out - where do you think we are headed during the next decade, and how do you plan to make it through/prosper/survive? At the moment, we have no plan to speak of beyond frugality and self-sufficiency; I don’t think this will do enough to protect our asses in the future (we’re 57 and 50).
sounds as if you’ve done very well by living within your means.
As far as the next 10 years, I would say inflation should be your biggest concern. With 50% in cash and another 40-50 years ahead of you, you are very conservative and if you wish to continue to stay that way you will most likely have to continue to work for some time. We have been spoiled with low inflation for two decades but with the amount of money being printed and treasuries being sold, we are most certainly going to realize inflation rates we haven’t seen in a long time. I would submit that the only way we (collectively) get ourselves out of this mess is to have a period of very high inflation.
How do you deal with inflation? Either invest less conservatively or plan on working a long time.
It is interesting to me that the personal “prescription” of being more frugal and working longer, will put our society into an even deeper downturn. Spending less means fewer jobs and working longer means higher competition for the few jobs that are left. Of course everybody has to do what they have to do… it just underscores how this will get worse before it gets better.
As a hedge against inflation I think owning real and useful assets would be the best thing. You’re in the midwest, so I look for some prime farmland.
As a hedge against inflation I think owning real and useful assets would be the best thing. You’re in the midwest, so I look for some prime farmland.
Actually, I think the prices of farmland need to come down, or the rental for said land needs to go up, before farmland is a worthwhile investment. Depending on what the rest of Boudreaux’s portfolio looks like, he might add a small position in gold or other commodities to hedge some of the inflation risk. Plus, it’s easier to do that than it is to buy land (an 80 acre parcel at $4000/acre is $320,000, just the 20% down is 64K and then you have a pretty substantial note payment each year. More than what you’re getting in cash rent…maybe a crop share deal will cash flow…but maybe not. You’re probably looking at an annual cash outlay when the payment comes due.).
“Real and Useable assets” pops up often. Are we talking about assets (land) which could throw off $$ - these $$ would be indexed to inflation as they come in in lease or crop; or assets (rental homes) which would throw off $$, but pose maintenance liabilities greater than land. Invest in strong dividend paying equities (we did in Dec, and I’m not comfortable buying more-I think).??
I do believe that a well positioned person could actually prosper through (or perhaps) after the rough road ahead.
Land is at an all time premie at the moment. We have held off buying more due to its price-I, for one, believe prices will come down. If the wheat drought continues here, things won’t be pretty.
It’s too early to tell so I’d deal with today instead of worrying about 10 years from now. If you don’t have a second freezer I’d look to buy one so you can put some food away. Same thing with the storage of dry goods. If inflation takes off your ability to buy bulk will be a big help. I’d also look at what you can do around the house to decrease your dependency on the utility companies and or heating/cooling bills. Install some solar that heats your water heater, a house fan to cool your home, upgrade your windows…Look at the stimulus and see how you can best make out. Prices are reasonable and for someone with cash you can make a great deal. The less dependent you are the better position you will find yourself in.
Actually, I think the prices of farmland need to come down, or the rental for said land needs to go up, before farmland is a worthwhile investment.
I agree that as an “investment” land doesn’t look so attractive… but if you are interested in survival, then it would be a good thing to have. I would wait for prices to soften a bit first though.
I mean really… what is a good thing to own in a severe inflationary depression? People will do without all sorts of things. Housing? Maybe… if it is basic and small and the cost is right near the cost of the building (ie cheap land). Speculating in gold could be good, but that is only for people with excess cash, and if things get really bad, nobody will need/want gold. Food will have a stable demand even if the economy goes to hell.
Try $15,000/ac here in the heartland of CA. I think we are in for a post-corn crash in the near future. I would be all about selling if I owned farmland.
Where to go? We are in a strong (50%) cash position at the moment, own our home, land, vehicles, clothes, bikes and don’t plan to buy a damn thing in the near future. Rural midUSA, so we don’t earn a lot, but cost of living is low.
It may not sound like it or feel like it but based on the numbers I have seen, you should feel happy and proud to be in the position you are in, because it would seem that very few people are actually in the position that you are in. Many have been living way beyond their means for some time, and now really have nothing to show for it or even worse, are carrying big debts that are going to take years, perhaps decades to pay off.
If inflation is a real risk why not buy a few I bonds? A very wise man told me 30 years ago that if the U.S. Government defaults on its financial obligations the entire world is in the toilet. I have been buying treasury securities ever since and have no regrets.
Where to go? We are in a strong (50%) cash position at the moment.
FWIW, here are things I am looking at.
I think with the market volatility it is dangerous to buy individual stocks so some funds maybe worthwhile. You can’t go wrong with some of the companies that have historically paid good dividends (Pepsi, Coke, McDonalds, J&J etc) so a fund like the Vanguard Dividend appreciation fund is not bad (Ticker: VIG)
I also like to think ahead so where are there going to be problems (ignore the current nonsense). One is fresh water and the other is agriculture. There are some funds out there focussing on agriculture and clean water, you can look around.
Financials are one area I would stay away from for now, see where the bailouts are going.
Finally, commodities are a good bed (oil, lumber, copper etc) so look for a fund focussing on commodity production and you should be good.
We nibbled into about 10 strong divvy payers back in Dec. Off the top of my head - included are J&J, McD, Chevron, Kraft, Heinz, Altria, Coke, Duke…as of this morning I am no longer interested in the market and will not invest another penny.
I bonds are interesting, but if I remember correctly, they are not indexed to real inflation. Why would I want to give another penny to our govt?
I hate to say this, but I’ve lost faith. As of right now, I intend to quit worrying about all of this, hunker down and wait for real bargains in land. As long as I can pay taxes there is not much the Govt can do to fark land up.
the comment about water in CA is right on the money…too many people building homes where homes should not be, now they need water. fact is there are too many farms where farms should not be…
Luck to all - I honestly believe the shit is about to hit the fan;
Kai
Congrats for living well within your means. I don’t have anymore specific advice other than just continue to spend less than you earn. You will have to “risk” some of your cash or it will be devoured by inflation at some point.
an 80 acre parcel at $4000/acre is $320,000, just the 20% down is 64K and then you have a pretty substantial note payment each year. More than what you’re getting in cash rent…maybe a crop share deal will cash flow…but maybe not. You’re probably looking at an annual cash outlay when the payment comes due.
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Based on this chart land prices are around 20% above the long term trend. They’ve experienced a bubble lately as well because of high grain prices. So this is probably not the best time to buy.
Still, if you can manage to almost cover the payments with your income you’ll eventually have something that historically appreciates faster than inflation, pays a decent dividend (~4%), will never go bankrupt, and requires no maintenance on your part.
you’ve played by all the rules, you’ve been responsible and done all the right things - - so have I and a lot of Americans - - - but that does not mean we won’t get the shaft in the end.
when the mongrels are pouring over the walls . . .
Doc’s gotit right. Btw. two States (IA and OK), I can’t name more than two farm families who aren’t leveraged to the hilt. Btw. land, machines, seed and fertilizer, the exercise of growing food is less about positive cash flow as it is servicing debt.
Seen it before (who said “fencerow to fencerow”). Cash for land baby - the exercise has always paid off - and we intend to be there when the bubble bursts.
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