Let’s talk about investing for the end of the world – or not.
I had a Twitter conversation with Lloyd from BusinessAndBullets.com earlier about personal investment/economic advice in terms of being prepared for inflation to happen.
It was a good conversation, and here are a couple of articles by Lloyd which are relevant to the topic at hand:
A few people joined in with questions on Twitter and it was a good conversation, so I thought I’d give my thoughts in longer form.
Let’s take a hypothetical scenario though:
Inflation happens rapidly due to some massive event. Don’t get stuck on the details, because that’s not important.
Imagine you wake up tomorrow and the price of everything has doubled.
This includes food and all the other stuff you buy at the store. It also includes your bills, rent/mortgage, car payments, fuel costs – basically everything that appears in your personal ledger book goes up to double overnight.
What do you do?
Well, hopefully the readers around these parts are already smarter than Average Joe.
Because Average Joe is in a lot of trouble if our scenario happens.
Trouble A’ Brewin’
Millions of people live paycheque to paycheque.
A scary amount live on paycheque to paycheque and use a liberal amount of credit card debt to fill in the blanks.
And all too often, these talks descend into “them there poor folks is stupid! REAL geniuses don’t have to worry about rising costs!”
But what I’ve just said applies to everyone from every walk of life.
Sure, some college kid who lives on ramen noodles and barely has enough to pay his debt, $20 a week food bill and $200 a month house share room is in a lot of trouble.
But who is in more trouble?
The would-be millionaire with the brand new Mercedes they now can’t afford to drive, a mortgage they’re upside down on and a job which probably won’t exist tomorrow because the boss has to cut purse strings.
“Them there cubicle rats is done! I have my own business!”
Yes… a business that runs on a bunch of people that are no longer able to afford to pay you.
Landlord? Can you operate on people not paying rent for months?
Let’s not go into too much of a tangent, but runaway inflation affects everyone and when everyone gets affected, things get erratic.
Don’t assume you’re immune, because you’re not.
Let’s Get Practical Here
Enough with the doom and gloom.
Let’s talk about practicality and the apocalypse – or not.
I’m going to talk about prepping.
Most people think of prepping as an obsession for crazies. Store as many guns as you can. Buy as many of those MRE’s as you can. Then prepare for the end of the world, zombie apocalypse.
And undoubtedly, some preppers are like that. They’ll have a million rounds of ammunition but won’t be able to walk a flight of stairs for being obese.
But let’s talk about how I think of prepping.
And the funniest thing… I find prepping to be the same as any other form of investment.
Prepping As An Investment
When you go and do your weekly shop, you are buying an investment in your future health and prosperity in the form of food.
Nobody thinks of this as investing, but it ties into how to approach prepping for the apocalypse.
If I said to an average business guy, “Hey, what rules would you give me for investing in gold?” they’d say:
- Buy low
- Sell high
- Hold what you can afford to
- Sell when you need capital
- Plan for the long term
- Don’t panic buy
They’d tell you a bunch of other basic investing advice. And you can think of your own investing advice along those lines.
Your preparation for the future is exactly the same.
Here’s some basic economic knowledge that underpins how I think of investing and prepping:
- What is the cost of something now?
- What is the likely cost of that thing in the future?
So if gold is worth $1000 now and it likely goes up to $1500 within a year, then I should buy it now.
Food is the same. Everyone can observe the following:
- The cost of living is rising and has been for some time. Your food bill is X.
- Do you think the price of your weekly shop is going down any time soon? Probably not.
And so you’re better off buying food now.
That Seems A Little Anal Retentive…
It might do, but it’s simple.
If your weekly shop is $100 a week today, and was $80 a week this time last year, you should have stocked up on whatever non-perishable foods you could last year.
Sure, you’ll have to buy more eventually, but week on week the savings add up… especially if you plan, work around offers and the like.
And you aren’t ever too rich to do this, because it’s basic economic sense. Moreover, you can do all your shopping online now, price comparison sites are everywhere, coupon clipping websites are everywhere and if you have a brain, the whole process can be very easy.
Let’s move back to the apocalypse.
I’ve written a lot of doom-and-gloom articles and sales letters over the years (this doesn’t help my paranoid tendencies, let me tell you.)
