With the recent collapse of the mortgage market, my advice to you is if you have a second home, sell it muy pronto. And if you anticipate moving within the next two or three years, sell your house and rent. The hassle of moving to a rental is nothing compared to the mental anguish of being “upside down” in a mortgage in a plummeting market. The next five years will be a great time to be a renter.
One unusual approach that might be prudent: Sell your house to a property-management company, and then rent it back from them. Let them watch the value of the house go down. Meanwhile, you’ll sleep well.
Depression-Proof Jobs
In these economic times, which are marked by increasing corporate layoffs, many people have asked me about recession-proof jobs. If you get laid off and can’t find work in your chosen field, then you ought to consider taking a cut in pay to take a far less glamorous job. In Japan, these jobs are called the “Three-K” jobs: kitsui (“hard”), kitanai (“dirty ”), and kiken (“dangerous”). If you are willing to take on any of the Three Ks, and you do cheerful, ardent work and have exemplary attendance, then you will likely have a job that will carry you all the way through a deep recession or even a depression. Some of these are low-level city and county payroll jobs. Sanitation workers, animal-control officers, sewer technicians, and highway-maintenance workers are a vital part of any society. Don’t let your family starve or end up homeless. There is no shame in accepting hard work. If you take a job that brings in only one half of your old income, consider that you’ll actually come out ahead of your contemporaries who are laid off for more than half of each year. Further, you will have uninterrupted benefits, such as health insurance.
A Home-Based Business: Your Ticket to the Boonies
The majority of preppers tell me that they live in cities or suburbs but would like to live full-time at a retreat in a rural area. Their complaint is almost always the same: “But I’m not self-employed. I can’t afford to live in the country because I can’t find work there, and the nature of my work doesn’t allow telecommuting.” They feel stuck.
Over the years I’ve seen lots of people “pull the plug” and move to the boonies with the hope that they ’ll find local work once they get there. That usually doesn’t work. Folks find that the most rural jobs typically pay little more than minimum wage and are often informally reserved for folks who were born and raised in the area. Newcomers from the big city certainly don’t have hiring priority.
I often encourage folks who are preparedness-minded to develop a second income stream with a home-based business. Once you have that business started, then start another one. There are numerous advantages to this approach, namely:
• You can get out of debt.
• You can generally build the businesses up gradually, so that you don’t need to quit your current occupation immediately.
• By working at home you will have the time to educate your children, and they will learn about operating a business.
• You can live at your retreat full-time. This will contribute to your self-sufficiency, since you will be there to tend to your garden, fruit/nut trees, and livestock.
• If one of your home-based businesses fails, then you can fall back on the other.
Ask yourself: What are you good at? What knowledge or skills do you have that you can utilize? Next, consider which businesses will flourish during bad times. Successful home-based businesses usually center around unfilled needs. If you live in a rural area, ask your neighbors: Is there anything that you buy or rent, or a service that you hire on a regular basis that currently requires a forty-mile drive to town? Those are your potential niches.
A successful recession-proof home-based business is likely to be one in which the demand for your goods and services is consistent—even in a weak economy. These include septic-tank pumping, home security/locksmithing, care for the very young and the very old, and escapist diversions such as DVD rentals. It is noteworthy that the movie industry was one of the few sectors of the economy that prospered in the 1930s.
Another category of business that prospered in the 1930s was repair work. Obviously, in hard economic times, people try to make do with what they have. So repair businesses are a natural. Perhaps there is some small appliance that you could repair that could be mailed from and back to the customer. This might include: DVD-player repair, laptop-computer repair, and so forth.
Another category is secondhand stores. People on tight budgets will be actively looking for secondhand goods rather than buying new items. A secondhand store in a medium-size town might do just fine in a depression.
Yet another approach, for those with mechanical aptitude who don’t mind strenuous outdoor work: Own one or more pieces of fairly expensive machinery that a lot of people need to rent (or hire the services of) on a semi-regular basis but that are expensive enough that they cannot justify buying one. Typically, this is machinery that sells for two thousand to twenty thousand dollars that you can hire out in a relatively unregulated business (not requiring any special licenses, guild membership, or a union card). Examples include Ditch Witch trenching machines (ditch witch.com), vehicle-mounted posthole augers, vehicle-mounted well-drilling rigs, portable sawmills, cherry-picker bucket hoists, Bobcat tractors, small tracked excavators, and so forth. Once you’ve identified a clear unfilled need, and after you’ve confirmed that nobody else in your local area already has a machine that they presently rent out, then start looking to buy one. Ideally, you’ll want one that is a few years old (since brand-new machinery is usually too expensive), in reliable running condition, and reasonably priced. As necessary, get a trailer to transport it. Practice with it at your own property, so that you’ll be competent and confident that you can do a good job. Practice loading, hauling, and unloading your machinery (if needed) a few times, so that you won’t look like an idiot when doing so. Be sure to get liability insurance started before you officially launch your business. Then it is simple enough to advertise your services on the Internet and through your local chamber of commerce, and post flyers at the local feed store and supermarket. You can “scale” the size of your second business (read: how busy you’ll be) by setting your prices. If you want a lot of hours, then price it low. If you are getting too much work, then just start raising your rates to slow down your business. Then, if and when you ever lose your primary income stream, you can drop your rates on your secondary business substantially, so that it can take up the slack for your lost income. If necessary, add a second or third piece of equipment that you can rent out, to diversify your business.
