Lately there are a lot of people asking about safety. Although that is something everyone should consider, it seems to be a more pressing concern in the past few months. There’s nothing new that should have people worried but it takes a different trigger for everyone. Sure, federal spending is out of control but that’s been going on for 40 years. China and Russia are flexing military muscle but those two countries have always tried to exert dominance.
A few days ago, Joe Biden delivered an address to a joint session of congress. That in itself is not very interesting to me but for some reason, the traffic on my website skyrocketed for 24 hours following the speech. Nothing else remarkable was happening so that’s the only thing we could figure out. I’ve watched stats and ad performance for years so I can tell when something is different. It wasn’t a small difference; this was way different!
Like it or not the federal government is probably going to keep spending money and lots of it. There are real talks about trimming social security benefits and tax increases are on the table, although they promise it will only affect the very wealthiest people. We can believe them, right? It’s all for our benefit, I’m sure.
Some of you may have heard the saying “beans and bullets”. It’s popular in the prepping and survival community as a phrase that suggests the importance of only the absolute necessities. All you need is something to eat and a way to protect it. Don’t worry, this isn’t going to be a lecture on prepping. You’re either into that or you’re not. I’m somewhere in the middle only because of how I was raised and the hobbies I pursue.
The difference between financial survival and physical survival is only a matter of perspective. In either case it’s nothing more than being prepared for the worst case scenario. I grew up in a Mormon family so we had staple foods stored on the shelves in our garage. My friends used to make fun of me for it but all that kind of made sense a year ago when people were fighting over toilet paper as Costco. And then that tanker got stuck in the Suez Canal and people are wondering why it’s hard to source some basic material that we all used to take for granted.
For years those who have prepared for the worst case scenario have been called crazy. With the insanity of the world that surrounds us I think it’s crazier to not be prepared. It makes no difference whether we’re talking about personal finances or basic living necessities.
Right now we have a stock market that seems to hit a new high every other day. Many are bummed out by the low interest rates but that’s one of the fundamental reasons why values are so high in equities markets. Cheap money for business expansion and real estate keeps a consumption-based economy hungry for more growth. Thanksgiving expands your stomach so you keep eating all the way through Christmas and New Year’s Day.
Excessive government spending and increasing deficits cause serious inflation, or so it should. You won’t get a straight answer from federal agencies as to exactly what that number is. The Consumer Price Index has never been above 2.5% annually in any of the past ten years but I think most of us would agree that it’s much higher in reality. I have never believed in the accuracy of numbers from the CPI.
Over the past 20 years there have been three periods of extreme exuberance in the economy and stock market alike. First was the Dot Com Bubble in 2001 and then the Banking Crisis of 2008. We don’t have a name for what’s happening now because it hasn’t happened yet. For some reason this one seems a bit more ominous to me. It kind of feels like coming home from a long vacation to find your front door wide open. Everything looks fine but you’re going to enter that house with a little bit of caution.
Yes, inflation may be on it’s way and just maybe the central bankers will finally be honest about it. The two best hedges for inflation are stocks and real estate. But 100% risk is never a good idea because nothing is guaranteed. What follows inflation is another concern and that’s deflation. The best hedge against deflation is cash-based assets. Annuities don’t always win in the short run but in the long run will prove their worth.
If you miss out on some yield now you’ll make it up on the back end. All the while you’ll be set up with what you need so you don’t have to worry about the short-term ups and downs. It makes more sense now than it ever has.
Beans and bullets… and annuities.