Three imperatives that Peter D. Schiff prescribes in ‘Crash Proof 2.0’ (www.wiley.com) are: Rethink your portfolio, gold rush, and stay liquid. He recommends investment in the foreign markets (read, non-American) as the most conservative place right now.
In the US, economic freedom, just like sound money, is a distant memory, the author rues. “So too are the low taxes, minimal regulations, and the high savings rates that went along with them. The comparative advantage we once had in limited government and freedom has been lost. Those advantages now prevail in Asia, and for that reason Asia is becoming the dominant factor in the global economy.”
Once China allows the dollar to collapse, its domestic purchasing power will surge and its economy will quickly overtake the US economy as the world’s largest, predicts Schiff. “Free from the burden of subsidising America, the rest of Asia will boom as well.” Are we already witnessing the gradual crash of the dollar?
The author foresees that a free-floating yuan, especially if backed by gold, could well become the world’s reserve currency. “In the long run, the euro as a fiat currency may very well fail like the US dollar. But being the largest non-dollar currency issued by a major creditor, it appears certain to thrive in the short term.”
The second step in his survival plan is to think gold, because ‘gold is substantially undervalued at present levels.’ Officially or unofficially, the function of gold as money will be restored, he envisages. “The result will be an explosion of demand and, with supply as low as it is, gold prices will rise dramatically.”
And the final step is to stay liquid, since the monetary and economic implosion which could happen in the future could be cataclysmic, with effects such as global disruption, confusion, and possibly panic.
eing liquid means doing something about assets that are owned and losing value, such as a house you should sell but cannot, Schiff instructs. “Staying liquid means converting existing adjustable-rate debt to fixed-rate debt, so that you don’t lose the asset because of an inability to service the debt.”
Wrong approach to analysis
Most people approach analysis in the wrong way, laments John Piper in ‘The Way to Trade: Discover your successful trading personality’ (www.visionbooksindia.com). Looking at people who come into contact with one particular technique – such as Elliott, Gann, and MACD – get to know how this technique works, and then start to use it, Piper says that it is like putting the cart before the horse.
Any type of analysis is designed to answer particular questions, he reasons. “A doctor examining a patient looks for symptoms and then decides to do further analysis to answer the outstanding questions. A doctor doesn’t become an expert in feet, and then do foot analysis whatever problem the patient may have.”
But this is how most technical analysts approach the situation, Piper bemoans. “They become expert in a particular technique and regardless of how they should be trading (to suit themselves) they use that technique. This is particularly a problem for traders starting out because they may know no more than that one technique.”
Another way in which analysis can be a negative is when it is used as ‘a foundation stone of the methodology’ while it should be just one factor, the author advises. Instead, decide how you want to trade, decide what opportunities you want to exploit, then choose your analysis methods around that, he suggests. “Avoid the use of well-known techniques in well-known ways, because the majority do that, and the majority lose. You want to do something different – you want to be a winner.”
Every family must come to grips with what it can afford, counsels Willard F. Harley, Jr. in the fifteenth anniversary edition of ‘His Needs Her Needs: Building an affair-proof marriage’ (www.magnamags.com). Budgets are not a necessary evil, but ‘good,’ he says, because a budget helps you discover what a certain quality of life really costs.
To more fully understand the quality of life you can afford, the author recommends three budgets: One to describe what you need, one to describe what you want, and one to describe what you can afford.
“The needs budget should include the monthly cost of meeting the necessities of your life, items you would be uncomfortable without. The wants budget includes the cost of meeting all your needs and wants – things that bring special pleasure to your life.”And the third, the affordable budget, begins with your income and should first include the cost of meeting your most important needs, explains Harley. “If there’s money left over when the cost of meeting all your needs is covered, your most important wants are then included in this budget until your expenses match your income.”