Author Topic: How long could you go?  (Read 7624 times)

quakerplain

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How long could you go?
« on: February 14, 2012, 09:06:47 PM »
A workable definition of wealth is forward sustainability.

Robert Kiyosaki put together this personal financial statement to define net worth in terms of months
http://www.richdad.com/Resources/Tools.aspx#financial-statement

Jacob at ERE defines FI as  monthly expenses x 300 or twenty five years.

That is all well and good if you have a stash in place. But what will you do if you are separated from your stash?

What if there were a bank holiday tomorrow, or your bank failed, or John Corzine mixed your stash with the company money
and put it all on lucky 13 at the local casino...and lost it. Don't laugh. Gerald Celente lost six figures in the MF Global theft
and they got away with it!

So there you are, bopplei, atm card in hand at the end of a very long line of fellow depositors. What are you going to do
NOW? How long can you go?

What you've got is what you've got. Go look in the fridge and ask yourself how wealthy you are? How many days?
A naked aborigine with a stick in the outback of Australia is wealthier than you are at this moment. How long can you go?

I can go a month before we run out of cream for the coffee. Three months before we have to slaughter the livestock,
Six months before we start whining about the food. A year before we start really getting cold, and three years before
we outright starve to death. All these numbers are shortened by Christian charity for those who have not prepared.
Which brings home the point, if my brother is not prepared, I am not prepared. It is after all a community effort.

How wealthy are you really? How long could you (and your community) go?





 

arebelspy

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Re: How long could you go?
« Reply #1 on: February 14, 2012, 09:23:32 PM »
Wow, those are some bold statements.

I'm going to ignore the alarmist parts that I don't personally find interesting and focus on the line I did: FI as defined by Jacob from ERE.

I think it's a little low, as 300 X monthly expenses is basically 25 X yearly, which is a 4% SWR (safe withdrawal rate). For many early retirees, that may be too high, given a potential timeline of 30 years or more for retirement.  A 3% (or less) SWR is a little safer, IMO (i.e. 33 X yearly expenses).

If the world collapses, I'll last about a second.  I'm not worried about it.
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quakerplain

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Re: How long could you go?
« Reply #2 on: February 14, 2012, 09:49:23 PM »
There are three kinds of people in the world.

Those who make things happen
Those who watch what happens
and those who don't know what happened

I stand by my statements and can give citations if you would like.

But you might find them "alarmist"

for example

BCM Has Ceased Operations (source)
Posted by Ann Barnhardt - November 17, AD 2011 10:27 AM MST

Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,

It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.

The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.

The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.

Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.

I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.

Perhaps the most ominous dynamic that I have yet heard of in regards to this mess is that of the risk of potential CLAWBACK actions. For those who do not know, “clawback” is the process by which a bankruptcy trustee is legally permitted to re-seize assets that left a bankrupt entity in the time period immediately preceding the entity’s collapse. So, using the MF Global customers as an example, any funds that were withdrawn from MFG accounts in the run-up to the collapse, either because of suspicions the customer may have had about MFG from, say, watching the company’s bond yields rise sharply, or from purely organic day-to-day withdrawls, the bankruptcy trustee COULD initiate action to “clawback” those funds. As a hedge broker, this makes my blood run cold. Generally, as the markets move in favor of a hedge position and equity builds in a client’s account, that excess equity is sent back to the customer who then uses that equity to offset cash market transactions OR to pay down a revolving line of credit. Even the possibility that a customer could be penalized and additionally raped AGAIN via a clawback action after already having their customer funds stolen is simply villainous. While there has been no open indication of clawback actions being initiated by the MF Global trustee, I have been told that it is a possibility.

And so, to the very unpleasant crux of the matter. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless, criminal political cronyism.

Remember, derivatives contracts are NOT NECESSARY in the commodities markets. The cash commodity itself is the underlying reality and is not dependent on the futures or options markets. Many people seem to have gotten that backwards over the past decades. From Abel the animal husbandman up until the year 1964, there were no cattle futures contracts at all, and no options contracts until 1984, and yet the cash cattle markets got along just fine.

Finally, I will not, under any circumstance, consider reforming and re-opening Barnhardt Capital Management, or any other iteration of a brokerage business, until Barack Obama has been removed from office AND the government of the United States has been sufficiently reformed and repopulated so as to engender my total and complete confidence in the government, its adherence to and enforcement of the rule of law, and in its competent and just regulatory oversight of any commodities markets that may reform. So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy.

