Reality Check Q&A, #3
Sept. 18, 2009
I am answering these in the order in which I received them.
BUSINESS START-UP
Age: 58 yrs old
Location: Kennett, Missouri 63957
Income: retired on Social Security Disability after a stroke on '01
#1 Goal: leave a lasting economic legacy thru online business income
Deadline: 01/01/2011I have little resources and am currently pursuing the "internet marketing thing", What is my best path to follow?
Your situation is dire, as you know. A stroke sets back anyone. I do not want to minimize your situation. I am impressed that you want to become productive.
Your first step is to identify what group of potential buyers of your services are willing and able to pay for these services on-line. This is no easy task. Finding the mesh between what you can deliver and what people are willing and able to pay for is the central problem for every business.
Second, you must check with Social Security to see if you will lose your monthly income if you re-enter the labor market. Get this in writing.
Third, you should understand how long it will probably take you to become self-supporting through Internet marketing. If you have no marketing skills, probably not before you go on full-time Social Security. But if you are a fast learner, figure a year to get the skills and three years to build the business.
Here are places to begin getting the training you need: www.wilsonweb.com, www.sitesell.com, and www.bmyers.com.
GOLD SHARES
I hold gold and gold stocks. Should I be holding them (or something else?) outside the U.S.? If so, how should I do that?Background:
Our California house is our only illiquid asset, worth $750K, mortgage $200K (5% fixed, 10 years to go).
We are both information workers, so we can work anywhere, though her business is mostly local and would take a bit of effort to start up again elsewhere. Mine is completely virtual (web developer).
We are in our mid 50's and do not intend to retire for at least ten years. We've saved a lot, but are not yet to a retirement level of savings.
My wife will always be welcome in her native New Zealand, so we have a place to run to if chaos descends on the U.S.
#1 Goal: ride out the economic storms of the next couple decades with minimal stress. (I know--lame and completely visionless. But it's what I think about most.)
Check with a lawyer in the U.S. and a lawyer in New Zealand. It would be wise for your wife to hold the assets in an entity set up in New Zealand. If you decide to go there, it's her money located off shore. If the U.S. government ever attempts to impose currency controls, your money will be beyond the controls.
Second, start a Web-based business that can be run out of New Zealand. Have her own it.
Third, treat her really well.
RETIREMENT FUNDS
Age: 32
Location: Jackson, MS
Occupation: Sr. Software Engineer for Defense Contractor
Retirement Date: None planned
#1 goal in life: To figure out what my #1 goal in life is
Deadline date: TBDI have approx $120k in my company 401k, which I can't roll over until I leave the company. What combo of international/domestic stocks/bonds/cash equivalents should I have for the next few years?
First, this assumes that you have 100% control over your 401(k). You are not limited in any way as to the asset mix. I'll bet you don't. I'll bet they make you put it in nice conventional investments that will keep them out of court when you retire broke. "We adhered to standards imposed by the investment community." "Case dismissed."
In such a situation, you should look for an Asian stock fund. If that isn't available, then an American stock fund. Shoot the whole deal on stocks, unless there is a commodity fund. Don't trust bonds. The dollar will fall too far. Buy bonds only when you are sure we are facing a depression because the FED has created 20% inflation and has finally ceased buying government debt.
Second, figure out what you want to do when you grow up.
Third, start funding that long-term goal, whether it is business-related or geographical.
SPILT MILK
My question is in regards to AIG.Although the name would imply this is an "American" company. AIG is domiciled in Ireland and incorporated in Bermuda.
So we, the taxpayers; essentially bailed out a company that does not pay taxes in the U.S.
Could you please explain this?
AIG owed billions to Goldman Sachs and other financial institutions. Its default threatened to take them all down. The Secretary of the Treasury, a former Goldman Sachs CEO, did not want this to happen.
SILVER
I began purchasing some silver this summer, and have about 120 ounces so far. I was wondering, given the recent increase in the price of gold and silver, if you would recommend purchasing more silver, and perhaps gold(?) or waiting to see if this upswing is just a temporary thing and purchasing when (if) it drops again?
Don't buy any more silver. Buy gold coins or a gold fund like GTU (Central Gold Trust), which stores gold.
ADVISING CLIENTS
As a financial adviser, I read you and Harry Dent among others. How should I counsel my clients through the next several years (months)?
Since Dent and I always disagree on everything, divide your clients into the North group and the Dent group. Expect to lose all or half of them.
You should tell them to get out of assets related to the United States, other than dollars in short-term funds, and buy Asian shares, a commodity fund, and Asian currencies.
Over the next few months, be more defensive: Asian currencies and dollars. I expect a W recession. I think the commercial real estate market is a looming disaster. I think banks will remain on the sidelines. I expect higher unemployment.
The problem with equities anywhere is the second recession, comparable to Reagan's 1981 recession following Carter's 1980 recession.
COLLAPSE
In the event of total economic collapse, would you expect fractional gold coins or junk silver coins be the most useful?
Neither will be useful. Rural property with a hand-pumped well will be useful. Stored food will be useful. This is what Franklin Sanders owns in rural Tennessee. He sells gold and silver coins for a living: the Moneychanger.
Where will you sell your coins? At one of a handful of coin stores? Will they still be in business? If so, then it won't be a collapse.
But American eagle gold coins are better than anything else in the rebuilding phase after a collapse, of you are still alive.
Think of a collapse in terms of trucks supplying goods to your city. Why will they come? For money? How will there be money in a collapse?
If you mean mass inflation, then buy gold coins and food. If you mean hyperinflation, but rural property and food, with a few coins. If you mean deflationary depression after inflation, rural property and food will help. Sell your gold coins for currency the week before the deflationary crisis begins.