Words of wisdom for these dangerous times

Hi,

The following isn't my wisdom (I'm not that smart--yet--in financial matters). I saw it on another forum.

[quote]

Here is my contention, if you get out of debt and put your excess funds into real assets that can produce cash-flow, then you will be on top when all these claims are settled. [Note from Boyd: what the author means by 'claims' is that Americans have claims to more wealth than actually exists.]

The reason for that is because you will have invested in the real economy. You can also put some assets into gold and silver because those assets will hold value irrespective of the other settlement process taking place. If you put wealth into any kind of debt obligation including a bank account or FRNs [Federal Reserve Notes] in the drawer, expect to have it revalued in some fashion. However if you own part of a debt-free positive cash-flowing business that produces something the economy needs, you will be in good shape. You can find companies like that on the stock exchanges or you can find them in your community if you look around.

[unquote]

Hope this is helpful in some way.

Best,

- Boyd

dno
> Hi,

> The following isn't my wisdom (I'm not that
> smart--yet--in financial matters). I saw it
> on another forum.

> [quote]

> Here is my contention, if you get out of
> debt and put your excess funds into real
> assets that can produce cash-flow, then you
> will be on top when all these claims are
> settled. [Note from Boyd: what the author
> means by 'claims' is that Americans have
> claims to more wealth than actually exists.]

> The reason for that is because you will have
> invested in the real economy. You can also
> put some assets into gold and silver because
> those assets will hold value irrespective of
> the other settlement process taking place.
> If you put wealth into any kind of debt
> obligation including a bank account or FRNs
> [Federal Reserve Notes] in the drawer,
> expect to have it revalued in some fashion.
> However if you own part of a debt-free
> positive cash-flowing business that produces
> something the economy needs, you will be in
> good shape. You can find companies like that
> on the stock exchanges or you can find them
> in your community if you look around.

> [unquote]

> Hope this is helpful in some way.

> Best,

> - Boyd

Okay. Let me get this straight...

Authors says people (Americans) have CLAIMS on more wealth than actually exists.

I take that to mean that if all the assets of a company were sold off to buy back all the shares the company had issued, there would not be enough money to go around. And if those sold off assets first had to SETTLE the outstanding debts those companies have, then the situation would be even worse.

Gold and Silver are suggested. NOT because their price fluctuates on the stock exchange and thus you can lose money as well as make money. BUT BECAUSE the price of Gold and Silver on the stock exchange is the ACTUAL WORTH of those items. They do NOT suffer from an INFLATED price like the stock of the previously mentioned companies. In that sense, having Gold or Silver is like having cash... it buys what it buys at the time and no other people share in the ownership.

The SETTLEMENT PROCESS is what puzzles me some. It sounds almost biblical... and behold the great settlement process took place. There was much dismay. Tears. Crying. Riots in the street.... as if this settlement will take place in one go. All accounts due NOW.

Granted, when banks have pulled stunts like that, the person who suddenly has to pay off the debt usually declares bankruptcy. Not that the sale of assets wouldn't pay off the debt. But the sale of those assets takes time - more time than the bank is willing to wait to get its money back. After all, there are not a lot of people who can afford to just up and buy a few hundred millions dollars of buildings and equipment.

Now I don't think the author is suggesting that this SETTLEMENT is going to happen all at once. But just the mere fact is needs to take place - and never seems to do - is a cause for concern. In other words... these companies - and individuals - are never paying off their debt. They are perpetually in debt. Always just getting by and making the payments. Debt releif only coming from massive sell off (for companies) or retirement lump sums (individuals).

And that the BEST position to be in is DEBT FREE and to own a business which produces positive cash flow (makes more money than it costs to run the business) in a market of needs.

Okay. Ignoring the fact the positive cash flow is usually associated with debt - the money made is enough to service the debt and still leave money left over - the author's suggestion is centering around NEED and not a product/service which could be deemed a LUXURY. Because when times are tough the luxury items are the first thing to be done away with.

Not partying. No family trips to the amusement park. No vacations. No-brand products are the order of the day. The grass can wait to be cut until it's lik a jungle instead of every two weeks. Good bye house maid. Good bye pool guy. Will do those things myself - kinda.

But if your product/service does not need debt to be up and running (which can be achieved by growing slowly by reinvesting excess profits into the business and not spending them on useless things), and is something people need - which involves food and shelter and and some other businesses associated with those basic needs (and there are many) - then you will do all right.

There is an aside to this... regardless of the state of the economy there will always be people with disposable income to spend on whatever they please. The rich. The wealthy. Whatever those words mean to you. Those people will continue to spend on the luxury items. So if you sell those luxury items, a bad economy means insted of selling to people who need to go into debt to buy your widget, you sell to people who actually have the money to buy your widget - just target different people.

Another consideration is: sell to large customers. IBM was big because they sold to large customers. Microsoft got big because they sold to IBM. Linfox, the Aussie haulage company, got big when they landed the supermarket chain contract - multiplying the size of their small fleet by five times just to handle that one contract. And there are plenty more examples - if you look.

All up. An interesting quote, Boyd, when you sit and think about it. Thanks.

Michael Ross