tag:blogger.com,1999:blog-80868300844427517472024-03-17T07:59:05.749-07:00Invest Like A FarmerInvest Like A Farmer is an investing blog by T. H. RAPKO AND COMPANY, LLC’s managing member Thomas H. Rapko focused on macroeconomics. It presents Tom’s insights and thoughts on the markets. Although the author expresses a view on the likely future performance of certain investment instruments, each individual should carefully consider his or her investment position in relation to his or her own circumstances and with the benefit of professional advice prior to making any investment decisions.Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comBlogger281125tag:blogger.com,1999:blog-8086830084442751747.post-84376778836020993992024-03-17T07:58:00.000-07:002024-03-17T07:58:06.361-07:00Happy St. Patrick's Day<p style="text-align: center;"> Happy St. Patrick's Day</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLYa08XagoaxCIvYFqx05_sLmJ0_iAHmGr6J4wm2gp18vCCy9Ue3IlOSe4_UVv1dKfPxZaoPoMhZsTzXeyNMG46vrbKWipMloHL3uA2_I3EV8UIwTmJcE5wnmVGVEVqj5VcQGFN9DU3pnSotAg2EO1fvLKfqAlDKCXiXtkWO6wI_mt2Kknofn8zxZMKaY/s2048/Four%20Leaf%20Clover.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1668" data-original-width="2048" height="261" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLYa08XagoaxCIvYFqx05_sLmJ0_iAHmGr6J4wm2gp18vCCy9Ue3IlOSe4_UVv1dKfPxZaoPoMhZsTzXeyNMG46vrbKWipMloHL3uA2_I3EV8UIwTmJcE5wnmVGVEVqj5VcQGFN9DU3pnSotAg2EO1fvLKfqAlDKCXiXtkWO6wI_mt2Kknofn8zxZMKaY/s320/Four%20Leaf%20Clover.jpg" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p style="text-align: left;"><span style="background-color: #fefdfa; caret-color: rgb(51, 51, 51); color: #333333; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px;">Happy St. Patrick's Day financial farmers! There are few cultures so naturally blessed with song, word, and dance than the Irish. The best investments are those that we can enjoy. If you're in the mood for some traditional Irish song along with your Guinness beer today check out The Harris Bros: </span><a href="https://youtu.be/6jfx7D10etE" style="color: #7d181e; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; text-decoration: none;">https://youtu.be/6jfx7D10etE</a></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comDublin, Ireland53.3498053 -6.260309725.039571463821154 -41.4165597 81.660039136178852 28.8959403tag:blogger.com,1999:blog-8086830084442751747.post-81294005526955411372024-03-15T07:11:00.000-07:002024-03-15T07:11:32.470-07:00Ides of March<p style="text-align: center;">Ides of March</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQaPrunyGxk521rsHRcmnsO6t4ncUWztGh2GHUjnioZ2OsdCnDpIMEYirzQ5l_u4HgSWD-rkX5qMMHwGxVA1ZUQX-_HZWxvtn4UOfVxb1irptFIP7RHjxQBy-7Q3pQ_EWIkGuDyAlS0b5nwmqKABGp3Hfl2Bqih1u5xamZe9LOAGSfHxV_MUzf5aiACdo/s253/Ides%20of%20March%20Coin.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="227" data-original-width="253" height="227" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQaPrunyGxk521rsHRcmnsO6t4ncUWztGh2GHUjnioZ2OsdCnDpIMEYirzQ5l_u4HgSWD-rkX5qMMHwGxVA1ZUQX-_HZWxvtn4UOfVxb1irptFIP7RHjxQBy-7Q3pQ_EWIkGuDyAlS0b5nwmqKABGp3Hfl2Bqih1u5xamZe9LOAGSfHxV_MUzf5aiACdo/s1600/Ides%20of%20March%20Coin.jpg" width="253" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">2,068 years ago <a href="https://en.wikipedia.org/wiki/Julius_Caesar" target="_blank">Julius Caesar</a> was assassinated in the Theatre of Pompey, ending the Roman Republic and starting the Roman Empire. The death of Julius Caesar led to the collapse of the Roman Republic and the ascension of his adopted heir Octavian who in 27 BC avenged Caesar's death. Octavian ultimately became Augustus Caesar and launched what would become the Roman Empire.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;"><a href="https://en.wikipedia.org/wiki/Pax_Romana" target="_blank">Pax Romana</a>, or Roman Peace, in this new Roman Empire lasted some 200 years across what was then the known world including large swaths of the Mediterranean, Northern Europe, and Northern Africa. It was at this time that Roman Citizenship afforded one unprecedented safety and security; a Roman Citizen could walk the known world with the assurance of the Roman Empire behind him. This citizenship status was one of the greatest benefits Romans enjoyed and allowed trade, commerce, and civilization to spread unimpeded for thousands of miles in all directions from Rome.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">In a world today where few people know the birthdates of their own grandparents, it is striking how the pull of history reminds us to the day of an event over 2,000 years ago, with only the birth of Jesus as a more profound and exact historical recording. Indeed, the scale of the respective Caesars' power was such that time was altered to incorporate their legacy into months of the year; July & August. <br /></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;"> <br /></div>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comRome, Metropolitan City of Rome Capital, Italy41.9027835 12.496365513.592549663821153 -22.6598845 70.213017336178837 47.652615499999996tag:blogger.com,1999:blog-8086830084442751747.post-59470830917457969752024-03-12T08:53:00.000-07:002024-03-12T08:53:01.147-07:00Truflation© Exceeds 50%<p style="text-align: center;"> Truflation© Exceeds 50%</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbi-rP8XWgzDZ7S1Jfc4eKURgY0uqRBqkmXGzIQp4NKV6DnGQybIxBd95XrClYQ3tjvRvpjqhib54u2nCvqIxZHwVeCBOIkWHa5aJip7NlxwcOoGWgTBNu3jFHbqPYrnbO6Blwx2P1ER7qoiYAtRZRw9-iawUC2BHOrVQ1xm-IhM4S5cf34G-TrYchNXs/s667/Monthly%20Consumer%20Price%20Increases%20Under%20Joe%20Biden.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="413" data-original-width="667" height="248" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbi-rP8XWgzDZ7S1Jfc4eKURgY0uqRBqkmXGzIQp4NKV6DnGQybIxBd95XrClYQ3tjvRvpjqhib54u2nCvqIxZHwVeCBOIkWHa5aJip7NlxwcOoGWgTBNu3jFHbqPYrnbO6Blwx2P1ER7qoiYAtRZRw9-iawUC2BHOrVQ1xm-IhM4S5cf34G-TrYchNXs/w400-h248/Monthly%20Consumer%20Price%20Increases%20Under%20Joe%20Biden.jpg" width="400" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">No hyperbole man, Truflation© on a cumulative basis since the start of the Joe Biden Administration in January 2021 now EXCEEDS 50%! Truflation©, as per its definition, is a basket of goods that consumers actually "touch" on a daily basis and are required for living in a modern society. This basket include five elements: <b>Food, Housing, Gas, Education, and Health Insurance</b>. </div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;"><b>The five pillars of Truflation© have now cumulatively exceeded a 50% increase since January 2021</b>. In essence, consumers have LOST over 50% of their buying power in real terms. The effects have been particularly devastating for young working American families on the hook for supporting a large portion of entitlement programs, many of which it is unlikely they will ever benefit from personally.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">What is a financial farmer to do? Well it is no coincidence that the price of Gold, the stock market, real estate, and crypto to name a few assets are UP over 50% since January 2021. <a href="https://en.wikipedia.org/wiki/Fiat_money" target="_blank">Fiat paper money</a> like the USD has literally been "heading for the hills" almost as fast as it is being printed. <b>Investor cash has sought refuge in physical commodities, ownership stakes in companies, and dirt.</b></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;"> <br /></div><br /><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comWashington, DC, USA38.9071923 -77.036870710.596958463821153 -112.1931207 67.217426136178844 -41.880620699999994tag:blogger.com,1999:blog-8086830084442751747.post-42851868602870157472024-03-08T09:39:00.000-08:002024-03-08T10:04:05.188-08:00Debt Bomb<p style="text-align: center;">Debt Bomb</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqbK3uFPfxV-_3OlEgxnab4EwIkDr2ljk8EEy3_zJdeK1yPTbSGXoLNKnm8dY3m6hn6qyZLHNs93jDLqGoxzFj7PJnKnSpGS0G4-p0XOQ74uLctm1OA0kA93nZHX8m-elHgKPyp7gpS5nGpFB-EJRsN_j189jk3O7Zu7-_Xx82j3J0Cn12Ll42w4gc2Sw/s512/Debt%20Bomb.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="512" data-original-width="507" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqbK3uFPfxV-_3OlEgxnab4EwIkDr2ljk8EEy3_zJdeK1yPTbSGXoLNKnm8dY3m6hn6qyZLHNs93jDLqGoxzFj7PJnKnSpGS0G4-p0XOQ74uLctm1OA0kA93nZHX8m-elHgKPyp7gpS5nGpFB-EJRsN_j189jk3O7Zu7-_Xx82j3J0Cn12Ll42w4gc2Sw/s320/Debt%20Bomb.png" width="317" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">Besides Defense, <b>a stable currency is the best thing a nation can provide to its citizens</b>. The current Administration is adding approximately $1,000,000,000,000 ($1T) to the <a href="https://en.wikipedia.org/wiki/National_debt_of_the_United_States" target="_blank">National Debt</a> every 100 days. This pace is unsustainable because an equal amount of value or productivity is NOT being created along with the corresponding debt. <b>This is how a country is destroyed.</b></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Over the centuries many governments have attempted to solve their economic problems by debasing their currency; whether by decreasing the <b>content </b>of gold or silver in coinage, increasing the supply of paper money relative to precious metal backing it, or altogether removing a currency from the <a href="https://en.wikipedia.org/wiki/Gold_standard" target="_blank">Gold Standard</a>. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Almost always, <b>the debasement of a country's currency has been the result of funding war</b>. War is extremely expensive not only in resources, but also loss of productivity to the warring countries. The larger and longer the conflicts, the greater the hit to the Treasury.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Currently the United States is waging at least three (3) Wars; one in the Middle East, one in Ukraine, and the other one on the Southern Border. The argument could be made that there are also multiple other skirmishes happening 24 hours a day, 365 days a year around the world in which the USA is involved. Putting those aside though, the three major conflicts are costing America vast sums of money. Think in terms of TRILLIONS, not billions.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">To look at the stock market or real estate or gold or Bitcoin one would think that this economy is booming. Record highs are being notched daily. There is jubilation in the trading pits. Every month a new high in single family home prices! Yet, just the opposite is occurring with the VALUE of the USD becoming increasingly worthless. As discussed frequently on this blog, <b>inflation has by my estimate destroyed over 50% of the USD buying power over the past 3 years alone</b>. And there is no end in sight.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Barring AI, the major increases in the share prices of many S&P 500 members has simply been a function of <b>increased pricing</b>. Anyone who shops at a grocery store knows this. Or fills up their car with gas. Or pays for health insurance. Or pays for education. Or resides somewhere other than a cozy cave. <b>Truflation© has been running double digits for years</b>. And that compounds quickly.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">I have understood the relationship between gold and value for a long time; gold is hard to find, easy to buy, and can not be made by man. Similarly, I also understood that higher and higher stock prices are typically a result of both higher earnings, but also to a large extent, inflation. Same thing for real estate; a classic supply and demand scenario with the added factor of uniqueness. <b>But Bitcoin has puzzled me</b>.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">I have come to believe that Bitcoin is a bet.<b> It is a lasting bet against stupidity, greed, and corruption.</b> Meaning Bitcoin, given its cap of 21,000,000 units, should continue to move higher in USD terms indefinitely until some time that sane monetary and fiscal policy is restored...but that day may never come.<br /></div><br /><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comSan Francisco, CA, USA37.7749295 -122.41941559.4646956638211535 -157.5756655 66.085163336178852 -87.2631655tag:blogger.com,1999:blog-8086830084442751747.post-44184413784440118552024-02-13T13:14:00.000-08:002024-02-13T13:14:11.032-08:00$12 Eggs<p style="text-align: center;"> $12 Eggs</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi3jlY6z_D7W6vq0KYMB0gFwGT-xC0PVOXKoqBiS240mVjRD_5BQvnuaZf6S43ejvBOrGbBIZbhWc-05gJJXKWTaVOoxrABn18CnpDSHo0n9VgVMLb9KppFQv_9MMigKavW7vAZ39TGmvAooRyKcmzdmNPENrKPFwH-_vH7OKFE3F2n6hYhn1gYWi0-UAc/s1125/$12%20Eggs.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="958" data-original-width="1125" height="272" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi3jlY6z_D7W6vq0KYMB0gFwGT-xC0PVOXKoqBiS240mVjRD_5BQvnuaZf6S43ejvBOrGbBIZbhWc-05gJJXKWTaVOoxrABn18CnpDSHo0n9VgVMLb9KppFQv_9MMigKavW7vAZ39TGmvAooRyKcmzdmNPENrKPFwH-_vH7OKFE3F2n6hYhn1gYWi0-UAc/w320-h272/$12%20Eggs.jpg" width="320" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;"> </div><p>Joe Biden has egg on his face. When the cost of a dozen eggs in the grocery store reaches twelve bucks, the economy is broken. <b>Inflation over the past 3 years has ravished the United States far worse than any enemy, foreign or domestic</b>. <br /></p><p>This author estimates that we have lost some <b>50%</b> (that's right, FIFTY percent) of our <a href="https://en.wikipedia.org/wiki/Purchasing_power" target="_blank">purchasing power</a> over the past 3 years alone. And it has hit us where it hurts most; housing, food, energy, healthcare, and education. Nobody really cares about the cost of a ton of soybeans, that is literally for bean counters in Washington, D.C.!</p><p>The median American has been decimated by rampant inflation in core goods and services. Paying for two wars and absorbing some 5-10% of the existing US population in new migrants has triggered massive price increases across the board. "Free" is probably the most expensive word in existence; trillions in spending adds up, especially if there is not a corresponding increase in productivity. <b>Empty carbs kill</b>.<br /></p><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comWashington, DC, USA38.9071923 -77.036870710.596958463821153 -112.1931207 67.217426136178844 -41.880620699999994tag:blogger.com,1999:blog-8086830084442751747.post-12575904153309413232024-02-06T13:24:00.000-08:002024-02-06T13:24:15.088-08:00Credit Card Nation<p style="text-align: center;"> Credit Card Nation</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhObnxB4Ji_819VW9Bpx7HIa9AVpP88SHdL1Zi4lBTI6EqlpHS74YyPn-4rvZ59eSlcwgSRi2pMbYN2Fm35piOOkpJo6HJoS2HkBm-0QVzqlo5RuDP9Lc_du5tnXvVzAIqVZgcNcXXdrI3hIQKIiTcGySvZHErkJVG46aUXn8JIb0dEdZelIrLQLmYXjjQ/s661/Credit%20Card%20Debt.