All Forum Posts by: Anthony Halstead

Interesting plan being proposed by govt, take REO properties and turn them into rental properties (govt subsidised no doubt).

Any thoughts on what impact this will have on rental rates?

http://truthingold.blogspot.com/2012/02/feast-or-famine.html

"I am investing a bit more in cash..." Now if that doesn't sound funny...but aside from that I pick up two points that keep coming up:

I see no proof of that yet, when will it come?

and, what is your definition of hyperinflation?

on the first point, you will not see proof of it until it is past and the statisticians "prove" it to you. Then you can either believe it or not. If you are an investor, or a speculator, or hedging for something that may impact your portfolio, I do not think it is the wisest course of action to wait until something is already occured to try to prevent it hurting performance.

On the second, who cares? I see that all here think that some form of inflation is coming, who cares whether it is 10% or 26.1% annually (thus technically hyperinflation according to some definition), the main thing is that if you think higher inflation is going to hurt your portfolio then prepare accordingly, whether it is hyper or not. I can say that hyperinflation is 100% per month, it does not matter, 30% annual inflation will still kill my portfolio if my debt service is dependant upon there being no-low inflation.

Here is a story to make this easier: in the summer nobody is thinking of winter. One guy is cutting wood. People laugh at him... In the fall they are still laughing, then a cold snap comes. He says that winter is coming, get ready. then the sun warms things back up, the continue laughing at him. They say winter was not so bad, what a fool. He continues preparing for winter (and yes, he is still enjoying the warm weather and utilizing it to grow food, etc). then another cold snap comes, some snow. People freak out, then the sun warms things up again. He tells them winter is coming, that was a warning. The laugh at him, look at how warm it has been, winter never even came last year... Then winter comes. It comes slowly, temps slowly averaging lower and lower until a freeze arrives and then the long winter begins.

I think that is what is going on now. People think they can control the weather. Just put stimulus and the sun comes out. look at the last 30 years, winter never came. yeah, the 2000 and 2008 markets were rough, but more money and the sun came out. You fool, spend your money, quit preparing for winter, it is not coming. meanwhile, they are burning all their firewood enjoying the extended warm season... and when the winter comes they have none left for warmth. The guy who can keep warm in the winter without having to buy/beg/steal firewood can capitalize on his position.

Look at the other examples of rough times in history. The goal was first to keep what you have until the rough times were over. Maybe they were not worth much, but the worst times last the least. that is one reason the great depression was so great, they tried to prevent it from being so deep. Other countries in the same period did not go so long, they bit the bullet and came out. Look at the US in the depression of 20-21. bet you never heard of it. It was severe, but in a year and a half the cleansing was done and it roared off. Now we have the accumulated non-cleansing of a long period to pay for. and they are trying the same stuff they tried in the '30s... so you try to keep your assets for the other side when you can grow them. You also try to purchase assets from those who think that they have little or no value because they do not produce anything of value (some here complaining that they pay in fiat currency which will be worthless thus the underlying asset is worthless...) so you take them off their hands. And the others who need your whatever, take the assets off their hands.

Like the port example Gene brings up, I bet it was not producing anything of value. In terms of revenue valued in the local currency... but if you look at a port, a place to unload / load ships, they are valuable. they do offer a service of value, so you snap it up, and then when things get sorted out you are doing ok. Same with anything of value, do not value them in terms of a worthless or worth less currency, value them in different terms. Use your head.

Tho I firmly believe that we are headed for winter, and am planning accordingly, I am still enjoying life while the sun is hot and warming the days. No need to be a doomer and gloomer, I am happy and enjoy life and secure in the fact that whatever happens I can prosper and am prepared. that is one value in preparing, no need to gloom and doom and worry.

Be a thinker, not a yes man (I think that a danger exists for those who listen/watch too much TV and talk radio, one forgets how to think critically, instead blindly parroting the opinions spouted there and taking ownership without critically analyzing motive, bias, incentive, wisdom, experience, etc), be a leader, not a follower, be a doer, not a talker.

