Saturday, December 6, 2014

How Do You Get an Easy $1,360?

1. Start with $5,000.

2. Go back in time to 2011.

May 22, 2011
Jim Grant warns of new dangers for investors

Perhaps one way to proceed is to hold cash at the opportunity cost of not much in Treasury bills. You make nothing, but you want to have this money when things are absolutely, not just relatively, cheap.

3. Park the $5,000 in cash as instructed. Don't worry about potential deposit gluts. Join the herd.

It does seem improbable that the inflation rate would ever get beyond 3.5 percent, let alone knock on the door of 10 percent. But I'm here to tell you it's going to 10 percent.

4. Patiently wait for 10 percent inflation, and wait, and wait...

And on the off chance it does happen, don't forget that you could have locked in a 1.84% real yield for 30 years on May 22, 2011 by buying a 30-year inflation protected treasury bond. If inflation does hit 10% then you'd be earning a whopping 11.84% as other investors apparently crash and burn. But hey, no need to play it safe. Anxiously await better opportunities!

Don't let it bother you that the same real yield is down to just 0.96% today and there you are sitting in cash. Remain optimistic in your pessimism! Better opportunities are nearly here!

With its wry observations about investor self-delusion, Grant's newsletter ($910 for an annual subscription) has become a sort of bible among the bold and bearish alike.

5. Use your cash to pay annual subscription fees.

5a. 2011: $4,090... cha-ching.
5b. 2012: $3,180... cha-ching.
5c. 2013: $2,270... cha-ching.
5d. 2014: $1,360... cha-ching.

You now have $1,360. Might need to start thinking about getting a job or something. Since you've been sitting in cash earning "nothing", your cash flow situation will turn dire by 2016! Stop being so delusional about your future! $910 per year is a small price to pay to secure your financial well-being!

13 comments:

Rob Dawg said...

My newsletter would have warned you about other so called newsletters.

Seriously. I cannot help shake the feeling there is going to be drilled a loophole in every form of risk free investments including TIPS.

Stagflationary Mark said...

Rob Dawg,

My newsletter would have warned you about other so called newsletters.

Your newsletter would have been a bargain at any price!

Seriously. I cannot help shake the feeling there is going to be drilled a loophole in every form of risk free investments including TIPS.

I agree wholeheartedly. I consider TIPS to be "safer assets". You know, like trying to pick out the least stinky fish head in a pile of stinky fish heads, lol. Sigh.

If nothing else, if inflation ran at 20% or more, the TIPS I own could easily financially ruin me. The yearly taxes on the inflationary gains would be crushing. I'd have to sell TIPS just to pay the taxes, and that would definitely not be a good feeling.

The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. - Alan Greenspan (1966)

In the long run, nothing is truly safe.

Rob Dawg said...

We need treasury inflation -and tax- protected securities. I'm sure with a little wordplay we could call them TITTIES and charge a huge premium just to look at the prospectus.

Stagflationary Mark said...

Rob Dawg,

Hahaha!!!

I recommend that they are auctioned off in multiples of two, so that portfolios remain properly balanced.

And let's make them Fed proof too. Nobody wants Operation TITTIES Twister. These bonds are for the public! They shouldn't be hoarded by the Fed! ;)

Rob Dawg said...

Access via a "Basic Repo Auction." Depending on the amount of support required yields can be pushed up to create more interest.

Stagflationary Mark said...

Rob Dawg,

You're killing me! You know I love puns. Hahaha!

Might I suggest Underwired Basic Repo Auctions?

Financially strapped consumers shouldn't have to wire the full amount. Perhaps we could make this part of a plus-sized model of economic prosperity.

Rob Dawg said...

Symmetrical bifurcation from the front. Parabolic curvature from the side. Note the consumer interest in the the two points upfront. Cold calls welcome. Buy Once Sell Once Maturities!

Rob Dawg said...

It will get confusing when AA rated contents are not considered investment grade and possibly inappropriate for properly aged portfolios.

Rob Dawg said...

I guess there's a reason squid tentacles are covered in suckers.

Rob Dawg said...

Fortunately there is a simple test to see if these assets pencil out.

Stagflationary Mark said...

Rob Dawg,

Hahaha!!!!

I'm busting up here, or sew it seams!

Properly padded and implanted treasured chests, baby. That's what I'm talking about.

Shame on me. Bad Mark. Bad. Bad. :)

Rob Dawg said...

Torpedoes away. Man the tranches. Take the high ground.

Stagflationary Mark said...

Sleep calls. I've been up all night.

I need to be perky if I want to stay abreast of the Seahawks playoff chances.

And if I go any longer, I'm likely to get pun-chi.