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="406" data-original-width="661" height="246" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhObnxB4Ji_819VW9Bpx7HIa9AVpP88SHdL1Zi4lBTI6EqlpHS74YyPn-4rvZ59eSlcwgSRi2pMbYN2Fm35piOOkpJo6HJoS2HkBm-0QVzqlo5RuDP9Lc_du5tnXvVzAIqVZgcNcXXdrI3hIQKIiTcGySvZHErkJVG46aUXn8JIb0dEdZelIrLQLmYXjjQ/w400-h246/Credit%20Card%20Debt.jpg" width="400" /></a></div><p></p><p>Increasingly Americans are just saying "charge it!" This has resulted in America becoming a Credit Card Nation racking up $1.13T in credit card debt. The timeline to the run-up in credit card debt overlaps almost perfectly with the run-up in consumer prices. This author has argued for some time that the "truflation" consumers bear is most likely around <b>+50% over the past 5 years.</b></p><p>With prices up so high and wages stagnant as a forest mushroom, the consumer has been forced to put purchases on the proverbial "loan shark in their wallet" to help cover expenses. By-and-large, the greatest costs borne have been in terms of housing, food, and energy...especially over the past 3 years when inflation has spiked sky high.<br /></p><p>Given the rate of growth in debt, it is going to be nearly impossible for many people to EVER pay off their credit card debt. Especially when the usury rates are almost at 30%. It becomes a vicious cycle punishing people repeatedly for a purchase made on a credit card. Obviously it also punishes the poorest in our country as well because the rich pay off their balances monthly.</p><p>A strong, prudent man from Delaware, where the largest credit card companies are incorporated, sure could make a difference. Perhaps the Consumer Protection Bureau could look into the favorable deals given to credit card companies so they can charge so much interest? Who is on the dole? And why?<br /></p><p>Barring some inclusive and diverse help, there will be a greater rate and dollar amount of defaults in the coming months. Ultimately consumers will slow spending or risk having the spigot of cash turned off. The upside? The dollars you owe today are worth less than the dollars you spent yesterday.<br /></p><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comWashington, DC, USA38.9071923 -77.036870710.596958463821153 -112.1931207 67.217426136178844 -41.880620699999994tag:blogger.com,1999:blog-8086830084442751747.post-12209835544477616232024-02-05T08:56:00.000-08:002024-02-05T08:56:43.300-08:00Dow 50,000<p style="text-align: center;"> Dow 50,000</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHMW8IOlR005N1pKE27IFXr5Ll9ZE7rEQWKVrrTu-U-u_4I7_fWmFEYv6fOWcwHpLGs9DNgRmVSBJqOvxTZoDI6nEi67P4a3KWdVFRqU_fBsOgZN91FMU-IwISw9c5y0uPwb7vKz11qf2VuneaxkASb-TF62LhFW41lSpN1e4lCPVsMTK1eH78Nde5IKQ/s701/40%20Years%20DJIA.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="443" data-original-width="701" height="253" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHMW8IOlR005N1pKE27IFXr5Ll9ZE7rEQWKVrrTu-U-u_4I7_fWmFEYv6fOWcwHpLGs9DNgRmVSBJqOvxTZoDI6nEi67P4a3KWdVFRqU_fBsOgZN91FMU-IwISw9c5y0uPwb7vKz11qf2VuneaxkASb-TF62LhFW41lSpN1e4lCPVsMTK1eH78Nde5IKQ/w400-h253/40%20Years%20DJIA.jpg" width="400" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">Forty years of Dow Jones Industrial Average performance begs the question "When?" not "If?" the DJIA will reach the 50,000 milestone.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">As often discussed on this blog, the greatest dangers to the financial farmer are taxation and inflation. In regards to the DJIA, we can clearly see the effects of inflation; the average has a relatively stable linear trajectory from 1984 to 2024. Albeit, there are some SERIOUS instances of volatility cause tremendous slides and spikes. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">With that said, we are about 32% away from Dow 50,000 or just about a third. Over the past forty years the Dow has risen some 37,000 points or 3200%. Is America 32X BETTER than it was in 1984? Doubtful.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">As best I can tell, the major "advances" over the past 40 years have largely been in the PRICES. Real wages have fallen after having peaked sometime in the early 1970s. What has increased? The price of nearly everything save perhaps for COMPUTING power. And that is what I argue has been the REAL growth over the past 40 years, indeed perhaps even dating back to the invention of the microprocessor itself.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Nearly every component of the Dow, the the members have changed significantly over the past 40 years, have by definition been industrial companies. Over time though those components have weighted more and more towards technology. The same can be said of the broader S&P 500 Index, whose 505 members are a cross section of the largest companies in the United States.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Today fewer companies make more of the profits, and naturally those companies have higher market capitalizations. It has gotten so extreme that less than a dozen technology companies account for the majority of the capitalization. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">There have been several seminal events over the past 40 years of Dow performance which has driven the market significantly higher. In the early 1980s the taxation structure was significantly changed in the United States under President Reagan. This led to an unprecedented boom.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">After the crash in 1987 and recession in the early 1990s I argue the next seminal event was in December 1994 when the Netscape Navigator browser was released. That opened the world to the internet. And even during multiple upheavals during the next 30 years the internet gradually came to dominate global commerce.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">I believe we are at a similar inflection point to December 16th, 1994 the day after Netscape Navigator was released with AI today. Via ChatGPT and distribution via the largest company in the world, Microsoft, I believe the world again is going to pivot higher in terms of real growth.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">What does this mean for the Dow Jones Industrial Average? Assuming more of its components harness AI, or are even replaced in the Index BY AI-dominate companies, the Dow itself should see meaningful increases in the year(s) ahead and not just due to inflation, but rather TRUE growth in terms of productivity. If the Netscape theory holds, then we should see Dow 50,000 sooner rather than later.<br /></div><br /><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comPebble Beach, Del Monte Forest, CA, USA36.5725286 -121.94859378.2622947638211528 -157.1048437 64.882762436178837 -86.7923437tag:blogger.com,1999:blog-8086830084442751747.post-33245922791994916852024-01-28T10:31:00.000-08:002024-01-28T10:31:44.036-08:00How to Buy (& Sell) Gold<p style="text-align: center;"> How to Buy (& Sell) Gold</p><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwI2CyguHhK2uzKkjeNLW8QorXNZvkpOBB60UCRrm_70_Z2nl1XHM4yaiSj8QCETzn-T7Afsq6NdCupD4zRFQO1qg6WBhvQZwBLODC5xNpF6Egw3Zq9jEqJBnrGNRzaTfLq11ceT7BlGEgQR74ogw5P3B8uUva0YT8r6Kwosp1f4lSv6DrgLc5W7-p0Mw/s507/Gold%20Bar%20Sizes.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="217" data-original-width="507" height="171" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwI2CyguHhK2uzKkjeNLW8QorXNZvkpOBB60UCRrm_70_Z2nl1XHM4yaiSj8QCETzn-T7Afsq6NdCupD4zRFQO1qg6WBhvQZwBLODC5xNpF6Egw3Zq9jEqJBnrGNRzaTfLq11ceT7BlGEgQR74ogw5P3B8uUva0YT8r6Kwosp1f4lSv6DrgLc5W7-p0Mw/w400-h171/Gold%20Bar%20Sizes.jpg" width="400" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">Buying gold as a store of value and protection against inflation seems like an easy thing to do, if you know how to do it correctly. Buying gold is only one side of the proverbial coin though, with selling proving to be the challenge many holders face. Thus, it is important to "begin with the end in mind," because <b>it is far easier to buy gold close to spot price than it is to sell it near spot price.</b></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">First, it is important to understand some terms in the gold market. Chief amongst them is <b>spot price</b>. Spot price is the price paid for a certain weight of gold on the global exchanges with New York and London being the primary pricing markets. Gold is almost universally quoted in dollars.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Gold generally trades 24 hours a day, 7 days a week. The vast majority of this trading is via contracts for future delivery of gold. Spot pricing is for a certain moment in time. The spot price also refers to a certain fineness of gold, typically 24K. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">24K implies 99%+ pure gold. Other common measures of fineness include 22K, 18K, 14K, and 10K. An easy rule of thumb to mentally figure out what those different fineness benchmarks mean is to divide by 24K. So for example, 10K gold would be 10/24 or 41.67% gold.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>There are many schemes to swindle the uneducated gold buyer out of their hard-earned cash involving spot price, weight, and purity</b>. That is usually done on the selling side, but buyers need to be aware of what they are really buying.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Generally speaking, <b>retail buyers should attempt to buy physical gold in liquid known instruments.</b> That is a fancy way of saying gold coins and gold bars minted by either governments or the handful of private commercial mints.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">To get the best pricing a buyer should shop around on several of the largest exchanges, eBay is a good starting point. There you can find hundreds of different sellers, many of whom have their own stores outside eBay. Companies with thousands of positive transactions with decades of experience are generally a safe bet. <br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>Depending on what state you live in, there may or may not be sales tax on gold.</b> In California for example, purchases UNDER $1500 are taxed, while those OVER are not. This is meaningful when you purchase say a 20 gram gold bar for $1450 and another $120 is tacked on for sales tax. Imagine if you were charged sales tax every time you bought a stock!</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">If you don't have $1500 or more to buy physical gold, or if you don't want to buy physical gold, there are other good options. Multiple companies have sponsored holdings called <b>Exchange Traded Funds</b>. These ETFs store gold in audited physical vaults with each share of this ETF representing a portion of that gold. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The advantages of a gold ETF are significant. First they are very easy to buy and sell at close to spot prices. Second, you don't have to worry about storage or security for your gold. Third, the sales tax problem goes away. The downside is you don't physically have your gold in hand. There is an old saying in the gold buying world, "<b>if you don't hold it, you don't own it.</b>"</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Along with ETFs there are gold mining companies whose common stock can be readily bought and sold on most exchanges. This offers investors the upside of owning companies with gold mines. The downside is you have to be right twice; once on gold itself and second (perhaps more importantly) on management of these companies. In the Gold Rush era, it was extremely common for investors to own "feet," or literally the measured foot of a gold mine and be paid on that holding quantity every Sunday in dividend.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Buying coins, bars, and nuggets are all ways to physically buy gold. And generally the closer you get to the source, the closer you get to spot price. Dealers typically tack on a 2-5% premium ABOVE spot. If you contact a miner directly it is possible to get nuggets at up to 10% below spot. A lot depends on who you buy from and in what quantity.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">One of the great conundrums of buying gold is that to get close to spot price on the buy you typically have to purchase larger quantities, unless you decide to go the ETF route. The real danger to an investor who has properly sourced a purchase of gold and perhaps needs to sell a portion down the road is SELLING it.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Of all the years I have been active in the gold market I have successfully only sold gold ONCE for above spot price, and that was for a gold bar still inside its protective plastic case. Barring that, you can expect to get a significant haircut SELLING gold; anything from 5-10% (or more!) depending on who you sell to. Seller beware!<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Who you sell to is important. There are all types of schemes to lighten your load. They include trying to confuse you with different weights (pennyweights, grams, troy ounces, etc.) Then there is the old acid test where a piece of your gold is scraped against stone and different acids are applied to determine the fineness of the gold. Of course fineness is then called into question.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">To help avoid these situations, physical gold like 1 Oz U.S. Gold Eagles, 100 Gram Gold Bars, and similar well-known instruments are best. For scrap gold or unknowns, it is almost always best to work with a smelter, but identify ahead of time what your estimated gold content is before a melt. Know the value before you sell!<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">This obviously is where ETFs have a significant advantage over physical gold. Liquidity is as easy as hitting "Sell" on the computer screen. The ETF shares are sold and funds deposited into your account immediately. Another advantage is that since ETFs trade as stocks rather than actual commodities any taxable implications are also treated favorably. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">As Johnny Cash said, "This world is rough, and if a man's gonna make it he's gotta be tough." The same can be said of the gold market. There still is tremendous friction in buying (and especially selling) gold. Scams and cheats abound, a little of the Wild West remains in every gold transaction. But if you know what you want to buy, can identify it precisely, and "buy smart" adding gold to your portfolio can be a smart move.<br /></div><br /> <p></p><br /><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comFort Knox, KY, USA37.8836637 -85.96526869.5734298638211541 -121.1215186 66.193897536178838 -50.8090186tag:blogger.com,1999:blog-8086830084442751747.post-37648339051340756362024-01-27T13:12:00.000-08:002024-01-27T13:12:02.006-08:00Taxflation<p style="text-align: center;">Taxflation</p><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsuniUQ0zZRCYmJmUP6oqW2II760jmfhNaW66eQIX_KtWB3KlQXqJtMkcsckhxwW0yVC3MMU3OswgZB8MLFo3CkuIqXEGmI2nnNfz6ecswFp19_TLLeIDkfANAbgQYrZVvxakRs0O40PRn59PMxsr5c4KjmlETWRpKf2BCL8jQe56crhV4jA75EASnD2w/s781/Uncle%20Sam%20Holdout.