Preparation H, I couldn't help it when I read the headline

anakinskywalker said:this topic has been brought up two months ago in this post I made; very few seemed concerned about hyperinflation then.

Anakin

Well, there are two questions: the when and the how.

I think we won't see hyperinflation any time soon. As long as housing prices are going down, the bigger threat is that of deflation.

However, eventually everybody and their mother who went all-in into US treas, will decide to dump the treasuries, and inflation will begin. At that time, you dump dollars for hard assets like R/E, gold, oil, cars, etc.

You have to prepare for deflation (now), hyperinflation (someday in the near future, but who knows exactly when), and the risk of the unthinkable. Within the third category I would include US government default and or devaluation; US government seizure of assets; punitively high income or wealth tax rates which are in essence the same as seizure; US government negotiated seizure of assets held in foreign countries; war; world war III.

Taking all of this into account, this is my ideal allocation (I'm not there yet)

25% primary residence with a mortgage.
20% US stocks
30% foreign stocks
10% US and global inflation adjusted bonds
5-10% gold stocks, gold investments, oil/nat gas investments
5-10% physical gold diversified in various places around the globe.

Personally I think it's critical to have the hard assets themselves in other countries. Having $100,000 in gold pieces in safe deposit boxes in other countries is a hedge against most of the unthinkable. World War III is something I can't worry about. Everything else on this list I take seriously.

psychtobe said:You have to prepare for deflation (now), hyperinflation (someday in the near future, but who knows exactly when), and the risk of the unthinkable. Within the third category I would include US government default and or devaluation; US government seizure of assets; punitively high income or wealth tax rates which are in essence the same as seizure; US government negotiated seizure of assets held in foreign countries; war; world war III.

Taking all of this into account, this is my ideal allocation (I'm not there yet)

25% primary residence with a mortgage.
20% US stocks
30% foreign stocks
10% US and global inflation adjusted bonds
5-10% gold stocks, gold investments, oil/nat gas investments
5-10% physical gold diversified in various places around the globe.

Personally I think it's critical to have the hard assets themselves in other countries. Having $100,000 in gold pieces in safe deposit boxes in other countries is a hedge against most of the unthinkable. World War III is something I can't worry about. Everything else on this list I take seriously.

Agreed generally, though my personal allocation is much more heavy on gold investments (though I never touch mining or other gold stocks).

When talking about hyperinflation, I think it's important to make the distinction between "fairly high inflation" (such as 10%-20% annually) and "Weimar Republic or Zimbabwe hyperinflation" (like 1,000,000%+). The first scenario is possible depending on how things shake out. The second scenario is simply not possible for the United States when the rest of the world holds so many dollars.

If you're really worried about hyperinflation, canned goods and similar food items with an extra long shelf life are a good idea.

Debt has it's downside, but if you REALLY believe that hyperinflation is just around the corner, borrow as much as you can for the non-depreciating hard asset(s) of your choice. Real-estate is about the easiest outside of an AOR.

czarandy said:You should be more worried about deflation. Last month's -1% inflation rate was the lowest in at least 60 years.

That's what I was thinking. I'm much more worried about deflation than inflation. Blue chip stocks are the best bet for high inflationary periods.

ILikeDollars said:
He's worried about another full-scale seizure of private gold holdings. Holding gold outside the US averts this problem, assuming you hold it in a country that:Interesting. I apologize for thinking he was nuts then.

It's starting

NEW YORK, Nov 24 (Reuters) - The spread or risk premium on 10-year U.S. Treasury credit default swaps hit record wide levels on Monday, prompted by worries about how the cost of rescuing banks and carmakers would affect U.S. creditworthiness, CMA DataVision said.

As the global financial crisis worsened in recent weeks, traders increased their bets on the bigger toll of the U.S. government's array of programs to help these ailing industries.

Ten-year U.S. Treasury CDS edged out to 49.8 basis points from 49.3 basis points at Friday's close, according to the credit data company.

Five-year Treasury CDS grew to 43.5 basis points versus 43.0 basis points late Friday, it said.

The risk premiums have nearly doubled from levels seen two months ago after the collapse of Lehman Brothers.

Prior to the financial crisis, default risk premiums on U.S. government debt had been running in the low-to-mid single digits.

EndlessKnight said:czarandy said:You should be more worried about deflation. Last month's -1% inflation rate was the lowest in at least 60 years.

That's what I was thinking. I'm much more worried about deflation than inflation. Blue chip stocks are the best bet for high inflationary periods.

You mean like Citi, AIG, Fannie Mae, Merrill Lynch, Lehman, and Bear Stearns. Also GM & GE for diversity.