Prospering During Deflation

"My favorite time to hold a stock is forever"

-Warren Buffett

With prices across America in the first phase of historic collapse, it's essential to reject the conventional "wisdom" that brought us this mess.

First, embrace lower prices. Lower prices are good for everybody. Capital gains speculation is irresponsible (I borrowed that word from modern socialist taking points just to annoy them) and should never form a large percentage of a comprehensive investment portfolio. Note, I'm using the word "investment" correctly, to describe the purchase of cash flow. When rip off artists driving our financial media use the term "investment" or "investor" they really mean someone who tries to attack and destroy companies through capital gains speculation. Let's be clear, ripping off a company is not an investment in that company.

Capital gains speculators are not investors. Speculators are people who want to buy low then sell high. They want to steal a piece of an organization and run. Virtually every educational institution teaches this stupidity as if it is viable method of creating wealth, using a flat broke staff of academic professors. Let's be clear about another thing, if you learned anything about money it in the halls of academia, it is completely wrong.

Capital gains speculation is about as close to throwing cash in the can as you can get, without actually dumping it. In fact, if you dump your cash somewhere you can often deduct it from your taxes, making in far more profitable than placing it with a speculator like a banker or broker, or speculating with it yourself.

The reason is obvious, ultimately, capital gains speculation is nothing more than a pyramid scheme, and you have to be pretty gullible to think any scheme is going to pay out over the long haul. Yet, almost everyone in the modern world is guzzling the pyramid-scheming socialist central bank's Kool-aid. That's exactly why the great majority are buried in incurable debt--the socialist's pyramid is in the process of collapse.

Note: I use the word "socialist" properly too--someone who wants the many to bear an equal burden supporting the privileged few.

You don't need to depend on corrupt government socialists exponentially expanding spending to thrive from their inflation of prices (or suffer as it deflates prices). You can actually make money instead of trying to snatch it via speculative pricing schemes. This is called, "investing."

Happily for investors the seemingly endless era of criminal inflation is over, at least for a few decades. The crime kingpins have once again destroyed their own phony credit for cash pyramid, and that makes investing extremely attractive.

Beat the rush.

Investors buy cash flow, they don't speculate on wild schemes to push prices higher. Investors pass cash flow positive assets on to their children. They intend to hold forever, because they aren't trying to leave some sucker with a wad of worthless paper. Investors want prices to fall, they want paper and real estate assets to become more affordable so they can buy more, at the same time bestowing greater buying power upon existing cash streams.

The key to prosperity for the rest of our lives is understanding the difference between "speculation" and "investment." Build an investment portfolio.

Lucky for people wanting to switch to investing, there has never been a better time to see the light. During Federal Reserve inflationeering (like a Disney Imagineer who can only draw Dumbo), investors are driven away by rising prices. During Federal Reserve implosioneering (kabooms are more interesting than floppy-eared elephants) and eventual bankruptcy, investment is grandly rewarded by falling prices. We live in the world of deflation, a return to the era of investment.

The first thing an investor notices, is that tax policy is sometimes on your side instead of working against you. That's because investors approximate or are businesses and should strongly consider incorporation. As such, capital outlays, or investments, are generally deductible. Cash flow beyond living expenses (salary) can also be taxed at a lower rate. There are a few things our tax policy actually gets right (for the time being), and rewarding investors more than speculators is one of them. Most people don't understand it.

Let's look at one of the most attractive investments during deflation: buying cash. Unlike what most were taught in the womb, cash is an asset during deflation. Plus, it is nearly risk free. It is hard to beat the risk/reward profile of cash. Buying cash as as simple as trading work to obtain it, or trading other assets for it. Once you hold it, cash starts producing cash flow. Yes, you can get a little interest on cash buy allowing the Treasury to protect it (don't risk it in banks, they will speculate it away), but I'm not talking about interest, I am talking about falling prices. As prices fall, idle cash in hand generates a steady stream of positive, spendable, cash flow.

If you have a lot of cash, you might need to protect your cash using Treasuries. Using the Treasury's relatively new C of I is a great way to stay completely liquid while protecting an unlimited number of cash flow notes.

If you work, another way is to decrease your W-4 exemptions to 0, so the government withholds the maximum amount of cash from your paycheck. This pool of government-protected cash isn't liquid after 30 days like a C of I account, but it is effortless and most people's time is worth more than a few pennies of interest. If you bank get's locked in private FDIC legal arbitration, or you are over the insurance limit, they'll mail a tax refund right to you.

The idea here is not return on capital, it is return of capital.

Lastly, there is the perennial favorite fire and water proof personal vault. Don't forget that boobie traps and overwhelming firepower can also function like investments. B e the bank. This one can pay off big when there is no cash accessible, ATMs are emptied by the first 10 in line, the world is in a panic to pay negative yields while migrating vulnerable bank account balances into the Treasury. You'll be growing your own cash at home.