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="781" data-original-width="640" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsuniUQ0zZRCYmJmUP6oqW2II760jmfhNaW66eQIX_KtWB3KlQXqJtMkcsckhxwW0yVC3MMU3OswgZB8MLFo3CkuIqXEGmI2nnNfz6ecswFp19_TLLeIDkfANAbgQYrZVvxakRs0O40PRn59PMxsr5c4KjmlETWRpKf2BCL8jQe56crhV4jA75EASnD2w/s320/Uncle%20Sam%20Holdout.jpg" width="262" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">It is hard to believe there was a time in the United States, nay the world, where there as NO income tax! Indeed, for the first glorious 137 years of our Republic there was no income tax. Save for a brief period of fundraising for the Civil War, 3% for incomes over $800 from 1861 to 1872, there was no Federal Income tax. </div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">In 1913, however, the Democrat Party along with Progressive Republicans helped usher in the age of taxation with passage of <a href="https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution" target="_blank">The 16th Amendment</a> which provided that "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The initial 1913 shakedown was minimal; <b>less than 1% of the population paid income taxes at the then 1% rate</b>. Oh how things have changed. The passage of the 16th Amendment quickly led to nearly every State then implementing an income tax. Not to be outdone, many local municipalities jumped on the bandwagon and passed legislation implementing THEIR own taxes.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Over time the RATE of income taxation has gone up in percentage terms considerably, where for many high earners the net take-home pay is less than half the amount earned. For some 110 years the trend has been for the Governments (yes plural; Federal, State, Local) to take MORE.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">This is obviously a serious concern for an investor, and especially a financial farmer because we know how much effort and labor it takes to create capital, grow it, and even harvest it. That entire process is now steeped in taxation. But it gets worse.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">America has long been involved in many conflicts, obviously the Civil War, World War I and World War II immediately come to mind. There have been numerous other large scale conflicts such the Korean War, Vietnam War, Cold War, Iraq Wars, Afghanistan, and also day-to-day funding of parawars in Central America, South America, Africa, Ukraine, and Israel to name but a few. Wars are expensive, very expensive.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">In nearly every single one of the example illustrated above, this country needed to raise funds. This was accomplished by either increasing (starting) taxation or printing more money. Productivity gains, winning wars, and general population growth developing Western States generally took care of the Civil War, World War I, and World War II. We saw taxation rates stabilize and fall. Inflation spiked, but then cooled. The straw that broke the proverbial camel's back, however, was Vietnam.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">To pay for Vietnam a combination of increased taxation and more spending wasn't enough. Ultimately Nixon needed to take the United States off of the Gold Standard in 1971. This allowed the government to print virtually unlimited money to pay for the war and inflate our way out of the financial situation. At least for a time, because we never went back on the gold standard. And the results have been disastrous.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">So what is a financial farmer to do regarding taxflation? The most important thing to do first is realize the danger taxflation poses to your economic well-being. It is in your best interest to make the best tax-advantaged moves you can make. A lot of that has to do with WHERE physically you generate income. Another concern is HOW MUCH income your generate, and it there are ways to reduce that number. Finally, if we are all using the fiat dollar, the one must put serious thought in how to squeeze immediate value from the currency.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Not everyone can move to Florida or Texas, control their income generation, and buy gold, real estate or stocks with whatever dollars they do generate. But for many of us, there are other salient options available such as reducing "friction," ie triggering gains unnecessarily, frequent moves, consuming rather than saving more resources than needed, or wasteful behavior. Those all have meaningful long-term impacts.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Ultimately, growth in real terms springs from increase in productivity. Stores of value, like gold and real estate, help protect against inflation because gold talks toil to obtain while real estate is a need universal good. But growth in a function of productivity...doing something in a new way; faster, cheaper, smarter than we are currently doing it. And that is what we are looking for as financial farmers. <br /></div><br /> <p></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comWashington, DC, USA38.9071923 -77.036870710.596958463821153 -112.1931207 67.217426136178844 -41.880620699999994tag:blogger.com,1999:blog-8086830084442751747.post-41768201996540704082024-01-26T13:03:00.000-08:002024-01-26T13:03:27.609-08:00Escape Velocity<p style="text-align: center;">Escape Velocity</p><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbF_-VTjX6aoaEbYpoQ6knF7aLZtZcMr1cWZa86CK6A1JmOGmDhsgtWX2GH1Qi9LWrJbUR-2ALl9qFtuTOuV-pLdmCGt0DxctnGxCNlEFB256vlnZTTBSINT92UWDYd4at11N4lGInAyr-mCUQVUP2o03a81Trw6NdZcsHZOv-RnRmyZShPYLMudEA2b8/s600/Escape%20Velocity.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="506" data-original-width="600" height="270" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbF_-VTjX6aoaEbYpoQ6knF7aLZtZcMr1cWZa86CK6A1JmOGmDhsgtWX2GH1Qi9LWrJbUR-2ALl9qFtuTOuV-pLdmCGt0DxctnGxCNlEFB256vlnZTTBSINT92UWDYd4at11N4lGInAyr-mCUQVUP2o03a81Trw6NdZcsHZOv-RnRmyZShPYLMudEA2b8/s320/Escape%20Velocity.jpg" width="320" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;"><b>"Escape velocity is the speed that an object needs to be traveling to break free of a planet or moon's gravity well and leave it without further propulsion." - Northwestern University</b></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">As financial farmers striving to build, grow, and ultimately subsist off of our portfolio it behooves us to understand this aerodynamic concept.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">As we have discussed many times, the greatest threats to the investor are taxation and inflation. Generally speaking, a financial metric like the S&P 500 will continue to increase in value over time because it is composed of survivors; ie only companies who remain prosperous remain in the index, while losers are dropped or go bankrupt. But even the S&P 500 fights a tough battle against inflation. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The question investors need to ask themselves is whether real growth is occurring are we simply seeing an increase in prices? Inflation often disguises itself as growth. A superb example is M2, or money supply. Does increasing the supply of money increase its true value? Not if it isn't backed by productivity gains.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Knowing that every dollar is worth less tomorrow than today due to inflation, an investor should seek to capture the value of that dollar sooner rather than later. Over the past 5 years the 3 assets classes which have been able to do that are gold, real estate, and stocks (S&P 500 as the preferred benchmark.)</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">For the worker who has been saving cash the past 5 years it has been brutal. And for those who have been steadily socking it away for decades even worse. The traditional saver has been inflated out of a good portion of their buying power, some 50% in the past 3 years alone!<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">In the example above, a spaceship needs enough velocity to escape a planet's gravity well. Velocity in our situation are resources, whether gold, real estate, or stocks. Assets that not only hold their value, but perhaps offer growth potential as well. The "gravity well" can be considered that suffocating burden of taxation and inflation which erodes true value and stifles growth.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The reason we Invest Like A Farmer is to achieve sustained growth over time. That rarely happens by chance. An investor needs to understand the value of their paper money and how best to deploy it quickly as fiat currency apparently has a half life in the current environment of about 3 years.<br /></div><br /> <br /><p></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comHouston, TX, USA29.7604267 -95.36980281.4501928638211545 -130.5260528 58.070660536178849 -60.2135528tag:blogger.com,1999:blog-8086830084442751747.post-22277565972531429162024-01-23T10:14:00.000-08:002024-01-23T10:14:49.757-08:00Why You Can't Buy a House<p style="text-align: center;"> Why You Can't Buy a House</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_sTyjOxeNfKcZK0RdnIKuEViKYF4xY7f2BkQGUMVu-vZM8f5rdAhAOkep6gxCNUgAEUKTG-nr3JjEXX8yGQsWkQrK6gBeqxpfi9XkV97s3A2GYpomGC8SktTB0cvCFEvRflJtp-b36aD8w4g-Ox7O6iyTajJQQoN0DUhsbM7fYkL2e6eleBwb9HNrdkw/s1277/Home%20Price%20to%20Income.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="488" data-original-width="1277" height="153" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_sTyjOxeNfKcZK0RdnIKuEViKYF4xY7f2BkQGUMVu-vZM8f5rdAhAOkep6gxCNUgAEUKTG-nr3JjEXX8yGQsWkQrK6gBeqxpfi9XkV97s3A2GYpomGC8SktTB0cvCFEvRflJtp-b36aD8w4g-Ox7O6iyTajJQQoN0DUhsbM7fYkL2e6eleBwb9HNrdkw/w400-h153/Home%20Price%20to%20Income.jpg" width="400" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">You can't afford to buy a house because the <a href="https://www.longtermtrends.net/home-price-median-annual-income-ratio/" target="_blank">Home Price to Median Household Income Ratio</a> is at the highest level ever at <b>7.56</b>. Historically that ratio has been around 4. Things are even worse, much worse, if you are in California.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Many of the small, medium and large cities in California are into the double digits. Are you a young family considering moving to Santa Barbara, CA? Good luck. With a median household income of $89,000 relocating to this beautiful city with a median home price of $2.4M results in a HP2MHIR of 27!</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">California is so bad because of the effects of <a href="https://en.wikipedia.org/wiki/1978_California_Proposition_13" target="_blank">Proposition 13</a> which has allowed a singular generation to capitalize on the real estate market by essentially capping their taxes while simultaneously allowing for unlimited upside potential. This law has kneecapped future generations. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Historically real estate has been an IDEAL investment (Income, DEpreciation, Appreciation, Leverage), but with a HP2MHIR at 7.56 (or worse) what is a young, ambitious gainfully employed American family to do?</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Well, first it helps to have 2 incomes. Ever since more women have entered the workforce rather than raise families the HP2MHIR has steadily risen. This makes sense. Money will chase good housing, and only those who have more money can get into better housing.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">This brings up the next point; it is far better (from a housing standpoint) to have no children. Children are expensive, and the cost of childcare, either directly or indirectly, is tantamount to LOSING one income. Good housing incentivizes childless couples, while penalizing families with children.<br /></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">All of these factors has lead many young families to be "trapped" in a never-ending renting loop that shows zero signs of abating. These families can afford to rent in a area that has good schools perhaps, but there is little to zero chance of them ever being able to purchase in these very areas.<br /></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">As the population grows there hasn't necessarily been in a growth of good places to live, or housing for that matter; demand is increasing, but supply is not. By definition, prices will continue to march higher as demand outstrips supply. Naturally the demographics will also change. Santa Barbara is a good example.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">What has historically been a sleepy surf town just two hours from Los Angeles, Santa Barbara has now become a large open air retirement enclave with many East Coast urban transplants along with many from the Chicago area whose politics fit neatly in their new home. The result of this migration has been the establishment of the owner class and the servant class. This scenario is playing out daily throughout coastal California.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">What is a young family that wants to have children to do? Immediately, probably the best course of action is to prioritize the best schools for your kid(s) even if that means renting. Alternatively, you could also look to a 2nd or 3rd tier area to live which may not have everything you want, but it may have everything you NEED.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">The United States is vast, so there really should be no housing shortage. Over the longer term, the best way to absorb the excess demand is to create more housing. There is plenty of room for multiple entire cities to spring up across the country. Creating more housing will lower the HP2MIHR.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The most obvious, and impactful, solution would be to increase productivity in the United States with a combination of monetary and fiscal policy that is pro-growth; the impact of this would be to significantly REDUCE inflation.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Inflation has bee the true scourge on the economy, causing prices to rise over 50% in the past 3 years alone. Couple that with dilution in the value of American Citizenship and we have some serious problems. The road ahead for potential home buyers is a slog. Unless there is a meaningful drop in prices, an increase in income, or both we have a polarized future of owners and renters who can never own.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comSanta Barbara, CA, USA34.4208305 -119.69819016.1105966638211555 -154.8544401 62.731064336178846 -84.5419401tag:blogger.com,1999:blog-8086830084442751747.post-37901661559878112392024-01-17T10:39:00.000-08:002024-01-17T10:53:01.069-08:00Wage Collapse<p style="text-align: center;"> Wage Collapse</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiG8lkBHrE3-8huMsjQ89JfDW2FfhN1TnbMgRpLCxse2F3IkZP43sC9UoQB3Yu0755lXhDQTwyN3sjdnCW-7K0ngf_djvSbK7oKPyLhVKWe0l4ER3j945BYLdjIg5kT5xCzDhTi2HwP59_5BdDhuoGFZtsLkO_f8sGMTZioA3l22ZMFPCvjr_nnSOQLW7s/s1174/Wage%20Collapse.