Tony

One correction:

The fed is not buying 91% of all debt issued, rather 91% of all debt issued in the 20-30 year maturity range.

The fed is buying 58% of all debt issued.

Tony

Some reading/listening for bending/mending the mind:

http://www.econtalk.org/archives/2012/01/taleb_on_antifr.html

http://www.zerohedge.com/news/mike-krieger-explains-why-its-leadership-stupid

http://www.historyisaweapon.com/defcon1/bernprop.html

Read also this guys book, War is a Racket: http://en.wikipedia.org/wiki/Smedley_Butler

Read, learn, think, understand.

Tony

it works until it dont...

http://www.zerohedge.com/contributed/why-notions-systemic-failure-are-par-bigfoot-and-unicorns-most-investors

Tony

One more:

http://www.zerohedge.com/news/under-twist-fed-has-purchased-91-all-gross-issuance-long-dated-us-treasurys

The fed is buying so they can dictate the interest rate. If the fed quit buying, the interest rate would be much higher.

Who will buy if the fed quits buying? Not gonna happen.

The interest rates have to remain at or near zero forever, if rates rise the fed has to increase printing dramatically (interest payments on the debt?).

Printing is now a fact of life in the US, and in Europe. It is the only thing that can happen.

You cannot tax more, the economy will collapse. You cannot raise rates, same story. Thus you print, and hope, and ...

Tony

Last post in this chain...

Yes, I expect, based on facts and history, a monetary problem in the near future in the US and the world at large. I think it will be worse than others in our lifetimes. I expect the nearest similar case is Rome; similar debasement of currency, similar taxation, similar foriegn entanglements, similar culture. Lets see if it takes 200 years for the US to collapse.

Tony

I think the key will be flexibility. If bad times come, and you are dependant on one scenario occuring, you are prob going to not do well if a different scenario occurs. Thus the hedging, etc.

I think that for those who plan / mitigate for extreme inflation such as Rich and Gene propose, it will not hurt them if the scenario does not occur, and if it does then they will be in the 0.01% who are able to take advantage of the scenario.

Look at history, whether it is the stock market, real estate, industry, etc. The times of quickest and greatest changes in wealth occur during downturns. If you shorted stocks in the downturns, you made much more than if you bought and held for 10 years. If you had cash russia or other places where a system collapsed (argentina, mexico, aisa, etc) you could pick up prime real estate for a song. If you were able to expand your business during a downturn because of a solid balance sheet (buying out overleveraged competitors, equipment and facilities for a song) your growth would perhaps be exponential.

The times of greatest wealth accumulation oppurtunity occur during the darkest days. Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that "The time to buy is when there's blood in the streets." In order to be able to take advantage of that buying oppurtunity, you need to be prepared. That is why Rich, Gene and others are cautiously waiting, diversifying, and preparing. First so that they do not loose all (to others who buy when blood is in the streets, preservation of principle is the first rule) and secondly so they can scoop up the deals.

There are countless examples of great investors who are patient, not getting overleveraged/overexposed, and then when the right situation/oppurtunity comes, they are prepared and sometimes the only bidder.

That is what I would like to work towards.

Tony

PS lots of info out there, just gotta go find it. Dont believe everything you read on a blog or newspaper... go verify it from other sources

and most importantly, think. Think for yourself. Ask the hard questions of yourself, and debate with those who have proven to be a winner. One of my maxims is that if you wish to learn how to do something, you do not ask someone who does not have success in that specific endeavor, no matter how successful or respected they may otherwise be. You go directly to those who have proven to be successful at exactly what you wish to do. From those you ask advice, attempt to learn, and hopefully can understand and gain wisdom.

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Extrapolating that 191billion was corporate tax paid, and at average of 25%, we get 764 billion in total corporate earnings.

Total income for US was about 7 trillion.