To my clients, who literally TO THE MAN agreed with my assessment of the situation, and were relieved to be exiting the markets, and many whom I now suspect stayed in the markets as long as they did only out of personal loyalty to me, I can only say thank you for the honor and pleasure of serving you over these last years, with some of my clients having been with me for over twelve years. I will continue to blog at Barnhardt.biz, which will be subtly re-skinned soon, and will continue my cattle marketing consultation business. I will still be here in the office, answering my phones, with the same phone numbers. Alas, my retirement came a few years earlier than I had anticipated, but there was no possible way to continue given the inevitability of the collapse of the global financial markets, the overthrow of our government, and the resulting collapse in the rule of law.

As for me, I can only echo the words of David:

“This is the Lord’s doing; and it is wonderful in our eyes.”

With Best Regards-
Ann Barnhardt

Mike Key

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Re: How long could you go?
« Reply #3 on: February 14, 2012, 10:15:34 PM »
Study History and Economics and you'll understand the world does in fact not ever collapse. Nations, Currencies, Systems all get replaced by others at some point in time.

BTW, the problems you mention can also be geo-based. A US dollar collapse (the most common fear among your types) won't have the same effect on everyone all over the world.

arebelspy

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Re: How long could you go?
« Reply #4 on: February 15, 2012, 06:24:54 AM »
Well put mikekey.

One should build a bunker and go off the grid and stock up on ammo as the reasonable course of action if you believe the above.

Otherwise realize that we may be in for some tough times, but the world isn't going to end, in which case the above is unreasonable.

Still, kinda fun to have that perspective on the forums, long as he doesn't spam it in every thread, yeah?  :D
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FrugalToque

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Re: How long could you go?
« Reply #5 on: February 15, 2012, 06:28:08 AM »
It's important to understand, from that lengthy quoted article, that the writer was talking about the futures and options market, which are strange birds indeed.

The general economy, however, will continue to exist.  People will keep inventing and producing things which other people will need or want (most notably "food" and "clothing").

Life will go on, even if the futures and options markets completely collapse.  The only duty the rest of us have is to make it so the gamblers don't impose undue penalties on the non-gamblers.

chrissyo

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Re: How long could you go?
« Reply #6 on: February 15, 2012, 07:36:57 AM »
Still, kinda fun to have that perspective on the forums, long as he doesn't spam it in every thread, yeah?  :D

My thoughts exactly!

Erin

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Re: How long could you go?
« Reply #7 on: February 15, 2012, 11:45:24 AM »
I married someone who will make sure we make it if things collapse. My job is to make sure we make it if things don't collapse.

If things do collapse, we have a pretty solid plan - we have food stored, rain barrel & well water, horses to ride, guns (light on the ammo) for defense, and livestock for food. We'll be better off than most, but I'm no survivalist so I'm sure some will be better off than us.

I am kind of a paranoid freak, so I do get concerned about this kind of thing. I often wonder if buying that generator is a better plan than saving $500 that won't actually be there if the world collapses. :/

vwDavid

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Re: How long could you go?
« Reply #8 on: February 15, 2012, 01:08:26 PM »
If the world collpases I'm sure the marauding gangs will relieve you of your hoard anyhow. SHTF sometimes...

However, I don't think it is very MMM to go the alarmist way of thinking. MMM is ultra positive, make the best of any circumstance (which I admit is very tough for me) but perhaps ultimately a better philosophy to learn as worry is TERRIBLE for ones current health.
« Last Edit: February 15, 2012, 01:09:59 PM by vwDavid »

adam

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Re: How long could you go?
« Reply #9 on: February 15, 2012, 01:31:28 PM »
If the world collapses we're moving in with my in laws.  There are some benefits to marrying into "country" folk.

AJ

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Re: How long could you go?
« Reply #10 on: February 15, 2012, 03:10:41 PM »
I tend to see two types of people:

1) Those who think the whole world is going to fall apart and we'll all be looting and starving within the year.
2) Those who say "well, if something goes wrong we'll all be screwed, so I'm not going to worry about it."

I think there can be a healthy middle. The likelihood of a full apocalypse may be small, but the likelihood of a large natural disaster is higher. Maybe you couldn't survive in perpetuity without a functional infrastructure, but would you last a week? A month? A year? What if a little prepping was all it took to make it through unscathed?

