ROME – What are we doing in Rome?
We’ll tell you Monday. That will give us time to figure it out…
In the meantime, remember: Cash is king. It’s one of the best-performing major asset classes this year. (More on that below in today’s Market Insight…)
It’s also – by far – the safest.
Even billionaire investor Carl Icahn is now urging investors to get into cash. Cash will someday disappoint us. But probably not today… or tomorrow.
The War on Cash
But the authorities don’t like cash…
As we’ve been warning Bill Bonner Letter readers, the feds have a bitter animosity toward cash. It has almost become a religious creed. Like the Temperance League’s attitude toward alcohol, the feds are afraid that cash is a pernicious temptation, leading to sin and suffering.
People have a “propensity to save,” they say. This, they believe, causes all sorts of social ills – from poverty to unemployment.
Fortunately, the feds are there to protect us. They fight this weakness in the human character with a variety of measures.
Zero-interest-rate policy (ZIRP), for example.
“You can save your money,” say the feds “But you won’t earn anything on it. And after inflation, you’ll have less than you started out with.”
It’s like alcohol-free beer: You can drink all you want without ever getting a buzz on.
There’s quantitative easing, too. It offers wavering dipsomaniacs the opportunity for a more intense high.
Prohibition drove drinkers out of honest bars and away from safe libations. You had to go get your liquor at an illicit speakeasy. Mobsters often ran these. And much of the alcohol consumed was dangerous bathtub hooch.
Now, the feds drive investors into speculative stocks – often run by nefarious cronies – and dangerous “high-yield” (aka junk) debt. Investors will end up with an awful hangover, but at least they won’t go blind.
When those schemes fail to quench the thirst for cash, as they inevitably do, the feds will turn to more drastic measures. After all, if you can make alcohol illegal, surely the sky’s the limit on social and financial engineering.
Rewriting the Script
When beads of sweat begin to form on regulators’ brows during the next 2008-style crisis, one of their first calls will be to Harvard economics professor Ken Rogoff.
“So, Ken, how does that ban on cash work again?” they will ask.
Rogoff did some good work, along with Harvard colleague Carmen Reinhart, in their book This Time Is Different: Eight Centuries of Financial Folly. They showed that, throughout history, high levels of debt have gone hand in hand with low economic growth.
We’d add that debt as a percentage of GDP has a habit of growing faster and faster – until the whole thing blows up.
But like almost all modern economists, Mr. Rogoff has little amor fati. That is Nietzsche’s phrase for letting nature take her course. Rather than relax and enjoy the show, Rogoff proposes to rewrite the script.
He has a solution! But not the obvious one – letting Mr. Market sort it out. Instead, he wants to make cash illegal.
It’s true that Mr. Market is likely to handle investors roughly. He practices a version of “tough love.” He corrects mistakes by teaching investors a lesson. Still, he gets the job done – quickly and as painlessly as possible.
The goal of practically every regulator, politician, crony, and economist is to stop him.
Mr. Rogoff, for example, wants to ban cash in order to impose “negative interest rates” on bank account holders.
Negative interest rates are a tax on savings. With no recourse to cash, your money would be trapped in bank accounts, where governments can easily levy negative interest rates.
No vote in Congress is necessary… no lobbying… no horse-trading… no smoke-filled rooms – none of the messiness of modern pseudo-democracy.
Instead, the bald-headed, gray-bearded PhDs will simply make it part of banking regulation. Like a drone attack on a suspected terrorist, no questions will be asked!
Buy a Home for $1,500
Meanwhile, we continue wondering what it takes to live on $500 a month.
Remember, our goal is to live better. We’re not sure if a used motor home in a Walmart lot will take us where we want to go.
So, let’s look at some alternatives:
Our son Will has been looking at shipping containers. You can buy them for as little as $1,500. They are spacious. They are strong. They can be outfitted in almost any way you like. And they can be set up easily, almost anywhere you like.
