Much More Than 24k Wealth

And currency controls around the world.

Like most sequels, the one we are now participating in is worse than the first.

Expect more currency controls everywhere. Soon. Piece by piece, ever tightening, until it's too late. If you have to leave, you waited too long.

A little bit of portable wealth protection might be in order. 24K jewelry is not an investment per se, but in frightening circumstances it can be a great form of insurance. In much of the world 24k jewelery is a preferred way to retain liquid wealth. But don't mistake it for just bullion; this is elegant jewelry: Click the solid gold necklace.

Back to the 1980s story.

A fine fatherly fellow from a civilized country with currency controls wanted to buy a commercial property. According to him, he had to start with half a million dollars, and by the time the red tape was done, he was able to get $200,000 of it to the USA. That was better than watching all of it disappear as his government engaged in what we now call quantitative easing, high taxes, and stimulus -- then it was printing money and high taxes -- always it has been creating inflation by diluting the monetary soup with dirty wash water. His money was loosing value faster than his government could steal it with fees for taking it out. The USA was more stable then.

Even if you have to pay an exit tax, how long will it take you to re-earn what you lose in a low or no-tax country with an open and growing economy? Look ahead, are unreasonable regulations, taxes, and unjust laws increasing where you are? How long will it take you to lose everything? Go play someplace where the rules are fair. My commercial real estate client had.

I should look him up, I wonder if he's moved again. Countries change constantly, in a year all that remains of your current country may be the name -- and the requirement that you worship it.

The Romans diluted their money by using less and less gold in their coins, until they were slugs with an emperor's face. Modern countries have done it by forsaking gold for paper, and once paper is worthless, a new currency will become all digital. Then it will end. Just like Rome.

Now almost the whole world (it should read hole world) is in a race to see who can buy an extension of their leaders' reign by throwing increasingly valueless currencies at give-away projects. Like making a minimum credit card payment, with payday advances, so you can quit your job. Trust me on this. It won't work.

Rather an ambitious goal, freedom. To be free you must own yourself.

All of society is drunk with excess credit. Why should you step away from the punch bowl?

That is a good question. Is there a time to expand credit, and a time to contract? When governments, businesses, and most people are looking to loan or borrow more why would anyone seek to escape the crowd?

Why should you?

I'll state just one of many compelling reasons before we look at an eight step plan to escape. Yes, let's escape from this teetering, tottering, house of cards.

The Business Week cover story of August 13th, 1979 proclaimed "Death of Equities." Everyone knew that commodity futures, gold, diamonds, and real things were the only protection from inflation. With the Dow Jones stuck under 900, it could only go lower, even pension funds were deserting stocks for "things." Financial assets were dead. Of course this was close to the bottom for stocks, a top for things.

Twenty-five years later financial assets rule the world. Gold is a called a "barbaric relic," commodities have been a dangerous waste of money for decades. Now however, the tide has turned. Interest rates are artificially low, and due to excess credit inflation has started to grow. Once again things are starting to increase in value as financial (paper) assets flounder. It will be a long ride, with many ups and downs, but in a decade those who are in debt to own paper assets will have lost, oh so much.

I don't know how or when the crowd will realize the tide has gone out and the beach is larger. By then it will be the middle or latter in the new cycle. The crowd's losses will not be recovered until the tide once more is ready to shift, and they will once again re-learn and re-lose through hard lessons.

Your first lesson:

Asset classes rise and fall in long term cycles.

Try to anticipate change and prepare early.

And Now......

Eight Steps to Financial Freedom

1) Get out of debt

If you want to be in control of watering your own vegetable garden, you must cut dependence on upstream political robber barons. Quit trusting them to be benevolent toward you. Quit believing them intelligent enough to control nature. Only what you own without debt is truly yours.

2) Start to save

Pay yourself first.

As a first goal, buy 100 shares in a company other than where you work. It is easier to make money decisions if you are not broke. Owning part of a company is one way to feel confident that you have assets. This is a great time to buy an emerging country company "too early," anticipating the next cycle.

