Conquer Change with Robert Ian

How to Make 350% on Your Money

A friend of ours asked how she could protect herself in these uncertain times. I told her that in my opinion, I believe it is important to invest in asset classes that will benefit from inflation. Things like gold, silver, base metals, food and energy. She didn't understand how gold could help protect her, so I gave this example:

Let's go back to 2002. You have ten thousand dollars you want to squirrel away. If you put that money underneath your mattress, it would only be worth about $6500 today. Why is that? It's because the dollar has lost about 35% of its purchasing power since 2002. You'd still have your 10 thousand dollars, but it would only buy you 2/3 of what it did in 2002.

Now let's pretend you put ten thousand dollars worth of gold coins under your bed in 2002. Today those gold coins would be worth approximately 35 thousand dollars. Why is that? It's because gold has increased about 350% since 2002. Even after subtracting the loss in purchasing power of those 35 thousand dollars, you'd still have nearly 23 thousand dollars of real purchasing power today.

In other words, buying gold, didn't just preserve your purchasing power, it more than doubled your purchasing. She asked me if I thought gold was at its peak. I said in my opinion, absolutely not. The inflation adjusted high in gold is estimated at $2400 an ounce and there are estimates that put that number as high as $6200 an ounce. Either way, the momentum is to the upside.

The tipping point has arrived. The world is about to experience change of unprecedented proportion. The secret to conquering that change is being prepared for it.

GM Closes 4 Plants: Economic Tsunami Begins

This week I've delivered two speaking presentations around the country and the topic that is top of mind with just about everyone is gasoline and food prices. As this tsunami of economic change sweeps the country, the confusion, the anger and the blame is only going to accelerate.

For example, in Wisconsin the GM plant that makes trucks and SUVs is going to close (along with 3 other GM plants in Ohio, Ontario and Mexico). According to state data, the average pay in transportation equipment manufacturing was $71,000, which is almost twice the average pay in the county where the GM plant is located. According to a recent article in the Milwaukee Journal Sentinel, Governor Doyle is upset because the state ponied up $10 million dollars to help GM retrofit this plant for Suburbans, Tahoes and Yukons. And it's not just GM. What about the area restaurants, retailers, service providers and area manufacturers who supply parts for the GM plant? Everyone is going to be hurt.

As this economic tsunami unwinds, finding replacement jobs isn't going to be easy. Even if opportunities are found elsewhere, moving will be difficult in this declining housing market. Long commutes will not be cost effective with 4 and 5 dollar a gallon gasoline. Right now there's a lot of pain and not a lot of positive solutions. I was talking with a good friend of mine who is directly affected by the GM plant closure and she said, "where are people going to find jobs"? Then she answered her own question by saying, "there are no jobs, at least not enough of them".

This is happening all across the country. The problems can't be hidden anymore. The tipping point has arrived. I believe history will show that $4 gasoline marked the beginning of the end of the consumer truck and SUV market which, in turn, is opening the door on Pandora's box to global hyperinflation.

At the end of the day there's only two unemployment numbers that mean anything. If you have a job, the unemployment rate is zero percent. If you don't have a job, the unemployment rate is 100%. Nothing else really matters.

Higher Gas Prices: How to Avoid a Sudden and Dramatic Change in Your Lifestyle

A recent story in the Boston Globe said that truck and SUV sales were down 32.8% in April compared to the same time last year, and sales of small cars were up 18.6% over the same period. And this is with gas at only $4 a gallon. What happens when gas is $5 a gallon? How about $6 or $7 a gallon? What happens then? Economically, it's going to get ugly.

T. Boone Pickens recently commented that oil production is 85 million barrels a day. Demand is 87 million barrels a day. Production capacity is maxed out. A rising gas price won't lower global demand but it may, temporarily, slow down the growing disparity between supply and demand. Change is coming fast in America. The hyper-inflationary genie is out of the bottle and he's not going back in. More important, the hyper-inflationary genie is now visible to everyone in the form of higher gas and food prices. This means inflation psychology is firmly taking root in the mind of the public. This means the idea of inflation expectations being "well anchored" was nothing more than wishful thinking and is now a thing of the past.

Congress has been making quite a spectacle out of themselves grilling the oil company executives. This type of public interrogation is usually a pre-cursor to some new tax scheme. Remember when they grilled cigarette makers and then taxed them to supposedly pay for healthcare? This time around, congress will piggyback some kind of new tax on the rising price of gasoline, probably to fund federal research into government approved alternative energy. Make no mistake about it, the rising price of gasoline is a vehicle that will be used to generate additional tax revenues. When we're at 5, 6 or 7 dollar gas, how much of that is going to be tax? It will be plenty.

And one final note. I talked with someone this weekend who recently received their government stimulus check. I asked her if she was doing her part to pull our country out of recession. She told me she paid two utility bills and put the rest down on her Visa card. So much for stimulating the economy.

The take away message in all this is that inflation psychology has taken hold in the mind of the public. When you couple this with the fact that asset classes like gold and silver are no where near their inflation adjusted norm, you have the making of the perfect financial storm. Everyone is about to experience a sudden and dramatic change in their lifestyle. For many this change will be downward. For those who are invested in asset classes that will benefit from this hyper inflation, the change will be to the upside and will be of staggering proportion.