From container living website ContainerHomePlans.org comes this information:
Container houses are cheap, flexible, and fast, say proponents. Those who’ve tried them report making complete houses out of them for as little as $20,000.
If – if – you were able to finance that… at 5%… you’d pay about $100 a month.
But wait. You have to put them somewhere.
Hmm… how about this?
Maybe you could build a house out of containers on someone else’s land. You live there but when you die or leave, the container house reverts to the landowner.
Are container houses BETTER than regular houses?
Remember, that is our goal: to live better on less. For that, we may need to think out-of-the-container-box.
And here, our readers are way ahead of us. Many have written in with useful advice and ideas. See below…
More to come…
Further Reading: If you’re interested in finding out how to build your own container home, this little blog has a useful overview of a simple shipping container cabin build.
Compared to the competition, cash has had a great year so far in 2015.
Today’s chart shows the performance of the major asset classes year to date.
The only major asset class with a positive return is U.S. bonds, as tracked by the Vanguard Total Bond Market ETF (NYSE:BND).
The SPDR Barclays 1-3 Month T-Bill ETF (NYSE:BIL) – a good proxy for money-market cash – is the second best performer.
Cash has held its value. That compares with an 18% loss on commodities… a 15% loss on emerging markets… and a 6% loss on U.S. stocks.
Icahn: Markets Are “Way Overpriced”
Carl Icahn is one of the most successful investors in the world. He’s warning that markets look “way overpriced” and this is putting many unsuspecting investors in a “dangerous” position.
Fed Ignores Dire CIA Warning
The CIA’s threat detection system has warned the Fed of a $100-trillion crisis on the horizon. But the Fed and its political cronies in Washington refuse to listen.
Germany’s GDP Forecast Rises Due to Immigration Surge
Instead of “People’s QE,” a simpler way to increase GDP is to loosen up immigration laws. Germany will take in 800,000 refugees this year. And this is boosting its growth prospects.
If you have personal experiences… or ideas… about how to live better on less, Bill and the team would love to hear from you. Write us at [email protected]
Here are some responses from readers to yesterday’s issue about how to live on $500 a month…
I lived in Chile for $500 a month. I was paid $1,000 a month for a year. I rented a room in one of the nicest neighborhoods in Santiago for $240. I used the bus, and food was quite a bit cheaper. I could also afford a nice dinner out or two a month. Had a bike. I also had a girlfriend with a car, so that helped a lot. Moral of story is to move south.
– John B.
You said, “It is impossible to live on $500 a month in the U.S. the way we are accustomed to living. Forget about renting a house or apartment.”
I was 27 in 1970, newly divorced, working, and wanted to just have fun. A friend let me park my cab over camper on his lot. We had a garden, ate out all the time; life was fun.
I enjoyed it so much I decided to stay a bum forever, just so no girl would want to turn me into a husband. Well those crazy girls still tried to get me haltered, but I had too much respect for them to ever let that happen.
– Jerry C.
Walmart Supercenters allow only a one-night stay. You can’t stay there for extended periods of time.
The best approach with an RV is to dry camp at one of the free campsites owned by the Bureau of Land Management. Watch Nomadic Fanatic, a TV program on RVs on YouTube.
My brother and his wife live in Guadalajara, Mexico. Their housing cost – including utilities and Internet – is $500 a month.
– Bill W.
Live in a trailer in a Walmart lot? That is, live in your car?
Please send your piece to the Shouts and Murmurs page of bleak black humor in The New Yorker.
Your suggestions tilt that way. Wonder how I’d feel about $5K purses and shoes, $100K watches, or cosy little dinners at the Terminus Nord from my deck chair on the Walmart pavement…
I’d much rather a lean-to in the woods, where at least there would be some green and perhaps a bit of birdsong, a trickle of water.
– Joeth B.
In Case You Missed It…
Our friends at International Living know all about living better for less.
Check out their video: “7 Great Retirement Towns You’ve Never Heard Of.”
It’s a list of inexpensive places where you can live the good life on nothing more than your Social Security check.