The correct analysis is that both deflation and inflation are possible. Anyone who warns just of inflation or deflation is missing half the puzzle - James Rickards
A few years ago, I spoke at my annual preparedness conference on the risk of another financial downturn. I think I may have stunned, if not outright upset, some of the attendees when I said:
Guys, here's the good news about the next financial crisis. We now know what one looks and feels like. We know it's survivable. And best of all, we know now what to do to protect our finances.
Perhaps they were taken aback by my use of the term "good news" when discussing the next financial crisis. While there's no doubt the crisis we endured ten years ago altered countless lives and our nation's history, we also learned a lot about ourselves, our economy and our government during that era.
Fast forward ten years. I've done several YouTube videos over the past year on the need to have a financial plan for when the market has its next big downturn. Today, I'd like for us to discuss what that means and how someone could go about doing it.
I'm not talking about the garden variety market corrections we see from time to time, which are necessary to a healthy marketplace. I'm talking about the need for a plan in the event we see something like we saw in the 2008 financial crisis.
I won't spend a lot of time making the case that such a financial crisis could occur again. As I talk to people about the prospects of another crisis, I find people either believe that it can happen again...or they don't. My job isn't to convince you it can happen. My goal is to provide ideas to those who believe that it can.
Inflation or Deflation?
One of the first questions we have to ask ourselves is whether we expect an inflationary event or a deflationary event. Simply put, will the next crisis be one where prices rise rapidly - faster than our wages? Or will it be another 2008, where prices for not only stocks but also cars, homes, and consumables falls dramatically?
Those who are concerned about the risk of another crisis often debate this enthusiastically. I don't think it's really necessary to debate the issue; I'd rather be prepared for either scenario and not worry about guessing which crisis may befall us.
For guidance on what to do in an inflationary crisis, Forbes contributor Clem Chambers outlines five investments which historically done well during such events. They include:
Meanwhile, contrarian financial expert James Rickards suggests we should be prepared for both deflationary and inflationary crises. In the aptly entitled article "Why You Should Be Prepared for Both Inflation and Deflation," Rickards outlines how you should invest in either scenario.
For the deflationary crisis, Rickards recommends cash, bonds and raw land. In an inflationary crisis, he recommends commodities such as gold and oil, stocks in blue chip companies with significant ownership in hard assets, along with collectibles such as fine art.
To help you identify what stocks you might choose in a market downturn, Kiplinger's has a list of blue chip stocks you should consider during a deflationary scenario.
Rickards recommends we "prepare for both [scenarios], watch carefully, and stay nimble."
If You Expect Another 2008 Style Crisis, Why Not Just Invest In Those Things That Did Well Back Then?
You certainly could, and fortunately we have some good clues on how to do that. U.S. News came up with seven stocks that performed well during the last financial crisis. As you scroll through these stock ideas, you'll see many names you recognize. You'll also quickly identify a trend with these stocks: companies that sell lower cost items and entertainment options did well during 2008-2009.
Can you make money while the stock market falls?
Consider investing in an inverse ETF which goes up in value as the stock market falls. Investing in one of these funds is very easy - you buy it just like your buying a stock if you're using an online trading account. For those who feel really adventurous, the inverse ETF with ticker symbol SDS is a leveraged inverse ETF. In rather simplistic terms, for every one percent drop in the S&P 500, SDS goes up by two percent. The catch, of course, is that for every one percent increase in the S&P 500, SDS does down by two percent.
It's not a trade for the faint of heart, but it can really provide meaningful gains in a deflationary event where the stock market is falling.
What can you do with your 401(k)?
The 401(k) issue is tough, because most people have very limited investment options. Your best bet is to study each of your investment options within your 401(k) and see how they fared during 2008-2009. That will give you a sense of what your best options are during a deflationary event. In that scenario, you may find it's better to just put your 401(k) in cash and ride out the downturn, knowing that the the dollars in your account are increasing in value (dollars increase in value compared to other currencies and investments during deflationary events.)
For inflationary events, the advice listed above is solid - find a mutual fund option that invests in hard assets, such as commodities and real estate.
Again, this will require a little research on your part, but it's not hard to do.
How to create your plan
I'm not a financial adviser. But I will tell you what I am doing now, and what my plan is, in an effort to give you some ideas.
First, I am currently fully invested in the stock market. I believe, as many experts do, we should expect the stock market to go higher for some time to come. That's not to say some event couldn't cause a major sell off or inflationary spike. But for now, my plan is to sit tight and remain invested in equities.