Most people live paycheque to paycheque.
Millions of people have less than $500 as an emergency fund.
Most people have less than three days’ worth of food stored at home.
Millions require massive commutes that in turn require a sophisticated infrastructure to work.
Everything is connected to “the grid” so far as your water, electricity, gas and so on are concerned.
And this is where prepping becomes essential.
Because it doesn’t take the end of the world to really screw up your afternoon.
If you get snowed in for a week, you’ll be glad you bought enough rice to feed you and have a gas stove in your garage.
If Hurricane Katrina 2.0 rolls through and wipes out your house, you’ll be glad you’ve got all your important stuff uploaded and encrypted in the cloud and a spare savings account.
And if everyone around you is losing their mind, you can’t afford to join them.
It’s Not About Stockpiling
The above is a bit rant like in nature, and focuses on stockpiling rice.
But none of this is about stockpiling anything, really. It’s about investing. Investing and preparing.
The cheapest investment you can make is also the most valuable. It’s in your skills. (Well, arguably it’s in your health – but I assume that’s a given.)
Let’s assume the hypothetical scenario again. Your cost of living rises dramatically.
You can’t afford a cleaner anymore. You can’t afford a handyman or a plumber.
What do you do?
Hopefully, you do it yourself. And hopefully, you have the tools to do it.
Because we live in an economy that’s based on stuff breaking after a year and everyone outsourcing the most menial of tasks to a blue collar apprentice, we live in a golden era for learning skills and buying stuff that’s useful.
As an example, I decided to get into metalwork a couple of years back.
For a hobby that’s cost at most about £500, I’ve learned a skill and made a ton of things for the basic cost of sheet metal and steel bars.
And because China are flooding the market with cheap steel, you can get a ton of steel bars for practically nothing.
And the equipment is cheap and if you’re on the lookout for deals, you can get stuff even cheaper because the biggest generation of humans ever are retiring and looking to flog their stuff on Ebay.
This isn’t just metalwork either. It’s crafts, arts, trades, everything: It’s never been cheaper and easier to learn stuff and yet most people are doing their best to be boring and know little.
That’s because times are good. Let’s look at that.
If You Haven’t Made Hay While The Sun Shines, You’re Out Of Luck, Kiddo
We can take my twee advice from above. Stockpile some food, learn a few handyman skills, otherwise go about your life.
Then assume there’s a short term disaster.
You’re sat at home and maybe putting some shutters around your windows to ensure your property doesn’t get damaged. You’ve made hay while the sun shines. You can close your windows and doors and rest for it to all blow over.
Other people are getting into riots over the last bottle of Evian at your local superstore.
You have probably saved your life, and hopefully the lives of the people you care about too.
By doing the same bloody thing you should be doing anyway: thinking ahead, buying stuff when it’s cheap and holding onto it until it’s valuable.
Most people don’t do this. They live in the moment, wait for things to go wrong and then when they do, they cry and try and fix a bleeding wound.
You don’t want to be that person, do you?
But Jamie… What If You’re Just A Paranoid Lunatic And Everything Is Awesome?
Great question.
The answer is: If I’m totally wrong, you’re still better off following my advice.
If everything gets rosy and everything gets cheaper and you don’t need a stockpile of anything, then what have you got with my advice?
- A stockpile of stuff you’re going to use anyway. (Food, fuel, toilet paper, etc.)
- A bunch of investments that have gained value (because you were smart and bought when they were low and will wait until they’re high)
- A set of skills which still save you having to get a guy out to unclog your toilet etc.
- Potentially some money making ventures that’ll work anyway
Let’s say you buy land. (I think that’s what Lloyd did.)
If the world goes to hell – you own land. You can house and potentially feed your family with that land.
If the world doesn’t go to hell – you could do the above or you could rent it out or sell it.
If you learned how to woodwork, and the world goes to hell: You can fix rooves. You can build things.
If it doesn’t go to hell: You can build stuff. You can sell stuff. And you still save money by not hiring a guy.
If the world goes to hell, you’re safe and have value.
If the world doesn’t go to hell, you’re safe, valuable and have assets. You’re also ready for if it ever becomes less than rosy once again.