The specific answers as to how to de-link will depend on each person’s individual situation. Should you buy gold bars, gold stocks, or silver, or platinum, or copper? Every form of de-linking has multiple variations. Should you buy rent houses, strip centers, raw land, stocks that hold real estate? Clearly sorting this out is a challenge, one we are prepared to sort out. Throughout these pages we will examine a number of De-linking strategies as well as asset protection strategies to protect your wealth from the ravages of inflation, market collapse and confiscation from creditors.
The de-linkng strategies fall into to a handful of categories: Real estate, commodities, private investments, and life insurance.
How is it that the stock market continues to float a lofty levels with all the threats we are facing? The national debt is enormous, the GDP is growing at a lethargic pace. we have tension with Russia, a nut is running a nuclear North Korea, and the Middle East is in chaos. The reason the market seems to ignore bad news is two fold in my estimation: 1. Money is pouring into stocks from the $billions of 401(k) contributions each pay period and 2. There simply is no other vehicle with the promise of returns. CD’s are not an option, bonds pay slightly more. How long can this last?
I still believe in America, although I do not trust the government. I believe in Amazon.com, Dell, Home Depot, Sams and many great companies. I am convinced that they will continue to grow, open new stores and increase revenues. The problem is the value of their stocks can move dramatically in a matter of hours without regard to the underlying reality of these company’s fundamentals. If you are close to or in retirement, a major crash will affect all companies, good and bad and this will affect your lifestyle. others.
Regarding stocks, if company x opens at $40 per share and goes to $41 by lunch, has the value of the company really changed in a few hours? Of course not. The humans who are buying and selling that stock are controlling the price based on their collective behavior which has nothing to do with the company itself or its prospects for the future. This is why a 20% drop on the market or a 50% drop is very possible and has happened many times in the past, with or without regard to the underlying value of the companies whose stock prices plummeted. The buy and hold crowd says if you buy quality and hold, eventually you will recover from whatever correction (a nice way of wording the process of getting clobbered). Well what if the market does not come back during my lifetime? Sure my grand-kids will be fine. Case in point: plenty of Japanese investors who invested from 1986 to 1990 are STILL UNDER WATER – that is 30 years of zero % return. So what do my comrades mean by eventually? This philosophy is either motivated by commissions, fees, or ignorance – or maybe a combination. At the other end of the spectrum are the doomsayers. In my thirty years, I have continually heard the market is too high or you'd better get out while you can. When I started the Dow was at 2000 and my whole office just sat at their desks shaking their heads. Surely the market can’t go above 2000, son you better find another job.
Well I didn’t have enough sense to find another job and today the market is over 19,000. So what is the answer? If both the buy and holders and the doomsayers are both wrong, what is one to do? No one knows the future, but most people are nervous and rightfully so. The answer is to de-link some or all of your assets. The market dropped 38% in 2008. If you had the bad luck of retiring then, you may have had to spend principal to pay bills and miss out on some of the rebound. We are facing the possibility or probability of a major financial earthquake with the markets, the dollar, the banks, or some of each
Contact David Disraeli at 512-464-1110 or david@pcfo.net for a free consultation.