All The Farm That Is Fit To Print

Wednesday, May 25, 2011

Content with Mediocrity

Inflation Spares None
By Nick Hodge in Energy and Capital
Friday, May 6th, 2011

It's getting tough out there, isn't it?

Milk hasn't been on special at my Safeway in weeks, the price placed firmly just under $4.00.

Gas is the same price.

The last time I filled up my truck, it cost me $105. I had to swipe my card once at the pump and again inside with the cashier; you're now only allowed to use a credit card once for $75 in a 24-hour period at the pump.

And while I can't say I take pleasure in paying higher prices — nobody does — I can say I see them as validation of the theories I and my fellow analysts have been presenting to you each and every day for years.

I take pride in the fact that I've not only prepared myself for economic uncertainty and price volatility, but that our advice has helped hundreds of thousands of people like you do the same.

But sometimes preparing yourself isn't just about finding the next best stock, timing an option play perfectly, or taking profits from rising commodity prices...

It's also about reducing your debt-load (or better yet, eliminating it) to increase the economic security of you and your family.

It's about spending wisely and saving diligently.

It's about taking the time to think about what you would do in an economic emergency.

Not many of us take enough time to think about it. Our society has been stable and prosperous for so long, and the government has kept the middle and lower classes placated so well, the honest truth is that hundreds of millions of people are content with mediocrity...

And not only content in mediocrity, but reveling in it.

Have you seen an Olive Garden on a Friday night, laden with an increasingly overweight population, giddy as they shell out their depreciating dollars for an endless basket of doughy breadsticks?

How many of them you think have taken in Tuscan air or even pondered the virtues of a Mediterranean lifestyle? How many of them do you think could point to the Mediterranean on a map?

And it isn't only a zombie middle class that's emerged. The lower class thinks it's entitled as well.

I see it every day on my drive home... East Baltimore stoops blanketed with long white t-shirts, airbrushed fingernails, and brown paper bags. Laughing faces pulling on Newports and riding bikes in the middle of the road.

They're okay with one of the lowest graduation rates in the country and one of the highest murder rates — because that new low-budget comedy and hip-hop album are gonna be off the hook, yo.

I share this perspective not to demean or belittle. I share it to show those who are interested how complacent we've become with our own destinies, and how accustomed we are to cheap goods and relative order.

But What If That Changes?

And what if it changes rather quickly, as we've seen with the sudden sharp rise in fuel and commodity prices?

Sure, Olive Garden will still be full when gas averages $4.00 — and probably even at $5.00.

But what about when it hits the $9.00+ currently being paid in Greece, Norway, Turkey, Hong Kong, and other parts around the globe?

What if milk and cereal and bread follow suit?

How long before meager discretionary income for Olive Garden turns into millions of middle-class deficits — incomes no longer able to cover all expenses, even basic ones?

How long before class distinctions turn into class warfare?

It's arrogant to think it can't happen here. It's naïve to think the government can prevent it.

Look how fast it happened in Algeria, Tunisia and Egypt. Those aren't third world countries. Algeria's GDP is larger than New Zealand's; Egypt's is larger than Ireland's.

Greece went from upscale tourist destination to rock-throwing in the streets in weeks...

The U.S. is closer than you think.


Now I'm not one of those go-buy-a-gun-right-now kind of guys (though I do have a few hunting rifles that can pull double duty).

But I am the get-your-house-in-order-and-keep-it-that-way type.

The dollar is approaching a 30-year low at the same time the cost of goods is skyrocketing. And the Fed's approach isn't helping matters.

Stocks may be going up, but the dollars you sell them for are worth less and less.

Unemployment and housing prices still say we're in recession.

Call it a recovery all you want...

Unions are being stripped of rights. Public pensions are in question. The government that's used the success of the rich to keep the poor at bay is flat broke.

And it's only a matter of time until all these simmering pots come to a boil.

If you aren't already financially free, times are only going to get tougher. The cost of living has never been higher, and it shows no sign of abating.

Stop spending frivolously now. Save vigorously.

And store that wealth in something besides dollars.

Secure your house and your property. If you don't have one or any, get some.

Focus on what you'll do in that situation as much as you hope it won't happen.

But most importantly, accept that the status quo won't always be so. Step outside the mundane long enough to see that $10 gas isn't out of the question — and could actually happen rather quickly.

And above all, know that the onus is on you.

No one will be a utilitarian if it happens.

Call it like you see it,

Nick Hodge

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