Once I decide it's time to change my investment strategy, I'll take two steps:
This is not as hard as you think. It does require you to do a little research. Spending time with a financial adviser you trust would also be a good use of your time.
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Preparedness isn't about buying a bunch of guns and military rations, waiting for "the big one." Much of what you will do to get better prepared will be tedious and boring.
And that's the good news - if you find your preparations tedious and boring, it probably means you're doing it right.
Currently called "Disease X," a new strain of bird flu in China is racking up significant fatalities - roughly 38 percent of those people infected are killed by the disease.
Newsweek ran this article on June 15. Other publications, such as The Atlantic, published articles as recent as three days ago decrying our lack of readiness for the next pandemic, such as Ebola. Even if you take away the unnecessary political bias in The Atlantic piece, it's clear the threat of pandemic is starting to bubble to the surface again in the minds of the disaster cognoscenti.
Pandemics rank high on the fear factor, in large part due to movies about pandemics over the last few years. The recent Ebola outbreak which saw two nurses in Dallas contract the deadly disease further alarmed Americans who were paying attention to such things. Slate provided an extensive timeline on how these two nurses contracted the disease and unwittingly exposed others to it.
CNN ran a piece last year entitled "Seven reasons we're more at risk than ever of a global pandemic." As with any mainstream media piece, all the bases are covered: increased global travel (widely understood and appreciated), climate change (the predictable boogeyman for various things that ail us), and calls for communities to become more resilient (a great idea, and one I advocate).
But one item stood out as a bit unexpected but intriguing nonetheless: "Faster communication raises the risk of pandemic." According to the CNN infographic, the worst case is "fearful rumors may trigger panic, which might hinder key institutions like stock markets and emergency responders."
A few weeks ago on my YouTube channel, I spent a fair amount of time discussing this article from B.J. Campbell entitled "The Suprisingly Solid Mathematical Case of the Tin Foil Hat Gun Prepper." I mentioned in my video that the article is perhaps one of the best articles on preparedness I had ever read, and I encourage you to spend time reading it as well.
In Campbell's effort to explain that those who are into preparedness are justified based upon a statistical approach using historical data, he writes:
The zombie apocalypse is obviously pure fiction, but it has an allure to a few tongue-in-cheek preppers because of its functional completeness. If you are prepared for zombies, you are literally prepared for anything. The key fixture of zombie preparedness is a fundamental understanding of what happens when our systems of economics, governance, and civil infrastructure fail. There’s a great one going on right now in Venezuela, with people eating rats and dogs, incapable of trading in the local currency, and a general humanitarian disaster associated with descent into anarchy. No class of person is more capable of riding out a situation like that than a well-provisioned zombie prepper. Various fixtures of zombie prepping include:
While no one I know truly believes there is such a thing as a zombie apocalypse, the closest thing to one would be a global pandemic like the ones referenced above. Watch the movie World War Z sometime to get a feel for the parallels between a zombie outbreak and a pandemic.
The pandemic scenario - or zombie apocalpyse if you prefer - is a useful tool to those in the preparedness and disaster planning community for the reasons Campbell mentions. It provides us a scenario requiring full spectrum readiness: food, water, power, sanitation, security and medicine.
Feel free to dismiss the concerns over another pandemic (although experts will tell you it's not a good bet to make - check out these reports from CNN and NPR). But for all of us who advocate for better readiness at all levels, fewer perils give us a better assortment of "things that would go wrong" than a pandemic.
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CENTRAL TEXAS 2018 WILDFIRE SYMPOSIUM MAY 4 – FREE TO ATTEND
I hope you’ll join me on Friday, May 4 for the annual Wildfire Symposium put on by the City of Austin. This is a great event. You can get more information here.
The following day, May 5, is National Wildfire Preparedness Day. You can learn more about it here. Over 98 million people in the U.S. live in a neighborhood at riks for wildfires. As this spring is shaping up to be both warmer and drier than average (thanks to La Nina), wildfire risk is a growing threat.
We just had our FireWise assessment done at our home last Saturday, conducted by the Austin Fire Department. It was very helpful, and there’s no charge. If you would like to have one done, email Nia Henry and ask her to set one up for you – and feel free to tell her I suggested you reach out to her.
EQUIPPING YOU WITH DATA AND FACTS ON THE GUN CONTROL DEBATE
Over the last couple of weeks, I’ve managed to save a number of articles that you may find helpful in the coming months.