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="624" data-original-width="1174" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiG8lkBHrE3-8huMsjQ89JfDW2FfhN1TnbMgRpLCxse2F3IkZP43sC9UoQB3Yu0755lXhDQTwyN3sjdnCW-7K0ngf_djvSbK7oKPyLhVKWe0l4ER3j945BYLdjIg5kT5xCzDhTi2HwP59_5BdDhuoGFZtsLkO_f8sGMTZioA3l22ZMFPCvjr_nnSOQLW7s/w400-h213/Wage%20Collapse.jpg" width="400" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">One of the greatest challenges Americans have faced over the past 3 years is the collapse in real wages caused by poor fiscal and monetary policy. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">As an investor, one of the primary goals is to <b><i>increase the value of your portfolio over time</i></b>. Value is typically associated with a dollar sign, ie the more your portfolio is worth in dollars over time, then logically one would assume that it is more valuable as well. That assumption would be a serious mistake.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">M2, or money supply, generally increases over time for a variety of reasons. Ideally that increase is stable, predictable, and backed by productivity gains. Since the US Dollar is a <a href="https://en.wikipedia.org/wiki/Fiat_money">fiat currency</a> (ie not backed by anything but "the full faith and credit" of the United States government), <b>an investor should keep a close eye on the M2</b>. Why?</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">As M2 increases without a corresponding increase in productivity or physical commodity backing, it DILUTES the value of every other dollar. So say you're a guy named Dollar Bill just minding your own business looking to make a purchase of a good or service. And out of nowhere a hundred, perhaps thousands of NEW Dollar Bills appear out of nowhere and want the SAME good or service that you do!</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The net effect of too many Dollar Bills is dilution in purchasing power. Value has decreased. <b>The illusion created by flooding the country with dollars is one of prosperity and wealth, the reality is just the opposite. </b>Wage earners feel the bite of this con worse than anyone else because wages are typically fixed, whereas the monetary supply, stock market, and gold market react immediately and exactly to the con.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Consider the charts below representing 5-year snapshots. The M2 increased by some $7,000,000,000,000 ($7 Trillion) over the past five years in nominal terms or roughly 50% MORE U.S. Dollars were created out of thin air. Not surprisingly, the stock market, as measured by the Dow Jones Industrial Average, also "gained" some 50%. As did the price of gold. Did your wage increase by 50%? Probably not.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMv6Jq9YIv8SLuBPQ830xi4jkg74odAqh8EVCBuwaIYCVQHPYlBxZwz5IX3SOpXW8FvBNwwAEBd0pYPhqHW5DkFparChpaKfKHWc1Y6cU1JjI8WyL7TFAdzZCAIwi0GdicRcaqQoYelToihBtgwSyTyXiLFcZq8z7i5FApD5h-Hb4Pd5rXOMlOFKvu3eA/s792/5YR%20Snapshot.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="646" data-original-width="792" height="326" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMv6Jq9YIv8SLuBPQ830xi4jkg74odAqh8EVCBuwaIYCVQHPYlBxZwz5IX3SOpXW8FvBNwwAEBd0pYPhqHW5DkFparChpaKfKHWc1Y6cU1JjI8WyL7TFAdzZCAIwi0GdicRcaqQoYelToihBtgwSyTyXiLFcZq8z7i5FApD5h-Hb4Pd5rXOMlOFKvu3eA/w400-h326/5YR%20Snapshot.jpg" width="400" /></a></div><br /><div class="separator" style="clear: both; text-align: left;">As a proactive investor, it behooves you to understand <b>the greatest challenge you face is probably inflation, especially if you are a wage earner.</b> And broadly speaking, probably 80%+ of all Americans are wage earners; whether you are a blue collar worker on an assembly line with an hourly salary or a white collar worker behind a desk or in an office with a fixed salary or even a "no collar" worker on the gig economy with a hybrid salary, the vast majority of us are all subject to a recurring price paid for labor. Typically the wage lags, or never catches up, the price charged by the manufacturer or service lead.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">What does this all mean? Vigilance coupled without action is useless. So the prudent financial farmer needs to have what I call an "<b>Argentine Mindset</b>." Americans can learn a lot from socialist countries that are corrupt and face raging inflation. Namely, what do their citizens do with cash when they get it from their jobs?</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Answer: They dump local currency ASAP and turn it into (pick one or more): a more stable currency, gold, real estate, stocks and/or physical goods or tools. They literally cannot spend it fast enough because it depreciates so rapidly. Indeed, it has been recounted frequently that inflation was so bad in the <a href="https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic" target="_blank">Weimar Republic </a>(pre-WW2 Germany) that a cart full of banknotes was left outside a bakery. When the owner returned, the cart was stolen.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>If the goal is to increase the value of a portfolio over time, one should understand the true value of their country's money and deploy it accordingly. </b><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comUnited States37.09024 -95.7128918.780006163821156 -130.869141 65.400473836178847 -60.556641tag:blogger.com,1999:blog-8086830084442751747.post-10894402649554637302024-01-13T10:02:00.000-08:002024-01-13T10:02:38.418-08:00Corruptflation<p style="text-align: center;"> Corruptflation</p><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgksrV0bcj_q8fO6vbHx9O1iiwSJJQa7LO2bj0ixp64KWrmcs-uogCz6qdo-jEbcH6ucobox2p4vua3glrMjmuvwed8kolpDNXbbU0qE9VCNlmcQO0dUg81nfFtWBOqpfLNogKRENEI2U32GsydgyTUDqfGxDOXr1-U9E05y-MwoOzU0HGUWHZvOuBJwf4/s2000/Purchasing%20Power%20by%20State.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1666" data-original-width="2000" height="334" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgksrV0bcj_q8fO6vbHx9O1iiwSJJQa7LO2bj0ixp64KWrmcs-uogCz6qdo-jEbcH6ucobox2p4vua3glrMjmuvwed8kolpDNXbbU0qE9VCNlmcQO0dUg81nfFtWBOqpfLNogKRENEI2U32GsydgyTUDqfGxDOXr1-U9E05y-MwoOzU0HGUWHZvOuBJwf4/w400-h334/Purchasing%20Power%20by%20State.jpg" width="400" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">"Where there is smoke, there is fire," the old adage goes. So too is the relationship between corruption and inflation; where one finds raging inflation, inevitably one will find corruption pushing those prices up via any number of nefarious schemes.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">As per the Bureau of Labor Statistics, consider the following <b>facts</b> since January 2021: Overall Inflation UP 17.2%, with Food UP 33.7%, Housing UP 18.7%, and Energy UP 32.8%. If you are a small business owner or someone working in the private sector paying full boat for your mandated healthcare insurance, that number is approaching <b>UP 50%</b> depending in which state your reside. It is no wonder that inflation is often referred to as "<b>the silent killer.</b>"<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>When too many dollars chase to few goods or services, inflation is the natural result.</b> Too few goods or services are often a victim of government regulation which often seeks to control outcomes by restricting free market choice. Stifling private competition is a classic tactic of big government.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Joe Biden's "<a href="https://en.wikipedia.org/wiki/Inflation_Reduction_Act" target="_blank">Inflation Reduction Act</a>," culpably passed by Congress, is as laughable as a Netflix comedy special. It may have done more damage to America than anything since Obamacare was forced upon us. The destruction to the economy is in the trillions, as <b>freedom of choice has been destroyed and replaced with mandatory purchases at government mandated prices</b>.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Consider how crazy things have become: If you do not purchase healthcare insurance as a legal California resident, you can be thrown in jail. Yet, if you are an illegal resident in California, you are provided with free healthcare insurance. Think about that one.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">How did we get here? Tremendous power begets tremendous lobbying. And <b>the taxpayer citizen really has no representation at an individual level anymore</b>. The best a taxpayer citizen can hope for is perhaps membership in a labor union to shake down other taxpayers or such wealth that they cannot be ignored by their "representatives."<br /></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Barring those two scenarios, a taxpayer citizen is left at the whim of chance. The net result of fiscal corruption results in inflation which reduces your purchasing power. <b>Your "fair share" has silently become whether you can afford to buy a house, start a family, or even retire in dignity.</b></div><div class="separator" style="clear: both; text-align: left;"><b> </b></div><div class="separator" style="clear: both; text-align: left;"><b> </b></div><br /> <p></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comWashington, DC, USA38.9071923 -77.036870710.596958463821153 -112.1931207 67.217426136178844 -41.880620699999994tag:blogger.com,1999:blog-8086830084442751747.post-42846832936789267142024-01-11T10:34:00.000-08:002024-01-13T10:19:04.740-08:00A Compelling Future<p style="text-align: center;"> A Compelling Future</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwu55GT_R50HiTNNLtbnAVqXT5ObY3tSP1fpzRZlpq6aewKrQHg1nza7JAgdKvdz0yWROOIBleHRpioRHqU2KqMfaPWJcMOGg6uGqBaGR7p-9M1Sbgd_P1dHZrzXiD2G7gAawihwDBPAmD_HzU7n_Ey4EC2eQn02m6Xg6tFsJ100we5PwNTbJ3b39FFhw/s300/Sailboat%20in%20Caribbean.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="168" data-original-width="300" height="224" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwu55GT_R50HiTNNLtbnAVqXT5ObY3tSP1fpzRZlpq6aewKrQHg1nza7JAgdKvdz0yWROOIBleHRpioRHqU2KqMfaPWJcMOGg6uGqBaGR7p-9M1Sbgd_P1dHZrzXiD2G7gAawihwDBPAmD_HzU7n_Ey4EC2eQn02m6Xg6tFsJ100we5PwNTbJ3b39FFhw/w400-h224/Sailboat%20in%20Caribbean.jpg" width="400" /></a></div><p style="text-align: left;">We all need a compelling future to motivate us to do our best in life. The opportunity for a compelling future has traditionally been the greatest gift offered by these United States to its citizens. It is a belief that with strong motivation and diligent work one's goals could be achieved because we live in a society built on a bedrock of freedom and justice.</p><p style="text-align: left;">Visualization is a big component of achieving one's future. Many articles and studies have been written about the importance of seeing your future self. Indeed, it has often been said that one "should start with the end in mind." Meaning imagine yourself at a later date and contemplate how you got there. Just about this time of year though, New Year's Resolutions begin to fade and often drop by the wayside as we fall back into old comfortable patterns.</p><p style="text-align: left;">For most people investing and securing that compelling future are the same thing, or at least should be. Additive steps in the right direction over time begin to compound. And like most things, over time greater and greater experience leads to greater resources and success. Chance definitely plays as part. As does your starting block. But time is a great equalizer in those regards.<br /></p><p style="text-align: left;">So for the young that compelling future is at first a fight for survival, honing one's skills, and becoming useful. As time passes that utility can be transformed into further growth and creation, from starting businesses to mastering valuable skills and building meaningful relationships. Utility becomes relevance.</p><p style="text-align: left;">Once relevance is achieved in the United States, the stars are the limit. Relevance can lead companies, raise capital, create new industry, unleash productivity, and a host of other meaningful results. Relevance by its very nature has a certain sanctity about it because others trust and believe in the potential of that individual. The flip side of the relevance coin is a higher standard to which that individual must be held.</p><p style="text-align: left;">It is this author's opinion that <b>the most compelling future leads to relevance</b>, regardless of industry or profession or even net worth in the traditional sense of dollar signs. As individuals, we can tell by the fruits of our labor the good accomplished. Steve Jobs considered his relevance most importantly as a toolmaker, not a tech titan or a visionary or a billionaire. But he ended up being all those things too.<br /></p><p style="text-align: left;"> </p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comMonterey, CA, USA36.6002378 -121.89467618.2900039638211567 -157.0509261 64.910471636178841 -86.7384261tag:blogger.com,1999:blog-8086830084442751747.post-17542273891307915312024-01-10T09:32:00.000-08:002024-01-13T10:22:27.920-08:00Systemic Inflation<p style="text-align: center;"> Systemic Inflation</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoM6ctkFfWHuI8StqeNFShtnbXybuA9OBCVSnHQf9zwtzjj68w5lGLEnrE1wcGpRBTsHbobkgTX_s-MMJmg9M8L3dBswqc1-HMZTn8Fqw2QtXOv-TRDpz8ap4mfaOdHKyGab2fPgTOs9fSPh7x21ynbsApCzBzcyVCUbzqXtQgy01oA1VZTue3_kCO7Fc/s636/Systemic%20Inflation.jpg" style="margin-left: 1em; margin-right: 1em;"> </a><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoM6ctkFfWHuI8StqeNFShtnbXybuA9OBCVSnHQf9zwtzjj68w5lGLEnrE1wcGpRBTsHbobkgTX_s-MMJmg9M8L3dBswqc1-HMZTn8Fqw2QtXOv-TRDpz8ap4mfaOdHKyGab2fPgTOs9fSPh7x21ynbsApCzBzcyVCUbzqXtQgy01oA1VZTue3_kCO7Fc/s636/Systemic%20Inflation.jpg" style="margin-left: 1em; margin-right: 1em;"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipkV8rVNwntioUfArp7aLvf_qwMzSliDJyea4ryonzV9RI2a26qE-4lzJqafp3cp76NFRdrMbbHHbfchMza2EwSVXdE-f9TwNDD-T6XdX-qUsOnUGaZo1ynClZJdJHxnvwahWVm-hBMwMAj0ZrDEgFKmDZixc3cA3UwNqpjKg76SHohA6Zef20wnqk1qY/s710/Systemic%20Inflation.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="479" data-original-width="710" height="270" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipkV8rVNwntioUfArp7aLvf_qwMzSliDJyea4ryonzV9RI2a26qE-4lzJqafp3cp76NFRdrMbbHHbfchMza2EwSVXdE-f9TwNDD-T6XdX-qUsOnUGaZo1ynClZJdJHxnvwahWVm-hBMwMAj0ZrDEgFKmDZixc3cA3UwNqpjKg76SHohA6Zef20wnqk1qY/w400-h270/Systemic%20Inflation.jpg" width="400" /></a></div> <br /></div><div class="separator" style="clear: both; text-align: left;">Systemic Inflation is one of the greatest risks to the survival of America. The debasement of the U.S. Dollar has resulted in wholesale destruction of value. And the rate of inflation is only <i>increasing</i> as poor monetary and fiscal policy has resulted in surging costs for diminishing values.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">What is inflation? Inflation in practical terms is <b>too much money chasing too few goods or services</b>. "Money" can be considered the Federal Reserve's supply of funds to facilitate the functioning of the economy. Per Trading Economics: "Money Supply M2 in the United States averaged 5163.74 USD Billion from 1959 until 2023, reaching an all time high of 21703.20 USD Billion in July of 2022 and a record low of 286.60 USD Billion in January of 1959." -Source, Federal Reserve.