Some other good examples of home-based businesses might include:
• Mail order/Internet sales/eBay auctioning of preparedness-related products
• Locksmithing
• Gunsmithing
• Medical transcription
• Accounting
• Repair/refurbishment
• Freelance writing
• Blogging (with paid advertising). If you have knowledge about a niche industry and there is currently no blog on the subject, then start your own. (It worked for me!)
• Mail order/Internet sales of entertainment items. (When times get bad, people still set aside a sizable percentage of their income to “escape” from their troubles. For example, movie-rental shops have done remarkably well during recessions.)
• Burglar-alarm installation
• Tinsmithing
• Broom- and basketmaking
• Wheel- and barrel-making
• Pewter casting
• Weaving and spinning
• Candle- and soapmaking
• Leatherworking
Keep in mind that if you choose publishing or another mail-order venture selling something compact and lightweight, then you can take advantage of a national or even global market. But if you are selling a service or a relatively bulky or heavy handcrafted item, then your market will be essentially local, so choose your venture wisely.
Tangibles
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If after you have expanded your food-storage program and developed a home-based business you still have some remaining cash, then it should be used either to pay down your mortgage or to invest in tangibles. If you expect chronic deflation, then apply it to your mortgage. But if you expect Uncle Sugar to inflate his way out of the current economic morass (as I do), then put it in tangibles. I recommend that you put your money in productive farmland in lightly populated dryland farming regions, precious metals, and guns. Unlike dollar-denominated investments, these can’t be inflated away to nothing.
Precious Metals as a Hedge—Not an Investment
Looking at the past fifty to a hundred years, the current bull market in precious metals is a bit of an anomaly. The precious metals, in general, are not an investment per se. Rather, they are more like a form of protection against the destruction of the U.S. dollar. With the exception of the present day—which, again, is anomalous—people can expect to buy precious metals with no firm hope of a return. Rather, they can be expected to keep up with the rate of inflation. I recommend that every family have a core (nonspeculative) holding of 5 to 10 percent of their net worth in precious metals.
As of this writing (2009) we are just in the opening stage of a bull market, so you haven’t missed the boat. I strongly recommend that if you own any metals you hold on until the market goes into the final phases of the bull cycle. In the nascent run-up, that probably means tops of around ninety dollars per ounce for silver and twenty-five hundred dollars for gold. That equates to a gain of nine times current spot prices for silver and 4.4 times for gold. In this bull, I think that silver will outperform gold considerably.
In a major disaster that creates an economic collapse, precious metals will have their greatest utility as a recognized store of value to facilitate barter in the latter stages of a post-collapse economy, as regular commerce starts to resume. Before that, you can expect only canned foods and common-caliber ammunition to be accepted in barter. The free market will determine their value, as it always has. If the dollar is completely wiped out, the old dollars will probably be declared worthless, and a new currency unit will be established, most likely pegged to gold.
In the short term, the metals markets—particularly for silver and platinum—are indeed quite volatile. But it is important to step back and look at the big picture. Forget the daily fluctuations. Instead, look at the 120-day moving averages (DMAs) and the five- and ten-year charts at Kitco.com. The federal government’s profligate spending and both government and consumer debt point to a long-term bear market in the dollar, and a corresponding long-term bull market in precious metals. I don’t expect Uncle Sam to change his spendthrift ways anytime soon, so take advantage of the long-term trend.
I recommend buying silver rather than gold coins. Gold is too compact a store of wealth for most barter transactions. If you want to buy a gallon of kerosene, a box of ammunition, or a can of beans, then gold will be awkward. How would someone make “change” for a transaction that is priced at one hundredth of the value of a one-ounce American Eagle or Krugerrand gold coin? With a cold chisel?
I recommend that you use two methodologies to purchase and maintain two distinct hoards of silver, and that you do not commingle them:
1. Your designated barter silver stockpile. The barter portion of your silver stockpile should be in small, divisible units, ideally pre-1965, 90 percent silver U.S. dimes. Those coins could presumably be used for day-to-day purchases in a recovery-stage (post-collapse) economy. Your barter silver should be considered a core holding, never sold for the sake of profit. If you don’t ever have to use it for barter, then count your blessings and just pass it along to your children or grandchildren so that they will have something to use for the same purpose. If you can afford it, I recommend buying one bag with a face value of one thousand dollars for each member of your family.
