Tag Archives: stocks

Don’t Miss Your Opportunity To Prepare For A Dollar Crisis (Video)

By Samuel Bryan Dr. Ron Paul hosted Peter Schiff on his Liberty Report this week. They discussed the failures of the Federal Reserve and how its policies have subsidized an irresponsible federal government. While the long-term effects are going to be disastrous for the U.S., Americans still have a chance to protect themselves from an inevitable currency crisis. If they prepare wisely, they may even profit from the coming collapse. “I do believe this window of opportunity will be rapidly closing. People need to act quickly to get out of U.S. dollars, to accumulate foreign assets in places like Switzerland or Singapore or New Zealand, to buy some gold , buy some mining stocks. Do that before the bottom really drops out of the dollar, when everybody else finally wakes up to the reality, instead of the fantasy world they’ve been living in…” Highlights from the interview: Peter: I’m surprised [this dollar crisis] hasn’t happened already. But I think it’s because the rest of the world has just been so brainwashed by the mainstream media, by the central bankers, by Wall Street, that they just haven’t figured out the problems that the Federal Reserve has created over the last seven years, with three rounds of quantitative easing and zero-percent interest rates. I think the U.S. economy is poised on a much bigger cliff than the one we went over in 2008. You and I know it was the Federal Reserve that laid the foundation for that crisis. Now, with the same policies – only worse, they’ve laid the foundation for a much greater crisis… I do believe this window of opportunity will be rapidly closing. People need to act quickly to get out of U.S. dollars, to accumulate foreign assets in places like Switzerland or Singapore or New Zealand, to buy some gold, buy some mining stocks. Do that before the bottom really drops out of the dollar, when everybody else finally wakes up to the reality, instead of the fantasy world they’ve been living in… Dr. Paul: It seems like there are so few of us out there emphasizing the Fed… What’s the ultimate solution to the Fed? Peter: You’re a medical doctor. When you have a cancer, there is no superficial treatment. You’ve got to remove that cancer or the patient is going to die… We need to get to the root cause of the problems. We need major surgery… The Federal Reserve is at the heart of it, because the Federal Reserve is enabling government. It’s subsidizing it. It’s making it possible to run all these deficits. It’s propping up Wall Street. It is basically giving us the novocaine to numb the pain, so we can let the disease get worse without actually doing anything about it… Dr. Paul: Some people approach me with the question, “What should we do? Keep our money here and work it out here? Or go overseas and do some investing overseas?” Some people will even say Europe is a shaky place… What’s your answer to that? Peter: Fortunately, the world is a big place. It’s not all just U.S. and Europe. We are underweight Europe too. I am cognizant of the problems in Europe. I just think ours are even bigger… Ours are being obscured by the fact that the dollar is still the world’s reserve currency, so we get to profit by everybody else’s mistakes for now. Everybody buys dollars when they’re worried about problems, even though our problems are bigger than the ones they’re worried about in Europe. Because the dollar is overpriced, we get to buy imports cheaper. We can keep these artificially low interest rates. We get to live beyond our means. There are countries you can invest in. In Europe, there’s Switzerland… They’re not doing everything perfect, but they’re in a much better shape than the Eurozone or the U.S. We invest in places like Singapore, countries like New Zealand. Nobody is doing it perfectly. You have to figure out which countries are making the fewest mistakes, which countries have the most economic freedom, the fewest regulations, the lowest taxes, the soundest fiscal policies, the less reckless central banks. No one’s on a gold standard – it’s all fiat money. But it’s a question of degree… To hedge ourselves against all countries, we buy gold… The average investor doesn’t have anything in gold, and I think that’s completely foolish. You have to be completely ignorant as to economic history to be so complacent as to have no money in gold… Dr. Paul: In Austrian economics we’re taught that it’s harder to predict the exact timing. You and I would be convinced that we don’t know exactly what the price of gold will be tomorrow or one week from now. We do know trends. We do know that low interest rates and artificially inflating the currency has consequences. Nevertheless, I’m sure you’re asked and you have to plan for it, and I’m asked this all the time – I want to know: when it’s going to happen. There are bubbles out there, but it’s different now… Do you ever get a little more specific? Peter: You always get in trouble when you try to put a time on it. More often than not, you overestimate the ability of everyone else to figure out the problem. I obviously know we’re a lot closer to the endgame than we were a few years ago. I think there’s a lot of signs that we’re getting closer, based on the fact the Fed has backed itself into this box… I tell people you got to be early. If you’re not going to prepare early, you’re not going to prepare at all. You’re not going to finesse it perfectly. So if you’re not too early, you’re too late. You can’t afford to be too late. Currency crises come quickly. The value is lost, and it can never be retrieved…