3) Invest in what you know

Are you an artist, a doctor, a workman? Consider what you know and trends in your area of knowledge. A bricklayer that invests in diamonds is probably buying cut glass. A bricklayer that sees growth in his area and buys a local gravel pit may find it more valuable than diamonds. When someone calls you about their great opportunity, hang up. Research what you know, and seek out your own opportunity.

4) Concentrate your investments in, at most, a few positions

Modern Portfolio Theory suggests 10 or so investments, depending on the size of your bankroll. I've found if I look at 100 investments and pick 10 good ones, my top 3 substantially outperform the next 7. Instead of putting your eggs in lots of baskets, put them in a few. Then watch those few very carefully.

5) Plan and control your own investments

No one cares more about your money than you. You have a huge advantage over professional investors. Professionals get their MBA and dive right into a specialized financial niche. As a private investor you will not be better at analyzing bonds than a bonds pro, or better at trading wheat than a wheat specialist. You can be good at guessing what's next, and learning how to profit in the almost now best sector to invest. If you think metals will take off as China's growth accelerates, you can research iron, gold, and uranium. The bond and wheat trader will still be great at their niche, but that's it. When in a decade or two you decide everyone hates stocks and bonds, you can switch back and by some stocks. If the professional bond trader is still in business, he'll still be great at bonds.

One big point. Find your own brokers and advisers. If they call you first, hang up. You want someone picked by you for price and quality. If they call you, they want a quick commission, and then it's on to the next sucker. Do your own research, or pick someone after you have researched them. You want to be in charge.

I've only had three advisory services where I was fully comfortable using their input as a starting point in my thought process. One was the Ney Report by Richard Ney, author of several useful books in the 1960s including The Wall Street Jungle.

Mr. Ney is no longer with us; look for his books in a used book store. His insights on the markets are still valuable.

The other two are the Elliott Wave Theorist by Robert Prechter and the International Speculator by Doug Casey. I have a lens for each listed below.

6) When wealth is achieved, diversify a little more

Wealth is made through concentration, preserved through diversification.

7) Travel and discover the asset protection of overseas diversification

Overseas is a valuable diversification once wealth starts to come you way. Law suits in your homeland usually will not touch overseas property. Most countries have had times when they kept their citizens from removing money from the country. Your home country may hit depression, lose a war, accept a totalitarian government, or break up into smaller parts. It will then be too late to protect your family. Whatever happens, you need a safety net, somewhere outside the disaster area.

8) Establish a second home for personal preservation

Find a new country that your family loves. Maybe it will be where your ancestors came from. Visit often, establish friends and business relationships. Take your family there for vacations. learn the language and local customs. Get a second passport, dual citizenship is legal in most countries. Yes, it will help you appreciate what you have at home. At some point in the future it may also provide a haven for you, your children or your grand children.

Don't plan to locate in the country next door, in a disaster they may treat you as a refuge and your family could become permanent political pawns. Go further away, far enough to be treated like a tourist. Most countries treat tourists better than citizens.

Do Not, ever, give control of your destiny to another. Use many pathways and conduits so if one fails, others survive. Do, always, learn as much as possible. Develop at least one protective back door to ensure survival if everything turns upside down.

Do not be more dedicated to your country than your country is dedicated to you. If you are viewed as a cow to be milked, and your children viewed as property to be expended at a whim, perhaps it is time to prepare to jump the fence. Worse times may be ahead, protect what you have created, determine to live your own life.

Start an action plan now, just in case. There may not be time latter. If you have to leave, you waited too long.

"The state lies in all languages of good and evil; and whatever it says, it lies; and whatever it has, it has stolen. Everything about it is false; it bites with stolen teeth." Nietzsche

Life is not linear
Great news,

The next 5 years will not be a rerun of the prior 5 years.

A scientist came to a horse handicapper and said he had found a perfect way to predict the winner in horse races. The gambler became excited; no more reading stats, comparing jockeys, watching the weather, etc. In other words winning would no longer be hard work and risk. The bookie took the scientist off to the side and asked for a hint to the process. The scientist said "well, first we assume the horses are all ellipses."

Look around you. How many natural shapes do you see that fit Euclidean Geometry? There is a reason we have the phrase, organic shapes. Math must force life into unnatural shapes to work with it. Unfortunately the results, while solid and comforting, have no resemblance to reality. Economists generally use linear models to predict, algebra to the fore. Algebra is great at lines, life is great at sudden huge surprises.