I’m often asked about one-ounce silver “Trade Dollars.” I don’t recommend buying the one-ounce rounds. They often carry a higher premium per ounce than circulated (“junk”) pre- 1965 coins, and they will probably be suspect as counterfeit in a barter situation.
Typically, dealers run most pre-1965 silver-coin orders through a mechanical coin counter. This is true for any orders large enough to be sold loose or bagged. (By bagged, I mean clanking together in a bag, rather than in rolls.) A quick visual inspection will show you that all of the coins are pre-1965. Scan for any rims that show a copper streak—which would indicate that post-1964 clad-copper coins got mixed in. There is certainly no need for you to count ten thousand dimes. As long as the bag weighs at least fifty-two pounds, then you got your full 715 troy ounces of silver. (That troy-ounce figure also applies to circulated silver quarters and half-dollars. But because of the different composition specifications of silver dollars, $1,000 bags of these coins contain around 765 ounces of silver.)
The quick way to gauge the value of a $1,000 bag versus the spot price of silver on any given day is simply to multiply the spot price by 715. Thus, at a spot silver price of $13.85 per ounce, a $1,000 bag of dimes is worth $9,902.75 (or just think of it as 9.9 times face value).
2. Your second portion of silver should be your designated investment-silver stockpile. The best way to buy this—with the lowest dealer premium per ounce—is serial-number-stamped one-hundred-ounce bars from a well-known maker such as Engelhard, A-Mark, or Johnson Matthey. The big, one-thousand-ounce industrial bars almost always require assay for resale, which is expensive and time-consuming—not to mention that they are a pain to transport.
This stockpile is designed as a time machine to protect your wealth from one side of a currency crisis to the other. You buy it in current-day dollars. After a currency collapse has come and gone, when a new, stable currency (hopefully backed by something other than hot air) is issued, then you can convert part or all of your investment-silver stockpile into the new currency. Odds are that most if not all of your original purchasing power will be preserved by this method. Leaving your money in dollar-denominated investments—and I mean any dollar-denominated investments—for the next thirty years will be disastrous. This is because the currency unit itself represents the biggest risk. In the long run, as with all other unbacked fiat currencies, the U.S. dollar will end up like the Zimbabwean dollar—inflated away to nothing.
Silver dollars—even those in poor condition—sell for about 20 to 30 percent more than the equivalent in silver dimes or quarters, both because of their slightly higher silver content (per dollar) and because even cruddy-looking silver dollars still have some numismatic value. So for barter you are probably better off with dimes and quarters. However, it is noteworthy that U.S. silver dollars will be even more recognizable and trusted than the smaller-denomination coins, so if you presently own any silver dollars, save those for transactions with your most reluctant barter customers.
Firearms Magazines
Other than silver and productive rural land that could be used as a survival retreat, my personal favorite tangible investment is full-capacity magazines. I’m talking about the kind that hold cartridges for firearms—not Architectural Digest magazine. Not only will these shelter you from further declines in the dollar, but they are also likely to zoom up in price if and when another federal magazine ban is enacted. During the last federal ban, which ran for ten years before thankfully expiring (due to a “sunset clause” in 2004), the price of a Glock pistol magazine jumped from fifteen dollars to seventy-five dollars. Even relative “commodity” magazines like U.S. Government Issue alloy M16 magazines doubled or tripled in value. Magazines would also, of course, be very desirable barter items WTSHTF. I expect that if and when a new federal ban is enacted it will have no sunset clause. Thus, it will have the same effect as the civilian transferable machine-gun freeze enacted in 1986. With no end to that ban in sight, prices have skyrocketed.
Keep in mind that several states and localities have enacted high-capacity-magazine bans, so research your laws before purchasing.
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br /> My guidance on full-capacity-magazine purchasing is:
1. Buy only magazines that are either original military contract or from original factory makers (no aftermarket junk). Beware of marketing terms such as “GI Type” and “top quality.” If it isn’t original, then don’t buy it, or you will be buying grief. Not only will it have poor feeding reliability, but it will also have only marginal resale value.
2. Initially, buy extra magazines for the guns that you already own.
3. Next, buy extra magazines for the guns that you definitely plan to buy. If a ban is enacted, then all semiautos may end up like Valmet rifles are today: The guns are easier to find than their spare magazines. The law of supply and demand is inescapable.
4. Next, buy extra magazines for the guns that you hope to buy, or that you expect that your children might need someday.
5. Next, buy extra magazines for the pistols and rifles that your local police and sheriff’s departments issue. If they don’t carry their long guns in visible racks, then ask them what model they carry in the trunks of their cruisers.
6. Next, buy a fairly large quantity of ubiquitous magazines that will serve well as barter items (mostly M14, M16, Mini-14, M1 Carbine, Glock, and Beretta M92).
How to Survive the End of the World as We Know It Page 24
