Tuesday, March 24, 2009
Creating Price-Variable Income Streams
The number one thing I think people need to do to prepare for a possible hyper-depression (=stagflation squared) is to move out of variable-rate, dollar-denominated debt as quickly as possible. You don't want an ARM or a rolling credit card balance when the prime rate jumps to 45%. Strictly speaking, it's fine to let the balances roll over right now, but make sure you can pay them off within a month if you had to. And of course the issue isn't, "Could I pay them off next month if I had to?" Rather, the issue is, "If the 'unthinkable' happens such that one of the offshoots is a 45% prime rate, in that environment would I be able to pay off all my variable rate credit card debt?"
The number two thing I think you should do is get your hands on (ideally) a few months' worth of income (at today's prices) for an austerity budget, in physical gold and silver. So for example, if your drop-dead monthly expenses right now are $5000, then ideally you would want $15,000 in actual gold and silver--and if we're really going to be specific, I think you want them embedded in old US coins, so that they will be very identifiable to many Americans.
The number three thing is to get the wheels in motion on income streams that will at least rise with general prices. For me, that vehicle is a book contract. The way my royalty contracts are structured, I get a percentage of the retail price. So if CPI goes up by 50% over the next two years--something I consider entirely possible, though I wouldn't yet commit to "likely"--at least my stream of royalties will rise too. It won't keep me whole, of course, since only the lucky recipients at the foot of Bernanke's printing press will be the real winners. But it's a lot better than having a salaried job where, at best, I can ask for a cost-of-living raise every 12 months.
If you have a bunch of spare cash, a possibility is buying low-frills housing or office space to rent out. Now maybe real estate per se is risky for obvious reasons right now, but you get the point: If at all possible, you want streams of income that will automatically rise with the fall of the dollar's purchasing power.
I don't know what other options exist, but there have to be tons of them. One of my former students used to make a decent amount of money cruising around looking at garage sales for stuff to sell on e-Bay. Now there, it's not as obvious, since presumably the person running the garage sale would increase the price of the stuff too. But even so, the point is that as an entrepreneur, you can increase your "markup" very flexibly. So whatever margin worked under the old price relations, could also be inflated in the new regime.
Ultimately, you do not want to be relying on a corporate salary--let alone bond payments and Social Security checks--if and when large price inflation hits.
The number two thing I think you should do is get your hands on (ideally) a few months' worth of income (at today's prices) for an austerity budget, in physical gold and silver. So for example, if your drop-dead monthly expenses right now are $5000, then ideally you would want $15,000 in actual gold and silver--and if we're really going to be specific, I think you want them embedded in old US coins, so that they will be very identifiable to many Americans.
The number three thing is to get the wheels in motion on income streams that will at least rise with general prices. For me, that vehicle is a book contract. The way my royalty contracts are structured, I get a percentage of the retail price. So if CPI goes up by 50% over the next two years--something I consider entirely possible, though I wouldn't yet commit to "likely"--at least my stream of royalties will rise too. It won't keep me whole, of course, since only the lucky recipients at the foot of Bernanke's printing press will be the real winners. But it's a lot better than having a salaried job where, at best, I can ask for a cost-of-living raise every 12 months.
If you have a bunch of spare cash, a possibility is buying low-frills housing or office space to rent out. Now maybe real estate per se is risky for obvious reasons right now, but you get the point: If at all possible, you want streams of income that will automatically rise with the fall of the dollar's purchasing power.
I don't know what other options exist, but there have to be tons of them. One of my former students used to make a decent amount of money cruising around looking at garage sales for stuff to sell on e-Bay. Now there, it's not as obvious, since presumably the person running the garage sale would increase the price of the stuff too. But even so, the point is that as an entrepreneur, you can increase your "markup" very flexibly. So whatever margin worked under the old price relations, could also be inflated in the new regime.
Ultimately, you do not want to be relying on a corporate salary--let alone bond payments and Social Security checks--if and when large price inflation hits.
Comments:
Per your naming contest a while back I stumbled across a really good term for the coming era: Depressflation.
Alas Dick Morris(of all people) came up with the term in a really insightful and somewhat Austrian friendly analysis last November.
http://www.realclearpolitics.com/articles/2008/11/the_real_threat_to_our_economy.html
Enjoy!