I like Erin's outlook above. Rain barrel, a couple guns with ammo, and (most importantly) know how could go a long way to making your family comfortable in a crisis.

And, FWIW, if we do ever face an apocalyptic event, I think salt and multivitamins would be the things to stock up on. They are cheap now, you'll use them anyway, and they could make great bargaining chips.

Guitarist

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Re: How long could you go?
« Reply #11 on: February 15, 2012, 08:16:20 PM »
Salt, heh heh, I believe it was one of the earliest forms of currency. Talk about coming full circle.

I would worry more about yellowstone blowing up then anything man will do with economies or weapons.

foodguy

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Re: How long could you go?
« Reply #12 on: February 15, 2012, 08:21:01 PM »
There are some benefits to marrying into "country" folk.

+1

And they've got a stocked beer fridge.  I'm good.

catalana

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Re: How long could you go?
« Reply #13 on: February 18, 2012, 11:12:40 AM »
And, FWIW, if we do ever face an apocalyptic event, I think salt and multivitamins would be the things to stock up on. They are cheap now, you'll use them anyway, and they could make great bargaining chips.
Oooooo and I was banking on coffee and pain killers for my bargaining.

I think there are levels of collapse, and for me an awareness of them is important.  I've not reached the livestock and ammo point yet though!

I think more likely is temporary/intermittent unavailability rather than complete collapse.  If you want a thought provoking book to read about city survival, try "The Siege" by Helen Dunmore.  It is a personalised account of the two and half year siege of Leningrad by Hitler.

Even if you don't believe in global collapse, it makes sense to split your stash amongst different institutions.  If any one hits diffficulties you will not lose everything.

Arbor33

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Re: How long could you go?
« Reply #14 on: April 24, 2012, 11:56:58 AM »
I'm a little late to the party here...
However, I don't think it is very MMM to go the alarmist way of thinking. MMM is ultra positive, make the best of any circumstance (which I admit is very tough for me) but perhaps ultimately a better philosophy to learn as worry is TERRIBLE for ones current health.

Call me odd, but I can see this type of scenario fitting in well with the MMM way of thinking. It just depends on your interpretation of the MMM way of thinking.

At the risk of over generalizing, I see it as "financial prepping to minimize the need to work". It's not so different really. In fact, the only difference is that money affords us the opportunity to buy a wider range of things than stocking up on food or livestock. I mean, we really only need food, water, and shelter. Should we have a situation where we no longer use money for our transactions, we've essentially wasted our time trying to get it because it can no longer provide for us. Food will always be useful unless it goes bad. However, if you purchased the right foods, you could see shelf lives of 30+ years!

I'm not saying the world as we know it will change drastically, but I can see merit in the prepping mentality. Quakerplain might not appear to be the crazy old uncle with a tin foil hat if you break down what he's saying. If we lose access to our stache, or the value of our stache drops to nill, we would have been far better off investing into our necessities (food, water, shelter), the things we're supposedly prioritizing with our anti-consumerism bravado.

James

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Re: How long could you go?
« Reply #15 on: April 24, 2012, 02:32:09 PM »
I think there is a pretty solid line between survivalist thinking and mustachian thinking.  I believe the posts here by Quakerplain were in the survivalist camp.  Nothing wrong with that, I've got family and friends in that camp, they are good people and are more like me than consumerists are.  If you see the need to sounds the alarm then so be it.  But I don't think it's mustachian and I don't like some of the tone that comes with some of the survivalist rhetoric.

Having said that, I think there is space to have that debate and don't mind considering the implications of the concerns they raise.  It would be foolish to bury our heads in the ground over every new wind that blows.  I welcome a thread or two discussing survivalist issues, but wouldn't consider that thinking mustachian in nature.

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Re: How long could you go?
« Reply #17 on: April 24, 2012, 05:27:06 PM »
http://www.oftwominds.com/blogjun08/survival6-08.html

This was awesome! I like the end:

"Because the best protection isn't owning 30 guns; it's having 30 people who care about you. Since those 30 have other people who care about them, you actually have 300 people who are looking out for each other, including you. The second best protection isn't a big stash of stuff others want to steal; it's sharing what you have and owning little of value."

Arbor33

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Re: How long could you go?
« Reply #18 on: April 25, 2012, 06:11:30 AM »
http://www.oftwominds.com/blogjun08/survival6-08.html

This was awesome! I like the end:

+1

That was a great write up!

