Posted by David Ige on Mon, Jul 12, 2010 @ 03:26 PM
“What is the most important question my clients are to ask themselves, now?”
This was the question asked by a financial counselor who specializes in helping people understand and restore their personal credit. I thought it strange that he would be asking me. But upon quick reflection, and having some exposure to history, the answer came. Money moves like people; in predictable patterns, routed by the confluence of ideas, enacted by governments, and those they partner with to form a power base, intertwined with the behavior of individuals as a response. “there is nothing new under the sun.”
So when we see people move into the halls of government, who believe that they have all the answers, and provides the best solutions for peoples problems, concerns and responsibilities, even for each individual life – what follows that is a false moral imperative, and a “responsibility” to capture as much of a societies recourse as possible to enact their “better” solutions, for the “common good”. Sound familiar?
In times when governments do what the Obama administration is doing, by fiat as some would argue; or by coercing a political class, the current crop of elected officials, to work against the interests of their constituents; that’s you and me, we see tragedy follow. This supplanting of interests – theirs for yours, renders them functionally obsolete. Their policies work to destroy or take by force, large portions of the lives they were elected to protect. This happens as “governments” view of itself, becomes an extension of the politician who wants to become a savior. He enacts programs and policies that always make others reliant on his ability to “save – heal – deliver – restore” them. Those that simply want opportunity to apply their God given talents and initiative, are an enemy of this new “savior”. So they must be de-funded. That’s ok, because the new ends of government must have new recourse so that the savior can keep on “saving” and directing lives of peoples. Government must now “Provide” what for generations past, people expected to do for themselves.
Therefore, because of these policies which mirror those of FDR in the 1930s we will see ever increasing taxes, declining home values, and even declining wages, as happened then. The more yet to come is staggering inflation, and a government that struggles to make it’s interest payments to the world. They will rely on inflation to promote “tax creep” and the principle of paying back “hard dollars” with soft dollars” . Because of this – the question: “what is important right now – in these times with my money?” is pivotal to all you will be able to do in the “times” yet to come.
1. How much cash do you have?
Cash on hand, reserves, emergency funds, rainy day funds etc. this is critical for fewer and fewer will have access to credit. So emergencies will require cash. Investments, ventures, opportunities will be “cash and carry” And watch how much politics will determine who gets credit, how much and on what terms. Whether by accident or design, the governments reach into every aspect of lending and financial management will have effects far beyond new taxation. Just watch who gets what deals and who doesn’t – especially the transactions that require major recourse. At some point banks may serve as instruments of political will more and more. How soon until that effects you personally may only be a matter of time.
2. Is your cash reserve pile increasing or decreasing?
Are you living and operating your business on less than your incoming revenues? Cash money. Cash positions, liquidity. Is it increasing in your life, your company, your balance sheet? Each day are you growing stronger financially or growing weaker?
If weaker is the answer, change something fast. If not, keep growing your cash – you’ll see why in a moment. (In the future – we may deal with the need to invest in strategies that grow companies and interests to provide for your future more than using your cash to provide for the future of the “Collective”.
3. Are you ready for the shift? It has already begun.
The next move that will happen in waves or stages:
Further devaluing of assets – in real-estate and other goods i.e. transportation – cars, trucks, etc. Possible stocks and financial paper backed investments will take another big hit. This may take 8 – 12 months to realize. This will exert more pressure on our languishing economy. An added factor is the re-indexing or increased float about to take effect with Chinas Currency. The RMB is set to gain in value by a possible – some say probable - 25% over the next year. Those accustomed to buying goods made in China, will see that they can buy 25% less or pay 25% more with each purchase. This will leave many importers scrambling for new supply points, to sustain price points for their customers. And their customers will be scrambling to maintain price points for their customers – and so it goes. If you have not started looking for additional suppliers outside of China – it may be a good time to begin.
4. Shift # 2 Are you Exporting yet? This shift has already begun.
In this upswing of the RMB – and other factors set to devalue the US dollar, Export may be the salvation of many. With the RMB Adjusting, the middle class in China will in effect receive a 25% increase in salary. With their saving rate above 30% each individual will accumulate more reserves, and still have more money on hand to spend at their whim – while we in the US will have less discretionary money to play with.
