The last half year is just another pile of evidence that the Fed can try to boost the economy all it wants, but the market will sift through and go back to the fundamentals. You can’t print your way out of a recession.
Almost every few years the government has tried to print its way to prosperity and has failed miserably.
This Happened Before and Will Happen Again
Of course, history repeats itself. Our leaders don’t learn from history, and never will. That means days like this just encourage the Fed to be more likely to start up QE3 — creating another bubble that will need to burst. The only question is when.
I spent almost all of last night reading “A History of Money and Banking in the United States” by Murray Rothbard. I know, this makes me a nerd and I should have read it before. But it’s fantastic: history has hundreds of examples of paper money not fixing the problems it was supposed to fix.
A Financial Strategy That Works
A strong financial strategy doesn’t have to change because the stock market fluctuates. It doesn’t have to change just because Wall Street decides to panic. A strong financial strategy is one that is systematic, predictable, and always works.
The strategy is almost perfectly lined up with the Permanent Portfolio Fund, a mutual fund that is allocated almost exactly like I described above. I have a lot of money in the fund.
The Permanent Portfolio Fund dropped about 1.9% on a day when silver dropped like 6% and stocks dropped like 5%.
This fund should be the simplest example of why the best way to hedge against economic calamity is diversifying with metals, international stocks, and swiss francs. Mixed with some good companies with a fantastic future, and you have a relatively boring portfolio that won’t have you jumping out a 60 story window.
The S&P 500 has essentially made 0% returns since 2010. People like myself who have bought the Permanent Portfolio Fund have seen a boring, systematic return of 10% since then, and have seen that same general return almost every year for almost a decade.
What You Should Do Right Now
What should you do? Figure out what a good portfolio loooks like, build it, and stick with it. The day traders, sheep-like 100% stock folks can go off a cliff — you’ll probably be just fine.
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