GP Academy Letter 250916: Time To Get Off The Nitro Train?

As I’m sure you each do, I have my own list of forward thinking individuals whose insights I follow and appreciate. They include Catherine Fitts, Martin Armstrong, Ed Dowd, Melanie Wright and various financial experts featured on the excellent podcast hosted by Daniela Carbone.

Rather than summarize what they each have to say, I’ll share my own thoughts as to how their insights merge.

First, capital markets are stretched to the upside to a degree never before seen, not even prior to the Great Financial Crisis (GFC) of 2008. U.S. equity markets are still going vertical with no indication from monthly or weekly chart candlesticks of a breakdown in upside momentum. Not yet.

Which means there is still money to be made chasing this bottle rocket higher. But when it reverses, it’s going to be spectacular. Just not for the millions of folks with 401ks and IRAs who will have no idea what to do to preserve their nest eggs. I’m saying a prayer for them already.

The residential housing market has started to turn over and is already creaking lower in TX, FL and elsewhere. Remember that the deep collapse in residential equity that began in 2005 preceded the GFC by several years the last time around. We can probably look forward to a repeat performance. Popcorn at the ready.

As the current recession deepens we could see the Fed make a series of small rate cuts in a desperate effort to throw real estate a life preserver. But demographics don’t line up with that effort.

Millions of aging Boomers are currently departing life’s stage each year, and these are the folks who own the majority of nice, and now expensive homes across America that they bought decades ago for a song.

Their surviving (and grieving) spouses typically can’t (or don’t want to) handle these properties all alone, and their kids can’t afford them.

So they go on the market… and sit there… hoping for a bid. One of these days reality will sink in and the kids who continue to pay property taxes, maintenance and insurance will capitulate to reality and accept whatever they can get.

Add to this the glut of multifamily housing created under Comrade Bidenksi to house millions of subsidized illegal aliens who are now being escorted back home (hasta la vista!), leaving millions of overpriced and increasingly unoccupied units looking for some love.

The setup? A huge market imbalance with tons of supply and nowhere near enough demand due to escalating consumer costs, entry level jobs falling to AI, and the relative lack of purchasing power of the younger, first-time-buyer crowd.

The outcome? Years of downward pressure on residential housing as prices revert to the mean.

Which is great news for anyone with both cash and patience. Not such great news for those over-leveraged out in the burbs, surrounded by lawns and SUVs.

Back in the Swamp, Uncle Sam is still in early innings of the Big End Game which is to geofence taxpaying Americans into a digital cattle pen, first with the Real ID then with magical crypto money.

The launch of stable coins by money center banks as programmable proxies for the “dollar” will create billions of new customers around the world who will be able to transact and borrow in dollars on their smart phones.

Since there is no real money in circulation, just credit, and since each new loan creates new money, a digital dollar as global reserve currency can be stretched out far into the future, with what should be purely domestic inflation pawned off onto the entire world to act as a sponge and soak it all up.

Pretty smooth move there on the part of Uncle. I’m sure it has nothing to do with why Bitcoin was created by the CIA. Of course not…

And the solutions? I’ve written and discussed this endlessly to the point where I’ve become my own echo chamber. But what the heck…

The answer is to make the decision that most will not be able to make due to hope, indecision, denial and other manifestations of fear.

Get off the train now. The car behind you is loaded with nitroglycerin. One BIG bump… or maybe the track just runs out… you get the idea.

Quietly, purposefully, start moving out of dollar investments into hard assets. Get out of debt to the extent possible. If you’ve still got a mortgage but are sitting on a nice bump in equity, sell, pay it off and downsize.

Move beyond the burbs where cows and chickens are allowed and use excess proceeds to hedge the future (again, gold, other hard assets).

Gold and silver have vastly outperformed the U.S. stock market over the past decade. But if you insist on investing in stocks (and why?), be sure to get the original stock certificates from your broker so The Great Taking doesn’t do to you what the Borg tried to do to Captain Picard. If your broker refuses, get a different broker.

Finally, stock up on at least one year’s worth of food, supplements, medicines, household goods, shotgun shells, other necessities. Spread your purchases out over time and at various locations, use cash only, and store it in places that your neighbors, family and closest friends know nothing about.

A friend living in a nicely appointed apartment bought 30-year dehydrated emergency food, packed it into eight identical storage tubs, lined them up 2×4, threw a mattress over them and covered it all with an oversized quilt that touches the floor.

Did the same thing in his guest bedroom. Visitors sleep on top of long term food security every night, and have no idea. Pleasant dreams!

And don’t forget rare coins. The nice thing here is, lots of value in a very small space. Wrap them individually in a baggie, put them in the bottom of a plant pot, cover them with dirt and place them on windowsills all around your home. Then tell your plants each day how much you love them.

BTW, my 1991 copy of “The DEA Stash Manual” by Paladin Press says to forget taping anything to the underside of the toilet tank lid or sticking it in the freezer wrapped in aluminum foil. That’s were burglars always look first.

But no one looks in a geranium.