Teachers are signing up for free gun training in Ohio
NPR: Millennials are no more liberal on gun control than their elders
USA Today: School shootings are not the new normal
NPR: Rate of gun violence has fallen since 1993
Scientific American: If you want to know how to stop school shootings, ask the Secret Service
National Review: How Nazis used gun control
National Review: Parkland Shooter did not use high capacity magazines
5 Years After Sandy Hook Shooting, Connecticut School Districts Violating Safety Laws
Washington Times: School safer today than 1990s.
US Secret Service and Department of Education: Final Report And Findings of the Safe School Initiative (2004)
Breitbart: Former Air Marshal: Arming Pilots Post-9/11 Worked, So Will Arming Teachers
NATIONAL STOP THE BLEED DAY IS MARCH 31
The top cause of preventable death in trauma is bleeding. Twenty percent of people who have died from traumatic injuries could have survived with quick bleeding control. Learn how you can help yourself or others in the event of trauma.
MORE EPISODES OF THE SITUATION
I’m trying to do an episode every week. I hope it is of interest.
March 6 episode: Rising interest rates hit homebuilders hard; Houston ambulances are in a "deplorable" condition; Natural gas provider in Dallas cuts gas to 2,800 homes for "3 to 4 weeks."
March 11 episode: DST conversion leads to increased chance of heart attacks; Costco selling prepper food; CNBC reports retirees have little savings; Ron Paul says another financial crisis is possible; Richard Duarte shares an article on changing migration patterns due to disasters; KQED reports on problems with response to California wildfires
Solar Cooker demo: Here’s a 42 second video on my solar cooker (which is different than a solar oven).
AUSTIN PACKAGE BOMBS AND THE NEED FOR READINESS
This month’s tragic package bombings in Austin – during SXSW, one of the busiest times for our first responders – once again demonstrates the need to be situationally aware and to be ready to be our own first responders until help arrives.
Seek out first aid and CPR classes. Learn to use a fire extinguisher. Get a NOAA weather radio for your home, and while you’re at it, pick up a TornadoAlert which I highly recommend.
If you are taking LTC and other firearm classes to help protect the lives of you and your family, then you also need to be getting trained to protect lives in other ways – for emergencies far more common than self defense.
UPCOMING LTC COURSES
I didn’t have any takers for the March 10 class – probably due to the fact it was the first weekend of spring break.
Let me know if you are interested in taking a class and what dates might work for you.
Also, if you have a group that is interested in the course, contact me about a flat fee to teach your group.
That’s all for now. Stay safe out there -
FRANKLIN BBQ EVENT FOR THE CENTRAL TEXAS FOOD BANK – SKIP THE LINE AND CONSUME ALL THE BBQ AND BEER YOU WANT
Once again, Kendel and I will be hosting a fundraiser for the Central Texas Food Bank at Franklin BBQ on February 20. Seating is very limited – ticket sales are capped at 60 people. That means there’s no line outside for you to stand in. Come eat dinner, drink some beer, and bid on some great live auction items (where I will be serving as the auctioneer once again.)
Karl Rehn at KR Training has graciously donated training certificates you can bid on, and I’ll be offering an all inclusive LTC class for you and your friends to be scheduled at a mutually convenient time.
Again – seating is limited – at least half of the tickets were sold in the first week they went on sale – get yours today.
DO NOT FIRE WARNING SHOTS
We cover this in my LTC class. Do not fire warning shots. This LTC holder here is facing a charge of aggravated assault with a deadly weapon in Travis County, which is a second-degree felony.
LISTEN TO THIS COP’S 911 CALL AFTER HE USED DEADLY FORCE.
This officer did it well. He is not facing charges. Listen to how he handles the situation with 911.
Note how he:
WORLD STAR HIP HOP: BAD TACTICS AND YET STILL GETS THE WIN
A security guard happens upon a robbery in progress. There’s a lot the security officer did wrong here, and yet he shuts down the robbery in progress. The lesson here is to get training so that you’ll be better able to handle yourself in this situation – and realize that sometimes the win comes with little to no resistance.
AS SPRING RAINS AND FLOODING APPROACHES, NEW FEMA MAPS SHOW GROWING RISK IN CENTRAL TEXAS
I just attended the annual Skywarn training for storm spotters on Saturday, and they were conveying that we still lose a lot of lives due to flooding.
The new FEMA flood maps show a significant increase in flood risk. Talk to your insurance agent to ensure that you have the right coverages.
WHEN’S THE NEXT LTC CLASS?
I’d like to do one in March. Message me if you’re interested.
AND WHAT SORT OF PREPAREDNESS TRAINING/MEETINGS ARE HAPPENING?