Alas Dick Morris(of all people) came up with the term in a really insightful and somewhat Austrian friendly analysis last November.
http://www.realclearpolitics.com/articles/2008/11/the_real_threat_to_our_economy.html
Enjoy!
you say tons of choices ... could u list few more ? this sh*t is scary, $ goes down but we still have depression ???
# posted by 
: March 25, 2009 at 3:03 AM
: March 25, 2009 at 3:03 AM
I didn't like the idea of selling stuff into ebay, opportunity cost seemed too high. I've sold stuff to those who sell on eBay, not much margin there. With consumer spending supposedly dropping, along with prices, keeping some junk or making a living selling the junk didn't seem like a good idea.
Gary North's idea of starting small with a school, taught by a man, made a lot of sense to me.
Being cash flow positive with real estate... not so sure about that either, per HBB. But lots of guys do it and talk it up, fine landlords who may be shocked to see a 9% YOY decrease in their competitors asking price, not to mention gov. revenue increases.
There are lists of "bad banks." Are there lists of good banks? Can a person start and own their own bank & trust? Is that a good idea?
I hope someone comes up with an idea to replace the problem dog owners have when they walk their dogs in certain cities. Talk about the ultimate unattractive accessory, esp on a woman.
Find a problem you have. Solve it. Perhaps millions of others with the same problem will pay for it.
That gets the juices flowing, then red tape creep begins and waters down a persons flame. I always thought the city administrators & the IRS was a big obstacle. Now Im learning the FTC is a bigger one. - So of course find ways around that problem.
My downtown has the same look as it did 25yrs ago, I always wondered why. Some businesses moved in recently and added new looks, I liked it more, the city responded by saying conform back to our vision of how the downtown should look. That is when I realized my US town was not any different from the PBS documentary town in China with The Party beauracrat telling the store owner, “If anything happens to that tree you’ll be in a lot of trouble. Water it now.”
Convince my state’s govenor not to spend part of his billion dollar stimulus plan on revamping the sewer system in my city and instead use less money and install something cheaper & better. Those incinerator toilets for one.
Convince the stimulus crazed govenors to subsidise those new flying cars so we can afford them rather than build new roads or repair roads that should just remain full of potholes because they reoccur every winter & spring. [‘Cause they ain’t gonna listen to the idea that we could afford them if they didn’t go around throwing money into the wind].
Adjustable auto window tinting for traveling state to state.
Bars as churches to get around smoking bans.
I intended to only write one idea and I’ve gone and brainstormed a whole list. Not the best list, but work off it.
I saw a guy use a pickup truck bed toolbox for a coffee table to hold ammo. A nicer one might sell, one that a wife wouldn‘t go, “eeww“ over.
One LRC guy hates Walmart a lot, alternatives to walmart could be good, the dollar stores seem to be doing well. One that does not point a camera at your every move would get me in. Me, I miss Sam Walton’s made in the USA products, remember when walmart did that? No robo-cops at the door either.
I could use a battery powered mini-microwave or single burner.
If the Dollar crashed and or we didn’t get stuff from China anymore that would open the door wide open to doing & making a whole world of stuff we need, like clothes & shoes. Perhaps this is good timing to learn to be a shoemaker?
I keep hearing Sean Corrigan in the background saying something about price shocks in the supply chain suprising producers and destroying profits & sales. Haven’t seen his name on an article in a long time.
The makers of false teeth were looking for help for the longest time in my town.
I could use an asian ladybug attractor to kill them indoors.
A dust buster type thingy that kills the bugs once they have been sucked up. One that makes some kind of reassuring sound signaling death of the bug.
Security in exchange for barter. Someone to call after they dialed 911.
Any method that does what the government does in a way that the government cannot claim you are competing with them. The personal fire-safety-put’er-out’er club. HAHA. They would never let you.
We have a lady in my town who threatened to put up a hog farm in the outskirts of the city unless the city caved and gave her a permit to build an upscale condo in a city that could not support one. Start a push in your city to allow livestock in the city and reclaim empty condos for hog lots? Hogs might do well in condos. Probably not a good idea as you need at least 40,000 head of hogs just to compete in that market, or so I’ve heard.
Grow lab mice & rats? I knew someone who did well raising & selling rabbits for labs. Rabbits might do well in condos & they don’t bark.
