Part 2: Aftershock – Dealing with the Coming Crisis

by Jack Lee

In the book the Aftershock it paints a grim scenario where America is locked into a bubble economy, four of our six bubbles have already burst and the next two bubbles are primed and ready to pop. When that happens all H— breaks loose! The stock marks dives, the world economy falls into a deep depression and paper money has little value. This is the time of the great reset when America wipes out its staggering debt…with worthless paper money. What happens then to you and your family?

BALANCE: How can you protect yourself and your family against such a catastrophic economic reversal? You begin by realizing that such things really can happen and they have throughout history. Limiting your own personal debt and moving your assets into inflation protected areas is always a smart move. This will serve as a hedge against any market downturns and it gives your assets the balance you need or looking at it another way…it’s just a form of insurance. Nobody can predict the future with absolute certainty, so the wise man always hedges his bets…you don’t need to be in crisis mode to believe this one!

STOCKS: A well balanced portfolio is diversified and right now ETF (funds) are far less risky than buying single issue stocks because they are spreading out their risk over all the companies in that one area of the market. If one sector sags another picks up the slack, right now energy is hot, but next time it could be the biotech sector, it’s tricky to know where the winds of fortune will shift and that’s why you balance your portfolio it’s the best way keep a steady gain against market volatility. Properly allocate your funds – the first rule of thumb being never exceed 8% in any one sector. The other part of intelligent investing is market timing, and there is a time to be in the market and a time to be out! Aftershock authors tell us when inflation creeps above 4% is a signal that it’s time to start reducing your stock exposure, and you probably want to be out as it inflation moves toward 10%.

REAL ESTATE: Aftershock sees real estate values plummeting and suggests your avoid the real estate market in terms of speculation. Home mortgages, like credit cards, should be paid down as quickly as possible. Where’s the downside in that? This is a no brainer. Personally I feel if you own a few rentals and you have a positive cash flow, then great, hang in there unless you are approaching retirement. The home values may go down, but people still need a place to live and during the depression real estate was a low risk investment, so I am going against the authors on this one.

CASH: In the Aftershock scenario cash is made worthless by hyper inflation. Paper money has no value because they nation’s credit has been wiped out. So hording cash under your mattress is not a good ideal

PRECIOUS METALS: Precious metals are the one commodity that has a long track record for safety in times of crisis. When bubbles burst or war breaks out, gold and other precious metals has always been the safe haven. Wall Street has a saying, scared money flees to gold.

A wise person would always want to keep at least a portion of their assets allocated in precious metals, gold, sliver, platinum, etc.; and right now gold appears to be more fairly priced than silver and it has a greater upside potential, even if nothing untoward happens! Let’s say the crisis is averted, the world is safe and everybody is doing great and here you are with your gold… and its value never went anywhere – is that so bad? You had the piece of mind knowing that if the worst happened, you did have a little safety net. What was that worth to you?

Here’s another way to stay ahead of the game in a bear market, or even if the stock market takes a huge dump. The simple answer is – you go short. Short sales is a little more risk than most folks want to take, however, if you are knowledgeable in the stock market this is a viable option and it’s used every day by some very astute investors. Many wealthy investors will hedge their market position on XYZ stock by buying [puts] against that stock, so if the stock tanks, they’ve offset some of the loss with options that pay you when the stock goes south. Put’s go up as stocks go down. If it goes up then they’ve made their profit, less whatever cost they incurred for the puts. [Puts] are merely an option to sell a stock at a given price within a certain time frame. If you don’t know what I am talking about, then you’re probably better off not going here.

BASIC LIFE NEEDS: Lastly, everyone should have an ample food/water supply on hand. Again, you don’t need to believe doomsday to see the wisdom of this. It’s just smart to have at least 10 days of food and water on hand in the event of a natural or man made disaster. It’s hard to imagine our supermarket shelves being bare, unless you’ve lived through something like Katrina in New Orleans. It happens – protect yourself. The Mormons believe everyone should have a 1 year food supply just in case and they have canning parties and they learn how to preserve foods in other ways. You might think 1 year is overkill, but this is about security and safety and you can’t fault the concept. FEMA has a great check list of things you should have on hand.

After every crisis has passed some people will always have the cash to score some amazing bargains. Why not you?

Now let’s hear from you, do you have a plan?