Some think economists exist to make weathermen look good.

#1) Life is not linear

An old economist saw is, "If you can't guess right, guess often." They can then point back to the closest guess and say, "I told you so." Most financial gurus fall into this camp. Be wary of anyone who claims to know the future, no matter how vague the claim. Unforeseen circumstances always surprise, that's why they are called unforeseen.

For math to be predictive or of value as a model it has to resemble reality. Reality is very messy, math is beautiful in it's symmetry. Short term all is chaos, and we all live in the short term. As Yogi Berra is supposed to have said, "In the long run, there may be no long run."

It was actually an economist, Keynes, that said it first. "In the long run we will all be dead." He was tired of folks pointing out his short term solutions would be disastrous long term. No wonder politicians love him. Spend money, live high today, ignore the effects on tomorrow.

It was actually the Bible that quoted it from earlier economists and politicos. "Eat drink and be merry, for tomorrow we die."

Regardless, we will live in the future. It will not be a straight extension of today.

#2) Success Is Dangerous

It is far too easy to believe in personal infallibility after a huge success. Everyone is a stock market genius and specialist when a market goes up for everyone. Don't become greedy and give it back. Get out, take a vacation, think and plan. Decide on your target before you shoot, once you hit it, move on.

What goes up. Always take your profit too soon. Invest too early, get out too soon. When you are establishing a position, enter slowly. If you think you are early, pick up a small un-leveraged speculation. You will watch closer and read more when you own a bit; but be careful not to think less. With increased confidence, expand the position -- but only on higher prices. As others start to discover the new investment category. pick up size and perhaps a bit of leverage. Over years, the media will turn from hating the asset category, to giving reports every 30 minutes. It's time to get cautious again. The crowd will be right for a while in the middle of a run, but they will pick up speed as the cliffs near. When everyone thinks they are brilliant for making money off this financial bonanza, you should already have your positions started in the next, unrelated, ventures. Let the crowd rush past you as you prepare to travel to a new destination. Avoid cliff walking, don't try to capture the last 10%.

#3) Hope Kills

When the ship starts to sink, Jump!

When you are in a hole, STOP DIGGING!

A most important concept is money management.

The keys to money management are:
* Keep losses small.
* Let profits run.
* Never commit too much to one venture.

Accept small losses cheerfully as a fact of life, plan for them. Expect to experience several while waiting for a large gain. Like poker, the commission and a small loss are the ante; if you don't have a wining hand, GET OUT! The first loss is the best loss. Wait for a good hand. After a loss make the next bet smaller. Don't try to recover your loss in a risky trade.

When you are winning hang on and bet big.

#4) Forecasts and Predictions are for suckers

Find low risk entry points instead. If it is at ten, and you expect it to go up rapidly, why would you hold it if it drops? You were wrong -- unload it immediately. You bought it at 17.5, knowing if it drops below 17 you will sell and close your position. If you can't plan a maximum loss exit and follow your plan, maybe you should take up knitting, Move that permissible loss exit point up as the venture gains.

Remember to think for yourself. Many ideas will be good, and quite a few will be timely; but only a few will be both good and timely for you. Make up your own mind. No one cares more about your money than you. You can be perfectly right on the event, but wrong on the time, and lose on your speculation. Inevitable does not mean immediate. The bigger the expected event, the longer it will take to happen! Well bought, (in price and time), is half sold, (profitably!).

#5) Always Distrust Emotions

Avoid putting down roots. Do not become trapped in a souring venture because of sentiments like loyalty or nostalgia. If you drive a Chevy, you don't have to keep your GM stock. Don't marry your investments, they don't love you. The stock does not know you bought it, and will not care that you sold it. Take the small loss and find a better venture. Time = Money, don't put them on hold. Never hesitate to abandon a deal if something more attractive comes into view. Jump at the better looking venture. Don't let short term blips distract you from a formulated goal; know the volitility of an investment before you purchase it.

Don't be tied to things or possessions. Things can bind. Stay Mobile, root in relationships, not to things. The only thing God is taking off this planet is people.

Bonus) More Keys To Financial Success

An outline for a finance book.