Part 1 –Safe Investing
Part 2 – Victory Garden
Part 3 – Food Storage
Part 4 – Glenn’s Last Meal
It’s All About Diversification
by Chuck Butler
It has changed a lot over the last 50 years. Think of a typical American household in the 1960’s: we bought an American car propelled by Oklahoma crude; toys for our children and clothing for everyone was mostly made right here in the USA; food was quick to market (and not fast food) from local producers; and we all felt paying off the mortgage quickly was the thing to do. And all these costs were denominated in US dollars.
Today every American household is a multinational importer. We buy autos from Europe and Japan, oil from the Middle East, consumer goods from a host of Asian countries, natural resource prices are dictated by mines in Australia and Africa, and we’ve financed our mortgage at lower rates with cash provided by China, Japan and Russia. And when the value of the US dollar declines costs for the family go higher.
But for the most part our investment portfolios are the same as they have always been. When you ask an associate if they have a diversified portfolio they’ll likely reply that yes, they have a number of the stocks in the S&P or maybe an index fund. But what about the rest of the world?
When people think about their investment portfolio usually it’s about stocks, bond and maybe real estate. But what many experts believe is that other asset classes like foreign currencies can reduce overall portfolio risk, hedge some of the price risk inherent in a falling US dollar for our typical multinational family, and at times provide a great return all by itself.
And of course when you consider investing in foreign currency: You wouldn’t buy just one stock for your portfolio would you? Then why have just one currency (dollars) in your portfolio?
The Declining US Dollar
Since February 2002, the dollar has been declining. The last four completed US dollar directional trends since departing the Bretton Woods Agreement in 1971 have ranged in length from 7 to 20 years and are propelled by a collection of fundamental reasons and events. Until these fundamental reasons change, the trend continues.
Trends are not a one way street – in 2005 for example the US dollar gained strength as the Federal Reserve raised rates. But as the US dollar enters its 7th year of decline one must wonder if the trend is nearing an end. The thing to keep in mind here is that at no time during each of the previous weak dollar trends did we, as a country, have a situation with a mortgage meltdown, credit and liquidity crunch, consumer debt greater than GDP, a Current Account Deficit greater than 5%, and a war to fight.
In this decline there appear to be a number of fundamental issues contributing to the decline but the big two have been the large US Current Account deficit, the Federal Budget deficit.
Current Account Deficit
In February 2002, the U.S. Current Account Deficit reached 4.5% of GDP. Historically, this level of indebtedness to GDP meant that the country posting such deficits would experience a currency crisis or at least a large depreciation. And so we have.
Since then the Current Account Deficit climbed to 6% of GDP in April of 2007, and has recently been running just below 6%. So instead of correcting the fundamental reason the weak trend of the dollar, has instead gotten worse.
Deficits Do Matter
People who should know better, continue to say that "Deficits Don’t Matter". Unfortunately, that’s not true. The rising Deficit is a contributor to the current dollar decline, and the fact that the Deficit continues to rise, keeps the dollar in its weak trend.
When a country incurs a Deficit, it needs to be financed. As a nation of non-savers this means that for us the financing will need to come from overseas.
Since financing is needed from abroad we face two choices:
1. Interest rates will have to move significantly higher to attract investment; or
2. The country can allow a debasement of their currency, which acts as a clearing mechanism for investments. As foreigners buy U.S. assets, their base currency is converted to dollars to purchase the asset. If the dollar is weak, it gives the buyer the ability to purchase the asset at a discount.
Given the options, politicians have recently chosen debasement of their currency. It’s the easy way out since there are no spending cuts to make or taxes to raise. Unfortunately, no country has ever debased their currency to prosperity!
Reducing Purchasing Power
As the US dollar declines the price of consumer goods for our typical multinational family will go up.
A good example is the price of oil. Since 2002 oil prices for a European family have risen by 92% – and that’s a lot. But unfortunately due to the decline in the US dollar prices for those of us in the USA have gone up a whopping 319%! That’s a whopper.
Protecting Yourself from Further Depreciation
As stated earlier, currencies can help provide a hedge against dollar depreciation. But how does one go about choosing a currency or which currencies to purchase?
Interest rates can play a big part in a country’s currency performance, as investors look for positive interest rate differentials around the world. However, interest rates are not the "end-all" to currency valuations, as countries with a need to attract foreign investment may raise interest rates above the norm to achieve their goal of attracting foreign investment.
I like to tell people to look at a currency as the "stock of a country" .
When you analyze a stock you are trained to look at the company’s balance sheet, their yield, their ability to attract investment, their leadership, and other things.