I've got to say, I whole heartedly agree. People are most definitely the most valuable resource regardless of what's going on around us. I definitely don't support the "buy guns for protection" kick that many preppers are on. Never really made sense to me...

nolajo

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Re: How long could you go?
« Reply #19 on: April 26, 2012, 08:53:49 PM »
I've gotten on a bit of a kick watching Walking Dead and I must say, I did recently evaluate my ability to stay in my house should there be a zombie apocalypse. The long and the short of it is, not long if the utilities go out. If they're still on, water and gas especially, maybe a week. Most of what I keep on hand in terms of food stuff and cash would be plenty to smooth over the more normal rough spots. Like AJ, as my location might indicate, I live in a moderately disaster prone area, as frankly do most Americans. Being able to cope either in an evacuation or even just staying put if the power goes out (how do you plan to access your cash if there's no electricity?) is more my speed. So, I have some cash and a go-bag along with a list of stuff to grab if I have to go quickly as well as some food supplies.

For a longer term situation though, I think MMM principles would be terrific. So much of what he advocates is learning skills that others might outsource and strengthening your ties to the community. If you can jerry-rig the things you need based on skills you have, you will always have that last safety net. If you've fostered some sense of community, as others have mentioned, you'll be even better off, regardless of whether your monetary stash is worthless or not.

atelierk

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Re: How long could you go?
« Reply #20 on: April 27, 2012, 09:46:50 AM »
I would worry more about yellowstone blowing up then anything man will do with economies or weapons.

Besides Yellowstone, there's the sun. I watched an episode of NOVA the other night, all about sunspots, solar storms, and their effect on the Earth. Seems if the conditions are right during "solar maximum" and the sun belches off a big whatever-it-was of energy at us with its polarity in the right alignment with Earth's magnetic field, we're all gonna be sittin' in the dark for many months or years because it's likely to blow half the big grid transformers on the planet. From what one of the scientists said, these transformers are huge and it'll take many months to build each new replacement.

Sounds far-fetched but they believe such a thing has already happened at least once in the last 200 years, in 1859 I believe they said. Interpreting old newspaper accounts of auroras and such, these solar scientists think we've already been nailed by one of these perfect solar storms, but it was no big deal because the world was largely unelectrified at that point. When it happens again (they said 'when' not 'if') it will be a big problem because we're pretty much unprepared for such a solar event and they're still impossible to predict with any long range accuracy.

Fun stuff, huh?

kdms

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Re: How long could you go?
« Reply #21 on: May 01, 2012, 01:38:32 PM »
I married someone who will make sure we make it if things collapse. My job is to make sure we make it if things don't collapse.

.....I often wonder if buying that generator is a better plan than saving $500 that won't actually be there if the world collapses. :/

I too married someone like this (and have much the same assets)....and we've been pondering the very same question.  Especially today, when our well pump blew up and we no longer had access to water.  Fortunately, we were able to find someone who had the skills to do the repair while we stood around and tried to learn as much as we could.....although, on the other side of the coin, without financial planning, we also wouldn't be able to pay the $1000 it cost us to fix it.

Saving all the money in the world isn't going to help one bit if you need to find or create the basics and can't buy it.  I put as much as I can towards attaining FI, but I must say I feel a lot more secure about our ability to take care of ourselves everytime we master a new practical skill than I do about the long-term future of the CPP or any other financial product. 

It's an interesting discussion....there are varying degress of survivalism, some extreme, some more practical.  Financial planning is imperative, but there's nothing wrong with learning how to hunt, either, if you're inclined to do so.  (Although, quite frankly, I wish that the spouse would deal with the cleaning someplace other than the driveway.)  Survival is, as previously said, about using your available skills and resources (which includes community) to stay ahead of the zombies... :)

atelierk

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Re: How long could you go?
« Reply #22 on: May 01, 2012, 04:27:20 PM »
The Chronicle of Higher Education ran a very interesting article last winter on the very few schools who include practical life skills (growing food, fixing things, cooking) as a required part of their curriculum. http://chronicle.com/article/Tools-for-Living/130615 Entertaining, encouraging and worrisome at the same time.

kdms

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Re: How long could you go?
« Reply #23 on: May 02, 2012, 07:32:10 AM »
Definitely a thought-provoking article....and it was interesting to read the comments; only one person pointed out that financial literacy should also be taught as a practical skill.  Thanks for sharing that link!