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Visually that data looks like this:</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiU1BGzExSnT1tqhSr1nrSXM4LxVuZHOKwhG5t7DHK4rtvd0rIFNzuTE7fHVhcNNt9Gy_p4LCQYoan4CNDh5ytZUILocESpPY9dkFQdwzvsVnHyLUZ36PBaoZfA0MPYlSXWo00bo3BrXidLfBFANHtO2qbZMLtWFsF_FDL68AUSR29YC9Nup-yT1WIg-1A/s636/M2%201959%20to%202023.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="329" data-original-width="636" height="208" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiU1BGzExSnT1tqhSr1nrSXM4LxVuZHOKwhG5t7DHK4rtvd0rIFNzuTE7fHVhcNNt9Gy_p4LCQYoan4CNDh5ytZUILocESpPY9dkFQdwzvsVnHyLUZ36PBaoZfA0MPYlSXWo00bo3BrXidLfBFANHtO2qbZMLtWFsF_FDL68AUSR29YC9Nup-yT1WIg-1A/w400-h208/M2%201959%20to%202023.jpg" width="400" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">From a pragmatic perspective, what this means is that <b>every dollar you have in your pocket today is worth less tomorrow, and increasingly so.</b></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">The problem with fiat currency (money not linked to a physical commodity, like gold) is that is has unlimited notional "value." The Federal Reserve, at the direction of the U.S. Treasury and Congress can literally create as much money as they need to fund whatever they want. Hence, as there is no "check & balance' on the U.S. government. There is <b>no limit</b> to the money that can be created.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">It wasn't always this way. In fact, looking at the data it is clearly obvious when things started to change. The moment the United States went off the <a href="https://en.wikipedia.org/wiki/Gold_standard">Gold Standard</a>, then under FDR made it <a href="https://en.wikipedia.org/wiki/Executive_Order_6102" target="_blank">illegal for Americans to actually own gold</a>, then finally to create money to fund Vietnam Nixon <a href="https://en.wikipedia.org/wiki/Nixon_shock" target="_blank">took us fully off</a> the Gold Standard. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The level of political corruption *might* have been as bad in the past as it is now, but at least there was some "check & balance" on the currency because it was linked to a physical commodity. Now there is <b>no tether</b> supporting the value of the dollar, which as we have well seen has spiked to whatever sellers are willing to charge. $10 for a gallon of milk? Sure. $100,000 for a new truck? OK. $2,000,0000 for a starter home? What a deal!</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Systemic Inflation has ravished our country and there is no end in sight. Here at Invest Like A Farmer we like to provide readers with some actionable solutions. First, as a society we need to take back control over our currency. Please support <a href="https://www.investlikeafarmer.com/2023/08/gold-money-act.html" target="_blank">The Gold Money Act</a>, which is a first step to restoring some semblance of sanity to our monetary policy.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">The GMA will be a tough act to pass, as politicians are afraid of gold; it transfers power away from them and returns it to the citizens. If you live in an area of the country where your voice is ignored and your vote doesn't count, then there are a couple other options besides seeking representational relief.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Knowing that Systemic Inflation is only getting worse, the antidote(s) can be found in several areas. Since the definition of inflation is <b>too much money chasing too few goods or services</b>, it would behoove the inflation weary to own those goods and services which are being pursued by ever-increasing dollars. Who doesn't like to be wooed?<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Land seems to make sense as there is a finite supply and you can also live on it. And for some, you can also sustain some level of farming. Obviously gold itself makes sense as it is both finite and extremely portable, liquid, and valuable. Ownership of select companies that are <i>increasing</i> their profitability in real dollar terms while also <i>decreasing</i> the number of outstanding shares.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">A couple more esoteric plays: Locking into long-term contracts with either insurance companies or city, state, federal governments in which you pay a fixed cost indefinitely and they bear the burden of Systemic Inflation. Buying tools that increase your business productivity on favorable long-term fixed debt terms.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Systemic Inflation is like gravity; it is inevitable due to the human condition (that's a nice way of me saying corruption, malfeasance, and downright stupidity.) The best we can do as financial farmers is protect our farms by taking concerted, concrete actions to stymie Systemic Inflation.<br /></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comtag:blogger.com,1999:blog-8086830084442751747.post-13169994422629703652024-01-03T09:32:00.000-08:002024-01-03T09:32:48.011-08:00Obsolete Cut<p style="text-align: center;">Obsolete Cut</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpxkHnyY-0CA5gPjrvq9RvWgMpiASORavVNDeA2T0nwlRUEd7kVB6qEXS5CyFaJBzBRNpWG78Nv2etgWDnCg9osI5FyhWw3avTitmHtEfjyy7YbOlnrckkpdIi_y_tm7dMrHoFsZxLJ8lsVUdNVZXnwkSEhMjxAEzY2pNp4sDxHoyBnvkkkrzpU_KCPC0/s389/5%20Ct%20Diamond%20Ring.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="388" data-original-width="389" height="319" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpxkHnyY-0CA5gPjrvq9RvWgMpiASORavVNDeA2T0nwlRUEd7kVB6qEXS5CyFaJBzBRNpWG78Nv2etgWDnCg9osI5FyhWw3avTitmHtEfjyy7YbOlnrckkpdIi_y_tm7dMrHoFsZxLJ8lsVUdNVZXnwkSEhMjxAEzY2pNp4sDxHoyBnvkkkrzpU_KCPC0/s320/5%20Ct%20Diamond%20Ring.jpg" width="320" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">In the future, the price of every diamond, regardless of cut, color, clarity or carat, will approach $0. How could this be possible? Aren't diamonds some of the most valuable objects on Earth? Haven't diamonds become almost mythical in love? Don't thousands of people each year die mining diamonds because they are so valuable? How can Invest Like a Farmer make such a bold prediction? Read on dear readers.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">For those not in the diamond industry, you have never had it better to purchase a special diamond for your true love. Prices over the past 20 years first stagnated, then started falling, and have now completely collapsed. Mind you, for the diamonds considered "natural" they have gone down at a slower rate. But the writing is on the wall.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Using technology developed in the 1950s for producing diamonds for commercial use, think saws, grinders, lasers, etc., retail diamond creation has advanced at a pace akin to the size of PCs. What was once the size of a garage, now line rows upon rows of desk-sized pressure & heat kilns in multiple diamond farms around the world. These machines are "seeded" with small diamond specs and churn our diamonds with similar or better characteristics of natural diamonds. Color, clarity, and carat can all be custom-grown. The final "c," cut, is still finished with some of the old techniques.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Natural diamonds are considered those stones mined from the the earth which were created by the heat and pressure of the Earth over thousands of years. Chemically they are identical to man made diamonds; both are a form of the element carbon.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The implications of this science are monumental, but as usual mainstream media has completely ignored it. The wealth destruction to nearly every married household is significant, especially for those large-diamonded second & third wives. Kidding, aside from a national perspective we're talkling ~100M+ diamond rings being reduced in value to the gold or platinum in their settings plus some notional value of the stone. Cumulatively this is the in $500B-$1T+ range.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">De Beers and the diamond monopoly is in a tough position now. They will need the mother of all marketing campaigns to convince the public that a natural diamond, a stone typically mined in Africa by poorly paid laborers under miserable conditions run by dictatorships bent on turning these diamonds into cash...yes the proverbial "blood diamond"...and then shipped for additional low cost labor to India for polishing typically by children, then a final polish in Antwerp then off to New York and beyond is BETTER than a man made stone which can be had for a fraction of the price and minimal social or environmental impact.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The only marketing campaign powerful enough to do this would be to pay the world's most powerful influencer to let her boyfriend know she prefers a natural diamond. I'm thinking De Beers could give the diamond industry one last gasp if it launched a "<b>Love is Natural</b>" diamond campaign. And yes, this would almost certainly involve Travis Kelce proposing to Taylor Swift with a large natural diamond.<br /></div><br /><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comtag:blogger.com,1999:blog-8086830084442751747.post-44497187929028455312023-08-08T13:08:00.000-07:002023-08-08T13:08:54.372-07:00Gold Money Act<p style="text-align: center;">Gold Money Act</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBmWbdSiHX_XjPXjG0ioiBK6nTJBrtFGhA1ddF6PoFp0ggF6TN1H5I1J3sOmstWTpANZrAbL655VQNkH9g1KKCI4WgaE6E7YMCZs106N7Ds74f4ZDfgDpONGAUL1B4pgXBJMwm51qme-HW6Gi5vs_L8Tid4B8xrxCXImlbbigkGwEIOeJ4iwTB6VEhr2A/s600/2023-1-oz-American-Gold-Eagle-Coin.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="600" data-original-width="600" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBmWbdSiHX_XjPXjG0ioiBK6nTJBrtFGhA1ddF6PoFp0ggF6TN1H5I1J3sOmstWTpANZrAbL655VQNkH9g1KKCI4WgaE6E7YMCZs106N7Ds74f4ZDfgDpONGAUL1B4pgXBJMwm51qme-HW6Gi5vs_L8Tid4B8xrxCXImlbbigkGwEIOeJ4iwTB6VEhr2A/s320/2023-1-oz-American-Gold-Eagle-Coin.jpg" width="320" /></a></div><p>"The <a href="https://en.wikipedia.org/wiki/United_States_Mint">United States Mint</a> founded on April 2nd, 1792, some 231 years ago, is almost as old as our nation. As a bureau of the Treasury, it is responsible for producing coinage for the country to conduct commerce and also responsible for controlling the movement of bullion. It does not produce any paper money. That job is fulfilled by the Bureau of Engraving and Printing. Currently there are four active coin-producing mints: West Point, Philadelphia, Denver, and San Francisco. Legal tender coins of today are minted solely for the Treasury's account."--Largely sourced from Wikipedia</p><p>The primer above was to provide the reader with a synopsis of the U.S. Mint. This author hopes to persuade readers of this blog to ask of their elected representatives for the immediate introduction, debate, and passage of a "<b>Gold Money Act</b>" whereby: <b>U.S. Gold Eagles be available for purchase or sale at any FDIC-insured retail banking institution in the United States at current spot gold price.</b></p><p>This legislation would allow Americans to buy and sell <a href="https://en.wikipedia.org/wiki/American_Gold_Eagle" target="_blank">U.S. Gold Eagles</a> at current spot gold price at any FDIC-insured bank in the United States. For far too long, many Americans have not had the opportunity to purchase or sell United States Gold Eagles. The nation's gold coinage should be widely available to all.<br /></p><p>Gold Eagles, which are issued by the U.S. Mint and assigned nominal values by the U.S. Treasury, are legal United States currency. Yet, currently the only way for most American to acquire or sell the Gold Eagles is via an antiquated network of coin dealers, auction platforms, or pawn shops. It is particularly burdensome for Americans buying and selling small amounts of gold via these methods; they are typically charged usurious commission rates. <b>The Gold Money Act </b>would help democratize the ownership of assets that are already minted and distributed in our country and also provide a fair means of liquidity for all.</p><p>I encourage all readers of this blog to share this post with their colleagues, friends, and family in the hopes of getting a nonpartisan piece of legislation introduced and passed which will largely benefit all Americans. Access to gold is a hallmark of a free society. It will also help put to rest a shameful piece of history in which <a href="https://en.wikipedia.org/wiki/Executive_Order_6102" target="_blank">Executive Order 6102</a> made owning gold in this country illegal.</p><p>From almost time immemorial gold has proven to be an excellent store of value, especially so in times of rampant inflation. There is no good reason why Americans can not buy and sell their own currency with ease at any <a href="https://www.fdic.gov/" target="_blank">FDIC</a>-insured bank. <b>Let them hear you in the halls of Congress!</b><br /></p><p><br /></p><p style="text-align: center;"><br /></p>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comWashington, DC, USA38.9071923 -77.036870710.596958463821153 -112.1931207 67.217426136178844 -41.880620699999994tag:blogger.com,1999:blog-8086830084442751747.post-68248686777288753422023-04-15T15:15:00.004-07:002023-04-17T07:44:08.396-07:00Buy Borrow Die<p style="text-align: center;">Buy Borrow Die</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiON80hkV67VmfGxMQAETmaz5T43kNLmusHsxn8YH2h-DlLBiBwhFqmWraOYIHJxsPippOV6VNALlBsHS40nb0Tr_j2Uik6ZpZBdRoYfwxp819YcNi3jUS9eqwjlHv1jp4xlsNjWBD5dzkpXxzgBSOUCu1W-PMc0237OddqnTwTYsTTHUB8nps4ueTc/s1024/A-10.jpg" style="margin-left: 1em; margin-right: 1em;"></a><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiON80hkV67VmfGxMQAETmaz5T43kNLmusHsxn8YH2h-DlLBiBwhFqmWraOYIHJxsPippOV6VNALlBsHS40nb0Tr_j2Uik6ZpZBdRoYfwxp819YcNi3jUS9eqwjlHv1jp4xlsNjWBD5dzkpXxzgBSOUCu1W-PMc0237OddqnTwTYsTTHUB8nps4ueTc/s1024/A-10.jpg" style="margin-left: 1em; margin-right: 1em;"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhduYW1HVCGccjAUueYEXnUbCnbSLnFjliu3nwA0XsT3WlfLasCqSFEj0lJe4hIwjJokFLNxfbVm9qBWsme160mOPNoxV_dJYi3FIULrsgaOIiqvk8lJfHNNfHDpkc_P_maSPQbWoXbghF6Zz_CrQk0mb3mdRIf_1P33QdqFIyOZqSObMtrtRSHghqc/s1024/Redwoods.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="683" data-original-width="1024" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhduYW1HVCGccjAUueYEXnUbCnbSLnFjliu3nwA0XsT3WlfLasCqSFEj0lJe4hIwjJokFLNxfbVm9qBWsme160mOPNoxV_dJYi3FIULrsgaOIiqvk8lJfHNNfHDpkc_P_maSPQbWoXbghF6Zz_CrQk0mb3mdRIf_1P33QdqFIyOZqSObMtrtRSHghqc/s320/Redwoods.jpg" width="320" /></a></div><br /></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">On this solemn day it is important to recognize that indeed only death and taxes are certain. To help assuage this bitter reality, let us focus our efforts today on one of the most effective investing strategies of all time termed "<b>Buy Borrow Die</b>." </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The fundamental premise behind the BBD strategy is that investors should purchase or create assets that will act as functional ATMs for life. <b>An asset is defined as something that pays YOU to own IT</b>. Assets can come in many shapes and sizes, the most common are real estate, companies, commodities, stocks & bonds, and intellectual property. There are others as well, some ingenious like a music catalog for example.