Take that same training to analyze the currency you want to purchase. Does the country have a positive balance of payments? (Surplus), Does the country provide a yield? Does the country need to attract foreign investment? Does the country’s Central Bank provide price stability (keep inflation low)?
For the longest time, I’ve pinned my colors to the mast of the countries that have a positive balance of payments (Surplus), as this does not require them to do things to attract foreign investment, and have a deficit dragging down their economy.
Those countries would include: Norway, Sweden, Eurozone, Switzerland, Singapore, Japan, and China.
Another thing to look for is the country’s ability to produce raw materials that other countries demand. Australia and Canada would be two countries that meet that criteria.
How To Use These Currencies
Now that you understand how foreign currencies can be an important part of your investment portfolio, here are ways you can buy them:
Foreign currency CD’s that give you interest based on a country’s interest rate structure, and the currency gain or loss depending on the currency’s performance vs the dollar.
There are also savings accounts that do not offer interest, but give the holder of the currency liquidity, thus enabling them to buy the currency one day and sell it the next should they want to do that.
The Benefit that these products hold over ETF’s is the fact that the holder actually owns the currency, of which they can take delivery of at some point in the future.
Chuck Butler is the President of Everbank.
Planting a Victory Garden
by: Michael Glassman
Back in World War II the United States Government urged people to plant food in order to help ease the burden on the nation’s food supply during a very difficult time in the history of our nation. The resulting gardens were nicknamed "Victory Gardens".
Today’s economy is not exactly the same as it was back then, but we are facing challenges of our own. Our food supply is not necessarily in danger of going away, but in case you haven’t noticed prices on the most basic of things are going through the roof—and that starts to add up. I realize not everyone has a giant corner of their yard to dig up and turn into a farm, but there are things you can grow in just about any landscape that will not only yield food, but blend in with the surroundings.
Vines that Fruit: Do you have a blank wall that needs something growing on it? Try building a lattice trellis on the wall and planting grapes to grow on the trellis. "Red Flame Seedless" or "Thompson Seedless" grapes are great vines to plant on a trellis or on an iron gazebo, the beautiful fruit bunches hanging down make a great addition to your landscape. Do you have an empty iron arch? A great vine is Kiwis. You need to plant a male and a female vine in order for them to cross pollinate and produce fruit. Plant one of each on either side of the arch. Sweet Peas or Snap beans also make a great vine for a trellis or an arch. If you have a blank spot in your garden that only gets morning sun, try planting Blueberries.
Pot Veggies: A bare patio could use a large pot planted with vegetables and herbs. In the center of a large pot place a wire topiary frame and plant a tomato. Tomatoes are the fastest and easiest to grow they take about 2 to 3 months before producing fruit. Place them in full sun and water daily. Around the tomato, plant basil, oregano, thyme and garlic-this pot has the making of a good pasta sauce. Or plant a pot with Butter lettuce, Romaine lettuce, radishes, a cherry tomato plant and you have a salad in a pot. Herbs make good ground covers: such as creeping thyme, lemon thyme, chamomile, strawberries, all make great ground covers and all grow in full sun.
Privacy Food: If you are looking to create some privacy between you and your neighbors, don’t just get any old plant. Plant "Laurus Nobilus", common name Bay Laurels, for a good privacy screen. This is better known as Bay leaves, the same spice that we dry and use in our spaghetti sauce. They are an evergreen bush or tree growing up to 35 feet in height. They give you plenty of privacy. Or plant "Feijoa Sellowiana" common name Pineapple Guava. They make a great evergreen screen growing up to 20 feet in height and have delicious fruit that can be eaten and will also make great mixed drinks.
Made in the shade: Fruit trees make a great shade tree or patio tree. Try planting a self pollinating Cherry Tree. Cherries are so expensive in the supermarket and yet one "Bing Cherry" can produce over 10 to 15 lbs of fruit. My family just harvested our Cherry tree. The fruit was delicious and we picked over 10 lbs of fruit. Other fruit tree options would be planting a Santa Rosa plum or Apricot. These trees produce beautiful white and pink flowers that turn into delicious fruit. If you have a very small yard plant a dwarf or semi-dwarf variety. Full size fruit trees can grow up to 20 feet in height, yet a semi dwarf fruit tree grows about 12 feet and a genetic dwarf fruit tree grows only to about 4 to 5 feet. Genetic fruit trees are great to grow in a pot or large tub. Peaches, nectarines and apples are also great trees to plant in your garden. If you have very limited space and only have room for one fruit tree but you like so many of the summer fruits, you can buy a fruit tree that is called a "fruit cocktail tree". These are fruit trees that have been grafted with several different kinds of fruit on one tree, such as a cherry, plum and peach.