I better stop.
Gary North's idea of starting small with a school, taught by a man, made a lot of sense to me.
Being cash flow positive with real estate... not so sure about that either, per HBB. But lots of guys do it and talk it up, fine landlords who may be shocked to see a 9% YOY decrease in their competitors asking price, not to mention gov. revenue increases.
There are lists of "bad banks." Are there lists of good banks? Can a person start and own their own bank & trust? Is that a good idea?
I hope someone comes up with an idea to replace the problem dog owners have when they walk their dogs in certain cities. Talk about the ultimate unattractive accessory, esp on a woman.
Find a problem you have. Solve it. Perhaps millions of others with the same problem will pay for it.
That gets the juices flowing, then red tape creep begins and waters down a persons flame. I always thought the city administrators & the IRS was a big obstacle. Now Im learning the FTC is a bigger one. - So of course find ways around that problem.
My downtown has the same look as it did 25yrs ago, I always wondered why. Some businesses moved in recently and added new looks, I liked it more, the city responded by saying conform back to our vision of how the downtown should look. That is when I realized my US town was not any different from the PBS documentary town in China with The Party beauracrat telling the store owner, “If anything happens to that tree you’ll be in a lot of trouble. Water it now.”
Convince my state’s govenor not to spend part of his billion dollar stimulus plan on revamping the sewer system in my city and instead use less money and install something cheaper & better. Those incinerator toilets for one.
Convince the stimulus crazed govenors to subsidise those new flying cars so we can afford them rather than build new roads or repair roads that should just remain full of potholes because they reoccur every winter & spring. [‘Cause they ain’t gonna listen to the idea that we could afford them if they didn’t go around throwing money into the wind].
Adjustable auto window tinting for traveling state to state.
Bars as churches to get around smoking bans.
I intended to only write one idea and I’ve gone and brainstormed a whole list. Not the best list, but work off it.
I saw a guy use a pickup truck bed toolbox for a coffee table to hold ammo. A nicer one might sell, one that a wife wouldn‘t go, “eeww“ over.
One LRC guy hates Walmart a lot, alternatives to walmart could be good, the dollar stores seem to be doing well. One that does not point a camera at your every move would get me in. Me, I miss Sam Walton’s made in the USA products, remember when walmart did that? No robo-cops at the door either.
I could use a battery powered mini-microwave or single burner.
If the Dollar crashed and or we didn’t get stuff from China anymore that would open the door wide open to doing & making a whole world of stuff we need, like clothes & shoes. Perhaps this is good timing to learn to be a shoemaker?
I keep hearing Sean Corrigan in the background saying something about price shocks in the supply chain suprising producers and destroying profits & sales. Haven’t seen his name on an article in a long time.
The makers of false teeth were looking for help for the longest time in my town.
I could use an asian ladybug attractor to kill them indoors.
A dust buster type thingy that kills the bugs once they have been sucked up. One that makes some kind of reassuring sound signaling death of the bug.
Security in exchange for barter. Someone to call after they dialed 911.
Any method that does what the government does in a way that the government cannot claim you are competing with them. The personal fire-safety-put’er-out’er club. HAHA. They would never let you.
We have a lady in my town who threatened to put up a hog farm in the outskirts of the city unless the city caved and gave her a permit to build an upscale condo in a city that could not support one. Start a push in your city to allow livestock in the city and reclaim empty condos for hog lots? Hogs might do well in condos. Probably not a good idea as you need at least 40,000 head of hogs just to compete in that market, or so I’ve heard.
Grow lab mice & rats? I knew someone who did well raising & selling rabbits for labs. Rabbits might do well in condos & they don’t bark.
I better stop.
All future profit is already factored into the sale price of most goods and potential investments in a declining economy. Without a correction being allowed to take place there is nothing worth investing into, or so it seems. This idea is supported by the likes of the Apple stock price chart in this article THE RALLY OF FALSE HOPES by Ghassan Abdallah, Ph.D.
http://financialsense.com/editorials/abdallah/2009/0324.html
And… if a great many people follow the advice in the article, WHEN AMERICA RULED THE WORLD by James Quinn, http://financialsense.com/editorials/quinn/2009/0324.html
sellers and producers might have a tough going of it for a short (but worthwhile?) time.