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Regardless of the asset type, BBD's major function is to amass a significant portion(s) of said asset(s) that you own or control. <b>The ideal holding period is forever </b>because realizing a gain triggers taxation and also loss of that asset. And it also prevents the next, and crucial step, in the BBD approach: Borrow.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Once an asset is secured, then the investor can borrow against it. Typically the borrowing is accomplished via a loan against the underlying value of the asset; for example suppose an investor buys $100,000 worth of stock, typically the brokerage company will allow said investor to borrow up to 50% of that amount on margin. The margin interest, as of now at least, is considered an investment expense and can be "written off" by the investor.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">The more an asset is worth, the more an investor can draw on it over time. The entire real estate industry is built on this premise, but in reverse; mortgage ("mort" from the French for "death") companies profit handsomely from lending large amounts of money secured by real estate. The BBD strategy works in the opposite, where the investor is his own bank borrowing against his own assets and paying interest to himself. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The asset(s) might start out small initially, but over time they can grow like mighty redwood trees. Investing, like most of life, is built around a "surviorship bias," ie if you survive past a certain point then you have a good chance of reaching the next point, and so on until what was once a fragile sapling is now a towering, nearly impervious behemoth. If an investor is prudent in his borrowing, the asset(s) can long outlive him.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The final genius of the BBD plan is the "step-up" basis recorded upon the investor's death. Suppose that $100,000 worth of stock was purchased in say 1950 for example. Assuming an annual rate of return of say 8%, upon death that $27,000,000 in stock would have its cost basis "stepped-up" to a cool $27,000,000 for the heirs. And for them, the real gravy train begins because they can now utilize the BBD strategy all over again!</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b style="font-family: verdana;">Ready for a New Investing Approach?</b></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: verdana;"><b><br /></b></span></div><span style="font-family: verdana;"><b><a href="https://thrapko.com/contact-1" target="_blank">Click Here and Let's Talk </a></b></span></div></div>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comMonterey, CA, USA36.6002378 -121.89467618.2900039638211567 -157.0509261 64.910471636178841 -86.7384261tag:blogger.com,1999:blog-8086830084442751747.post-81905599267138678062023-03-12T22:02:00.026-07:002023-03-27T09:42:51.352-07:00Checkmate Socialism<div><p style="text-align: center;">Checkmate Socialism</p><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtjZgEy8PAmJgURNhschwWLqjAikGIO-uaByuWkEhV_mTyKQ7bSHCEDCox7BgEmkmjgrilLeoJST-WJrBUZoJtCvOKdr66pTdotmMU3upm3kBgSRGWt5uwExkITpZCqV3CleNuG34KwkKXkL40NDWkmWCgJHyIKJAzDRfLVnlZ4oKq-H3EiXYL-nQ3/s1024/Checkmate%20Socialism.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="731" data-original-width="1024" height="228" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtjZgEy8PAmJgURNhschwWLqjAikGIO-uaByuWkEhV_mTyKQ7bSHCEDCox7BgEmkmjgrilLeoJST-WJrBUZoJtCvOKdr66pTdotmMU3upm3kBgSRGWt5uwExkITpZCqV3CleNuG34KwkKXkL40NDWkmWCgJHyIKJAzDRfLVnlZ4oKq-H3EiXYL-nQ3/s320/Checkmate%20Socialism.jpg" width="320" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">With the following phrase from the <a href="https://en.wikipedia.org/wiki/Federal_Reserve" target="_blank">Federal Reserve</a> that "All depositors of this institution will be made whole. As with the resolution of <a href="https://en.wikipedia.org/wiki/Silicon_Valley_Bank" target="_blank">Silicon Valley Bank</a>, no losses will be borne by the taxpayer," the United States officially became <a href="https://en.wikipedia.org/wiki/Socialism" target="_blank">Socialist</a>. The death knell you hear ringing in the distance is from <a href="https://en.wikipedia.org/wiki/Capitalism" target="_blank">Capitialism</a>. ~250 years of "the American Experience" has effectively been destroyed tonight. <b>Checkmate Socialism.</b><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Consider, the Federal Reserve, <b>an unelected agency</b>, has unilaterally made the decision <b>to eliminate ALL depositor risk from the banking system</b>. Bluntly, <b>they changed the rules of the game for an institution that was politically connected at the highest levels.<br /></b></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Previously, poor leadership and bad banking decisions had dire consequences. Accepting billions in deposits, buying longer-term bonds for higher yields while keeping insufficient funds available to meet the liquidity of on-demand withdrawals would result in bank failure. <a href="https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation" target="_blank">FDIC insurance</a> historically covered only up to $250K per account, per depositor, per institution. There was a reason for this termed "<a href="https://en.wikipedia.org/wiki/Moral_hazard" target="_blank">moral hazard.</a>" Now the taxpayer is on the hook for limitless losses. How did this happen?<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">When the tide went out this time though, <b>lots and lots of startups (3,500+) with far in excess of $250K were left naked. And afraid.</b> Even after knowing for months that the on-demand cash reserves, burn rate, and long-term loss risk were all significant factors, <b>the FDIC did nothing until the moment of receivership</b>.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The normal course of events in a situation like this would have been for the bank to enter receivership, the FDIC pay the limits of insurance, and then either a liquidation or sale of the remaining bank assets to make depositors partially whole. Not this time. <b><a href="https://www.wsj.com/articles/companies-with-deposits-trapped-in-silicon-valley-bank-9034f33b" target="_blank">These were very special depositors</a></b>; the Federal Reserve <b>"broke bad"</b> to save a litany of politically aligned startups with billions in deposits unlikely ever to be recovered save by the largess of the Federal Reserve. </div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Almost universally, the client profile of the depositors at Silicon Valley Bank that taxpayers just bailed out were wealthy investors and startups with an average balance of $4,000,000. Silicon Valley Bank would <b>NOT</b> qualify as the typical "community bank" almost anywhere else in the country. These startups were the darlings of Silicon Valley.<br /></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Banking relationships at SVB were by invitation only, and this "members-only" bank just stuck the average working class taxpayer with billions in losses and triggered a global bank run.<b> </b>The Federal Reserve was only too happy to spent billions in taxpayer money to shoring up the finances of thousands of millionaires and many billionaires at Silicon Valley Bank. As <a href="https://en.wikipedia.org/wiki/Jackie_Chiles" target="_blank">Jackie Chiles</a> would say: "Outrageous, Egregious, Preposterous!"<br /></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Sadly this is not an isolated incident, <b>almost every bank in America, to some degree, was/is in a similar situation to Silicon Valley Bank.</b> SVB bought long-dated bonds with incoming despositor cash and held those bonds at increasing losses as interest rates rose. With the Federal Reserve hellbent on raising rates and the bank apparently caught on its heels, they were trapped. The "surviving" banks, however, have one major difference: their deposit bases are largely focused on <b>retail investors</b> who do not have the ability (or wherewithal) to coordinate an almost simultaneous <b><a href="https://en.wikipedia.org/wiki/Bank_run" target="_blank">run on the bank</a></b>.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">When rumors on the "bro network" that Silicon Valley Bank had taken significant losses on its bond portfolio, failed to raise capital, and CEO Greg Becker uttered the fateful words "keep calm," VCs jumped on their smartphone apps while riding the Sun Valley ski lift and moved $40B+ with a swipe of their middle fingers. <b>Silicon Valley Bank was the first "victim" of a fintech-enabled bank run.<br /></b></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">What does this "full backstop" by the Federal Reserve mean for FDIC insurance and the banking industry in general? What's good for the goose is good for the gander, and if startup companies with hundreds of millions of <b>UNINSURED</b> deposits are going to be made whole, well then <b>EVERY SINGLE AMERICAN</b> now also has "full backstop."</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Think of the potential here. Your banker makes a bad decision? No problem. Bank goes under for risky loans? No problem. <b>Bank invests in longer dated bonds, bond value drops 15-20%, and bank becomes insolvent? NO PROBLEM!</b></div><p></p><div class="separator" style="clear: both; text-align: left;">There do seem to be a couple caveats, however, to the "<b>proportionality of risk</b>;" it is unlikely a community bank with retail deposits say in Detroit, would have been saved. <b>Silicon Valley Bank was the poster child of <a href="https://www.svb.com/about-us/living-our-values/diversity-equity-inclusion" target="_blank">progressive liberalism applied to banking</a>, yet they did not practice what they preached.</b> Their client base and leadership were almost exclusively of mind and race alike. They are politically connected at the highest levels. <b>Taxpayers should be drooling for a list of "public servants" who had accounts at Silicon Valley Bank in excess of $250,000</b>.<br /></div><p></p><div class="separator" style="clear: both; text-align: left;">As the fallout from Silicon Valley Bank radiates over the country in the coming days, weeks, and months (years?) it has become obvious that the Federal Reserve is far, far too powerful. The <a href="https://en.wikipedia.org/wiki/Federal_Reserve_Act" target="_blank">Federal Reserve Act</a> needs to be amended at the least, and perhaps revoked. <b>Centralized authority for the global economy is not working</b> (well, at least not for the vast majority of people.) For the uber-elite it works quite well.<br /></div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">The glaring problem is that too many powerful people are juiced in to the existing structure, and time and again bear no consequences for failure. A bank run can be a healthy event in that bad decisions are held accountable by customers literally voting with their feet. It is a shameless debacle that taxpayers feet are now held to the fire to pay the inequities of failed regulatory bodies, executive malfeasance, and corrupt politicians. The failure of SVB has left many Americans wondering if we just saw the end of capitalism.<br /></div><div class="separator" style="clear: both; text-align: left;"><b> </b></div></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b style="font-family: verdana;">Ready for a New Investing Approach?</b></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: verdana;"><b><br /></b></span></div><span style="font-family: verdana;"><b><a href="https://thrapko.com/contact-1" target="_blank">Click Here and Let's Talk </a></b></span></div><br />Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comSilicon Valley, CA, USA37.387474 -122.05754349.077240163821152 -157.2137934 65.697707836178836 -86.9012934tag:blogger.com,1999:blog-8086830084442751747.post-88153995013806755092023-03-03T09:57:00.008-08:002023-03-27T09:43:24.945-07:00Bond Ladder<div><div><p style="text-align: center;">Bond Ladder</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj73-7OHHA7s14UFPGC5p7wqyjq5vEkdZUae2dNCljRTGBDoCuk_dBzs8b2IfeLLY-VGDJe_J7BRv7FCh5BaURul_97hwTpA2ofB8GsxqwOKclEXnaggVfFtduiFXMdVSjY1NIo_QmHK8BpiIXVOQw4xRZ2IY_6TMph3MH6I-qxL5pXRtKuJa8il39A/s533/Ladder.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="533" data-original-width="408" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj73-7OHHA7s14UFPGC5p7wqyjq5vEkdZUae2dNCljRTGBDoCuk_dBzs8b2IfeLLY-VGDJe_J7BRv7FCh5BaURul_97hwTpA2ofB8GsxqwOKclEXnaggVfFtduiFXMdVSjY1NIo_QmHK8BpiIXVOQw4xRZ2IY_6TMph3MH6I-qxL5pXRtKuJa8il39A/s320/Ladder.jpg" width="245" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">The <a href="https://en.wikipedia.org/wiki/Laddering" target="_blank">Bond Ladder</a> has recently emerged as<b> the hottest trade on Wall Street</b>. Laddering bonds is both elegant and efficient; investors parcel out their cash via "steps," or purchases, of certain denomination & maturity bonds which yield a certain annual rate. These "steps" form the proverbial <b>rungs</b> of the Bond Ladder. As rates steadily rise, <b>the investor is locking in that higher rate with each new rung</b>.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">This strategy is particularly effective in a rising interest rate environment. With a Bond Ladder, the investor is frequently rolling cash into new bonds at higher rates. So for example, using a $120,000 cash position to build a bond ladder an investor could buy <a href="https://en.wikipedia.org/wiki/United_States_Treasury_security" target="_blank">Treasury Bills</a> now yielding over 5% at multiple maturities. In this instance, an investor could buy twelve (12) $10,000 Treasury Bill positions maturing each month for the next year. Every month that $10,000 would come due, and the investor could roll those funds into new, and possibly higher paying, Treasury Bills.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">With the <a href="https://en.wikipedia.org/wiki/Federal_Reserve" target="_blank">Federal Reserve</a> hellbent on breaking the back of rampant inflation in the United States, it seems highly probable. In fact, Greenlight Capital's <a href="https://en.wikipedia.org/wiki/David_Einhorn_(hedge_fund_manager)" target="_blank">David Einhorn</a> suggests investors should be "<a href="https://www.cnbc.com/2023/03/01/david-einhorn-says-investors-should-be-bearish-on-stocks-and-bullish-on-inflation.html" target="_blank">Bearish on stocks and Bullish on inflation.</a>" Meaning? He suspects that the Federal Reserve will raise rates higher than the existing consensus of <a href="https://www.atlantafed.org/cenfis/market-probability-tracker" target="_blank">4.50-4.75%</a>.