In warmer climates citrus trees and bushes are wonderful. A full size citrus tree can grow 20 feet, it is an evergreen tree with fragrant flowers and wonderful fruit. If you like navel oranges plant "Washington Navels" or "Robertson navels". If juice is desired plant a "Valencia Orange". If you are interested in making Lemonade, plant a" Eureka" or a "Lisbon" Lemon, if you want a decorative Lemon with an orange skin plant a Improved Mayer Lemon. Genetic dwarf citrus grow to a height of 4 to 6 feet are great to grow in a large pot. If you do get a cold spell you can cover them with a plastic tarp making a tent (try not to touch the leaves) or bring the pot inside or on a sheltered patio. Plant strawberries to drape over the container around the dwarf citrus.
Melons are very expensive to buy at the store. Take an area that gets full sun and build 12" high by 24" wide mounds of dirt. Place two melon plants "Ambrosia" cantaloupes or "Sugar Baby" watermelons on the top of the mounds and water daily for two weeks. Melons should be planted after the last frost. After the first two weeks water every other day. It takes 65 to 85 days for your melons to ripen and be ready to eat. When preparing the soil mix in coffee grounds or compost to add organic material to your soil. Aged horse manure is one of the best composts since it is not as high in Urinemic acid as cow manure is.
These are just a few starter ideas help you create an edible garden. Will it solve all of your problems with high food prices? No. But you’ll be surprised at how much you’ll gain from the work you put into growing your own food. You’ll gain a little in the pocketbook; you’ll make a few less trips to the grocery store. But most importantly you’ll experience the satisfaction of growing your own fruits, herbs and vegetables—and you’ll possess the knowledge that you are prepared to provide for your family (at least basic nourishment) no matter what is going on in the world—which is a bit of a ‘victory’ in its own right.
Michael Glassman is co-host of the Discovery Channel’s "Garden Police". He has over 20 years experience, and a degree in Landscape Design and Horticulture from the University of California at Davis. He currently lives in Northern California with his wife and daughter and his work can be viewed on his website.
Family Emergency Survival – Air, Water, and Food
by: Arthur B. Robinson, PhD
During emergencies – natural and man-made – one’s family and friends may find themselves without ordinary essentials that make life possible. A human can survive only a few minutes without air, a few days without water, and a few weeks without food. Each of us has a fundamental moral responsibility to make certain that those people for whom we are responsible can get to the other side of an emergency alive, regardless of inconvenience or unhappiness that may occur during the event.
A safe air supply can be lost due to chemical, biological, or nuclear fallout contamination, or, of course, through simpler means such as flood waters over one’s head. These threats are best met by public civil defense preparations – preparations that U.S federal and state politicians and bureaucrats have been unwilling to make. So, concerned private citizens must either buy costly air protection systems or arrange to live in locations that are less threatened. These preparations are beyond the scope of this article. Definitive and comprehensive civil defense information is available here.
The Federal Emergency Management Agency, FEMA, performs exactly the function that its name indicates. FEMA "manages" emergencies. It does not prepare for emergencies. The last remaining civil defense functions – physical preparations for emergencies – of FEMA were defunded by the Clinton Administration. People deprived of safe air die within minutes. All that remains to be "managed" is their burial.
A safe supply of emergency water is relatively easy to provide. One method is to simply close the inlet and outlet valves of the home water heater in case of impending emergency. This will preserve many gallons of life-saving drinking water. Storage of additional water is also prudent. This can be done in one gallon milk containers, 50 gallon plastic drums, or most other containers of convenience. It is best to use multiple containers rather one container, the possible loss of which endangers the entire supply. As time passes, regardless of the water treatment method, stored water usually accumulates contaminants that one would ordinarily prefer to avoid, but which are acceptable during an emergency. Excellent purification systems are available from many sources, although emergency preparation funds are probably better spent in other ways.
Stored water must, however, be protected from poisonous biological contamination that can accumulate with time. The simplest way to provide this protection is by addition of chlorine compounds available as ordinary bleach. This must be done safely and correctly. These procedures are given in the book, Nuclear War Survival Skills, available on-line without cost here. This book also provides instructions for expedient water purification procedures.
A safe and sufficient supply of food is also easy to arrange, but provision of emergency food is often misunderstood.