Under a government which imprisons any unjustly, the true place for a just man is also a prison.
Henry David Thoreau
http://financialsense.com/editorials/abdallah/2009/0324.html
And… if a great many people follow the advice in the article, WHEN AMERICA RULED THE WORLD by James Quinn, http://financialsense.com/editorials/quinn/2009/0324.html
sellers and producers might have a tough going of it for a short (but worthwhile?) time.
Under a government which imprisons any unjustly, the true place for a just man is also a prison.
Henry David Thoreau
On LRC I read more along this line of thinking:
The Coming Destruction of Wal-Mart
Posted by Bill Anderson at March 25, 2009 06:56 AM
The main corporate entity in the crossfire of the Left is not Wall Street, but rather a Main Street entity, Wal-Mart. The morning of Obama's electoral victory, I made a number of predictions on this page, and the smashing of Wal-Mart by the Obama administration was one of them.
The beginning of that day has arrived. The EEOC pretty much has called for the company to have hundreds of millions if not billions of dollars confiscated from it, and this only is the beginning. In fact, any company that still is profitable pretty much is going to be toast, as the government will go after these few firms with ruinous taxation, regulations, and a general hate campaign.
For all the talk of "stimulus" and "recovery," the last thing Obama wants is a real recovery. The government is piling on regulations and making threats, which means no one -- and I mean no one -- will be willing to make long-term investments.
This government is looking to create a huge currency crisis, and then it will build a virtual Berlin Wall around our borders to stop any American who wants to leave, or it at least will confiscate the property of any American trying to flee this country.
In my November 4, 2008, comments, I ended with the following:
We are like the Cambodians who hopefully greeted the conquering Khmer Rouge with flowers and cheers. The same day those soldiers came into the capital city, they began their campaign or murder, terror, and forcing people into the countryside, where a quarter of the population died. We hope that the new people in power will be gentle, but I believe that the groups that now control the Democratic Party are so anti-liberty (except for promoting unlimited abortions) that they are just one step above the Khmer Rouge.
To re-phrase Sir Edward Grey, the lamps are going out all over the USA, and they will not be lit in my lifetime or the lifetime of anyone else.
That pretty much sums up the order of the day. We have a free market-hating president and a Congress that would make the Supreme Soviet proud. This time, they are determined not to stop until every vestige of freedom and free markets is gone.
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The Coming Destruction of Wal-Mart
Posted by Bill Anderson at March 25, 2009 06:56 AM
The main corporate entity in the crossfire of the Left is not Wall Street, but rather a Main Street entity, Wal-Mart. The morning of Obama's electoral victory, I made a number of predictions on this page, and the smashing of Wal-Mart by the Obama administration was one of them.
The beginning of that day has arrived. The EEOC pretty much has called for the company to have hundreds of millions if not billions of dollars confiscated from it, and this only is the beginning. In fact, any company that still is profitable pretty much is going to be toast, as the government will go after these few firms with ruinous taxation, regulations, and a general hate campaign.
For all the talk of "stimulus" and "recovery," the last thing Obama wants is a real recovery. The government is piling on regulations and making threats, which means no one -- and I mean no one -- will be willing to make long-term investments.
This government is looking to create a huge currency crisis, and then it will build a virtual Berlin Wall around our borders to stop any American who wants to leave, or it at least will confiscate the property of any American trying to flee this country.
In my November 4, 2008, comments, I ended with the following:
We are like the Cambodians who hopefully greeted the conquering Khmer Rouge with flowers and cheers. The same day those soldiers came into the capital city, they began their campaign or murder, terror, and forcing people into the countryside, where a quarter of the population died. We hope that the new people in power will be gentle, but I believe that the groups that now control the Democratic Party are so anti-liberty (except for promoting unlimited abortions) that they are just one step above the Khmer Rouge.
To re-phrase Sir Edward Grey, the lamps are going out all over the USA, and they will not be lit in my lifetime or the lifetime of anyone else.
That pretty much sums up the order of the day. We have a free market-hating president and a Congress that would make the Supreme Soviet proud. This time, they are determined not to stop until every vestige of freedom and free markets is gone.
# posted by : March 25, 2009 at 3:10 PM
: March 25, 2009 at 3:10 PM Subscribe to Post Comments [Atom]
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