Are You Crazy?

April 28, 2012

This is the question I get asked most often and semi-understandably why, although I don’t condone it!

Promises always sound better than reality until the truth punctures the false promises, and the only thing that’s left is the truth.

Let us quickly look at where we’ve been the last 15 years as a country. In 1997 the country was strong under President Clinton, life was busy, but easy. By the end of the 90s we weren’t sure if Clinton was a good person, but presidentially he had sustained the nation, and with the threat of Y2K (google this if you forgot) looming closely, surprisingly, the stock market was still going up, and at a rapid pace. Y2k came and went and nothing happened, but the stock markets continued to rise! Companies like Enron were sky rocketing through the roof, a measly $500 could have returned you $10,000 if you invested and pulled out at the right time during this short year cycle before the stock market went BUST!

With the new millenium and the stock market crash behind us, the country then began to rally in something sturdy, something that will always go in value, something that is tangible – LAND! People were taking out second loands on their homes to buy new homes, hold them for 3 months, then sell them for $30,000 more! My childhood neighbors listed their home at 2x’s what they paid for it just 10 year prior, and then 3 people got into a bidding war and their home sold for $10,000 OVER ASKING price! New home buyer began flooding this market. People making a dual income of $50,000 were taking out loans of over $200,000 on 3/2 homes thinking that the house would soon be worth $250,000 if they ever couldn’t make their mortgage it would be an easy sale! Well, in 2006, this all came down. Houses dropped faster than they had risen, and “no one saw it coming.” For the last 6 years people have been walking out on their homes, because the housing market HAS NOT RECOVERED, it is in a dead cat bounce. A dead cat bounce is like a bouncy ball when you were a kid. You’d drop it, it’d hit the ground and bounce back up, but not as high as before, and it’d pause in the air for a second, then it falls again, then bounces back up. This process repeats a couple of times. We’ve seen house prices drop and they’re still dropping. We haven’t come close to bottom out! Your house may be worth the same US currency it was in 1990, but since 1990 the government has admitted to raising inflation by 24%! Your house isn’t worth as much as you think it is, and it’s going down.

Well, what’s going to bubble next? Precious metals. Precious metals aren’t the answer for everything, but the next year will be a great time to accumulate! If you’re reading this and it’s 2014, I’m sorry, but it will be too late. You’ll be the people buying stock in the late part of 2000 and buying a house in early 2006. You’re getting in right as smart people are getting out and the average person is getting in, and you’ll be stuck with the bill.

The world works in cycles. A modest investment of $16,000 – 500oz of silver will soon in the next 2 years be able to equal the price of a single family home. When something gets inflated, something must deflate. When silver hits an astronomic bubble, real estate will be at a new low. Maybe not US currency wise, but in the ratio of gold/silver, oil, wheat, and the stock market.

Everyone has the money to buy, you just have to retrain yourself how to invest, realizing great wealth can be found in a short amount of time and your retirement fund will not save you, neither will the government.

So, am I crazy? If I am, I don’t want to know what sane looks like. History is just repeating itself, learn from it, capitalize on it.

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