All Forum Posts by: Alfred Bell

OK. I did a little tally here so we can see where we are at so far:

BASICS:
Have stored water, food, guns/ammo, a little of all currencies (cash, gold and silver coins), other survival stuff.

DEFLATION:
Cash is king.

Get out of stocks, bonds and most other assets.

Don't have ANY debt.

Be frugal and SAVE.

Be resourceful and figure out how to make lots of $$ (and save it) in preparation to buy assets.

Buying income properties now is moot... some say take advantage of deals right now, some say wait until closer to or at the bottom for much better deals and more bang for your buck.

Gold is also moot (may not play the role it has in past, and government can confiscate it like they did in Great Depression).

Have your INFLATION strategy set up now during DEFLATION and be prepared to launch it as soon as inflation starts to kick in on a significant basis.

INFLATION:
Get out of cash fast!

Go into hard assets fast! (rental properties, etc.)

Every time you get cash, convert it quickly to a hard asset.

Go into debt (will be able to pay off with cheap dollars).

Regarding going into debt... Buy your income properties at super low prices with super low interest 30 year fixed mortgages. If inflation goes really high, your tenants could pay the mortgages off for you in a matter of 10 years or less.

Own income properties (altho govmt intervention in the form of higher prop taxes, rent control, etc. is a threat).

Own your own business (deliver needed products and services).

Again... gold is moot (may not play the role it has in past, and a threat that government can confiscate it, like they did in Great Depression).

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The key issues on my mind are... how long we have in this current deflationary time period to get our ducks in a row... will I be able to recognize when real estate has hit bottom (or close to the bottom)... whether inflation will hit hard and fast, or will be a gradual increase? Short of having a crystal ball, the only thing I can think of is have the right indicators/statistics and keep an eye on them and be ready to move RAPIDLY when we hit bottom (RE acquisitions) and be ready to move RAPIDLY in transfering over to the inflationary strategy.

Yes. GOVERNMENT (our nemesis) will be raising property taxes and will install rent controls. Landlords' profits will be cut in the future as the GOVERNMENT continues to get us in deeper and deeper financial trouble... that they caused... and we allowed.

I think we age getting a little bit off the thread. My original question was...

"What does one do? What are the rules to follow when heading for a high inflationary period (possibly an inflationary depression)? How do you prepare? What is the ideal situation to be in so that you can make it through these upcoming tough times? How do you maintain a decent standard of living? How do you maintain your existing wealth?"

The survivalist aspect is fine (food & water storage, etc.). My question was more on a financial basis... how protect your existing wealth? what will you turn your cash into when inflation begins? what do with your existing assets? what assets to grab before inflation starts heavily? what would be a good business to start for recess/depress times? etc. etc.

Hal,
The penalty for violating the rules of recommending a website is that you have to give me your user name and password for North's site.

Thanks for the tip. Alfred

Ok. We are in deflation now, and we don't know how long it is going to last.

Because of our government, we know that eventually interest rates, taxes, and inflation are going to go up, up, up. The most important prices for the average American—food, utilities and energy prices—are going to soar. This inflation will really devalue the dollar, reducing its already low purchasing power even further. We could even have hyper-inflation.

This inflation (and the big price increases) could begin in 6 months, 1 year, 2 years... there is no way to tell.

What does one do? What are the rules to follow when heading for a high inflationary period (possibly an inflationary depression)? How do you prepare? What is the ideal situation to be in so that you can make it through these upcoming tough times? How do you maintain a decent standard of living? How do you maintain your existing wealth?

I had said in my earlier post that prices would continue to drop and some questioned me. Here is some recent data that supports my projection.

Bloomberg: Housing Prices in 20 U.S. Cities Fall a Record 18.5%

Also, the Obama foreclosure rescue will not work. Over 48% of loan modifications done by Bush administration went into reforeclosure (probably more by now). Lowering distressed homeowners interest/payment rate isn't going to do much... they will still walk because of their negative equity, lack of savings, loss of job, salary cuts, etc.

Some may stay in their homes if their principle is reduced in a modification (or a bankruptcy judge cramsdown/reduces the principle, which they now have the right to do). But this is destructive and a direct breach by the Fed government of contract law and interfering with state's activity. Smart... the govmt wants banks to lend but at the same time is stepping in and changing their contracts on them and cutting down the balance owed on the loan! I wouldn't lend under those conditions would you? Reducing principle is ripping off and causing banks fruther losses, as well as stealing from investors who own those mortgages in bundles/tranches and expect an income stream from them.

Our brilliant government leaders have their foot on the brake and the accelerator at the same time.

They won't stop home prices from falling. There will be a glut of homes on the market for a very long time. Prices will come down to a good affordability rate. Wages have been stagnant for decades and now they are going down further. Home prices will follow them despite the government's attempt to intervene and try to prop up the bubble.

As a real estate investor my prospects look good for buying and selling foreclosures.

Excellent advice Harrison. Thank you very much.

Ok guys, got it.

Also, I guess I'm thinking like an investor, as opposed to a consumer who is buying a home.

Again, speaking as an investor, as regards timing the market, I think it can be done with some decent amount of success. It was very clear to me that the market had turned around mid August of 2006 just as I finished building my second spec house. I sold a lot that I was going to build my next house on for a profit and sold the second spec house both for good profits and then I moved off of spec building. Through studying and keeping up on DataQuick and other data sources on real estate and the general economy, it is pretty certain that housing will drop some more. Rather than buy now I'd rather TRY to buy at the bottom (staying very tuned in to sales and other statistics and using all of my resources to monitor activity). Even if I missed and was a little late I'd still be better off than I would be buying now. I think one could be good enough to buy at the slope going into the bottom, the bottom, or the slope coming out of the bottom... either point would be fine. I'm not interested in choosing a price point, I'm interested in getting an income property for the lowest price possible (and a foreclosure at the bottom of a market is the lowest price you are going to get). Is there some logic to my reasoning here or do you still think I'm missing the boat on this?

Before you answer, I should add this key data: I'm saving and amassing as much cash as I can right now with the plan of buying foreclosures and/or REOs as close to the bottom as possible so that I can have good income properties for the rest of my life. I plan to own them free and clear or with very small loans. My strategy is that buying at the bottom AND buying foreclosures at trustee sales or as REOs, I will optimize my purchasing power by getting the lowest prices possible, enabling me to wind up owning let's say 5 rather than 4 rental properties.

Does this make sense now or is my thinking still off?

I'm aware that people are buying homes now. I know an agent in SoCal who has sold 57 homes in 2008 and already has sold 10 in 2009. She tells me that these people are buying retirement homes. Most of them will rent, let them lay vacant or use as a vacation home for 5-10 years and then make it their primary home for retirement.

I wouldn't buy a home now. Why would you when you know that home prices will continue to decline another 10-20%. Why not wait for the bottom and save yourself 20 to 100K?

Does anyone have any insight into this mindset? Why would they buy now?

It's all about your attitude and your inner world:

Mind Power -- John Kehoe
The Slight Edge -- Jeff Olson
Secrets of the Millionaire Mind -- Eker
Retire Young, Retire Rich -- Kiyosaki
The Science of Getting Rich -- Wattles