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhSaR_rkhJp73kbrQB6PjLr9pkU4MtlByKNkn1WQfjXI4GF2vToZacWEqxcVNrG-Pxkoe-_GfRy5LC_vOVGKqmfiW4mdQlC_Y73jC3voUc_p-pkCmb5aPnzkFOQ93Z8NfUaLIAJpaBB9v1NRSO2874Aho2_a_mbbHdMdPTFnY5Ie65LBiyRFBSusFoG/s655/FF%20Rate%20Prediction%20ATL%203%20Mar%2023.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="360" data-original-width="655" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhSaR_rkhJp73kbrQB6PjLr9pkU4MtlByKNkn1WQfjXI4GF2vToZacWEqxcVNrG-Pxkoe-_GfRy5LC_vOVGKqmfiW4mdQlC_Y73jC3voUc_p-pkCmb5aPnzkFOQ93Z8NfUaLIAJpaBB9v1NRSO2874Aho2_a_mbbHdMdPTFnY5Ie65LBiyRFBSusFoG/w400-h220/FF%20Rate%20Prediction%20ATL%203%20Mar%2023.jpg" width="400" /> </a></div><div class="separator" style="clear: both; text-align: center;"> </div><div class="separator" style="clear: both; text-align: left;">With Treasury Bills yielding over 5% now, this should be a concern for investors as <b>selling rates are exceeding predicted rates</b>, ie Einhorn is probably correct assuming the Fed raises again in March. There's an old axiom on Wall Street: "Don't fight the Fed." <b>For those investors looking to preserve a portion of their capital, and earn a "riskfree" rate of return, a Bond Ladder here might make sense. </b></div><div class="separator" style="clear: both; text-align: left;"><b> </b></div></div></div><div style="text-align: center;"><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b style="font-family: verdana;">Ready for a New Investing Approach?</b></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: verdana;"><b><br /></b></span></div><span style="font-family: verdana;"><b><a href="https://thrapko.com/contact-1" target="_blank">Click Here and Let's Talk </a></b></span></div></div><br />Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comMonterey, CA, USA36.6002378 -121.89467618.2900039638211567 -157.0509261 64.910471636178841 -86.7384261tag:blogger.com,1999:blog-8086830084442751747.post-37253260624377308552023-02-14T08:11:00.024-08:002023-03-27T09:44:00.292-07:00Covered Calls<div><p style="text-align: center;">Covered Calls</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgS0-ULwiz43RqBd_IEXKENwmNtpZp3Zmz-_5BNjjb7YL7GgH37YB5_fc-nSE1TuHW-7Qw0w0PysWYXxPl1WsraaxmdaxZIk2x2m2e97hIcVq5Ey3qhTipeKw-AEXGUO19PQkFXOzO59OKoVmYbY0H4oKjbDs5XrEH4bU8So_NWou7ZHpaSbSk6YglQ/s281/Rodney%20Dangerfield.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="281" data-original-width="220" height="281" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgS0-ULwiz43RqBd_IEXKENwmNtpZp3Zmz-_5BNjjb7YL7GgH37YB5_fc-nSE1TuHW-7Qw0w0PysWYXxPl1WsraaxmdaxZIk2x2m2e97hIcVq5Ey3qhTipeKw-AEXGUO19PQkFXOzO59OKoVmYbY0H4oKjbDs5XrEH4bU8So_NWou7ZHpaSbSk6YglQ/s1600/Rodney%20Dangerfield.jpg" width="220" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Similar to the legendary <a href="https://en.wikipedia.org/wiki/Rodney_Dangerfield" target="_blank">Rodney Dangerfield</a>, <b>Covered Calls don't "get no respect!"</b> Although investors should always consult with their advisor, the <a href="https://en.wikipedia.org/wiki/Covered_option" target="_blank">Covered Call Investment Strategy</a> has many appealing components, and may offer advantages to the classic "Buy-and-Hold" philosophy hammered into the psyche of the public by index fund providers. Indeed, much like Rodney Dangerfield, <b>investors may come to love this strategy.</b></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">First let's have "the talk." If you are investing in the stock market it is by its very nature speculation, and as 2022 clearly demonstrated, it can be EXTREMELY volatile. <b>Volatility is ten-letter word for "risk" or "loss" or "sleepless night" or "anxiety."</b> Basically the opposite of a <a href="https://www.investopedia.com/trading/market-cycles-key-maximum-returns/" target="_blank">Bull Market</a>, which can be summarized also with a single word: euphoria. </div><div class="separator" style="clear: both; text-align: left;"><b> </b></div><div class="separator" style="clear: both; text-align: left;"><b>Investors need to internalize the FACT that holdings in the stock market can and do fluctuate, and a "<a href="https://seekingalpha.com/article/4168757-investment-returns-are-not-linear" target="_blank">linear return</a>" is fallacy in the short-term.</b> On any given day, the markets can swing in multiple percentages up & down. As 2022 taught us, these downward trends can be sustained for months. For those old enough to remember to the 1970s, with the wrong economic policies these trends can be sustained for YEARS. That's the bad news.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Now on to the good news. Given that there are a limited number of places to put your hard-earned money in life (gold, stocks, bonds, real estate, and <a href="https://www.forbes.com/sites/forbescoachescouncil/2021/11/22/how-to-cultivate-an-ownership-mindset-in-your-team/" target="_blank">business ownership</a> come to mind) <b>there is a good chance some or most of your liquid assets will be held in the stock market.</b></div><div class="separator" style="clear: both; text-align: left;"><b> </b></div><div class="separator" style="clear: both; text-align: left;">Without diving too deeply into "the history of Wall Street," the stock market offers (generally) almost daily liquidity, established exchanges, and highly-regulated firms. All the major governments of the world are immersed in the global stock exchanges. So with that said, <b>there is a reasonably good chance that owning a basket of stocks over time will turn out well.</b></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">As a Portfolio Manager (PM), <b>my job is to select those securities which I have studied and researched which I believe with a high-level of confidence offer a solid rate of return for my clients.</b> From a mechanical perspective, I also want to add a couple layers of additional protection. One, as frequently discussed on this blog, are dividends.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">Dividends are cash payments companies make to their shareholders typically on a quarterly basis. It is a reminder to corporations as to who they work for, ie you. It also, obviously, a return on investment for the shareholder doled out at recurring intervals. Timing is notoriously tricky, but I believe<b> it is better to get returns drizzled out over time than pray for a rainstorm.</b></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Second, let's start embracing Covered Calls. <b>Covered Calls are Call Options written (sold) on existing stock positions</b>. These contracts are traded on similar hours as the underlying stocks themselves. Each Call Contract represents 100 shares of the underlying stock. So for example, if you own 1,000 shares of XYZ, then you could write up to 10 contracts on that position.</div><div class="separator" style="clear: both; text-align: left;"><b> </b></div><div class="separator" style="clear: both; text-align: left;"><b>Part of the Portfolio Manager's job is to determine the likely TIME and LENGTH of that Covered Call.</b> That is extremely challenging. It is often the confluence of volumes of data, and of course greed. How much do we think the stock will go up over a certain amount of time? Are we more concerned about losing the stock or leaving money on the table? How much is the premium paying? What is the likelihood of expiration without losing the stock?</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">A LOT of variables go into deciding the best course of action, and a lot depends on the client's goals.<b> Ultimately, investing boils down to cash flow.</b> Covered Calls are unique in the investing world in that you are paid UP FRONT for the premium on a contract in the future. <b>Investors know with certainty how much they will be paid the moment the contract is sold.</b> Cash from a Covered Call sale is deposited into investors' brokerage account instantly. And to segue to the third layer (first dividends, second Covered Calls), that premium cash can then earn <b>additional interest</b> in very nice 5% Treasury Bills currently.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The art & science of Covered Calls is tricky, and like most things in life experience is probably the best teacher. One would think the primary goal is to maximize the premium return without getting the stock called away, but that is not always the case. There are also times where the stock WILL get called away by buyers who want to capture the dividend from investors. The biggest challenge for the PM starts with "the talk."</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">What is the client's annual return needs vs. wants vs. probability of accomplishing that goal? Is a $30K annual withdrawal on a $500K account reasonable? What is the implied risk? Can a client mentally forgo additional alpha if XYZ stock was purchased at $125 with Covered Calls written at $150 and the stock subsequently spikes to $175? Or like 2022, clients have a low cost basis and have been raking in dividends, premiums, and capital appreciation for years and suddenly find themselves down 15%, 20%, 25%. What then? This is why "the talk" is so important.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">In summary, if you're on board with actively investing in the stock market I believe utilizing a Covered Call strategy makes sense for a lot of reasons; from security selection, cash flow certainty, hedging and tax-loss harvesting to name a few.</div><div class="separator" style="clear: both; text-align: left;"> </div><div class="separator" style="clear: both; text-align: left;">One of the greatest challenges, and one humans throughout time have been really, really bad at, is moderating greed. Adding layers of risk protection goes out the window the moment we say: "Well I'm gonna close out that contract and hold the stock now because it just keeps going higher. I don't want to miss out!" <b>Letting hedges lapse is dangerous business.</b><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">By definition, employing a Covered Call strategy almost always involves getting some positions called away. That is the nature of the beast. But if 2022 taught us anything, it is that <b>markets are inherently volatile and in any given year long-term investors can be subjected to gut-wrenching selloffs.</b> I like having three (3) layers of added protection when investing in the stock market, that's probably why they call me "Mr. Covered Call!" If this strategy sounds appealing to you we should talk.<br /></div><div class="separator" style="clear: both; text-align: left;"> </div></div><div style="text-align: center;"><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b style="font-family: verdana;">Ready for a New Investing Approach?</b></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: verdana;"><b><br /></b></span></div><span style="font-family: verdana;"><b><a href="https://thrapko.com/contact-1" target="_blank">Click Here and Let's Talk </a></b></span></div><div style="text-align: center;"><span style="font-family: verdana;"><b> </b></span></div><div style="text-align: center;"><span style="font-family: verdana;"><b> </b></span></div></div>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comMonterey, CA, USA36.6002378 -121.89467618.2900039638211567 -157.0509261 64.910471636178841 -86.7384261tag:blogger.com,1999:blog-8086830084442751747.post-42318369337681867252023-01-05T12:54:00.012-08:002023-03-27T09:44:40.382-07:005% T-Bills<div><div><div><p style="text-align: center;">5% T-Bills</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh34V7qztaydnG7vgm0FIkOsXdyVOSXE1x5MP7E_6o8ttvONvvRYU7jTRhuv3IzPaVotZgV7gitrxwnkx6Od50ogoisdPYTtNmSzT-4uOvRzEbKLjf-jQq4DnTawfafxM39htdersRJVBWO430P2O-QJSy5HKDEYWnBKXPsJf9r6ISM3IN4HUeSB7mw/s1024/Treasury%20Bill.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="714" data-original-width="1024" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh34V7qztaydnG7vgm0FIkOsXdyVOSXE1x5MP7E_6o8ttvONvvRYU7jTRhuv3IzPaVotZgV7gitrxwnkx6Od50ogoisdPYTtNmSzT-4uOvRzEbKLjf-jQq4DnTawfafxM39htdersRJVBWO430P2O-QJSy5HKDEYWnBKXPsJf9r6ISM3IN4HUeSB7mw/s320/Treasury%20Bill.jpg" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><a href="https://en.wikipedia.org/wiki/Warren_Buffett" target="_blank">Warren Buffett</a> once quipped that "<b>5% interest rates draw money from the moon.</b>" Well dear readers, we are nearly there. Today 6-month Treasury Bills due on 6 July '23 sold for a yield of 4.82%. With the economy in shambles, record inflation, and <a href="https://www.reuters.com/technology/amazon-layoff-signals-more-pain-tech-sector-recession-fears-mount-2023-01-05/" target="_blank">Big Tech</a> laying people off as fast as they can email, this "risk free" asset, has surged in popularity sucking growth capital out of the economy like a vampire squid.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Yes, you are probably losing more in terms of "real interest" due to inflation than gaining on T-Bill rates, but at least you don't suffer the double indignation of seeing BOTH your buying power AND balance going down daily like the stock market. The popularity of a similar bond, the<a href="https://www.wsj.com/articles/investors-flock-savings-bonds-for-protection-against-inflation-11643850044" rel="nofollow" target="_blank"> I-Bond</a>, is such that if a proposed program to expand the existing cap from <a href="https://www.moneytalksnews.com/bill-would-increase-inflation-savings-bond-limit/" target="_blank">$10K to $100K</a> passes it would most likely cause the stock market to crash. What is a Treasury Bill anyway?</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Treasury Bills were spawned at the close of "<a href="https://en.wikipedia.org/wiki/World_War_I" target="_blank">The Great War</a>." They are lasting relics of World War I's <a href="https://en.wikipedia.org/wiki/Liberty_bond" target="_blank">Liberty Bonds</a> which were needed to finance America's war efforts. Because the country didn't have enough money to pay back all the Liberty bondholders, the Federal Government got the idea of rolling those bonds into NEW bonds. These new bonds became modern day Treasury Bills (up to 52 weeks in duration, with established auction cycles and a defined bidding process.)</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The new auction and rolling approach would ladder out the debt. And we sure have a boatload of debt. $31,000,000,000,000 of it at the Federal Level. <b>By the time you are done reading this blog post, another $3M dollars in interest will have accrued to our National Debt.</b></div><div class="separator" style="clear: both; text-align: left;"><b> </b></div></div></div></div><div style="text-align: center;"><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b style="font-family: verdana;">Ready for a New Investing Approach?