“Cash is King”
So be ready – You will be able to buy used goods, some fixed assets like real-estate, at super “bargain basement” prices. You will need Cash to do this. This will produce a wealth transfer to bolster the advantage of those “advantaged” or soon to be “advantaged” if you are “sitting pretty” with cash. New goods will cost more. Therefore those selling new goods to the US market must work their “niche” aggressively – from every angle. And keep your customers “Happy.”
Moreover, look to see what it is that you do, that you can export. The weak dollar will open up opportunities for the prepared; “cash in hand”. The new middle class in China are buying Americana. GM Sales in China are skyrocketing. But I guarantee – as opportunities abound and grow to new dimensions for those who see them, your view will be obscured by your ability to access them. We will see a credit crunch more severe than we can imagine. Governments will drain credit resources and increase your taxes to pay for their extravagance. So the ability to “leverage other peoples money” – will at some point feel like a relic, an adage of some forgotten “days gone by”. Cash will again be king. PS. – you noticed this with Lending Requirements enacted in the last 2 yrs. – First question of a lender is: What are your “Reserves”? This question may soon be the only question that counts.
This “Cash is King” time will produce great pressure on Government’s ability to collect tax revenues, and more panic will emerge from those in tax reliant positions – government workers, politicians, unions etc. and we will hear more and more about how many are not paying “their fair share” – but more for another posting.
Be Ready. Be Aware. Be Prepared. Be Aggressive. Cash in Hand will be like a scepter, that can make you “King” or “Queen” of an increasing domain.
Dave Stover
Account Executive, Universal Cargo Management
Posted by David Ige on Wed, Jun 23, 2010 @ 11:00 AM
ON THE SUBJECT OF the WEALTHY giving it all away
Bill Gates and Warren Buffet are showing the world what it should mean to be wealthy.
Warren Buffett, Melinda and Bill Gates
Recently they invited several other Billionaires to a secret dinner hosted by non other than 95 year old David Rockefeller. Among those present were Oprah Winfrey, Michael Bloomberg, Ted Turner and George Soros. The theme of the evening was on the Global economic status and Philanthropy. The general goal of those present was to give away 50% of their money. Warren Buffet is actually planning on giving away 99% of his money. His attitude being even with keeping his 1%, more than all of his needs are being met.
Of course we would tend to think "it's easy for them to give so much away, they're filthy rich". However I would like to point out the fact that although most Billionaires give away huge sums of their wealth, and America leads the world in giving by a landslide, as we should. There lacks a concerted effort on behalf of a consortium of Billionaires to focus on this as a goal. Even 50% represents trillions that can go towards needed efforts...such as AIDS research, Melinda Gates goal of eradicating Malaria, stopping child slavery and sex trade, Ecological solutions to what is happening in the Gulf, poverty and so on, that can be better served by the private community rather than leaving it up to governments who history has shown has never solved the problems, they only help foster them and make them worse.
So while we have a government hellbent on creating a United States of Europe, while Socialist Europe is flailing about, flurting with financial ruin, we have two proud American's in Buffet and Gates who are showing the world what it really means to be an American. By not only having the testimony of how they gained their wealth, from nothing up to their current vast empires, exhibiting the power of American ingenuity and free enterprise, but also being able to directly address the problems of society without the bureaucratic red tape of government or world dictatorships clogging and siphoning away all the money.
But studies also have shown that it is perfectly natural for people with wealth to give away money. Be it from guilt or a genuine care for their fellow man, it seems to be wired into the DNA of the wealthy. An interesting book I recommend that talks about this subject is called "The Soul of Money" by Lynne Twist . Even the vilified John D. Rockefeller gave away enormous sums of his money to charity and his church back in the late 1800's.
One of my favorite proverbs is Prov 13:22 "A good man leaves an inheritance for his children's children, while the wealth of the wicked is stored up for the righteous."
We all have tremendous opportunities before us everyday to make something of what we have been given by our creator. May we be good stewards with our abilities and wealth that follows.
Devin T. Burke
CEO, Universal Cargo Management, Inc.