For the thousandth time, please understand that the stock market isn’t what drives our economy. Sometimes it’s the other way around, but the market really is a thing unto itself. In the March 9 edition of the Appeal, an Associated Press article suggested that because the paper values (Dow Jones, Nasdaq, etc.) of stocks are now much higher, households have recovered their recession losses. How absurd! I doubt more than 10 percent of all households trade stocks.
The market value of stocks in no way reflects the intrinsic value of the companies represented by those stocks. The only difference is that you, the stock-buying public, are out-bidding one another in a frenzy to trade deflated dollars for inflated company shares because of your fear of an impending dollar collapse, caused by our president’s failure to make an honest effort to reduce spending and our national debt.
Of course, you stock market investors are succeeding in proving once and for all that the market is nothing more than the biggest Ponzi scheme of all time. How can that be when it’s legal, you ask? Thomas, are you saying that it’s impossible to make money in the market? Not at all! My father was a stock broker with one of the Big Ten houses for 35 years, and we both made money in the market. With every Ponzi scheme, some folks always make money. But when the bubble bursts as it always does, at some point years of gains are wiped out.
One problem is that at any given time there is only a finite number of companies in which to invest, but there is an ever-increasing number of cheap dollars from new investors thanks to IRAs, Keoughs, retirement systems, etc. Too much money chasing too few stocks spells massive distortion. Share prices are blown way out of proportion to the actual values of the companies those shares represent.
OK, if not the securities market, then in what should we be investing to protect the value of what our money will still buy? Well, in times like these I, personally, want to own something I can see and touch as opposed to pieces of paper representing shares in something over which I have zero control. Real estate is number one in my book provided you own it outright — no mortgages that you can’t cover with reserve cash. Income-producing properties are by far the best of all worlds. Farmland is also great for the long term. You can lease it to a farmer while it continues to appreciate.
I like gold and silver coins but not mining stocks. Precious metal coins always represent real buying power and are readily marketable. But don’t speculate. Buy and hold or sell for goods as needed. It’s great to have gold and silver coins in your possession because not only are they publicly traded they are legal tender that, unlike paper money, has intrinsic value.
Times like these call for revised thinking and planning. There is no way in this economy to plan in traditional ways for wealth appreciation. Even if you ring the bell with some good stock market gains, what are you going to do with the paper profits — buy more stocks? You need to preserve and hopefully enhance your purchasing power now, while you still can. In other words, it matters not what the price of a loaf of bread costs as long as you own something, like a pure-silver coin, that will always buy that loaf, when a stock certificate will not.
Remember, if the dollar collapses completely we’ll all be dealing with black marketers who will have the goods we need but will only take gold or silver coins, or other valuable goods in exchange such as wines, whiskeys and other scarce commodities. These items will be in great demand and are ideal for bartering.
And don’t forget, Mormons are experts on dried-food reserves. These are edible and tradable.
What I’ve recommended here are the kinds of wealth preservation that are also immediately useful should things go to hell, as I expect they will. Survival must take priority.
Bob Thomas is a retired high-tech industrialist who later served on the Carson City School Board, the state welfare board and the airport authority, and as a state assemblyman. His website is www.confessionsoftheentrepreneur.com.