</b></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: verdana;"><b><br /></b></span></div><span style="font-family: verdana;"><b><a href="https://thrapko.com/contact-1" target="_blank">Click Here and Let's Talk </a></b></span></div></div><br />Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comMonterey, CA, USA36.6002378 -121.89467618.2900039638211567 -157.0509261 64.910471636178841 -86.7384261tag:blogger.com,1999:blog-8086830084442751747.post-39886670631108620402023-01-01T15:26:00.008-08:002023-03-27T09:45:22.631-07:00Back to Basics<div><p style="text-align: center;">Back to Basics</p><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiIocjXCyhNYj3MXVHIBDQuoi70Ow-2o0HfWB8YvNhn3VOpTi1DxIODZ_jhiJoqAE8JfGNPn1qU4tW66QYO7gyfZCUPZI-KDtNFqj7W1_KswXgSBvdQVwCTjo8fX_BuaKpsC1dvCBvjZfVbbl9NKG_YegNybDprdZSsQmzosKig6k4BXCv8YW-v5ilh/s550/Back%20to%20Basics.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="319" data-original-width="550" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiIocjXCyhNYj3MXVHIBDQuoi70Ow-2o0HfWB8YvNhn3VOpTi1DxIODZ_jhiJoqAE8JfGNPn1qU4tW66QYO7gyfZCUPZI-KDtNFqj7W1_KswXgSBvdQVwCTjo8fX_BuaKpsC1dvCBvjZfVbbl9NKG_YegNybDprdZSsQmzosKig6k4BXCv8YW-v5ilh/s320/Back%20to%20Basics.jpg" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;">When all else fails, investors can always go back to basics; own dividend-paying monopolies with powerful, lasting brands across multiple sectors. Save regularly, or better yet religiously, and also keep a healthy stash of seed capital in risk-free U.S. Treasury Bills earning that juicy ~5% interest.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">This <a href="https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets" target="_blank">Bear Market</a> will end as every other bear market ended, when, however is unknown. Some clues will be that the Federal Reserve stops hiking rates, inflation stabilizes or falls, and/or an increasing number of stocks begin to hit new 52-week highs.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The latter point is almost always a sign we have exited a Bear Market. So for those weary investors beaten to a pulp by bad economic policy and the Fed tightening the screws on you, hang in there. Continue to build positions and keep an eye out for the end of the bear. Until then, it is back to basics and avoid the <a href="https://en.wikipedia.org/wiki/Risk_of_ruin" target="_blank">Risk of Ruin</a>.</div><div class="separator" style="clear: both; text-align: left;"> </div></div><div style="text-align: center;"><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b style="font-family: verdana;">Ready for a New Investing Approach?</b></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: verdana;"><b><br /></b></span></div><span style="font-family: verdana;"><b><a href="https://thrapko.com/contact-1" target="_blank">Click Here and Let's Talk </a></b></span></div></div><div><p></p></div>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comMonterey, CA, USA36.6002378 -121.89467618.2900039638211567 -157.0509261 64.910471636178841 -86.7384261tag:blogger.com,1999:blog-8086830084442751747.post-18660940096755975792022-12-30T09:24:00.021-08:002023-04-17T08:23:25.592-07:00Shearing Sheeple<div><div><div><p style="text-align: center;">Shearing Sheeple</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNJru2lZpiB1z85kHWxR9_WNN0csuV-puSmJe5djKj39A9Rp4-qnW8FEIVxXgDy89h62pTAdGorwsk2LjDFCdTgXx92xEhtqoEYkz6dvEDjI2ezvVXOyTbdxOnBevyjYvLJXxCAONhMn-JnNcW-nsvDLk-HccLh1cZ3hdlNxmK1b5DNa2rzulhgP1a/s428/Shearing%20Sheep.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="250" data-original-width="428" height="187" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNJru2lZpiB1z85kHWxR9_WNN0csuV-puSmJe5djKj39A9Rp4-qnW8FEIVxXgDy89h62pTAdGorwsk2LjDFCdTgXx92xEhtqoEYkz6dvEDjI2ezvVXOyTbdxOnBevyjYvLJXxCAONhMn-JnNcW-nsvDLk-HccLh1cZ3hdlNxmK1b5DNa2rzulhgP1a/s320/Shearing%20Sheep.jpg" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;">This isn't a Christmas story for the faint of heart. As the <a href="https://oversight.house.gov/landing/biden-family-investigation/" target="_blank">First Family</a> disembarked from <a href="https://en.wikipedia.org/wiki/Air_Force_One" target="_blank">Air Force One</a>, the gaggle of 15+ leisurely made their way to a <a href="https://www.foxnews.com/politics/biden-staying-at-st-croix-house-of-billionaire-democrat-donor" target="_blank">billionaire's residence</a> for the holidays. Though much of the country was "sheltering in place" due to a massive <a href="https://en.wikipedia.org/wiki/Explosive_cyclogenesis" target="_blank">Arctic Bomb</a>, the Bidens slipped off their loafers and Manolo Blahniks into flip-flops. Something, however, just wasn't kosher in the America north of <a href="https://en.wikipedia.org/wiki/Saint_Croix" target="_blank">St. Croix</a>.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Yes inflation was raging and the stock market had suffered a <a href="https://www.cnbc.com/2022/12/29/stock-market-futures-open-to-close-news.html" target="_blank">Barrackian year</a>; its worst performance since the elder statesman's jefe began his reign in 2008. But that wasn't it. Only capitalist pigs bought companies! Far better to extract value via a <a href="https://www.americanprogressaction.org/article/unions-critical-democratic-partys-electoral-success/" target="_blank">Labor Union</a>. Invent something? Everything has already been invented! Yes crime was surging in every major urban area, but that didn't matter. "Hold your tongue and count your blessings," admonished the <a href="https://awoiaf.westeros.org/index.php/High_Septon" target="_blank">High Septon</a>. No it was something else. </div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Gas at $5? What a deal! That couldn't be it. 10,000+ new *friends* joining our country illegally <a href="https://www.pewresearch.org/fact-tank/2023/01/13/monthly-encounters-with-migrants-at-u-s-mexico-border-remain-near-record-highs/" target="_blank">EVERY DAY</a>? How dare you criticize someone committing an illegal activity! Americans don't want those jobs anyway, especially not American teenagers who have to compete with adults lacking documentation. What is documentation anyway? Paper! The theft of resources at scale only hurts the rich anyways. No, it was a peculiar buzzing sound. Bzzz. Bzzz. Bzzz.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The noise reverberated through the night. A buzzing electric sound constant in application and thorough in design. Why it was the shearing of sheeple! Taxpaying citizens lined up in seemingly endless rows having their hard-earned wool being sheared off their backs during the peak of winter. Brrrr it was cold out there! Many sheeple were shaking. What a foolish thing to shear so deeply, but those in absolute power told us: <b>"ALL must pay their fair shear."</b></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">So on it went day after day, until the sheeple had given all that there was to give; here, there, everywhere piles of wool lay. Much was burned to keep the shearers themselves comfortably warm, less THEY too feel the cold. Being in the Shearer's Union meant never being cold. Aye, but they left many sheeple naught enough wool to harbor in the storm! No matter, the rows were endlessly long. There would always be sheeple to shear.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Boy was it hot in St. Croix! Even staying free can be troublesome, now the dear leader would have to grant his favor on some billionaire friend. What a labor of love this job was! Along the boardwalk he pandered around, his crusty feet full of golden sands. Laughter was heard all around, <b>how they had gotten away with it all!</b> Joy was theirs! And if they had gotten this far, why <b>what could be next?</b></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">On a silver tray produced was <a href="https://nypost.com/2022/12/29/biden-signs-1-7t-spending-bill-while-vacationing-in-st-croix/" target="_blank"><b>a 4,000 page Omnibus Bill flown fresh in from America</b></a> to the north totaling $1,650,000,000,000. Why it was even <b>MORE</b> than he asked for! Would the blessings ever end? And even here, far away from America to the north, the sound could be faintly heard. Bzzzz. Bzzzzz. Bzzzzz.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Investors beware, to what you value hold dear! The shears are out and your wool will soon be theirs. Protest and mutton you may become. The tide has turned and <a href="https://en.wikipedia.org/wiki/Marxism" target="_blank">socialism</a> is here. America has become a welfare state with open borders. What could possibly go wrong?</div><div class="separator" style="clear: both; text-align: left;"> </div></div></div></div><div style="text-align: center;"><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b style="font-family: verdana;">Ready for a New Investing Approach?</b></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: verdana;"><b><br /></b></span></div><span style="font-family: verdana;"><b><a href="https://thrapko.com/contact-1" target="_blank">Let's Talk </a></b></span></div></div><br />Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comSt Croix, USVI17.7245968 -64.834799199999992-10.585637036178845 -99.991049199999992 46.034830636178846 -29.678549199999992tag:blogger.com,1999:blog-8086830084442751747.post-62547874686630352152022-12-08T07:53:00.017-08:002023-03-27T09:51:04.003-07:00Speed Brake<p style="text-align: center;">Speed Brake</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEINkI0tw33ohAlLl4AcdANLUryoXav_d87tjn6nR1CV6AryJkT_0nw_0737q8VkjIsJLJ-mB0SnNw5fW5zZh5sEW9fZu29MhA81JMoaYm_EZ89ByOlxBBk7uAYpoqd1tgEJRsgW9qqdN30LpM1GwzTTg0XfiD423jODuYqgS9r8Wwz202xDyVYIlB/s600/Laffer%20Curve.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="434" data-original-width="600" height="289" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEINkI0tw33ohAlLl4AcdANLUryoXav_d87tjn6nR1CV6AryJkT_0nw_0737q8VkjIsJLJ-mB0SnNw5fW5zZh5sEW9fZu29MhA81JMoaYm_EZ89ByOlxBBk7uAYpoqd1tgEJRsgW9qqdN30LpM1GwzTTg0XfiD423jODuYqgS9r8Wwz202xDyVYIlB/w400-h289/Laffer%20Curve.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;">If ever there was a speed brake on the economy, it is the ironically titled "<a href="https://en.wikipedia.org/wiki/American_Rescue_Plan_Act_of_2021" target="_blank">American Rescue Plan</a>." The keystone language in this travesty of a <a href="https://keating.house.gov/policy-work/legislative-process" target="_blank">Bill</a> is the issuance of 1099-Ks for "transactions totaling a cumulative of $600 per year." Think about this for a moment. What better way to kill small business, prevent new business, and ramp up the police state than searching for needles in the haystack? Meanwhile, the barn door is <b>wide open out back</b> with government spending giving drunken sailors a good name.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Similar to the laughingly false "<a href="https://en.wikipedia.org/wiki/Inflation_Reduction_Act_of_2022" target="_blank">Inflation Reduction Act</a>," which promises to <b>reduce inflation by spending more</b>, the "American Rescue Plan" aims to HELP Americans by raising their taxes, lowering taxable thresholds, and adding 87,000 more enforcement agents to "help" them. Cue up the Ronald Reagan quote of the nine most dangerous words in the English language: "<a href="https://www.reaganfoundation.org/ronald-reagan/reagan-quotes-speeches/news-conference-1/" target="_blank">I'm from the Government, and I'm here to help</a>."</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>Let's get serious people</b>! As readers of this blog well know, we are big believers in the Laffer Curve. This economic principle illustrates that there is a strong relationship between taxation and tax returns. As so elegantly illustrated above, <b>when you squeeze the lemon too much you don't get more juice</b>. In fact, you get less juice.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Consider for a moment the contribution of Small Business to the American Economy. Small Businesses account for two-thirds of new jobs and half of all existing jobs. <b>The Small Business sector generates almost HALF of this country's GDP.</b> So what happens when the jackboot of government is on the throat of Small Business? Well, nothing good happens. Productivity crashes. Output contracts. The lemon shrivels up.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">There is little doubt this has been a coordinated effort to reallocate capital. Congressional bills don't write themselves. They are typically written by lobbyists paid by special interests. So if Small Businesses are the losers, who are the winners? Winners would be those who typically don't need or have a Small Business or side hustle. They would be those with local, State, and Federal government jobs, labor unions, and big business executives. Collectively 15% of the population will seemingly reap significant benefits from the other 85%, but there is a flip side to this coin.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">To have Government welfare programs and an expansive state, it is first necessary to have a thriving economy. Not many people know JFK passed some of the largest tax cuts in American history. He knew that<b> a thriving economy is based on a free-market with light regulation</b>. Light regulation does not mean no regulation, ie bad actors like Samuel Bank-Fried and the <a href="https://www.cnbc.com/2022/12/13/ftx-founder-sam-bankman-fried-charged-with-campaign-finance-violations-in-criminal-indictment.html" target="_blank">beneficiaries of his largess</a> need to be held to account. The French coined this approach best with the term "Laissez-Faire."</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>What is an investor to do?</b> Until there is a regime change, investors not plugged into the political gravy train need to stay in their foxholes; consider dividend paying large companies with monopolistic pricing power and brand recognition. If their products are vital or addictive, so much the better. The landscape for startups is barren as the moon, never mind Mars. Raising capital in an increasing interest rate environments during a recession is pointless. Cash in this environment sits in risk-free Treasury Bills.<br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>When the Laffer Curve is ignored, or even mocked, and a turn is taken into a socialist regime then the capitalist must look for safety, income, and muted growth until an opportunity emerges to make a move into pro-growth, low-tax, and economically sound policy. It might be a while.</b></div><div class="separator" style="clear: both; text-align: left;"><b> </b></div><div class="separator" style="clear: both; text-align: center;"><b> </b><br /><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b style="font-family: verdana;">Ready for a New Investing Approach?</b></div><div class="separator" style="clear: both; text-align: center;"><span style="font-family: verdana;"><b><br /></b></span></div><span style="font-family: verdana;"><b><a href="https://thrapko.com/contact-1" target="_blank">Click Here and Let's Talk </a></b></span></div></div>Tom Rapkohttp://www.blogger.com/profile/06884633243128890100noreply@blogger.comMonterey, CA, USA36.6002378 -121.89467618.2900039638211567 -157.0509261 64.910471636178841 -86.7384261