First, most adults and children – with the exception of infants – can survive for several weeks without food. Survival food storage is required primarily for emergencies lasting for weeks, months, or even years.
Second, stored food should provide essential nutrition – not gourmet satisfaction. Storage of freeze-dried ordinary food, for example, caters to the illusion that a food-requiring emergency will be such a benign event that the participants will be very concerned about the tastiness of their food. Nothing could be further from the truth. Emergency food preparedness involves staying alive and in functional good health – not catering to one’s pallet. Every food storage dollar should purchase the greatest quantity of nutritious food possible – not unneeded luxuries.
Third, a family food storage program should include as great an amount of nutritious, long-lasting food as the family can afford – not an amount estimated for the family’s personal needs. The family friends and neighbors who have not stored food will need to be fed, too. Very, very few Americans would, in an emergency, eat stored food while allowing their neighbors and friends to die from starvation. Consequently, a family must realize that their food will likely last only so long as they can feed themselves and their friends and neighbors.
Fourth, stored food should last for 50 years or more in good condition.
During the 1980s at the Oregon Institute of Science and Medicine, we developed food storage recommendations that consider these requirements. These recommendations were subsequently adopted and publicized by FEMA. Our food storage suggestions are as follows:
1. Store whole grain – not ground or otherwise processed – corn, wheat, and soybeans in a ratio by weight of 2:2:1. In other words, if one is storing 40 pound plastic, nitrogen-packed pails of grain, store 2 pails each of wheat and corn for each single pail of soybeans. Combined in these proportions, ground to flour, cooked (as in corn bread), and eaten, 2 to 3 pounds per day of this mixture will provide the nutrition required for a marine in combat – except for vitamin C and salt. An ordinary person surviving during an emergency would require perhaps half as much. Note: soybeans must be cooked before eating to avoid danger to health.
Nitrogen packing helps to assure that insects cannot infest the food. Containers should be long-lived and rodent resistant. There are several good commercial sources of food already appropriately packaged for storage – for example, Walton Feed in Idaho.
2. Store 1 kilogram of ascorbic acid (vitamin C) for each person-year of food. This is 3 grams per day. People under stress require extra vitamin C for optimum health. For prevention of death from scurvy, however, about 1% of this amount will suffice, so storage of vitamin C in these amounts might save the lives of an entire community.
Store crystalline vitamin C – not pills. During storage, the pills may deteriorate. In a cool, dry bottle, crystalline vitamin C will last indefinitely. Vitamin C can also be obtained by simply sprouting some of the food grain before eating. In a serious emergency, however, sprouting may prove difficult. Store also, in a cool place, a supply of ordinary multivitamin pills.
3. Store lots of salt. This could be crucial to saving many lives. An inexpensive and convenient form is in bags or salt blocks obtained from a local farm feed store.
4. For infants, store dried milk available from food storage suppliers in #10 cans. Infants can live on the grain ration, but they may refuse to eat less familiar food and will do better with milk.
5. Store several 4 gallon plastic buckets each containing 25 pounds of ordinary table sugar – sucrose; 1 pound baking soda; 5 x 11 ounce containers of Lite salt – KCl &NaCl; and a teaspoon for measuring. Dehydration from burns and diseases such as cholera can be treated with proper oral administration of these items. Instructions can be found in the March 1988, Volume 1, # 12, Fighting Chance newsletter. These buckets could save many lives during a serious prolonged emergency, where ordinary medical care is not available.
In ordinary times, soy bean, corn, and wheat flour can serve as a base for delicious and nutritious corn bread – when cooked with lots of baking soda, vegetable oil, and fruit for flavor.
Prior to the current U.S. government program to burn America’s food for fuel, the rations above could be purchased and stored for about $100 per person per year of food. Prices now are between $200 and $300 per person year. If Americans continue to allow repressive government regulation and taxation of their nuclear and hydrocarbon energy industries and tax-subsidized use of food for fuel, these prices will rise much higher.
It is best to store food now, while it is still available at a reasonable price.
Art Robinson is a scientist and currently a professor at the Oregon Institute of Science and Medicine. The Federal Emergency Management Agency has commended and utilized Robinson work on emergency preparedness.
The Amazing Recipes for Glenn’s last meal
by: Michale Lomonaco
Here, as promised, are the delicious recipes for Glenn’s last meal, provided by Michael Lomonaco. These recipes are so good, however, that it’s highly recommended they be utilized many, many times in between now and your last meal.
Michael Lomonaco is Executive Chef and Partner at Porter House restaurant located at 10 Columbus Circle, 4th Floor, New York, NY 10019. (212-823-9500).