We had a good meeting at Inks Lake State Park last weekend – tested some get home bags, tried out various fire starting techniques, and talked about how we could be better prepared.
I’m hoping to schedule another weeknight meeting sometime in March and another campout sometime in April. Message me if you are interested.
THE SITUATION: DOW DOWN 666 ON FRIDAY – WHAT’S YOUR PLAN IN THE EVENT OF ANOTHER FINANCIAL CRISIS?
I posted this Friday – last week the markets were somewhat unsettled. Here’s my take on what’s happening and what we need to be doing.
Meanwhile, Chris Martenson sounds the financial alarm. This reading isn’t for those looking for a rosy economic outlook.
That’s it for now. Stay safe out there.
Part of being an advocate for preparedness means we support organizations that help people in times of crisis. And for me, that means supporting the Central Texas Food Bank.
Kendel and I are once again part of the host team that rents out award winning Franklin BBQ to put on the Skip The Line For Hunger event to support the Food Bank. Rather than stand in line for hours to eat some of the best BBQ on the planet, you can be a part of a limited seating audience and consume all of the BBQ and beer you want.
This event runs from 6:30 PM to 9:30 PM on Tuesday, February 20. We'll also have a live auction - with yours truly serving as auctioneer - with a number great items for you to bid on. KR Training has graciously agreed once again to donate certificates good for training at their firearms classes as part of this event.
We hope you will join us for the event. Click here to get your tickets!
Often in the first responder/emergency response community, we hear of reports and analyses of lessons learned and weaknesses identified after a training exercise or actual emergency. These are often referred to as an after action review or AAR.
I find AARs quite helpful, not only for formal training and actual events, but even for smaller happenings in our lives. Memorializing the lessons we learn from various things that happen in our lives - the car battery dies at an inconvenient time, getting stuck in an airport overnight, your kid leaves the water running in the bathtub for too long - help us identify ways to prevent such things from happening again.
As the winter weather approached Texas from the Rockies and Northern Plains a few days ago, I began my planning in earnest, knowing that I'd be doing an AAR on my efforts once the storm passed. I thought I'd share this AAR with you with the hopes that a) you'll get something out of what I did and learned and b) you'll consider doing AARs in your various efforts at home and work as well.
First things first: since we live in a new house (built by us and occupied since May 2017), we had no checklist of what to do in the event of a pending ice storm. I began formulating a check list to memorialize the various things I did in anticipation of being iced in for a couple of days. (I'm posting a draft of that checklist below, with the caveat that a) it's a draft and b) I will likely be amending it in the days to come).
I'm a big believer in checklists. My sister in law gave me The Checklist Manifesto: How To Get Things Right by Atul Gawande for Christmas. A prepper friend recommended the book this fall, and so I am looking forward to reading it this weekend. Checklists are great, especially when you are trying to get your house ready for a severe weather event in short order. I made a similar checklist as Hurricane Harvey approached the Texas coast.
Things I did not have on hand (and had to purchase):
Things we did well:
Things were we learned lessons or could improve upon:
At this point, many people would say, "Paul....enough with the lists and the analysis of what you did and didn't do." And that's fine - we all learn in different ways. For me, being able to streamline the process and do things thoroughly are priorities. This is the best way I have found to do that.
This weekend, Karl Rehn of KR Training and I held our annual prepper training weekend event, normally scheduled for the first full weekend after January 1.
This year's event deviated dramatically from the past five years. First, we moved from our usual venue - the Cabela's outdoor store in Buda, Texas - to Karl's facility near Lincoln. This enabled us to have training in the classroom as well as the range. We also expanded the event to two days, which enabled us to cover much more material than we normally would have.
The new format seemed to really go over well with attendees. Most of them had never attended the Cabela's events before (of 14 attendees, only three had previously joined us at Cabela's.)
Here are some notes on some selected parts of the presentations I did:
In addition, Karl taught two mornings on the range. We gave students the option of classroom training or range training during the morning session. Karl covered fundamentals on Saturday morning, progressing to shooting from cover and armed movement in structures. The Sunday morning range session had students conducting team tactics - something most shooting programs don't stress. In an emergency, you may not only be trying to stop the threat - you may have to coordinate the movements of friends and family who are with you.
Some overall thoughts:
Karl and I are already working on some advanced preparedness training opportunities for this summer and beyond. I have some ideas on where we need to go next, and the participants offered some good suggestions as well.
Make 2018 the year you get better prepared.
Here's where I tell you what I think about things I think about.