Even if corporate tax collected doubled, and federal income tax collected doubled, (382 billion corp tax, (7.626 trillion wages *11.2 average tax rate * 2) 1.708 trillion (here is where going to more decimal places makes a difference :))) the total tax collected would be 2.09 trillion.

Federal budget for 2011 was over 3 trillion, so the increase in taxes collected (1.045 trillion) would not even cover the increase in debt.

yes, if you cut spending, and doubled taxes, you could slow the increase in debt, and even possibly reduce it if you spent less than any politician could hope to get through, but is it possible? Probable? gonna happen? I will say no.

And what about the effect on the economy of this doubling of taxation? Think that will have a damper on the economy? Look at what they have tried, Bush and Obama have both tried tax relief, tax credits, etc. To stimulate the economy.

Taxes cannot be raised (enough to make a difference) without pushing the US economy over the cliff into severe depression.

Spending will not be cut (significantly, just meaningless gestures such as saving 20 million here or there) enough to stop the growth in the US debt.

Thus US Federal Debt will increase.

As Gene pointed out, the us is already buyer of 92% of US Debt, this means more money printing.

Thus there will be more money running around chasing the same amount of assets.

Remember Monopoly; in the beginning money is tight, then as you go around and around (free 200, pass go?) and your "economy" grows, the more money in circulation, the more sudden the spikes up or down, and at the end of the game one person wins it all. The ones with the power to demand money of others (taxes, rents, etc) are the ones who collect the money, and thus the assets when the other person has not sufficient money left.

Bryan, that is the end game of Gene's idea. The money collected as rent during inflationary / hyperinflationary times still has value, it goes to pay down the mortgage. Thus the more money the fed prints, the faster you pay down the mortgage... (unless nobody is working, which means system collapse right away, and Gene has plans in place to mitigate that also). So in essence the rental property is a transfer mechanism to enable that fed printing to benefit you. At some point the money is worthless, maybe you try to collect money and pay off the mtg even faster...

Few thoughts, lots of good discussion and information.

First, the statement that half of all Americans pay no tax. That is correct as far as federal income tax goes, however they still pay sales tax, property tax (unless they rent from you...) and other associated taxes including FICA, SS, etc. As a proportion of their disposable income (as this half is the lower half of wage earners in the US) their taxes paid are higher than many other income levels. Think about it. If someone earns 2 million a year, their SS/FICA is capped at 150,000, so every dollar after that is 13.2% or whatever cheaper for them because that tax is gone. And taxes on food, property, gas, etc as a percentage of their disposable income is much lower than a person making 40k per year and paying zero federal income tax but paying 2500 in property tax, 13.2% in FICA/SS, plus other associated taxes... So the tax burden, in FELT TAX BURDEN, is actually much higher on the half of Americans who pay no federal income tax, they have not much disposable income to pay it with.

Here is an article with interesting stats:

http://www.reuters.com/article/2011/08/04/us-usa-economy-incomes-idUSTRE77302W20110804

"The average income of those filing but paying no tax was $14,483.

the share of those filing who paid no income tax rose to 41.7 percent of tax returns in 2009, up from 36.4 percent in 2008.

a married couple does not pay income tax until they make at least $18,300, and families with two children pay no income tax until they make more than $40,000 under policies started in 1997 and since expanded at the behest of Congressional Republicans, many of whom complain that too many households do not pay income taxes.

No income tax was paid by 1,470 of the 235,413 taxpayers earning $1 million or more in 2009

Total adjusted gross income reported on tax returns, measured in 2009 dollars, was $7.626 trillion, down from $8.233 trillion in 2008 and $8.989 trillion in 2007."

And then this article:

http://www.nytimes.com/2011/05/03/business/economy/03rates.html

A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied.

Corporate taxes accounted for about 9 percent of all federal revenue in 2010. At $191 billion, they were equal to 1.3 percent of the nation’s gross domestic product.

United States companies pay about a quarter of their profits in federal income taxes, a few percentage points higher than the rate paid by companies in most other major industrial countries, according to a number of studies and tax experts.

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