Learning From The Past, Part 6 [Hopefully Final, But It Won’t Be…]

This is the last article in this series … for now. The advantages of the modern era… I went back through my taxes over the last eleven years through a series of PDF files and pulled out all of the remaining companies where I lost more than half of the value of what I invested, 2004-2014. Here’s the list: Avon Products (NYSE: AVP ) Avnet (NYSE: AVT ) Charlotte Russe [Formerly CHIC – Bought out by Advent International] Cimarex Energy (NYSE: XEC ) Devon Energy (NYSE: DVN ) Deerfield Triarc [formerly DFR, now merged with Commercial Industrial Finance Corp] Jones Apparel Group [formerly JNY – Bought out by Sycamore Partners] Valero Energy (NYSE: VLO ) Vishay Intertechnology (NYSE: VSH ) YRC Worldwide (NASDAQ: YRCW ) The Collapse of Leverage Take a look of the last nine of those companies. My losses all happened during the financial crisis. Here I was, writing for RealMoney.com, starting this blog, focused on risk control, and talking often about rising financial leverage and overvalued housing. Well, goes to show you that I needed to take more of my own medicine. Doctor David, heal yourself? Sigh. My portfolios typically hold 30-40 stocks. You think you’ve screened out every weak balance sheet or too much operating leverage, but a few slip through… I mean, over the last 15 years running this strategy, I’ve owned over 200 stocks. The really bad collapses happen when there is too much debt and operations fall apart – Deerfield Triarc was the worst of the bunch. Too much debt and assets with poor quality and/or repayment terms that could be adjusted in a negative way. YRC Worldwide – collapsing freight rates into a slowing economy with too much debt. (An investment is not safe if it has already fallen 80%.) Energy prices fell at the same time as the economy slowed, and as debt came under pressure – thus the problems with Cimarex, Devon, and to a lesser extent Valero. Apparel concepts are fickle for women. Charlotte Russe and Jones Apparel executed badly in a bad stock market environment. That leaves Avnet and Vishay – too much debt, and falling business prospect along with the rest of the tech sector. Double trouble. Really messed up badly on each one of them, not realizing that a weak market environment reveals weaknesses in companies that would go unnoticed in good or moderate times. As such, if you are worried about a crushing market environment in the future, you will need to stress-test to a much higher degree than looking at financial leverage only. Look for companies where the pricing of the product or service can reprice down – commodity prices, things that people really don’t need in the short run, intermediate goods where purchases can be delayed for a while, and any place where high fixed investment needs strong volumes to keep costs per unit low. One final note – Avon calling! Ding-dong. This was a 2015 issue. Really felt that management would see the writing on the wall, and change its overall strategy. What seemed to have stopped falling had only caught its breath for the next dive. Again, an investment is not safe if it has already fallen 80%. There is something to remembering rule number 1 – Don’t lose money. And rule 2 reminds us – Don’t forget rule number 1. That said, I have some things to say on the positive side of all of this. The Bright Side A) I did have a diversified portfolio – I still do, and I had companies that did not do badly as well as the minority of big losers. I also had a decent amount of cash, no debt, and other investments that were not doing so badly. B) I used the tax losses to allow a greater degree of flexibility in investing. I don’t pay too much attention to tax consequences, but all concerns over taking gains went away until 2011. C) I reinvested in better companies, and made the losses back in reasonably short order, once again getting to pay some taxes in the process by 2011. Important to note: losses did not make me give up. I came back with vigor. D) I learned valuable lessons in the process, which you now get to absorb for free. We call it market tuition, but it is a lot cheaper to learn from the mistakes of others. Thus in closing – don’t give up. There will be losses. You will make mistakes, and you might kick yourself. Kick yourself a little, but only a little – it drives the lessons home, and then get up and try again, doing better. Full disclosure: Long VLO – made those losses back and then some.